1
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, 1994
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file 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
incorporation or organization) Identification 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 requirements 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 5,346,611 shares (March 31, 1994)
2
PART I - FINANCIAL INFORMATION
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
1994 1993
ASSETS __________ ___________
Current Assets:
Cash and Cash Equivalents $38,274 $32,770
Accounts Receivable, Net 42,851 46,134
Net Investment in Direct
Financing Leases 2,240 2,257
Current Deferred Income Taxes 1,501 1,955
Other Current Assets 3,354 6,666
Material and Supplies
Inventory, At Cost 8,324 7,853
_______ _______
Total Current Assets 96,544 97,635
_______ _______
Investments In and Advances
to Unconsolidated Entities 29,894 30,367
_______ _______
Net Investment in Direct
Financing Leases 28,222 28,775
_______ _______
Vessels, Property and Other Equipment, At Cost:
Vessels and Barges 461,661 432,429
Other Marine Equipment 3,857 3,842
Terminal Facilities 17,874 17,521
Land 2,317 2,317
Furniture and Equipment 10,093 9,676
_______ _______
495,802 465,785
Less - Accumulated Depreciation (196,307) (189,924)
________ ________
299,495 275,861
________ ________
Other Assets:
Deferred Charges in Process of
Amortization 38,605 41,992
Acquired Contract Costs, Net of
Accumulated Amortization 26,023 26,781
Due from Related Parties, Net of
Allowance for
Doubtful Accounts 4,115 4,360
Other 11,170 12,929
________ ________
79,913 86,062
________ ________
$534,068 $518,700
======== ========
<FN>
The accompanying notes are an integral part of these statements.
3
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
1994 1993
_________ __________
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current Maturities of
Long-Term Debt $ 26,392 $ 25,879
Current Maturities of Capital
Lease Obligations 5,127 5,000
Accounts Payable and
Accrued Liabilities 46,659 49,447
Current Liabilities to be
Refinanced (246) (340)
_______ ________
Total Current Liabilities 77,932 79,986
_______ ________
Current Liabilities to be
Refinanced 246 340
_______ ________
Billings in Excess of Income
Earned and Expenses Incurred 5,283 4,133
_______ ________
Long-Term Capital Lease Obligations,
Less Current Maturities 25,942 27,020
_______ ________
Long-Term Debt,
Less Current Maturities 229,324 213,112
________ ________
Reserves and Deferred Credits:
Deferred Income Taxes 34,587 35,613
Claims and Other 24,078 23,999
________ ________
58,665 59,612
________ ________
Stockholders' Investment:
Common Stock 5,405 5,405
Additional Paid-in Capital 54,450 54,450
Retained Earnings 77,954 75,775
Less - Shares of Common Stock in
Treasury, at Cost (1,133) (1,133)
________ ________
136,676 134,497
________ ________
$534,068 $518,700
======== ========
<FN>
The accompanying notes are an integral part of these
statements.
4
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
1994 1993
________ ________
Revenues $78,443 $79,398
Operating Differential Subsidy 4,918 4,599
________ ________
83,361 83,997
________ ________
Operating Expenses:
Voyage Expenses 62,188 62,470
Vessel and Barge Depreciation 6,107 5,796
________ ________
Gross Voyage Profit 15,066 15,731
________ ________
Administrative and General
Expenses 6,620 6,330
Gain on Sale of Assets 7 10
________ ________
Operating Income 8,453 9,411
________ ________
Interest:
Interest Expense 5,339 4,934
Investment Income (456) (198)
________ ________
4,883 4,736
________ ________
Unconsolidated Entities (Net
of Applicable Taxes):
Equity in Net Income (Loss) of
Unconsolidated Entities 142 (1,969)
________ ________
Income Before Provision
for Income Taxes 3,712 2,706
________ ________
Provision for Income Taxes:
Current 1,819 1,185
Deferred (572) 424
State 18 41
________ ________
1,265 1,650
________ ________
Net Income $ 2,447 $ 1,056
Less:
Preferred Stock Dividends -- 355
Accretion of Discount on
Preferred Stock -- 63
________ ________
Net Income Applicable to Common
and Common Equivalent Shares $ 2,447 $ 638
======== ========
Earnings Per Share:
Net Income $ 0.46 $ 0.12
======== ========
Common and Common
Equivalent Shares 5,346,611 5,135,572
<FN>
The accompanying notes are an integral part of these
statements.
