SOURCE: TBS International Limited

November 07, 2006 16:55 ET

TBS International Limited Reports Third Quarter 2006 Financial Results

HAMILTON, BERMUDA -- (MARKET WIRE) -- November 7, 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 third quarter and for the nine month period ended September 30, 2006.

Third Quarter 2006 Results:

For the third quarter ended September 30, 2006, total revenues were $65.4 million, an increase of 10.8% from the $59.0 million in the third quarter of 2005. Net income for the third quarter 2006 was $9.2 million, a decrease of 25.2% compared to $ 12.3 million in the same period of 2005. However, EBITDA, which is a non-GAAP measure, increased by 10.8% to $22.6 million for the third quarter 2006 from $20.4 million for the same period in 2005. Please see later in this press release for a reconciliation of EBITDA to net income.

Earnings per share on a diluted basis for the third quarter 2006, calculated on 28,088,310 weighted average common shares outstanding, were $0.33.

During the third quarter of 2006, TBS International incurred $ 1.2 million in consulting fees dealing with the re-engineering of certain of our business processes to better meet the company's business needs as it grows. Also, we incurred non-recurring charges of $ 1.3 million and $ 2.1 million for the write-off of deferred finance costs and early prepayment fees, respectively, on re-financed debt related to the new Bank of America credit facility which closed on July 31, 2006. These charges were partially offset by a gain of $ 2.2 million from the sale of M.V. Dakota Belle. Excluding these items, earnings for the third quarter 2006 would have been $11.6 million, or $ 0.41 per share. Please see later in this press release for a reconciliation of GAPP net income to net income as adjusted, which a non-GAPP measure.

An average of 34 vessels (excluding off-hire) were operated during the third quarter of 2006, compared to 32 vessels (excluding off-hire) during the third quarter of 2005.

The total revenues of $65.4 million during the third quarter 2006 include voyage revenues of $47.9 million, time charter revenues of $16.9 million and other revenues of $0.6 million.

Voyage revenues in the third quarter 2006 were $47.9 million, an increase of 22.2% from the $39.2 million in the third quarter of 2005. Tons of cargo carried increased 50.9% from 750,684 tons in the third quarter 2005 to 1,133,148 tons in the third quarter 2006. The increase of cargo carried by 382,464 tons in total during the third quarter 2006 includes an increase by 292,357 in lower freighted aggregates and an increase of 90,107 tons in general cargo. Average freight rates excluding aggregates increased $ 0.97 per ton or 1.7% from $ 56.21 per ton in the third quarter 2005 to $ 57.18 per ton in the third quarter 2006. The reduction in average freight rates for all cargoes by 19.2% from $52.28 per ton in the third quarter 2005 to $42.25 per ton in the third quarter 2006 reflects the higher volume of aggregates as a percentage of the total volume of cargo carried.

Time charter revenues showed a decrease of 12.4% from $19.3 million in the third quarter 2005 to $16.9 million in the third quarter 2006. Time charter days decreased by 9.8% from 1,239 days during the third quarter 2005 to 1,118 days in the third quarter 2006 reflecting the fact that in the third quarter 2006 we chartered out on average 12 vessels compared to 14 vessels during the third quarter 2005. Furthermore, the average daily charter-out hire rate decreased by 2.7% from $15,546 in the third quarter 2005 to $15,129 in the third quarter 2006 reflective of the higher than usual rates that we received in 2005.

Voyage expenses, which include fuel, commissions, port call charges and stevedoring increased by $ 4.4 million or 25.1% from $ 17.5 million in the third quarter 2005 to $ 21.9 million in the third quarter 2006. The bulk of this increase is attributable to fuel expense which increased by $ 3.5 million or 51.5% from $ 6.8 million in the third quarter 2005 to $ 10.3 million during the same period 2006 reflecting a higher average price per metric ton ("MT") from $325 per MT during the third quarter 2005 to $419 per MT during the same period 2006 and an increase in consumption by 17.2% from 20,927 MT during the third quarter 2005 to 24,523 MT in the third quarter 2006. The increase of 28.9% or $94 per metric ton in the average price of fuel compared to the third quarter 2005 was a major factor in the reduction of net income in the third quarter 2006 compared to the same period in 2005.

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, increased by 1.2% in the third quarter 2006, from $16.1 million in the third quarter 2005 to $16.3 million during the same period in 2006. This reflects the change in the composition of our fleet from an average of 28 controlled vessels in the third quarter 2005 to an average of 32 controlled vessels during the same period in 2006. The increase in the number of owned vessels decreased our demand for chartered-in vessels.

