-----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, UOUfryxYrLINIyDtOep1n5L4BV3h+6UZfaXpynGJHP3Z5wVHHYMaY0p2+GkLTNdB gW+mVOuhhYhn/ot3u02nTQ== 0000278041-04-000040.txt : 20040812 0000278041-04-000040.hdr.sgml : 20040812 20040812111100 ACCESSION NUMBER: 0000278041-04-000040 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040812 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: 1934 Act SEC FILE NUMBER: 001-10852 FILM NUMBER: 04969028 BUSINESS ADDRESS: STREET 1: 650 POYDRAS ST STE 1700 CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5045295470 10-Q 1 q2nd04.txt 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 June 30, 2004 ------------- __ 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12B-2 of the Exchange Act). YES_________ NO____x____ 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 (June 30, 2004) - --------------------------- ------------------- ----------------- 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 Six Months Ended June 30, June 30, 2004 2003 2004 2003 --------- --------- --------- --------- Revenues $ 64,843 $ 67,505 $130,686 $132,311 Operating Expenses: Voyage Expenses 51,924 52,013 103,139 101,631 Vessel and Barge Depreciation 4,696 5,138 9,323 9,792 --------- --------- --------- --------- Gross Voyage Profit 8,223 10,354 18,224 20,888 --------- --------- --------- --------- Administrative and General Expenses 4,289 4,000 8,395 8,011 (Gain) Loss on Sale of Other - (39) 7 (43) Assets --------- --------- --------- --------- Operating Income 3,934 6,393 9,822 12,920 --------- --------- --------- --------- Interest and Other: Interest Expense 2,626 3,171 5,348 6,652 Loss on Sale of Investment - - 623 - Investment Income (161) (302) (329) (530) Other Income - (81) - (103) Loss (Gain) on Early Extinguishment of Debt 15 - 46 (1,260) --------- --------- --------- --------- 2,480 2,788 5,688 4,759 --------- --------- --------- --------- Income Before Provision for Income Taxes and Equity in Net Income of Unconsolidated Entities 1,454 3,605 4,134 8,161 --------- --------- --------- --------- Provision for Income Taxes: Current 105 164 210 164 Deferred 460 1,085 1,347 2,672 State 10 26 13 68 --------- --------- --------- --------- 575 1,275 1,570 2,904 --------- --------- --------- --------- Equity in Net Income of Unconsolidated Entities (Net of Applicable Taxes) 949 160 2,161 227 --------- --------- --------- --------- Net Income $ 1,828 $ 2,490 $ 4,725 $ 5,484 ========= ========= ========= ========= Basic and Diluted Earnings Per Share: Net Income $ 0.30 $ 0.41 $ 0.78 $ 0.90 ========= ========= ========= ========= Weighted Average Shares of Common Stock Outstanding: Basic 6,082,887 6,082,887 6,082,887 6,082,887 Diluted 6,097,164 6,082,887 6,094,813 6,082,887 The accompanying notes are an integral part of these statements.
3 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (All Amounts in Thousands) (Unaudited)
June 30, December 31, ASSETS 2004 2003 ------------ ------------ Current Assets: Cash and Cash Equivalents $ 9,564 $ 8,881 Restricted Cash 6,541 7,406 Marketable Securities 4,140 2,650 Accounts Receivable, Net of Allowance for Doubtful Accounts of $298 and $327 in 2004 and 2003, Respectively: Traffic 18,516 23,070 Agents' 4,035 4,119 Claims and Other 9,960 9,438 Federal Income Taxes Receivable 271 - Deferred Income Tax 144 144 Net Investment in Direct Financing Lease 2,232 2,128 Other Current Assets 3,634 6,295 Material and Supplies Inventory, at Lower of Cost or Market 3,235 3,177 Current Assets Held for Disposal 89 89 ------------ ------------ Total Current Assets 62,361 67,397 ------------ ------------ Investment in Unconsolidated Entities 9,814 8,413 ------------ ------------ Net Investment in Direct Financing Lease 47,981 49,136 ------------ ------------ Vessels, Property, and Other Equipment, at Cost: Vessels and Barges 324,459 324,413 Other Equipment 7,082 5,233 Terminal Facilities 140 345 Furniture and Equipment 3,812 4,304 ------------ ------------ 335,493 334,295 Less - Accumulated Depreciation (120,185) (111,154) ------------ ------------ 215,308 223,141 ------------ ------------ Other Assets: Deferred Charges, Net of Accumulated Amortization of $14,510 and $14,614 in 2004 and 2003, Respectively 13,514 12,319 Acquired Contract Costs, Net of Accumulated Amortization of $22,157 and $21,430 in 2004 and 2003, Respectively 8,367 9,095 Due from Related Parties 2,535 2,535 Other 9,566 10,415 ------------ ------------ 33,982 34,364 ------------ ------------ $ 369,446 $ 382,451 ============ ============ 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)
June 30, December 31, LIABILITIES AND STOCKHOLDERS' INVESTMENT 2004 2003 ------------ ------------ Current Liabilities: Current Maturities of Long-Term Debt $ 12,366 $ 14,866 Accounts Payable and Accrued Liabilities 28,530 35,510 Federal Income Tax Payable - 183 ------------ ------------ Total Current Liabilities 40,896 50,559 ------------ ------------ Billings in Excess of Income Earned and Expenses Incurred 2,804 5,271 ------------ ------------ Long-Term Debt, Less Current Maturities 156,122 164,144 ------------ ------------ Other Long-Term Liabilities: Deferred Income Taxes 22,216 19,565 Other 20,675 21,545 ------------ ------------ 42,891 41,110 ------------ ------------ Commitments and Contingent Liabilities Stockholders' Investment: Common Stock 6,756 6,756 Additional Paid-In Capital 54,450 54,450 Retained Earnings 74,655 69,930 Less - Treasury Stock (8,704) (8,704) Accumulated Other Comprehensive Loss (424) (1,065) ------------ ------------ 126,733 121,367 ------------ ------------ $ 369,446 $ 382,451 ============ ============ The accompanying notes are an integral part of these statements.
