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 March 31, 2001
----------------
__ 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
- ------------------------------------------------------------------------
(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 6,082,887 shares (March 31,2001)
-----------
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(All Amounts in Thousands Except Share Data)
(Unaudited)
Three Months Ended March 31,
2001 2000
-------- --------
Revenues $77,118 $85,349
Subsidy Revenue 3,281 3,675
-------- --------
80,399 89,024
-------- --------
Operating Expenses:
Voyage Expenses 63,453 69,907
Vessel and Barge Depreciation 9,307 9,942
Impairment Loss 2,355 -
-------- --------
Gross Voyage Profit 5,284 9,175
-------- --------
Administrative and General Expenses 5,996 5,706
Loss on Sale of Vessel (1,270) -
Gain on Sale of Other Assets 1,204 -
-------- --------
Operating (Loss) Income (778) 3,469
-------- --------
Interest:
Interest Expense 7,834 8,524
Investment Income (328) (259)
-------- --------
7,506 8,265
-------- --------
Loss Before Provision for Income
Taxes and Equity in Net Income(Loss)
of Unconsolidated Entities (8,284) (4,796)
-------- --------
Benefit for Income Taxes:
Current 95 649
Deferred (2,936) (2,275)
State 56 84
-------- --------
(2,785) (1,542)
-------- --------
Equity in Net Income (Loss) of
Unconsolidated Entities (Net of
Applicable Taxes) 146 (45)
-------- --------
Net Loss $(5,353) $(3,299)
======== ========
Basic and Diluted Earnings Per Share:
Net Loss $ (0.88) $ (0.54)
======== ========
Weighted Average Shares of
Common Stock Outstanding 6,082,887 6,083,155
<FN>
The accompanying notes are an integral part of these statements.
3
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(All Amounts in Thousands)
(Unaudited)
March 31, December 31,
ASSETS 2001 2000
------------ ------------
Current Assets:
Cash and Cash Equivalents $ 18,284 $ 16,906
Marketable Securities 5,750 6,018
Accounts Receivable, Net of Allowance
for Doubtful Accounts of $229 and $282
in 2001 and 2000, Respectively:
Traffic 37,805 49,278
Agents' 5,909 5,226
Claims and Other 9,346 9,513
Federal Income Taxes Receivable 423 812
Deferred Income Taxes 42 42
Net Investment in Direct Financing Leases 3,712 3,621
Other Current Assets 4,604 8,032
Material and Supplies Inventory, at Lower
of Cost or Market 10,179 11,016
------------ ------------
Total Current Assets 96,054 110,464
------------ ------------
Marketable Equity Securities 200 186
------------ ------------
Investment in Unconsolidated Entities 5,843 3,538
------------ ------------
Net Investment in Direct Financing Leases 107,203 108,106
------------ ------------
Vessels, Property, and Other Equipment, at Cost:
Vessels and Barges 731,290 744,999
Other Marine Equipment 8,307 8,291
Terminal Facilities 17,730 18,377
Land 1,230 1,230
Furniture and Equipment 14,767 15,974
------------ ------------
773,324 788,871
Less - Accumulated Depreciation (369,435) (374,006)
------------ ------------
403,889 414,865
------------ ------------
Other Assets:
Deferred Charges, Net of Accumulated
Amortization of $34,557 and $30,867
in 2001 and 2000, Respectively 29,649 32,296
Acquired Contract Costs, Net of Accumulated
Amortization of $17,429 and $17,065 in
2001 and 2000, Respectively 13,097 13,461
Due from Related Parties 781 633
Other 13,433 11,627
------------ ------------
56,960 58,017
------------ ------------
$ 670,149 $ 695,176
============ ============
<FN>
The accompanying notes are an integral part of these statements.