General and administrative expenses increased by $ 1.9 million or 38.0% from $5.0 million in the third quarter 2005 to $6.9 million in the second quarter 2006. The majority of this increase is due to $ 1.2 million in consulting fees dealing with the re-engineering of certain of our business processes to better meet our business needs as we grow. The remaining amount of this increase relates to additional professional fees that we incur as a public company and travel expenses, as well as to increased salary and related costs reflecting the expansion of our business.

Interest expense increased by $3.5 million from $2.8 million in the third quarter 2005 to $6.3 million in the third quarter 2006. This was due primarily to the costs incurred in connection with our debt refinancing. Included in interest expense is $ 2.1 million paid in early repayment fees and $ 1.3 million in write-off of unamortized debt finance costs related to the new Bank of America credit facility which closed on July, 31 2006.

Results for the Nine Months Ended September 30, 2006:

For the nine months ended September 30, 2006, total revenues were $188.1 million, an increase of 4.3% compared to the $ 180.4 million over the nine months of 2005. Net income for the nine months ended September 30, 2006 was $22.9 million, a decrease of 45.7% compared to $ 42.2 million in the same period of 2005. However, EBITDA, which is a non-GAAP measure, decreased only by 8.6% to $55.0 million for the nine months of 2006 from $60.2 million in the same period of 2005. Please see later in this press release for a reconciliation of EBITDA to net income.

Earnings per share on a diluted basis for the nine months of 2006, calculated on 28,088,310 weighted average common shares outstanding, were $0.82.

During the second and third quarters 2006 we incurred charges of $ 2.3 million for consulting fees dealing with the re-engineering of certain of our business processes. Also, in the third quarter 2006 we incurred non-recurring charges of $ 1.3 million and $ 2.1 million for the write-off of deferred finance costs and early prepayment fees, respectively, on re-financed debt related to the new Bank of America credit facility. These charges were partially offset by a gain of $ 2.2 million from the sale of M/V Dakota Belle. Excluding these items, earnings for the nine months 2006 would have been $26.4 million or $0.94 per share. Please see later in this press release for a reconciliation of GAAP net income to adjusted net income which is a non-GAAP measure.

An average of 34 vessels (excluding off-hire) were operated during the nine months of 2006, compared to 29 vessels (excluding off-hire) during the same period of 2005.

The total revenues during the first nine months of 2006 of $188.1 million include voyage revenues of $141.0 million, time charter revenues of $45.9 million and other revenues of $1.2 million.

Fleet Development

TBS International entered into agreements to purchase three additional vessels and sell one, thereby expanding its fleet to 34 vessels in total.

On September 5, 2006 TBS entered into an agreement to acquire two handysize bulk carriers, the M.V. Clipper Flamingo and the M.V. Clipper Frontier, both charter free and for a total purchase price of $45.1 million. The M.V. Clipper Flamingo, 29,516 dwt built in 1997, will be renamed the M.V. Seminole Princess, and the M.V. Clipper Frontier, 29,458 dwt built in 1996, will be renamed the M.V. Laguna Belle. Both vessels are expected to be delivered to TBS during November 2006.

On October 27, 2006, TBS International agreed to acquire a handymax bulk carrier, the M.V. Aliki to be renamed the M.V. Alabama Belle, charter free and for a total purchase price of $16.1 million. The M.V. Alabama Belle, 41,808 dwt built in 1986, is expected to be delivered to TBS between November 20 and December 5, 2006.

On August 8, 2006 TBS International agreed to sell the M.V. Dakota Belle, a 18,576 dwt multipurpose tweendecker built in 1977, for $ 3.2 million. The vessel was delivered to the purchaser on September 27, 2006. TBS realized a gain of $ 2.2 million from the sale of this vessel and utilized the proceeds to reduce its outstanding revolving credit.

New Credit Facility

As announced, on July 31, 2006, TBS International entered into a $140.0 million credit facility with a syndicate of commercial lenders led by Bank of America to refinance existing indebtedness, provide for working capital and fund the acquisition of additional vessels.

The Company entered into an interest rate swap on November 2, 2006, effectively converting $56.2 million of its borrowings under the Bank of America Credit Facility from a floating to a fixed rate. Exclusive of the applicable margin, the Company will pay interest based on a fixed LIBOR rate of 5.09% for the next four years.

This new credit facility increased our borrowing capacity, provided us with better terms and simplified the administration of our debt as we consolidated all prior facilities into a single one.

Management Commentary:

Joseph E. Royce, Chairman and Chief Executive Officer and President, stated: "The strong operational performance and financial results of TBS during the third quarter of 2006 are the result of our consistent implementation of our business strategy which is to reinforce our franchise in our core markets, pursue new business opportunities, expand our fleet in response to the growth of our business and maintain moderate leverage.

"In the third quarter 2006, we experienced volume increases both in general cargo and aggregates coupled with stronger freight rates, not only when compared to the third quarter of 2005 but also when compared to prior quarters of 2006.

