<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 June 30, 2000
-----------------
__ 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
incorporation or organization) Number)
650 Poydras Street New Orleans, Louisiana 70130
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(Address of principal executive offices) (Zip Code)
(504) 529-5461
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(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 6,082,887 shares (June 30, 2000)
----------------
<PAGE>2
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1-FINANCIAL STATEMENTS
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(All Amounts in Thousands Except Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 85,265 $ 82,476 $ 170,614 $ 167,265
Subsidy Revenue 3,672 3,359 7,347 6,999
---------- ---------- ---------- ----------
88,937 85,835 177,961 174,264
---------- ---------- ---------- ----------
Operating Expenses:
Voyage Expenses 65,797 59,950 135,704 126,159
Vessel and Barge Depreciation 9,841 9,640 19,783 19,282
---------- ---------- ---------- ----------
Gross Voyage Profit 13,299 16,245 22,474 28,823
---------- ---------- ---------- ----------
Administrative and General Expenses 5,862 6,134 11,568 12,148
Gain on Sale of Land/Vessels 5,063 7,753 5,063 10,161
---------- ---------- ---------- ----------
Operating Income 12,500 17,864 15,969 26,836
---------- ---------- ---------- ----------
Interest:
Interest Expense 8,346 7,672 16,870 15,241
Investment Income (459) (320) (718) (695)
---------- ---------- ---------- ----------
7,887 7,352 16,152 14,546
---------- ---------- ---------- ----------
Income (Loss) Before Provision
(Benefit) for Income Taxes
and Equity in Net Income of
Unconsolidated Entities 4,613 10,512 (183) 12,290
---------- ---------- ---------- ----------
Provision (Benefit) for Income
Taxes:
Current 430 193 1,079 643
Deferred 1,244 3,524 (1,031) 3,705
State 56 37 140 161
---------- ---------- ---------- ----------
1,730 3,754 188 4,509
---------- ---------- ---------- ----------
Equity in Net Income of
Unconsolidated Entities (Net
of Applicable Taxes) 59 65 14 65
---------- ---------- ---------- ----------
Net Income (Loss) $ 2,942 $ 6,823 $ (357) $ 7,846
========== ========== ========== ==========
Basic and Diluted Earnings Per
Share:
Net Income (Loss) $ 0.48 $ 1.04 $ (0.06) $ 1.20
========== ========== ========== ==========
<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>
June 30, December 31,
ASSETS 2000 1999
------------- -------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 47,754 $ 18,661
Marketable Securities 7,143 11,337
Accounts Receivable, Net of
Allowance for Doubtful
Accounts of $280 and $294 in
2000 and 1999, Respectively:
Traffic 45,518 47,855
Agents' 6,412 6,660
Claims and Other 7,344 7,174
Federal Income Taxes Receivable 630 583
Deferred Income Taxes 58 60
Net Investment in Direct Financing
Leases 3,456 3,137
Other Current Assets 6,516 4,134
Material and Supplies Inventory, at
Lower of Cost or Market 12,149 12,726
------------- -------------
Total Current Assets 136,980 112,327
------------- -------------
Marketable Equity Securities 201 234
------------- -------------
Investment in Unconsolidated Entities 3,618 2,805
------------- -------------
Net Investment in Direct Financing Leases 109,851 112,032
------------- -------------
Vessels, Property, and Other Equipment, at
Cost:
Vessels and Barges 763,413 775,001
Other Marine Equipment 8,276 7,897
Terminal Facilities 18,478 18,470
Land 1,230 1,230
Furniture and Equipment 17,249 17,222
------------- -------------
808,646 819,820
Less - Accumulated Depreciation (369,833) (379,588)
------------- -------------
438,813 440,232
------------- -------------
Other Assets:
Deferred Charges, Net of Accumulated
Amortization of $43,686 and $49,880
in 2000 and 1999, Respectively 35,200 39,692
Acquired Contract Costs, Net of
Accumulated Amortization of $16,337 and
$15,609 in 2000 and 1999, Respectively 14,188 14,916
Due from Related Parties 813 580
