<PAGE>1
INTERNATIONAL SHIPHOLDING CORPORATION AND SUBSIDIARIES
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
--------------------------
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 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 Identification Number)
incorporation or organization)
650 Poydras Street New Orleans, Louisiana 70130
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(504) 529-5461
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing for the past 90 days. YES X NO
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock $1 Par Value 6,682,887 shares (September 30, 1998)
--------------------
<PAGE>2
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1-FINANCIAL STATEMENTS
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(All Amounts in Thousands Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 94,912 $ 97,141 $276,691 $280,434
Subsidy Revenue 3,693 3,168 10,400 12,389
---------- ---------- --------- ---------
98,605 100,309 287,091 292,823
---------- ---------- --------- ---------
Operating Expenses:
Voyage Expenses 72,188 78,566 211,935 224,858
Vessel and Barge Depreciation 9,647 8,629 27,768 25,778
---------- ---------- --------- ---------
Gross Voyage Profit 16,770 13,114 47,388 42,187
---------- ---------- --------- ---------
Administrative and General
Expenses 6,730 5,893 19,744 19,422
---------- ---------- --------- ---------
Operating Income 10,040 7,221 27,644 22,765
---------- ---------- --------- ---------
Interest:
Interest Expense 7,153 6,937 21,484 20,879
Investment Income (365) (346) (1,261) (1,081)
---------- ---------- --------- ---------
6,788 6,591 20,223 19,798
---------- ---------- --------- ---------
Income Before Provision
for Income Taxes and
Extraordinary Item 3,252 630 7,421 2,967
---------- ---------- --------- ---------
Provision for Income Taxes:
Current 603 898 2,020 1,770
Deferred 647 (696) 702 (743)
State 26 23 178 265
---------- ---------- --------- ---------
1,276 225 2,900 1,292
---------- ---------- --------- ---------
Income Before Extraordinary
Item $ 1,976 $ 405 $ 4,521 $ 1,675
---------- ---------- --------- ---------
Extraordinary Loss on Early
Extinguishment of Debt
(Net of Income Tax Benefit
of $554) - - (1,029) -
---------- ---------- --------- ---------
Net Income $ 1,976 $ 405 $ 3,492 $ 1,675
========== ========== ========= =========
Basic and Diluted Earnings Per
Share:
Income Before Extraordinary
Loss $ 0.29 $ 0.06 $ 0.67 $ 0.25
Extraordinary Loss - - (0.15) -
---------- ---------- --------- ---------
Net Income $ 0.29 $ 0.06 $ 0.52 $ 0.25
========== ========== ========= =========
Weighted Average Shares of
Common Stock Outstanding 6,682,887 6,682,887 6,682,887 6,682,887
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>3
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(All Amounts in Thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
1998 1997
ASSETS ------------- ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 18,600 $ 32,002
Marketable Securities 11,901 10,758
Accounts Receivable, Net of Allowance
for Doubtful Accounts of $85 and $208
in 1998 and 1997, Respectively:
Traffic 42,462 35,442
Agents' 4,046 7,128
Claims and Other 4,426 3,031
Federal Income Taxes Receivable 508 43
Net Investment in Direct Financing Leases 1,827 1,913
Other Current Assets 4,411 4,187
Material and Supplies Inventory, at Cost 13,727 13,296
------------- -----------
Total Current Assets 101,908 107,800
------------- -----------
Marketable Equity Securities 290 582
------------- -----------
Investment in Unconsolidated Entity 488 -
------------- -----------
Net Investment in Direct Financing
Leases 19,196 20,552
------------- -----------
Vessels, Property, and Other Equipment,
at Cost:
Vessels and Barges 744,571 689,856
Other Marine Equipment 7,734 7,590
Terminal Facilities 18,494 18,377
Land 2,317 2,317
Furniture and Equipment 16,415 16,853
------------- ------------
789,531 734,993
Less - Accumulated Depreciation (340,396) (311,557)
------------- ------------
449,135 423,436
Other Assets: ------------- ------------
Deferred Charges, Net of Accumulated
Amortization of $70,547 and $53,913
in 1998 and 1997, Respectively 39,551 38,960
Acquired Contract Costs, Net of
Accumulated Amortization of $13,790 and
$12,699 in 1998 and 1997, Respectively 16,735 17,826
Due from Related Parties 314 369
Other 7,534 8,679
------------ ------------
64,134 65,834
------------ ------------
$ 635,151 $ 618,204
============ ============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>4
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(All Amounts in Thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
1998 1997
LIABILITIES AND STOCKHOLDERS' INVESTMENT ------------- -------------
<S> <C> <C>
Current Liabilities:
Current Maturities of Long-Term Debt $ 15,248 $ 35,865
Current Maturities of Capital Lease
Obligations 2,915 2,579
Accounts Payable and Accrued Liabilities 54,760 51,735
Current Deferred Income Tax Liability 847 171
Current Liabilities to be Refinanced - (22,511)
------------- -------------
