<PAGE 1>
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, 1994
OR
__TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Transition Period From _________ to _________
Commission File No. 2-63322
INTERNATIONAL SHIPHOLDING CORPORATION
(Exact name of registrant as specified in its
charter)
Delaware 36-2989662
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
650 Poydras Street, New Orleans, Louisiana 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(504) 529-5461
Securities registered pursuant to Section
12(b) of the Act:
Name of each exchange
Title of each class on which registered
_________________ ____________________
Common Stock, $1 Par Value New York Stock Exchange
9% Senior Notes Due 2003 New York Stock Exchange
Indicate by check mark whether the
registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter
period that the registrant was required to
file such reports), and (2) has been subject
to such filing requirements for the past 90
days. YES X NO ____
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K 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. X
State the aggregate market value of the
voting stock held by non-affiliates of the
registrant.
Date Amount
____ __________
March 1, 1995 $74,267,381
Indicate the number of shares outstanding of
each of the registrant's classes of common
stock, as of the latest practicable date.
Common stock, $1 par value. . . . . . . .
5,346,611 shares outstanding as of March 1, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to
Shareholders for the fiscal year ended
December 31, 1994, have been incorporated by
reference into Parts I and II of this Form 10-
K. Portions of the registrant's definitive
proxy statement dated March 13, 1995 have
been incorporated by reference into Part III
of this Form 10-K.
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL SHIPHOLDING CORPORATION
Form 10-K
Table of Contents
PAGE
<S> <C>
PART I.
ITEM 1.BUSINESS 2
General 2
History 4
Liner Service/Contracts of
Affreightment 4
Military Sealift Command 6
Pure Car Carriers 7
Bulk Carrier 8
Float-On/Float-Off 8
Domestic Transportation
Services 8
Investments in specialized
Vessels 9
Ancillary Services 10
Marketing 10
Insurance 10
Regulation 11
Competition 13
Employees 14
ITEM 2. PROPERTIES 15
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS 16
ITEM 4a.EXECUTIVE OFFICERS AND
DIRECTORS OF THE REGISTRANT 16
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S
COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS 19
ITEM 6. SELECTED FINANCIAL DATA 19
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS 19
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANT'S ON
ACCOUNTING AND FINANCIAL
DISCLOSURE 19
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE
OFFICERS OF
THE REGISTRANT 20
ITEM 11. EXECUTIVE COMPENSATION 20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT 20
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED MATTERS 20
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON
FORM 8-K. 21
SIGNATURES 23
</TABLE>
<PAGE 2>
PART I
ITEM 1. BUSINESS
GENERAL
The Company, through its subsidiaries,
operates a diversified fleet of U. S., and
international flag vessels that provide
international and domestic maritime
transportation services to commercial
customers and agencies of the United States
government primarily under medium- to long-
term charters or contracts. The Company's
fleet consists of 28 ocean-going vessels, 14
towboats, 129 river barges, 1,650 LASH barges
and related shoreside handling facilities.
The Company's strategy is to (i) identify
customers with marine transportation needs
requiring specialized vessels or operating
techniques, (ii) seek medium- to long-term
charters or contracts with those customers
and, if necessary, modify, acquire or
construct vessels to meet the requirements of
those charters or contracts, and (iii) secure
financing for the vessels predicated
primarily on those charter or contract
arrangements. The Company believes that this
strategy has produced valuable long-term
relationships with its customers and stable
operating cash flows.
The Company is the only significant
operator of the LASH (lighter aboard ship)
system, which it pioneered in 1969. The
Company's fleet includes ten large LASH
vessels, four LASH feeder vessels and 1,650
LASH barges. In its liner services, the
Company uses the LASH system primarily to
gather cargo on rivers, in island chains and
in harbors that are too shallow for
traditional vessels and to transport to and
from those areas large items, such as forest
products, natural rubber and steel, that
cannot be transported efficiently in
containerized vessels. In addition, the LASH
system enables barges to be rapidly loaded
onto and unloaded from the large LASH vessels
without shoreside support facilities while
minimizing the number of times that the cargo
is handled. Because the Company's LASH
barges are used primarily to transport large
items, the Company's LASH fleet often has a
competitive advantage over containerized
vessels. Additionally, because containerized
and breakbulk vessels cannot operate in
certain of the areas where the Company's LASH
system operates, the Company often has a
competitive advantage over such vessels.
The Company's diversified ocean-going
fleet also includes (i) two international
flag and two U.S. flag pure car carriers that
are specially designed to transport
automobiles; (ii) the only two U.S. flag ice-
strengthened multi-purpose vessels, which
supply Pacific rim military bases and
scientific operations in the Arctic and
Antarctic; (iii) three roll-on/roll-off
vessels that permit rapid deployment of
rolling stock, munitions and other military
cargoes requiring special handling; (iv) two
PROBO vessels that can carry various refined
petroleum products and dry bulk cargoes on
back-to-back voyages because of their ability
to rapidly self-clean their cargo holds
between voyages
<PAGE 3>
with minimal shoreside support; (v) one
international flag cape-size bulk carrier;
(vi) one U.S. flag semi-submersible barge;
and (vii) one molten sulphur carrier, which
is used to carry molten sulphur from
Louisiana and/or Texas to a processing plant
on the Florida Gulf Coast. The Company also
operates 14 inland waterway towboats and 111
super-jumbo river barges that transport coal
from Indiana to Florida for an electric
utility via shoreside unloading facilities
owned and operated by the Company.
Through its principal operating
subsidiaries, Central Gulf Lines, Inc.
("Central Gulf"), LCI Shipholdings, Inc.
("LCI"), Forest Lines Inc. ("Forest Lines")
and Waterman Steamship Corporation
("Waterman"), the Company engages primarily
in four types of services: (i) international
flag LASH liner service between U. S. Gulf
and East Coast ports and ports in northern
Europe, and a subsidized U. S. flag LASH
liner service between U. S. Gulf and East
Coast ports and ports in South Asia, the
Middle East and northern Africa; (ii) time
charters to and other contracts with the
Military Sealift Command ("MSC") for use in
its military prepositioning program and to
service scientific operations in the Arctic
and Antarctic; (iii) time charters to
transport Toyota and Honda automobiles from
Japan to the United States and Hyundai
automobiles from Korea primarily to the
United States and Europe; and (iv) domestic
transportation and services, primarily
involving its coal and sulphur contracts and
its ownership of an inter-modal transfer and
warehouse facility in Memphis, Tennessee.
The Company also has investments in several
overseas entities that own and operate
specialized cargo carriers.
The Company currently has time charters
or contracts to carry cargoes for commercial
customers that include International Paper
Company, Freeport-McMoRan, Inc., The Goodyear
Tire and Rubber Company, Toyota Motor
Corporation, Honda Motor Co., Ltd. and
Hyundai Motor Company. The Company has one
of the number of vessels on charter to the
MSC operating nine vessels for the MSC under
charters or contracts that typically contain
options permitting MSC to extend the charter
or contract on similar terms and conditions
for one or more extension periods. With two
exceptions, the MSC has always exercised its
renewal options on the Company's charters or
contracts, and the Company generally has been
successful in winning charter or contract
renewals when they are rebid.
The Company's business historically has
generated stable cash flows because most of
its medium- to long-term charters provide for
a daily charter rate that is owed whether or
not the charterer utilizes the vessel (unless
the vessel is unavailable for the charterer's
use) and most of its medium- to long-term
contracts guarantee a minimum amount of cargo
for transportation. The Company is partially
insulated from increases in certain operating
expenses because time charters generally
require the charterer to pay certain voyage
costs, including fuel, port and stevedoring
expenses, and often include cost escalation
features covering certain of the expenses
paid by the Company.
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HISTORY
Central Gulf was founded in 1947 by the
late Niels F. Johnsen and his sons, Niels W.
Johnsen, the Company's current Chairman, and
Erik F. Johnsen, its current President.
Central Gulf was privately held until 1971
when it was acquired by Trans Union
Corporation. In 1978, the Company was
formed to act as a holding company for
Central Gulf, LCI and other affiliated
companies in connection with the 1979 spin-
off by Trans Union of the Company's common
stock to Trans Union's stockholders. In
1986, the Company acquired the assets of
Forest Lines, and, in 1989, the Company
acquired the stock of Waterman. Since its
spin-off from Trans Union, the Company has
continued to act solely as a holding company,
and its only significant assets consist of
the capital stock of its subsidiaries.
LINER SERVICES/CONTRACTS OF AFFREIGHTMENT
International Flag. Under the name
"Forest Lines" the Company operates two
international flag LASH vessels and a self-
propelled, semi-submersible feeder vessel on
a scheduled liner service. Forest Lines
normally makes 11 round trip sailings per
LASH vessel per year between U. S. Gulf and
East coast ports and ports in northern
Europe. Approximately one-half of the
aggregate eastbound cargo space is reserved
for International Paper Company under a long-
term contract of affreightment. The
remaining space is provided on a voyage
affreightment basis to commercial shippers.
Historically, approximately 20% has been used
by other paper manufacturers. The remaining
30% has been used by various commercial
shippers to carry general cargo. Since 1969,
when the LASH liner service commenced
operation, the vessels generally have been
fully utilized on their eastbound voyages.
The Company has had ocean transportation
contracts with International Paper since 1969
when the Company had two LASH ships built to
accommodate International Paper's trade. The
Company's contract of affreightment with
International Paper is for the carriage of
wood pulp, liner board and other forest
products, the characteristics of which are
well suited for transportation by LASH
vessels because the LASH system minimizes
damage to such cargo by reducing the number
of times that the cargo is handled. In
addition, the LASH system permits the Company
to load and unload these products at the
shipper's and the receiver's facilities,
which are generally located on river systems
that container and breakbulk vessels do not
serve. The Company's current contract with
International Paper is for a ten-year term
ending in 2002.
Over the years the Company has
established a base of commercial shippers to
which it provides space on the westbound
Forest Lines service. The principal cargoes
carried westbound are high-grade paper
products, aluminum slabs, steel products and
other general cargo. Over the last five
years, the westbound utilization rate for
these vessels averaged approximately 88% per
year.
<PAGE 5>
U. S. Flag. Waterman is a party to an
operating differential subsidy agreement with
the U. S. Maritime Administration, an agency
of the Department of Transportation
("MarAd"), that permits the Company to
operate U. S. flag vessels on designated
international trade routes and receive
subsidy payments from the United States
government approximating the excess of
certain vessel expenses, primarily wages,
over comparable costs of the Company's
principal foreign flag competitors on the
same trade routes. Under the subsidy
agreement the Company operates a scheduled
liner service that makes approximately 16
round voyages per year (four per vessel)
between U. S. Gulf and Atlantic ports and
ports in the Red Sea, Persian Gulf and Indian
Ocean (Trade Route No. 18) and ports in
Indonesia, Malaysia and Singapore (Trade
Rouge No. 17). The subsidy agreement also
permits the Company to make per year up to 18
calls at Egyptian ports on the Mediterranean
and up to 12 calls to south and east Africa
ports. The Company also operates FLASH
vessels as feeder vessels in this service in
southeast Asia. In 1994, the Company
received approximately $21.7 million under
its subsidy agreement. The Company's subsidy
agreement with MarAd expires on December 31,
1996, and there can be no assurance that it
will be renewed. See "Item 1. Business -
Regulation" for a discussion of the subsidy
program.
On the eastbound portion of this
service, a significant part of each vessel's
cargo traditionally has been shipped to
lesser developed countries under the Public
Law-480 program, pursuant to which the United
States government sells or donates surplus
food products for export to developing
countries. 75% of this cargo is reserved
for carriage by U.S. flag vessels, if they
are available at reasonable rates. Awards
under the Public Law-480 program are made on
a voyage-to-voyage basis through periodic
competitive bidding. The remaining eastbound
cargo consists of general cargo, including
some military equipment. Over the last five
years, these vessels generally have been
fully utilized on their eastbound voyages.
On the westbound portion of this
service, the Company provides a significant
portion of its cargo space to Goodyear for
the transportation of natural rubber under a
contract of affreightment expiring in
February 1996. Space is also provided on a
voyage-to-voyage basis to other importers of
natural rubber, including Uniroyal Goodrich
Tire Co., Bridgestone/Firestone, Inc. and
certain members of the Rubber Trade
Association. The Company has had a
continuing relationship with such companies
and the Association since the early 1970s.
The Company's LASH barges are ideally suited
for large shipments of natural rubber because
damage to rubber due to compression is
minimal as compared to the damage that can
occur when shipments are made in traditional
breakbulk vessels. As a result, Waterman is
the largest U.S. flag carrier of natural
rubber from southeast Asia to the United
States. The remaining westbound cargo
generally consists of coffee, jute, guar,
piece goods and other general cargo. Over
the last five years, these vessels generally
have been fully utilized on their westbound
voyages.
<PAGE 6>
MILITARY SEALIFT COMMAND
General. The Company has had contracts
with the MSC (or its predecessor) almost
continuously for several decades. At the
present time, the Company's subsidiaries have
nine vessels under contract to the MSC.
These vessels are employed in the MSC's
prepositioning programs, which strategically
place military cargo throughout the world, or
are chartered to the MSC to service long-term
scientific operations. The Company believes
that the demand for military prepositioning
vessels will increase during the next decade,
notwithstanding planned reductions in overall
military spending, because these vessels are
vital to the military's ability to respond
quickly to international incidents throughout
the world without incurring the significant
costs of operating foreign bases, some of
which also may not be available because of
changing political situations.
MSC charters and contracts are awarded
through competitive bidding, for fixed terms
with options allowing the MSC to extend the
charters or contracts for additional periods.
With two exceptions, the MSC has always
exercised its extension options, and the
Company generally has been successful in
winning renewals when the charters and
contracts are rebid. All charters and
contracts require the MSC to pay certain
voyage costs, including fuel, port and
stevedoring expenses, and certain charters
and contracts include cost escalation
features covering certain of the expenses
paid by the Company.
LASH Vessels. The Company charters four
U. S. flag LASH vessels to the MSC under
time charters that expire in April 1996,
May 1996, July 1996 and October 1996,
respectively, and provide the MSC with
options to renew each contract for one or two
additional 17-month periods. These vessels
are in the MSC's prepositioning force
stationed in the Indian Ocean area.
Ice-Strengthened Multi-purpose Vessels.
The Company owns and operates the only two
U.S. flag ice-strengthened multi-purpose
vessels. These vessels are capable of
transporting containerized and breakbulk
cargo and are used by the MSC to resupply
Pacific rim military bases and to supply
scientific projects in the Arctic and
Antarctic. One of the vessels is being
operated under a charter with the MSC that
will expire in November 1996 and may be
extended for an additional 17-month period at
the option of the MSC. The other vessel is
being operated under a charter with the MSC
that will expire in November 1995 and may be
extended for an additional 17-month period at
the option of the MSC.
Roll-On/Roll-Off Vessels. In 1983
Waterman was awarded a contract to operate
three U. S. flag roll-on/roll-off vessels
under time charters to the MSC for use by the
United States Navy in its maritime
prepositioning ship ("MPS") program. These
vessels represent three of the four MPS
vessels currently in the MSC's Atlantic
fleet, which provides support for the U. S.
Marine Corps. These ships are designed
primarily to carry rolling stock and
containers, and can each carry support
equipment for 17,000
<PAGE 7>
military personnel. Waterman sold the three
vessels to unaffiliated corporations shortly
after being awarded the contract, but
retained the right to operate the vessels
under operating agreements. The MSC time
charters commenced in late 1984 and early
1985 for initial five-year periods and were
renewable at the MSC's option for additional
five-year periods up to a maximum of twenty-
five years. In 1993, the Company reached
agreement with MSC to make certain reductions
in future charter hire payments in
consideration of fixing the period of these
charters for the full twenty-five years. The
charters will now terminate in the years 2009
and 2010. The operating agreements are for
corresponding periods and are renewed as the
charters are renewed.
