-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KUm6/jvCoViBXQTgxKfS/AeljlGu2GU9uv+DG3xik4uib9EeaDsMSxfmCN1eLZ5e UEyYWRwQJ+4iNjpsaY2vLA== 0000278041-98-000012.txt : 19981116 0000278041-98-000012.hdr.sgml : 19981116 ACCESSION NUMBER: 0000278041-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL SHIPHOLDING CORP CENTRAL INDEX KEY: 0000278041 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 362989662 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10852 FILM NUMBER: 98746713 BUSINESS ADDRESS: STREET 1: 650 POYDRAS ST STE 1700 CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5045295461 10-Q 1 THIRD QUARTER 1998 FORM 10-Q 1 INTERNATIONAL SHIPHOLDING CORPORATION AND SUBSIDIARIES UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 -------------------------- __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission file number 2-63322 ------------------------------------------------------- INTERNATIONAL SHIPHOLDING CORPORATION - ----------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 36-2989662 - ----------------------- ------------------------- (State or other jurisdiction of (I.R.S.Employer Identification Number) incorporation or organization) 650 Poydras Street New Orleans, Louisiana 70130 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (504) 529-5461 - ----------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days. YES X NO --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Common Stock $1 Par Value 6,682,887 shares (September 30, 1998) -------------------- 2 PART I - FINANCIAL INFORMATION ITEM 1-FINANCIAL STATEMENTS INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (All Amounts in Thousands Except Per Share Data) (Unaudited)
Three Months Ended Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1998 1997 1998 1997 ---------- ---------- --------- --------- Revenues $ 94,912 $ 97,141 $276,691 $280,434 Subsidy Revenue 3,693 3,168 10,400 12,389 ---------- ---------- --------- --------- 98,605 100,309 287,091 292,823 ---------- ---------- --------- --------- Operating Expenses: Voyage Expenses 72,188 78,566 211,935 224,858 Vessel and Barge Depreciation 9,647 8,629 27,768 25,778 ---------- ---------- --------- --------- Gross Voyage Profit 16,770 13,114 47,388 42,187 ---------- ---------- --------- --------- Administrative and General Expenses 6,730 5,893 19,744 19,422 ---------- ---------- --------- --------- Operating Income 10,040 7,221 27,644 22,765 ---------- ---------- --------- --------- Interest: Interest Expense 7,153 6,937 21,484 20,879 Investment Income (365) (346) (1,261) (1,081) ---------- ---------- --------- --------- 6,788 6,591 20,223 19,798 ---------- ---------- --------- --------- Income Before Provision for Income Taxes and Extraordinary Item 3,252 630 7,421 2,967 ---------- ---------- --------- --------- Provision for Income Taxes: Current 603 898 2,020 1,770 Deferred 647 (696) 702 (743) State 26 23 178 265 ---------- ---------- --------- --------- 1,276 225 2,900 1,292 ---------- ---------- --------- --------- Income Before Extraordinary Item $ 1,976 $ 405 $ 4,521 $ 1,675 ---------- ---------- --------- --------- Extraordinary Loss on Early Extinguishment of Debt (Net of Income Tax Benefit of $554) - - (1,029) - ---------- ---------- --------- --------- Net Income $ 1,976 $ 405 $ 3,492 $ 1,675 ========== ========== ========= ========= Basic and Diluted Earnings Per Share: Income Before Extraordinary Loss $ 0.29 $ 0.06 $ 0.67 $ 0.25 Extraordinary Loss - - (0.15) - ---------- ---------- --------- --------- Net Income $ 0.29 $ 0.06 $ 0.52 $ 0.25 ========== ========== ========= ========= Weighted Average Shares of Common Stock Outstanding 6,682,887 6,682,887 6,682,887 6,682,887 The accompanying notes are an integral part of these statements.
