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

RESULTS OF OPERATIONS:

Three Months Ended March 31, 1999 and 1998

Operating revenues for the three months ended March 31, 1999 were $22,750,604 an increase of $6,403,201 or 39.2%, compared to the first quarter of 1998. Based upon the deployment of an additional vessel, Trailer Bridge had 29.8% more overall vessel capacity deployed to Puerto Rico compared to the first quarter of 1998. Core trailer volume to Puerto Rico increased 71.8% compared to the year earlier period and total car and other vehicle volume was up 35.8% compared to the year earlier period. As a result, core trailer revenue to Puerto Rico increased $5,454,116 or 63.8% compared to the year earlier period and car and other vehicle revenue increased $875,464 or 24.7% compared to the year earlier period. For the first quarter, revenue from shipper owned or leased equipment moving to Puerto Rico increased $201,512 or 15.9% from the year earlier period. Volume from Puerto Rico increased 14.2% while related revenue increased $222,116 or 10.8% compared to the first quarter of 1998. Non-Puerto Rico revenue of $1,087,689 represented a decrease of 12.1% from the first quarter of 1998.

First quarter operating loss was $2,078,435 a decrease of $2,364,477 from the $286,042 operating income in the year earlier period and an increase of $1,266,336 from the operating loss in the fourth quarter of 1998. Operating income was lower compared to the year earlier period primarily due to $2.4 million of additional costs related to the disruption resulting from the continued loss of use of the San Juan ramp structure due to Hurricane Georges. The favorable impact of the increased volume was offset by reduced rate levels and the impact of the new coastwise service. As a result, Trailer Bridge's operating ratio was 109.1% during the first quarter of 1999 compared to the 98.3% operating ratio during the year earlier period. Net interest expense of $652,793 was up $467,196 from the year earlier period that included significant interest income on short-term investments. During the first quarter of 1999, Trailer Bridge also had a gain of $30,417 related to the sale of older trailer equipment.

The $2,382,910 of estimated additional costs related to the hurricane situation included $1,176,823 in operating and maintenance costs (comprised primarily of stevedoring and port related items), $1,005,230 in rent and purchased transportation (comprised primarily of terminal equipment rental, trucking expense in San Juan and the U.S. and revenue equipment rental), $121,523 in salaries and wages, $17,448 in insurance and claims and $61,886 in communications and other operating expenses.

The inability to utilize the San Juan ramp necessitated alternative methods of discharging and re-loading the two roll-on, roll-off vessels that nearly quadrupled cargo operations time while at the same time reducing available vessel space. The resulting schedule tightness and uncertainty exacerbated costs beyond those directly related to San Juan cargo operations, including trucking costs on the mainland. The Company's goal during this period of disruption was to continue to provide a high level of service to customers despite certain adverse cost consequences. The new Triplestack Box Carriers™ now deployed in Puerto Rico do not utilize the floating ramp structure and were not adversely affected by Hurricane Georges. The ramp structure was re-floated on January 11. Following repairs, including filling tanks with permanent flotation foam, it was utilized for partial cargo operations on March 19 and full cargo operations in mid-April.

Loss before income taxes for the first quarter was $2,700,811, a decrease of $2,829,766 from the year earlier period. After income taxes, net loss for the first quarter was $1,683,679, which was well below net income of $69,156 for the year earlier period. Net loss per share was $.17 for the first quarter compared to net income per share of $.01 for the year earlier.

For the first quarter of 1999, total volume to Puerto Rico including cars and other vehicles grew 55.5% compared to the same period last year, well above the 29.8% increase in deployed vessel capacity. Total volume from Puerto Rico grew only 14.2% or less than half the growth in deployed vessel capacity. During that period, total revenue to and from Puerto Rico increased 48.5% and 10.8%, respectively, implying reductions 4.5% and 3.0%, respectively, in the overall average yield on Trailer Bridge's Puerto Rico business compared to the same period last year. Compared to the fourth quarter of 1998, the overall average yield on Trailer Bridge's business to Puerto Rico increased 1.4% and the overall average yield on business from Puerto Rico increased 2.2%. The Company's Puerto Rico deployed vessel capacity utilization during the first quarter was 88.1% to Puerto Rico and 26.8% from Puerto Rico. These were generally above comparable figures of 73.5% and 87.8% to Puerto Rico and 30.5% and 25.5% from Puerto Rico during the first and fourth quarters of 1998, respectively. They are, however, well below the benchmark utilization of 96.0% and 51.6% to and from Puerto Rico achieved during all of 1995.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1999, available cash amounted to $3.9 million, working capital was $2.6 million and stockholders' equity was equal to $29.7 million. Net cash used by operations was $2.4 million in the three months ended March 31, 1999 compared to net cash provided by operations of $974,358 in the same period in 1998. Net cash used in investing activities amounted to $37,736 in the three month period ending March 31, 1999 reflects $993,681 in capital expenditures partially offset by a decrease of restricted cash and investments of $522,656 representing the proceeds of the Company's Title XI bond issuances which were used to fund the construction of the Company's new Triplestack Box Carriers, the last of which was delivered in the period and $430,000 in proceeds from the sale of trailer equipment. Net cash provided by financing activities was $734,863 consisting of a $2.0 million draw down under the Company's revolving credit facility partially offset by $1.3 million in principal payments on notes payable.

Management believes that cash flow from operations combined with the Company's borrowing capacity will be adequate to meet the Company's debt service requirements, its anticipated capital expenditures, and to meet its 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 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 expensed and to date total approximately $75,000.

The Company's computer hardware, operating systems, dispatch applica- tions, 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.