SOURCE: TBS International Limited

March 15, 2006 18:09 ET

TBS International Limited Reports Quarter and Year Ended December 31, 2005 Financial Results

HAMILTON, BERMUDA -- (MARKET WIRE) -- March 15, 2006 -- TBS International Limited (NASDAQ: TBSI), an ocean transportation services company that offers worldwide shipping solutions through liner, parcel and bulk transportation services, announced today its financial and operating results for the fourth quarter and full year ended December 31, 2005.

Fourth Quarter 2005 Results:

For the fourth quarter ended December 31, 2005, total revenues were $67.6 million, an increase of 15.6% over the comparable quarter of the preceding year. Net income for the 2005 quarter was $11 million, an increase of 29.4% over the same period of 2004. EBITDA, which is a non-GAAP measure, was $19.8 million for the fourth quarter 2005, an increase of 43.5% over the same period in 2004. Please see later in this press release for a reconciliation of EBITDA to net income.

Earnings per share on a diluted basis for the fourth quarter 2005, calculated on 28,088,329 weighted average common shares outstanding, was $0.39.

An average of 35 vessels were operated during the fourth quarter of 2005 compared to 28 vessels during the fourth quarter of 2004.

The total revenues of $67.6 million during the fourth quarter 2005 include voyage revenues of $46.2 million, time charter revenues of $21.0 million and other revenues of $0.4 million.

Voyage revenues in the fourth quarter 2005 was $46.2 million, an increase of 16.4% over the $39.7 million in the fourth quarter of 2004. Average freight rates decreased 14.0% from $56.55 per ton in the 2004 quarter to $48.63 per ton in the 2005 quarter while tons of cargo carried increased by 249,000 tons or 35.5% from 702,000 tons in the 2004 quarter to 951,000 tons in the 2005 quarter.

Time charter revenue in the fourth quarter 2005 was $21.0 million, an 11.7% increase over the $18.8 million in fourth quarter 2004. The average daily time charter-out rate in the 2005 quarter was $15,317, a decrease of 19.7% compared to the average daily rate of $19,078 in the 2004 quarter.

Year Ended 2005 Results:

For the year ended December 31, 2005, total revenue was $248.0 million, an increase of 18.8% over 2004. Net income for 2005 was $53.3 million, an increase of 27.2% over 2004. EBITDA, which is a non-GAAP measure, was $80.1 million for 2005, an increase of 40.3% over 2004.

Earnings per share on a fully diluted basis for 2005, calculated on 24,310,909 weighted average common shares outstanding, was $1.97.

An average of 31 vessels were operated during 2005 compared to 25 vessels in 2004.

The total annual revenues of $248.0 million in 2005 include voyage revenues of $175.6 million, time charter revenues of $71.5 million and other revenues of $0.9 million.

Voyage revenue, which represented 70.8% of our total revenues in 2005, was $175.6 million, an increase of 11.3% from the $157.8 million in 2004. Excluding high-volume low freighted aggregates bulk cargo, average freight rates increased 7.2% from $52.79 per ton in 2004 to $56.58 per ton in 2005 while tons of cargo carried increased by 255,000 tons or 9% from 2,837,000 tons in 2004 to 3,092,000 tons in 2005.

Time charter revenues, which represented 28.8% of our total revenues in 2005, were $71.5 million, a 41.0% increase over the $50.7 million in 2004. The average daily time charter-out rate in 2005 was $16,785 per day, a decrease of 8% compared to the average daily rate of $18,254 in 2004.

Voyage expenses, which include fuel, commissions, port call charges and stevedoring increased by 24.1% in 2005 from $60.7 million in 2004 to $75.3 million in 2005. The bulk of this increase is attributable to fuel expense and port call charges. Fuel expense increased by 52.2% from $18.4 million in 2004 to $28 million in 2005 reflecting a higher average price per metric ton ("MT") from $ 220 per MT in 2004 to $ 300 per MT in 2005 and an increase in consumption given the higher number of vessels we operated in 2005. Port call expense increased by 22.3% from $13.9 million in 2004 to $17 million in 2005, reflecting the 873 port calls in 2005 as compared to 775 in 2004, resulting from the growth of our business and fleet in 2005 coupled with an increase in the average duration of port calls in 2005 compared to 2004.

