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

RESULTS OF OPERATIONS:

Three Months Ended June 30, 1999 and 1998

Total revenue was $22,686,417 for the three months ended June 30, 1999, an increase of $4,278,095 or 23.2% compared to the second quarter of 1998. Trailer Bridge had 2.7% more overall vessel capacity deployed to Puerto Rico compared to the second quarter of 1998 as full twice weekly sailing frequency was initiated but not fully in place throughout the year earlier quarter. Core trailer volume to Puerto Rico increased 50.9% and total car and other vehicle volume was up 31.3% compared to the year earlier period. As a result, core trailer revenue to Puerto Rico increased $3,071,883 or 32.2% and car and other vehicle revenue increased $1,023,281 or 25.4% compared to the year earlier period. For the second quarter, revenue from shipper owned or leased equipment moving to Puerto Rico decreased $71,300 or 5.7% from the year earlier period. Volume from Puerto Rico increased 15.4% while related revenue increased $96,028 or 4.0% compared to the second quarter of 1998. Total non-Puerto Rico revenue of $1,318,806 represented an increase of 13.6% from the second quarter of 1998.

Second quarter operating income was $140,417, a decrease of $270,455 from the $410,872 operating income in the year earlier period. Operating income was lower compared to the year earlier period due to $709,335 of additional costs related to the disruption resulting from the loss of use of the San Juan ramp structure due to Hurricane Georges. As a result, Trailer Bridge's operating ratio was 99.4% during the second quarter of 1999 compared to the 97.8% operating ratio during the year earlier period. Net interest expense of $816,695 was up $613,595 from the year earlier period that included significant interest income on short-term investments. During the second quarter of 1999, Trailer Bridge also had a gain of $48,866 related to the sale of older trailer equipment.

The $709,335 of estimated additional costs related to the hurricane situation included $422,123 in operating and maintenance costs (comprised primarily of stevedoring and port related items), $257,883 in rent and purchased transportation (comprised primarily of terminal equipment rental, trucking expense in San Juan and the U.S. and revenue equipment rental), and $29,329 in salaries and wages.

The San Juan ramp structure was back in service in mid-April but further refinements were needed before stevedoring related costs began better resembling pre-Hurricane Georges levels as they did later in the quarter. Throughout the second quarter, stevedoring related costs lessened as Hurricane Georges related cost dissipated.

Loss before income taxes for the second quarter was $627,412, a decrease of $935,639 from net income of $308,227 for the year earlier period. After income taxes, net loss for the second quarter was $399,377 compared to net income of $149,098 for the year earlier period. Net loss per share was $.04 for the second quarter compared to net income per share of $.02 for the year earlier period.

For the second quarter of 1999, total volume to Puerto Rico including cars and other vehicles grew 36.6% compared to the same period last year, well above the 2.7% increase in deployed vessel capacity. Total volumes from Puerto Rico grew 15.4% or also well above the growth in deployed vessel capacity. During that period, total revenue to and from Puerto Rico increased 27.1% and 4.0%, respectively, implying reductions of 7.0% and 9.9%, respectively, in the overall average yield on Trailer Bridge's Puerto Rico business compared to the same period last year. The Company's Puerto Rico deployed vessel capacity utilization during the second quarter was 90.6% to Puerto Rico and 30.6% from Puerto Rico. These were above comparable figures of 68.1% to Puerto Rico and 28.0% from Puerto Rico during the second quarter of 1998. They are, however, well below the benchmark utilization of 96.0% and 51.6% to and from Puerto Rico achieved during all of 1995.

Six Months Ended June 30, 1999 and 1998

Total revenue was $45,437,021 for the six months ended June 30, 1999, an increase of $10,681,296 or 30.7% compared to the six months ended June 30, 1998. Trailer Bridge had 14.8% more overall vessel capacity deployed to Puerto Rico compared to the six months ended June 30, 1998 as full twice weekly sailing frequency was initiated but not fully in place throughout the prior year period. Core trailer volume to Puerto Rico increased 60.1% and total car and other vehicle volume was up 21.8% compared to the six months ended June 30, 1998. As a result, core trailer revenue to Puerto Rico increased $8,325,999 or 46.8% and car and other vehicle revenue increased $1,898,745 or 25.1% compared to the six months ended June 30, 1998. For the six months ended June 30, 1999, revenue from shipper owned or leased equipment moving to Puerto Rico increased $130,212 or 5.1% from the six months ended June 30, 1998. Volume from Puerto Rico increased 16.5% while related revenue increased $158,943 or 3.6% compared to the six months ended June 30, 1998. Total non-Puerto Rico revenue of $2,406,495 represented an increase of $8,196 from the six months ended June 30, 1998.

