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 September 30, 2009

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 000-51368

TBS INTERNATIONAL LIMITED

(Exact name of registrant as specified in its charter)

Bermuda	98-0225954
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
Commerce Building, Chancery Lane, Hamilton HM 12, Bermuda
(Address of principal executive offices)

(441) 295-9230

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes ¨ 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 ¨ Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of November 6, 2009, the registrant had outstanding 17,513,371 Class A common shares, par value $0.01 per share, and 12,390,461 Class B common shares, par value $0.01 per share.

TBS INTERNATIONAL LIMITED

Form 10-Q For the Quarterly Period Ended September 30, 2009

Table of Contents

		Page
PART I: FINANCIAL INFORMATION
Item 1	Financial Statements
	Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008	3
	Consolidated Statements of Income (Unaudited) for the three and nine months ended September 30, 2009 and September 30, 2008	4
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2009 and September 30, 2008	5
	Consolidated Statement of Changes in Shareholders' Equity (Unaudited) for the nine months ended September 30, 2009	6
	Notes to Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosure About Market Risk	49
Item 4	Controls and Procedures	50

PART II: OTHER INFORMATION
Item 1	Legal Proceedings	51
Item 1A	Risk Factors	51
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3	Defaults Upon Senior Securities	53
Item 4	Submission of Matters to a Vote of Security Holders	53
Item 5	Other Information	53
Item 6	Exhibits	54
	Signatures

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TBS INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and par value per share)

				September 30,			December 31,
				2009			2008
				(unaudited)
Assets
	Current assets
		Cash and cash equivalents		$	46,401		$	131,150
		Restricted cash			12,675
		Charter hire receivable, net of allowance of $500 in 2009 and 2008			30,918			45,786
		Fuel and other inventories			13,859			12,079
		Prepaid expenses and other current assets			8,246			10,722
		Advances to affiliates			1,238			6,402
			Total current assets		113,337			206,139
	Fixed assets, net				798,634			808,706
	Goodwill				8,426			8,426
	Other assets and deferred charges				21,069			18,414

			Total assets	$	941,466		$	1,041,685

Liabilities and Shareholders' Equity
	Current liabilities
		Debt (Note 1 and 8)		$	341,247		$	56,945
		Accounts payable and accrued expenses			41,091			41,602
		Voyages in progress			284			3,268
		Advances from affiliates			271			13
			Total current liabilities		382,893			101,828

	Debt, long-term portion (Note 8)							326,129
	Other liabilities				12,402			15,432
			Total liabilities		395,295			443,389

	COMMITMENTS AND CONTINGENCIES (Note 12)

	Shareholders' equity
		Common shares, Class A, $.01 par value, 75,000,000 authorized, 17,531,996 shares issued and 17,513,371 shares outstanding in 2009 and 17, 519,496 shares issued and 17,509,496 outstanding in 2008			175			175
		Common shares, Class B, $.01 par value, 30,000,000 authorized, 12,390,461 shares issued and outstanding in 2009 and 2008			124			124
		Warrants			21			21
		Additional paid-in capital			187,664			186,683
		Accumulated other comprehensive (loss)			(10,415	)		(13,727	)
		Retained earnings			369,069			425,409
		Less: Treasury stock (18,625 shares, at cost)			(467	)		(389	)
			Total shareholders' equity		546,171			598,296
			Total liabilities and shareholders' equity	$	941,466		$	1,041,685

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

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TBS INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts and outstanding shares)

		Three Months Ended September 30,						Nine Months Ended September 30,
		2009			2008			2009			2008
		(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenue
	Voyage revenue	$	57,163		$	161,397		$	181,417		$	388,253
	Time charter revenue		15,972			19,308			34,311			77,292
	Logistics revenue		1,014			2,045			1,550			5,288
	Other revenue		183			572			448			1,012
	Total revenue		74,332			183,322			217,726			471,845
Operating expenses
	Voyage		25,505			52,882			81,818			126,731
	Logistics		754			1,726			1,175			4,417
	Vessel		28,502			30,759			82,001			78,508
	Depreciation and amortization of vessels and other fixed assets		23,747			19,980			70,069			49,988
	General and administrative		9,086			14,121			26,121			41,184
	Total operating expenses		87,594			119,468			261,184			300,828
(Loss) income from operations			(13,262	)		63,854			(43,458	)		171,017
Other (expenses) and income
	Interest expense		(4,863	)		(5,041	)		(12,840	)		(12,318	)
	Loss on extinguishment of debt											(2,318	)
	Interest and other income (expense)		(14	)		330			(42	)		781
	Total other (expenses) and income, net		(4,877	)		(4,711	)		(12,882	)		(13,855	)

Net (loss) income		$	(18,139	)	$	59,143		$	(56,340	)	$	157,162


Earnings per share
Net (loss) income per common share
	Basic and Diluted	$	(0.61	)	$	1.96		$	(1.89	)	$	5.40

Weighted average common shares outstanding
	Basic and Diluted		29,863,460			30,104,863			29,836,239			28,980,101

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

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TBS INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

				Nine Months Ended September 30,
				2009			2008
				(unaudited)			(unaudited)
Cash flows from operating activities
	Net (loss) income			$	(56,340	)	$	157,162
	Adjustments to reconcile net income to net cash
		provided by operating activities
		Depreciation and amortization			70,069			49,988
		Loss on change in value of interest swap contract			282			234
		Amortization and write-off of deferred financing costs			1,889			3,342
		Non cash stock based compensation			981			1,949
		Drydocking expenditures			(10,544	)		(9,138	)
		Loss in joint venture						(226	)
		Changes in operating assets and liabilities
			Decrease (increase) in charter hire receivable		14,868			(26,711	)
			(Increase) in fuel and other inventories		(1,780	)		(6,873	)
			Decrease (increase) in prepaid expenses and other current assets		2,476			(2,122	)
			(Increase) in other assets and deferred charges		(776	)		(3,973	)
			(Decrease) increase in accounts payable and accrued expenses		(511	)		7,612
			(Decrease) increase in voyages in progress		(2,984	)		4,381
			Increase (decrease) in advances from/to affiliates, net		5,422			(2,993	)
Net cash provided by operating activities					23,052			172,632

Cash flows from investing activities

	Vessel acquisitions / capital improvement costs / vessel construction in progress payments				(49,453	)		(356,304	)
	Restricted cash to fund 2009 new vessel payments				(20,000	)
	Decrease in restricted cash for new vessel payments				7,325
	Deposit for vessel purchases							(4,120	)
	Investment in joint venture				(366	)
	Return of dividend from joint venture							100
	Repayment of loan made from joint venture							760
Net cash (used) by investing activities					(62,494	)		(359,564	)
Cash flows from financing activities
	Proceeds from issuance of shares in secondary public offering, net of offering costs							95,739
	Repayment of debt principal				(61,002	)		(162,636	)
	Proceeds from debt				19,175			318,000
	Payment of deferred financing and leasing costs				(3,402	)		(4,688	)
	Acquisition of treasury stock				(78	)
Net cash provided by (used in) financing activities					(45,307	)		246,415

Net increase (decrease) in cash and cash equivalents					(84,749	)		59,483
Cash and cash equivalents beginning of period					131,150			30,498
	Cash and cash equivalents end of period			$	46,401		$	89,981
Supplemental cash flow information:
	Interest paid, net of amounts capitalized			$	18,314		$	10,207

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

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TBS INTERNATIONAL LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

(in thousands, except shares)

(unaudited)

																Accumulated
																Other Com-
											Additional					prehensive
	Common Shares			Treasury Stocks				Warrants			Paid-in		Retained			Income
	Shares	Amount		Shares	Amount			Shares	Amount		Capital		Earnings			(Loss)			Total

Balance at December 31, 2008	29,909,957		299	10,000		(389	)	311,903		21		186,683		425,409			(13,727	)	$	598,296
Net loss														(56,340	)					(56,340	)
Unrealized gain on cash flow hedges																	3,312			3,312
Comprehensive income																				(53,028	)
Stock based compensation	12,500											981								981
Treasury stock				8,625		(78	)													(78	)

Balance at September 30, 2009	29,922,457	$	299	18,625	$	(467	)	311,903	$	21	$	187,664	$	369,069		$	(10,415	)	$	546,171

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

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Note 1 — Basis of Presentation

TBS International Limited ("TBSI") and its subsidiaries (the "Company", "we" or "our") are engaged in the ocean transportation of dry cargo offering shipping solutions through liner, parcel, bulk and services. Substantially all related corporations of TBSI are foreign 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 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 presentation 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, 2008. Operating results for the nine month period ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.

The consolidated balance sheet at December 31, 2008 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, 2008 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 30, 2009.

The Company's board of directors has unanimously approved, and is submitting to our shareholders, a proposal that would result in our shareholders holding shares in TBS International plc, an Irish company, rather than TBS International Limited, a Bermuda company. Later this year, our shareholders will be asked to vote in favor of completing the reorganization at a shareholders meeting. If conditions are satisfied, including approval by the Company's shareholders and the Supreme Court of Bermuda, TBS International plc will replace TBS International Ltd. as the ultimate parent company for the Company's operations.

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 September 30, 2009, although the Company was in compliance with all modified additional covenants and the debt is not currently callable by the lenders, the Company would have been in violation of the previously effective minimum consolidated fixed charge coverage ratio and the maximum consolidated leverage ratio. Based on current internal projections, the Company anticipates that it will not meet certain of the restated covenant requirement during the next twelve months. Accordingly, long-term loans are classified as a current liability in the consolidated balance sheet at September 30, 2009. As further discussed in Note 8 – Financing, the Company is in the process of both seeking financing to repay most of its credit facilities and discussing permanent and / or temporary modifications of the financial covenants on any credit facilities not being repaid. Assuming the Company is successful in completing the financing and / or modifications, the Company expects to reclassify the long-term portion of outstanding debt as such on the consolidated balance sheet. The Company cannot give any assurance that it will be able to obtain the financing and / or covenant modifications, which would have a material adverse effect on its business, operations, financial condition and liquidity and would raise substantial doubt about its ability to continue as a going concern at that time.

Note 2 — New Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued the FASB Accounting Standards Codification (ASC), The Codification and the Hierarchy of Generally Accepted Accounting Principles Topic ASC 105-10. The Company implemented the guidance in the third quarter of 2009 which stipulates the Codification as the authoritative version of the FASB Accounting Standards Codification (Codification) as the single source of authoritative nongovernmental U.S. Generally Accepted Accounting Principles (GAAP). The statement is effective for interim and annual periods ending after September 15, 2009. The Company updated its references to GAAP in its consolidated financial statements issued for the period ended September 30, 2009. As the Codification was not intended to change or alter existing GAAP, it did not have any impact on the Company’s consolidated financial statements.

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Adopted

In May 2009, the FASB issued guidance on accounting for and disclosure 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 impact on our consolidated financial statements because the Company already followed a similar approach prior to the adoption of this guidance.

In April 2009, the FASB issued updated guidance on interim disclosures about the fair value of financial instruments effective for interim periods ending after June 15, 2009. The guidance, which is outlined in ASC Topic 825 – Financial Instruments, did not have an impact on our consolidated financial statements.

On January 1, 2009, the Company adopted changes issued by the FASB on determining whether instruments granted in share-based payment transactions are participating securities and should be included in the computation of earnings per share using the two-class method. The guidance, which is outlined in ASC Topic 260 – Earnings per Share, provides that unvested share-based payment awards that contain non-forfeitable rights to dividends are participating securities that should use the two-class method of computing earnings per share, which is an earnings allocation formula that determines earnings per share for common 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. The adoption of the provisions did not have a material impact on the Company’s previously issued consolidated financial statements.

On January 1, 2009, the Company adopted changes issued by the FASB on accounting and reporting standards for entities with an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The guidance, which is outlined in ASC Topic 810 – Consolidation is effective for fiscal years and interim periods beginning after December 15, 2008. The changes improve the relevance, comparability and transparency of financial information that a reporting entity provides in its consolidated financial statements. The guidance requires: ownership interests in subsidiaries held by parties other than the parent be clearly identified and presented within equity but separate from the parent's equity in the consolidated statement of financial position; consolidated net income attributable to the parent and the noncontrolling interest be identified and presented on the face of the consolidated statement of income; changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be consistently accounted for as equity transactions; any retained noncontrolling equity investment in a deconsolidated subsidiary be initially measured at fair value and that any gain or loss on the deconsolidation of a subsidiary be measured using fair value of the noncontrolling equity investment rather than the carrying amount of that retained investment; and entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and noncontrolling owners. Adoption of these changes had no impact on our consolidated financial statements as all consolidated subsidiaries are wholly owned.