Semi-submersible Barge. In late 1989,
the Company acquired, for approximately $4.4
million, and commenced operation of a U. S.
flag semi-submersible barge, the Caps
Express. The Caps Express was initially
deployed under a charter to the MSC and was
used extensively in Operation Desert
Shield/Desert Storm. The charter expired in
April 1991 and the MSC did not exercise its
renewal option under the charter. Since that
time, the Caps Express has been operated in
the commercial market.
PURE CAR CARRIERS
U. S. Flag. In 1986, the Company
entered into multi-year charters to carry
Toyota and Honda automobiles from Japan to
the United States. To service these
charters, the Company had constructed two U.
S. flag pure car carriers which are specially
designed to carry 4,000 and 4,660
automobiles, respectively. Both vessels were
built in Japan, but are registered under the
U.S. flag, making them two of only four U.S.
flag pure car carriers in the Japanese trade.
In order to be competitive with foreign flag
vessels operated by foreign crews, the
Company worked in close cooperation with the
unions representing the Company's U.S.
citizen shipboard personnel. Service under
these charters commenced in the fourth
quarter of 1987. These charters were renewed
for additional multi-year terms.
International Flag. Since 1988, the
Company has transported Hyundai automobiles
from Korea primarily to the United States and
Europe under two long-term charters. To
service these charters, the Company had two
new pure car carriers constructed by a
shipyard affiliated with Hyundai. Each of
the vessels has a carrying capacity of 4,800
automobiles.
Under each of the car carrier charters,
the charterers are responsible for voyage
costs including fuel, port and stevedoring
expenses while the Company is responsible for
normal operating expenses including crew
wages, repairs and insurance. The Hyundai
charters also include escalation features
covering certain of the expenses paid by the
Company. During the terms of these charters,
the Company is entitled to its full fee
irrespective of the number of voyages
completed or the number of cars carried per
voyage.
<PAGE 8>
BULK CARRIER
In 1990 the Company acquired a 148,000
dwt cape size dry bulk carrier. The vessel
has been fully employed under various
charters in specific trading areas where bulk
cargoes move on a regular basis.
FLOAT-ON/FLOAT-OFF VESSELS
During 1994 the Company entered into a
long-term contract to provide ocean
transportation services to a major mining
company producing copper concentrates at its
mine in West Irian Jaya, Indonesia. The
Company has acquired two semi-submersible
barge carrying vessels and is having
constructed 26 cargo barges to be used with
the aforementioned vessels. The Company will
also acquire a small container vessel in
order to fulfill the requirements of the
contract, which is expected to commence in
late 1995. See "Item 7. Management's
Discussion and Analysis of Financial
Condition and Results of Operations -
Liquidity and Capital Resources."
DOMESTIC TRANSPORTATION SERVICES
Coal. In 1981, the Company entered into
a 22-year contract expiring in 2004 with a
Florida based rural electric generation and
transmission cooperative for the
transportation of coal from Mt. Vernon,
Indiana to Gulf County, Florida. Under this
contract, which was awarded pursuant to
competitive bidding, the Company is annually
guaranteed transportation of a minimum of 2.7
million tons of coal through its operation of
14 chartered towboats, 108 chartered super-
jumbo river barges and three such barges that
it owns. Under this contract, the Company
typically has transported three million tons
of coal per year. To protect both parties
against cost variations, the contract
contains escalation and de-escalation clauses
designed to adjust the contract price for
fluctuations in fuel costs, wages and other
operating expenses. The Company is also
responsible for unloading the barges at the
discharge point in Gulf County, Florida and
transferring the coal into railcars. To
facilitate this process, the Company owns and
operates an automated terminal facility. The
terminal can be operated by relatively few
employees and is capable of loading and
unloading three times the amount of coal
currently transported through the facility
under the contract.
The Company contracted in October 1994,
to purchase a U.S. flag Coal Carrier. The
vessel will be placed under long-term charter
to a major electric utility company based in
Massachusetts to carry part of its fuel
supply. The ship will also be used to carry
coal and other bulk commodities for account
of other major charterers. See "Item 7.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- Liquidity and Capital Resources."
Molten Sulphur. The Company recently
entered into a 15-year transportation
contract with an affiliate of a major sulphur
producer for which it had built a 24,000
deadweight ton molten sulphur carrier that
carries molten sulphur from Louisiana
<PAGE 9>
and/or Texas to a fertilizer plant on the
Florida Gulf Coast. Under the terms of this
contract, the Company will be guaranteed the
transportation of a minimum of 1.8 million
tons of sulphur per year. The contract also
gives Freeport three five-year renewal
options. The vessel delivered and began
service during late 1994. See "Item 7.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
- Liquidity and Capital Resources."
LITCO Facility. During 1991, the
Company entered into an agreement with
Cooper/T. Smith Stevedoring pursuant to which
the Company acquired a 50% interest in a
newly constructed, all weather rapid cargo
transfer facility in the river port of
Memphis, Tennessee for handling LASH barges
transported by subsidiaries of the Company in
its LASH liner services. The terminal began
operation in May 1992 and provides 287,500
square feet of enclosed warehouse and
loading/discharging stations for LASH barge,
rail, truck and heavy-lift operations. In
June 1993, the Company purchased the other
50% interest for $1.9 million from Cooper/T.
Smith Stevedoring, which will continue to
manage the facility under a management
agreement with the Company.
INVESTMENTS IN SPECIALIZED VESSELS
Liquid Petroleum Gas. In 1985, the
Company purchased a one-third interest in A/S
Havtor, a Norwegian company that owned
interests in and chartered-out on a long-term
basis vessels specializing in the
transportation of liquid petroleum gas and
various chemical products. In 1985, the
Company also purchased a 14.2% interest in
A/S Havtor Management, a Norwegian ship
management company affiliated with A/S
Havtor. During the first quarter of 1993,
the Company sold an 18.5% interest in A/S
Havtor thereby reducing its interest to
approximately 14.8%. During 1994 A/S Havtor,
certain associated companies and a portion of
A/S Havtor Management were merged into a
publicly listed company, Havtor AS. The
Company's interest in Havtor AS is
approximately 12.6%, including both direct
and indirect holdings. Havtor AS operates
mainly a fleet of about 25 liquified
petroleum gas carriers, 7 dry bulk carriers
and is also joint owner with the Company in
the two PROBO vessels. Subsequent to year
end, Havtor AS signed a letter of intent
whereby A/S Havtor Management and the gas
carrier activities of Kvaerner a.s would be
merged into Havtor AS. This merger would
result in Havtor AS having ownership interest
varying between 10% and 100% in 46 gas
carriers, 6 drycargo carriers, 2 PROBO
vessels and 1 product carrier in addition to
other minor participations.
During 1990, the Company increased its
participation in the liquid petroleum gas
market by acquiring a 10% interest in a
56,000 cubic meter liquid petroleum gas
carrier that was delivered and began
operation during 1993.
<PAGE 10>
Combination Dry Cargo/Petroleum
Products. LCI holds a 50% equity interest in
two foreign entities, one of which owns two
combination dry cargo/petroleum products
(PROBO) vessels, and the other of which
operates the vessels under long-term charters
to a European marketing and profit-sharing
pool consisting of these two vessels and four
identical sister ships. Under these
charters, the pool operates and markets the
vessels in exchange for monthly payments that
are periodically adjusted under a profit-
sharing formula. PROBO vessels are able to
carry various refined petroleum products and
drybulk cargoes on back-to-back voyages
because of their ability to rapidly self-
clean their cargo holds between voyages with
minimal shoreside support.
ANCILLARY SERVICES
The Company has several subsidiaries
providing ship charter brokerage, agency,
barge fleeting and other specialized services
to the Company's subsidiaries and, in the
case of ship charter brokerage and agency
services, to unaffiliated companies. The
income produced by these services
substantially covers the related overhead
expenses. These services facilitate the
Company's operations by allowing it to avoid
reliance on third parties to provide these
essential shipping services. The Company
also has a 50% equity interest in a firm
offering ship management services in
Singapore.
MARKETING
The Company maintains marketing staffs
in Washington, D. C., New York, New Orleans,
Houston, Chicago, Baltimore, San Francisco,
Rotterdam and Singapore and maintains a
network of marketing agents in major cities
around the world who market the Company's
liner, charter and contract services. The
Company markets its Trans-Atlantic LASH liner
service under the trade name "Forest Lines",
and its LASH liner service between the U. S.
Gulf and Atlantic coast ports and South Asia
ports under the Waterman house flag. The
Company advertises its service in trade
publications in the United States and abroad.
INSURANCE
The Company maintains protection and
indemnity ("P&I") insurance to cover
liabilities arising out of the ownership or
operation of vessels with Assuranceforeningen
GARD and the Standard Steamship Owners'
Protection & Indemnity Association (Bermuda)
Ltd., which are mutual shipowners' insurance
organizations commonly referred to as P&I
clubs. Both clubs are participants in and
subject to the rules of their respective
international group of P&I associations. The
premium terms and conditions of the P&I
coverage provided to the Company are governed
by the rules of each club.
The Company maintains hull and machinery
insurance policies on each of its vessels in
amounts related to the value of each vessel.
This insurance coverage,
<PAGE 11>
which includes increased value, freight and
time charter hire, is maintained with a
syndicate of hull underwriters from the
United States, British, French and
Scandinavian insurance markets. The Company
maintains war risk insurance on each of the
Company's vessels in an amount equal to each
vessel's total insured hull value. War risk
insurance is placed through Underwriters at
Lloyds and Norwegian war risk insurance
markets and covers physical damage to the
vessels and P&I risks for which coverage
would be excluded by reason of war exclusions
under either the hull policies or the rules
of the applicable P&I club.
The Company also maintains loss of hire
insurance with underwriters from the
Norwegian market to cover its loss of revenue
in the event that a vessel is unable to
operate for a certain period of time due to
loss or damage arising from the perils
covered by the hull and machinery policy.
Insurance coverage for shoreside
property, shipboard consumables and
inventory, spare parts, workers'
compensation, office contents, and general
liability risks are maintained with
underwriters in the United States and British
markets. The Company also carries insurance
to meet certain liabilities that could arise
from the discharge of oil or hazardous
substances in U.S., international and foreign
waters.
Insurance premiums for the coverage
described above vary from year to year
depending upon the Company's loss record and
market conditions. In order to reduce
premiums, the Company maintains certain
deductible and co-insurance provisions that
it believes are prudent and generally
consistent with those maintained by other
shipping companies and in recent years has
increased the self-insurance portion under
its insurance program.
REGULATION
The Company's operations between the
United States and foreign countries are
subject to the Shipping Act of 1916 (the
"Shipping Act"), which is administered by the
Federal Maritime Commission, and certain
provisions of the Federal Water Pollution
Control Act, the Oil Pollution Act of 1990
and the Comprehensive Environmental Response
Compensation and Liability Act, all of which
are administered by the U. S. Coast Guard,
and certain other international, federal,
state and local laws and regulations,
including international conventions and laws
and regulations of the flag nations of its
vessels. Pursuant to the requirements of the
Shipping Act, the Company has on file with
the Federal Maritime Commission tariffs
reflecting the outbound and inbound prices
currently charged by the Company to transport
cargo between the United States and foreign
countries as a common carrier. These tariffs
are filed by the Company either individually
or in connection with its participation as a
member of rate or conference agreements,
which are agreements that (upon becoming
effective following filing with the Federal
Maritime Commission ) permit the members to
agree concertedly upon rates and practices
relating to the carriage of goods in U. S. and
<PAGE 12>
foreign ocean commerce. Tariffs filed by
a company unilaterally or collectively under
rate or conference agreements are subject to
Federal Maritime Commission approval. Once a
rate or conference agreement is filed, rates
may be changed in response to market
conditions on 30 days' notice, with respect
to a rate increase, and one day's notice,
with respect to a rate decrease.
The Merchant Marine Act of 1936 (the
"Merchant Marine Act") authorizes the Federal
government to pay an operating differential
subsidy to U. S. flag vessels employed in the
foreign trade of the United States. Under
the subsidy program, MarAd is authorized to
pay qualified U.S. flag operators (i) the
differential between U. S. and foreign crew
wage costs and (ii) the differential between
U.S. and foreign costs of protection and
indemnity insurance, hull and machinery
insurance, and maintenance and repairs not
compensated by insurance, so that U.S. ships
can compete on an equal footing with their
lower-cost foreign competitors. To qualify
for the subsidy, vessels must be built in the
United States, documented under the U.S. flag
and be at least 75% owned by U.S. citizens.
Under subsidy contracts, which are typically
20 years in length, operators provide service
on "essential trade routes" as determined by
MarAd. Each subsidized operator is required
to employ its vessels between a stated
minimum and maximum number of sailings each
year. Currently, four liner operators,
including Waterman, and 13 bulk carrier
operators hold subsidy contracts for a total
of 54 liner and 29 bulk ships. Total U.S.
governmental subsidy appropriations for the
fiscal year ending September 30, 1994 were
$240.9, and $214.4 has been appropriated for
the fiscal year ending September 30, 1995.
Approximately 85% of the aggregate subsidy is
paid to offset crew wage differentials.
Since 1981, the Federal government has
entered into no new subsidy contracts. In
1991, the Bush administration announced that
current contracts would be honored, but no
new ODS contracts would be entered into as
the old contracts expire. The Clinton
administration has continued this policy.
Waterman's subsidy contract expires on
December 31, 1996, and all other subsidy
agreements with U.S. flag liner operators
expire on December 31, 1997. This year, the
Clinton administration proposed legislation
that would implement a new subsidy program.
If enacted, this program would authorize
funding for 50 U. S. flag ships for up to ten
years. Both Waterman and Central Gulf would
intend to apply for participation in this new
program. There can be no assurance that the
bill will be adopted by Congress, that if
adopted it will be signed by the President,
or that if enacted into law, it will provide
funding to all or some of the Waterman and
Central Gulf vessels. Therefore, it is
possible that the existing program will be
terminated, that no replacement program will
be enacted, or that a replacement program
will provide substantially less funding than
the current program. Alternative steps are
under consideration so as to continue its
competitive position.
Seven of the Company's U.S. flag LASH
vessels were constructed with the aid of
construction differential subsidies and Title
XI loan guarantees administered by MarAd, the
receipt of which obligates the Company to
comply with various dividend and other
financial restrictions. Vessels constructed
with the aid of construction differential
<PAGE 13>
subsidies may not be operated in domestic
coastwise trade or domestic trade with
Hawaii, Puerto Rico or Alaska without the
permission of MarAd and without repayment of
the construction differential subsidy under a
formula established by law. Recipients of
Title XI loan guarantees must pay an annual
fee of up to 1% of the loan amount.
Under the Merchant Marine Act, U.S. flag
vessels are subject to requisition or charter
by the United States whenever the President
declares that the national security requires
such action. The owners of any such vessels
must receive just compensation as provided in
the Merchant Marine Act, but there is no
assurance that lost profits, if any, will be
fully recovered. In addition, during any
extension period under each MSC charter or
contract, the MSC has the right to terminate
the charter or contract on 30 days' notice.
However, the MSC has never exercised such
termination right with respect to the
Company.
Certain of the Company's operations,
including its subsidized U.S. flag LASH liner
service and its carriage of U.S. foreign aid
cargoes, as well as the Company's coal and
molten sulphur transportation contracts and
its Title XI financing arrangements, require
the Company to be as much as 75% owned by
U.S. citizens. The Company monitors its
stock ownership to verify its continuing
compliance with these requirements and has
never had more than 1% of its common stock
held of record by non-U.S. citizens.
However, the Company's charter and stock
transfer procedures do not prohibit the
acquisition of its common stock by non-U.S.
citizens. However, the Company believes that
it is able to maintain compliance with these
requirements.
The Company is required by various
governmental and quasi-governmental agencies
to obtain permits, licenses and certificates
with respect to its vessels. The kinds of
permits, licenses and certificates required
depend upon such factors as the country of
registry, the commodity transported, the
waters in which the vessel operates, the
nationality of the vessel's crew, the age of
the vessel and the status of the Company as
owner or charterer. The Company believes
that it has or can readily obtain all
permits, licenses and certificates necessary
to permit its vessels to operate.