5 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (All Amounts in Thousands) (Unaudited)
Six Months Ended June 30, 2004 2003 ------------ ------------ Cash Flows from Operating Activities: Net Income $ 4,725 $ 5,484 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 9,572 10,195 Amortization of Deferred Charges and Other Assets 3,724 3,730 Deferred Provision for Federal Income Taxes 1,347 2,672 Equity in Net Income of Unconsolidated Entities (2,161) (227) Loss (Gain) on Sale of Other Assets 7 (43) Loss (Gain) on Early Extinguishment of Debt 46 (1,260) Loss on Sale of Investment 623 - Changes in: Accounts Receivable 5,607 (8,295) Inventories and Other Current Assets 4,135 3,095 Deferred Drydocking Charges (2,225) (287) Other Assets 612 1,593 Accounts Payable and Accrued Liabilities (10,618) 1,291 Federal Income Taxes Payable (646) 1,760 Billings in Excess of Income Earned and Expenses Incurred (2,467) (1,226) Other Long-Term Liabilities (1,697) (3,344) ------------ ------------ Net Cash Provided by Operating Activities 10,584 15,138 ------------ ------------ Cash Flows from Investing Activities: Net Investment in Direct Financing Lease 1,051 941 Additions to Vessels and Other Assets (1,698) (2,837) Proceeds from Sale of Vessels and Other Assets - 478 Purchase of and Proceeds from Short Term Investments (1,637) 54 Proceeds from Sale of Marketable Equity Securities - 200 Investment in Unconsolidated Entities 2,008 128 Partial Sale of Unconsolidated Entities - 15 Net Decrease (Increase) in Restricted Cash Account 865 (124) Other Investing Activities 113 (18) ------------ ------------ Net Cash Provided (Used) by Investing Activities 702 (1,163) ------------ ------------ Cash Flows from Financing Activities: Proceeds from Issuance of Debt 1,000 17,000 Repayment of Debt (11,522) (33,700) Additions to Deferred Financing Charges (65) (66) Other Financing Activities (16) 1,380 ------------ ------------ Net Cash Used by Financing Activities (10,603) (15,386) ------------ ------------ Net Increase (Decrease) in Cash and Cash Equivalents 683 (1,411) Cash and Cash Equivalents at Beginning of Period 8,881 4,419 ------------ ------------ Cash and Cash Equivalents at End of Period $ 9,564 $ 3,008 ============ ============ The accompanying notes are an integral part of these statements.