On January 1, 2009, the Company adopted changes issued by the FASB on accounting for business combinations. The guidance, which is outlined in ASC Topic 805 – Business Combinations, applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The changes, while retaining the fundamental requirements of accounting for business combinations, require that the purchase method be used for all business combinations. The guidance establishes principles and requirements for how an acquiring entity measures and recognizes in its financial statements: the identifiable assets acquired; the liabilities assumed; any noncontrolling interest in the acquiree; and the goodwill acquired or a gain from a bargain purchase. It further sets forth disclosure criteria to enable a better understanding of the nature and effects of a business combination. Adoption of this guidance did not have an impact on our consolidated financial statements.

As of January 1, 2009, the Company adopted changes issued by the FASB on fair value accounting and reporting relating to nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements. The Company has previously adopted as of January 1, 2008, changes issued by the FASB on fair value accounting and reporting of financial assets and liabilities. The guidance, which is outlined in ASC Topic 820 – Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements about fair value measurement. The guidance applies to other accounting standards that require or permit fair value measurements and indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Fair value is defined in the guidance as based upon an exit price model. Adoption of these changes did not have an impact on our consolidated financial statements.

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Starting with the consolidated financial statements for the first quarter of 2008, the Company adopted changes issued by the FASB on disclosures about derivative instruments and hedging activities. The changes enhance disclosures about an entity’s derivative and hedging activities, including (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The guidance, which is outlined in ASC Topic 815 – Derivatives and Hedging, was effective for fiscal years and interim periods beginning after November 15, 2008 with early application encouraged. Adoption of these changes had no impact on our consolidated financial statements other than additional disclosures made in our notes to the consolidated financial statements.

Issued

In August 2009, the FASB issued changes to fair value accounting for liabilities. These changes clarify existing guidance that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using either a valuation technique that uses a quoted price of either a similar liability or a quoted price of an identical or similar liability when traded as an asset, or another valuation technique that is consistent with the principles of fair value measurements, such as an income approach (e.g., present value technique). This guidance also states that both a quoted price in an active market for the identical liability and a quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company is currently evaluating the potential impact to the consolidated financial statements of these changes, which become effective for the Company on October 1, 2009.

In June 2009, the FASB issued changes to the accounting for variable interest entities. These changes require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to 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 impact the entity’s economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. These changes become effective January 1, 2010, and the Company is currently evaluating the potential impact of these changes on our consolidated financial statements.

Note 3 — Fuel and Other Inventories

Fuel and other inventories consist of the following (in thousands):

	September 30,		December 31,
Description	2009		2008
Fuel	$	8,084	$	7,081
Lubricating oil		4,898		4,356
Other		877		642
TOTAL	$	13,859	$	12,079

Note 4 — Advances to / from Affiliates

Advances 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. The Company typically advances funds to affiliates in connection with the payment of management fees, commissions and consulting fees. Advances from affiliates originated primarily from amounts due to affiliates for management fees, commissions and consulting fees earned.

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Note 5 — Fixed Assets

Fixed assets consist of the following (in thousands):

Description	September 30, 2009			December 31, 2008
Vessels	$	717,535		$	677,901
Vessel improvements and other equipment		159,931			140,738
Deferred drydocking costs		26,268			15,724
Vessel construction in process		114,883			126,024
Other fixed assets		18,746			16,979
		1,037,363			977,366
Less accumulated depreciation and amortization		(238,729	)		(168,660	)
	$	798,634		$	808,706

In February 2007, the Company entered into individual contracts, through six wholly owned subsidiaries, with China Communications Construction Company Ltd. and Nantong Yahua Shipbuilding Group Co., Ltd. ("Shipyard") to build six newly designed 34,000 dwt multipurpose tweendecker vessels with retractable tweendecks at an original contract purchase price of $35.4 million per vessel. The vessels were designated as Hull numbers NYHS200720 through NYHS200725. One vessel the Rockaway Belle formerly Hull No. NYHS200720 was delivered in September 2009. Another vessel, the Dakota Princess formerly Hull No NYHS200721 was launched in May 2009 and is tentatively scheduled to be delivered during the first quarter of 2010. Based on delays at the shipyard the anticipated delivery of the remaining vessels have been pushed back an average of seven months. Accordingly, the anticipated delivery dates of the remaining four vessels were changed from one vessel during each quarter of 2010 to two vessels anticipated to be delivered in 2010 and two vessels to be delivered in 2011. We are working with the shipyard in effort to keep as close as possible to the original scheduled delivery dates.

Upon delivery of the Rockaway Belle, the Company transferred $39.6 million representing the purchase price, capitalized interest, design and other costs from vessel construction in progress to vessels. As of September 30, 2009, the Company made cumulative payments of $98.4 million to the shipyard toward the purchase of the five remaining newbuild vessels. The Company also made payments of $3.2 million on those five vessels for design, supervisory and other costs.

The Company capitalizes interest expense and deferred finance costs incurred in financing the construction of the vessels as part of the vessels cost. For the three and nine months ended September 30, 2009 approximately $1.9 million and $6.3 million, respectively, of interest incurred was capitalized. The Company also capitalized financing costs, principally loan origination and bank guarantee fees of $3.0 million associated with The Royal Bank of Scotland new vessel building credit facility including $1.0 million of capitalized finance cost incurred in connection with the March 2009 loan modification.

Note 6 — Valuation of Long-Lived Assets and Goodwill

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, then we must write down the carrying value to its estimated fair value. Forecasting future cash flows involves the use of significant estimates and assumptions. Due to the economic climate, the decline in the spot shipping rates that occurred in the fourth quarter of 2008 and the decline in our market capitalization, we concluded that there was a possible indication of impairment of long-lived assets at December 31, 2008 and accordingly an analysis was prepared. The cash flow period was based on the remaining lives of the vessels which range from 4 to 30 years. Revenue and expense assumptions used in the cash flow projections are consistent with internal projections and reflected our economic outlook. As of the December 31, 2008 analysis, there was no impairment of long-lived assets. During the nine month period ended September 30, 2009, we continued to monitor the overall shipping market including freight and charter rates. Based on our observations it is our belief that the assumptions used in our December 31, 2008 impairment analysis, are still applicable, and there have not been any significant changes in events or circumstances. Consequently we have concluded that our analysis does not require updating and that there is no impairment to our fleet at September 30, 2009. Future events or circumstances, which could require us to perform updated tests for impairment, may cause us to conclude that impairment of our fleet exists.

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The provisions of FASB ASC Topic 350 – Intangible – Goodwill and Other requires an annual impairment test be performed on goodwill. We perform our annual impairment analysis of goodwill on May 31st of each year, or more often if there are indicators of impairment present. The first of two steps require 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 considered not impaired and we are not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then we must 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.

Determining the reporting unit’s fair value involves the use of significant estimates and assumptions. The reporting unit consists of the companies acquired in connection with the initial public offering that created the goodwill of $8.4 million. 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, 2009 by: (a) updating our 2009 budgeted cash flow based on actual results, (b) updating our forecast for years 2010 through 2013 based on changes made to our 2009 cash flow estimates, (c) updating our estimates of the weighted-average cost of capital. During the three months ended September 30, 2009, there were no changes in circumstances that necessitated goodwill impairment testing. Based on our review, there was no impairment of goodwill at September 30, 2009.

Note 7 — Accounts Payable and Accrued Expenses

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

	September 30,		December 31,
Description	2009		2008
Accounts payable and accrued expenses - vessel	$	21,616	$	29,082
Accounts payable and accrued expenses - voyage		18,578		11,126
Accrued expenses - General administrative		897		1,394
Total	$	41,091	$	41,602

Note 8 — Financing

The Company's outstanding debt balances consist of the following (in thousands)

	Interest Rate at September 30, 2009		September 30, 2009			December 31, 2008

Bank of America term credit facility,
expires December 31, 2011	4.28	%	$	76,000		$	95,000
Bank of America revolving credit facility,
expires March 26, 2012	4.30% & 4.32	%		75,000			75,000
The Royal Bank of Scotland credit facility,
new vessel buildings, expires December 2015	3.78	%		93,758			75,000
Credit Suisse credit facility,
expires December 12, 2017 and February 19, 2018	3.05% & 3.18	%		28,750			31,750
DVB Group Merchant Bank (Asia) Ltd credit facility,
expires January 23, 2013	4.50	%		35,864			60,324
AIG Commercial Equipment Finance, Inc. credit facility,
expires April 1, 2012	7.00	%		19,250			29,750
Commerzbank AG credit facility,
expires June 2, 2011	3.60	%		4,500			6,500
Berenberg Bank credit facility,
expires June 19, 2012	3.31	%		8,125			9,750
Total			$	341,247		$	383,074
Less: Current Portion				(341,247	)		(56,945	)
Long Term Portion			$			$	326,129

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The table below illustrates our payment obligations due according to the original agreements. The long-term portion of the debt obligations on the below table have not been reclassified to current debt.

2009 (October 1, 2009 through December 31, 2009)	$
2010		73,479
2011		72,533
2012		103,908
2013		15,959
Thereafter		75,368
	$	341,247

Debt Reclassification

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 September 30, 2009, although the Company was in compliance with all modified additional covenants and the debt is not currently callable by the lenders, the Company would have been in violation of the previously effective minimum consolidated fixed charge coverage ratio and the maximum consolidate leverage ratio. Based on current internal projections, the Company anticipates that it will not meet certain of the reinstated covenant requirements during the next twelve months. Accordingly, long-term loans are classified as a current liability in the consolidated balance sheet at September 30, 2009. The Company is in the process of both seeking financing to repay most of its credit facilities and discussing permanent and / or temporary modifications of the financial covenants on any credit facilities not being repaid. The Company expects that in conjunction with refinancing or modifications of any of its credit facilities, amounts that may be borrowed under such credit facilities may be reduced. If and when the Company is able to obtain such financing and / or modifications, the Company expects to reclassify its long-term portion of outstanding debt as such on the consolidated balance sheet.

March 2009 Loan Modifications

In March 2009, the Company finalized negotiations with all of its creditors to obtain waivers of the collateral coverage requirements and other financial covenants such as leverage, fixed interest coverage ratios and minimum net worth and cash balance requirements through the fourth quarter of 2009. The lenders agreed to waive the original financial covenants through January 1, 2010, at that will be reinstated, provided the company is in compliance with two additional covenants during the period. The two additional covenants require (1) an earnings before interest, depreciation and amortization to interest expense ratio of not less than 1.35 to 1.00 and 1.75 to 1.00 at the end of the third and fourth quarters of 2009, respectively, and (2) minimum end of month cash balance of not less than $40.0 million. The Company was in compliance with the two additional covenants for the period ending September 30, 2009; however, based on current internal projections the Company anticipates that it will not meet the reinstated covenant requirements in 2010. As discussed above, at September 30, 2009, while the Company was in compliance with the two additional covenants, the Company would not have been in compliance with two of the previously-effective original financial covenants.

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In connection with the modification of the Bank of America Credit Facility, the amount available under the Bank of America Revolving Credit Facility was reduced from $125.0 million to $85.0 million. The interest rate margins on the Bank of America, The Royal Bank of Scotland, and AIG Commercial Equipment Finance, Inc. credit facilities increased 1.75%. The interest rate margins on the Credit Suisse, DVB Group Merchant Bank and the Commerzbank AG credit facilities increased 1.70%, 1.50% and 1.50%, respectively. The interest rate margin on the Joh. Berenberg, Gossler & Co. KG Credit Facility increased 1.30%. The repayment term of each of the loans made under The Royal Bank of Scotland Credit Facility were modified from 40 quarterly installments after the drawdown of the respective delivery advance to 20 quarterly installments. The quarterly installments of $0.4 million due on each of the loans remained the same; however, the final payment due when the last quarterly payment is made increased from $8.3 million to $16.6 million. The Company is required under the amended Bank of America and The Royal Bank of Scotland Credit Facilities to maintain an average monthly cash balance of $15 million and $10 million, respectively that is counted toward the $40.0 million end of month cash balance requirement. The Company was also required under the amended The Royal Bank of Scotland Credit Facility to deposit $20.0 million, which represents the portion of payments due to the shipyard during 2009 that are not funded by The Royal Bank of Scotland Credit Facility and is recorded as restricted cash on the consolidated balance sheet. During the third quarter of 2009, payments of approximately $2.5 million were made to the shipyard which reduced the balance in restricted cash from $15.2 million to $12.7 million at September 30, 2009. Cash held in restricted cash account is not counted toward the $40.0 million end of month cash balance requirement. In connection with the loan modifications the Company incurred total financing costs of $4.0 million, including $1.0 million for The Royal Bank of Scotland Credit Facility.

