-----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, SQcsKdaNaR3fEC91j4uTgjiVv16x3REwQOb/KfHkQci7HzaLCv41lzgsPHSGXakv +J7VtFmq8OS3MJSn4csaBg== 0000278041-01-500017.txt : 20010516 0000278041-01-500017.hdr.sgml : 20010516 ACCESSION NUMBER: 0000278041-01-500017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 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: 1634454 BUSINESS ADDRESS: STREET 1: 650 POYDRAS ST STE 1700 CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5045295470 10-Q 1 q011stq.txt 1ST Q 01 10Q LIVE 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 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 ============ ============ 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 ============ ============ 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 ============================================================= 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 ========= ========= 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 ___________________________ -----END PRIVACY-ENHANCED MESSAGE-----