COMPETITION
The shipping industry is intensely
competitive and is influenced by events
largely outside the control of shipping
companies. Varying economic factors can
cause wide swings in freight rates and sudden
shifts in traffic patterns. Vessel
redeployments and new vessel construction can
lead to an overcapacity of vessels offering
the same service or operating in the same
market. Changes in the political or
regulatory environment can also create
competition that is not necessarily based on
normal considerations of profit and loss.
The Company's strategy is to reduce
competitive pressures and the effects of
cyclical market conditions by operating
specialized vessels in identifiable market
segments and deploying a substantial number
of its vessels under medium- to long-term
charters or contracts and on trade routes
where it has
<PAGE 14>
established market shares. The Company also
seeks to compete effectively in the
traditional areas of price, reliability and
timeliness of service.
Competition principally comes from
numerous breakbulk vessels and, occasionally,
containerized vessels.
Much of the Company's revenue is
generated by contracts with the MSC and
contracts to transport Public Law-480 U.S.
government-sponsored cargo, a cargo
preference program requiring that 75% of all
foreign aid "Food for Peace" cargo must be
transported on U.S. flag vessels, if they are
available at reasonable rates. The Company
competes with all U.S. flag companies,
including Overseas Shipholding Group, Inc.,
OMI Corporation, Marine Transport Lines,
Inc., Farrell Lines, Inc., Lykes Brothers
Steamship Company, Sea-Land Service, Inc. and
American President Lines, Inc. for the MSC
work and the Public Law-480 cargo.
Additionally, the Company's principal foreign
competitors include Hoegh Lines, Star
Shipping, Wilhelmsen Lines, and the Shipping
Corporation of India.
The Company's international flag LASH
liner service faces competition from foreign
flag liner operators and, to a lesser degree,
from U. S. flag liner operators, including
those receiving operating differential
subsidies. In addition, during periods in
which the Company participates in conference
agreements or rate agreements, competition
includes not only the other participants
obligated to charge the same rates, but also
non-participants charging lower rates.
Because the Company's LASH barges are
used primarily to transport large items, such
as forest products, natural rubber and steel,
that cannot be transported as efficiently in
containerized vessels, the Company's LASH
fleet often has a competitive advantage over
these vessels for this type of cargo. In
addition, the Company believes that the
ability of its LASH system to operate in
shallow harbors and river systems and its
specialized knowledge of these harbors and
river systems give it a competitive advantage
over operators of containerized and breakbulk
vessels, which are too large to operate in
these areas.
The Company's pure car carriers operate
worldwide in markets where foreign flag
vessels with foreign crews predominate. The
Company believes that its U.S. flag pure car
carriers can continue to compete effectively
if it continues to receive the cooperation of
its unions in controlling costs.
EMPLOYEES
The Company employs approximately 409
shipboard personnel and 335 shoreside
personnel. The Company considers relations
with its employees to be excellent.
<PAGE 15>
All of the Company's U.S. shipboard
personnel and certain shoreside personnel are
covered by collective bargaining agreements.
Central Gulf, Waterman and other U.S.
shipping companies are subject to collective
bargaining agreements for shipboard personnel
in which the shipping companies servicing
U.S. Gulf and East coast ports also must make
contributions to pension plans for dockside
workers. The Employee Retirement Income
Security Act of 1974, as amended, provides
for liabilities for withdrawal from a multi-
employer pension plan if an employer reduces
its operations below a minimum level. It is
possible that the failure or withdrawal of
any shipping company employer may cause other
employers (such as the Company) to increase
their plan contributions or result in
additional potential liability. The Company
has experienced no strikes or other
significant labor problems during the last
ten years.
ITEM 2. PROPERTIES
Vessels. Of the 28 ocean-going vessels
in the Company's fleet, 23 are owned by the
Company, three are operated under operating
contracts and two are owned and operated by a
Norwegian partnership in which the Company
has a 50% interest. Of the approximately
1,650 LASH barges operated in conjunction
with the Company's LASH and FLASH vessels,
the Company owns approximately 1,330 barges
and leases 320 barges under leases with 12-
year terms expiring in late 2003 and early
2004. The Company also owns approximately 50
additional LASH barges, which are not
required for current vessel operations. All
of the Company's barges are registered under
the U.S. flag. The Company time charters-in
108 super-jumbo river barges (and owns three
such barges) and 14 towboats specially built
to meet the requirements of the Company's
coal transportation contract. The Company
also owns 18 standard river barges which are
chartered to unaffiliated companies on a
short-term basis. Until May 1993, these
barges were bareboat chartered-in from
affiliates of the Company. Upon the
expiration of these bareboat charters, the
Company purchased the barges from these
affiliates for $1.6 million in the aggregate.
Except for the approximately 50 LASH
barges that are not required for the
Company's operations, all of the vessels
owned, operated or leased by the Company are
in good condition. Since 1988, the Company
has completed life extension work on six LASH
vessels, completed the refurbishment of
approximately 1,300 related barges and
acquired 167 LASH barges. Management
believes that the useful lives of these
vessels have been extended by this work
through at least 2003. Under governmental
regulations, insurance policies and certain
of the Company's financing agreements and
charters, the Company is required to maintain
its vessels in accordance with standards of
seaworthiness, safety and health prescribed
by governmental regulations or promulgated by
certain vessel classification societies.
Vessels in the fleet are maintained in
accordance with governmental regulations and
the highest classification standards of the
American Bureau of Shipping or, for certain
vessels registered overseas, of Norwegian
Veritas or Lloyds Register classification
societies.
<PAGE 16>
Certain of the vessels and barges owned
by the Company's subsidiaries are mortgaged
to various lenders to secure such
subsidiaries' long-term debt. See Note B of
the Notes to the Company's Consolidated
Financial Statements included elsewhere
herein.
Other Properties. The Company leases
its corporate headquarters in New Orleans,
its administrative and sales office in New
York and office space in Houston, Chicago and
Washington, D. C. The Company also leases
space in St. Charles and Orleans Parishes,
Louisiana for the fleeting of barges.
Additionally, the Company leases a terminal
in Memphis, Tennessee that is a totally
enclosed multi-modal cargo transfer facility.
In 1994, the aggregate annual rental payments
under these operating leases were
approximately $2.3 million.
The Company owns two separate facilities
in St. Charles Parish, Louisiana and one
facility in Jefferson Parish, Louisiana that
are used primarily for the storage and
fleeting of barges. The Company also owns a
terminal in Gulf County, Florida that is used
in its coal transportation contract.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in various
lawsuits that have arisen in the ordinary
course of its business in which claimants
seek damages of various amounts for personal
injuries, property damage and other matters.
All material claims asserted under lawsuits
of this nature are believed to be covered by
insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None
ITEM 4a. EXECUTIVE OFFICERS AND DIRECTORS OF
THE REGISTRANT
Set forth below is information
concerning the directors and executive
officers of the Company. Directors are
elected by the shareholders for one year
terms. Executive officers serve at the
pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Name Current Position
<S> <C>
Niels W. Johnsen Chairman and Chief
Executive Officer
Erik F. Johnsen President, Chief Operating
Officer and Director
Harold S. Grehan, Jr. Vice President
and Director
Niels M. Johnsen Vice President and Director
Erik L. Johnsen Vice President and Director
<PAGE 17>
Stanley E. Morrison Treasurer
Gary L. Ferguson Vice President and
Chief Financial Officer
Laurance Eustis Director
Raymond V. O'Brien, Jr.Director
Edwin Lupberger Director
Edward K. Trowbridge Director
</TABLE>
Niels W. Johnsen, 72, has been the
Chairman and Chief Executive Officer of the
Company since its commencement of operations
in 1979 and is also Chairman and Chief
Executive Officer of each of the Company's
principal subsidiaries. He previously served
as Chairman of Trans Union Corporation's
ocean shipping group of companies from
December 1971 through May 1979. He was one
of the founders of Central Gulf in 1947 and
held various positions with Central Gulf
until Trans Union acquired Central Gulf in
1971. He is also a director and trustee of
Atlantic Mutual Companies, an insurance
company and a director of Reserve Fund, Inc.,
a money market fund.
Erik F. Johnsen, 69, has been the
President, Chief Operating Officer and
Director of the Company since its
commencement of operations in 1979 and is
also the President and Chief Operating
Officer of each of the Company's principal
subsidiaries except Waterman where he is
Chairman of the Executive Committee. Along
with his brother, Niels W. Johnsen, he was
one of the founders of Central Gulf in 1947
and has served as its President since 1966.
Mr. Johnsen is also a director of First
Commerce Corporation, a bank holding company.
Harold S. Grehan, Jr., 67, is Vice
President of the Company. He joined Central
Gulf in 1958 and became Vice President in
1959, Senior Vice President in 1973 and
Executive Vice President and Director in
1979. He participated in the development of
the Company's LASH program and has direct
responsibility for conventional and LASH
vessel traffic movements.
Niels M. Johnsen, 49, is Vice President
of the Company. Mr. Johnsen has served as a
director of the Company since April 1988. He
joined Central Gulf on a full time basis in
1970 and held various positions with the
Company before being named Vice President in
1986. He is also President of N. W. Johnsen
& Co., Inc., a subsidiary of the Company
engaged in ship and cargo charter brokerage.
He is the son of Niels W. Johnsen.
Erik L. Johnsen, 37, is Vice President
of the Company. He joined Central Gulf in
1979 and held various positions with the
Company before being named Vice President in
1987. He is responsible for all operations
of the Company's vessel fleet and leads the
Company's Ship Management Group. He is also
President of Sulphur Carriers, Inc., a wholly-
owned subsidiary of the Company. He is the
son of Erik F. Johnsen.
<PAGE 18>
Stanley E. Morrison, 67, is Treasurer of
the Company, a position he assumed when he
joined Central Gulf in 1959.
Gary L. Ferguson, 54, is Vice President
and Chief Financial Officer of the Company.
He joined Central Gulf in 1968 where he held
various positions with the Company prior to
being named Controller in 1977, and Vice
President and Chief Financial Officer in
1989.
Laurance Eustis, 81, has served as a
director of the Company since 1979. He is
the Chairman of the Board of Eustis
Insurance, Inc., mortgage banking and general
insurance, located in New Orleans, Louisiana.
Mr. Eustis is also a director of First
Commerce Corporation, a bank holding company,
and Pan American Life Insurance Company.
Raymond V. O'Brien, Jr., 67, has served
as a director of the Company since 1979. He
is also a director of Emigrant Savings Bank.
He served as Chairman of the Board and Chief
Executive Officer of the Emigrant Savings
Bank from January 1978 through December 1992.
Edwin Lupberger, 58, has served as a
director of the Company since April 1988.
Mr. Lupberger is the Chairman of the Board,
Chief Executive Officer and Director of
Entergy Corporation and its wholly-owned
subsidiaries. He also is a director of First
Commerce Corporation, a bank holding company.
Edward K. Trowbridge, 66, has served as
a director of the Company since April 1994.
He served as Chairman of the Board and Chief
Executive Officer of the Atlantic Mutual
Companies from July 1988 through November
1993.
<PAGE 19>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED SECURITY
HOLDER MATTERS.
The information called for by Item 5 is
included in the 1994 Annual Report to
Shareholders in the section entitled "Common
Stock Prices and Dividends for Each Quarterly
Period of 1993 and 1994" and is incorporated
herein by reference to page 23 of Exhibit 13
filed with this 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information called for by Item 6 is
included in the 1994 Annual Report to
Shareholders in the section entitled "Summary
of Selected Consolidated Financial Data" and
is incorporated herein by reference to page 1
of Exhibit 13 filed with this 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information called for by Item 7 is
included in the 1994 Annual Report to
Shareholders in the section entitled
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations" and is incorporated herein by
reference to pages 7 through 9 of Exhibit 13
filed with this 10-K.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The consolidated balance sheets as of
December 31, 1994, and December 31, 1993, and
the related consolidated statements of
income, changes in stockholders' investment
and cash flows for each of the three years in
the period ended December 31, 1994 are
included in the 1994 Annual Report to the
Shareholders and are incorporated herein by
reference to pages 10 through 14 of Exhibit
13 filed with this 10-K. Such statements
have been audited by Arthur Andersen & Co.,
independent public accountants, as set forth
in their report included in such Annual
Report and incorporated herein by reference
to page 24 of Exhibit 13 filed with this 10-
K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
<PAGE 20>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT
The information called for by Item 10 is
incorporated herein by reference to Item 4a,
Executive Officers and Directors of the
Registrant.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by Item 11 is
included on pages 6, 7 and 8 of the Company's
definitive proxy statement dated March 13,
1995, filed pursuant to Section 14(a) of the
Securities Exchange Act of 1934, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information called for by Item 12 is
included on pages 2, 3, 4 and 5 of the
Company's definitive proxy statement dated
March 13, 1995, filed pursuant to Section
14(a) of the Securities Exchange Act of 1934,
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information called for by Item 13 is
included on pages 2, 3, 4, 5 and 8 of the
Company's definitive proxy statement dated
March 13, 1995, filed pursuant to Section
14(a) of the Securities Exchange Act of 1934,
and is incorporated herein by reference.
<PAGE 21>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM
8-K
The following financial statements,
schedules and exhibits are filed as part of
this report:
(a) 1. Financial Statements
The following financial statements
and related notes are included in
the Company's 1994 Annual Report to
Shareholders and are incorporated
herein by reference to pages 10
through 24 of Exhibit 13 filed with
this 10-K.
Consolidated Balance Sheets at
December 31, 1994 and 1993
Consolidated Statements of
Income for the years ended
December 31, 1994, 1993, and
1992
Consolidated Statements of
Changes in Stockholders'
Investment for the years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash
Flows for the years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial
Statements
Report of Independent Public
Accountants
2. Financial Statement Schedules
None.
3. Exhibits
(3) Restated Certificate of Incorporation,
as amended, and By-Laws of the Registrant
(filed with the Securities and Exchange Commission
as Exhibit 3 to the Registrant's Annual Report
on Form 10-K for the year ended December 31,
1987 and incorporated herein by reference)
(4) Specimen of Common Stock
Certificate (filed as an exhibit
to the Company's Form 8-A filed with
the Securities and Exchange Commission on
April 25, 1980 and incorporated herein by
reference)
<PAGE 22>
(4.1) Form of Indenture between the Company
and the Bank of New York, as Trustee, with
respect to 9% Senior Notes due July 1, 2003
(filed as Exhibit 4(c) to Amendment No. 1
to the Company's Registration Statement on Form
S-2 (Registration No. 33-62168) and incorporated
herein by reference).
(4.2) Form of 9% Senior Notes due July 1, 2003
(included in Exhibit (4.1) hereto and incorporated
herein by reference).
(11) Statement regarding Computation of Earnings
per Share
(13) 1994 Annual Report to Shareholders
(21) Subsidiaries of International Shipholding
Corporation
(b) No reports on Form 8-K were filed during
the last quarter of the period covered
by this Report.
(c) The Index of Exhibits and required
Exhibits are included following the
signatures beginning at page 26 of this
Report.
<PAGE 23>
SIGNATURES
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this
report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNATIONAL SHIPHOLDING CORPORATION
(Registrant)
/S/ Gary L. Ferguson
March 24, 1995 By
______________________________
Gary L. Ferguson
Vice President and Chief
Financial Officer
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report
has been signed below by the following
persons on behalf of the registrant and in
the capacities and on the dates indicated.
INTERNATIONAL SHIPHOLDING CORPORATION
(Registrant)
/S/ Niels W. Johnsen
March 24, 1995 By
____________________________
Niels W. Johnsen
Chairman of the Board,
Director and Chief Executive
Officer
/S/ Erik F. Johnsen
March 24, 1995 By
_____________________________
Erik F. Johnsen
President and Director
<PAGE 24>
/S/ Harold S. Grehan, Jr.
March 24, 1995 By
_____________________________
Harold S. Grehan, Jr.
