Annual Reports

 
Quarterly Reports

  • 10-Q (Nov 9, 2011)
  • 10-Q (Aug 9, 2011)
  • 10-Q (May 10, 2011)
  • 10-Q (Nov 9, 2010)
  • 10-Q (Aug 9, 2010)
  • 10-Q (May 10, 2010)

 
8-K

 
Other

TBS International 10-Q 2010

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-31.3
  5. Ex-32
  6. Ex-32
tbsi10q-063010.htm
UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2010
 
or
 o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                                                   to
 
Commission File Number 001-34599
 
TBS INTERNATIONAL PLC
 (Exact name of registrant as specified in its charter)
 
Ireland
98-0646151
(State or other jurisdiction of
incorporation or organization)
(IRS Employer Identification No.)
Arthur Cox Building
Earlsfort Terrace
Dublin 2, Ireland
(Address of principal executive offices)
 
1 353(0) 1 618 0000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                                                        
 
Yes x   No ¨
   
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                                                
       
Yes x   No ¨ 

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:
 
    Large Accelerated Filer  ¨ Accelerated Filer x Non-accelerated Filer ¨ (Do not check if a small reporting company)   Smaller Reporting Filer ¨
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).                                
Yes ¨  No x

As of August 3, 2010, the registrant had outstanding 16,440,162 Class A ordinary shares, par value $0.01 per share, and 14,740,461 Class B ordinary shares, par value $0.01 per share.

 
 

 
 
TBS INTERNATIONAL plc
Form 10-Q For the Quarterly Period Ended June 30, 2010
 
   
Page
 PART I:  FINANCIAL INFORMATION
 
Item 1
 
 
3
 
4
 
5
 
6
 
7
     
Item 2
22
Item 3
47
Item 4
48
     
 PART II:  OTHER INFORMATION
 
Item 1
49
   Item 1A
49
Item 2
49
Item 3
49
Item 4
49
Item 5
49
Item 6
50
   
     
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 

 
2

 
 TBS INTERNATIONAL PLC AND SUBSIDIARIES>
 
(in thousands, except shares and par value per share)
(unaudited)
           
June 30,
   
December 31,
 
           
2010
   
2009
 
Assets
           
 
Current assets
           
   
Cash and cash equivalents
  $ 30,097     $ 51,040  
   
Restricted cash
    6,575       8,675  
   
Charter hire receivable, net of allowance of $1,315 in 2010
               
     
 and $1,000 in 2009, respectively
    29,232       34,605  
   
Fuel and other inventories
    16,960       15,040  
   
Prepaid expenses and other current assets
    10,172       9,314  
   
Vessel held for sale
    2,463          
   
Advances to affiliates
    255       1,386  
     
Total current assets
    95,754       120,060  
 
Fixed assets, net
    787,501       804,258  
 
Goodwill
    8,426       8,426  
 
Other assets and deferred charges
    27,148       20,844  
                         
     
Total assets
  $ 918,829     $ 953,588  
                         
Liabilities and Shareholders' Equity
               
 
Current liabilities
               
   
Debt, current portion
  $ 73,098     $ 351,247  
   
Accounts payable and accrued expenses
    54,608       52,054  
   
Voyages in progress
    824       1,892  
   
Advances from affiliates
    343       690  
     
Total current liabilities
    128,873       405,883  
                         
 
Debt, long-term portion
    258,068          
 
Other liabilities
    9,710       9,977  
     
Total liabilities
    396,651       415,860  
                         
 
COMMITMENTS AND CONTINGENCIES (Note 12)
               
                         
 
Shareholders' equity
               
   
TBS International plc shareholders' equity
               
     
Ordinary shares, Class A, $.01 par value, 75,000,000 authorized,
               
       
15,808,365 shares issued and 15,676,662 shares outstanding in 2010 and
               
       
17,533,996 shares issued and 17,513,125 outstanding in 2009
    158       175  
     
Ordinary shares, Class B, $.01 par value, 30,000,000
               
       
authorized, 14,740,461 shares issued and outstanding in 2010 and
               
       
12,390,461 shares issued and outstanding 2009
    147       124  
     
Warrants
    21       21  
     
Additional paid-in capital
    192,296       187,798  
     
Accumulated other comprehensive (loss)
    (10,749 )     (8,275 )
     
Retained earnings
    340,849       358,369  
     
Less: Tresury stock (131,703 shares in 2010 and 20,871 shares in 2009, at cost)
    (1,170 )     (484 )
       
Total TBS International plc shareholders' equity
    521,552       537,728  
   
Noncontrolling interests' equity
    626          
       
Total shareholders' equity
    522,178       537,728  
       
Total liabilities and shareholders' equity
  $ 918,829     $ 953,588  
                         

The accompanying notes are an integral part of these consolidated financial statements

TBS INTERNATIONAL PLC AND SUBSIDIARIES
 
(in thousands, except per share amounts and outstanding shares)
(unaudited)
 
       
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
 
   
2010
   
2009
   
2010
   
2009
 
Revenue
                       
 
Voyage revenue
  $ 70,640     $ 59,741     $ 144,998     $ 124,254  
 
Time charter revenue
    37,658       12,168       60,561       18,339  
 
Logistics revenue
    2,931       270       5,583       536  
 
Other revenue
    11       57       167       265  
   
Total revenue
    111,240       72,236       211,309       143,394  
Operating expenses
                               
 
Voyage
    37,268       27,314       72,048       56,313  
 
Logistics
    1,748       172       3,625       421  
 
Vessel
    31,668       25,520       59,439       53,499  
 
Depreciation and amortization of vessels and other
fixed assets
    25,733       23,603       51,230       46,322  
 
General and administrative
    14,030       8,349       26,403       17,035  
 
Net loss on vessel held for sale
    5,154               5,154          
   
Total operating expenses
    115,601       84,958       217,899       173,590  
(Loss) from operations
    (4,361 )     (12,722 )     (6,590 )     (30,196 )
Other (expenses) and income
                               
 
Interest expense
    (6,172 )     (4,466 )     (11,568 )     (7,977 )
 
Loss on extinguishment of debt
                    (200 )        
 
Interest and other income (expense)
    42       275       24       (28 )
   
Total other (expenses) and income, net
    (6,130 )     (4,191 )     (11,744 )     (8,005 )
                                     
Net (loss)
    (10,491 )     (16,913 )     (18,334 )     (38,201 )
                                     
 
Less: Net (loss) attributable to
                               
   
noncontrolling interests
    (814 )             (814 )        
                                     
Net (loss) attributable to TBS International plc
  $ (9,677 )   $ (16,913 )   $ (17,520 )   $ (38,201 )
                                     
Loss per share
                               
Net (loss) per ordinary share
                               
 
Basic and Diluted
  $ (0.32 )   $ (0.57 )   $ (0.59 )   $ (1.28 )
                                     
Weighted average ordinary shares outstanding
                               
 
Basic and Diluted
    29,973,420       29,827,345       29,930,634       29,822,402  





 
 
 
The accompanying notes are an integral part of these consolidated financial statements.