Total Current Liabilities 73,770 67,839
------------- -------------
Current Liabilities to be Refinanced - 22,511
------------- -------------
Billings in Excess of Income Earned and
Expenses Incurred 9,271 5,903
------------- -------------
Long-Term Capital Lease Obligations, Less
Current Maturities 12,085 14,994
------------- -------------
Long-Term Debt, Less Current Maturities 298,051 271,835
------------- -------------
Reserves and Deferred Credits:
Deferred Income Taxes 37,879 39,494
Claims and Other 29,267 22,823
------------- ------------
67,146 62,317
------------- ------------
Commitments and Contingent Liabilities
Stockholders' Investment:
Common Stock 6,756 6,756
Additional Paid-In Capital 54,450 54,450
Retained Earnings 115,033 112,794
Less - Treasury Stock (1,133) (1,133)
Accumulated Other Comprehensive Loss (278) (62)
------------ -----------
174,828 172,805
------------ -----------
$ 635,151 $ 618,204
============ ===========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>5
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
(All Amounts in Thousands)
(Unaudited)
<CAPTION>
Accumulated
Additional Other
Common Paid-In Retained Treasury Comprehensive
Stock Capital Earnings Stock Income (Loss) Total
------ --------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1996 $6,756 $ 54,450 $ 112,310 ($1,133) $ 24 $172,407
Comprehensive Income:
Net Income for
Year Ended
December 31,
1997 - - 2,155 - - 2,155
Other Comprehensive Income:
Unrealized Holding
Loss on Marketable
Securities, Net of
Deferred Taxes of
($46) - - - - (86) (86)
-------
Total Comprehensive
Income 2,069
Cash Dividends - - (1,671) - - (1,671)
------- ------- --------- -------- --------- --------
Balance at December
31, 1997 $6,756 $ 54,450 $ 112,794 ($1,133) $ (62) $172,805
======= ======== ========= ======== ========= =========
Comprehensive Income:
Net Income for the
Period Ended September 30,
1998 - - 3,492 - - 3,492
Other Comprehensive Income:
Unrealized Holding Loss on
Marketable Securities,
Net of Deferred Taxes of
($116) - - - - (216) (216)
-------
Total Comprehensive
Income 3,276
Cash Dividends - - (1,253) - - (1,253)
------- ------- ---------- -------- ----------- --------
Balance at
September 30,
1998 $6,756 $ 54,450 $ 115,033 $ (1,133) $ (278) $174,828
====== ======== ========== ========= =========== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>6
<TABLE>
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All Amounts in Thousands)
(Unaudited)
For Nine Months Ended September 30,
1998 1997
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 3,492 $ 1,675
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation 29,716 27,805
Amortization of Deferred Charges
and Other Assets 17,769 18,200
Provision for Deferred Income Taxes 703 1,027
Gain on Sale of Assets (3) (8)
Extraordinary Loss 1,029 -
Changes in:
Accounts Receivable (5,293) 4,647
Net Investment in Direct Financing
Leases 1,442 1,704
Inventories and Other Current Assets (654) (1,148)
Other Assets 1,016 (466)
Accounts Payable and Accrued
Liabilities (2,020) (11,616)
Federal Income Taxes Payable (1,437) (502)
Unearned Income 3,368 (533)
Reserve for Claims and Other Deferred
Credits 4,577 4,770
-------------- --------------
Net Cash Provided by Operating
Activities 53,705 45,555
-------------- --------------
Cash Flows from Investing Activities:
Purchase of Vessels and Other
Property (54,266) (17,248)
Additions to Deferred Charges (9,844) (14,822)
Proceeds from Sale of Assets 220 245
Purchase of and Proceeds from
Short-Term Investments (1,221) (7,484)
Investment in Unconsolidated Entity (488) (778)
Other Investing Activities 55 131
-------------- --------------
Net Cash Used by Investing Activities (65,544) (39,956)
-------------- --------------
Cash Flows from Financing Activities:
Proceeds from Issuance of Debt 156,435 73,066
Reduction of Debt and Capital Lease
Obligations (153,409) (95,147)
Additions to Deferred Financing
Charges (2,904) (77)
Other Financing Activities (432) -
Common Stock Dividends Paid (1,253) (1,253)
-------------- --------------
Net Cash Used by Financing Activities (1,563) (23,411)
-------------- --------------
Net Decrease in Cash and Cash
Equivalents (13,402) (17,812)
Cash and Cash Equivalents at Beginning
of Period 32,002 43,020
-------------- --------------
Cash and Cash Equivalents at End of
Period $ 18,600 $ 25,208
============== ==============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
Note 1. Basis of Preparation
The accompanying unaudited interim financial statements
have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information
and footnote disclosures required by generally accepted
accounting principles for complete financial statements have
been omitted. It is suggested that these interim
statements be read in conjunction with the financial
statements and notes thereto included in the Form 10-K of
International Shipholding Corporation for the year ended
December 31, 1997. Certain reclassifications have been made
to prior period financial information in order to conform to
current year presentations.