Bank of America Credit Facility

On March 26, 2008, the Company, through its subsidiaries, entered into a credit agreement to amend and restate the existing Bank of America Credit Facility ("BA Credit Facility"). The amendment increased the total syndicated BA Credit Facility to $267.5 million from $160 million, increasing both the loan facility ("BA Term Credit Facility") and the revolving credit facility ("BA Revolving Credit Facility"). The BA Term Credit Facility was increased to $142.5 million from $80 million and the BA Revolving Credit Facility was increased to $125 million from $80 million. In connection with the March 27, 2009 modification of the Bank of America Credit Facility, the amount available under the Bank of America Revolving Credit Facility was reduced from $125.0 million to $85.0 million. At September 30, 2009, $75 million was outstanding under the BA Revolving Credit Facility. The March 27, 2009 loan modification requires the Company maintain to minimum average monthly cash balance of $15.0 million with Bank of America, which is part of the $40.0 million minimum average cash balance required to be maintained under the additional covenants.

The BA Term Credit Facility is repayable over four years in 15 quarterly installments of $9.5 million with the last installment due December 31, 2011. At September 30, 2009 the Company had $9.5 million remaining from a prepayment made during the first quarter of 2009 in connection with the loan modification covering the December 2009 installment. The BA Revolving Credit Facility is due March 26, 2012. The Company has the option of selecting interest on the BA Credit Facility at the 30-day, 60-day, or 90-day Eurodollar LIBOR rate or the Base rate, each as defined in the credit agreement. Interest is at the index rate selected by the Company plus a loan margin rate based on the Company’s consolidated leverage ratio. After March 13, 2009, the loan margin increased pursuant to the terms of the March 27, 2009 loan modification to 4.0% if the Company’s quarter-end consolidated leverage ratio is less than 6.00 to 1.00 and 5.25% if the consolidated leverage ratio is 6.00 to 1.00 or higher.

In connection with the March 26, 2008 amendment and restatement of the Bank of America Credit Facility, the Company incurred deferred financing costs of $2.4 million. Applying the guidance of FASB ASC Topic 470, (Debt, 50-40-6 through 40-12), which is applicable to the BA Term Credit Facility, and FASB ASC Topic 470-50 which is applicable to the BA Revolving Credit Facility, $2.3 million of unamortized financing costs, previously incurred on the credit facility prior to the amendment, was charged to consolidated income during the first quarter of 2008 and reported under the caption "Loss on extinguishment of debt". The $2.4 million incurred as a result of the March 2008 amendment and restatement of the Bank of America Credit Facility is being amortized over the term of the BA Credit Facility. In connection with the March 2009 loan modification the Company incurred additional finance cost of $2.4 million, which is being amortized over the remaining term of the BA Credit Facility, and charged to income from operations as interest expense, approximately $0.4 million in deferred financing costs associated with the decrease in the BA Revolving Credit Facility.

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The BA Credit Facility is collateralized primarily by 30 of our vessels having a net book value at September 30, 2009 of $398.6 million, as well as by TBSI’s equity interests in the subsidiaries that own the vessels. In connection with the March 27, 2009 loan modification, five vessels were added as additional collateral to the BA Credit Facility, which increased the number of vessels collateralizing the credit facility from 25 to 30 vessels. Each subsidiary of TBSI with an ownership interest in the collateralized vessels has provided an unconditional guaranty and pledged any insurance proceeds received related to the vessels. The BA Credit Facility is guaranteed by TBSI and other non-borrowing subsidiaries.

The BA Credit Facility agreement contains certain financial and non-financial covenants. The non-financial covenants 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; and change the nature of its business. The financial covenants require that we maintain certain fixed charge and leverage ratios, as well as maintain tangible net worth within defined limits. We are also required to maintain minimum cash and cash equivalent balances and collateral coverage. Further, mandatory prepayment or delivery of additional security is required in the event that the fair market value of the vessels falls below limits specified in the loan agreement. As described in "Loan Modifications" above the Company obtained a waiver of the collateral coverage requirement and other financial covenants. At September 30, 2009, the Company was in compliance with the additional financial covenants under the modified credit facility.

The Royal Bank of Scotland Credit Facility - New Vessel Buildings

On March 29, 2007, the Company, through six wholly owned subsidiaries, entered into a credit agreement with a syndicate of lenders led by The Royal Bank of Scotland plc for a $150.0 million term loan credit facility (the "RBS Credit Facility") to finance the building and purchase of six new Multi-Purpose vessels with retractable tweendecks. On March 27, 2009, the Company agreed to a modification of the RBS Credit Facility that reduced the collateral coverage requirements and waived the financial covenants through January 1, 2010. In connection with the loan modification, the loan interest margin and commitment fee increased and the Company is required to keep minimum cash balances with The Royal Bank of Scotland. Originally payments toward each vessel were scheduled to be made in $5 million installments based on the completion of five milestones. The five milestones were (1) contract signing, (2) steel cutting (3) keel laying (4) launching and (5) delivery. The RBS Credit Facility was therefore made up of six $25.0 million individual term loans. However, based on the modification construction advances made during the covenant waiver period are subject to adjustment if the amount scheduled for advance by the lenders, exceeds 75% of the value of the vessel, as determined by a valuation of similar size and type ship and due to be delivered at the same time as the ship in construction. Therefore, the milestone payment would be reduced from $5 million to an amount adjusted based on the delivery value of the vessel. The loans for the remaining four vessels are available through April 30, 2010, August 31, 2010, June 30, 2010 and October 31, 2010, or such later date as agreed upon by the lenders.

At September 30, 2009 the Company had $24.6 million outstanding under the RBS Credit Facility, which was collateralized by the Rockaway Belle, and the following draw downs made with respect to building milestones;

·	$ 19.6 million drawn down on the contract signing, steel cutting keel laying and launch of Hull No NYHS20721 (M/V Dakota Princess);

·	$ 15.0 million drawn down on the contract signing, steel cutting, keel laying of Hull No NYHS20722 (M/V Montauk Maiden);

·	$ 10.0 million drawn down on the contract signing, steel cutting of Hull No NYHS200723;

·	$ 14.6 million drawn down on the contract signing, steel cutting, keel laying of Hull No NYHS200724, and

·	$ 10.0 million drawn down on the contract signing, steel cutting of Hull No NYHS200725.

The RBS Credit Facility is collateralized by the respective shipbuilding contracts while the vessels are under construction and after delivery of the respective vessel by Preferred Ship Mortgages (as defined in the loan agreement) on the new vessels and assignment of freight revenue and insurance. At September 30, 2009, the newly delivered vessel Rockaway Belle had a net book value of approximately $39.6 million. TBSI guarantees the obligations of the borrowing subsidiaries under the RBS Credit Facility.

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Under the loan modification, the loan margin increased to LIBOR plus a margin of 3.50% from a margin of 1.75% prior to the drawdown of the advance at the time of delivery. The loan margin after the delivery advance is drawn down was not changed from LIBOR plus a margin of 1.50%. Interest is payable either monthly, quarterly or semi-annually depending on the interest period selected by the Company. Each of the loans made under the RBS Credit Facility were originally payable in 40 quarterly installments of $0.4 million beginning three months after the drawdown of the delivery advance with a final payment of $8.3 million due when the last quarterly payment is made. The repayment term of each of the loans was reduced under the March 27, 2009 loan modification from 40 quarterly installments to 20 quarterly installments. The quarterly installments of $0.4 million on each of the loans remained unchanged; however the final payment due was increased from $8.3 million to $16.6 million. If the delivery advance is not advanced in full, the repayment installments will be reduced pro-rata. In September 2009, the Company made a prepayment of $0.4 million covering the December 2009 quarterly installment due on the Rockaway Belle. The loan modification requires the Company to maintain a minimum average monthly cash balance of $10.0 million, which is part of the $40.0 million minimum cash balance that is required under the modified covenants. The Company was also required to deposit $20.0 million with The Royal Bank of Scotland after the signing of the loan modification to be used to pay the Company’s portion of the 2009 installment payments due under the shipbuilding contracts. The amount on deposit with RBS is not considered part of the $40.0 million end of month minimum cash balance required to be maintained. The restricted cash balance decreases as payments are made to the shipyard in 2009. For the three months ended September 30, 2009 we made payments to the shipyard of approximately $2.5 million. For the nine months ended September 30, 2009, we made total payments to the shipyard of approximately $7.3 million out of restricted cash. At September 30, 2009 the remaining balance of $12.7 million is recorded as restricted cash on the consolidated balance sheet.

The RBS Credit Facility agreement contains certain financial and non-financial covenants. The non-financial covenants include customary restrictions on the borrowing subsidiaries' ability to incur indebtedness or grant liens, enter into transactions with affiliates, merge, consolidate, or dispose of assets, change the nature of their business and materially amend or fail to enforce the shipbuilding contracts with China Communications Construction Company Ltd. and Nantong Yahua Shipbuilding Group Co., Ltd. The borrowing subsidiaries are also required to, among other things, maintain the vessels when delivered, comply with all applicable laws, keep proper books and records, preserve their corporate existence, maintain insurance and pay taxes in a timely manner. Further, the fair market value of the vessels subject to the mortgage must be at least 125% of the outstanding loan amount. The financial covenants require that the Company maintain certain fixed charge and leverage ratios, as well as maintain tangible net worth within defined limits. We are also required to maintain minimum cash and cash equivalent balances and collateral coverage. In connection with the loan modification the Company obtained a waiver of the financial covenants through January 1, 2010 and a reduction of the collateral coverage requirement, which was reduced from 125% to 100% during the waiver period. TBSI as Guarantor, as defined in the loan agreement, is restricted from paying dividends or making other distributions that would: (1) result in a default of the RBS Credit Facility, (2) exceed 50% of consolidated net income for the fiscal year the dividend or distributions are made or (3) cause the Company to be out of compliance with the minimum consolidated fixed charge coverage ratio and the maximum consolidate leverage ratio as defined in the loan agreement. At September 30, 2009, the Company was in compliance with the additional financial covenants under the loan modification. See above section, "Loan Modifications".

Concurrent with the TBSI's subsidiaries entering into the RBS Credit Facility, the borrowing subsidiaries entered into an agreement ("Guarantee Facility") to have The Royal Bank of Scotland plc guarantee payments due under the shipbuilding contracts. Under the Guarantee Facility, The Royal Bank of Scotland plc has agreed to guarantee the second, third, and fourth installments due by the borrowing subsidiaries under their respective shipbuilding contracts. The Guarantee Facility provides for a guarantee of up to $14.0 million for each borrower subsidiary for an aggregate guarantee of $84.0 million. The Guarantee Facility for each borrower subsidiary expires twelve months after the rescheduled anticipated delivery date of the respective vessel. The Company guarantees the obligations of the borrower subsidiary under the Guarantee Facility.

As of September 30, 2009, the Company capitalized interest and, finance cost, including loan origination and bank guarantee fees of $9.4 million and $3.0 million, respectively on the Royal Bank of Scotland Credit Facility.

Credit Suisse Term Loan Facility

On December 7, 2007, the Company, through two of its subsidiaries, entered into a credit agreement with Credit Suisse for a $40.0 million term loan credit facility (the "CS Credit Facility") to replenish working capital used to purchase the Arapaho Belle and Oneida Princess. The loan was fully drawn down shortly after the delivery of the Oneida Princess on February 19, 2008. On March 24, 2009, the Company agreed to a modification of the CS Credit Facility that waived the financial covenants through January 1, 2010.

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The CS Credit Facility is repayable over ten years in quarterly installments of $1.5 million for the first eight quarters and $0.9 million for the remaining 32 quarters. At September 30, 2009 the Company had $1.5 million remaining from a prepayment made during the first quarter of 2009 in connection with the loan modification covering the December 2009 installment. The loan modification increased the loan margin to LIBOR plus 2.75%.

During 2008, the Company incurred financing costs of $0.5 million that are being deferred and amortized over the term of the CS Credit Facility. The CS Credit Facility is collateralized primarily by the two vessels, which had a net book value at September 30, 2009 of $59.8 million, and a pledge of any insurance proceeds received related to the vessels. The CS Credit Facility is guaranteed by TBSI. Under the loan modification the Company incurred additional deferred finance cost in the first quarter of 2009 of $0.1 million, which is being amortized over the remaining term of the CS Credit Facility.

The CS Credit Facility agreement contains certain financial and non-financial covenants. The non-financial covenants 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, and change the nature of its business. The financial covenants require that we maintain certain fixed charge and leverage ratios, as well as maintain tangible net worth within defined limits. We are also required to maintain minimum cash and cash equivalent balances and collateral coverage. The CS Credit Facility requires minimum collateral coverage, restricts the payment of dividends and the amount of leverage, investment and capital expenditures without consent of the lender. In addition, mandatory prepayment or delivery of additional security is required in the event that the fair market value of the vessels falls below limits specified in the loan agreement. As described in the above "Loan Modifications" section the Company obtained a waiver of the financial covenants provided that the additional financial covenants are met. At September 30, 2009, the Company was in compliance with the additional financial covenants under the modified credit facility.

