UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-K


(Mark
One)


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


For
the fiscal year ended December 31, 2009





or


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




For the
transition period
from                                       
to




Commission
File Number 000-34599




TBS
INTERNATIONAL PLC


(Exact name of registrant as specified
in its charter)


Ireland
            98-0646151(State
      or other jurisdiction of
              incorporation
      or organization)
            (IRS
      Employer Identification No.)Arthur
      Cox Building
              Earlsfort
      Terrace
              Dublin
      2, Ireland(Address
      of principal executive offices)(Registrant's telephone number,
      including area code)1 353(0) 1 618
      0000Securities
      registered pursuant to section 12(b) of the Act:Title
      of each class
            
            Name
      of each exchange
              on
      which registeredClass
      A ordinary shares, par value $0.01
            
            The
      NASDAQ Global Select Market





Securities
registered pursuant to section 12(g) of the
Act:  None


Indicate
      by check mark if the registrant is a well-known seasoned issuer, as
      defined in Rule 405 of the Securities
      Act.
              Yes o   No xIndicate
      by check mark if the registrant is not required to file reports pursuant
      to Section 13 or Section 15(d) of the
      Act.
              Yes o   No xIndicate
      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 oIndicate
      by check mark whether the registrant has submitted electronically and
      posted on its corporate Web site, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulation S-T
      (§ 232.405 of this chapter) during the preceding 12 months (or for such
      shorter period that the registrant was required to submit and post such
      files).
              Yes o  No oIndicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
      will not be contained, to the best of registrant’s knowledge, in
      definitive proxy or information statements incorporated by reference in
      Part III of this Form 10-K or any amendment to this Form
      10-K.
              oIndicate
      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 check
      one):Large
      Accelerated Filer   ̈ Accelerated
      Filer xNon-accelerated Filer  ̈(Do not check if
      a small reporting company)   Smaller Reporting Filer  ̈Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the
      Act).
              Yes o   No xThe
      aggregate market value of voting and non-voting common equity held by
      non-affiliates was $133.3 million on June 30, 2009, based upon the
      last reported sales price of such stock on the NASDAQ Global Select Market
      on that date.




As of February 26,
      2010, the registrant had outstanding 17,503,102Class
      A ordinary shares, par value $0.01 per share, and12,390,461Class B ordinary shares, par value $0.01 per
      share.DOCUMENTS
      INCORPORATED BY REFERENCEPortions
      of the proxy statement for the 2010 Annual Meeting of Stockholders, to be
      filed within 120 days of the end of the fiscal year ended December 31,
      2009, are incorporated in Part III to the extent described
      herein.













TBS
International plc


2009
FORM 10-K
 Table of Contents


PagePart
      IItem
      1
            BusinessA
            Overview
            4B
            Our Business Strategy
            7C
            Fleet Overview
            8D
            Classification and
      Inspection
            9E
            Operations Management, Ship Management and
      Commercial Agents
            10F
            Employees and Labor Relations
            11G
            Customers
            11H
            Competition
            12I
            Environmental and Other
      Regulations
            13J
            Security
            14K
            Insurance
            15L
            Taxation
            16M
            Website Access to Reports
            17Item
      1A
            Risk Factors
            17Item
      1B
            Unresolved Staff
    Comments
            34Item
      2
            Properties
            34Item
      3
            Legal Proceedings
            34Item
      4
            ReservedPart
      IIItem
      5
            Market for Registrant’s Common Equity,
      Related Stockholder Matters and Issuer Purchases of Equity
      Securities
            35Item
      6
            Selected Financial
      Data
            38Item
      7
            Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
            41Item
      7A
            Quantitative and Qualitative Disclosures
      about Market Risk
            72Item
      8
            Financial Statements and Supplementary
      Data
            73Item
      9
            Changes in and Disagreements with Accountants on
      Accounting and Financial Disclosure
            73Item
      9A
            Controls and
    Procedures
            73Item
      9B
            Other Information
            73Part
      IIIItem
      10
            Directors, Executive Officers and Corporate
      Governance
            74Item
      11
            Executive Compensation
            76Item
      12
            Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters
            76Item
      13
            Certain Relationships and Related
      Transactions and Director Independence
            76Item
      14
            Principal Accountant Fees and
      Services
            76Part
      IVItem
      15
            Exhibits and Financial Statement
      Schedules
            77Signatures









2


As
used in this Annual Report on Form 10-K, the terms "we," "our," and "us," "TBS"
and "the Company" refer to TBS International plc, as successor to TBS
International Limited, and its consolidated subsidiaries.  We use the
term "International," and "TBSI" when we wish to refer only to TBS International
plc, the holding company that is the issuer of our ordinary shares and
International Limited, the former holding company and issuer of our ordinary
shares, and not to TBS International plc and its consolidated
subsidiaries.


Forward-Looking
Statements
 
 Our filings
with the Securities and Exchange Commission or the SEC, including this Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, our Annual
Report to Shareholders, any quarterly report on Form 10-Q or any current report
on Form 8-K (along with any exhibits or amendments to such reports), our press
releases, or any other written or oral statements made by or on our behalf, may
include or incorporate by reference forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may include, among other things, the information concerning our
possible or assumed future results of operations, our newbuilding plan, our
drydocking program, business strategies, financing plans, competitive position,
potential growth opportunities, customer demand and the effects of future
regulation and competition.
 
 Generally,
one can identify these forward-looking statements because they use words like
"anticipates," "believes," "estimates," "expects," "future," "intends," "plans,"
"targets," "projects," "seeks", "will," "should," "likely" and similar
expressions. These statements appear throughout this Annual Report on Form 10-K
including in the sections entitled "Item 1 - Business" and "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations."  These statements are only our current
expectations.  They are based on our management's beliefs and
assumptions and on information currently available to our
management.  The matters discussed in these forward-looking statements
involve risks, uncertainties and assumptions.  Although we do not make
forward-looking statements unless we believe we have a reasonable basis for
doing so, we cannot assure you of 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, risks, and other
factors.  These 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 current economic conditions and uncertainty;●
                the
      effect of a decline in vessel valuations;●
                our
      ability to maintain financial ratios and satisfy financial covenants
      required by our credit facilities;●
                our
      ability to finance our operations and raise additional capital on
      commercially reasonable terms or at all;●
                changes
      in rules and regulations applicable to the shipping industry, including
      legislation adopted by international organizations such as
      the  International Maritime Organization and the European Union
      or by individual countries;●
                actions
      taken by regulatory authorities;●
                changes
      in trading patterns, which may significantly affect overall vessel tonnage
      requirements;●
                changes
      in the typical seasonal variations in charter rates;●
                volatility
      in costs, including changes in production of or demand for oil and
      petroleum products, crew wages, insurance, provisions, repairs and
      maintenance, generally or in particular regions;●
                the
      risk that financial counterparties will default;●
                a
      material decline or weakness in shipping rates, which may occur if the
      economic recovery is not sustainable;●
                changes
      in general domestic and international political
  conditions;●
                changes
      in the condition of our vessels or applicable maintenance or regulatory
      standards which may affect, among other things, our anticipated drydocking
      or maintenance and repair costs;●
                increases
      in the cost of our drydocking program or delays in our anticipated
      drydocking schedule;●
                China
      Communications Construction Company Ltd./Nantong Yahua Shipbuilding Group
      Co., Ltd.’s ability to complete and deliver the remaining vessels on the
      anticipated schedule and the ability of the parties to satisfy the
      conditions in the shipbuilding agreements;●
                the
      possible effects of pending and future legislation in the United States
      that may limit or eliminate potential U.S. tax benefits resulting from our
      jurisdiction of incorporation;●
                Irish
      corporate governance and regulatory requirements which could prove
      different or more challenging than currently expected;
  and●
                other
      factors listed from time to time in our filings with the Securities and
      Exchange Commission, including, without limitation, our Annual Report
      on Form 10-K for the period ended December 31, 2009 and our subsequent
      reports on Form 10- Q and Form
8-K.
 
 Table of Contents
 3
 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.
 
 PART
I
 
 Item 1. Business
  A. Overview
  We are an
ocean transportation services company, originating in 1993, 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.The flexibility of
our fleet allows us to carry a wide range of cargo, including industrial goods,
project cargo, steel products, metal concentrates, fertilizer, salt, sugar,
grain, aggregates and general cargo, that cannot be carried efficiently by
container or large dry bulk carriers.  In December 2009, shareholders
voted in favor of a reorganization proposal pursuant to which TBS International
Ltd. common shares would be cancelled and holders of such shares would receive
ordinary shares of TBS International plc, an Irish company, on a one-to-one
basis.  The reorganization transaction was completed on January 6,
2010, at which time TBS International plc replaced TBS International Ltd. as the
ultimate parent company for our operations. Shares of TBS International plc
began trading on the NASDAQ Global Select Market on January 7, 2010 under the
symbol "TBSI," the same symbol under which TBS International Ltd. shares were
previously traded.
 
 Over the past
17 years, we have developed our business model around key trade routes between
Latin America and Japan, South Korea and China, as well as ports in North
America, Africa, the Caribbean, and the Middle East.  We differentiate
ourselves from our competitors by offering a fully integrated shipping solution
to our customers, which we refer to as our Five Star Service.  As part
of our Five Star Service, 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.  We also provide frequent, regularly scheduled voyages
within our shipping network  and offer additional services such as
strategic planning, cargo scheduling, loading and discharge.
 
 As of
December 31, 2009, our controlled fleet totaled 48 vessels, including 46 ships
that we own and two that we charter-in with an option to purchase.  On
March 29, 2007, we entered into a contract for six "Roymar Class" 34,000
deadweight ton, or dwt, multipurpose vessels with retractable tweendecks,
designed to our specifications.  We took delivery of the first vessel
the Rockaway Belle on
September 23, 2009 in China from Nantong Yahua Shipbuilding Group Co., Ltd.
Three of the vessels
are scheduled for delivery in 2010 and the remaining two in 2011.  The
three newbuildings, which are expected to be delivered in the first, second and
fourth quarter of 2010, have been named Dakota Princess, Montauk Maidenand Omaha Belle,
respectively.
  Financial
data including revenues from external customers, at and for the years ended
December 31, 2009, 2008 and 2007: (in millions except for Number of
Voyages)
 Year
      ended December 31,
                
                Total
      Assets
                
                Total
      Revenue
                
                Net
      Income/ (Loss)
                
                Total
      revenue tons (RT) carried
                
                Number
      of Voyages2009
                
                $
                953.6
                
                $
                302.5
                
                $
                (70.0
                )
                8.8
      RT
                
                4242008
                
                $
                1,041.7
                
                $
                611.6
                
                $
                191.8
                
                9.3
      RT
                
                3802007
                
                $
                559.1
                
                $
                352.9
                
                $
                98.2
                
                6.6
      RT
                
                276
 We target
niche markets, which include trade routes, ports and cargoes not efficiently
served by container and large dry bulk vessel operators. In order to
effectively serve these markets, we offer regularly scheduled voyages using our
fleet of multipurpose tweendeckers and handysize and handymax dry bulk
carriers.  Tweendeck vessels are differentiated by their retractable
decks that can create separate holds, facilitating the transportation of
non-containerized cargoes.  Our vessels are able to navigate and
service many ports with restrictions on vessel size and transport many types of
cargo that cannot be carried efficiently by container or large dry bulk
carriers.
 
 Table of Contents
 4
 As part of
our comprehensive transportation service offering, we provide portside and
inland logistics, related support services and solutions for challenging
cargoes.  To provide these services, we employ a professional staff of
approximately 170 employees at December 31, 2009, with extensive experience and
diverse backgrounds.  In addition, our affiliate, TBS Commercial Group
Ltd. has fully-staffed agencies and representative offices on five continents,
with local teams of commercial agents and port captains who meet regularly with
customers to tailor solutions to their logistics needs. We believe this
full-service approach to shipping provides a superior level of service that has
resulted in the development of long-term relationships with our
customers.
 
 Our customers
rely on our regular service as an integral part of their supply chain, and many
of these relationships have been established for over 16 years.  We
serve approximately 300 customers in more than 20 countries.  We have
developed long-term relationships with established and well-respected industrial
shippers in diverse markets including mining, steel manufacturing, trading,
heavy industry, industrial equipment and construction.  We believe our
business model allows us to respond rapidly to our customers’ changing demands
and short delivery windows, increasing the value of our services to them as we
enable them to schedule production and distribution.
 
 Shipping
freight rates declined during the first three quarters of 2009; however,
beginning in the fourth quarter of 2009 rates began to increase
slightly.  This increase has continued into the first quarter of
2010.
 
 Our
Competitive Strengths
 
 Trade
Routes and Ports of Call
 
 We provide
ocean transportation services over eight routes, focusing primarily on Asia and
Latin America, with additional operations in North America, the Middle East and
Africa.  We began operations in 1993, sailing between East Asia and
the West Coast of South America. In 1995, we expanded our routes by adding
sailings between the East and West Coasts of South America. In 2002, we began
offering cargo service between North America and the East and West Coasts of
South America and expanded our routes by offering service from Brazil to West
Africa and within the Middle East. We continued to expand our service in
the Middle East and North Africa during 2005 and
2006.
 
 During 2009
we operated our vessels in five liner, parcel and bulk services.  We
have taken a conservative approach to building our service network. The initial
sailings on each route are typically based on the requirements of a major
customer. After regular sailings are established, we notify other potential
customers of the service so their cargoes may be transported as well. As demand
increases, we evaluate committing additional resources to serve the route,
either by purchasing or chartering-in additional vessels. We plan the loading
and stowage of cargo on each sailing to maximize our ability to add cargo as
vessels call in selected ports to discharge cargo, increasing our utilization
rate and maximizing revenue per sailing. A summary of our services and routes
operated during 2009 is as follows:
  Table of Contents
 5
  Service
                
                Routes
                
                CargoesTBS
      Pacific Service
                
                Eastbound:Japan,
      South Korea and
                
                Steel
      products, project cargoChina
      to the West, North and East Coasts of South America
                
                and
      general cargoWestbound:Peru,
      Ecuador and Chile to East Asia
                
                Minerals,
      metals, metal concentrates and fishmealTBS
      Latin America Service
                
                Northbound:Brazil
      to the Caribbean basin
                
                Steel
      products, project cargoand
      the West Coast of South America
                
                and
      general cargoSouthbound:Colombia
      to Brazil and Argentina
                
                Coal
      and petroleum cokeTBS
      North America Service
                
                Southbound:North
      America to the Caribbean
                
                Fertilizer,
      agricultural productsbasin,
      South America and West Africa
                
                and
      steel productsNorthbound:Caribbean
      to North America
                
                Limestone
      and aggregatesTBS
      Middle East Carriers
                
                Middle
      East region, including ports in the United Arab Emirates, to Qatar and
      Kuwait
                
                Bulk
      aggregatesTBS
      Ocean Carriers
                
                Brazil
      to the West Coast of Africa
                
                Bulk
      sugar and salt
 
 Our liner,
parcel and bulk services primarily carry steel products, salt, sugar, grain,
fertilizers, chemicals, metal concentrates and aggregates plus general and
project cargoes.
 
 ·
                Steel
      products include specialty and carbon steel coils, steel pipe and
      structural steel used in  infrastructure development,
      construction, oil and gas transmission and automotive and appliance
      manufacturing industries.
 ·
                Fertilizers
      include ammonium sulfate shipped in bulk for use in commercial
      agriculture.
 ·
                Metal
      concentrates include copper, zinc, silver and other metals generally
      shipped in small break-bulk lots from 1,000 to 10,000 metric ton parcels
      that are processed at their destinations by smelters into purer
      forms.
 ·
                General
      and project cargoes includes industrial machinery, spare parts, oil well
      supplies, trailers, industrial tanks and other commercial goods used in
      industrial applications.
 
 In
addition to our liner, parcel and bulk services on the trade routes described
above, we time charter-out vessels on an individual customer basis through TBS
Ocean Carriers.  However, any of our services may time charter-out a
vessel to meet our customers' needs.  Generally, we time charter-out
vessels on a long-term basis to customers seeking vessel tonnage and on a
short-term basis to reposition a vessel.
 
 A time
charter is a contractual arrangement under which a shipowner is paid for the use
of a vessel at a daily rate for a fixed period of time. The shipowner is
responsible for providing the crew and paying vessel operating expenses while
the charterer is responsible for paying the voyage expenses. At December 31,
2009, 16 vessels of our controlled and owned fleet were time chartered-out with
an average remaining duration of 30 days.
 
 The
following table shows the annual number of time charters-out, related duration
and gross charter revenue since 2005.
 Year
                  
                  Number
      of Charters
                  
                  Duration
      (Days)
                  
                  Gross
      Revenue
                    (in
      thousands)2009
                  
                  132
                  
                  4,733
                  
                  $
                  51,2012008
                  
                  74
                  
                  3,004
                  
                  
                  83,8832007
                  
                  67
                  
                  3,659
                  
                  
                  88,3652006
                  
                  57
                  
                  4,301
                  
                  
                  63,1142005
                  
                  55
                  
                  4,257
                  
                  
                  71,456
  Table of Contents
 6
 B.  Our Business Strategy
 
 Our
business strategy consists of providing reliable transportation services to
leading industrial shippers over key ocean trade routes. The key elements of our
business strategy are:
 
 Focus on
Increasing Cargo Volumes on Our Key Routes.We intend
to increase cargo volumes on our key Pacific and Latin American trade routes, as
well as our third sailing from China and Korea which carries steel parcels to
Mexico, Central and South America.  By adding additional vessels and
sailings to the markets we already serve, we believe we will be able to provide
more regular service to our clients, which we expect will allow us to capture a
larger share of their shipping needs, and win new
clients.
 
 Develop New Trade
Routes.  We intend to
continue developing new trade routes, such as adding sailings from Asia to
Africa to our TBS Pacific Service. Our agents and port captains work closely
with our clients, as well as potential clients, to identify additional services
that we can provide.  We target routes that share the characteristics
of our established routes and appear suited to our fleet and our full service
approach.  When developing new trade routes, we initially utilize
chartered-in vessels and commit resources to acquire vessels for operation on
those routes once we have determined that the economics of the route are
favorable and sustainable.
 
 Develop Our Logistics
Support.We
intend to further develop our logistics support through our Five Star Service.
The goal of our Five Star Service is to provide 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.
 
 Expand Our Fleet of
Focused Vessel Types.  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 named the
"Roymar Class".  These 34,000 dwt vessels are a larger vessel class
and their addition to our fleet will be a significant milestone in the
implementation of our business plan to modernize and expand our fleet. 
While we remain committed to expanding our fleet, pending a significant change
in global economic conditions, we are temporarily suspending any further
acquisitions of secondhand vessels.  Our current business strategy
includes growing through newbuildings of multipurpose tweendeckers and
chartering-in vessels as needed.
 
 In September
2009, we took delivery of the first of six newbuildings, the Rockaway
Belle.  Three newbuildings are scheduled for delivery in 2010,
and the last two newbuild vessels are scheduled for delivery in
2011.   At December 31, 2009, the milestones met and the expected
delivery dates for the remaining vessels are noted below:


Caton
            
            Dorchester
            
            Longwoods
            
            McHenry
            
            SunswyckMaritime
      Corp.
            Maritime
      Corp.
            Maritime
      Corp.
            Maritime
      Corp.
            Maritime
      Corp.Milestone
            
            Hull
      No NYHS200721
            
            Hull
      No NYHS200722
            
            Hull
      No NYHS200723
            
            Hull
      No NYHS200724
            
            Hull
      No NYHS200725Dakota
      Princess
            Montauk
      Maiden
            To
      be Named
            Omaha
      Belle
            To
      be  NamedContract
      Signing
            
            Met
            
            Met
            
            Met
            
            Met
            
            MetSteel
      Cutting
            
            Met
            
            Met
            
            Met
            
            Met
            
            MetKeel
      Laying
            
            Met
            
            Met
            
            Met
            
            Met
            
            2nd  Qtr
      2010Launching
            
            Met
            
            Met
            
            3rd
      Qtr 2010
            
            2nd
      Qtr 2010
            
            4th
      Qtr 2010Anticipated
      Delivery
            
            1st
      Qtr 2010
            
            3rd
      Qtr 2010
            
            1st
      Qtr 2011
            
            4th
      Qtr 2010
            
            3rd
      Qtr 2011






Table of Contents
 7


C.  Fleet Overview





Our current
controlled fleet consists of a total of 48 vessels, aggregating approximately
1.4 million dwt.  The fleet consists of 25 multipurpose
tweendeckers (8,000–34,000 dwt) and 23 dry bulk carriers, including 18 Handymax
(35,000–46,000 dwt) and five Handysize (22,000–29,000 dwt) vessels. All vessels
are dual flagged in either Panama or Liberia and the Philippines.  In
addition to the newbuild vessel that we placed into operation in the third
quarter of 2009, we have committed to acquire five additional newbuild 34,000
dwt multipurpose tweendeckers for a total purchase price of $214.3 million. We
expect three vessels to be delivered in 2010 and the last two vessels in
2011.




The following
table provides information regarding the 48 vessels in our controlled fleet at
December 31, 2009, which excludes vessels chartered-in under short-term
charter.




Year
            
            DeadweightVessel
      Name
            
            Vessel
      Type
            
            Built
            
            Weight
      TonsZia
      Belle
            
            Multipurpose
      Tweendecker
            
            1997
            
            8,492Tamoyo
      Maiden
            
            Multipurpose
      Tweendecker
            
            1986
            
            17,235Ainu
      Princess
            
            Multipurpose
      Tweendecker
            
            1987
            
            17,324Siboney
      Belle
            
            Multipurpose
      Tweendecker
            
            1987
            
            17,324Kiowa
      Princess
            
            Multipurpose
      Tweendecker
            
            1986
            
            19,762Seneca
      Maiden
            
            Multipurpose
      Tweendecker
            
            1986
            
            19,764Aztec
      Maiden
            
            Multipurpose
      Tweendecker
            
            1984
            
            19,777Hopi
      Princess
            
            Multipurpose
      Tweendecker
            
            1984
            
            20,401Navajo
      Princess
            
            Multipurpose
      Tweendecker (1)
            
            1987
            
            21,902Inca
      Maiden
            
            Multipurpose
      Tweendecker (1)
            
            1986
            
            22,133Shawnee
      Princess
            
            Multipurpose
      Tweendecker
            
            1984
            
            22,323Caribe
      Maiden
            
            Multipurpose
      Tweendecker
            
            1987
            
            22,800


Ottawa
      Princess
            
            Multipurpose
      Tweendecker
            
            1987
            
            22,800Taino
      Maiden
            
            Multipurpose
      Tweendecker
            
            1985
            
            23,278Tuckahoe
      Maiden
            
            Multipurpose
      Tweendecker
            
            1985
            
            23,278Cherokee
      Princess
            
            Multipurpose
      Tweendecker
            
            1990
            
            23,286Kickapoo
      Belle
            
            Multipurpose
      Tweendecker
            
            1987
            
            23,319Apache
      Maiden
            
            Multipurpose
      Tweendecker
            
            1987
            
            23,325Mohegan
      Princess
            
            Multipurpose
      Tweendecker
            
            1983
            
            26,276Tayrona
      Princess
            
            Multipurpose
      Tweendecker
            
            1983
            
            26,320Laguna
      Belle (2)
            
            Multipurpose
      Tweendecker
            
            1996
            
            28,503Seminole
      Princess (2)
            
            Multipurpose
      Tweendecker
            
            1997
            
            28,503Nanticoke
      Belle
            
            Multipurpose
      Tweendecker
            
            1989
            
            28,835Wichita
      Belle
            
            Multipurpose
      Tweendecker
            
            1991
            
            28,843Rockaway
      Belle (3)
            
            Multipurpose
      Tweendecker
            
            2009
            
            34,005Savannah
      Belle
            
            Handysize
      Bulk Carrier
            
            1982
            
            22,558Arapaho
      Belle
            
            Handysize
      Bulk Carrier
            
            1998
            
            24,021Oneida
      Princess
            
            Handysize
      Bulk Carrier
            
            1998
            
            24,247Mohave
      Maiden
            
            Handysize
      Bulk Carrier
            
            1984
            
            28,074Zuni
      Princess
            
            Handysize
      Bulk Carrier
            
            1984
            
            28,166La
      Jolla Belle (3)
            
            Handymax
      Bulk Carrier
            
            1982
            
            35,025Shinnecock
      Belle
            
            Handymax
      Bulk Carrier
            
            1985
            
            37,451Maori
      Maiden
            
            Handymax
      Bulk Carrier
            
            1984
            
            37,734Tupi
      Maiden
            
            Handymax
      Bulk Carrier
            
            1992
            
            38,852Nyack
      Princess
            
            Handymax
      Bulk Carrier
            
            1984
            
            38,885Biloxi
      Belle
            
            Handymax
      Bulk Carrier
            
            1984
            
            39,225Miami
      Maiden
            
            Handymax
      Bulk Carrier
            
            1984
            
            39,333Iroquois
      Maiden
            
            Handymax
      Bulk Carrier
            
            1983
            
            40,876Fox
      Maiden
            
            Handymax
      Bulk Carrier
            
            1985
            
            40,902Alabama
      Belle
            
            Handymax
      Bulk Carrier
            
            1986
            
            41,808Houma
      Belle
            
            Handymax
      Bulk Carrier
            
            1985
            
            42,219Sioux
      Maiden
            
            Handymax
      Bulk Carrier
            
            1989
            
            42,248Mohawk
      Princess
            
            Handymax
      Bulk Carrier
            
            1982
            
            42,360Yakima
      Princess
            
            Handymax
      Bulk Carrier
            
            1990
            
            42,475Canarsie
      Princess
            
            Handymax
      Bulk Carrier
            
            1985
            
            42,842Chesapeake
      Belle
            
            Handymax
      Bulk Carrier
            
            1984
            
            44,146Tuscarora
      Belle
            
            Handymax
      Bulk Carrier
            
            1984
            
            44,189Manhattan
      Princess
            
            Handymax
      Bulk Carrier
            
            1982
            
            45,526Total
      DWT
            
            
            
            1,432,970




Table of Contents
 8




(1)
              These
      vessels are multipurpose tweendeckers with the ability to carry wheeled
      cargo such as automobiles, tractors or trailers. The vessels allow cargo
      to be "rolled on" and "rolled off" in addition to allowing cargo to
      be "lifted-on" and "lifted-off".
 (2)
              These
      vessels are leased and operated by us under a sale-leaseback arrangement
      that expires in 2014. The  agreements allow for the purchase of
      the respective vessel at the end of 2012 and each year thereafter until
      the end of the charter period.
 (3)
              On
      September 23, 2009 we took delivery of the newly-constructed vesselRockaway Belle from Nantong Yahua Shipbuilding Group Co., Ltd.
       La
      Jolla Belle was previously named Rockaway
      Belle and was part of our existing
fleet.
 
 Multipurpose
Tweendeckers
 
 Our
multipurpose tweendecker vessels have retractable tweendecks that can convert a
multipurpose tweendecker to a bulk carrier, and back again. Unlike container
ships, which can carry only cargo that can be or has been pre-packaged into
standard 20-foot or 40-foot containers, or bulk carriers that limit the ability
to mix different cargoes in any one hold, multipurpose tweendeckers can be
divided into multiple cargo compartments by a mezzanine deck, or tweendeck. The
tweendeck permits the carriage of cargoes of differing sizes and shapes in the
same or separate holds and permits greater flexibility in the stowage and
carriage of cargo. Many of our vessels sailing eastbound from Asia will call at
multiple Latin American ports to discharge cargo and load additional cargo for
shipment to other ports. Cargoes are stowed in a manner that facilitates
efficient loading and discharging.
 
 The following
diagram shows a typical multipurpose tweendeck ship fitted for different types
of cargo.









Bulk
Carriers
 
 Our bulk
carriers range in size from 22,558 dwt to 45,526 dwt. Several of the vessels
have equipment that enables self-loading and discharging in an effort to enhance
our ability to serve a broad range of ports.
 
 
 D.  Classification and
Inspection
 
 The hull and
machinery of every commercial vessel must be "classed" by a classification
society authorized by its country of registry. Our vessels currently are
enrolled with Lloyds Register of Shipping, or LR, Nippon Kaiji Kyokai, or NKK,
American Bureau of Shipping, or ABS, Det Norske Veritas, or DNV, and Bureau
Veritas, or BV. 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 promulgated by the
International Maritime Organization, or IMO. These include the Convention on
Maritime Pollution Prevention, the International Safety Management Code, or ISM
Code, and International Convention for the Safety of Life at Sea, or SOLAS. All
of our vessels have been certified as being "in class" by their respective
classification societies.
 
 Table of Contents
 9
 A vessel must
undergo annual surveys, intermediate surveys and special surveys. In lieu of a
special survey, a vessel's machinery may be on a continuous survey cycle, under
which the machinery would be surveyed periodically over a five-year period. All
of our controlled vessels are on special survey cycles for hull inspection and
continuous survey cycles for machinery inspection.Every vessel is required
to be drydocked twice in every five-year period, with no interval greater than
three years.  Vessels less than 15 years of age may be underwater
inspected instead of drydocked, at the intermediate period.Our fleet of 48 vessels will require approximately 96 drydockings over a
five-year period.  We anticipate drydocking approximately 19 vessels
per year.  We had 23 vessels in drydock during
2009,  including one vessel that entered into drydock during December
2008.  During 2010, we anticipate having 18 vessels in drydock,
including two vessels that entered into drydock in late 2009.


For
      the Year Ended December 31,2009
            
            2008
            
            2007Vessels
      Entering Drydock
            
            22
            
            16
            
            21




In 2009, our
drydocking program focused on capital expenditures that were necessary or
otherwise recommended by classification surveyors. In the two years prior to
2009, we used vessel drydocking to perform steel renewal and reinforcements that
might have been required in the next five to ten years to reduce the cost of
subsequent vessel drydockings.
 
 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 30
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.
 
 E.  Operations Management, Ship Management and
Commercial Agents
 
 Substantially
all of the operations, ship maintenance, supervision of crewing, technical
support, purchasing, insurance, financial management services and network of
commercial agents necessary to support our fleet and operate our business are
supervised by four service companies.
 
 Two of
these service companies, TBS Shipping Services Inc. and Roymar Ship Management
Inc., are our wholly-owned subsidiaries that manage the accounts of our other
subsidiaries and, on their behalf, make payments and advances for costs
associated with the operation of our business.  The other service
companies, TBS Commercial Group Ltd. and Beacon Holdings Ltd., are controlled
by certain of our key executive officers.  Together these four
companies employ approximately 340 experienced professionals who meet regularly
with shippers and consignees to market our services in more than 20 countries
and address the needs and concerns of our customers.
 
 Operations
management
 
 TBS
Shipping Services coordinates services to customers, integrates the activities
of our commercial agency network, oversees charter activities, administers
voyages and provides accounting services, including the preparation of our
account ledgers and financial statements.
 
 Table of Contents
 10
 Ship
management
 
 Roymar
manages our controlled fleet providing an experienced technical management staff
and a full range of vessel maintenance capabilities to ensure that we maintain a
high-level of ship performance.  The services provided by Roymar
include:
 ●
                supervising
      the recruiting of crew;●
                obtaining
      spares, stores and provisions necessary on board the
    vessels;●
                implementing
      our maintenance program;●
                arranging
      for and supervising all drydocking procedures;●
                arranging
      for surveys and inspections according to requirements of classification
      society, flag state and port state rules and
  regulations;●
                maintaining
      high safety and environmental protection standards in compliance with the
      ISM Code and SOLAS;●
                arranging
      for insurance of the vessels; and●
                identifying
      vessels to acquire and negotiating purchase options on vessels that we
      charter.
 
 We are fully
responsible for the maintenance of our controlled fleet.  We make
every effort to prevent delays at sea or in port caused by malfunctions or
breakdowns.  Roymar deploys superintendents, including master mariners
and engineers, to supervise the maintenance of our controlled
fleet.  We minimize operation costs through continuous onboard
supervision of our vessels and use of the vessels' crews for ship
maintenance.  We believe that our preventive maintenance practice has
extended the lives of the vessels in our controlled fleet, minimized drydocking
expenses and nearly eliminated downtimes and off-hire periods resulting from
speed deficiencies, stoppages at sea and vessel breakdowns.
 
 Commercial
agents
 
 We have
established a network of long-term commercial and operational relationships with
affiliated commercial agency service companies.  The majority of these
service companies are wholly or partly-owned by TBS Commercial
Group.  These service companies employ locally-based sales and
customer service professionals who personally meet with shippers and consignees
on a regular basis.  These professionals provide a competitive
advantage by addressing our customers' concerns and anticipating their future
needs through their personal contact with our customers.  We believe
that personal attention to customers has played a critical role in our growth
and success.  Our method of operation focuses on sales and service for
long-term sustained expansion.  The agreements with TBS Commercial
Group are subject to the approval of the Compensation Committee of our Board of
Directors.  We paid TBS Commercial Group approximately $7.8 million,
$16.8 million and $8.0 million in 2009, 2008, and 2007,
respectively.  See "Note 14 — Related Party
Transactions" to our consolidated financial statements.
 
 F.  Employee and Labor Relations
 
 As of
December 31, 2009, we had approximately 170 office employees located in Yonkers
and Scarsdale, New York.  At December 31, 2009, we had contracts with
three unaffiliated manning agents, to provide approximately 1,150 crew for
our vessels.  We are not a party to the contracts with the seagoing
personnel, all of whom are required to have appropriate maritime
licenses.  Historically our labor relations have been
good.
 
 G.  Customers
 
 We believe we
distinguish ourselves from our competition by offering proven reliability,
frequent and on-time service, flexible cargo management, expert loading and
stowage and close client coordination in the ports and on the
vessels.  This customer focus has enabled us, through our affiliated
agents, to develop long-term relationships with established and well-respected
industrial shippers in diverse markets including mining companies, steel
manufacturers, trading companies, heavy industry, industrial equipment
enterprises and construction companies.  Our business model is
designed to enable us to respond rapidly to our customers' changing demands and
short delivery windows, increasing the value of our services to them as we
enable them to schedule production and distribution.
 
 Table of Contents
 11
 A substantial
majority of our repeat business is based on our relationships and reputation
with our customers, and is not governed by long-term contracts.  We
depend upon a limited number of customers for a large part of our
revenue.  Our top ten customers by revenue, accounted for, in the
aggregate, 40.5% of our total consolidated revenue for 2009.  We
have affreightment contracts with several of these customers.
 
 As noted
in the table below, only one of our customers accounted for more than 10% of
revenue.  The loss of this customer could have a material adverse
effect on our results of operations.  The percentages of
consolidated  revenues from our major customers for each of the last
three fiscal years are as follows:


Year
      Ended December 31,Customer
            
            2009
            
            
            2008
            
            
            2007Dangote
      Industry Limited
            
            
            13.5
            %
            
            
            13.0
            %
            
            
            13.4
            %


We transport
cargo throughout the world, including the United States.  The amount
of voyage revenue generated by country for each of the last three fiscal years
is as follows (in thousands):


Year
      Ended December 31,Country
            
            2009
            
            
            2008
            
            
            2007Brazil
            
            $
            53,192
            
            
            $
            127,360
            
            
            $
            72,053Japan
            
            
            35,914
            
            
            
            79,812
            
            
            
            40,592United
      Arab Emirates
            
            
            32,387
            
            
            
            69,714
            
            
            
            24,406USA
            
            
            28,137
            
            
            
            33,702
            
            
            
            19,785Peru
            
            
            26,870
            
            
            
            48,707
            
            
            
            31,728Chile
            
            
            16,564
            
            
            
            46,923
            
            
            
            11,219China
            
            
            12,944
            
            
            
            42,319
            
            
            
            21,624Argentina
            
            
            8,021
            
            
            
            8,312
            
            
            
            15,059Korea
            
            
            6,744
            
            
            
            15,699
            
            
            
            5,775Venezuela
            
            
            5,063
            
            
            
            9,903
            
            
            
            4,579Others
            
            
            22,144
            
            
            
            36,456
            
            
            
            14,689$
            247,980
            
            
            $
            518,907
            
            
            $
            261,509


Revenue
attributed to these countries is based on the location where the cargo is
loaded.  Time charter revenue by country cannot be allocated because
we do not control the itinerary of the vessel.




H.  Competition





The cargo
markets we serve are highly competitive.  Our competition on the
routes we serve consists primarily of regional shipping companies focused on the
breakbulk market, international bulk shipping companies competing in the large
lot segment of the bulk metal concentrates market and larger shipping concerns
that compete in diverse shipping segments in addition to the breakbulk
market.  We compete on the basis of targeting niche markets that
include trade routes, ports and cargoes not efficiently served by many container
and large dry bulk vessel operators.  We focus on smaller lots of
1,000 to 10,000 metric tons in the bulk metal concentrates market in Chile and
Peru, whereas other bulk shipping companies focus on shipments of 20,000 to
45,000 metric tons of bulk metal concentrates.  Additionally, we
compete with other regional shipping companies in providing logistics,
operations, port services and strategic planning.




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 12


I.  Environmental and Other
Regulations





Vessel
Environmental Regulations





Ocean
shipping and related operations are affected by extensive and changing
environmental protection and other laws and regulations.  These laws
and regulations take the form of international conventions and agreements,
including those administered by the IMO, and SOLAS, with which all
internationally trading vessels must comply, and national, state and local laws
and regulations, all of which are amended frequently.  Compliance with
these laws and regulations may entail significant expenses at any time,
including expenses for ship modifications and changes in operating procedures,
which could have an adverse effect on our results of
operations.  Subject to the discussion below and to the fact that the
kinds of permits, licenses and certificates required for the operation of the
owned vessels will depend upon a number of factors, we believe that we have and
will be able to obtain all permits, licenses and certificates material to the
conduct of our operations.




In the United
States, we are subject to various federal, state and local environmental laws,
ordinances and regulations requiring the cleanup of environmental contamination
resulting from a discharge of oil or other regulated material, and may be held
liable to a governmental entity or to third parties for remediation costs and
related damages in connection with environmental contamination.  These
laws typically impose cleanup responsibility, and liability, which under these
laws, has been interpreted to be strict and under certain circumstances, joint
and several, and subject to very limited statutory defenses.  The
costs of investigation, remediation or removal of such regulated materials and
damages resulting from their release may be substantial.




Although we
do not transport petroleum products, we are subject to the U.S. Oil Pollution
Act of 1990 (“OPA 90”), because we use petroleum products for fuel and because
the possibility of accidents involving oil tankers presents an exposure to our
vessels.  Under OPA 90, vessel owners, operators and bareboat
charterers are responsible parties and are jointly, severally and strictly
liable, unless the spill results solely from the act or omission of a third
party, an act of God or an act of war, for containment and cleanup costs and
other damages resulting from the discharge or threatened discharge of oil into
the navigable waters, adjoining shorelines or the 200 nautical mile exclusive
economic zone of the United States.  OPA 90 limits the liability of
responsible parties for such costs and damages to the greater of $1,000 per
gross ton of the vessel or $854,400 per non-oil tanker vessel that is over 300
gross tons, subject to possible adjustment for inflation.  The Federal
Water Pollution Control Act (“FWPCA”) imposes significant civil penalties as
well as strict, joint and several liability on responsible parties for removal
costs and imposes liability for natural resource damages arising from the
discharge of oil or other hazardous substances into U.S. navigable waters,
adjoining shorelines, waters of the contiguous zone and areas of the outer
continental shelf and deepwater ports.  The Comprehensive
Environmental Response, Compensation & Liability Act of 1980,
(“CERCLA”), imposes strict, and under certain circumstances, joint and several
liability on responsible parties for releases and threatened releases of
hazardous substances (other than oil) whether on land or at sea, subject to
limits depending on the nature of the vessel and its cargo.  Liability
under CERCLA is limited to the greater of $300 per gross ton or $5 million
for vessels over 300 gross tons carrying hazardous substances as
cargo.  The limits on liability under OPA 90, FWPCA and CERCLA do not
apply if the discharge is caused by gross negligence, willful misconduct, or in
the cases of OPA 90 and CERCLA, the violation by a responsible party or its
agent of any applicable safety, construction or operating
regulation.  The statutory limits on liability may not apply in
certain other instances, including if the responsible parties fail or refuse to
report the incident or refuse to cooperate and assist in connection with oil
removal activities.  In addition, OPA 90, FWPCA and CERCLA
specifically permit individual states to impose their own liability regimes with
regard to oil and hazardous waste releases occurring within their boundaries,
and many states have enacted legislation providing for unlimited liability for
oil spills.  In some cases, states that have enacted such legislation
have not yet issued implementing regulations under these laws.  We
intend to comply with all applicable state regulations in ports where we
call.




Pursuant to
regulations promulgated by the U.S. Coast Guard, responsible parties (as defined
in such regulations) must establish and maintain evidence of financial
responsibility in the amount of $1,000 per gross ton, for a non-tank
vessel.  The Protection & Indemnity (“P&I”) Associations,
which historically provided shipowners and operators financial assurance, have
refused to furnish evidence of insurance to responsible parties, and therefore
responsible parties have obtained financial assurance from other sources at
additional cost, including evidence of surety bond, guaranty or by
self-insurance.  In addition, in recent years the U.S. Coast Guard has
increased its inspection of vessels entering the United States to ensure they
comply with applicable environmental regulations, including regulations related
to the discharge of oil.







Table of Contents
 13







The IMO has
adopted regulations that are designed to reduce oil pollution in international
waters.  In complying with OPA 90, IMO and other regulations that may
be adopted, shipowners and operators may be forced to meet new maintenance and
inspection requirements, develop contingency arrangements for potential spills
and obtain additional insurance coverage.




The technical
manager of our vessels, Roymar, is ISO 14001:2004
certified.  Roymar has developed and implemented environmental
practices and monitoring thereof, which protect and preserve the marine
environment in which our managed vessels operate.  We have high
standards in our fleet for pollution prevention, regulatory compliance and
continual improvement of our environmental management activities.




Other
Regulations





Operation of
our vessels also is affected by the requirements of the ISM Code.  The
ISM Code mandates an extensive “Safety Management System” that includes, among
other things, the adoption of a safety and environmental protection policy
setting forth instructions and procedures for operating vessels safely and
describing procedures for dealing with emergencies.  Our owned vessels
and Roymar, the technical manager of our vessels, are currently ISM Code
certified.




We also are
required by various governmental and quasi-governmental agencies and other
regulatory authorities to obtain permits, licenses and certificates in
connection with our operations.  Some countries in which we operate
have laws that restrict the carriage of cargoes depending on the registry of a
vessel, the nationality of its crew and prior and future ports of call, as well
as other considerations relating to particular national interest.