TBS INTERNATIONAL PLC AND SUBSIDIARIES
 
(in thousands)
(unaudited)

       
Six Months Ended June 30,
 
       
2010
   
2009
 
       
(unaudited)
   
(unaudited)
 
Cash flows from operating activities
           
 
Net (loss)
  $ (18,334 )   $ (38,201 )
 
Adjustments to reconcile net loss to net cash provided by operating activities
               
 
Depreciation and amortization
    51,230       46,322  
 
(Gain)/Loss on change in fair value and termination of
               
   
interest swap contracts
    368       (143 )
 
Currency Translation Gain
    (95 )      
 
Amortization and write-off of deferred financing costs
    2,212       1,289  
 
Increase to allowance for doubtful accounts
    315        
 
Non cash stock based compensation
    4,498       751  
 
Drydocking expenditures
    (6,120 )     (6,741 )
 
Net loss on vessel held for sale
    5,154        
 
Loss from non-consolidated joint ventures
    (56 )      
 
Changes in operating assets and liabilities
               
   
Decrease in charter hire receivable
    5,058       17,123  
   
Increase in fuel and other inventories
    (1,920 )     (2,005 )
   
(Increase)/decrease in prepaid expenses and other current assets
    (858 )     2,499  
   
Increase in other assets and deferred charges
    (3,357 )     (524 )
   
Increase/(decrease) in accounts payable and accrued expenses
    2,190       (2,344 )
   
Decrease  in voyages in progress
    (1,068 )     (2,748 )
   
Increase in advances to/from affiliates, net
    784       5,320  
Net cash provided by operating activities
    40,001       20,598  
                     
Cash flows from investing activities
               
                     
 
Vessel acquisitions/capital improvements
    (35,970 )     (34,138 )
 
Payments to restricted cash
    (400 )     (20,000 )
 
Payments from restricted cash
    2,500       4,825  
 
Repayment of loan made to non-consolidated joint venture
    237        
 
Investment in non-consolidated joint venture
    (947 )     (87 )
Net cash used in investing activities
    (34,580 )     (49,400 )
                     
Cash flows from financing activities
               
 
Repayment of debt principal
    (35,081 )     (60,585 )
 
Proceeds from debt
    15,000       14,175  
 
Payment of deferred financing costs
    (4,023 )     (3,372 )
 
Payment to terminate interest swap contract
    (3,014 )      
 
Capital contribution of noncontrolling interest
    1,440        
 
Acquisition of treasury stock
    (686 )     (78 )
Net cash used in financing activities
    (26,364 )     (49,860 )
                     
Net decrease in cash and cash equivalents
    (20,943 )     (78,662 )
Cash and cash equivalents beginning of period
    51,040       131,150  
 
Cash and cash equivalents end of period
    30,097     $ 52,488  
Supplemental cash flow information:
               
 
Interest paid, net of amounts capitalized
  $ 11,977     $ 11,565  
                     

The accompanying notes are an integral part of these consolidated financial statements.



TBS INTERNATIONAL PLC AND SUBSIDIARIES
 
(in thousands, except shares)
(unaudited)

 
                                 
Accumulated
             
                                 
Other Com-
 
Total TBS
         
                         
Additional
     
prehensive
 
International plc
  Non-  
Total
 
 
Ordinary Shares
 
Treasury Stocks
 
Warrants
 
Paid-in
 
Retained
 
Income
 
Shareholders'
 
controlling
 
Shareholders'
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
Earnings
 
(Loss)
 
Equity
 
Interest
 
Equity
 
 
                                               
Balance at December 31, 2009
29,924,457   $ 299   20,871   (484 ) 311,903   21   187,798   358,369   (8,275 ) $ 537,728       $ 537,728  
Net loss
                                      (17,520 )         (17,520 )   (814 )   (18,334 )
Foreign currency translation adjustments
                                            (95 )   (95 )         (95
Unrealized gain on cash flow hedges
                                            (2,379 )   (2,379 )         (2,379 )
Comprehensive income
                                                  (19,994 )         (19,994 )
Stock based compensation
624,369     6                         4,498                 4,504           4,504  
Increase in Warrants due to anti-dilutive provisions
                    37,684                                            
Treasury stock
          110,832     (686 )                               (686 )         (686 )
Non-controlling Interest in Subsidiary
                                                        1,440     1,440  
                                                                   
Balance at June 30, 2010
30,548,826   $ 305   131,703   $ (1,170 ) 349,587   $ 21   $ 192,296   $ 340,849   $ (10,749 ) $ 521,552   $ 626   $ 522,178  
                                                                   



 
 

 
 

 

 


 



The accompanying notes are an integral part of these consolidated financial statements.

 
 
    TBS International plc ("TBSI") and its subsidiaries (collectively, the "Company", "we" or "our") are engaged in the ocean transportation of dry cargo offering shipping solutions through liner, parcel, bulk and logistics services. Substantially all related corporations of TBSI are non-U.S. corporations and conduct their business operations worldwide.  The accompanying unaudited consolidated financial statements and notes thereto have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included.  These consolidated interim financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.  Operating results for the three and six-month periods ended June 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.

    The consolidated balance sheet at December 31, 2009 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
 
For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2009 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 16, 2010.

Accounting principles require that long-term loans be classified as a current liability when either a covenant violation that gives the lender the right to call the debt occurred at the balance sheet date, or such a covenant violation would have occurred absent a waiver of those covenants and, in either case, it is probable that the covenant violation will not be cured within the next twelve months.  At December 31, 2009, the Company did not meet minimum collateral requirements on its loans and anticipated that it would not meet the existing consolidated fixed charge and consolidated leverage ratio requirements during the subsequent twelve months.   Accordingly, at December 31, 2009, the debt was considered to be callable by the lenders and the long-term portion of outstanding debt was classified as a current liability on the consolidated balance sheet.  As further discussed in Note 8 – Financing, the Company obtained modifications of the financial covenants for all of its credit facilities.  The Company anticipates that it will meet the amended covenant requirements during the next twelve months making the debt no longer callable, and the long-term portion of outstanding debt was recorded as long-term on the consolidated balance sheet at June 30, 2010.

Note 2 — New Accounting Pronouncements

 
Adopted
 
In January 2010, the Financial Accounting Standards Board (“FASB”) issued an amendment to FASB ASC Topic 820 – “Fair Value Measurements and Disclosures”, regarding the accounting for fair value measurements and disclosures. This amendment provides more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3 details.  This amendment was effective with the March 31, 2010 reporting period, with an exception for the gross presentation of Level 3 roll forward information, which is required for the 2011 interim and annual reporting periods.  Adoption of the amendments in 2010 did not have an effect on the Company’s financial statements disclosures and adoption of the amendment that is effective for the 2011 reporting periods is not expected to have an effect.
 

In June 2009, the FASB issued changes to the accounting for variable interest entities. These changes, as discussed in ASC Topic 810 - Consolidation, require an enterprise to: (i) perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity; (ii) perform ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; (iii) eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; (iv) add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly affect the entity’s economic performance: and (v) enhance disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. Adoption of this guidance, which became effective January 1, 2010, did not have an effect on our consolidated financial statements.

In May 2009, the FASB issued guidance which was subsequently amended in February 2010 regarding accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance, which is outlined in ASC Topic 855 – Subsequent Events, establishes the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of these changes did not have an effect on our consolidated financial statements because the Company already followed a similar approach prior to the adoption of this guidance.

