TBS International plc Reports Third Quarter and Nine Months 2011 Financial Results
Management Commentary:
Ferdinand V. Lepere, Senior Executive Vice President and Chief Financial Officer, commented:
“TBS’ results for the third quarter 2011 reflect the weakness in the global marketplace for the transportation of dry bulk cargo, along with the over-supply of dry bulk vessels which continues to have an adverse effect on freight rates and the continued high cost of fuel. During the third quarter 2011, revenues decreased by 4.1%, compared to the same period in 2010.
“The Company was not in compliance with all financial covenants relating to its debt at September 30, 2011. We have classified the entire amount of outstanding debt as a current liability in the consolidated balance sheet at September 30, 2011, in accordance with U.S. GAAP.
“As previously announced, on September 7, 2011, we entered into Forbearance Agreements with all lenders under our various credit facilities. The Forbearance Agreements terminate on the earlier of: (i) December 15, 2011 or (ii) the date that the Company fails to comply with any of the terms or undertakings of the Forbearance Agreements and the related credit agreements, as amended, including events of default not identified above. During this negotiation period, we will continue to operate our business as usual, although we did not make the principal payments due September 30, 2011 on such facilities.
“During this forbearance period, the Company and its lenders have been discussing a variety of matters, including the restructuring of our indebtedness and the sale of certain vessels. While our discussions with our lenders have not reached the stage where the terms of a restructuring have been agreed upon, we believe that the lenders would not accept that our common equity has any value and, therefore, would not agree to a restructuring in which any value were attributed to our common equity.
“Even if the Company is successful in restructuring scheduled principal amounts or the Forbearance Agreements are extended, the Company will still need to raise additional funds to facilitate principal repayments subsequent to December 15, 2011, and to remain in compliance with the minimum cash liquidity covenant or other covenants under its credit facilities. As a result, there continues to be substantial doubt about the Company’s ability to continue as a going concern.
“On October 19, 2011, we entered into agreements to sell two vessels for an aggregate net sales price of $11.2 million. On October 31, 2011, we agreed to sell an additional vessel for a net sales price of $4.8 million. Proceeds from these sales will be utilized to reduce the Company’s debt obligations.
“During the third quarter 2011, we continued our drydocking program and drydocked three vessels, including two vessels which entered into drydock during the second quarter of 2011, for a total of 105 days.”
Third Quarter 2011 Results:
For the third quarter ended September 30, 2011, total revenues were $95.7 million, a decrease of $4.1 million, or 4.1%, compared to $99.8 million for the same period in 2010. Net loss for the third quarter 2011 was $21.2 million, after loss attributable to non-controlling interests, which is an increase of $10.8 million compared to $10.4 million loss for the same period in 2010. Loss per share on a basic and diluted basis were $0.70 in the third quarter of 2011, calculated based on 30,577,381 shares, compared to a loss of $0.34 for the third quarter of 2010, calculated based on 30,519,326 shares.
EBITDA, which is a non-GAAP measure, decreased to $7.4 million for the quarter ended September 30, 2011 from $21.9 million for the same period in 2010. Please see “Non-GAAP Reconciliations – EBITDA” following the financial statements in this press release for a reconciliation of EBITDA to net loss.
Revenues:
Total revenues for the third quarter of 2011 were $95.7 million and include voyage revenues of $72.3 million, time charter revenues of $23.0 million and logistics and other revenues of $0.4 million.
An average of 52 vessels (excluding off-hire) were operated during the third quarter 2011 compared to 47 vessels (excluding off-hire) during the same period in 2010.
Voyage Revenues:
Voyage revenues for the quarter ended September 30, 2011 were $72.3 million, a decrease of $2.9 million, or 3.9% from $75.2 million for the same period in 2010.
Total cargo volume (including aggregates) increased 228,000 tons or 9.0% to 2,768,000 tons for the quarter ended September 30, 2011, from 2,540,000 tons for the same period in 2010. Aggregates carried for the three months ended September 30, 2011 increased by approximately 149,000 tons as compared to 2010, due to an increase in the number of aggregates voyages in 2011. The increase in non-aggregate revenue tons carried by 79,000 tons was led primarily by higher bulk cargo.
