Executives
Joseph Royce - Chairman, President and CEO
Fred Lepere - SEVP and CFO
Analysts
TBS International Plc (TBSI) Q1 2011 Earnings Call May 11, 2011 8:00 AM ET
Operator
Welcome to the TBS International first quarter ended March 31, 2011 earnings conference call. We have with us Mr. Joseph Royce, Chairman, President and CEO; and Mr. Fred Lepere, Senior Executive Vice President and Chief Financial Officer of the company. (Operator Instructions)
The conference call will also be webcast live, audio and slideshow on the Investor Relations section of the company's website, www.tbsship.com, by clicking on the webcast banner. I must advice you that this conference is being recorded today, Wednesday, May 11, 2011.
I will now pass the floor to one of your speakers today, Mr. Fred Lepere.
Fred Lepere
Well, good morning and thank you for joining TBS International's quarterly conference call. The purpose of today's call is to discus the results of TBS' first quarter ended March 31, 2011.
On Monday, May 9th, we issued a press release after the market closed in New York, with financial and operational information for the first quarter ended March 31, 2011. If you have not received this release, you may log on to our website at www.tbsship.com and navigate to the Investor Relations page or you can call Capital Link at area code 212-661-7566. We will also post the transcript of this call on our website once it's been prepared.
Our remarks today will be followed by a question-and-answer session. For those of you, who want to follow our slide presentation, please go to the TBS website, which again is www.tbsship.com, and click on the webcast link. Note that the slides are user controlled. For those of you, who want to follow the webcast, please click on the arrow at the bottom of the webcast screen to make the slides turn. Also, please note that the webcast will be archived on our website.
Now, I would like you to please turn to Slide number 2. This slide refers to forward-looking statements. During the course of this conference call, we may make forward-looking statements. Such statements are just predictions and involve risks and uncertainties such that actual results may differ materially.
I'd like to refer you to our filings with the Securities and Exchange Commission, in particular our quarterly reports on Form 10-Q and our annual reports on Form 10-K. These documents contain and identify important factors that could cause the actual results to differ materially from those expressed in these forward-looking statements.
And with that, I'd like to introduce Joseph Royce, our Chairman, CEO and President.
Joseph Royce
Thank you, Fred. Good morning, everybody, and welcome to TBS International's conference call for the results of the first quarter ended March 31, 2011.
I'd like to begin with our presentation with Slide number 3, the Baltic Indices. The first quarter of 2011 was very challenging for the Baltic Dry shipping industry. There was (inaudible) delivery of new build ships and continuing downward pressure on dry cargo freight rates as evidence by the Baltic Dry Indices.
The Baltic Dry Index, or BDI, which was at 1,773 on December 24, 2010, dropped to a low of 1,043 in early February this year and modestly recovered to 1,344 on May 9, 2011. Correspondingly, the Baltic Handysize Index, or BHSI, which was at 829 on December 24, 2010, dropped to a low of 634 also in early February, and has modestly recovered to 789 on May 9, 2011.
Please now turn to Slide 4, factors impacting first quarter 2011 financial results. We believe that there are many reasons for continued weakness in freight rates including the large amount of additional tonnage from recent deliveries in all vessel sizes, as well as natural and governmental occurrences that significantly decrease the amount of available progress.
There was severe flooding in Australia, which interrupted shipments of coal, iron ore and wheat. Along with government-imposed reductions of the export of coal from Indonesia, and Iron ore from India, causing deviation of vessels that traditionally carried these cargoes from that region into the Atlantic.
There was an extended heat wave in grain growing regions of Russia and Ukraine. And the earthquake, tsunami and radioactive contamination resulted from the damaged nuclear power plants in Japan, disrupted the natural flow of cargoes through and from that country.
Please now turn to Slide number 5, bunker costs. Most significantly, we exceptionally rapid rise in the cost of transportation crew, as you all have noticed from the previous cause is severely impacting our company's operating results. On January 3rd, in Singapore and (inaudible) crude oil was $518 per ton. And at the end of April the price was about $693 per ton, a rise of a $175 per ton or 34%.
Most of our vessels consume between 20 ton and 25 tons of Bunker fuel per day, when at sea and with the fleet of 51 vessels, you can well imagine the monthly increases in our Voyage fuel cost.