The DVB Credit Facility

On January 16, 2008, the Company, through seven of its subsidiaries, entered into a $75.0 million credit facility with a syndication of lenders led by DVB Group Merchant Bank (Asia) Ltd. ("DVB Credit Facility"). The proceeds were used to replenish working capital used to exercise a purchase option for seven multipurpose tweendeck vessels chartered in under a sale-leaseback arrangement, and for general corporate purposes. These vessels have been part of our operational fleet since 2003 under a 66 month sale-leaseback contract which provided purchase options. On March 24, 2009, the Company agreed to a modification of the DVB Credit Facility that waived the financial covenants and collateral coverage requirements through January 1, 2010 in return for a higher loan margin and amendment fee.

The loan is repayable over five years in quarterly installments of $4.9 million for the first ten quarters and $2.6 million for the remaining ten quarters. At September 30, 2009, the Company had $9.8 million remaining from a prepayment a made during the first quarter of 2009 in connection with the loan modification covering the October 2009 and January 2010 quarterly installments. Interest which was at LIBOR plus 2.50% was increased to LIBOR plus 4.00%. Interest is payable quarterly in arrears.

During 2008, the Company incurred financing costs of $1.3 million that are being deferred and amortized over the term of the DVB Credit Facility. Under the loan modifications the Company incurred additional deferred finance cost of $0.2 million in the first quarter of 2009 that is being amortized over the remaining term of the DVB Credit Facility.

The DVB Credit Facility is collateralized primarily by the seven vessels, which had a net book value at September 30, 2009 of $36.5 million, and a pledge of any insurance proceeds received related to the vessels. The DVB Credit Facility is guaranteed by TBSI.

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The DVB Credit Facility agreement contains certain financial and non-financial covenants. The financial covenants require that we maintain certain fixed charge and leverage ratios, minimum cash and cash equivalent balances and collateral coverage, and tangible net worth within defined limits. As described in "Loan Modifications" above the Company obtained a waiver of the financial covenants and collateral coverage requirements provided that the additional financial covenants are met. Non-financial covenants include, among other covenants, compliance with maritime laws and regulations, maintenance of the vessels consistent with first-class ship ownership and management practice, keep appropriate accounting records and maintain adequate insurance. At September 30, 2009, the Company was in compliance with the additional financial covenants under the modified credit facility.

AIG Commercial Equipment Finance Credit Facility

On February 29, 2008, the Company, through three of its subsidiaries, borrowed $35.0 million from AIG Commercial Equipment Finance, Inc. ("AIG Credit Facility"). The loan proceeds were used to replenish working capital used to acquire the Hopi Princess, Mohave Maiden and Zuni Princess. On March 27, 2009, the Company agreed to a modification of the AIG Credit Facility that waived the financial covenants and collateral coverage requirements through January 1, 2010.

The AIG Credit Facility is repayable over four years in quarterly installments of $2.6 million for the first eight quarters and $1.75 million for the remaining eight quarters. At September 30, 2009, the Company had $2.6 million remaining from a prepayment made during the first quarter of 2009 in connection with the loan modification covering the October 2009 quarterly installment. In connection with the loan modification interest, which was at LIBOR plus an interest margin of 1.75% with an interest rate floor of 5.0%, was changed to LIBOR plus an interest margin of 3.50% with an interest rate floor of 7.0%.

Upon the Company’s first borrowing under the AIG Credit Facility the Company incurred financing costs of $0.5 million that are being deferred and amortized over the term of the AIG Credit Facility. Under the March 27, 2009 loan modifications the Company incurred additional finance cost of $0.3 million that is being amortized over the remaining term of the AIG Credit Facility.

The AIG Credit Facility was collateralized primarily by four vessels, including the Zia Belle which was added as collateral in connection with the loan modification. Collateralized vessels had a net book value at September 30, 2009 of $83.9 million. The AIG Credit Facility is also collateralized with a pledge of any insurance proceeds received related to the vessels and a guarantee from TBSI.

The AIG Credit Facility agreement contains certain financial and non-financial covenants. The financial covenants require that we maintain certain fixed charge and leverage ratios, minimum cash and cash equivalent balances and collateral coverage, and tangible net worth within defined limits. As described in the above "Loan Modifications" section the Company obtained a waiver of the financial covenants and collateral coverage requirements provided that the additional financial covenants are met. The non-financial covenants require the Company, among other covenants, to maintain the vessels, comply with applicable laws, maintain proper books and records preserve its corporate existence and maintain adequate insurance. At September 30, 2009, the Company was in compliance with the additional financial covenants under the modified credit facility.

Commerzbank AG Loan

On June 2, 2008, the Company, through a subsidiary, borrowed $12.5 million from Commerzbank AG to finance part of the acquisition costs of the vessel Caribe Maiden, whose purchase price was $23.0 million (the "Commerzbank AG Loan"). The Commerzbank AG Loan is guaranteed by TBS International Limited. On March 2, 2009, Company agreed to a modification of the Commerzbank AG Loan that waived the financial covenants and collateral coverage requirement through December 31, 2009.

The Commerzbank AG Loan is repayable over three years in 12 quarterly installments. Payments are $1.5 million for the first four installments, followed by six installment payments of $1.0 million and $0.25 million for the remaining two installments. At September 30, 2009, the Company had $1.0 million remaining from a prepayment made during the first quarter of 2009 in connection with the loan modification for the December 2009 quarterly installment. The loan modification increased the loan's interest rate, which was at LIBOR plus an interest margin of 1.50%, to LIBOR plus an interest margin of 3.00% during the waiver period.

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The Company incurred financing costs of $0.1 million that are being amortized over the term of the Commerzbank AG Loan. The Commerzbank AG Loan is collateralized by the vessel Caribe Maiden, which had a net book value of $23.1 million at September 30, 2009, and assignment of freight and insurance proceeds.

The Commerzbank AG Loan contains certain financial and non-financial covenants. The financial covenants require that we maintain certain fixed charge and leverage ratios, minimum cash and cash equivalent balances and collateral coverage, and tangible net worth within defined limits. As described in "Loan Modifications" above the Company obtained a waiver of the financial covenants and collateral coverage requirements provided that the additional financial covenants are met. The non-financial covenants require the Company, among other things to maintain the vessel, comply with applicable laws, preserve its corporate existence and maintain adequate insurance. At September 30, 2009, the Company was in compliance with the additional financial covenants under the modified credit facility.

Berenberg Bank Loan

On June 19, 2008, the Company, through a subsidiary, borrowed $13.0 million from Joh. Berenberg, Gossler & Co. KG (the "Berenberg Bank Loan") to finance part of the acquisition cost of the vessel Ottawa Princess, whose purchase price was $23 million. The Berenberg Bank Loan is guaranteed by TBS International Limited. On March 10, 2009, Company agreed to a modification of the Berenberg Bank Loan that waived the collateral coverage requirement through December 31, 2009.

The Berenberg Bank Loan is repayable over four years in 16 consecutive quarterly installments of approximately $0.8 million each. At September 30, 2009, the Company had $0.8 million remaining from a prepayment made during the first quarter of 2009 in connection with the loan modification covering the December 2009 quarterly installment. The loan modification increased the applicable rate of interest, which was at LIBOR plus an interest margin of 1.70%, to LIBOR plus an interest margin of 3.00% effective May 1, 2009.

The Company incurred financing costs of $0.2 million that are being deferred and amortized over the term of the Berenberg Bank Loan. The Berenberg Bank Loan is collateralized by the vessel, Ottawa Princess, which had a net book value of $24.0 million at September 30, 2009 and assignment of freight and insurance proceeds.

The Berenberg Bank Loan agreement contains a collateral coverage requirement and non-financial covenants. The collateral coverage was waived by the bank. The non-financial covenants require the Company, among other covenants, to maintain the vessel, comply with applicable laws, preserve its corporate existence and maintain adequate insurance. At September 30, 2009 the Company was in compliance with all covenants.

Note 9 — Derivative Financial Instruments

The Company is exposed to certain risks relating to its ongoing business operations. Currently, the only risk managed by using derivative instruments is interest rate risk. Interest rate swaps are entered into to manage interest rate risk associated with the Company’s floating-rate borrowings. ASC Topic 815- Derivative and Hedging requires companies to recognize all derivative instruments as either assets or liabilities 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 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.

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As of September 30, 2009, the total notional amount of the Company’s receive-variable/pay-fixed interest rate swaps was $201.1 million. Interest rate contracts have fixed interest rates ranging from 2.92% to 5.24%, with a weighted average rate of 3.78%. Interest rate contracts having a notional amount of $131.1 million at September 30, 2009, 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
		September 30, 2009			December 31, 2008
		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Derivatives designated as hedging instruments

	Interest rate contracts	Other liabilities	$	11,103	Other liabilities	$	13,727

Derivatives not designated as hedging instruments

	Interest rate contracts	Other liabilities		1,299	Other liabilities		1,705
Total derivatives			$	12,402		$	15,432

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)
	September 30, 2009		December 31, 2008

Interest rate contracts	$	10,415	$	13,727

		Amount of Gain or (Loss) Recognized in Income on Derivatives
		For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Derivatives Cash Flow Hedging Relationships	Location of Gain or (Loss) Recognized in Income on Derivatives	2009			2008			2009			2008

Derivatives Not Designated as Hedging Instruments

Interest rate contracts	Interest expense	$	550		$	(153	)	$	407		$	(234	)

Ineffective Portion of Derivatives Designated as Hedging Instruments

Interest rate contracts	Interest expense		(125	)					(689	)
		$	425		$	(153	)	$	(282	)	$	(234	)

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A deferred starting interest rate contract, which starts December 29, 2014 and continues through December 29, 2019, for the notional amount of $20.0 million of debt, is callable at the bank’s option at anytime during the contract. Accordingly, changes to the value of the swap contract do not qualify for hedge accounting treatment and are included as a component of interest expense in the consolidated statement of income. For the three and nine months ended September 30, 2009 approximately $0.3 million loss and $0.4 million gain, respectively, were recognized as interest expense.

In connection with the loan modifications completed in March 2009, the Company prepaid principal installments on all its credit facilities. The prepayment resulted in the notional amount of certain swap contracts to be greater than the debt balance being hedged. For the three and nine months ending September 30, 2009, approximately $0.1 million and $0.7 million respectively, were recognized as additional interest expense for the ineffective portion of derivatives caused by the prepayment of principal installments.

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 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 recurring basis at September 30, 2009:

(in thousands)
	Level 1	Level 2		Level 3
Liabilities
Interest rate contracts	$	$	12,402	$

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 — Equity Transactions

Class A and Class B Common Shares

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

The holders of Class A common shares can convert their Class A common shares into Class B common shares, and the holders of Class B common shares can convert their Class B common shares into Class A common shares at any time. Further, the Class B common shares will automatically convert into Class A common shares upon transfer to any person other than another holder of Class B common shares, in each case 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 common shares cease to be regularly traded on an established securities market for purposes of Section 883 of the Code.

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In conjunction with the secondary public offering completed on May 28, 2008 shareholders of Class B shares elected to convert an aggregate of 1,014,000 Class B common shares to Class A common shares. On September 30, 2009 there were 17,531,996 Class A common shares issued, of which 17,513,371 were outstanding, and 12,390,461 Class B common shares issued and outstanding.

The Company's board of directors has approved unanimously, and is submitting to our shareholders, a proposal that would result in our shareholders holding shares in TBS International plc, an Irish company, rather than TBS International Limited, a Bermuda company. Later this year, our shareholders will be asked to vote in favor of completing the reorganization at a shareholders meeting. If conditions are satisfied, including approval by the Company's shareholders and the Supreme Court of Bermuda, TBS International plc will replace TBS International Ltd. as the ultimate parent company for the Company's operations.

Warrants

At September 30, 2009, there were outstanding exercisable warrants to purchase 106,156 Class A common shares and 205,747 Class B common 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 recipients’ estimated statutory minimum tax liability. The retained shares are held in the Company's treasury ("Treasury Stock"). In 2009 employees vested in a total of 28,000 Class A common shares granted in 2008. Certain employees elected to have the Company withhold and remit their respective payroll tax obligations. Accordingly, the Company retained and added to Treasury Stock 8,625 Class A common shares, valued at $77,798, to cover the recipient's estimated payroll tax liability. At September 30, 2009, there were 18,625 Treasury Stock shares held by the Company having a cost of $466,798.