Vessel expenses, which consist of operating expenses relating to owned vessels, such as crewing, stores, maintenance, insurance and drydocking, in addition to charter hire for ships we charter-in and the occasional space charter, decreased by 8.4% in 2005, from $79.3 million in 2004 to $72.6 million in 2005. This reflects the change in the composition of our fleet from an average of 15 owned and 10 chartered-in vessels in 2004 to an average of 26 owned and 5 chartered-in vessels in 2005.

General and administrative expenses increased from $7.3 million in 2004 to $17.6 million in 2005. This is primarily due to the acquisition of our service companies, Roymar and TBS Shipping, which required us to include their operating costs. It is also partly due to the compensation expenses incurred in connection with our initial public offering.

Interest expense increased by 82.4% from $5.1 million in 2004 to $9.3 million in 2005. This reflects the additional long-term borrowings of $95 million in 2005 to finance our fleet expansion during the year as well as an overall increase in interest rates.

Management Commentary:

Joseph E. Royce, Chairman and Chief Executive Officer and President stated: "We are pleased to report solid operational and financial results for the fourth quarter and the full year 2005, a pivotal year in the development of TBS International. On June 29, 2005, we concluded the offering of 7,000,000 common shares at $ 10 per share raising a total of $ 65.1 million after underwriting fees but before expenses and we became a publicly listed company, a step that we believe will enhance the growth prospects of our company.

Within 2005, we also expanded our controlled fleet, from 18 vessels at the beginning of the year to 31 vessels by the end of the year, comprising 24 vessels that we own and 7 that we charter-in with options to purchase. We also have a memorandum of agreement to acquire an additional multipurpose vessel expected to be delivered to us within the second quarter of 2006, thereby growing our controlled fleet to 32 vessels. We focus on multipurpose tweendeckers and handysize drybulk vessels.

TBS's business model includes a mixture of tariff-based liner, parcel and bulk transportation services focusing on non-containerized cargoes. We focus on niche markets including trade routes, ports and cargoes that are not efficiently served by container and traditional dry bulk vessel operators. We are in the business of providing complete transportation solutions to our customers and in this respect we differ from traditional drybulk cargo companies.

We currently operate our vessels on five trade routes.

--  TBS Pacific Service operates eastbound and westbound liner and parcel
    services from East Asia to the West or North coasts of South America.
--  TBS Latin America Service operates sailings between the East and West
    coasts of South America.
--  TBS North America Service operates bulk and parcel cargo services
    between South America and North America.
--  TBS Ocean Carriers offers shipping solutions worldwide on a customer-
    by-customer basis including sailings between Brazil and the West coast of
    Africa.
--  TBS Middle East Carriers offers bulk service within the Middle East
    region from ports in the United Arab Emirates (UAE) to ports in Kuwait and
    Qatar (operating as of January 2006).
    
In 2005, we continued the execution of our long-term business growth strategy, which is to continue solidifying and expanding our franchise businesses while researching and developing new growth opportunities.
--  In 2005, keeping in line with our business strategy, we experienced an
    increase of cargo carried (excluding aggregates) by 9.0% as well as an
    increase of average freight rates per ton (excluding aggregates) by 7.2%.
    Strong economic growth in Latin American countries generated increased
    volume of imports and exports. Our established shipping routes from Latin
    America and our long-standing presence in Latin America through our
    affiliated service companies positioned us well to take advantage of the
    increased demand. We believe that today TBS transports a significant
    portion of the non-containerized break bulk, parcel and liner cargoes from
    Japan and Korea to the West Coast and North Coast of South America.  There
    is significant growth in our transportation of steel and project exports
    from China to Latin America.
    