3 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (All Amounts in Thousands) (Unaudited)
September 30, December 31, 1998 1997 ASSETS ------------- ------------ Current Assets: Cash and Cash Equivalents $ 18,600 $ 32,002 Marketable Securities 11,901 10,758 Accounts Receivable, Net of Allowance for Doubtful Accounts of $85 and $208 in 1998 and 1997, Respectively: Traffic 42,462 35,442 Agents' 4,046 7,128 Claims and Other 4,426 3,031 Federal Income Taxes Receivable 508 43 Net Investment in Direct Financing Leases 1,827 1,913 Other Current Assets 4,411 4,187 Material and Supplies Inventory, at Cost 13,727 13,296 ------------- ----------- Total Current Assets 101,908 107,800 ------------- ----------- Marketable Equity Securities 290 582 ------------- ----------- Investment in Unconsolidated Entity 488 - ------------- ----------- Net Investment in Direct Financing Leases 19,196 20,552 ------------- ----------- Vessels, Property, and Other Equipment, at Cost: Vessels and Barges 744,571 689,856 Other Marine Equipment 7,734 7,590 Terminal Facilities 18,494 18,377 Land 2,317 2,317 Furniture and Equipment 16,415 16,853 ------------- ------------ 789,531 734,993 Less - Accumulated Depreciation (340,396) (311,557) ------------- ------------ 449,135 423,436 Other Assets: ------------- ------------ Deferred Charges, Net of Accumulated Amortization of $70,547 and $53,913 in 1998 and 1997, Respectively 39,551 38,960 Acquired Contract Costs, Net of Accumulated Amortization of $13,790 and $12,699 in 1998 and 1997, Respectively 16,735 17,826 Due from Related Parties 314 369 Other 7,534 8,679 ------------ ------------ 64,134 65,834 ------------ ------------ $ 635,151 $ 618,204 ============ ============ The accompanying notes are an integral part of these statements.
4 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (All Amounts in Thousands) (Unaudited)
September 30, December 31, 1998 1997 LIABILITIES AND STOCKHOLDERS' INVESTMENT ------------- ------------- Current Liabilities: Current Maturities of Long-Term Debt $ 15,248 $ 35,865 Current Maturities of Capital Lease Obligations 2,915 2,579 Accounts Payable and Accrued Liabilities 54,760 51,735 Current Deferred Income Tax Liability 847 171 Current Liabilities to be Refinanced - (22,511) ------------- ------------- Total Current Liabilities 73,770 67,839 ------------- ------------- Current Liabilities to be Refinanced - 22,511 ------------- ------------- Billings in Excess of Income Earned and Expenses Incurred 9,271 5,903 ------------- ------------- Long-Term Capital Lease Obligations, Less Current Maturities 12,085 14,994 ------------- ------------- Long-Term Debt, Less Current Maturities 298,051 271,835 ------------- ------------- Reserves and Deferred Credits: Deferred Income Taxes 37,879 39,494 Claims and Other 29,267 22,823 ------------- ------------ 67,146 62,317 ------------- ------------ Commitments and Contingent Liabilities Stockholders' Investment: Common Stock 6,756 6,756 Additional Paid-In Capital 54,450 54,450 Retained Earnings 115,033 112,794 Less - Treasury Stock (1,133) (1,133) Accumulated Other Comprehensive Loss (278) (62) ------------ ----------- 174,828 172,805 ------------ ----------- $ 635,151 $ 618,204 ============ =========== 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, 1996 $6,756 $ 54,450 $ 112,310 ($1,133) $ 24 $172,407 Comprehensive Income: Net Income for Year Ended December 31, 1997 - - 2,155 - - 2,155 Other Comprehensive Income: Unrealized Holding Loss on Marketable Securities, Net of Deferred Taxes of ($46) - - - - (86) (86) ------- Total Comprehensive Income 2,069 Cash Dividends - - (1,671) - - (1,671) ------- ------- --------- -------- --------- -------- Balance at December 31, 1997 $6,756 $ 54,450 $ 112,794 ($1,133) $ (62) $172,805 ======= ======== ========= ======== ========= ========= Comprehensive Income: Net Income for the Period Ended September 30, 1998 - - 3,492 - - 3,492 Other Comprehensive Income: Unrealized Holding Loss on Marketable Securities, Net of Deferred Taxes of ($116) - - - - (216) (216) ------- Total Comprehensive Income 3,276 Cash Dividends - - (1,253) - - (1,253) ------- ------- ---------- -------- ----------- -------- Balance at September 30, 1998 $6,756 $ 54,450 $ 115,033 $ (1,133) $ (278) $174,828 ====== ======== ========== ========= =========== ======== The accompanying notes are an integral part of these statements.