Note 3 — Fuel and Other Inventories
 
    Fuel and other inventories consist of the following (in thousands):
 
   
June 30,
   
December 31,
 
Description
 
2010
   
2009
 
Fuel
  $ 10,251     $ 9,093  
Lubricating oil
    6,038       5,235  
Other
    671       712  
TOTAL
  $ 16,960     $ 15,040  
                 

Note 4 — Amounts Due to / from Affiliates
 
    The Company typically advances funds to affiliates in connection with the payment of management fees, commissions and consulting fees.  Amounts due to / from affiliates, which are entities related by common shareholders, are non-interest-bearing, due on demand, and expected to be collected or paid in the ordinary course of business, generally within one year.  
 
Note 5 — Fixed Assets
 
    Fixed assets consist of the following (in thousands):
 
Description
 
June 30, 2010
   
December 31, 2009
 
Vessels
  $ 746,989     $ 717,535  
Vessel improvements and other equipment
    176,990       170,325  
Deferred drydocking costs
    30,978       26,619  
Vessel construction in process
    116,329       130,711  
Other fixed assets
    19,294       18,912  
      1,090,580       1,064,102  
Less accumulated depreciation and amortization
    (303,079 )     (259,844 )
    $ 787,501     $ 804,258  
                 
 
 
    In March 2010 the Dakota Princess, the second of the six vessels being built under individual contracts with China Communications Construction Company Ltd. and Nantong Yahua Shipbuilding Group Co., Ltd. ("Shipyard"), was delivered.  The contracts to build six multipurpose vessels with retractable tweendecks were entered into in February 2007 at an original contract purchase price of $35.4 million per vessel.  The third and fourth vessels are tentatively scheduled to be delivered during the third and fourth quarters of 2010 and the fifth and sixth vessels are scheduled for delivery during the second and third quarters of 2011.  Installments of $7.0 million per vessel are due to the Shipyard when each of four pre-delivery milestones (contract signing, steel cutting, keel laying, and launching) are met.  At delivery, a final installment of $7.8 million, as adjusted, is due to the Shipyard.  Payments made as of June 30, 2010 for the four remaining vessels to be delivered are as follows (in thousands):
 
Hull Number
 
Vessel Name
 
Payments through
 June 30, 2010
 
Hull No NYHS200722
 
Montauk Maiden
    28,000  
Hull No NYHS200723
 
Comanche Maiden
    21,000  
Hull No NYHS200724
 
Omaha Belle
    28,000  
Hull No NYHS200725
 
Maya Princess
    21,000  
   
Payments to yard
  $ 98,000  
   
Capitalized  interest
    14,862  
   
Design & other costs
    3,467  
        $ 116,329  
 
    The Company capitalized interest, including loan origination fees, of $2.0 million and $1.9 million for  the three months ended June 30, 2010 and 2009, respectively; and  $4.0 and $3.3 million for  the six months ended June 30, 2010 and 2009, respectively.   Capitalized interest and deferred finance costs are added to the cost of each vessel and will be amortized over the estimated useful life of the vessel when it is placed into service.

    On June 29, 2010, the Company signed a Memorandum of Agreement to sell the Savannah Belle for $2.8 million.  Accordingly, the vessel cost and improvements less accumulated depreciation was reclassified to vessel held for sale at June 30, 2010.  A $5.2 million charge was recorded during the six months ended June 30, 2010 to adjust the vessel held for sale to its net realized value.  The sale was completed on July 20, 2010 and the net proceeds were used to pay down the BOA Revolver.

Note 6 — Valuation of Long-Lived Assets and Goodwill
 
    In accordance with FASB ASC Topic 350 – “Intangibles—Goodwill and Other”, we perform tests for  impairment of long-lived assets whenever events or circumstances, such as significant changes in charter rates or vessel valuations, suggest that long-lived assets may not be recoverable.  An analysis of long-lived assets differs from our goodwill analysis in that impairment is only deemed to have occurred if the sum of the forecasted undiscounted future cash flows related to the assets is less than the carrying value of the assets we are testing for impairment.  If the forecasted cash flows from long-lived assets are less than the carrying value of such assets, we must write down the carrying value to its estimated fair value.  Forecasting future cash flows involves the use of significant estimates and assumptions. Revenue and expense assumptions used in the cash flow projections are consistent with internal projections and reflect management’s economic outlook at the time of preparation.  The cash flow period used is based on the remaining lives of the vessels, which range from four to 30 years.
 
    The provisions of FASB ASC Topic 350 – “Intangible – Goodwill and Other”, require an annual impairment test to be performed on goodwill.  We perform our annual impairment analysis of goodwill on May 31 of each year, or more frequently if there are indicators of impairment.  The first of two steps requires us to compare the reporting unit’s carrying value of net assets to their fair value.  If the fair value exceeds the carrying value, goodwill is not considered impaired and we are not required to perform further testing.  If the carrying value of the net assets exceeds the fair value, we must then perform the second step of the impairment test in order to determine the implied fair value of goodwill.  If the carrying value of goodwill exceeds its implied fair value, then we are required to record an impairment loss equal to the difference.

The reporting unit consists of the companies acquired in connection with the initial public offering that created the goodwill of $8.4 million.  Determining the reporting unit’s fair value involves the use of significant estimates and assumptions.   We estimate the fair value using income and market approaches through the application of discounted cash flow.  We performed our annual analysis at May 31, 2010 by:  
(a) updating our 2010 budgeted cash flow based on actual results; (b) updating our forecast for years 2011 through 2014 based on changes made to our cash flow estimates; and, (c) updating our estimates of the weighted-average cost of capital.  Based on our analysis, we concluded that there was no indication of goodwill impairment at May 31, 2010.   Between May 31 and June 30, 2010, there were no changes in circumstances that necessitated further goodwill impairment testing.
 
Note 7 — Accounts Payable and Accrued Expenses

    Accounts payable and accrued expenses consist of the following (in thousands):

   
June 30,
   
December 31,
 
Description
 
2010
   
2009
 
Accounts payable and accrued expenses - vessel
  $ 29,763     $ 33,631  
Accounts payable and accrued expenses - voyage
    22,695       16,541  
Accounts payable and accrued expenses - other
    1,439       1,813  
Accrued payroll and related costs
    711       69  
Total
  $ 54,608     $ 52,054  

Note 8 — Financing
 
    The Company's outstanding debt balances consist of the following (in thousands):
 
     
Interest Rate at
June 30, 2010
 
June 30, 2010
   
December 31, 2009
 
Bank of America - term credit facility,
               
 
expires December 31, 2011
  5.78%   $ 57,000     $ 76,000  
Bank of America - revolving credit facility,
                   
 
expires March 26, 2012
 
5.54% & 5.55%
    75,000       75,000  
The Royal Bank of Scotland credit facility,
                   
 
new vessel buildings, expires June 2016
 
5.53% & 5.56%
    117,505       103,758  
DVB Group Merchant Bank (Asia) Ltd credit facility,
                   
 
expires January 23, 2013
  5.68%     30,972       35,864  
Credit Suisse credit facility,
                   
 
expires December 12, 2017 and  February 19, 2018
 
3.71% & 3.79%
    26,689       28,750  
AIG Commercial Equipment Finance, Inc. credit facility,
                   
 
expires April 1, 2012
  10.00%     14,000       19,250  
Commerzbank AG credit facility,
                   
 
expires June 2, 2011
  4.29%     3,500       4,500  
Berenberg Bank credit facility,
                   
 
expires June 19, 2012
  5.56%     6,500       8,125  
                       
 
Total
      $ 331,166     $ 351,247  
 
Less current portion
        (73,098 )     (351,247 )
 
Long term portion
      $ 258,068     $    
                       
 
    The table below illustrates our payment obligations due according to the agreements as modified.  The long-term portion of the debt obligations on the below table have not been reclassified to current debt.