J.  Security





We are
subject to a variety of initiatives intended to enhance vessel security,
including the Maritime Transportation Security Act of 2002, or
MTSA.  U.S. Coast Guard regulations require that vessels operating in
waters subject to the jurisdiction of the United States implement a number of
security measures.  Similarly, a new chapter of SOLAS, dealing
specifically with maritime security, which came into effect in July 2004,
imposes various detailed security obligations on vessels and port authorities,
most of which are contained in the International Ship and Port Facilities
Security Code, or ISPS Code.  The ISPS Code is designed to protect
ports and international shipping against terrorism.  Since
July 1, 2004, to engage in international trade, a vessel must have an
International Ship Security Certificate, or ISSC, which attests to the vessel’s
compliance with SOLAS security requirements and the ISPS Code, from a recognized
security organization approved by the vessel’s flag state.  ISPS Code
requirements include:


·
              on-board
      installation of automatic identification systems to provide a means for
      the  automatic transmission of safety-related information among
      similarly equipped ships and shore stations, including information on a
      ship's identity, position, course, speed and navigational
      status;
 ·
              on-board
      installation of ship security alert systems that do not sound on the
      vessel but instead alert the onshore
  authorities;
 ·
              development
      of vessel security plans;
 ·
              permanent
      marking of a ship's identification number on its
  hull;
 ·
              maintenance
      of a continuous synopsis record on-board showing a vessel's history,
      including the name of the vessel and of the state whose flag the ship is
      entitled to fly, the date on which the ship was registered with that
      state, the ship's identification number, the port at which the ship is
      registered and the name of the registered owners and their registered
      address; and
 ·
              compliance
      with flag state security certification
  requirements.


Table of Contents
 14




Coast Guard
regulations, intended to align with international maritime security standards,
exempt non-U.S. vessels from MTSA vessel security measures, provided they have a
valid ISSC on board.  Our vessels comply with all MTSA, SOLAS and ISPS
Code requirements and vessel certifications, which are kept current by
Roymar.





Acts of
piracy have historically affected ocean-going vessels trading in regions of the
world such as the South China Sea and in the Gulf of Aden off the coast of
Somalia. Throughout 2009 piracy incidents have continued in the Gulf of Aden,
with dry bulk vessels and tankers particularly vulnerable to such attacks. We
have implemented a corporate and vessel anti-piracy plan on all vessels
transiting high risk areas. These plans incorporate best prevention and
proactive practices in training, procedures and equipment recommended by
security consultants and industry panels. These protective measures are being
carried out for every transit in high risk areas, but do not ensure that an
attack will be repulsed.





K.  Insurance





Our business
is subject to normal hazards associated with owning and operating vessels in
international trade.  The operation of ocean-going vessels carries an
inherent risk of catastrophic marine disaster, including oil spills and other
environmental accidents, as well as property losses caused by adverse weather
conditions, cargo loss or damage, mechanical failures, human error, war,
terrorism and business interruption due to political circumstances in foreign
countries, hostilities, piracy and labor action.  Not all risk can be
insured against and the policies have certain deductibles and other limits on
coverage for which we are responsible.  We believe that our current
insurance coverage is adequate to protect us against normal accident-related
risk involved in the conduct of our business.  Our principal insurance
policies include:




Hull and machinery
and war risks insuranceincludes coverage for damages to a vessel’s
hull and machinery in a collision, as well as basic perils of the sea and
contributions for general average and salvage charges.  This coverage
includes the risk of actual or constructive total loss for our controlled
fleet.  Each vessel is insured for at least its fair market value,
with a deductible of $75,000 per vessel per incident under the hull and
machinery coverage and no deductible under the war risk coverage.  The
respective owners of the other vessels that we charter-in maintain insurance on
those vessels, and we maintain time charter liability insurance to a limit of
$500 million per incident.





Protection and
Indemnity, or P&I, Insurance includes coverage for oil pollution,
damage to docks and other installations and coverage against third-party
liabilities including collision liabilities encountered in our commercial
operations.  It also includes coverage for the death, injury or
illness of our crew.  Our P&I insurance is provided by mutual
marine insurance associations or P&I Clubs.  P&I Clubs are
formed by shipowners to provide protection from large financial losses to one
member by contribution towards the loss by all members.  We are
subject to potential additional premiums for prior years due to funding
requirements and coverage shortfalls of the clubs in the event claims exceed
available funds and reserves.  We also are subject to future premium
increases based on prior year underwriting loss experience.  We have
an overall coverage limit of approximately $5.0 billion for damage to cargo and
third party liabilities and a sublimit for oil pollution of $1.0 billion per
vessel for each accident or occurrence.  Deductibles range from $5,000
to $50,000 depending on the nature of the claim.





Other
Insurance is maintained for legal expenses with respect to freight,
demurrage and defense claims.  We also carry limited insurance
covering the loss of revenue resulting from extended vessel off-hire
periods.





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 15


L.  Taxation





U.S.
Taxation of Shipping Income





Unless exempt
from U.S. federal income taxation under the rules discussed below, a foreign
corporation generally is subject to U.S. federal income tax in respect of
shipping income derived from sources within the United States.  For
these purposes, 50% of shipping income that is attributable to transportation
that begins or ends, but that does not both begin and end, in the United States
constitutes income from sources within the United States ("U.S. source shipping
income").  Shipping income attributable to transportation exclusively
between non-U.S. ports will be considered to be 100% derived from sources
outside the United States.  Accordingly, in the absence of an exemption
from tax under Section 883 of the U.S. Internal Revenue Code, as amended (the
"Code") our gross U.S. source shipping income would be subject to either a 4%
tax imposed without allowance for deductions or to a net basis tax.





The net
tax regime is applicable if we are considered to have a fixed place of business
in the United States that is involved in the earning of U.S. source shipping
income and substantially all of such shipping income is attributable to
regularly scheduled transportation.  The U.S. source shipping income to
which the net tax regime is applicable, net of applicable deductions, would be
subject to an effective tax rate of up to 54.5% and certain interest paid would
be subject to a 30% branch interest tax, or such lesser percentage as may be
available under an applicable treaty.  Any gain derived from the sale
of a vessel, if considered to be from U.S. sources, also would be partly or
wholly subject to the net tax regime.  If the net tax regime does not
apply, the gross tax regime will apply.  Under the gross tax regime,
our U.S. source shipping income, which, by operation of the source rule, cannot
be more than 50% of our total shipping income, would be subject to a 4% tax
imposed on a gross basis, without allowance for deductions.





U.S.
source shipping income of a foreign corporation will qualify for exemption from
U.S. federal income tax under Section 883 of the Code if (i) the corporation is
organized in a foreign country that grants an equivalent exemption to U.S.
corporations (the "country of organization requirement"), (ii) the stock of the
corporation, or the direct or indirect corporate parent thereof (provided the
parent is organized in a country that satisfies the country of organization
requirement) is "primarily and regularly traded on an established securities
market" in such country, in another country that grants the equivalent exemption
from tax to U.S. corporations or in the United States, and (iii) certain other
requirements are met, including that non-qualified shareholders, each holding 5%
or more of a class of stock of the corporation, do not own 50% or more of the
total value of such class of stock for more than one-half the days of taxable
year (together, the "publicly traded test").  This exemption is available
whether or not the corporation has or is considered to have a fixed place of
business in the United States that is involved in the earning of U.S. source
shipping income.  Regardless of whether our U.S. source shipping income
qualifies for exemption under Section 883 of the Code, gain realized on a sale
of a vessel generally will not be subject to U.S. federal income tax, provided
the sale is considered to occur outside of the United States for U.S. federal
income tax purposes.




We
currently qualify for exemption under Section 883 of the Code, because
International and its subsidiaries currently are incorporated in jurisdictions
that satisfy the country of organization requirement and we satisfy the publicly
traded test by virtue of International’s Class A ordinary shares being primarily
traded on the NASDAQ Global Select Market.  Further, the aggregate
ownership of all non-qualified 5% shareholders is less than 50% of the total
value of the Class A ordinary shares.  If at any time we fail to satisfy
the publicly traded test and we are unable to qualify for another applicable
exemption, our U.S. source shipping income would be subject to U.S. federal
income tax, either under the gross tax or under net tax regime, each of which is
described above.





Federal
and State Taxation of TBS International plc’s U.S. Subsidiaries





Our U.S.
subsidiaries, Roymar and TBS Shipping Services and its subsidiaries, are subject
to U.S. federal and state income taxes on the income earned by the respective
subsidiary.





Table of Contents
 16


Ireland
Taxation of TBS International plc





TBS
International plc, the successor issuer to TBS International Limited, is
incorporated in Ireland. TBS International plc as a separate entity is subject
to tax in Ireland on its worldwide income and gains at 25% with the exception of
dividend income received from its subsidiaries that are sourced from active
trading profits, which is subject to tax in Ireland at 12.5%. TBS International
plc should be considered an investment company for Irish tax purposes and should
be allowed to deduct expenses of management against its income and gains.
However, as it is not anticipated that TBS International plc will receive any
significant dividends from its subsidiaries in the foreseeable future it
 is not expected that TBS International plc will have any material income
subject to Irish taxation.


Bermuda
Taxation of Our Subsidiary, TBS International Limited
 
 There
currently is no Bermuda income or profits tax, withholding tax, capital gains
tax, capital transfer tax, estate duty or inheritance tax payable by our
subsidiary TBS International Limited.  We have obtained an assurance from
the Minister of Finance of Bermuda under the Exempted Undertakings Tax
Protection Act 1966 that, in the event that any legislation is enacted in
Bermuda imposing any tax computed on profits or income, or computed on any
capital asset, gain or appreciation or any tax in the nature of estate duty or
inheritance tax, such tax shall not, until March 28, 2016, be applicable to TBS
International Limited  or any of its operations, debentures or
other obligations except insofar as such tax applies to persons ordinarily
resident in Bermuda or to any taxes payable by TBS International
Limited  in respect of real property owned or leased by us in
Bermuda.





Marshall
Islands Taxation of TBS International plc





Pursuant
to the Marshall Islands Revised Code (the Association Law), a Marshall Islands
non-resident corporation is exempt from any corporate profit tax, income tax,
withholding tax on revenues of the entity, asset tax, tax reporting requirement
on revenues of the entity, stamp duty, exchange controls or other
fees.  There is an agreement between the Marshall Islands and the
United States for the exchange of information with respect to
taxes.





M.  Website Access to Reports





We make
all of our filings with the SEC, including this annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all related
amendments, available free of charge on our website at www.tbsship.com, under
the Investor Relations tab, "SEC Filings" section.  These reports are
available soon after they are filed electronically with the SEC.  Our
SEC filings are also available at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, DC 20549.  Investors may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.  In addition, the SEC maintains an Internet site at
http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC, from which investors
can electronically access our SEC filings.





Additionally,
our corporate governance materials, including the charters of the Audit,
Compensation, and Nominating and Corporate Governance Committees, the Corporate
Governance Guidelines, and the Code of Business Conduct and Ethics may also be
found under the "Governance" section of our website at www.tbsship.com.  A
copy of the foregoing corporate governance materials is available free of charge
upon written request.  In addition, we intend to post on our website
at www.tbsship.com any
amendment to, or waiver from, a provision of our Code of Business Conduct and
Ethics that applies to our principal executive officer, principal financial
officer, corporate controller and other employees performing similar functions
within four business days following the date of such amendment or
waiver.





Item 1A.  Risk Factors


The following
risk factors and other information included in or incorporated by reference into
this report should be carefully considered.  Additional risks and
uncertainties not presently known to us may also impair our business
operations.  If any of the following risks occur, our business,
financial condition, operating results and cash flows could be materially
adversely affected and the trading price of our Class A ordinary shares
could decline.
 
 Table of Contents
 17
 Risk
Factors Relating to the Shipping Industry and Current Economic
Conditions
 
  The
global financial crisis has had, and may continue to have, an impact on our
business and financial condition.  Additionally, protracted economic
weakness could have a material adverse effect on our operating income, cash
flows and ability to service our debt obligations.
  The dry bulk
shipping industry is volatile and unpredictable.  In 2009, we
experienced added pressure on freight rates directly correlating to the global
financial crisis.  The global financial crisis reduced the
availability of liquidity and credit to borrowers, which further pressured
shipping rates.  Many lenders and institutional investors reduced and,
in some cases, ceased to provide funding and letters of credit necessary to
finance purchases of steel products, agricultural commodities, metal
concentrates and aggregates.  As a result, corresponding with a
decline in freight rates there was a reduced demand for steel products,
agricultural commodities, metal concentrates and aggregates.
 
 Shipping
rates and the demand for shipping services correspond directly with the demand
and price for commodities.  Global economic conditions adversely
affected the demand for commodities and in conjunction with the volatile prices
for steel products, agricultural commodities, metal concentrates and aggregates,
the demand for shipping services had moderated.  The market turmoil
and tightening of credit led to a widespread reduction of business activity, in
general, which adversely affected demand for our services.  These
conditions are continuing into early 2010.
 
 There
continues to be uncertainty as to the long-term success of international efforts
to address the global economic crisis.  We cannot predict the timing
and severity of future global economic or shipping
downturns.  However, a protracted economic slowdown, including
recessions in major geographic regions, could reduce the demand for shipping
services while decreasing freight rates and increasing our costs, which could
have a material adverse effect on our results of operations and financial
condition, including causing asset impairments, as well as a material adverse
affect on our operating income, cash flows and the trading price of our
stock.
  Moreover,our business is exposed
to risks associated with the creditworthiness and stability of our suppliers,
customers and business partners.  The consequences of such adverse
effects could include interruptions or delays in performance of our contracts,
reductions, renegotiations and interruptions in customer contracts, delays in or
the inability of customers to obtain financing or letters of credit to finance
shipping, and bankruptcy of customers or other creditors.  Any of
these events may adversely affect our cash flow, profitability and financial
condition.  Further, a continued downturn in the economy and our revenues
could adversely affect our ability to maintain specified financial ratios and
satisfy financial covenants required by our credit facilities.
 
 The current
worldwide financial crisis has reduced the availability of liquidity and credit
to fund or support the continuation and expansion of business operations
worldwide.  Continued disruption of the credit markets has affected
and could continue to adversely affect our suppliers’ and customers’ access to
credit, which supports the continuation and expansion of their businesses
worldwide and could result in disruptionsin
our business operations, contract cancellations or suspensions and payment
delays or defaults by our customers.  If current market conditions
continue for a protracted period, our ability to access credit on favorable
terms, or at all, may be adversely affected, which may limit our ability to
finance future operations or capital needs, acquire vessels or pursue business
opportunities.
 
 The
global financial crisis has had an adverse impact on our vessel values and cash
flows, which in turn has adversely affected our ability to comply with certain
financial covenants in our credit facilities.
  One of the
significant effects of the current global financial downturn has been a
reduction in vessel values, which directly affected our ability to comply with
certain financial covenants in our credit facilities.  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 and to prepay principal or deliver additional security in
the event that the fair market value of the vessels falls below limits specified
in the loan agreement..  We concluded in early 2009, that due to the
downturn in the shipping market and based on third-party vessel valuations, we
did not meet our collateral coverage requirements.  Consequently, we
obtained waivers from all of our lenders to the collateral coverage ratio and
financial covenants through January 1, 2010.   As a result of the loan
modification two additional covenants were introduced that require us
to have a minimum end of month cash balance and a minimum EBITDA to interest
expense ratio.
 
 Table of Contents
 18
 We met each
of the additional covenants in 2009.  In late December 2009, while
economic conditions continued to improve, we concluded that based upon internal
projections and the four quarter look-back methodology used in computing the
ratios, it was probable that we would be in violation of the leverage and fixed
charge coverage ratios on January 1, 2010 after the waivers
expire.  Accordingly, we obtained from all of our lenders, an
extension of the waivers until April 1, 2010.  The additional
covenants are applicable through the extended waiver period.
 
 Based on
current internal projections, however, we anticipate that we will not meet
certain of the reinstated covenant requirements during the next 12
months.  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 12 months.  Accordingly,
long-term loans are classified as a current liability in our consolidated
balance sheet at December 31, 2009.
 
 We are in the
process of discussing permanent modifications to our credit facilities with our
lenders.  Additionally, we are seeking alternative financing sources
to repay our credit facilities. We cannot give any assurance that we will be
able to obtain the permanent covenant modifications and /or other
financing.  The failure to obtain the permanent covenant modifications
or other financing would have a material adverse effect on our business,
operations, financial condition and liquidity and would raise substantial doubt
about our ability to continue as a going concern.
 
 Costs
and revenues in the shipping industry are volatile.
 
 The shipping
industry historically has experienced volatility in freight rates, the cost of
fuel oil, the cost and availability of crew, port charges and currency exchange
rates, as well as in vessel charter rates and vessel values due to changes in
the level and pattern of global economic activity and the highly competitive
nature of the world shipping industry.  In addition, an increasing
number of countries are regulating the sulfur content of fuel oil, which may
increase the cost of such fuel.  Changes to marine regulatory regimes in
the ports at which our vessels call also may increase our
costs.
  Our revenue
is influenced by a number of factors that are difficult to predict with
certainty, including global and regional economic conditions, developments in
international trade, changes in seaborne and other transportation patterns, the
effects of global climate change on developing economies and agricultural
production, weather patterns, port congestion, canal closures, political
developments, armed conflicts, acts of terrorism, embargoes and
strikes.  Demand for our transportation services is influenced by the
demand for the goods we ship, including steel products, agricultural
commodities, metal concentrates and aggregates, which in turn is affected by
general economic conditions, commodity prices and competition.  Steel
products, agricultural commodities, metal concentrates and aggregates accounted
for approximately 24.2%, 20.7%, 15.1%, and 13.5%, respectively, of our
total voyage revenues in 2009.  Beginning in the fourth quarter of
2008 and continuing through most of 2009 the worldwide economy experienced a
sluggish demand for steel products, metal concentrates, agricultural
commodities, and aggregates.  The softened demand for products and
commodities translated into a decreased demand for shipping.  However,
a future worsening of worldwide economic conditions could result in a decrease
in demand for steel products, metal concentrates, agricultural commodities, and
aggregates, which could adversely affect our results of
operations.
  Our
business depends to a significant degree on the stability and growth of the
Asian and Latin American economies.
 Freight rates
for dry bulk transport, whether computed on a spot or period basis, were at or
near all-time highs in 2008 as compared to prior years, as were prices for both
new and secondhand vessels.  The strength of the shipping industry in
the past several years has been attributable, to a significant degree, to the
rapid growth of the Chinese economy.  Economic growth in China caused
unprecedented demand for raw materials from Latin America, including iron ore,
bauxite, soybeans, timber, zinc, manganese and copper.  These raw
materials generally are transported by ocean freight.
 
 The growth of
the Chinese economy stimulated growth in other Asian economies as
well.  Any pronounced slowdown or decline in the Chinese economy could
be expected to have significant adverse effects on the economies of Latin
American and Asian countries and on the demand for our services and could be
expected to result in declines in freight rates and the value of our
vessels.  We expect that a significant decline in the Asian and Latin
American economies would have a materially adverse effect on our results of
operations.





Table of Contents
 19


High
or volatile oil prices could adversely affect the global economy and our results
of operations.





As oil
prices continue to fluctuate, and experience periods of prolonged volatility,
the global economy could weaken significantly.  A global recession
would significantly reduce the demand for ocean freight while our fuel costs
could increase.  A significant reduction in the demand for ocean
freight combined with increased fuel costs would have a material and adverse
impact on our results of operations and financial condition.





Acts
of piracy on ocean-going vessels have increased recently in frequency and
magnitude, which could


adversely
affect our business.





Beginning
in 2008, acts of piracy have risen steeply.  While international
efforts have been and continue to be made to prevent them, acts of piracy
continue to occur, particularly off the coast of Somalia in the Gulf of Aden
and  in the South China Sea.  If piracy attacks occur in
regions in which our vessels are deployed, that are characterized by insurers as
‘‘war risk’’ zones or ‘‘war and strikes’’ listed areas, premiums payable for
such insurance coverage could increase
significantly and such insurance coverage may be more difficult to
obtain.  Crew costs, including those due to employing on-board
security guards, could increase in such circumstances.  In addition,
while we
believe the time  charterer remains liable for charter payments when a
vessel is seized by pirates for the period specified in the
charter agreement, the charterer may dispute this and withhold charter fees
until the vessel is released.  A charterer may also claim that a
vessel seized by pirates was not "on-hire" for a certain number of days and it
is therefore entitled to cancel the charter, a claim that we would
dispute.  The detention of any of our vessels hijacked as a result of
an act of piracy and any unrecoverable costs, increases in insurance premiums
payable, or losses due to the unavailability of insurance coverage, could have a
material adverse impact on our business, financial condition, results of
operations and cash flows.





In
the highly competitive international shipping market, we may not be able to
compete with new entrants or established companies with greater
resources.





We employ
our vessels in highly competitive markets that are capital-intensive and highly
fragmented.  Competition arises primarily from other vessel owners,
many of whom have substantially greater resources than we
have.  Competition for the transportation of cargo by sea is intense
and depends on price, location, size, age, condition and the acceptability of
the vessel and its operators.  Due in part to the highly fragmented
market, competitors with greater resources could enter our market and operate
larger fleets through consolidation or acquisitions and may be able to offer
lower rates and higher quality vessels than we are able to offer.





Worldwide
increases in shipping capacity may further reduce shipping rates, which could
adversely affect our results of operations.





The
worldwide supply of shipping capacity is influenced by the type of vessel,
number of newbuilding deliveries, the scrapping of older vessels, vessel
casualties and the number of vessels that are out of service.  An
excess in shipping capacity, particularly dry bulk carriers, may result in a
reduction of shipping rates, which may adversely affect the profitability of our
shipping services.





Failure
to comply with international safety regulations could subject us to increased
liability, adversely affect our insurance coverage and result in a denial of
access to, or detention in, certain ports.





The
operation of our vessels is affected by the requirements of the International
Maritime Organization's International Safety Management Code for the Safe
Operation of Ships and Pollution Prevention, or the ISM Code.  The ISM
Code requires shipowners and bareboat charterers to develop and maintain an
extensive "Safety Management System" that includes the adoption of a safety and
environmental protection policy setting forth instructions and procedures for
safe operation and describing procedures for dealing with
emergencies.  Any failure to comply with the ISM Code could subject us
to increased liability, could invalidate existing insurance or decrease
available insurance coverage for the affected vessels and could result in a
denial of, access to, or detention in certain ports, all of which could
materially and adversely affect our results of operations and
liquidity.





Table of Contents
 20


We
could be adversely affected by violations of the U.S. Foreign Corrupt Practices
Act and similar worldwide anti-bribery laws.





The U.S.
Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally
prohibit companies and their intermediaries from making improper payments to
non-U.S. officials for the purpose of obtaining or retaining
business.  Our policies mandate compliance with these
laws.  We operate in many parts of the world that have experienced
governmental corruption to some degree and, in certain circumstances; strict
compliance with anti-bribery laws may conflict with local customs and
practices.  Despite our training and compliance program, we cannot
assure you that our internal control policies and procedures always will protect
us from reckless or negligent acts committed by our employees or
agents.  Violations of these laws, or allegations of such violations,
could disrupt our business and result in a material adverse effect on our
business and operations.




Compliance
with environmental and other laws and regulations could adversely affect our
business.





Extensive
and changing environmental protection and other laws and regulations directly
affect the operation of our vessels.  These laws and regulations take
the form of international conventions and agreements, including the
International Maritime Organization, or IMO, conventions and regulations and the
International Convention for the Safety of Life at Sea, or SOLAS, which are
applicable to all internationally traded vessels, and national, state and local
laws and regulations, all of which are amended frequently.  Under
these laws and regulations, various governmental and quasi-governmental agencies
and other regulatory authorities may require us to obtain permits, licenses and
certificates in connection with our operations.  Some countries in
which we operate have laws that restrict the carriage of cargoes depending on
the registry of a vessel, the nationality of its crew and prior and future ports
of call, as well as other considerations relating to particular national
interest.  An increasing number of jurisdictions also regulate the
sulfur content of fuel used by our vessels.  Changes in governmental
regulations and safety or other equipment standards, the passage of new
regulations or standards in response to global climate change,  may
require unbudgeted expenditures for alterations, special surveys, drydocking or
the addition of new equipment for our vessels or increased fuel and operating
costs  Port authorities in various jurisdictions may demand that
repairs be made before allowing a vessel to sail, even though that vessel may be
certified as "in class" and in compliance with all relevant maritime
conventions.  Compliance with these laws and regulations may require
significant expenditures, including expenses for ship modifications and changes
in operating procedures or penalties for failure to comply with these laws and
regulations, which could adversely affect our results of
operations.
 
 Pursuant
to regulations promulgated by the U.S. Coast Guard, responsible parties (as
defined in such regulations) must establish and maintain evidence of financial
responsibility.  The P&I Associations, which historically provided
shipowners and operators financial assurance, have refused to furnish evidence
of insurance to responsible parties, and therefore responsible parties have
obtained financial assurance from other sources at additional cost, including
evidence of surety bond, guaranty or by self-insurance.  In addition,
in recent years the U.S. Coast Guard has increased its inspection of vessels
entering the United States to ensure they comply with applicable environmental
regulations, including regulations related to the discharge of
oil.  Any inability on our part to continue to comply with any of
these Coast Guard regulations would have a material adverse effect on our
results of operations.
 
 Port
State authorities in general and in certain jurisdictions in particular have
become more active in inspecting older vessels visiting their ports and, in
certain instances, demanding that repairs be made before allowing a vessel to
sail, even though that vessel may be fully insured, in class and in compliance
with all relevant maritime conventions including SOLAS.  Vessels under
certain flags are more likely to be subject to inspections by the coast
guard.  Additional expenses may be incurred for unscheduled repairs
mandated by port state authorities.


Table of Contents
 21


The
IMO has adopted regulations that are designed to reduce oil pollution in
international waters.  In complying with U.S. Oil Pollution Act of
1990, or OPA 90 and IMO regulations and other regulations that may be adopted,
shipowners and operators may be forced to incur additional costs in meeting new
maintenance and inspection requirements, in developing contingency arrangements
for potential spills and in obtaining insurance coverage.  Additional
laws and regulations may be adopted that could have a material adverse effect on
our results of operations.  In the United States and in other
countries where we operate, we are subject to various federal, state or local
environmental laws, ordinances and regulations and may be required to clean up
environmental contamination resulting from a discharge of oil or hazardous
substances, such as a discharge of fuel.  We also may be held liable
to a governmental entity or to third parties in connection with the
contamination.  These laws typically impose cleanup
responsibility.  Liability under these laws has been interpreted to be
strict, joint and several, and subject to very limited statutory
defenses.  The costs of investigation, remediation or removal of such
substances and damages resulting from such releases could be substantial and
could adversely affect our results of operations.





The operation
of any ocean-going vessel carries with it an inherent risk of marine disaster,
environmental mishaps and collision or property losses.  In the course
of operating a vessel, marine disasters such as oil spills and other
environmental mishaps, cargo loss or damage, business interruption due to
political developments, labor disputes, strikes and adverse weather conditions
could result in loss of revenues, liabilities or increased costs.  We
transport bulk cargoes such as fertilizer, salt and coal which, if not
transported properly, could pose a risk to our vessels and to the
environment.  We cannot assure you that any insurance we maintain
would be sufficient to cover the cost of damages or the loss of income resulting
from a vessel being removed from operation or that any insurance claims would be
paid or that insurance will be obtainable at reasonable rates in the
future.  Any significant loss or liability for which we are not
insured, or for which our insurers fail to pay us, could have a material adverse
effect on our financial condition.  In addition, the loss of a vessel
would adversely affect our cash flows and results of operations.





Risk
associated with the shipping industry could affect our business and reputation,
which could adversely affect our results of operations and share
price.





As mentioned
above, the operation of ocean-going vessels carries inherent risk of marine
disaster and environmental mishap.  The involvement of our vessels in
a marine disaster or an environmental mishap will harm our reputation as a safe
and reliable vessel owner and operator could have a material adverse effect on
our financial condition and results of operations.





Marine
claimants could arrest our vessels, which could damage our on-time performance
reputation and result in a loss of cash flow.





Under
general maritime law in many jurisdictions, crew members, tort claimants,
claimants for breach of certain maritime contracts, vessel mortgagors, suppliers
of fuel, materials, goods and services to a vessel and shippers and consignees
of cargo may be entitled to a maritime lien against that vessel for unsatisfied
debts, claims or damages.  In many circumstances, a maritime lien
holder may bring an action to enforce its lien by "arresting" a
vessel.  In some jurisdictions, under the "sister ship" theory of
liability, a claimant may arrest not only the vessel subject to the claimant's
maritime lien, but also any "associated" vessel owned or controlled by the legal
or beneficial owner of that vessel.  The arrest of one or more of our
vessels could result in a loss of cash flow or require us to pay substantial
amounts to have the arrest lifted.  Any interruption in our sailing
schedule and our on-time performance could adversely affect our customer
relationships.





Governments
could requisition our vessels during a period of war or emergency, resulting in
a loss of earnings.





A
government could requisition one or more of our vessels for title or for
hire.  Requisition for title occurs when a government takes control of
a vessel and becomes its owner, while requisition for hire occurs when a
government takes control of a vessel and effectively becomes its charterer at
dictated charter rates.  Generally, requisitions occur during periods
of war or emergency, although governments may elect to requisition vessels in
other circumstances.  Although we would be entitled to compensation in
the event of a requisition of one or more of our vessels, the amount and timing
of payment would be uncertain.  Government requisition of one or more of
our vessels could have a material adverse effect on our cash flows and results
of operations.





Table of Contents
 22


Risks
Factors Relating to Our Business





Our
competitive advantage in niche markets may be eliminated.





Our fleet
primarily consists of vessels suited to niche markets not efficiently served by
container ships or large dry bulk vessels.  If the markets in which we
successfully compete upgrade their port infrastructure to accommodate larger
vessels, or if the volume of cargo shipped from these markets increases
sufficiently, container ships or large dry bulk vessels would be able to serve
these markets more efficiently.  Because operators of container ships
and large dry bulk vessels have significantly lower costs per cargo ton than we
do, their entry into our markets could result in increased price competition and
affect our ability to maintain our rates.  Our future operating
results could be adversely affected if we are unable to identify and efficiently
serve new niche markets in the face of more effective competition in our current
markets.





We
depend upon a limited number of customers for a large part of our
revenue.





Our top ten
customers by revenue accounted for a significant portion of our consolidated revenue.  If
any of these customers were to reduce significantly the amount of cargoes
shipped on our
vessels, our results of operations could be adversely affected.





As
our fleet ages, the risks associated with older vessels could adversely affect
our operations.





In
general, the costs to maintain an ocean-going vessel in good operating condition
increase with the age of the vessel.  As of December 31, 2009, the
average age of the 48 vessels in our controlled fleet was 22
years.  We estimate that the economic useful life of most multipurpose
tweendeckers and handymax bulk carriers is approximately 30 years, depending on
market conditions, the type of cargo being carried and the level of
maintenance.  Some of our dry bulk carriers are used to transport
products such as coal, salt or fertilizer that may damage our vessels and reduce
their useful lives, if we do not follow specified maintenance and cleaning
routines.  Older vessels may develop unexpected mechanical and
operational problems despite adherence to regular survey schedules and proper
maintenance.  Due to improvements in engine technology, older vessels
typically are less fuel-efficient than more recently constructed
vessels.  Cargo insurance rates increase with the age of a
vessel.  Governmental regulations and safety or other equipment
standards related to the age of vessels may require expenditures for alterations
or the addition of new equipment, to our vessels and may restrict the type of
activities in which our vessels may engage.  We cannot assure you that
we will be able to operate our vessels profitably during the remainder of their
projected useful lives or that we will be able to sell them profitably when we
can no longer utilize them in our fleet.




Certain
of our expenses are primarily
inelastic, and any unexpected decrease in revenue would harm
us.




Generally,
expenses such as fuel, lube oil, crew wages, insurance, stores, repairs and
maintenance do not vary significantly with the amount of cargo
carried.  As a result, a change in the tons of cargo carried or a
decrease in freight rates would have a disproportionate effect on our operating
and financial results.  Any pronounced slowdown or decline in demand
for shipping may require us to run voyages at less than full capacity in an
effort to maintain all of our shipping routes.  Our inability to fully
book a ship would reduce revenue on each voyage while the vessel and voyage
costs would remain fairly constant.  We do not have long-term
contracts with our customers and if we are unable to fully book our vessels, we
may operate voyages at a loss.  Additionally, we could be affected by
factors beyond our control such as irrational pricing from the
market.  Accordingly our profitability and liquidity would be
adversely affected.


Table of Contents
 23
 We
may be required to record a significant charge to earnings if our long-lived
assets or goodwill becomes impaired.
 
 We are
required to review for impairment whenever events or circumstances indicate that
the carrying amount of an asset may not be recoverable.  Management
performs impairment analyses when certain triggering events
occur.  Factors that would indicate potential impairment may include,
but are not limited to, a significant decrease in the market value of the
long-lived asset, a significant change in the long-lived asset’s physical
condition, and operating or cash flow losses associated with the use of the
long-lived asset.  We may be required to record a significant charge
to earnings in our financial statements during the period in which any
impairment of our long-lived assets is determined.


Goodwill is required to be tested for
impairment at least annually or when events or changes in circumstances indicate
the carrying value may not be recoverable.  Factors that may be
considered a change in circumstances indicating that the reporting unit’s
carrying value of goodwill may not be recoverable include a decline in stock
price and market capitalization, or other materially adverse
events.  We may be required to record a significant charge to earnings
in our financial statements during the period in which any impairment of our
goodwill is determined.  This may adversely impact our results of
operations.  As of December 31, 2009, our goodwill was $8.4million.





We
are subject to regulation and liability under environmental laws that could
require significant expenditures and adversely affect our financial condition,
results of operations and cash flows.





Our
business and the operation of our vessels are materially affected by government
regulation in the form of international conventions, national, state and local
laws and regulations in force in the jurisdictions in which the vessels operate,
as well as in the country or countries of their registration.  Because
such conventions, laws, and regulations are often revised, we may not be able to
predict the ultimate cost of complying with such conventions, laws and
regulations or the impact thereof on the resale prices or useful lives of our
vessels.  Additional conventions, laws and regulations may be adopted,
which could limit our ability to do business, cause us to incur the costs of
retrofitting our vessels or result in financial penalties, thereby adversely
affecting our financial condition, results of operations and cash
flows.





We also
are affected by the requirements of the ISM Code.  The ISM Code
mandates an extensive "Safety Management System" that includes, among other
things, the adoption of a safety and environmental protection policy setting
forth instructions and procedures for operating vessels safely and describing
procedures for dealing with emergencies.  Material noncompliance with
the ISM Code may subject shipowners or bareboat charterers to increased
liability, may lead to decreases in available insurance coverage for affected
vessels and may result in the denial of access to, or detention in, certain
ports.  Our owned vessels and Roymar, the technical manager for our
vessels, are ISM Code certified.  However, we cannot assure you that
such certification will be maintained indefinitely.





We are
required by various governmental and quasi-governmental agencies and other
regulatory authorities to obtain permits, licenses and certificates in
connection with our operations.  Some countries in which we operate,
have laws that restrict the carriage of cargoes depending on the registry of a
vessel, the nationality of its crew and prior and future ports of call, as well
as other considerations relating to particular national interest.  We
cannot assure you that any failure to comply with these requirements would not
have a material adverse effect on our results of operations.





Vessel
drydockings could adversely affect our operations.





We
anticipate that we will have an average of approximately 19 vessels per year
being drydocked, based on our current controlled fleet of 48 vessels and the
requirement to drydock each vessel twice during a five-year
cycle.  During 2010, we expect to drydock 17 vessels, including two
vessels, which entered drydock in November and December 2008.  In
addition, we will need to reposition our vessels or charter-in outside vessels
to accommodate our drydocking schedule and business
needs.  Approximately 30 of our vessels regularly trade in the
Atlantic and Middle East region; consequently, drydocking our vessels in Chinese
shipyards require complex logistics planning.  We are investigating
having the drydockings done at shipyards closer to where some of our vessels
trade.  The loss of earnings while the vessel is being drydocked, as
well as the repositioning of our vessels in response to the drydocking and the
actual costs of the drydocking and possible charter-in expense in response to
the drydocking, could have a material adverse effect on our cash flows and
results of operations.





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 24


Our
vessels may suffer damage and we may need to unexpectedly drydock a vessel,
which could adversely affect our operations.





If a
vessel suffers damage, it may need to be repaired at a drydocking
facility.  The costs of drydock repairs are unpredictable and can be
substantial.  The loss of earnings while the vessel is being repaired
and the repositioning of our vessels in response to the unexpected drydocking,
as well as the actual costs of the repairs, would have a material adverse effect
on our cash flows and results of operations.  We may not have
insurance that is sufficient to cover all of these costs or losses.





Construction
delays or mechanical faults could affect our ability to replace aging vessels or
grow our vessel fleet.





We depend on
China Communications Construction Company Ltd. and Nantong Yahua Shipbuilding
Group Co., Ltd.  to construct and deliver the new multipurpose
tweendeckers that we contracted to purchase on a timely basis and in good
working order.  The complicated nature of building these kinds of
vessels involves risks.  Delays or mechanical faults in vessel
construction may affect our ability to increase cargo volumes on key routes or
to win new customers and could necessitate unscheduled drydocks and repairs of
vessels.  Shipyard insolvency and other industrial actions could also
delay or indefinitely postpone the timely delivery of new
vessels.  Construction delays or mechanical faults in new vessels
could have a material adverse effect on our ability to replace aging vessels,
our ability to grow our vessel fleet, our cash flows and our results of
operations.





There
are risks associated with the operation of secondhand vessels.





Part of our
previous business strategy involved growing our fleet through the purchase of
secondhand vessels.  Global economic conditions and the reduction in
demand for shipping services have caused us to reevaluate acquiring secondhand
vessels.  Pending any dramatic change in global economic conditions we
have decided to suspend any further acquisitions of secondhand
vessels.  Secondhand vessels generally carry no warranties from the
sellers or manufacturers.  Although we inspected secondhand vessels
prior to purchase, an inspection normally would not provide us with the same
knowledge about their condition that we would have if they had been built for
and operated exclusively by us.  Secondhand vessels may have
conditions or defects that we were not aware of when we bought the vessel and
that may require us to undertake costly repairs.  These repairs may
require us to put a vessel into drydock, which would reduce our fleet
utilization.  The costs of drydock repairs are unpredictable and can
be substantial.  We may not have insurance that is sufficient to cover
all of these repair costs or losses and may have to pay drydocking costs not
covered by our insurance.  The loss of earnings while our vessels were
being repaired in drydock and repositioned, as well as the actual cost of those
repairs, would decrease our income from operations.  Additionally, our
future operating results could be adversely affected if some of the secondhand
vessels do not perform as we expect.





The
market values of our vessels, which have declined from historically high levels,
may fluctuate significantly, which could cause us to breach covenants in our
credit facilities and result in foreclosure of the vessels securing such credit
facilities.





The shipping
industry historically has experienced volatility in vessel
valuations.  The market value of vessels is highly volatile and will
continue to fluctuate depending on economic and market conditions affecting the
shipping industry and prevailing charter hire rates, vessel supply and rates of
vessel scrapping, competition from other shipping companies and other modes of
transportation, types, sizes and age of vessels, applicable governmental
regulations and the cost of newbuildings.  The market price for
secondhand vessels during the past few years had been at all-time highs;
however, in late 2008 market prices of all vessel types declined when
shipping rates began to fall.  This decline in market price continued
until late 2009 when market prices began to stabilize. If the market value of
our fleet were to decline again we may be in breach of the collateral covenants
again and we may be unable to remedy the relevant breach.  Our lenders
could then accelerate our debt and foreclose on our controlled
fleet.





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 25


We
may not be able to grow our vessel fleet or effectively manage our
growth.





A principal
focus of our long-term strategy is to continue to grow by increasing the number
of vessels in our fleet and by taking advantage of changing market conditions,
which may include increasing the frequency of service on routes we already
operate or adding new routes and expanding into other regions.  Our
future growth will depend upon a number of factors, some of which we or our
affiliated service company, TBS Commercial Group, can control and some of which
TBS Commercial Group or we cannot control.  These factors include our
ability to:


●
              identify
      vessels for acquisitions;●
              integrate
      any acquired vessels successfully with our existing
      operations;●
              hire,
      train and retain qualified personnel to manage and operate our growing
      business and fleet;●
              identify
      additional new markets and trade routes;●
              recruit,
      train and retain the port captains and other local staff required for our
      affiliated service companies to provide the necessary level of service in
      any new or expanded markets;●
              improve
      our operating and financial systems and controls; and●
              obtain
      required financing for our existing and new operations on acceptable
      terms.





The failure
to effectively identify, purchase, develop and integrate any newly acquired
vessels could adversely affect our business, financial condition and results of
operations.  Our current operating and financial systems may not be
adequate as we expand the size of our fleet and our attempts to improve those
systems may be ineffective.  As our fleet expands, we may have excess
capacity if demand for our services does not grow as we expect.  In
addition, as we expand our fleet, our service companies will need to hire
suitable additional management and administrative personnel and our affiliated
service companies will need to recruit and train port captains and other local
staff necessary to meet the needs of our growing business.  We cannot
assure you that we will be able to hire suitable employees as we expand our
business.  If our operating and financial systems are not effective or
if we or our affiliated service companies cannot recruit and retain suitable
employees as we grow, our future operations could be adversely
affected.





We
may be unable to pass along increased fuel costs to our customers.





A majority of
our revenue is derived from freight voyages for which we bear the fuel expense,
in contrast to charters, for which the charterer bears the fuel
expense.  Fuel expense represented approximately 49% of our voyage
expense for the year ended December 31, 2009, compared to approximately 51% in
2008 and 44% in 2007.  If we are unable to pass along increased fuel
costs to our customers, high oil prices could adversely affect our results of
operations.





Shortages
of qualified crews, engineers and vessel captains could adversely affect our
business.





Newbuilding
programs, including our own, have increased the demand for qualified crew,
engineers and vessel captains to work on our vessels, and stringent
certification standards required by national and international regulations, such
as "Standards of Training, Certification and Watchkeeping for Seafarers"
promulgated by the IMO, make it difficult to recruit qualified
crewmembers.  In 2009 we used four unaffiliated manning agents,
Aboitiz Jebsen Bulk Transport Corp., Intermodal Shipping, Inc., Magsaysay
Maritime Corp. and C. F. Sharp Crew Management, Inc. to provide Filipino
officers and non-officers to crew our vessels.  If we are unable to
recruit and retain enough crew, engineers or vessel captains with the
appropriate skills, we may be unable to satisfy any increased demand for our
shipping services, which could have an adverse effect on our business, financial
condition and results of operations.