4
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(All Amounts in Thousands Except Share Data)
(Unaudited)
March 31, December 31,
2001 2000
------------ ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current Maturities of Long-Term Debt $ 31,604 $ 22,181
Current Maturities of Capital Lease
Obligations 6,516 7,824
Accounts Payable and Accrued Liabilities 57,263 52,276
Current Liabilities to be Refinanced (10,000) -
------------ ------------
Total Current Liabilities 85,383 82,281
------------ ------------
Current Liabilities to be Refinanced 10,000 -
------------ ------------
Billings in Excess of Income Earned and
Expenses Incurred 921 5,462
------------ ------------
Long-Term Capital Lease Obligations, Less
Current Maturities 48,978 51,827
------------ ------------
Long-Term Debt, Less Current Maturities 288,763 308,037
------------ ------------
Other Long-Term Liabilities:
Deferred Income Taxes 40,259 43,300
Claims and Other 20,746 22,737
------------ ------------
61,005 66,037
------------ ------------
Commitments and Contingent Liabilities
Stockholders' Investment:
Common Stock 6,756 6,756
Additional Paid-In Capital 54,450 54,450
Retained Earnings 124,022 129,755
Less - Treasury Stock (8,704) (8,704)
Accumulated Other Comprehensive Loss (1,425) (725)
------------ ------------
175,099 181,532
------------ ------------
$ 670,149 $ 695,176
============ ============
<FN>
The accompanying notes are an integral part of these statements.
5
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
(All Amounts in Thousands)
(Unaudited)
Accumulated
Additional Other
Common Paid-In Retained Treasury Comprehensive
Stock Capital Earnings Stock Income(Loss) Total
-------------------------------------------------------------
Balance at
December 31, 1999 $ 6,756 $ 54,450 $130,440 ($8,654) ($508) $182,484
Comprehensive Income:
Net Income for Year
Ended December 31,
2000 - - 836 - - 836
Other Comprehensive Income:
Unrealized Holding Loss
on Marketable Securities,
Net of Deferred Taxes
of ($117) - - - - (217) (217)
--------
Total Comprehensive Income 619
Treasury Stock - - - (50) - (50)
Cash Dividends - - (1,521) - - (1,521)
-------------------------------------------------------------
Balance at
December 31, 2000 $ 6,756 $54,450 $129,755 ($8,704) ($725) $181,532
=============================================================
Comprehensive Income:
Net Loss for the Period
Ended March 31, 2001 - - (5,353) - - (5,353)
Other Comprehensive Income:
Unrealized Holding Loss on
Marketable Securities,
Net of Deferred Taxes
of ($60) - - - - (112) (112)
Cumulative Effect of Adoption
of SFAS No.133, Net of
Deferred Taxes of ($135),
on January 1, 2001 - - - - (250) (250)
Unrealized Holding Loss
on Derivatives, Net
of Deferred Taxes of
($182) - - - - (338) (338)
------
Total Comprehensive Income (6,053)
Cash Dividends - - (380) - - (380)
-------------------------------------------------------------
Balance at
March 31, 2001 $6,756 $54,450 $124,022 ($8,704) ($1,425) $175,099
=============================================================
<FN>
The accompanying notes are an integral part of these statements.
6
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All Amounts in Thousands)
(Unaudited)
Three Months
Ended March 31,
2001 2000
--------- ---------
Cash Flows from Operating Activities:
Net Loss $ (5,353) $ (3,299)
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation 9,872 10,704
Amortization of Deferred Charges
and Other Assets 4,198 4,905
(Benefit) Provision for Deferred Income Taxes (2,936) (2,275)
Equity in Net(Gain)Loss of Unconsolidated
Entities (133) 45
(Gain) Loss on Sale of Vessels and Other Property (35) 5
Impairment Loss 2,355 -
Changes in:
Accounts Receivable 12,157 5,145
Inventories and Other Current Assets 3,594 (377)
Other Assets (1,219) 2,518
Accounts Payable and Accrued Liabilities 1,794 4,512
Federal Income Taxes Payable 589 452
Billings in Excess of Income Earned and
Expenses Incurred (4,541) (1,622)
Other Long-Term Liabilities (2,987) 1,505
--------- ---------
Net Cash Provided by Operating Activities 17,355 22,218
--------- ---------
Cash Flows from Investing Activities:
Net Investment in Direct Financing Leases 812 1,088
Purchase of Vessels and Other Property (118) (897)
Additions to Deferred Charges (3,550) (710)
Proceeds from Sale of Vessels and Other Property 3,473 104
Proceeds from and Purchase of Short-Term
Investments 78 781
Investment in Unconsolidated Entities (2,100) -
Other Investing Activities (119) 19
--------- ---------
Net Cash(Used)Provided by Investing Activities (1,524) 385
--------- ---------
Cash Flows from Financing Activities:
Proceeds from Issuance of Debt and Capital
Lease Obligations 9,800 5,000
Reduction of Debt and Capital Lease Obligations(23,808) (21,870)
Additions to Deferred Financing Charges (65) -
Purchase of Treasury Stock - (50)
Common Stock Dividends Paid (380) (381)
Other Financing Activities - -
--------- ---------
Net Cash Used by Financing Activities (14,453) (17,301)
--------- ---------
Net Increase in Cash and Cash Equivalents 1,378 5,302
Cash and Cash Equivalents at Beginning of Year 16,906 18,661
--------- ---------
Cash and Cash Equivalents at End of Year $18,284 $23,963
========= =========
<FN>
The accompanying notes are an integral part of these statements.
