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 June 30, 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 (June 30, 1994)
2
PART I - FINANCIAL INFORMATION
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
June 30, December 31,
1994 1993
ASSETS _______ ____________
Current Assets:
Cash and Cash Equivalents $25,906 $13,492
Marketable Securities 12,346 19,278
Accounts Receivable, Net 40,156 46,134
Net Investment in Direct
Financing Leases 2,223 2,257
Current Deferred Income Taxes 1,501 1,955
Other Current Assets 2,022 6,666
Material and Supplies
Inventory, At Cost 8,502 7,853
_______ _______
Total Current Assets 92,656 97,635
_______ _______
Investments In and Advances
to Unconsolidated Entities 34,423 34,905
_______ _______
Net Investment in Direct
Financing Leases 27,674 28,775
_______ _______
Vessels, Property and Other
Equipment, At Cost:
Vessels and Barges 464,248 432,429
Other Marine Equipment 4,012 3,842
Terminal Facilities 17,875 17,521
Land 2,317 2,317
Furniture and Equipment 11,920 9,676
_______ _______
500,372 465,785
Less - Accumulated Depreciation (202,734) (189,924)
_________ ________
297,638 275,861
_________ ________
Other Assets:
Deferred Charges in Process
of Amortization 35,503 41,992
Acquired Contract Costs, Net of
Accumulated Amortization 25,410 26,781
Due from Related Parties, Net of
Allowance for Doubtful Accounts 6,038 4,360
Other 11,509 12,929
_______ _______
78,460 86,062
_______ _______
$530,851 $523,238
======== ========
<FN>
The accompanying notes are an integral part of these
statements.
3
INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
CAPTION>
June 30, December 31,
1994 1993
LIABILITIES AND STOCKHOLDERS' ________ ____________
INVESTMENT
Current Liabilities:
Current Maturities of
Long-Term Debt $ 25,726 $ 25,879
Current Maturities of
Capital Lease Obligations 9,474 5,000
Accounts Payable and
Accrued Liabilities 47,157 49,447
Current Liabilities to be
Refinanced (5,565) (340)
_________ ________
Total Current Liabilities 76,792 79,986
_________ ________
Current Liabilities to be
Refinanced 5,565 340
_________ ________
Billings in Excess of Income
Earned and Expenses Incurred 2,059 4,133
_________ ________
Long-Term Capital Lease Obligations,
Less Current Maturities 21,342 27,020
_________ ________
Long-Term Debt,
Less Current Maturities 220,618 213,112
_________ ________
Reserves and Deferred Credits:
Deferred Income Taxes 39,855 40,151
Claims and Other 25,014 23,999
_________ ________
64,869 64,150
_________ ________
Stockholders' Investment:
Common Stock 5,405 5,405
Additional Paid-in Capital 54,450 54,450
Retained Earnings 81,079 75,775
Less - Shares of Common Stock in
Treasury, at Cost (1,133) (1,133)
Net Unrealized Holding Loss on
Marketable Securities (195) --
_________ _________
139,606 134,497
_________ _________
$530,851 $523,238
========= =========
<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 Six Months Ended
June 30, June 30,
1994 1993 1994 1993
____ ____ ____ ____
Revenues $83,490 $84,387 $161,933 $163,785
Operating Differential Subsidy 5,658 5,456 10,576 10,055
_______ _______ ________ ________
89,148 89,843 172,509 173,840
_______ _______ ________ ________
Operating Expenses:
Voyage Expenses 68,535 66,670 130,723 129,140
Vessel and Barge Depreciation 6,123 5,953 12,230 11,749
_______ _______ ________ ________
Gross Voyage Profit 14,490 17,220 29,556 32,951
_______ _______ ________ ________
Administrative and
General Expenses 6,748 7,043 13,368 13,363
Gain on Sale of Assets - 87 7 87
_______ _______ ________ ________
Operating Income 7,742 10,264 16,195 19,675
_______ _______ ________ ________
Interest:
Interest Expense 5,055 4,868 10,394 9,802
Investment Income (1,018) (195) (1,474) (393)
_______ _______ ________ ________
4,037 4,673 8,920 9,409
_______ _______ ________ ________
Unconsolidated Entities
(Net of Applicable Taxes):
