TRAILER BRIDGE INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - TRAILER BRIDGE INC	Financial_Report.xls
EX-32.1 - SECTION 906 CERTIFICATIONS - TRAILER BRIDGE INC	dex321.htm
EX-31.1 - SECTION 302 CERTIFICATION OF CEO - TRAILER BRIDGE INC	dex311.htm
EX-31.2 - SECTION 302 CERTIFICATION OF CFO - TRAILER BRIDGE INC	dex312.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, 2011

¨	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 0-22837

TRAILER BRIDGE, INC.

(Exact name of registrant as specified in its charter)


DELAWARE		13-3617986
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

10405 New Berlin Road East Jacksonville, FL 32226		32226
(Address of Principal Executive Offices)		(Zip Code)

(904) 751-7100

(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 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 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 if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):

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 8, 2011, 12,102,587 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

TRAILER BRIDGE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011

TABLE OF CONTENTS


	PART I: FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010 (unaudited)	1

	Condensed Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010	2

	Condensed Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010 (unaudited)	3

	Notes to the Condensed Unaudited Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	15

Item 4.	Controls and Procedures	15

	PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	15

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18

Item 3.	Defaults Upon Senior Securities	18

Item 5.	Other Information	18

Item 6.	Exhibits	18

	SIGNATURES	20

	EXHIBIT 31.1	21

	EXHIBIT 31.2	22

	EXHIBIT 32.1	23

PART I: FINANCIAL INFORMATION

TRAILER BRIDGE, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
OPERATING REVENUES	$	29,000,936		$	31,656,653		$	53,814,883		$	60,501,618
OPERATING EXPENSES:
Salaries, wages, and benefits		4,117,729			4,174,077			7,630,623			8,213,832
Purchased transportation and other rent		8,583,890			7,890,464			15,854,229			15,065,666
Fuel		5,652,241			4,406,820			10,730,160			8,700,474
Operating and maintenance (exclusive of depreciation & dry-docking shown separately below)		7,215,871			7,590,395			13,521,349			14,148,476
Dry-docking		290,031			—			6,900,293			—
Taxes and licenses		112,431			136,645			250,730			315,469
Insurance and claims		769,363			797,625			1,537,677			1,569,557
Communications and utilities		202,004			177,754			387,574			349,543
Depreciation and amortization		1,589,805			1,552,360			3,152,830			3,093,103
(Gain) loss on sale of property and equipment		(2,642	)		4,852			(3,420	)		26,196
Other operating expenses		1,599,369			1,534,839			2,997,136			3,397,772

		30,130,092			28,265,831			62,959,181			54,880,088

OPERATING (LOSS) INCOME		(1,129,156	)		3,390,822			(9,144,298	)		5,621,530

NONOPERATING (EXPENSE) INCOME:
Interest expense		(2,513,660	)		(2,490,697	)		(4,882,640	)		(5,025,888	)
Interest income		1,297			4,537			2,741			8,923

(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES		(3,641,519	)		904,662			(14,024,197	)		604,565

PROVISION FOR INCOME TAXES		(7,200	)		(7,200	)		(14,400	)		(14,670	)

NET (LOSS) INCOME	$	(3,648,719	)	$	897,462		$	(14,038,597	)	$	589,895

PER SHARE AMOUNTS:

NET (LOSS) INCOME PER SHARE BASIC	$	(0.30	)	$	0.07		$	(1.17	)	$	0.05

NET (LOSS) INCOME PER SHARE DILUTED	$	(0.30	)	$	0.07		$	(1.17	)	$	0.05

WEIGHTED AVERAGE
SHARES OUTSTANDING BASIC		12,016,681			12,044,398			12,016,681			12,029,093

SHARES OUTSTANDING DILUTED		12,016,681			12,106,947			12,016,681			12,126,238

See accompanying summary of significant accounting policies and notes to the condensed unaudited financial statements

TRAILER BRIDGE, INC.

CONDENSED BALANCE SHEETS


	June 30, 2011			December 31, 2010
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	173,164		$	11,481,965
Trade receivables, less allowance for doubtful accounts of $1,062,272 and $1,065,955		14,798,131			13,022,057
Prepaid and other current assets		2,656,900			2,397,948
Deferred income taxes, net		225,645			225,645

Total current assets		17,853,840			27,127,615

Property and equipment, net		81,229,126			82,631,050
Reserve fund for long-term debt		4,640,742			4,638,215
Other assets		1,899,370			2,004,426

TOTAL ASSETS	$	105,623,078		$	116,401,306

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable	$	7,306,084		$	7,411,181
Accrued liabilities		3,840,335			4,725,030
Unearned revenue		1,621,478			1,410,963
Current portion of long-term debt		93,711,161			85,374,700

Total current liabilities		106,479,058			98,921,874

Long-term debt, less current portion		13,065,882			17,795,827

TOTAL LIABILITIES		119,544,940			116,717,701

Commitments and Contingencies

Stockholders’ Deficit:
Preferred stock, $.01 par value, 1,000,000, shares authorized; no shares issued or outstanding		—			—
Common stock, $.01 par value, 20,000,000 shares authorized; 12,102,587 shares issued; 12,016,681 shares outstanding at June 30, 2011 and December 31, 2010		121,026			121,026
Treasury stock, at cost, 85,906 shares at June 30, 2011 and December 31, 2010		(318,140	)		(318,140	)
Additional paid-in capital		55,046,773			54,613,643
Capital deficit		(68,771,521	)		(54,732,924	)

TOTAL STOCKHOLDERS’ DEFICIT		(13,921,862	)		(316,395	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	105,623,078		$	116,401,306

See accompanying summary of significant accounting policies and notes to the condensed unaudited financial statements

TRAILER BRIDGE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,

(Unaudited)


