TRAILER BRIDGE INC (TRBR)
Quarterly Report (SEC form 10-Q)

RESULTS OF OPERATIONS:

Three Months Ended March 31, 2001 and 2000

Operating revenues for the three months ended March 31, 2001 were $20,636,713 a decrease of $696,692 or 3.3%, compared to the first quarter of 2000. Core trailer volume to Puerto Rico increased 7.7% compared to the year earlier period while total car and other vehicle volume was down 27.1% compared to the year earlier period. As a result, core trailer revenue increased $431,236 or 3.3%, compared to the year earlier period; conversely, car and other vehicle revenue decreased 30.1% compared to the year earlier period. For the three months ended March 31, 2001, revenue from shipper owned or leased equipment moving to Puerto Rico decreased $220,865, or 27.1%, from the year earlier period. Trailer volume from Puerto Rico decreased 8.8%, while related revenue decreased $231,197, or 10.6%, compared to the three months ended March 31, 2000. Total domestic revenue of $986,338 represented an increase of $242,845, or 32.7%, from the year earlier period. The PIERS data indicates that the overall Puerto Rico market was up 1.5% compared to the year earlier quarter but down 6.4% compared sequentially to the fourth quarter of 2000. Based upon the change to two missed sailings related to weekly sailing frequency in the Northeast, the effect of which was mitigated by the dry-docking of the Company's roll-on, roll-off vessels, the Company had 9.1% more overall vessel capacity in the Puerto Rico lane compared to the first quarter of 2000.

The market conditions in the trade lanes in which the Company operates that have been characterized by excess high-cost vessel capacity continued throughout the three months ended March 31, 2001. Overall market volume reductions and the movement towards a bankruptcy filing by a large carrier in the trade further exacerbated competitive activity. On March 21, 2001, the largest participant in the Puerto Rico market, NPR/Navieras, which had a 29.0% share of market in 2000, in conjunction with its parent and affiliates filed for Chapter 11 bankruptcy protection in the Delaware Bankruptcy Court in Wilmington, Delaware. Comparing overall market share changes from the fourth quarter of 2000 to the first quarter of 2001, all carriers other than NPR/Navieras increased their market share, although generally below the Company's increase discussed below. NPR/Navieras' market share declined 3.7 percentage points to an overall share of 25.0% during the three months ended March 31, 2001. Competitive activity and excess capacity are continuing.

The Company's operating loss for the three months ended March 31, 2001 was $4,532,175, as compared to an operating loss of $903,031 in the prior year period. The results for the three months ended March 31, 2001 are not affected by a forgiveness of charter due to an affiliate of $1,809,000 that has been treated as a contribution of capital. Compared to the three months ended March 31, 2000, operating loss was higher primarily due to lower capacity utilization, lower yields and higher purchased transportation and fuel costs. The operating loss for the three months ended March 31, 2001 was further impacted by the expense related to the dry-docking of one of the ro/ro vessels operated by the Company under charter from an affiliate of $877,865. The Company has elected to expense the full costs of dry-dockings as they occur rather than capitalize such expenses and amortize them over the period between dry-dockings. While the Company believes that this conservative treatment is the preferred method under SEC guidelines it may not be the prevailing industry standard, used by other shipping companies, including competitors of the Company that capitalize such expenses and amortize them over the period between  scheduled dry-dockings. As a result, the operating ratio was 122.0% during the first quarter of 2001 compared to the 104.2% operating ratio during the year earlier period. Net interest expense of $873,862 was down $70,134 from the year earlier period.

The Company's loss before income taxes for the three months ended March 31, 2001 was $5,374,153, compared to a pre-tax loss of $894,917 in the year earlier period. The net loss for the three months ended March 31, 2001 remained at $5,374,153, or $.55 per share, as compared to a net loss of 1,150,927, or $.12 per share for the year earlier period. The first quarter of 2001 includes no income tax benefit, while the year earlier period included a $.07 per share non-cash income tax benefit.

For the three months ended March 31, 2001, total southbound volume increased 1.8% and total northbound volume decreased 9.0% compared to the year earlier period. These year-to-year overall comparisons were affected by declines in car and other volume. Trailer and container volume alone increased 7.7% southbound while decreasing 9.3% northbound. Southbound market share improved to 13.6% from 12.2% from the year earlier period and 13.2% in the fourth quarter of 2000. Northbound market share declined slightly to 15.3% from 15.6% from the year earlier period but recovered significantly from the 13.8% in the fourth quarter of 2000. Overall combined market share improved to 14.0% in the first quarter of 2001 from 13.0% in the first quarter of 2000 and 13.4% in the fourth quarter of 2000, continuing the upward trend in market share that has been consistently evident in year-to-year and sequential quarterly comparisons.