Vice President and Director
/S/ Laurance Eustis
March 24, 1995 By
__________________________
Laurance Eustis
Director
/S/ Edwin Lupberger
March 24, 1995 By
__________________________
Edwin Lupberger
Director
/S/ Raymond V. O'Brien, Jr.
March 24, 1995 By
___________________________
Raymond V. O'Brien, Jr.
Director
/S/ Niels M. Johnsen
March 24, 1995 By
___________________________
Niels M. Johnsen
Vice President and
Director
/S/ Edward K. Trowbridge
March 24, 1995 By
____________________________
Edward K. Trowbridge
Director
/S/ Erik L. Johnsen
March 24, 1995 By
____________________________
Erik L. Johnsen
Vice President and Director
<PAGE 25>
/S/ Gary L. Ferguson
March 24, 1995 By
____________________________
Gary L. Ferguson
Vice President and Chief
Financial Officer
/S/ Deanie E. Jones
March 24, 1995 By
_____________________________
Deanie E. Jones
Chief Accounting Officer
<PAGE 26>
INTERNATIONAL SHIPHOLDING CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number
<S> <C>
(3)Restated Certificate of Incorporation, as
amended, and as amended, and By-Laws of the
Registrant (filed with the Securities and
Exchange Commission as Exhibit 3 to the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987 and incorporated
herein by reference) --
(4)Specimen of Common Stock certificate (filed
as an exhibit to the Company's Form 8-A filed
with the Securities and Exchange Commission on
April 25, 1980 and incorporated herein by
reference) --
(4.1)Form of Indenture between the Company and the
Bank of New York, as Trustee, with respect
to 9% Senior Notes due July 1, 2003 (filed as
Exhibit 4(c) to Amendment No. 1 to the
Company's Registration Statement on Form S-2
(Registration No. 33-62168) and incorporated
herein by reference). --
(4.2)Form of 9% Senior Note due July 1, 2003
(included in Exhibit (4.1)) hereto and
incorporated herein by reference. --
(11)Statement Regarding Computation of Earnings
per Share --
(13)1994 Annual Report to Shareholders --
(22)Subsidiaries of International Shipholding
Corporation --
</TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
(All amounts in Thousands Except Share, Per
Share Data and Ratios)
The following summary of selected
consolidated financial data is not covered by
the auditors' report appearing elsewhere
herein. However, in the opinion of
management the summary of selected
consolidated financial data includes all
adjustments necessary for a fair
representation of each of the years
presented. This summary should be read in
conjunction with the consolidated financial
statements and the notes thereto appearing
elsewhere in this annual report.
<TABLE>
Year Ended December 31,
<CAPTION>
1994 1993 1992 1991 1990
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 342,333 $ 341,651 $ 324,608 $ 328,429 $ 327,453
Gross
Voyage
Profits $ 65,315 $ 64,318 $ 54,581 $ 61,303 $ 61,485
Income Before
Extraordinary
Item and
Cummulative
Effect of
Accounting
Change $ 13,051 $ 7,645 $ 6,499 $ 15,233 $ 15,065
Extraordinary
Item - $ (1,716) - - -
Cumulative
Effect of
Accounting
Change - - $ (3,218) - -
Net Income $ 13,051 $ 5,929 $ 3,281 $ 15,233 $ 15,065
Earnings
Per Common
and Common
Equivalent
Shares:
Before
Extraordinary
Item and
Cumulative
Effect of
Accounting
Change $ 2.44 $ 1.26 $ 0.96 $ 2.66 $ 2.62
Extraordinary
Item - $ (0.33) - - -
Cumulative
Effect of
Accounting
Change - - $ (0.63) - -
Net Income $ 2.44 $ 0.93 $ 0.33 $ 2.66 $ 2.62
Weighted
Average of
Common and
Common
Equivalent
Shares: 5,346,611 5,220,207 5,138,866 5,125,546 5,156,879
Total
Assets $ 547,091 $ 531,372 $ 519,963 $ 496,994 $ 473,582
Long-Term
Debt
(including
Capital Lease
Obligations)$ 251,944 $ 240,132 $ 231,148 $ 200,472 $ 208,048
Redeemable
Preferred
Stock - - $ 13,548 $ 13,290 $ 13,034
Common
Stockholders'
Investment $ 146,316 $ 134,497 $ 124,004 $ 123,408 $ 110,789
Ratio of
Long-Term
Debt and
Capital Lease
Obligations
to Common
Stockholders'
Investment 1.72:1 1.79:1 1.86:1 1.62:1 1.88:1
Working
Capital $ 16,819 $ 17,649 $ 7,920 $ 28,327 $ 11,933
Cash
Dividends
Per Common
Share $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20
</TABLE>
<PAGE 2>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's vessels are operated under
a variety of charters and contracts. The
nature of these arrangements is such that,
without a material variation in gross voyage
profits (total revenues less voyage expenses
and vessel and barge depreciation), the
revenues and expenses attributable to a
vessel deployed under one type of charter or
contract can differ substantially from those
attributable to the same vessel if deployed
under a different type of charter or
contract. Accordingly, depending on the mix
of charters or contracts in place during a
particular accounting period, the Company's
revenues and expenses can fluctuate
substantially from one period to another even
though the number of vessels deployed, the
number of voyages completed, the amount of
cargo carried and the gross voyage profit
derived from the vessel remain relatively
constant. As a result, fluctuations in
voyage revenues and expenses are not
necessarily indicative of trends in
profitability, and management believes that
gross voyage profit is a more appropriate
measure of operating performance than
revenues. Accordingly, the discussion below
addresses variations in gross voyage profits
rather than variations in revenues.
RESULTS OF OPERATIONS
Year ended December 31, 1994 Compared to Year
Ended December 31, 1993
GROSS VOYAGE PROFIT. Gross voyage
profit increased 1.6% to $65.3 million in
1994 as compared to $64.3 million in 1993.
Positively affecting 1994 results were
improved freight rates and increased volume
in the Company's Trans-Atlantic LASH liner
service. Also contributing to the increased
gross voyage profit in 1994 was the addition
in early fourth quarter of a newly built
vessel employed carrying molten sulphur under
a long-term contract with a major sulphur
producer. Results for 1994 also reflected
only 79 days out-of-service for drydocking,
an unusually low number, as compared to 292
days in 1993. Partially offsetting these
increases was reduced freight rates on the
Eastbound leg of the Company's LASH vessels
employed in liner service between ports on
the U.S. Gulf/U.S. Atlantic Coast and South
Asia (Trade Routes 18 and 17). Also
impacting 1994 results were scheduled
reductions in rates earned on some of the
Company's Military Sealift Command ("MSC")
charter operations, primarily reflecting
negotiated adjustments for three Roll-On/Roll-
Off vessels in consideration of fixing the
period of these charter for the full 25
years. Scheduled rate reductions were also
implemented upon the exercise of the first
option periods for two LASH vessels.
The Company currently charters nine
vessel to the MSC. During 1994, the MSC
exercised the first of two seventeen month
option periods which extend through mid 1995
on two of these vessels. MSC also exercised
the second of two seventeen month option
periods which extend into 1995 on two LASH
vessels. The initial charter period for a
breakbulk vessel which began in late 1993
will expire in 1995; however there are two
seventeen month option periods which may be
exercised by the MSC. A new charter with an
initial period of seventeen months with two
seventeen month option periods began in early
1995 for one of the Company's LASH vessels.
The three Roll-On/Roll-Off vessels on charter
to the Military Prepositioning Service are
fixed on MSC charters that will terminate in
the years 2009 and 2010.
Vessel and barge depreciation decreased
by 2.8% to $23.3 million during 1994 as
compared to $23.9 million in 1993 primarily
due to the life extension of two LASH vessels
which were purchased in 1994 upon the
termination of the capital lease of these
vessels. The reduction was partially offset
by amortization of costs associated with the
Company's barge refurbishment program and
costs associated with upgrade work on a
breakbulk vessel.
OTHER INCOME AND EXPENSES.
Administrative and general expenses decreased
3.0% to $27.4 million during 1994 as compared
to $28.2 million in 1993. This reduction
resulted primarily from the expensing in 1993
of approximately $1.0 million in costs that
related to a proposed acquisition that was
not consummated.
Interest expense increased to $21.7
million in 1994 as compared to $21.2 million
in 1993 primarily due to interest incurred on
the Company's $100 million, 9% Senior Notes
issued in July, 1993, interest incurred on
the financing of a molten sulphur carrier
that delivered in October 1994, and higher
interest rates on variable rate loans. This
increase was partially offset by regularly
scheduled debt payments of $37.1 million in
1994 and prepayment of $58.9 million of debt
during 1993 from the proceeds of the $100
million Senior Notes.
Investment income increased from $1.7
million in 1993 to $2.8 million in 1994.
This increase reflected higher interest rates
earned on invested funds and the recognition
of interest earned on a promissory note
related to the sale of an 18.5% interest in
A/S Havtor as further discussed below.
Additionally impacting the favorable variance
was a higher average balance of invested
funds during 1994.
The Company's equity in losses of
unconsolidated entities decreased from $2.3
million in 1993 to $0.1 million in 1994. The
loss in 1993 resulted primarily from the
Company's investment in A/S Havtor and A/S
Havtor Management, Norwegian companies in
which the Company had an interest. During
the first quarter 1993 the Company sold an
18.5% direct interest in A/S Havtor for $7.6
million, of which $2.8 million was received
in cash and $4.8 million was received in the
form of a promissory note. The transaction
reduced the Company's direct interest in A/S
Havtor to 14.8% and resulted in a gain after
taxes of approximately $.9 million. A
provision for doubtful accounts was recorded
in 1993 to reflect the deferral of the gain
until receipt of the proceeds from the
promissory note, which matures in mid-1996.
In the second quarter of 1994, A/S Havtor and
associated Norwegian companies merged with a
publicly listed company on the Oslo Stock
Exchange. This new public company, Havtor
AS,
<PAGE 3>
operates mainly Liquified Petroleum Gas (LPG)
carriers. In substitution for the A/S Havtor
stock held as collateral under the
aforementioned promissory note, shares of
Havtor AS were pledged. Due to the liquidity
and market value of these shares, deferral of
the gain was no longer necessary; therefore
during 1994 the related allowance was
reversed resulting in income after tax of
$900,000. Since the Company has no
substantive control or input regarding the
operations of Havtor AS or A/S Havtor
Management and its direct and indirect
ownership in each in below 20%, the
investments are accounted for under the cost
method of accounting which permits
recognition of income only upon distribution
of dividends or sale of interests.
Also contributing to the improved
results for the unconsolidated entities in
1994 as compared to 1993 was improved charter
rates on the two PROBO vessels in which the
Company has a 50% interest. This improvement
was partially offset by 14 days out-of-
service for one of the vessels for scheduled
drydocking in 1994.
INCOME TAXES. During 1994 the Company
provided $6.6 million for Federal income
taxes at the statutory rate of 35% for both
years 1994 and 1993. Income of
unconsolidated entities is shown net of
applicable taxes.
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT. During 1993 the
Company recognized an extraordinary loss of
$1.7 million, net of taxes, resulting from
prepayment penalties and the write-off of
deferred loan costs associated with the early
payment of high interest debt and the
redemption of preferred stock from the
proceeds of the Company's $100 million Senior
Notes issued in 1993. See Liquidity and
Capital Resources.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR
ENDED DECEMBER 31, 1992
GROSS VOYAGE PROFIT. Gross voyage
profit increased 11.7% to $64.3 million in
1993 as compared to $57.6 million in 1992.
Positively affecting 1993 results was the
deployment of the Jeb Stuart on charter to
the MSC beginning in late 1992. The vessel
had previously been deployed on less
favorable terms through May 1992 at which
time it was taken out of service for
drydocking and prepositioning to prepare for
the MSC charter. Additionally, gross voyage
profit was favorably affected by an improved
volume of cargo in the LASH Trans-Atlantic
service during 1993 as compared to 1992.
Offsetting these positive results were 99 out-
of-service days due to maintenance on one of
the Company's foreign flag bulk carriers.
Through mid 1993, the Company also operated a
Roll-On/Roll-Off vessel which had been
operated under a time charter to the MSC
since 1984. Upon expiration of this charter
in June 1993, the vessel had reached the end
of its economic useful life and was sold for
demolition at approximately net book value.
Vessel and barge depreciation increased
by 7.3% to $23.9 million during 1993 as
compared to $22.3 million in 1992 primarily
due to additions to the Company's LASH barge
fleet and capitalized costs associated with
the barge refurbishment program during 1992.
OTHER INCOME AND EXPENSES.
Administrative and general expenses increased
6.3% to $28.2 million during 1993 as compared
to $26.5 million in 1992. This increase
resulted primarily from the expensing of
approximately $1.0 million of costs that
related to a proposed acquisition that was
not consummated. Bonuses paid to employees
were higher in 1993 than 1992. These
increases were partially offset by reduced
costs in other areas stemming from continuing
cost reduction efforts throughout the
Company.
Interest expense decreased to $21.2
million in 1993 as compared to $21.7 million
in 1992, primarily because of lower interest
rates on variable rate loans, regularly
scheduled debt payments of $36.9 million, and
prepayment of $58.9 million of debt during
1993 from the proceeds of the Company's $100
million Senior Notes. This reduction was
partially offset by interest incurred on the
Senior Notes.
The Company's share of losses from
unconsolidated entities increased from $1.4
million in 1992 to $2.3 million in 1993,
primarily as a result of a weakened market
for the liquified petroleum gas carriers
owned and operated by A/S Havtor and A/S
Havtor Management.
INCOME TAXES. During 1993 the Company
provided $6.6 million for Federal income
taxes at the statutory rate of 35% as
compared to a provision of $4.4 at the
statutory rate of 34% during 1992.
OPERATING DIFFERENTIAL SUBSIDY.
For the years ended December 31, 1994,
1993 and 1992, the Company received aggregate
operating differential subsidy payments of
$21.7 million, $19.3 million and $19.7
million, respectively. The Company's subsidy
agreement expires on December 31, 1996 and
all other subsidy agreements with U.S. flag
operators expire on December 31, 1997. It is
not clear at this point whether the subsidies
will be renewed. If the subsidy program is
not renewed the Company will be required to
consider various options for its U.S. Flag
vessels receiving operating differential
subsidy, including vessel modifications that
would increase fuel efficiency, reduction of
crew size and wages to more closely
approximate those of non-subsidized vessels,
reduction of other operating expenses, and/or
transfer to foreign flag operations with
foreign crews.
LIQUIDITY AND CAPITAL RESOURCES
The following discussion should be read
in conjunction with the more detailed
Consolidated Balance Sheets and Consolidated
Statements of Cash Flows included elsewhere
herein as part of the Company's Consolidated
Financial Statements.
The Company's working capital decreased
from $17.6 million at December 31, 1993 to
$16.8 million at December 31, 1994 after
provision for current maturities of long-term
debt of $26.8 million and capital lease
obligations of $1.3 million. Cash and cash
equivalents increased during 1994 by $8.0
million to a total of $29.6 million.
Positive cash flows were achieved from
operating activities
<PAGE 4>
during 1994 in the amount of $58.8 million.
The major source of cash from operations was
net income, adjusted for noncash provisions
such as depreciation and amortization.
Net cash used for investing activities
amounted to $57.2 million during 1994.
Capital investments included $45.3 million
for the construction costs of a molten
sulphur carrier, $1.6 million for the
refurbishment of LASH barges, $2.2 million
for life extension work on a foreign flag
bulk carrier, $4.4 million for upgrades to
information systems and $3.5 million in other
miscellaneous items. Also the Company added
$6.6 million of deferred charge items,
primarily drydocking and vessel survey
expenditures. The Company received
approximately $12.2 million from the
liquidation of securities, $1.4 million from
its investments in unconsolidated entities
and $.7 million from sales of property. Net
cash used for other investing activities
amounted to $8.0 million and included $3.1
million placed in escrow for the purchase of
a coal carrier to be delivered in 1995. Also
included was $5.6 million of restricted
investments held as collateral for a letter
of credit related to the construction of 26
barges to be delivered in 1995.