	2011			2010
Operating activities:
Net (loss) income	$	(14,038,597	)	$	589,895
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		3,152,830			3,093,103
Amortization of loan costs		474,461			456,794
Non-cash stock compensation expense		433,128			452,143
Provision for doubtful accounts		451,388			347,325
(Gain) loss on sale of property and equipment		(3,420	)		26,196
(Increase) decrease in:
Trade receivables		(2,227,462	)		(2,899,760	)
Prepaid and other current assets		(258,952	)		755,827
Other assets		(384,004	)		5,375
(Decrease) increase in:
Accounts payable		(105,097	)		3,411,814
Accrued liabilities		(884,692	)		(1,487,655	)
Unearned revenue		210,516			272,987

Net cash (used in) provided by operating activities		(13,179,901	)		5,024,044

Investing activities:
Purchases of property and equipment		(1,795,330	)		(1,024,661	)
Proceeds from sale of property and equipment		59,917			48,038
Additions to other assets		—			(385,999	)

Net cash used in investing activities		(1,735,413	)		(1,362,622	)

Financing activities:
Proceeds from revolving line of credit		20,248,603			—
Payments on revolving line of credit		(15,204,737	)		—
Exercise of stock options		—			(5,562	)
Principal payments on notes payable		(1,437,353	)		(2,453,795	)
Purchase of treasury stock		—			(106,699	)

Net cash provided by (used in) financing activities		3,606,513			(2,566,056	)

Net (decrease) increase in cash and cash equivalents		(11,308,801	)		1,095,366
Cash and cash equivalents, beginning of the period		11,481,965			10,987,379

Cash and cash equivalents, end of period	$	173,164		$	12,082,745

Supplemental cash flow information:
Cash paid for interest	$	4,912,064		$	5,081,979

See accompanying summary of significant accounting policies and notes to the condensed unaudited financial statements

TRAILER BRIDGE, INC.

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 and 2010

1. BASIS OF PRESENTATION AND GENERAL INFORMATION

Basis of Presentation

The accompanying unaudited condensed financial statements include all adjustments, consisting of normal recurring accruals, which Trailer Bridge, Inc. (the “Company”) considers necessary for a fair presentation of the results of operations for the periods shown. The financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. For further information, refer to the Company’s audited financial statements for the year ended December 31, 2010 included in the Form 10-K filed by the Company with the Securities and Exchange Commission.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the condensed unaudited financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain prior period’s amounts in the financial statements have been reclassified to conform to current year presentation.

Accounts Receivable Concentration

At June 30, 2011 collection of approximately 8% of the Company’s trade accounts receivable was dependent upon Puerto Rico government funding.

Earnings per share

Options to purchase 1,378,739 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because their effect would be anti-dilutive during each of the three and six month periods ended June 30, 2011. During each of the three and six months ended June 30, 2010, options to purchase 1,317,564 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because their effect would be anti-dilutive.

2. GOING CONCERN, LIQUIDITY, AND MANAGEMENT’S PLANS

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the balance sheet, as of June 30, 2011 the Company had short-term debt obligations of $93,711,161, which includes $82,500,000 of the 9.25% Senior Secured Notes (the “Notes”) which become due in November 2011. The Company’s available liquidity plus the expected additional cash generated by operations will not be sufficient to pay this debt, without additional financing. This resulted in the inclusion of an explanatory going concern paragraph in the audit report of our Independent Registered Certified Public Accounting Firm for the year ended December 31, 2010. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its current debt obligations on a timely basis through refinancing, and ultimately to attain successful operations.

The Company is working towards refinancing these Notes prior to November 2011. Any refinancing of these Notes could involve new lenders and/or existing lenders and might involve the private or public lending market and include an equity component or change of control. The Company is currently borrowing on its revolving line of credit to provide sufficient cash to cover operating costs. In the second quarter of 2011, this Revolving Credit Agreement was amended and the Company is no longer subject to financial covenants until September 30, 2011. The Revolving Credit and Term Loan Agreements were also amended in the second quarter of 2011 to increase the borrowing rate to 2% in excess of prime. The Company will need an additional amendment or waiver for the Revolving Credit Agreement and Term Loan Agreement if the debt refinancing is not complete through September 30, 2011 when the Company will be subject to financial covenants. As a result, the Company has classified these as a current liability on the Company’s balance sheet at June 30, 2011. Beginning August 1, 2011 the Company’s availability under the Revolving Credit Agreement shall be reduced by $100,000 each week for ten weeks. Failure to effectuate a timely refinancing could require the Company to file for protection under the federal bankruptcy laws.

TRAILER BRIDGE, INC.

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 and 2010

3. RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”) which amends ASC 820 to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. ASU 2010-06 also clarifies existing fair value disclosures about level of disaggregation and about inputs and valuation techniques used to measure fair value. Further, ASU 2010-06 amends guidance on employers’ disclosures about postretirement benefit plan assets under ASC 715, Compensation - Retirement Benefits to require that disclosures be provided by classes of assets instead of by major categories of assets. ASU 2010-06 is effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuance, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.

In October 2009, the FASB issued ASU No. 2009-13, Multiple - Deliverable Revenue Arrangements, (“ASU 2009-13”). ASU 2009-13 amends existing revenue recognition accounting pronouncements that are currently within the scope of ASC Subtopic 605-25, Multiple - Element Arrangements. ASU 2009-13 provides accounting principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated and the consideration allocated. This guidance eliminates the requirement to establish the fair value of undelivered products and services and also eliminates the residual method of allocating arrangement consideration. The new guidance provides for separate revenue recognition based upon management’s estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that undelivered item. Under the previous guidance, if the fair value of all of the elements in the arrangement was not determinable, then revenue was deferred until all of the items were delivered or fair value was determined. This new approach is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply ASU 2009-13 (i) prospectively to new or materially modified arrangements after its effective date or (ii) retrospectively for all periods presented. The adoption of ASU 2010-13 did not have a material impact on the Company’s financial statements.