5
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
INVESTMENT
(Dollars in Thousands)
(Unaudited)
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
_________ _________ _________ _________ _________
Balance at December 31,
1992 $ 4,978 $ 48,216 $ 71,943 $ (1,133) $ 124,004
Net Income for Year
Ended December 31,
1993 5,929 5,929
Preferred Stock
Dividends (868) (868)
Accretion of Discount
on Preferred Stock (202) (202)
Cash Dividends (1,027) (1,027)
Issuance of Stock,
427,500 Shares
Pursuant to
Exercise of Warrants 427 6,234 6,661
_________ _________ _________ _________ _________
Balance at December
31, 1993 $ 5,405 $ 54,450 $ 75,775 $ (1,133) $ 134,497
Net Income for
Three Months Ended
March 31, 1994 2,447 2,447
Cash Dividends (268) (268)
_________ _________ _________ _________ _________
Balance at
March 31, 1994 $ 5,405 $ 54,450 $ 77,954 $ (1,133) $ 136,676
========= = ======= ========= ========= =========
<FN>
The accompanying notes are an integral part of these statements.
6
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
March 31,
1994 1993
________ _________
Cash Flows from Operating
Activities:
Net Income $ 2,447 $ 1,056
Adjustment to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation 6,392 6,003
Amortization of Deferred
Charges and Other Assets 4,114 4,697
(Benefit) Provision for
Deferred Income Taxes (572) 424
Equity in Unconsolidated Entities (142) 1,969
Gain on Sale of Vessels
and Other Property (7) (10)
Changes in:
Reserve for Claims and
Other Deferred Credits 79 (4,784)
Net Investment in Direct
Financing Leases 570 580
Unearned Income 1,150 (3,837)
Other Assets 2,315 503
Accounts Receivable 3,283 3,301
Inventories and Other
Current Assets 2,841 480
Accounts Payable and
Accrued Liabilities (1,085) 8,091
________ ________
Net Cash Provided by
Operating Activities 21,385 18,473
_________ ________
Cash Flows from Investing Activities:
Purchase of Vessels and
Other Property (29,348) (3,511)
Additions to Deferred Charges (2,663) (3,460)
Proceeds from Sale of Vessels
and Other Property 9 599
Investment in and Advances to
Unconsolidated Entities 615 (3,756)
_________ _________
Net Cash Used by Investing Activities (31,387) (10,128)
_________ _________
Cash Flows from Financing Activities:
Proceeds from Issuance of Debt
and Capital Lease Obligations 21,109 22,132
Reduction of Debt and Capital
Lease Obligations (5,335) (25,177)
Preferred and Common Stock
Dividends Paid (268) (601)
_________ _________
Net Cash Provided (Used) by
Financing Activities 15,506 (3,646)
_________ _________
Net Increase in Cash and
Cash Equivalents 5,504 4,699
Cash and Cash Equivalents at
Beginning of Period 32,770 30,879
_________ _________
Cash and Cash Equivalents
at End of Period $38,274 $35,578
========= =========
<FN>
The accompanying notes are an integral part of these
statements.
7
INTERNATIONAL SHIPHOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1994
(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,
1993.
Interim statements are subject to possible adjustments
in connection with the annual audit of the Company's
accounts for the full year 1994; 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 1994 interim results are not necessarily
indicative of the results of operations for the full
year 1994.
The Company's policy is to consolidate all
subsidiaries in which it holds a 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 a
20% voting interest and in which the Company cannot
exercise significant influence over operating and
financial activities. The Company uses the equity
method to account for investments in entities in which
it holds a 20% to 50% voting interest.
Certain investments previously accounted for under the
equity method are currently accounted for under the
cost method as a result of a sale of partial interests
as further discussed in the "Results of Operations".
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INTERNATIONAL SHIPHOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
_____________________
The Company's vessels are operated under a variety of
charters and contracts. The nature of these
arrangements is such that, without a material variation
in gross voyage profits (total revenues less voyage
expenses and vessel and barge depreciation), the
revenues and expenses attributable to a vessel deployed
under one type of charter or contract can differ
substantially from those attributable to the same
vessel if deployed under a different type of charter or
contract. Accordingly, depending on the mix of charters
or contracts in place during a particular accounting
period, the Company's revenues and expenses can
fluctuate substantially from one period to another even
though the number of vessels deployed, the number of
voyages completed, the amount of cargo carried and the
gross voyage profit derived from the 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.