6 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS JUNE 30, 2004 (Unaudited) Note 1. Basis of Preparation We have prepared the accompanying unaudited interim financial statements pursuant to the rules and regulations of the Securities and Exchange Commission, and we have omitted certain information and footnote disclosures required by generally accepted accounting principles for complete financial statements. The condensed consolidated balance sheet as of December 31, 2003 has been derived from the audited financial statements at that date. We suggest that you read these interim statements in conjunction with the financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2003. We have made certain reclassifications to prior period financial information in order to conform to current year presentations. The foregoing 2004 interim results are not necessarily indicative of the results of operations for the full year 2004. Interim statements are subject to possible adjustments in connection with the annual audit of our accounts for the full year 2004. Management believes that all adjustments necessary, consisting only of normal recurring adjustments, for a fair presentation of the information shown have been made. Our policy is to consolidate all subsidiaries in which we hold a greater than 50% voting interest and to use the equity method to account for investments in entities in which we hold a 20% to 50% voting interest. We use the cost method to account for investments in entities in which we hold less than 20% voting interest and in which we cannot exercise significant influence over operating and financial activities. We have eliminated all significant intercompany accounts and transactions. Note 2. Employee Benefit Plans The following table provides the components of net periodic benefit cost for the pension plan:
(All Amounts in Thousands) Three Months Ended Six Months Ended June 30, June 30, COMPONENTS OF NET PERIODIC BENEFIT COST: 2004 2003 2004 2003 ------------- -------------- Service cost $ 137 $ 117 $ 274 $ 234 Interest cost 308 298 616 596 Expected return on plan assets (346) (300) (692) (600) Amortization of prior service cost 2 2 4 4 Amortization of net actuarial loss 23 47 46 94 -------------- -------------- Net periodic benefit cost $ 124 $ 164 $ 248 $ 328 ============== ==============
7 The following table provides the components of net periodic benefit cost for the postretirement benefits plan:
(All Amounts in Thousands) Three Months Ended Six Months Ended June 30, June 30, COMPONENTS OF NET PERIODIC BENEFIT COST: 2004 2003 2004 2003 -------------- -------------- Service cost $ 19 $ 16 $ 38 $ 32 Interest cost 147 149 294 298 Amortization of net actuarial loss 25 17 50 34 -------------- -------------- Net periodic benefit cost $ 191 $ 182 $ 382 $ 364 ============== ==============
We contributed $143,000 to our pension plan in the first quarter of 2004. We do not expect to make any further contributions to our pension plan in 2004 and we do not expect to make any contributions to our post retirement benefits plan in 2004. In December of 2003, the Medicare Prescription Drug,Improvements, and Modernization Act of 2003 ("Act") was signed into law. In addition to including numerous other provisions that have potential effects on an employer's retiree health plan, the Medicare law included a special subsidy for employers that sponsor retiree health plans with prescription drug benefits that are at least as favorable as the new Medicare Part D benefit. In May of 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvements, and Modernization Act of 2003," that provides guidance on the accounting for the effects of the Act for employers that sponsor postretirement health care plans that provide drug benefits. We are required to adopt the provisions of this FSP effective July 1, 2004 and are still evaluating the impact of adoption on our financial position and results of operations. Note 3. Operating Segments Our four operating segments, Liner Services, Time Charter Contracts, Contracts of Affreightment, and Rail-Ferry Service, are identified primarily by the characteristics of the contracts and terms under which our vessels and barges are operated. We report in the Other category results of several of our subsidiaries that provide ship charter brokerage, agency, and other specialized services primarily to our operating segments. We manage each reportable segment separately, as each requires different resources depending on the nature of the contract or terms under which each vessel within the segment operates. We do not allocate administrative and general expenses, investment income, other income, losses or gains on early extinguishment of debt, equity in net income of unconsolidated entities, or income taxes to our segments. Intersegment revenues are based on market prices and include revenues earned by subsidiaries that provide specialized services to the operating segments. 8 The following table presents information about segment profit and loss for the three months ended June 30, 2004 and 2003:
(All Amounts in Thousands) Time Liner Charter Contracts of Rail-Ferry Services Contracts Affreightment Service Other Elim. Total - ------------------------------------------------------------------------------- 2004 Revenues from external customers $22,375 $28,422 $4,035 $3,928 $ 6,083 - $ 64,843 Intersegment revenues - - - - 3,116 (3,116) - Vessel and barge depreciation 855 2,283 605 729 224 - 4,696 Gross voyage profit (loss) 300 6,997 1,423 (854) 357 - 8,223 Interest expense 205 1,496 379 491 55 - 2,626 Gain on sale of other assets - - - - - - - Segment profit (loss) before administrative and general expenses, investment income, loss on sale of investment, loss on early extinquishment of debt, other income, equity in net income of unconsolidated entities, and taxes 95 5,501 1,044 (1,345) 302 - 5,597 - ------------------------------------------------------------------------------- 2003 Revenues from external customers $19,809 $33,882 $4,013 $4,209 $5,592 - $67,505 Intersegment revenues - - - - 3,386 (3,386) - Vessel and barge depreciation 823 2,887 604 729 95 - 5,138 Gross voyage (loss) profit (536) 9,520 1,232 (416) 554 - 10,354 Interest expense 209 2,093 364 469 36 - 3,171 Gain on sale of other assets - - - - 39 - 39 Segment (loss) profit before administrative and general expenses, investment income, loss on sale of investment, loss on early extinguishment of debt, other income, equity in net income of unconsolidated entities, and taxes (745) 7,427 868 (885) 557 - 7,222 - -------------------------------------------------------------------------------