Rising
crew costs may adversely affect our results of operations.





Crew costs
are a significant operating expense for our operations.   The cost of
employing suitable crew is unpredictable and fluctuates based on events outside
our control, including the supply and demand for crew and the wages paid by
other shipping companies.  Any increase in crew costs may adversely
affect our profitability.





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 26


If
we have U.S. source income, we will have to pay U.S. federal income tax on it,
which would reduce our earnings.





Under the
U.S. Internal Revenue Code of 1986 (as amended), or the Code, 50% of the
gross


shipping
income of a corporation that owns or charters vessels that is attributable to
transportation that begins or ends, but that does not both begin and end, in the
United States is characterized as U.S. source transportation
income.  Our U.S. source transportation income will be subject to
either a 4% U.S. federal income tax without allowance for any deductions or, if
such income is effectively connected with business in the United States, a net
basis tax at regular graduated U.S. federal income tax rates, and, possibly, an
additional 30% branch profits tax on our effectively connected earnings and
profits, unless an exemption is available.





We currently
qualify for exemption under Section 883 of the Code, because International and
its subsidiaries currently are incorporated in jurisdictions that satisfy the
country of organization requirement and we satisfy the publicly traded test by
virtue of International’s Class A ordinary being primarily traded on the NASDAQ
Global Select Market.  Further, the aggregate ownership of all
non-qualified 5% shareholders is less than 50% of the total value of the Class A
ordinary shares.  If at any time we fail to satisfy the publicly traded
test and we were unable to qualify for another applicable exemption, our U.S.
source shipping income would be subject to U.S. federal income tax.





Our
ability to continue to qualify for the exemption depends on circumstances
related to the ownership of our ordinary shares that are beyond our control and
on interpretations of existing regulations of the U.S. Treasury
Department.  In particular, if 50% or more of our Class A ordinary
shares are held by one or more non-qualified U.S. shareholders, each of whom
owns 5% or more of the shares, the exemption would not be
available.  At December 31, 2009, non-qualified U.S. shareholders who
own 5% or more of our shares owned an aggregate of 20.2% of our Class A ordinary
shares.  We cannot assure you that we will qualify for exemption under
Section 883 in the future.





Changes
in the Code, the Treasury regulations or the interpretation thereof by the
Internal Revenue Service or the courts could also adversely affect our ability
to take advantage of the exemption under Section 883.





We
may be treated as a passive foreign investment company in the future, which
would result in adverse tax consequences to holders of our Class A ordinary
shares.





Based
upon the nature of our current and projected income, assets and activities, we
do not believe that we are, and we do not expect the Class A ordinary shares to
be considered shares of a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes.  However, the determination of whether
the Class A ordinary shares constitute shares of a PFIC is a factual
determination made annually, and we cannot assure you that we will not be
considered a PFIC in the future.  If we are treated as a PFIC, a
holder of our Class A ordinary shares would be subject to special rules with
respect to any gain realized on the sale or other disposition of the Class A
ordinary shares and any "excess distribution" by us to the holder (generally,
any distribution during a taxable year in which distributions to the holder on
the Class A ordinary shares exceed 125% of the average annual taxable
distribution the holder received on the Class A ordinary shares during the
preceding three taxable years or, if shorter, the holder’s holding period for
the Class A ordinary shares). Under those rules, the gain or excess distribution
would be allocated ratably over the holder’s holding period for the Class A
ordinary shares, the amount allocated to the taxable year in which the gain or
excess distribution is realized and to taxable years before the first day we
became a PFIC would be taxable as ordinary income, the amount allocated to each
other year (with certain exceptions) would be subject to tax at the highest tax
rate in effect for that year, and the interest charge generally applicable to
underpayments of tax would be imposed in respect of the tax attributable to each
such year.





The
majority of our revenue is derived from operations outside the United States and
may be adversely affected by actions taken by foreign governments or other
forces or events over which we have no control.





We derive a
significant portion of our voyage revenue from operations in Latin America,
Asia, Africa and the Middle East.  Our profitability will be affected
by changing economic, political and social conditions in these
regions.  In particular, our operations may be affected by war,
terrorism, piracy, expropriation of vessels, the imposition of taxes, increased
regulation or other circumstances, any of which could reduce our profitability,
impair our assets or cause us to curtail our operations.  The
economies of the Latin American countries where we conduct operations have been
volatile and subject to prolonged, repeated downturns, recessions and
depressions.  Adverse economic or political developments or conflicts
in these countries could have a material adverse effect on our
operations.





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 27


We
have experienced losses and filed for bankruptcy in 2000.





We filed for
bankruptcy in 2000.  Our ability to generate net income is influenced
by a number of factors that are difficult to predict, including changes in
global and regional economic conditions and international trade.  For
example, the losses and bankruptcy in 2000 were attributable in part to the
acute decline in the Asian and South American economies in 1998 and
1999.





Foreign
currency exchange rates may adversely affect our results.





We are
exposed to a variety of market risks, including the effects of changes in
foreign currency exchange rates.  We incur approximately 8% of our
operating expenses in currencies other than U.S. dollars.  At December
31, 2009, approximately 9% of our outstanding accounts payable were denominated
in currencies other than U.S. dollars.  Therefore, when the U.S.
dollar weakens in relation to the currencies of the countries where we incur
expenses, our U.S. dollar reported expenses increase and our income will
decrease.  Changes in the relative values of currencies occur from
time to time and may, in some instances, have a significant effect on our
operating results.





Risk
Factors Related to Our Financings





We
may not be able to obtain an extension of waivers for financial ratios and
financial covenants that expire on April 1, 2010.





In late
December 2009, we obtained an extension of waivers for financial ratios and
other financial covenants through April 1, 2010 from all our credit
facilities.  The financial ratios, which are tested
quarterly, are based on earnings before interest, taxes, depreciation and
amortization for the previous four quarters.  As a result of the weak
economic conditions and their effects on the shipping industry during 2009, it
is probable that we would be in violation of the leverage and fixed charge
coverage ratios after the waivers expire.  We may be required to take
action to reduce our debt or to act in a manner contrary to our business
objectives to meet these financial ratios or obtain future waivers or loan
modifications to keep us from being in breach of the covenants.  If we
are unable to obtain additional waivers or loan modifications, lenders could
elect to declare the debt, together with accrued interest and other fees, to be
immediately due and payable and proceed against the collateral securing that
debt.   We cannot assure you that we will obtain the waivers or
loan modifications, and any inability to do so could have a material adverse
effect on our financial condition.





Our
indebtedness could affect our ability to provide strong results to the holders
of our Class A ordinary shares.





Our
indebtedness could have important consequences to investors,
including:


●
                Increasing
      our vulnerability to general adverse economic and industry conditions by
      making it more difficult for us to react quickly to changing
      conditions;●
                Our
      level of debt may limit our ability to obtain additional financing to fund
      future working  capital, capital expenditures, acquisitions and
      other general corporate requirements;●
                We
      may be required to use a substantial portion of our cash flow from
      operations for the payment of interest on our debt which would reduce our
      ability to use our cash flow to fund working capital, capital
      expenditures, acquisitions and general corporate
    requirements;●
                While
      most of our debt is covered under swap agreements, we do have some
      exposure to risks inherent in interest rate fluctuations because some of
      our borrowings are at variable rates of interest, which could result in a
      higher interest expense in the event of increases in interest
      rates;●
                Our
      current debt could limit our flexibility in planning for, or reacting to,
      changes in our business, and the industry in which we
    operate;●
                Our
      banks could demand mandatory prepayment or delivery of additional security
      in the event that the fair market value of the vessels falls below limits
      specified in the loan agreement; and●
                We
      could be at a competitive disadvantage compared with our competitors that
      have less indebtedness.
  Table of Contents
 28


Our
credit facilities require us to maintain specified financial ratios and satisfy
financial covenants.






Events beyond
our control, including changes in the economic and business conditions in the
markets in which we operate, may affect our ability to comply with these
covenants.  We cannot assure you that we will meet these ratios or satisfy
these covenants or that our lenders will waive any failure to do so.  A
breach of any of the covenants or our inability to maintain the required
financial ratios under our credit facilities would result in a default.  If
a default occurs under any of our credit facilities, the lender could elect to
declare that debt, together with accrued interest and other fees, to be
immediately due and payable and proceed against the collateral securing that
debt, which constitutes all or substantially all of our assets.  Moreover,
any acceleration of the debt outstanding under the credit facilities or other
agreements upon a declaration of default could result in a default under our
other credit facilities.





If
we default under any of our loan agreements, we could forfeit our rights in our
vessels and their charters.





We have
pledged all of our vessels as security to the lenders under our loan
agreements.  Default under any of these loan agreements, if not waived or
modified, would permit the lenders to foreclose on the mortgages over the
vessels, and we could lose our rights in the vessels and their
charters.





Our
credit facilities currently impose, and it is possible that any additional debt
incurred could impose, significant operating and financial restrictions on
us.





The indenture
governing our asset-based revolving credit facility debt does, and future
agreements may, contain covenants that could limit our ability to finance our
future operations or capital needs, make acquisitions or pursue available
business opportunities.





Our credit
facilities restrict, among other things, our ability to:





·
            incur
      additional indebtedness or issue certain capital or preferred
      stock;





·
            pay
      dividends on, redeem or repurchase, our shares or make other restricted
      payments and investments;





·
            create
      certain liens;





·
            transfer
      or sell assets;





·
            agree
      to certain restrictions on the ability of restricted subsidiaries to make
      payments to us;





·
            amalgamate,
      merge, consolidate or sell all or substantially all of our properties and
      assets;





·
            engage
      in certain transactions with affiliates;
and





·
            designate
      unrestricted subsidiaries.





These
provisions impose significant operating and financial restrictions on us, and it
is possible that


additional
debt may include further restrictions upon us.





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 29


We
will require a significant amount of cash, and our ability to generate
sufficient cash depends upon many factors, some of which are beyond our
control.




Our ability
to make payments on and refinance our indebtedness and to fund working capital
needs and planned capital expenditures depends on our ability to generate
adequate cash flow in the future. To some extent, this is subject to general
economic, financial, competitive, and regulatory factors and other factors that
are beyond our control. For example, we need to drydock vessels and make
constant upgrades to vessels which could increase our working capital needs. We
cannot give assurance that our business will continue to generate cash flow from
operations at current levels or that our cash needs will not increase. If we are
unable to generate sufficient cash flow from operations in the future to service
our indebtedness and meet our other needs, we may have to refinance all or a
portion of our existing indebtedness, obtain additional financing, reduce
expenditures that we deem necessary to do business. We cannot give assurance
that any refinancing of this kind would be possible or that any additional
financing could be obtained or could be obtained on commercially reasonable
terms. The inability to obtain additional financing could have a material
adverse effect on our financial condition and on our ability to meet our
financing obligations.




The
market values of vessels under construction could decline, which could cause us
to fund more of the purchase from working capital.





We rely on
The Royal Bank of Scotland Credit Facility, which we refer to as the RBS Credit
Facility, to finance a large portion of the scheduled payments as they come due
under the shipbuilding contracts.  Any decline in the market value of
vessels under construction could cause us to fund a larger portion of each
installment due under the shipbuilding contract.  In the absence of
other available funds to pay the higher portion of the installments due would
cause us to be in default under the shipbuilding contract, which would cause a
default in the RBS Credit Facility.





A default in
our credit facilities would result in possible foreclosure of vessels securing
such credit facilities.





Any default
under our credit facilities would result in a default of all our credit
facilities.  In such a case our rights to our vessels, including our
rights to vessels under the shipbuilding contracts, would be subject to
foreclosure by the applicable creditor.





A payment
default under the shipbuilding contract would give the shipyard the right to
terminate the contract.





A payment
default under a shipbuilding contract would give the shipyard the right to
terminate the contract without any further obligation to finish construction and
we would lose the right to all payments made for the undelivered
vessel.  It may also give the shipyard rights against us for having
failed to make the required payments.





Any default
under our credit facilities would result in a default of the RBS Credit Facility
and a default under the associated shipbuilding contract.  In such a
case our rights to the vessels under the related shipbuilding contracts would be
subject to foreclosure by the applicable creditor and the holders of our
indebtedness would demand immediate payment in full. A payment default under a
shipbuilding contract would give the shipyard the right to terminate the
contract without any further obligation to finish construction and may give it
rights against us for having failed to make the required payments.





Variable
rate indebtedness subjects us to interest rate risk, which could cause our debt
service obligations to increase significantly.





Certain
portions of some of our borrowings, primarily our RBS loan, are, and are
expected to continue to be, at variable rates of interest and expose us to
interest rate risk. Most of our loans are hedged. However, if interest rates
increase, our debt service obligations on the variable rate indebtedness would
increase even though the amount borrowed remains the same and our net income
would decrease. Pursuant to the indenture governing certain loans, we were
required to enter into interest rate swaps, involving the exchange of floating
for fixed rate interest payments, or other forms of derivative transactions, to
reduce interest rate volatility.




Table of Contents
 30


The
international nature of our operations may make the outcome of any bankruptcy
proceedings difficult to predict.





We are
incorporated under the laws of the Republic of Ireland and most of our
subsidiaries are incorporated under the laws of the Republic of the Marshall
Islands.  Our operations are conducted in countries around the world.
Consequently, in the event of any bankruptcy, insolvency or similar proceedings
involving us or one of our subsidiaries, bankruptcy laws other than those of the
United States could apply. We have limited operations in the United States. If
we become a debtor under the United States bankruptcy laws, bankruptcy courts in
the United States may seek to assert jurisdiction over all of our assets,
wherever located, including property situated in other countries. There can be
no assurance, however, that we would become a debtor in the United States or
that a United States bankruptcy court would be entitled to, or accept,
jurisdiction over such bankruptcy case or that courts in other countries that
have jurisdiction over us and our operations would recognize a United States
bankruptcy court’s jurisdiction if any other bankruptcy court would determine it
had jurisdiction.





Risks
Factors Relating to Our Corporate Structure





International,
the issuer of our ordinary shares, is a holding company and depends on the
ability of its subsidiaries to distribute funds to it in order to meet its
financial obligations.





International,
the issuer of our ordinary shares, is a holding company with no significant
assets other than the shares of capital stock of its subsidiaries that conduct
all of its operations and own all of its vessels.  International
derives all of its cash flow from dividends and other payments from its
subsidiaries, which in turn derive all of their cash flows from payments from
their direct and indirect operations.





We
have relied, and will continue to rely, to a significant degree upon affiliated
service companies.





We have
relied upon and will continue to rely upon TBS Commercial Group and Beacon
Holdings Ltd., both affiliated service companies, for agency services that are
critical to our business.  These companies employ sales and customer
service professionals who meet with shippers and consignees to anticipate the
needs and address the concerns of our customers. Our business, results of
operations and liquidity may be materially adversely affected if we lose our
relationship with TBS Commercial Group or Beacon Holdings Ltd., or they become
unable to perform these services or their key employees leave their respective
company.





TBS
Commercial Group is a privately held company, and there is little or no publicly
available information about it.





The
ability of TBS Commercial Group to continue providing critical services for our
benefit will depend in part on its own financial
strength.  Circumstances beyond our control could impair its financial
strength and, because TBS Commercial Group is privately held, it is unlikely
that information about its financial strength would become public.  As
a result, an investor in our Class A ordinary shares might have little advance
warning of problems affecting TBS Commercial Group, even though these problems
could have a material adverse effect on us.





The
interests of our controlling shareholders could be adverse to your interests as
a public shareholder.





Our executive
officers who control TBS Commercial Group and Beacon Holdings Ltd. could use
their positions with us and in TBS Commercial Group or Beacon Holdings
Ltd. to shift revenues and operating income from us to TBS Commercial Group or
Beacon Holdings Ltd., for their individual benefit and contrary to the interests
of our public shareholders.  For example, these individuals could cause us
to pay above-market fees to TBS Commercial Group or Beacon Holdings Ltd. or to
permit TBS Commercial Group or Beacon Holdings Ltd. to take advantage of
corporate opportunities.  We cannot assure you that these potential
conflicts of interest will be handled in the best interests of our public
shareholders or holders of our debt.





Table of Contents
 31





Risk
Factors Related to Our Ordinary Shares  and Our Jurisdiction of
Incorporation




In December
2009, shareholders voted in favor of a reorganization proposal pursuant to which
TBS International Ltd. common shares would be cancelled and holders of such
shares would receive ordinary shares of TBS International plc on a one-to-one
basis. The reorganization transaction was completed on January 6, 2010, at which
time TBS International plc, an Irish company, replaced TBS International Ltd. as
the ultimate parent company for our operations. Shares of TBS International plc
began trading on the NASDAQ Global Select Market on January 7, 2010 under the
symbol "TBSI," the same symbol under which TBS International Ltd. shares were
previously traded.  Our memorandum and articles of association
contains provisions that could make it more difficult for a third party to
acquire us without the consent of our Board of Directors.  These
provisions will provide for our Board of Directors to determine the powers,
preferences and rights of our preference shares and to issue the preference
shares without shareholder approval.





We
have anti-takeover provisions in our memorandum and articles of association that
may discourage a change of control.





Our articles
of association contain provisions that could make it more difficult for a third
party to acquire us without the consent of our Board of
Directors.  Specifically, our Board of Directors has the power to
determine the powers, preferences and rights of our preference shares and to
issue the preference shares without shareholder approval.  Irish law
does not expressly prohibit companies from issuing share purchase rights or
adopting a shareholder rights plan as an anti-takeover measure.  While
a plan would, however be subject to the Irish Takeover Rules (including the
prohibition on our Board of Directors from taking action which might frustrate
an offer where an approach has been received or is believed to be imminent),
these powers of our Board of Directors to issue shares outlined above could make
it more difficult for a third party to acquire us, even if the third party's
offer may be considered beneficial by many shareholders.  As a result,
shareholders may be limited in their ability to obtain a premium for their
shares.





It
may be difficult for shareholders to enforce judgments against us or our
directors and executive officers.




It may not be
possible to enforce court judgments obtained in the United States against us in
Ireland based on the civil liability provisions of the U.S. federal or state
securities laws. One of our directors is not a resident of the United States,
and a substantial portion of our assets are located outside the United States.
As a result, it may be difficult for investors to effect service of process on
those persons in the United States or to enforce in the United States judgments
obtained in U.S. courts against us or those persons based on the civil liability
provisions of the U.S. securities laws. In addition, there is some uncertainty
as to whether the courts of Ireland would recognize or enforce judgments of U.S.
courts obtained against us or our directors or officers based on the civil
liabilities provisions of the U.S. federal or state securities laws or hear
actions against us or those persons based on those laws. We have been advised
that the United States currently does not have a treaty with Ireland providing
for the reciprocal recognition and enforcement of judgments in civil and
commercial matters. Therefore, a final judgment for the payment of money
rendered by any U.S. federal or state court based on civil liability, whether or
not based solely on U.S. federal or state securities laws, would not
automatically be enforceable in Ireland.




Table of Contents
 32


Irish
law differs from the laws in effect in the United States.




As an Irish
company, we are governed by the Irish Companies Act, which differs in some
material respects from laws generally applicable to U.S. corporations and
shareholders.  These differences include, among others, differences
relating to interested director and officer transactions and shareholder
lawsuits. In addition, the duties of directors and officers of an Irish company
generally are owed to the company only. Shareholders of Irish companies
generally do not have a personal right of action against a company’s directors
or officers and may exercise such rights of action on behalf of the company only
in limited circumstances. Accordingly, holders of our ordinary shares may have
more difficulty protecting their interests than would holders of securities of a
corporation incorporated in a jurisdiction of the United States.




A  future transfer of your
ordinary shares may be subject to Irish stamp duty.


Transfers by
shareholders who hold their ordinary shares beneficially through banks, brokers,
trustees, custodians or other nominees, which in turn hold those shares through
the Depository Trust and Clearing Corporation, or DTC, will generally not be
subject to Irish stamp duty where such transfers are to holders who also hold
through DTC. If you hold your ordinary shares directly rather than beneficially,
any purchase of your shares will be subject to Irish stamp duty. Irish stamp
duty is currently levied at the rate of 1% of the price paid or the market value
of the ordinary shares acquired, if higher. Any transfer of ordinary shares
which is subject to Irish stamp duty will not be registered in the name of the
buyer unless an instrument of transfer is executed by or on behalf of the
seller, is duly stamped and is provided to our transfer agent. The potential for
stamp duty could adversely affect the price of ordinary
shares.





Dividends you receive may be subject
to Irish dividend withholding tax.


In certain
circumstances, as an Irish tax resident company, we may be required to deduct
Irish dividend withholding tax (currently at the rate of 20%) from dividends
paid to our shareholders. The majority of shareholders will generally not be
subject to Irish withholding tax provided that, in each case, they complete
certain tax forms.





Legislative
or regulatory action could materially and adversely affect us.





Our tax
position could be adversely impacted by changes in tax laws, tax treaties or tax
regulations or the interpretation or enforcement thereof by any tax
authority.  For example, legislative proposals have been introduced in
the U.S. Congress which, if enacted, could override tax treaties upon which
we expect to rely, or could change the circumstances under which we would be
treated as a U.S. person for U.S. federal income tax purposes, each of
which could materially and adversely affect our effective tax rate and require
us to take further action, at potentially significant expense, to seek to
preserve our effective tax rate.  We cannot predict the outcome of any
specific legislative proposals.  However, if proposals were enacted
limiting our ability as an Irish company to take advantage of the tax treaties
between Ireland and the United States, we could be subjected to increased
taxation and/or potentially significant expense.  In addition, any
future amendments to the current income tax treaties between Ireland and other
jurisdictions (including the United States) could subject us to increased
taxation and/or potentially significant expense.  Also, various
U.S. federal and state legislative proposals have been introduced and/or
enacted in recent years that deny government contracts to certain
U.S. companies that reincorporate or have reincorporated outside the
United States. While the Company was not a U.S. company that
moved outside the United States, our move to Ireland may not eliminate therisk
that these contract bans and other legislative proposals could be enacted in a
way to affect us.





As an Irish
company, we are required to comply with numerous Irish and European Union legal
requirements. Compliance with the laws and regulations of Ireland and the
European Union may have a material and adverse effect on the Company’s financial
condition and results of operations.




Table of Contents
 33




Item 1B.  Unresolved Staff
Comments





None.





Item 2. Properties





Our fleet is
described in Item 1. Business - Fleet Overview. Most of our vessels are
mortgaged to secure our credit facilities.





At December
31, 2009 we leased four properties, which are used by TBSI’s service company
subsidiaries TBS Shipping Services and its subsidaries and Roymar for the
administration of their operations.  Our principal office, which is leased
through our subsidiary TBS Shipping Services, is located in Yonkers, New York
and is approximately 15,000 square feet.  The office space is leased
from our chairman and chief executive officer.  The lease expires on
December 31, 2010, subject to five one-year renewal options.  The lease
provides for monthly rent of $20,000, plus operating expenses including real
estate taxes.  We also leased 7,232 square feet of office space used
by our TBS Houston office that is located in Houston Texas.  The
lease, which  runs from October 1, 2009 to September 30,
2014, provides for monthly rent of $8,054 through September 30, 2010, after
which monthly rent increases to $8,255 through October 2011, $8,463 through
October 2012, $8,677 through October 2013 and $8,898 through October
2014.  We  also leases a 40,000 square feet warehouse
located in Houston, Texas. The lease runs from May 1, 2009 to June 30, 2012
at a monthly rent of $22,000 through June 30, 2010.  The monthly
rent increases to $22,400 through June 2011 and $22,800 through June
2012.





We lease
approximately 12,520 square feet of office space located in Scarsdale, New
York at a monthly rent of approximately $27,000 plus an additional charge for
real estate tax escalations. The lease expires in November 2010.





We had
leased undeveloped land in the Calhoun County Navigation District, Port Comfort,
Texas.  The lease had a term of ten years expiring December 31, 2016,
and provided for monthly rent of $6,000. In May 2008 the lease was cancelled
with no lease cancellation costs.





We
believe that our facilities are generally adequate for current and anticipated
future use.





Item 3. Legal
Proceedings





We are
periodically a defendant in cases involving personal injury, property damage
claims and other matters that arise in the normal course of business. While any
pending or threatened litigation has an element of uncertainty, we believe that
the legal proceedings pending against us, individually or in the aggregate, will
not materially adversely affect our consolidated financial position, results of
operations or cash flows.








Item 4. [Reserved]




Table of Contents
 34


PART
II







Item
5.Market
for Registrant's Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities





Market
Information





During 2009,
the Class A common shares of TBS International Ltd. traded on the NASDAQ Global
Select Market under the symbol "TBSI".  Our Class A ordinary shares began
to trade on the NASDAQ Global Select Market under the same symbol on January 7,
2010.  Our Class B ordinary shares are not publicly
traded.





The following
table sets forth for the periods indicated, since our initial public offering,
the high and low prices for the Class A common shares of TBS International
Ltd. as reported on the NASDAQ Global Select Market:




Year
      Ended December 31, 2009
            HIGH
            
            LOWFourth
      Quarter
            
            $
            9.97
            
            
            $
            7.17Third
      Quarter
            
            $
            9.78
            
            
            $
            6.15Second
      Quarter
            
            $
            11.90
            
            
            $
            6.35First
      Quarter
            
            $
            13.95
            
            
            $
            5.04Year
      Ended December 31, 2008
            HIGH
            
            LOWFourth
      Quarter
            
            $
            13.23
            
            
            $
            3.62Third
      Quarter
            
            $
            38.49
            
            
            $
            12.73Second
      Quarter
            
            $
            59.11
            
            
            $
            31.89First
      Quarter
            
            $
            39.82
            
            
            $
            20.19







Table of Contents
 35





Cumulative
      Return ComparisonJune
      24,
              2005
            
            December
      31,
              2005
            
            December
      31,
              2006
            
            December
      31,
              2007
            
            December
      31,
              2008
            
            December
      31,
              2009TBS
      International Limited ("TBSI")
            100.00
            
            65.42
            
            86.11
            
            325.71
            
            98.82
            
            72.41NASDAQ
      Transportation Index
            100.00
            
            117.70
            
            124.67
            
            129.06
            
            90.98
            
            94.20NASDAQ
      Composite Index
            100.00
            
            107.21
            
            117.42
            
            128.94
            
            76.67
            
            110.32


Holders





As of
March 11, 2010,
there were 8,999 holders of record of our Class A ordinary shares
and 12
holders of record of our Class B ordinary shares.








Dividend
and Dividend Policy





As of
December 31, 2009, we have never declared or paid dividends on our ordinary
shares. Provisions of our debt instruments and related loan agreements for our
syndicated credit facilities allow the subsidiaries borrowing under the credit
facilities to pay dividends to us but restrict us from declaring or making
dividends or other distributions that would result in a default or the credit
facility or exceed 50% or our prior year’s consolidated net income. These
restrictions may restrict our ability to pay dividends on our ordinary shares.
Future dividends, if any, on our ordinary shares will be at the discretion of
our Board of Directors and will depend on, among other things, our results
of operations, cash requirements and surplus, financial condition, contractual
restrictions and other factors that our Board of Directors may deem relevant, as
well as our ability to pay dividends in compliance with Irish law.





Under Irish
law, TBS International plc must have “distributable reserves” in its
unconsolidated balance sheet prepared in accordance with the Irish Companies
Acts to enable it to pay cash dividends buy back shares in the
future.   Our shareholders passed a resolution that created
“distributable reserves” in accordance with Irish law.





Distributions
made by us will generally be subject to dividend withholding tax at Ireland’s
standard rate of income tax (currently 20 percent). For dividend
withholding tax purposes, a dividend includes any distribution made by TBS
International plc to its shareholders, including cash dividends, non-cash
dividends and additional stock or units taken in lieu of a cash dividend. TBS
International plc is responsible for withholding dividend withholding
tax and forwarding the relevant payment to the Irish Revenue
Commissioners.




U.S.
Holders




Dividends
paid to U.S. residents will not be subject to Irish dividend withholding tax
provided that:




·
            in
      the case of shareholders who hold their TBS International plc shares
      beneficially through banks, brokers, trustees, custodians or other
      nominees, which in turn hold those shares through DTC, the address of the
      beneficial owner in the records of his or her broker is in the United
      States and this information is provided by the broker to the qualifying
      intermediary of TBS International plc;
or




·
            in
      the case of other shareholders, the shareholder has provided to the
      transfer agent of TBS International plc a valid W-9 showing either a U.S.
      address or a valid taxpayer identification
  number.




Table of Contents
 36


Irish income
tax may also arise with respect to dividends paid on the ordinary shares of TBS
International plc.  A U.S. resident who meets one of the exemptions
from dividend withholding tax described above and who does not hold shares in
the Company through a branch or agency in Ireland through which a trade is
carried on generally will not have any Irish income tax liability on a dividend
paid by TBS International plc. In addition, if a U.S. shareholder is subject to
the dividend withholding tax, the withholding payment discharges any Irish
income tax liability, provided the shareholder furnishes to the Irish Revenue
authorities a statement of the dividend withholding tax imposed.




While the
U.S./Ireland Double Tax Treaty contains provisions regarding withholding tax,
due to the wide scope of the exemptions from dividend withholding tax available
under Irish domestic law, in general it would  be unnecessary for a
U.S. resident shareholder to rely on the treaty provisions.




Relevant
territory holders




Dividends
paid to “relevant territory” residents will not be subject to Irish DWT provided
that the holders have filed the relevant Irish DWT exemption forms with their
broker, for onward transmission to the company, (in the case
of  shares held beneficially through DTC) or with the company or its
transfer agent (in the case of shares held directly).




Equity
Compensation Plans





Information
regarding our equity compensation plans as of December 31, 2009 is disclosed in
"Item 12."Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters" and in "Note 15 — Stock Plans" to
our consolidated financial statements.




Irish
Restrictions on Import and Export of Capital




The Financial
Transfers Act 1992 provides that the Irish Minister of Finance can make
provision for the restriction of financial transfers between Ireland and other
countries.  For the purposes of this Act, “financial transfers”
include all transfers which would be movements of capital or payments within the
meaning of the treaties governing the European Communities if they had been made
between Member States of the Communities. This Act has been used by the Minister
of Finance to implement European Council Directives, which provide for the
restriction of financial transfers to certain countries, organizations and
people including Belarus, Burma/Myanmar, Democratic People’s Republic of Korea,
Democratic Republic of Congo, Iran, Iraq, Ivory Coast, Lebanon, Liberia,
Republic of Serbia, Slobodan Milosevic and associated persons, Somalia, Sudan,
Osama Bin Laden, Al-Qaeda and the Taliban of Afghanistan, Uzbekistan and
Zimbabwe.


Irish
Taxation
 
 TBS
International plc, the successor issuer to TBS International Limited, is
incorporated in Ireland. TBS International plc as a separate entity is subject
to tax in Ireland on its worldwide income and gains at 25% with the exception of
dividend income received from its subsidiaries that are sourced from active
trading profits, which is subject to tax in Ireland at 12.5%. TBS International
plc should be considered an investment company for Irish tax purposes and should
be allowed to deduct expenses of management against its income and gains.
However, as it is not anticipated that TBS International plc will receive any
significant dividends from its subsidiaries in the foreseeable future it is not
expected that TBS International plc will have any material income subject to
Irish taxation.


Table of Contents
 37







Item 6. Selected Financial
Data





The
selected historical consolidated financial data presented below should be read
in conjunction with the consolidated financial statements and notes thereto and
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations, included in this Report.




Year
      Ended December 31,2009
            
            2008
            
            2007
            
            2006
            
            2005(In
      thousands, except for share and per share amounts)RevenueVoyage
      revenue
            
            $
            247,980
            
            $
            518,907
            
            $
            261,509
            
            $
            187,147
            
            $
            173,881Time
      charter revenue
            
            
            51,201
            
            
            83,883
            
            
            88,365
            
            
            63,114
            
            
            71,456Logistics
      revenue (1)
            
            
            2,689
            
            
            7,000
            
            
            668Other
      revenue
            
            
            646
            
            
            1,843
            
            
            2,379
            
            
            1,460
            
            
            979Revenue
            
            
            302,516
            
            
            611,633
            
            
            352,921
            
            
            251,721
            
            
            246,316Operating
      expensesVoyage
            
            
            113,084
            
            
            172,929
            
            
            89,241
            
            
            81,389
            
            
            73,576Logistics
      (1)
            
            
            2,193
            
            
            5,717
            
            
            557Vessel
            
            
            104,046
            
            
            110,354
            
            
            85,958
            
            
            63,205
            
            
            68,711Depreciation
      of vesselsand
      other fixed assets
            
            
            95,870
            
            
            73,479
            
            
            36,022
            
            
            29,867
            
            
            19,537Management
      fees
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,624General
      and administrative
            
            
            37,265
            
            
            39,879
            
            
            38,703
            
            
            27,256
            
            
            17,618Loss
      (gain) from sale of vessels (2)
            
            
            
            
            
            
            
            
            814
            
            
            (2,180
            )Operating
      expenses
            
            
            352,458
            
            
            402,358
            
            
            251,295
            
            
            199,537
            
            
            182,066(Loss)
      income from operations
            
            
            (49,942
            )
            
            209,275
            
            
            101,626
            
            
            52,184
            
            
            64,250Other
      (expenses) and incomeInterest
      expense
            
            
            (17,119
            )
            
            (17,228
            )
            
            (10,394
            )
            
            (11,577
            )
            
            (9,346
            )Interest
      and other income
            
            
            21
            
            
            2,048
            
            
            983
            
            
            1,810
            
            
            752(Loss)  on
      early extinguishment of debt (3)
            
            
            
            
            
            (2,318
            )
            
            
            
            
            (3,357
            )Gain
      on sale and insurance recovery of vessel (4)
            
            
            
            
            
            
            
            
            6,034Total
      other (expenses) and income
            
            
            (17,098
            )
            
            (17,498
            )
            
            (3,377
            )
            
            (13,124
            )
            
            (8,594
            )Net
      (los) income
            
            
            (67,040
            )
            
            191,777
            
            
            98,249
            
            
            39,060
            
            
            55,656Amount
      allocated to participating preferred shareholders
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (5,706
            )Net
      (loss) income  available for ordinary
    shareholders
            
            $
            (67,040
            )
            $
            191,777
            
            $
            98,249
            
            $
            39,060
            
            $
            49,950Net
      (loss) income per ordinary shareBasic
      (5) (6)
            
            $
            (2.25
            )
            $
            6.53
            
            $
            3.49
            
            $
            1.39
            
            $
            2.28Diluted
      (5) (6)
            
            $
            (2.25
            )
            $
            6.53
            
            $
            3.49
            
            $
            1.39
            
            $
            2.04Weighted
      average ordinary shares outstandingBasic
      (5) (6)
            
            
            29,843,566
            
            
            29,263,292
            
            
            28,029,340
            
            
            27,998,843
            
            
            21,870,160Diluted
      (5) (6)
            
            
            29,843,566
            
            
            29,263,292
            
            
            28,029,340
            
            
            27,998,843
            
            
            24,368,263






Table of Contents
 38


December
      31,2009
              
              2008
              
              2007
              
              2006
              
              2005(In
      thousands)Balance
      Sheet Data:Cash
      and cash equivalents
              
              $
              51,040
              
              $
              131,150
              
              $
              30,498
              
              $
              12,007
              
              $
              27,158Working
      capital
              
              
              (285,823
              )
              
              104,311
              
              
              1,744
              
              
              (3,816
              )
              
              (866
              )Total
      assets
              
              
              953,588
              
              
              1,041,685
              
              
              559,113
              
              
              403,091
              
              
              344,671Total
      Debt
              
              
              351,247
              
              
              383,074
              
              
              180,166
              
              
              125,804
              
              
              105,737Obligations
      under capital leases, includingcurrent
      portion
              
              
              
              
              
              
              
              
              
              
              
              21,355
              
              
              24,703Total
      shareholders' equity
              
              
              537,728
              
              
              598,296
              
              
              319,563
              
              
              223,604
              
              
              184,207


Year
      Ended December 31,2009
              
              2008
              
              2007
              
              2006
              
              2005Other
      Operating Data:Controlled
      vessels (at end of period) (7)
              
              
              48
              
              
              47
              
              
              36
              
              
              34
              
              
              31Chartered
      vessels (at end of period)  (8)
              
              
              
              
              
              
              
              
              1
              
              
              1
              
              
              6Voyage
      Days (9)
              
              
              11,470
              
              
              14,904
              
              
              11,868
              
              
              12,119
              
              
              10,885Vessel
      days (10)
              
              
              17,567
              
              
              16,337
              
              
              13,236
              
              
              12,701
              
              
              11,264Tons
      of cargo shipped (in thousands)
              
              
              8,788
              
              
              9,315
              
              
              6,621
              
              
              4,368
              
              
              3,170Revenue
      per ton (11)
              
              $
              28.22
              
              $
              55.70
              
              $
              39.49
              
              $
              42.85Tons
      of cargo shipped, excludingaggregates
      (in thousands) (12)
              
              
              4,727
              
              
              5,109
              
              
              3,447
              
              
              3,227
              
              
              3,092Revenue
      per ton, excludingaggregates
      (11) (12)
              
              $
              45.36
              
              $
              88.08
              
              $
              68.79
              
              $
              54.67Chartered
      -out days
              
              
              4,733
              
              
              3,004
              
              
              3,659
              
              
              4,301
              
              
              4,257Chartered
      -out rate per day
              
              $
              10,818
              
              $
              27,924
              
              $
              24,150
              
              $
              14,674
              
              $
              16,785
 
 (1)
              Represents
      revenue and related costs for cargo and transportation management services
      as part of our Five Star Service
 
 (2)
              Represents
      a 2007 loss of $0.8 million on the sale of theMaya Princess and a
      2006 gain of $2.2 million on the sale of theDakota
      Belle.
 
 (3)
              The
      2008 loss on extinguishment of debt represents the write off of
      unamortized deferred finance costs in connection with the March 2008
      refinancing of the Bank of America syndicated credit
      facility.  The 2006 loss on early extinguishment
      of debt represents the write-off of unamortized debt finance
      costs of $1.3 million and the payment of loan prepayment fees of $2.1
      million when we repaid most of our then existing credit facilities in July
      2006 with our  $140.0 million syndicated credit
      facility.
 
 (4)
              We
      recognized a gain on the sale and insurance recovery of theHuron
      Maiden.The vessel was severely damaged in a grounding
      accident on an uncharted rock while on passage near Indonesia in March
      2007.  The vessel was declared a constructive total loss, and we
      received a net insurance recovery of $8.0 million, after a scrap value
      credit of $2.0 million.  We then sold the vessel for scrap for
      $2.8 million.  After expenses in connection with the accident and
      sale of the vessel of approximately $1.2 million, we realized a net
      gain on the casualty and sale of the vessel of approximately $6.0
      million.
 
 (5)
              During
      the year ended December 31, 2005, the convertible preference shares would
      have added 2,498,103 ordinary shares on a weighted average basis to
      diluted shares outstanding. These shares were not included in the diluted
      earnings per share calculation because the effect would have been
      anti-dilutive.
 
 Table of Contents
 39
 (6)
              In
      2009, we adopted the applicable provisions of ASC Topic 260 –
      Earnings per Share and computed earnings per ordinary share using the
      two-class method for participating securities and nonvested share-based
      payment awards that contain non-forfeitable rights to dividends. 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 earnings per ordinary share for the
      years ended December 31, 2008, 2007 and  2006 decreased $0.02,
      $0.02 and $0.01, respectively, from the amounts previously disclosed in
      our prior filings and there was no change for the year ended December 31,
      2005.  Diluted earnings per ordinary share for the years ended
      December 31, 2008, 2007 and 2005 decreased $0.01 from the amounts
      previously disclosed in our prior filings and there was no change for
      the year ended December 31, 2006.
 
 (7)
              Controlled
      vessels are vessels that we own or charter-in with an option to purchase.
      As of December 31, 2008, two vessels in our controlled fleet were
      chartered-in with an option to
purchase.
 
 (8)
              Represents
      both vessels that we charter-in under short-term charters (less than one
      year at the start of the charter) and charter-in of vessels under
      long-term charters without an option to
  purchase.
 
 (9)
              Represents
      the number of days controlled and time-chartered vessels were operated by
      us, excluding off-hire days.
 
 (10)
              Represents
      the number of days that relate to vessel expense for controlled and
      time-chartered vessels. Vessel expense relating to controlled vessels is
      based on a 365-day year. Vessel expense relating to chartered-in vessels
      is based on the actual number of days we operated the vessel, excluding
      off-hire days.
 
 (11)
              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.
 
 (12)
              Aggregates
      represent high-volume, low-freighted cargo. Including aggregates,
      therefore, can overstate the amount of tons that we carry on a regular
      basis and reduce our revenue per ton. We regularly carried aggregates in
      all years represented in the table above except 2005 when we temporarily
      suspended the transport of aggregates. We believe that the exclusion
      of aggregates better reflects our cargo shipped and revenue per ton data
      for our principal services.
 
 
 Table of Contents
 40
 Item
7.Management's
Discussion and Analysis of Financial Condition and Results of
Operations
 
 General
 
 The following
is a discussion of our financial condition at December 31, 2009 and 2008 and our
results of operations comparing the years ended December 31, 2009 and
2008  and years ended December 31, 2008 and 2007.  You
should read this section in conjunction with our consolidated financial
statements, including the related notes to those financial statements included
elsewhere in this Annual Report.
 
 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 and vessel chartering supported by a fleet of
multipurpose tweendeckers and handysize and handymax bulk carriers. In
addition to providing frequent, regularly scheduled voyages within our shipping
network, we offer services, such as cargo scheduling, loading and discharge,
that offer a fully integrated shipping solution to our customer. This
distinguishes us from traditional dry cargo shipping companies.
 
 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.
 
 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;
  ·
              the
      availability of liquidity and credit to fund our suppliers’ and customers’
      businesses;
  ·
              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.
  In 2009 the
global financial crisis reduced demand for shipping services and caused a
significant downturn in spot freight and time charter rates. The crisis has
adversely affected our revenues, the market values of our vessels and our
ability to maintain financial ratios as required by our credit facilities. While
there was slight improvement in the global economy in December 2009, the effects
of the crisis are continuing and we cannot predict with any degree of certainty
how global economic conditions will affect the shipping industry and
us.
  We continue to
take measures to manage our business during the recovery.  These
measures include considering issuing equity to our executives and employees in
lieu of cash compensation, reducing 2010 salary increases, continuing our cost
cutting program, negotiating loan modifications, reducing capital expenditures
and continuing to scale back our accelerated steel renewal and reinforcement
program.
 