2010 (July 1, 2010 through December 31, 2010)
  $ 37,461  
2011
    71,528  
2012
    103,991  
2013
    16,041  
2014
    29,665  
Thereafter
    72,480  
    $ 331,166  
         
 
Classification of Debt
 
    U.S. generally accepted accounting principles require that long-term loans be classified as a current liability when either a covenant violation that gives the lender the right to call the debt has occurred at the balance sheet date, or such a covenant violation would have occurred absent a waiver of those covenants, and in either case it is probable that the covenant violation will not be cured within the next twelve months.  At December 31, 2009, the Company did not meet minimum collateral requirements on its loans and anticipated that it would not meet the existing consolidated fixed charge and consolidated leverage ratio requirements during the subsequent twelve months.   Accordingly, at December 31, 2009, the debt was considered to be callable by the lenders and the long-term portion of outstanding debt was classified as a current liability on the consolidated balance sheet.  The Company obtained waivers from all its lender’s for the minimum collateral requirement through May 14, 2010 by which time amendments to all its credit facilities were finalized.  At June 30, 2010, the Company expects to be in compliance with all amended financial covenants during the next twelve months, and the debt is not expected to be callable by the lenders.  Accordingly, the long-term portion of outstanding debt at June 30, 2010 is being classified as long-term debt in the consolidated balance sheet.

Loan Modifications
 
    In May 2010 the Company finalized the amendment of its credit agreements.  The amended credit agreements set new financial covenant levels, eliminated the minimum consolidated tangible net worth requirement, increased bank margins and provided a new EBITDA calculation.  EBITDA, as redefined, excludes additional items such as goodwill or vessel impairment charges incurred through December 31, 2011, costs of up to $3.0 million incurred in connection with the redomiciliation of TBSI, non-cash stock compensation to employees of up to $10.0 million in both 2010 and 2011 and any gain or loss on the sale or other disposition of a vessel.

Borrowings under the amended Bank of America Credit Facility at June 30, 2010 were $132.0 million, consisting of borrowings of $75.0 million under a revolving credit facility (“BOA Revolver”) and a term loan (“BOA Term Loan”) with a current remaining balance of $57.0 million.  The full proceeds of any future sale or total loss of a vessel collateralizing the BOA Credit Facility or any disposition of any asset owned by a BOA Credit Facility borrowing subsidiary is required to be applied toward the prepayment of the BOA Revolver.  The amount available under the BOA Revolver, which expires March 2012, is reduced by any prepayments.

In connection with the amendment of existing credit facilities, the Company incurred deferred financing costs of $4.0 million during the six months ended June 30, 2010.  Applying guidance provided by FASB ASC 470-50-40 -  “Accounting for Modifications and Extinguishment of Debt”, $0.2 million of unamortized deferred financing costs previously incurred was charged to consolidated income during the first quarter of 2010.  The financing costs incurred in amending the credit facilities are being amortized over the terms of the respective credit facilities.
 
 
Covenants
 
    Our various debt agreements contain both financial and non-financial covenants, and include customary restrictions on the Company’s ability to incur indebtedness or grant liens, pay dividends under certain circumstances, enter into transactions with affiliates, merge, consolidate, or dispose of assets, or change the nature of our business.  The Company is required to comply with maritime laws and regulations, maintain the vessels consistent with first-class ship ownership and management practice, keep appropriate accounting records and maintain specified levels of insurance.  Covenants for all loan agreements with the exception of the Joh. Berenberg Gossler & Co. KG Bank credit facility require that the Company maintain a minimum consolidated fixed charge ratio, a maximum restricted consolidated leverage ratio and minimum month-end cash and cash equivalent balances.  Some of our credit agreements also restrict leverage, investment and capital expenditures without lender consent.  The table below sets forth a summary of the financial covenants in place as of June 30, 2010:

Covenant
 
Required as of June 30, 2010
     
Minimum Cash Liquidity
 
Qualified cash of $15.0 million, which is defined in the agreement as cash and cash equivalents.
 
Minimum Consolidated Interest Charge Coverage Ratio
 
Not less than a ratio of 3.00 to 1.00 at June 30, 2010 and 3.75 to 1.00 at September 30, 2010 of consolidated EBITDA for the four previous quarters to consolidated interest expense for the same period.  Not measured after September 30, 2010.
     
Maximum Consolidated Leverage Ratio
 
Not more than a ratio of 5.00 to 1.00 at June 30, 2010, 3.75 to 1.00 at September 30, 2010, 3.00 to 1.00 at December 31, 2010 and March 31, 2011, 2.75 to 1.00 at June 30, 2011 and 2.50 to 1.00 at September 30, 2011 and thereafter, of consolidated funded indebtedness, as defined in the loan agreements, at the end of a quarter to consolidated EBITDA for the four previous quarters.
     
Minimum Consolidated Fixed Charge Coverage Ratio
 
Not measured until December 31, 2010.  Not less than a ratio of 1.10 to 1.00 at December 31, 2010, 1.30 to 1.00 at March 31, 2011, 1.50 to 1.00 at June 30, 2011 and, 1.75 to 1.00 at September 30, 2011 and thereafter of consolidated EBITDA for the four previous quarters to consolidated interest expense for the same period plus regularly scheduled debt payments for the following 12 months.
  
    As of June 30, 2010 the Company met the minimum cash liquidity, minimum consolidated interest charge coverage ratio and maximum consolidated leverage ratio requirements.
 