--  We identified the steam coal import requirements of U.S. companies to
    meet growing demand for alternative sources of fuel as a significant growth
    opportunity for TBS. We have been aggressively pursuing contracts to
    transport coal from South America into the United States and in the fourth
    quarter of 2005 we fulfilled an initial contract to transport 250,000 tons
    of coal.
    
--  We consider West Africa to be another promising growth opportunity for
    TBS and in 2006 we established a new joint venture shipping service from
    Argentina, Brazil and Venezuela to West Africa. This new service enables
    TBS to leverage its strong relations with existing South American exporters
    to the markets of West Africa.
    
We experienced significant declines in freight rates during the second half of 2005. Freight rates historically have been cyclical, and we do not anticipate that freight rates will increase in the near term. While we have maintained our market share and increased the amount of cargo carried, the cumulative effect of reduced freight rates, higher fuel costs and an increase in interest rates negatively impacted our results for the second half of 2005."

Ferdinand V. Lepere, Executive Vice President and Chief Financial Officer, commented: "We believe that the key financial characteristics of TBS create a sustainable business model. Our revenue base is well balanced by cargoes, geographies and customers. Our policy to retain capital, coupled with moderate leverage; at the end of 2005, our net debt to capitalization ratio was 37% provides us with significant financial flexibility."

Conference call and webcast:

Thursday, March 16, 2006 at 9:30 am EST, the Company's management will host a conference call to discuss the results.

Conference call details:

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1-800-591-6923 (from the U.S.) or 1-617-614- 4907 (from outside the U.S.). Access Code: 80822198.

Webcast:

There will also be a live --and then archived -- slides and audio webcast of the conference call on the Company's website www.tbsship.com, which can be accessed by clicking on the webcast link. As soon as practicable, the webcast and the corresponding slides will be archived and will also be accessible on the website.

Replay:

A telephonic replay of the conference call will be available from 11:30 a.m. eastern standard time on Thursday, March 16, 2006 until March 23, 2006 by dialing 1-888-286-8010 (from the U.S.) or 1-617-801-6888 (from outside the U.S.). Access Code: 29110918. A replay of the webcast will be available soon after the completion of the call.

                      TBS International Limited
                       Statement of Operations

                                                Three Months Ended
                                                    December 31,
                                                2004            2005
                                           --------------  --------------

Revenue
  Voyage revenue                           $   39,654,987  $   46,232,516
  Time charter revenue                         18,811,283      20,968,779
  Other revenue                                         -         381,368
                                           --------------  --------------
  Total Revenue                                58,466,270      67,582,663
                                           --------------  --------------

Operating expenses
  Voyage                                       16,662,584      21,429,354
  Vessel                                       24,535,843      20,362,162
  Depreciation and amortization of vessels
    and other fixed assets                      3,696,400       6,229,368
        Management fees                         1,275,244               -
        General and administrative              2,181,268       6,127,076
                                           --------------  --------------
        Total Operating expenses               48,351,339      54,147,960
                                           --------------  --------------
Income from operations                         10,114,931      13,434,703
                                           --------------  --------------

Other (expenses) and income
  Interest expense                             (1,711,596)     (2,693,222)
  Interest and Other income                        71,662         304,754
                                           --------------  --------------
    Total other (expenses) and income          (1,639,934)     (2,388,468)
                                           --------------  --------------
Net (loss) income                               8,474,996      11,046,235

   Deemed preference dividends
     and accretion                                      -               -
Amount allocated to participating
  preferred shareholders                       (2,824,999)              -
                                           --------------  --------------
Net (loss) income available for common
  shareholders                             $    5,649,998  $   11,046,235
                                           ==============  ==============
Net (loss) income per common share
  Basic                                    $         0.53  $         0.39
  Diluted                                  $         0.27  $         0.39
Weighted average common shares
  outstanding
    Basic (2) (3)                              10,187,795      27,983,829
    Diluted (2) (3)                            20,385,775      28,088,329



                Fourth Quarter 2005 Operating Statistics

Please find below TBS's operating data for the fourth quarters ended
December 31, 2004 and 2005.

