EXHIBIT 99.1
FreeSeas Inc. Announces 2008 Fourth Quarter and Year End Financial Results
Fourth Quarter 2008 Financial Highlights * Q4 2008 operating revenues of $20.8 million, an increase of 179.5% year-over-year * Q4 2008 net income of $5.4 million, or $0.25 earnings per share, basic and diluted * Q4 2008 net income excluding non-cash items of $6.4 million, or $0.30 earnings per share, basic and diluted * Q4 2008 adjusted EBITDA of $13.1 million * Nine vessels owned and operated during the period, earning an average Time Charter Equivalent, or TCE, of $25,673 per day 2008 Year Ended Financial Highlights * 2008 operating revenues of $66.7 million, an increase of 231% year-over-year * 2008 net income of $19.2 million, or $0.91 earnings per share, basic and diluted * 2008 net income excluding non-cash items of $21 million, or $1.00 earnings per share, basic and diluted * 2008 adjusted EBITDA of $40.7 million * An average of 7.4 vessels owned and operated during the year, earning an average TCE of $25,719 per day 2008 Operational Highlights * Increased the size of the Company's fleet from five to nine vessels, taking delivery of the Free Impala, Free Knight, Free Lady, and Free Maverick * Increased carrying capacity by 84% from 145,704 DWT to 68,166 DWT * Lowered the average age of the Company's fleet from 16.4 years to 13.7 Outlook for 2009 * Charter agreements in place for 53% of available days in 2009, which represents approximately $45 million in revenue * Company to discontinue dividend payments as it focuses on debt reduction * Profitable operations expected based on current fleet charter deployment
PIRAEUS, Greece, March 26, 2009 (GLOBE NEWSWIRE) -- FreeSeas Inc. (Nasdaq:FREE) (Nasdaq:FREEW) (Nasdaq:FREEZ) ("FreeSeas" or the "Company"), a transporter of dry bulk cargoes through the ownership and operation of a fleet of seven Handysize vessels and two Handymax vessels, today announced financial results for its fourth quarter and year ended December 31, 2008.
Mr. Ion Varouxakis, President and CEO of FreeSeas, stated, "We are particularly pleased to report strong results for the year ended December 31, 2008, a transformational year for our Company. During 2008 we grew our fleet from five to nine vessels, lowered the average age of our fleet and secured frontloaded charters. We decided not to enter into newbuilding contracts or engage in a chartering policy of spot only coverage or long period charter at unsustainably high rates, opting instead to adopt a balanced chartering strategy.
The Company's focus in the smaller and versatile Handysize market provides for distinct competitive advantages over the larger dry bulk segments. Our vessels can transport a wider array of cargo, access a larger number of ports due to their shallow draft and onboard crane equipment, and have historically achieved greater charter rate stability. The worldwide Handysize fleet has been shrinking over the last few months, as scrapping of over-age tonnage has far outweighed newbuilding deliveries. As a result, over the last few weeks Handysize rates have outperformed those of larger vessels. We are optimistic that this trend will continue, which will in turn greatly increase the earning potential of our fleet.
Entering 2009, we have strengthened our relationships with all of our lenders, extended a number of our existing charters, and thus, solidified our near-term revenue and cash flow visibility through the second quarter of 2009 (contracting 53% of our available days, or approximately $45 million in revenue for 2009), and maintained a solid relationship with established charterers.
We believe that our current financial position is solid, as evidenced by the recent modifications to our loan agreements. In order to further strengthen the Company's balance sheet in this challenging economic environment, our management and Board of Directors has decided, in coordination with its lenders, to concentrate on reducing FreeSeas' debt. We expect to achieve debt reduction with the utilization of operating cash flow and through the suspension of dividend payments until economic and market conditions are more favorable."