 
 

 
Credit Facility Terms
 
    The table below summarizes the repayment terms, interest rate benchmark and post amendment margin rates, number of vessels and net book value at June 30, 2010 collateralizing each credit facility:
         
Base and
Margin
 
Net Book Value of Collateral at
 
Number of
Vessels
 
         
  Interest Rate at
 
June 30, 2010
 
Collaterazlizing
 
Credit Facility
 
Repayment terms
 
June 30, 2010
 
in millions
 
Credit Facility
 
Bank of America - Term Credit Facility
 
15 quarterly installments of $9.5 million through December 31, 2011
 
LIBOR plus 5.25% (a)
         
                     
Bank of America - Revolving Credit Facility,
 
Balloon Payment due March 26, 2012
 
LIBOR plus 5.25% (a)
  $ 360.70   30  
                       
The Royal Bank of Scotland Credit Facility
                   
 
Construction Period
 
Conversion to term loan of the debt associated with each vessel upon delivery of the respective vessel
 
LIBOR plus 5.00%
  $ 116.30   4 (b)
                       
 
Post Delivery Term Loan
 
20 quarterly installments of $0.4 million commencing three months after delivery of each vessel with a final installment due of  $16.6 million
 
LIBOR plus 5.00%
  $ 79.40   2  
                       
DVB Group Merchant Bank (Asia) Ltd Credit Facility
 
10 quarterly installments of $4.9 million and 10 quarterly installments of $2.6 million through January 2013
 
LIBOR plus 5.25% (a)
  $ 35.90   7  
                       
Credit Suisse Credit Facility
 
8 quarterly installments of $1.5 million and 32 quarterly installments of $0.9 million through December 2017 and February 2018
 
LIBOR plus 3.25%
  $ 57.80   2  
                       
AIG Commercial Equipment Finance, Inc. Credit Facility
 
8 quarterly installments of $2.63 million and
 
LIBOR plus 5.00%
           
     
8 quarterly installments of $1.75 million through April 2012
 
With an Interest Rate Floor of 10%
  $ 75.70   4  
                       
Commerzbank AG Credit Facility
 
4 quarterly installments of $1.5 million, and 4 quarterly installments of $1.0 million and 2 quarterly installments of $0.25 million through June 2011
 
LIBOR plus 4.00%
  $ 21.20   1  
                       
Berenberg Bank Credit Facility
 
16 quarterly installments of $0.8 million through June  2012
 
LIBOR plus 5.00%
  $ 22.10   1  
                    51  
     
(a) -
The base rate increases 50 basis points every six months starting with 5.25% through June 30, 2010; 5.75% through December 31, 2010; 6.25% through June 30, 2010; 6.75% through December 31, 2011 and 7.25% to maturity.
 
                       
(b) -
While vessels are under construction, advances are collateralized by shipbuilding contracts.
           

The above credit facilities are collateralized primarily by vessels that are subject to the respective ship mortgages and assignment of the respective vessels’ freight revenue and insurance, as well as guarantees by TBSI and each of its subsidiaries with an ownership interest in the collateralized vessel.  The credit agreement with Bank of America, N.A. is also guaranteed by the Company’s non vessel owning subsidiaries.  The market value of vessels, as determined by appraisal, is required to be above specified value to loan ratios, as defined in each credit facility agreement, which range from 125% to 177% of the respective credit facility’s outstanding amount.  The credit facilities require mandatory prepayment or delivery of additional security in the event that the fair market value of the vessels falls below limits specified.  Beginning with the second quarter of 2010, the amended BOA Credit Facility requires that we obtain quarterly third-party vessel valuations of the vessels collateralizing the credit facility.  As of June 30, 2010, the Company met the minimum collateral requirements of all credit facilities.

    The loan facility agreement with The Royal Bank of Scotland plc (the “RBS Facility”) is collateralized by shipbuilding contracts while the respective vessels are under construction and by ship mortgages on the new vessels and assignment of freight revenue and insurance after delivery of the vessel.   Further, the RBS Facility prohibits the Company from materially amending or failing to enforce the shipbuilding contracts.

    At June 30, 2010 the Company had $117.5 million outstanding under the RBS Facility consisting of $47.9 million outstanding for delivered vessels, which is collateralized by the Rockaway Belle and Dakota Princess, and had $69.6 million outstanding in construction draw downs as shown below:

·  
$ 20.0 million drawn down on the contract signing, steel cutting, keel laying and launch of Hull No NYHS200722 (Montauk Maiden);
·  
$ 15.0 million drawn down on the contract signing, steel cutting and keel laying of Hull No NYHS200723 (Comanche Maiden)
·  
$ 19.6 million drawn down on the contract signing, steel cutting, keel laying and launch of Hull No NYHS200724; (Omaha Belle), and
·  
$ 15.0 million drawn down on the contract signing, steel cutting and keel laying of Hull No NYHS200725 (Maya Princess).

    As of June 30, 2010, $30.0 million remains available for draw-down under the RBS Facility

    The RBS Facility requires that the Company deposit funds into a restricted cash account from which payments due to the Shipyard and not funded by The Royal Bank of Scotland plc (“RBS”) are to be paid.  Cash held in the restricted cash account is not counted toward the minimum cash liquidity requirement.  At June 30, 2010, there was a balance of $6.2 million in the restricted cash account.  The current RBS Facility amendment does not require that additional deposits be made to the restricted cash account; however, no Company funded payments due to the shipyard for the remainder of 2010 are to be made from this account.  Instead the balance is to carry over into 2011 and will be used to pay the Company’s share of payments due on the last two vessels to be delivered.

Guarantee Facility
 
     Concurrently with the RBS Facility, the Company entered into a guarantee facility pursuant to which RBS guaranteed certain payments due under the shipbuilding contracts.  Under the guarantee facility, RBS has agreed to guarantee up to $14.0 million for each of the six vessels due under the shipbuilding contracts for an aggregate guarantee of $84.0 million.  The guarantee on each shipbuilding contract is reduced by $7.0 million after keel laying and $7.0 million after launching.  At June 30, 2010, the remaining amount outstanding under the guarantee facility was $14.0 million.  The guarantee facility, which expires twelve months after the anticipated delivery date of the respective vessel, is guaranteed by TBSI.

Note 9 — Derivative Financial Instruments

    The Company is exposed to certain risks relating to its ongoing business operations.  Currently, the only risk managed by derivative instruments is interest rate risk.  Interest rate swaps are entered into to manage the interest rate risk associated with the Company’s floating-rate borrowings.  FASB ASC Topic 815 - “Derivatives and Hedging”, requires companies to recognize all derivative instruments at fair value in the statement of financial position.  The Company designates and accounts for its interest rate swap contracts as cash flow hedges in accordance with FASB ASC Subtopic 815-30 - “Cash Flow Hedges”.

    For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.  Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

    As of June 30, 2010, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swaps was $158.0 million.  Interest rate contracts have fixed interest rates ranging from 2.92% to 5.24%, with a weighted average rate of 3.08%.  Interest rate contracts having a notional amount of $88.0 million at June 30, 2010, decrease as principal payments on the respective debt are made. 

     Information on the location and amounts of derivative fair values in the consolidated balance sheets and derivative gains and losses in the consolidated income statements is shown below (in thousands):

 
Liability Derivatives
 
 
June 30, 2010
 
December 31, 2009
 
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
Derivatives designated as hedging instruments under ASC Topic 815
               
                 
Interest rate contracts
Other liabilities
  $ 5,774  
Other liabilities
  $ 8,997  
                     
Derivatives not designated as hedging instruments under ASC Topic 815
                   
                     
Interest rate contracts
Other liabilities
    3,936  
Other liabilities
    980  
Total derivatives
    $ 9,710       $ 9,977  
 
 
   
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
 
Derivatives under ASC Topic 815 Cash Flow Hedging Relationships
 
June 30,
2010
   
December 31,
2009
 
Designated Hedges:
           
Interest rate contracts
  $ (5,130 )   $ (8,275 )
De-designated Hedges:
               
Interest rate contracts-OCI frozen
  (5,525 )        
Total derivatives
  $ (10,655 )   $ (8,275 )
 