                                              Fourth Quarter Ended
                                                   December 31,
                                                2004            2005
                                           --------------  --------------
Other Operating Data:
Controlled vessels (at quarter end)  (4)               18              31
Chartered vessels (at quarter end)  (5)                10               6
Voyage Days (6)                                     2,528           3,218
Vessel days (7)                                     2,607           3,357
Tons of cargo shipped (8)                         702,124         950,734
Revenue per ton (9)                        $        56.55  $        48.63
Tons of cargo shipped, excluding
   aggregates (8)(10)                             702,124         950,734
Revenue per ton, excluding
   aggregates (9)(10)                      $        56.55  $        48.63
Chartered -out days                                   986           1,369
Chartered -out rate per day                $       19,078  $       15,317



                        TBS International Limited
                         Statement of Operations

                                         Year  Ended December 31,
                                    2003           2004          2005
                               -------------  -------------  -------------

Revenue
  Voyage revenue               $ 119,528,501  $ 157,794,098  $ 175,595,810
  Time charter revenue            23,625,003     50,745,653     71,455,764
  Other revenue                      192,579        266,802        979,644
                               -------------  -------------  -------------

    Total revenue                143,346,083    208,806,553    248,031,218
Operating expenses
  Voyage                          52,453,794     60,691,623     75,291,117
  Vessel                          62,233,677     79,273,414     72,608,679
  Depreciation and amortization
   of vessels and other fixed
   assets                          6,886,720     10,136,694     18,021,267
  Management fees                  3,864,828      4,413,909      2,624,391
  General and administrative       6,463,242      7,347,046     17,617,690
  Loss from sale of vessels,
   net (1)                         9,904,907              -              -
                               -------------  -------------  -------------
      Total operating expenses   141,807,168    161,862,686    186,163,144
                               -------------  -------------  -------------

Income from operations             1,538,915     46,943,867     61,868,074

Other (expenses) and income
  Interest expense                (5,145,103)    (5,147,686)    (9,346,461)
  Other income                        68,226        110,513        752,208
  Gain on early extinguishment
   of debt                         2,373,490              -              -
  Deemed preference dividends
   and accretion                    (829,703)             -              -
                               -------------  -------------  -------------
    Total other expenses, net     (3,533,090)    (5,037,173)    (8,594,253)
                               -------------  -------------  -------------

Net (loss) income                 (1,994,175)    41,906,694     53,273,821

Deemed preference dividends
 and accretion                      (796,827)             -              -
Amount allocated to
 participating preferred
 shareholders                              -    (11,497,264)    (5,461,345)
                               -------------  -------------  -------------

Net (loss) income available
 for common shareholders       $  (2,791,002) $  30,409,430  $  47,812,476
                               =============  =============  =============

Earnings per share
Net income per common share
  Basic                        $       (0.27) $        2.98  $        2.19
  Diluted                      $       (0.27) $        1.49  $        1.97
Weighted average common
 shares outstanding
  Basic (2) (3)                   10,187,795     10,187,795     21,870,160
  Diluted (2) (3)                 10,187,795     20,385,775     24,310,909



                      Full Year 2005 Operating Statistics
Please find below TBS's operating data for the full years ended
December 31, 2003, 2004 and 2005.

