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

RESULTS OF OPERATIONS:

Three Months Ended March 31, 2003 and 2002

Operating revenues for the three months ended March 31, 2003 were $19.0 million an increase of $1.5 million or 8.6%, compared to the first quarter of 2002. For the three months ended March 31, 2003, total southbound volume over Jacksonville increased 11.4% compared to the year earlier period. Northbound, total volume over Jacksonville increased 24.7% from the year ago. The effective yield of all of the southbound and northbound cargo moving via Jacksonville represented a decrease of 1.4% and 6.0%, respectively from the year earlier period. The Company's fuel surcharge is included in the Company's revenues and amounted to $762,116 for the three months ended March 31, 2003 compared to $622,686 in the year earlier period.

The Company's Jacksonville-San Juan, Puerto Rico deployed vessel capacity utilization overall during the first quarter of 2003 was 90.3% to Puerto Rico and 22.4% from Puerto Rico compared to 81.1% and 18.3%, respectively, during the first quarter of 2002. The Company had an average of 184 tractor units operating on the mainland during the three months ended March 31, 2003, generating an average of 9,326 miles per month of which 73.2% were loaded compared to 178 tractors generating an average of 9,076 miles per month at a 79.6% loaded mile factor during the year earlier period.

Operating expenses increased $2.7 million for the three months ended March 31, 2003 from $18.1 million for the same period in 2002 to $20.8 million. The increased operating expenses were primarily the result of a higher fuel prices in addition to volume related increases. Salary, wages and benefits increased $197,651 or 5.0% primarily due to an increase in property and liability insurance costs. Purchased transportation, other than related party increased $977,134 or 22.2% primarily as a result of increased purchased miles and an increase in rate for such miles. Fuel expense increased $749,988 or 46.4% from the year earlier period primarily due to an increase in the average price of fuel for the tugs that pull the Company's barges from $0.597 per gallon to $1.031 per gallon and in the average price of diesel fuel from $1.094 per gallon from the year earlier period to $1.556 per gallon. Operating and maintenance expense increased $307,676 or 7.7% primarily due to expenses associated with increased volume and increased equipment maintenance expense. Insurance and claims expense increased $203,603 or 32.5% to $829,374 primarily due to increased insurance premiums. Communications and utilities expense decreased $50,051 or 31.5% to $108,663 primarily as a result of use of a new telephone carrier and termination of the Newark service. Depreciation and amortization expense decreased $65,317 or 7.1% to $855,273 primarily due to the full depreciation of the Company's tractor fleet during 2002. Other operating expense increased $505,126 or 166.1% from the year earlier period primarily as a result of the effect of the Newark shutdown on other operating expenses in 2002. The operating loss for the three months ended March 31, 2002 was $1.8 million, as compared to an operating loss of $587,387 in the prior year period. As a result of the above, the operating ratio was 109.6% during the three months ended March 31, 2003 compared to the 103.3% operating ratio during the year earlier period. Net interest expense of $697,210 was down $25,937 from the year earlier period due primarily to lower interest rates.

As a result of the factors described above the company reported a net loss for the three months ended March 31, 2003 of $2.5 million, compared to a net loss of $1.3 million in the year earlier period. The net loss applicable to common shares for the three months ended March 31, 2003 after accretion of preferred stock discount was equivalent to $.31 per share as compared to $.13 per share for the year earlier period.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operations was $214,383 during the three months ended March 31, 2003 compared to net cash used by operations of $1.8 million during the same period in 2002.

At March 31, 2003, cash amounted to $2.4 million, working capital was a negative $15.5 million due to the presentation of the Company's term loan and revolving credit facility totaling $15.0 million as short term due to its expiration at January 31, 2004, and stockholders' equity was $7.4 million.

As of March 31, 2003, the Company had $6.5 million drawn under the credit facility against a borrowing base of $6.6 million that is secured by net receivables of $10.6 million.

Subsequent to the end of the three-month period ended March 31, 2003 the Company commenced payment of full charterhire to an affiliate, Kadampanattu Corp.

The Company believes the projected cash flows from operations and continued funding of its revolving credit line will be sufficient for it to meet its ongoing operational needs and debt service obligations through at least the end of 2003. Ultimately, the Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing or refinancing as may be required, and its ability to attain successful operations.

KNOWN TRENDS DURING SECOND QUARTER of 2003

Most recently, for the six-week period ending May 9, 2003, a period representing almost half of the second quarter, deployed vessel capacity utilization was 98.3% southbound and 27.7% northbound, which resulted in average weekly revenue of $1.7 million. This average actual weekly revenue level is 16.1% above the overall average weekly revenues for the first quarter of 2003. The Company believes that the revenue generated from these volume levels and vessel capacity utilization, if such conditions continue for the remainder of the second quarter will result in profitable operations and improved cash flow. Furthermore, based upon increased volume from specific existing accounts, increased customer commitments and actual growing booking trends, the Company believes that these actual volume and revenue levels are sustainable and therefore more indicative of what to expect going forward than any recent actual historical period. Despite the improved volume and vessel capacity utilization experienced by the Company since early March 2003, no assurance can be made that such improved volume and vessel capacity utilization will continue or that competitive pressures will not increase.

FORWARD-LOOKING STATEMENTS

This report, particularly the preceding discussion of "Liquidity and Capital Resources" and "Known Trends During Second Quarter of 2003" 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 risk of economic recessions, severe weather conditions, changes in the price of fuel, changes in demand for transportation services offered by the Company, changes in services offered by the Company's competitors, risks of transportation generally and changes in rate levels for transportation services offered by the Company.

©1998 Trailer Bridge, Inc.