"The significant increase in fuel costs which had a negative impact in our profitability seems to have abated in the third quarter of 2006, as energy prices around the world stabilized and actually decreased. We are optimistic that in the current environment it is feasible to secure bunker protection clauses in the renegotiation of some of our long-term contracts.

"In response to the growth of our business in our main markets and trade routes, as well as to the new business opportunities we have been developing, we continued our program of fleet renewal and expansion, and our fleet will shortly include a total of 34 multipurpose, handymax and handysize vessels, which are ideally suited for the ports and cargoes we service.

"Looking ahead, we believe TBS is well positioned to benefit from the positive freight environment and the increased trade flows especially in our core markets of Asia and Latin America. We will also continue looking for additional vessel acquisitions to accommodate the growth of our business."

Mr. Royce noted, "however, that because the ages and survey positions of the vessels in the TBS Fleet are quite similar, TBS will be entering into an exceptionally heavy period of its drydock cycle in which we expect to drydock approximately 20 vessels during the next 9 to 12 months."

Ferdinand V. Lepere, Executive Vice President and Chief Financial Officer commented: "Our strong cash flow generation coupled with the resources provided by our new $ 140 million credit facility enabled us to continue with our fleet expansion program, as evidenced by our three recent vessel acquisitions. At the end of the third quarter 2006, our net debt to capitalization ratio stood at 33%, which is moderate for industry standards and affords us significant flexibility for further growth."

Conference call and webcast:

On Wednesday, November 8, 2006 at 9:30 a.m. 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: 1-866-272-9941 (from the US) or 1-617-213-8895 (International Dial in). Participant Passcode: 67188667. The conference call will also be webcast live on the company's website: www.tbsship.com by clicking on the webcast link.

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 our website.

Replay:

A telephonic replay of the conference call will be available from 11:30 a.m. EST by dialing 1-888-286-8010 (from the US) or 1-617-801-6888 (from outside the US). Access Code: 70277554. A replay of the webcast will be available soon after the completion of the call.

TBS International Limited
Consolidated Statements of Income for the Third Quarter and for the Nine
months ended of 2005 and 2006


                        TBS International Limited
                    Consolidated Statements of Income s
          (In thousands, except for share and per share amounts)


                              Three Months Ended        Nine Months Ended
                                 September 30,            September 30,
                               2005        2006        2005        2006
                            ----------  ----------  ----------  ----------
Revenue:
   Voyage revenue           $   39,243   $  47,880  $  129,364  $  141,008
   Time charter revenue         19,263      16,915      50,487      45,911
   Other revenue                   513         607         598       1,233
                            ----------  ----------  ----------  ----------
     Total revenue              59,019      65,402     180,449     188,152
                            ----------  ----------  ----------  ----------

Operating expenses:
   Voyage                       17,540      21,857      53,862      63,765
   Vessel                       16,063      16,324      52,247      52,754
   Depreciation and
    amortization                 5,486       7,211      11,792      20,560
   Management and agency
    fees                            59                   2,624
   General and
    administrative               5,016       6,883      11,486      19,250
   Gain from sale of vessel                 (2,180)                 (2,180)
                            ----------  ----------  ----------  ----------
    Total operating expenses    44,164      50,095     132,011     154,149
                            ----------  ----------  ----------  ----------

Income from operations          14,855      15,307      48,438      34,003
                            ----------  ----------  ----------  ----------

Other (expenses) and
  income:
   Interest expense             (2,817)     (6,291)     (6,621)    (11,903)
   Other income                    239         198         411         801
                            ----------  ----------  ----------  ----------
   Total other (expenses)
    and income                  (2,578)     (6,093)     (6,210)    (11,102)
                            ----------  ----------  ----------  ----------

Net income                      12,277       9,214      42,228      22,901
Allocated amount to
  preference shares                                     (6,092)
                            ----------  ----------  ----------  ----------
Net income available for
  common shareholders       $   12,277  $    9,214  $   36,135  $   22,901
                            ==========  ==========  ==========  ==========

Earnings per share:
Net income per common
  share:
    Basic                   $     0.44  $     0.33  $     1.82  $     0.82
    Diluted                 $     0.44  $     0.33  $     1.57  $     0.82

Weighted average common
  shares outstanding:
    Basic (1)               27,983,829  28,013,310  19,809,880  27,993,968
    Diluted                 28,088,329  28,088,310  23,037,937  28,088,310
Operating Data for the Third Quarter and for the Nine Months 2005 and 2006

Please find below TBS's operating data for the third quarter and for the
nine months ended September 30, 2005 and 2006:


                                          Three Months       Nine Months
                                             Ended              Ended
                                          September 30,     September 30,
                                        ----------------- -----------------
                                          2005     2006     2005     2006
                                        -------- -------- -------- --------
Other Operating Data:
  Controlled vessels (at end of period)
   (2)                                        29       31       29       31
  Chartered vessels (at end of period)
   (3)                                         6        3        6        3
  Voyage days (4)                          2,866    3,102    7,667    9,161
  Vessel days (5)                          2,925    3,201    7,907    9,585
  Tons of cargo shipped (6)                  751    1,133    2,219    3,197
  Revenue per ton (7)                   $  52.28 $  42.25 $  58.29 $  44.11
  Tons of cargo shipped, excluding
   aggregates (6) (8)                        689      779    2,141    2,526
  Revenue per ton, excluding
   aggregates (7) (8)                   $  56.21 $  57.18 $  60.12 $  53.13
  Chartered-out days                       1,239    1,118    2,888    3,280
  Chartered-out rate per day            $ 15,546 $ 15,129 $ 17,482 $ 13,997

(1)  Basic weighted average common shares outstanding for the three months
     ended September 30, 2006 includes 288,853 common shares issuable on
     the exercise of warrants. These shares are treated as outstanding for
     purposes of basic earnings per share for the period beginning February
     8, 2005, because on that date the exercise condition of the warrants
     were satisfied and the shares subject to the exercise of the warrants
     are issuable for nominal consideration.

(2)  Controlled vessels are vessels that we own or charter-in with an
     option to purchase. As of September 30, 2006, seven vessels in our
     controlled fleet were chartered-in with an option to purchase.

(3)  Vessels that we charter-in without an option to purchase.

(4)  Represents the number of days controlled and time-chartered vessels
     were operated by us, excluding off-hire days.

(5)  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.

(6)  In thousands.

(7)  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.

(8)  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 believe that
     the exclusion of aggregates better reflects our cargo shipped and
     revenue per ton data for our principal service.


Balance Sheet Data:

Please find below TBS's selected balance sheet data for the periods ending
December 31, 2005 and September 30, 2006

                                    December 31,             September  30,
                                        2005                      2006
                                    --------------          --------------

Balance Sheet Data (In Thousands):
Cash and cash equivalents           $      27,158           $      15,732
Working capital                            (5,056)                 (3,706)
Total assets                              342,442                 341,747
Long-term debt, including current         105,737                  91,746
 portion
Obligations under capital leases,
 including current portion                 24,703                  22,304
Total shareholders' equity                177,789                 200,985
NON-GAAP RECONCILIATIONS

Please find below TBS' EBITDA reconciliation for the three months ended September 30, 2005 and 2006 and for the nine months ended September 30, 2005 and 2006

                           Three Months    Nine Months
                             Ended           Ended
                          September 30,   September 30,
                           2005   2006    2005    2006
                         ------  ------  ------  ------
EBITDA Reconciliation
 (In millions):
Net Income               $ 12.3  $  9.2  $ 42.2  $ 22.9
Net interest expense        2.6     6.2     6.2    11.5
Depreciation                5.5     7.2    11.8    20.6
                         ------  ------  ------  ------
EBITDA                   $ 20.4  $ 22.6  $ 60.2  $ 55.0
                         ======  ======  ======  ======
Please find below TBS' reconciliation of net income to income before non- recurring items for the three and nine months ended September 30, 2006


                                         Three Months      Nine Months
                                            Ended            Ended
Income before non-recurring items        September 30,   September 30,
                                             2006            2006
                                       ---------------  ---------------
Reconciliation (In millions):
Net Income                             $           9.2  $          22.9
Re-engineering costs                               1.2              2.3
Loan prepayment fees paid                          2.1              2.1
Non cash write-off of unamortized
 deferred finance costs on refinancing             1.3              1.3
Gain on sale of vessel                            (2.2)            (2.2)
                                       ---------------  ---------------
Income before non-recurring
items                                  $          11.6  $          26.4
                                       ===============  ===============
Earnings per share
 (before non recurring items)
   Basic                               $          0.41  $          0.94
   Diluted                             $          0.41  $          0.94

Weighted average common shares
 outstanding
   Basic                                    28,013,310       27,993,968
   Diluted                                  28,088,310       28,088,310

During the three and nine months ended September 30, 2006 we incurred costs related to outside consultants who are assisting us in reengineering certain of our business processes to better meet our business needs as we grow, paid loan prepayment fees to our previous lenders and wrote-off deferred financing costs associated with loans made by the previous lenders when we refinanced substantially all our debt to reduce our average borrowing costs and increase our liquidity. We also sold the vessel Dakota Belle for a gain of $2.2 million. We believe that these items are non- recurring in nature and their exclusion provides a better financial measure of our operating results for the three and nine months ended September 30, 2006.


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
    Annual Report on Form 10-K for the period ended December 31, 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 and bulk services, and vessel chartering. 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