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

RESULTS OF OPERATIONS:

Three Months Ended September 30, 1999 and 1998

Total revenue for the three months ended September 30, 1999, was $20,625,799, an increase of $1,773,822 or 9.4% compared to the third quarter of 1998. Trailer Bridge had 7.5% less overall vessel capacity deployed to Puerto Rico compared to the third quarter of 1998 primarily due to one less voyage of Trailer Bridge's large roll-on, roll-off vessels during the period because of Hurricane Floyd. The tugboat that was towing Trailer Bridge's vessel the week of the storm suffered a casualty and needed to be replaced. While neither Trailer Bridge's vessel nor its cargo was damaged by this marine casualty, the time and recovery efforts of substituting a new tug caused a major schedule disruption that resulted in one less roll-on, roll-off voyage.

Core trailer volume to Puerto Rico increased .5% compared to the year earlier period and total car and other vehicle volume was up 15.3% compared to the year earlier period. As a result, core trailer revenue to Puerto Rico increased $364,726 or 3.2% compared to the year earlier period and car and other vehicle revenue increased $281,185 or 8.7% compared to the year earlier period. For the third quarter, revenue from shipper owned or leased equipment moving to Puerto Rico decreased $205,216 or 18.0% from the year earlier period. Volume from Puerto Rico increased 37.6% while related revenue increased $569,585 or 31.2% compared to the third quarter of 1998. Total non-Puerto Rico revenue of $1,893,661 represented an increase of 67.6% from the third quarter of 1998.

Third quarter operating income was $1,464,174, an increase of $1,861,966 from the $397,792 operating loss in the year earlier period. Operating income during the period was significantly impacted by two non-recurring events that were partially offsetting. During the period Trailer Bridge recognized a recovery of certain operating expenses in the amount of $3,710,000 related to costs associated with the floating ramp structure formerly used in Jacksonville which have been determined to be insurable losses and certain other excess miscellaneous expenses related to the floating ramp system. The recovery was partially offset by the non-recurring revenue effect of the lost voyage described above. Revenue for the roll-on, roll-off voyage immediately preceding was $1,108,660. Continuing rate pressure in the Puerto Rico freight market further offset the non-recurring insurance amount. As a result of the above, the operating ratio was 92.9% during the third quarter of 1999 compared to the 102.1% operating ratio during the year earlier period. Net interest expense of $889,423 was up $584,398 from the year earlier period due to increased debt. During the third quarter of 1999, Trailer Bridge also had a gain of $4,008 related to the sale of older trailer equipment.

Income before income taxes for the third quarter was $578,759, an increase of $1,219,976 from the year earlier period. After income taxes, net income for the third quarter was $345,617 compared to net loss of $435,605 for the year earlier period. Net income per share was $.04 for the third quarter compared to net loss per share of $.04 for the year earlier period.

For the third quarter of 1999, total volume to Puerto Rico including cars and other vehicles decreased 1.7% compared to the same period last year, above the 7.5% decrease in deployed southbound vessel capacity. Total volumes from Puerto Rico grew 37.8% or well above the 2.7% decrease in deployed northbound vessel capacity. During that period, total revenue to and from Puerto Rico increased 2.8% and 31.2%, respectively, implying an increase of 4.6% and a decrease of 4.8%, 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 third quarter was 82.7% to Puerto Rico and 32.8% from Puerto Rico. These were above comparable figures of 77.8% to Puerto Rico and 23.2% from Puerto Rico during the third quarter of 1998. The third quarter capacity utilization levels continue to be below the benchmark utilization of 96.0% and 51.6% to and from Puerto Rico achieved during all of 1995.

Nine Months Ended September 30, 1999 and 1998

Total revenue was $66,062,820 for the nine months ended September 30, 1999, an increase of $12,455,118 or 23.2% compared to the nine months ended September 30, 1998. Trailer Bridge had 8.1% more overall vessel capacity deployed to Puerto Rico compared to the nine months ended September 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 35.8% and total car and other vehicle volume was up 73.9% compared to the nine months ended September 30, 1998. As a result, core trailer revenue to Puerto Rico increased $8,690,725 or 29.7% and car and other vehicle revenue increased $2,179,930 or 20.2% compared to the nine months ended September 30, 1998. For the nine months ended September 30, 1999, revenue from shipper owned or leased equipment moving to Puerto Rico decreased $75,004 or 2.0% from the nine months ended September 30, 1998. Volume from Puerto Rico increased 21.0% while related revenue increased $638,098 or 10.3% compared to the nine months ended September 30, 1998. Total non-Puerto Rico, including Atlantic Highway, revenue of $4,300,156 represented an increase of $771,738 from the nine months ended September 30, 1998.

Operating loss for the nine months ended September 30, 1999 was $473,843, a decrease of $772,965 from the $299,122 operating income in the nine months ended September 30, 1998. Operating income was lower compared to the nine months ended September 30, 1998 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. These additional expenses were offset in the third quarter by a cost recovery of $3.7 million from an unrelated ramp casualty. As a result, Trailer Bridge's operating ratio was 100.7% during the nine months ended September 30, 1999 compared to the 99.4% operating ratio during the nine months ended September 30, 1998. Net interest expense of $2,358,912 was up $1,665,190 from the nine months ended September 30, 1998 that included significant interest income on short-term investments. During the nine months ended September 30, 1999, Trailer Bridge also had a gain of $83,921 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 nine months ended September 30, 1999 was $2,749,464, a decrease of $2,545,429 from the loss before income taxes of $204,035 for the nine months ended September 30, 1998. After income taxes, net loss for the nine months ended September 30, 1999 was $1,737,439 compared to a net loss of $217,351 for the nine months ended September 30, 1998. Net loss per share was $.18 for the nine months ended September 30, 1999 compared to net loss per share of $.02 for the nine months ended September 30, 1998.

For the nine months ended September 30, 1999, total volume to Puerto Rico including cars and other vehicles grew 27.3% compared to the nine months ended September 30, 1998, well above the 6.6% increase in deployed vessel capacity. Total volumes from Puerto Rico grew 21.9% also well above the 9.6% growth in deployed vessel capacity. During the nine months ended September 30, 1999, total revenue to and from Puerto Rico increased 24.7% and 14.1%, respectively, implying reductions of 2.1% and 6.4%, respectively, in the overall average yield on Trailer Bridge's Puerto Rico business compared to the nine months ended September 30, 1998. The Company's Puerto Rico deployed vessel capacity utilization during the nine months ended September 30, 1999 was 87.4% to Puerto Rico and 30.0% from Puerto compared to 73.2% and 27.0%, respectively, for the nine months ended September 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1999, available cash amounted to $2.0 million, working capital was $2.3 million and Stockholders equity was equal to $29.6 million. Net cash used by operations was $1.5 million in the nine months ended September 30, 1999 compared to net cash used by operations of $1.1 million in the same period in 1998. Net cash used in investing activities amounted to $5.8 million in the nine-month period ending September 30, 1999, reflecting $7.3 million in capital expenditures. This was partially offset by a decrease of restricted cash and investments of $507,527 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 first quarter. Net cash provided by financing activities was $3.7 million consisting of a $7.0 million draw down under the Company's revolving credit facility partially offset by $3.3 million in principal payments on notes payable.

Preliminary review of October, 1999 results indicates that the Company generated a profit and positive cash flow from operations for that period sufficient to meet all obligations. Management believes that available cash balances and cash flow from operations combined with possible transactions with Kadampanattu Corp., an affiliate, 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 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 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. 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 1999, and were approximately $75,000 in 1998 and $15,000 in 1999.

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.

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.