Note 11 — Earnings Per Share

The following table sets forth the computation of basic and diluted net (loss) income per share for the three and nine months ended September 30, 2009 and 2008:

		Three Months Ended September 30,						Nine Months Ended September 30,
		2009			2008			2009			2008
		(in thousands, except number of shares and earnings per share amounts)						(in thousands, except number of shares and earnings per share amounts)

Numerators:
	Net (loss) income	$	(18,139	)	$	59,143		$	(56,340	)	$	157,162
	Allocation of undistributed income to nonvested restricted common shares					(219	)					(583	)

	(Loss) earnings available to common shareholders — Basic and Diluted	$	(18,139	)	$	58,924		$	(56,340	)	$	156,579

Denominators:
	Weighted average common shares outstanding — Basic and Diluted		29,863,460			30,104,863			29,836,239			28,980,101

Net (loss) income per common share:
	Basic and Diluted	$	(0.61	)	$	1.96		$	(1.89	)	$	5.40

	Anti-dilutive warrants not included above		311,903						311,903

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As outlined in sections of 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 earnings per share. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Our nonvested 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. We have adopted the applicable provisions of ASC 260 and computed earnings per common share using the two-class method for all periods presented. The adoption of the provisions did not have a material impact on the Company’s previously issued consolidated financial statements; however, for comparability purposes, we recalculated and restated our previously reported earnings per share. Basic and diluted earnings per common share for the three months ended September 30, 2008 did not change. Basic and diluted earnings per common share for the nine months ended September 30, 2008 decreased $0.02 and $0.01, respectively, from the amount previously disclosed in our prior filings.

At September 30, 2009, there were outstanding exercisable warrants to purchase 106,156 Class A and 205,747 Class B common shares, held by parties not affiliated with existing shareholders. The warrants are issuable for nominal consideration upon exercise. Consequently, the warrants have been treated as outstanding for purposes of computing basic earnings per share for the three and nine months ended September 30, 2008. For the three and nine months ended September 30, 2009, the warrants were not treated as outstanding for purposes of computing basic and diluted earnings per share because they would be antidilutive.

Note 12 — Commitments and Contingencies

Commitments

Charters-in of Vessels

The Company charters-in two vessels (Laguna Belle and Seminole Princess) under long-term noncancelable operating leases (bareboat charters) that were part of a sale-leaseback transaction. Both bareboat charters expire on January 30, 2014. Each bareboat charter requires charter hire payments of $10,500 per day for the first two years of the charter, $10,000 per day during the third year of the charter and $7,350 per day during the fourth through seventh years of the charter. 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 were 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 lease. 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. Deferred leasing costs of $1.6 million incurred in connection with the origination and the amendment of the charters in March 2009, are being amortized over the terms of the leases. 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 September 30, 2009 and December 31, 2008, deferred rent expense was $3.4 million and $2.6 million, respectively.

Other Leases

The Company leases two properties used by TBS’s service company subsidiaries Roymar and TBS Shipping Services for the administration of their operations. The main office space is rented from our chairman and chief executive officer by our wholly-owned subsidiary TBS Shipping. The lease, which expires December 31, 2009, contains five one-year renewal options through December 31, 2014. The lease provides for monthly rent of $20,000 per month, plus operating expenses including real estate taxes.

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Roymar renewed its lease under the first of two one-year renewal options through November 30, 2010 at a monthly rent of approximately $27,000. The lease requires Roymar to pay additional rent for real estate tax escalations.

TBS Energy Logistics, LP leases a warehouse in Harris County, Texas for 38 months commencing May 1, 2009 through June 30, 2012 at a monthly rent of $22,000 for the period of July 1, 2009 through June 30, 2010. The monthly rent increases to $22,400 and $22,800, for the period of July 2010 through June 2011 and July 2011 through June 2012, respectively.

As of September 30, 2009, future minimum commitments under operating leases with initial or remaining lease terms exceeding one-year are as follows (in thousands):

			Office
At September 30, 2009	Vessel Hire		Premises		Total
2009 (October 1, 2009 through December 31, 2009)	$	1,840	$	207	$	2,047
2010		5,524		565		6,089
2011		5,366		271		5,637
2012		5,380		137		5,517
2013		5,366				5,366
Thereafter		441				441
	$	23,917	$	1,180	$	25,097

Purchase Obligations – New Vessel Buildings

At September 30, 2009, the Company had purchase obligations totaling $81.5 million in connection with its new vessel building program, including obligations under the contract for the supervision and inspection of vessels under construction. The obligations will become payable as the shipyard meets several milestones during 2010 and 2011. As of September 30, 2009 $81.0 million of the purchase obligation is scheduled to be paid as follows: $14.0 million during the remainder of 2009, $51.4 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 13 — 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 the United States. Voyage revenue is attributed to foreign 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.

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Voyage revenue generated in countries excluding the U.S. (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Country	2009		2008		2009		2008
Brazil	$	16,006	$	35,265	$	38,449	$	101,755
United Arab Emirates		6,791		22,200		26,797		50,058
Japan		5,893		20,239		25,452		60,995
Peru		4,706		12,790		18,262		36,788
Chile		3,679		13,288		13,580		34,561
China		3,392		21,498		9,601		29,542
Argentina		1,975		2,356		6,982		3,133
Korea		1,139		3,044		5,202		12,007
Venezuela		2,654		3,074		3,887		8,730
Others		6,053		11,235		15,611		27,572
Total	$	52,288	$	144,989	$	163,823	$	365,141

At September 30, 2009 one customer accounted for 10% or more of charter hire receivables. No customers accounted for 10% or more of charter hire receivables at December 31, 2008.

For the three and nine months ended September 30, 2009, one customer accounted for 15.4% and 14.0%, respectively of voyage and time charter revenue.

Note 14 — Subsequent Events

Management evaluated all activity of the Company through November 9, 2009, 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.

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

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, the 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" 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 a number of uncertainties and risks, including the risks disclosed in our Form 10-K filed with the Securities and Exchange Commission on March 30, 2009, and other unforeseen risks. The uncertainties, risks and other factors, among other unforeseen risks, include, but are not limited to:

·	changes in demand for our services, which are increasingly difficult to predict due to the current economic downturn and the widespread reduction of business activity generally;

·	a decline in rates in the shipping market will continue for a prolonged period;

·	the effect of a decline in vessel valuations;

·	our ability to maintain financial ratios and satisfy financial covenants in our credit facilities;

·	changes in rules and regulations applicable to the shipping industry, including, without limitation, 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 significantly impacting overall vessel tonnage requirements;

·	changes in the typical seasonal variations in charter rates;

·	increases 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;

·	the risk that financial counterparties will default;

·	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./ Nantong Yahua Shipbuilding Group Co., Ltd.’s ability to complete and deliver the newbuild vessels on the anticipated schedule and the ability of the parties to satisfy the conditions in the shipbuilding agreements; and

other factors listed from time to time in our filings with the Securities and Exchange Commission, including, without limitation, the risks disclosed in our Form 10-K filed with the Securities and Exchange Commission on March 30, 2009 and in our subsequent Forms 10-Q and other filings with the Securities and Exchange Commission.

You should not rely on any forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required under applicable law.

General

The following is a discussion of our financial condition at September 30, 2009 and December 31, 2008 and our results of operations comparing the three and nine months ended September 30, 2009 with the three and nine months ended September 30, 2008. You should read this section in conjunction with the consolidated financial statements including the related notes to those financial statements included elsewhere in this Quarterly Report.

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Overview

We are an ocean transportation services company that offers worldwide shipping solutions to a diverse client base of industrial shippers. We offer liner, parcel and bulk services supported by a fleet of multipurpose tweendeckers and handysize and handymax bulk carriers. Our liner, parcel and bulk services carry a wide range of cargo, including steel products, metal concentrates, fertilizer, salt, sugar, grain, industrial goods, project cargo, aggregates and general cargo. In addition to providing frequent, regularly scheduled voyages within our shipping network, we offer a unique Five-Star Service consisting of ocean transportation, logistics, port services, operations and strategic planning, which distinguishes us from traditional dry cargo shipping companies.

Our Five Star Service provides a complete transportation solution to our global customers by providing a fully-integrated cargo and transport management system. We offer total project coordination, door-to-door supply chain management including port services, terminal operations, trucking, barging, warehousing, distribution, inland pick-up and delivery, and documentation. The Five Star Service differentiates us from traditional dry bulk ship owners by adding strategic planning and logistics support to our customers. Additionally, we intend to expand our port warehouse network to support our logistics services.

Over the past 16 years, we have developed our business model around key trade routes between Latin America and China, Japan and South Korea, as well as select ports in North America, Africa, the Caribbean, and the Middle East. In addition to providing frequent, regularly scheduled voyages within our shipping network, we offer additional services such as cargo scheduling, loading and discharge that offer a fully integrated shipping solution to our customers.

We have a strong position in various trade lanes in the Far East, South America, North America, the Caribbean, the Middle East and Africa. We offer our services globally in more than 20 countries to over 300 customers through a network of affiliated service companies. We have expanded and upgraded our fleet, which now numbers 48 vessels, including 46 ships that we own and two that we charter-in with an option to purchase. Historically, we have expanded our fleet by acquiring secondhand vessels. While we remain committed to expanding our fleet, the current economic conditions and the current decline in demand for shipping services have caused us to reevaluate acquiring secondhand vessels. Our current business strategy includes growing through the acquisition of multi-purpose tweendeckers under our newbuilding contract, and chartering-in vessels as needed. Our financial results are largely driven by the following factors:

·	macroeconomic conditions in the geographic regions where we operate;

·	general economic conditions in the industries in which our customers operate;

·	changes in our freight and sub-time charter rates - rates we charge for vessels we charter out - and, in periods when our voyage and vessel expenses increase, our ability to raise our rates to pass such cost increases through to our customers;

·	the extent to which we are able to efficiently utilize our controlled fleet and optimize its capacity; and

·	the extent to which we can control our fixed and variable costs, including those for port charges, stevedore and other cargo-related expenses, fuel, and commission expenses.

Our loan agreements with our various credit facilities contain both financial and non-financial covenants. We concluded in March 2009 that, based on third-party vessel valuations, we did not meet collateral coverage requirements. The credit facilities were modified to waive the collateral coverage and all financial covenants through the fourth quarter 2009. See - "Note 8 - Financing" to our financial statements in Part I. Item 1 and “Liquidity and Capital Resources” for detailed information.

Recent Developments

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Drydocking

The hull and machinery of every commercial vessel must be "classed" by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and international conventions. All of our vessels have been certified as being "in class" by their respective classification societies.

A vessel must undergo annual surveys, intermediate surveys and special surveys. All of our controlled vessels are on special survey cycles for hull inspection and continuous survey cycles for machinery inspection. Therefore, these vessels must be drydocked twice during a five-year cycle. Thus, our controlled fleet of 48 vessels at September 30, 2009, would result in approximately 96 drydockings over five years or an average of 19 vessels per year.

In 2008 and prior years, we accelerated the timing of steel renewals and reinforcements for vessels drydocked. We used vessel drydocking as an opportunity to make steel renewal and reinforcements that we expected might have been required during the next five to ten years, and we believe the accelerated steel renewal and reinforcements will reduce the cost of future drydockings. We expect that during the next few years our drydocking program will only address deficiencies identified and recommendations made by classification surveyors.

Our drydocking expenditures and surveys are being accounted for using the deferral method. Under the deferral method of accounting for drydocking, the costs incurred are deferred and amortized on a straight-line basis over the period through the date of the next drydocking, which is typically thirty months. We only include in deferred drydocking costs those costs that are incurred to meet regulatory requirements, or are expenditures that add economic life to the vessel, increase the vessel’s earnings capacity or improve the vessel’s efficiency. Normal repairs and maintenance, whether incurred as part of the drydocking or not, are expensed as incurred.

During the first quarter of 2009, one vessel that entered into drydock during the fourth quarter of 2008 continued its drydocking for 16 days into the first quarter and eight vessels entered drydock for 138 days. During the second quarter of 2009, five vessels that entered into drydock during the first quarter of 2009 continued their drydocking for 88 days and three vessels entered drydock for 48 days. During the third quarter of 2009, three vessels that entered into drydock during the second quarter of 2009 continued their drydocking for 55 days and six vessels entered drydock for 136 days. Our quarterly drydock schedule of vessels anticipated to be drydocked during the last quarter of 2009, including estimated number of drydock days and metric tons of steel renewal, is as follows:

Number of vessels in drydock from

previous quarter

Estimated Number of vessels entering

drydock during quarter

Estimated Number of drydock days

during quarter

Approximate metric tons (MT) of

steel installed

Fourth Quarter 2009

179

days

505

We estimate that vessel drydockings that require less than 100 metric tons of steel renewal will take from 25 to 35 days and that vessel drydockings that require over 100 metric tons of steel renewal will take from 35 to 75 days. We capitalize the cost of the first drydocking after we acquire vessels.

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New Ship Building

We are expanding our fleet of multipurpose retractable tweendeckers through our newbuilding program. In 2007, we contracted a Chinese shipyard to build six newly designed vessels. These 34,000 dwt vessels are a larger class of tweendeckers and their addition to our fleet will be a significant milestone in the implementation of our business plan to modernize and expand our fleet. The ships were designed by a TBS team, drawn from all phases of our operations, to optimize our efficient cargo transportation in our trade lanes. Two vessels, the Rockaway Belle formerly Hull No. NYHS200720, and the Dakota Princess formerly Hull No. NYHS200721 were launched in November 2008 and May 2009, respectively. We took delivery of the Rockaway Belle in the third quarter of 2009 and we expect to take delivery of the Dakota Princess in the first quarter of 2010. The milestones met (as defined in the agreements) and the expected delivery dates as of September 30, 2009 are noted below:

Argyle

Caton

Dorchester

Longwoods

McHenry

Sunswyck

Maritime Corp.