 Table of Contents
 41
 Going
Concern
  One of the
significant effects of the current global financial downturn has been a
reduction in vessel values, which directly affected our ability to comply with
certain financial covenants in our credit facilities. In 2009,  we
negotiated waivers to these covenants, including modifications through April 1,
2010 to the minimum consolidated fixed charge coverage ratio and the maximum
consolidated leverage ratio requirements.  We currently are in
compliance with these modified minimum consolidated fixed charge coverage ratio
and maximum consolidated leverage ratio requirements.  Without these
modifications, we would have been in violation of the original minimum
consolidated fixed charge coverage ratio and the maximum consolidated leverage
ratio requirements at December 31, 2009. Based on current internal projections,
we anticipate that we will not meet the modified additional covenant
requirements during the next 12 months.
 
 We are in the
process of discussing permanent modifications to our credit facilities with our
lenders.  Additionally, we are seeking alternative financing sources
to repay our credit facilities. We cannot assure you that we will be able to
obtain permanent covenant modifications or other financing.  The
failure to obtain permanent covenant modifications or other financing would have
a material adverse effect on our business, operations, financial condition and
liquidity and would raise substantial doubt about our ability to continue as a
going concern.
 
 Generally
accepted accounting principles require that long-term debt 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 the covenant and, in either
case, it is probable that the covenant violation will not be cured within the
next 12 months. Accordingly, we have classified our long term debt as a current
liability in our consolidated balance sheet at December 31, 2009. The financial
statements do not include any adjustments that might be necessary if we are
unable to continue as a going concern.
 
 New
Vessel Construction
 
 The first of
six new build vessels was delivered in 2009, three vessels are expected to be
delivered in 2010 and the remaining two vessels are expected to be delivered in
2011.
 
 Impairment
  Our fleet now
numbers 48 vessels.  We perform impairment analyses of long-lived
assets when certain triggering events occur such as significant decreases in the
assets market value, [significant] changes in the assets’ physical condition,
and [significant] changes in the operating or cash flow losses associated with
the use of the long-lived assets, [in each case?] combined with a history of
operating or cash flow losses. Impairment is recognized when the estimate of
undiscounted future cash flows expected to be generated by the asset is less
than its carrying amount. Measurement of the impairment loss is calculated based
upon comparison of the fair value to the carrying value of the asset.
Historically, both freight rates and vessel values tend to be volatile. The
carrying value of our fleet may not represent their fair market value at any
point in time since the market prices of second-hand vessels tend to fluctuate.
Our impairment calculations contain uncertainties because they require
management to make assumptions about future cash flows. These assumptions are
based on historical trends as well as future expectations. Although management
believes that the assumptions used to evaluate potential impairment are
reasonable and appropriate, such assumptions are highly
subjective.  Our analysis showed that there was no impairment of
long-lived assets at December 31, 2009. We continue to monitor the shipping
environment and update our impairment analyses.  See "Summary of Critical Accounting
Policies".
  As of May 31,
2009, we performed our annual impairment analysis of goodwill, which indicated
that there was no impairment. Subsequent to our analysis and as of December 31,
2009, no events occurred that indicated that there was an impairment of goodwill
during the year 2009.
 
 Table of Contents
 42
 Drydocking
  During 2007
and 2008, we engaged in an accelerated streel renewal and replacement program
for our drydocked vessels.  Consequently, in 2009, we realized savings
in steel renewal and replacement drydocking costs for some vessels, and we
expect to realize additional savings in 2010. Under the accelerated program,
steel renewal and replacement were made on the basis of the physical condition
of the vessel, including renewals and replacements that were, at that time,
believed to be required in the upcoming five to ten years.
 
 Vessels must
be drydocked twice during a five-year cycle. Our controlled fleet of 48 vessels
at December 31, 2009, would require approximately 96 drydockings over five years
for an average of 19 vessels per year.   The first drydocking of
a newly constructed vessel, which would be a special survey of the vessel, is
typically done five years after delivery of the vessel from the
shipyard.
 
 During 2009,
23 vessels, requiring approximately 2,400 metric tons of steel, were in drydock
for 664 days.  A summary by quarter is as
follows:
 Actual
      number of vessels entering drydock
                during
      quarter
              
              Actual
      number of drydock days during quarter
              
              Actual
      metric  tons  of steelFirst
      Quarter 2009
              9
      (a)
              
              154
              days
              
              600
              MTSecond
      Quarter 2009
              3
              
              136
              days
              
              400
              MTThird
      Quarter 2009
              6
              
              191
              days
              
              700
              MTFourth
      Quarter 2009
              5
              
              183
              days
              
              700
              MT(a)
      Including one vessel that entered into drydock during December
      2008.


Presented in
the table below is our preliminary quarterly drydock schedule for vessels we
anticipate to be in drydock during 2010, including an estimated number of
drydock days and metric tons of steel renewal. Our estimates are based on
current and anticipated congestion in the repair shipyards, which could be
adversely affected by unanticipated inclement weather or congestion in the
shipyard.  Further, our 2010 drydock schedule is subject to changes
based on unanticipated commercial needs of our business.
 Estimated
      number of vessels entering drydock during quarter
                
                Estimated
      number of drydock days during quarter
                
                Estimated
      metric tons of steelFirst
      Quarter 2010
                5
      (a)
                
                77
                days
                
                200
                MTSecond
      Quarter 2010
                5
                
                131
                days
                
                400
                MTThird
      Quarter 2010
                3
                
                80
                days
                
                300
                MTFourth
      Quarter 2010
                5
                
                147
                days
                
                900
                MT(a)
      Including two vessels that entered into drydock during November and
      December 2009.
 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 100 to 500
metric tons of steel renewal will take from 35 to 75 days.We capitalize vessel
improvements, including steel renewal and reinforcement, in connection with the
first drydocking after we acquire vessels.
  Table of Contents
 43
 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. Prior to 2008, the revenues and
related voyage expenses for voyages in progress were recognized on the
percentage of service completed at the balance sheet date by prorating the
estimated final voyage revenue and expenses using the ratio of voyage days
completed through the balance sheet date to total voyage days. For voyages in
progress at December 31, 2009 and 2008, we recognized voyage expense as incurred
and recognized voyage revenues ratably over the length of the voyage, all in
accordance with the guidance outlined in ASC Topic 605-Revenue Recognition. The
effects in 2007 of recognizing voyage expenses ratably over the length of each
voyage was not materially different from the method of recognizing such costs as
incurred. 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 charter-out
days that the vessel was on-hire through period end.
 
 Voyage
revenueconsists 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
revenueconsists 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
expensesare 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, charter hire fees we pay to owners for use
of their vessels. The costs are paid by our subsidiaries.
 
 Depreciation and
amortization expense is computed for vessels and vessel improvements
on the remaining useful life of each vessel, which is 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 a ten year useful
life.  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 are paid to unrelated companies and TBS
Commercial Group and Beacon Holdings.  Management fees and commissions
paid to TBS Commercial Group are fixed under agreements that are approved by our
Board of Directors. The Compensation Committee of our Board of Directors
approved, effective October 1, 2007, additional commissions of 1.25% of freight
revenue for commercial agency services provided by subsidiaries of TBS
Commercial Group and an increase of approximately 33 1/3% in port
agency fees for agency services provided by most subsidiaries of TBS Commercial
Group and Beacon.
  Lack
of Historical Operating Data for Vessels Before their Acquisition
  Consistent
with shipping industry practices, there is no historical financial due diligence
process when we acquire secondhand vessels other than the inspection of the
physical condition of the vessels and examination of classification society
records. Accordingly, we do not obtain the historical operating data for the
vessels from the sellers because that information is not material to our
decision to make acquisitions, nor do we believe it would be helpful to
investors in assessing our business or profitability.
 
 Table of Contents
 44
 Most
vessels are sold under a standardized agreement, which, among other things,
provides the buyer with the right to inspect the vessel and the vessel's
classification society records. The standard agreement does not give the buyer
the right to inspect, or receive copies of, the historical operating data of the
vessel and does not provide for financial information or historical results for
the vessel to be made available to the buyer. Prior to the delivery of a
purchased vessel, the seller typically removes from the vessel all records,
including past financial records and accounts related to the vessel. In
addition, the technical management agreement between the seller's technical
manager and the seller is automatically terminated and the vessel's trading
certificates are revoked by its flag state following a change in
ownership.
 
 Consistent
with shipping industry practice, we treat the acquisition of a vessel, whether
acquired with or without charter, as the acquisition of an asset rather than a
business. Due to the differences between us and the prior owners of these
vessels with respect to the routes we operate, the shippers and consignees we
serve, the cargoes we carry, the freight rates and charter hire rates we charge
and the costs we incur in operating our vessels, we believe that our operating
results will be significantly different from the operating results of the
vessels while owned by the prior owners.
 
 The Financial
Accounting Standards Board, or FASB, as outlined in ASC Topic 805-Business Combinations,
provides guidance for accounting for the acquisition of assets rather than a
business.  It states that for a transferred set of activities and
assets to be a business, it must contain all of the inputs and processes
necessary for it to continue to conduct normal operations after the transferred
set is separated from the transferor, which includes the ability to sustain a
revenue stream by providing its output to customers.  The purchase of
a vessel alone cannot operate or generate revenue or constitute a business
operation without the significant inputs and processes that we provide, as
described below:
 
 ·
              We
      provide our own captains, senior officers and crew to the
      vessels.·
              The
      vessels are managed by our subsidiary Roymar. All of the functions of
      vessel management, from technical ship management to crewing, vessel
      maintenance and drydocking, are conducted by Roymar, in a manner different
      from the prior manager, according to our standards.·
              The
      necessary commercial activities - maintaining customer relationships,
      providing local teams of commercial agents and port captains, offering
      transportation management skills and logistics solutions - are provided by
      our subsidiary TBS Shipping Services and our affiliate TBS Commercial
      Group in a manner different from the former owners.·
              The
      vessels will operate under our trade name and carry our distinctive native
      peoples’ naming convention.
 
 The
revenue-producing activity of the vessels we purchase will be generated from
carrying cargoes for our customers on the routes we serve. The vessels we
purchase are operated by different parties than their former owners, serve
different customers, carry different cargoes, charge different rates, cover
different routes and, in all respects engage in a different business with
different revenues, costs and operating margins. Only the vessels are being
purchased and profitable operation of the vessels will depend on our skill and
expertise.
 
  Table of Contents
 45
 Results
of Operations
 
 Year
ended December 31, 2009 compared to year ended December 31, 2008
  Year
      Ended December 31,2009
              
              
              2008
              
              
              Increase
      (Decrease)In
      Thousands
              
              
              As
      a % of Total Revenue
              
              
              In
      Thousands
              
              
              As
      a % of Total Revenue
              
              
              In
      Thousands
              
              
              PercentageVoyage
      revenue
              
              $
              247,980
              
              
              82.0
              
              
              $
              518,907
              
              
              84.8
              
              
              $
              (270,927
              )
              
              (52.2
              )Time
      charter revenue
              
              
              51,201
              
              
              16.9
              
              
              
              83,883
              
              
              13.7
              
              
              
              (32,682
              )
              
              (39.0
              )Logistics
      revenue
              
              
              2,689
              
              
              0.9
              
              
              
              7,000
              
              
              1.2
              
              
              
              (4,311
              )
              
              (61.6
              )Other
      revenue
              
              
              646
              
              
              0.2
              
              
              
              1,843
              
              
              0.3
              
              
              
              (1,197
              )
              
              (64.9
              )Total
      revenue
              
              
              302,516
              
              
              100.0
              
              
              
              611,633
              
              
              100.0
              
              
              
              (309,117
              )
              
              (50.5
              )Voyage
      expense
              
              
              113,084
              
              
              37.4
              
              
              
              172,929
              
              
              28.3
              
              
              
              (59,845
              )
              
              (34.6
              )Logistics
      expense
              
              
              2,193
              
              
              0.7
              
              
              
              5,717
              
              
              0.9
              
              
              
              (3,524
              )
              
              (61.6
              )Vessel
      expense
              
              
              104,046
              
              
              34.4
              
              
              
              110,354
              
              
              18.0
              
              
              
              (6,308
              )
              
              (5.7
              )Depreciation
      and amortization
              
              
              95,870
              
              
              31.7
              
              
              
              73,479
              
              
              12.1
              
              
              
              22,391
              
              
              30.5General
      and administrative
              
              
              37,265
              
              
              12.3
              
              
              
              39,879
              
              
              6.5
              
              
              
              (2,614
              )
              
              (6.6
              )Total
      operating expenses
              
              
              352,458
              
              
              116.5
              
              
              
              402,358
              
              
              65.8
              
              
              
              (49,900
              )
              
              (12.4
              )(Loss)
      income from operations
              
              
              (49,942
              )
              
              (16.5
              )
              
              
              209,275
              
              
              34.2
              
              
              
              (259,217
              )
              
              (123.9
              )Other
      (expenses) and incomeInterest
      expense
              
              
              (17,119
              )
              
              (5.7
              )
              
              
              (17,228
              )
              
              (2.8
              )
              
              
              109
              
              
              (0.6
              )Loss
      on extinguishment of debt
              
              
              
              
              
              
              
              
              
              (2,318
              )
              
              (0.4
              )
              
              
              2,318
              
              
              (100.0
              )Other
      income (expense)
              
              
              21
              
              
              
              
              
              
              2,048
              
              
              0.4
              
              
              
              (2,027
              )
              
              (99.0
              )Net
      (loss)  income
              
              $
              (67,040
              )
              
              (22.2
              )
              
              $
              191,777
              
              
              31.4
              
              
              $
              (258,817
              )
              
              (135.0
              )
  Voyage
revenue
 
 The table
below provides detailed information for voyage revenue:
  Year
      Ended December 31,2009
              
              
              2008
              
              
              Increase/
      (Decrease)Voyage
      Revenue (in thousands)
              
              $
              247,980
              
              
              $
              518,907
              
              
              
              (270,927
              )
              
              (52.2
              )%Number
      of vessels (1)
              
              
              31
              
              
              
              33
              
              
              
              (2
              )
              
              (6.1
              )%Days  available
      for hire (2)
              
              
              11,680
              
              
              
              12,141
              
              
              
              (461
              )
              
              (3.8
              )%Freight
      voyage days (3)
              
              
              11,470
              
              
              
              11,900
              
              
              
              (430
              )
              
              (3.6
              )%Revenue
      tons carried (thousands) (4)For
      all cargoes
              
              
              8,788
              
              
              
              9,315
              
              
              
              (527
              )
              
              (5.7
              )%Excluding
      aggregates
              
              
              4,727
              
              
              
              5,109
              
              
              
              (382
              )
              
              (7.5
              )%Aggregates
              
              
              4,061
              
              
              
              4,206
              
              
              
              (145
              )
              
              (3.4
              )%Freight
      Rates (5)For
      all cargoes
              
              $
              28.22
              
              
              $
              55.70
              
              
              $
              (27.48
              )
              
              (49.3
              )%Excluding
      aggregates
              
              $
              45.36
              
              
              $
              88.08
              
              
              $
              (42.72
              )
              
              (48.5
              )%Daily
      time charter equivalent rates (6)
              
              $
              12,069
              
              
              $
              29,526
              
              
              $
              (17,457
              )
              
              (59.1
              )%
  (1)
              Weighted
      average number of vessels in the fleet, not including vessels chartered
      out.(2)
              Number
      of days that our vessels were available for hire, not including vessels
      chartered out.(3)
              Number
      of days that our vessels were earning revenue, 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)
              Weighted
      average freight rates measured in dollars per revenue
  ton.(6)
              Daily
      Time Charter Equivalent or "TCE" rates are defined as voyage revenue less
      voyage expenses during the year divided by the number of available freight
      voyage days during the year. 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.
  Table of Contents
 46
 The 52.2%
reduction in voyage revenue during 2009 was caused by the economic downturn,
which cut  average freight rates in half.  Additionally,
voyage revenue was also negatively affected by a 5.7% decrease in revenue tons
carried.
  Freight
rates, not under contracts, are set by the market and depend on both the demand
for ocean freight transportation and the availability of appropriate
vessels.  Average freight rates for 2009 decreased $27.48 per ton or
49.3% to $28.22 per ton as compared to $55.70 per ton in
2008.  Freight rates during most of 2009, were negatively influenced
by supply and demand imbalances for ocean freight transportation caused by the
economic crisis.   Excluding aggregates, average 2009 freight
rates would have been $45.36 per ton or 48.5% lower than the 2008 average
freight rate of $88.08 per ton.
 
 Revenue
tons carried in 2009 decreased 0.5 million tons or 5.7% to 8.8 million tons from
9.3 million tons carried in 2008, due mainly to a decrease in steel products
transported.
 
 The
following table shows voyage revenues attributed to our principal
cargoes:
  Year Ended
      December 31,2009
              
              
              2008
              
              
              Increase
      (Decrease)Description
              In
      Thousands
              
              As
      a % of Total Voyage Revenue
              
              
              In
      Thousands
              
              As
      a % of Total Voyage Revenue
              
              
              In
      Thousands
              
              %Steel
      products
              $
              60,063
              
              24.2
              
              
              $
              128,472
              
              24.8
              
              
              $
              (68,409
              )
              (53.2
              )Agricultural
      products
              
              51,417
              
              20.7
              
              
              
              86,650
              
              16.7
              
              
              
              (35,233
              )
              (40.7
              )Aggregates
              
              33,561
              
              13.5
              
              
              
              68,884
              
              13.3
              
              
              
              (35,323
              )
              (51.3
              )Metal
      concentrates
              
              37,469
              
              15.1
              
              
              
              92,824
              
              17.9
              
              
              
              (55,355
              )
              (59.6
              )Other
      bulk cargo
              
              26,483
              
              10.7
              
              
              
              59,031
              
              11.3
              
              
              
              (32,548
              )
              (55.1
              )General
      cargo
              
              9,826
              
              4.0
              
              
              
              15,012
              
              2.9
              
              
              
              (5,186
              )
              (34.5
              )Project
      cargo
              
              10,067
              
              4.1
              
              
              
              22,900
              
              4.4
              
              
              
              (12,833
              )
              (56.0
              )Rolling
      stock
              
              5,765
              
              2.3
              
              
              
              19,498
              
              3.7
              
              
              
              (13,733
              )
              (70.4
              )Fertilizers
              
              4,488
              
              1.8
              
              
              
              8,286
              
              1.6
              
              
              
              (3,798
              )
              (45.8
              )Automotive
      products
              
              4,426
              
              1.8
              
              
              
              10,833
              
              2.1
              
              
              
              (6,407
              )
              (59.1
              )Fishmeal
              
              2,544
              
              1.0
              
              
              
              
              
              
              
              
              
              2,544Other
              
              1,871
              
              0.8
              
              
              
              6,517
              
              1.3
              
              
              
              (4,646
              )
              (71.3
              )Total
      voyage revenue
              $
              247,980
              
              100.0
              
              
              $
              518,907
              
              100.0
              
              
              $
              (270,927
              )
              (52.2
              )
  In 2009 and
2008, we transported approximately 3.7 million revenue tons and 6.4 million
revenue tons, respectively, under contracts or Contracts of Affreightment
("COA") and generated approximately $53.6 million and $230.4 million of
voyage revenue, respectively.  A Contract of Affreightment ("COA")
obligates the charterers to transport a specified quantity, at a specified rate
over a specified number of voyages or period.  As of December 31,
2009, we had outstanding COAs to transport approximately 2.4 million revenue
tons on contracts expiring through December 2011. We also have requirement or
Supply Agreement COAs which differ from the standard COA. While a standard COA
specifies a specific range of tons to be shipped or a number of shipments,
requirement COAs require the customer to ship with only their partner when cargo
is available. In such a case, there would be no penalty for shipping less cargo
than called for or estimated in the requirement COA. We have a requirement COA
agreement, which expires in 2019 that calls for approximately 300,000 tons
to be shipped during the first four years and approximately 400,000 tons to be
shipped the final six years. The quantity of cargo may be increased by mutual
agreement and the base rate is $25.50 per ton, which equates to a projected
total revenue of approximately $91.8 million.
  Table of Contents
 47
 Time
charter revenue
 
 The key
factors driving time charter revenue for the years 2009 and 2008 are as
follows:
  Year
      Ended December 31,2009
                
                
                2008
                
                
                Increase
      (Decrease)Time
      Charter Revenue (in thousands)
                
                $
                51,201
                
                
                $
                83,883
                
                
                $
                (32,682
                )
                
                (39.0
                )%Number
      of vessels (1)
                
                
                13
                
                
                
                8
                
                
                
                5
                
                
                62.5
                %Time
      Charter days (2)
                
                
                4,733
                
                
                
                3,004
                
                
                
                1,729
                
                
                57.6
                %Daily
      charter hire rates (3)
                
                $
                10,818
                
                
                $
                27,924
                
                
                $
                (17,106
                )
                
                (61.3
                )%Daily
      time charter equivalent rates (4)
                
                $
                10,070
                
                
                $
                26,134
                
                
                $
                (16,064
                )
                
                (61.5
                )%
 (1)
              Weighted
      average number of vessels chartered out.(2)
              Number
      of days the 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 year 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 years ending December 31, 2009 and December 31, 2008
      were $2.1 million and $3.6 million, respectively. For the years ending
      December 31, 2009 and 2008, time charter voyages include fuel cost and
      other miscellaneous voyage costs of $1.4 million and $1.8 million,
      respectively. The fuel cost, which made up most of the costs, 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.
 
 The decrease
in time charter revenue in 2009 as compared to 2008 was principally caused by a
61.3% decrease in time charter rates.  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. Average time charter rates for 2009 was negatively influenced by supply
and demand imbalances for ocean freight transportation caused by the economic
crisis.
 
 The lower
time charter rates were partially offset by an increase in time charter out
days.  More vessels were available for time charter-out during 2009
due to the repositioning of vessels and the inability to fully use some vessels
in our established voyage business.
  Logistics
revenue
 
 Logistics
revenues represent revenues for both ocean and in-land transportation of cargo
that is provided through our Five Star Service. Logistics revenue decreased $4.3
million for the year ending December 31, 2009 as compared to 2008 due to the
economic slowdown and its negative effect on the demand for logistics
services.
 
 Table of Contents
 48
 Voyage
expense
 
 The
principal components of voyage expense are as follows:
  Year
      Ended December 31,2009
              
              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 RevenueFuel
      expense
              
              $
              55,418
              
              49.0
              
              18.5
              
              $
              87,342
              
              50.5
              
              14.5
              
              $
              (31,924
              )
              (36.6
              )
              4.0Commission
      expense
              
              
              15,123
              
              13.4
              
              5.1
              
              
              29,779
              
              17.2
              
              4.9
              
              
              (14,656
              )
              (49.2
              )
              0.2Port
      call expense
              
              
              23,882
              
              21.1
              
              8.0
              
              
              27,511
              
              15.9
              
              4.6
              
              
              (3,629
              )
              (13.2
              )
              3.4Stevedore
      and othercargo-related
      expense
              
              
              10,669
              
              9.4
              
              3.6
              
              
              18,273
              
              10.6
              
              3.0
              
              
              (7,604
              )
              (41.6
              )
              0.6Miscellaneous
      voyageexpense
              
              
              7,992
              
              7.1
              
              2.7
              
              
              10,024
              
              5.8
              
              1.7
              
              
              (2,032
              )
              (20.3
              )
              1.0Voyage
      expense
              
              $
              113,084
              
              100.0
              
              37.9
              
              $
              172,929
              
              100.0
              
              28.7
              
              $
              (59,845
              )
              (34.6
              )
              9.2
  Voyage
expense decreased $59.8 million or 34.6% for the year ending December 31, 2009
as compared to 2008, principally due to a decrease in fuel expense
and commission expense.
 
 The decrease
in fuel expense was the result of a decrease in the average price per metric
ton, or MT, and a decrease in consumption.  For the year ending
December 31, 2009, the average price per MT decreased $140 per MT or 27.2% to
$374 per MT from $514 per MT for the same period in 2008.  Consumption
decreased 21,913 MT or 12.9% to 148,078 MT for the year ending December 31, 2009
from 169,991 MT  in 2008 due to an increase in time-chartered-out
vessels and lower daily average fuel consumption per
vessel.   When vessels are time-charterd out the cost of fuel is
the responsibility of the charterer.  Average fuel cost
per freight voyage day was $4,832 for the year ending December 31, 2009 and
$7,340 for the same period in 2008.
 
 The 49.2%,
decrease in 2009 commission expense is principally caused by the 50.5% decrease
in 2009 freight and time charter revenue as compared to the prior
year.
  Port call
expense varies 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 in 2009 is primarily due a decrease in the number of port calls and
total  port days.  The number of port calls
decreased to 1,037 port calls for 2009 from 1,201 port calls for 2008 and
the total aggregate port days decreased 427 days in 2009 to
5,604  port days as compared to 6,031 port days in 2008.
  Logistics
expenses
 Logistics
expenses, which repesent expenses associated with logistics movements, decreased
$3.5 million to $2.2 million in 2009 from  $5.7 million in 2008,
primarily due to lower business volumes caused by the economic
slowdown.  Logistics operating margins remained constant at
approximately 18.4% in 2009 and 18.3%  in 2008.
  Table of Contents
 49
 Vessel
expense
 
 The principal
components of vessel expense are as follows:
  Year
      Ended December 31,2009
                
                
                2008
                
                
                Increase
      (Decrease)In
      Thousands
                
                
                As
      a % of Vessel Expense
                
                
                In
      Thousands
                
                
                As
      a % of Vessel Expense
                
                
                In
      Thousands
                
                
                PercentageOwned
      vessel expense
                
                $
                92,593
                
                
                
                88.9
                
                
                $
                91,377
                
                
                
                82.8
                
                
                $
                1,216
                
                
                
                1.3Chartered-in
      vessel expense
                
                
                3,597
                
                
                
                3.5
                
                
                
                11,551
                
                
                
                10.5
                
                
                
                (7,954
                )
                
                
                (68.9
                )Controlled
      vessel expense
                
                
                6,538
                
                
                
                6.3
                
                
                
                6,363
                
                
                
                5.7
                
                
                
                175
                
                
                
                2.8Space
      charter expense
                
                
                1,318
                
                
                
                1.3
                
                
                
                1,063
                
                
                
                1.0
                
                
                
                255
                
                
                
                24.0Vessel
      expense
                
                $
                104,046
                
                
                
                100.0
                
                
                $
                110,354
                
                
                
                100.0
                
                
                $
                (6,308
                )
                
                
                (5.7
                )
 The
decrease in vessel expense in 2009 was principally due to a decrease in the
average charter-in rate per day we paid to charter-in vessels and a decrease in
the number of chartered-in vessels as compared to 2008.  Vessel
expense as a percentage of total revenue increased 17% to 34% of total revenue
for 2009 as compared to 18% of total revenue for 2008, due to the significant
decrease in freight and time charter-out rates in 2009.
 
 Average
charter-in rate per day for 2009, decreased $7,729 per day or 40.2% to $11,491
per day as compared to $19,220 per day for 2008.  Chartered-in vessels
days decreased 47.9% to 313 days during 2009 as compared to 601 days during 2008
because our controlled fleet met the needs of our established voyage business,
which decreased our demand for charter-in vessels.
 
 The
increase in owned vessel expense was due to an increase in fleet size partially
offset by a decrease in the vessel operating day rate.  Average number
of controlled vessels, which is computed based on the number of days that we
operated our controlled vessels, increased to 47 vessels or 17,254 vessel days
in 2009 from 43 vessels or 15,736 vessel days in 2008.  The average
vessel operating expense day rate decreased $441 per day or 7.6% to
$5,366 per day for 2009 as compared to $5,807 per day for 2008, principally
because of decreases in repair and maintenance and  related freight
expenses partially offset by an increase in crew and related expenses. 
Owned vessel expenses was reduced by $4.0 million for an out-of-period
adjustment related to freight costs incurred and expensed for the years ended
December 31, 2008 and 2007.  The freight costs were incurred to put into
service capitalized assets and should have been capitalized.  Excluding
this adjustment average vessel operating expense day rate would have been $5,598
per day.
  Controlled
vessel charter expense relates to a sale-leaseback transaction entered on
January 31, 2007 for the Seminole Princess and Laguna Belle, which were
chartered back under a bareboat charter party.
  Depreciation
and amortization
 Depreciation
and amortization expense increased $22.4 million 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 year ended December
31, 2009 as compared to 43 vessels for the year ending December 31,
2008.
  General
and administrative expense
 
 General
and administrative expense decreased $2.6 million in 2009 as compared to 2008
due principally to cost cutting efforts.
  Table of Contents
 50
 Los s
from operations
 
 We
had a loss from operations in 2009 because our revenues, which are more market
driven, decreased in greater proportion than our operating costs, some of which
are fixed in nature.
 
 Interest
expense
  Interest expense decreased $0.1 million for the
year ending December 31, 2009 due to lower debt levels which were partially
off-set by higher interest rates.  Average debt levels decreased $19.2
million to $261.0  million in 2009 as compared to $280.2 million in
2008; average effective interest rates increased 0.50% to
6.0% during 2009 as compared to 5.5 % during 2008.  The
increase in our average effective interest rate was due to higher bank margins
on our bank loans, which increased when we obtained covenant waivers in March
2009.  The increases in margins were partially offset by lower average
LIBOR rates on un-hedged debt in 2009 as compared to 2008.
 
 Loss
on extinguishment of debt
 
 The
$2.3 million loss on extinguishment of
debt in 2008 represents the write-off of unamortized deferred financing costs in
connection with the March 2008 refinancing of our original Bank of America
credit facility.
    Table of Contents
 51
 Results
of Operations
 
 Year
ended December 31, 2008 compared to year ended December 31, 2007
  Year
      Ended December 31,2008
                
                
                2007
                
                
                Increase
      (Decrease)In
      Thousands
                
                
                As
      a % of Total Revenue
                
                
                In
      Thousands
                
                
                As
      a % of Total Revenue
                
                
                In
      Thousands
                
                
                PercentageVoyage
      revenue
                
                $
                518,907
                
                
                84.8
                
                
                $
                261,509
                
                
                74.1
                
                
                $
                257,398
                
                
                98.4Time
      charter revenue
                
                
                83,883
                
                
                13.7
                
                
                
                88,365
                
                
                25.0
                
                
                
                (4,482
                )
                
                (5.1
                )Logistics
      revenue
                
                
                7,000
                
                
                1.2
                
                
                
                668
                
                
                0.2
                
                
                
                6,332Other
      revenue
                
                
                1,843
                
                
                0.3
                
                
                
                2,379
                
                
                0.7
                
                
                
                (536
                )
                
                (22.5
                )Total
      revenue
                
                
                611,633
                
                
                100.0
                
                
                
                352,921
                
                
                100.0
                
                
                
                258,712
                
                
                73.3Voyage
      expense
                
                
                172,929
                
                
                28.3
                
                
                
                89,241
                
                
                25.3
                
                
                
                83,688
                
                
                93.8Logistics
                
                
                5,717
                
                
                0.9
                
                
                
                557
                
                
                0.2
                
                
                
                5,160Vessel
      expense
                
                
                110,354
                
                
                18.0
                
                
                
                85,958
                
                
                24.4
                
                
                
                24,396
                
                
                28.4Depreciation
      and amortization
                
                
                73,479
                
                
                12.1
                
                
                
                36,022
                
                
                10.2
                
                
                
                37,457
                
                
                104.0General
      and administrative
                
                
                39,879
                
                
                6.5
                
                
                
                38,703
                
                
                11.0
                
                
                
                1,176
                
                
                3.0Loss
      from sale of vessel
                
                
                
                
                
                
                
                
                
                814
                
                
                0.2
                
                
                
                (814
                )
                
                (100.0
                )Total
      operating expenses
                
                
                402,358
                
                
                65.8
                
                
                
                251,295
                
                
                71.3
                
                
                
                151,063
                
                
                60.1Income
      from operations
                
                
                209,275
                
                
                34.2
                
                
                
                101,626
                
                
                28.7
                
                
                
                107,649
                
                
                105.9Other
      (expenses) and incomeInterest
      expense
                
                
                (17,228
                )
                
                (2.8
                )
                
                
                (10,394
                )
                
                (2.9
                )
                
                
                (6,834
                )
                
                65.7Loss
      on extinguishment of debt
                
                
                (2,318
                )
                
                (0.4
                )
                
                
                
                
                
                
                
                
                
                (2,318
                )Gain
      from sale and insurance recovery of vessel
                
                
                
                
                
                
                
                
                
                6,034
                
                
                1.7
                
                
                
                (6,034
                )
                
                (100.0
                )Other
      income (expense)
                
                
                2,048
                
                
                0.4
                
                
                
                983
                
                
                0.3
                
                
                
                1,065
                
                
                108.3Net  income
                
                $
                191,777
                
                
                31.4
                
                
                $
                98,249
                
                
                27.8
                
                
                $
                93,528
                
                
                95.2
  Voyage
revenue
 
 The table
below provides detailed information for voyage revenue:
  Year
      Ended December 31,2008
                
                
                2007
                
                
                Increase
      (Decrease)Voyage
      Revenue (in thousands)
                
                $
                518,907
                
                
                $
                261,509
                
                
                $
                257,398
                
                
                98.4
                %Number
      of vessels (1)
                
                
                33
                
                
                
                22
                
                
                
                11
                
                
                50.0
                %Freight
      voyage days (2)
                
                
                11,900
                
                
                
                8,209
                
                
                
                3,691
                
                
                45.0
                %Days
      on hire (3)
                
                
                12,141
                
                
                
                8,292
                
                
                
                3,849
                
                
                46.4
                %Revenue
      tons carried (thousands) (4)For
      all cargoes
                
                
                9,315
                
                
                
                6,621
                
                
                
                2,694
                
                
                40.7
                %Excluding
      aggregates
                
                
                5,109
                
                
                
                3,447
                
                
                
                1,662
                
                
                48.2
                %Aggregates
                
                
                4,206
                
                
                
                3,174
                
                
                
                1,032
                
                
                32.5
                %Freight
      Rates (5)For
      all cargoes
                
                $
                55.70
                
                
                $
                39.49
                
                
                $
                16.21
                
                
                41.0
                %Excluding
      aggregates
                
                $
                88.08
                
                
                $
                68.79
                
                
                $
                19.29
                
                
                28.0
                %Daily
      time charter equivalent rates (6)
                
                $
                29,526
                
                
                $
                21,658
                
                
                $
                7,868
                
                
                36.3
                %
 
 (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)
                Weighted
      average freight rates measured in dollars per revenue
  ton.  Table of Contents
 52
  (6)
                Daily
      Time Charter Equivalent or "TCE" rates are defined as voyage revenue less
      voyage expenses during the year divided by the number of available freight
      voyage days during the year. Voyage expenses include: fuel, port call,
      commissions, stevedore and other cargo related and miscellaneous voyage
      expenses.  To conform with the 2008 presentation, daily time charter
      equivalent rates for 2007 were revised to exclude intercompany commissions
      and management fees eliminated in consolidation.  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.
 
 Voyage
revenue in 2008 increased primarily due to an increase in revenue tons carried
coupled with an increase in freight rates. Approximately 63% of the increase in
voyage revenue is attributable to the increase in revenue tons carried, with the
balance of approximately 37% due to higher freight rates on cargoes
carried.
 
 Revenue
tons carried in 2008 increased 2.7 million tons or 40.7% to 9.3 million tons
from 6.6 million tons carried in 2007. We increased our TBS Middle East service
in 2008, which increased the aggregate bulk cargo we carried and, consequently,
was the principal reason for the increase in revenue tons. Aggregate bulk cargo
accounted for 38% of the increase in revenue tons carried.
 
 Freight
rates, not under contracts, are set by the market and depend on both the demand
for ocean freight transportation and the availability of appropriate
vessels.  A COA obligates the charterers to transport a specified
quantity, at a specified rate over a specified number of voyages or
period.  In 2008 and 2007, we had COAs under which we carried
approximately 6.4 million revenue tons and 4.2 million revenue tons and
generated approximately $230.4 million and $89.6 million of voyage revenue,
respectively.  As of December 31, 2008, we had outstanding COAs to
transport approximately 3.2 million revenue tons on contracts expiring through
December 2009.
 
 Average
freight rates for 2008 increased $16.21 per ton or 41.0% to $55.70 per ton as
compared to $39.49 per ton in 2007. The increase was principally caused by
higher rates for the aggregates carried. Excluding aggregates, average freight
rates would have been $88.08 per ton and $68.79 per ton for 2008 and 2007,
respectively.
 
 The
following table shows voyage revenues attributed to our principal
cargoes:
 Year
      Ended December 31,2008
                
                2007
                
                Increase
      (Decrease)Description
                
                In
      Thousands
                
                As
      a % of Total Voyage Revenue
                
                In
      Thousands
                
                As
      a % of Total Voyage Revenue
                
                In
      Thousands
                
                PercentageSteel
      products
                
                $
                128,472
                
                24.8
                
                $
                91,182
                
                34.9
                
                $
                37,290
                
                40.9Metal
      concentrates
                
                
                92,824
                
                17.9
                
                
                38,772
                
                14.8
                
                
                54,052
                
                139.4Agricultural
      products
                
                
                86,650
                
                16.7
                
                
                45,247
                
                17.3
                
                
                41,403
                
                91.5Aggregates
                
                
                68,884
                
                13.3
                
                
                24,406
                
                9.4
                
                
                44,478
                
                182.2Other
      bulk cargo
                
                
                59,031
                
                11.3
                
                
                19,866
                
                7.6
                
                
                39,165
                
                197.1Project
      cargo
                
                
                22,900
                
                4.4
                
                
                2,757
                
                1.1
                
                
                20,143Rolling
      stock
                
                
                19,498
                
                3.7
                
                
                13,110
                
                5.0
                
                
                6,388
                
                48.7Automotive
      products
                
                
                10,833
                
                2.1
                
                
                5,345
                
                2.0
                
                
                5,488
                
                102.7General
      cargo
                
                
                15,012
                
                2.9
                
                
                5,769
                
                2.2
                
                
                9,243
                
                160.2Fertilizers
                
                
                8,286
                
                1.6
                
                
                9,709
                
                3.7
                
                
                (1,423
                )
                (14.7
                )Other
                
                
                6,517
                
                1.3
                
                
                5,346
                
                2.0
                
                
                1,171
                
                21.9Total
      voyage revenue
                
                $
                518,907
                
                100.0
                
                $
                261,509
                
                100.0
                
                $
                257,398
                
                98.4
  Table of Contents
 53
 
 Time
charter revenue
 
 The key
factors driving time charter revenue for the years 2008 and 2007 are as
follows:
  Year
      Ended December 31,2008
                
                
                2007
                
                
                Increase
      (Decrease)Time
      Charter Revenue (in thousands)
                
                $
                83,883
                
                
                $
                88,365
                
                
                $
                (4,482
                )
                
                (5.1
                )%Number
      of vessels (1)
                
                
                8
                
                
                
                10
                
                
                
                (2
                )
                
                (20.0
                )%Time
      Charter days (2)
                
                
                3,004
                
                
                
                3,659
                
                
                
                (655
                )
                
                (17.9
                )%Daily
      charter hire rates (3)
                
                $
                27,924
                
                
                $
                24,150
                
                
                $
                3,774
                
                
                15.6
                %Daily
      time charter equivalent rates (4)
                
                $
                26,134
                
                
                $
                23,078
                
                
                $
                3,056
                
                
                13.2
                %
 
 (1)
                Weighted
      average number of vessels chartered out.(2)
                Number
      of days the 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 year reduced
      principally by commissions divided by the number of available time charter
      days during the year.  Commission for vessels that are time chartered
      out for the year ended December 31, 2008 and December 31, 2007 were $3.6
      million and $3.9 million, respectively. For the year ended December 31,
      2008, time charter voyages include fuel and other miscellaneous voyage
      expenses of $1.8 million.  The fuel expense cost, which made up
      most of the expenses, is related to fuel price differentials caused by
      volatility in the fuel market and the cost for ballasting vessels to time
      charter delivery ports.  To conform with the 2008 presentation
      daily time charter equivalent rates for 2007 were revised to exclude
      intercompany commissions and management fees eliminated in
      consolidation.  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.
 
 The
decrease in time charter revenue in 2008 was the result of a decrease in the
number of time charter-out days. The decrease in time charter-out days is due
mainly to the reduced number of vessels available for time charter-out because
of the increased use of our controlled vessels in our established voyage
business.
 
 An
increase in average charter hire rates offset the decrease in the time
charter-out days in 2008. 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 increase
in average time charter rates for 2008 as compared to 2007 was reflective of the
strong worldwide shipping markets for most of 2008.
 
 Logistics
revenue and expenses
 
 Logistics
revenues represent revenues from cargo and transportation management services
provided through our Five Star Service. For 2008, logistics revenues and related
cargo and management costs represent a full year's growth compared to 2007 when
we initiated logistics support in the fourth quarter. The logistics operating
margin was approximately 18.3% in 2008.
 