Other 8,732 12,185
------------- -------------
58,933 67,373
------------- -------------
$ 748,396 $ 735,003
============= =============
<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 Except Share Data)
(Unaudited)
<CAPTION>
June 30, December 31,
2000 1999
------------- -------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Current Maturities of Long-Term Debt $ 24,754 $ 23,137
Current Maturities of Capital Lease
Obligations 5,957 3,231
Accounts Payable and Accrued Liabilities 56,336 50,388
------------- -------------
Total Current Liabilities 87,047 76,756
------------- -------------
Billings in Excess of Income Earned and
Expenses Incurred 8,994 5,083
------------- -------------
Long-Term Capital Lease Obligations, Less
Current Maturities 17,145 8,853
------------- -------------
Long-Term Debt, Less Current Maturities 384,337 391,589
------------- -------------
Other Long-Term Liabilities:
Deferred Income Taxes 43,626 45,124
Claims and Other 26,078 25,114
------------- -------------
69,704 70,238
------------- -------------
Commitments and Contingent Liabilities
Stockholders' Investment:
Common Stock 6,756 6,756
Additional Paid-In Capital 54,450 54,450
Retained Earnings 129,322 130,440
Less - Treasury Stock (8,704) (8,654)
Accumulated Other Comprehensive Loss (655) (508)
------------- -------------
181,169 182,484
------------- -------------
$ 748,396 $ 735,003
============= =============
<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, 1998 $ 6,756 $ 54,450 $117,399 ($ 1,422) ($75) $177,108
Comprehensive Income:
Net Income for Year
Ended December 31,
1999 - - 14,623 - - 14,623
Other Comprehensive Income:
Unrealized Holding
Loss on Marketable
Securities, Net of
Deferred Taxes of
($233) - - - - (433) (433)
--------
Total Comprehensive Income 14,190
Treasury Stock - - - (7,232) - (7,232)
Cash Dividends - - (1,582) - - (1,582)
-------- -------- --------- -------- ------------ --------
Balance at
December 31, 1999 $ 6,756 $ 54,450 $130,440 ($ 8,654) ($508) $182,484
======== ======== ========= ======== ============ ========
Comprehensive Income:
Net Loss for the
Period Ended
June 30, 2000 - - (357) - - (357)
Other Comprehensive Income:
Unrealized Holding
Loss on Marketable
Securities, Net of
Deferred Taxes of $79 - - - - (147) (147)
--------
Total Comprehensive Income (504)
Treasury Stock - - - (50) - (50)
Cash Dividends - - (761) - - (761)
-------- -------- --------- -------- ------------ --------
Balance at
June 30, 2000 $ 6,756 $ 54,450 $129,322 ($ 8,704) ($655) $181,169
======== ======== ========= ======== ============ ========
<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)
<CAPTION>
For Six Months Ended June 30,
2000 1999
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (Loss) Income $ (357) $ 7,846
Adjustments to Reconcile Net (Loss)
Income to Net Cash Provided by
Operating Activities:
Depreciation 21,284 20,772
Amortization of Deferred Charges and
Other Assets 9,634 8,866
(Benefit) Provision for Deferred Income Taxes (1,031) 3,705
Equity in Net Income of Unconsolidated Entities (14) (65)
Gain on Sale of Vessels and Other Property (5,074) (10,296)
Changes in:
Accounts Receivable 2,807 (1,121)
Inventories and Other Current Assets (267) (908)
Other Assets 3,434 (1,008)
Accounts Payable and Accrued Liabilities 5,044 (8,568)
Federal Income Taxes Payable (439) (1,089)
Unearned Income 3,911 (6,248)
Other Long-Term Liabilities (235) 1,183
-------------- --------------
Net Cash Provided by Operating Activities 38,697 13,069
-------------- --------------
Cash Flows from Investing Activities:
Net Investment in Direct Financing Lease 1,902 (57,056)
Purchase of Vessels and Other Property (33,214) (3,539)
Additions to Deferred Charges (3,253) (6,622)
Proceeds from Sale of Vessels and Other Property 17,690 18,690
Purchase of and Proceeds from Short-Term
Investments 4,002 (1,647)
Investment in and Partial Sale of
Unconsolidated Entities (791) 766
Purchase of Marketable Equity Securities - (20)
Other Investing Activities (233) 94