6 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (All Amounts in Thousands) (Unaudited) For Nine Months Ended September 30, 1998 1997 -------------- -------------- Cash Flows from Operating Activities: Net Income $ 3,492 $ 1,675 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 29,716 27,805 Amortization of Deferred Charges and Other Assets 17,769 18,200 Provision for Deferred Income Taxes 703 1,027 Gain on Sale of Assets (3) (8) Extraordinary Loss 1,029 - Changes in: Accounts Receivable (5,293) 4,647 Net Investment in Direct Financing Leases 1,442 1,704 Inventories and Other Current Assets (654) (1,148) Other Assets 1,016 (466) Accounts Payable and Accrued Liabilities (2,020) (11,616) Federal Income Taxes Payable (1,437) (502) Unearned Income 3,368 (533) Reserve for Claims and Other Deferred Credits 4,577 4,770 -------------- -------------- Net Cash Provided by Operating Activities 53,705 45,555 -------------- -------------- Cash Flows from Investing Activities: Purchase of Vessels and Other Property (54,266) (17,248) Additions to Deferred Charges (9,844) (14,822) Proceeds from Sale of Assets 220 245 Purchase of and Proceeds from Short-Term Investments (1,221) (7,484) Investment in Unconsolidated Entity (488) (778) Other Investing Activities 55 131 -------------- -------------- Net Cash Used by Investing Activities (65,544) (39,956) -------------- -------------- Cash Flows from Financing Activities: Proceeds from Issuance of Debt 156,435 73,066 Reduction of Debt and Capital Lease Obligations (153,409) (95,147) Additions to Deferred Financing Charges (2,904) (77) Other Financing Activities (432) - Common Stock Dividends Paid (1,253) (1,253) -------------- -------------- Net Cash Used by Financing Activities (1,563) (23,411) -------------- -------------- Net Decrease in Cash and Cash Equivalents (13,402) (17,812) Cash and Cash Equivalents at Beginning of Period 32,002 43,020 -------------- -------------- Cash and Cash Equivalents at End of Period $ 18,600 $ 25,208 ============== ============== The accompanying notes are an integral part of these statements.