The following table presents information about segment profit and loss for the six months ended June 30, 2004 and 2003:
(All Amounts in Thousands) Time Liner Charter Contracts of Rail-Ferry Services Contracts Affreightment Service Other Elim. Total - ------------------------------------------------------------------------------- 2004 Revenues from external customers $45,607 $57,501 $8,030 $7,984 $11,564 - $130,686 Intersegment revenues - - - - 6,229 (6,229) - Vessel and barge depreciation 1,711 4,566 1,209 1,458 379 - 9,323 Gross voyage profit (loss) 762 14,712 2,724 (1,718) 1,744 - 18,224 Interest expense 426 3,046 770 996 110 - 5,348 Loss on sale of other assets - - - - (7) - (7) Segment profit (loss) before administrative and general expenses, investment income, loss on sale of investment, loss on early extinguishment of debt, other income, equity in net income of unconsolidated entities, and taxes 336 11,666 1,954 (2,714) 1,627 - 12,869 - ------------------------------------------------------------------------------- 2003 Revenues from external customers $39,950 $66,614 $8,017 $7,380 $10,350 - $132,311 Intersegment revenues - - - - 6,883 (6,883) - Vessel and barge depreciation 1,642 5,318 1,208 1,458 166 - 9,792 Gross voyage (loss) profit (545) 19,237 2,481 (1,149) 864 - 20,888 Interest expense 507 4,110 861 1,108 66 - 6,652 Gain on sale of other assets - - - - 43 - 43 Segment (loss) profit before administrative and general expenses, investment income, loss on sale of investment, loss on early extinguishment of debt, other income, equity in net income of unconsolidated entities, and taxes (1,052) 15,127 1,620 (2,257) 841 - 14,279 - -------------------------------------------------------------------------------
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 June 30, Six Months Ended June 30, 2004 2003 2004 2003 --------------------------- ------------------------- Total profit for reportable segments $5,597 $7,222 $12,869 $14,279 Unallocated amounts: Loss on sale of investment - - (623) - Investment income 161 302 329 530 Other income - 81 - 103 (Loss) gain on early extinguishment of debt (15) - (46) 1,260 Administrative and general expenses (4,289) (4,000) (8,395) (8,011) -------------------------- ------------------------ Income before provision for income taxes and equity in net income of unconsolidated entities $1,454 $3,605 $4,134 $8,161 ========================= ========================
Note 4. Unconsolidated Entities In the fourth quarter of 2003, we acquired a 50% investment in Dry Bulk Cape Holding Inc. ("Dry Bulk"), which owns two cape-size bulk carrier vessels built in calendar years 2002 and 2003. We account for our investment in Dry Bulk under the equity method, and as such our share of the earnings or losses of Dry Bulk is reported in our consolidated statements of income net of taxes. For the six months ended June 30, 2004, our portion of earnings, net of taxes, was $1.7 Million. For the three months ended June 30, 2004, our portion of earnings net of taxes was $621,000. In April of 2004, we received a cash distribution of $1.6 Million from Dry Bulk representing first quarter earnings and in July of 2004, we received a cash distribution of $1 Million from Dry Bulk representing second quarter earnings, which were both recorded as reductions of our investment in Dry Bulk. The unaudited combined condensed results of operations of Dry Bulk are summarized below:
(All Amounts in Thousands) Three Months Ended Six Months Ended June 30, 2004 June 30, 2004 -------------------- -------------------- Opeating Revenue $ 4,246 $ 9,928 Operating Income $ 2,781 $ 6,881 Net Income $ 1,912 $ 5,236
Note 5. 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 included in the computation of diluted earnings per share in the first six months of 2004, but were excluded from the computation of diluted earnings per share in the first six months of 2003, as the effect would have been antidilutive. 10 Note 6. Comprehensive Income (Loss) The following table summarizes components of comprehensive income (loss) for the three months period ended June 30, 2004 and 2003:
Three Months Ended June 30, (Amounts in Thousands) 2004 2003 ---------------------------- Net Income $ 1,828 $ 2,490 Other Comprehensive Income (Loss): Unrealized Holding (Loss) Gain on Marketable Securities, Net of Deferred Taxes of ($64) and $103, Respectively (118) 192 Net Change in Fair Value of Derivatives, Net of Deferred Taxes of ($11) and $95, Respectively (21) 176 -------------------------- Total Comprehensive Income $ 1,689 $ 2,858 --------------------------
The following table summarizes components of comprehensive income (loss) for the six months period ended June 30, 2004 and 2003:
Six Months Ended June 30, (Amounts in Thousands) 2004 2003 -------------------------- Net Income $ 4,725 $ 5,484 Other Comprehensive Income (Loss): Recognition of Unrealized Holding Loss on Marketable Securities, Net of Deferred Taxes of $216 Unrealized Holding (Loss) Gain on 402 - Marketable Securities, Net of Deferred Taxes of ($50) and $97, Respectively (92) 181 Net Change in Fair Value of Derivatives, Net of Deferred Taxes of $178 and $337, Respectively 331 625 -------------------------- Total Comprehensive Income $ 5,366 $ 6,290 --------------------------
