8-K/A

UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K/A

(Amendment No. 1 to Registrant’s Current Report on Form 8-K filed December 6, 2012)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

November 30, 2012

Date of Earliest Event Reported

Commission file number  –  001-10852

INTERNATIONAL SHIPHOLDING CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		36-2989662
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
11 North Water Street, Suite 18290 Mobile, AL		36602
(Address of principal executive offices)		(Zip Code)
	(251) 243-9100
	(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [ ]  Written communications pursuant to Rule 425 under the Securities Act

 [ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act

 [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

 [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Explanatory Note

This Amendment No. 1 supplements the Current Report on Form 8-K filed by International Shipholding Corporation (“we”, “ours”, “ISH”, or the “Company”) with the Securities and Exchange Commission on December 6, 2012, in which we disclosed the completion of our acquisition of U.S. United Ocean Services (“UOS”) on November 30, 2012. We are filing this Amendment No. 1 to include in such report the audited financial statements of UOS as of and for the years ended December 31, 2010 and 2011, unaudited interim financial statements as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011 and unaudited pro forma financial statements for the year ended December 31, 2011 and for the nine months ended September 30, 2012.

ITEM 9.01 Financial Statements and Exhibits

(a)   Financial statements of businesses acquired

The financial statements of UOS for the periods specified in Rule 3-05(b) of Regulation S-X and an accountant’s report provided pursuant to Rule 2-02 of Regulation S-X are filed herewith as Exhibit 99.2 and 99.3.

(b)   Pro forma financial information

The unaudited pro forma financial information reflecting our UOS acquisition which is required pursuant to Article 11 of Regulation S-X is filed herewith as Exhibit 99.4.

(c)   Exhibits

Exhibit Number                                      Document

2.1	Membership Interest Purchase Agreement dated October 9,  2012 between International Shipholding Corporation and United Maritime Group, LLC (filed with the Securities and Exchange Commission as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated October 11, 2012, and incorporated by herein by reference).
23.1*	Consent of Warren Averett, LLC, independent registered public accounting firm for UOS.
99.1	Press Release by International Shipholding Corporation dated November 30, 2012, announcing the completion of its acquisition of U.S. United Ocean Services, LLC (filed with the Securities and Exchange Commission as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated November 30, 2012, and incorporated herein by reference).
99.2*	Audited consolidated financial statements of UOS as of and for the year ended December 31, 2010 and December 31, 2011.
99.3*	Unaudited interim consolidated financial statements of UOS as of September 30, 2012 and for nine months ended September 30, 2012 and 2011.
99.4*	Unaudited pro forma condensed combined financial statements as of and for the nine months ended September 30, 2012 and for the year ended December 31, 2011.

   __________

*Filed herewith.

 

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/ Manuel G. Estrada

_____________________________________________

Manuel G. Estrada

Vice President and Chief Financial Officer

Date:    February 8, 2013

EX-23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-169899) and Form S-8 (No. 333-176475) of International Shipholding Corporation of our report dated February 5, 2013 relating to the financial statements of U.S. United Ocean Services, LLC, which appears in the Current Report on Form 8-K/A of International Shipholding Corporation.

/S/ Warren Averett, LLC

Montgomery, Alabama

February 7, 2013

EX-99.2

U.S. UNITED OCEAN SERVICES, LLC

FINANCIAL STATEMENTS

DECEMBER 31, 2011 AND 2010

U.S. UNITED OCEAN SERVICES, LLC

DECEMBER 31, 2011 AND 2010

TABLE OF CONTENTS

 PAGE

Independent Auditors’ Report	1
Balance Sheets	2
Statements of Operations	3
Statements of Changes in Member’s Equity	4
Statements of Cash Flows	5
Notes to Financial Statements	6

Independent Auditors’ Report

To Management

We have audited the accompanying balance sheets of U.S. United Ocean Services, LLC (the Company), as of December 31, 2011 and 2010, and the related statements of operations, changes in member’s equity and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of U.S. United Ocean Services, LLC, as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Warren Averett, LLC

Montgomery, Alabama

February 5, 2013

U.S. UNITED OCEAN SERVICES, LLC

BALANCE SHEETS

DECEMBER 31, 2011 AND 2010

ASSETS	2011			2010
	(In thousands)
CURRENT ASSETS
Cash and cash equivalents	$	173		$	281
Accounts receivable		11,815			9,659
Materials and supplies		7,038			9,638
Prepaid expenses and other current assets		241			396
Total current assets		19,267			19,974
Property and equipment		139,230			166,133
Accumulated depreciation		(49,228	)		(49,295	)
Property and equipment, net		90,002			116,838
Intangible assets, net of amortization of
$8,972 and $8,561, respectively		16,128			26,084
Deferred major maintenance, net of amortization
of $3,418 and $7,861, respectively		4,557			5,743
TOTAL ASSETS	$	129,954		$	168,639
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,481		$	3,058
Cash overdrafts		231			796
Accrued expenses		2,776			3,568
Deferred revenue		-			1,315
Current portion of insurance reserves		2,141			2,243
Total current liabilities		7,629			10,980
Long-term portion of insurance reserves		1,795			835
TOTAL LIABILITIES		9,424			11,815
Member's Equity		120,530			156,824
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	129,954		$	168,639

See independent auditors’ report and notes to financial statements.

U.S. UNITED OCEAN SERVICES, LLC

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

REVENUE	2011			2010
	(In thousands)
Operating revenue	$	122,742		$	145,526
EXPENSES
Operating expenses		8,796			9,816
Salaries, wages and benefits		17,311			21,566
Vessel leases		4,772			5,483
Chartering		22,053			23,322
Fuel, lube and power		24,225			24,514
Maintenance and repairs		6,567			13,068
Administrative and general		5,922			8,694
Related party administrative and general		6,404			6,614
Depreciation and amortization		21,204			23,424
Amortization of intangible assets		2,678			2,724
Loss on impairment of property and equipment		5,919			2,630
(Gain) loss on sale of assets		(102	)		1
Loss on lease buyout		9,807			-
Total expenses		135,556			141,856
NET INCOME (LOSS)	$	(12,814	)	$	3,670

See independent auditors’ report and notes to financial statements.

U.S. UNITED OCEAN SERVICES, LLC

STATEMENTS OF CHANGES IN MEMBER’S EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

					Additional						Total
	Membership Units				Paid-in			Retained			Member's
	Shares		Amount		Capital			Earnings			Equity
	(All amounts in thousands except for shares)
Balance at January 1, 2010		100	$	71,411	$	67,124		$	34,558		$	173,093
Net income		-		-		-			3,670			3,670
Owner distributions		-		-		(19,939	)		-			(19,939	)
Balance at December 31, 2010		100		71,411		47,185			38,228			156,824
Net loss		-		-		-			(12,814	)		(12,814	)
Owner distributions		-		-		(23,480	)		-			(23,480	)
Balance at December 31, 2011		100	$	71,411	$	23,705		$	25,414		$	120,530

See independent auditors’ report and notes to financial statements.

