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

RESULTS OF OPERATIONS:

Three Months Ended September 30, 1998 and 1997

Total revenue of $18,851,977 for the three months ended September 30, 1998, increased $2,175,877 or 13.0% compared to the three months ended September 30, 1997. Based upon the deployment of two additional vessels throughout the entire period in 1998, Trailer Bridge had 54% more vessel capacity compared to the same period in 1997. Core trailer volume to Puerto Rico increased 27.0% compared to the year earlier period and total car and other vehicle volume was up 37.9% compared to the year earlier period. As a result, core trailer revenue to Puerto Rico increased $1,745,958 or 17.9% compared to the year earlier period and car and other vehicle revenue increased $667,951 or 26.0% compared to the year earlier period. Revenue from shipper owned or leased equipment moving to Puerto Rico increased $10,210 or 0.9%. Trailer volume from Puerto Rico increased 9.4% while related revenue decreased $31,530 or 1.8% compared to the year earlier period. Non-Puerto Rico revenue of $1,053,101 represented a decrease of 13.4% from the three months ended September 30, 1997.

Operating loss for the three month period ending September 30, 1998 was $397,792, a decrease of $1,914,294 from the $1,516,502 operating income in the year earlier period. Operating income was lower compared to the year earlier period due to both reduced rate levels and reduced capacity utilization levels on the 54% higher vessel capacity offered. As a result, Trailer Bridge's operating ratio was 102.1% during the third quarter of 1998 compared to the 90.9% operating ratio during the year earlier period. Net interest expense of $305,025 was up $236,956 from the year earlier period which included significant interest income on short-term investments. During the three months ended September 30, 1998, Trailer Bridge also had a gain of $61,600 related to the sale of older trailer equipment.

Operating expenses for the third quarter were reduced by a $600,000 non-recurring forgiveness of barge charterhire from Kadampanattu Corp. to Trailer Bridge in recognition of the impact of Hurricane Georges and in consideration of the efforts of Trailer Bridge to recover and repair the San Juan triple-deck ramp structure utilized by the two triple-deck barges. The ramp structure is owned by Kadampanattu Corp. and, in conjunction with its bareboat charter agreement relating to the two vessels, Trailer Bridge has unlimited use of the ramp structure during the term of the charter agreement. On September 21, the floating ramp structure became partially submerged due to the storm. Following an initial period of disruption and delay, Trailer Bridge developed alternative methods of discharging and re-loading the two roll-on, roll-off vessels and those vessels are now back on their weekly schedule. The $600,000 forgiveness of charterhire is slightly below the direct impact Trailer Bridge estimates the loss of use of the ramp structure due to Hurricane Georges had on its financial results during the third quarter. The three new Triplestack Box Carriers(TM) now deployed in Puerto Rico do not utilize the floating ramp structure and were not adversely affected by Hurricane Georges. Efforts are continuing to re-float the ramp structure but in the interim the cost related to discharging and re-loading the two roll-on, roll-off vessels using the alternative methods will be increased. The terms of the charter agreement did not obligate Kadampanattu Corp. to forgive the charterhire and Trailer Bridge does not expect that similar action will be taken in the future.

Loss before income taxes for the three months ended September 30, 1998 was $641,217, a decrease of $2,006,073 from the $1,364,856 net income before income taxes in the year earlier period. After income taxes, net loss for the third quarter was $435,605, which was significantly below proforma net income of $2,445,963 after a non-recurring tax credit for the year earlier period during which Trailer Bridge operated as an S Corporation. Net loss per share was $.04 for the three months ended September 30, 1998 compared to net income per share of $.28 for the year earlier period.

Nine Months Ended September 30, 1998 and 1997

Total revenue for the nine months ended September 30, 1998 was $53,607,702, an increase of $4,314,849 or 8.8% compared to the year earlier period. Core trailer volume to Puerto Rico increased 26.2% compared to the year earlier period and total car and other vehicle volume was up 5.8% compared to the year earlier period. As a result, core trailer revenue to Puerto Rico increased $3,954,978 or 15.6% compared to the year earlier period and car and other vehicle revenue increased $500,856 or 4.9% compared to the year earlier period. Revenue from shipper owned or leased equipment moving to Puerto Rico increased $563,298 or 18.1%. Trailer volume from Puerto Rico increased 12.8% while related revenue decreased $187,381 or 3.0% compared to the year earlier period. Non-Puerto Rico revenue of $3,305,639 represented a decrease of 10.8% from the year earlier period of 1997.