       
Amount of Gain or (Loss) Recognized in Income on Derivatives
 
       
For the Three Months Ended June 30,
   
For the Six Months Ended June 30,
 
Derivatives in Statement 133 Cash Flow Hedging Relationships
 
Location of Gain or (Loss)  Recognized
in Income on Derivatives
 
2010
 
2009
   
2010
 
2009
 
                         
Derivatives Not Designated as Hedging Instruments under Statement 133
                       
                         
Interest rate contracts
 
Interest expense
  $ 826   $ 510     $ 895   $ 707  
                                 
Ineffective Portion of Derivatives Designated as Hedging Instruments under Statement 133
                               
                                 
Interest rate contracts
 
Interest expense
             (355 )              (564 )
        $ 826   $ 155     $ 895   $ 143  
 
 
    In June 2010, the Company terminated two interest rate contracts.  One was a deferred starting interest rate contract, which started December 29, 2014 and continued through December 29, 2019, for the notional amount of $20.0 million of debt, that was callable at the bank’s option at any time during the contract.  In connection with this deferred starting interest rate contract, the Company entered into the second of the terminated interest rate contracts, a receiver swap option which gave the Company the right but not the obligation to enter into a subsequent interest rate contract if the bank called the initial contract.  Accordingly, changes to the value of these contracts did not qualify for hedge accounting treatment and were included as a component of interest expense in the consolidated statement of income from inception of the contracts.
 
    In June 2010, the Company changed the expiration date, from June 2019 to June 2014, on one of its interest rate contracts that had been designated a hedging instrument.  At the time, it was determined that it was no longer probable that the hedging instrument would effectively hedge future cash flows and the hedging instrument was de-designated.  The amount to other comprehensive income of $5.9 million was frozen and will be reclassified into earnings quarterly through June 2019.  At June 30, 2010, we did not designate the interest rate contract having the new expiration date as a hedging instrument.  The Company paid $3.0 million to modify/terminate the three interest rate contracts.

    The Company does not obtain collateral or other security to support financial instruments subject to credit risk.  The Company monitors the credit risk of our counterparties and enters into agreements only with established banking institutions.  The financial stability of those institutions is subject to current and future global and national economic conditions, and governmental support.
 
     Effective January 1, 2008, the Company adopted FASB ASC Topic 820 – “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  The fair value hierarchy for disclosure of fair value measurements is as follows:

    Level 1 – Quoted prices in active markets for identical assets or liabilities
    Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable
    Level 3 – Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
 
    The following table summarizes assets and liabilities measured at fair value on a recurring basis at June 30, 2010 (in thousands):
 
   
Level 1
   
Level 2
   
Level 3
 
Liabilities
                 
Interest rate contracts
  $ -     $ 9,710     $ -  
 
    Our interest rate swap contracts are traded in the over-the-counter market.  The fair value is based on the quoted market price for a similar liability or determined using inputs that use as their basis readily observable market data that are actively quoted and can be validated through external sources.
 
Note 10 — Investment in Joint Ventures
 
    Investment in a consolidated joint venture:
 
    In January 2010, the Company entered into a joint venture agreement to form Log.Star Navegação S.A. ("Log-Star") a Brazilian corporation. The Company acquired a 70% economic interest in Log-Star while Logística Intermodal S.A. (“Log-In”) an unrelated Brazilian corporation purchased the remaining 30% interest.  Log-Star is authorized to transport breakbulk, bulk, liner, and parcel services in the Brazilian coastal cabotage trade as well as in the Amazon River. 
 

 
    Under the joint venture agreement, the Company has the right to appoint or remove the chief operating officer of Log-Star, who is responsible for the management of commercial and operational activities, as well as for the technical management of the vessels.  This would allow the Company to have the power to significantly affect Log-Star’s economic performance.  Based on the accounting guidance provided by FASB ASC Topic 810 - “Consolidation” the Company is considered the primary beneficiary of Log-Star and is required to consolidate it in the Company’s consolidated financial statements.  The Company has consolidated Log-Star’s results in its financial statements.

Investment in non-consolidated variable interest entities (VIE):

     In February 2010, the Company acquired a 50% interest in African Project Logistics ("APL") for $0.9 million of which $0.4 million was paid in February 2010.  The balance is due in installments when specific performance metrics are met.  APL provides project logistics services in South Africa.  Additionally, the Company has a 50% interest in Panamerican Port Services SAC, which operates a warehouse located in Callao, Peru and a 50% interest in GAT-TBS Mining Consortium S.A, which mines calcium carbonate aggregates in the Dominican Republic.  We have determined that our 50% interest in each of these joint ventures is a VIE.

    As of June 30, 2010 our investments in these entities, including equity and loans made and committed to be made subsequent to June 30, 2010, is our maximum exposure to loss from these entities.  We are not contractually required to provide any financial or other support to any of the joint ventures.  We have determined we are not the primary beneficiary of any of the VIE’s as we do not have the power to direct the activities that most significantly impact their economic performance.  Accordingly, we do not consolidate these entities and account for our investments in the entities under the equity method.  The investments in the joint ventures are included within other assets and deferred charges in our consolidated financial statements.

Note 11 — Equity Transactions

Class A and Class B Ordinary Shares

    The Company has two classes of ordinary shares that are issued and outstanding: Class A ordinary shares, which are listed on the NASDAQ Global Select Market under the symbol "TBSI", and Class B ordinary shares.  The Class A ordinary shares and Class B ordinary shares have identical rights to dividends, surplus and assets on liquidation; however, the holders of Class A ordinary shares are entitled to one vote for each Class A ordinary share on all matters submitted to a vote of holders of ordinary shares, while holders of Class B ordinary shares are entitled to one-half of a vote for each Class B ordinary share.

    The holders of Class A ordinary shares can convert their Class A ordinary shares into Class B ordinary shares, and the holders of Class B ordinary shares can convert their Class B ordinary shares into Class A ordinary shares at any time.  The Class B ordinary shares will automatically convert into Class A ordinary shares upon transfer to any person other than another holder of Class B ordinary shares, as long as the conversion will not cause the Company to become a controlled foreign corporation, as defined in the Internal Revenue Code of 1986, as amended ("Code"), or the Class A ordinary shares have not ceased to be regularly traded on an established securities market for purposes of Section 883 of the Code.  During the six months ended June 30, 2010, certain holders of Class A ordinary shares converted 2,350,000 Class A ordinary shares into 2,350,000 Class B ordinary shares.

Warrants
 
    As a result of additional shares issued in connection with our Equity Incentive Plan, the number of shares exercisable under outstanding warrants increased by 2,369 Class A ordinary shares and 35,315 Class B ordinary shares. Accordingly, at June 30, 2010, there were outstanding exercisable warrants to purchase 108,525 Class A ordinary shares and 241,062 Class B ordinary shares held by parties not affiliated with existing shareholders. The warrants are exercisable for a period of ten years following the date on which their exercise condition was met (February 8, 2005), at a price of $0.01 per share.
 