Milestone

Hull No NYHS200720

Hull No NYHS200721

Hull No NYHS200722

Hull No NYHS200723

Hull No NYHS200724

Hull No NYHS200725

Rockaway Belle

Dakota Princess

Montauk Maiden

To be Named

Contract Signing

Met

Steel Cutting

Met

Keel Laying

Met

4th Qtr 2009

Met

2nd Qtr 2010

Launching

Met

4th Qtr 2009

3rd Qtr 2010

2nd Qtr 2010

4th Qtr 2010

Anticipated Delivery

Delivered 3rd Qtr 2009

1st Qtr 2010

3rd Qtr 2010

1st Qtr 2011

4th Qtr 2010

3rd Qtr 2011

While delivery dates have been rescheduled, we are working with the shipyard in effort to keep as close as possible to original scheduled delivery dates.

Components of revenue and expense

We report our revenue as voyage revenue, reflecting the operations of our vessels that are not chartered out, and charter revenue, reflecting the operations of our vessels that have been chartered out to third parties. Voyage revenue and expenses for each reporting period include estimates for voyages in progress at the end of the period. For voyages in progress at September 30, 2009, we recognized voyage expense as incurred and recognized voyage revenues ratably over the length of the voyage. When a loss is forecast for a voyage, the full amount of the anticipated loss is recognized in the period in which that determination is made. Revenue from time charters in progress is calculated using the daily charter hire rate, net of daily expenses multiplied by the number of voyage days on-hire through period end.

Voyage revenue consists of freight charges paid to our subsidiaries for the transport of customers' cargo. Freight rates are set by the market and depend on the relationship between the demand for ocean freight transportation and the availability of appropriate vessels. The key factors driving voyage revenue are the number of vessels in the fleet, freight voyage days, revenue tons carried and the freight rates.

Time charter revenue consists of a negotiated daily hire rate for the duration of a voyage. The key factors driving time charter revenue are the number of days vessels are chartered out and the daily charter hire rates.

Voyage expenses consist of costs attributable to specific voyages. The number of voyage days is a significant determinant of voyage expense, which primarily consists of fuel costs, commissions, port call, stevedoring and lashing materials. The costs are paid by our subsidiaries.

Vessel expenses are vessel operating expenses that consist of crewing, stores, lube oil, repairs and maintenance including registration taxes and fees, insurance and communication expenses for vessels we control and charter hire fees we pay to owners for use of their vessels. The costs are paid by our subsidiaries.

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Depreciation and amortization is computed for vessels and vessel improvements on the remaining useful life of each vessel, which is estimated as the period from the date we put the vessel into service to the date 30 years from the time that the vessel was initially delivered by the shipyard. Drydock costs are amortized on a straight-line basis over the period through the date of the next drydocking which is typically 30 months. Other fixed assets, consisting principally of computer hardware, software and office equipment are depreciated on a straight-line basis using useful lives of from three to seven years. Grabs are depreciated on a straight-line basis using useful lives of ten years. Vessel leasehold improvements, which are included with vessel improvements and other equipment, are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease.

Commissions on freight and port agency fees, in addition to payments to unrelated parties are paid to two related companies, Beacon Holdings Ltd. ("Beacon") and TBS Commercial Group Ltd. ("TBS Commercial Group"), companies that are owned by our principal shareholders. Management fees and commissions paid to Beacon and TBS Commercial Group are fixed under agreements, and any new management agreements or amendments to the current management agreements with Beacon and TBS Commercial Group are subject to approval by the Compensation Committee of our board of directors.

Results of Operations

Comparison of the three months ended September 30, 2009 to the three months ended September 30, 2008

		Three Months Ended					Three Months Ended
		September 30, 2009					September 30, 2008					Increase (Decrease)
		In Thousands			As a % of Total Revenue		In Thousands			As a % of Total Revenue		In Thousands			Percentage

Voyage revenue		$	57,163		76.9		$	161,397		88.0		$	(104,234	)	(64.6	)
Time charter revenue			15,972		21.5			19,308		10.5			(3,336	)	(17.3	)
Logistics revenue			1,014		1.4			2,045		1.1			(1,031	)	(50.4	)
Other revenue			183		0.2			572		0.4			(389	)	(68.0	)
	Total revenue		74,332		100.0			183,322		100.0			(108,990	)	(59.5	)

Voyage expense			25,505		34.3			52,882		28.8			(27,377	)	(51.8	)
Logistics			754		1.0			1,726		0.9			(972	)	(56.3	)
Vessel expense			28,502		38.3			30,759		16.9			(2,257	)	(7.3	)
Depreciation and amortization			23,747		31.9			19,980		10.9			3,767		18.9
General and administrative			9,086		12.2			14,121		7.7			(5,035	)	(35.7	)
	Total operating expenses		87,594		117.7			119,468		65.2			(31,874	)	(26.7	)
(Loss) income from operations			(13,262	)	(17.7	)		63,854		34.8			(77,116	)	(120.8	)
Other (expenses) and income
	Interest expense		(4,863	)	(6.5	)		(5,041	)	(2.7	)		178		(3.5	)
	Loss on extinguishment of debt
	Other income (expense)		(14	)				330		0.2			(344	)
Net (loss) income		$	(18,139	)	(24.2	)	$	59,143		32.3		$	(77,282	)	(130.7	)

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Voyage revenue

The table below shows key metrics related to voyage revenue:

		Three Months Ended September 30,
		2009		2008		Increase (Decrease)

Voyage Revenue (in thousands)		$	57,163	$	161,397	$	(104,234	)	(64.6	)%
Number of vessels (1)			29		36		(7	)	(19.4	)%
Freight voyage days (2)			2,630		3,296		(666	)	(20.2	)%
Days on hire (3)			2,677		3,347		(670	)	(20.0	)%
Revenue tons carried (thousands) (4)
	For all cargoes		2,098		2,628		(530	)	(20.2	)%
	Excluding aggregates		1,063		1,461		(398	)	(27.2	)%
	Aggregates		1,035		1,167		(132	)	(11.3	)%
Freight Rates
	For all cargoes	$	27.25	$	61.40	$	(34.15	)	(55.6	)%
	Excluding aggregates	$	46.81	$	95.85	$	(49.04	)	(51.2	)%
Daily time charter equivalent rates (5)		$	12,296	$	33,143	$	(20,847	)	(62.9	)%

(1)	Weighted average number of vessels in the fleet, not including vessels chartered out.

(2)	Number of days that our vessels were earning revenue, not including vessels chartered out.

(3)	Number of days that our vessels were available for hire, not including vessels chartered out.

(4)	Revenue tons is a measurement on which shipments are freighted. Cargoes are rated as weight (based on metric tons) or measure (based on cubic meters); whichever produces the higher revenue will be considered the revenue ton.

(5)

Daily Time Charter Equivalent or "TCE" rates are defined as voyage revenue less voyage expenses during the period divided by the number of available freight voyage days during the period. Voyage expenses include: fuel, port call, commissions, stevedore and other cargo related and miscellaneous voyage expenses. No deduction is made for vessel or general and administrative expenses. TCE includes the full amount of any probable losses on voyages at the time such losses can be estimated. TCE is an industry standard for measuring and analyzing fluctuations between financial periods and as a method of equating TCE revenue generated from a voyage charter to time charter revenue.

The decrease in voyage revenue for the three months ended September 30, 2009, as compared to the same period in 2008, was primarily due to a decrease of approximately 56% in average freight rates for all cargoes carried combined with a decrease in revenue tons carried.

Average freight rates for all cargoes decreased $34.15 per ton, or 55.6%, to $27.25 per ton for the three months ended September 30, 2009, as compared to $61.40 per ton for the same period in 2008. Included in voyage revenue is bulk cargo revenue from high-volume, low-freighted aggregates. Excluding aggregates, average freight rates were $46.81 per ton as compared to $95.85 per ton for the same period in 2008. While average freight rates on aggregates bulk cargo are lower than average freight rates on other types of cargoes, voyage costs are also lower resulting in comparable daily time charter equivalent rates.

Revenue tons carried decreased 530,000 tons, or 20.2% to 2,098,000 tons for the three months ended September 30, 2009 from 2,628,000 tons for the same period in 2008. Non-aggregate revenue tons carried decreased 398,000 tons for the third quarter due to decreases in non-aggregate bulk cargo. Aggregate revenue tons carried decreased 132,000 tons for the three months ended September 30, 2009 as compared to the same period in 2008. For the three months ended September 30, 2009 and 2008, we had contracts of affreightment, expiring through 2010, under which we carried approximately 830,000 and 1,653,000 revenue tons and generated $11.8 million and $61.1 million of voyage revenue, respectively.

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The following table shows revenues attributed to our principal cargoes:

		Three Months Ended
		September 30, 2009			September 30, 2008			Increase (Decrease)
Description		In Thousands		As a % of Total Voyage Revenue	In Thousands		As a % of Total Voyage Revenue	In Thousands			%
Steel products		$	14,153	24.8	$	41,364	25.6	$	(27,211	)	(65.8	)
Agricultural products			11,070	19.3		27,011	16.7		(15,941	)	(59.0	)
Other bulk cargo			10,928	19.1		18,194	11.3		(7,266	)	(39.9	)
Metal concentrates			7,813	13.7		26,241	16.3		(18,428	)	(70.2	)
Aggregates			7,398	12.9		21,370	13.2		(13,972	)	(65.4	)
General cargo			1,672	2.9		4,006	2.5		(2,334	)	(58.3	)
Fertilizers			1,345	2.4		6,095	3.8		(4,750	)	(77.9	)
Automotive products			948	1.7		3,142	1.9		(2,194	)	(69.8	)
Project cargo			883	1.5		5,938	3.7		(5,055	)	(85.1	)
Rolling stock			518	0.9		6,479	4.0		(5,961	)	(92.0	)
Other			276	0.5		1,557	1.0		(1,281	)	(82.3	)
Fishmeal			159	0.3					159
	Total voyage revenue	$	57,163	100.0	$	161,397	100.0	$	(104,234	)	(64.6	)

Time charter revenue

The key metrics related to time charter revenue are as follows:

	Three Months Ended September 30,
	2009		2008		Increase (Decrease)
Time Charter Revenue (in thousands)	$	15,972	$	19,308	$	(3,336	)	(17.3	)%
Number of vessels (1)		15		6		9		150.0	%
Time Charter days (2)		1,384		577		807		139.9	%
Daily charter hire rates (3)	$	11,540	$	33,464	$	(21,924	)	(65.5	)%
Daily time charter equivalent rates (4)	$	11,048	$	32,206	$	(21,158	)	(65.7	)%

(1)	Weighted average number of vessels chartered out.

(2)	Number of days the vessels earned charter hire.

(3)	Weighted average charter hire rates.

(4)

Time charter revenue decreased to $16.0 million for the three months ended September 30, 2009 from $19.3 million for the comparable period in 2008. The key factors driving time charter revenue are the daily charter hire rates and the number of days that vessels are chartered out.

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The decrease in time charter revenue was primarily attributable to a decrease in average charter hire rates, which decreased $21,924 per day to $11,540 for the three months ended September 30, 2009 from $33,464 for the comparable period in 2008. This decrease was partially offset by an increase in time charter-out days. Charter hire rates are set, to a significant degree, by the market and depend on the relationship between the demand for ocean freight transportation and the availability of appropriate vessels. The decrease in the average charter hire rate per day is primarily due to the worldwide economic crisis which has dramatically affected shipping spot market rates. The increase in time-charter-out days is the result of decreased use of our controlled vessels in our established voyage business and shipping market conditions.

Logistics revenue and expenses

Logistics revenues represent revenues from cargo and transportation management services provided in connection with our Five Star Service. We initiated logistics support services in the fourth quarter of 2007. Logistics revenue and expenses decreased approximately 50% and 56% respectively for the three months ended September 30, 2009 as compared to the same period in 2008, principally due to the impact of the economic downturn.

Management sees a slow strengthening in several of the targeted industries, and actual logistics results will be heavily dependent on the decision of customers to go forward with projects. We have reinforced our commitment to the logistics business segments by relocating two executives, expanding our office and establishing a port warehouse.

Voyage expense

Voyage expenses are costs attributable to specific voyages. The number of voyage days is a significant determinant of voyage expense, which consists of fuel costs, commissions, port call, stevedoring and other cargo related costs, and miscellaneous voyage expense.