7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2001
(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, 2000. 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 2001. 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 2001 interim results are not necessarily indicative of
the results of operations for the full year 2001.
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. During the first quarter, 2001, a
reclassification of the Southeast Asia Transportation contract was made from
the CONTRACTS OF AFFREIGHTMENT segment to the TIME CHARTER CONTRACTS segment.
The
8
reclassified service was amended to reflect a fixed monthly revenue basis
as opposed to freights earned based upon amounts of cargo carried. 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 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 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 provide specialized
services to the operating segments. The following table presents information
about segment profit and loss for the three months ended March 31, 2001 and
2000.
Time
Liner Charter Contracts of
(All Amounts in Thousands) Services Contracts Affreightment Other Total
- ---------------------------------------------------------------------------
2001
Revenues from external
Customers $ 41,074 $ 34,369 $ 3,766 $ 1,190 $80,399
Intersegment revenues - - - 7,178 7,178
Gross voyage profit
before depreciation 952 14,707 1,950 (663) 16,946
Depreciation 4,102 4,384 746 75 9,307
Interest expense 1,182 4,965 1,610 77 7,834
Impairment (Loss) - (2,355) - - (2,355)
(Loss)Gain on Sale of Vessel
and Other Assets - (345) - 279 (66)
Segment (loss) profit before
interest income, Administrative
and general expenses, equity
in Unconsolidated entities
and taxes (4,332) 2,658 (406) (536) (2,616)
- ----------------------------------------------------------------------------
2000
Revenues from external
Customers $ 44,918 $ 34,313 $ 7,669 $ 2,124 $89,024
Intersegment revenues - - - 8,994 8,994
Gross voyage profit
before depreciation 858 14,787 3,032 440 19,117
Depreciation 4,503 4,402 969 68 9,942
Interest expense 1,418 5,164 1,784 158 8,524
Segment(loss)profit before
interest income, Administrative
and general expenses, equity
in Unconsolidated entities
and taxes (5,063) 5,221 279 214 651
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
9
Following is a reconciliation of the totals reported for the operating
segments to the applicable line items in the consolidated financial
statements:
(All Amounts in Thousands) Three Months Ended March 31,
2001 2000
--------- ---------
Total (loss) profit for reportable segments $ (2,616) $ 651
Unallocated amounts:
Interest income 328 259
Administrative and general expenses 5,996 5,706
--------- ---------
Loss before income taxes and equity in
Unconsolidated entities $ (8,284) $ (4,796)
========= =========
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. Stock options covering 475,000 shares were excluded
from the computation of diluted earnings per share in the first three
months of 2001 and 2000, as the effect would have been antidilutive.
Note 4. 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 adopted SFAS No. 133 on January 1, 2001, which resulted
in a cumulative effect of an accounting change to earnings of $16,000 and
an increase in other comprehensive income included in Stockholders'
Investment of $385,000. The Company employs interest rate swap agreements,
foreign currency contracts, and commodity swap contracts.
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, 2000.
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.
11
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2000
Gross Voyage Profit
- -------------------
Gross voyage profit decreased 42.4% from $9.2 Million in the first
quarter of 2000 to $5.3 Million in the first quarter of 2001. The decrease
resulted primarily from deterioration in the TIME CHARTER CONTRACTS segment
which was affected by the before tax impairment loss of approximately $2.3
Million recognized as a result of the disposition of the Company's U.S. Flag
LASH vessel, the GREEN HARBOUR, sold for scrap early in the second quarter.