Equity in Net Income
(Loss) of Unconsolidated
Entities 144 (277) 286 (2,246)
Gain on Sale of Equity
Interests -- -- -- 900
(Allowance) for Doubtful
Accounts 900 -- 900 (900)
________ _______ _______ _______
1,044 (277) 1,186 (2,246)
Income Before Provision for
Income Taxes and
Extraordinary Loss 4,749 5,314 8,461 8,020
________ ________ ________ ________
Provision for Income Taxes:
Current 904 732 2,723 1,917
Deferred 365 1,112 (207) 1,536
State 89 286 107 327
________ ________ ________ ________
1,358 2,130 2,623 3,780
________ ________ ________ ________
Income Before
Extraordinary Loss $3,391 $3,184 $5,838 $4,240
Extraordinary Loss
(Net of Income Tax
Benefit of $878) -- (1,703) -- (1,703)
________ ________ ________ ________
Net Income $3,391 $1,481 $5,838 $2,537
======== ======== ======== ========
Less:
Preferred Stock Dividends -- 359 -- 714
Accretion of Discount
on Preferred Stock -- 64 -- 127
________ ________ ________ ________
Net Income Applicable to Common
and Common Equivalent Shares $3,391 $1,058 $5,838 $1,696
======== ======== ======== ========
Earnings Per Share:
Income Before
Extraordinary Loss $ 0.63 $ 0.54 $ 1.09 $ 0.66
Extraordinary Loss -- (0.33) -- (0.33)
________ ________ _______ ________
Net Income $ 0.63 $ 0.21 $ 1.09 $ 0.33
======== ======== ======= ========
Common and Common
Equivalent Shares 5,346,611 5,148,430 5,346,611 5,142,203
<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)
Net
Additional Unrealized
Common Paid-In Retained Treasury Holding
Stock Capital Earnings Stock Loss 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
Six Months
Ended June 30, 1994 5,838 5,838
Cash Dividends (534) (534)
Unrealized Holding
Loss on
Marketable
Securities, Net of
Deferred Taxes (195) (195)
________ _______ _________ ________ _______ ________
Balance at
June 30, 1994 $5,405 $54,450 $81,079 $(1,133) $ (195) $139,606
======== ======= ========= ======== ======= ========
<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)
Six Months Ended
June 30,
1994 1993
______ ______
Cash Flows from Operating Activities:
Net Income $ 5,838 $2,537
Adjustment to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation 12,825 12,122
Amortization of Deferred Charges and Other Assets 8,316 9,308
(Benefit) Provision for Deferred Income Taxes (207) 1,536
Equity in Unconsolidated Entities (1,186) 2,246
Gain on Sale of Vessels and Other Property (7) (87)
Extraordinary Item -- 1,703
Changes in:
Reserve for Claims and Other Deferred Credits 1,015 (8,685)
Net Investment in Direct Financing Leases 1,135 1,160
Unearned Income (2,074) (3,333)
Other Assets 1,132 4,792
Accounts Receivable 5,978 (5,283)
Inventories and Other Current Assets 3,995 (1,055)
Accounts Payable and Accrued Liabilities 1,307 12,501
_______ _______
Net Cash Provided by Operating Activities 38,067 29,462
_______ _______
Cash Flows from Investing Activities:
Purchase of Vessels and Other Property (33,969) (6,244)
Additions to Deferred Charges (3,801) (5,082)
Proceeds from Sale of Vessels and Other Property 417 2,552
Proceeds from Short-Term Investments 6,932 --
Investment in and Advances to
Unconsolidated Entities 753 1,656
Purchase of LITCO -- (1,606)
_______ _______
Net Cash Used by Investing Activities (29,668) (8,724)
_______ _______
Cash Flows from Financing Activities:
Proceeds from Issuance of Debt
and Capital Lease Obligations 21,109 38,248
Reduction of Debt and Capital Lease Obligations (16,560) (52,260)
Preferred and Common Stock Dividends Paid (534) (1,206)
_______ _______
Net Cash Provided (Used) by Financing Activities 4,015 (15,218)
_______ _______
Net Increase in Cash and Cash Equivalents 12,414 5,520
Cash and Cash Equivalents at Beginning of Period 13,492 30,879
_______ _______
Cash and Cash Equivalents at End of Period $25,906 $36,399
======== =======
<FN>
The accompanying notes are an integral part of these
statements.
