May 24, 2004
TRAILER BRIDGE INC (TRBR)
Quarterly Report (SEC form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS:
EXECUTIVE SUMMARY
The Company produces revenue by the movement of freight by water to and from
Puerto Rico from the continental United States through
its terminal facility in Jacksonville, Florida. The Company also generates revenue from the movement
of freight within the continental United
States by truck when such movement complements its core business of moving freight to and from Puerto Rico.
The Company's operating
expenses consist of the cost of the equipment, labor, facilities, fuel and administrative support necessary to move freight to
and from Puerto
Rico and within the continental United States. The Puerto Rico lane in which the Company operates had been subjected to overcapacity
and intense competition over the five years prior to 2003. During 2003, the Puerto
Rico lane stabilized and competition became less intense.
The Company has increased utilization of its vessels during 2003 and in the second half of 2003
saw the severe rate compression that had
occurred since 1998 begin to unwind.
Three Months Ended March 31, 2004 Compared to the Three Months Ended March
31.
The following table sets forth the indicated items as a percentage of net
revenues for three months ended March 31, 2004 and 2003.
Operating Statement - Margin Analysis
(% of Operating Revenues)
1st Qtr 2004 1st Qtr 2003
---------------- ----------------
Operating Revenues 100% 100%
Salaries, wages, and benefits 16 21
Rent and purchased transportation:
Related Party 8 9
Other 24 28
Fuel 11 12
Operating and maintenance
(exclusive of depreciation shown separately below) 24 25
Taxes and licenses 1 1
Insurance and claims 3 4
Communications and utilities 1 1
Depreciation and amortization 3 4
(Gain) Loss on sale of equipment 0 (0)
Other operating expenses 4 4
---------------- ----------------
Total Operating Expenses 95 109
Operating income (loss) 5 (9)
Net interest expense (3) (4)
---------------- ----------------
Net income (loss) 2% (13)%
================ ================
The Company's operating ratio (operating expense stated as a percentage of
operating revenues) improved from 109% during the
three months ended March
31,2003 to 95% during the three months ended March 31, 2004. This improvement is
more fully explained
under operating expense caption set forth below.
Revenues
The following table sets forth by percentage and dollar, the changes in the
Company's revenue by sailing route and freight carried:
Revenue & Volume changes for three months ended March 31, 2004 compared
to Three Months Ended March 31, 2003.
Overall Southbound Northbound
---------------- ----------------- ----------------
Volume Percent Change:
Core container & trailer 11.9% 6.5% 31.3%
Auto and other cargos 4.4% (0.5)% 42.0%
SOLs 21.4% 30.6% (42.9)%
Domestic linehaul (40.4)%
Revenue Change ($millions):
Core container & trailer 1.9 1.5 0.4
Auto and other cargos 0.5 0.4 0.1
SOLs 0.1 0.2 (0.1)
Domestic linehaul (0.2)
Other Revenues 1.2
-------------
Total Revenue Change 3.5
-------------
Vessel capacity utilization on the core continental U.S. to Puerto Rico
traffic lane was 91.8% during first quarter of 2004, compared to 90.4%
during first quarter of 2003.
The Company's revenues amounted to $22.9 million during the three months
ended March 31, 2004 and $19.4 million in the same period in 2003.
The Company's rates as well as its ability to pass along other accessorial charges
increased throughout the period. The Company's fuel surcharge is
included in the Company's revenues and amounted to $1.2 million during the three months ended
March 31,2004 compared to $.8 million in the same
period in 2003. The Company's demurrage is included in the Company's revenues and amounted to $.8 million
during the three months ended March 31,
2004 compared to $.4 million in the same
period in 2003. Demurrage is a charge assessed for failure to return empty
freight equipment on time. The
Company's charter hire is included in the Company's revenues and amounted to $.2 million during the three months ended
March 31,2004 compared
to no charter hire in the same period in 2003. Charter hire is rental revenue for vessels not in use in liner service.
Operating expenses
Salary, wages and benefits decreased by 9.4% due to lower employee health
insurance expense as a result of switching insurance providers.