2008 Fourth Quarter Financial Review
To facilitate an understanding of FreeSeas, a summary of financial results is included below:
In USD thousands, except share numbers and EPS (unaudited) (unaudited) ----------------- Q4 2008 Q4 2007 ------------------ ------------------ % of % of Y-O-Y % Amount Revenue Amount Revenue CHANGE --------- ------- --------- ------- ------- Operating revenues $ 20,789 100.0% $ 7,438 100.0% 179.5% Vessel operating expenses $ 4,176 20.1% $ 2,309 31.0% 80.9% Depreciation expense $ 4,369 21.0% $ 1,820 24.5% 140.1% Income from operations $ 8,482 40.8% $ 1,579 21.2% 437.2% Interest and finance costs $ 2,116 10.2% $ 1,339 18.0% 58.0% Net income (loss) $ 5,366 25.8% $ (2,281) NM Basic earnings (loss) per share $ 0.25 $ (0.14) NM Diluted earnings (loss) per share $ 0.25 $ (0.14) NM Adjusted EBITDA $ 13,085 62.9% $ 975 13.1% 1242.1% Net income (loss), excluding non- cash items $ 6,362 30.6% $ 696 9.4% 814.1% Basic and diluted earnings (loss) per share, excluding non- cash items $ 0.30 $ 0.04 Basic weighted average number of shares 21,171,329 16,022,084 32.1% Diluted weighted average number of shares 21,171,329 16,022,084 32.1%
Operating revenues for the 2008 fourth quarter were $20.8 million, an increase of 179.5% from $7.4 million in the comparable period of the prior year, largely due to the increase in the size of the Company's fleet.
Vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, totaled $4.2 million, or 20.1% of revenue, for the 2008 fourth quarter, as compared to $2.3 million, or 31.0% of revenue, for the comparable period of the prior year. For the fourth quarter of 2008, depreciation expense totaled $4.4 million, as compared to $1.8 million for the fourth quarter of 2007. The increase in operating and depreciation expenses was a result of an increase from five to nine vessels.
Net income for the fourth quarter of 2008 was $5.4 million, or $0.25 per share based on 21.2 million basic and diluted weighted average number of shares outstanding, as compared to a net loss of ($2.3) million, or ($0.14) per basic and diluted share based on 16.0 million shares outstanding, for the fourth quarter of 2007. Net income for the fourth quarter of 2008, excluding stock-based compensation expense, loss on debt extinguishment and change in derivatives fair value was $6.4 million, or $0.30 per share, basic and diluted. Adjusted EBITDA for the quarter ended December 31, 2008 increased to $13.1 million from $975,000 in the prior year quarter. A table reconciling adjusted EBITDA to net income can be found in footnote (1) to this release.
2008 Year End Financial Review
In USD thousands, except share data and EPS (unaudited) ----------------- 2008 2007 ------------------ ------------------ % of % of Y-O-Y % Amount Revenue Amount Revenue CHANGE --------- ------- --------- ------- ------- Operating revenues $ 66,689 100.0% $ 20,147 100.0% 231% Vessel operating expenses $ 16,354 24.5% $ 6,001 29.8% 172.5% Depreciation expense $ 13,349 20.0% $ 4,435 22.0% 201% Income from operations $ 26,570 39.8% $ 5,761 28.6% 361.2% Interest and finance costs $ 6,209 9.3% $ 3,204 15.9% 93.8% Net income (loss) $ 19,192 28.8% $ (156) NM Basic earnings (loss) per share $ 0.91 $ (0.02) NM Diluted earnings (loss) per share $ 0.91 $ (0.02) NM Adjusted EBITDA $ 40,658 61.0% $ 8,350 41.4% 386.9% Net income (loss), excluding non- cash items $ 20,999 31.5% $ 3,259 16.2% 544.3% Basic and diluted earnings (loss) per share, excluding non- cash items $ 1.00 $ 0.37 Basic weighted average number of shares 21,006,497 8,786,287 139.1% Diluted weighted average number of shares 21,051,963 8,786,287 139.6%
Operating revenues for the year ended December 31, 2008 were $66.7 million, an increase of 231% from $20.1 million in the prior year, largely due to the increase in the size of the Company's fleet. Vessel operating expenses totaled $16.4 million, or 24.5% of revenue, for 2008, as compared to $6.0 million, or 29.8% of revenue, for the comparable period of the prior year. For the year ended December 31, 2008, depreciation expense totaled $13.3 million as compared to $4.4 million for 2007. The increase in operating and depreciation expenses was a result of an increase from five to nine vessels.
Net income for 2008 was $19.2 million, or $0.91 per share based on 21.1 million diluted weighted average number of shares outstanding, as compared to a net loss of ($156,000), or ($0.02) per diluted share based on 8.8 million shares outstanding in 2007. Net income for the year ended December 31, 2008 excluding stock-based compensation expense, loss on debt extinguishment and change in derivatives fair value was $21 million, or $1.00 earnings per share, basic and diluted. Adjusted EBITDA for the year ended December 31, 2008 increased to $40.7 million from $8.4 million in the prior year.