Please now turn to Slide number 6, addressing weakness in dry cargo market. TBS is taking an aggressive proactive approach in dealing with the weaknesses in dry cargo market. We are engaged in cost-reduction programs. We had restructured the company's debt obligation by revising the principal repayment schedules under our credit facilities. Revising the financial covenants, including covenants who made it to the company's consolidated leverage ratio, consolidated EPS coverage ratio and minimum cash balance, and modified other terms of the credit facilities.
As a commitment towards the success of restructuring of that credit facilities, three key members of TBS management agreed to provide $10 million of new equity to the company. We are preparing a rights offering that will entitle the holders of the company Class A shares other than the three key members of TBS management, prepare to Class A preference shares that are convertible into the company Class A shares.
Please now turn to Slide 7, looking into the second quarter 2011. Looking into the second quarter of this year, we note that the impact of a number of the aforementioned factors is ameliorating. Australia is increasing its exports. Cargo volumes are improving to and from Japan. The grain export season in South America has commenced.
And more normalize balanced returning to the distribution of vessels looking for the cargoes between the Atlantic and the Pacific. Freight rates in the Handysize and Handymax dry cargo bulk categories outside ships have stabilized and are now showing early signs of improvement.
Now, I'd like to turn the floor over to Fred Lepere, our Senior Executive Vive President and Chief Financial Officer.
Fred Lepere
Thank you, Joe. We should all now be on Slide number 8. This slide summarizes our first quarter 2011 operating and financial highlights. For the first quarter ended March 31, 2011 total revenues were $89.8 million, a decrease of 10% over the same period in 2010.
Our Voyage revenues for the three months ended March 31, 2011 were $69.4 million, a decrease of 7% from the $74.4 million during the same period in 2010. Time Charter revenues for the first quarter of 2011 decreased by 16% to $19.2 million from $22.9 million for the same period and three months ended March 31, 2010.
Our net loss for the first quarter of 2011 was $16.7 million as compared to a net loss of $7.8 million over the same period in 2010. Earnings per share on a basic and diluted basis for the first quarter 2011, was a loss of $0.54 per share as compared to a loss of $0.26 per share for the first quarter of last year. EBITDA, which is a non-GAAP measure was $11.3 million for the first quarter of 2011, a decrease of 51% over the same period in 2010.
Our newbuilding program continues of six multi-purpose Tweendeck vessels ordered, we have taken delivery of five so far, including two in the first quarter of 2011. We expect to take delivery of the remaining vessel in the second quarter of 2011. We currently have an operational fleet of 51 vessels with an aggregate of $1.55 million over deadweight tons, consisting of 29 Tweendeckers and 22 Handymax/Handysize bulk carriers.
Well in the first quarter of 2011, we continued our drydocking program and drydock five vessel, including one vessel, which entered into drydock during the fourth quarter of 2010, for a total of 187 days.
Please now turn to Slide number 9. This slide demonstrates the revenue metrics of our business for the first quarter of 2011. We'll begin with our Voyage business. During the first quarter of 2011, we operated 31 vessels in our Freight Voyage business and had 2,759 freight voyage days, as compared to 31 vessels in 2,804 freight voyages days in the first quarter of 2010.
Our Daily Average Voyage Time Charter Equivalent was $11, 147, a decrease of 23% compared to last year's first quarter. As you can see on the slide, during the first quarter of 2011, we had a 6% increase in the total tons of cargo shipped and a 4% decrease in the tons of cargo ship excluding aggregates.
Now turning to our time charter revenue metrics, on the same slide. Our Average Daily Time Charter Equivalent for this business was $12,063 per day in the first quarter of 2011, a decrease of 26% from the $16,299 during the same period of 2010. We operated 17 vessels in this business for a total of 1,490 days as compared to 15 vessels for 1,337 days in the first quarter of 2010.
Please now turn to Slide number 10. This slide provides the highlights of our consolidated balance sheet. As of March 31, 2011, our net debt-to-capitalization ratio stood at 53.9%. Our cash balance at March 31, 2011, was $18.4 million, plus $400,000 in restricted cash. In connection with our new building program, for the first quarter 2011, we paid $6.2 million from our restricted cash to the shipyard.