The principal components of voyage expense were as follows:

		Three Months Ended				Three Months Ended
		September 30, 2009				September 30, 2008				Increase (Decrease)
		In Thousands		As a % of Voyage Expense	As a % of Voyage & Time Charter Revenue	In Thousands		As a % of Voyage Expense	As a % of Voyage & Time Charter Revenue	In Thousands			As a % of 2008 Expense		As a % of Voyage & Time Charter Revenue
Fuel expense		$	13,123	51.5	17.9	$	28,297	53.6	15.7	$	(15,174	)	(53.6	)	2.2
Commission expense			3,774	14.8	5.2		9,111	17.2	5.0		(5,337	)	(58.6	)	0.2
Port call expense			5,686	22.3	7.8		7,694	14.5	4.3		(2,008	)	(26.1	)	3.5
Stevedore and other
	cargo-related expense		2,082	8.2	2.8		4,813	9.1	2.7		(2,731	)	(56.7	)	0.1
Miscellaneous voyage
	expense		840	3.2	1.1		2,967	5.6	1.6		(2,127	)	(71.7	)	(0.5	)
	Voyage expense	$	25,505	100.0	34.8	$	52,882	100.0	29.3	$	(27,377	)	(51.8	)	5.5

Voyage expense decreased $27.4 million or 51.8% for the three months ended September 30, 2009, as compared to the same period in 2008, principally due to a decrease in fuel, commission, and stevedore and other cargo-related expense.

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The increase in voyage expense as a percentage of voyage and time charter revenue for the three months ended September 30, 2009 as compared to the same period in 2008 was primarily due to the decrease in freight rates, which decreased primarily due to the worldwide economic crisis.

The decrease in fuel expense was due to a decrease in the average price per metric ton ("MT") and a decrease in consumption. For the three months ended September 30, 2009, the average price per MT decreased to $396 per MT as compared to $663 per MT for the same period in 2008. Consumption decreased for the three months ended September 30, 2009 to 33,175 MT from 42,653 MT for the same period in 2008. Average fuel cost per freight voyage day was $4,990 during the three months ended September 30, 2009 and $8,585 during the same period in 2008.

Commission expense is based on the amount of revenue. The decrease in commission expense for the three months ended September 30, 2009 as compared to the same period in 2008 was primarily due to the decrease in revenue.

The decrease in stevedore and other cargo-related expense for the three months ended September 30, 2009 as compared to the same period in 2008 was primarily due to a change in the mix of revenue booked under different shipping terms. Most cargo was booked under "full liner" terms and a combination of "free-in and free-out" terms. For analysis purposes we group cargoes into three categories: (1) cargo booked under "free-in free-out" terms which are shipments that the customer pays all or part of the costs of loading and unloading, (2) cargo booked under "full liner" terms, which are shipments where we bear the costs of loading and unloading and (3) a combination of free-in free-out and full liner terms.

Port call expense will vary from period to period depending on the number of port calls, port days and cost structure of the ports called upon. The decrease in port call expense is primarily due to a decrease in the number of port calls, which decreased to 225 port calls for the three months ended September 30, 2009 from 335 port calls during the same period in 2008. The number of port days decreased to 1,193 port days for the three months ended September 30, 2009 from 1,598 port days during the same period in 2008. The decrease in port call expense was partially offset by a slight increase in average port call costs.

The decrease in miscellaneous voyage expense is primarily due to a decrease in container overhead and other miscellaneous costs.

Vessel expense

Vessel expense consists of costs we incur to own and maintain our fleet that are not allocated to a specific voyage, such as charter hire rates for vessels we charter-in, crew costs, insurance, lube oil, maintenance, and registrations and fees for vessels we own or control. The following table sets forth the basic components of vessel expense:

	Three Months Ended			Three Months Ended
	September 30, 2009			September 30, 2008			Increase (Decrease)
	In Thousands		As a % of Vessel Expense	In Thousands		As a % of Vessel Expense	In Thousands			Percentage
Owned vessel expense	$	24,751	86.9	$	25,753	83.7	$	(1,002	)	(3.9	)
Chartered-in vessel expense		1,638	5.7		2,311	7.5		(673	)	(29.1	)
Controlled vessel expense		1,651	5.8		1,632	5.3		19		1.2
Space charter expense		462	1.6		1,063	3.5		(601	)	(56.5	)
Vessel expense	$	28,502	100.0	$	30,759	100.0	$	(2,257	)	(7.3	)

The decrease in owned vessel expense for the three months ended September 30, 2009, as compared to the same period in 2008 was due primarily to a decrease in the operating expense day rate. For the three months ended September 30, 2009, the average operating expense day rate was $5,715 as compared to $6,224 per day for the same period in 2008. Average operating expense day rates deceased principally due to a decrease of expenditures for repairs and maintenance. During the nine months ended September 30, 2008 we acquired ten vessels. Those vessels required repairs and maintenance at a higher level than vessels in our existing fleet which caused the day rate to be higher. Although owned vessel expense decreased for the three months ended September 30, 2009 compared to the same period in 2008 due to decreased revenue resulting from a decrease in freight rates vessel expense as a percentage of revenue increased 21.4% to 38.3% for the three months ended September 30, 2009 compared to 16.9% for the same period in 2008.

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Our controlled fleet increased to an average of 47 vessels during the three months ended September 30, 2009, as compared to an average of 45 vessels for the same period in 2008. The increases in our controlled fleet translated to an increase in vessel days, which are the total days we operate our controlled vessels. During the second quarter of 2009, vessel days increased 193 days to 4,331 days from 4,138 days for the comparable period in 2008.

Chartered-in vessel expense consists of charter hire-in costs for vessels under charter agreements that do not have a purchase option. We charter-in vessels to meet specific customer needs, which will vary slightly from quarter to quarter. The decrease in chartered-in vessel expense was due to a decrease in the charter-in rate per day of $6,398 per day to $17,423 per day for the three months ended September 30, 2009 from $23,821 per day for the same period in 2008. For the three months ended September 30, 2009, we chartered-in vessels for 94 days as compared to 97 days for the same period in 2008.

Controlled vessel expense consists of charter hire-in costs for vessels under charter agreements that contain a purchase option. During the three months ended September 30, 2009, we incurred charter-in hire costs of $1.7 million compared to $1.6 million for the same period in 2008. This controlled vessel expense relates to the bareboat charters for the Laguna Belle and Seminole Princess, both of which were part of a sale leaseback transaction that we entered into in January 2007.

Depreciation and amortization

The 18.9% increase in depreciation and amortization expense to $23.7 million in 2009 from $20.0 million in 2008 was due principally to an increase in the average vessel cost of newly acquired vessels, increased vessel improvements and the overall growth of the fleet. The growth of our owned/controlled fleet increased to an average number of 47 vessels for the three months ended September 30, 2009 as compared to 45 vessels for the three months ended September 30, 2008.

General and administrative expense

General and administrative expense decreased $5.0 million for the three months ended September 30, 2009 compared to the same period for 2008. The decrease in general and administrative expense is primarily due to a $4.5 million decrease in salary and related expenses, and that no bonus accruals were made for the three months ended September 30, 2009 as compared to $4.0 million accrued for bonuses for the three months ended September 30, 2008.

Income from operations

The decrease in income from operations was mainly attributable to a decrease in revenue resulting from decreased freight rates and revenue tons carried. Freight and charter hire rates decreased due to weak market conditions in the ocean transport industry. Operating expenses decreased 26.7% in 2009; however as a percentage of revenue total operating expenses increased to 117.7 % of revenue from 65.2% of revenue. The decrease in revenue combined with the increased percentage of operating expenses to revenue caused our operating margin to decrease to a loss of 17.7% for the three months ended September 30, 2009 compared to an operating profit margin of 34.8% for the same period in 2008.

Interest expense

Interest expense decreased $0.2 million primarily due to lower debt levels and lower LIBOR rates paid on debt not hedged with interest rate swap contracts. This decrease was partially offset by an increase in our loan margins on our credit facilities, and higher deferred financing cost amortization. Our average effective interest rate was approximately 6.5% for 2009 compared to approximately 6.4% for 2008.

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Comparison of the nine months ended September 30, 2009 and September 30, 2008

		Nine Months Ended					Nine Months Ended
		September 30, 2009					September 30, 2008					Increase (Decrease)
		In Thousands			As a % of Total Revenue		In Thousands			As a % of Total Revenue		In Thousands			Percentage
Voyage revenue		$	181,417		83.3		$	388,253		82.3		$	(206,836	)	(53.3	)
Time charter revenue			34,311		15.8			77,292		16.4			(42,981	)	(55.6	)
Logistics revenue			1,550		0.7			5,288		1.1			(3,738	)	(70.7	)
Other revenue			448		0.2			1,012		0.2			(564	)	(55.7	)
	Total revenue		217,726		100.0			471,845		100.0			(254,119	)	(53.9	)

Voyage expense			81,818		37.6			126,731		26.9			(44,913	)	(35.4	)
Logistics			1,175		0.5			4,417		0.9			(3,242	)	(73.4	)
Vessel expense			82,001		37.7			78,508		16.6			3,493		4.4
Depreciation and amortization			70,069		32.2			49,988		10.7			20,081		40.2
General and administrative			26,121		12.0			41,184		8.7			(15,063	)	(36.6	)
	Total operating expenses		261,184		120.0			300,828		63.8			(39,644	)	(13.2	)
(Loss) income from operations			(43,458	)	(20.0	)		171,017		36.2			(214,475	)	(125.4	)
Other (expenses) and income
	Interest expense		(12,840	)	(5.9	)		(12,318	)	(2.6	)		(522	)	4.2
	Loss on extinguishment of debt							(2,318	)	(0.5	)		2,318		(100.0	)
	Other income (expense)		(42	)				781		0.2			(823	)	(105.4	)
Net (loss) income		$	(56,340	)	(25.9	)	$	157,162		33.3		$	(213,502	)	(135.8	)

Voyage revenue

The table below shows key metrics related to voyage revenue:

		Nine Months Ended September 30,
		2009		2008		Increase (Decrease)

Voyage Revenue (in thousands)		$	181,417	$	388,253	$	(206,836	)	(53.3	)%
Number of vessels (1)			32		31		1		3.2	%
Freight voyage days (2)			8,728		8,429		299		3.5	%
Days on hire (3)			8,900		8,648		252		2.9	%
Revenue tons carried (thousands) (4)
	For all cargoes		6,694		6,960		(266	)	(3.8	)%
	Excluding aggregates		3,513		3,688		(175	)	(4.7	)%
	Aggregates		3,181		3,272		(91	)	(2.8	)%
Freight Rates
	For all cargoes	$	27.10	$	55.78	$	(28.68	)	(51.4	)%
	Excluding aggregates	$	43.75	$	91.92	$	(48.17	)	(52.4	)%
Daily time charter equivalent rates (5)		$	11,726	$	31,463	$	(19,737	)	(62.7	)%

(1)	Weighted average number of vessels in the fleet, not including vessels chartered out.

(2)	Number of days that our vessels were earning revenue, not including vessels chartered out.

(3)	Number of days that our vessels were available for hire, not including vessels chartered out.

(4)	Revenue tons is a measurement on which shipments are freighted. Cargoes are rated as weight (based on metric tons) or measure (based on cubic meters); whichever produces the higher revenue will be considered the revenue ton.

(5)

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The decrease in voyage revenue for the nine months ended September 30, 2009, as compared to the same period in 2008, was primarily due to an approximately 51% decrease in average freight rates for all cargoes carried.

Average freight rates for all cargoes decreased $28.68 per ton, or 51.4%, to $27.10 per ton for the nine months ended September 30, 2009, as compared to $55.78 per ton for the same period in 2008. Included in voyage revenue is bulk cargo revenue from high-volume, low-freighted aggregates. Excluding aggregates, average freight rates were $43.75 per ton as compared to $91.92 per ton for the same period in 2008. While average freight rates on aggregates bulk cargo are lower than average freight rates on other types of cargoes, voyage costs are also lower resulting in comparable daily time charter equivalent rates. During the first nine months of 2009 the freight rates for dry bulk ocean shipping decreased significantly due primarily to the worldwide economic crisis.

Revenue tons carried decreased 266,000 tons, or 3.8% to 6,694,000 tons for the nine months ended September 30, 2009 from 6,960,000 tons for the same period in 2008. Non-aggregate revenue tons decreased 175,000 tons for the nine months due to decreases in steel products, metal concentrates, and agricultural products. Aggregate revenue tons decreased by 91,000 tons for the nine months ended September 30, 2009 as compared to the same period in 2008. For the nine months ended September 30, 2009 and 2008, we had contracts of affreightment, expiring through 2010, under which we carried approximately 3,266,000 and 4,839,000 revenue tons and generated $49.4 million and $165.7 million of voyage revenue, respectively.