7
INTERNATIONAL SHIPHOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 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. 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 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".
8
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 by
10.3% to $29.6 million in the first six months of 1994
as compared to $33 million for the same period of 1993.
Gross voyage profit decreased by 15.9% to $14.5 million
in the Second Quarter of 1994 as compared to $17.2
million in the same period in 1993. Contributing
to these decreases was lower gross profit generated by
the Company's LASH vessels employed in a liner service
between ports on the U.S. Gulf/U.S. Atlantic Coast and
South Asia (Trade Routes 18 and 17), which resulted
from lower freight rates and cargo volume on the East-
bound leg of this service. Results for the Company's
vessels chartered to the Military Sealift Command
("MSC") decreased in the first half of 1994 as compared
to the first half of 1993 due to scheduled reductions
in charterhire rates upon the exercise of additional
option periods. Partially offsetting these negative
effects were improved freight rates and increased
volume of westbound cargo in the Company's foreign flag
Trans- Atlantic LASH liner service during the first half
of 1994 as compared to the first half of 1993.
Vessel and barge depreciation expense increased
slightly by 4.1% to $12.2 million during the first six
months of 1994 as compared to $11.8 million for the
comparable period
9
in 1993 due to the amortization of costs associated
with the Company's barge refurbishment program, costs
associated with 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%. These additions and refurbishment costs
also resulted in increased depreciation for the Second
Quarter of 1994 as compared to the same period in 1993.
Other Income and Expense. Administrative and general
expense during the first half of 1994 was consistent
with that of the comparable period in 1993.
Administrative and general expense decreased by 4.2% to
$6.7 million in the second quarter of 1994 from $7
million in the second quarter of 1993.
Interest expense increased 6% from $9.8 million in the
six months ended June 30, 1993 to $10.4 million during
the comparable period of the current year 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 $2.2 million in
the first six months of 1993 to net income of $1.2
million in the first six months of 1994. The loss in
the first half of 1993 resulted primarily from the
Company's investment in A/S Havtor and A/S Havtor
Management, Norwegian companies in which the Company
had an interest. During the first quarter 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 was recorded in 1993 to
reflect the deferral of the gain until receipt of the
proceeds from the promissory note, which matures in mid-
1996. In the Second Quarter of 1994, A/S Havtor and
associated Norwegian companies merged with a publicly
listed company on the Oslo Stock Exchange. This new
public company, Havtor A/S, operates mainly Liquified
Petroleum Gas (LPG) Carriers. In substitution for the
A/S Havtor stock held as collateral under the
aforementioned promissory note, the Company will
receive shares in the publicly listed Havtor A/S. Due
to the liquidity of these shares, deferral of the gain
is no longer necessary, therefore in the Second Quarter
of 1994 the related allowance was reversed resulting in
income after tax of $900,000. Since the Company has
no substantive control regarding their operations and
holds direct and indirect ownership interests in each
that
10
are less than 20%, the investments have been accounted
for since April 1, 1993 under the cost method of
accounting, which calls for recognition of income only
upon the distribution of dividends.
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%.
Improved charterhire rates on these two vessels during
the first six months of 1994 as compared to the same
period in 1993 also contributed to the improved results
in the current period.