7 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (Unaudited) Note 1. Basis of Preparation The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures required by generally accepted accounting principles for complete financial statements have been omitted. It is suggested that these interim statements be read in conjunction with the financial statements and notes thereto included in the Form 10-K of International Shipholding Corporation for the year ended December 31, 1997. Certain reclassifications have been made to prior period financial information in order to conform to current year presentations. Interim statements are subject to possible adjustments in connection with the annual audit of the Company's accounts for the full year 1998. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the information shown have been included. The foregoing 1998 interim results are not necessarily indicative of the results of operations for the full year 1998. The Company's policy is to consolidate all subsidiaries in which it holds greater than 50% voting interest. All significant intercompany accounts and transactions have been eliminated. Note 2. Subsequent Events Early in the fourth quarter of this year, the Company purchased a newbuilding car/truck carrier capable of transporting large dimension and heavy lift vehicles, as well as automobiles. The vessel is scheduled to deliver new from the shipyard in December of 1998 and will immediately enter a long-term time charter to Hyundai. Long-term fixed interest rate financing has been arranged with a bank syndicate. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements made in this report or elsewhere by, or on behalf of, the Company that are not based on historical facts are intended to be forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on assumptions about future events and are therefore subject to risks and uncertainties. The Company cautions readers that certain important factors have affected and may affect in the future the Company's actual consolidated results of operations and may cause future results to differ materially from those expressed in or implied by any forward-looking statements made in this report or elsewhere by, or on behalf of, the Company. A description of certain of these important factors is contained in the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1997. The Company's vessels are operated under a variety of charters, liner services, and contracts. The nature of these arrangements is such that, without a material variation in gross voyage profits (total revenues less voyage expenses and vessel and barge depreciation), the revenues and expenses attributable to a vessel deployed under one type of charter or contract can differ substantially from those attributable to the same vessel if deployed under a different type of charter or contract. Accordingly, depending on the mix of charters or contracts in place during a particular accounting period, the Company's revenues and expenses can fluctuate substantially from one period to another even though the number of vessels deployed, the number of voyages completed, the amount of cargo carried and the gross voyage profit derived from the vessels remain relatively constant. As a result, fluctuations in voyage revenues and expenses are not necessarily indicative of trends in profitability, and management believes that gross voyage profit is a more appropriate measure of performance than revenues. Accordingly, the discussion below addresses variations in gross voyage profits rather than variations in revenues. 9 RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 Gross Voyage Profit - ------------------- Gross voyage profit increased from $42.2 Million in the first nine months of 1997 to $47.4 Million in the first nine months of 1998 primarily due to improved market share and lower operating costs resulting from lower fuel oil prices for the Company's liner services. Early in the second quarter of 1998, the Company purchased a 1994-built Pure Car/Truck Carrier. After being reflagged to U.S. registry and renamed Green Point, the vessel commenced a long-term contract. The Green Point contributed to the increase in gross voyage profit during 1998 as compared to 1997. Additionally, the Company's U.S. Flag Coal Carrier, Energy Enterprise, produced more gross voyage profit during the first nine months of this year than in the same period of last year, because the vessel was out of service for 28 additional days last year to complete refurbishment work. These favorable variances were partially offset by reduced cargo volume on the Company's Indonesian and certain of its domestic services, and scheduled reductions in charterhire rates on three of the Company's LASH vessels chartered to the Military Sealift Command ("MSC"). Gross voyage profit also compares favorably for the first nine months of this year as compared to last year because the second quarter of 1997 was negatively impacted by the Company's decision to discontinue development of a new LASH service between the U.S. Gulf and Brazil which resulted in a charge to operating expense of approximately $1.2 Million for termination costs and the repositioning of equipment. Vessel and barge depreciation for