                                                  Year Ended December 31,
                                                2003       2004       2005
                                              -------    -------    -------

Other Operating Data:
Controlled vessels (at end of year)  (4)           13         18         31
Chartered vessels (at end of year)  (5)            11         10          6
Voyage Days (6)                                 9,033      8,892     10,885
Vessel days (7)                                 9,116      9,138     11,264
Tons of cargo shipped (8)                       5,907      3,658      3,170
Revenue per ton (9)                           $ 20.24    $ 43.13    $ 55.39
Tons of cargo shipped, excluding
aggregates (8)(10)                              2,582      2,837      3,092
Revenue per ton, excluding
   aggregates (9)(10)                         $ 39.27    $ 52.79    $ 56.58
Chartered -out days                             2,439      2,780      4,257
Chartered -out rate per day                   $ 9,686    $18,254    $16,785

(1) Represents the difference between the price paid to us and the book
value of seven vessels that we sold in December 2003 and one vessel that we
sold in October 2003. We used the proceeds from the December 2003 sale to
repurchase outstanding senior secured debt relating to the sold vessels, on
which we recorded a gain of $2.4 million.
(2) Basic and diluted weighted average common shares for 2001 through 2004
reflect the 2.547 to 1 adjustment for the consolidation and redesignation
of common shares made June 29, 2005. See Item 15. Exhibits and Financial
Statements Schedules, Footnotes 17 - Equity Transactions and Footnote 18 -
Earnings Per Share.
(3) Diluted weighted average common shares outstanding for 2005 includes
2,387,497 weighted average common shares issuable under the exercise of
warrants and 53,252 weighted average common shares relating to the 100,000
restricted Class A common shares issued to our chief financial officer and
4,500 restricted Class A common shares issued to our independent directors.
Diluted weighted average common shares outstanding for 2004 includes
10,197,980 common shares issuable on the exercise of exercisable warrants.
Diluted weighted average common shares outstanding for 2001 includes
9,108,333 common shares for the Series A, B and C warrants
(4) Controlled vessels are vessels that we own or charter-in with an option
to purchase. As of December 31, 2005, seven vessels in our controlled fleet
were chartered-in with an option to purchase.
(5) Represents both vessels that we charter-in under short-term charters
(less than one year at the start of the charter) and charter-in of vessels
under long-term charters without an option to purchase
(6) Represents the number of days controlled and time-chartered vessels
were operated by us, excluding off-hire days.
(7) Represents the number of days that relate to vessel expense for
controlled and time-chartered vessels. Vessel expense relating to
controlled vessels is based on a 365-day year. Vessel expense relating to
chartered-in vessels is based on the actual number of days we operated the
vessel, excluding off-hire days.
(8) In thousands.
(9) Revenue per ton is a measurement unit for cargo carried that is
dependent upon the weight of the cargo and has been calculated using number
of tons on which revenue is calculated, excluding time charter revenue.
(10) Aggregates represent high-volume, low-freighted cargo. Including
aggregates, therefore, can overstate the amount of tons that we carry on a
regular basis and reduce our revenue per ton. We no longer regularly carry
aggregates and believe that the exclusion of aggregates better reflects our
cargo shipped and revenue per ton data for our principal services.


BALANCE SHEET DATA
Please find below TBS' selected Balance Sheet Data for the periods ended
December 31, 2004 and December 31, 2005
                                                     December 31,
                                                     ------------
                                                  2004          2005
                                               ---------     ---------
                                                    (In thousands)
    Balance Sheet Data:
  Cash and cash equivalents                    $  21,674     $  27,158
  Working capital                                  9,566        (5,055)(1)
  Total assets                                   157,159       342,442
  Long-term debt, including current portion       38,511       105,737
  Obligations under capital leases, including
   current portion                                34,642        24,703
  Total shareholders' equity                      61,959       177,789

(1) At December 31, 2005, we had negative working capital of $5.1 million,
    due primarily to the timing of our last two vessel acquisitions.  It
    is our practice to fund vessel acquisitions through working capital,
    which we subsequently replenish with long-term debt secured by a
    mortgage for typically 60% of the vessel cost.  The vessels Nyack
    Princess and Sioux Maiden that were purchased in early November of
    2005, for $10.0 million and $17.5 million, respectively, were funded
    solely with our working capital.  We anticipate having positive working
    capital by the first quarter of 2006.



