Trailer Bridge says Q3 liquidity 'remained strong,' company working on refinancing 2011 bonds

By Paul Deckelman

New York, Nov. 16 - Trailer Bridge Inc. ended the third quarter in a "strong" liquidity position, the company's chief financial officer said Tuesday, despite less-than-robust earnings, and is working on refinancing an outstanding junk bond issue slated to come due a year from now.

Mark A. Tanner, who is also the principal accounting officer and vice president for administration of the Jacksonville, Fla.-based trucking and marine transportation company, said on the conference call following the release of the company's financial results that as of the end of the quarter on Sept. 30, Trailer Bridge had some $20 million of liquidity, including $13.2 million of cash on hand.

The company also had $7.3 million of availability under its $10 million revolving credit facility, its borrowing base determined by eligible receivables, with nothing drawn against the revolver.

Bond refinancing on the agenda

Long-term debt at Sept. 30, less the current portion, stood at $100.7 million, down from $103.1 million at the end of 2009. The bulk of this was the $82.5 million of remaining outstanding 9¼% senior secured notes scheduled to come due on Nov. 15, 2011. The company sold the original $85 million of the bonds in November 2004, bought back $1.5 million late last year and repurchased another $1 million in this year's first quarter.

Tanner and the company's chief executive officer, Ivy B. Suter, said on the conference call that Trailer Bridge had engaged a financial adviser during the third quarter, whom they did not identify, and that the company and its adviser are working toward refinancing the bonds.

According to the company's 10-Q report filed with the Securities and Exchange Commission on Monday, the existing bonds are secured by a substantial portion of the company's revenue-generating assets; Trailer Bridge believes that this collateral, "when combined with additional collateral it has to offer or unsecured borrowings will be sufficient to permit such a refinancing."

Trailer Bridge's ratio of net debt to adjusted EBITDA improved to 4.1 times at Sept. 30 from 4.4x at the end of the 2009 third quarter.

Mediocre earnings performance

Hurt by lower charter rates and slippage volume, Trailer Bridge's revenues declined to $29.3 million during the third quarter, down 7.5% sequentially from the 2010 second quarter and off 3.4% from a year earlier.

Third-quarter operating income of $2.5 million slid by 40.3% from $4.1 million in the third quarter of 2009, with higher fuel costs and other expenses hurting earnings in the latest period. Third-quarter net income was $6,876, or break-even on a diluted per-share basis, versus $1.7 million, or 14 cents per share, a year earlier. Third-quarter EBITDA fell 29.2% to $4 million from $5.7 million a year ago, and adjusted EBITDA likewise declined to $4.4 million in the third quarter from $6.2 million a year earlier.

The company's bonds last traded at par in late October. Its Nasdaq-traded shares slid as much as 9% intraday Tuesday on the quarterly results before ending the day off about 5%, on nearly three times normal volume.

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