U.S. UNITED OCEAN SERVICES, LLC

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
	2011			2010
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(12,814	)	$	3,670
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization		21,204			23,424
Loss on impairment of property and equipment		5,919			2,630
(Gain) loss on sale of assets		(102	)		1
Loss on equity investment in unconsolidated affiliate		-			127
Amortization of intangible assets		2,678			2,724
Loss on lease buyout		9,807			-
Changes in operating assets and liabilities:
Accounts receivable		(2,156	)		1,280
Materials and supplies		1,161			(2,684	)
Prepaid expenses and other assets		(170	)		2,666
Deferred major maintenance		(1,694	)		(5,283	)
Accounts payable and accrued expenses		(1,389	)		(152	)
Deferred revenue and other liabilities		(457	)		1,350
Net cash provided by operating activities		21,987			29,753
CASH FLOWS FROM INVESTING ACTIVITIES
Lease buyout payment		(6,301	)		-
Purchase of property and equipment		(6,340	)		(9,939	)
Proceeds from the sale of property and equipment		14,591			-
Distributions from unconsolidated affiliate		-			325
Net cash provided (used) by investing activities		1,950			(9,614	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdrafts		(565	)		(269	)
Distributions to owner		(23,480	)		(19,939	)
Net cash used by financing activities		(24,045	)		(20,208	)
DECREASE IN CASH AND CASH EQUIVALENTS		(108	)		(69	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		281			350
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	173		$	281

See independent auditors’ report and notes to financial statements.

U.S. UNITED OCEAN SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011 AND 2010

1.   THE COMPANY AND NATURE OF BUSINESS

U.S. United Ocean Services, LLC (“UOS” or “the Company”) is a wholly-owned subsidiary of United Maritime Group, LLC, a Florida limited liability company.  In December 2007, United Maritime Group, LLC became an independent company acquired from TECO Energy by a group consisting of Greenstreet Equity Partners, LLC, Jefferies Capital Partners and AMCI Capital, L.P. and affiliates (the Members).

UOS provides transportation services on domestic and international voyages. These services are contracted under single or consecutive voyage charters on a spot basis, or long-term contracts ranging from one to ten years. Most of the international voyages are performed under cargo preference programs, the most significant of which is PL-480. The Company charges for these services either on a per ton or per day basis. Under a per ton contract, the Company is generally responsible for all expenses including fuel. Revenues under these contracts are based on a per ton rate. The Company bears the risk of time lost due to weather, maintenance, and delay at docks which are not covered by demurrage. Demurrage is compensation due from the customer when there are delays at the dock that prevent the vessel from loading or unloading within the contract terms. The Company’s contracts have fuel price mechanisms that limit its exposure to changes in fuel price. The Company also time charters its vessels, such that the customer has exclusive use of a particular vessel for a specified time period and rates are on a per day basis. The Company pays expenses related to the vessel’s maintenance and operation and the charterer is responsible for all voyage costs, including port charges and fuel.

Rates for UOS movements are based on the amount of freight demand relative to the availability of vessels to meet that demand. In the coastwise market, a significant portion of the movements are based on long-term contractual relationships. Vessels are often customized or particularly suited for individual customers, cargoes or trades. Cargo volumes in the preference trade are based on funding for such programs and the availability of U.S. flag vessels. If customer requirements for movements of cargoes are reduced or spot employment is not available as a vessel completes its last movement, the vessel may be idle and not generate revenue. If this situation exists for an extended period of time, the Company may place a vessel in lay-up status. While in lay up, all machinery is shut down, the crew is removed and the vessel is secured. Lay up minimizes the costs associated with the vessel, particularly fuel and crew costs.  Restoring a vessel back to active service may require time to hire crews and perform dry-docking or other maintenance required to ensure the vessel is fully compliant with classification society and U.S. Coast Guard regulations.

Operating costs for UOS consist primarily of crewing, insurance, maintenance, lease, fuel and voyage-specific port and direct costs. Maintenance costs materially fluctuate in relation to the number and extent of regulatory drydockings in any given period.

2.   SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and the disclosures made in the accompanying notes. Despite the intention to establish accurate estimates and use reasonable assumptions, actual results could differ from the Company’s estimates and such differences could be material.

Accounts Receivable

Accounts receivable in the accompanying balance sheets are reported without an estimated allowance for doubtful accounts. All amounts reported as accounts receivable have subsequently been paid and thus the stated amount of such receivables represents their net realizable value.

Materials and Supplies

Materials and supplies, including fuel costs, are stated at the lower of cost or market using the average cost method.

Revenue

Revenue is primarily derived from coal, phosphate, and grain transportation (among other cargoes). Revenues from transportation services are recognized as services are rendered. Revenue from certain transportation services are recognized using the percentage-of-completion method, which includes estimates of the distance traveled or time elapsed compared to the total estimated contract.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Additions, replacements and betterments are capitalized; maintenance and repairs are charged to expense as incurred. Items sold or retired are removed from the assets and accumulated depreciation accounts and any resulting gains or losses are properly included in the statements of operations.

The following table illustrates the components of depreciation and amortization expense (in thousands):

	2011		2010
Depreciation	$	17,457	$	19,278
Amortization – major maintenance		3,747		4,146
Total depreciation and amortization	$	21,204	$	23,424

U.S. UNITED OCEAN SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011 AND 2010

2.   SIGNIFICANT ACCOUNTING POLICIES (Continued)

Deferred Major Maintenance

In accordance with the guidance for deferred major maintenance activities, expenditures incurred during major maintenance are deferred and amortized on a straight-line basis over the period until the next scheduled major maintenance, generally two and a half years. The Company only includes in deferred major maintenance those direct costs that are incurred as part of the vessel’s maintenance that is required by the Coast Guard and/or vessel classification society regulation. Direct costs include shipyard costs as well as the costs of placing the vessel in the shipyard. Costs relating to major steelwork, coatings or any other work that extends the life of the vessel are capitalized. Expenditures for routine maintenance and repairs, whether incurred as part of the major maintenance or not, are expensed as incurred. The total deferred major maintenance costs as of December 31, 2011 and 2010 are $4.6 million and $5.7 million, respectively. The amount of amortization expense recognized during the years ended December 31, 2011 and 2010 is $3.7 million and $4.1 million, respectively.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of trade receivables. During the normal course of business, the Company extends credit to customers primarily in North America conducting business in the utility, metallurgical, phosphate and grain industries. The Company performs ongoing credit evaluations of its customers and does not require collateral. The customers’ financial condition and payment history have been considered in determining the need for an allowance for doubtful accounts.

Investment in Unconsolidated Affiliate

In June 2009, the Financial Accounting Standards Board (FASB) issued guidance amending the accounting for variable interest entities (“VIEs”) and changing the process as to how an enterprise determines which party consolidates a VIE. This guidance also defines the party that consolidates the VIE (the primary beneficiary) as the party with (1) the power to direct activities of the VIE that most significantly affect the VIE’s economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Upon adoption, the reporting enterprise must reconsider its conclusions on whether an entity should be consolidated, and should a change result, the effect on its net assets will be recorded as a cumulative effect adjustment to retained earnings. The VIE was liquidated in early 2010 and no adjustment to the financial statements is necessary at December 31, 2010.

Ocean Dry Bulk, LLC was a joint venture between the Company and Moran Towing. The joint venture owned a single dry bulk ocean-going barge which had been chartered to a third party operator. The management of the barge, which included technical support for the vessel, was handled under a separate husbandry agreement between Ocean Dry Bulk, LLC and Moran Towing. The Company utilized the equity method to account for its investment in the unconsolidated joint venture. The investment was liquidated in 2010.