Operating loss for the six months ended June 30, 1999 was $1,938,018, a decrease of $2,634,932 from the $696,914 operating income in the six months ended June 30, 1998. Operating income was lower compared to the six months ended June 30, 1999 due to $3,092,245 of additional costs related to the disruption resulting from the loss of use of the San Juan ramp structure due to Hurricane Georges. Approximately $2.3 million of these costs occurred in the first quarter of 1999 and approximately $700,000 of these costs occurred in the early part of the second quarter of 1999. As a result, Trailer Bridge's operating ratio was 104.3% during the six months ended June 30, 1999 compared to the 98.0% operating ratio during the six months ended June 30, 1998. Net interest expense of $1,469,488 was up $1,080,791 from the six months ended June 30, 1998 that included significant interest income on short-term investments. During the six months ended June 30, 1999, Trailer Bridge also had a gain of $79,283 related to the sale of older trailer equipment.

The $3,092,245 of estimated additional costs related to the hurricane situation included $1,598,946 in operating and maintenance costs (comprised primarily of stevedoring and port related items), $1,263,113 in rent and purchased transportation (comprised primarily of terminal equipment rental, trucking expense in San Juan and the U.S. and revenue equipment rental), $150,852 in salaries and wages, $17,449 in insurance and claims and $61,885 in communications and other operating expenses.

Loss before income taxes for the six months ended was $3,328,223, a decrease of $3,765,405 from the income before income taxes of $437,182 for the six months ended June 30, 1998. After income taxes, net loss for the six months ended June 30, 1999 was $2,083,056 compared to net income of $218,254 for the six months ended June 30, 1998. Net loss per share was $.21 for the six months ended June 30, 1999 compared to net income per share of $.02 for the six months ended June 30, 1998.

For the six months ended June 30, 1999, total volume to Puerto Rico including cars and other vehicles grew 46.0% compared to the six months ended June 30, 1998, well above the 14.8% increase in deployed vessel capacity. Total volumes from Puerto Rico grew 14.8% slightly below the 16.5% growth in deployed vessel capacity. During the six months ended June 30, 1999, total revenue to and from Puerto Rico increased 37.1% and 7.1%, respectively, implying reductions of 6.1% and 6.7%, respectively, in the overall average yield on Trailer Bridge's Puerto Rico business compared to the six months ended June 30,1998. The Company's Puerto Rico deployed vessel capacity utilization during the six months ended June 30, 1999 was 89.7% to Puerto Rico and 28.7% from Puerto compared to 70.5% and 29.1%, respectively, for the six months ended June 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES:

At June 30, 1999, available cash amounted to $3.3 million, working capital was $2.4 million and stockholders equity was equal to $29.3 million. Net cash used by operations was $2.2 million in the six months ended June 30, 1999 compared to net cash provided by operations of $345,818 in the same period in 1998. Net cash provided by operations in the second quarter of 1999 was $228,086 a significant improvement over the $2.4 million used in the first quarter of 1999, reflecting the dissipation of Hurricane Georges related stevedoring expenses throughout the second quarter. Net cash used in investing activities amounted to $5.0 million in the six month period ending June 30, 1999 reflecting $6.5 million in capital expenditures partially offset by a decrease of restricted cash and investments of $515,281 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 $861,884 in proceeds from the sale of older trailer equipment. Net cash provided by financing activities was $5.0 million consisting of a $7.0 million draw down under the Company's revolving credit facility partially offset by $2.0 million in principal payments on notes payable. The Company voluntarily reduced the capacity of its revolving credit facility to $22 million. The Company does not expect to utilize this revolving credit facility for the remainder of 1999.

Management believes that cash flow from operations combined with equipment financings will be adequate to meet the Company's debt service requirements, its anticipated capital expenditures, and to meet its working capital needs for the remainder of 1999.

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 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 were implemented throughout the year and finally tested on July 1, 1999. Based on the results of the 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's contingency plan is designed to assure that the Company will be able to continue to provide services in the event that third party customers or suppliers fail to properly respond to their Year 2000 issues.

FORWARD-LOOKING STATEMENTS:

This report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The matters discussed in this report include statements regarding the intent, belief or current expectations of the Company, its directors or its officers with respect to the future operating performance of the Company. Investors are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward looking statements as a result of various factors. Without limitation, these risks and uncertainties include the risks of weather, economic recessions, changes in demand for transportation services offered by the Company, and changes in rate levels for transportation services offered by the Company.

©1998 Trailer Bridge, Inc.