Purchased transportation other than to a related party increased $.2 million or
3.9%primarily due to increases in tug charter hire due to switching to
more fuel-efficient
tugs. The Company was able to offset higher fuel cost through the use of rail
service and more fuel-efficient tugs pulling the
Company's vessels. Operation and
maintenance expense increased $.8 million or 15.8% principally due to $.3 million
in higher stevedoring and
wharfage costs related to increased volume and
increased stevedoring rates in Jacksonville; $.2 million for dry docking that
occurred in the first
quarter of 2004. As a result, the Company's operating ratio
improved to 95% during the three months ended March31, 2004 from 109% in the
same
period in 2003.
As a result of the factors described above, the Company reported a net income
of $.4 million for the three months ended March 31, 2004 compared
to net loss
of$2.5 million in the same period in 2003.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $.9 million in the first quarter of
2004compared to net cash provided by operations of $.2 million in 2003. This
represented an improvement of $.7 million primarily resulting from an
increase in net income of $2.9 million, partially offset by $1.6 million increase
in accounts receivable. Net cash used in financing activities was $.3 million
in2004 compared to net cash used in financing activities of $39,245 in 2003
representing a difference of $.3 million the decrease principally results
from the larger loan repayments and $.1 million paid to its new lender in
connection with its refinancing that occurred in April 2004. At March 31, 2004,
cash amounted to approximately $1 million, working capital was a
positive
$.5million, and stockholders' equity was approximately $5 million.
At March 31, 2004, the Company had $13.4 million due under its senior credit
facility, which expired January 31, 2004. In addition,
the Company had
$8.1million due to related parties, all of which was due in 2004. In April
2004,after receiving extensions from its then
existing senior lender, the Company refinanced this debt with a new senior lender. The new debt consists of
a revolving line of credit in the
amount of $20.0 million and a term loan in the amount of $3.0 million, both of which are due in April 2007. The new
debt provides for
interest at prime plus 1.5% for the revolving line of credit and prime plus 7.5% for the term loan and is payable monthly. The revolving line
of credit is subject to a borrowing base calculation but requires the Company
maintain a minimum availability of $2.0 million. The borrowing
base is
based ona percentage of eligible accounts receivable and revenue equipment, as
defined. On April 23, 2004, the Company received
$3.0 million in proceeds from
the term loan and borrowed $11.0 million under the credit facility against a
borrowing base of $14.5 million.
Both obligations are secured by net receivables
of $13.2million and revenue equipment of $13.8 million. As of March 31, 2004,
the former
senior credit facility was secured by net receivables of $13.0 million and
revenue equipment of $13.8 million. Related Party debt of $4.9 million,
due in October 2004, has been scheduled for payment in May 2007. Additionally,
$.7million of the 2004 scheduled repayment of related party
debt has been rescheduled for 36 monthly principal payments commencing January 2005.
Effective March 1, 2004 the Company's affiliate,
Kadampanattu Corp., agreed to
defer $1.0million of charter hire to be paid by the Company in 2004. This
deferred amount is payable in 36
monthly payments beginning in January 2005.
These factors along with increased rates and vessel utilization, are expected to
allow the Company
to meet its working capital requirements in 2004 and through
December 31, 2005.The Company's business plan does not require the full
utilization
of the revolving credit facility.
CRITICAL ACCOUNTING POLICIES
The Company believes that there have been no significant changes to our
critical accounting policies during the three months ended March 31, 2004,
as
compared to those we disclosed in Management's Discussion and Analysis of
Financial Condition and Results of Operations in our Annual Report
on Form 10-K
for the year ended December 31, 2003.
KNOWN TRENDS DURING SECOND QUARTER of 2004
Most recently, for the six-week period ending May 14, 2004, a period
representing almost half of the second quarter, deployed vessel capacity
utilization was 91.8% southbound and 29.7% northbound, which resulted in
average weekly revenue of $1,836,409 million compared to $1,757,177
during the first quarter.
FORWARD-LOOKING STATEMENTS
This report, particularly the preceding discussion of "Liquidity and
Capital Resources" and "Known Trends During Second Quarter of
2004" 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.
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