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses (“ASU 2010-20”). ASU 2010-20 improves disclosures about the credit quality of an entity’s financing receivables and related allowance for credit losses by facilitating evaluation of the nature of credit risk inherent in an entity’s portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses and the changes and reasons for those changes in the allowance for credit losses. A financing receivable is defined as a contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in the entity’s statement of financial position including loans, trade accounts receivable, notes receivable, credit cards receivables and lease receivables, except for operating leases. Short term trade receivables and receivables measured at fair value or lower of cost or fair value are excluded. Further, the standard defines two levels of disaggregation for disclosure purposes: portfolio segment and class of financing receivables. The disclosures relating to disaggregated investment balances, allowance for credit losses, nonaccrual status, credit quality indicators, credit risk factors and impairment of financing receivables are effective for interim and annual periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2011. The adoption of this standard had no material impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 provides amendments that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements include the following: (1) the ASU permits an exception to the requirements in ASC 820 for measuring fair value when a reporting entity manages its financial instruments on the basis of its net exposure, rather than its gross exposure, to those risks; (2) the ASU clarifies that the application of premiums and discounts in a fair value measurement is related to the unit of account for the asset or liability being measured at fair value; and (3) the ASU amendments expand the disclosures about fair value measurements. Further, as a result of the amendments, blockage discounts are no longer permitted for level 2 and 3 investments. The amendments in ASC 2011-04 are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011; early application is not permitted. The Company is currently evaluating the adoption of ASU 2011-04.

TRAILER BRIDGE, INC.

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 and 2010

4. STOCK BASED COMPENSATION

During the three months ended June 30, 2011, and 2010, the Company recorded compensation cost relating to previously issued stock options of $208,100 and $226,100, respectively, and $433,100 and $452,100 during the six months ended June 30, 2011, and 2010, respectively. These costs are recorded in salaries, wages and benefits in the Condensed Unaudited Statements of Operations. As of June 30, 2011, the total compensation expense not yet recognized in the Condensed Unaudited Statement of Operations was approximately $1.9 million and is expected to be recognized over a period of up to 5 years.

During the three and six months ended June 30, 2011, no options were exercised. During the three and six months ended June 30, 2010, 20,934 and 69,141 options were exercised, respectively. There were no options granted during the three months ended June 30, 2011, and 2010. On January 15, 2010, the Company granted options to purchase 175,000 shares of the Company’s common stock under the Company’s Non-Employee Director Stock Incentive Plan, subject to shareholder approval for an increase in the authorized number of shares available for issuance which was obtained at the 2010 Annual Meeting held on May 27, 2010. Using the Black-Scholes method, the assumptions used to calculate the fair value of those options granted on January 15, 2010 are as follows:


		2010
Expected Term		6.5 years
Volatility		64.53%
Risk-free interest rate		3.17%
Dividends		None

There were no options granted during the first six months ended June 30, 2011.

5. INCOME TAXES

The federal tax expense related to second quarter of 2011 and 2010 under the tonnage tax method is estimated to be approximately $7,200. The federal tax expense for the six months ended June 30, 2011, and 2010 is estimated to be approximately $14,400 and $14,700, respectively. As of June 30, 2011, and 2010, the remaining deferred tax asset of approximately $226,000 and $279,000, respectively, represents the state portion of the Company’s deferred tax asset. The Company’s research of the tonnage tax suggests that states do not recognize the tonnage tax and, therefore, NOL’s related to state qualifying shipping income would not be suspended.

During the first quarter of 2011, the Company received notice that the IRS will be conducting an audit of its 2009 tax year which is currently in process. The Company intends to fully cooperate with the IRS and all of its requests during the audit. The Company is not currently involved in any state income tax examination.

6. SEGMENTS

The Company’s primary business is to transport freight from its origination point in the continental United States to San Juan, Puerto Rico and Puerto Plata, Dominican Republic and from San Juan, Puerto Rico and Puerto Plata, Dominican Republic to its destination point in the continental United States. The Company provides a domestic trucking system and a barge vessel system, which work in conjunction with each other to service its customers.

While each of the services that the Company performs related to the transportation of goods may be considered to be separate business activities, the Company does not capture or report these activities separately because all activities are considered part of the Company’s “Intermodal Model” for providing customer service. Intermodal is a term used to represent the variety of transportation services the Company provides to move products from one location to another, including but not limited to water, land and rail. The Company provides intermodal services to its customers to and from the continental United States, San Juan, Puerto Rico and Puerto Plata, Dominican Republic. Customers are billed for the transportation of goods from the point of origin to the final destination, and are not billed separately for inland or marine transportation.

TRAILER BRIDGE, INC.

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 and 2010

While the Company is able to track the expenses for these services separately, the Company does not capture the revenues based on inland or marine transportation because the results of revenues are not considered relevant to the model currently employed by the Company instead management and directors of the Company make operating and reporting decisions based on the total results of operations.

7. CONTINGENCIES AND COMMITMENTS

On April 17, 2008, the Company received a subpoena from the Antitrust Division of the U.S. Department of Justice (the “DOJ”) seeking documents and information relating to a criminal grand jury investigation of alleged anti-competitive conduct by Puerto Rico ocean carriers. Company representatives have met with United States Justice Department attorneys and pledged the Company’s full and complete cooperation with the DOJ investigation. The Company has made document submissions to the DOJ in response to the subpoena. Neither the Company nor any of its employees has been charged with any wrongdoing in this investigation and we will continue to cooperate with government officials.

Following publicity about the DOJ investigation, beginning on April 22, 2008, shippers in the Puerto Rico trade lane, and in one case indirect consumer purchasers within Puerto Rico, have filed at least 40 purported class actions against domestic ocean carriers, including Horizon Lines, Sea Star Lines, Crowley Liner Services and the Company. The actions alleged that the defendants inflated prices and engaged in other allegedly anti-competitive conduct in violation of federal antitrust laws and seek treble damages, attorneys’ fees and injunctive relief. The actions, which were filed in the United States District Court for the Southern District of Florida, the United States District Court for the Middle District of Florida, and the United States District Court for the District of Puerto Rico, were consolidated into a single multi-district litigation proceeding (MDL 1960) in the District of Puerto Rico for pretrial purposes.