Net cash provided by financing
activities amounted to $6.3 million.
Proceeds from the issuance of debt
obligations of $90.5 million included $43.4
million from Title XI financing for the
construction cost of a sulphur carrier
vessel. Also included was $32.2 million
drawn under interim construction financing
for this vessel which was repaid from the
proceeds of the Title XI loan, $5 million to
finance the purchase of two LASH vessels upon
the termination of their capital lease and
$10 million drawn under lines of credit.
These proceeds were partially offset by
regularly scheduled principal payments of
$37.1 million and $5.2 million to prepay a
portion of the Senior Notes issued in 1993.
Additionally $1.1 million was used to meet
common stock dividend requirements.
The Company's newly constructed molten
sulphur carrier delivered in the fourth
quarter of 1994. The vessel is employed
carrying molten sulphur from Louisiana and
Texas to the Westcoast of Florida under a
long-term contract with a major sulphur
producer. In early 1993 the Company had
received interim construction financing
through a pool of commercial banks on a
variable rate basis. Draws under the interim
financing totaled $8.7 million in 1993 and
$32.2 million in 1994. In October 1994 the
Company received $43.4 million from U.S.
Government Guaranteed Ship Financing Bonds to
cover the permanent fixed rate financing of
approximately 75% of the cost of the vessel.
The interim construction financing was repaid
from the proceeds of the permanent financing.
Two U.S. Flag LASH vessels operating in
the Company's LASH liner service had been
operating under leases since their delivery
from the builders in 1974. These leases
provided the Company with the option to
purchase the vessels at the termination of
the leases in October 1994. The Company
exercised its option to purchase these
vessels for fair market value of
approximately $6.2 million as determined by
an appraisal panel organized under the terms
of the lease. In late 1994 the Company
received medium-term financing in the amount
of $5 million on a variable rate basis to
cover a major portion of this purchase.
The Company has entered into a long-term
contract to provide ocean transportation
services to a major mining company producing
copper concentrates at its mine in West Irian
Jaya, Indonesia. The Company has acquired
two semi-submersible barge carrying vessels
and is having constructed 26 cargo barges to
be used with the aforementioned vessels. The
cost of these capital expenditures is
expected to approximate $70 million. The
Company will also charter or acquire a small
container vessel in order to fulfill the
requirements of the contract which is
expected to commence in late 1995. The
Company has arranged a major portion of the
financing cost of these acquisitions through
a long-term loan from commercial banks on a
variable rate basis.
The Company contracted, in October 1994,
to purchase a U.S. Flag Coal Carrier. The
vessel will be placed under long-term charter
to a major electric utility company to carry
part of its fuel supply. The ship will also
be used to carry coal and other bulk
commodities for account of other major
charters. The Company has arranged financing
with a commercial bank for a major portion of
the purchase price of the vessel but is also
considering alternative financing.
In the third quarter of 1988, the Board
of Directors declared a quarterly dividend of
$.05 per share and has continued quarterly
dividends in the same amount for each
quarterly period through the first quarter of
1995. The Board has expressed its intent to
continue to declare similar quarterly
dividends in the future, subject to the
ability of the Company's operating
subsidiaries to continue to achieve
satisfactory earnings. Dividends on common
stock at the current rate of $.05 per share
amount to approximately $1.1 million.
Management believes that normal
operations will provide sufficient working
capital and cash flows to meet debt service
and dividend requirements during the
foreseeable future.
During 1992, the Financial Accounting
Standards Board issued Statement No. 112
"Employers' Accounting for Postemployment
Benefits", which required adoption for fiscal
years ending after December 15, 1993. This
statement was adopted in 1994 and had no
material impact on the Company's financial
position or results of operations.
To meet short-term requirements when
fluctuations occur in working capital, the
Company has available three lines of credit
totaling $15 million, against which $10
million was drawn as of December 31, 1994.
This amount was repaid in early 1995.
Subsequent to year end, the Company entered
into a three year agreement with a commercial
bank for a $20 million revolving line of
credit for working capital and other general
corporate purposes.
The Company has not been notified that
it is a potentially responsible party in
connection with any environmental matters.
<PAGE 5>
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, December 31,
1994 1993
ASSETS ____________ _____________
( All Amounts In Thousands)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $29,611 $21,626
Marketable Securities 7,096 19,278
Accounts Receivable, Net of
Allowance for
Doubtful Accounts of $404
and $470 in 1994 and 1993,
Respectively:
Traffic 27,183 28,303
Agents' 10,087 8,346
Claims and Other 9,574 9,485
Net Investment in Direct
Financing Leases 2,186 2,257
Current Deferred Income Taxes -- 1,955
Other Current Assets 3,847 6,666
Material and Supplies Inventory,
At Cost 8,954 7,853
________ _______
Total Current Assets 98,538 105,769
________ _______
Investments In and Advances
to Unconsolidated Entities:
At Cost 13,152 12,971
At Equity 20,008 21,934
________ _______
33,160 34,905
________ _______
Net Investment in Direct
Financing Leases 26,588 28,775
________ _______
Vessels, Property and
Other Equipment, At Cost:
Vessels and Barges 484,354 432,429
Other Marine Equipment 3,999 3,842
Terminal Facilities 18,116 17,521
Land 2,317 2,317
Furniture and Equipment 14,071 9,676
_________ ________
522,857 465,785
Less - Accumulated Depreciation (214,395) (189,924)
_________ ________
308,462 275,861
_________ ________
Other Assets:
Deferred Charges in Process of
Amortization 30,613 41,992
Acquired Contract Costs, Net of
Accumulated Amortization of
$14,044 and $12,122 in 1994
and 1993, Respectively 24,185 26,781
Due from Related Parties, Net of
Allowance for Doubtful
Accounts of $0 and $1,385 in
1994 and 1993, Respectively 6,174 4,360
Other 19,371 12,929
_________ ________
80,343 86,062
_________ ________
$547,091 $531,372
======= =======
</TABLE>
[FN]
The accompanying notes are an integral part of these
statements.
<PAGE 6>
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
LIABILITIES AND STOCKHOLDERS'
INVESTMENT _______________ ___________
(All Amounts in Thousands
Except Per Share Data)
<S> <C> <C>
Current Liabilities:
Current Maturities of
Long-Term Debt $ 26,755 $ 25,879
Current Maturities of
Capital Lease Obligations 1,329 5,000
Accounts Payable and
Accrued Liabilities 53,061 57,581
Federal Income Tax Payable 260 --
Current Deferred Income Tax
Liability 314 --
Current Liabilities to be
Refinanced -- (340)
_________ ________
Total Current Liabilities 81,719 88,120
_________ ________
Current Liabilities to be
Refinanced -- 340
_________ ________
Billings in Excess of Income
Earned and Expenses Incurred 4,471 4,133
_________ ________
Long-Term Capital
Lease Obligations,
Less Current Maturities 21,092 27,020
_________ ________
Long-Term Debt,
Less Current Maturities 230,852 213,112
_________ ________
Reserves and Deferred Credits:
Deferred Income Taxes 39,414 40,151
Claims and Other 23,227 23,999
_________ ________
62,641 64,150
_________ ________
Stockholders' Investment:
Common Stock, $1.00 Par Value,
10,000,000 Shares
Authorized, 5,405,366
Shares Issued at December
31, 1994 and 1993 5,405 5,405
Additional Paid-in Capital 54,450 54,450
Retained Earnings 87,757 75,775
Less - 58,755 Shares of
Common Stock in
Treasury,at Cost, at
December 31, 1994 and 1993 (1,133) (1,133)
Unrealized Holding Loss
on Marketable Securities (163) --
________ ________
146,316 134,497
________ ________
$547,091 $531,372
======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these
statements.
<PAGE 7>
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(Amounts in Thousands Except Per Share Data)
Year Ended December 31,
1994 1993 1992
_________ _________ _________
<S> <C> <C> <C>
Revenues $320,585 $322,313 $304,872
Operating Differential Subsidy 21,748 19,338 19,736
_________ _________ _________
342,333 341,651 324,608
_________ _________ _________
Operating Expenses:
Voyage Expenses 253,729 253,386 244,711
Vessel and Barge Depreciation 23,289 23,947 22,316
_________ _________ _________
Gross Voyage Profit 65,315 64,318 57,581
Administrative and
General Expenses 27,371 28,206 26,540
Gain(Loss) on Sale of Assets (83) 374 (106)
_________ _________ _________
Operating Income 37,861 36,486 30,935
_________ _________ _________
Interest:
Interest Expense 21,650 21,245 21,679
Investment Income (2,826) (1,748) (1,135)
_________ _________ _________
18,824 19,497 20,544
_________ _________ _________
Other Income -- -- 2,059
_________ _________ _________
Unconsolidated Entities
(Net of Applicable Taxes):
Equity in Net Loss of
Unconsolidated Entities (124) (2,289) (1,421)
Gain on Sale of Equity Interests -- 900 --
Provision for Doubtful Accounts 900 (900) --
_________ _________ _________
776 (2,289) (1,421)
_________ _________ _________
Income Before Provision for
Income Taxes, Extraordinary
Item and Cumulative Effect
of Accounting Change 19,813 14,700 11,029
_________ _________ _________
Provision for Income Taxes:
Current 4,961 714 2,841
Deferred 1,621 5,851 1,562
State 180 490 127
_________ ________ ________
6,762 7,055 4,530
_________ ________ _________
Income Before Extraordinary
Item and Cumulative Effect
of Accounting Change $ 13,051 $ 7,645 $ 6,499
_________ _________ _________
Extraordinary Loss on Early
Extinguishment of Debt
(Net of Income Tax Benefit
of $924) -- (1,716) --
Cumulative Effect of Accounting
Change (Net of Income Tax
Benefit of $1,657) -- -- (3,218)
_________ _________ _________
Net Income $ 13,051 $ 5,929 $ 3,281
Less:
Preferred Stock Dividends -- 868 1,444
Accretion of Discount on
Preferred Stock -- 202 257
_________ _________ _________
Net Income Applicable to Common
and Common Equivalent Shares$ 13,051 $ 4,859 $ 1,580
======= ======== ========
Earnings Per Share:
Income Before Extraordinary
Loss and Cumulative Effect
of Accounting Change $ 2.44 $ 1.26 $ 0.96
Extraordinary Loss $ -- $ (0.33) $ --
Cumulative Effect of
Accounting Change $ -- $ -- $ (0.63)
-------- --------- ---------
Net Income $ 2.44 $ 0.93 $ 0.33
======== ======= ========
</TABLE>
[FN]
The accompanying notes are an integral part of these
statements.
<PAGE 8>
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
INVESTMENT
<CAPTION>
Additional Net
(All Amounts Common Paid-In Retained Treasury Unrealized
in Thousands Stock Capital Earnings Stock Holding Loss Total
Except Share Data)
________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1991 $4,978 $48,216 $71,347 $(1,133) $ -- $123,408
Net Income for
Year Ended
December 31, 1992 3,281 3,281
Preferred Stock
Dividends (1,444) (1,444)
Accretion of
Discount on
Preferred (257) (257)
Stock
Cash Dividends (984) (984)
________________________________________________________
Balance at
December 31, 1992 $4,978 $48,216 $71,943 $(1,133) $ -- $124,004
========================================================
Net Income
for Year Ended
December 31, 1993 5,929 5,929
Preferred Stock
Dividends (868) (868)
Accretion of
Discount on
Preferred Stock (202) (202)
Cash Dividends (1,027) (1,027)
Issurance of Stock,
427,500 Shares
Pursuant to Exercise
of Warrants 427 6,234 6,661
_______________________________________________________
Balance at
December 31, 1993 $5,405 $54,450 $ 75,775 $(1,133) $ -- $134,497
=======================================================
Net Income
for Year Ended
December 31, 1994 13,051 13,051
Cash Dividends (1,069) (1,069)
Unrealized Holding
Loss on
Marketable Securities,
Net of Deferred Taxes (163) (163)
________________________________________________________
Balance at
December 31, 1994 $5,405 $54,450 $ 87,757 $(1,133) $ (163) $146,316
========================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
<PAGE 9>
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended December 31,
1994 1993 1992
_______ _______ _______
(All Amounts in Thousands)
<S> <C> <C> <C>
Cash Flows from Operating
Activities:
Net Income $13,051 $5,929 $3,281
Adjustment to Reconcile
Net Income to Net Cash
Provided by Operating
Activities:
Depreciation 24,516 24,895 23,172
Amortization of
Deferred Charges and
Other Assets 17,105 19,785 19,043
Provision for Deferred
Income Taxes 1,568 5,851 1,562
Equity in Unconsolidated
Entities (776) 2,289 1,421
Loss (Gain) on Sale of Vessels
and Other Property 83 (374) 106
Extraordinary Loss -- 1,716 --
Cumulative Effect of
Accounting Change -- -- 3,218
Changes in:
Reserve for Claims and Other
Deferred Credits (772) (5,926) (4,919)
Net Investment in Direct
Financing Leases 2,258 2,314 2,140
Unearned Income 45 (6,431) 6,339
Other Assets 1,138 3,267 1,702
Accounts Receivable (466) (534) (1,673)
Inventories and
Other Current Assets 1,718 (1,551) 1,160
Accounts Payable and
Accrued Liabilities (634) 11,989 (2,293)
__________________________
Net Cash Provided by
Operating Activities 58,834 63,219 54,259
__________________________
Cash Flows from
Investing Activities:
Purchase of Vessels
and Other Property (56,977) (12,044)(60,963)
Additions to Deferred Charges (6,576) (24,251)(23,614)
Proceeds from Sale of
Vessels and Other Property 710 3,201 1,717
Proceeds from (Purchase of)
Short-Term Investments 12,182 (19,278) --
Investment in and Advances to
Unconsolidated Entities 1,447 377 (1,857)
Purchase of LITCO -- (1,606) --
Other Investing Activities (7,983) -- --
_________________________
Net Cash Used by
Investing Activities (57,197) (53,601)(84,717)
_________________________
Cash Flows from
Financing Activities:
Proceeds from Issuance of Debt
and Capital Lease Obligations 90,538 146,748 113,540
Reduction of Debt and Capital
Lease Obligations (83,121)(154,224) (87,612)
Preferred and Common
Stock Dividends Paid (1,069) (1,895) (2,428)
Proceeds from Issuance of
Common Stock -- 4,250 --
Redemption of Preferred Stock -- (13,750) --
_________________________
Net Cash Provided (Used)
by Financing Activities 6,348 (18,871) 23,500
_________________________
Net Increase (Decrease)
in Cash and Cash Equivalents 7,985 (9,253) (6,958)
Cash and Cash Equivalents
at Beginning of Year 21,626 30,879 37,837
_________________________
Cash and Cash Equivalents
at End of Year $29,611 $21,626 $30,879
======== ======= ========
</TABLE>
[FN]
The accompanying notes are an integral part of these
statements.
<PAGE 10>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
__________________
The accompanying financial statements
include the accounts of International
Shipholding Corporation and its consolidated
subsidiaries (the Company). All significant
intercompany accounts and transactions have
been eliminated.
The Company uses the cost method to
account for investments in entities in which
it holds less than a 20% voting interest and
in which the Company cannot exercise
significant influence over operating and
financial activities. The Company uses the
equity method to account for investments in
entities in which it holds a 20% to 50%
voting interest.
Certain reclassifications have been made
to the prior period financial information in
order to conform to current year
presentation.
Voyage Accounting
________________
Revenues and expenses relating to
voyages are recorded on the percentage-of-
completion method, except that provisions for
loss voyages are recorded when contracts for
the voyages are fixed or when losses become
apparent for voyages in progress.
Vessels and Other Property
_______________________
Costs of all major property additions
and betterments are capitalized. Ordinary
maintenance and repair costs are expensed as
incurred. Interest and finance costs
relating to vessels, barges and other
equipment under construction are capitalized
to properly reflect the cost of assets
acquired. Capitalized interest totaled
$1,763,000, $918,000 and $136,000 for the
years ended December 31, 1994, 1993, and
1992, respectively.
