TBS International Limited Reports Fourth Quarter and Year Ended December 31, 2008 Financial Results

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Mar 2009

TBS International Limited announced yesterday its financial and operating results for the fourth quarter and year ended December 31, 2008. Management Commentary:
Joseph E. Royce, Chairman, Chief Executive Officer and President, stated: "Our record 2008 financial results have quickly become history. Since the last quarter of 2008 we have been experiencing a dramatic decline in the global economy, and we now operate in a completely different financial and economic environment, without clear visibility as to when the turmoil will end.
"The near term effects of this dramatic decline have been devastating on the dry cargo shipping industry. The freezing of the credit markets and the virtual elimination of letters of credit which are the traditional financing mechanism of global trade have caused a significant decrease in the volume of cargo transported thereby affecting freight rates, vessel utilization and asset values.
"At TBS, our strongest asset is our worldwide team of shipping professionals. We have fully staffed affiliate agencies and representative offices on five continents. We offer a unique Five Star Service consisting of Ocean Transportation, Logistics, Port Services, Operations and Strategic Planning. We implement this Five Star Service with our Fleet of 47 owned or controlled vessels consisting of 23 handymax and handysize bulk carriers and 24 multipurpose tweendeckers, one of which (the M.V. Zia Belle) has two 150 ton cranes combinable to 300 tons.
"Despite the lack of immediate visibility in the prevailing market conditions, we are cautiously optimistic for a gradual return to an improved market environment in the second half of 2009. Urbanization and core economic development which have been the prevalent trends in developing economies, especially in China and India, may temporarily slow down but are irreversible. The concerted efforts of governments around the world to inject liquidity into the credit markets and to implement stimulus programs aimed mainly at infrastructure development should eventually result in increased dry cargo movement. In the meantime, we will stay the course, and remain vigilant to safeguard the value we have created and alert to new opportunities that may arise."
Ferdinand V. Lepere, Executive Vice President and Chief Financial Officer, commented: "As we announced, we are pleased to have obtained waivers to the financial covenants from all of our lenders. The current economic conditions and their impact on the shipping industry, and specifically the market value of vessels, caused us to initiate discussions with all lenders of our credit facilities to obtain waivers of the collateral coverage requirements and other financial covenants. This is indicative of our excellent relationship with our lenders and a favorable development for the company. In connection with the credit facility waivers, we prepaid all principal installments that would have become due under our term loan facility during 2009, reducing our total non-construction debt to $247.5 million.
"Our newbuilding program for the six Roymar Class tweendeckers is progressing and we have in place fixed term financing with a syndicate of lenders led by 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.
"In the fourth quarter of 2008, we continued with our drydocking and vessel upgrade programs and drydocked five vessels for 223 drydocking days in total. For the full year 2008, we drydocked 17 vessels for an aggregate of 791 days at a cost of approximately $31.9 million. The recent completion of our multi-year accelerated vessel upgrade and drydock program enables us to make only necessary maintenance-related capital expenditures in 2009."
Fourth Quarter 2008 Results:
For the fourth quarter ended December 31, 2008, total revenues were $139.8 million, an increase of 22.2% compared to the $114.4 million for the same period in 2007. Net income for the fourth quarter 2008 was $34.6 million, a decrease of 1.7% compared to $35.2 million for the same period in 2007. Earnings per diluted share were $1.15 in the fourth quarter of 2008 compared to $1.26 for the fourth quarter 2007.
EBITDA, which is a non-GAAP measure, increased 31.6% to $62.9 million for the fourth quarter 2008 from $47.8 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.
An average of 44 vessels (excluding off-hire) were operating during the fourth quarter of 2008 compared to 34 vessels (excluding off-hire) during the same period in 2007.
Results for the Full Year ended December 31, 2008:
For the year ended December 31, 2008, total revenues were $611.6 million, an increase of 73.3% compared to $352.9 million for the same period in 2007. Net income for the full year 2008 was $191.8 million, an increase of 95.3% compared to $98.2 million for the same period in 2007. Earnings per share on a diluted basis were $6.54 for the full year 2008, calculated based on 29,316,132 shares, compared to $3.50 for the same period in 2007, calculated based on 28,066,736 shares.