the first nine months of 1998 increased 7.7% to $27.8 Million as compared to $25.8 Million in the same period of 1997 primarily due to the purchase and commencement of operations early in the second quarter of 1998 of the Green Point. In the third quarter, the Company also began depreciating the Hickory, a recently purchased LASH vessel operating as a feeder vessel on an interim basis for the Company's Waterman liner service. Depreciation on the Company's U.S. Flag Coal Carrier and one of the LASH vessels in 10 its Waterman Liner Service also increased due to capital improvements made during the second quarter of 1997. Other Income and Expenses - ------------------------- Administrative and general expenses increased slightly from $19.4 Million in the first nine months of 1997 to $19.7 Million in the same period in 1998. Interest expense was $21.5 Million for the first nine months of 1998 as compared to $20.9 Million for the same period in 1997. The increase was primarily the result of financing associated with the acquisition of the Green Point early in the second quarter of 1998. On January 22, 1998, the Company issued $110 Million of 7 3/4% Senior Notes due 2007 (the "Notes"), the proceeds of which were used to repay shorter-term amortizing bank debt. Interest expense on these Notes was substantially offset by the aforementioned early repayment of debt and regularly scheduled principal payments. Investment income increased from $1.1 Million for the first nine months of 1997 to $1.3 Million for the first nine months of 1998 due to an increase in the balance of invested funds and slightly higher interest rates, as well as a change in the mix of investments. Income Taxes - ------------ The Company provided $2.7 Million for Federal income taxes in the first nine months of 1998 and $1.0 Million in the first nine months of 1997 at the statutory rate of 35% for both periods. Extraordinary Loss on the Early Extinguishment of Debt - ------------------------------------------------------ The Company incurred an after tax extraordinary loss of approximately $1 Million during the first nine months of 1998 related to the early extinguishment of debt. This loss resulted primarily from the write-off of previously deferred financing costs related to the loans repaid early with the proceeds of the aforementioned Notes and a make-whole premium on one of those loans. 11 THIRD QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO THIRD QUARTER ENDED SEPTEMBER 30, 1997 Gross Voyage Profit - ------------------- Gross voyage profit increased from $13.1 Million in the third quarter of 1997 to $16.8 Million in the third quarter of 1998 primarily due to improved market share and lower operating costs for the Company's liner services. Additionally, the Company added the Green Point to its fleet early in the second quarter of 1998 which contributed to the increase in gross voyage profit. These favorable variances were partially offset by reduced cargo volume on the Company's Indonesian and certain of its domestic services, and scheduled reductions in charterhire rates on three of the Company's LASH vessels chartered to the MSC. Vessel and barge depreciation for the third quarter of 1998 increased 11.8% to $9.6 Million as compared to $8.6 Million in the same period of 1997 primarily due to the commencement of operations of the Green Point in the second quarter of 1998 and the Hickory in the third quarter of 1998 as discussed in the preceeding nine month comparison. Other Income and Expenses - ------------------------- Administrative and general expenses increased from $5.9 Million in the third quarter of 1997 to $6.7 Million in the third quarter of 1998 primarily reflecting employee bonuses accrued this year expected to be paid early in 1999 based on 1998 earnings. Interest expense increased approximately 3.1% to $7.1 Million in the third quarter of 1998 from $6.9 Million in the third quarter of 1997 primarily resulting from the financing of the Green Point during the second quarter of 1998. Investment income increased slightly from $346,000 for the third quarter of 1997 to $365,000 for the third quarter of 1998 due to an increase in the balance of invested funds and slightly higher interest rates, as well as a change in the mix of investments. Income Taxes - ------------ The Company provided $1.3 Million for Federal income taxes in the third quarter of 1998 and $202,000 in the third quarter of 1997 at the statutory rate of 35% for both periods. 