Company Achieves Greater Financial Flexibility through Refinancing
The Company recently announced that it has obtained market-value-to-loan covenant waivers from each of its lenders and also reached an agreement with Hollandsche Bank - Unie N.V. to refinance a balloon payment of $27.1 million due on August 1, 2009 for the Free Maverick. The balloon payment will be replaced in March by a new 3.5 year facility, which is payable through 13 quarterly installments of $600,000 beginning on August 1, 2009 and one installment of $19.3 million payable on November 1, 2012. As of December 31, 2008, the Company's ratio of debt to total capitalization was approximately 57%.
Outlook for 2009
Mr. Varouxakis concluded, "Based on our current revenue expectations as a result of recent time-charter extensions, we expect to operate profitably in 2009. We are also encouraged with the recent improvement in the dry bulk market, especially for Handysize vessels, with the Baltic Dry Index having recovered substantially from its lows in December 2008. While we acknowledge that challenges remain, we continue to see a trend towards more favorable rates and greater demand in the charter market. We expect to charter our vessels in the spot market or short period market for the time being, until longer period charter rates further improve. While our primary focus is on debt reduction, we are in a market with a once-in-a-generation opportunity to acquire vessels at highly attractive prices and, as appropriate, we shall look to expand our fleet in the coming year. We continue to remain focused on profitable operations and appropriately deploying our capital."
Fleet Employment Data ---------------------------------------------------------------------- Vessel Name Dwt Type Built Employment ---------------------------------------------------------------------- Free Destiny 25,240 Handysize 1982 Spot time charter trip of 2-4 months at $4,000 per day through April/June 2009 ---------------------------------------------------------------------- Free Envoy 26,318 Handysize 1984 Balance of time-charter at $20,000 per day through July/August 2009 ---------------------------------------------------------------------- Free Goddess 22,051 Handysize 1995 Balance of time-charter at $8,000 per day through September 2009 (+50% profit sharing above $10,000); increases to $10,500 per day on September 15, 2009 through January/February 2010 (+50% profit sharing above $12,500 per day) ---------------------------------------------------------------------- Free Hero 24,318 Handysize 1995 60 day spot time charter trip at $4,500 per day through April 2009 ---------------------------------------------------------------------- Free Impala 24,111 Handysize 1997 45 day spot time charter trip at $6,500 per day through March 2009 ---------------------------------------------------------------------- Free Jupiter 47,777 Handymax 2002 Balance of time charter at $28,000 per day through March 2010 and $24,000 per day through March 2011 ---------------------------------------------------------------------- Free Knight 24,111 Handysize 1998 40 day spot time charter trip at $7,000 per day through April 2009 ---------------------------------------------------------------------- Free Lady 50,246 Handymax 2003 Balance of time charter at $51,150 per day through May 2010 ---------------------------------------------------------------------- Free Maverick 23,994 Handysize 1998 Balance of time charter at $32,000 per day through April 2009 ----------------------------------------------------------------------
Conference Call
The Company will discuss these results in a conference call on Friday, March 27, 2009 at 11:00 a.m. ET.
The dial-in numbers are:
(866) 861-6730 (U.S.) (702) 696-4678 (INTERNATIONAL)
The conference call will also be broadcast live via the "Investor Relations" section of FreeSeas' website at www.freeseas.gr. Once at the "Investor Relations" section, interested parties should click on "Events & Presentations", or go directly to: http://investor.shareholder.com/media/eventdetail.cfm?mediaid=35945&c=FREE&mediakey=AE558775379DED2791EBAABFDC021E8B&e=0.
About FreeSeas Inc.
FreeSeas Inc. is a Marshall Islands corporation with principal offices in Piraeus, Greece. FreeSeas is engaged in the transportation of dry bulk cargoes through the ownership and operation of dry bulk carriers. Currently, it has a fleet of seven Handysize vessels and two Handymax vessels. FreeSeas' common stock and warrants trade on the NASDAQ Global Market under the symbols FREE, FREEW and FREEZ, respectively. Risks and uncertainties are described in reports filed by FreeSeas Inc. with the U.S. Securities and Exchange Commission, which can be obtained free of charge on the SEC's website at http://www.sec.gov. For more information about FreeSeas Inc., please visit the corporate website, http://www.freeseas.gr.