Investment in Unconsolidated Affiliate (Continued)

A summary of the changes in the equity investment in the unconsolidated joint venture is as follows (in thousands):

Balance at January 1, 2010	$	452
Capital distributions from joint venture		(325	)
Equity interest in net loss of joint venture		(127	)
Balance at December 31, 2010	$	-

Asset Impairment

The Company periodically assesses whether there has been a permanent impairment of its long-lived assets and certain intangibles held and used by the Company, in accordance with Accounting Standards Codification (ASC) No. 360, Property, Plant, and Equipment and ASC No. 205, Presentation of Financial Statements. ASC No. 360 establishes standards for determining when impairment losses on long-lived assets have occurred and how impairment losses should be measured. The Company is required to review long-lived assets and certain intangibles, to be held and used, for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable. In performing such a review for recoverability, the Company is required to compare the expected future cash flows to the carrying value of long-lived assets and finite-lived intangibles. If the sum of the expected future undiscounted cash flows is less than the carrying amount of such assets and intangibles, the assets are impaired and the assets must be written down to their estimated fair market value. In 2010, the Company had an appraisal performed and one of its vessels had a cost that exceeded its fair market value.  A $2.6 million loss was taken during 2010 and is reflected in the financial statements accordingly.  An appraisal was completed for all vessels in December of 2011 and a decrease in fair market value triggered the necessity of managements’ impairment review and analysis at December 31, 2011.  At December 31, 2011, an impairment of $5.9 million was recorded on two ocean-going vessels and is reflected in the financial statements accordingly.

U.S. UNITED OCEAN SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011 AND 2010

2.   SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

ASC No. 820 requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped based on significant levels of inputs. The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Quoted prices for identical assets and liabilities in active markets.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs for the assets or liabilities.

The fair value of the Company’s impaired assets was based upon observable inputs other than quoted market prices (Level 2 criteria).  The following table presents the fair values of items measured at fair value on a non-recurring basis for the years ended December 31, 2011 and 2010 (in thousands):

	Fair Value Measurement Category
	Fair Value		Level 1		Level 2		Level 3		Total Losses
December 31, 2011:
Vessels	$	4,550		-	$	4,550	$	-	$	5,919
December 31, 2010:
Vessels	$	6,200		-	$	6,200	$	-	$	2,630

The 2011 fair value represents the appraised value of two vessels after the impairment charges taken in 2011. The 2010 fair value represents the appraised value of a vessel after the impairment charge taken in 2010. The valuation technique used was a weighted average of the cost, comparable sales and income approach.  The carrying value of this vessel is no longer equal to the fair value due to annual depreciation.

Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reflected in the financial statements at their carrying value, which approximates their fair value due to their short maturity.

Income Taxes

The Company implemented the accounting guidance for uncertainty in income taxes using the provisions of ASC No. 740, Income Taxes.  Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the positions will be sustained upon examination by the tax authorities.

As of December 31, 2011 and 2010, the Company had no uncertain tax positions, or interest and penalties, which qualify for either recognition or disclosure in the financial statements.

Subsequent Events

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  Subsequent events have been evaluated through the date of the audit opinion and management has included those items deemed to be reportable in Note 9 (Subsequent Events).

3.   PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

	Average Useful		December 31,
	Lives in Years		2011			2010
Buildings		1 – 30	$	349		$	349
Vessels, net of impairment		3 – 28		137,619			164,479
Other		1 – 20		1,262			1,262
Work in progress				-			43
Total costs, net of impairment				139,230			166,133
Accumulated depreciation				(49,228	)		(49,295	)
Property and equipment, net			$	90,002		$	116,838

In 2011, the Company sold several vessels generating net proceeds of $14.6 million resulting in a gain on sale of assets totaling $0.1 million.

4.   INTANGIBLE ASSETS

In conjunction with the original acquisition in December 2007, the Company assessed all operating leases in place at that time to determine whether the lease terms were favorable or unfavorable given market conditions as of December 2007. As a result, the Company recorded a favorable lease intangible asset in 2007 for $15.4 million with a life of 6 years. Also in connection with the business acquisition, an intangible asset of $19.2 million was assigned to customer relationships in 2007, which are subject to amortization with a weighted average useful life of approximately 10 years.

Amortization of intangible assets is charged to amortization of intangibles on a straight-line basis in the accompanying statements of operations. If impairment events occur, the Company could accelerate the timing of intangible asset charges. For each of the years ended December 31, 2011 and 2010, amortization expense related to the intangible assets acquired was $2.7 million.

In 2011, the Company terminated the leases on two ocean vessels with the subsequent write off of associated in-the-money leases (favorable lease intangible assets).  The Company transferred the lease and purchase option upon sale of one of its leased vessels and paid $6.3 million to buy out the other lease. A summary of intangible assets at December 31, 2011 and 2010 is as follows (in thousands):

		January 1,								December 31,
		2011		Lease						2011
	Asset Life	Balance		Terminations			Amortization			Balance
Favorable lease – Ocean Vessels	6 years	$	12,548	$	(7,278	)	$	(833	)	$	4,437
Customer relationship (contracts)	10 years		13,536		-			(1,845	)		11,691
Total		$	26,084	$	(7,278	)	$	(2,678	)	$	16,128.0

		January 1,							December 31,
		2010		Lease					2010
	Asset Life	Balance		Terminations		Amortization			Balance
Favorable lease – Ocean Vessels	6 years	$	13,426	$	-	$	(878	)	$	12,548
Customer relationship (contracts)	10 years		15,382		-		(1,846	)		13,536
Total		$	28,808	$	-	$	(2,724	)	$	26,084

Estimated future amortization expense is as follows at December 31, 2011 (in thousands):

2012                                                                                        $          2,251

2013                                                                                                    6,245

2014                                                                                                    1,908

2015                                                                                                    1,908

2016                                                                                                    1,908

   Thereafter                                                                                           1,908

   Total amortization expense$        16,128

The 2013 amortization includes $3.8 million of amortization expense for favorable lease purchase options.

5.   EMPLOYEE POSTRETIREMENT BENEFITS

401(k) Savings Plan

The Company has a 401(k) savings plan covering substantially all employees of the Company that enables participants to save a portion of their compensation up to the limits allowed by IRS guideline. Effective July 1, 2010, the Company reinstated an employer contribution to this plan at a level of 50% of up to 6% of eligible participant contributions.  The expenses of $0.3 million and $0.2 million for the years ended December 31, 2011 and 2010 are reflected in the operating expenses financial statement line item in the Company’s statements of operations.

6.   RELATED PARTY TRANSACTIONS

The Company has certain transactions, in the ordinary course of business, with entities in which directors of the Company have interests. During the years ended December 31, 2011 and 2010, the Company incurred management fees of $6.4 million and $6.6 million, respectively, which are classified as related party administrative and general expense in the Company’s statements of operations.

U.S. UNITED OCEAN SERVICES, LLC

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2011 AND 2010

7.   COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in various legal proceedings that have arisen in the ordinary course of business. In the opinion of the Company’s management, all such proceedings are adequately covered by insurance or, if not so covered, should not result in any liability which would have a material adverse effect on the financial position or operations of the Company.