Note 7. Coal Carrier Contract As previously reported, our wholly owned subsidiary, Enterprise Ship Company, Inc. ("Enterprise"), time charters the U.S. Flag coal carrier, ENERGY ENTERPRISE, to US Generating New England, Inc. ("USGenNE"), an indirect subsidiary of PG&E Corporation. On July 8, 2003, USGenNE filed a petition for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code and has subsequently received from the court an extension of time to submit its bankruptcy plan until November 1, 2004, and an extension of time until December 31, 2004, to solicit acceptance to its plan. USGenNE is current in all of its obligations to Enterprise under the time charter except for approximately $850,000 of pre-petition invoices covering charter hire and related expenses. The $850,000 is an unsecured claim in the bankruptcy proceeding. Under the federal bankruptcy laws, USGenNE has the right to either accept or reject the charter. If USGenNE accepts the charter, it is then required to meet its financial obligations under the charter including the $850,000 pre-petition invoices. If USGenNE rejects the charter, then Enterprise would have a priority administrative claim with respect to all amounts due it under the charter related to the post-petition period. At this time, we cannot predict whether the charter will be accepted or rejected; therefore, we have not provided an allowance for the pre-petition invoices in our financial statements as of June 30, 2004. In the event the charter is ultimately rejected, management believes the vessel can be utilized in alternative 11 employment without incurring a material impairment to the vessel's carrying value, although we can give no assurance at this time. Although USGenNE has continued to use the vessel in 2004 through the date of this report, we can give no assurance whether USGenNE will continue to use the vessel through the end of the year. Note 8. New Accounting Pronouncements In January of 2003, the FASB issued Financial Accounting Series Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." FIN 46 requires a variable interest entity to be consolidated by the primary beneficiary of the entity, where the company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns, or both. In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. We have investments in certain unconsolidated entities in which we have less than 100% ownership. We have evaluated these investments and determined that we do not have any investments in variable interest entities. Therefore, the adoption of FIN No. 46 as of January 1, 2004 did not have an impact on the financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements - --------------------------- Certain statements made by us or on our behalf in this report or elsewhere 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 beliefs and assumptions about future events that are inherently unpredictable and are therefore subject to significant risks and uncertainties. In this report, the terms "we," "us," "our," and "the Company" refer to International Shipholding Corporation and its subsidiaries. Such statements include, without limitation, statements regarding (1) estimated fair values of capital assets, the recoverability of the cost of those assets,the estimated future cash flows attributable to those assets, and the appropriate discounts to be applied in determining the net present values of those estimated cash flows; (2) estimated scrap values of assets held for disposal; (3) estimated fair values of financial instruments, such as interest rate and commodity swap agreements; (4) estimated losses (including independent actuarial estimates) under self-insurance arrangements, as well as estimated losses on certain contracts, trade routes, lines of business and asset dispositions; (5) estimated losses attributable to asbestos claims; (6) estimated obligations, and the timing thereof, to U.S. Customs relating to foreign repair work; (7) the adequacy and availability of capital resources on commercially acceptable terms; (8) our ability to remain in compliance with our debt covenants; (9) anticipated trends in 12 government sponsored cargoes; (10) our ability to maintain our government subsidies; and (11) the anticipated improvement in the results of our Mexican Rail-Ferry Service. We caution readers that certain important factors have affected, and are likely in the future to affect, our ability to achieve our expectations in those areas and in others, including our actual consolidated results of operations. Such factors may, and in some cases are likely to, cause future results to differ materially from those expressed in or implied by any forward-looking statements made in this report or elsewhere by us or on our behalf. Such factors include, without limitation, (1) political events in the United States and abroad, including terrorism, and the U.S. military's response to those events; (2) election results, regulatory activities and the appropriation of funds by the U.S. Congress; (3) charter hire rates and vessel utilization rates; (4) unanticipated trends in operating expenses such as fuel and labor costs; (5) trends in interest rates, and the availability and cost of capital to us; (6) the frequency and severity of claims against us, and unanticipated court results and changes in laws and regulations; (7) our success in renewing existing contracts and securing new ones, in each case on favorable economic terms; (8) unplanned maintenance and out-of-service days; (9) the ability of customers to fulfill their obligations to us; (10) the performance of our unconsolidated subsidiaries, (11) the uncertain future of our Coal Carrier contract with USGenNE, and (12) our ability to effectively handle our substantial leverage by servicing, and meeting the covenant requirements in, each of our debt instruments, thereby avoiding any defaults under those instruments and avoiding cross defaults under others. A more complete description of certain of these important factors is contained in our Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2003. General - -------- Our 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, our 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 our 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. Executive Summary - ------------------ Our net income for the second quarter of 2004 was $1.8 Million as compared to $2.5 Million for the second quarter of 2003. For the first six months of 2004, net income was $4.7 Million as compared to $5.5 Million for the 2003 period. The 2003 results included a gain of approximately $1.3 Million from the retirement of some of our 7.75% Unsecured Notes scheduled to mature in 2007. 