Income Taxes. During the first half of 1994, the
Company provided $2.5 million for federal income taxes
at the statutory rate of 35% as compared to a provision
of $3.5 million at the statutory rate of 34% in the
first half of 1993. The Company provided $1.3 million
in the Second Quarter of 1994 at the statutory rate of
35% as compared to $1.8 million in the Second Quarter
of 1993 at the statutory rate of 34%.
The Company's effective tax rate decreased from 47% in
the first six months of 1993 to 31% in the comparable
period in 1994. The effective tax rate for the Second
Quarter decreased from 40% in 1993 to 29% in 1994. The
decrease occurred primarily because losses from
unconsolidated entities in 1993 were recorded net of
applicable taxes.
LIQUIDITY AND CAPITAL RESOURCES
_________________________________
The Company's working capital decreased from $17.6
million at December 31, 1993 to $15.8 million at June
30, 1994, after provision for current maturities of
long-term debt of $25.7 million and capital lease
obligations of $9.5 million. Cash and cash equivalents
increased during the first six months of 1994 by $12.4
million to a total of $25.9 million at June 30,1994.
Positive cash flows were achieved from operating
activities in the first six months of 1994 in the
amount of $38 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
$29.7 million during the first six months of 1994.
Capital investments included $27.5 million for
construction costs of a molten sulphur carrier, $1.4
million for the refurbishment of barges, $2.0 million
for computer software development and upgrades, $1.4
million for upgrade work on one of the Company's
foreign flag vessels and $1.6 million in other
miscellaneous items. Also, the Company added $3.8
million of deferred charge items, primarily drydocking
and vessel
11
survey expenditures. The Company received
approximately $7 million from the liquidation of
marketable securities.
Net cash provided by financing activities during the
first six months of 1994 was $4 million. Included in
this total were proceeds in the amount of $21.1 million
drawn under an interim financing agreement for the
construction of the Company's molten sulphur carrier.
These proceeds were offset by regularly scheduled
principal payments of $16.6 million for debt and
lease obligations. Additionally, $534,000 was used to
meet common stock dividend requirements.
The Company's molten sulphur carrier is scheduled for
delivery at the end of August, 1994. 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 June 30, 1994, the
Company had paid $42.5 million of the estimated cost of
approximately $60.7 million. Of these costs, $27.5
million was paid during the first half of 1994 and the
balance was paid during 1993 and 1992. Capitalized
interest related to this construction totalled $384,000
for the first half of 1994. Interim construction
financing has been arranged through a pool of
commercial banks and will be repaid with permanent
financing after construction is completed. Draws on
the interim loan currently total $29.8 million. The
Company has received a commitment from the U.S.
Maritime Administration for Title XI guarantee under
the Merchant Marine Act of 1936 to cover the permanent
financing of 75% of the cost of the vessel.
The Company has entered into a long-term contract with
P.T. Freeport Indonesia Company (an affiliate of
Freeport-McMoRan Copper and Gold, Inc.) to provide
transportation services for supplies associated with
the operation of a copper and gold mine on the
Indonesian Island of Irian Jaya. The Company will
acquire or build in a foreign shipyard two semi-
submersible barge carrying vessels and 26 cargo barges
to be used with the aforementioned vessels. The Company
will also acquire one small container vessel in order to
fulfill the requirements of the contract which is
expected to commence early 1996. 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 for fair market value which was determined by
an appraisal panel organized under
12
the terms of the lease. The Company feels that long-
term financing can be arranged for the purchase. In
the interim, internally generated funds or amounts
available under the Company's undrawn lines of credit
may be utilized.
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.
The Financial Accounting Standards Board issued
Statement No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", during 1993. The
Company has adopted this statement during 1994 and it
has not had 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 June
30, 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 July 20, 1994, the Board of
Directors declared a quarterly dividend of five cents
per share of common stock to be paid on September 16,
1994 to its stockholders of record as of September 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 six
months ended June 30, 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
Date: August 12, 1994