-------------- -------------
Net Cash Used by Investing Activities (13,897) (49,334)
-------------- -------------
Cash Flows from Financing Activities:
Proceeds from Issuance of Debt and Capital
Lease Obligations 74,400 58,000
Reduction of Debt and Capital Lease Obligations (69,017) (30,803)
Additions to Deferred Financing Charges (279) (21)
Purchase of Treasury Stock (50) (2,624)
Common Stock Dividends Paid (761) (813)
-------------- -------------
Net Cash Provided by Financing Activities 4,293 23,739
-------------- -------------
Net Increase (Decrease) in Cash and Cash
Equivalents 29,093 (12,526)
Cash and Cash Equivalents at Beginning of
Period 18,661 32,008
-------------- -------------
Cash and Cash Equivalents at End of Period $ 47,754 $ 19,482
============== =============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000
(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, 1999. 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 2000. 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 2000 interim results are not necessarily
indicative of the results of operations for the full year
2000.
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.
The Company uses the cost method to account for
investments in entities in which it holds less than 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.
Note 2. Operating Segments
The Company's three operating segments, Liner Services,
Time Charter Contracts, and Contracts of Affreightment, are
identified primarily based on the characteristics of the
contracts and terms under which its fleet of vessels and
barges are operated. The Company also reports an Other
category that includes results of several of the Company's
subsidiaries that provide ship charter brokerage, agency,
barge fleeting and other specialized services primarily to
<PAGE>8
the Company's operating segments described below. Each of
the reportable segments is managed separately as each
requires different resources depending on the nature of the
contract or terms under which each vessel within the segment
operates.
The following table presents information about segment
profit and loss for the six months ended June 30, 2000 and
1999. The Company does not allocate interest income,
administrative and general expenses, equity in
unconsolidated entities, or income taxes to its segments.
Intersegment revenues are based on market prices and include
revenues earned by subsidiaries of the Company that provided
specialized services to the operating segments.
<TABLE>
<CAPTION>
Time
Liner Charter Contracts of
(All Amounts in Thousands) Services Contracts Affreightment Other Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000
Revenues from external
customers $ 92,214 $ 67,620 $ 15,853 $ 2,274 $177,961
Intersegment revenues - - - 15,373 15,373
Gross voyage profit
before depreciation 5,706 28,446 6,560 1,545 42,257
Depreciation 7,692 8,658 3,296 137 19,783
Interest expense 2,785 10,355 3,505 225 16,870
Gain on sale of vessels - 5,063 - - 5,063
Segment (loss) profit before
interest income, administrative
and general expenses, equity
in unconsolidated entities
and taxes (4,771) 14,496 (241) 1,183 10,667
-------------------------------------------------------------------------------
1999
Revenues from external
customers $ 87,185 $ 63,214 $ 15,922 $ 4,787 $171,108
Net revenue from contract
settlement - accrual - - 3,156 - 3,156
Intersegment revenues - - - 18,495 18,495
Gross voyage profit
before depreciation 11,425 24,669 9,376 2,635 48,105
Depreciation 7,111 8,521 3,296 354 19,282
Interest expense 2,869 7,652 4,168 552 15,241
Gain on sale of vessel and land - 7,753 - 2,408 10,161
Segment profit before interest
income, administrative and
general expenses, equity in
unconsolidated entities
and taxes 1,445 16,249 1,912 4,137 23,743
-------------------------------------------------------------------------------
</TABLE>
<PAGE>9
The following table presents information about segment
profit and loss for the second quarter ended June 30, 2000
and 1999.