The Company filed a motion to dismiss the last operative consolidated complaint with the court. On April 30, 2010, in a non-final order, the Court granted the Company’s motion to be dismissed with prejudice as to the claims of the named plaintiffs. This order will not become final and appealable until a further order or judgment is entered by the Court. The Company expects this order to become final in the third quarter of 2011. The Company does not expect this order to be appealed.

Horizon Lines, Crowley Liner Services, Sea Star Lines, LLC, Saltchuck Resources, an affiliate of Sea Star Lines, LLC, and their related companies entered into settlement agreements with certain named direct purchaser plaintiffs on behalf of a purported class of claimants in the MDL 1960 proceeding, while denying any liability for the underlying claims.

Plaintiffs who have opted-out are likely to pursue claims against the settling defendants. It is not clear whether an individual opt-out plaintiff would attempt to bring an action against the Company in such a proceeding or even whether they could do so in light of the Company’s dismissal with prejudice from the underlying MDL. Moreover, it is not clear what, if any, impact these settlements, whether or not finally approved, will have on further prosecution of the MDL 1960 or other claims on the Company, or on the trade, in general.

Although legal fees have been substantially reduced in 2011, significant legal fees and costs could still be incurred in connection with the DOJ investigation, the class actions, and other related matters. During the three month periods ended June 30, 2011, and 2010, costs were approximately $9,400 and $145,500, respectively. During the six month periods ended June 30, 2011, and 2010, costs were approximately $34,600 and $525,400, respectively.

On October 15, 2009, the Company commenced legal action against its insurer for a judicial declaration that the insurer owes and has breached its duty to defend the Company in an antitrust lawsuit captioned: “In re Puerto Rican Cabotage Antitrust Litigation”, U.S.D.C., Puerto Rico, Case No. 3:08-md-01960-DRD (MDL 1960), and for judgment requiring the insurer to defend and to reimburse the Company’s defense expenses. The case was held in the Middle District of Florida, Jacksonville Division, and was captioned: “Trailer Bridge, Inc. v. Illinois National Insurance Company”. On July 23, 2010 the Court denied the Company’s motion and granted summary judgment in favor of the defendant. The Company appealed this decision to the Eleventh Circuit Court of Appeals on August 19, 2010. Oral argument will be scheduled in October, 2011, for a future date however, the appeal’s outcomes cannot be predicted with certainty.

The Company is not able to predict the ultimate outcome or cost of the DOJ investigation, the civil class actions, or other related matters. However, should this result in an unfavorable outcome for the Company or continued legal expense, it could have a material adverse effect on the Company’s financial position and future operations.

TRAILER BRIDGE, INC.

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 and 2010

The Company is a defendant in certain employee actions for wrongful termination, age and gender discrimination from employee terminations in 2009 and 2010. The Company is insured for such actions and in the opinion of management such actions are not expected to have a material adverse effect on the Company’s financial position or cash flows.

The Company is involved in routine litigation and is subject to certain claims which arise in the normal course of business, none of which, in the opinion of management, are expected to have a material adverse effect on the Company’s financial position or cash flows.

In the second quarter of 2010, the Company committed to capital expenditures of approximately $5.5 million for modifications and improvements at its San Juan, Puerto Rico terminal. As of June 30, 2011, approximately $5.5 million had been spent and in the first quarter of 2011, the Company placed into service the land-based ramp that was built to replace the floating ramp.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This report on Form 10-Q contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The matters discussed in this Report include statements regarding the intent, belief or current expectations of Trailer Bridge, Inc. (the “Company”), its directors or its officers with respect to the future operating performance of the Company. Investors are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward looking statements as a result of various factors. Without limitation, these risks and uncertainties include, the ability of the Company to generate cash from its operations, the Company’s ability to refinance its existing debt, the risks of changes in demand for transportation services offered by the Company, changes in rate levels for transportation services offered by the Company, changes in the cost of fuel, unfavorable outcomes from the United States Department of Justice (“DOJ”) investigation and related class or individual actions, economic recessions and severe weather as well the ability to retain and/or attract the necessary personnel and maintain necessary vendor relationships. An additional description of the Company’s risk factors is described in Part 1 – Item 1A. “Risk Factors” filed on Form 10-K for the year ended December 31, 2010. In addition to those risk factors filed within Form 10-K for the year ended December 31, 2010, there are additional risk factors filed within this Form 10-Q for the quarter ended June 30, 2011 as described in Part 11 – Item 1A. “Risk Factors”. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS:

EXECUTIVE SUMMARY

The Company earns revenue by the movement of freight by water to and from Puerto Rico, the Dominican Republic and the continental United States through its terminal facility in Jacksonville, Florida. The Company also earns revenue from the movement of freight within the continental United States when such movement complements its core business of moving freight to and from Puerto Rico and the Dominican Republic. The Company also earns revenue from chartering its vessels that are not in liner service to third party operators. The Company’s operating expenses consist of the cost of the equipment, labor, facilities, fuel, inland transportation and administrative support necessary to move freight to and from Puerto Rico, the Dominican Republic and within the continental United States.

Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010

For the three month period ended June 30, 2011, the Company had a net loss of $3.6 million compared to net income of $0.9 million in the same period of the previous year. The Company’s operating loss for the three month period ended June 30, 2011, was $1.1 million compared to operating income of $3.4 million in the same period of the previous year.

