CHANGES IN ACCOUNTING ESTIMATES

12 Months Ended

Dec. 31, 2012

CHANGES IN ACCOUNTING ESTIMATES [Abstract]

CHANGES IN ACCOUNTING ESTIMATES

NOTE Z – CHANGES IN ACCOUNTING ESTIMATES

Based on company policy, we review the reasonableness of the salvage values for our fleet every three years based on the most recent three year average price of scrap steel per metric ton. In the first quarter of 2012 we reviewed and adjusted the salvage values on eight of our vessels, based on the change in the market value of scrap steel.  These eight vessels have short remaining useful lives with an average of 9 years remaining. The adjustments resulted in increasing the salvage values and reducing our depreciation expense on these eight vessels by approximately $3.8 million annually.  This adjustment increased both our pre-tax and net income by $3,780,000, or $0.53 per share, for the twelve months ended December 31, 2012.  Due to the company being in a valuation allowance position there was no impact on income taxes.

In the first quarter of 2010, we extended the economic life on our U.S. Flag Coal Carrier, basing this change in estimate on the extension of the vessel's time charter contract.  This change in estimate reduced our depreciation expense and increased our pre-tax income by $5.2 million and our net income by $3.4 million, or $0.47 per share, for the year ended December 31, 2010.

Also in the first quarter of 2010, we extended the economic life of both the Mobile, Alabama and Coatzacoalcos, Mexico rail terminal's leasehold improvements due to contractual extensions to the rail terminal operating agreement.  The amortization periods were extended two and a half years and six years, respectively. The extension of these amortization periods increased our pre-tax income by approximately $1.8 million, and our net income by approximately $1.2 million, or $0.16 per share, for the year ended December 31, 2010.