<TABLE>
<CAPTION>
Time
Liner Charter Contracts of
(All Amounts in Thousands) Services Contracts Affreightment Other Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000
Revenues from external
customers $ 47,296 $ 33,307 $ 8,184 $ 150 $ 88,937
Intersegment revenues - - - 6,379 6,379
Gross voyage profit
before depreciation 4,848 13,659 3,528 1,105 23,140
Depreciation 3,867 4,256 1,649 69 9,841
Interest expense 1,367 5,191 1,721 67 8,346
Gain on sale of vessels - 5,063 - - 5,063
Segment profit (loss) before
interest income, administrative
and general expenses, equity
in unconsolidated entities
and taxes (386) 9,275 158 969 10,016
-------------------------------------------------------------------------------
1999
Revenues from external
customers $ 41,735 $ 31,844 $ 8,118 $ 2,565 $ 84,262
Net revenue from contract
settlement - accrual - - 1,573 - 1,573
Intersegment revenues - - - 9,364 9,364
Gross voyage profit
before depreciation 6,279 12,977 4,893 1,736 25,885
Depreciation 3,559 4,266 1,648 167 9,640
Interest expense 1,400 3,972 2,029 271 7,672
Gain on sale of vessel - 7,753 - - 7,753
Segment profit before
interest income, administrative
and general expenses, equity
in unconsolidated entities
and taxes 1,320 12,492 1,216 1,298 16,326
-------------------------------------------------------------------------------
</TABLE>
Following is a reconciliation of the totals reported
for the operating segments to the applicable line items in
the consolidated financial statements:
<TABLE>
<CAPTION>
(All Amounts in Thousands) Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total profit for reportable
segments $ 10,016 $ 16,326 $ 10,667 $ 23,743
Unallocated amounts:
Interest income 459 320 718 695
Administrative and
general expenses 5,862 6,134 11,568 12,148
-------- -------- -------- --------
Income (loss) before income
taxes and equity in
unconsolidated entities $ 4,613 $ 10,512 $ (183) $ 12,290
======== ======== ======== ========
</TABLE>
Note 3. Earnings Per Share
Basic and diluted earnings per share were computed
based on the weighted average number of common shares issued
and outstanding during the relevant periods. Certain stock
options totaling 475,000 were excluded from the computation
of diluted earnings per share in the first six months of
2000 and 1999, as the effect would have been antidilutive.
Note 4. Subsequent Events
The Company concluded in early August a sale/leaseback
agreement on one of its Pure Car/Truck Carriers ("PCTC")
which resulted in net sales proceeds of approximately $38.0
Million.
<PAGE>10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
--------------------------
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, 1999.
General
-------
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>11
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
Gross Voyage Profit
-------------------
Gross voyage profit decreased 22.0% from $28.8 Million
in the first six months of 1999 to $22.5 Million in the
first six months of 2000. The first six months of 1999
included a pro-rata accrual of $3.2 Million for the
anticipated receipt of lost profits in connection with the
1999 termination of a coal transportation contract as
discussed in the Company's December 31, 1999 Form 10-K.
After excluding this accrual from the first six months 1999
results, gross voyage profit decreased for the first six
months of 2000 as compared to the same period in 1999 by
12.4%. The remaining decrease occurred primarily in the
Company's LINER SERVICES segment, where gross voyage profit
before depreciation decreased 50.1% from $11.4 Million for
the first six months of 1999 to $5.7 Million for the first
six months of 2000. The decrease resulted in part because
one of the segment's LASH vessels, the RHINE FOREST, was in
a shipyard for over 75 days for planned maintenance during
the first quarter of 2000. Additionally, the cost of bunker
fuel has risen significantly in the past six months. During
the first six months of 2000, the Company paid $6.8 Million
more for fuel for its LINER SERVICES segment than in the
first six months of 1999. This increased fuel cost was
incurred even though fewer voyage days were incurred in the
first quarter of 2000 because of the out-of-service time for
the RHINE FOREST. The decrease in gross voyage profit
before depreciation was partially offset by higher revenues
for the first six months of 2000 due to higher Transatlantic
westbound cargo volumes.