The following table sets forth the indicated items as a percentage of net revenues for three months ended June 30, 2011, and 2010:

Operating Statement - Margin Analysis

(% of Operating Revenues)


	Three Months Ended June 30,
	2011			2010
Operating revenues		100.0	%		100.0	%
Salaries, wages, and benefits		14.2			13.2
Purchased transportation and other rent		29.6			24.9
Fuel		19.5			13.9
Operating and maintenance (exclusive of depreciation & dry-docking shown separately below)		24.9			24.0
Dry-docking		1.0			—
Taxes and licenses		0.4			0.4
Insurance and claims		2.7			2.5
Communications and utilities		0.7			0.6
Depreciation and amortization		5.5			4.9
Other operating expenses		5.4			4.9

Total operating expenses		103.9			89.3
Operating (loss) income		(3.9	)		10.7
Net interest expense		(8.7	)		(7.9	)

Net (loss) income		(12.6	)%		2.8	%

The Company’s operating ratio, or operating expenses expressed as a percentage of revenue, declined from 89.3% during the three months ended June 30, 2010, to 103.9% during the three months ended June 30, 2011. The decline is primarily due to lower revenues as a result of lower volume and lower charterhire rates combined with higher fuel and purchased transportation costs as explained under the operating expenses caption below.

Revenues

The following table sets forth by percentage and dollar, the changes in the Company’s revenue and volume as measured by equivalent units:

Volume & Revenue Changes in the second quarter of 2011 compared to 2010


	Overall
Volume Percent Change:
Total Equivalent Units		(12.9	)%

Revenue Change (in millions):
Core Service Revenue	$	(2.6	)
Other Revenues		(0.1	)

Total Revenue Change	$	(2.7	)

Vessel capacity utilization southbound was 91.2% for the three months ended June 30, 2011 compared to 100.1% for the three months ended June 30, 2010. Vessel capacity utilization northbound was 24.1% for the three months ended June 30, 2011 compared to 29.5% for the three months ended June 30, 2010. The vessel capacity utilization southbound and northbound decreased primarily due to decreased cargo volumes with the northbound volume negatively affected by the temporary cessation of the movement of recyclable tires.

Total revenue for the three months ended June 30, 2011 was $29.0 million, compared to $31.7 million for the three months ended June 30, 2010. Excluding the effect of fuel surcharge revenue, revenue decreased 12.2% from the prior year period primarily as a result of a decrease in freight volumes and charterhire revenue. The Company’s decrease in freight volume

was partially attributable to maintenance of operating equipment, which resulted in a shortage of available equipment to meet peak service demands. The Company’s fuel surcharge, which is included in operating revenues, amounted to $5.3 million during the three months ended June 30, 2011 compared to $4.7 million from the prior year period. This increase in fuel surcharge revenue was primarily the result of higher fuel market prices. Charterhire, which is rental revenue for vessels not in use in liner service, amounted to approximately $0.6 million during the three months ended June 30, 2011, compared to $0.9 million in the prior year period. This decrease in charterhire revenue was primarily the result of lower charter rates in second quarter of 2011 as compared to the same period in the prior year.

Operating Expenses

Total operating expense was $30.1 million for the three months ended June 30, 2011 as compared to $28.3 million for the prior year period. This increase was primarily due to higher fuel, inland purchased transportation, and dry-docking costs, partially offset by a decrease in operating and maintenance expenses. Fuel expense increased $1.2 million or 28.3% due primarily to market price increases. The category fuel expense does not include fuel related expenses associated with embedded inland purchased transportation that experienced an increase as well. Rent and purchased transportation increased $0.7 million or 8.8% due to a shift from company employed drivers to purchased transportation and increases in fuel related components of purchased transportation. The Company estimates that its fuel expense associated with purchased transportation increased $476,700 or 29.6%. Dry-docking expenses associated with required regulatory dry-docking during the second quarter of 2011 came to approximately $0.3 million. The Company did not have any dry-docking expenses in the second quarter of 2010. Operating and maintenance expenses decreased $0.4 million or 4.9% primarily as a result of decreased equipment maintenance and repair expenses.

As a result of the factors above, the Company reported a net loss of $3.7 million or $0.30 per basic share and diluted share for the three months ended June 30, 2011 compared to net income of $0.9 million or $0.07 per basic share and diluted share in the same period in 2010.

Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010

For the six month period ended June 30, 2011, the Company had a net loss of $14.0 million compared to net income of $0.6 million in the prior year period. The Company’s operating loss for the six month period ended June 30, 2011, was $9.1 million compared to operating income of $5.6 million in the prior year period.

The following table sets forth the indicated items as a percentage of net revenues for six months ended June 30, 2011, and 2010:

Operating Statement - Margin Analysis

(% of Operating Revenues)


	Six Months Ended June 30,
	2011			2010
Operating revenues		100.0	%		100.0	%

Salaries, wages, and benefits		14.2			13.6
Purchased transportation and other rent		29.5			24.9
Fuel		19.9			14.4
Operating and maintenance (exclusive of depreciation & dry-docking shown separately below)		25.1			23.4
Dry-docking		12.8			—
Taxes and licenses		0.5			0.5
Insurance and claims		2.9			2.6
Communications and utilities		0.7			0.6
Depreciation and amortization		5.9			5.1
Other operating expenses		5.5			5.6

Total operating expenses		117.0			90.7

Operating (loss) income		(17.0	)		9.3
Net interest expense		(9.1	)		(8.3	)

Net (loss) income		(26.1	)%		1.0	%

The Company’s operating ratio, or operating expenses expressed as a percentage of revenue, declined from 90.7% during the six months ended June 30, 2010, to 117.0% during the six months ended June 30, 2011. The decline is primarily due to lower revenues as a result of lower volume and lower charterhire combined with higher dry-docking, fuel, and purchased costs as explained under the operating expenses caption below.