Treasury Stock

    The Company's Equity Incentive Plan permits stock grant recipients to elect a net settlement.  Under the terms of a net settlement, the Company retains a specified number of shares to cover the recipient's estimated statutory minimum tax liability.  The retained shares are held in the Company's treasury.  During the three and six months ended June 30, 2010, a total of 624,369 and 650,869 Class A ordinary shares, respectively, vested with employees. Certain employees elected to have the Company withhold and remit their respective payroll tax obligations.  Accordingly, the Company retained and added to its treasury stock 110,832 Class A ordinary shares, valued at $686,000 to cover employees’ estimated payroll tax liability.  At June 30, 2010, the Company held 131,703 Class A ordinary shares as treasury stock, having a cost of $1,169,519.

Note 12 — Stock Plan
 
    The Company adopted an Equity Incentive Plan in 2005, which authorizes the grant of "non-qualified" shares to employees and independent directors. In 2009 the Equity Incentive Plan was amended to increase the maximum number of shares that can be granted under the plan, allow for the granting of both Class A ordinary shares and Class B ordinary shares and expand the definition of eligible persons under the plan to include affiliates and agency service companies.  The maximum number of shares that can be granted under the plan increased to 5,000,000 shares, including no more than 1,000,000 Class B shares.
 
    Prior to 2010, the Company awarded 234,000 restricted Class A ordinary shares, of which 34,500 shares have not yet vested as of June 30, 2010.  On April 15, 2010, the Company awarded 12,500 restricted Class A ordinary shares to its independent directors that vested at the time of the Company’s Annual General Meeting on June 10, 2010.  On June 1, 2010, the Company issued 338,869 fully vested Class A ordinary shares to employees.  The full award to employees was 559,582 Class A ordinary shares; however, 220,713 Class A ordinary shares were not issued to reimburse the Company for payroll taxes paid on behalf of employees.  The shares will be issued by the Company at a later date.  On June 30, 2010, the Company issued 169,381 fully vested Class A ordinary shares to senior management.  The shares are part of a 273,000 Class A ordinary share award to senior management from which 103,619 shares were withheld, under a net settlement arrangement, to reimburse the Company for payroll taxes paid on behalf of the executives.  On June 30, 2010, the Company granted 765,000 Class A ordinary shares to employees.  These shares, which had a fair value of $4.7 million at grant date, vest in four equal installments starting June 30, 2011 and will be recognized ratably over the vesting period.
 
    The Company recognized total stock-based compensation costs of $3.3 million and $0.3 million for the three months ended June 30, 2010 and 2009, respectively, and $5.9 million and $0.8 million for the six months ended June 30, 2010 and 2009, respectively.  These amounts are reflected in the Consolidated Statement of Income in general and administrative expenses.  The company derives no material income tax benefit for stock based compensation due to its tax structure.
 
    At June 30, 2010, unrecognized stock-based compensation expense related to non-vested restricted stock-based awards totaled $4.9 million.  The cost of these non-vested awards will be recognized over a weighted-average period of 2.4 years.

Note 13 — Earnings Per Share

    The following table, which is in thousands except for the number of shares and loss per share amounts; sets forth the computation of basic and diluted net (loss) per share for the three and six months ended June 30, 2010 and 2009:
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
   
(in thousands, except number of shares and earnings per share amounts)
 
Numerators:
                       
    Net (loss) attributed to TBS International plc and
                               
    (Loss) available to ordinary shareholders — basic and diluted
  $ (9,677 )   $ (16,913 )   $ (17,520 )   $ (38,201 )
                                 
Denominators:
                               
    Weighted average ordinary shares outstanding — basic and diluted
    29,973,420       29,827,345       29,930,634       29,822,402  
                                 
Net (loss) per ordinary share:
                               
    basic and diluted
  $ (0.32 )   $ (0.57 )   $ (0.59 )   $ (1.28 )
                                 
    Anti-dilutive warrants not included above
    349,587       311,903       349,587       311,903  
 

    As outlined in sections of FASB ASC Topic 260 – “Earnings per Share”, unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities that should be included in the two-class method of computing loss per share. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings (loss) per share for ordinary stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings.  Our non-vested stock, consisting of time-vested restricted shares are considered participating securities since the share-based awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest. 
 
    At June 30, 2010 there were outstanding exercisable warrants to purchase 108,525 Class A and 241,062 Class B ordinary shares, held by parties not affiliated with existing shareholders.  The warrants are issuable for nominal consideration upon exercise, which would have caused the warrants to be treated as outstanding for purposes of computing basic earnings per share.  However, for the three and six months ended June 30, 2010 and 2009, the warrants were not treated as outstanding for purposes of computing basic and diluted earnings per share because they would be anti-dilutive.

Note 14 — Commitments and Contingencies

Commitments
 
Charters-in of Vessels
 
    The Company charters-in two vessels (Laguna Belle and Seminole Princess) under amended long-term non-cancelable operating leases (the “Bareboat Charters”), that were part of a sale-leaseback transaction.  The Bareboat Charters expire on January 30, 2014.  Each Bareboat Charter requires charter hire payments of $10,500 per day for the first 24 months of the charter, $10,000 per day for the 25th through the 36th months of the charter (through January 2010), $8,041 per day for the 37th through the 39th months of the charter (February 2010 through April 2010), $8,240 per day for the 40th through the 48th months of the charter (May 2010 through January 2011), $8,110 per day for the 49th through the 60th months of the charter (February 2011 through January 2012), $8,030 per day for the 61st through the 72nd months of the charter (February 2012 through January 2013) and $7,950 per day for the 73rd through the 84th months of the charter (February 2013 through January 2014).  The charter agreements allow for the purchase of the respective vessel at the end of the fifth, sixth or seventh year of the charter period at a vessel price of $11.1 million, $9.15 million, or $6.75 million, respectively, and for the purchase options to be exercised at any other date during the option period at a pro rata price.  The leases under the sale-leaseback transactions are classified as operating leases.  Deposits of $2.75 million, to be held by the lessor for each charter during the charter period, were required at the inception of the leases.  The deposits are to be returned, without interest, at the expiration of the charter period, unless applied earlier toward the amounts due upon exercise of the purchase option.

    As mentioned above, the Bareboat Charters contain predetermined fixed decreases of the charter hire payments due under the charters.  The Company recognizes the related rental expense on a straight-line basis over the term of the charters and records the difference between the amounts charged to operations and amounts paid as deferred rent expense.  At June 30, 2010 and December 31, 2009, deferred rent expense was $3.4 million and $3.5 million, respectively.  Deferred leasing costs of $1.7 million are being amortized over the terms of the leases.

    The Company, through its consolidated Brazilian joint venture, charters-in three Brazilian flagged vessels under a bareboat charter at a charter hire rate of 5,000 Brazilian Reais per vessel per day that expires in February 2013.  The vessels are chartered in from Log-in Logistica Intermodal S.A., who holds the 30% non-controlling interest in the consolidated Brazilian joint venture.

Other Leases

    The Company leases four properties, two of which are used by TBSI’s service company subsidiaries, Roymar Ship Management, Inc. (“Roymar”) and TBS Shipping Services and its subsidiaries, for the administration of their operations.  The third and fourth properties are office and warehouse space leased by TBS Energy Logistics.
 
    TBS Shipping Services leases its main office space from our chairman and chief executive officer, Joseph E. Royce.  The lease expires on December 31, 2010, subject to five one-year renewal options.  The lease provides for monthly rent of $20,000, plus operating expenses including real estate taxes.
 