Since the second quarter sale resulted in a loss, for accounting and
reporting purposes, first quarter results were adjusted to reflect an
impairment loss, measured as the amount by which the carrying value of the
vessel exceeded its fair value established by the sales price. This vessel
recently completed its contract with the U.S. Military Sealift Command
("MSC") and had reached the end of its economic life. Excluding the
impairment loss, the TIME CHARTER CONTRACTS segment gross voyage profit
before depreciation was approximately unchanged from the first quarter
2000. Lower gross profit resulting from the completion of the contracts on
two of the Company's LASH vessels previously on charter to the MSC was
approximately offset by the reclassification of the Southeast Asia
Transportation contract that was previously included within the CONTRACTS
OF AFFREIGHTMENT segment. During fourth quarter, 2000, the contract
applicable to the reclassified service was amended to reflect a fixed
monthly revenue basis as opposed to freights earned based upon amounts of
cargo carried. This contract is through 2002 thereafter with automatic
yearly extensions at either party's option to cancel.
Gross voyage profit before depreciation for the LINER SERVICES segment
increased from $858,000 in the first quarter of 2000 to $952,000 in the
first quarter of 2001. Results of the Company's Trans-Atlantic Liner
Service accounted for all of the increase plus an additional amount as a
result of both vessels in the service operating for the entire first quarter
as opposed to the same quarter in 2000, during which one of the vessels was
in the shipyard for 75 days for planned maintenance. Another of the Company's
LASH vessels was substituted during the 75 days but at higher operating cost
levels. The higher Trans-Atlantic gross profit was partially offset by 105
out of service days in the current first quarter associated with unplanned
maintenance required on two LASH vessels operating in the Waterman service
between the U.S. Gulf and South Asia. Both of these vessels have now
returned to service, and operations are
12
expected to return to normal after scheduling realignments are worked out
during the second quarter. The aforementioned increase in the Trans-Atlantic
Liner operation was further offset by losses incurred in the rail-car ferry
service between Mobile, Alabama and Coatzacoalcos, Mexico ("Mexican Service").
The Company's two special purpose vessels, BALI SEA and BANDA SEA, were used
to initiate the Mexican Service in February. This operation experienced lower
than normally expected cargo bookings in the early weeks of operation which
is not unusual with the start-up of a new service. Cargo bookings continue
to grow, however, and positive results for the service are expected to be
achieved in the near term.
The CONTRACTS OF AFFREIGHTMENT segment's gross profit before depreciation
decreased 35.7% from $3.0 Million in the first quarter of 2000 to $2.0 Million
in the first quarter of 2001 due to the aforementioned reclassification
resulting from the change in the nature of a contract as described in the
TIME CHARTER CONTRACTS segment.
Vessel and barge depreciation for the first quarter of 2001 decreased
6.4% to $9.3 Million as compared to $9.9 Million in the same period of 2000
primarily due to the sale of one of the Company's Ice Strengthened
Multi-Purpose vessels and one of the Company's LASH vessels being fully
depreciated at the end of 2000.
Other Income and Expenses
- -------------------------
Administrative and general expenses increased from $5.7 Million in
the first quarter of 2000 to $6.0 Million in the same period in 2001
primarily reflecting increases associated with the start-up of the Mexican
Service.
Earnings for the TIME CHARTER CONTRACTS segment in 2001 included a
loss of of $1.3 Million due to the sale of a LASH vessel which was partially
offset by a gain of $1.2 Million from the sale of certain assets no longer
required in the Company's operations.
Interest expense was $7.8 Million for the first quarter of 2001 as compared
to $8.5 Million for the same period in 2000. This decrease is primarily due
to the repurchase of 9% and 7.75% Senior Notes in 2000 partially offset from
the financing associated with the acquisition of the Pure Car/Truck Carrier
("PCTC"), "Green Cove", in June of 2000.
Investment income increased from $259,000 for the first quarter of 2000
to $328,000 for the first quarter of 2001 reflecting slightly higher returns
on marketable securities.
13
Income Taxes
- ------------
In the first quarter of 2001, the Company had an income tax benefit of
$2.8 Million compared to an income tax benefit of $1.5 Million in the same
period in 2000, at the statutory rate of 35% for both periods.
14
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased from $28.2 Million at December
31, 2000, to $10.7 Million at March 31, 2001, after provision for current
maturities of long-term debt and capital lease obligations of $38.1 Million.