The decrease in gross voyage profit for the LINER
SERVICES segment was partially offset by improved results
for the TIME CHARTER CONTRACTS. The gross voyage profit
before depreciation for the TIME CHARTER CONTRACTS segment
increased 15.3% from $24.7 Million in the first six months
of 1999 to $28.4 Million for the same period in 2000 due to
the acquisition and commencement of operations of the
Company's U.S. Flag PCTC, the GREEN DALE, in September of
1999. In addition, the Company's PCTC, the ASIAN EMPEROR,
that delivered to the Company and commenced operations in
May of 1999, showed improved results over the older and
smaller vessel it replaced. The Company also sold one of
its U.S. Flag Pure Car Carriers ("PCCs"), the GREEN BAY, in
June of 2000, and replaced it with a newer and larger PCTC,
the GREEN COVE.
<PAGE>12
The CONTRACTS OF AFFREIGHTMENT segment's gross profit
before depreciation and after the aforementioned elimination
of the 1999 first and second quarter contract termination
accrual, increased 5.5% from $6.2 Million in the first six
months of 1999 to $6.6 Million for the same period in 2000
due to a slight increase in revenue tons carried.
Vessel and barge depreciation for the first six months
of 2000 increased 2.6% to $19.8 Million as compared to $19.3
Million in the same period of 1999 primarily due to the
commencement of operations of the GREEN DALE as discussed
above.
Other Income and Expenses
-------------------------
Administrative and general expenses decreased from
$12.1 Million in the first six months of 1999 to $11.6
Million in the same period in 2000 due to a continuing cost
reduction program.
Earnings in 2000 included a gain of $6.1 Million
recognized on the sale of a PCC in June of 2000 offset by a
loss of $1.0 Million recognized on the sale of one of the
Company's LASH vessels no longer needed for operations.
Earnings in 1999 included a gain of $2.4 Million recognized
on the sale of a parcel of land no longer required in the
Company's operations and a gain of $7.8 Million recognized
on the sale of a PCC in May of 1999.
Interest expense was $16.9 Million for the first six
months of 2000 as compared to $15.2 Million for the same
period in 1999. The increase resulted primarily from the
financing associated with the acquisition of the ASIAN
EMPEROR early in the second quarter of 1999 and the
acquisition of the GREEN DALE at the end of the third
quarter of 1999.
Investment income increased from $695,000 for the first
six months of 1999 to $718,000 for the first six months of
2000 due to a higher average balance of invested funds and
more favorable interest rates.
Income Taxes
------------
The Company provided $48,000 for Federal income taxes
in the first six months of 2000 and $4.3 Million in the
first six months of 1999 at the statutory rate of 35% for
both periods.
<PAGE>13
SECOND QUARTER ENDED JUNE 30, 2000
COMPARED TO SECOND QUARTER ENDED JUNE 30, 1999
Gross Voyage Profit
-------------------
Gross voyage profit decreased 18.1% from $16.2 Million
in the second quarter of 1999 to $13.3 Million in the second
quarter of 2000. The second quarter of 1999 included a pro-
rata accrual of $1.6 Million for the anticipated receipt of
lost profits in connection with the 1999 termination of a
coal transportation contract as discussed in the Company's
December 31, 1999 Form 10-K. After excluding this accrual
from the second quarter 1999 results, gross voyage profit
decreased in the second quarter of 2000 as compared to the
same period in 1999 by 9.4%. The remaining decrease
occurred primarily in the Company's LINER SERVICES segment,
where gross voyage profit before depreciation decreased
22.8% from $6.3 Million in the second quarter of 1999 to
$4.8 Million for the second quarter of 2000. The decrease
resulted primarily from the cost of bunker fuel, which has
risen significantly in the past six months. In the second
quarter of 2000, the Company paid $3.5 Million more for fuel
for its LINER SERVICES segment than in the second quarter of
1999.