    Roymar renewed the lease for its main offices in November 2009 for one year through November 30, 2010, under the first of two one-year renewal options at a monthly rent of approximately $27,000.  The lease requires Roymar to pay additional rent for real estate tax escalations.
 
    At June 30, 2010, we leased property through our subsidiary TBS Energy Logistics.  The lease term is for five years commencing October 1, 2009 and running through September 30, 2014. Monthly rent is $8,054 for the first year, October 1, 2009 through September 30, 2010.  The monthly rent increases to $8,255, $8,463, $8,677 and $8,898, for the second through fifth years.

    TBS Energy Logistics also leases a warehouse for 38 months commencing May 1, 2009 through June 30, 2012 at a monthly rent of $22,000 for the year commencing July 1, 2009 through June 30, 2010.  The monthly rent increases to $22,400 and $22,800, for the years ending June 2011 and June 2012, respectively.
 
    As of June 30, 2010, future minimum commitments under operating leases with initial or remaining lease terms exceeding one-year are as follows (in thousands):
 
         
Office
       
At June 30, 2010
 
Vessel Hire
   
Premises
   
Total
 
    2010  (July 1, 2010 through December 31, 2010)
    4,583       439       5,022  
    2011
    9,004       371       9,375  
    2012
    8,967       239       9,206  
    2013
    6,120       105       6,225  
    Thereafter
    493       80       573  
    $ 29,167     $ 1,234     $ 30,401  
                         

Purchase Obligations – New Vessel Buildings
 
    At June 30, 2010, the Company had purchase obligations totaling $45.3 million in connection with its new vessel building program, including a $0.1 million obligation under the contract for the supervision and inspection of vessels under construction.  The obligations will become payable as the shipyard meets several milestones through September  2011.  As of June 30, 2010, $45.2 million of the purchase obligation is scheduled to be paid as follows: $29.6 million in 2010 and $15.6 million in 2011.  The timing of actual payments will vary based upon when the milestones are met.
 
Contingencies
 
    The Company is periodically a defendant in cases involving personal injury and other matters that arise in the normal course of business. While any pending or threatened litigation has an element of uncertainty, the Company believes that the outcome of these lawsuits or claims, individually or combined, will not materially adversely affect the consolidated financial position, results of operations or cash flows of the Company.

Note 15 — Business Segment
 
    The Company is managed as a single business unit that provides worldwide ocean transportation of dry cargo to its customers through the use of owned and chartered vessels.  The vessels are operated as one fleet and when making resource allocation decisions, our chief operating decision maker evaluates voyage profitability data, which considers vessel type and route economics, but gives no weight to the financial impact of the resource allocation decision on an individual vessel basis.  The Company's objective in making resource allocation decisions is to maximize its consolidated financial results, not the individual results of the respective vessels or routes.
 
    The Company transports cargo throughout the world, including to and from the United States.  Voyage revenue is attributed to non-U.S. countries based on the loading port location.  The difference between total voyage revenues and total revenue by country is revenue from the United States.  Time charter revenue by country cannot be allocated because the Company does not control the itinerary of the vessel.

    Voyage revenue generated in countries excluding the U.S. (in thousands):
 
   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
Country
 
2010
 
2009
   
2010
 
2009
 
Brazil
  $ 14,181   $ 14,130     $ 30,154   $ 22,443  
Japan
    11,785     8,584       25,178     19,559  
United Arab Emirates
    8,808     7,427       16,978     20,006  
Chile
    7,064     5,072       14,244     9,902  
China
    8,766     2,125       13,753     6,209  
Peru
    5,186     7,397       9,694     13,556  
Korea
    1,934     731       5,277     4,063  
Argentina
    1,320     2,396       1,310     5,007  
Venezuela
    825     1,233       1,532     1,233  
Others
    5,237     6,518       13,329     9,557  
Total
  $ 65,106   $ 55,613     $ 131,449   $ 111,535  
                             
 
    For the three and six months ended June 30, 2010 no customers and one customer, respectively, accounted for 10% or more of voyage and time charter revenue.  For the three and six months ended June 30, 2009, no customers accounted for 10% or more of voyage and time charter revenue.

    At June 30, 2010, no customers accounted for 10% or more of charter hires receivables.  One customer accounted for 10% or more of charters hire receivables at December 31, 2009.

Note 16 — Subsequent Events

    Management evaluated all activity of the Company through the date of issuance of our consolidated financial statements, and concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.

    On June 29, 2010, the Company signed a Memorandum of Agreement to sell the Savannah Belle for $2.8 million.  The sale was completed on July 20, 2010 and the net proceeds were used to pay down the BOA Revolver.
 



Forward - Looking Statements
 
    This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements reflect current expectations of the Company's management.  They are based on our management's beliefs and assumptions and on information currently available to our management.  Forward-looking statements include, among other things, all information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities and the effects of future regulation and competition.  Forward-looking statements include all statements that are not historical facts and can generally be identified as forward-looking statements because they use words such as "anticipates," "believes," "estimates," "expects," "future," "intends," "plans," "targets," "projects," "sees," "seeks," "should," "will," and similar terms.

    Forward-looking statements involve risks, uncertainties and assumptions.  Although the Company does not make forward-looking statements unless it believes it has a reasonable basis for doing so, it cannot guarantee their accuracy.  Actual results may differ materially from those expressed, implied or projected in or by these forward-looking statements due to important factors that could cause actual results to differ materially from those in the forward-looking statement, including the risks disclosed in our Form 10-K filed with the Securities and Exchange Commission on March 16, 2010, and other unforeseen risks.  Among other unforeseen risks, uncertainties, risks and other factors that could cause actual results to differ materially include, but are not limited to:
 
·  
changes in demand for our services, which are increasingly difficult to predict due to the current economic conditions and uncertainty;
·  
a decline in vessel valuations;
·  
our ability to maintain financial ratios and comply with the financial covenants required by our credit facilities as amended;
·  
our ability to finance our operations and raise additional capital on commercially reasonable terms or at all; 
·  
changes in rules and regulations applicable to the shipping industry, including legislation adopted by international organizations such as the International Maritime Organization and the European Union or by individual countries;
·  
actions taken by regulatory authorities;
·  
changes in trading patterns, which significantly may affect overall vessel tonnage requirements;
·  
changes in the typical seasonal variations in charter rates;
·  
volatility in costs, including changes in production of or demand for oil and petroleum products, crew wages, insurance, provisions, repairs and maintenance, generally or in particular regions;
·  
default by financial counterparties;
·  
a material decline or weakness in shipping rates, which may occur if the economic recovery is not sustainable;
·  
changes in general domestic and international political conditions;
·  
changes in the condition of our vessels or applicable maintenance or regulatory standards which may affect, among other things, our anticipated drydocking or maintenance and repair costs;
·  
increases in the cost of our drydocking program or delays in our anticipated drydocking schedule;
·  
China Communications Construction Company Ltd./ and Nantong Yahua Shipbuilding Group Co., Ltd.’s ability to complete and deliver the remaining multipurpose tweendeckers on the anticipated schedule and the ability of the parties to satisfy the conditions in the shipbuilding agreements;