Assets under capital leases are recorded
on the balance sheet under the caption
Vessels, Property and Other Equipment (See
Note G).
For financial reporting purposes,
vessels are generally depreciated over their
estimated useful life of 25 years from
construction using the straight-line method.
As a result of major capital improvements
during 1990, 1991 and early 1992, the useful
lives of the Company's LASH vessels have been
extended from 25 to 30 years. In late 1994,
the Company purchased two previously leased
LASH vessels at fair market value. The
estimated useful lives from construction of
each of these vessels is 30 years. The two
pure car carriers are being depreciated over
estimated useful lives of 20 years. The
coal terminal is being depreciated over 22
years and the LITCO terminal is being
depreciated over 11 years. Other marine
equipment is being depreciated predominantly
over a four year period.
The Company groups all LASH barges into
pools with estimated useful lives
corresponding to the remaining useful lives
of the vessels with which they are utilized.
Major barge refurbishments are capitalized
and included in the aforementioned group of
barge pools. The estimated useful lives of
the pools have been extended through 2003 in
accordance with the extension of the vessel
lives. The Company refurbished a major
portion of these barges during 1990 through
1992 to allow utilization through 2003.
From time to time, the Company disposes
of barges in the ordinary course of business.
In these cases, proceeds from the disposition
are credited to the remaining net book value
of the respective pool and future
depreciation charges are adjusted
accordingly.
Income Taxes
____________
Deferred income taxes are provided on
items of income and expense which affect
taxable income in one period and financial
income in another.
Certain foreign operations are not
subject to income taxation under pertinent
provisions of the laws of the country of
incorporation or operation. However,
pursuant to existing U.S. Tax Laws, earnings
from certain foreign operations are subject
to U.S. income taxes (See Note D).
Foreign Currency Translation
________________________
All exchange adjustments are charged or
credited to income in the year incurred.
Exchange losses of $119,000, $359,000, and
$35,000 were recognized for the years ended
December 31, 1994, 1993 and 1992,
respectively.
Dividend Policy
_____________
The Board of Directors declared and paid
dividends of $.05 per share for each quarter
in 1994, 1993 and 1992. Subsequent to year
end a dividend of $.05 per common share was
declared to be paid in the first quarter of
1995. The payment of dividends is subject to
restrictions set forth in certain of the
Company's debt instruments. The Company paid
dividends on its common stock of $1,069,000,
$1,027,000, and $984,000 in 1994, 1993, and
1992, respectively. Such amounts did not
exceed restrictions set forth in these
agreements or its other debt instruments.
Net Income per Common Share
___________________________
Primary earnings per common share are
based on the weighted average number of
shares outstanding during the period after
consideration of the dilutive effect of stock
warrants based on the average market price of
common stock for the period. The primary
weighted average number of common shares
outstanding was 5,346,611, 5,220,207, and
5,138,866 for the years ended December 31,
1994, 1993 and 1992, respectively. Primary
and fully diluted weighted average common
shares outstanding were the same for each of
these years.
Operating Differential Subsidy Agreements
____________________________________
The Company operates a fleet of four
U.S. Flag vessels under an operating
differential subsidy ("ODS") agreement with
the U.S. Maritime Administration ("MarAd"),
an agency of the Department of Transportation
("DOT") under Title VI
<PAGE 11>
of the Merchant Marine Act of 1936, as
amended. Under this agreement, MarAd agrees
to pay the excess of certain vessel expenses
over comparable vessel expenses of principal
foreign competitors in each respective trade
route through the scheduled termination date
of December 31, 1996. These vessels are
employed in a liner service between ports on
the U.S. Gulf/U.S. Atlantic Coast and South
Asia (Trade Routes 18 and 17).
Traffic accounts receivable include
$3,080,000 and $3,486,000 due from MarAd
under these ODS agreements at December 31,
1994 and 1993, respectively. Subsidy
billings are based on rates furnished by
MarAd.
Self-Retention Insurance
____________________
Effective December 1, 1993, the Company
became self-insured for most Personal Injury
and Cargo claims under $ 1,000,000 and for
Hull claims under $2,500,000. The Company
maintains insurance for claims over the above
amounts and maintains Stop Loss insurance to
cover claims below $1,000,000 and $2,500,000.
Under the Stop Loss insurance, the Company is
responsible for all claims under $ 1,000,000
and $ 2,500,000 until the total amount of
claims between primary deductibles and the
above amounts reach $ 8,300,000 in the
aggregate per year. Primary deductibles are
$25,000 for Hull, Personal Injury and Cargo,
and $1,000 for LASH barges. After the
Company has retained $8,300,000 in the
aggregate, all additional claims are
recoverable from underwriters. From February
20, 1992 until December 1, 1993 the Company
was self-insured for most personal injury and
cargo claims under $250,000. Provisions for
losses are recorded based on the Company's
estimate of the eventual settlement costs.
The current and noncurrent portions of these
liabilities were $1,978,000 and $5,789,000 at
December 31, 1994, respectively.
NOTE B - LONG-TERM DEBT
<TABLE>
<CAPTION>
(All Amounts in Thousands)
December 31, Balance at December 31,
Description 1994 1993 Due 1994 1993
_______________ ______ ______ ____ ______ _____
<S> <C> <C> <C> <C> <C>
Unsecured
Senior Notes -
Fixed Rate 9.00% 9.00% 2003 $94,800 $100,000
Fixed Rate 8.25- 8.25- 1999- 67,707 82,374
Notes Payable 10.50% 10.50% 2002
Variable Rate 6.6875- 4.4946- 1994- 39,824 42,739
Notes Payable 7.75% 7.57% 1999
U.S. Government
Guaranteed Ship
Financing Notes
& Bonds - 6.58- 6.58- 2000- 55,276 13,878
Fixed Rate 8.30% 7.50% 2009
____________________
$257,607 $238,991
Less Current
Maturities (26,755) (25,879)
____________________
$230,852 $213,112
====================
</TABLE>
The aggregate principal payments
required for each of the next five years are
$26,755,000 in 1995, $38,685,000 in 1996,
$22,685,000 in 1997, $21,204,000 in 1998, and
$16,964,000 in 1999.
Certain of the vessels and barges owned
by the Company are mortgaged under certain
debt agreements. Additional collateral
includes a security interest in certain
operating contracts and receivables. Most of
these agreements, among other things, impose
minimum working capital and net worth
requirements, as defined, impose restrictions
on the payment of dividends (see Note A), and
prohibit the Company from incurring, without
prior written consent, additional debt or
lease obligations, except as defined. The
Company has consistently met the minimum
working capital and net worth requirements
during the period covered by the agreements
and is in compliance with these requirements
as of December 31, 1994.
Under the most restrictive of its credit
agreements, the Company cannot declare or pay
dividends unless (1) the total of (a) all
dividends paid, distributions on or other
payments made with respect to the Company's
capital stock during the period beginning
October 1, 1989 and ending on the date of
dividend declaration or other payment and (b)
all investments other than Qualified
Investments (as defined) of the Company and
certain designated subsidiaries will not
exceed the sum of $3,000,000 plus 50% (or,
in case of a loss, minus 100% ) of the
Company's consolidated net income during the
period described above plus the net cash
proceeds received from the issuance of common
stock by the Company during the above period,
and (2) no default or event of default has
occurred.
Certain loan agreements also restrict
the ability of the Company's subsidiaries to
make dividend payments, loans or advances,
the most restrictive of which contain
covenants that restrict payments of
dividends, loans or advances to the Company
from Central Gulf Lines, Inc., Waterman
Steamship Corporation and Sulphur Carriers,
Inc. unless certain financial ratios are
maintained. As long as those ratios are
maintained, there is no restriction on loans
or advances to the Company from those
subsidiaries; however, dividends generally
are restricted to 40% of the most recent four
quarters' net income of Central Gulf Lines,
Inc. and Waterman Steamship Corporation.
Dividends of Sulphur Carriers, Inc. are
restricted to 40% of undistributed earnings.
The amounts of restricted assets as of
December 31, were as follows:
<TABLE>
<CAPTION>
(In Thousands)
1994 1993
_________________
<S> <C> <C>
New Combo, Inc. $ 415 $ 313
Allied Ocean Carriers, Inc. 0 837
Cypress Auto Carriers, Inc. 8,625 0
Sulphur Carriers, Inc. 21,588 5,965
Waterman Steamship Corp. 69,674 53,345
Central Gulf Lines, Inc. 69,141 49,701
__________________
$169,443 $110,161
==================
</TABLE>
<PAGE 12>
The Company has available three lines of
credit totaling $15,000,000. Two of these
lines of credit were fully drawn as of
December 31, 1994 for an amount totaling
$10,000,000. This amount was repaid in early
1995. These lines of credit are used to meet
short-term requirements when fluctuations
occur in working capital. The Company is
required to maintain a $375,000 compensating
balance for one of the lines of credit.
This balance is included in Cash and Cash
Equivalents. Subsequent to year end, the
Company entered into a three year agreement
with a commercial bank for a $20,000,000
revolving line of credit. The amount
avilable under this facility decreases to
$10,000,000 in the third year. This line of
credit is currently undrawn.
Under certain of the above described
loan agreements, deposits are made into bank
retention accounts to meet the requirements
of the applicable agreements. At December
31, 1994, these escrowed amounts totaled
$21,021,000 of which $1,000,000 was included
in Cash and Other Cash Equivalents,
$7,096,000 in Marketable Securities, and
$12,925,000 in Other Assets. At December 31,
1993, escrowed amounts, which were included
in Cash and Other Cash Equivalents, totaled
$5,733,000.
Subsequent to year end, the Company
obtained medium term, variable rate financing
from a commercial bank in the amount of
$12,000,000 for general corporate purposes.
NOTE C - PENSION PLAN AND POSTRETIREMENT
BENEFITS
The Company's retirement plan covers all
full-time employees of domestic subsidiaries
who are not otherwise covered under union-
sponsored plans. The benefits are based on
years of service and the employee's
compensation during the last five years of
employment. The Company's funding policy is
based on minimum contributions required under
ERISA as determined through an actuarial
computation. Plan assets consist primarily
of investments in certain bank common trust
funds of trust quality assets and money
market holdings.
The following table sets forth the
plan's funded status and pension costs
recognized by the Company at December 31,
1994 and 1993.
<TABLE>
<CAPTION>
Actuarial Present Value of Benefit Obligations:
December 31,December 31,
1994 1993
______________________
(All Amounts in Thousands)
<S> <C> <C>
Vested Benefit Obligation $ (8,658) $ (7,914)
======================
Accumulated Benefit Obligation $ (8,784) $ (8,060)
======================
Projected Benefit Obligation $ (9,805) $ (9,320)
Plan Assets at Fair Value 10,172 10,125
----------------------
Projected Benefit Obligation
Less Than Plan Assets 367 805
Unrecognized Net Gain (373) (877)
Prior Service Cost Not Yet
Recognized in Net Periodic
Pension Cost (184) 106
Unrecognized Net Obligation
Being Recognized Over 15 Years 446 520
______________________
Accrued Pension Asset $ 256 $ 554
======================
</TABLE>
<TABLE>
<CAPTION>
Net Periodic Pension Cost:
1994 1993 1992
_____ _____ ____
<S> <C> <C> <C>
Service Cost $469 $396 $387
Interest Cost on Projected Benefit
Obligation 701 630 589
Actual Return on Plan Assets 150(1,033) (293)
Net Amortization and Deferral (922) 343 (362)
----- ----- -----
Net Periodic Pension Cost $ 398 $ 336 $ 321
===== ===== =====
</TABLE>
Actuarial assumptions used to develop
the components of pension expense for the
years ended December 31, 1994, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------
<S> <C> <C> <C>
Discount Rate 8.0% 7.5% 8.0%
Rate of Increase in
Future Compensation
Levels 6.0% 6.0% 6.0%
Expected Long-term Rate
of Return on Assets 8.5% 8.5% 8.5%
</TABLE>
Crew members on the Company's U.S. flag
vessels belong to union-sponsored pension
plans. The Company contributed approximately
$2,106,000, $2,495,000 and $2,248,000 to
these plans for the years ended December 31,
1994, 1993 and 1992, respectively. These
contributions are in accordance with
provisions of negotiated labor contracts and
generally are based on the amount of straight
pay received by the union members.
Information from the plans' administrators is
not available to permit the Company to
determine whether there may be unfunded
vested benefits.
In December 1990, the Financial
Accounting Standards Board issued Statement
No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions".
This new standard requires that the expected
cost of these benefits must be charged to
expense during the years that the employees
render service and must be adopted for fiscal
years beginning after December 15, 1992.
The Company elected early implementation
effective January 1, 1992 which has resulted
in a cumulative adjustment for years prior to
1992 of $4,875,000 (with a tax benefit of
$1,657,000) and has been reported as a
cumulative effect of a change in accounting
principle in 1992. This negative impact of
$3,218,000 on 1992 reported financial
position and results of operations resulted
from the significant change in the Company's
previous policy of recognizing these benefit
costs on a cash basis rather than when
service is rendered.
The Company's postretirement benefit
plans currently provide medical, dental and
life insurance benefits to eligible retired
employees and their eligible dependents. The
following table sets forth the plans'
combined funded status reconciled with the
amount included in the Company's balance
sheet classification Reserves and Deferred
Credits at December 31, 1994 and 1993 (All
Amounts in Thousands):
<TABLE>
<CAPTION>
Accumulated Postretirement Benefit Obligation:
1994 1993
______ ______
<S> <C> <C>
Retirees $(3,594) $(3,626)
Fully eligible active plan
participants (1,345) (1,406)
Other active plan participants (1,405) (1,467)
_______ ______
(6,344) (6,499)
Plan Assets at Fair Value __ __
------- ------
Accumulated Postretirement Benefit
Obligation in Excess of Plan Assets (6,344) (6,499)
Unrecognized Experience Gain 799 --
Prior Service Cost not yet
recognized in expense -- 1,250
______ ______
Accrued Postretirement Benefit
Cost in the Balance Sheet (5,545) (5,249)
====== ======
</TABLE>
<PAGE 13>
<TABLE>
<CAPTION>
Net postretirement benefit cost includes the following
components:
1994 1993
_______ ______
<S> <C> <C>
Service Cost $ 107 $ 10
Interest Cost on Accumulated
Postretirement Benefit Obligation 464 445
Net Amortization 71 --
_______ ______
Net Postretirement Benefit Cost $ 642 $ 455
======= ======
</TABLE>
The accumulated postretirement benefit
obligation was computed using an assumed
discount rate of 8.0%. The health care cost
trend rate was assumed to be 14% for 1994
through 1995, then the trend rate was assumed
to decline until the year 2002 at which time
the rate remains 5.0%. The dental care cost
trend rate was assumed to be 8.0% for years
1994 through 1995, then the trend rate was
assumed to decline until the year 2002 at
which time the rate remains 5.0%.
If the health and dental care cost trend
rate were increased one percent for all
future years, the accumulated postretirement
benefit obligation as of December 31, 1994
would have increased approximately
$523,000 or 8%. The effect of this change in
the net postretirement benefit cost for 1994
would have been an increase of approximately
$113,000 or 18%.
The Company continues to evaluate ways
in which it can better manage these benefits
and control the costs. Any changes in the
plan or revisions to assumptions that affect
the amount of expected future benefits may
have a significant effect on the amount of
the reported obligation and annual expense.
In November 1992, the Financial
Accounting Standards Board issued Statement
112, "Employers' Accounting for
Postemployment Benefits", which requires
adoption for fiscal years beginning after
December 15, 1993. The new standard requires
an obligation to be recorded if the following
four conditions are met: (1) the obligation
is attributable to employees' services
already rendered, (2) employees' rights to
those benefits accumulate or vest, (3)
payment of the benefit is probable and (4)
the amount of the benefit can be reasonably
estimated. This is a change from the
Company's current policy of recognizing these
costs on a cash basis. Adoption did not have
a material impact on the Company's financial
position or results of operations.