Revenues

The following table sets forth by percentage and dollar, the changes in the Company’s revenue and volume as measured by equivalent units:

Volume & Revenue Changes in the first six months of 2011 compared to 2010


	Overall
Volume Percent Change:
Total Equivalent Units		(15.5	)%

Revenue Change (in millions):
Core Service Revenue	$	(6.5	)
Other Revenues		(0.2	)

Total Revenue Change	$	(6.7	)

Vessel capacity utilization southbound was 89.7% for the six months ended June 30, 2011, compared to 98.3% for the six months ended June 30, 2010. This was mainly attributable to volume decreases. Vessel capacity northbound was 23.4% for the six months ended June 30, 2011, compared to 29.8% for the six months ended June 30, 2010.

Revenue for the six months ended June 30, 2011, was $53.8 million compared to $60.5 million for the six months ended June 30, 2010. The decrease in revenue was primarily due to decreased volume and charterhire revenue partially offset by higher fuel surcharge revenue. The Company’s decrease in freight volume was partially attributable to schedule disruption arising from the dry-docking of both the Company’s ro/ro vessels and to maintenance of operating equipment, which resulted in a shortage of available equipment to meet peak service demands.

The Company’s fuel surcharge, which is included in the Company’s revenues, amounted to $9.0 million during the six months ended June 30, 2011, compared to $8.8 million in the prior year period. The increase in fuel surcharge revenue was primarily the result of increases in the market price of fuel and the related surcharge. Charterhire, which is rental revenue for vessels not in use in liner service, amounted to $0.6 million during the six months ended June 30, 2011, compared to $2.2 million in the prior year period. This decrease in charterhire revenue was primarily the result of lower daily charter rates and fewer days the vessels were charted in second quarter of 2011 as compared to the same period in the prior year.

Operating Expenses

Total operating expense was $63.0 million for the six months ended June 30, 2011 as compared to $54.9 million for the prior year period. This increase was primarily due to higher dry-docking, fuel, and inland purchased transportation costs, partially offset by decreases in operating and maintenance, salaries and benefits, and other expenses. Dry-docking expenses associated with the required regulatory dry-docking of the Company’s two roll-on/roll-off (“ro/ro”) barges during the first quarter of 2011 and one Triplestack Box Carrier^® (“TBC”) barge during the second quarter of 2011 came to approximately $6.9 million. The Company did not have any dry-docking expenses in the first and second quarters of 2010. The expense associated with the dry-docking of the Company’s two ro/ro vessels was approximately $6.3 million compared to $0.6 million for the one TBC. The ro/ro vessels are not scheduled for another regulatory dry-docking until 2014 for one and 2016 for the other. Fuel expense increased $2.0 million or 23.3% due primarily to market price increases. The category fuel expense does not include fuel related expenses associated with embedded inland purchased transportation that experienced an increase as well. Rent and purchased transportation increased $0.8 million or 5.2% due to a shift from company employed drivers to purchased transportation and increases in fuel related components of purchased transportation. The Company estimates that its fuel expense associated with purchased transportation increased $544,400 or 17.9%. Operating and maintenance expenses decreased $0.6 million or 4.4% primarily as a result of decreased equipment maintenance and repair expenses. Salaries, wages, and benefits decreased by $0.6 million or 7.1% primarily due to reductions in force in 2010 and less driver payroll as a result of a shift from company employed drivers to purchased transportation. Other operating expenses decreased by $0.4 million or 11.8% primarily due to decreases in legal fees associated with the on-going DOJ investigation and other related legal matters.

As a result of the factors described above, the Company reported a net loss of $14.0 million or $1.17 per basic share and diluted share for the six months ended June 30, 2011, compared to net income of $0.6 million or $0.05 per basic share and diluted share in the same period in 2010.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operations was $13.2 million in the first six months of 2011 compared to net cash provided by operations of $5.0 million in the first six months of 2010. This decrease of $18.2 million resulted primarily from higher cash outflows as a result of higher fuel costs due to an increase in market prices and dry-docking costs of approximately $6.9 million for the Company’s two ro/ro and one TBC vessels that underwent required regulatory dry-docking in 2011. Net cash used in investing activities was $1.7 million in the first six months of 2011 compared to $1.4 million for the same period in 2010. This increase resulted primarily from payments made for improvements at the Company’s San Juan, Puerto Rico terminal for the construction of a land-based ramp that was put into service in the first quarter of 2011. Net cash provided by financing activities was $3.6 million in the first six months of 2011 compared to net cash used in financing activities of $2.6 million in the first six months of 2010. The change in financing activities was mainly attributable to cash received on draws made in the second quarter of 2011 on the Company’s revolving line of credit. At June 30, 2011, cash amounted to approximately $173,200, working capital deficit was $88.6 million, primarily due to classification of the Company’s $82.5 million 9.25% Senior Secured Notes (the “Notes”) due November 2011 and term loan debt as current in the Company’s June 30, 2011 balance sheet. The Company also had $4.6 million in a reserve fund for its two series of Ship Financing Bonds designated as its 7.07% Sinking Fund Bonds due September 30, 2022 and 6.52% Sinking Fund Bonds due March 30, 2023. These bonds are guaranteed by the U.S. government under Title XI of the Merchant Marine Act of 1936, as amended (collectively, the “Title XI Bonds”).

The Company’s revolving credit facility, as amended, provides for a maximum availability of $10 million and expires April 2012. As amended in the second quarter of 2011, the facility provides for interest equal to 2% in excess of the prime rate. The revolving line of credit is subject to a borrowing base formula based on a percentage of eligible accounts receivable. The revolving credit facility is secured by the Company’s accounts receivable. At June 30, 2011, approximately $5.0 million was drawn on this credit facility. During the fourth quarter of 2008, the Company amended the Revolving Credit Agreement to eliminate all financial covenants at any time the Company has at least

$3.0 million in unused borrowing capacity under the facility. As of June 30, 2011, the Company had approximately $1.8 million available under this facility as calculated by the borrowing base formula. As of the date of this filing the Company’s borrowings under this facility did not exceed the available amount under the borrowing base calculation. During the second quarter of 2011, the Revolving Credit Agreement was amended and the Company is no longer subject to any financial covenants until September 30, 2011. Beginning August 1, 2011 the Company’s availability under the Revolving Credit Agreement shall be reduced by $100,000 each week for ten weeks. The Company will need an additional amendment or waiver for the Revolving Credit Agreement if the debt refinancing is not complete through September 30, 2011 when the Company will be subject to financial covenants.