The decrease in gross voyage profit for the LINER
SERVICES segment was partially offset by improved results
for the TIME CHARTER CONTRACTS. The gross voyage profit
before depreciation for the TIME CHARTER CONTRACTS segment
increased 5.3% from $13.0 Million in the second quarter of
1999 to $13.7 Million for the same period in 2000 due to the
acquisition and commencement of operations of the Company's
U.S. Flag PCTC, the GREEN DALE, in September of 1999. In
June of 2000, the Company sold one of its PCC's, the GREEN
BAY, and replaced it with a newer and larger PCTC, the GREEN
COVE.
The CONTRACTS OF AFFREIGHTMENT segment's gross profit
before depreciation and after the aforementioned elimination
of the 1999 second quarter contract termination accrual,
increased 6.3% from $3.3 Million in the second quarter of
1999 to $3.5 Million for the same period in 2000 due to a
slight increase in revenue tons carried.
Vessel and barge depreciation for the second quarter of
2000 increased 2.1% to $9.8 Million as compared to $9.6
Million in the same period of 1999 primarily due to the
commencement of operations of the GREEN DALE as discussed
above.
Other Income and Expenses
-------------------------
Administrative and general expenses decreased from $6.1
Million in the second quarter of 1999 to $5.9 Million in the
same period in 2000 due to a continuing cost reduction
program.
<PAGE>14
Earnings in 2000 included a gain of $6.1 Million
recognized on the sale of a PCC in June of 2000 offset by a
loss of $1.0 Million recognized on the sale of one of the
Company's LASH vessels no longer needed for operations.
Earnings in the second quarter of 1999 included a gain of
$7.8 Million recognized on the sale of a PCC in May of 1999.
Interest expense was $8.3 Million for the second
quarter of 2000 as compared to $7.7 Million for the same
period in 1999. The increase resulted primarily from the
financing associated with the acquisition of the ASIAN
EMPEROR early in the second quarter of 1999 and the
acquisition of the GREEN DALE at the end of the third
quarter of 1999.
Investment income increased from $320,000 for the
second quarter of 1999 to $459,000 for the second quarter of
2000 due to a higher average balance of invested funds and
more favorable interest rates.
Income Taxes
------------
The Company provided $1.7 Million for Federal income
taxes in the second quarter of 2000 and $3.7 Million in the
second quarter of 1999 at the statutory rate of 35% for both
periods.
<PAGE>15
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased from $35.6
Million at December 31, 1999, to $49.9 Million at June 30,
2000, after provision for current maturities of long-term
debt and capital lease obligations of $30.7 Million. Cash
and cash equivalents increased during the first six months
of 2000 by $29.1 Million to a total of $47.8 Million. This
increase, which resulted from cash provided by operating
activities of $38.7 Million and by financing activities of
$4.3 Million, was partially offset by cash used for
investing activities of $13.9 Million.
The major source of cash from operations was net loss
adjusted for the gain on sale of vessels and other property,
as well as non-cash provisions such as depreciation and
amortization. Investing activities during the period
included asset additions of $33.2 Million, substantially
all of which resulted from the purchase of the GREEN COVE
and $3.3 Million in deferred vessel drydocking charges. These
additions were partially offset by the proceeds of $17.7
Million received from the sale of vessels and property,
substantially all of which resulted from the sale of the
GREEN BAY, proceeds from the sale of short-term marketable
securities of $4.0 Million, and returns from investments in
direct financing leases of $1.9 Million.
The net cash provided by financing activities of $4.3
Million included proceeds from the financing of the GREEN
COVE for $22.4 Million, proceeds from a sale-leaseback of
two LASH vessels for $14.0 Million and draws against the
Company's line of credit totaling $38.0 Million, offset by
reductions of debt and capital lease obligations of $69.0
Million stemming from regularly scheduled principal payments
and repayments of amounts drawn under lines of credit.