13 The combination of our 50% investment in two Capesize bulk carriers and our 30% investment in companies owning and operating cement carrying vessels continue to be major contributors to our results. In the second quarter of 2004, these investments earned approximately $900,000. We continue to see cargo volumes on our commercial liner services improve from the 2003 levels while our U.S. Flag PCTCs experienced lower supplemental cargo volumes during the quarter. Although we had the aforementioned improvements, we experienced a significant increase in both our planned and unplanned vessel out-of-service days. Our U.S. Flag Coal Carrier was out-of-service twenty-six days during the quarter for an accelerated drydock due to required repair work. Also in the quarter, one of our U.S. Flag PCTCs had a casualty, which resulted in twenty-six unplanned out-of-service days while a second U.S. Flag PCTC underwent her scheduled drydock of fifteen days. In addition, our Mexican Rail-Ferry service's results were negatively impacted by higher costs related to unanticipated maintenance problems. RESULTS OF OPERATIONS ----------------------- SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2003 Gross Voyage Profit - --------------------- Gross voyage profit decreased 12.8% from $20.9 Million in the first six months of 2003 to $18.2 Million in the first six months of 2004. The changes associated with each of our segments are discussed below. Liner Services: Gross voyage profit for this segment improved from a loss of $545,000 in the first six months of 2003 to a profit of $762,000 in the first six months of 2004. The improvement was primarily a result of higher cargo volumes in the first six months of 2004 compared to 2003 for both our U.S. Flag LASH Liner service and Foreign Flag LASH Liner service. Time Charter Contracts: The decrease in this segment's gross voyage profit from $19.2 Million in the first six months of 2003 to $14.7 Million in the first six months of 2004 was attributable primarily to our U.S. Flag PCTCs carrying less supplemental cargoes, which are in addition to the time charter agreements, during 2004 as compared to 2003. The results of our U.S. Flag PCTCs were further impacted by a casualty on one vessel resulting in twenty-six unplanned out-of-service days in the second quarter of 2004 while a second U.S. Flag PCTC underwent her scheduled drydock of fifteen days. The results of our U.S. Flag Coal Carrier was impacted by an accelerated drydock due to required repair work resulting in twenty-six out-of-service days during the second quarter of 2004. Additionally, our Multi-Purpose vessel, completed its charter with the Military Sealift Command in early 2003 and was sold shortly thereafter. Contracts of Affreightment: The increase in this segment's gross voyage profit from $2.5 Million in the first six months of 2003 to $2.7 Million in the first six months of 2004 was primarily due to lower operating costs in 2004. Rail-Ferry Service: Gross voyage loss for this segment increased from a loss of $1.1 Million in the first six months of 2003 to a loss of $1.7 Million in the first six months of 2004. Although cargo volume increased, this 14 service experienced higher operating costs, including cost of approximately $430,000 related to unanticipated maintenance problems during the first six months of 2004, as well as higher fuel costs. Other: Gross voyage profit for this segment increased from $864,000 in the first six months of 2003 to $1.7 Million in the first six months of 2004. The increase resulted primarily from our 50% owned car transportation truck company, which experienced an increase in car volume. Other Income and Expense - ------------------------- Interest expense decreased 19.6% from $6.7 Million in the first six months of 2003 to $5.3 Million in the first six months of 2004. Decreases due to regularly scheduled payments on outstanding debt and lower interest rates accounted for $916,000 of the difference. Reduced cost from the early repayment of our 7.75% Senior Notes, as well as early debt retirements, accounted for approximately $484,000 of the decrease. Loss on early extinguishment of debt of $46,000 reported in the first six months of 2004 was due to the early retirement of debt associated with our Molten Sulphur Carrier, as well as the retirement at a slight premium of $410,000 of our 7.75% Senior Notes due in 2007. The gain of $1,260,000 in the first six months of 2003 resulted from the retirement at a discount of approximately $7.9 Million of our 7.75% Senior Notes. Income Taxes - ------------- We had a tax provision of $1.6 Million in the first six months of 2004 and $2.9 Million for the first six months of 2003 at the statutory rate of 35% for both periods. Equity in Net Income of Unconsolidated Entities - ------------------------------------------------ Equity in net income of unconsolidated entities, net of taxes, increased from $227,000 in the first six months of 2003 to $2.2 Million in the first six months of 2004. The improvement was primarily related to our 50% investment in a company owning two newly built cape-size bulk carrier vessels and our minority interest in companies owning and operating cement carrying vessels. Our 50% investment in the cape-size bulk carrier company, which was acquired in November of 2003, contributed $1.7 Million net of taxes in 2004. Our 30% investment in the cement carrier company contributed $417,000 net of taxes in the first six months of 2004 compared to $227,000 net of taxes in the first six months of 2003. THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2003 Gross Voyage Profit - -------------------- Gross voyage profit decreased 20.6% from $10.4 Million in the second quarter of 2003 to $8.2 Million in the second quarter of 2004. The changes associated with each of our segments are discussed below. Liner Services: Gross voyage profit for this segment improved from a loss of $536,000 in the second quarter of 2003 to a profit of $300,000 in the second quarter of 2004. The improvement was primarily a result of higher cargo volumes in the second quarter of 2004 compared to 2003 for our Foreign Flag LASH Liner service. 