12 LIQUIDITY AND CAPITAL RESOURCES The Company's working capital decreased from $40 Million at December 31, 1997, to $28.1 Million at September 30, 1998, after provision for current maturities of long- term debt and capital lease obligations of $18.2 Million. Cash and cash equivalents decreased during the first nine months of 1998 by $13.4 Million to a total of $18.6 Million. This decrease resulted from cash used for investing and financing activities of $65.5 Million and $1.6 Million, respectively, partially offset by operating cash flows of $53.7 Million. The major source of cash from operations was net income adjusted for non-cash provisions such as depreciation, amortization, and the write-off of unamortized deferred financing costs related to loans repaid with the proceeds of the Notes. Investing activities during the period included the purchase of the Green Point, the Hickory (a recently built LASH vessel), 82 LASH barges, and two special purpose barges for a total cost of about $52 Million. Additionally, cash of $9.8 Million was used for the cost of drydocking of certain vessels. The net cash used by financing activities of $1.6 Million included the net proceeds from the Company's sale of the Notes in January of 1998 of approximately $109.4 Million and draws against the Company's line of credit totaling approximately $47 Million. The proceeds from the Notes were used primarily to repay certain indebtedness of the Company's subsidiaries and for related transaction costs. These sources of cash from financing activities were offset by reductions of debt and capital lease obligations of $153.4 Million for repayment of debt, including the Company's repurchase of $1 Million principal amount of its 9% Senior Notes and the use of the proceeds from the 7 3/4% Notes as discussed above, scheduled principal payments, and repayments of amounts drawn under lines of credit. Additionally, $2.9 Million was used for transaction costs of issuing the Notes, $1.3 Million was used to meet common stock dividend requirements, and $432,000 was used to pay a make-whole premium on one of the loans prepaid with the proceeds of the Notes. In the first quarter of 1998, the Company purchased a 1989-built LASH vessel renamed Hickory. As reported in the third quarter of 1997, the Company also purchased a 1987- built LASH vessel renamed Willow. The Willow is now in reserve pending a decision on its conversion/deployment while, on an interim basis, the Hickory is being employed as a feeder vessel for LASH barge movements in Southeast Asia. The Company is making plans to 13 refurbish at least one of these vessels, after which that vessel will likely replace one of the older vessels in the Company's fleet. As discussed in Note 2 to the financial statements, the Company purchased a newbuilding car/truck carrier early in the fourth quarter. This vessel is scheduled to deliver new from the shipyard in December of 1998 and immediately enter a long-term time charter to Hyundai. Long-term, fixed interest rate financing has been arranged with a bank syndicate. Also in the fourth quarter, the Company acquired a 37.5% interest in three companies that own one cement carrier each. These vessels are operating under fixed medium to long-term charters. The Company acquired these investments for a total consideration of $2.9 Million. The equity method of accounting will be used to report the Company's 37.5% investment beginning in the fourth quarter of 1998. At December 31, 1997, the Company had available three lines of credit totaling $35.0 Million to meet short-term requirements when fluctuations occur in working capital. Early in the first quarter of 1998, the Company entered into a $25 Million revolving credit facility that replaced these lines of credit. At the end of the first quarter of 1998, the Company increased this revolving credit facility to $50 Million. At September 30, 1998, $18 Million was outstanding on this credit facility as a result of drawdowns of $32 Million for financing purposes, some of which will be refunded within the next six months from available cash flows. Management believes that normal operations will provide sufficient working capital and cash flows to meet debt service and dividend requirements during the foreseeable future. The Company has not been notified that it is a potentially responsible party in connection with any environmental matters. At a regular meeting held October 21, 1998, the Board of Directors declared a quarterly dividend of 6.25 cents per Common Share payable on December 18, 1998, to shareholders of record on December 4, 1998. At that same meeting, authorization was given to management to repurchase up to 500,000 shares of the Company's common stock at their discretion, and subject to market conditions. The Company expects that the shares will be repurchased from time to time through open market transactions over the next few years. 14 YEAR 2000 COMPLIANCE The Year 2000 (Y2K) issue refers to the potential failure of information technology (IT) systems, telecommunications, and other electronic devices before, on or after January 1, 2000. This problem is primarily due to the use of a 2-digit year indicator within software code including applications, operating systems, hardware, or microchips. Non-compliant systems will likely interpret the "00" in "2000" incorrectly as "1900." State of Readiness - ------------------ The Company has appointed a Y2K Project Manager who, along with a designated Y2K Project Team, is aggressively addressing the Y2K issue. The Company's Y2K Plan is an overall corporate plan supported by lower-tier plans and schedules developed by each functional area. The phases in the Y2K Plan include inventory, assessment, remediation, testing, and contingency planning. During the inventory phase, all computer-based systems, components (such as systems developed in-house, purchased software, computers, and associated hardware), service providers, and hardware that contain microchips that support the functionality of the Company