NOTE D - INCOME TAXES
The Federal income tax returns of the
Company are filed on a consolidated basis and
include the results of operations of its
wholly-owned U.S. subsidiaries. Pursuant to
the Tax Reform Act of 1986, the earnings of
foreign subsidiaries ($4,147,420 in 1994,
$11,904 in 1993 and $43,425 in 1992) are also
included.
Prior to 1987, deferred income taxes
were not provided on undistributed foreign
earnings of $6,689,245, all of which are
expected to remain invested indefinitely. In
accordance with the Tax Reform Act of 1986,
commencing in 1987 earnings generated from
profitable controlled foreign subsidiaries
are subject to Federal income taxes.
In February 1992, the Financial
Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", which
superseded accounting standards for income
taxes which the Company adopted in 1988. The
Company adopted Statement No. 109 effective
January 1, 1993 and adoption had no impact on
the Company's financial position or results
of operations.
<TABLE>
Components of the net deferred tax liability/(asset)
are as follows:
<CAPTION>
December 31, December 31,
1994 1993
----------- ------------
(All Amounts in Thousands)
<S> <C> <C>
Gross Liabilities:
Fixed Assets $35,036 $33,102
Deferred Charges 5,234 9,465
Unterminated
voyage revenue/
expense 2,047 2,603
Intangible Assets 8,465 9,373
Other liabilities 11,747 6,812
Gross Assets:
Insurance and
claims reserve (5,394) (4,876)
Net operating loss
carryforward/
unutilized
deficit (6,752) (9,509)
Valuation allowance 879 879
Other assets (11,534) (9,653)
------------- ------------
Total deferred
tax
liability,
net $ 39,728 $38,196
====== ======
</TABLE>
Deferred tax liability increased during
1994 due to the recognition of the deferred
federal income tax expense of $1,621,000 and
a deferred tax benefit of $89,000 due to an
unrealized holding loss on marketable
securities.
The following is a reconciliation of the
U. S. statutory tax rate to the Company's
effective tax rate for the years ended
December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Year Ended December 31,
_______________________________
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Statutory Rate 35.0% 35.0% 34.0%
State Income Taxes .9% 3.3% 1.2%
Goodwill Amortization -- -- 1.8%
(Income) Loss of
Unconsolidated
Entities (1.6%) 5.1% 3.0%
Tax Rate Adjustment -- 5.2% --
Other (.2%) (.6%) 1.1%
--------- --------- ---------
34.1% 48.0% 41.1%
===== ===== =====
</TABLE>
The Company has available at December
31, 1994, unused operating loss carryforwards
of $ 18.9 million and unused foreign deficits
of $.3 million. The operating loss
carryforwards will expire in 2001.
NOTE E - TRANSACTIONS WITH RELATED PARTIES
The Company was a party to agreements
with certain corporations controlled by
members of the Company's management to
charter 39 river barges owned by such
corporations for use in the Company's
domestic and international operations. The
Company paid $440,000 for the period ended
April 30, 1993 and $1,342,000 for the year
ended 1992 in barge rentals under the
agreements. The Company purchased these
barges for $1.6 million in the aggregate in
May of 1993.
During 1990, the Company sold one if its
subsidiaries to a former employee at a sales
price of $500,000. Collections on this
receivable were $101,000, and $92,000 in
1993
<PAGE 14>
and 1992, respectively. At the end of 1993,
the Company sold another subsidiary to the
same party for a sales price of $692,000.
The receivables due from this related party
were combined and totaled $665,000 and
$965,000 at December 31, 1994 and 1993,
respectively. Collections on the total
receivable were $300,000 for the year ended
December 31, 1994. This receivable is for a
period of ten years and bears interest at the
rate of 10% for the first five years and a
variable rate of LIBOR plus 2% thereafter.
During 1992, the Company sold one of its
subsidiaries to a former employee at a sales
price of $250,000. No material gain or loss
was recognized on this transaction.
Since the Company's inception, the legal
firm of Jones, Walker, Waechter, Poitevent,
Carrere and Denegre has been utilized for
various legal services. During 1992, a son of
the President of the Company became a partner
of the firm. The Company made payments to
the firm totaling approximately $1,525,000,
$1,781,000 and $1,851,000 for the years
ending December 31, 1994, 1993, and 1992,
respectively.
Combined amounts due to related parties
associated with the above listed transactions
were $78,000 and $43,000 at December 31, 1994
and 1993, respectively and were included in
Accounts Payable and Accrued Liabilities.
Combined amounts due from related parties
associated with the above listed transactions
were $ 665,000 and $965,000 at December 31,
1994 and 1993, respectively and were included
in Due From Related Parties. The total
amount in Due From Related Parties at
December 31, 1994 also included a receivable
in the amount of $5,509,000. At December 31,
1993, this same receivable was included in
Due from Related parties at $4,780,000, net
of an allowance of $1,385,000 as further
discussed in Note K.
NOTE F - COMMITMENTS AND CONTINGENCIES
During 1994, the Company entered into a
long-term contract to provide ocean
transportation services to a major mining
company. The Company has purchased and will
convert two semi-submersible barge carrying
vessels and will have 26 cargo barges built
to be used with the aforementioned vessels.
The cost of these capital expenditures is
expected to approximate $70 million. The
Company will also charter or acquire a small
container vessel in order to fulfill the
requirements of the contract which is
expected to commence in late 1995. The
Company anticipates financing a major portion
of the cost of these acquisitions through
medium to long term loans from commercial
banks.
The Company contracted, in October 1994,
to purchase a U. S. Flag Coal Carrier. The
vessel will be placed under long-term charter
to a major electric utility company to carry
part of its fuel supply. The ship will also
be used to carry coal and other bulk
commodities for account of other major
charterers. The Company has arranged
financing with a commercial bank for a major
portion of the purchase price of the vessel
but is also considering alternative
financing.
As of December 31, 1994, 18 vessels that
the Company owns or operates were under
various contracts extending beyond 1994 and
expiring at various dates through 2010. In
addition the Company also operates 111 jumbo
river barges, 14 towboats and certain
terminal tranfer equipment under a contract
which expires in 2004. Certain of these
agreements also contain options to extend the
contracts beyond their minimum terms.
The Company acts as a 10% guarantor for
repayment of funds borrowed by a limited
partnership in which the Company holds a 10%
interest as further discussed in Note K. The
Company's share of the guarantee is
approximately $3,500,000.
The Company also maintains a $600,000
line of credit to cover standby letters of
credit for membership in various shipping
conferences.
The Company has an agreement with the
Seamen's Church Institute of New York and New
Jersey to aid in paying the cost of a new
building. The Company is committed to
contribute annual installments of $60,000
through 1995.
NOTE G - LEASES
In 1988, the Company entered into direct
financing leases of two foreign flag pure car
carriers expiring in the year 2000. The
schedule of future minimum rentals to be
received under these direct financing leases
in effect at December 31, 1994 is as follows:
<TABLE>
<CAPTION>
Receivables Under
(All Amounts in Thousands) Financing Leases
--------------------
<S> <C>
Year Ended December 31,
1995 $ 5,668
1996 5,328
1997 4,972
1998 4,621
1999 4,265
Thereafter 1,313
--------------
Total Minimum Lease Payments Receivable 26,167
Estimated Residual Values of
Leased Properties 18,000
Less Unearned Income (15,393)
--------------
Total Net Investment in Direct
Financing Leases 28,774
Current Portion (2,186)
--------------
Long-term Net Investment in Direct
Financing Leases at
December 31, 1994 $26,588
==============
</TABLE>
The Company was also a party to a
capital lease agreement for two LASH vessels.
The term of the lease was twenty years and
expired in the Fourth Quarter of 1994. The
Company purchased these previously leased
capital assets at their fair market value.
The Company entered into sale-leaseback
agreements in 1991 and 1992 for a group of
the Company's LASH barges. These leases meet
the required criteria for a capital lease and
are accounted for as such. The terms of the
leases are 12 years.
The aforementioned capital leases are
included in Vessels, Property and Other
Equipment as follows:
<TABLE>
<CAPTION>
(All Amounts in Thousands) 1994 1993
_______ _______
<S> <C> <C>
Vessels and LASH barges $24,950 $45,779
Less Accumulated
Depreciation 6,134 17,341
_______ _______
Total $18,816 $28,438
======= =======
</TABLE>
<PAGE 15>
The following is a schedule, by year, of
future minimum lease payments under capital
leases, together with the present value of
the minimum payments as of December 31, 1994:
<TABLE>
<CAPTION>
Payments Under
(All Amounts in Thousands) Capital Leases
Year Ended December 31, ______________
<S> <C>
1995 $ 3,705
1996 3,705
1997 4,061
1998 4,450
1999 4,521
Thereafter 15,166
_________
$ 35,608
Less -
Amount Representing Interest (13,187)
_________
Present Value of Future Minimum
Payments (Based on a Weighted
Average of 10.39%) $ 22,421
=========
</TABLE>
The following is a schedule, by year, of
future minimum payments required under
operating leases that have initial or
remaining non-cancellable terms in excess of
one year as of December 31, 1994:
<TABLE>
<CAPTION>
Payments Under
(All Amounts in Thousands) Operating Leases
Year Ended December 31, _______________
<S> <C>
1995 $ 2,453
1996 2,238
1997 2,133
1998 1,386
1999 489
Thereafter 1,827
________
Total Future Minimum Payments $ 10,526
========
</TABLE>
NOTE H - DEFERRED CHARGES AND ACQUIRED CONTRACT COSTS
The Company defers certain costs related
to the acquisition of vessel operating
contracts, the cost of placing vessels in
service, and the drydocking of vessels. The
costs of acquiring vessel operating
contracts and vessel prepositioning are
amortized over the applicable contract
periods. Deferred drydocking costs are
amortized over the period between drydockings
(generally two to five years). Financing
charges are amortized over the life of the
applicable debt involved. Deferred costs are
comprised of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
(All Amounts in Thousands) 1994 1993
------------------------
<S> <C> <C>
Drydocking $21,695 $32,722
Prepositioning 774 832
Financing Charges and Other 8,145 8,438
________________________
$30,614 $41,992
========================
</TABLE>
The Company amortizes acquired contract
costs over the contracts' useful lives using
the straight-line method of amortization.
The acquired contract cost represents the
portion of the purchase price paid for
Waterman Steamship Corporation applicable
primarily to that company's maritime
prepositioning ship contracts and operating
differential subsidy agreements. These costs
are being amortized over useful lives ranging
from seven to twenty-one years from the
acquisition date.
NOTE I - SIGNIFICANT OPERATIONS
The Company has several medium to long-
term contracts related to the operations of
various vessels (See Note F), from which
revenues represent a significant amount of
the Company's total revenue. Revenues from
the contracts with the United States Military
Sealift Command were $75,137,000,
$82,239,000, and $68,222,000 for the years
ended December 31, 1994, 1993 and 1992,
respectively. Additionally, the Company
operates four U.S. Flag LASH vessels on
subsidized liner service between the U.S.
Gulf and South Asia (Trade Routes 18 and 17).
Revenues, including ODS, from this operation
were $137,021,000, $143,811,000 and
$140,671,000 for the years ended December 31,
1994, 1993 and 1992, respectively.
A significant portion of the Company's
traffic receivables are due from contracts
with the U. S. Military Sealift Command and
transportation of government sponsored cargo.
There are no other concentrations of
receivables from customers or geographic
regions that exceed 10% of stockholders'
investment at December 31, 1994 or 1993.
NOTE J - REDEEMABLE PREFERRED STOCK
In 1987 and 1989, the Company issued
85,000 and 25,000 shares, respectively, of
cumulative redeemable preferred stock,
together with warrants to purchase shares of
common stock. The coupon rate and warrants
were adjustable under certain conditions. As
of 1993, the coupon rate on the preferred
stock ranged from 8.822% to 10.898%, and the
number of shares of common stock purchasable
under the warrants totaled 427,500.
During 1993, the Company redeemed the
remaining preferred stock outstanding of
$13.750 million at a total redemption cost
including accrued interest and prepayment
penalties of $14.178 million. The warrant
holders exercised their rights under the
warrants to purchase the 427,500 shares of
common stock at an exercise price of $10.12
per share.
NOTE K - UNCONSOLIDATED ENTITIES
As of December 31, 1993, the Company
held a 14.8% interest in A/S Havtor, a
Norwegian company that managed and chartered-
out vessels specializing in the
transportation of liquid petroleum gas and
various chemical products. The Company also
held a 14.2% equity interest in A/S Havtor
Management, a Norwegian ship management
company affiliated with A/S Havtor. During
1994 A/S Havtor, certain associated
companies, and a portion of A/S Havtor
Management were merged into a publicly listed
company, Havtor AS. The Company's interest
in Havtor AS at December 31, 1994, which
approximated 9%, had a market value of
approximately $21,200,000. The carrying
value of the Company's investment in Havtor AS
approximated $7,700,000 as of the same date.
No earnings have been distributed from Havtor
AS since the merger. As of December 31, 1994,
the Company held a 14.2% interest in A/S Havtor
Management which had a market value of
approximately $6,300,000. The Company's
investment in A/S Havtor Management as of the
same date was approximately $3,200,000. It
is anticipated that A/S Havtor Management
will merge with Havtor AS during 1995 or
1996. No dividends were received from A/S
Havtor Management during 1994, 1993 or 1992.
Since the Company has no substantive control
or input regarding the operations of Havtor
AS or A/S Havtor Management and its direct
and indirect ownership in both is below 20%,
the investments are accounted for under the
cost method of accounting which permits
recognition of income only upon distribution
of dividends or sale of interests.
At December 31, 1992, the Company held a
one-third interest in A/S Havtor. During the
first quarter of 1993, the company sold an
18.5% direct interest in A/S Havtor for
approximately $7,557,000, of which $2,777,000
was received in cash and $4,780,000 was
received in the form of a promissory note.
The transaction reduced the Company's direct
interest in A/S Havtor to 14.8% and resulted
in an after tax gain of approximately
$900,000. A provision for doubtful accounts
was recorded in 1993 to reflect the deferral
of the gain until receipt of the proceeds
from the promissory note, which matures in
mid-1996. In substitution for the A/S Havtor
stock held as collateral under this
promissory note, shares in the publicly
traded Havtor AS were pledged during 1994
due to the aforementioned merger. These shares
which represent a 3.6% interest in Havtor AS,
had a market value of approximately $8,600,000
as of December 31, 1994. The carrying amount
of the related note receivable and the accrued
interest as of the same date was approximately
$5,500,000. Due to the liquidity and market
value of these shares, deferral of the gain
was no longer necessary and therefore during
1993 the related allowance was reversed resulting
in income after tax of $900,000.
Following is a summary of combined
financial data of A/S Havtor and A/S Havtor
Management for the twelve months ended
September 30, 1992:
<TABLE>
<CAPTION>
(All Amounts in Thousands)
<S> <C>
Gross Revenues/Equity in
Losses of Investees $ (4,215)
Gross Loss $ (7,266)
Net Loss $ (5,487)
</TABLE>
At December 31, 1994, the Company held a
50% interest in a foreign entity, Bulkowner's
1984 which was formed to construct and own
two combination dry cargo/petroleum products,
PROBO vessels, which delivered in 1989. The
Company's investment in ($9,802,000) and
advances to ($11,556,000) Bulkowner's 1984
approximated $21,358,000 at December 31,
1994. At December 31, 1992, the Company held
a 39% equity interest in Bulkowner's 1984.
During 1993 the Company reacquired an 11%
interest which had been sold in 1991. This
additional interest was acquired for
approximately $6,359,000 of which $3,463,000
was a cash payment and $2,896,000 was paid
through cancellation of notes receivable due
from the sellers that previously had been
delivered to the Company as partial
consideration for the 1991 sale.