The FreeSeas Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5981
Forward-Looking Statements
This press release contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and the Company's growth strategy and measures to implement such strategy, including expected vessel acquisitions. Words such as "expects," "intends," "plans," "believes," "anticipates," "hopes," "estimates," and variations of such words and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company. Actual results may differ materially from those expressed or impli ed by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for dry bulk vessels; competitive factors in the market in which the Company operates; risks associated with operations outside the United States; and other factors listed from time to time in the Company's filings with the Securities and Exchange Commission. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based.
PERFORMANCE INDICATORS (All amounts in tables in thousands of United States dollars, except for fleet data) Three Months Twelve Months Ended Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2008 2007 2008 2007 ------- ------- ------- ------- Adjusted EBITDA (1) $13,085 $ 975 $40,658 $ 8,350 Fleet Data: Average number of vessels (2) 9.00 4.70 7.36 3.3 Ownership days (3) 828 430 2,688 1,206 Available days (4) 799 430 2,605 1,177 Operating days (5) 752 333 2,441 1,048 Fleet utilization (6) 90.8% 77.4% 90.8% 86.9% Average Daily Results: Average TCE rate (7) $25.673 $21.288 $25.719 $17.925 Vessel operating expenses (8) 5.043 5.370 6.084 4.976 Management fees (9) 0.865 0.674 0.727 0.726 General and administrative expenses(10) 0.988 2.396 1.129 2.014 Total vessel operating expenses (11) $ 5.908 6.044 6.811 5.702 (1) Adjusted EBITDA reconciliation to net income: Adjusted EBITDA represents net earnings before interest, taxes, depreciation and amortization, change in the fair value of derivatives and loss on debt extinguishment. Adjusted EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of adjusted EBITDA may not be comparable to that reported by other companies. Adjusted EBITDA is included herein because it is an alternative measure of our liquidity, performance and indebtedness. The following is a reconciliation of adjusted EBITDA to net income: Three Months Twelve Months Ended Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2008 2007 2008 2007 ------- ------- ------- ------- Net income (loss) $ 5,366 $(2,281) $19,192 $ (156) Depreciation and amortization 4,639 1,974 14,137 5,192 Change in derivatives fair value 971 386 1,061 749 Interest and finance cost 2,109 896 5,629 $ 2,565 Loss on debt extinguishment 639 ------- ------- ------- ------- Adjusted EBITDA $13,085 $ 975 $40,658 $ 8,350 ======= ======= ======= ======= (2) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in the period. (3) Ownership days are the total number of days in a period during which the vessels in our fleet have been owned by us. Ownership days are an indicator of the size of our fleet over a period and affect both the amount of revenues and the amount of expenses that we record during a period. (4) Available days are the number of ownership days less the aggregate number of days that our vessels are off-hire due to major repairs, dry dockings or special or intermediate surveys. The shipping industry uses available days to measure the number of ownership days in a period during which vessels should be capable of generating revenues. (5) Operating days are the number of available days less the aggregate number of days that our vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a period during which vessels actually generate revenues. (6) We calculate fleet utilization by dividing the number of our fleet's operating days during a period by the number of ownership days during the period. The shipping industry uses fleet utilization to measure a company's efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off-hire for reasons such as scheduled repairs, vessel upgrades, or dry dockings or other surveys. (7) Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing operating revenues (net of voyage expenses and commissions) by operating days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods: Three Months Twelve Months Ended Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2008 2007 2008 2007 ------- ------- ------- ------- Operating revenues $20,789 $ 7,438 $66,689 $20,147 Voyage expenses and commissions (1,483) (349) (3,910) (1,362) Net operating revenues 19,306 7,089 62,779 18,785 Operating days 752 333 2,441 1,048 ------- ------- ------- ------- Time charter equivalent daily rate $25.673 $21.288 $25.719 $17.925 ======= ======= ======= ======= (8) Average daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs, is calculated by dividing vessel operating expenses by ownership days for the relevant time periods: Three Months Twelve Months Ended Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2008 2007 2008 2007 ------- ------- ------- ------- Vessel operating expenses $ 4,176 $ 2,309 $16,354 $ 6,001 Ownership days 828 430 2,688 1,206 ------- ------- ------- ------- Daily vessel operating expense $ 5.043 $ 5.370 $ 6.084 $ 4.976 ======= ======= ======= ======= (9) Daily management fees are calculated by dividing total management fees paid on ships owned by ownership days for the relevant time period. (10)Average daily general and administrative expenses are calculated by dividing general and administrative expenses by operating days for the relevant period. (11)Total vessel operating expenses, or TVOE, is a measurement of our total expenses associated with operating our vessels. TVOE is the sum of daily vessel operating expense and daily management fees. Daily TVOE is calculated by dividing TVOE by fleet ownership days for the relevant time period. FREESEAS INC. CONDENSED UNAUDITED STATEMENTS OF OPERATIONS (All amounts in tables in thousands of United States dollars, except for share data) For three For twelve months ended months ended 31-Dec-08 31-Dec-07 31-Dec-08 31-Dec-07 (Unaudited) (Unaudited) ---------- ---------- ---------- ---------- OPERATING REVENUES $ 20,789 $ 7,438 $ 66,689 $ 20,147 OPERATING EXPENSES: Vessel operating expenses (4,176) (2,309) (16,354) (6,001) Voyage expenses (342) (527) (267) Depreciation expense (4,369) (1,820) (13,349) (4,435) Amortization of deferred charges (270) (154) (788) (757) Management fees to a related party (1,020) (290) (2,634) (875) Commissions (1,141) (349) (3,383) (1,095) Stock-based compensation expense (25) (21) (107) (96) General and administrative expenses (743) (798) (2,756) (2,111) Bad debt (221) (118) (221) (118) Gain on sale of vessel 1,369 ---------- ---------- ---------- ---------- Income from operations $ 8,482 $ 1,579 $ 26,570 $ 5,761 OTHER INCOME (EXPENSE): Interest and finance costs $ (2,116) $ (1,339) (6,209) $ (3,204) Loss on debt extinguishment (2,570) (639) (2,570) Change in derivatives fair value (971) (386) (1,061) (749) Interest income 7 443 580 639 Other (36) (8) (49) (33) ---------- ---------- ---------- ---------- Other (expense) $ (3,116) $ (3,860) (7,378) $ (5,917) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss) $ 5,366 $ (2,281) 19,192 $ (156) ========== ========== ========== ========== Basic earnings (loss) per share $ 0.25 $ (0.14) 0.91 $ (0.02) Diluted earnings (loss) per share $ 0.25 $ (0.14) 0.91 $ (0.02) Basic weighted average number of shares 21,171,329 16,022,084 21,006,497 8,786,287 Diluted weighted average number of shares 21,171,329 16,022,084 21,051,963 8,786,287 FREESEAS INC. CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS (All amounts in tables in thousands of United States dollars, except for share data) Dec. 31, Dec. 31, 2008 2007 (Unaudited) --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents 3,378 $ 63,394 Trade receivables, net 812 60 Insurance claims 17,807 16,116 Due from related party 1,634 1,037 Inventories 579 499 Back log assets 907 -- Restricted cash 1,095 -- Prepayments and other 972 334 --------- --------- Total current assets $ 27,184 $ 81,440 Fixed assets, net 275,405 108,021 Deferred charges, net 3,772 2,161 Restricted cash 1,500 350 --------- --------- Total non-current assets $ 280,677 $ 110,532 --------- --------- Total assets $ 307,861 $ 191,972 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Account payable $ 10,916 $ 3,181 Accrued liabilities 11,347 16,713 Due to related party 12 -- Unearned revenue 1,320 783 Deferred revenue-current portion 1,620 Derivatives financial instruments at fair value 473 -- Bank loans - current portion 26,700 11,800 --------- --------- Total current liabilities $ 50,768 $ 34,097 Derivatives financial instruments at fair value 1,337 749 Deferred revenue 1,251 -- Bank loans - net of current portion 133,650 44,500 --------- --------- Total long term liabilities $ 136,238 $ 45,249 Commitments and Contingencies SHAREHOLDERS' EQUITY: Common stock 21 20 Additional paid-in capital 110,322 115,464 Retained earnings / (deficit) 10,512 (2,858) Total shareholders' equity $ 120,855 $ 112,626 --------- --------- Total liabilities and shareholders' equity $ 307,861 $ 191,972 ========= =========
CONTACT: FreeSeas Inc. Ion Varouxakis, Chief Executive Officer 011-30-210-45-28-770 Fax: 011-30-210-429-10-10 info@freeseas.gr www.freeseas.gr 89 Akti Miaouli Street 185 38 Piraeus, Greece The Equity Group Inc. Investor Relations Adam Prior, Vice President 212-836-9606 aprior@equityny.com www.theequitygroup.com