Interim statements are subject to possible adjustments
in connection with the annual audit of the Company's
accounts for the full year 1998. In the opinion of
management, all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of
the information shown have been included.
The foregoing 1998 interim results are not necessarily
indicative of the results of operations for the full year
1998.
The Company's policy is to consolidate all subsidiaries
in which it holds greater than 50% voting interest. All
significant intercompany accounts and transactions have been
eliminated.
Note 2. Subsequent Events
Early in the fourth quarter of this year, the Company
purchased a newbuilding car/truck carrier capable of transporting
large dimension and heavy lift vehicles, as well as automobiles.
The vessel is scheduled to deliver new from the shipyard in
December of 1998 and will immediately enter a long-term time
charter to Hyundai. Long-term fixed interest rate financing
has been arranged with a bank syndicate.
<PAGE>8
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements made in this report or elsewhere by,
or on behalf of, the Company that are not based on
historical facts are intended to be forward-looking
statements within the meaning of the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on assumptions about
future events and are therefore subject to risks and
uncertainties. The Company cautions readers that certain
important factors have affected and may affect in the future
the Company's actual consolidated results of operations and
may cause future results to differ materially from those
expressed in or implied by any forward-looking statements
made in this report or elsewhere by, or on behalf of, the
Company. A description of certain of these important
factors is contained in the Company's Form 10-K filed with
the Securities and Exchange Commission for the year ended
December 31, 1997.
The Company's vessels are operated under a variety of
charters, liner services, 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
vessels 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 performance than revenues.
Accordingly, the discussion below addresses variations in
gross voyage profits rather than variations in revenues.
<PAGE>9
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Gross Voyage Profit
- -------------------
Gross voyage profit increased from $42.2 Million in the
first nine months of 1997 to $47.4 Million in the first nine
months of 1998 primarily due to improved market share and
lower operating costs resulting from lower fuel oil prices
for the Company's liner services. Early in the second
quarter of 1998, the Company purchased a 1994-built Pure
Car/Truck Carrier. After being reflagged to U.S. registry
and renamed Green Point, the vessel commenced a long-term
contract. The Green Point contributed to the increase in
gross voyage profit during 1998 as compared to 1997.
Additionally, the Company's U.S. Flag Coal Carrier, Energy
Enterprise, produced more gross voyage profit during the
first nine months of this year than in the same period of
last year, because the vessel was out of service for 28
additional days last year to complete refurbishment work.
These favorable variances were partially offset by reduced
cargo volume on the Company's Indonesian and certain of its
domestic services, and scheduled reductions in charterhire
rates on three of the Company's LASH vessels chartered to
the Military Sealift Command ("MSC"). Gross voyage profit
also compares favorably for the first nine months of this
year as compared to last year because the second quarter of
1997 was negatively impacted by the Company's decision to
discontinue development of a new LASH service between the
U.S. Gulf and Brazil which resulted in a charge to operating
expense of approximately $1.2 Million for termination costs
and the repositioning of equipment.
Vessel and barge depreciation for the first nine months
of 1998 increased 7.7% to $27.8 Million as compared to $25.8
Million in the same period of 1997 primarily due to the
purchase and commencement of operations early in the second
quarter of 1998 of the Green Point. In the third quarter,
the Company also began depreciating the Hickory, a recently
purchased LASH vessel operating as a feeder vessel on an
interim basis for the Company's Waterman liner service.
Depreciation on the Company's U.S. Flag Coal Carrier and one
of the LASH vessels in
<PAGE>10
its Waterman Liner Service also increased due to capital
improvements made during the second quarter of 1997.