At June 30, 2000, $9.0 Million was outstanding on the
Company's $48.0 Million revolving credit facility.
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 concluded in early August a sale/leaseback
agreement on one of its PCTCs which resulted in net sales
proceeds of approximately $38.0 Million.
The Company has not been notified that it is a
potentially responsible party in connection with any
environmental matters.
At a regular meeting held July 19, 2000, the Board of
Directors declared a quarterly dividend of 6.25 cents per
Common Share payable on September 15, 2000, to shareholders
of record on September 1, 2000.
<PAGE>16
STOCK REPURCHASE PROGRAM
In October of 1998, the Company's Board of Directors
approved a stock repurchase program to buy up to 500,000
shares of its common stock. In October of 1999, the Company
completed the program and the Company's Board of Directors
approved another stock repurchase program to buy up to
1,000,000 shares of its common stock, based on the Board's
belief that the market value of the Company's common stock
did not adequately reflect the Company's inherent value.
Repurchases are expected to be made in the open market or in
privately negotiated transactions at the discretion of the
Company's management, depending upon financial and market
conditions. As of June 30, 2000, 600,000 shares had been
repurchased under these two programs for a total cost of
$7,571,000 at an average market price of $12.68 per share,
of which 4,300 shares were repurchased during 2000.
NEW ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard
("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts,
and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15,
1999. In June of 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 is an amendment of SFAS No.
133 and defers the effective date of SFAS No. 133 to fiscal
years beginning after June 15, 2000. The Company has not
chosen early adoption and, as it is not possible to predict
the Company's derivative position at the time this standard
will be applied, it is unknown what effect, if any, SFAS No.
133 will have on its financial statements once adopted.
While the Company has not yet quantified the impact on its
financial statements, the Company does not believe adoption
will have a material impact on net income, although adoption
is likely to increase volatility of comprehensive income and
accumulated other comprehensive income.
<PAGE>17
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of its business, the Company is
exposed to foreign currency, interest rate, and commodity
price risk. The Company utilizes derivative financial
instruments including forward exchange contracts, interest
rate swap agreements and commodity swap agreements to manage
certain of these exposures. The Company hedges only firm
commitments or anticipated transactions and does not use
derivatives for speculation. The Company neither holds nor
issues financial instruments for trading purposes.
At June 30, 2000, there were no material changes in
market risk exposure for the foreign currency risk described
in the Company's Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1999.
The fair value of long-term debt at June 30, 2000,
including current maturities, was estimated to be $411.7
Million compared to a carrying value of $409.1 Million. The
potential increase in fair value resulting from a
hypothetical 10% increase in the average interest rates
applicable to the Company's long-term debt at June 30, 2000,
would be approximately $8.6 Million or 2.1% of the carrying
value.
The estimated fair value of the interest rate swap
agreements at June 30, 2000, discussed in the Company's Form
10-K, based on the amount that the banks would receive or
pay to terminate the swap agreements taking into account
current market conditions and interest rates at the
reporting date, was an asset of $3.9 Million. A
hypothetical 10% decrease in interest rates at June 30,
2000, would have resulted in a $1.7 Million decrease in the
fair value of the asset.
The estimated fair value of the commodity swap
agreements at June 30, 2000, discussed in the Company's Form
10-K, based on the difference between price per ton of fuel
at the end of the second quarter and the contract delivery
price per ton of fuel times the quantity applicable to the
agreements, was an asset of $1.3 Million. A hypothetical
10% decrease in the price per ton of fuel at June 30, 2000,
would have resulted in a $616,000 decrease in the fair value
of the asset.
<PAGE>18
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The matters voted upon and results of the voting at the
Company's annual meeting of shareholders held April 12,
2000, were reported in response to Item 4 of the Company's
Form 10-Q filed with the Securities and Exchange Commission
for the quarterly period ended March 31, 2000, and are
incorporated herein by reference.
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
June 30, 2000.
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 August 11, 2000
___________________________