15 Time Charter Contracts: The decrease in this segment's gross voyage profit from $9.5 Million in the second quarter of 2003 to $7 Million in the second quarter of 2004 was primarily a result of our U.S. Flag PCTCs carrying less supplemental cargoes, which are in addition to the time charter agreements, during 2004 as compared to 2003. The results of our U.S. Flag PCTCs were further impacted by a casualty on one vessel resulting in twenty- six unplanned out-of-service days in the second quarter of 2004 and another vessel undergoing a scheduled drydocking during the quarter. The results of our U.S. Flag Coal Carrier was impacted by an accelerated drydock due to required repair work resulting in twenty-six out-of-service days during the second quarter of 2004. Contracts of Affreightment: Gross voyage profit for this segment increased slightly from $1.2 Million in the second quarter of 2003 to $1.4 Million in the second quarter of 2004, primarily due to lower operating costs in 2004. Rail-Ferry Service: Gross voyage loss for this segment increased from a loss of $416,000 in the second quarter of 2003 to a loss of $854,000 in the second quarter of 2004. The increase in this service's gross voyage loss was primarily related to less cargo volume on southbound voyages and higher operating costs, including costs of approximately $100,000 related to unanticipated maintenance problems during the second quarter of 2004. Other: Gross voyage profit for this segment decreased slightly from $554,000 in the second quarter of 2003 to $357,000 in the second quarter of 2004. The decrease resulted primarily from an unexpected casualty on one of our vessels that our insurance subsidiary, which operates solely to cover self-retained insurance risks, had to cover for the current policy year, partially offset by our 50% owned car transportation truck company experiencing an increase in car volume. Other Income and Expense - ------------------------- Interest expense decreased 17.2% from $3.2 Million in the second quarter of 2003 to $2.6 Million in the second quarter of 2004. Decreases due to regularly scheduled payments on outstanding debt and lower interest rates accounted for $380,000 of the difference. Reduced cost from the early repayment of our 7.75% Senior Notes, as well as early debt retirements, accounted for approximately $165,000 of the decrease. Income Taxes - ------------- We had a tax provision of $575,000 and $1.3 Million for the second quarter of 2004 and 2003, respectively, at the statutory rate of 35% for both periods. Equity in Net Income of Unconsolidated Entities - ------------------------------------------------ Equity in net income of unconsolidated entities, net of taxes, increased from $160,000 in the second quarter of 2003 to $949,000 in the second quarter of 2004. The improvement was primarily related to our 50% investment in a company owning two newly built cape-size bulk carrier vessels and our minority interest in companies owning and operating cement carrying vessels. Our 50% investment in the cape-size bulk carrier company, which was acquired in November of 2003, contributed $621,000 net of taxes in 2004. Our 30% investment in the cement carrier company contributed $305,000 net of taxes in the second quarter of 2004 compared to $160,000 net of taxes in the second quarter of 2003. 16 LIQUIDITY AND CAPITAL RESOURCES --------------------------------- The following discussion should be read with the more detailed Consolidated Condensed Balance Sheets and Consolidated Statements of Cash Flows included elsewhere herein as part of our Consolidated Financial Statements. Our working capital increased from $16.8 Million at December 31, 2003, to $21.5 Million at June 30, 2004. Of the $40.9 Million in current liabilities, $12.4 Million related to current maturities of long-term debt at June 30, 2004. Cash and cash equivalents increased during the first six months of 2004 by $683,000 from $8.9 Million at December 31, 2003, to $9.6 Million at June 30, 2004. The increase was due to cash provided by operating activities of $10.6 Million and investing activities of $702,000, partially offset by cash used for financing activities of $10.6 Million. Operating activities generated a positive cash flow after adjusting net income of $4.7 Million for non-cash provisions such as depreciation and amortization. Cash provided by investing activities of $702,000 was primarily related to cash distributions received from our investments in unconsolidated entities, partially offset by purchases of non-vessel related assets used by our car transportation truck company and purchases of short-term investments. Cash used for financing activities of $10.6 Million included $6.6 Million used for regularly scheduled payments of debt, $1 Million used to repay draws on our line of credit made during the same period, $2.5 Million used for early repayment of one of our debt obligations, and $1.5 Million used for an additional payment on our Title XI loan, which was partially offset by draws on our line of credit of $1 Million. As of June 30, 2004, $14.7 Million was available on our $15 Million revolving credit facility, which expires in April of 2006. Debt and Lease Obligations - We have several vessels under operating leases, including three PCTCs, one LASH vessel, one Ice Strengthened Breakbulk/Multi Purpose vessel, a Container vessel and a Tanker vessel. We also conduct certain of our operations from leased office facilities and use certain transportation and other equipment under operating leases. Our obligations associated with these leases are summarized in the table below. The following is a summary of the scheduled maturities by period of our outstanding debt and lease obligations as of June 30, 2004:
Jul. 1- Debt and lease Dec. 31, obligations (000's) 2004 2005 2006 2007 2008 Thereafter - ------------------------------------------------------------------------------ Long-term debt (including current maturities) $ 6,183 $12,366 $10,804 $80,001 $ 7,468 $51,793 Operating leases 12,238 19,060 19,073 18,948 16,893 91,558 ---------------------------------------------------- Total by period $18,421 $31,426 $29,877 $98,949 $24,361 $143,351 ====================================================