Other Income and Expenses
- -------------------------
Administrative and general expenses increased slightly
from $19.4 Million in the first nine months of 1997 to $19.7
Million in the same period in 1998.
Interest expense was $21.5 Million for the first nine
months of 1998 as compared to $20.9 Million for the same
period in 1997. The increase was primarily the result of
financing associated with the acquisition of the Green Point
early in the second quarter of 1998. On January 22, 1998,
the Company issued $110 Million of 7 3/4% Senior Notes due
2007 (the "Notes"), the proceeds of which were used to repay
shorter-term amortizing bank debt. Interest expense on
these Notes was substantially offset by the aforementioned
early repayment of debt and regularly scheduled principal
payments.
Investment income increased from $1.1 Million for the
first nine months of 1997 to $1.3 Million for the first nine
months of 1998 due to an increase in the balance of invested
funds and slightly higher interest rates, as well as a
change in the mix of investments.
Income Taxes
- ------------
The Company provided $2.7 Million for Federal income
taxes in the first nine months of 1998 and $1.0 Million in
the first nine months of 1997 at the statutory rate of 35%
for both periods.
Extraordinary Loss on the Early Extinguishment of Debt
- ------------------------------------------------------
The Company incurred an after tax extraordinary loss of
approximately $1 Million during the first nine months of
1998 related to the early extinguishment of debt. This loss
resulted primarily from the write-off of previously deferred
financing costs related to the loans repaid early with the
proceeds of the aforementioned Notes and a make-whole
premium on one of those loans.
<PAGE>11
THIRD QUARTER ENDED SEPTEMBER 30, 1998
COMPARED TO THIRD QUARTER ENDED SEPTEMBER 30, 1997
Gross Voyage Profit
- -------------------
Gross voyage profit increased from $13.1 Million in the
third quarter of 1997 to $16.8 Million in the third quarter
of 1998 primarily due to improved market share and lower
operating costs for the Company's liner services.
Additionally, the Company added the Green Point to its fleet
early in the second quarter of 1998 which contributed to the
increase in gross voyage profit. These favorable variances
were partially offset by reduced cargo volume on the
Company's Indonesian and certain of its domestic services,
and scheduled reductions in charterhire rates on three of
the Company's LASH vessels chartered to the MSC.
Vessel and barge depreciation for the third quarter of
1998 increased 11.8% to $9.6 Million as compared to $8.6
Million in the same period of 1997 primarily due to the
commencement of operations of the Green Point in the second
quarter of 1998 and the Hickory in the third quarter of 1998
as discussed in the preceeding nine month comparison.
Other Income and Expenses
- -------------------------
Administrative and general expenses increased from $5.9
Million in the third quarter of 1997 to $6.7 Million in the
third quarter of 1998 primarily reflecting employee bonuses
accrued this year expected to be paid early in 1999 based on
1998 earnings.
Interest expense increased approximately 3.1% to $7.1
Million in the third quarter of 1998 from $6.9 Million in
the third quarter of 1997 primarily resulting from the
financing of the Green Point during the second quarter of
1998.
Investment income increased slightly from $346,000 for
the third quarter of 1997 to $365,000 for the third quarter
of 1998 due to an increase in the balance of invested funds
and slightly higher interest rates, as well as a change in
the mix of investments.
Income Taxes
- ------------
The Company provided $1.3 Million for Federal income
taxes in the third quarter of 1998 and $202,000 in the third
quarter of 1997 at the statutory rate of 35% for both
periods.
<PAGE>12
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased from $40
Million at December 31, 1997, to $28.1 Million at September
30, 1998, after provision for current maturities of long-
term debt and capital lease obligations of $18.2 Million.
Cash and cash equivalents decreased during the first nine
months of 1998 by $13.4 Million to a total of $18.6 Million.
This decrease resulted from cash used for investing and
financing activities of $65.5 Million and $1.6 Million,
respectively, partially offset by operating cash flows of
$53.7 Million.
The major source of cash from operations was net income
adjusted for non-cash provisions such as depreciation,
amortization, and the write-off of unamortized deferred
financing costs related to loans repaid with the proceeds of
the Notes.
Investing activities during the period included the
purchase of the Green Point, the Hickory (a recently built
LASH vessel), 82 LASH barges, and two special purpose barges
for a total cost of about $52 Million. Additionally, cash
of $9.8 Million was used for the cost of drydocking of
certain vessels.