On August 9, 2010, the Company received a letter from The Mosaic Company (“Mosaic”) claiming that, as a result of a preliminary injunction affecting Mosaic’s South Fort Meade phosphate mine, a force majeure event had occurred under the Company’s contract with Mosaic (the “Mosaic Agreement”).

Mosaic issued a claim of force majeure under its agreement with the Company, and in 2010, shipped amounts that were below its minimum contract volume.  Since October 2010, Mosaic has terminated further shipments of phosphate “wet rock” under the agreement but has continued very nominal shipments of finished phosphate “dry rock” as a means of providing a partial mitigation of the volume shortfall.  The impact on the Company’s revenue in 2010 of Mosaic’s failure to ship minimum volumes was approximately $9.7 million.  The impact on the Company’s revenue in 2011 of Mosaic’s failure to ship minimum volumes was $30.4 million and stoppage has continued into 2012 with shipments resuming in late 2012.  The Company is pursuing rights to recover deadfreight through arbitration.  The Company is also pursuing other uses of the shipping capacity used to service the Mosaic agreement pending Mosaic’s resumption of its compliance with the agreement.  In the fourth quarter of 2010, the Company placed one vessel into temporary lay-up status and placed a second vessel into the same status in the first quarter of 2011 in an effort to mitigate the Company’s exposure to the reduction in volumes from Mosaic.  The Company does not expect that these efforts to mitigate consequences of Mosaic’s actions will fully compensate for the revenue losses.

For the the years ended December 31, 2011 and 2010 revenues from its contract with Mosaic generated $11.8 million and $26.2 million, respectively, which represented 9.6% and 18.0%, respectively, of total revenues.

Operating Leases

The Company rents four ocean vessels under certain non-cancelable operating leases expiring in December 2013 and a warehouse lease expiring in December 2015. Rental expense for the years ended December 31, 2011 and 2010 amounted to approximately $5.5 million and $4.8 million, respectively. Rental expense is included in the operating expenses financial statement line item in the statements of operations.

During 2011, the Company terminated the lease of two ocean vessels. The following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2011 (in thousands):

2012	$	1,890
2013		1,547
2014		19
2015		19
Total minimum lease payments	$	3,475

8.   SIGNIFICANT CUSTOMERS

During the years ended December 31, 2011 and 2010, the Company derived revenues from certain major customers, each one representing more than 10% of revenue. In 2011 and 2010, revenue from these two customers aggregated to 44% and 45%, respectively, of the Company’s total revenues.

9.   SUBSEQUENT EVENTS

The Company has evaluated subsequent events through February 5, 2013, the date these financial  statements were available to be issued.

During 2012, the Company sold five vessels for net proceeds of $7.5 million resulting in a $2.7 million loss on the sale of those assets.

On November 30, 2012, United Maritime Group, LLC, a Florida limited liability company, sold to International Shipholding Corporation, a Delaware corporation, all of the issued and outstanding limited liability company interests of the Company for $111.0 million, subject to various purchase adjustments.

EX-99.3

Financial Statements

U.S. United Ocean Services, LLC

Nine Months Ended September 30, 2012 and 2011

(Unaudited)

U.S. United Ocean Services, LLC

Financial Statements

Nine Months Ended September 30, 2012 and 2011

(Unaudited)

Contents

Balance Sheets	2
Statements of Operations	3
Statements of Changes in Member’s Equity	4
Statements of Cash Flows	5
Notes to Financial Statements	6

U.S. United Ocean Services, LLC

Balance Sheets

(Unaudited)

(in thousands)

	September 30,			December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	105		$	173
Accounts receivable		4,858			11,815
Materials and supplies		6,814			7,038
Prepaid expenses and other current assets		901			241
Total current assets		12,678			19,267
Property and equipment		121,899			139,230
Accumulated depreciation		(49,100	)		(49,228	)
Property and equipment, net		72,799			90,002
Intangible assets, net of amortization of $10,606 and $8,972, respectively		14,494			16,128
Deferred major maintenance, net of amortization of $2,034 and $3,418, respectively		3,222			4,557
Total assets	$	103,193		$	129,954
LIABILITIES AND MEMBER’S EQUITY
Current liabilities:
Accounts payable	$	3,295		$	2,481
Cash overdrafts		62			231
Accrued expenses		2,832			2,776
Deferred revenue		151			-
Current portion of insurance reserves		601			2,141
Total current liabilities		6,941			7,629
Long-term portion of insurance reserves		1,717			1,795
Total liabilities		8,658			9,424
Member’s equity		94,535			120,530
Total liabilities and member’s equity	$	103,193		$	129,954

The accompanying notes are an integral part of these financial statements.

2

U.S. United Ocean Services, LLC

Statements of Operations

(Unaudited)

(in thousands)

	9 Months Ending September 30,
	2012		2011
Operating revenue	$	70,417	$	93,512
Operating expenses:
Operating expenses		5,453		7,205
Salaries, wages and benefits		9,882		14,008
Vessel leases		1,404		4,110
Chartering		8,781		15,012
Fuel, lube & power		16,102		18,706
Maintenance and repairs		4,068		5,644
Administrative and general		3,414		5,485
Related party administrative and general		5,898		4,173
Depreciation and amortization		10,404		16,454
Amortization of intangible assets		1,634		2,043
Loss (gain) on sale of assets		2,142		(508	)
Total operating expenses		69,182		92,332
Net income	$	1,235	$	1,180

The accompanying notes are an integral part of these financial statements.

3

U.S. United Ocean Services, LLC

Statements of Member’s Equity

(Unaudited)

(in thousands except share amounts)

	Membership Units
	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Total Member’s Equity
Balance at January 1, 2011		100	$	71,411	$	47,185		$	38,228		$	156,824
Net loss				-		-			(12,814	)		(12,814	)
Owner distributions		-		-		(23,480	)		-			(23,480	)
Balance at December 31, 2011		100	$	71,411	$	23,705		$	25,414		$	120,530
Net income				-		-			1,235			1,235
Owner distributions		-		-		(23,705	)		(3,525	)		(27,230	)
Balance at September 31, 2012		100	$	71,411	$	-		$	23,124		$	94,535

The accompanying notes are an integral part of these financial statements.

4

U.S. United Ocean Services, LLC

Statements of Cash Flows

(Unaudited)

(in thousands)

	September 30,			September 30,
	2012			2011
Operating activities
Net income	$	1,235		$	1,180
Adjustments to reconcile net (loss) income to net cash provided by operations:
Depreciation and amortization		10,404			16,454
Loss (gain) on disposition of property and equipment		2,142			(508	)
Amortization of intangible assets		1,634			2,043
Changes in operating assets and liabilities:
Accounts receivable		6,957			887
Materials and supplies		224			100
Prepaid expenses and other assets		(660	)		(1,225	)
Deferred major maintenance		(565	)		(3,090	)
Accounts payable and accrued expenses		870			(2,038	)
Deferred revenue and other liabilities		(1,467	)		(242	)
Net cash provided by operating activities		20,774			13,561
Investing activities
Purchase of property and equipment		(203	)		(4,738	)
Proceeds from the sale of property and equipment		6,760			2,501
Net cash provided by (used in) investing activities		6,557			(2,237	)
Financing activities
Cash overdrafts		(169	)		(584	)
Distributions to owner		(27,230	)		(10,799	)
Net cash used in financing activities		(27,399	)		(11,383	)
Net change in cash		(68	)		(59	)
Cash at beginning of period		173			281
Cash at end of period	$	105		$	222

The accompanying notes are an integral part of these financial statements.