The Company has an outstanding term loan that provides for interest, as amended in the second quarter of 2011, equal to 2% in excess of the prime rate and principal payments over a 72 month period through December 2014. At June 30, 2011, approximately $5.0 million was drawn on this loan to fund previous equipment purchases. This term loan is collateralized by eligible new equipment with a carrying value of $13.9 million at June 30, 2011. No new draws are permitted under this facility. Under this facility the Company will be subject to financial covenants on September 30, 2011 that it will not be able to meet absent an additional amendment or waiver. As a result, the Company has classified this as a current liability on the Company’s balance sheet at June 30, 2011.

The Company’s $82.5 million Notes mature on November 15, 2011. Interest on the Notes is payable semi-annually on each May 15 and November 15. The Company may redeem the Notes, in whole or in part, at its option at any time or from time to time at the redemption prices specified in the indenture governing the Notes, plus accrued and unpaid interest thereon, if any, to the redemption date. Upon the occurrence of certain changes in control specified in the indenture governing the Notes, the holders of the Notes will have the right, subject to certain conditions, to require the Company to repurchase all or any part of their Notes at a repurchase price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest thereon, if any, to the redemption date. The agreement among other things, places restrictions on the Company’s ability to (a) incur or guarantee additional debt, (b) to pay dividends, repurchase common stock or subordinated debt, (c) create liens, (d) transact with affiliates, and (e) transfer or sell assets.

The Company is actively working with its lenders and advisors to refinance the Notes and other indebtedness of the Company. Any refinancing of the Notes and other indebtedness could involve new lenders and/or existing lenders and might involve the private or public lending market and include an equity component that might result in a change of control. The interest rate the Company pays on its overall debt may be higher under such refinancing and the Company could incur significant additional expenses, including prepayment penalties on the Title XI Bonds and expensing of unamortized issuance costs in completing such a transaction. The existing Notes are secured by a substantial portion of the Company’s revenue generating assets and failure to refinance the debt could impair the Company’s ability to use such assets. The Company can provide no assurance that it will be able to refinance the Notes. In the event the Company is not able to refinance the Notes, the Company’s finances and ability to operate would be severely impaired and the Company could be required to seek protection under the federal bankruptcy laws.

The Company is restricted from performing certain financial activities described below due to certain leverage ratios under its Title XI Bonds. The provisions of the Title XI Bond debt documents provide that, in the event the Company does not maintain certain leverage ratios, the Company is restricted from conducting certain financial activities without obtaining the written permission of the Secretary of Transportation of the United States. If such permission is not obtained and the Company enters into any of the following actions it will be considered to be in default of the Title XI Bond covenants and the lender will have the right to call the debt. These actions are as follows: (1) acquire any fixed assets other than those required for the normal maintenance of its existing assets; (2) enter into or become liable under certain charters and leases (having a term of six months or more); (3) pay any debt subordinated to the Title XI Bonds; (4) incur any debt, except current liabilities or short term loans incurred in the ordinary course of business; (5) make investments in any person, other than obligations of the U.S. government, bank deposits or investments in securities of the character permitted for money in the reserve fund; or (6) create any lien on any of its assets, other than pursuant to loans guaranteed by the Secretary of Transportation of the United States under Title XI of the Merchant Marine Act of 1936, as amended, and liens incurred in the ordinary course of business. As of June 30, 2011, the Company was in compliance with such restrictions. If the Company retires this debt prior to the maturity date, the Company will be subject to certain prepayment penalties as defined in the agreement. The Company may seek to delay or defer payments under these bonds if the refinancing discussed above is not completed before the next payment date or expiration of the grace period contained therein.

OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2011, the Company did not have any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES

There have been no significant changes to our critical accounting policies during the six months ended June 30, 2011, as compared to those the Company disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report filed on Form 10-K for the year ended December 31, 2010.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements are detailed in Note 3 of the Company’s Unaudited Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on their evaluation, our principal executive officer and principal financial officer concluded that Trailer Bridge, Inc.’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no significant change in our internal controls over financial reporting identified in connection with the evaluation referred to in the paragraph above that occurred during the three month period ended June 30, 2011 that has materially affected, or is reasonably likely to materially effect, our internal controls over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

An investment in our securities involves a high degree of risk. In addition to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010, you should also be aware of the following additional risk factors.

Lack of liquidity could adversely affect our financial health and limit our business activities.

As of June 30, 2011, the Company had $0.2 million in cash and had drawn $5.0 million on its Revolving Credit facility. If this amount of cash as well as cash from operations are not sufficient to fund our business and other funds are not otherwise available, our ability to run our business could be curtailed and we may need to delay, limit or eliminate various portions of our business and our operations. A lack of liquidity could have a material adverse effect on our business, financial condition and results of operation.

Our cash flows and capital resources may be insufficient to make required payments on our substantial indebtedness and future indebtedness.

As of June 30, 2011, we had approximately $106.5 million of current liabilities of which $93.7 million is the current portion of outstanding long-term debt. Cash used in operations during the six months ended June 30, 2011 was $13.2 million. Our available liquidity plus the additional cash expected to be generated by operations will not be sufficient, without additional financing, to pay the $82.5 million in 9.25% Senior Secured Notes (the “Notes”) which become due in November 2011 or the interest thereon and the $11.2 million current portions of our other indebtedness which become due periodically throughout the next twelve months. Our failure to refinance these obligations that have not matured prior to March 31, 2011, has

resulted in the inclusion of an explanatory going concern paragraph in the audit report of our Independent Registered Certified Public Accounting Firm which was contained in our Annual Report on Form 10-K for the year ended December 31, 2010.