The net cash used by financing activities of $1.6
Million included the net proceeds from the Company's sale of
the Notes in January of 1998 of approximately $109.4 Million
and draws against the Company's line of credit totaling
approximately $47 Million. The proceeds from the Notes were
used primarily to repay certain indebtedness of the
Company's subsidiaries and for related transaction costs.
These sources of cash from financing activities were offset
by reductions of debt and capital lease obligations of
$153.4 Million for repayment of debt, including the
Company's repurchase of $1 Million principal amount of its
9% Senior Notes and the use of the proceeds from the 7 3/4%
Notes as discussed above, scheduled principal payments, and
repayments of amounts drawn under lines of credit.
Additionally, $2.9 Million was used for transaction costs of
issuing the Notes, $1.3 Million was used to meet common
stock dividend requirements, and $432,000 was used to pay a
make-whole premium on one of the loans prepaid with the
proceeds of the Notes.
In the first quarter of 1998, the Company purchased a
1989-built LASH vessel renamed Hickory. As reported in the
third quarter of 1997, the Company also purchased a 1987-
built LASH vessel renamed Willow. The Willow is now in
reserve pending a decision on its conversion/deployment
while, on an interim basis, the Hickory is being employed as
a feeder vessel for LASH barge movements in Southeast Asia.
The Company is making plans to
<PAGE>13
refurbish at least one of these vessels, after which that
vessel will likely replace one of the older vessels in the
Company's fleet.
As discussed in Note 2 to the financial statements, the
Company purchased a newbuilding car/truck carrier early in
the fourth quarter. This vessel is scheduled to deliver new
from the shipyard in December of 1998 and immediately enter
a long-term time charter to Hyundai. Long-term, fixed
interest rate financing has been arranged with a bank
syndicate.
Also in the fourth quarter, the Company acquired a
37.5% interest in three companies that own one cement
carrier each. These vessels are operating under fixed
medium to long-term charters. The Company acquired these
investments for a total consideration of $2.9 Million. The
equity method of accounting will be used to report the
Company's 37.5% investment beginning in the fourth quarter
of 1998.
At December 31, 1997, the Company had available three
lines of credit totaling $35.0 Million to meet short-term
requirements when fluctuations occur in working capital.
Early in the first quarter of 1998, the Company entered into
a $25 Million revolving credit facility that replaced these
lines of credit. At the end of the first quarter of 1998,
the Company increased this revolving credit facility to $50
Million. At September 30, 1998, $18 Million was outstanding
on this credit facility as a result of drawdowns of $32
Million for financing purposes, some of which will be
refunded within the next six months from available cash
flows.
Management believes that normal operations will provide
sufficient working capital and cash flows to meet debt
service and dividend requirements during the foreseeable
future.
The Company has not been notified that it is a
potentially responsible party in connection with any
environmental matters.
At a regular meeting held October 21, 1998, the Board
of Directors declared a quarterly dividend of 6.25 cents per
Common Share payable on December 18, 1998, to shareholders
of record on December 4, 1998. At that same meeting,
authorization was given to management to repurchase up to
500,000 shares of the Company's common stock at their
discretion, and subject to market conditions. The Company
expects that the shares will be repurchased from time to
time through open market transactions over the next few
years.
<PAGE>14
YEAR 2000 COMPLIANCE
The Year 2000 (Y2K) issue refers to the potential
failure of information technology (IT) systems,
telecommunications, and other electronic devices before, on
or after January 1, 2000. This problem is primarily due to
the use of a 2-digit year indicator within software code
including applications, operating systems, hardware, or
microchips. Non-compliant systems will likely interpret the
"00" in "2000" incorrectly as "1900."
State of Readiness
- ------------------
The Company has appointed a Y2K Project Manager who,
along with a designated Y2K Project Team, is aggressively
addressing the Y2K issue. The Company's Y2K Plan is an
overall corporate plan supported by lower-tier plans and
schedules developed by each functional area. The phases in
the Y2K Plan include inventory, assessment, remediation,
testing, and contingency planning.
During the inventory phase, all computer-based systems,
components (such as systems developed in-house, purchased
software, computers, and associated hardware), service
providers, and hardware that contain microchips that support
the functionality of the Company will be identified.
Additionally, items that, in and of themselves, may not be
impacted by the date change, but that interface with systems
or equipment that are impacted by the date change will be
identified.
The assessment phase involves determining which systems
are date-sensitive and prioritizing how critical each of
these systems is to continuation of the Company's business
activities.