Average freight rates for all cargoes decreased $3.50 per ton, or 11.8%, to $26.10 per ton for the three months ended September 30, 2011, as compared to $29.60 per ton in 2010. Average freight rates for aggregate cargoes decreased $1.04 per ton, or 12.7%, to $7.18 per ton for the three months ended September 30, 2011, as compared to $8.22 per ton in 2010. Average freight rates for non-aggregate cargoes decreased $5.39 per ton, or 10.0%, to $48.25 per ton for third quarter of 2011, as compared to $53.64 per ton for the third quarter of 2010.
Average Daily Voyage Time Charter Equivalent, which is an industry standard metric reflecting the daily net earnings of a voyage after deducting all voyage expenses from voyage revenues, was $10,825 per day for the third quarter of 2011, a decrease of 19.1% from $13,383 per day during the third quarter of 2010.
Time Charter Revenues:
Time charter revenues increased by $0.3 million, or 1.4%, to $23.0 million for the quarter ended September 30, 2011 from $22.7 million for the quarter ended September 30, 2010. The increase in time charter revenue was primarily due to more time-charter out days which increased 617 days, or 48.9%, to 1,879 days for the three months ended September 30, 2011 from 1,262 days in 2010.
Average Daily Time Charter Equivalent, which is an industry standard metric reflecting time charter-out revenues during the period reduced by commissions, was $11,101 per day for the third quarter of 2011, a decrease of $6,159 from $17,260 per day during the same period in 2010. Decreases in the average charter hire rate per day are reflective of the continued over-supply of freight vessels and weakness of the worldwide economy.
Expenses:
Total operating expenses for the quarter ended September 30, 2011 increased by $5.2 million or 5.0% to $109.3 million from $104.1 million for the same period in 2010.
Voyage expenses, which include fuel costs, commissions, port call charges, stevedoring and other cargo-related expenses, increased by $7.4 million, or 21.3%, to $42.2 million for the quarter ended September 30, 2011. The rise was primarily due to an increase in fuel expense, port call expense, and miscellaneous voyage expense, partially offset by a decrease in commission and stevedoring expense.
Vessel expenses, which consist of operating expenses relating to owned and controlled vessels, such as crewing, stores, repairs and maintenance, insurance and charter hire fees for vessels that are chartered-in, increased by $4.9 million, or 15.8%, to $36.0 million for the third quarter 2011 as compared to the third quarter of 2010. Owned vessel expense for the three months ended September 30, 2011 were $28.7 million, an increase of $0.8 million, or 2.7%, versus the same period in 2010. The average operating expense day rate for the 52 non-Brazilian flagged vessels in the fleet was $5,482 per day for the three months ending September 30, 2011 compared to $5,861 per day during the same period in 2010. Average operating expense day rates decreased principally due to cost cutting measures.
Depreciation and amortization for three months ended September 30, 2011 decreased by $5.4 million, or 21.1%, to $20.2 million, versus 2010. The decrease was due to lower vessel depreciable values resulting from a $201.7 million impairment charge recorded at December 31, 2010.
General and administrative expenses were $10.6 million for the three months ended September 30, 2011, a decrease of $0.6 million, or 5.0%, versus 2010. This reduction emanated from our continuing efforts to cut overhead expenses.
Interest expenses for the three months ended September 30, 2011 were $8.3 million, an increase of $1.7 million, or 26.0%, versus 2010. The increase was due to the inclusion of interest on borrowings related to three new ships that was previously capitalized while the ships were under construction.
Results for the Nine Months ended September 30, 2011:
For the nine months ended September 30, 2011, total revenues were $282.6 million, a decrease of 9.1% compared to the $311.1 million for the same period in 2010. Net loss for the nine months 2011 was $52.3 million, after loss attributable to the non-controlling interests, an increase of 87.6% compared to $27.9 million loss for the same period 2010. Loss per share on a basic and diluted basis were $1.72 for the nine months ended September 30, 2011, calculated based on 30,482,293 shares, compared to a loss of $0.92 for the same period of 2010, calculated based on 30,139,778 shares.
