NOTE M- LEASES

Direct Financing Leases

In 2005, we entered into a direct financing lease of a PCTC expiring in 2015; and, in 1999, we entered into a direct financing lease of a PCTC expiring in 2019. We sold the PCTC expiring in 2019 to a third party in the first quarter of 2012. The schedule of future minimum rentals to be received by us under the direct financing lease in effect at December 31, 2012, is as follows:

(Amounts in Thousands)	Receivables Under Direct Financing Leases
Year Ended December 31,
2013	$	5,625
2014		5,625
2015		4,219
Total Minimum Lease Payments Receivable		15,469
Estimated Residual Value of Leased Property		6,000
Less: Unearned Income		(4,468	)
Total Net Investment in Direct Financing Leases		17,001
Current Portion		(3,540	)
Long-Term Net Investment in Direct Financing Leases at December 31, 2012	$	13,461

Operating Leases

On February 22, 2012, we completed a sale and leaseback transaction with Wells Fargo Bank Northwest, National Association, of our 2007-built PCTC. The transaction generated gross proceeds of $59.0 million, which we used to pay down debt of $54.5 million. We are leasing the vessel back under a ten year lease agreement with early buyout options that can be exercised in 2017 and 2019. This lease is classified as an operating lease, with the $14.9 million gain on this sale-leaseback being deferred and recognized over the term of the lease.

On June 15, 2012, we negotiated the early buy-out of the operating lease related to our molten-sulphur carrier. On November 27, 2012, we sold this vessel to BMO Harris Equipment Finance Company for approximately $32 million cash and commenced a seven-year lease agreement with an early buy-out option that can be exercised in 2017. This lease is classified as an operating lease, with the $8.0 million gain on this sale-leaseback being deferred and recognized over the term of the lease. Also on November 27, 2012 we sold a 1998-built PCTC to Capital Source Bank for approximately $31 million cash and commenced a six-year lease agreement with an early buy-out option that can be exercised in 2017. This lease is classified as an operating lease, with the $11.7 million gain on this sale-leaseback being deferred and recognized over the term of the lease. The Company used the net proceeds of approximately $63 million from the November 27, 2012 transactions to finance a portion of the purchase price for the Company's acquisition of U.S. United Ocean Services, LLC, which was completed on November 30, 2012.

On December 27, 2012, we sold a 1999-built PCTC to BB&T Equipment Finance for $32 million cash and commenced a six-year lease agreement with an early buy-out option that can be exercised in 2015 and again in 2018. This lease is classified as an operating lease.

Included in the acquisition of UOS was one Integrated Tug/Barge unit under an operating lease. This lease will expire in December of 2013 and we have an agreement to purchase the unit back up to the expiration date.

We will continue to operate all of the aforementioned leased vessels under their respective charters and contract of affreightment arrangements. Annual rent payments due under the new lease agreements can be found in the table below. A complete list of our vessels can be found on page 37.

Our operating lease agreements have fair value renewal options and fair value purchase options. Most of the agreements impose defined minimum working capital and net worth requirements, impose restrictions on the payment of dividends, and prohibit us from incurring, without prior written consent, additional debt or lease obligations, except as defined.

The Mobile corporate office lease, which commenced on April 1, 2007, has a twenty year term with periodic graduating payments that are accounted for on a straight line basis. We incurred $730,000 in leasehold improvements and were provided with incentives in the amount of $1.4 million, both of which are amortized over the life of the lease with the incentives amortized as a credit to rent expense. In October 2008, the Company renewed its lease agreement on its New York office space under a ten year term with the first nine months as free rent and includes periodic graduating payments. The rent expense is amortized on a straight line basis over the term of the lease. In addition, we incurred $503,000 in leasehold improvements which will be amortized over the life of the lease. The Company also leases a Shanghai office, with the current term expiring in September 2013, and a Singapore office. As part of our acquisition of UOS, we acquired a lease for our Tampa office space, expiring August 2013 and a warehouse, expiring December 2015.

In addition to those operating leases with terms expiring after December 31, 2012, we also operated certain vessels under short-term time charters during 2012.

Rent expense related to all of our operating leases totaled approximately $11,190,000, $13,634,000 and $28,844,000 for the years ended December 31, 2012, 2011 and 2010, respectively. The following is a schedule, by year, of future minimum payments required under operating leases that have initial non-cancelable terms in excess of one year as of December 31, 2012:

	Payments Under Operating Leases
(Amounts in thousands	Vessels		Other Leases		Total
Year Ended December 31,
2013	$	18,223	$	1,880	$	20,103
2014		18,071		1,300		19,371
2015		18,071		1,367		19,438
2016		18,071		1,095		19,166
2017		18,692		1,119		19,811
Thereafter		46,214		7,022		53,236

Total Future Minimum Payments	$	137,342	$	13,783	$	151,125