TBS Reports 3Q, 9 Mo Results
Joseph E. Royce, Chairman and Chief Executive Officer and President of TBS International Limited, stated: "We attribute these record results to the efforts of our worldwide team of shipping professionals delivering our TBS Five Star Service (Ocean Transportation, Logistics, Portside Services, Operations and Strategic Planning) to our global customer base. TBS owns its vessels, deals directly with our clients and presently does not have vessels on long term time charters.
"We are in unprecedented times for the global economy and dry cargo shipping industry. The stagnation caused by the crisis in the financial community has interrupted normal trade and reduced cargo movement. When normal trading patterns resume, we believe that the inevitable global recession that we are facing will result in reduced levels of cargo movement. At TBS we are taking a cautious approach.
"TBS is conserving its cash. We have delayed our program to build additional Roymar Class Multipurpose Tweendeckers; we are deferring the purchase of additional second-hand vessels; and TBS is a growth company that does not pay out its cash flow in dividends. We are evaluating our entire cost matrix to identify potential savings.
"At TBS we are preparing for difficult circumstances while positioning the Company to take advantage of opportunities that present themselves. TBS uses interest rate derivatives to hedge a portion of its floating rate debt; however, TBS does not use freight rate derivatives, such as freight forward agreements (FFA's), in its business.
"With our Five Star Service and our team of approximately 300 dedicated employees throughout the world, we are able to provide complete logistics and transportation solutions for our customers. We believe that this value-added approach combined with our efficient and reliable service will serve TBS well through the challenging times we will face in 2009."
Ferdinand V. Lepere, Executive Vice President and Chief Financial Officer, commented: "TBS has liquidity, moderate debt and strong banking relationships. These are competitive advantages particularly in today's market place and they enhance our operating flexibility and our ability to pursue our prudent growth plans.
"As of September 30, 2008, we had $90 million of cash on our balance sheet and our net debt to total capitalization was 30%, a moderate level for our industry. Our newbuilding program for the six Roymar Class tweendeckers is progressing, we have in place fixed term financing with The Royal Bank of Scotland for all remaining installments to the shipyard including the delivery of the vessels. We expect delivery of two vessels in 2009 and four vessels in 2010.
"Through interest rate swaps we have fixed the interest on 77% of our total outstanding debt as of September 30, 2008 to a weighted average annual rate of 3.85% before bank margins.
"In the third quarter of 2008, we continued with our drydocking and maintenance program and drydocked nine vessels for 229 drydocking days."
Third Quarter 2008 Results:
For the third quarter ended September 30, 2008, total revenues were $183.3 million, an increase of 100.1% compared to the $91.6 million for the same period in 2007. Net income for the third quarter 2008 was $59.1 million, an increase of 118.9% compared to $27.0 million for the same period in 2007. Earnings per diluted share were $1.96 in the third quarter of 2008 compared to $0.96 for the third quarter 2007.
EBITDA, which is a non-GAAP measure, increased 117.9% to $83.9 million for the third quarter 2008 from $38.5 million in 2007. Please see "Non-GAAP Reconciliations - EBITDA" following the financial statements in this press release for a reconciliation of EBITDA to net income.
Total revenues of $183.3 million for the third quarter of 2008 include voyage revenues of $161.4 million, time charter revenues of $19.3 million and Logistics and other revenues of $2.6 million.
An average of 42 vessels (excluding off-hire) were operated during the third quarter 2008 compared to 32 vessels (excluding off-hire) during the same period of 2007.
Voyage revenues in the third quarter 2008 were $161.4 million, an increase of $90.5 million or 127.6% from the $70.9 million during the same period in 2007.
Total cargo volume (including aggregates) increased 967,324 tons or 58.2% to 2,628,585 tons for the third quarter 2008 from 1,661,261 for the same period in 2007. The majority of this increase in cargo volume is attributed to a 54% increase in general cargo excluding aggregates, which increased by 513,393 tons.
Cargo volume (excluding aggregates) increased 513,393 tons or 54.2% to 1,460,826 tons for the third quarter 2008 from 947,433 tons for the same period in 2007. Freight rates excluding aggregates increased $26.61 per ton or 38.4% to $95.85 per ton for the third quarter 2008 from $69.24 per ton during the same period in 2007.
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 $33,143 per day in the third quarter 2008, an increase of 47.1% from the $22,527 during the same period in 2007 and an increase of 6.2% from the $31,212 per day during the second quarter 2008.
Time Charter Revenues:
Time charter revenues decreased by $1.3 million or 6.3% to $19.3 million for the third quarter 2008 from $20.6 million for the same period in 2007 reflecting decreased time charter days as we used more of the fleet in our core voyage business.
Average Daily Time Charter Equivalent, which is an industry standard metric reflecting time charter-out revenues during the period reduced by commissions, was $32,206 per day in the third quarter 2008, an increase of 30.6% from the $24,656 during the same period of 2007. The key factor driving the increase in the average time charter equivalent rate per day was the strength in the worldwide shipping spot market.
Total operating expenses for the third quarter 2008 increased by $57.4 million or 92.4% to $119.5 million from $62.1 million for the same period in 2007. However, as a percentage of revenue, total operating expenses decreased by 2.7% to 65.2% for the third quarter of 2008 from 67.9% for the same period of 2007.