EBITDA, which is a non-GAAP measure, decreased to $32.1 million for the nine months ended September 30, 2011 from $67.4 million in the same period of 2010. Please see “Non-GAAP Reconciliations – EBITDA” following the financial statements included in this press release for a reconciliation of EBITDA to net loss.
An average of 51 vessels (excluding off-hire) were operated during the nine months 2011 compared to 47 vessels (excluding off-hire) during the same period of 2010.
Total revenues of $282.6 million for the nine months 2011 include voyage revenues of $217.6 million, time charter revenues of $62.8 million and logistic and other revenues of $2.2 million.
Forbearance Agreements:
As previously announced on September 7, 2011, TBS entered into Forbearance Agreements with all lenders participating in the various credit facilities. As a result, TBS did not make the principal payments due September 30, 2011 on such facilities. In accordance with the terms of the Forbearance Agreements, the lenders have agreed to forbear from exercising their rights and remedies against the Company for events of default under the various credit agreements related to the Company’s failure to pay the scheduled principal amount due to the lenders on September 30, 2011, to comply with the Minimum Consolidated Interest Charges Coverage Ratio and the Maximum Consolidated Leverage Ratio as defined in the various credit agreements, and to maintain a Loan Value equal to or in excess of the Total Outstandings, as defined in the various credit agreements. The Forbearance Agreements terminate on the earlier of December 15, 2011 or the date that the Company fails to comply with any of the terms or undertakings of the Forbearance Agreements and the related credit agreements, as amended, including events of default not identified above.
TBS Fleet:
TBS successfully concluded its newbuilding program with the delivery of the last of six newbuild Roymar Class multipurpose vessels with retractable tweendecks. During 2011, three of those vessels, the Omaha Belle, Comanche Maiden and the Maya Princess were delivered in January, February and May, respectively.
On October 19, 2011, TBS entered into agreements to sell two vessels to an independent party for an aggregate net sales price of $11.2 million. On October 31, 2011, we agreed to sell an additional vessel for a net sales price of $4.8 million. Proceeds from these sales will be utilized to reduce the Company’s debt obligations. Excluding these vessels, TBS’ fleet comprises 49 vessels with an aggregate of 1.5 million dwt tons, consisting of 28 tweendeckers and 21 handysize/handymax bulk carriers.
While TBS remains committed to expanding its fleet, pending a significant change in global economic conditions, the Company has temporarily suspended any further acquisitions of secondhand vessels.
TBS 2011 Drydock Program and Vessel Upgrade Program:
For 2011, TBS’ plan is to drydock 13 vessels, including one vessel that entered into drydocking during the fourth quarter of 2010, for approximately 472 drydocking days with a steel renewal of about 940 metric tons at a total cost of approximately $13.4 million.
Our anticipated 2011 drydocking schedule is as follows:
| · | During the first quarter 2011, one vessel that entered into drydock during the fourth quarter of 2010 continued its drydock for 89 days into the first quarter of 2011, and four additional vessels entered into drydock for 98 days. These vessels required about 328 metric tons of steel. |
| · | During the second quarter 2011, two vessels that entered into drydock during the first quarter of 2011 continued its drydock for 38 days into the second quarter of 2011, and three additional vessels entered into drydock for 45 days. These vessels required about 217 metric tons of steel. |
| · | During the third quarter 2011, two vessels that entered into drydock during the second quarter of 2011 continued its drydock for 69 days into the third quarter of 2011, and one additional vessel entered into drydock for 36 days. These vessels will require about 125 metric tons of steel. |
| · | In the fourth quarter 2011, TBS plans to drydock four vessels, requiring about 270 metric tons of steel and about 97 drydock days. |
We use EBITDA as a liquidity measure. The following schedule reconciles EBITDA and Adjusted EBITDA to Net Cash Provided by Operating Activities for the three and nine months ended September 30, 2011 and 2010 (in thousands):
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:
Ferdinand V. Lepere
Tel. 914-961-1000
Capital Link, Inc. New York
Tel. 212-661-7566