EBITDA RECONCILIATION
Please find below TBS' EBITDA reconciliation for the three months ended
December 31, 2004 and 2005 and for twelve months ended December 31, 2005
and 2004
                              Three Months Ended     Twelve Months Ended
                                   December 31,           December 31,
                               2004        2005        2004        2005
                              ------      ------      ------      ------

  EBITDA Reconciliation
  (In millions):
      Net Income              $  8.5      $ 11.0      $ 41.9      $ 53.3
      Net interest expense       1.6         2.6         5.1         8.8
      Depreciation               3.7         6.2        10.1        18.0
                              ------      ------      ------      ------

        EBITDA                $ 13.8      $ 19.8      $ 57.1      $ 80.1
                              ======      ======      ======      ======

          EBITDA represents net income plus net interest expense, income
          tax expense, depreciation and amortization. EBITDA is included
          because it is used by management and certain investors as a
          measure of operating performance.  EBITDA is used by analysts in
          the shipping industry as a common performance measure to compare
          results across peers.  Our management uses EBITDA as a
          performance measure in consolidating monthly internal financial
          statements and it is presented for review at our board meetings.
          EBITDA is also used by our lenders in certain loan covenants.
          For these reasons, we believe that EBITDA is a useful measure to
          present to our investors.  EBITDA is not an item recognized by
          U.S. GAAP and should not be considered as an alternative to net
          income, operating income or any other indicator of a company's
          operating performance required by U.S. GAAP.  EBITDA is not a
          source of liquidity or cash flows as shown in our consolidated
          statement of cash flows.  The definition of EBITDA used here may
          not be comparable.
Forward-Looking Statements "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations.

Included among the factors that, in the company's view, could cause actual results to differ materially from the forward-looking statements contained in this press release are the following:

--  changes in demand;
--  a material decline or prolonged weakness in rates in the shipping
    market;
--  changes in rules and regulations applicable to the shipping industry,
    including, without limitation, legislation adopted by international
    organizations such as the International Maritime Organization and the
    European Union or by individual countries;
--  actions taken by regulatory authorities;
--  changes in trading patterns significantly impacting overall vessel
    tonnage requirements;
--  changes in the typical seasonal variations in charter rates;
--  increases in costs including without limitation: changes in production
    of or demand for oil and petroleum products, generally or in particular
    regions; crew wages, insurance, provisions, repairs and maintenance;
--  changes in general domestic and international political conditions;
--  changes in the condition of the company's vessels or applicable
    maintenance or regulatory standards (which may affect, among other things,
    the company's anticipated drydocking or maintenance and repair costs); and
--  other factors listed from time to time in the company's filings with
    the Securities and Exchange Commission, including, without limitation, its
    Quarterly Report on Form 10-Q for the period ended September 30, 2005 and
    its subsequent reports on Form 10-Q and Form 8-K.
    
About TBS International Limited

TBS is an ocean transportation services company that offers worldwide shipping solutions through liner, parcel, bulk and vessel chartering services. TBS has developed its business around key trade routes between Latin America and China, Japan and South Korea, as well as select ports in North America, Africa and the Caribbean. TBS provides frequent regularly scheduled voyages in its network, as well as cargo scheduling, loading and discharge for its customers.

Visit our website at www.tbsship.com

Contact Information

  • For more information, please contact:
    Company Contact:
    Ferdinand V. Lepere
    Executive Vice President and Chief Financial Officer
    TBS International Limited
    Tel. 914-961-1000
    InvestorRequest@tbsship.com

    Investor Relations / Media:
    Nicolas Bornozis
    Capital Link, Inc. New York
    Tel. 212-661-7566
    E-mail: nbornozis@capitallink.com