Voyage expenses, which include fuel costs, commissions, port call charges and stevedoring, increased by $29.9 million or 130.5% to $52.9 million for the third quarter 2008. The increase is due to an increase in fuel expenses which were a result of higher average fuel costs and higher fuel consumption due to an increased fleet; higher commission expense as a result of higher voyage revenues, as well as port call expenses and stevedore and other cargo-related expenses reflecting the increased volume of business.
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 $8.6 million or 38.7% to $30.8 million for the third quarter 2008 as compared to $22.2 million for the same period in 2007. Owned vessel expenses increased by $11.5 million due to an increase in the average number of owned vessels (45 compared to 33) and higher daily operating expenses. Chartered-in vessel expenses decreased $3.9 million due to a decrease in chartered-in vessel days. However, as a percentage of total revenue, vessel expenses decreased by 7.3% as compared to the same period last year.
General and administrative expenses increased by $6.2 million or 77.4% to $14.1 million in the third quarter 2008 due to a higher bonus accrual and to a smaller extent due to an increase in staff levels and stock-based compensation costs.
Net interest expense for the second quarter 2008 increased by $2.4 million as compared to the same period last year. This is primarily due to higher debt levels, higher fees and amortization of financing costs partially offset by lower borrowing costs.
The operating expenses for the third quarter of 2008 also include an expense of $1.7 million related to TBS Logistics Incorporated, a cargo and transport management subsidiary started during the fourth quarter of 2007.
Results for the Nine Months ended September 30, 2008:
For the nine months ended September 30, 2008, total revenues were $471.8 million, an increase of 97.7% compared to the $238.6 million for the same period 2007. Net income for the nine months 2008 was $157.2 million, an increase of 149.1% compared to $63.1 million for the same period 2007. Earnings per share on a diluted basis were $5.41 for the nine months of 2008, calculated on 29,036,752 shares, compared to $2.25 for the nine months of 2007 calculated on 28,059,545 shares.
Net income and earnings per share for the nine months of 2008 include $2.3 million for the loss on extinguishment of debt, or $0.08 per share. Net income and earnings per share for the nine months of 2007 include a gain of $6.0 million from the sale and insurance recovery of the M.V. Huron Maiden and a loss of $800 thousand from the sale of the M.V. Maya Princess, or $0.19 per share. Before these items, net income would have been $159.5 million or $5.49 per diluted share for the nine months of 2008 and $57.9 million or $2.06 per diluted share for the nine months of 2007.
EBITDA, which is a non-GAAP measure, increased 129.7% to $221.0 million for the nine months ended September 30, 2008 from $96.2 million in 2007. Please see "Non-GAAP Reconciliations - EBITDA" following the financial statements included in this press release for a reconciliation of EBITDA to net income.
An average of 39 vessels (excluding off-hire) were operated during the nine months 2008 compared to 32 vessels (excluding off-hire) during the same period of 2007.
Total revenues of $471.8 million for the nine months of 2008 include voyage revenues of $388.2 million, time charter revenues of $77.3 million and Logistics and other revenues of $6.3 million.
Recent Fleet Developments:
On August 11, 2008, TBS took delivery of the M.V. Tupi Maiden, formerly known as the M.V. Ken Blossom, an acquisition the Company announced in June 2008. TBS had agreed to acquire the vessel charter free for $44.0 million.
On August 22, 2008, TBS took delivery of the M.V. Fox Maiden, previously known as the M.V. Desert Explorer, an acquisition the Company announced in June 2008. TBS had agreed to acquire the vessel for $35.5 million charter free.
On September 8, 2008, the Company entered into an agreement to acquire the M.V. CEC Cardigan, to be renamed the M.V. Zia Belle, a 1997 built, 8,734 dwt heavy-lift multipurpose tweendecker with two 150 ton cranes, combinable up to 300 tons. The Company agreed to acquire this vessel charter free for $20.6 million with expected delivery within the next 30 days.
After acquisition of the M.V. Zia Belle the TBS fleet will be comprised of 47 vessels, with an aggregate of 1.4 million dwt, consisting of 24 multipurpose tweendeckers and a combination of 23 handysize and handymax bulk carriers.
Fleet Expansion and Newbuilding Program:
The TBS Newbuilding Program to construct six multipurpose vessels with retractable tweendecks is proceeding with the launching of the first vessel projected for the end of November. We expect delivery of two vessels in 2009 and four vessels in 2010.
TBS has in place a $150 million term loan credit agreement with a syndicate of lenders led by The Royal Bank of Scotland to finance the building and purchase of these six new multipurpose vessels.
We had been actively pursuing opportunities to build additional Roymar Class ships in China for delivery through 2011. However, in light of current conditions, we have delayed this program.
TBS 2008 Drydock Program:
For the first nine months of 2008, TBS drydocked 15 vessels, including one vessel that entered into drydock during the fourth quarter of 2007 and three vessels that continued into the fourth quarter of 2008, for an aggregate of approximately 570 drydocking days. The drydockings, including steel renewals of about 2,800 metric tons, had a total cost of approximately $21.4 million. During the fourth quarter 2008, three vessels that had entered drydock during the third quarter are expected to continue into this quarter for 99 days. In addition, two vessels requiring about 800 metric tons of steel will be drydocked for about 90 drydock days.