Because we have substantial debt, we require significant amounts of cash to fund our debt service obligations. Our ability to generate cash to meet scheduled payments or to refinance our obligations with respect to our debt depends on our financial and operating performance which, in turn, is subject to prevailing economic and competitive conditions and to the following financial and business factors, some of which may be beyond our control:

•

operating difficulties;

•

equipment availability and condition;

•

increased operating costs;

•

increased fuel costs;

•

general economic conditions;

•

decreased demand for our services;

•

market cyclicality;

•

tariff rates;

•

prices for our services;

•

the actions of competitors;

•

regulatory developments; and

•

delays in implementing strategic projects.

If our cash flow and capital resources are insufficient to fund our debt service obligations, including refinancing the Notes due November 15, 2011, we could face substantial liquidity problems and might be forced to reduce or delay capital expenditures, dispose of material assets or operations, seek to obtain additional equity capital, restructure or refinance our indebtedness. In the event that we are required to dispose of material assets or operations to meet our debt service obligations, we cannot be sure as to the timing of such dispositions or the proceeds that we would realize from those dispositions. The value realized from such dispositions will depend on market conditions and the availability of buyers, and, consequently, any such disposition may not, among other things, result in sufficient cash proceeds to repay our indebtedness. Also, our existing debt agreements (and any new financing documents may) contain covenants that may limit our ability to dispose of material assets or operations or to restructure or refinance our indebtedness. Further, we cannot provide assurance that we will be able to restructure or refinance any of our indebtedness or obtain additional financing, given the uncertainty of prevailing market conditions from time to time. Such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In such an event, we may be forced to file for protection under federal bankruptcy laws. If we are able to restructure or refinance our indebtedness or obtain additional financing, we anticipate that the economic terms on which such indebtedness is restructured, refinanced or obtained will not be as favorable to us as our current indebtedness and may include an equity component that could include a change of control.

We may be unable to refinance our 9.25% Senior Secured Notes; in such an event, we may be forced to file for protection under federal bankruptcy laws.

Our Notes mature on November 15, 2011. As of June 30, 2011, the aggregate principal outstanding on our Notes is $82.5 million. We will not generate sufficient funds from our operations to pay off the aggregate principal outstanding on our Notes when due in November 2011. Our failure to refinance these obligations that have not matured prior to March 31, 2011, has resulted in the inclusion of an explanatory going concern paragraph in the audit report of our Independent Registered Certified Public Accounting Firm which was contained in our Annual Report on Form 10-K for the year ended December 31, 2010. If we are unable to refinance these Notes on acceptable terms, we might be forced (i) to dispose of property or equipment, which might result in losses (ii) to obtain financing at unfavorable terms, and/or (iii) file for protection under bankruptcy laws. Each of (i) or (ii) could reduce the cash flow available for operations and, therefore, have a negative effect on our results of operations. In such an event, we may be forced to file for protection under federal bankruptcy laws. In addition, under the terms of our Revolving Loan Agreement and Term Loan Agreement if we fail to refinance the Notes prior to September 30, 2011, we will be in default under the terms of the Agreements.

Covenants in our debt agreements may restrict our operating activities and adversely affect our financial condition.

Our debt agreements contain customary covenants and financial tests, including compliance with certain financial ratios under certain circumstances. We expect that any new financing would contain similar or more restrictive covenants and financial tests. These covenants could limit our operational flexibility and our acquisition activities. Moreover, if we breach any of the covenants and did not cure the breach within the applicable cure period, we could be forced to repay the debt immediately, even in the absence of a payment default. There can be no assurance that we will be able to refinance our Notes. We will need an additional amendment or waiver for the Revolving Credit Agreement and Term Loan Agreement if the debt refinancing is not complete through September 30, 2011. If we are able to refinance our Notes, there can be no assurance that we will be able to refinance on terms that are as favorable as our current Notes. Consequently, the covenants in our future debt agreements may be even more restrictive than our current covenants. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations, and the market value of our stock. It is likely that any refinancing of our existing indebtedness as described above will contain similar or more restrictive covenants and include an equity component that could include a change of control.

A Change of Control may occur as a result of our refinancing.

Any refinancing of our Notes and other indebtedness may lead to one or more parties who participate in such refinancing gaining rights to have board representation or rights to control over certain of our operating decisions. In addition such parties who participate in such refinancing may receive an equity interest in our Company and such equity interest may be large enough to constitute a change of control. In the event of a change of control, your interests as a shareholder may conflict with the interests of the majority shareholders and the trading prices of shares of our common stock could be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 5. Other Information

None

Item 6. Exhibits

(a)

Exhibits

In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements. The Agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•

may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

•

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this report not misleading. Additional information about the Company may be found elsewhere in this report and the Company’s other public files, which are available without charge through the SEC’s website at http://www.sec.gov.


Exhibit Number		Description of Exhibit

10.6.3		Amendment No. 2 to the Term Loan and Security Agreement dated as of June 29, 2011, by and among Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association, successor by merger to Congress Financial Corporation (Florida), as Agent and the Lenders from time to time party thereto, as Lenders. (Incorporated by reference to the Company’s Form 8-K filed on July 18, 2011)

10.6.4		Amendment No. 9 to the Term Loan and Security Agreement dated as of June 29, 2011, by and among Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association, successor by merger to Congress Financial Corporation (Florida), as Agent and the Lenders from time to time party thereto, as Lenders. (Incorporated by reference to the Company’s Form 8-K filed on July 18, 2011)

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

31.2		Certification of Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

32.1		Certification of Trailer Bridge, Inc.’s Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of 2002)

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

TRAILER BRIDGE, INC.

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

¨ (Do not check if a smaller reporting company)

Smaller Reporting Company