Debt Covenant Compliance Status - We have met all of the financial covenants under our various debt agreements, the most restrictive of which include the working capital, leverage ratio, minimum net worth, and interest coverage ratio as of June 30, 2004, and believe we will continue to meet them throughout 2004, although we can give no assurance to that effect. 17 If our cash flow and capital resources are not sufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, obtain additional equity capital, enter into additional financings of our unencumbered vessels or restructure debt. Mexican Rail-Ferry Service Results - We expect the results of the Mexican Rail-Ferry Service to improve and contribute to our cash flows. If market conditions adversely impact those projections, we believe we could find alternative placement for the two vessels supporting the service. Dividend Payments - In view of the impairment loss recognized on Assets Held for Disposal during 2001, and to comply with certain financial covenants under our debt agreements, the suspension of quarterly dividend payments on our common shares of stock remains in effect. Environmental Issues - We have not been notified that we are a potentially responsible party in connection with any environmental matters. NEW ACCOUNTING PRONOUNCEMENTS -------------------------------- In January of 2003, the FASB issued Financial Accounting Series Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities." FIN 46 requires a variable interest entity to be consolidated by the primary beneficiary of the entity, where the company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns, or both. In general, a variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. We have investments in certain unconsolidated entities in which we have less than 100% ownership. We have evaluated these investments and determined that we do not have any investments in variable interest entities. Therefore, the adoption of FIN No. 46 as of January 1, 2004 did not have an impact on the financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK In the ordinary course of our business, we are exposed to foreign currency, interest rate, and commodity price risks. We utilize derivative financial instruments including forward exchange contracts, interest rate swap agreements, and commodity swap agreements to manage certain of these exposures. We hedge only firm commitments or anticipated transactions and do not use derivatives for speculation. We neither hold nor issue financial instruments for trading purposes. Interest Rate Risk. The fair value of long-term debt at June 30, 2004, including current maturities, was estimated to be $172.1 Million compared to a carrying value of $168.5 Million. The potential increase in fair value 18 resulting from a hypothetical 10% decrease in the average interest rates applicable to our long-term debt at June 30, 2004, would be approximately $1.5 Million or 0.9% of the carrying value. The fair value of the interest rate swap agreement discussed in our 2003 Form 10-K was a liability of $516,000 at June 30, 2004, 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. A hypothetical 10% decrease in interest rates as of June 30, 2004, would not result in a material change in the fair value of the liability primarily because this agreement expires in September of 2004. Commodity Price Risk. As of June 30, 2004, we have no commodity swap agreements to manage our exposure to price risk related to the purchase of the estimated 2004 fuel requirements for our Liner Services or Rail-Ferry Service segment. Foreign Exchange Rate Risk. There were no material changes in market risk exposure for the foreign currency risk described in our Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2003. ITEM 4. CONTROLS AND PROCEDURES (a) Within the 90-day period prior to filing this report, we conducted an evaluation of the effectiveness of our "disclosure controls and procedures," as that phrase is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934. The evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). Based on that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be disclosed in our periodic filings with the Securities and Exchange Commission ("SEC"), and in ensuring that the information required to be disclosed in those filings is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. (b) Subsequent to the date of the evaluation, there were no significant changes in our internal controls or in other factors that could significantly affect the internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. 19 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The matters voted upon and results of the voting at the Company's Annual Meeting of Shareholders held on April 28, 2004, were reported in response to Item 4 of the Company's Form 10-Q filed with the Securities and Exchange Commission for the quarterly period ended March 31, 2004, and are incorporated herein by reference. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBIT INDEX Exhibit Number Description --------------- -------------- 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) 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) On July 29, 2004, we filed a current report on Form 8-K to furnish the public announcement of our second quarter 2004 earnings. 20 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 August 12, 2004 Date ___________________________ EX-31.1 2 q2nd04ex311.txt EXHIBIT 31.1 CERTIFICATION I, Erik F. Johnsen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of International Shipholding Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2004 /s/ Erik F. Johnsen - ----------------------- Erik F. Johnsen Chairman of the Board of Directors and Chief Executive Officer International Shipholding Corporation EX-31.2 3 q2nd04ex312.txt EXHIBIT 31.2 CERTIFICATION I, Gary L. Ferguson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of International Shipholding Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the quarterly report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 12, 2004 /s/ Gary L. Ferguson - ----------------------------- Gary L. Ferguson Vice President and Chief Financial Officer International Shipholding Corporation EX-32.1 4 q2nd04ex321.txt Exhibit 32.1 Certification of CEO Pursuant to 18 U.S.C. Section 1350 (Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) In connection with the Quarterly Report on Form 10-Q of International Shipholding Corporation (the "Company") for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Erik F. Johnsen, as Chairman and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 12, 2004 /s/ Erik F. Johnsen ------------------------ Erik F. Johnsen Chairman of the Board and Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-32.2 5 q2nd04ex322.txt Exhibit 32.2 Certification of CFO Pursuant to 18 U.S.C. Section 1350 (Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) In connection with the Quarterly Report on Form 10-Q of International Shipholding Corporation (the "Company") for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Gary L. Ferguson, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: August 12, 2004 /s/ Gary L. Ferguson -------------------------- Gary L. Ferguson Vice President and Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----