Comparing total volume and total revenue by direction, for the three month period ended March 31, 2001, the Company's effective yield to and from Puerto Rico decreased 6.7% and 5.2%, respectively, compared to the same period last year.

The Company's Puerto Rico deployed vessel capacity utilization overall during the three months ended March 31, 2001 was 70.7% to Puerto Rico and 22.0% from Puerto Rico. These were below comparable figures of 74.7% to Puerto Rico and 26.8% from Puerto Rico during the three months ended March 31, 2000. As implied in the table above, however, the Company's vessel capacity utilization improved at the end of the quarter when compared to the earlier portion of the quarter. All of these capacity utilization figures are based upon vessels deployed in service and exclude the effect of one Triplestack Box Carrier(TM) that is presently laid-up. Total net expenses related to that vessel for the three months ended March 31, 2001, consisting primarily of depreciation and interest, were $150,762. In February, the Company made changes related to tugs pulling two of the Triplestack Box Carriers(TM) and believes these changes will lead to better schedule integrity.

Both of the roll-on, roll-off vessels, chartered by the Company from an affiliate, had their periodic regulatory dry-docking during the three months ended March 31, 2001. As a result of these dry-dockings, two fewer roll-on, roll-off voyages, one at the beginning and one at the end, occurred during the quarter. The revenue related to the voyages immediately preceding the dry-dockings was $1.8 million. While not all revenue related to the cancelled voyages is lost when the Company is not operating at capacity, there are cost implications to a lost sailing. As such, the Company believes that the revenue from a sailing preceding a cancelled voyage is a simple, effective proxy for the overall impact to the Company. Both in recognition of this and in furtherance of its support of the Company, the affiliate that owns the vessels elected to forgive the entire $1,809,000 of charter that would otherwise have been due during the three months ended March 31,2001. Such forgiveness has been treated as a contribution to capital and does not affect the Company's operating results.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2001, cash amounted to $481,508, working capital was $3.0 million and stockholders' equity was $15.3 million. Stockholders' equity was favorably impacted by the $1.8 million capital contribution related to a first quarter charter hire forgiveness by an affiliate and therefore decreased only $3.6 million from December 31, 2000. For the three months ended March 31, 2001, net cash used by operating activities was $4.5 million, a deterioration of approximately $5.7 million from the year earlier period. During the three month period ended March 31, 2001 net cash provided by financing activities was $4.0 million, consisting of $2.0 million drawn under the Company's revolving credit facility, a capital contribution from an affiliate of $1.8 million and $1.3 million net borrowings from an affiliate, partially offset by $1.0 million of principal payments on notes payable.

For the three months ended March 31, 2001, the Company received loans from an affiliate totaling approximately $3.2 million comprised of $1.0 million in direct advances, $800,000 to fund certain dry-docking expenditures and $1.4 million at the end of the quarter to fund the semi-annual Title XI payment. The forgiveness of charter hire previously paid during the first quarter was accomplished through a reduction of $1.8 million in amounts due to an affiliate and has been treated as a contribution to capital.

The Company's projected cash flows from operations and financing transactions, including those with an affiliate indicate that there is sufficient available liquidity to maintain its current level of operations through at least March 31, 2002. The Company has reached an agreement with an affiliate to assist in meeting its cash flow requirements in 2001 by deferring $2.8 million in second and third quarter charter payments until 2002. The Company has also identified additional sources of liquidity. In April 2001 the Company sold excess 48' trailer equipment for approximately $650,000. The Company owns additional equipment with a carrying value of approximately $5.8 million that is potentially available for asset based financing. In addition, the Company is exploring the possible sale/leaseback of its Jacksonville office building/truck terminal.

Management believes that as a result of cash flow from operations and financing transactions, including those with an affiliate, the Company will meet all of its working capital requirements, anticipated capital expenditures and other obligations at least through March 31, 2002.

FORWARD-LOOKING STATEMENTS

This report may contain statements that may be considered as forward-looking or predictions concerning future operations. Such statements are based on management's belief or interpretation of information currently available. These statements and assumptions involve certain risks and uncertainties and management can give no assurance that such expectations will be realized. Among all the factors and events that are not within the Company's control and could have a material impact on future operating results are general economic conditions, cost and availability of diesel fuel, adverse weather conditions and competitive rate fluctuations.

©1998 Trailer Bridge, Inc.