EBITDA, which is a non-GAAP measure, increased by 97.2% to $283.9 million for the full year 2008 from $144.0 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.
Revenues:
Total revenues of $611.6 million for the full year 2008 include voyage revenues of $518.9 million, time charter revenues of $83.9 million and logistics and other revenues of $8.8 million.
An average of 41 vessels (excluding off-hire) were operated during the full year 2008 compared to 33 vessels (excluding off-hire) during the same period of 2007.
Voyage Revenues:
Voyage revenues for the full year 2008 were $518.9 million, an increase of $257.4 million or 98.4% from the $261.5 million during the same period in 2007.
Total cargo volume (including aggregates) increased 2,693,825 tons or 40.7% to 9,315,298 tons for the full year 2008 from 6,621,473 for the same period in 2007. The increase in cargo volume is attributed to a 32.5% increase in aggregates carried, and a 48.2% increase of non-aggregates carried.
Cargo volume (excluding aggregates) increased 1,661,969 tons or 48.2% to 5,108,983 tons for the full year 2008 from 3,447,014 tons for the same period in 2007. Freight rates excluding aggregates increased $19.29 per ton or 28.0% to $88.08 per ton for the year ended December 31, 2008 from $68.79 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 $29,526 per day for 2008, an increase of 36.3% from the $21,658 during the same period in 2007 and a decrease of 6.2% from the $31,463 per day during the nine months of 2008.
Time Charter Revenues:
Time charter revenues decreased by $4.5 million or 5.1% to $83.9 million for the full year 2008 from $88.4 million for the same period in 2007 reflecting decreased time charter days due to the increase in the Company's controlled vessels that were used in our established 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 $26,134 per day for 2008, an increase of 13.2% from the $23,078 during the same period of 2007.
Expenses:
Total operating expenses for the full year 2008 increased by $151.1 million or 60.1% to $402.4 million from $251.3 million for the same period in 2007. However, as a percentage of revenue, total operating expenses decreased by 5.5% to 65.8% for the year ended December 31, 2008 from 71.3% for the same period of 2007.
Voyage expenses, which include fuel costs, commissions, port call charges and stevedoring, increased by $83.7 million or 93.8% to $172.9 million for the full year 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 increased port call expenses and stevedore and other cargo-related expenses reflecting greater business volume.
Vessel expenses which consist of operating expenses relating to owned and controlled vessels, such as crewing, stores, repairs and maintenance, insurance, as well as charter hire fees for vessels that are chartered-in, increased by $24.4 million or 28.4% to $110.4 million for full year 2008 as compared to $86.0 million for the same period in 2007. Owned vessel expenses increased by $34.5 million due to a 25.6% increase in the day rate and a 27.9% increase in vessel days for owned/controlled vessels. Chartered-in vessel expenses decreased $11.4 million due to a decrease in chartered-in vessel days and rates. However, as a percentage of total revenue, vessel expenses decreased by 6.4% as compared to the same period last year.
General and administrative expenses increased by $1.2 million or 3.1% to $39.9 million for the full year 2008. This is mainly attributed to an increase in salary and related expenses due to an increase in staff levels and stock-based compensation costs offset by the elimination of 2008 bonuses.
The operating expenses for the full year 2008 also include an expense of $5.7 million related to TBS Logistics Incorporated, a cargo and transport management subsidiary started during the fourth quarter of 2007.
Recent Fleet Developments:
On December 12, 2008, TBS took delivery of the M.V. Zia Belle, previously known as the M.V. CEC Cardigan, an acquisition the company announced in September 2008. TBS had agreed to acquire the vessel charter free for $20.6 million. This vessel is a 1997 built, 8,492 dwt heavy-lift multipurpose tweendecker with two 150 tons cranes, combinable to 300 tons.
TBS' current fleet comprises 47 vessels, with an aggregate of 1,398,965 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 first vessel launched in 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 cancelled this program.
TBS 2008 Drydock Program and Vessel Upgrade Program:
For the full year 2008, TBS drydocked 17 vessels, including one vessel that entered into drydock during the fourth quarter of 2007 for an aggregate of approximately 791 drydocking days, requiring steel renewals of about 3,378 metric tons, had a total cost of approximately $31.9 million.
During the fourth quarter 2008, three vessels that entered into drydock during the third quarter extended into this quarter for 124 drydock days. In addition, two vessels entered into drydocking during the fourth quarter requiring about 696 metric tons of steel and 99 drydock days.

Source: TBS International Ltd.