FreeSeas 2Q10 Results Miss on Higher Operating Costs; Due to Debt Reduction Maintain Buy
August 05, 2010 3:19 PM
Dahlman Rose states FreeSeas (NASDAQ: FREE) reported 2Q10 EPS of $0.07, below their $0.11 estimates. This is due to higher than expected operating expenses. Their operating expenses increased 14% from the previous quarter.
Despite the lower than expected results, the company remains on track of reducing the debt that is owed through generating cash flow. During the 2Q10, the company made its scheduled $3.85 million debt repayment, with equal payments scheduled quarterly for the remainder of the year.
For 2011, scheduled debt repayments total $16.75 million against Dahlman Rose’s FCF estimate for the year of $28.3 million. Dahlman rose expects FreeSeas to continue to reduce their debt with additional cash build.
Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash it’s tough to develop new products, make acquisitions, pay dividends and reduce debt.
FreeSeas has a NAV of $2. Net asset value is a better measure of comparing the relative performance of several funds because it ignores the market forces that can cause some funds to trade at a premium or discount to their NAV. Dahlman Rose maintains their Buy rating, but lowers their target from $3 to $2 based on their NAV calculations.