 Table of Contents
 54
 Voyage
expense
 
 The
principal components of voyage expense are as follows:
  Year
      Ended December 31,2008
                
                2007
                
                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 2007 Expense
                
                As
      a % of Voyage & Time Charter RevenueFuel
      expense
                $
                87,342
                
                50.5
                
                14.5
                
                $
                39,427
                
                44.2
                
                11.3
                
                $
                47,915
                
                121.5
                
                3.2Commission
      expense
                
                29,779
                
                17.2
                
                4.9
                
                
                16,196
                
                18.1
                
                4.6
                
                
                13,583
                
                83.9
                
                0.3Port
      call expense
                
                27,511
                
                15.9
                
                4.6
                
                
                17,225
                
                19.3
                
                4.9
                
                
                10,286
                
                59.7
                
                (0.3
                )Stevedore
      and othercargo-related
      expense
                
                18,273
                
                10.6
                
                3.0
                
                
                11,072
                
                12.4
                
                3.2
                
                
                7,201
                
                65.0
                
                (0.2
                )Miscellaneous
      voyageexpense
                
                10,024
                
                5.8
                
                1.7
                
                
                5,321
                
                6.0
                
                1.5
                
                
                4,703
                
                88.4
                
                0.2Voyage
      expense
                $
                172,929
                
                100.0
                
                28.7
                
                $
                89,241
                
                100.0
                
                25.5
                
                $
                83,688
                
                93.8
                
                3.2
 
 Voyage
expense increased in 2008 primarily due to an increase in fuel expense, which
resulted from higher average fuel costs, an increase in fuel consumption and
higher average port call costs.
  Fuel expense
increased $47.9 million in 2008 primarily due to an increase in the average
price paid per MT. In 2008, the average price paid per MT increased $112 or
approximately 28% to $514 per MT compared to the average price paid per MT of
$402 per MT during 2007.  Consumption increased 72,006 MT to 169,991
MT for the year, compared to 97,985 to 2007.  The increase in
consumption is directly related to the increase in freight voyages. Average fuel
cost per freight voyage day was $7,340 during 2008 and $4,803 during
2007.
  The increase
in commission expenses in 2008 is attributable to increased revenues and to a
lesser extent because the  commission rate paid to our unconsolidated
affiliate TBS Commercial Group was increased effective October 1,
2007.  The rate increase to TBS Commercial Group accounted for
approximately 31% of the commission increase.
  Port call
expense varies from period to period depending on the number of port calls, port
days and cost structure of the ports called upon. The increase in port call
expense in 2008 is primarily due to additional port calls and port days by
vessels. The number of port calls increased to 1,201 port calls for 2008
from 894 port calls for 2007 and the total aggregate port days in 2008 was 6,031
as compared to 3,970 port days in 2007.
  Stevedore
and other cargo-related expenses fluctuate based on cargo volumes and the
shipping terms under which the cargo is booked.  Stevedore and other
cargo-related cost increased in 2008 due to a higher percentage of cargo being
booked under "full liner" terms and 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.
  Table of Contents
 55
 Vessel
expense
 
 The
principal components of vessel expense are as follows:
  Year
      Ended December 31,2008
                
                
                2007
                
                
                Increase
      (Decrease)In
      Thousands
                
                
                As
      a % of Vessel Expense
                
                
                In
      Thousands
                
                
                As
      a % of Vessel Expense
                
                
                In
      Thousands
                
                
                PercentageOwned
      vessel expense
                
                $
                91,377
                
                
                82.8
                
                
                $
                56,856
                
                
                66.2
                
                
                $
                34,521
                
                
                60.7Chartered-in
      vessel expense
                
                
                11,551
                
                
                10.5
                
                
                
                22,905
                
                
                26.6
                
                
                
                (11,354
                )
                
                (49.6
                )Controlled
      vessel expense
                
                
                6,363
                
                
                5.7
                
                
                
                6,073
                
                
                7.1
                
                
                
                290
                
                
                4.8Space
      charter expense
                
                
                1,063
                
                
                1.0
                
                
                
                124
                
                
                0.1
                
                
                
                939Vessel
      expense
                
                $
                110,354
                
                
                100.0
                
                
                $
                85,958
                
                
                100.0
                
                
                $
                24,396
                
                
                28.4
 
 The
increase in vessel expense in 2008 was primarily due to an increase in our fleet
of owned and controlled vessels.  Vessel expense as a percentage of
total revenue decreased 6.0% to 18% of total revenue for 2008 as compared to 24%
of total revenue for 2007, primarily due to the increase in revenue resulting
from higher freight rates.
 
 The
increase in owned vessel expense was due to an increase in the average operating
expense day rate of $1,187 per day to $5,807 for 2008 as compared to $4,620 per
day for 2007. The average operating expense day rate, increased principally
because of increases in crew cost, insurance and maintenance and repairs. The
owned vessel expense increase was also due to an increase in the average number
of controlled vessels, which increased the number of vessel
days.  Vessel days are the total days we operated our controlled
vessels which increased 3,430 days to 15,736 during 2008 from 12,306 days during
2007.
  The
decrease in chartered-in vessel expense was due to a decrease in the average
charter-in rate per day we paid to charter in vessels.  The average
charter-in rate per day decreased $5,409 per day to $19,220 per day in 2008 as
compared to $24,629 per day for 2007.  We chartered-in vessels for 601
days during 2008 as compared to 930 days during 2007 because of an increase in
our controlled fleet, which decreased our demand for charter-in
vessels.
 
 Controlled
vessel charter expense relates to a sale-leaseback transaction entered on
January 31, 2007 for the Seminole Princess and Laguna Belle, which were
chartered back under a bareboat charter party. Controlled vessel expense
increased in 2008 as compared to 2007 because we chartered-in the vessels for
the full year during 2008.  Charter-in days increased to 366 days per
vessel in 2008 as compared to 336 days per vessel in 2007.
 
 Depreciation
and amortization
 
 The
increase in depreciation and amortization expense to $73.5 million in 2008 from
$36.0 million in 2007 was due principally to additional depreciation and
amortization on vessel improvements and drydockings made during
2008.  The growth of our owned/controlled fleet, which increased to an
average of 43 vessels for the year ended December 31, 2008 as compared to an
average of 34 vessels for the year ended December 31, 2007, also added to the
increase in depreciation and amortization.
 
 Table of Contents
 56
 General
and administrative expense
 
 The $1.2
million net increase in general and administrative expense in 2008 as compared
to 2007 is primarily made up of a $2.6 million and $1.6 million increase in
professional fees and miscellaneous expense, respectively, offset by a $4.0
million decrease in salary and related expenses.  Salaries and related
expenses decreased principally due to management's decision to eliminate our
2008-bonus in response to current worldwide economic conditions and its impact
on the shipping industry.  Our bonus program, under which employees
may receive an annual cash bonus payment based on our annual operating
performance, is discretionary.  For the year ended December 31, 2007,
we gave bonuses to our officers and employees of $10.2 million.  We
had previously made provisions for a 2008 bonus of approximately $15.1
million.  The elimination of the bonus was offset by an increase in
salaries and related expenses of $4.3 million due to increases in staff levels,
which increased to approximately 170 employees at December 31, 2008 from
approximately 130 employees at December 31, 2007, to manage the growth of our
business.  Higher non-cash stock-based compensation, which increased
to $2.4 million from $0.5 million for the years ended December 31, 2008 and
2007, respectively, also added to the increase in salaries and related
expenses.
 
 Loss
from sale of vessels
 
 The loss in
2007 represents the sale, on March 13, 2007, of the vessel Maya Princessfor $13.0
million.  The loss on sale was $0.8 million after deducting the cost
of vessel and improvements less accumulated depreciation, and other closing
costs.
  Income
from operations
 
 The increase in
income from operations was mainly attributable to an increase in revenue
resulting from increased freight rates and increased revenue tons carried.
Freight and charter hire rates increased due to strong market conditions in the
ocean transport industry through September 30, 2008. The charter hire rates
declined during the fourth quarter of 2008 which partially offset earlier
revenue increases. Operating expenses increased in 2008 as previously described
for voyage expense, vessel expense, depreciation, and general and administrative
expenses. The increase in revenue was greater than the increase in operating
expenses causing our operating margin to increase to 34.2%for 2008 from 28.7%for 2007.
 
 Interest
expense
  Interest
expense increased $6.8 million for the year ended December 31, 2008 as
compared to the same period in 2007 principally due to higher debt levels,
increased costs related to our interest swap contracts and higher bank fees.
These increases were offset by a reduction in interest rates and a decrease in
our borrowing costs when we repaid our capital lease obligation with loan
proceeds having lower borrowing costs. Our average effective interest rate
decreased to approximately 5.5% for 2008 compared to approximately 8.1% for
2007.
 
 For the year
ended December 31, 2008, our debt levels averaged $280.2 million as compared to
$114.5 million during the same period in 2007.  The increase in the average
debt level for 2008 is attributable to debt incurred to fund vessel acquisitions
and $75.0 million borrowed during the fourth quarter of 2008 under the Bank of
America revolving credit facility.  During 2008, we capitalized
interest of $3.6 million directly related to The Royal Bank of Scotland credit
facility for the new vessel building program and interest of $2.3 million
imputed on construction in progress payments funded with cash flows from
operations and other debt, as required by generally accepted accounting
principals.
 
 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 incurred in connection with the March 2008
refinancing of our original Bank of America credit facility.
 
 Table of Contents
 57
 Gain
on sale and insurance recovery of vessel
 
 TheHuron Maiden was severely
damaged in a grounding accident on an uncharted rock while on passage near
Indonesia on March 9, 2007.  On April 4, 2007, the vessel was declared
a constructive total loss.  Accordingly, we received a net amount of $8.0
million from our Hull & Machinery/Increased Value insurances after a scrap
value credit of $2.0 million.  We retained the proceeds on the sale of
the vessel for scrap, which was sold and delivered to the buyer on May 4, 2007
for $2.8 million.  After deducting the cost of vessel and improvements less
accumulated depreciation and expenses incurred in connection with the
accident and sale of the vessel we realized a gain on the sale of the vessel and
insurance recovery of approximately $6.0 million.
   Balance
Sheet
 
 December
31, 2009 as compared to December 31, 2008
 
 Charter
Hire Receivables
 
 Our gross
charter hire receivables balance at December 31, 2009 and December 31, 2008 was
$35.6 million ($34.6 million after the allowance for doubtful accounts of $1.0
million and $46.3 million ($45.8 million after the allowance for doubtful
accounts of $0.5 million), respectively.
 
 In accordance
with our bad debt allowance policy, we identify specific receivables that we
believe will be difficult to collect and create allowances for those
receivables.  The aggregate allowance totaled $1.0 million at December
31, 2009 and $0.5 million at December 31, 2008.  Charter receivable
balances at December 31, 2009 are lower than the previous year due in part to
lower average revenue per voyage and tighter collections efforts.
 
 Fuel
and Other Inventories
 
 Fuel and
other inventories at December 31, 2009 increased $2.9 million to $15.0 million
from the December 31, 2008 balance of $12.1 million.  Approximately $2.5
million of the increase was due to an increase in the average fuel prices at
December 31, 2009 as compared to December 31, 2008, which was partially offset
by a $0.5 million decrease caused by lower quantities of fuel on board the
vessels and a lower number of vessels with fuel inventory at December 31, 2009
as compared to December 31, 2008.  At December 31, 2009, the combined
average price for industrial fuel oil/marine diesel oil increased $133 per
metric ton to $503 per metric ton from $370 per metric ton at December 31,
2008. Changes in fuel quantities result 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 December 31,
2009, as compared to 37 vessels as of December 31, 2008.  The
remaining increase in fuel and other inventories at December 31, 2009 as
compared to December 31, 2008, was due to an $0.9 million increase in
lubricating oil on board vessels at December 31, 2009.  The increase
is principally due to the timing of lubricating oil deliveries to the
vessels.
  Off-Balance
Sheet Arrangements
 
 At December
31, 2009 we had outstanding, interest rate swap agreements having a total
notional amount of $186.7 million.  See "Item 7A Quantitative and
Qualitative Disclosures about Market Risk" for additional
information.
 Table of Contents
 58
 Other
Commitments
 
 Our
contractual obligations as of December 31, 2009 are shown in the following
table (in thousands):
  Total
                  
                  
                  Less
      than 1 year
                  
                  
                  1-3
      years
                  
                  
                  3-5
      years
                  
                  
                  More
      than 5 yearsDebt
      Obligations (1)
                  
                  $
                  351,247
                  
                  
                  $
                  73,541
                  
                  
                  $
                  175,101
                  
                  
                  $
                  45,873
                  
                  
                  $
                  56,732Estimated
      variable interest payments (2 )
                  
                  
                  63,332
                  
                  
                  
                  22,013
                  
                  
                  
                  26,466
                  
                  
                  
                  11,630
                  
                  
                  $
                  3,223Operating
      lease obligations (3)
                  
                  
                  25,325
                  
                  
                  
                  6,890
                  
                  
                  
                  12,125
                  
                  
                  
                  6,310Other
      newbuild program obligations (4) (5)
                  
                  
                  67,100
                  
                  
                  
                  51,400
                  
                  
                  
                  15,700Total
      contractual cash obligations
                  
                  $
                  507,004
                  
                  
                  $
                  153,844
                  
                  
                  $
                  229,392
                  
                  
                  $
                  63,813
                  
                  
                  $
                  59,955
 
 (1)
                  As of December 31,
      2009, we had $351.2 million of indebtedness outstanding under loans to
      our subsidiaries that
      we guarantee, $28.7 million under the $40.0 million credit facility with
      Credit Suisse, $35.9 million under the $75.0 million credit facility with
      DVB Group Merchant Bank (Asia) Ltd., $19.2 million under the $35.0 million
      credit facility with AIG Commercial Equipment Finance, $76.0 million under
      the $142.5 term loan with Bank of America,  $75.0 million under
      the $85.0 million revolving credit facility with Bank of America, $4.5
      million under the $12.5 million credit facility with Commerzbank AG, $8.1
      million under the $13.0 million credit facility with Berenberg Bank and
      $103.8 million under the $150.0 million credit facility with The Royal
      Bank of Scotland for the new vessel building program.  The above
      schedule does not reflect future advances of $45.0 million under the
      $150.0 million credit facility with The Royal Bank of Scotland for the new
      vessel building.  The long-term portion of the debt obligations
      on the above table have not been reclassified to current debt, but see
      Footnote 11 – Financing, Debt Reclassification. If the debt obligations of
      $351.2 million were reclassified to current debt and shown as being due in
      the less than one year column, “Total contractual cash obligations” on the
      above table would have been as follows: less than one year, $431.6
      million; 1-3 years, $27.8 million; 3-5 years, $6.3 million; and more than
      5 years, $2.6
million.
  (2)
                  Amounts
      for all periods represent our estimated future interest payments on our
      debt facilities based upon amounts outstanding at December 31, 2009
      and an annual interest rate of 7.0%, which approximates the average
      interest rate on all outstanding debt at December 31,
  2009.
 
 (3)
                  Operating
      lease obligations includes obligations under two seven-year bareboat
      charters for the Seminole Princess and the Laguna Belle and office
      leases.
 
 (4)
                  Approximately
      $45.0 million of the purchase obligation for the new vessels will be
      funded under the $150.0 million credit facility with The Royal Bank of
      Scotland for the newbuilding program. Under the loan 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.  We had outstanding purchase obligations to the
      shipyard at December 31, 2009 on the purchase of the five remaining
      vessels to be delivered as follows (in
  thousands):
 Owning
      Subsidiary
                
                Hull
      Number
                
                Total
                
                
                Less
      than 1 year
                
                
                1-3
      yearsArgyle
      Maritime Corp.
                
                NYHS200720
      - Rockaway
                
                $
                
                
                
                $
                
                
                
                $Caton
      Maritime Corp.
                
                NYHS200721
      - Dakota
                
                
                7,600
                
                
                
                7,600Dorchester
      Maritime Corp.
                
                NYHS200722
      - Montauk
                
                
                7,800
                
                
                
                7,800Longwoods
      Maritime Corp.
                
                NYHS200723
                
                
                14,800
                
                
                
                7,000
                
                
                
                7,800McHenry
      Maritime Corp.
                
                NYHS200724-
      Omaha
                
                
                14,800
                
                
                
                14,800Sunswyck
      Maritime Corp.
                
                NYHS200725
                
                
                21,800
                
                
                
                14,000
                
                
                
                7,800Total
                
                $
                66,800
                
                
                $
                51,200
                
                
                $
                15,600
  (5)
                In
      connection with the newbuilding program, we entered into a contract for
      the supervision and inspection of vessels under
      construction.  As of December 31, 2009, commitments under
      the contract were $0.3 million, with $0.2 million due within one year and
      $0.1 million due between one and three
years.
 
 Table of Contents
 59
 Liquidity and
Capital Resources
 
 Our ability
to fund operating expenses and capital expenditures and our ability to make
scheduled payments of interest and to satisfy any other present or future debt
obligations will depend on future operating performance, prevailing economic
conditions and financial and other factors beyond our control, including those
disclosed below and under "Item 1A. Risk Factors."
 
 Our
principal sources of funds are operating cash flows and long-term bank
borrowings.  Our principal uses of funds are expenditures to operate
our fleet of vessels, capital expenditures to maintain the quality of our fleet
and keep us in compliance with international shipping standards and regulations,
and to pay principal and interest on outstanding debt.  Through the first
three quarters of 2009, we continued to experience lower freight rates as a
result of the global financial crisis, which began in 2008. Additionally, there
was a corresponding reduction in the demand for our services, which began to
stabilize in December 2009.  Consequently, our operating cash flows
were adversely impacted.
 
 Management
continued its efforts to mitigate the impact of the economic decline by
extending many of the actions it took at the beginning of the financial crisis
in late 2008.  These actions included but were not limited to freezing
salaries at 2008 levels; scaling back our steel renewal and reinforcement during
drydocking program; suspending the purchase of second-hand bulk carriers and
reducing capital expenditures. Resumption of the acquisition of vessels will be
subject to improvement in global economic conditions, management’s expectations,
and the availability of funding on favorable terms.  Our business is
capital intensive, and our future success will still depend on our ability to
maintain a high-quality fleet through the ongoing maintenance of our currently
owned ships and, in the long term, the acquisition of additional
ships.  We believe our current cost control initiatives will not
impact our long term goals.
 
 The
economic downturn and its effect on the market value of vessels gave an
indication of possible collateral coverage (loan to value) ratio and financial
covenant issues in 2009.  In the fourth quarter of 2008 we
decided to prepay certain loans, and we initiated discussions with our lenders
to obtain waivers to the collateral and other financial
covenants.  Our various debt agreements contain both financial and
non-financial covenants, and include customary restrictions on our 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 our 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.  In addition, certain credit agreements restrict the payment
of dividends, and the amount of leverage, investment and capital expenditures we
may undertake without consent of the lender.  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.
 
 We
concluded in early 2009, that due to the downturn in the shipping market and
based on third-party vessel valuations we would not meet our collateral coverage
requirements.  Consequently, we obtained waivers from all of our
lenders to the collateral coverage ratio and financial covenants through January
1, 2010.  As a result of the loan modification two additional
covenants were introduced that required us to have a minimum end of month cash
balance of not less than $40.0 million during 2009 and earnings before
interest, depreciation and amortization or EBITDA to interest expense
ratio of not less than:
 
 1.10
      to 1.00
                EBITDA
      for the two fiscal quarters ended June 30, 2009 to interest expense for
      the same period;1.35
      to 1.00
                EBITDA
      for the  three fiscal quarters ended September 30, 2009 to
      interest expense for the same period; and1.75
      to 1.00
                EBITDA
      for the  four fiscal quarters ended December 31, 2009 to
      interest expense for the same
period.
 
 Table of Contents
 60
 Each of the
additional covenants were met in 2009.  In late December 2009, while
economic conditions continued to improve, we concluded that based upon internal
projections and the four quarter look back methodology used in computing the
ratios, it was probable that we would violate the leverage and fixed charge
coverage ratios once the waivers expired on January 1,
2010.  Accordingly, we obtained from all of our lenders an extension
of the waivers until April 1, 2010.  In connection with these waivers,
the minimum end of month cash balance was reduced from $40.0 million to $25.0
million.  The additional covenants are applicable through the extended
waiver period. As long as the two additional covenants are met,
the financial covenants described in the table below are
waived.
 
 Covenant
                
                Required
                ActualMinimum
      Consolidated Tangible Net Worth
                
                $235
      million plus 75% of net income per quarter for all quarters
      after  September 30, 2007, with no reduction for
      losses,  plus 100% of increases to shareholders equity for the
      issuance of stock.  At December 31, 2009, a Consolidated
      Tangible Net Worth of $501.0 million.
                $522.0
      millionMaximum
      Consolidated Leverage Ratio
                
                Not
      more than a ratio of 3.00 to 1.00 of Consolidated Funded Indebtedness, as
      defined in the loan agreements, at the end of a quarter to Consolidated
      EBITDA for the four previous quarters.
                5.93
      to 1.00
                  waivedMinimum
      Consolidated Fixed Charge Coverage Ratio
                
                Not
      less than a ratio of 1.50 to 1.00 of Consolidated EBITDA for the four
      previous quarters to Consolidated interest expense for the same period
      plus regularly scheduled debt payments for the following 12
      months
                0.48
      to 1.00 waivedMinimum
      Cash Liquidity
                
                Qualified
      cash of $15.0 million, [$10.0 million under the AIG credit facility]
      [Qualified cash is defined in the agreement as cash and cash equivalents
      plus the available unused portion under the revolving credit
      facility]
                $51.0
      million
  Although we
were in compliance with all modified additional covenants on December 31, 2009
and the debt was not and is not currently callable by the lenders absent the
waivers, we would have been in violation of the previously effective minimum
consolidated fixed charge coverage ratio and the maximum consolidate leverage
ratio as shown above.  Based on current internal projections, we
anticipate that we will not meet certain of the reinstated covenant requirements
during the next 12 months.  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 12
months.  Accordingly, long-term loans are classified as a current
liability in the consolidated balance sheet at December 31, 2009.  If
and when we are able to obtain alternative financing or modifications to our
credit facilities, we expect to reclassify the portion of our outstanding debt
that is scheduled to come due in more than one year as long-term debt on our
consolidated balance sheet.
 
 We are
actively pursuing a more permanent borrowing solution, which may include
obtaining alternative financingor modifications to, or repayment of, our
existing credit facilities.  In conjunction with any alternative
financing or modifications, additional future borrowings may be reduced. We
cannot make assurances that we will be able to obtain such financing or
modifications to the credit facilities.  Failure to do so would result
in a default, which would enable the lenders to accelerate the timing of
payments and exercise their lien on essentially all of our assets, which would
have a material adverse effect on our business, operations, financial condition
and liquidity and would raise substantial doubt about our ability to continue as
a going concern.
 
 Table of Contents
 61
 On
December 31, 2009, our cash balance was $51.0 million, which excludes $8.7
million of restricted cash on deposit with The Royal Bank of Scotland to be used
to pay our portion of installments due under our shipbuilding
contracts.  The $8.7 million is not counted toward the $25.0 million
end of month cash balance requirement that we are required to maintain under our
loan agreements.  The $8.7 million of restricted cash will decrease as
payments are made to the shipyard. Additionally, we have $10.0 million
available, subject to collateral limits, on the BA Revolving Credit Facility,
which expires on March 26, 2012.
 We are
not certain about whether we will have sufficient liquidity to meet our
needs for operating cash for fiscal year ending December 31, 2010.  We
expect that our ability to meet such needs will depend primarily on our cash
balance at December 31, 2009 of $51.0million,
our 2010 operating cash flows; our ability to borrow under our existing
credit facilities and our ability to secure additional or replacement financing
for our business.
 
 Below is a
summary of investing and financing activities for the years ended December 31,
2009 and 2008:
 
 Financing
Activities 2009
 
 ·
                We
      made scheduled debt repayments totaling $7.5
  million;
  ·
                We
      prepaid principal payments in the amount of  $53.5 million,
      consisting of $3.0 million to Credit Suisse, $19.6 million to DVB, $19.0
      million to Bank of America, $7.9 million to AIG, $2.0 million to
      Commerzbank, $0.4 million to The Royal Bank of Scotland and $1.6 million
      to Berenberg Bank;
  ·
                We
      borrowed an additional $29.2 million under our $150.0 million credit
      facility with The Royal Bank of Scotland to fund construction
      payments due on the building of the new multipurpose vessels with
      retractable tweendecks.  At December 31, 2009, we had total
      borrowings under the credit facility of $103.8  million
      with  $46.2 million available for future drawdown upon the ship
      yard meeting specific construction
milestones;
  ·
                We
      paid $3.4 million of deferred financing and leasing
  costs
  Investing
Activities 2009
  Using
capital from operations and borrowings, we made the following acquisitions and
capital improvements:
 For
      the Year EndedDecember
      31,2009
              
              
              2008(in
      millions)Vessels
      purchased
              
              $
              39.8
              
              
              $
              313.7Vessel
      improvements and other equipment
              
              
              29.3
              
              
              
              49.3Construction
      in progress
              
              
              44.5
              
              
              
              63.2Amount
      reclassed from construction in progress to vessels
              
              
              (39.8
              )
              
              
              0.0Other
      fixed assets
              
              
              2.0
              
              
              
              3.5Sub
      total
              
              
              75.8
              
              
              
              429.7Less:
      Vessel deposits paid in prior years
              
              
              
              
              
              
              (14.8
              )Total
      Vessel acquisitions / capital improvement
              
              $
              75.8
              
              
              $
              414.9
  Table of Contents
 62
 ·
              In
      connection with our new vessel construction program we made payments to
      the ship building yard and incurred capitalized costs totaling $44.5
      million.  During the third quarter the Rockaway Belle,which
      is the first of the six vessels being built, was
      delivered.  Three of the remaining vessels are scheduled to be
      delivered in 2010, with the remaining two vessels scheduled to be
      delivered in 2011.  The project is being funded from our $150.0
      million credit facility with The Royal Bank of Scotland and operating cash
      flows.
  ·
              In
      connection with the March 2009 amendment to The Royal Bank of Scotland
      Credit Facility, we were required to deposit $20.0 million with The Royal
      Bank of Scotland after the signing of the loan modification to be used to
      pay our portion of the 2009 newbuild installment payments that are not
      funded by The Royal Bank of Scotland new building credit
      facility.  The restricted cash balance decreases as payments are
      made to the shipyard in 2009.  For the year ended December 31,
      2009, payments of approximately $11.3 million were made to the shipyard
      from the $20.0 million of restricted
cash.
  ·
              We
      spent $29.3 million for vessel improvements and vessel
      equipment.  Vessel improvements and other equipment include
      steel renewal and replacement, major overhauls, new equipment, and
      takeover costs, including the cost of first drydocking after
      acquisition.
  ·
              We
      spent $2.0 million in other assets.
 
 Financing
Activities 2008
 
 During
2008, we increased our working capital by the following activities:
 
 ·
              We
      made debt repayments totaling $183.5 million consisting of $58.3 million
      in scheduled debt principal payments and $125.2 million to payoff our
      former credit facilities with Bank of America and The Royal Bank of
      Scotland.
  ·
              We
      prepaid principal payments due in 2009 totaling $26.6 million consisting
      of $3.0 million to Credit Suisse, $19.0 million to Bank of America,
      $3.0 million to Commerzbank AG, and $1.6 million to Berenberg
      Bank.
  ·
              In
      June, we received $95.7 million in net proceeds from a secondary offering
      of Class A common shares of TBS International
  Ltd.
  ·
              We
      borrowed $12.5 million from Commerzbank AG in June. The proceeds of this
      loan, together with working capital, were used to purchase the vessel
      Caribe
      Maiden.
  ·
              Also
      in June, we borrowed $13.0 million from Berenberg Bank. The proceeds of
      this loan together with working capital were used to purchase the vessel
      Ottawa
      Princess.
  ·
              In
      March, we amended and restated our existing Bank of America Credit
      Facility.  In connection with the amendment, we increased the
      term loan facility to $142.5 million and the revolving credit facility to
      $125.0 million.  We borrowed $142.5 million under the term loan
      credit facility to repay the existing credit facility and pay closing
      costs and fees. After the repayment of principal, interest and fees, the
      remaining amount of $18.9 million was used for general corporate
      purposes.  At December 31, we have drawn down $75.0 million
      under our revolving credit
facility.
  ·
              We
      borrowed an additional $20.0 million in February, and $20.0 million in
      December 2008 under our $150.0 million credit facility with The Royal Bank
      of Scotland to fund the construction payments due on the building of six
      new multipurpose vessels with retractable
  tweendecks.
  Table of Contents
 63
 ·
              In
      February, we borrowed the remaining $20.0 million available under the
      Credit Suisse credit facility.  The proceeds of this loan,
      together with available working capital, were used to purchase the vessel
      Oneida
      Princess.
  ·
              We
      borrowed $35.0 million from AIG Commercial Equipment Finance, Inc. in
      February to replenish operating funds used to purchase the Mohave Maiden, Zuni Princessand Hopi
      Princess.
  ·
              In
      January, we borrowed $75.0 million, under a syndicated credited facility
      with DVB Group Merchant Bank (Asia) Ltd. The proceeds were used to
      replenish funds used to exercise a purchase option for seven tweendeck
      vessels chartered-in under a sale-leaseback arrangement, to fund
      additional vessel acquisitions and for general corporate
      purposes.
  
 Investing
Activities 2008
 
 Using
capital from operations and borrowings, we made the following acquisitions and
capital improvements:
  For
      the Year EndedDecember
      31,2008
              
              
              2007(in
      millions)Vessels
      purchased
              
              $
              313.7
              
              
              $
              88.4Vessel
      improvements and other equipment
              
              
              49.3
              
              
              
              44.4Construction
      in progress
              
              
              63.2
              
              
              
              60.6Other
      fixed assets
              
              
              3.5
              
              
              
              3.9Sub
      total
              
              
              429.7
              
              
              
              197.3Less:
      Vessel deposits paid in prior years
              
              
              (14.8
              )
              
              
              (1.7
              )Total
      Vessel acquisitions / capital improvement
              
              $
              414.9
              
              
              $
              195.6
 
 ·
              We
      acquired eleven vessels that were delivered during the year ended December
      31 2008 for a total purchase price of $313.7 million, including $14.8
      million in deposits paid in 2007. We used cash from borrowings and
      operations to fund the
acquisitions.
 
 ·
              We
      spent $49.3 million for vessel improvements and vessel equipment. Vessel
      improvements and other equipment includes steel renewal and replacement,
      major overhauls, new equipment, and takeover costs, including the cost of
      first drydocking after acquisition.
 
 ·
              In
      connection with our construction program to build six newly designed
      multipurpose vessels with retractable tweendecks, we made payments to the
      ship building yard and incurred capitalized costs totaling $63.2
      million.  These ships were designed by a TBS team drawn from all
      phases of our operations specifically to optimize our efficient cargo
      transportation in our trade lanes, support the requirements of our
      customer base and enhance the growth of our business.  Two of
      the vessels are scheduled for delivery in 2009, and four vessels are
      scheduled for delivery in 2010. The project is being funded from our
      $150.0 million credit facility with The Royal Bank of Scotland and
      operating cash flow.
 
 Table of Contents
 64
 Dividend
Policy
 
 We have not
declared or paid and do not anticipate declaring or paying any cash dividends on
our ordinary shares in the foreseeable future.  Because we are a
holding company with no material assets other than the stock of our
subsidiaries, our ability to pay dividends will depend on the earnings and cash
flow of our subsidiaries and their ability to pay dividends to
us.  The provisions of some of our debt instruments and related loan
agreements prevent some of our subsidiaries from paying dividends to TBSI, which
may restrict our ability to pay dividends on our ordinary shares.  The
timing and amount of future cash dividends, if any, would be determined by our
Board of Directors and would depend upon our earnings, financial condition, cash
requirements, obligations to lenders at the time and other factors that our
Board of Directors may deem relevant, as well as our ability to pay dividends in
compliance with Irish law.
 
 Under Irish
law, TBS International plc must have “distributable reserves” in its
unconsolidated balance sheet prepared in accordance with the Irish Companies
Acts to enable it to pay cash dividends or buy back shares in the future. Our
shareholders passed a resolution that created “distributable reserves” in
accordance with Irish law.
  Significant
Related Party Transactions
  Certain of
our key executive officers control each of TBS Commercial Group and Beacon
Holdings.  We have established long-term commercial and operational
relationships with other commercial agency service companies that are located in
various overseas ports in which we conduct our business.  The majority
of these companies are wholly- or partly-owned direct or indirect subsidiaries
of either TBS Commercial Group or Beacon Holdings.  We believe that
the transactions described below are on terms no less favorable than those that
could be obtained pursuant to arm's-length negotiations with independent third
parties.  Under the arrangements with these commercial agents, we
generally pay a commission on freight revenue booked by the agent, which is
based upon market rates, and on certain freights where they attend to the
receivers of the cargo.  Commissions paid to TBS Commercial Group and
Beacon Holdings for commercial agency services were approximately $5.9 million,
$14.6 million and $7.1 million for the years ended December 31, 2009, 2008, and
2007, respectively.  Port agency fees paid to TBS Commercial Group and
Beacon Holdings are for agents to attend to vessels while in port and are based
on market rates for such services.  For the years ended December 31,
2009, 2008, and 2007, we paid approximately $1.9 million, $2.2 million and $1.0
million respectively.
  TBS
Commercial Group made payments for consulting fees of $60,000 to Lawrence A.
Blatte, who is an Executive Vice President, during 2007.
  Globe
Maritime Limited ("Globe") occasionally acts as a broker for chartering and
vessel sales and purchases. Globe is owned by James W. Bayley who is an officer
of International and member of International's Board of
Directors.  During 2009, 2008 and 2007, we paid Globe approximately
$0.1 million, $1.2 million and $0.2 million, respectively.
  TBS Shipping
Services maintains an office in Yonkers, New York that is leased from our
chairman and chief executive officer, Joseph E. Royce.  During 2009,
2008 and 2007, payments to Mr. Royce, as required under the lease, totaled
$240,000 per year.
  Our board
of directors has delegated authority to the Compensation Committee to review and
approve or ratify on an annual basis all transactions with our executive
officers, directors, and affiliates.
  Table of Contents
 65
 Summary
of Critical Accounting Policies
 
 The
discussion and analysis of our financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States,
or GAAP. The preparation of those financial statements requires us to make
estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities at the date of our financial statements. Actual results may
differ from these estimates under different assumptions or
conditions.
 
 Critical
accounting policies are those that reflect significant judgments or
uncertainties and could result in materially different results under different
assumptions and conditions. We have described below what we believe are our most
critical accounting policies that involve a high degree of judgment and the
methods of their application. For a description of all of our significant
accounting policies, see "Note 2 —Summary of Significant
Accounting Policies" to our consolidated financial statements.
 
 Allowance
for doubtful accounts
 
 We assess the
recoverability of doubtful accounts, and we create an allowance for the
possibility of non-recoverability. Although we believe our allowances to be
based on fair judgment at the time of their creation, it is possible that an
amount under dispute is not recovered and the estimated allowance for doubtful
recoverability is inadequate.
 
 Claims
Receivable
 
 Claims
receivable represent claims for reimbursement of expenses incurred that have
been or will be made under our hull and machinery and P&I insurance
coverage. We record the probable amount that we expect to recover from
insurance, net of the applicable deductible.
 
 Fuel
and Other Inventories
 
 Fuel and
other inventories, consisting primarily of fuel, lubricating oil and spare parts
aboard the vessels, are valued at the lower of cost (determined using a
first-in, first-out basis for fuel and a weighted average basis for lubricating
oil and spare parts) or market.
 
 Depreciation
 
 Vessels are
stated at cost, which includes contract price and other direct costs relating to
acquiring and placing the vessels in service, less accumulated depreciation.
Major vessel improvements are capitalized and depreciated over the remaining
useful lives of the vessels. Depreciation on vessels is calculated, based on
cost less estimated residual value, using the straight-line method over the
remaining useful life of the vessel.  Salvage, or scrap, value is based on
a vessel’s lightweight tonnage multiplied by a scrap rate. We use a scrap rate
of $180 per lightweight tonnage, which may differ from actual salvage
rates.  Depreciation on vessel improvements is calculated using the
straight-line method over the remaining useful life of the vessel. The remaining
useful life of each vessel is estimated as the period from the date the vessel
is put in service to the date 30 years from the time that the vessel was
initially delivered by the shipyard. Maintenance and repair costs that do not
improve or extend the useful lives of the vessels, other than dry dock costs
discussed below, are expensed as incurred.
 
 Vessel
construction in progress
 
 We capitalize
direct and indirect costs clearly associated with the development, design, and
construction of the vessels as these costs have a future benefit. Costs include
installments paid to the shipyard, payments made to third parties in connection
with the vessel construction program and interest costs incurred during the
construction period, which is defined as the period from the start of
construction until the date that each vessel is substantially complete and ready
for use.
 
 Table of Contents
 66
 Drydocking
  Within the
shipping industry, two methods are used to account for drydockings: (1) the
deferral method, in which drydocking costs are capitalized and then amortized
over the period to the next scheduled drydocking, and (2) the incurred
method, in which drydocking costs are expensed as incurred. We use the deferral
method and amortize drydocking costs on a straight-line basis over the period
through the date of the next drydocking, which is typically 30 months. We
include in deferred drydocking costs those costs that are incurred as part of
the drydocking to meet regulatory requirements, or are expenditures that either;
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. We believe
the deferral method better matches costs with revenue than expensing the costs
as incurred. We use judgment when estimating the period between drydocks
performed, which can result in adjustments to the estimated amortization of
drydock expense if the subsequent drydock is done earlier than
anticipated.
  Valuation
of Long-Lived Assets and Goodwill
 
 As of
December 31, 2009, due to the improving current economic conditions and their
impact on the shipping industry, which has resulted in an improvement and
stabilization of charter rates, we concluded that there is presently no
indication of possible impairment of long-lived assets and
goodwill.
 
 In accordance
with the guidance outlined in ASC Topic 360-Property, Plant and
Equipment, 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.
 
 Due to the
economic crisis, and the resulting decline in spot shipping rates that started
in late 2008 and carried into 2009, together with 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 prepared an analysis. Forecasting
future cash flows involves the use of significant estimates and assumptions.
Revenue and expense assumptions used in the cash flow projections are consistent
with internal projections and reflected our economic outlook at the time of
preparation.  The cash flow period used was based on the remaining
lives of the vessels, which ranged from 4 to 30 years.  As of the
December 31, 2008 analysis, there was no impairment of long-lived
assets.
 
 During 2009,
we continued to monitor the overall shipping market including freight and
charter rates.  Based on our observations, we believe 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 there are no new
triggering events requiring an additional impairment analysis during 2009
and  there is no impairment to our fleet at December 31,
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.
 
 The
provisions of ASC Topic 350 –
Intangible – Goodwill and Other require that 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.
 
 Table of Contents
 67
 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 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 cash flow estimates, (c) updating our estimates of the
weighted-average cost of capital.  From the time we performed our
analysis at May 31, 2009 until December 31, 2009, there were no changes in
circumstances that necessitated further goodwill impairment testing, and we
concluded that there was no indication of goodwill impairment at December 31,
2009.
 
 Deferred
Financing Costs
 
 Deferred
financing costs are amortized over the term of the related financing using the
straight-line method, which we believe, is not materially different than the
effective interest method. Fees incurred in a refinancing of existing loans,
which results in an extinguishment of the debt, are written off and included
in the gain or loss on extinguishment of debt.
 
 Leases
 
 Leases are
classified as either capital or operating. Those leases that transfer
substantially all the benefits and risks of ownership of property to us are
accounted for as capital leases. All other leases are accounted for as operating
leases. Capital leases are accounted for as assets and are fully amortized on a
straight-line basis over the expected useful life of the assets. Commitments to
repay the principal amounts arising under capital lease obligations are included
in current liabilities to the extent that the amount is repayable within one
year; otherwise the principal is included in amounts due after one year. The
capitalized lease obligation reflects the present value of future lease
payments. The financing element of the lease payments is charged to income over
the term of the lease. Deferred leasing costs are amortized over the
term of the lease using the straight-line method, which is not materially
different than the effective interest method.  Rental expense, for
leases classified as operating and that contain predetermined fixed decreases of
minimum rentals during the term of the lease, is recognized on a straight-line
basis over the life of the lease, beginning with the point at which we obtain
control and possession of the leased properties.  The difference
between the amounts charged to operations and amounts paid is recorded as
deferred rent expense.
 
 Revenue
recognition
 
 Revenue is
generally recorded when services are rendered, we have a signed charter
agreement or other evidence of an arrangement, pricing is fixed or determinable
and collection is reasonably assured. We generally employ our vessels under time
or voyage charters. With time charters, we receive a fixed charter hire per
on-hire day and are responsible for meeting all the vessel operating expenses
such as crew costs, insurance, stores and lubricants and repairs and
maintenance. Time charter revenues are recorded over the term of the charter as
service is provided. Revenue from time charters in progress at year end is
calculated using the daily charter hire rate, net of daily expenses, multiplied
by the number of voyage days on-hire through year end.
 
 In the case
of voyage charters, the vessel is contracted for a voyage between two or more
ports. We are paid for the cargo transported and we pay all voyage expenses,
such as fuel, port call expenses and commissions, as well as all vessel
operating expenses. Prior to 2008, the revenues and related voyage expenses for
voyages in progress were recognized on the percentage of service completed at
the balance sheet date by prorating the estimated final voyage revenue and
expenses using the ratio of voyage days completed through the balance sheet date
to total voyage days. For voyages in progress at December 31, 2009 and 2008, we
recognized voyage expense as incurred and recognized voyage revenues ratably
over the length of the voyage, all in accordance with the guidance outlined in
ASC Topic 605 —Revenue Recognition. The
effects in 2007 of recognizing voyage expenses ratably over the length of each
voyage was not materially different from the method of recognizing such costs as
incurred. Probable losses on voyages are provided for in full at the time such
losses can be estimated. A voyage is deemed to commence upon the completion of
discharge of the vessel's previous cargo and is deemed to end upon the
completion of discharge of the current cargo. Vessel operating expenses for
both voyage and time charters are expensed as incurred.
 
 Table of Contents
 68
 Stock Based
Compensation
 
 The Company
accounts for stock based compensation in accordance with the guidelines outlined
in ASC Topic 718 –
Compensation – Stock Compensationusing the modified prospective method
which requires measurement of compensation cost for all stock-based awards at
fair value on the date of grant and recognition of compensation over the service
period for awards expected to vest.
 
 Earnings Per
Share
 
 Basic
earnings (loss) per ordinary share are computed using the two-class method for
share-based payment transactions, which are participating securities. The
two-class method of computing earnings per share is an earnings allocation
formula that determines earnings per share for ordinary stock and any
participating securities according to dividends declared (whether paid or
unpaid) and participation rights in undistributed earnings.  Our
non-vested stock, consisting of time-vested restricted shares, are considered
participating securities since the share-based awards contain a non-forfeitable
right to dividends irrespective of whether the awards ultimately
vest.
 
 Fair
Value of Financial Instruments
 
 Financial
instruments, which potentially subject us to concentrations of credit risk,
consist principally of cash equivalents, charter hire receivables and debt. We
place our cash equivalents with a number of financial institutions to help limit
the amount of credit exposure to any one financial institution. Concentrations
of credit risk with respect to trade receivables are limited due to the large
number of customers comprising our customer base, and their dispersion across
many geographic areas. As of December 31, 2009 and 2008, one customer accounted
for 11.7% and 7.7%, respectively, of charter hire receivables.
 
 The following
method and assumptions were used to estimate the fair value of financial
instruments included in the following categories:
 
 ·
              Cash and cash equivalents,
      charter hire and claims receivable - The carrying amount reported
      in the accompanying consolidated balance sheets for cash and cash
      equivalents, charter hire and claims receivable approximates their fair
      value due to the current
maturities.
 
 ·
              Short-term debt - The
      carrying amount reported in the accompanying consolidated balance sheets
      for short-term debt approximates its fair value due to the current
      maturity of such instruments and their variable
  rates.
 
 ·
              Long-term debt - The
      carrying amount of our long-term debt, which was reclassified to
      short-term in our 2009 balance sheet, approximates fair value due to the
      variable interest rates on bank borrowings and based on the current rates
      offered to us for debt of the same remaining
  maturities.
 
 ·
              Interest Rate Swaps
      - We utilize certain derivative financial instruments to
      manage interest rate risk. Derivative instruments are entered into for
      periods consistent with related underlying exposures and do not constitute
      positions independent of those exposures.  We do not enter into
      contracts for speculative purposes, nor are we a party to any leveraged
      derivative instruments.  We are exposed to credit loss in the
      event of nonperformance by the counterparties on derivative contracts. We
      minimize our credit risk on these transactions by dealing with several
      financial institutions and, therefore, we do not anticipate
      nonperformance.
 