will be identified. Additionally, items that, in and of themselves, may not be impacted by the date change, but that interface with systems or equipment that are impacted by the date change will be identified. The assessment phase involves determining which systems are date-sensitive and prioritizing how critical each of these systems is to continuation of the Company's business activities. Once the assessment phase is complete, the remediation phase begins. During this phase, the strategies for addressing systems that are not Y2K compliant will be developed. Possible strategies include repairing, replacing, or retiring the system. The testing phase will verify that the repaired or replaced system will operate properly when the date changes, and that existing business functions will continue to operate as expected. Testing efforts will not be confined solely to IT systems. Non-IT systems such as building infrastructure and components with embedded microchips will also be evaluated. The inventory and assessment phases are complete for IT systems, and those identified as most critical are scheduled to be remediated and tested by December 31, 1998. The remaining 15 IT systems will be addressed by August of 1999. Vessel systems inspection, remediation, and testing is ongoing through April of 1999. The Company has contacted its key suppliers and customers to ensure they are addressing the Y2K issue. Y2K questionnaires have been issued to these suppliers and customers and their responses are being reviewed to determine what action by the Company, if any, is necessary. The Costs to Address Y2K Issues - ------------------------------- Expenditures related to evaluating and remediating any Y2K problems through September 30, 1998, have not had a material effect on the Company's financial position or results of operations. During 1998 and 1999, it is anticipated that the resources required to address Y2K issues will be provided primarily by existing levels of personnel. While management does not expect Y2K compliance costs to have a material adverse effect on the Company, estimates of total expenditures for Y2K issues, including all phases of the Y2K Plan described above, as well as the cost of replacing or modifying any non-compliant systems, are not yet complete. A budget for Y2K costs expected to be incurred during 1999 is currently being developed. The Company plans to include an estimate of its total anticipated Y2K expenditures for IT and Non-IT systems in its December 31, 1998, Form 10-K. The Risks of Y2K Issues - ----------------------- A definitive assessment of the risk to the Company if systems that are not Y2K compliant were not identified, or identified but not successfully remediated, has been and continues to be undertaken. No Y2K issues have been identified that are unique to the Company or that otherwise would not be found in its industry. Progress in assessing this risk is expected before the Company issues its December 31, 1998, Form 10-K at which time a more definitive description of the risk will be available. Contingency Plans - ----------------- Once the potential problems that could result from the Y2K issue have been identified, the steps required in the event any system fails will be determined. The Company's contingency plan will identify potential activities and responsibilities for initiating alternate plans in the event Y2K remediation activities are not successful. This contingency plan will address both 16 programmatic (computing) and operational (business continuation) issues, including the impacts of internal and external risks. Cost estimates to establish and implement the contingency plan will be developed and analyzed against other options. The Company's Y2K contingency plan is scheduled to be completed by November 30, 1998. 17 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBIT INDEX Exhibit Number Description -------------- ------------ Part I Exhibits: 27 Financial Data Schedule Part II Exhibits: 3 Restated Certificate of Incorporation, as amended, and By-Laws of the Registrant (filed with the Securities and Exchange Commission as Exhibit 3 to the Registrant's Form 10-Q for the quarterly period ended June 30, 1996, and incorporated herein by reference) (b) No reports on Form 8-K were filed for the three month period ended September 30, 1998. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL SHIPHOLDING CORPORATION /S/ Gary L. Ferguson _____________________________________________ Gary L. Ferguson Vice President and Chief Financial Officer Date November 13, 1998 -------------------------- EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from financial statements for the period ended September 30, 1998 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1998 SEP-30-1998 18,600 11,901 50,934 85 13,727 101,908 789,531 340,396 635,151 73,770 310,136 0 0 6,756 168,072 635,151 0 287,091 0 259,447 21,484 0 21,484 7,421 2,900 4,521 0 (1,029) 0 3,492 0.52 0.52 Amounts inapplicable or not disclosed as a separate line on the Balance Sheet or Statement of Income are reported as 0 herein. *Notes and accounts receivable - trade are reported net of allowances for doubtful accounts in the Balance Sheet.
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