Cash and cash equivalents increased during the first three months of 2001 by
$1.4 Million to a total of $18.2 Million. This increase, which resulted from
cash provided by operating activities of $17.4 Million, was partially offset
by cash used for financing activities of $14.5 Million and cash used for
investing activities of $1.5 Million.
Operating activities generated the positive cash flow after adjusting
the net loss for non-cash provisions such as depreciation, amortization and
impairment loss. Investing activities during the period included $3.6 Million
in deferred vessel drydocking charges and $2.1 Million for a 30% interest in
companies which own and operate special purpose cement carrying vessels.
These additions were partially offset by $3.5 Million received from the sale
of a vessel and property.
The net cash used for financing activities of $14.5 Million included
reductions of debt and capital lease obligations of $23.8 Million stemming
from regularly scheduled principal payments and repayments of amounts drawn
under lines of credit. These reductions were offset by proceeds received from
financing secured by one of the Company's PCTC's, for $1.8 Million, and draws
against the Company's line of credit totaling $8.0 Million.
At March 31, 2001, $11.0 Million was outstanding on the Company's $38.0
Million revolving credit facility, which expires March 31, 2002. At the end
of the first quarter the Company entered into an additional $10.0 Million
revolving credit facility which expires April 23, 2003 and was undrawn at March
31, 2001.
Management believes that normal operations will provide sufficient
working capital and cash flows to meet debt service and dividend requirements
during the foreseeable future. Despite the reported loss during the first
quarter of 2001, the Company continued to meet all of its financial covenants
under its various debt agreements. However, because the first quarter loss has
reduced the margin on certain of those covenants, management is taking steps to
ensure continuing compliance with the covenants even if additional losses are
incurred.
The Company has not been notified that it is a potentially responsible
party in connection with any environmental matters.
15
At a regular meeting held April 18, 2001, the Board of Directors declared
a quarterly dividend of 6.25 cents per Common Share payable on June 15, 2001,
to shareholders of record on June 1, 2001.
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 being 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 March 31, 2001, 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. No shares have been purchased during 2001.
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 adopted
SFAS No. 133 on January 1, 2001, which resulted in a cumulative effect of an
accounting change to earnings of $16,000 and an increase in other comprehensive
income included in Stockholders' Investment of $385,000. The Company employs
interest rate swap agreements, foreign currency contracts, and commodity swap
contracts.
17
MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT
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.
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, 2000.
The fair value of long-term debt at March 31, 2001, including current
maturities, was estimated to be $327.5 Million compared to a carrying value
of $320.4 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 March 31, 2001, would be approximately $5.0
Million or 1.6% of the carrying value.
The fair value of the interest rate swap agreements at March 31, 2001,
as discussed in the Form 10-K, estimated based on the amount that the banks
would receive or pay to terminate the swap agreements at the reporting date
taking into account current market conditions and interest rates, was a
liability of $579,000. A hypothetical 10% decrease in interest rates as of
March 31, 2001, would have resulted in a $1.5 Million increase in the fair
value of the liability.
The fair value of the commodity swap agreements at March 31, 2001, as
discussed in the Form 10-K, estimated based on the difference between first
quarter price per ton of fuel and the contract delivery price per ton of
fuel times the quantity applicable to the agreements, was a liability of
$290,000. A hypothetical 10% decrease in the first quarter fuel price per
ton of fuel as of March 31, 2001, would have resulted in a $455,000 increase
in the fair value of the liability.
18
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held April 18, 2001. The matters
voted upon and the results of the voting were as follows:
(1) Election of Board of Directors:
Nominee Shares Voted For Withheld Authority
------- ---------------- ------------------
Niels W. Johnsen 5,132,434 580,268
Erik F. Johnsen 5,132,434 580,268
Niels M. Johnsen 5,132,691 580,011
Erik L. Johnsen 5,132,691 580,011
Harold S. Grehan, Jr. 5,132,434 580,268
Raymond V. O'Brien, Jr. 5,132,691 580,011
Edwin Lupberger 5,132,691 580,011
Edward K. Trowbridge 5,132,434 580,268
(2) Ratification of Arthur Andersen LLP, certified public accountants, as
independent auditors for the Corporation for the fiscal year ending
December 31, 2001:
Shares Voted For 5,704,024
Shares Voted Against 717
Abstentions 7,961
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 March
31, 2001.
19
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 ___________________________