 
 Foreign
Currency Transactions
 
 The financial
statements are expressed in United States dollars. Gains and losses resulting
from foreign currency transactions, which are not significant, are included in
other income.
 
 Table of Contents
 69
 Financial
Derivative Instruments and Hedging Activities
 
 We seek
to manage our interest rate risk associated with variable rate borrowings with
the use of derivative financial instruments. We account for derivative financial
instruments in accordance with the guidance outlined in ASC Topic 815 – Derivatives and Hedging.The
fair value of derivative financial instruments are recognized as assets or
liabilities at each balance sheet date, with changes in fair value affecting net
income (loss) or comprehensive income (loss) as applicable. We do not purchase
or hold any derivative instruments for trading purposes.
 
 New
Accounting Pronouncements
 
 In
June 2009, the FASB issued the FASB Accounting Standards Codification
(ASC), The Codification and
the Hierarchy of Generally Accepted Accounting PrinciplesTopic ASC
105-10.  We implemented the guidance in the third quarter of 2009,
which stipulates that the Codification as the authoritative version of the FASB
Accounting Standards Codification (Codification) as the single source of
authoritative nongovernmental U.S. GAAP.  The statement is effective
for interim and annual periods ending after September 15,
2009.  We have updated our references to GAAP in our consolidated
financial statements issued for the year ended December 31,
2009.  As the Codification was not intended to change or alter
existing GAAP, its adoption did not have any impact on our consolidated
financial statements.
  Adopted
  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).  The adoption of the
provisions did not have a material impact on our previously issued consolidated
financial statements.
 
 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 we had already
followed a similar approach prior to the adoption of this guidance.
 
 In April
2009, the FASB issued updated guidance oninterim
disclosures about the fair value of financial instruments effective for interim
and annual reporting 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, we 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 ordinary stock and any
participating securities according to dividends declared (whether paid or
unpaid) and participation rights in undistributed earnings. Our non-vested
stock, consisting of time-vested restricted shares, are considered participating
securities since the share-based awards contain a non-forfeitable right to
dividends irrespective of whether the awards ultimately vest.  The
adoption of the provisions did not have a material impact on our previously
issued consolidated financial statements.
  Table of Contents
 70
 On January 1,
2009, we 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:  (i) 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; (ii) consolidated net income attributable to the parent and the
noncontrolling interest be identified and presented on the face of the
consolidated statement of income; (iii) 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; (iv) 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 (v) 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, we 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:  (i) the
identifiable assets acquired; (ii) the liabilities assumed; (iii) any
noncontrolling interest in the acquiree and (iv) 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, we 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.  We
had 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.
 
 Starting with
the consolidated financial statements for the first quarter of 2008, we
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.
  Table of Contents
 71
 Issued
  In June 2009,
the FASB issued changes to the accounting for variable interest entities. These
changes, as discussed in ASC Topic 810-Consolidation, require an
enterprise to:  (i) perform an analysis to determine whether the
enterprise’s variable interest or interests give it a controlling financial
interest in a variable interest entity; (ii) require ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest entity;
(iii) eliminate the quantitative approach previously required for determining
the primary beneficiary of a variable interest entity; (iv) add an additional
reconsideration event for determining whether an entity is a variable interest
entity when any changes in facts and circumstances occur such that holders of
the equity investment at risk, as a group, lose the power from voting rights or
similar rights of those investments to direct the activities of the entity that
most significantly impact the entity’s economic performance and (v) 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 became effective January 1, 2010, and we are currently
evaluating the potential impact of these changes on our consolidated financial
statements.
 
 Item 7A. Quantitative and
Qualitative Disclosures about Market Risk
 
 Interest
Rate Risk
  We are
exposed to various market risks associated with changes in interest rates
relating to our floating rate debt. We use derivative instruments, solely
interest rate swaps, to manage our borrowing costs and convert floating rate
debt to fixed rate debt. All derivative contracts are for non-trading purposes
and are entered into with financial institutions thereby minimizing counterparty
risk.
 
 At December
31, 2009, we had $351.2 million of floating debt outstanding.  In
order to hedge our interest rate risk, we entered into interest rate swap
contracts that hedged approximately 53.2% of our outstanding debt at December
31, 2009. We had interest rate swap contracts to pay an average fixed rate of
3.79% before loan margin and receive a floating rate of interest on the notional
amount of $186.7 million. At December 31, 2009, the fair value of interest rate
swap agreements was a $10.0 million liability.  Interest loan margins
over LIBOR at December 31, 2009, after changes made under the December 2009 loan
modifications, were 5.25% on $151.0 million of debt; 5.00%, on $55.1 million of
debt; 4.00% on $8.1 million of debt; 3.75% on $103.8 million of debt 3.00% on
$4.5 million of debt; and 2.75% on $28.7 million of debt.
 
 As an
indication of the extent of our sensitivity to interest rate changes, an
increase in the LIBOR rate of 100 basis points would have increased our net loss
for the year ended December 31, 2009 by approximately $1.6 million, based on our
unhedged debt at December 31, 2009, of $164.5 million.
 
 The following
table sets forth the sensitivity of our outstanding average unhedged debt in
U.S. dollars to a 100 basis point increase in LIBOR during the next five
years:
  Year
              
              Unhedged
      Debt subject to Floating Rate
              
              
              Estimated
      Interest Change(in
      thousands)2010
              
              $
              134,125
              
              
              $
              1,3412011
              
              
              111,530
              
              
              
              1,1152012
              
              
              27,389
              
              
              
              2742013
              
              
              36,481
              
              
              
              3652014
              
              
              6,732
              
              
              
              67
  Foreign
Exchange Rate Risk
  We consider
the U.S. dollar to be the functional currency for all of our
entities.  Our financial results are affected by changes in foreign
exchange rates.  Changes in foreign exchange rates could adversely
affect our earnings.  We generate all of our revenues in U.S. dollars,
but incurred approximately 8% of our operating expenses in currencies other than
U.S. dollars for the year ended December 31, 2009.  For accounting
purposes, expenses incurred in currencies other than U.S. dollars are converted
into U.S. dollars at the exchange rate prevailing on the date of each
transaction.  At December 31, 2009, approximately 9% of our
outstanding accounts payable were denominated in currencies other than U.S.
dollars.
 
 Table of Contents
 72
 Item 8. Financial Statements and Supplementary
Data
 
 Information
with respect to this Item is contained in our consolidated financial statements
included in "Item 15 – Exhibits and Financial Statement Schedules."
  Item
9. Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 There were no
changes in or disagreements with accountants on accounting and financial
disclosure.
 
 Item 9A. Controls and
Procedures
 
 Disclosure
Controls and Procedures
  Under the
supervision and with the participation of our management, including our Chief
Executive Officer, Chief Financial Officer and Chief Accounting Officer, we
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of December 31, 2009, as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended,
or the Exchange Act, as of the end of the period covered by this report (the
"Evaluation Date"). Based on this evaluation, our Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer concluded as of the Evaluation
Date that our disclosure controls and procedures were effective such that the
information relating to the Company, including our consolidated subsidiaries,
required to be disclosed in our SEC reports (i) is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms, and (ii) is accumulated and communicated to the Company's management,
including our Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer, as appropriate to allow timely decisions regarding required
disclosure.
  Management's
Report on Internal Control over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act. Our internal control over financial reporting was
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes, in
accordance with generally accepted accounting principles. Because of inherent
limitations, a system of internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate due to change in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
  Our
management, including our Chief Executive Officer, Chief Financial Officer and
Chief Accounting Officer, conducted an evaluation of the effectiveness of our
internal control over financial reporting using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework. Based on its evaluation, our management
concluded that our internal control over financial reporting was effective as of
December 31, 2009.
 
 The
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2009, has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report that
appears herein.
  Changes
in Internal Control over Financial Reporting
  There
were no changes in our internal control over financial reporting, as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during the fourth quarter of
fiscal 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
  Item 9B.  Other Information
 
 None.
 
 Table of Contents
 73
 PART
III
 
 Item 10. Directors,
Executive Officers and Corporate Governance
 
 The following
table provides information regarding our executive officers and
directors.
 Name
                Age
                TitleJoseph
      E. Royce
                65
                President,
      Chief Executive Officer, Chairman and DirectorGregg
      L. McNelis
                54
                Senior
      Executive Vice President, Chief Operating Officer and
    DirectorLawrence
      A. Blatte
                80
                Senior
      Executive Vice PresidentFerdinand
      V. Lepere
                58
                Executive
      Vice President and Chief Financial OfficerJames
      W. Bayley
                69
                Vice
      President and DirectorJohn
      P. Cahill
                51
                DirectorRandee
      E. Day
                61
                DirectorWilliam
      P. Harrington
                52
                DirectorPeter
      S. Shaerf
                55
                DirectorAlexander
      Smigelski
                52
                Director
 Our
directors hold office until the earlier of their death, resignation, removal or
disqualification or until their successors have been elected and qualified.
Executive officers are appointed by and serve at the pleasure of our Board of
Directors. A brief biography of each director and executive officer
follows:
 
 Joseph E.
Royce:  Mr. Royce has been President, Chairman and a director
since our inception, and Chief Executive Officer since March 2005. Since 1993,
Mr. Royce has served as President of TBS Shipping Services, a subsidiary of TBS
International that provides commercial and operational management. Mr. Royce has
over 40 years experience in the maritime industry and has expertise in
breakbulk, liner and bulk cargo shipping in developing
economies.  Between 1984 and 1993, Mr. Royce was President of COTCO, a
dry cargo pool of over 45 vessels. From 1973 to 1983, he was active as a
shipbroker and independent ship operations manager involved in the shipment of
various products worldwide. Mr. Royce is a director of Covenant House New York,
the not-for-profit adolescent care agency.
 
 Gregg L. McNelis:Mr. McNelis has served as a director since February 2004 and as
Senior Executive Vice President and Chief Operating Officer since March
2005.  Since 1993, Mr. McNelis has served as Executive Vice
President of the Commercial Department at TBS Shipping Services, where he
manages the chartering department, responsible for commercial employment of the
fleet.  He has worked with Mr. Royce for over 25 years, engaging
in contract negotiations, time charters, voyage charters, contracts of
affreightment, and developing and controlling trade
lanes.  Mr. McNelis previously served as vice president of
COTCO.  Mr. McNelis has over 30 years of experience in the
international shipping industry.
  Lawrence A.
Blatte:Since March 2005, Mr. Blatte has served as Senior
Executive Vice President of the Company and in this role provides business
development services. He served as our corporate legal counsel from our
inception until December 31, 2005. Mr. Blatte has also served as Vice
Chairman of TBS Shipping Services since January 2004. As a public servant,
Mr. Blatte held the position of Mayor of the Village of Lawrence, New York
from 1996 to 2002, and served as a Trustee of the Village from 1979 to
1996.
  Ferdinand V.
Lepere:Mr. Lepere has served as Executive Vice President and
Chief Financial Officer since March 2005 and as Executive Vice President of
Finance of TBS Shipping Services since January 1995, responsible for all
financial and accounting matters. Mr. Lepere has over 30 years of experience in
shipping, most recently from February 1981 to December 1994 with Hapag-Lloyd
A.G. as chief financial officer and board member of its American subsidiary. Mr.
Lepere is a Certified Public Accountant and holds a Masters Degree in Finance
and Accounting.
  Table of Contents
 74
 James W.
Bayley:Mr. Bayley has served as a director since 2007,
having previously served as a director from our inception until 2006, and has
been Vice President since November 2001.  Mr. Bayley is the owner
and Managing Director of Globe Maritime Limited, a company that is well
established in the London shipping market.  Mr. Bayley has been
in the shipping industry since 1956 and a member of the Baltic Exchange London
since 1962, becoming a Fellow of the Institute of Chartered Shipbrokers in
1967.
  John P. Cahill:Mr.
Cahill has served as a director since June 2007. Mr. Cahill is counsel at
Chadbourne & Parke LLC, a law firm in New York City that he joined in March
2007. Mr. Cahill is also Co-Founder and CEO of the Pataki-Cahill Group, LLC, a
specialized consulting firm in New York City that focuses on energy issues and
asset privatization. He is an attorney with experience in both the private and
public sectors. From 2002 until 2006, Mr. Cahill served as the Secretary and
Chief of Staff to the Governor of the State of New York, which is the highest
ranking appointed official in New York State Government. Prior to this
appointment, Mr. Cahill was Commissioner of the New York State Department of
Environmental Conservation.
 
 Randee E. Day:Ms.
Day has served as a director and Chairperson of the Audit Committee since 2001.
Since 2004, Ms. Day has been a Managing Director at Seabury Transportation
Holdings LLC, a leading advisory and consulting firm specializing in the
transportation industry, and is responsible for all of Seabury’s activities
related to the maritime industry. Ms. Day has more than 25 years of specialized
international financial experience in the marine and energy sectors. From 1985
to 2004, Ms. Day was president and chief executive officer of Day &
Partners, Inc., a financial advisory and consulting firm focused on the
maritime, energy and cruise industries with a diversified client base consisting
of shipping companies, commercial banks and government agencies. Ms. Day has an
extensive background in international trust and maritime law and has worked with
clients on bankruptcies, foreign judgments and strategies for disposing of real
estate and shipping assets in various international jurisdictions. From 1979 to
1985, Ms. Day served as the head of J.P. Morgan’s Marine Transportation and
Finance department in New York, where she was responsible for managing a loan
portfolio and overseeing relationships with the bank’s shipping clients in the
Western Hemisphere and the Far East. She also served in the London offices of
J.P. Morgan, Continental Illinois National Bank & Trust and Bank of America.
Ms. Day has served as an independent director of DHT Maritime, Inc. (NYSE) since
July 2005 and is the chairperson of its audit committee.
 
 William P.
Harrington:Mr. Harrington has served as a director since 2005
and is Chairperson of the Nominating and Corporate Governance Committee and the
Lead Independent Director. Mr. Harrington is a partner and head of the
litigation and toxic tort/complex litigation practice groups at Bleakley, Platt
& Schmidt, LLP, a law firm in White Plains, New York. He is an experienced
trial attorney who has represented Fortune 500 companies in criminal,
commercial, environmental, real estate and employment discrimination matters.
From 2000 until 2006, Mr. Harrington served as a member of the New York
Gubernatorial Review Panel for the Federal Judiciary. Mr. Harrington also once
served as a law clerk to Hon. Charles L. Brient, Chief Judge of the United
States District Court for the Southern District of New York.  Mr.
Harrington became an independent director of Community Mutual Savings Bank
(NASDAQ) in March 2009.
 
 Peter S.
Shaerf:Mr. Shaerf has served as a director since 2001 and is
Chairperson of the Compensation Committee. Since 2002, Mr. Shaerf has been a
Partner and Managing Director at AMA Capital Partners LLC, an investment bank
and private equity firm specializing in the maritime industry. From 1998 to
April 2002, Mr. Shaerf was a Managing Director of Poseidon Capital, an
independent maritime consulting and investment company that works extensively in
the investment community. From 1980 to 2002, he was a partner of The
Commonwealth Group, a brokerage and consulting company that specialized in the
dry cargo and liner shipping industry. From 1977 to 1980, he was a director of
Common Brothers U.S.A. Ltd., a shipbroking subsidiary of a British
shipowner of dry cargo and tanker tonnage. Mr. Shaerf is a director of
General Maritime Corporation (NYSE) and a director of Seaspan Corporation
(NYSE). Mr. Shaerf is Chairman of New York Maritime Inc. (NYMAR), a
leading global trade association that promotes New York maritime center.
Mr. Shaerf holds a B.A. degree in international business law from the
London Metropolitan University.
  Alexander Smigelski:Mr. Smigelski has served as a director since June
2007.  Mr. Smigelski is a senior partner with Kings Point Capital
Partners, a New York-based private equity firm investing in multiple strategies
since 2006, and is presently the CEO of its Restaurant
Division.  Until mid-2006, Mr. Smigelski was Senior Vice
President with Morgan Keegan & Company Inc., a leading brokerage and
investment firm. Mr. Smigelski’s overall Wall Street career spanned 17 years,
primarily with Merrill Lynch. In addition, he is a Master Mariner and was the
youngest captain in the Exxon fleet.
 
 Other
information required by Item 10 will be in the definitive proxy statement for
the Company's 2010 Annual General Meeting of Shareholders and is incorporated by
reference.
 
 Table of Contents
 75
 Item
11.Executive
Compensation
 
 Information
required by Item 11 will be in the definitive proxy statement for the Company's
2010 Annual General Meeting of Shareholders and is incorporated herein by
reference.
 
 Item
12. Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters
 
 Certain
Information required by Item 12 will be in the definitive proxy statement for
the Company's 2010 Annual General Meeting of Shareholders and is incorporated
herein by reference.
 
 The table
below sets forth information about the shares authorized for issuance under the
Company's equity
compensation plans (2005 Equity Incentive Plan and Employee Share Purchase Plan)
as of December 31, 2009.
 
 Plan
      category
              
              Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
              
              Weighted
      average exercise price of outstanding options, warrants and
      rights
              
              Number
      of securities remaining available for future issuanceEquity
      compensation plans approved by security holders
              
              61,000
              
              $
              
              3,062,500Equity
      compensation plans not approved by security holdersTotal
              
              61,000
              
              $
              
              3,062,500
 
 
 Item 13. Certain Relationships and
Related Transactions, and Director Independence
 
 Information
required by Item 12 will be in the definitive proxy statement for the Company's
2010 Annual General Meeting of Shareholders and is incorporated herein by
reference.
 
 Item
14.Principal
Accounting Fees and Services
 
 Information
required by Item 14 will be in the definitive proxy statement for the Company's
2010 Annual General Meeting of Shareholders and is incorporated herein by
reference.
  
   Table of Contents
 76
  PART
IV
 
 Item
15.Exhibits
and Financial Statement Schedules
 
 (a) Documents
filed as part of this Annual Report
   1.
              Financial
      Statements
 The
following consolidated financial statements of the Company are included in a
separate section of this report:
 
 Report of Independent Registered Public Accounting
      Firm
              
              F-1Consolidated Balance Sheets as of December 31,
      2009 andDecember 31,
      2008
              
              F-2Consolidated Statements of
      Operations for the
 Years ended December 31, 2009,
      2008 and2007
              
              F-3Consolidated Statements of Cash
      Flows for the
 Years ended December 31, 2009,
      2008 and2007
              
              F-4Consolidated Statements of
      Changes in Shareholders' Equity for the
 Years ended December 31, 2009,
      2008 and2007
              
              F-5Notes to Consolidated Financial
      Statements
              
              F-6
      - F-33
 
  2.
              Financial Statement
      Schedules.
 All
      schedules are omitted because they are not applicable or not required or
      because the required information is included in the Consolidated Financial
      Statements or the Notes thereto.
 
 3.
              Exhibits.
 The
      following exhibits are filed as part of, or incorporated by reference
      into, this Annual Report:
   Table of Contents
 77
  Exhibit
              Description
              Filed
      Herewith
              Incorporated
      by ReferenceForm
              File
      No.
              Exhibit
              Filing
      Date3.1
              Certificate
      of Incorporation of TBS International plc
              
              S-8
      POS
              333-137517
              4.2
              1/19/20103.2
              Amended
      and Restated Memorandum of Association of TBS International
      plc
              
              8-K12B
              001-34599
              3.1
              1/8/20104.1
              Form
      of Indenture of TBS International Limited.
              
              S-3/A
              000-51368
              4.3
              10/8/20094.2
              Form
      of Subordinated Indenture of TBS International Limited
              
              S-3/A
              000-51368
              4.4
              10/8/20094.3
              Form
      of Deposit Agreement/Deposit Receipt
              
              S-3/A
              000-51368
              4.5
              10/8/200910.1
              TBS
      International Amended and Restated 2005 Equity Incentive
Plan*
              
              S-8
      POS
              333-137517
              99.1
              1/19/201010.2
              Form
      of Restricted Share Award Agreement under the TBS International Limited
      2005 Equity Incentive Plan*
              
              8-K
              000-51368
              10.2
              1/26/200710.3
              Form
      of Bonus Share Award Agreement under the TBS International Limited 2005
      Equity Incentive Plan*
              
              8-K
              000-51368
              10.3
              1/26/200710.4
              Form
      of Share Unit Award Agreement under the TBS International Limited 2005
      Equity Incentive Plan*
              
              10-Q
              000-51368
              10.1
              11/9/200710.5
              Form
      of Restricted Share Award Agreement under the TBS International Limited
      2005 Equity Incentive Plan*
              
              10-Q
              000-51368
              10.1
              5/9/200810.6
              Form
      of Share Unit Award Agreement under the TBS International Limited 2005
      Equity Incentive Plan*
              
              10-Q
              000-51368
              10.2
              5/9/200810.7
              Restricted
      Stock Grant Agreement, dated June 29, 2005, between Ferdinand Lepere and
      TBS International Ltd.*
              
              10-Q
              000-51368
              10.7
              8/10/200710.8
              First
      Amendment, dated May 8, 2008, to Restricted Stock Grant Agreement, dated
      June 29, 2005, between Ferdinand Lepere and TBS International
      Ltd.*
              
              10-Q
              000-51368
              10.4
              5/9/200810.9
              Form
      of Restricted Share Award Agreement under the TBS International Amended
      and Restated 2005 Equity Incentive Plan*
              X
              
              
              10.110.10
              Form
      of Bonus Share Award Agreement under the TBS International Amended and
      Restated 2005 Equity Incentive Plan*
              X
              
              
              10.210.11
              Form
      of Share Unit Award Agreement under the TBS International Amended and
      Restated 2005 Equity Incentive Plan*
              X
              
              
              10.310.12
              Deed
      Poll of Assumption by and between TBS International Limited and TBS
      International plc
              
              8-K
              001-34599
              10.1
              1/8/201010.13
              Deed
      Poll of Indemnity by and between TBS International Limited and TBS
      International plc
              
              8-K
              001-34599
              10.2
              1/8/201010.14
              Lease
      of Real Property, dated January 1, 2008, between Joseph E. Royce and TBS
      Shipping Services Inc.
              
              10-K
              000-51368
              10.40
              3/14/200810.15
              Lease
      agreement, dated January 1, 2009, between Joseph E. Royce and TBS Shipping
      Services Inc.
              
              10-K
              000-51368
              10.1
              3/30/200910.16
              Lease
      agreement, dated January 1, 2010, between Joseph E. Royce and TBS Shipping
      Services Inc.
              X
              
              
              10.410.17
              Loan
      Agreement, dated December 21, 2004, between Avon Maritime Corp. and The
      Royal Bank of Scotland plc.
              
              S-1/A
              333-123157
              10.5
              5/16/200510.18
              Umbrella
      Agreement, dated December 5, 2003, between TBS International Limited and
      Arkadia Shipping Inc.
              
              S-1/A
              333-123157
              10.7
              4/19/200510.19
              Form
      of Memorandum of Agreement related to sale-leaseback financings with
      Arkadia Shipping Inc.
              
              S-1/A
              333-123157
              10.8
              4/19/200510.20
              Form
      of Bareboat Charter related to sale-leaseback financings with Arkadia
      Shipping Inc.
              
              S-1/A
              333-123157
              10.9
              4/19/200510.21
              Management
      Agreement, dated February 8, 2001, by and among TBS Shipping International
      Limited, TBS Worldwide Services Inc., its indirect and direct
      subsidiaries, TBS Commercial Group Ltd. and Beacon Holdings
      Ltd.
              
              S-1/A
              333-123157
              10.1
              4/19/200510.22
              Form
      of Commercial Agency Agreement with TBS Worldwide Services Inc. and its
      direct and indirect subsidiaries
              
              S-1/A
              333-123157
              10.6
              4/19/200510.23
              Memorandum
      of Agreement, dated as of January 24, 2007, by and between TBS
      International Limited, Fairfax Shipping Corp. and Adirondack Shipping
      LLC
              
              10-K
              000-51368
              10.1
              3/12/200710.24
              Bareboat
      Charter Agreement, dated January 24, 2007, by and between TBS
      International Limited, Fairfax Shipping Corp and Adirondack Shipping
      LLC
              
              10-K
              000-51368
              10.3
              3/12/200710.25
              First
      Amendatory Agreement, dated March 26, 2009, to the Bareboat Charter
      Agreement, dated January 24, 2007, by and between TBS International
      Limited, Fairfax Shipping Corp and Adirondack Shipping LLC
              
              8-K
              000-51368
              10.12
              4/2/200910.26
              Second
      Amendatory Agreement, dated April 16, 2009, to the Bareboat Charter
      Agreement, dated January 24, 2007, by and between TBS International
      Limited, Fairfax Shipping Corp and Adirondack Shipping LLC
              X
              
              
              10.510.27
              Third
      Amendatory Agreement, dated December 31, 2009, to the Bareboat Charter
      Agreement, dated January 24, 2007, by and between TBS International
      Limited, Fairfax Shipping Corp and Adirondack Shipping LLC
              X
              
              
              10.610.28
              Fourth
      Amendatory Agreement, dated January 12, 2010, to the Bareboat Charter
      Agreement, dated January 24, 2007, by and between TBS International
      Limited, Fairfax Shipping Corp and Adirondack Shipping LLC
              X
              
              
              10.710.29
              Memorandum
      of Agreement, dated January 24, 2007, by and between TBS International
      Limited, Rushmore Shipping LLC and Beckman Shipping Corp.
              
              10-K
              000-51368
              10.2
              3/12/200710.30
              Bareboat
      Charter Agreement, dated January 24, 2007, by and between TBS
      International Limited, Rushmore Shipping LLC and Beckman Shipping
      Corp.
              
              10-K
              000-51368
              10.4
              3/12/200710.31
              First
      Amendatory Agreement, dated March 26, 2009, to the Bareboat Charter
      Agreement, dated January 24, 2007, by and between TBS International
      Limited, Rushmore Shipping LLC and Beckman Shipping Corp.
              
              8-K
              000-51368
              10.13
              4/2/200910.32
              Second
      Amendatory Agreement, dated April 16, 2009, to the Bareboat Charter
      Agreement, dated January 24, 2007, by and between TBS International
      Limited, Rushmore Shipping LLC and Beckman Shipping Corp.
              X
              
              
              10.810.33
              Third
      Amendatory Agreement, dated December 31, 2009, to the Bareboat Charter
      Agreement, dated January 24, 2007, by and between TBS International
      Limited, Rushmore Shipping LLC and Beckman Shipping Corp.
              X
              
              
              10.910.34
              Fourth Amendatory
      Agreement, dated January 12, 2010, to the Bareboat Charter Agreement,
      dated January 24, 2007, by and between TBS International Limited, Rushmore
      Shipping LLC and Beckman Shipping Corp.
              X
              
              
              10.1010.35
              Overall
      Agreement, dated February 2007, relating to the construction of six
      multipurpose vessels, between TBS International Limited, China
      Communications Construction Company Ltd and Nantong Yahua Shipbuilding
      Co., Ltd.**
              
              10-Q
              000-51368
              10.1
              5/15/200710.35
              Shipbuilding
      Contract, dated February 2007, between Argyle Maritime Corp., China
      Communications Construction Company Ltd and Nantong Yahua Shipbuilding
      Co., Ltd.**
              
              10-Q
              000-51368
              10.2
              5/15/200710.36
              Amendment
      Number 1, dated June 27, 2007, to Shipbuilding Contract, dated February
      2007, between Argyle Maritime Corp., China Communications Construction
      Company Ltd and Nantong Yahua Shipbuilding Co., Ltd.
              
              10-Q
              000-51368
              10.1
              8/10/200710.37
              Shipbuilding
      Contract, dated February 2007, between Caton Maritime Corp., China
      Communications Construction Company Ltd and Nantong Yahua Shipbuilding
      Co., Ltd.**
              
              10-Q
              000-51368
              10.3
              5/15/200710.38
              Amendment
      Number 2, dated June 27, 2007, to Shipbuilding Contract, dated February
      2007, between Caton Maritime Corp., China Communications Construction
      Company Ltd and Nantong Yahua Shipbuilding Co., Ltd.
              
              10-Q
              000-51368
              10.2
              8/10/200710.39
              Shipbuilding
      Contract, dated February 2007, between Dorchester Maritime Corp., China
      Communications Construction Company Ltd and Nantong Yahua Shipbuilding
      Co., Ltd.**
              
              10-Q
              000-51368
              10.4
              5/15/200710.40
              Amendment
      Number 2, dated June 27, 2007, to Shipbuilding Contract, dated February
      2007, between Dorchester Maritime Corp., China Communications Construction
      Company Ltd and Nantong Yahua Shipbuilding Co., Ltd.
              
              10-Q
              000-51368
              10.3
              8/10/200710.41
              Shipbuilding
      Contract, dated February 2007, between Longwoods Maritime Corp., China
      Communications Construction Company Ltd and Nantong Yahua Shipbuilding
      Co., Ltd.**
              
              10-Q
              000-51368
              10.5
              5/15/200710.42
              Amendment
      Number 2, dated June 27, 2007, to Shipbuilding Contract, dated February
      2007, between Longwoods Maritime Corp., China Communications Construction
      Company Ltd and Nantong Yahua Shipbuilding Co., Ltd.
              
              10-Q
              000-51368
              10.4
              8/10/200710.43
              Shipbuilding
      Contract, dated February 2007, between McHenry Maritime Corp., China
      Communications Construction Company Ltd and Nantong Yahua Shipbuilding
      Co., Ltd.**
              
              10-Q
              000-51368
              10.6
              5/15/200710.44
              Amendment
      Number 2, dated June 27, 2007, to Shipbuilding Contract between McHenry
      Maritime Corp. and China Communications Construction Company Ltd and
      Nantong Yahua Shipbuilding Co., Ltd.
              
              10-Q
              000-51368
              10.5
              8/10/200710.45
              Shipbuilding
      Contract, dated February 2007, between Sunswyck Maritime Corp., China
      Communications Construction Company Ltd and Nantong Yahua Shipbuilding
      Co., Ltd.**
              
              10-Q
              000-51368
              10.7
              5/15/200710.46
              Amendment
      Number 1, dated June 27, 2007, to Shipbuilding Contract, dated February
      2007, between Sunswyck Maritime Corp., China Communications Construction
      Company Ltd and Nantong Yahua Shipbuilding Co., Ltd.
              
              10-Q
              000-51368
              10.6
              8/10/200710.47
              Term
      Loan Facility Agreement, dated March 29, 2007, among TBS International
      Limited, certain subsidiaries of TBS International Limited, certain
      lenders and The Royal Bank of Scotland plc.
              
              8-K
              000-51368
              10.1
              4/2/200710.48
              Supplemental
      Agreement, dated March 27, 2009, to the Term Loan Facility Agreement,
      dated March 29, 2007, among TBS International Limited, certain
      subsidiaries of TBS International Limited, certain lenders and The Royal
      Bank of Scotland plc.
              
              10-Q
              000-51368
              10.7
              8/7/200910.49
              Supplemental
      Agreement, dated December 31, 2009, to the Term Loan Facility Agreement,
      dated March 29, 2007, among TBS International Limited, certain
      subsidiaries of TBS International Limited, certain lenders and The Royal
      Bank of Scotland plc.
              X
              
              
              10.1110.50
              Guarantee,
      dated January 7, 2010, by TBS International plc pursuant to which it
      guaranteed certain obligations under the Term Loan Facility Agreement,
      dated March 29, 2007, among TBS International Limited, certain
      subsidiaries of TBS International Limited, certain lenders and The Royal
      Bank of Scotland plc.
              X
              
              
              10.1210.51
              Guarantee
      Facility Agreement, dated March 29, 2007, among TBS International Limited,
      certain subsidiaries of TBS International Limited and The Royal Bank of
      Scotland plc.
              
              10-Q
              000-51368
              10.1
              8/7/200910.52
              Supplemental
      Agreement, dated March 27, 2009, to the Guarantee Facility Agreement,
      dated March 29, 2007, among TBS International Limited, certain
      subsidiaries of TBS International Limited and The Royal Bank of Scotland
      plc.
              
              10-Q
              000-51368
              10.8
              8/7/200910.53
              Supplemental
      Agreement, dated December 31, 2009, to the Guarantee Facility Agreement,
      dated March 29, 2007, among TBS International Limited, certain
      subsidiaries of TBS International Limited and The Royal Bank of Scotland
      plc.
              X
              
              
              10.1310.54
              Guarantee,
      dated January 7, 2010, by TBS International plc pursuant to which it
      guaranteed certain obligations under the Guarantee Facility Agreement,
      dated March 29, 2007, among TBS International Limited, certain
      subsidiaries of TBS International Limited and The Royal Bank of Scotland
      plc.
              X
              
              
              10.1410.55
              Loan
      Agreement, dated December 7, 2007, by and among Claremont Shipping Corp.,
      Yorkshire Shipping Corp. and Credit Suisse
              
              10-K
              000-51368
              10.37
              3/14/200810.56
              Supplemental
      Letter, dated March 24, 2009, to the Loan Agreement, dated December 7,
      2007, by and among Claremont Shipping Corp., Yorkshire Shipping Corp. and
      Credit Suisse
              
              8-K
              000-51368
              10.10
              4/2/200910.57
              Supplemental
      Letter, dated December 22, 2009, to the Loan Agreement, dated December 7,
      2007, by and among Claremont Shipping Corp., Yorkshire Shipping Corp. and
      Credit Suisse
              X
              
              
              10.1510.58
              Guarantee,
      dated January 11, 2010, by TBS International plc pursuant to which it
      guaranteed certain obligations under the Loan Agreement, dated December 7,
      2007, by and among Claremont Shipping Corp., Yorkshire Shipping Corp. and
      Credit Suisse
              X
              
              
              10.1610.59
              Loan
      Agreement, dated January 16, 2008, by and among TBS International Limited,
      certain subsidiaries of TBS International Limited, DVB Group Merchant Bank
      (Asia) Ltd., The Governor and Company of the Bank of Ireland, DVB Bank AG,
      Natixis and Mount Washington LLC
              
              10-Q
              000-51368
              10.2
              8/7/200910.60
              First
      Amendatory Agreement, dated March 23, 2009, to Loan Agreement, dated
      January 16, 2008, by and among TBS International Limited, certain
      subsidiaries of TBS International Limited, DVB Group Merchant Bank (Asia)
      Ltd., The Governor and Company of the Bank of Ireland, DVB Bank AG,
      Natixis and Mount Washington LLC
              
              8-K
              000-51368
              10.9
              8-K10.61
              Second
      Amendatory Agreement, dated December 31, 2009, to the Loan Agreement,
      dated January 16, 2008, by and among TBS International Limited, certain
      subsidiaries of TBS International Limited, DVB Group Merchant Bank (Asia)
      Ltd., The Governor and Company of the Bank of Ireland, DVB Bank AG,
      Natixis and Mount Washington LLC
              X
              
              
              10.1710.62
              Guarantee,
      dated January 11, 2010, by TBS International plc pursuant to which it
      guaranteed certain obligations under Loan Agreement, dated January 16,
      2008, by and among TBS International Limited, certain subsidiaries of TBS
      International Limited, DVB Group Merchant Bank (Asia) Ltd., The Governor
      and Company of the Bank of Ireland, DVB Bank AG, Natixis and Mount
      Washington LLC
              X
              
              
              10.1810.63
              Loan
      Agreement, dated February 29, 2008, by and among TBS International
      Limited, certain subsidiaries of TBS International Limited and AIG
      Commercial Equipment Finance, Inc.
              
              10-K
              000-51368
              10.39
              3/14/200810.64
              First
      Amendment, dated March 27, 2009, to Loan Agreement, dated February 29,
      2008, by and among TBS International Limited, certain subsidiaries of TBS
      International Limited and AIG Commercial Equipment Finance,
      Inc.
              
              10-Q
              000-51368
              10.5
              8/7/200910.65
              Second
      Amendment, dated December 30, 2009, to Loan Agreement, dated February 29,
      2008, by and among TBS International Limited, certain subsidiaries of TBS
      International Limited and AIG Commercial Equipment Finance,
      Inc.
              X
              
              
              10.1910.66
              Guarantee, dated
      January 7, 2010, by TBS International plc pursuant to which it guaranteed
      certain obligations under the Loan Agreement, dated February 29, 2008, by
      and among TBS International Limited, certain subsidiaries of TBS
      International Limited and AIG Commercial Equipment Finance,
      Inc.
              X
              
              
              10.2010.67
              Amended
      and Restated Credit Agreement, dated March 26, 2008, by and among TBS
      International Limited, certain subsidiaries of TBS International Limited,
      Bank of America, N.A. and the lenders named thereto
              
              10-Q
              000-51368
              10.3
              8/7/200910.68
              Amendment
      No. 1 and Waiver, dated March 27, 2009, to the Amended and Restated Credit
      Agreement, dated March 26, 2008, by and among TBS International Limited,
      certain subsidiaries of TBS International Limited, Bank of America, N.A.
      and the lenders named thereto.**
              
              10-Q
              000-51368
              10.4
              8/7/200910.69
              Amendment
      No. 2 and Waiver, dated December 31, 2009, to the Amended and Restated
      Credit Agreement, dated March 26, 2008, by and among TBS International
      Limited, certain subsidiaries of TBS International Limited, Bank of
      America, N.A. and the lenders named thereto.
              X
              
              
              10.2110.70
              Joinder
      Agreement, effective as of January 7, 2010, by TBS International plc
      pursuant to which it guaranteed certain obligations under the Amended and
      Restated Credit Agreement, dated March 26, 2008, by and among TBS
      International Limited, certain subsidiaries of TBS International Limited,
      Bank of America, N.A. and the lenders named thereto.
              X
              
              
              10.2210.71
              Loan
      Agreement, dated May 28, 2008, by and between among Dyker Maritime Corp.,
      TBS International Limited and Commerzbank AG
              
              10-Q
              000-51368
              99.2
              8/7/200810.72
              Supplemental
      Letter, dated March 2, 2009, to the Loan Agreement, dated May 28, 2008, by
      and between among Dyker Maritime Corp., TBS International Limited and
      Commerzbank AG
              
              8-K
              000-51368
              10.11
              4/2/200910.73
              Supplemental
      Letter, dated December 28, 2009, to the Loan Agreement, dated May 28,
      2008, by and between among Dyker Maritime Corp., TBS International Limited
      and Commerzbank AG
              X
              
              
              10.2310.74
              Guarantee,
      dated January 11, 2010, by TBS International plc pursuant to
      which it guaranteed certain obligations under the Loan Agreement, dated
      May 28, 2008, by and between among Dyker Maritime Corp., TBS International
      Limited and Commerzbank AG
              X
              
              
              10.2410.75
              Loan
      Agreement, dated June 19, 2008, by and between among Grainger Maritime
      Corp. and Joh. Berenberg, Gossler & Co. KG
              
              10-Q
              000-51368
              99.1
              8/7/200810.76
              Supplemental
      Letter, dated March 10, 2009, to the Loan Agreement, dated June 19, 2008,
      by and between among Grainger Maritime Corp. and Joh. Berenberg, Gossler
      & Co. KG
              
              10-Q
              000-51368
              10.6
              8/7/200910.77
              Supplemental
      Letter, dated December 30, 2009, to the Loan Agreement, dated June 19,
      2008, by and between among Grainger Maritime Corp. and Joh. Berenberg,
      Gossler & Co. KG
              X
              
              
              10.2510.78
              Guarantee,
      dated January 28, 2010, by TBS International plc pursuant to
      which it guaranteed certain obligations under the Loan Agreement, dated
      June 19, 2008, by and between among Grainger Maritime Corp. and Joh.
      Berenberg, Gossler & Co. KG
              X
              
              
              10.2621.1
              Subsidiaries
      of the Registrant
              X
              
              
              21.123.1
              Consent
      of PricewaterhouseCoopers LLP
              X
              
              
              23.131.1
              Certification
      of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) of
      the Securities and Exchange Act, as amended
              X
              
              
              31.131.2
              Certification
      of the Chief Financial and Accounting Officer pursuant to Rule 13a-14(a)
      and 15d-14(a) of the Securities and Exchange Act, as amended
              X
              
              
              31.231.3
              Certification
      of the Chief Accounting Officer pursuant to Rule 13a-14(a) and 15d-14(a)
      of the Securities and Exchange Act, as amended
              X
              
              
              31.332
              Certification
      of Chief Executive Officer, Chief Financial Officer and Chief Accounting
      Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002
              X
              
              
              32




*
Management contract or compensatory plan.


Table of Contents
 78
 
 Report
of Independent Registered Public Accounting Firm
 
 To
Shareholders and
 Board of
Directors
 of TBS
International PLC
 
 In our
opinion, the consolidated financial statements listed in the index appearing
under Item 15(a)(1) present fairly, in all material respects, the financial
position of TBS International PLC and its subsidiaries at December 31, 2009 and
2008, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2009 in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on criteria
established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in Management's Report on
Internal Control over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on these financial statements and on the
Company's internal control over financial reporting based on our integrated
audits.  We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).  Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was
maintained in all material respects.  Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.  Our audit of internal control over
financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk.  Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our
opinions.
 