Operating income for the nine months ended was $299,122, a decrease of $4,760,519, from the $5,059,641 operating income in the year earlier period net of a non-recurring charge. Operating income was lower compared to the year earlier period due to both continued reduced rate levels and lower capacity utilization levels on the increased vessel capacity offered. As a result, Trailer Bridge's operating ratio was 99.4% during the nine months ended September 30, 1998 compared to the 89.7% operating ratio during the year earlier period. Net interest expense of $693,722 was up $102,672 from the year earlier period that included significant interest income on short-term investments. During the nine month period, Trailer Bridge also had a gain of $190,565 related to the sale of older trailer equipment.

Loss before income taxes for the nine months ended September 30, 1998 $204,035, a decrease of $4,590,725, from the year earlier period, net of a non-recurring charge. After income taxes, net loss for the nine months was $217,351, which was significantly below proforma net income of $2,707,578 after a non-recurring tax credit for the year earlier period during which Trailer Bridge operated as an S Corporation. Net loss per share was $.02 for the nine months ended compared to net income per share of $.37 for the year earlier period, after non-recurring charge.

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial condition remained strong at the end of the quarter. At September 30, 1998, available cash amounted to $3.9 million, working capital was $6.1 million and stockholders equity was equal to $33.6 million.

Net cash used by operating activities was $1.1 million for the first nine months of 1998, compared with $6.9 million provided in 1997.

Net cash used in investing activities was $13.5 million in 1998 and 22.6 million in 1997. The investment spending was primarily for the new TBC vessels and the related revenue equipment, primarily 53' containers and chassis.

The vessels were funded primarily from Title XI financing and the revenue equipment was funded primarily from the remaining proceeds of the Company's IPO in 1997. The Company entered into a $25 million revolving credit/term loan facility that can be utilized for general corporate purposes. As of September 30, 1998 the amount available on the loan facility was $14.8 million.

Management believes that cash flow from operations combined with the company's borrowing capacity under it's revolving credit/term loan facility will be adequate to meet the Company's debt service requirements, fund continued growth, and meet working capital needs.

YEAR 2000

Management recognizes the potential effect Year 2000 may have on the Company's operations and, as a result, has implemented a Year 2000 Compliance Project. The term "Year 2000 compliant" means that the software, hardware, equipment, goods or systems utilized by, or material to the physical operations, business operations, or financial reporting of an entity will properly perform date sensitive functions before, during and after year 2000.

The Company's Year 2000 Compliance Project includes an awareness phase, an assessment phase, an implementing phase, and a testing phase of our data processing network, accounting systems, computer and operating systems and software packages. The project includes surveying our major customers and suppliers. Total costs incurred to date associated with the Company's Year 2000 compliance project have been reflected in the Company's income statement throughout 1998, and were approximately $75,000.

The Company's computer hardware, operating systems, dispatch applications, PC network and other desktop applications are Year 2000 compliant as certified by the various vendors and application consultants. Year 2000 compliance for general accounting applications will be implemented and tested during the fourth quarter of 1998. Based on initial testing, Management does not anticipate any Year 2000 issues that will materially impact on operations or operating results.

The Company has surveyed its major suppliers to determine the extent to which the Company is vulnerable to third parties' failure to resolve their Year 2000 issues. The company will be able to more adequately assess its third party risk when responses are received from the majority of the entities contacted.

Management believes its planning efforts are adequate to address the Year 2000 Issue and that its risk factors are primarily those that it cannot directly control, including the readiness of its major suppliers and customers. Failure on the part of these entities to become Year 2000 compliant could result in disruption in the Company's cash receipts and disbursements functions. There can be no guarantee, however, that the systems of unrelated entities upon which the Company's operations rely will be corrected on a timely basis and will not have a material adverse effect on the Company.

The Company does not have a formal contingency plan or a timetable for implementing one. Contingency plans will be established, if they are deemed necessary, after the Company has adequately assessed the impact on operations should third parties fail to properly respond to their Year 2000 issues.

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.