Once the assessment phase is complete, the remediation
phase begins. During this phase, the strategies for
addressing systems that are not Y2K compliant will be
developed. Possible strategies include repairing,
replacing, or retiring the system.
The testing phase will verify that the repaired or
replaced system will operate properly when the date changes,
and that existing business functions will continue to
operate as expected. Testing efforts will not be confined
solely to IT systems. Non-IT systems such as building
infrastructure and components with embedded microchips will
also be evaluated.
The inventory and assessment phases are complete for IT
systems, and those identified as most critical are scheduled
to be remediated and tested by December 31, 1998. The
remaining
<PAGE>15
IT systems will be addressed by August of 1999.
Vessel systems inspection, remediation, and testing is
ongoing through April of 1999.
The Company has contacted its key suppliers and
customers to ensure they are addressing the Y2K issue. Y2K
questionnaires have been issued to these suppliers and
customers and their responses are being reviewed to
determine what action by the Company, if any, is necessary.
The Costs to Address Y2K Issues
- -------------------------------
Expenditures related to evaluating and remediating any
Y2K problems through September 30, 1998, have not had a
material effect on the Company's financial position or
results of operations. During 1998 and 1999, it is
anticipated that the resources required to address Y2K
issues will be provided primarily by existing levels of
personnel. While management does not expect Y2K compliance
costs to have a material adverse effect on the Company,
estimates of total expenditures for Y2K issues, including
all phases of the Y2K Plan described above, as well as the
cost of replacing or modifying any non-compliant systems,
are not yet complete. A budget for Y2K costs expected to be
incurred during 1999 is currently being developed. The
Company plans to include an estimate of its total
anticipated Y2K expenditures for IT and Non-IT systems in
its December 31, 1998, Form 10-K.
The Risks of Y2K Issues
- -----------------------
A definitive assessment of the risk to the Company if
systems that are not Y2K compliant were not identified, or
identified but not successfully remediated, has been and
continues to be undertaken. No Y2K issues have been
identified that are unique to the Company or that otherwise
would not be found in its industry. Progress in assessing
this risk is expected before the Company issues its December
31, 1998, Form 10-K at which time a more definitive
description of the risk will be available.
Contingency Plans
- -----------------
Once the potential problems that could result from the
Y2K issue have been identified, the steps required in the
event any system fails will be determined. The Company's
contingency plan will identify potential activities and
responsibilities for initiating alternate plans in the event
Y2K remediation activities are not successful. This
contingency plan will address both
<PAGE>16
programmatic (computing) and operational (business continuation)
issues, including the impacts of internal and external risks.
Cost estimates to establish and implement the contingency plan
will be developed and analyzed against other options. The Company's
Y2K contingency plan is scheduled to be completed by November 30, 1998.
<PAGE>17
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT INDEX
Exhibit Number Description
-------------- ------------
Part I Exhibits: 27 Financial Data Schedule
Part II 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
Form 10-Q for the quarterly
period ended June 30, 1996, and
incorporated herein by
reference)
(b) No reports on Form 8-K were filed for the three month
period ended September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities and
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
/S/ Gary L. Ferguson
_____________________________________________
Gary L. Ferguson
Vice President and Chief Financial Officer
Date November 13, 1998
--------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the period ended September 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,600
<SECURITIES> 11,901
<RECEIVABLES> 50,934
<ALLOWANCES> 85
<INVENTORY> 13,727
<CURRENT-ASSETS> 101,908
<PP&E> 789,531
<DEPRECIATION> 340,396
<TOTAL-ASSETS> 635,151
<CURRENT-LIABILITIES> 73,770
<BONDS> 310,136
0
0
<COMMON> 6,756
<OTHER-SE> 168,072
<TOTAL-LIABILITY-AND-EQUITY> 635,151
<SALES> 0
<TOTAL-REVENUES> 287,091
<CGS> 0
<TOTAL-COSTS> 259,447
<OTHER-EXPENSES> 21,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,484
<INCOME-PRETAX> 7,421
<INCOME-TAX> 2,900
<INCOME-CONTINUING> 4,521
<DISCONTINUED> 0
<EXTRAORDINARY> (1,029)
<CHANGES> 0
<NET-INCOME> 3,492
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52<F1><F2>
<FN>
<F1>Amounts inapplicable or not disclosed as a separate line on the Balance
Sheet or Statement of Income are reported as 0 herein.
<F2>*Notes and accounts receivable - trade are reported net of allowances for
doubtful accounts in the Balance Sheet.
</FN>
</TABLE>