 The
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Notes 2 and 11 to
the consolidated financial statements, the Company believes it will not be in
compliance with the financial covenants under its credit facilities during 2010,
which under the agreements would make the debt callable. This has created
uncertainty regarding the Company's ability to fulfill its financial commitments
as they become due.  These conditions raise substantial doubt about
the Company's ability to continue as a going concern.  Management’s
plans concerning these matters are also described in Notes 2 and
11.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 /s/
PricewaterhouseCoopers LLP
 New York,
New York
 March 16,
2010
  Table of Contents
 F-1
 
 Part
I.    FINANCIAL INFORMATION
  Item
1.    Financial Statements
  TBS
INTERNATIONAL PLC AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (in
thousands, except par value per share)
  December
      31,
              
              
              December
      31,2009
              
              
              2008AssetsCurrent
      assetsCash
      and cash equivalents
              
              $
              51,040
              
              
              $
              131,150Restricted
      cash
              
              
              8,675Charter
      hire receivable, net of allowance of $1,000 in 2009 and $500 in
      2008
              
              
              34,605
              
              
              
              45,786Fuel
      and other inventories
              
              
              15,040
              
              
              
              12,079Prepaid
      expenses and other current assets
              
              
              9,314
              
              
              
              10,722Advances
      to affiliates
              
              
              1,386
              
              
              
              6,402Total
      current assets
              
              
              120,060
              
              
              
              206,139Fixed
      assets, net
              
              
              804,258
              
              
              
              808,706Goodwill
              
              
              8,426
              
              
              
              8,426Other
      assets and deferred charges
              
              
              20,844
              
              
              
              18,414Total
      assets
              
              $
              953,588
              
              
              $
              1,041,685Liabilities
      and Shareholders' EquityCurrent
      liabilitiesDebt
      (Note 1 and 8)
              
              $
              351,247
              
              
              $
              56,945Accounts
      payable and accrued expenses
              
              
              52,054
              
              
              
              41,602Voyages
      in progress
              
              
              1,892
              
              
              
              3,268Advances
      from affiliates
              
              
              690
              
              
              
              13Total
      current liabilities
              
              
              405,883
              
              
              
              101,828Debt,
      long-term portion (Note 8)
              
              
              
              
              
              
              326,129Other
      liabilities
              
              
              9,977
              
              
              
              15,432Total
      liabilities
              
              
              415,860
              
              
              
              443,389COMMITMENTS
      AND CONTINGENCIES (Note 12)Shareholders'
      equityOrdinary
      shares, Class A, $.01 par value, 75,000,000 authorized, 17,533,996 shares
      issued and 17,513,125 shares
                outstandingin
      2009 and 17, 519,496 shares issued and 17,509,496 outstanding in
      2008
              
              
              175
              
              
              
              175Ordinary
      shares, Class B, $.01 par value, 30,000,000 authorized, 12,390,461 shares
      issued and outstanding
                in
      2009 and 2008
              
              
              124
              
              
              
              124Warrants
              
              
              21
              
              
              
              21Additional
      paid-in capital
              
              
              187,798
              
              
              
              186,683Accumulated
      other comprehensive (loss)
              
              
              (8,275
              )
              
              
              (13,727
              )Retained
      earnings
              
              
              358,369
              
              
              
              425,409Less:
      Treasury stock (20,871 shares, at cost)
              
              
              (484
              )
              
              
              (389
              )Total
      shareholders' equity
              
              
              537,728
              
              
              
              598,296Total
      liabilities and shareholders' equity
              
              $
              953,588
              
              
              $
              1,041,685
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 Table of Contents
 F-2
 
  TBS
INTERNATIONAL PLC AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (in
thousands, except per share amounts and outstanding shares)
  Year
      Ended December 31,2009
              
              
              2008
              
              
              2007RevenueVoyage
      revenue
              
              $
              247,980
              
              
              $
              518,907
              
              
              $
              261,509Time
      charter revenue
              
              
              51,201
              
              
              
              83,883
              
              
              
              88,365Logistics
      revenue
              
              
              2,689
              
              
              
              7,000
              
              
              
              668Other
      revenue
              
              
              646
              
              
              
              1,843
              
              
              
              2,379Total
      revenue
              
              
              302,516
              
              
              
              611,633
              
              
              
              352,921Operating
      expensesVoyage
              
              
              113,084
              
              
              
              172,929
              
              
              
              89,241Logistics
              
              
              2,193
              
              
              
              5,717
              
              
              
              557Vessel
              
              
              104,046
              
              
              
              110,354
              
              
              
              85,958Depreciation
      of vesselsand
      other fixed assets
              
              
              95,870
              
              
              
              73,479
              
              
              
              36,022General
      and administrative
              
              
              37,265
              
              
              
              39,879
              
              
              
              38,703Loss
      (gain) from sale of vessel
              
              
              
              
              
              
              
              
              
              
              814Total
      operating expenses
              
              
              352,458
              
              
              
              402,358
              
              
              
              251,295(Loss)
      income from operations
              
              
              (49,942
              )
              
              
              209,275
              
              
              
              101,626Other
      (expenses) and incomeInterest
      expense
              
              
              (17,119
              )
              
              
              (17,228
              )
              
              
              (10,394
              )Loss
      on extinguishment of debt
              
              
              
              
              
              
              (2,318
              )Gain
      on sale and insurance recovery of vessel
              
              
              
              
              
              
              
              
              
              
              6,034Interest
      and other income (expense)
              
              
              21
              
              
              
              2,048
              
              
              
              983Total
      other (expenses) and income, net
              
              
              (17,098
              )
              
              
              (17,498
              )
              
              
              (3,377
              )Net
      (loss) income
              
              $
              (67,040
              )
              
              $
              191,777
              
              
              $
              98,249Earnings
      per shareNet
      (loss) income per ordinary shareBasic
      and Diluted
              
              $
              (2.25
              )
              
              $
              6.53
              
              
              $
              3.49Weighted
      average ordinary shares outstandingBasic
      and Diluted
              
              
              29,843,566
              
              
              
              29,263,292
              
              
              
              28,029,340









The
accompanying notes are an integral part of these consolidated financial
statements.
     Table of Contents
 F-3
  TBS
INTERNATIONAL PLC AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (in
thousands)
 Year Ended
      December 31,2009
              
              
              2008
              
              
              2007Cash
      flows from operating activitiesNet
      (loss)  income
              
              $
              (67,040
              )
              
              $
              191,777
              
              
              $
              98,249Adjustments
      to reconcile net income to net cashprovided
      by operating activitiesGain
      on sale and insurance recovery of vessel
              
              
              
              
              
              
              
              
              
              
              (6,034
              )Loss
      (gain) on sale of vessel
              
              
              
              
              
              
              
              
              
              
              814Depreciation
      and amortization
              
              
              95,870
              
              
              
              73,479
              
              
              
              36,022(Gain)
      loss on change in value of interest swap contract
              
              
              (3
              )
              
              
              1,138
              
              
              
              568Amortization
      and write-off of deferred financing costs
              
              
              2,489
              
              
              
              3,486
              
              
              
              1,074Addition
      to allowance for bad debt
              
              
              901
              
              
              
              54
              
              
              
              81Non
      cash stock based compensation
              
              
              1,115
              
              
              
              2,436
              
              
              
              525Drydocking
      expenditures
              
              
              (15,581
              )
              
              
              (8,349
              )
              
              
              (6,209
              )(Income)
      loss in joint venture
              
              
              (101
              )
              
              
              (226
              )
              
              
              27Distribution
      from joint venture
              
              
              
              
              
              
              100Changes
      in operating assets and liabilitiesDecrease
      (increase) in charter hire receivable
              
              
              10,280
              
              
              
              (15,759
              )
              
              
              (4,766
              )(Increase)
      decrease in fuel and other inventories
              
              
              (2,961
              )
              
              
              (956
              )
              
              
              (3,866
              )Decrease
      (increase) in prepaid expenses and other current assets
              
              
              1,408
              
              
              
              (2,980
              )
              
              
              302(Increase)
      in other assets and deferred charges
              
              
              (1,029
              )
              
              
              (1,706
              )
              
              
              (1,127
              )Increase
      (decrease) in accounts payable and accrued expenses
              
              
              10,452
              
              
              
              (6,835
              )
              
              
              20,982(Decrease)
      increase  in voyages in progress
              
              
              (1,376
              )
              
              
              (3,748
              )
              
              
              2,747Increase
      (decrease)  in advances from/to affiliates, net
              
              
              5,693
              
              
              
              (5,939
              )
              
              
              (926
              )Net
      cash provided by operating activities
              
              
              40,117
              
              
              
              225,972
              
              
              
              138,463Cash
      flows from investing activitiesProceeds
      on sale of vessels
              
              
              
              
              
              
              
              
              
              
              62,014Vessel
      acquisitions / capital improvement costs
              
              
              (75,841
              )
              
              
              (414,919
              )
              
              
              (195,635
              )Deposit
      for vessel purchases
              
              
              
              
              
              
              
              
              
              
              (14,836
              )Restricted
      cash to fund 2009 new vessel payments
              
              
              (20,000
              )Decrease
      in restricted cash for new vessel payments
              
              
              11,325Return
      of investment in security
              
              
              
              
              
              
              
              
              
              
              160Investment
      in government securities
              
              
              
              
              
              
              
              
              
              
              (229
              )Investment
      in joint venture
              
              
              (351
              )
              
              
              (4,660
              )Repayment
      of loans from joint venture / (Loans to joint venture)
              
              
              
              
              
              
              760
              
              
              
              (360
              )Net
      cash (used) by investing activities
              
              
              (84,867
              )
              
              
              (418,819
              )
              
              
              (148,886
              )Cash
      flows from financing activitiesProceeds
      from issuance of shares in secondary public offering ,net
      of offering costs
              
              
              
              
              
              
              95,739Repayment
      of debt principal
              
              
              (61,002
              )
              
              
              (139,716
              )
              
              
              (21,199
              )Proceeds
      from credit facilities
              
              
              29,175
              
              
              
              338,000
              
              
              
              60,000Payment
      of deferred financing costs
              
              
              (3,438
              )
              
              
              (4,760
              )
              
              
              (4,093
              )Proceeds
      from revolving debt facility
              
              
              
              
              
              
              75,000
              
              
              
              101,000Repayment
      of revolving debt facility
              
              
              
              
              
              
              (70,375
              )
              
              
              (85,439
              )Acquistion
      of treasury stock
              
              
              (95
              )
              
              
              (389
              )Reduction
      of obligations under capital leases
              
              
              
              
              
              
              
              
              
              
              (21,355
              )Net
      cash (used in) provided by financing activities
              
              
              (35,360
              )
              
              
              293,499
              
              
              
              28,914Net
      (decrease) increase in cash and cash equivalents
              
              
              (80,110
              )
              
              
              100,652
              
              
              
              18,491Cash
      and cash equivalents beginning of period
              
              
              131,150
              
              
              
              30,498
              
              
              
              12,007Cash
      and cash equivalents end of period
              
              $
              51,040
              
              
              $
              131,150
              
              
              $
              30,498Supplemental
      cash flow information:Interest
      paid, net of amounts capitalized
              
              $
              23,589
              
              
              $
              14,741
              
              
              $
              9,868Noncash
      Investing activities:For
      the year ended December 31, 2007, the proceeds on the sale-leaseback of
      the vessels Laguna Belle and Seminole Princess excludes the
      noncash portion of $5.5 million, which was retained by the
      buyer/lessor as a deposit on the bareboat charters.Noncash
      Financing activities:For
      the years ended December 31, 2009, 2008, and 2007, 45,500,42,500 and
      31,000 shares were issued to independent directors and employees,
      respectively under the 2005 Employee Incentive Plan.


The
accompanying notes are an integral part of these consolidated financial
statements.
  Table of Contents
 F-4
   TBS
INTERNATIONAL PLC AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
 (in
thousands, except shares)
 AccumulatedOther
      Com-Additional
              
              
              
              prehensiveOrdinary
      Shares
              
              Treasury
      Stocks
              
              Warrants
              
              Paid-in
              
              Retained
              
              IncomeShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Earnings
              
              (Loss)
              
              TotalBalance
      at December 31, 2006
              27,724,457
              
              
              277
              
              
              
              
              
              288,853
              
              
              21
              
              
              87,881
              
              
              135,383
              
              
              42
              
              
              223,604Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              98,249
              
              
              
              
              
              98,249Unrealized
      loss on cash flow hedges
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,939
              )
              
              (2,939
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              95,310Stock-based
      award activity
              31,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              649
              
              
              
              
              
              
              
              
              649Balance
      at December 31, 2007
              27,755,457
              
              
              277
              
              
              
              
              
              288,853
              
              
              21
              
              
              88,530
              
              
              233,632
              
              
              (2,897
              )
              
              319,563Net
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              191,777
              
              
              
              
              
              191,777Unrealized
      loss on cash flow hedges
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (10,830
              )
              
              (10,830
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              180,947Stock
      based compensation
              154,500
              
              
              2
              
              
              
              
              
              
              
              
              
              
              
              2,434
              
              
              
              
              
              
              
              
              2,436Secondary
      public offering,net
      of expenses
              2,000,000
              
              
              20
              
              
              
              
              
              
              
              
              
              
              
              95,719
              
              
              
              
              
              
              
              
              95,739Increase
      in Warrants due toanti-dilutive
      provisions
              
              
              
              
              
              
              
              
              
              23,050Treasury
      stock
              
              
              
              
              
              10,000
              
              
              (389
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (389
              )Balance
      at December 31, 2008
              29,909,957
              
              
              299
              
              10,000
              
              
              (389
              )
              311,903
              
              
              21
              
              
              186,683
              
              
              425,409
              
              
              (13,727
              )
              $
              598,296Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (67,040
              )
              
              
              
              
              (67,040
              )Unrealized
      gain on cash flow hedges
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,452
              
              
              5,452Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (61,588
              )Stock
      based compensation
              14,500
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,115
              
              
              
              
              
              
              
              
              1,115Treasury
      stock
              
              
              
              
              
              10,871
              
              
              (95
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (95
              )Balance
      at December 31, 2009
              29,924,457
              
              $
              299
              
              20,871
              
              $
              (484
              )
              311,903
              
              $
              21
              
              $
              187,798
              
              $
              358,369
              
              $
              (8,275
              )
              $
              537,728


The
accompanying notes are an integral part of these consolidated financial
statements.
  Table of Contents
 F-5
  
  TBS
INTERNATIONAL PLC AND SUBSIDIARIES
 NOTES
TO FINANCIAL STATEMENTS
  Note 1 —Organization and Nature of
Business
 
 TBS
International plc ("TBSI"), which is the successor to TBS International Limited,
is organized in Ireland.  In December 2009, the shareholders of TBS
International Limited approved a plan to hold shares in TBS International plc
rather than TBS International Limited, a Bermuda company.  Effective
January 7, 2010, shareholders exchanged their shares in TBS International
Limited for an equal number of shares in TBS International plc.  TBSI
through its subsidiaries is engaged in the ocean transportation of dry cargo
through the use of owned and chartered vessels. All the related corporations of
TBSI, except Roymar and TBS Shipping Services and its subsidiaries, are foreign
corporations and conduct their business operations worldwide. Roymar and TBS
Shipping Services and its subsidiaries conduct their business operations in the
United States. The terms "we," "our," and "us," and "the Company" refer to TBS
International plc and its consolidated subsidiaries. We use the term
"International," and "TBSI" when we wish to refer only to TBS International plc,
the holding company that is the issuer of our ordinary shares, and not to TBS
International plc and its consolidated subsidiaries.
 
 A listing
of all of TBSI’s subsidiaries, with their country of registry and vessel owned,
if applicable is as follows:
  TBS
      International plc (Ireland)TBS
      International Limited (Bermuda)TBS
      Holdings Limited (Bermuda)Westbrook
      Holdings Ltd. and its Subsidiaries (Marshall Islands)Ablemarle
      Maritime Corp. - Mohawk PrincessAmoros
      Maritime Corp. - Hopi PrincessArden
      Maritime Corp. - Tayrona PrincessArgyle
      Maritime Corp. - Rockaway BelleAvon
      Maritime Corp. - Wichita BelleBedford
      Maritime Corp. - Apache MaidenBeekman
      Shipping Corp. - Laguna BelleBirnam
      Maritime Corp. - Sioux MaidenBrighton
      Maritime Corp. - Kickapoo BelleBristol
      Maritime Corp. - Tuscarora BelleChatham
      Maritime Corp. - Zuni PrincessChester
      Shipping Corp. - Tamoyo MaidenClaremont
      Shipping Corp. - Arapaho BelleColumbus
      Maritime Corp. - Seneca MaidenCumberland
      Navigation Corp. - Fox MaidenDarby
      Navigation Corp. - Nyack PrincessDover
      Maritime Corp. - Aztec MaidenDyker
      Maritime Corp. - Caribe MaidenElrod
      Shipping Corp. - Nanticoke BelleExeter
      Shipping Corp. - Alabama BelleFairfax
      Shipping Corp. - Seminole PrincessFrankfort
      Maritime Corp. - Shawnee PrincessGlenwood
      Maritime Corp. - Miami MaidenGrainger
      Maritime Corp. - Ottawa PrincessHancock
      Navigation Corp. - Kiowa PrincessHansen
      Shipping Corp. - Ainu PrincessHari
      Maritime Corp. - Navajo PrincessHartley
      Navigation Corp. - Canarsie PrincessHenley
      Maritime Corp. - Tuckahoe MaidenHudson
      Maritime Corp. - Chesapeake BelleJessup
      Maritime Corp.- Savannah BelleLancaster
      Maritime Corp. - Mohave MaidenLeaf
      Shipping Corp. - Management CompanyMontrose
      Maritime Corp. - Yakima PrincessOldcastle
      Shipping Corp. - Taino MaidenPacific
      Rim Shipping Corp. - PhilippineProspect
      Navigation Corp. - Inca MaidenQuentin
      Navigation Corp.- Houma BelleRector
      Shipping Corp. - Siboney BelleRemsen
      Navigation Corp. - Maori MaidenSheffield
      Maritime Corp. - Manhattan PrincessSherman
      Maritime Corp. - La Jolla BelleSherwood
      Shipping Corp. - Zia BelleSterling
      Shipping Corp. - Biloxi BelleStratford
      Shipping Corp. - Iroquois MaidenVedado
      Maritime Corp. - Tupi MaidenVernon
      Maritime Corp. - Mohegan PrincessWhitehall
      Marine Transport Corp. - Cherokee PrincessWindsor
      Maritime Corp. - Shinnecock BelleYorkshire
      Shipping Corp.- Oneida PrincessCaton
      Maritime Corp. - Dakota Princess (New Vessel Building)Dorchester
      Maritime Corp. - Montauk Maiden (New Vessel Building)Longwoods
      Maritime Corp. -  (New Vessel Building)McHenry
      Maritime Corp. - Omaha Belle (New Vessel Building)Sunswyck
      Maritime Corp. (New Vessel Building)Transworld
      Cargo Carriers S.A. (Marshall Islands)TBS
      Worldwide Services, Inc. (Marshall Islands)TBS
      African Ventures LimitedGMTBS
      Africa line, Ltd (Hong Kong - 50%)TBS
      Eurolines, Ltd.TBS
      Latin America Liner, Ltd.TBS
      Middle East Carriers, Ltd.TBS
      North America Liner, Ltd.TBS
      Ocean Carriers, Ltd.TBS
      Pacific Liner, Ltd.Mercury
      Marine Ltd. (Marshall Islands)Roymar
      Ship Management, Inc. (New York)TBS
      Shipping Services Inc. (New York)Compass
      Chartering Corp. (New York)Azalea
      Shipping & Chartering Inc.  (New York)TBS
      US Enterprises LLC (Delaware)TBS
      Energy Logistics LP (Delaware)TBS
      Logistics Incorporated (Texas)TBS
      Warehouse & Equipment Holdings Ltd. (Marshall
  Islands)TBS
      Warehouse & Distribution Group Ltd. (Marshall
  Islands)Panamerican
      Port Services SAC (50% ownership)TBS
      Mining Limited (Marshall Islands)GAT-TBS
      Consorcio S.A. (50% ownership)TBSI
      New Ship Development Corp. (Marshall
Islands)
 Westbrook
Holdings Ltd. and its subsidiaries ("Westbrook") operate their vessels under
pool agreements with an affiliate, TBS Worldwide Services Inc. ("TBS Worldwide")
and its subsidiaries, (TBS Pacific Liner, Ltd., TBS Latin America Liner, Ltd.,
TBS North America Liner, Ltd., TBS Ocean Carriers, Ltd., TBS Middle East
Carriers, Ltd., TBS African Ventures Limited and TBS Eurolines, Ltd.)
(collectively, the "Pools"). Transworld Cargo Carriers, S.A. ("TWCC") operates
substantially all its vessels under pool agreements with TBS Worldwide. Roymar
and TBS Shipping Services provide technical and operational management services
to TBS and its other subsidiaries. TBS Warehouse & Equipment Holdings Ltd.
and TBS Mining Limited hold interests in joint ventures.TBSI
New Ship Development Corp manages the Company’s ship building
program.
   Table of Contents
 F-6
 Note
2 — Summary of Significant Accounting Policies and Basis of
Presentation
 
 A summary of
the significant accounting policies followed in the preparation of the
accompanying consolidated financial statements is presented below:
  Basis of
Presentation
  The
accompanying consolidated financial statements are prepared on the accrual basis
of accounting in accordance with accounting standards generally accepted in the
United States of America.
 
 One of the
significant effects of the current global financial downturn has been a
reduction in vessel values.  In 2008, the Company made advance
payments on its debt, and obtained waivers to existing financial and collateral
covenants. The  waivers to the credit facilities, which expire on
January 1, 2010, modified the original financial and collateral covenants. At
December 31, 2009, the Company was in compliance with all modified additional
covenants and the debt was not callable by the lenders. However, the Company
anticipates that it will not meet the existing consolidated fixed charge and
consolidated leverage ratio requirements during the next 12 months and
consequently, long term debt is classified as a current liability in the
consolidated balance sheet at December 31, 2009.
 
 The Company
is discussing with its lenders the modification of financial covenants and other
terms to its credit facilities, and in connection with those discussions
obtained a three month extension, to April 1, 2010, of waivers expiring on
January 1, 2010.  Additionally, the Company is pursuing alternative
financing sources to repay some of the existing  credit
facilities.  The Company cannot give any assurance that it will be
able to obtain the covenant modifications and /or other financing. The failure
to obtain the covenant modifications and/or other financing 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. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.  Refer to Note 11-Financing for more
detailed explanation of our financing agreements and the classification of
long-term debt.
  Out
of Period Adjustment
  During the fourth quarter of 2009, the
Company identified an out-of-period adjustment in its consolidated financial
statements for the years ended December 31, 2008 and 2007.  Freight
costs incurred in putting into service the capitalized assets were expensed when
they should have been capitalized.  In the fourth quarter of 2009, the
Company recorded a cumulative effect of this adjustment, net
depreciation that reduced vessel expense and increased
vessel improvements and other equipment by $4.0
million.  Approximately $1.9 million and $2.1 million of the change
related to the years ended December 31, 2008 and 2007,
respectively.  The amounts involved are not material to the Company’s
consolidated financial statements in any individual prior period, and the
cumulative amount is not material to the results of operations for the year
ending December 31, 2009.
  Principles
of Consolidation
  The
consolidated financial statements include the accounts of TBS and all
subsidiaries that are more than 50 percent owned. All significant intercompany
transactions and balances have been eliminated in consolidation. Companies that
are not consolidated, but over which the Company exercises significant
influence, are accounted for under the equity method of accounting.
 
 Segment
Reporting
 
 The Company
has determined, in accordance with ASC Topic 280-Segment
Reporting  that it operates in one reportable segment, the worldwide
ocean transportation of dry cargo.
  
 Table of Contents
 F-7
 
 Use
of Estimates 
 The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America ("GAAP") requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates. The most
significant estimates relate to; cash flow estimates used for impairment
analysis, allowances for charter hire and claims receivable, estimated lives of
vessels and voyages in progress.
 Revenue is
generally recorded when services are rendered, evidence of an arrangement is
obtained, pricing is fixed or determinable and collection is reasonably assured.
The Company generally employs its vessels under time or voyage charters. With
time charters, the Company receives a fixed charter hire per on-hire day and is
responsible for meeting all the vessel operating expenses such as crew costs,
insurance, stores and lubricants and repairs and maintenance. Time charter
revenue is recorded over the term of the charter as service is provided. Revenue
from time charters in progress at year end is calculated using the daily charter
hire rate, net of daily expenses, multiplied by the number of voyage days
on-hire through year end.
  In the case
of voyage charters, the vessel is contracted for a voyage between two or more
ports. The Company is paid for the cargo transported and pays all voyage
expenses, such as fuel, port call expenses and commissions, as well as all
vessel operating expenses. Prior to 2008, the revenues and related voyage
expenses for voyages in progress  were recognized on the percentage of
service completed at the balance sheet date by prorating the estimated final
voyage revenue and expenses using the ratio of voyage days completed through the
balance sheet date to total voyage days. The impact of recognizing voyage
expenses ratably over the length of each voyage was not materially different
from the method of recognizing such costs as incurred in accordance with the
guidance, as outlined in ASC Topic 605-Revenue Recognition, on both
a quarterly and annual basis. For voyages in progress at December 31, 2009 and
2008, we recognized voyage expense as incurred and recognized voyage revenues
ratably over the length of the voyage. Probable losses on voyages are provided
for in full at the time such losses can be estimated. A voyage is deemed to
commence upon the completion of discharge of the vessel's previous cargo and is
deemed to end upon the completion of discharge of the current cargo.Vessel operating expenses
for both voyage and time charters are expensed as incurred.
 
 Cash
and Cash Equivalents
 
 The Company
considers all highly liquid investments with maturities when purchased of three
months or less to be cash equivalents.
 
 Charter
Hire Receivable and Allowance for Doubtful Accounts
 
 Charter hire
receivables are recorded at the invoiced amount and do not bear interest. The
allowance for doubtful accounts is the Company's best estimate of the amount of
probable credit losses in the Company's existing accounts receivable. The
Company determines the allowance based on specific identification of certain
receivable balances for which management believes collectability is questionable
and by maintaining a percentage of outstanding receivable balances as an
allowance to assure coverage for risks not specifically identified.
 
 Claims
Receivable
 
 Claims
receivable, which are included in prepaid expenses and other current assets,
represent claims for reimbursement of expenses incurred that have been or will
be made under our hull and machinery, and protection and indemnity coverages. We
record the probable amount that we expect to recover from insurance net of the
applicable deductible.
 
 Concentrations
of Credit Risk
 
 Financial
instruments which potentially subject the Company to significant concentrations
of credit risk consist principally of cash, charter hire receivables and
derivative instruments. These financial institutions are located throughout the
world, and the Company's policy is designed to limit exposure to any one
institution.  The Company maintains reserves for potential credit
losses, and historically such losses have not been significant.
 Table of Contents
 F-8
 Fuel
and Other Inventories
 
 Fuel
and other inventories, consisting primarily of fuel, lubricating oil and spare
parts aboard the vessels, are valued at the lower of cost (determined using a
first-in, first-out basis for fuel and a weighted average basis for lubricating
oil and spare parts) or market.
  Vessels
are stated at cost, which includes contract price and other direct costs
relating to acquiring and placing the vessels in service, less accumulated
depreciation. Major vessel improvements are capitalized and depreciated over the
remaining useful lives of the vessels. Depreciation on vessels is calculated,
based on cost less estimated residual value, using the straight-line method over
the remaining useful life of the vessel.  Depreciation on vessel
improvements is calculated using the straight-line method over the remaining
useful life of the vessel. The remaining useful life of each vessel is estimated
as the period from the date we put the vessel in service to the date 30 years
from the time that the vessel was initially delivered by the shipyard.
Maintenance and repair costs that do not improve or extend the useful lives of
the vessels, other than dry dock costs discussed below, are expensed as
incurred.
 
 Vessel construction in
progress represents the accumulated costs to build
vessels.  The Company capitalizes direct and indirect costs clearly
associated with the development, design, and construction of new vessels as
these costs have a future benefit. Costs include installments paid to the
shipyard, payments made to third parties in connection with the vessel
construction program, and interest costs incurred during the construction
period, which is defined as the period from the start of construction until the
date that each vessel is substantially complete and ready for use.
 
 Vessel leasehold improvements are the
cost of improvements made to two vessels chartered in under long term
charters.  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.
 
 Deferred dry docking costsrepresent amounts incurred for periodic inspections and overhaul
activities required for regulatory and insurance purposes.  Dry dock
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 grabs, computer hardware, software and office equipment are
depreciated on a straight-line basis.
 
 We use the
following useful lives to calculate depreciation and amortization:
  Description
              Useful  LifeVessel
              Remaining
      vessel life, 4 -21 yearsVessel
      improvements
              Remaining
      vessel life, 4 -21 yearsVessel
      equipment
              2-5
      yearsOther
      fixed assets including grabs
              3-10
      years
 
 Valuation
of Long-Lived Assets and Goodwill
 
 In accordance
with the guidance outlined in ASC Topic 360-Property, Plant and Equipment
, 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.
 
 Table of Contents
 F-9
 Due
to the economic crisis, and the resulting decline in spot shipping rates that
started in late 2008 and carried into 2009, together with 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 prepared an analysis.
Forecasting future cash flows involves the use of significant estimates and
assumptions. Revenue and expense assumptions used in the cash flow projections
are consistent with internal projections and reflected our economic outlook at
the time of preparation.  The cash flow period used was based on the
remaining lives of the vessels, which range from 4 to 30 years.  As of
the December 31, 2008 analysis, there was no impairment of long-lived
assets.
 
 During
the year ended December 31, 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 that there have not been any significant
changes in events or circumstances.  Consequently we have concluded
that there are no new triggering events requiring an additional impairment
analysis during 2009 and there is no impairment to our fleet at December
31, 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.
 
 The
provisions of ASC Topic 350 –
Intangible – Goodwill and Other require 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.  A two step approach is required.  The first
requires us to compare the reporting unit’s carrying value of net assets to
their fair value.  If the fair value exceeds the carrying value, goodwill
is 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 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 cash flow estimates, (c) updating our estimates of
the weighted-average cost of capital.  From the time we performed our
analysis at May 31, 2009 to December 31, 2009, there were no changes in
circumstances that necessitated further goodwill impairment testing and we
concluded that there was no indication of goodwill impairment at December 31,
2009.
 
 Deferred
Financing Costs
 
 Deferred financing costs are amortized
over the term of the related financing using the straight-line method, which is
not materially different than the effective interest
method.  Unamortized deferred financing costs are written off when the
related debt is repaid and included in debt extinguishment gain or loss in the
accompanying consolidated statements of operations.
 
 Leases
 
 Leases
are classified as either capital or operating. Those leases that transfer
substantially all the benefits and risks of ownership of property to the Company
are accounted for as capital leases. All other leases are accounted for as
operating leases. Capital leases are accounted for as assets and are fully
amortized on a straight-line basis over the lesser of the estimated useful lives
or the remaining available lease terms. Commitments to repay the principal
amounts arising under capital lease obligations are included in current
liabilities to the extent that the amount is repayable within one year;
otherwise the principal is included in amounts due after one year. The
capitalized lease obligation reflects the present value of future lease
payments. The financing element of the lease payments is charged to income over
the term of the lease.  Deferred leasing costs are amortized over the
term of the lease using the straight-line method, which is not materially
different than the effective interest method.  Rental expense for
leases classified as operating and that contain predetermined fixed decreases
of  minimum rentals during the term of the lease is recognized on a
straight-line basis over the life of the lease, beginning with the point at
which the Company obtains control and possession of the leased
properties.  The difference between the amounts charged to operations
and amounts paid is recorded as deferred rent expense.
 
 Table of Contents
 F-10
 Taxation
 
 As
discussed above, the shareholders of the Bermuda company exchanged their shares
for an equal number of shares in a newly formed Irish company. TBSI is not
subject to corporate income taxes on its profits in Ireland because its income
is derived from sources outside this jurisdiction. Currently there is no Bermuda
income or profit tax and there is no Marshall Islands corporate income taxes on
income derived from sources outside the Marshall Islands.  Minor
registration and tonnage taxes must be paid annually and have been included in
the vessels' operating expenses in the accompanying consolidated statements of
operations.
 
 Pursuant
to the Internal Revenue Code of the United States, U.S. source income from the
international operations of ships is generally exempt from U.S. tax if the
company operating the ships meets certain requirements. Among other things, in
order to qualify for this exemption, the company operating the ships must meet
two requirements.  First, a company must be incorporated in a country
which grants an equivalent exemption from income taxes to U.S. citizens and U.S.
corporations.  Second, more than 50% of the outstanding shares of
stock of either the company or its parent, by both total combined voting and
total value, must be listed on an exchange in the country of incorporation or
another country that grants an equivalent exemption from income taxes to U.S.
citizens and U.S. corporations or on a U.S. exchange and be regularly traded, as
defined.
 
 TBSI and
its foreign subsidiaries are incorporated in countries that grant equivalent
exemption from income taxes to U.S. citizens and U.S. corporations. In June
2005, TBSI met the second requirement for exemption from U.S. income tax when it
completed its initial public offering and its stock began being regularly traded
on the NASDAQ market.
 
 United
States federal and state income taxes that TBSI's U.S. subsidiaries are subject
to are not significant to the accompanying consolidated financial statements and
are included as a component of general and administrative expenses in the
consolidated statements of operations.
 
 Stock
Based Compensation
 
 The
Company accounts for stock based compensation in accordance with the guidelines
outlined in ASC Topic 718-Stock Compensation using the
modified prospective method which requires measurement of compensation cost for
all stock-based awards at fair value on the date of grant and recognition of
compensation over the service period for awards expected to vest.
 
 Earnings
Per Share
 
 Basic
earnings (loss) per ordinary share are computed using the two-class method for
share-based payment transactions, which are participating securities. The
two-class method of computing earnings per share is an earnings allocation
formula that determines earnings per share for ordinary stock and any
participating securities according to dividends declared (whether paid or
unpaid) and participation rights in undistributed earnings.  The
earning (loss) available to ordinary shares are divided by the weighted-average
number of ordinary shares outstanding during the year.  Diluted earnings
(loss) per share is computed by dividing the earning (loss) available to
ordinary shares by the weighted-average number of ordinary shares outstanding
during the year excluding dilutive shares that are  participating
securities.
 
 Fair
Value of Financial Instruments
 
 Financial
instruments, which potentially subject us to concentrations of credit risk,
consist principally of cash equivalents, charter hire receivables, derivate
instruments and debt. We place our cash equivalents with a number of
financial institutions to help limit the amount of credit exposure to any one
financial institution. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising our
customer base, and their dispersion across many geographic areas. As of December
31, 2009 and 2008, one customer accounted for 11.7% and 7.7%, respectively, of
charter hire receivables.
 
 Table of Contents
 F-11
 The following
method and assumptions were used to estimate the fair value of financial
instruments included in the following categories:
 
 ·
              Cash and cash equivalents,
      charter hire and claims receivable - The carrying amount reported
      in the accompanying consolidated balance sheets for cash and cash
      equivalents, charter hire and claims receivable approximates their fair
      value due to the current
maturities.
 
 ·
              Short-term debt - The
      carrying amount reported in the accompanying consolidated balance sheets
      for short-term debt approximates its fair value due to the current
      maturity of such instruments and their variable
  rates.
 
 ·
              Long-term debt - The
      carrying amount of our long-term debt, which was reclassified to
      short-term due to probable financial ratio covenant violations within the
      next 12 months, approximates fair value due to the variable interest rates
      on bank borrowings and based on the current rates offered to us for debt
      of the same remaining maturities.
 
 ·
              Interest Rate Swaps
      - The Company utilizes certain derivative financial
      instruments to manage interest rate risk. Derivative instruments are
      entered into for periods consistent with related underlying exposures and
      do not constitute positions independent of those exposures.  The
      Company does not enter into contracts for speculative purposes, nor is it
      a party to any leveraged derivative instruments.  The Company is
      exposed to credit loss in the event of nonperformance by the
      counterparties on derivative contracts. The Company minimizes its credit
      risk on these transactions by dealing with several financial institutions
      and, therefore, does not anticipate
  nonperformance.
  Foreign
Currency Transactions
 
 The financial
statements are expressed in United States dollars. Gains and losses resulting
from foreign currency transactions, which are not significant, are included in
other income.
 
 Financial
Derivative Instruments and Hedging Activities
 
 The
Company seeks to manage its interest rate risk associated with variable rate
borrowings with the use of derivative financial instruments. The Company
accounts for derivative financial instruments in accordance with the guidance
outlined in ASC Topic 815 – Derivatives and Hedging.The
fair value of derivative financial instruments are recognized as assets or
liabilities at each balance sheet date, with changes in fair value affecting net
income (loss) or comprehensive income (loss) as appropriate.
 
 Note
3 — 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 PrinciplesTopic 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 has updated its
references to GAAP in its consolidated financial statements issued for the year
ended December 31, 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.
  Table of Contents
 F-12
 Adopted
  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).  The adoption of the
provisions did not have a material impact on the Company’s previously issued
consolidated financial statements.
 
 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 oninterim
disclosures about the fair value of financial instruments effective for interim
and annual reporting 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 ordinary shares 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: (i) 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; (ii) consolidated net income
attributable to the parent and the noncontrolling interest be identified and
presented on the face of the consolidated statement of income; (iii) 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;
(iv) 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 (v) 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.
 
 Table of Contents
 F-13
 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: (i) the identifiable assets
acquired; (ii) the liabilities assumed; (iii) any noncontrolling interest in the
acquiree and (iv) 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 had 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.
 
 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 June 2009,
the FASB issued changes to the accounting for variable interest entities. These
changes, as discussed in ASC Topic 810-Consolidation, require an
enterprise (i) 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; (ii) to require ongoing reassessments of whether an
enterprise is the primary beneficiary of a variable interest entity; (iii) to
eliminate the quantitative approach previously required for determining the
primary beneficiary of a variable interest entity; (iv) 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 (v) 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.
  Table of Contents
 F-14
 Note 4 — Allowance for Charter Hire
 
 The Company
reviews the allowances for doubtful accounts monthly. Account balances are
charged off against the allowance when the Company feels that it is probable the
receivable will not be recovered.
 
 Allowance for
doubtful charter hire receivable is as follows (in thousands):
  Balance
      at
                
                
                
                Write-offs
      Net of
                
                
                Balance
      atBeginning
      of Year
                
                Additions
                
                Recoveries
                
                
                End
      of YearDecember
      31, 2009
                $
                500
                
                $
                901
                
                $
                (401
                )
                
                $
                1,000December
      31, 2008
                $
                490
                
                $
                54
                
                $
                (44
                )
                
                $
                500December
      31, 2007
                $
                443
                
                $
                81
                
                $
                (34
                )
                
                $
                490
  Note
5 — Prepaid Expenses and Other Current Assets
  Prepaid
expenses and other current assets consist of the following (in
thousands):
  December
      31,
                
                
                December
      31,Description
                
                2009
                
                
                2008Claims
      receivable
                
                $
                4,908
                
                
                $
                5,302Due
      from agents
                
                
                1,546
                
                
                
                2,120Other
      receivables
                
                
                807
                
                
                
                1,163Prepaid
      expenses
                
                
                2,053
                
                
                
                2,137TOTAL
                
                $
                9,314
                
                
                $
                10,722
  Note
6 — Fuel and Other Inventories
  Fuel and
other inventories consist of the following (in thousands):
  December
      31,
                  
                  
                  December
      31,Description
                  
                  2009
                  
                  
                  2008Fuel
                  
                  $
                  9,093
                  
                  
                  $
                  7,081Lubricating
      oil
                  
                  
                  5,235
                  
                  
                  
                  4,356Other
                  
                  
                  712
                  
                  
                  
                  642TOTAL
                  
                  $
                  15,040
                  
                  
                  $
                  12,079
  Note
7 — Fixed Assets
  Fixed assets
consist of the following (in thousands):
  Description
                
                December
      31,2009
                
                
                December
      31, 2008Vessels
                
                $
                717,535
                
                
                $
                677,901Vessel
      improvements and other equipment
                
                
                170,325
                
                
                
                140,738Deferred
      drydocking costs
                
                
                26,619
                
                
                
                15,724Vessel
      construction in process
                
                
                130,711
                
                
                
                126,024Other
      fixed assets
                
                
                18,912
                
                
                
                16,9791,064,102
                
                
                
                977,366Less
      accumulated depreciation and amortization
                
                
                (259,844
                )
                
                
                (168,660
                )$
                804,258
                
                
                $
                808,706
 
 Table of Contents
 F-15
 In September
2009, the Rockaway
Belle, which is the first of the six vessels being built under individual
contracts with China Communications Construction Company Ltd. and Nantong Yahua
Shipbuilding Group Co., Ltd. ("Shipyard"), was delivered. The contracts to build
six multipurpose vessels with retractable tweendecks were entered into in
February 2007 at an original contract purchase price of $35.4 million per
vessel.  Three of the vessels are tentatively scheduled to be
delivered during the 1st, 2nd and
4th
quarters of 2010 and two remaining vessels are scheduled for delivery during the
1st and
3rd
quarters of 2011.  Installments of $7.0 million per vessel are due to the
Shipyard when each of four pre-delivery milestones (contract signing, steel
cutting, keel laying, and launching) are met.  At delivery, the final
installment of $7.4 million, as adjusted, is due to the
Shipyard.  Payments made for the five remaining vessels to be
delivered as of December 31, 2009 are as follows (in thousands):
 Hull
      Number
                Vessel
      Name
                
                Payments
      through
                  December
      31, 2009Hull
      No NYHS200721
                Dakota
      Princess
                
                $
                28,000Hull
      No NYHS200722
                Montauk
      Maiden
                
                
                28,000Hull
      No NYHS200723
                To
      be Named
                
                
                21,000Hull
      No NYHS200724
                Omaha
      Belle
                
                
                21,000Hull
      No NYHS200725
                To
      be Named
                
                
                14,000Payments
      to yard
                
                $
                112,000Cap
      interest
                
                
                14,856Design
      & other costs
                
                
                3,855$
                130,711
 
 The Company
capitalized interest, including loan origination fees, of $4.2 million,
$5.8 million, and $4.9 million in 2009, 2008 and 2007,
respectively.  Capitalized interest and deferred finance costs are
added to the cost of each vessel and will be amortized over the estimated useful
life of the respective vessel when the vessel is placed into
service.
 During 2009,
2008 and 2007 the Company took delivery of one vessel for $39.8 million, 11
vessels for $312.5 million and four vessels for $85.7 million.
 
 In 2007 the
Company sold four vessels for $62.4 million. The Maya Princess was sold for
$13.0 million from which the Company realized a loss of approximately $0.8
million.  The Huron
Maiden was severely damaged in a grounding accident that resulted in the
vessel being declared a total loss.  The Company received insurances
proceeds of $8.0 million, after a scrap value credit of $2.0 million, in
addition to sale proceeds on the sale of the vessel for scrap of $2.8
million and realized a gain on the casualty and sale of the vessel of
approximately $6.0 million.  Lastly, in January 2007, the Company sold
and leased back the Seminole
PrincessandLaguna
Belle for $23.0 million and $22.0 million, respectively.  Net
proceeds from the transactions were $38.6 million after expenses of $0.9 million
and a buyer/lessor deposit retained by the charters of $5.5
million.  The Company had taken delivery of the vessels for
a cost of $45.1 million in November 2006.  Under the sale-leaseback
arrangement, the Company entered into a seven-year bareboat charters for
each vessel.  The charters are classified as operating leases – see
Note 18 "Commitments and Contingencies."
 
 The bareboat
charters allow the Company to purchase 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.  The purchase
options can be exercised at any other date during the option period at a
pro-rata price.  The $5.5 million deposit will be returned
or can be applied toward the purchase option if the vessels are
purchased.
  Depreciation
and amortization of vessels and other assets was $95.9 million, $73.5
million, and $36.0 million respectively, for the years ended December 31, 2009,
2008 and 2007, respectively.
 
 Table of Contents
 F-16
 Note
8 — Advances to / from Affiliates
 
 Advances
to/from affiliates, which are entities related by ordinary shareholders, are
non-interest-bearing, due on demand and expected to be collected or paid in the
ordinary course of business, generally within the 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.
 