Following is a summary of unaudited financial data of
Bulkowner's 1984:
<TABLE>
<CAPTION>
(All Amounts in Thousands) 1994 1993
________ _________
<S> <C> <C>
Current Assets $ 27,385 $ 23,048
Non-current Assets 42,577 45,497
_________ _________
Total Assets $ 69,962 $ 68,545
Current Liabilities $ 325 $ 2,785
Non-current Liabilities 63,978 59,226
Equity 5,659 6,534
________ ________
Total Liabilities
and Shareholder's Equity $ 69,962 $ 68,545
========= =========
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
October 31,
1994 1993 1992
_______ _______ ______
<S> <C> <C> <C>
Gross Revenues $9,052 $8,809 $8,252
Gross Profit $4,132 $3,919 $2,792
Net Income $1,840 $1,126 $ 33
</TABLE>
During 1990, the Company agreed to
participate in a limited partnership (10%
interest) with certain Norwegian interests to
construct and own a Liquified Petroleum Gas
(LPG) carrier which was delivered in April
1993. The Company has contributed $2,271,000
in equity funds as of December 31, 1994. The
Company is also acting as a 10% guarantor for
repayment of funds borrowed to construct the
LPG carrier. The Company's share of the
guarantee is approximately $3,500,000.
The Company has a 50% interest in a
foreign entity, Marco Shipping Company,
(PTE.) Ltd. ("Marco"), which acts in an agent
capacity on behalf of the Company. The
Company's investment in Marco at December 31,
1994 had been fully written-off through the
recognition of losses generated from the
entity.
During 1993, the Company purchased the
remaining 50% interest in a LASH barge
intermodal company ("LITCO") for $1,900,000.
The acquisition was accounted for as a
purchase and the results of LITCO have been
included in the accompanying consolidated
financial statements since
<PAGE 17>
the date of acquisition. The cost of the
acquisition has been allocated on the basis
of the estimated fair market value of assets
acquired and the liabilities assumed. This
allocation results in goodwill of
approximately $324,000 which is being
amortized over 10 years.
Income of foreign unconsolidated
entities is recorded net of applicable taxes
of approximately $32,000 in 1994. In 1993
and 1992, losses from unconsolidated entities
are recorded net of applicable tax benefits
of approximately $1,405,000 and $701,000,
respectively.
NOTE L - CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
(All Amounts in Thousands) 1994 1993 1992
_______ _______ ______
<S> <C> <C> <C>
Non-Cash Investing
and Financing Activities:
Accounts Payable
to be Refinanced $ 0 $ 340 $ 6,344
Cash Payments:
Interest Paid Net
of Capitalized
Interest 23,537 20,510 20,005
Taxes Paid 2,982 3,087 4,596
</TABLE>
As discussed in Note K, during 1993 the
Company reacquired an 11% interest in a
foreign entity, Bulkowner's 1984. Notes
receivable from the sellers in the amount of
$2,896,000 were canceled as a part of the
purchase price. The Company also sold an
interest in A/S Havtor in 1993 for $7,557,000
of which $2,777,000 was received in cash and
$4,780,000 in the form of a promissory note
which is included in Other Assets: Due from
Related Parties.
For purposes of the accompanying
statement of cash flows, the Company
considers highly liquid debt instruments
purchased with a maturity of three months or
less to be cash equivalents.
NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS
AND DERIVATIVES
The following methods and assumptions
were used to estimate the fair value of each
class of financial instruments for which it
is practicable to estimate that value:
CASH AND CASH EQUIVALENTS AND MARKETABLE
SECURITIES
The carrying amount approximates fair
value for each of these instruments.
INTEREST RATE CONVERSION AGREEMENTS
The Company has only limited involvement
with derivative financial instruments. They
are used to manage well-defined interest rate
risks and are not used for trading purposes.
During 1993 the Company entered into interest
rate conversion agreements with two
commercial banks to reduce the possible
impact of higher rates in the long-term
market by utilizing potentially lower rates
in the short-term market. The floating rate
payor is the Company, and the commercial
banks are the fixed rate payors. The
floating rate and fixed rates at December 31,
1994 were 5.125% and 4.72%, respectively.
The contract amounts totaled $100,000,000 at
December 31, 1994 and will expire August
1996. The Company received payments under
these agreements totaling $1,146,000 during
1994. A payment of $237,000 was made under
the agreements in early 1995. Net receipts
or payments under the agreements are
recognized as an adjustment to interest
expense. The fair value of interest rate
swaps is the estimated amount that the bank
would receive or pay to terminate the swap
agreements at the reporting date, taking into
account current market conditions and
interest rates.
FOREIGN CURRENCY CONTRACTS
The Company enters into forward exchange
contracts to hedge certain firm purchase and
sale commitments denominated in foreign
currencies. The term of the currency
derivatives is rarely more than one year.
The purpose of the Company's foreign currency
hedging activities is to protect the Company
from the risk that the eventual dollar cash
inflows or outflows resulting from revenue
collections from foreign customers and
purchases from foreign suppliers will be
adversely affect by changes in exchange
rates. As of December 31, 1994 the Company
had entered into various forward purchase
contracts for Singapore Dollars totaling
$24,048,000 U.S. Dollar equivalents to hedge
against future payments due to Singapore
shipyards for conversion work on two float-
on/float-off vessels and drydocking cost of a
bulk carrier. Gains or losses on forward
exchange contracts which hedge exposures on
firm foreign currency commitments are
deferred and recognized as adjustments to the
bases of those assets. As of December 31,
1994 the Company was also a party to forward
sales contracts in various currencies
totaling $1,175,000 U.S. Dollar equivalents
which approximated fair market value. Gain
and losses on these contracts are recognized
in net income of the period in which the
exchange rate changes.
LONG-TERM DEBT
The fair value of the Company's debt is
estimated based on quoted market prices for
the publicly listed Senior Notes and the
current rates offered to the Company on other
outstanding obligations.
INVESTMENTS IN UNCONSOLIDATED ENTITIES
RECORDED UNDER THE COST METHOD OF ACCOUNTING
The fair market value of some
investments are estimated based on quoted
market prices and for others are based on
ship values collected from an independent
broker with adjustments for value of freight
contracts, management activity and ship pool
participation as applicable.
AMOUNTS DUE FROM RELATED PARTIES
The carrying amount of these notes
receivable approximates fair market value as
of December 31, 1994. Fair market value
takes into consideration the current rates at
which similar notes would be made and the
market value of collateral underlying the
notes.
RESTRICTED INVESTMENTS
The carrying amount of these
investments, which were included in Other
Assets, approximated fair market value as of
December 31, 1994 based upon current rates
offered on similar instruments.
<PAGE 18>
The estimated fair value of the
Company's financial instruments and
derivatives are as follows:
<TABLE>
<CAPTION>
(All Amounts in Thousands) Carrying Amount Fair Value
_______________ __________
<S> <C> <C>
Interest Rate
Conversion Agreements -- ($ 4,908)
Forward Purchase Contracts -- 318
Long-Term Debt ($257,608) ( 251,429)
Investments in
Unconsolidated Entities
Recorded at Cost 13,152 28,412
</TABLE>
Disclosure of the fair value of all
balance sheet classifications is not
required, including but not limited to
certain vessels, property, plant and
equipment, direct financing leases or
intangible assets which may have a fair value
in excess of historical cost. Therefore,
this disclosure does not purport to represent
the fair value of the Company.
NOTE N - ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES
Detailed below are the components of the
Balance Sheet classification Accounts Payable
and Accrued Liabilities for the periods
indicated.
<TABLE>
<CAPTION>
1994 1993
_______________
<S> <C> <C>
(All Amounts in
Thousands)
Trade Accounts
Payable $13,232 13,706
Accrued Salaries
and Benefits 5,265 1,678
Accrued Voyage
Expenses 31,573 34,492
Accrued Interest 2,991 7,705
Taxes Payable 260 ---
________________
$53,321 $57,581
================
</TABLE>
<TABLE>
<CAPTION>
NOTE O-QUARTERLY FINANCIAL INFORMATION -(Unaudited)
Quarter Ended
March 31 June 30 Sept. 30 Dec. 31
---------------------------------------
<S> <C> <C> <C> <C>
1994 Revenue $83,361 $89,148 $81,568 $88,256
Expense 68,295 74,658 64,792 69,273
Gross Voyage Profit 15,066 14,490 16,776 18,983
Net Income 2,447 3,391 3,498 3,715
Earnings per Common
and Common
Equivalent
Share
Primary:
Net Income 0.46 0.63 0.65 0.69
1993 Revenue $83,997 $89,843 $82,214 $85,597
Expense 68,266 72,623 66,876 69,568
Gross Voyage Profit 15,731 17,220 15,338 16,029
Income Before
Extraordinary Item 1,056 3,184 1,465 1,940
Extraordinary Item -- (1,703) 110 (123)
Net Income 1,056 1,481 1,575 1,817
Earnings per Common
and Common
Equivalent
Share
Primary:
Income 0.12 0.54 0.24 0.36
Before
Extraordinary
Item
Extraordinary Item -- (0.33) 0.02 (0.02)
Net Income 0.12 0.21 0.26 0.34
1992 Revenue $76,627 $81,694 $82,395 $83,892
Expense 62,239 66,829 69,456 68,503
Gross Voyage Profit 14,388 14,865 12,939 15,389
Income Before
Cumulative Effect of
Accounting Change 2,282 1,901 1,919 397
Cumulative Effect of
Accounting Change (3,218) -- -- --
Net Income (936) 1,901 1,919 397
Earnings per Common
and Common
Equivalent
Share
Primary:
Income
Before
Cumulative
Effect of
Accounting
Change 0.37 0.29 0.30 0.00
Cumulative Effect of
Accounting
Change (0.63) -- -- --
Net Income (0.26) 0.29 0.30 0.00
</TABLE>
[FN]
First Quarter of 1992 amounts have been restated to reflect
the cumulative effect of an accounting change.
COMMON STOCK PRICES AND DIVIDENDS FOR EACH
QUARTERLY PERIOD OF 1993 AND 1994
(Source: New York Stock Exchange)
<TABLE>
<CAPTION>
Cash
Dividends
1993 High Low Paid
__________________________________________
<S> <C> <C> <C>
1st Quarter 21 1/2 18 1/8 .05/Share
2nd Quarter 23 7/8 20 7/8 .05/Share
3rd Quarter 23 1/4 19 3/8 .05/Share
4th Quarter 22 5/8 18 1/2 .05/Share
</TABLE>
<TABLE>
<CAPTION>
Cash
Dividends
1994 High Low Paid
_____________________________________________
<S> <C> <C> <C>
1st Quarter 23 1/8 18 3/8 .05/Share
2nd Quarter 22 5/8 20 .05/Share
3rd Quarter 21 3/4 19 3/4 .05/Share
4th Quarter 21 5/8 19 1/2 .05/Share
</TABLE>
Approximate Number of Common Stockholders of
Record at March 1, 1995 - 944
<PAGE 19>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Stockholders of International
Shipholding Corporation
We have audited the accompanying
consolidated balance sheets of International
Shipholding Corporation (a Delaware
corporation) and subsidiaries (the Company)
as of December 31, 1994 and 1993, and the
related consolidated statements of income,
changes in stockholders' investment and cash
flows for each of the three years in the
period ended December 31, 1994. These
financial statements are the responsibility
of the Company's management. Our
responsibility is to express an opinion on
these financial statements based on our
audits. We did not audit the financial
statements of A/S Havtor and subsidiaries and
A/S Havtor Management and subsidiaries
("Havtor"), the investment in which is
reflected in the accompanying financial
statements using the equity method of
accounting through March 31, 1993 (see Note
K). The equity in the combined Havtor net
loss represents (18.9%) of the Company's
consolidated income before extraordinary loss
and cumulative effect of accounting change,
for the year ended December 31, 1992. The
statements of Havtor for 1992 were audited by
other auditors whose report has been
furnished to us and our opinion, insofar as
it relates to the amounts included for
Havtor, is based solely on the report of the
other auditors.
We conducted our audits in accordance
with generally accepted auditing standards.
Those standards require that we plan and
perform the audit to obtain reasonable
assurance about whether the financial
statements are free of material misstatement.
An audit includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements. An
audit also includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluating the
overall financial statement presentation. We
believe that our audits provide a reasonable
basis for our opinion.
In our opinion, based on our audits and
the report of the other auditors for 1992,
the financial statements referred to above
present fairly, in all material respects, the
consolidated financial position of
International Shipholding Corporation and
subsidiaries as of December 31, 1994 and
1993, and the consolidated results of their
operations and their cash flows for each of
the three years in the period ended December
31, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note C to the financial
statements, the Company changed its method of
accounting for post-retirement benefits in
1992 to comply with provisions of Statement
No. 106 of the Financial Accounting Standards
Board.
New Orleans, Louisiana
January 13, 1995
Arthur Andersen LLP
<PAGE>
<TABLE>
EXHIBIT 11(1)
<CAPTION>
Year Ended December 31,
1994 1993 1992
_________ ________ _________
<S> <C> <C> <C>
Primary:
Average Shares Outstanding 5,346,611 5,087,769 4,919,111
Net Effect of Dilutive Stock
Warrants - Based on the
Treasury Stock Method Using
Average Market Price -- 132,438 219,755
Common and Common
Equivalent Shares 5,346,611 5,220,207 5,138,866
========== ========= =========
Fully Diluted:
Average Shares Outstanding 5,346,611 5,087,769 4,919,111
Net Effect of Dilutive Stock
Warrants - Using Ending Market
Price Unless Average Market
Price is Higher -- 132,438 219,755
Common and Common
Equivalent Shares 5,346,611 5,220,207 5,138,866
========= ========= =========
Income before Extraordinary
Item and Cumulative Effect
of Accounting Change $13,051,000 $7,645,000 $6,499,000
Extraordinary Item -- (1,716,000) --
Cumulative Effect of
Accounting Change -- -- (3,218,000)
Net Income $13,051,000 $5,929,000 $3,281,000
Plus(Less):
Preferred Stock Dividends -- (868,000) (1,444,000)
Accretion of Discount on
Preferred Stock -- (202,000) (257,000)
Interest on Warrant
Put Rights -- -- 119,000
Net Income Applicable to
Common and
Common Equivalent Shares $13,051,000 $4,859,000 $1,699,000
========== ========= =========
Per Share Amount:
Income before Extraordinary
Item and Cumulative Effect
of Accounting Change $ 2.44 $ 1.26 $ 0.96
Extraordinary Item $ -- $ (0.33) $ --
Cumuative Effect of
Accounting
Change $ -- $ -- $ (0.63)
Net Income $ 2.44 $ 0.93 $ 0.33
========= ========== ==========
</TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
Jurisdiction Under
Which Organized
__________________
<S> <C>
International Shipholding Corporation
(Registrant) Delaware
International Shipholding Corporation (1) New York
Waterman Steamship Corporation New York
Sulphur Carriers, Inc. Delaware
Central Gulf Lines, Inc. Delaware
Florida Barge Lines Corporation Delaware
Material Transfer, Inc. Delaware
Bay Insurance Company Bermuda
LCI Shipholdings, Inc. Liberia
Gulf South Shipping Pte. Ltd. Singapore
Cypress Auto Carriers, Inc. Liberia
New Combo, Inc. Liberia
Bulkowner's 1984 (2) Liberia
New Combo Ships Pte. Ltd. Singapore
Marco Shipping Co. Pte. Ltd. (2) Singapore
Marcoship Agencies (3) Malaysia
Forest Lines Inc. Liberia
N. W. Johnsen & Co., Inc. New York
St. Rose Fleeting Company, Inc. Louisiana
Lash Marine Services, Inc. Louisiana
Lash Intermodal Terminal Company Delaware
Resource Carriers, Inc. Delaware
</TABLE>
[FN]
(1) New York name-holding corporation
(2) 50% owned by the Registrant
(3) 90% owned by the Registrant
All of the subsidiaries listed above are wholly-owned subsidiaries and
are included in the consolidated financial statements incorporated by
reference herein unless otherwise indicated. In addition the
Registrant has interests in several Norwegian entities; however it has
no substantive control or input regarding the operations of such
entities and its ownership interest in each is below 20%.