Gross Voyage Profit. Gross voyage profit decreased
slightly by 4.2% to $15.1 million in the first quarter
of 1994 as compared to $15.7 million for the first
quarter of 1993. Gross profit for the Company's LASH
vessels which are employed in a liner service between
ports on the U.S. Gulf/U.S. Atlantic Coast and South
Asia (Trade Routes 18 and 17) decreased during the
first quarter of 1994 as compared to the comparable
period in 1993. This was primarily the result of a
decline in freight rates and lost voyage days resulting
from weather delays and a casualty involving one of the
Company's FLASH units employed in this service. The
vessel has been repaired and is now back in service.
Results for the vessels chartered to the Military
Sealift Command ("MSC") decreased in the first quarter
of 1994 as compared to the first quarter of 1993 due to
scheduled reductions in charterhire rates. Gross
profit was favorably affected by improved charterhire
rates and increased volume of westbound cargo in the
Company's foreign flag LASH liner service during the
first quarter of 1994 as compared to the comparable
period in 1993.
Vessel and barge depreciation expense increased by
5.3% to $6.1 million during the first quarter of 1994
as compared to $5.8 million for the first quarter of
1993 due to costs associated with the Company's barge
refurbishment program, costs associated with
9
vessel upgrade work done on the Amazon and the
acquisition in June, 1993 of the remaining 50%
ownership interest in a company which operates a LASH
barge intermodal terminal located in Memphis,
Tennessee. This increased the Company's interest from
50% to 100%.
Other Income and Expense. Administrative and general
expense increased slightly from $6.3 million for the
first quarter of 1993 to $6.6 million for the first
quarter of 1994 in large part due to the aforementioned
acquisition of a LASH barge intermodal terminal
facility whose results have been included in the
Company's consolidated statements since June 1, 1993.
Interest expense increased to $5.3 million in the
first quarter of 1994 as compared to $4.9 million in
the first quarter of 1993, primarily due to interest
incurred on the $100 million, 9% Senior Unsecured Notes
issued in July, 1993. Partially offsetting this
increase were lower interest payments on other company
debt as the result of the prepayment of approximately
$63.8 million of debt during 1993 from the
aforementioned bond issue.
The Company's share of earnings from unconsolidated
entities increased from a net loss of $1,969,000 in the
first quarter of 1993 to net income of $142,000 in the
first quarter of 1994. The loss in the first quarter of
1993 resulted primarily from the Company's investment
in A/S Havtor and A/S Havtor Management, Norwegian
companies in which the Company has an interest. During
the first quarter of 1993 the Company sold an 18.5%
direct interest in A/S Havtor for $7.6 million, of
which $2.8 million was received in cash and $4.8
million was received in the form of a promissory note.
The transaction reduced the Company's direct interest
in A/S Havtor to 14.8% and resulted in a gain before
taxes of approximately $ 1.4 million. A provision for
doubtful accounts equal to the pre-tax gain was
recorded which will have the effect of deferring
recognition of the gain until receipt of the proceeds
from the promissory note, which matures in mid-1996.
Since the Company has no substantive control regarding
their operations and holds direct and indirect
ownership interests in each that are less than 20%,
the investments have been accounted for since April 1,
1993 under the cost method of accounting, which permits
recognition of income only upon the distribution of
dividends. The Company has been advised that A/S
Havtor and A/S Havtor Management are planning a
restructuring, the objective of which is the
development of a large integrated shipowning company
whose shares are publicly traded in international
markets. In exchange for shares held in A/S Havtor and
A/S Havtor Management, the Company would receive in the
restructuring shares representing a smaller interest in
a
10
larger consolidated company. Other unrelated companies
are also expected to acquire similar equity interests.
Also contributing to the improved results for the non-
consolidated entities in 1994 was an additional 11%
interest acquired in the first quarter of 1993 in two
PROBO vessels increasing the Company's interest to 50%.
Increased charterhire rates on these two PROBO vessels
as compared to the same period in 1993 also contributed
to the improvement.
Income Taxes. In the first quarter of 1994, the
Company provided $1.3 million for federal income taxes
at the statutory rate of 35% as compared to a provision
of $1.6 million at the statutory rate of 34% in the
first quarter of 1993. Income of non-consolidated
entities is shown net of applicable taxes.
The Company's effective tax rate decreased from 61% in
the first quarter of 1993 to 34% in the first quarter
of 1994. The decrease was attributable primarily to the
fact that $2.0 million in losses from unconsolidated
entities in the first quarter of 1993 were recorded net
of applicable taxes.