 Note
9 —
Other assets and deferred charges
 
 Other assets
and deferred charges consist of the following (in thousands):
  December
      31,Description
                
                2009
                
                
                2008Deferred
      financing costs, net
                
                $
                5,963
                
                
                $
                5,015Deposit
      for bareboat charterand
      deferred rent expense
                
                
                9,152
                
                
                
                8,123Investment
      in equity securities available for sale
                
                
                404
                
                
                
                404Investments
      in joint ventures
                
                
                5,325
                
                
                
                4,872Total
                
                $
                20,844
                
                
                $
                18,414
 
 Deferred
financing costs represent fees incurred to obtain new financing,
refinance existing debt or arranging long term leases on vessels.
Accumulated amortization of deferred financing costs was $3.4 million and $1.2
million at December 31, 2009 and 2008, respectively.
  In connection
with the sale-leaseback of the Seminole Princess and Laguna Bellein January 2007,
$5.5 million was retained by the buyer/lessor as a deposit on the bareboat
charters.  The leases for the vessels contain predetermined fixed
decreases of charter hire payments due under the charters during the term of the
leases.  The Company recognizes the related rental expense on a
straight-line basis over the life of the leases and records the difference
between the amounts charged to operations and amounts paid as deferred rent
expense.
  In March
2008, the Company acquired a 50% interest in Panamerican Port Services SAC("PPS") for $1.9million.  PPS operates a
warehouse located in Callao, Peru.In September 2008, the
Company acquired a 50% interest in GAT-TBS Mining Consortium S.A ("GAT-TBS
Mining"), which mines calcium carbonate aggregates in the Dominican Republic.
Investments of $0.4million and $2.8million were madein GAT-TBS Mining for the years ending
December 31, 2009 and 2008, respectively.
  In November
2005, the Company entered into a joint venture with GMT Shipping Line Ltd. to
provide liner services to and from the East and North Coasts of South America
and from and to the West Coast of Africa. The Company acquired a 50% interest in
the joint venture for $0.9 million in investments and loans.  In
November 2007, the joint venture partners agreed to end the activities of the
joint venture in 2008 when all outstanding loans of $0.8 million were repaid and
a partial distribution of profits of $0.1 million was paid to the Company.
  All
investments are accounted for using the equity method.  For the years
ended December 2009 and 2008, income earned from joint ventures was $0.1 million
and $0.2 million, respectively. For the year ended December 2007 losses from
joint ventures was $27,000.
  Table of Contents
 F-17
 Note
10 — Accounts Payable-Accrued Expenses
  Accrued
expenses consist of the following (in thousands):
  December
      31,Description
                
                2009
                
                
                2008Accounts
      payable and accrued expenses - vessel
                
                
                33,631
                
                
                
                29,082Accounts
      payable and accrued expenses - voyage
                
                
                16,288
                
                
                
                11,126Accrued
      payroll and related costs
                
                
                2,135
                
                
                
                1,394Total
                
                $
                52,054
                
                
                $
                41,602
 Note
11 — Financing
  The Company’s
outstanding debt balances consist of the following (in thousands)
  Interest
      Rate at
                December
      31, 2009
              
              December
      31, 2009
              
              December
      31, 2008Bank
      of America - term credit facility,expires
      December 31, 2011
              
              5.53%
              
              $
              76,000
              
              $
              95,000Bank
      of America - revolving credit facility,
              
              5.53%expires
      March 26, 2012
              
              75,000
              
              
              75,000The
      Royal Bank of Scotland credit facility,new
      vessel buildings,  expires December 2015
              
              4.00%
              
              
              103,758
              
              
              75,000Credit
      Suisse credit facility,expires
      December 12, 2017 and  February 19, 2018
              
              3.00%
      & 3.02%
              
              
              28,750
              
              
              31,750DVB
      Group Merchant Bank (Asia) Ltd credit facility,expires
      January 23, 2013
              
              6.28%
              
              
              35,864
              
              
              60,324AIG
      Commercial Equipment Finance, Inc. credit facility,expires
      April 1, 2012
              
              10.00%
              
              
              19,250
              
              
              29,750Commerzbank
      AG credit facility,expires
      June 2, 2011
              
              3.25%
              
              
              4,500
              
              
              6,500Berenberg
      Bank credit facility,expires
      June 19, 2012
              
              4.25%
              
              
              8,125
              
              
              9,750Total
              
              
              
              $
              351,247
              
              $
              383,074Less:
      Current Portion
              
              
              
              
              (351,247
              )
              
              (56,945
              )Long
      Term Portion
              
              
              
              
              
              
              
              326,129
 Table of Contents
 F-18
  Below are
payment obligations due during the next five years according to the scheduled
repayment terms in the credit facility agreements.
 2010
              
              $
              73,8972011
              
              
              72,5332012
              
              
              103,9082013
              
              
              15,9592014
              
              
              29,584Thereafter
              
              
              55,366$
              351,247
  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 12 months.  At December 31, 2009, the Company was in
compliance with all modified additional covenants and the debt was not callable
by the lenders. The Company anticipates, however, that it will not meet the
existing consolidated fixed charge and consolidated leverage ratio requirements
during the next 12 months.   The Company is discussing with its
lenders the modification of financial covenants and other terms to its credit
facilities.   Additionally, the Company is
pursuing alternative financing sources to repay some of the existing credit
facilities.  The long-term portion of outstanding debt is required to
be classified as a current liability on the consolidated balance sheet at
December 31, 2009, until the loan modifications have been finalized
or funding from alternative financing sources has been
received.  However, once the loan modifications are made or
alternative financing is received, the debt due after 2010 will be classified as
long term debt in the consolidated balance sheet.
 
 Loan
Modifications
  As a result
of the global financial downturn and its impact on the shipping industry,
specifically vessel market valuations, the Company started discussions with its
lenders in early 2009 to obtain waivers of the collateral coverage
requirement and financial covenants such as the consolidated leverage ratio,
consolidated fixed interest coverage ratios and minimum cash balance
requirement.  The credit facilities were modified in March 2009, to
waive the collateral coverage and financial covenants through January 1, 2010,
provided that we meet two additional covenants. The loan modifications
introduced the requirement that the Company have earnings before interest,
taxes, depreciation and amortization or EBITDA to interest expense ratio of not
less than 1.10 to 1.00, 1.35 to 1.00 and 1.75 to 1.00 for the second, third and
fourth quarters of 2009, respectively, and minimum  month-end cash
balance of not less than $40.0 million during 2009.  In connection
with the March 2009 loan modifications, the Company incurred financing costs of
$4.4 million, which is being deferred and amortized over the remaining in term
of the respective credit facilities.
 
 In connection
with the March 2009 modifications that introduced the additional covenants, some
of the credit facilities were further modified and additional minimum cash
sub-requirements were imposed, which are counted toward the month-end minimum
cash balance requirement.  The amount available under the Bank of
America Revolving credit facility was reduced to $85.0 million from $125.0
million and an average monthly cash balance of $15 million is required to be
kept with Bank of America.  The repayment term of each of
the loans made under The Royal Bank of Scotland credit facility or RBS were
modified from 40 quarterly installments to 20 quarterly
installments.  Further, while the quarterly installments of $0.4
million due on each of the RBS loans remained the same, the final payment due
increased to $16.6 million from $8.3 million and an average monthly cash balance
of $10 million is required to be kept with RBS.  The Company was also
required to deposit $20.0 million into a restricted cash account from which
payments due to the shipyard that are not funded by RBS are to be
paid.  Cash held in the restricted cash account is not counted toward
the minimum month-end cash balance requirement.  In 2009, payments of
$11.3 million were made to the shipyard from the restricted cash account and at
December 31, 2009, there was a balance of $8.7 million in the restricted cash
account.
 
 Table of Contents
 F-19
 The Company
began discussion in late 2009 with its lenders to modify financial covenants and
other terms to its credit facilities. In connection with those ongoing
discussions, the Company obtained a three month extension to April 1, 2010, of
waivers expiring on January 1, 2010.  Under the waiver extensions an
EBITDA to interest expense ratio of not less than 1.75 to 1.00 is allowed
at the determination date (March 31, 2010).  Additionally, a minimum
month-end cash balance of not less than $25 million is required, which was a
reduction from the previous minimum month-end cash balance of $40.0
million.  In connection with the waiver extension the Company incurred
finance costs of $1.5 million, which are being deferred and amortized over the
remaining in term of the respective credit facility.
 
 Covenants
  At December 31,
2009, the Company was required, under the March 2009 waiver, to meet modified
covenants consisting of EBITDA to interest expense ratio of not less than 1.75
to 1.00 and month-end cash balance of not less than $40.0
million.  The Company was in compliance with the modified covenants at
December 31, 2009, and consequently, the minimum consolidated fixed charge
ratio and maximum consolidated leverage ratio covenants, as provided for in
the original credit facilities, were waived.  The covenants for all
but the Berenberg Bank credit facility require that the Company maintain a
minimum consolidated fixed charge ratio, a maximum restricted consolidated
leverage ratio, as well as maintain tangible net worth within defined limits and
maintain minimum month-end cash and cash equivalent
  Balances as
described in the below table:
 
 Convenant
              
              Required
              
              ActualMinimum
      Consolidated Tangible Net Worth
              
              $235
      million plus 75% of net income per quarter for all quarters
      after  September 30, 2007, with no reduction for
      losses,  plus 100% of increases to shareholders equity for the
      issuance of stock.  At December 31, 2009, a Consolidated
      Tangible Net Worth of $501.0 million
              
              $522.0
      millionMaximum
      Consolidated Leverage Ratio
              
              Not
      more than a ratio of 3.00 to 1.00 of Consolidated Funded Indebtedness, as
      defined in the loan agreements, at the end of a quarter to Consolidated
      EBITDA for the four previous quarters.
              
              5.93
      to 1.00
                waivedMinimum
      Consolidated Fixed Charge Coverage Ratio
              
              Not
      less than a ratio of 1.50 to 1.00 [1.25 to 1.00 under the Credit Suisse
      credit facility] of Consolidated EBITDA for the four previous quarters to
      Consolidated interest expense for the same period. plus regularly
      scheduled debt payments for the following 12 months
              
              0.48
      to 1.00
                waivedMinimum
      Cash Liquidity
              
              Qualified
      cash of $15.0 million, [$10.0 million under the AIG credit facility]
      [Qualified cash is defined in the agreement as cash and cash equivalents
      plus the available unused portion under the revolving credit
      facility]
              
              $51.0
      million
 
 The credit
facilities include,among others requirements, customary restrictions on the Company’s
ability to incur indebtedness or grant liens, enter into transactions with
affiliates, merge, consolidate, or dispose of assets, change the nature of its
business, and the requirements to comply with maritime laws and regulations,
maintain the vessels consistent with first-class ship ownership and management
practice, keep appropriate accounting records and maintain adequate
insurance.  In addition, some of the credit facilities restrict the
Company as to the payment of dividends, and the amount of leverage, investment
and capital expenditures without consent of the lender.
 
 Table of Contents
 F-20
 The table
below summarizes the repayment terms, interest rate benchmark and post amendment
margin rates, number of vessels and net book value at December 31, 2009
collateralizing each credit facility:
  Credit
      Facility
              
              Repayment
      terms
              
              Base
      and Margin Interst Rate
              
              Net
      Book Value of Collateral at
                December
      31, 2009
                in
      millions
              
              Number
      of Vessels Collateralizing Credit FacilityBank
      of America - term credit facility
              
              15
      quarterly installments of $9.5 million through December 31,
      2011
              
              LIBOR
      plus 5.25%Bank
      of America - revolving credit facility,
              
              Balloon
      Payment
      due                                March
      26, 2012
              
              LIBOR
      plus 5.25%
              
              $           390.7
              
              30The
      Royal Bank of Scotland credit facilityConstruction
      Period
              
              Conversion
      to term loan of the debt associated with each vessel upon delivery of the
      respective vessel
              
              LIBOR
      plus 3.75%
              
              $           130.7
              
              5
      (a)Post
      Delivery Term Loan
              
              20
      quarterly installments of $0.4 million commencing three months after
      delivery of each vessel with a final installment due of  $16.6
      million
              
              LIBOR
      plus 1.50%
              
              $             39.8
              
              1DVB
      Group Merchant Bank (Asia) Ltd credit facility
              
              10
      quarterly installments of $4.9 million and 10 quarterly installments of
      $2.6 million through January 2013
              
              LIBOR
      plus 5.00%
              
              $             35.1
              
              7AIG
      Commercial Equipment Finance, Inc. credit facility
              
              8
      quarterly installments of $2.63 million and 8 quarterly installments of
      $1.75 million through April 2012
              
              LIBOR
      plus 5.00%With
      an Interest Rate Floor of 10%
              
              $             80.8
              
              4Credit
      Suisse credit facility
              
              8
      quarterly installments of $1.5 million and 32 quarterly installments of
      $0.9 million through December 2017 and February 2018
              
              LIBOR
      plus 2.75%
              
              $             59.0
              
              2Commerzbank
      AG credit facility
              
              4
      quarterly installments of $1.5 million, and 4 quarterly installments of
      $1.0 million and 2 quarterly installments of $0.25 million through June
      2011
              
              LIBOR
      plus 3.00%
              
              $             22.3
              
              1Berenberg
      Bank credit facility
              
              16
      quarterly installments of $0.8 million through
      June  2012
              
              LIBOR
      plus 4.00%
              
              $             23.4
              
              151(a)
      - vessels are under construction at December 31, 2009 and collaterialized
      by shipbuilding contracts.
  Table of Contents
 F-21


The above
credit facilities are collateralized primarily by vessels that are subject to
the respective ship mortgages and assignment of the respective vessels’ freight
revenue and insurance, as well as guarantees by TBSI and each of its
subsidiaries with an ownership interest in the collateralized
vessel.  The BOA credit facility is also guaranteed by the Company’s
non vessel owning subsidiaries.  The market value of the vessels, as
determined by appraisal, is required to be above specified value to loan ratios,
as defined in each credit facility agreements, that range from 125% to 177% of
the respective credit facility’s outstanding amount.  The credit
facilities require mandatory prepayment or delivery of additional security
in the event that the fair market value of the vessels falls below limits
specified in each credit facility agreement.
 
 The RBS
credit facility is collateralized by the respective shipbuilding contracts while
the vessels are under construction and by Preferred Ship Mortgages on the new
vessels and assignment of freight revenue and insurance after delivery of the
respective vessel.   Further, the RBS credit facility prohibits
the Company from materially amending or failing to enforce the shipbuilding
contracts.
 
 At December
31, 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 NYHS200721 (M/V
      Dakota Princess);
 ·
              $
      20.0 million drawn down on the contract signing, steel cutting, keel
      laying of Hull No NYHS200722 (M/V Montauk
  Maiden);
 ·
              $ 15.0
      million drawn down on the contract signing, steel cutting, keel laying of
      Hull No NYHS200723;
 ·
              $ 14.6
      million drawn down on the contract signing, steel cutting, keel laying of
      Hull No NYHS200724; (M/V Omaha Belle),
and
 ·
              $ 10.0
      million drawn down on the contract signing, steel cutting of Hull No
      NYHS200725.
 
 Guarantee
Facility
  Concurrent
with the Company entering into the RBS credit facility, the Company 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 Company  under the
respective shipbuilding contract. The Guarantee Facility provides for a
guarantee of up to $14.0 million for each vessel loan for an aggregate guarantee
of $84.0 million. The Guarantee Facility expires 12 months after the
rescheduled anticipated delivery date of the respective vessel.  TBSI
guarantees the Guarantee Facility.
 
 Note
12 — 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.
  Table of Contents
 F-22
 As of
December 31, 2009, the total notional amount of the Company’s
receive-variable/pay-fixed interest rate swaps was $186.7 million and have
various maturity dates from June 2010 to December 2019.  Interest rate
contracts have fixed interest rates ranging from 2.92%to 5.24%, with a weighted
average rate of 3.79%.  Interest rate contracts having a notional
amount of $186.7 million at December 31, 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
      DerivativesDecember
      31, 2009
            
            December
      31, 2008Balance
      Sheet Location
            
            Fair
      Value
            
            Balance
      Sheet Location
            
            Fair
      ValueDerivatives
      designated as hedging instruments under ASC Topic 815Interest
      rate contracts
            Other
      liabilities
            
            $
            8,997
            
            Other
      liabilities
            
            $
            13,727Derivatives
      not designated as hedging instruments under ASC Topic 815Interest
      rate contracts
            Other
      liabilities
            
            
            980
            
            Other
      liabilities
            
            
            1,705Total
      liability derivatives
            
            
            $
            9,977
            
            
            
            $
            15,432






Amount
      of Gain or (Loss) Recognized in OCI on Derivatives (Effective
      Portion)For
      the Years Ended December 31,Derivatives
      in ASC Topic 815 Cash Flow Hedging Relationships
            
            2009
            
            
            2008
            
            
            2007Interest
      rate contracts
            
            $
            (8,275
            )
            
            $
            (13,727
            )
            
            $
            (2,897
            )






Amount
      of Gain or (Loss) Recognized in Income on DerivativesFor
      the Years Ended December 31,Derivatives
      Not Designated as Hedging
              Instruments
      under ASC Topic 815
            Location
      of Gain or (Loss)  Recognized in
              Income
      on Derivatives
            
            2009
            
            
            2008
            
            
            2007Interest
      rate contracts
            Interest
      expense
            
            $
            3
            
            
            $
            (1,138
            )
            
            $
            (568
            )





Table of Contents
 F-23





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
years ended December 31, 2009, 2008 and 2007 approximately $0.7million gain, $1.1million loss and $0.6million loss, respectively, were
recognized and included in 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 being greater than the
debt balance being hedged.  For the year ended December 31,
2009 approximately $0.7 million loss was 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 a
recurring basis at December 31, 2009:




Level
      1
              
              Level
      2
              
              Level
      3LiabilitiesInterest
      rate contracts
              
              
              
              $      9,977
  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
13 — Equity Transactions
  Class
A and Class B Ordinary Shares
 
 The Company
has two classes of ordinary shares that are issued and outstanding: Class A
ordinary shares, which are listed on the NASDAQ Global Select Market under the
symbol "TBSI", and Class B ordinary shares.  The Class A ordinary
shares and Class B ordinary shares have identical rights to dividends, surplus
and assets on liquidation; however, the holders of Class A ordinary shares are
entitled to one vote for each Class A ordinary share on all matters submitted to
a vote of holders of ordinary shares, while holders of Class B ordinary shares
are entitled to one-half of a vote for each Class B ordinary share.
 
 Table of Contents
 F-24
 The holders
of Class A ordinary shares can convert their Class A ordinary shares into Class
B ordinary shares, and the holders of Class B ordinary shares can convert their
Class B ordinary shares into Class A ordinary shares at any
time.  Further, the Class B ordinary shares will automatically convert
into Class A ordinary shares upon transfer to any person other than another
holder of Class B ordinary shares, 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 ordinary
shares cease to be regularly traded on an established securities market for
purposes of Section 883 of the Code.
 
 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 ordinary shares to Class A ordinary shares. On December 31, 2009, there
were 17,533,996
Class A ordinary shares issued, of which 17,513,125
were outstanding, and 12,390,461 Class B ordinary shares issued and
outstanding.
 
 The Company's
shareholders have approved the proposal that resulted in shareholders holding
shares in TBS International plc, an Irish company, rather than TBS International
Limited, a Bermuda company.  The Supreme Court of Bermuda and the
Irish High Court approved the transaction on January 7, 2010.
 
 Warrants
 
 At December
31, 2009, there were outstanding exercisable warrants to purchase 106,156 Class
A ordinary shares and 205,747 Class B ordinary shares held by parties not
affiliated with existing shareholders.  The warrants are exercisable
for a period of ten years following the date on which their exercise condition
was met (February 8, 2005), at a price of $0.01 per share.
 
 Treasury
Stock
 
 The Company's
Equity Incentive Plan permits stock grant recipients to elect a net
settlement.  Under the terms of a net settlement, the Company retains
a specified number of shares to cover the 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
65,500
Class A common shares.  Certain employees elected to have the Company
withhold and remit their respective payroll tax
obligations.  Accordingly, the Company retained and added to Treasury
Stock 10,871 Class A common shares, valued at $95,204, to cover the recipient's
estimated payroll tax liability.  At December 31, 2009, there were
20,871 Treasury Stock shares held by the Company having a cost of
$484,304.
  Note 14 —Related Party
Transactions
  Commercial and Port Agency Services
  Two
companies affiliated with the Company’s major shareholders provide commercial
and port agency service to us.
 
 (1)
              TBS
      Commercial Group Ltd. ("TBS Commercial Group") - This Bermuda-based
      holding company owns 25 operating companies that operate commercial and
      port agencies in South America, Europe, and Asia. Its subsidiaries are (1)
      Solar Shipping Logistica e Tranportes Ltda. (TBS Do Brasil); (2)
      TBS-Tecnisea C. Ltda.; (3)  Aquarius Shipping Colombia Ltda.;
      (4) TBS De Venezuela C.A.; (5) TBS Bolivia S.R.L.; (6) TBS Asia Ltd.; (7)
      TBS Shipping Services Europe GmbH; (8) Seganport S.A. (TBS Peru); (9)
      Brasinav Agenciamentos Ltda.; (10) Seganport Selva S.A.; (11) GMTBS Africa
      Line GmbH; (12) Nautica Groupe Ltd.; (13) Hermes Logistics Ltd.; (14)
      Interport Logistics Ltda.; (15) Almacenera Grau; (16) Yonkers Real Estate;
      (17) TBS Logistics Bolivia SRL; (18) TBS Logistics de Colombia S.A.; (19)
      TBS Project Logistics Limited; (20) TBS de Colombia S.A.; (21)
      Interproject Carriers Ltd.; (22) Cia Vapores Arco Iris; (23) Transportes
      Maritimas Y Fluviales SRL; (24) Bademar and (25) Groupa Sedei(2)
              Beacon
      Holdings Ltd. ("Beacon") - This Bermuda-based holding company owns four
      operating companies: (1) TBS Real Estate de Colombia S.A.; (2) Beacon Real
      Estate Holdings Ltd.; (3) Beacon Holdings America Latin Ltda. and (4) TBS
      Japan Ltd.  Beacon is in the same business as TBS Commercial
      Group Ltd.
 
 Table of Contents
 F-25
 Port agency
fees and commission rates are based upon contractual agreements with us.
Individuals who own a majority of the Company’s ordinary shares, some of whom
are members of our Board of Directors, own these companies. As a result of their
share ownership and board positions, and for so long as they collectively own a
significant percentage of our issued and outstanding ordinary shares, they will
be able to influence the Company and determine the outcome of any shareholder
vote.
 
 Port agency
fees paid to TBS Commercial Group and Beacon for the years ended December 31,
2009, 2008, and 2007, were approximately $1.9 million, $2.1 million and $1.0
million, respectively.  Effective October 1, 2007, the Board of
Directors’ Compensation Committee approved an increase of approximately 33
1/3% in port agency fees for agency services provided by most subsidiaries
of TBS Commercial Group and Beacon.  A higher increase was approved
for the Brazilian and Colombian agents to reflect the greater currency
depreciation that occurred in those countries.
 
 Commissions
paid to TBS Commercial Group and Beacon for commercial agency services were
approximately $5.9 million, $14.6 million, and $7.1 million for the years ended
December 31, 2009, 2008, and 2007, respectively. Effective October 1, 2007, the
Board of Directors’ Compensation Committee approved additional commissions of
1.25% of freight revenue for commercial agency services provided by subsidiaries
of TBS Commercial Group.
 
 At December
31, 2009 and 2008, the below amounts due to related commercial and port agents
are included in accounts payable and accrued expenses and other liabilities (in
thousands):
  AccruedAccounts
              
              
              and
      OtherPeriod
              
              Payable
              
              
              Liabilities
              
              
              TotalDecember
      31, 2009
              
              $
              1,726
              
              
              $
              2,970
              
              
              $
              4,696December
      31, 2008
              
              $
              1,530
              
              
              $
              1,293
              
              
              $
              2,823
  Consulting Fees
 
 TBS
Commercial Group Ltd. made no payments for consulting fees for 2009 and 2008 and
$60,000 in payments to Lawrence A. Blatte, who is an Executive Vice President,
during 2007.
 
 Commercial,
Operational and Vessel Agency Services
  Chartering Broker
  Globe
Maritime Limited ("Globe") occasionally acts as a broker for chartering and
vessel sales and purchases.  James W. Bayley who is a Company officer
and member of the Board of Directors owns Globe.  During 2009, 2008
and 2007, we paid Globe approximately $0.1 million $1.2 million and $0.2
million, respectively.
 
 Lease
  TBS Shipping
Services maintains an office in Yonkers, New York that is leased from our
chairman and chief executive officer, Joseph E. Royce.  During 2009,
2008 and 2007, payments to Mr. Royce under this lease totaled $240,000 per
year.
 
 Table of Contents
 F-26
 
 Note 15 — Stock
Plans
 
 2005 Equity Incentive
Plan
 
 The Company
adopted an Equity Incentive Plan  in 2005, which authorizes the grant
of "non-qualified" shares to employees, independent directors.  In
2009 the Equity Incentive Plan was amended to increase the maximum number of
shares that can be granted under the plan, allow for the granting of both Class
A ordinary shares and Class B ordinary shares and expand the definition of
eligible persons under the plan to include affiliates and agency service
companies.  The  maximum number of shares that can be
granted under the plan increased to 5,000,000 shares, including no more than
1,000,000 Class B shares.
 In January
2007, the Company awarded 6,000 restricted Class A  shares to its
independent directors that vested at the time of our Annual General Meeting on
June 19, 2007.  In August 2007, the Company awarded 15,000 share units
to an officer (the Director – New Shipbuilding Projects).  One-third
of these units vested upon the launch of the first vessel in November
2008.  The remaining units will vest in two equal installments upon
the first and second anniversaries of the launch date.  In November
2007, the Company awarded 73,500 restricted Class A shares to its
employees.  Approximately one-third of the shares vest annually
starting on January 20, 2009.
 
 On April 1,
2008, the Company awarded 1,500 restricted Class A shares to an
employee.  Approximately one-third of the shares vest annually
starting on January 20, 2009.  In 2009, the remaining 1,000 non-vested
shares of this grant were forfeited. On April 8, 2008, the Company awarded
12,500 restricted Class A shares to its independent directors that vested at the
time of the Company's Annual General Meeting on June 17,
2008.  Lastly, in April 2008, the Company awarded 12,000 restricted
Class A shares to its Executive Vice President and Chief Financial
Officer.  The shares vest in equal installments over four years
commencing March 1, 2009.
 
 On April 28,
2009, the Company awarded 12,500 restricted Class A shares to its independent
directors that vested at the time of the Company's Annual General Meeting on
June 22, 2009.
 
 The Company
recognized total stock-based compensation costs of $1.1 million (less
forfeitures of $0.1 million) $2.4 million and $0.5 million in 2009, 2008, and
2007, respectively.  These amounts are reflected in the Consolidated
Statement of Income in general and administrative expenses.  There is
no material income tax benefit for stock-based compensation due to the Company’s
tax structure.
 
 At December
31, 2009, unrecognized stock-based compensation expense related to non-vested
restricted stock and share unit awards totaled $.5 million. The cost of these
non-vested awards will be recognized over a weighted-average period of 1.7
years.
  Table of Contents
 F-27
 Transactions
under the Equity Incentive Plan are summarized as follows (aggregate values in
thousands):
  Number
      of Share Units
              
              
              Number
      of
                Restricted
      Shares
              
              
              Weighted-Average
      Fair Value
                at
      Grant Date
              
              
              Aggregate
      Value at Grant DateNon-vested
      at December 31, 2006
              
              
              
              
              
              75,000Granted,
      restricted shares
              
              
              
              
              
              79,500
              
              
              $
              34.01
              
              
              $
              2,704Granted,
      share units
              
              
              15,000
              
              
              
              
              
              
              $
              31.19
              
              
              $
              468ForfeitedVested
              
              
              
              
              
              
              ( 31,000
              )Non-vested
      at December 31, 2007
              
              
              15,000
              
              
              
              123,500Granted,
      restricted shares
              
              
              
              
              
              
              26,000
              
              
              $
              33.80
              
              
              $
              879Granted,
      share unitsForfeitedVested
              
              
              ( 5,000
              )
              
              
              ( 37,500
              )Non-vested
      at December 31, 2008
              
              
              10,000
              
              
              
              112,000Granted,
      restricted shares
              
              
              
              
              
              
              12,500
              
              
              $
              7.64
              
              
              $
              95Granted,
      share unitsForfeited
              
              
              
              
              
              
              ( 3,000
              )Vested
              
              
              ( 5,000
              )
              
              
              ( 65,500
              )Non-vested
      at December 31, 2009
              
              
              5,000
              
              
              
              56,000
  Employee Share Purchase
Plan
  The Company
adopted an Employee Share Purchase Plan in 2005, effective on the date of our
initial public offering. Under the share purchase plan a maximum of 1,300,000
shares can be granted. All eligible employees, as defined in the plan, can
subscribe to purchase shares of the Company’s stock at a purchase price of 95%
of the fair market value of the common shares on the last day of the
subscription period. At December 31, 2009, no shares were subscribed or issued
under the plan.
 
 Note
16 — Employee Benefit Plans
 
 The Company
maintains, through its subsidiaries TBS Shipping Services and Roymar, an
employee savings plan under Section 401(k) of the Internal Revenue Code. The
plan covers all office employees and allows participants to contribute to the
plan a percentage of pre-tax compensation, but not in excess of the maximum
allowed under the Internal Revenue Code. The Company does not make matching
contributions.
  The Company
also has a discretionary cash bonus program under which employees may receive an
annual cash bonus payment based on the Company’s annual operating
performance.  For the years ended December 31, 2009 and 2008, the
Company did not pay bonuses.  For the year ended December 31, 2007,
the Company made cash bonus payments totaling $10.2 million.
  Table of Contents
 F-28
 Note
17 — Earnings Per Share
  In accordance
with ASC Topic 260 – Earnings per Share, the following table sets forth the
computation of basic and diluted net (loss) income per share for 2009, 2008 and
2007:
  Year
      Ended December 31,2009
              
              
              2008
              
              
              2007(In
      thousands, except number of shares and earnings per share
      amounts)Numerators:Net
      (loss) income
              
              $
              (67,040
              )
              
              $
              191,777
              
              
              $
              98,249Allocation
      of undistributed income to nonvested restriced common
    shares
              
              
              
              
              
              $
              (711
              )
              
              $
              (433
              )(Loss)
      earnings available to common shareholders-Basic and
Diluted
              
              $
              (67,040
              )
              
              $
              191,066
              
              
              $
              97,816Denominators:Weighted
      average common shares outstanding-Basic and Diluted
              
              
              29,843,566
              
              
              
              29,263,292
              
              
              
              28,029,340Net
      (loss) income per common share:Basic
      and Diluted
              
              $
              (2.25
              )
              
              $
              6.53
              
              
              $
              3.49Anti-dilutive
      warrants not included above
              
              $
              311,903
  As outlined
in sections of ASC Topic 260 – Earnings per Share, nonvested 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 ordinary shares and
any participating securities according to dividends declared (whether paid or
unpaid) and participation rights in undistributed earnings. The Company’s
nonvested stock, consisting of time-vested restricted shares are considered
participating securities since the share-based awards contain a non-forfeitable
right to dividends regardless of whether the awards ultimately
vest.  We have adopted the applicable provisions of ASC Topic 260 and
computed earnings per ordinary 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 ordinary share for the year
ended December 31, 2008 decreased $0.02 and $0.01, respectively, and basic and
diluted earnings per ordinary share for the year ended December
31,  2007 also decreased $0.02 and $0.01, respectively, from the
amounts previously disclosed in our prior filings.
  At December
31, 2009 and 2008, there were outstanding exercisable warrants to purchase
106,156 Class A ordinary shares and 205,747 Class B ordinary
shares.  At December 31, 2007, there were outstanding exercisable
warrants to purchase 98,311 Class A ordinary shares and 190,542 Class B ordinary
shares.  All warrants are held by parties not affiliated with existing
shareholders. The warrants have been excluded from the computation of basic and
diluted earnings per share because they are
anti-dilutive.  However, the warrants have been treated as
outstanding for purposes of basic earnings per share for the years ended
December 31, 2008 and 2007 because they are issuable for nominal consideration
upon exercise of the warrants.
  Table of Contents
 F-29
 Note
18 — Commitments and Contingencies
 
 Charters-in
of Vessels
  At December
31, 2009, we chartered-in two vessels under long-term operating leases and no
vessels under short-term operating leases.  Charters or leases that
have initial terms of more than one year at the inception of the charter and are
noncancelable are treated as long-term leases. Total lease expense, consisting
of both short and long term charters-in, classified as operating leases, is as
follows (in thousands):
  Year
      ended December 31,2009
              
              
              2008
              
              
              2007Charters-in
      under short term operating leases
              
              $
              3,597
              
              
              $
              11,551
              
              
              $
              22,905Charters-in
      under long term operating leases
              
              
              6,538
              
              
              
              6,363
              
              
              
              6,073Total
      lease expense
              
              $
              10,135
              
              
              $
              17,914
              
              
              $
              28,978
 
 The Company
charters-in two vessels (Laguna BelleandSeminole 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
$1.2 million 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 December 31, 2009, deferred rent
expense was $3.5 million.  In December 2009, the bareboat charters
were amended increasing the daily charter hire payment required to be made
during the fourth through seventh years.  Each bareboat charter, which
originally required payments of $7,350 per day during the fourth through
seventh years, was amended to increase the daily charter hire payment to $8,041
per day during the fourth year, $7,909 per day during the fifth year, $7,827 per
day during the sixth year and $7,748 per day during the seventh
year.  The amendment did not change the lease classification as an
operating lease.
  Other Leases
  The Company
leases four properties, two of which are used by TBSI’s service company
subsidiaries Roymar and TBS Shipping Services and its subsidiaries for the
administration of their operations,  the third is office space leased
by TBS Energy Logistics and the fourth is a warehouse leased by TBS Energy
Logistics.
  TBS Shipping
Services leases its main office space from our chairman and chief executive
officer, Joseph E. Royce. The lease expires on December 31, 2010, subject to
five one-year renewal options. The lease provides for monthly rent of $20,000,
plus operating expenses including real estate taxes.
  Table of Contents
 F-30
 Roymar
renewed the lease for its main offices in November 2009 for one year through
November 30, 2010, under the first of two one-year renewal options at a monthly
rent of approxiamately $27,000.  The lease requires Roymar to pay
additional rent for real estate tax escalations.
  At December
31, 2009, we leased property through our subsidiary TBS Energy Logistics. The
lease term is for 5 years commencing October 1, 2009 through September 30, 2014.
There is a monthly rent of $8,054 for the first year, October 1, 2009 through
September 30, 2010.  The monthly rent increases to $8,255, $8,463,
$8,677 and $8,898, for the second through fifth years.
 
 TBS Energy
Logistics, LP also leases a warehouse for 38 months commencing May 1, 2009
through June 30, 2012 at a monthly rent of $22,000 for the year commencing July
1, 2009 through June 30, 2010.  The monthly rent increases to $22,400
and $22,800, in each of the subsequent years ending June 2011 and June
2012, respectively.
  As of
December 31, 2009, future minimum commitments under operating leases with
initial or remaining lease terms exceeding one-year are as follows (in
thousands):
 OfficeAt
      December 31, 2009
                
                Vessel
      Hire
                
                
                Premises
                
                
                Total2010
                
                
                6,007
                
                
                
                902
                
                
                
                6,9092011
                
                
                5,781
                
                
                
                371
                
                
                
                6,1522012
                
                
                5,734
                
                
                
                239
                
                
                
                5,9732013
                
                
                5,660
                
                
                
                105
                
                
                
                5,765Thereafter
                
                
                465
                
                
                
                80
                
                
                
                545$
                23,647
                
                
                $
                1,697
                
                
                $
                25,344
  Purchase
Obligations –Vessels
  Purchase
Obligations –New Vessel Buildings
  At December
31, 2009, the Company had purchase obligations totaling $67.1 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 through September 2010.  As of December 31,
2009, $66.8 million of the purchase obligation is scheduled to be paid as
follows: $51.2 million in 2010 and $15.6 million in 2011.  The timing
of actual payments will vary based upon when the milestones are
met.
  Litigation
  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.
  Table of Contents
 F-31
 Note
19 — 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 U.S.  The
amount of voyage revenue generated in countries other than the U.S. was $219.8
million, $485.2 million and $241.7 million for the years ended December 31,
2009, 2008 and 2007 respectively.
 
 Revenue
was generated in the following principal foreign geographic areas:
  Year
      Ended December 31,Country
                
                2009
                
                
                2008
                
                
                2007Brazil
                
                $
                53,192
                
                
                $
                127,360
                
                
                $
                72,053Japan
                
                
                35,914
                
                
                
                79,812
                
                
                
                40,592United
      Arab Emirates
                
                
                32,387
                
                
                
                69,714
                
                
                
                24,406Peru
                
                
                26,870
                
                
                
                48,707
                
                
                
                31,728Chile
                
                
                16,564
                
                
                
                46,923
                
                
                
                11,219China
                
                
                12,943
                
                
                
                42,319
                
                
                
                21,624Korea
                
                
                6,744
                
                
                
                15,699
                
                
                
                5,775Venezuela
                
                
                5,063
                
                
                
                9,903
                
                
                
                4,579Argentina
                
                
                8,021
                
                
                
                8,312
                
                
                
                15,059Others
                
                
                22,144
                
                
                
                36,457
                
                
                
                14,690$
                219,842
                
                
                $
                485,206
                
                
                $
                241,725
  Revenue is
attributed to these countries based on the location where the cargo is loaded.
The difference between total voyage revenue and total voyage revenue by country
is revenue from the United States, which is $28.1 million, $33.7 million, and
$19.8 million for 2009, 2008, 2007, respectively.  Time charter
revenue by country cannot be allocated because the Company does not control the
itinerary of the vessel.
 
 One customer
accounted for 11.7% of charter hire receivables at December 31, 2009 and no
customer accounted for more than 10.0% of charter hire receivables at December
31, 2008.  One customer accounted for 13.6% and 13.0% of voyage and
time charter revenue for the year ended December 31, 2009 and December 31,
2008 respectively.
   Table of Contents
 F-32
 Note 20 —
Subsequent Events
  On
January 29,
2010, the Company entered into a joing ventured with Log. Star
Navegacao S.A and invested $3.4 million for a 70% interest in TBS Do Sul Ltd. .
The joint venture will bareboat and operate three vessels in
Brazil.
  On January 7,
2010 the Supreme Court of Bermuda and the Irish High Court approved the
transaction that resulted in shareholders holding shares in TBS International
plc, an Irish company, rather than TBS International Limited, a Bermuda
company.
  Note
21—Selected Quarterly Financial Information (unaudited)
 
 The
following information is presented as supplementary financial information for
2009 and 2008 (in thousands, except per share information):
 
 Year
      Ended December 31, 2009First
      Quarter
                  
                  
                  Second
      Quarter
                  
                  
                  Third
      Quarter
                  
                  
                  Fourth
      QuarterRevenue
                  
                  $
                  71,158
                  
                  
                  $
                  72,236
                  
                  
                  $
                  74,332
                  
                  
                  $
                  84,790(Loss)
      from operations
                  
                  $
                  (17,474
                  )
                  
                  $
                  (12,722
                  )
                  
                  $
                  (13,262
                  )
                  
                  $
                  (6,484
                  )Net
      (loss) (a)
                  
                  $
                  (21,288
                  )
                  
                  $
                  (16,913
                  )
                  
                  $
                  (18,139
                  )
                  
                  $
                  (10,700
                  )Net
      (loss) per share:(a)Basic
      and Diluted
                  
                  $
                  (0.71
                  )
                  
                  $
                  (0.57
                  )
                  
                  $
                  (0.61
                  )
                  
                  $
                  (0.36
                  )
 Year
      Ended December 31, 2008First
      Quarter
                
                
                Second
      Quarter
                
                
                Third
      Quarter
                
                
                Fourth
      QuarterRevenue
                
                $
                131,576
                
                
                $
                156,947
                
                
                $
                183,322
                
                
                $
                139,788Income
      from operations
                
                $
                50,464
                
                
                $
                56,699
                
                
                $
                63,854
                
                
                $
                38,258Net
      income (a)
                
                $
                45,378
                
                
                $
                52,641
                
                
                $
                59,143
                
                
                $
                34,615Net
      income per share:(a)Basic
      and Diluted
                
                $
                1.61
                
                
                $
                1.82
                
                
                $
                1.96
                
                
                $
                1.15
 
 (a)
                The
      quarterly computations are independent of the annual computation. The
      computation of quarterly and annual earnings per share includes a
      weighting of the then average number of shares outstanding that will vary
      for each period. Accordingly, the sum of the four quarters' net income per
      share will not equal the annual earnings per share. See "Note 17 --
      Earnings per share."
   Table of Contents
 F-33
  TBS International plc, and
Subsidiaries
  Signatures
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized, on
the 16th day of March 2010.
 
 TBS
      INTERNATIONAL PLC(Registrant)/s/ Joseph E. RoyceJoseph
      E. Royce
                  President,
      Chief Executive Officer, Chairman
  and  Director/s/ Ferdinand V.
      LepereFerdinand
      V. Lepere
                  Executive
      Vice President, Chief Financial Officer/s/ Frank J.
      PittellaFrank
      J. Pittella
                  Chief
      Accounting Officer
 
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report
on Form 10-K has been signed on the 16th day of March 2010 by the following
persons in the capacities indicated:
 
 /s/ Joseph E.
      Royce
                
                /s/ Ferdinand V.
      LepereJoseph
      E. Royce, President, Chief Executive Officer,
                  Chairman
      and Director
                
                Ferdinand
      V. Lepere, Executive Vice President,
                  Chief
      Financial Officer/s/ Frank J.
      Pittella
                
                /s/ Gregg L. McNelis
      McNelisFrank
      J. Pittella, Chief Accounting Officer
                
                Gregg
      L. McNelis, Senior Executive Vice President,Chief
      Operating Officer and Director/s/ James W.
      Bayley
                
                /s/ John P.
      CahillJames
      W. Bayley, Vice President and Director
                
                John
      P. Cahill, Director/s/ Randee E.
      Day
                
                /s/ William P.
      HarringtonRandee
      E. Day, Director
                
                William
      P. Harrington, Director/s/ Alexander
      Smigelski
                
                /s/ Peter S.
      ShaerfAlexander
      Smigelski,
      Director
                
                Peter
      S. Shaerf, Director