5

U.S. United Ocean Services, LLC

Notes to Financial Statements

(Unaudited)

September 30, 2012

1.   THE COMPANY AND NATURE OF BUSINESS

In this report, unless the context otherwise requires, or unless specifically stated otherwise, references to the terms “we,” “our,” “us” and the “Company” refer to the financial statements of U.S. United Ocean Services, LLC (“UOS”).

The Company is a wholly owned subsidiary of United Maritime Group, LLC, a Florida limited liability company.  In December 2007, United Maritime Group, LLC became an independent company acquired from TECO Energy by a group consisting of Greenstreet Equity Partners LLC, Jefferies Capital Partners and AMCI Capital L.P. and affiliates (the Members).

UOS provides transportation services on domestic and international voyages. These services are contracted under single or consecutive voyage charters on a spot basis, or long-term contracts ranging from one to ten years. Most of the international voyages are performed under cargo preference programs, the most significant of which is PL-480. We charge for these services either on a per ton or per day basis. Under a per ton contract, we are generally responsible for all expenses including fuel. Revenues under these contracts are based on a per ton rate. We bear the risk of time lost due to weather, maintenance, and delay at docks which are not covered by demurrage. Demurrage is compensation due from the customer when there are delays at the dock that prevent the vessel from loading or unloading within the contract terms. Our contracts have fuel price mechanisms that limit our exposure to changes in fuel price. We also time charter our vessels, such that the customer has exclusive use of a particular vessel for a specified time period and rates are on a per day basis. We pay expenses related to the vessel’s maintenance and operation and the charterer is responsible for all voyage costs, including port charges and fuel.

Rates for UOS movements are based on the amount of freight demand relative to the availability of vessels to meet that demand. In the coastwise market, a significant portion of the movements are based on long-term contractual relationships. Vessels are often customized or particularly suited for individual customers, cargoes or trades. Cargo volumes in the preference trade are based on funding for such programs and the availability of U.S. flag vessels. If customer requirements for movements of cargoes are reduced or spot employment is not available as a vessel completes its last movement, the vessel may be idle and not generate revenue. If this situation exists for an extended period of time, we may place a vessel in lay up status. While in lay up, all machinery is shut down, the crew is removed and the vessel is secured. Lay up minimizes the costs associated with the vessel, particularly fuel and crew costs.  Restoring a vessel back to active service may require time to hire crews and perform dry-docking or other maintenance required to ensure the vessel is fully compliant with classification society and U.S. Coast Guard regulations.

Operating costs for UOS consist primarily of crewing, insurance, maintenance, lease, fuel and voyage-specific port and direct costs. Maintenance costs materially fluctuate in relation to the number and extent of regulatory drydockings in any given period.

2.   SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and the disclosures made in the accompanying notes. Despite the intention to establish accurate estimates and use reasonable assumptions, actual results could differ from the Company’s estimates and such differences could be material.

Accounts Receivable

Accounts receivable in the accompanying balance sheets are reported without an estimated allowance for doubtful accounts. All amounts reported as accounts receivable have subsequently been paid and thus the stated amount of such receivables represents their net realizable value.

Materials and Supplies

Materials and supplies, including fuel costs, are stated at the lower of cost or market using the average cost method.

Revenue

Revenue is primarily derived from coal, phosphate, and grain transportation (among other cargoes). Revenues from transportation services are recognized as services are rendered. Revenue from certain transportation services are recognized using the percentage of completion method, which includes estimates of the distance traveled or time elapsed compared to the total estimated contract.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Additions, replacements and betterments are capitalized; maintenance and repairs are charged to expense as incurred. Items sold or retired are removed from the assets and accumulated depreciation accounts and any resulting gains or losses are properly included in the statements of operations.

The following table illustrates the components of depreciation and amortization expense (in thousands):

	September 30, 2012		September 30, 2011
Depreciation	$	8,504	$	13,652
Amortization – major maintenance		1,900		2,802
Total depreciation and amortization	$	10,404	$	16,454

6

2.   SIGNIFICANT ACCOUNTING POLICIES (Continued)

Deferred Major Maintenance

In accordance with the guidance for deferred major maintenance activities, expenditures incurred during major maintenance are deferred and amortized on a straight-line basis over the period until the next scheduled major maintenance, generally two and a half years. The Company only includes in deferred major maintenance those direct costs that are incurred as part of the vessel’s maintenance that is required by the Coast Guard and/or vessel classification society regulation. Direct costs include shipyard costs as well as the costs of placing the vessel in the shipyard. Costs relating to major steelwork, coatings or any other work that extends the life of the vessel are capitalized. Expenditures for routine maintenance and repairs, whether incurred as part of the major maintenance or not, are expensed as incurred. The total deferred major maintenance costs as of September 30, 2012 and 2011 are $3.2 million and $6.0 million, respectively. The amount of amortization expense recognized during the years ended September 30, 2012 and 2011 is $1.9 million and $2.8 million, respectively.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentration of credit risk consist principally of trade receivables. During the normal course of business, the Company extends credit to customers primarily in North America conducting business in the utility, metallurgical, phosphate and grain industries. The Company performs ongoing credit evaluations of its customers and does not require collateral. The customers’ financial condition and payment history have been considered in determining the need for an allowance for doubtful accounts.

Asset Impairment

The Company periodically assesses whether there has been a permanent impairment of its long-lived assets and certain intangibles held and used by the Company, in accordance with ASC No. 360 (“ASC 360”), Property, Plant, and Equipment and ASC No. 205, Presentation of Financial Statements. ASC 360 establishes standards for determining when impairment losses on long-lived assets have occurred and how impairment losses should be measured. The Company is required to review long-lived assets and certain intangibles, to be held and used, for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable. In performing such a review for recoverability, the Company is required to compare the expected future cash flows to the carrying value of long-lived assets and finite-lived intangibles. If the sum of the expected future undiscounted cash flows is less than the carrying amount of such assets and intangibles, the assets are impaired and the assets must be written down to their estimated fair market value. No impairments were recorded for the nine-months ended September 30, 2012 and 2011.

Fair Value of Financial Instruments

ASC No. 820 requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped based on significant levels of inputs. The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Quoted prices for identical assets and liabilities in active markets.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs for the assets or liability.

The fair value of the Company’s impaired assets was based upon observable inputs other than quoted market prices (Level 2 criteria).  The following table presents the fair values of items measured at fair value on a non-recurring basis for the years ended December 31, 2011 and 2010 (in thousands):

			Fair Value Measurement Category
	Fair Value		Level 1		Level 2		Level 3		Total Losses
December 31, 2011:
Vessels	$	4,550	$	-	$	4,550	$	-	$	5,919
December 31, 2010:
Vessels	$	6,200	$	-	$	6,200	$	-	$	2,630

The 2011 fair value represents the appraised value of two vessels after the impairment charges taken in 2011. The 2010 fair value represents the appraised value of a vessel after the impairment charge taken in 2010. The carrying value of this vessel is no longer equal to the fair value due to annual depreciation.

Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reflected in the financial statements at their carrying value, which approximates their fair value due to their short maturity.