Liquidity and Capital Resources
_______________________________
The Company's working capital increased from $17.6
million at December 31, 1993 to $18.6 million at March
31, 1994, after provision for current maturities of
long-term debt of $26.4 million and capital lease
obligations of $5.1 million. Cash and cash equivalents
increased during the first quarter of 1994 by $5.5
million to a total of $38.3 million at March 31, 1994.
Accounts payable and accrued expenses decreased by $2.8
million or 5.6% during the first quarter of 1994
primarily due to interest payments made in January,
1994 which had been accrued at December 31, 1993.
Positive cash flows were achieved from operating
activities in the first quarter of 1994 in the amount
of $21.4 million. The major source of cash from
operations was net income, adjusted for non-cash
provisions such as depreciation and amortization.
Net cash used for investing activities amounted to
$31.4 million during the first quarter of 1994.
Capital investments included $26.9 million for
construction costs of a molten sulphur carrier, $1.0
million for the refurbishment of barges and $1.4
million in other miscellaneous items. Also, the
Company added $2.7 million of deferred charge items,
primarily drydocking and vessel survey expenditures.
Net cash provided by financing activities during the
first quarter of 1994 was $15.5 million. Included in
this amount were proceeds in the amount of $21.1
million drawn under an interim financing agreement for
the construction of a sulphur carrier vessel.
11
These proceeds were offset by regularly scheduled
principal payments of $5.3 million for debt and lease
obligations. Additionally, $268,000 was used to meet
common stock dividend requirements.
The Company's molten sulphur carrier is scheduled for
delivery at the end of July, 1994. Upon delivery she
will be named "SULPHUR ENTERPRISE" and will enter a
long-term contract with Freeport-McMoRan Resource
Partners ("FRP") carrying molten sulphur between
Louisiana and Westcoast Florida, in support of FRP
production of agricultural fertilizers. As of March
31, 1994, the Company had paid $41.7 million of the
estimated cost of approximately $58 million. Of these
costs, $26.9 million was paid during the first quarter
of 1994 and the balance was paid during 1993 and 1992.
Capitalized interest related to this construction
totalled $140,000 for the first quarter of 1994.
Interim construction financing has been arranged
through a pool of commercial banks and is expected to
be repaid with permanent financing after construction
is completed. At the Company's option, the
construction loan can be converted to a three-year term
loan with the same banks when the vessel commences
operation. Draws on the interim loan currently total
$29.8 million. As an alternative to the
aforementioned term loan, the Company has received a
commitment for a Title XI guarantee to cover the
permanent financing of 75% of the cost of the vessel.
The Company has entered into a long-term
transportation contract with P.T. Freeport Indonesia
Company (an affiliate of Freeport-McMoRan Copper and
Gold Inc.) for the movement of various supply cargoes
between Singapore, Australia and Indonesia. The
Company will have built two multi-purpose vessels and
will have built or acquire one containership in order
to fulfill the requirements of the contract which is
expected to commence in the fourth quarter of 1995.
The Company anticipates financing a major portion of
the cost of the vessel acquisitions through medium- to
long- term loans with commercial banks.
Two of the U.S. Flag LASH vessels operating in the
Company's LASH liner service, "ROBERT E. LEE" and
"STONEWALL JACKSON", have been operating under leases
since their delivery from the builders in 1974. These
leases provide the Company with the option to purchase
the vessels at the termination of the leases in
October, 1994. The Company has notified the lessor of
its intent to exercise the option to purchase these
vessels at the fair market value to be determined by an
appraisal panel organized under the terms of the lease.
The Company feels that long-term financing can be
arranged for the purchase. In the interim, amounts
available under the Company's undrawn lines of credit
may be utilized.
12
The Financial Accounting Standards Board issued
Statement No. 112, "Employers' Accounting for
Postemployment Benefits", during 1992. This statement
will be adopted in 1994 and is not expected to have a
material effect on the Company's financial position or
results of operations.
To meet short-term requirements when fluctuations
occur in working capital, the Company has available
three lines of credit totalling $15 million. At March
31, 1994, these lines were undrawn.
The Company has not been notified that it is a
potentially responsible party in connection with any
environmental matters.
At a regular meeting held April 20, 1994, the Board of
Directors declared a quarterly dividend of five cents
per share of common stock to be paid on June 16, 1994
to its stockholders of record as of June 2, 1994.
PART II. - OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K
________________________________
(b) No reports on Form 8-K have been filed for the three
months ended March 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
INTERNATIONAL SHIPHOLDING CORPORATION
/s/ Gary L. Ferguson
Gary L. Ferguson
Vice President and Chief Financial Officer
May 13, 1994
Date