The following table shows revenues attributed to our principal cargoes:

		Nine Months Ended
		September 30, 2009			September 30, 2008			Increase (Decrease)
Description		In Thousands		As a % of Total Voyage Revenue	In Thousands		As a % of Total Voyage Revenue	In Thousands			%
Steel products		$	41,034	22.6	$	104,535	26.9	$	(63,501	)	(60.7	)
Agricultural products			33,858	18.7		62,065	16.0		(28,207	)	(45.4	)
Aggregates			27,727	15.3		49,229	12.7		(21,502	)	(43.7	)
Metal concentrates			26,804	14.8		69,838	18.0		(43,034	)	(61.6	)
Other bulk cargo			20,109	11.1		40,698	10.4		(20,589	)	(50.6	)
General cargo			8,264	4.5		11,525	3.0		(3,261	)	(28.3	)
Project cargo			7,786	4.3		17,531	4.5		(9,745	)	(55.6	)
Rolling stock			4,994	2.8		14,531	3.7		(9,537	)	(65.6	)
Fertilizers			3,516	1.9		6,095	1.6		(2,579	)	(42.3	)
Automotive products			3,370	1.9		7,626	2.0		(4,256	)	(55.8	)
Fishmeal			2,544	1.4					2,544
Other			1,411	0.7		4,580	1.2		(3,169	)	(69.2	)
	Total voyage revenue	$	181,417	100.0	$	388,253	100.0	$	(206,836	)	(53.3	)

Time charter revenue

The key metrics related to time charter revenue are as follows:

	Nine Months Ended September 30,
	2009		2008		Increase (Decrease)
Time Charter Revenue (in thousands)	$	34,311	$	77,292	$	(42,981	)	(55.6	)%
Number of vessels (1)		12		9		3		33.3	%
Time Charter days (2)		3,411		2,384		1,027		43.1	%
Daily charter hire rates (3)	$	10,059	$	32,421	$	(22,362	)	(69.0	)%
Daily time charter equivalent rates (4)	$	9,255	$	30,876	$	(21,621	)	(70.0	)%

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(1)	Weighted average number of vessels chartered out.

(2)	Number of days vessels earned charter hire.

(3)	Weighted average charter hire rates.

(4)

Daily Time Charter Equivalent or "TCE" rates for vessels that are time chartered out are defined as time charter revenue during the period reduced principally by commissions divided by the number of available time charter days during the period. Commission for vessels that are time chartered out for the nine months ended September 30, 2009 and September 30, 2008 were $1.4 million and $3.7 million, respectively. For the nine months ended September 30, 2009, time charter voyages include primarily fuel cost as well as other miscellaneous voyage costs for a total of $1.3 million. The fuel cost is related to fuel price differentials caused by volatility in the fuel market and the cost for ballasting vessels to time charter delivery ports. No deduction is made for vessel or general and administrative expenses. TCE is an industry standard for measuring and analyzing fluctuations between financial periods and as a method of equating TCE revenue generated from a voyage charter to time charter revenue.

Time charter revenue decreased to $34.3 million for the nine months ended September 30, 2009 from $77.3 million for the comparable period in 2008. The key factors driving time charter revenue are the daily charter hire rates and the number of days that vessels are chartered out.

The decrease in time charter revenue was due to a decline in the average charter hire rate, which decreased $22,362 per day to $10,059 for the nine months ended September 30, 2009 from $32,421 for the comparable period in 2008. This decrease is primarily due to the current weakness in the overall worldwide shipping markets due to the current economic crisis. Charter hire rates are set, to a significant degree, by the market and depend on the relationship between the demand for ocean freight transportation and the availability of appropriate vessels. The decrease in average charter rates was partially offset by an increase in the chartered vessel days, which increased 1,027 days to 3,411 for the nine months ended September 30, 2009 compared to 2,384 days for the same period in 2008.

Logistics revenue and expenses

Logistics revenues represent revenues from cargo and transportation management services provided in connection with our Five Star Service. We initiated logistics support services in the fourth quarter of 2007. Logistics revenue and expenses decreased approximately 71% and 73%, respectively, for the nine months ended September 30, 2009 as compared to the same period in 2008, principally due to the impact of the economic downturn.

Voyage expense

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The principal components of voyage expense were as follows:

		Nine Months Ended				Nine Months Ended
		September 30, 2009				September 30, 2008				Increase (Decrease)
		In Thousands		As a % of Voyage Expense	As a % of Voyage & Time Charter Revenue	In Thousands		As a % of Voyage Expense	As a % of Voyage & Time Charter Revenue	In Thousands			As a % of 2008 Expense			As a % of Revenue
Fuel expense		$	39,742	48.6	18.4	$	62,659	49.4	13.5	$	(22,917	)		(36.6	)	4.9
Commission expense			10,728	13.1	5.0		23,928	18.9	5.1		(13,200	)		(55.2	)	(0.1	)
Port call expense			17,882	21.8	8.3		19,722	15.6	4.2		(1,840	)		(9.3	)	4.1
Stevedore and other
	cargo-related expense		7,181	8.8	3.3		13,351	10.5	2.9		(6,170	)		(46.2	)	0.4
Miscellaneous voyage
	expense		6,285	7.7	2.9		7,071	5.6	1.5		(786	)		(11.1	)	1.4
	Voyage expense	$	81,818	100.0	37.9	$	126,731	100.0	27.2	$	(44,913	)		(35.4	)	10.7

Voyage expense decreased $44.9 million or 35.4% for the nine months ended September 30, 2009 as compared to the same period in 2008, principally due to a decrease in fuel expense, commission expense, and stevedore and other cargo-related expense.

The increase in voyage expense as a percentage of voyage and time charter revenue for the nine months ended September 30, 2009 as compared to the same period in 2008 was primarily due to the decrease in freight rates, which are set to a significant degree by the market and have decreased primarily due to slowing demand due to the worldwide economic crisis.

The decrease in fuel expense was primarily due to a decrease in the average price per metric ton ("MT") partially offset by an increase in consumption. For the nine months ended September 30, 2009, the average price per MT decreased to $347 per MT as compared to $604 per MT for the same period in 2008. Consumption increased for the nine months ended September 30, 2009 to 114,476 MT from 103,720 MT for the same period in 2008. Average fuel cost per freight voyage day was $4,553 during the nine months ended September 30, 2009 and $7,434 during the same period in 2008. The increase in consumption is principally due to an increase in the average number of controlled vessels, which increased to an average of 47 vessels during the nine months ended September 30, 2009, as compared to an average of 42 vessels for the same period in 2008.

Commission expense is based on the amount of revenue. The decrease in commission expense for the nine months ended September 30, 2009 as compared to the same period in 2008 was primarily due to the decrease in revenue.

The decrease in stevedore and other cargo-related expense for the nine months ended September 30, 2009 as compared to the same period in 2008 was primarily due to a lower percentage of cargo being booked under “full liner” terms or a combination of “free-in, free-out” terms. For analysis purposes we group cargoes into three categories: (1) cargo booked under "free-in free-out" terms which are shipments that the customer pays all or part of the costs of loading and unloading, (2) cargo booked under "full liner" terms, which are shipments where we bear the costs of loading and unloading and (3) a combination of free-in free-out and full liner terms.

The decrease in miscellaneous voyage expense is primarily due to decrease in leased containers shipped and to a lesser extent a reduction in canal dues.

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Vessel expense

Vessel expense consists of costs we incur to own and maintain our fleet that are not allocated to a specific voyage, such as charter hire rates for vessels we charter-in and maintenance, insurance and crewing expenses for vessels we own and control. The following table sets forth the basic components of vessel expense:

	Nine Months Ended				Nine Months Ended
	September 30, 2009				September 30, 2008				Increase (Decrease)
	In Thousands		As a % of Vessel Expense		In Thousands		As a % of Vessel Expense		In Thousands			Percentage
Owned vessel expense	$	72,233		88.1	$	63,793		81.3	$	8,440			13.2
Chartered-in vessel expense		3,597		4.4		8,918		11.3		(5,321	)		(59.7	)
Controlled vessel expense		4,887		5.9		4,734		6.0		153			3.2
Space charter expense		1,284		1.6		1,063		1.4		221
Vessel expense	$	82,001		100.0	$	78,508		100.0	$	3,493			4.4

Vessel expense for the nine months ended September 30, 2009, as compared to the same period in 2008, increased $3.5 million. The 4.4% increase in vessel expense for the nine months ended September 30, 2009 as compared to the same period in 2008 was primarily due to an increase in the number of vessel days for owned/controlled vessels.

The increase in owned vessel expense for the nine months ended September 30, 2009, as compared to the same period in 2008, was primarily due to an increase in the average operating expense day rate, which increased $72 per day. Increases in our controlled fleet translated to an increase in vessel days, which are the total days we operate our controlled vessels. During the nine months ended September 30, 2009, vessel days increased 1,353 days to 12,838 days from 11,485 days for the comparable period in 2008. For the nine months ended September 30, 2009, the average operating expense day rate was $5,626 as compared to $5,554 per day for the same period in 2008. Average operating expense day rates increased principally due to increases in the crew and crew related costs and maintenance & repair costs, which were slightly offset by reduction in freight expense on spares and stores.

Chartered-in vessel expense consists of charter-in hire costs for vessels under charter agreements that do not have a purchase option. The 59.7% decrease in chartered-in vessel expenses for the nine months ended September 30, 2009 as compared to the same period in 2008 resulted from a decrease in vessel days and charter-in rates. The average charter-in rate per day decreased $11,670 per day, or 50%, to $11,494 per day for the nine months ended September 30, 2009 from $23,164 per day for the same period in 2008. Chartered-in vessel days decreased by 72 vessel days to 313 days for the nine months ended September 30, 2009 as compared to 385 days for the same period in 2008.

Controlled vessel expense consists of charter-in hire costs for vessels under charter agreements that contain a purchase option. During the nine months ended September 30, 2009, we incurred charter hire-in costs of $4.9 million compared to $4.7 million for the same period ended September 30, 2008 under the bareboat charters for the Laguna Belle and Seminole Princess both of which were part of a sale-leaseback transaction that we entered into in January 2007.

Depreciation and amortization

The $20.1 million increase in depreciation and amortization expense is due to an increase in the average vessel cost of newly acquired vessels, increased vessel improvements and the overall growth of the fleet. The growth of our owned/controlled fleet increased to an average number of 47 vessels for the nine months ended September 30, 2009 as compared to 42 vessels for the nine months ended September 30, 2008.

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General and administrative expense

General and administrative expense decreased $15.1 million primarily due to a $12.0 million decrease in salary and related expenses. Salary and related expenses decreased primarily because no bonus accruals were made for the nine months ended September 30, 2009 as compared to a bonus accrual of $13.8 million for the nine months ended September 30, 2008.

Income from operations

The decrease in income from operations was mainly attributable to a decrease in revenue resulting from decreased freight rates and to a lesser extent revenue tons carried. Freight and charter hire rates decreased due to weak market conditions in the ocean transport industry. Operating expenses decreased in 2009; however as a percentage of revenue they increased from 63.8% to 120.0% of revenue. The decrease in revenue combined with the increased percentage of operating expenses to revenue caused our operating margin to decrease to a loss of 20% for the nine months ended September 30, 2009, compared to an operating profit margin of 36.2% for the same period in 2008.

Interest expense

Interest expense increase $0.5 million for the nine months ended September 30, 2009 principally due to higher borrowing costs resulting from higher loan margins on our credit facilities and higher amortization of deferred financing cost. Our average effective interest rate for the nine months ended September 30, 2009 and 2008 was approximately 5.96% and 5.56%, respectively.

Loss on extinguishment of debt

The $2.3 million loss on extinguishment of debt in 2008 was due to the write-off of unamortized deferred financing costs in connection with the March 2008 refinancing of our Bank of America syndicated credit facility.

Balance Sheet

Fuel and Other Inventories

Fuel and other inventories at September 30, 2009 increased $1.8 million to $13.9 million from the December 31, 2008 balance of $12.1 million. There was a $1.6 million increase due to higher average prices at September 30, 2009 as compared to December 31, 2008 which was offset by a $0.6 million decrease as a result of lower quantities of fuel at September 30, 2009 as compared to December 31, 2008. At September 30, 2009, the combined average price for industrial fuel oil/marine diesel oil increased to $465 per metric ton from a combined average price of $370 per metric ton at December 31, 2008. Changes in fuel quantities resulted principally from the timing of vessel refueling and the number of vessels having fuel inventory. The number of vessels having fuel inventory will fluctuate from period to period based on the number of vessels on time charter. When a vessel is time chartered out, the fuel on board the vessel is sold to the charterer and later repurchased at a price stipulated in the charter party agreement. Vessels having fuel included in inventory decreased to 32 vessels as of September 30, 2009 as compared to 37 vessels as of December 31, 2008. There was also an increase of $0.5 million in lubricating oil on board the vessels at September 30, 2009, which resulted principally from the timing of deliveries to the vessels.

Charter Hire Receivables

Our gross charter hire receivables ba

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