Income Taxes

The Company implemented the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Income Taxes.  Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the positions will be sustained upon examination by the tax authorities.

As of September 30, 2012 and 2011, the Company had no uncertain tax positions, or interest and penalties, which qualify for either recognition or disclosure in the financial statements.

Subsequent Events

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles. Subsequent events have been evaluated through the date of the audit opinion and management has included those items deemed to be reportable in Note 6 (Subsequent Events).

7

3.   PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

	Average Useful
	Lives in Years		September 30, 2012			December 31, 2011
Buildings		1 – 30	$	349		$	349
Vessels, net of impairment		3 – 28		120,098			137,619
Other		1 – 20		1,262			1,262
Work in progress				190			-
Total costs, net of impairment				121,899			139,230
Accumulated depreciation				(49,100	)		(49,228	)
Property and equipment, net			$	72,799		$	90,002

4.   INTANGIBLE ASSETS

In conjunction with the original acquisition in December 2007, the Company assessed all operating leases in place at that time to determine whether the lease terms were favorable or unfavorable given market conditions as of December 2007. As a result, the Company recorded a favorable lease intangible asset in 2007 for $15.4 million with a life of 6 years. Also in connection with the business acquisition, an intangible asset of $19.2 million was assigned to customer relationships in 2007, which are subject to amortization with a weighted average useful life of approximately 10 years.

Amortization of intangible assets is charged to amortization of intangibles on a straight-line basis in the accompanying statements of operations. If impairment events occur, the Company could accelerate the timing of intangible asset charges. For the nine months ended September 30, 2012 and 2011, amortization expense related to the intangible assets acquired was $1.6 million and $2.0 million, respectively.

In December 2011, the Company terminated the leases on two ocean vessels with the subsequent write off of associated in-the-money leases (favorable lease intangible assets).  The company transferred the lease and purchase option upon sale of one of its leased vessels and paid $6.3 million to buy out the other lease. A summary of intangible assets at September 30, 2012 and December 31, 2011 is as follows (in thousands):

		January 1,							September 30,
		2012							2012
	Asset Life	Balance		Terminations		Amortization			Balance
Favorable lease- Ocean Vessels	6 years	$	4,437	$	-	$	(250	)	$	4,187
Customer relationship (contracts)	10 years		11,691		-		(1,384	)		10,307
Total		$	16,128	$	-	$	(1,634	)	$	14,494

		January 1,								December 31,
		2011								2011
	Asset Life	Balance		Terminations			Amortization			Balance
Favorable lease- Ocean Vessels	6 years	$	12,548	$	(7,278	)	$	(833	)	$	4,437
Customer relationship (contracts)	10 years		13,536		-			(1,845	)		11,691
Total		$	26,084	$	(7,278)		$	(2,678	)	$	16,128

Estimated future amortization expense is as follows at September 30, 2012 (in thousands):

2012	(October 1, 2012 through December 31, 2012)	$	563
2013			6,245
2014			1,908
2015			1,908
2016			1,908
Thereafter			1,908
Total amortization expense		$	14,440

The 2013 amortization includes $3.8 million of amortization expense for favorable lease purchase options.

8

5.   EMPLOYEE POSTRETIREMENT BENEFITS

401(k) Savings Plan

The Company has a 401(k) savings plan covering substantially all employees of the Company that enables participants to save a portion of their compensation up to the limits allowed by IRS guideline. Effective July 1, 2010, the Company reinstated an employer contribution to this plan at a level of 50% of up to 6% of eligible participant contributions.  The expenses of $0.2 million and $0.3 million for the nine months ended September 30, 2012 and 2011, respectively, are reflected in the operating expenses financial statement line item in the Company’s statements of operations.

6.   RELATED PARTY TRANSACTIONS

The Company has certain transactions, in the ordinary course of business, with entities in which directors of the Company have interests. During the nine months ended September 30, 2012 and 2011, the Company incurred management fees of $5.9 million and $4.2 million, respectively, which are classified as related party administrative and general expense in the Company’s statement of operations.

7.   COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in various legal proceedings that have arisen in the ordinary course of business. In the opinion of the Company’s management, all such proceedings are adequately covered by insurance or, if not so covered, should not result in any liability which would have a material adverse effect on the financial position or operations of the Company.

On August 9, 2010, the Company received a letter from The Mosaic Company (“Mosaic”) claiming that, as a result of a preliminary injunction affecting Mosaic’s South Fort Meade phosphate mine, a force majeure event had occurred under the Company’s contract with Mosaic (the “Mosaic Agreement”).

Mosaic issued a claim of force majeure under its agreement with us, and in 2010, shipped amounts that were below its minimum contract volume.  Since October 2010, Mosaic has terminated further shipments of phosphate “wet rock” under our agreement but has continued very nominal shipments of finished phosphate “dry rock” as a means of providing a partial mitigation of the volume shortfall.  The impact on our revenue in 2010 of Mosaic’s failure to ship minimum volumes was approximately $9.7 million.  The impact on our revenue in 2011 of Mosaic’s failure to ship any volumes was $30.4 million and stoppage has continued into 2012 with shipments resuming in late 2012.  We are pursuing rights to recover deadfreight through arbitration.  We are also pursuing other uses of the shipping capacity used to service the Mosaic agreement pending Mosaic’s resumption of its compliance with our agreement.  In the fourth quarter of 2010, we placed one vessel into temporary lay-up status and placed a second vessel into the same status in the first quarter of 2011 in an effort to mitigate our exposure to the reduction in volumes from Mosaic.  The Company does not expect that these efforts to mitigate consequences of Mosaic’s actions will fully compensate for our revenue losses.

For the nine months ended September 30, 2012 and 2011 revenues from its contract with Mosaic generated $7.1 million and $7.2 million, respectively. This represents 10.1% and 7.7%, respectively, of total revenues.

Operating Leases

The Company rents four ocean vessels under certain non-cancelable operating leases expiring in December 2013 and a warehouse lease expiring in December 2015. Rental expense for the nine months ended September 30, 2012 and 2011 amounted to approximately $1.4 million and $4.1 million, respectively. Rental expense is included in the operating other financial statement line item in the statements of operations.

During 2011, the Company terminated the lease of two ocean vessels. The following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2011 (in thousands):

2012	$	-
2013		1,547
2014		19
2015		19
Total minimum lease payments	$	1,585

8.   SIGNIFICANT CUSTOMER

During the nine months ended September 30, 2012 and 2011, the Company derived revenues from certain major customers, each one representing more than 10% of revenue. In 2012 and 2011, revenue from these two customers aggregated to 50% and 42%, respectively, of the Company’s total revenues.

9.   SUBSEQUENT EVENTS

The  Company  has  evaluated  subsequent  events  through  February 1,  2013,  the  date  these financial  statements  were  available  to  be  issued.

On November 30, 2012, United Maritime Group, LLC, a Florida limited liability company, sold to International Shipholding Corporation, a Delaware corporation, all of the issued and outstanding limited liability company interests of U.S. United Ocean Services, LLC, a Florida limited liability company for $111 million, subject to various purchase adjustments.

9

EX-99.4

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

 The following unaudited pro forma condensed combined balance sheet presents our financial position as of September 30, 2012, assuming that the acquisition of UOS had been completed as of September 30, 2012.