As announced, on April 18, 2011, we and our members agreed on a modification of our financial covenants through December 31, 2011, reducing the minimum consolidated interest charge coverage ratio for the fiscal quarters ending June 30, 2011 through December 31, 2011 from 3.35-to-1 to 2.50-to-1. In addition, the modifications increased to maximum consolidated leverage ratio for the same period from 4-to-1 to 5.10-to-1, and reduced the minimum cash requirement from $15 million to $10 million for the period from July 1, 2011, through December 31, 2011.
We expect that these amendments will allow us to remain in compliance with our various credit facilities through December 31, 2011. After December 31, 2011, financial covenant requirements will revert back to the levels set in the January 28, 2011 credit agreement amendments. Unless the Baltic Dry Index and the freight and charter rates that we obtain strengthen significantly in the near future, it is likely that after December 31, 2011, we would fail to meet the tests under certain of our financial covenants.
Our lenders have agreed to enter into further negotiations at that time, if necessary, to seek further modifications of those financial covenants. The ability to make the cash payment later in the year and maintain our minimum cash requirement of $10 million is contingent upon obtaining additional funding. Failure to meet any of the financial covenants or our inability to obtained a waiver of such future covenant violations would continue to raise substantial doubt about our ability to continue with it's own concern.
At March 31, 2011, we were in compliance with all the financial covenants relating to our debt as amended on January 28, 2011. We now reached the end of our presentation. The slides in the appendix provide our EBITDA reconciliation. And additional information on our business model, our trade routes, our fleet and our global network. Please take a look at them at your convenience.
We thank you for your interest in and support of our company. And I would like to open the conference call to questions from our investors. Operator, please open the floor for questions.
Question-and-Answer Session
Operator
(Operator Instructions) Our first question will come from the line of (William Harrington).
Unidentified Analyst
I was wondering, I've just gone through the slide on Page 6, if you could just walk us through what you mean by cost-reduction program? If you can tell us how much of those permanent cost savings, temporary cost savings, and if you can quantify how much cost savings are being implemented currently?
Fred Lepere
If we annualize the cost savings that we've achieved so far, it's about $25 million. Of course those will be implemented during the course of 2011. But if you look it on an annualized basis, it's about $23 million. Again speaking on a pro-forma full-year basis related to vessels are about $12 million, the Voyage cost about $6.7 million and the G&A about $4.6 million.
We do have opportunities for additional savings, but that's how it looks at the moment, as we sit here today. Our other estimates are somewhere around $3 million to $4 million of those savings that would be difficult to continue on a long-term basis, as regulate to certain repairs and maintenance on both the vessels. That I think for the period of 2011 and 2012 we should be able to maintain these savings at these levels.
Unidentified Analyst
Just going through the presentation, I appreciate the additional detail of Q1 actuals. Is there any type of guidance you can give investors for the rest of the year, either revenue projection or EBITDA or different scenarios that you've run. Listening to some your comments, it sounds like Q1 was probably the lower quarter of the year in your forecasts. And I'm just trying to come up with an EBITDA number in my head. I understand its contingent on several factors. But is there any type of guidance, even if it's not specific guidance that you can give the investors for the rest of this year?
Fred Lepere
I'm sorry, we don't give guidance. It's been our public policy since we became a public company in 2005, not to give guidance.
Unidentified Analyst
So you suggested that the Baltic Dry Index has to improve pretty significantly by the ended the year in order to satisfy the financial covenants. What do you mean by significant compare to where it is now? Are we talking a 20% recovery, an 80% recovery in Baltic Dry Index?
Fred Lepere
I think the first thing to mention here is that the covenant calculations are backward looking. So that when you get to the first quarter of 2012, we have one quarter of 2012 and the last three quarters of 2011, so just to make that clear. And the area we're talking about is probably similar around 20% improvements in the BVI.
Operator
(Operators Instruction) We have no additional questions at this time. I would now like to hand the conference back over to Mr. Royce for closing remarks.
Joseph Royce
Well, again thank you very much. And I would like to thank everyone for your interest and support. And look forward to our next conference call for the second quarter 2011. And I would like to wish everybody a nice day. Thank you.
Operator
Thank you for attending today's conference. This concludes the presentation. You may now disconnect and have a great day.
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