 The following unaudited pro forma condensed combined statements of income include operations of the Company for the nine months ended September 30, 2012 and the twelve months ended December 31, 2011, assuming as if the acquisition had been consummated on January 1, 2011.

 These unaudited pro forma results are not necessarily indicative of the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.

 The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition of UOS and are factually supportable.  Our unaudited pro forma combined financial information and explanatory notes present how our combined financial statements may have appeared had the businesses actually been combined as of the dates above. The unaudited pro forma combined financial information shows the impact on the combined balance sheet and the combined historical statements of income under acquisition accounting with International Shipholding Corporation treated as the acquirer. Under this method of accounting, the assets purchased and liabilities assumed of UOS have been recorded by International Shipholding Corporation at their estimated fair values as of the acquisition date. See the accompanying Notes for additional information.

 The unaudited pro forma combined financial information is presented for illustrative purposes only and does not indicate the financial results  or financial position of the combined businesses had they actually been combined on the dates and in accordance with the assumptions described herein. However, management believes that the assumptions used provide a reasonable basis for presenting the combined pro forma information, that the pro forma adjustments give the appropriate effect to the assumptions and are properly applied in the unaudited pro forma combined financial information. The results of operations of UOS will be included in our historical consolidated financial statements beginning November 30, 2012.

As explained in more detail in the accompanying notes to the unaudited pro forma combined financial information, the allocation of the purchase price for the UOS acquisition that is reflected in our pro forma combined financial information is subject to adjustment. The actual purchase price allocation will be recorded based on the final settlement of the working capital adjustment in accordance with the applicable agreement. In addition, there may be further refinements of the purchase price allocation for the UOS acquisition as additional information becomes available.

INTERNATIONAL SHIPHOLDING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(All Amounts in Thousands Except Share Data)

(Unaudited)

			UOS		ISH
			Pro Forma		Pro Forma		Pro Forma
	ISH	UOS	Adjustments *		Adjustments		Combined
Revenues	$                    186,686	$                       70,417	$                                         -		$                                -		$                    257,103
Operating Expenses:
Voyage Expenses	143,246	53,730	-		-		196,976
Vessel Depreciation/Amortization	18,180	10,404	(10,404)	1	2,411	1	20,591
Other Depreciation	9	-	-		-		9
Administrative and General Expenses	15,871	3,414	-		-		19,285
Amortization of Intangible	-	1,634	(1,634)	2	3,872	2	3,872
(Gain) Loss on Sale/Purchase         of Other Assets	(4,463)	-	-		-		(4,463)
Total Operating Expenses	172,843	69,182	(12,038)		6,283		236,270
Operating Income	13,843	1,235	12,038		(6,283)		20,833
Interest and Other:
Interest Expense	7,152	-	-		745	3	7,897
Derivative Loss	97	-	-		-		97
Gain on Sale of Investment	(66)	-	-		-		(66)
Other Income from Vessel Financing	(1,815)	-	-		-		(1,815)
Investment Income	(391)	-	-		-		(391)
Foreign Exchange Loss (Gain)	(771)	-	-		-		(771)
	4,206	-	-		745		4,951
							-
Income Before Provision for Income Taxes and
Equity in Net (Loss) Income of Unconsolidated Entities	9,637	1,235	12,038		(7,028)		15,882
(Benefit) Provision for Income Taxes:
Current	280	-	-		-		280
Deferred	(400)	-	-		-		(400)
	(120)	-	-		-		(120)
Equity in Net Income of Unconsolidated
Entities (Net of Applicable Taxes)	665	-	-		-		665
Net Income	$                       10,422	$                         1,235	$                                12,038		$                      (7,028)		$                       16,667
Basic and Diluted Earnings Per Common Share:
Basic Earnings Per Common Share:	$                            1.45						$                           2.32
Diluted Earnings Per Common Share:	$                            1.45						$                            2.31
Weighted Average Shares of Common Stock Outstanding:
Basic	7,192,818						7,192,818
Diluted	7,208,886						7,208,886
Dividends Per Share	$                        0.750						$                        0.750
* Reverse balance to be replaced with fair market value at acquisition date.
1. Reversal of the historical depreciation with the replacement of new depreciation based on fair value at acquisition date.
2. Represents the amortization of the intangibles that were identified and measured during the acquisition of UOS by ISH.
3. Represents interest expense on new debt to partially fund acquisition, based on one-month Libor rate plus 2.5%.

INTERNATIONAL SHIPHOLDING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2011

(All Amounts in Thousands Except Share Data)

(Unaudited)

			UOS		ISH
			Pro Forma		Pro Forma		Pro Forma
	ISH	UOS	Adjustments *		Adjustments		Combined
Revenues	$                    263,196	$                    122,742	$                                        -		$                                     -		$                   385,938
Operating Expenses:
Voyage Expenses	192,082	99,935	-		-		292,017
Vessel Depreciation/Amortization	25,388	21,204	(21,204)	1	3,215	1	28,603
Administrative and General Expenses	20,961	5,922	-		-		26,883
Gain on Dry Bulk Transaction	(18,844)	(102)	-		-		(18,946)
Impairment Loss on property and equipment	-	5,919	(5,919)	2	-		-
Amortization of Intangible	-	2,678	(2,678)	3	5,162	3	5,162
Total Operating Expenses	219,587	135,556	(29,801)		8,377		333,719
Operating Income	43,609	(12,814)	29,801		(8,377)		52,219
Interest and Other:
Interest Expense	10,361	-	-		993	4	11,354
Derivative Loss	101	-	-		-		101
Loss on Sale of Investment	747	-	-		-		747
Other Income from Vessel Financing	(2,653)	-	-		-		(2,653)
Investment Income	(637)	-	-		-		(637)
Foreign Exchange Loss (Gain)	3,051	-	-		-		3,051
	10,970	-	-		993		11,963
Income Before Provision for Income Taxes and
Equity in Net (Loss) Income of Unconsolidated Entities	32,639	(12,814)	29,801		(9,370)		40,256
(Benefit) Provision for Income Taxes:
Current	680	-	-		-		680
Deferred	-	-	-		-		-
	680	-	-		-		680
Equity in Net Income of Unconsolidated
Entities (Net of Applicable Taxes)	(410)	-	-		-		(410)
Net Income	$                       31,549	$                      (12,814)	$                               29,801		$                            (9,370)		$                       39,166
Basic and Diluted Earnings Per Common Share:
Basic Earnings Per Common Share:	4.42	-					5.49
Diluted Earnings Per Common Share:	4.40	-					5.46
Weighted Average Shares of Common Stock Outstanding:
Basic	7,131,820	-					7,131,820
Diluted	7,176,647	-					7,176,647
Dividends Per Share	$                         1.500	-					$                         1.500
* Reverse balance to be replaced with fair market value at acquisition date.
1. Reversal of the UOS historical depreciation with the replacement of new depreciation based on fair value at acquisition date.
2. To reverse out impairment charges due to the fact the assets were adjusted to fair value at acquisition date.
3. Represents the amortization of the intangibles that were identified and measured during the acquisition of UOS by ISH.
4. Represents interest expense on new debt to partially fund acquisition, based on one-month Libor rate plus 2.5% and reflects 12 months of interest.

INTERNATIONAL SHIPHOLDING CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED

BALANCE SHEET

September 30, 2012

(All Amounts in Thousands)

(Unaudited)

				UOS	ISH
				Pro Forma	Pro Forma		Pro Forma
ASSETS		ISH	UOS	Adjustments (a)	Adjustments		Combined
Cash and Cash Equivalents	$	12,714	105	(105)	(9,243)	b,c	$                              3,471
Marketable Securities		13,382	-	-	-		13,382
Accounts Receivable		19,511	4,858	(4,858)	8,650	b	28,161
Net Investment in Direct Financing Leases		3,423	-	-	-		3,423
Other Current Assets		6,144	901	(901)	669	b	6,813
Notes Receivable		4,433	-	-	-		4,433
Material and Supplies Inventory		5,312	6,814	(6,814)	6,510	b	11,822
Total Current Assets		64,919	12,678	(12,678)	6,586		71,505
Investment in Unconsolidated Entities		13,524	-	-	-		13,524
Net Investment in Direct Financing Leases		14,391	-	-	-		14,391
Vessels, Property, and Other Equipment, at Cost:
Vessels		561,207	121,899	(121,899)	16,696	b,c	577,903
Building		1,211	-	-	-		1,211
Land		623	-	-	-		623
Leasehold Improvements		26,348	-	-	-		26,348
Construction in Progress		602	-	-	-		602
Furniture and Equipment		11,053	-	-	-		11,053
		601,044	121,899	(121,899)	16,696		617,740
Less -  Accumulated Depreciation		(185,907)	(49,100)	49,100	-		(185,907)
		415,137	72,799	(72,799)	16,696		431,833
							-
Other Assets:							-
Deferred Charges, Net of Accumulated Amortization		18,278	3,222	(3,222)	-		18,278
of $15,821 and $17,429 in 2012 and 2011, Respectively
Intangible Assets, Net		1,775	14,494	(14,494)	45,131	b	46,906
of $30,525 and $30,162 in 2010 and 2009, Respectively
Due from Related Parties		1,735	-	-	-		1,735
Notes Receivable		34,458	-	-	-		34,458
Other		6,036	-	-	2,000	c	8,036
Goodwill		-	-	-	1,901	b	1,901
		62,282	17,716	(17,716)	49,032		111,314
TOTAL ASSETS	$	570,253	103,193	(103,193)	72,314		642,567

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt	$	27,951	-	-	6,000	c	33,951
Accounts Payable and Accrued Liabilities		34,620	6,189	(6,189)	7,696	b,c	42,316
Insurance Reserves		-	601	(601)	547	b	547
Deferred Revenues		-	151	(151)	342	b	342
Total Current Liabilities		62,571	6,941	(6,941)	14,585		77,156
Long-Term Debt, Less Current Maturities		185,660	-		36,000	c	221,660
Other Long-Term Liabilities:
Lease Incentive Obligation		6,338	-	-	-		6,338
Other		62,073	1,717	(1,717)	21,729	b,c	83,802
		68,411	1,717	(1,717)	21,729		90,140
TOTAL LIABILITIES		316,642	8,658	(8,658)	72,314		388,956
Commitments and Contingent Liabilities
Stockholders' Equity:
Common Stock, $1.00 par value, 20,000,000 shares authorized and		8,617	71,411	(71,411)	-		8,617
7,203,860 And  7,140,752 Shares Issued and Outstanding at
September 30, 2012 and December 31, 2011, Respectively
Additional Paid-In Capital		86,041	-	-	-		86,041
Retained Earnings		207,919	23,124	(23,124)	-		207,919
Treasury Stock, 1,388,066 shares at September 30, 2012 and		(25,403)	-	-	-		(25,403)
December 31, 2011
Defined Benefits Plan
Accumulated Other Comprehensive (Loss)		(23,563)	-	-	-		(23,563)
TOTAL STOCKHOLDERS' EQUITY		253,611	94,535	(94,535)	-		253,611
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	570,253	103,193	(103,193)	72,314		$                          642,567
See accompanying notes to unaudited pro forma condensed combined financial statements

Notes to Unaudited Pro Forma Financial Statements

Pro Forma Basis of Presentation

 The acquisition of UOS is reflected in the unaudited pro forma combined financial statements as being accounted for under the acquisition method in accordance with ASC 805. Under the acquisition method, the total estimated purchase price of the acquired company is allocated to the assets acquired and liabilities assumed based on their fair values. Due to the fact that the unaudited pro forma combined financial statements have been prepared based on preliminary estimates of these fair values, the final amounts recorded may differ materially from the information presented.

 The unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2012 and twelve months ended December 31, 2012, assume the acquisition occurred January 1, 2011. The unaudited pro forma condensed combined balance sheet as of September 30, 2012 assumes the acquisition was completed as of September 30, 2012.   The unaudited pro forma combined financial statements are based on historical consolidated financial statements of UOS and International Shipholding Corporation, as adjusted for the effects of the acquisition as further described herein.

 Under ASC 805, acquisition costs (such as advisory, legal, valuation or other professional fees) are not included as a component of consideration transferred and have been excluded from the unaudited pro forma combined statements of operations.

 The unaudited pro forma combined financial statements do not include the realization of any cost savings from anticipated operating efficiencies, synergies, or other restructuring activities which might result from the acquisition. The unaudited pro forma combined financial statements should be read in conjunction with the separately filed historical consolidated financial statements and accompanying notes of UOS.

 The unaudited pro forma combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial conditions of the combined company that would have been reported had the acquisition been completed as of the dates presented, and further should not be taken as representative of the future consolidated results of operations or financial condition of the Company.

Pro Forma Adjustments

 Adjustments to the pro forma condensed combined statements of income are reflected on the face of those statements.  Adjustments to the pro formas condensed combined balance sheet are set forth below.  All of these adjustments are based on current assumptions and are subject to change upon completion of the final purchase price allocation of assets acquired and liabilities assumed from UOS at the acquisition closing date.

a.   To reverse UOS balance sheet

b.   To record the UOS preliminary fair value of assets acquired and liabilities assumed funded by the combination of assets sold and leased back of $63 million, bank financing of $30 million, a line of credit draw of $12 million and the remainder with available cash.

Accounts Receivable	$	8,650,415
Inventory		6,509,731
Other Current Assets		668,547
Vessels and Vehicles		60,036,883
Intangible asset		45,131,316
Goodwill		1,900,520
Total Assets	$	122,897,412
Accounts Payable and Accrued Liabilities	$	4,956,425
Other Current Liabilities		890,186
Non-Current Liabilities		2,069,663
Total Liabilities		7,916,274
Fair Value of Acquisition Price	$	114,981,138

c.   Funding for Acquisition was based on the following:

Vessels and Vehicles (Sale leaseback of two vessels)	$	(43,341,000	)
Other Long Term Liabilities (Sale leaseback of two vessels)		(19,659,000	)
Current Maturities of Long-Term Debt (Bank Loan)		(6,000,000	)
Long-Term Debt, Less Current Maturities (Bank Loan)		(24,000,000	)
Long-Term Debt, Less Current Maturities (Line of Credit Draw)		(12,000,000	)
Accounts Payable (Assumed working capital settlement)		(2,738,610	)
Cash and Cash Equivalents		(9,242,528	)
Other Assets (Security Deposit Pledged)		2,000,000
Total Funding for Acquisition	$	114,981,138