NOTE B – ACQUISITIONS

U.S. United Ocean Services, LLC Acquisition

On November 30, 2012, ("the acquisition date") we acquired 100% of the membership interest of U.S. United Ocean Services, LLC ("UOS"). Founded in 1959, UOS provides marine transportation services for dry bulk and break-bulk commodities in the United States. UOS operates the largest U.S. Flag Jones Act dry bulk fleet today (131,000 dead weight tons), which consists of two handysize bulkers and four tug/barge units. The fleet operates under long-term contracts with Tampa Electric ("TECO") and The Mosaic Company ("Mosaic"), both of whom have maintained longstanding relationships with UOS that have spanned several decades.

This acquisition will provide the company with increased scale and a more diverse product offering within the U.S. Flag Jones Act dry bulk transportation market, where we maintain a strong position. The acquisition fits within our core growth strategy of acquiring assets to fill niche market needs, expanding contracted revenue with quality counterparts, and broadening customer relationships.

The total consideration of approximately $115.0 million consisted of a $112.2 million cash payment and the assumption of $2.7 million in Current Liability (which remains subject to a customary post-closing adjustments). As of December 31, 2012, we discharged substantially all known accounts payable assumed in the acquisition. Acquisition expenses of approximately $1.8 million related to legal, consulting, and valuation fees have been included under the caption "Administrative and General Expenses" in our Condensed Consolidated Statement of Income.

The transaction has been accounted for as a business combination using the acquisition method of accounting which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. While most assets and liabilities were measured at fair value, a single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. Our judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.

The following is a tabular summary of the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:

Description	Amount Recognized as of Acquisition Date (Dollars in Thousands)
Working Capital including Cash Acquired	$	8,512
Inventory		6,510
Property, Plant, & Equipment		60,037
Identifiable Intangible Assets		45,131
Total Assets Acquired		120,190
Misc. Payables & Accrued Expenses		(5,039	)
Other Long Term Liability		(2,070	)
Total Liabilities Assumed		(7,109	)
Net Assets Acquired		113,081
Working Capital Settlement		(2,738)
Total Consideration Transferred		(112,244	)
Goodwill*	$	1,901

* Goodwill is calculated as the excess of the consideration transferred over the net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Our above-described goodwill will not be amortized nor do we expect it to be deductible for tax purposes. Specifically, the goodwill recorded as part of the acquisition of UOS includes the following:

· the expected synergies and other benefits that we believe will result from combining the operations of UOS with our existing Jones Act operations.

· any intangible assets that do not qualify for separate recognition, including an assembled workforce of the acquired company, and

· the anticipated higher rate of return of UOS's existing businesses as going concerns compared to the anticipated rate of return if we had acquired all of the net assets separately.

The following unaudited pro forma results present consolidated information as if the UOS acquisition had been completed as of January 1, 2011. The pro forma results include the amortization associated with the acquired intangible assets, interest expense associated with the debt used to fund a portion of the acquisition, the impact of fair value adjustments such as depreciation adjustments related to adjustments to property, plant and equipment. The pro forma results should not be considered indicative of the results of operations or financial position of the combined companies had the acquisition been consummated as of January 1, 2011, and are not necessarily indicative of results of future operations of the company.

The 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 following table sets forth the pro forma revenues, net earnings attributable to ISH, basic net earnings per share and fully diluted net earnings per share attributable to ISH common stockholders for the years ended December 31, 2012 and 2011, respectively (unaudited and in thousands, except share amounts):

	2012		2011
	Pro Forma		Pro Forma
Revenues	$	329,079	$	385,938
Net earnings attributable to ISH	$	30,765	$	39,166
Net earnings per share attributable to ISH common stockholders:
Basic	$	4.28	$	5.49
Diluted	$	4.27	$	5.46

UOS's revenue for fiscal year 2012 of $7.6 million represents approximately 3.1% of our consolidated revenue for fiscal year 2012. UOS's assets including intangible assets, represent approximately 19.5% of our consolidated assets at December 31, 2012.

Frascati Shops, Inc. and Tower, LLC Acquisition

On August 6, 2012, ("the acquisition date") we acquired the common stock and membership interest of Frascati Shops, Inc. ("FSI") and Tower LLC, ("Tower"), respectively. FSI and Tower (collectively, the "Acquired Companies") own and operate a certified rail-car repair facility near the port of Mobile, Alabama. Both will continue to be used to service and repair rail-cars from third party customers as well as rail-cars that are transported via our Rail-Ferry vessels. Our acquisition of the Acquired Companies enables us to (i) lower our Rail-Ferry maintenance and operating costs, (ii) increase the revenues of our Rail Services operations and (iii) deepen our existing customer relationships.

The total consideration of approximately $4.5 million consisted of a $623,000 cash payment, the assumption of $3.5 million in debt, and $383,000 in miscellaneous payables. As of September 30, 2012, we discharged all debt and substantially all known accounts payable assumed in the acquisition. Acquisition expenses of approximately $40,000 related to legal fees incurred in due diligence have been included under the caption "Administrative and General Expenses" in our Condensed Consolidated Statement of Income.

The following is a tabular summary of the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:

Description	Amount Recognized as of Acquisition Date (Dollars in Thousands)
Working Capital including Cash Acquired	$	18
Inventory		231
Property, Plant, & Equipment		3,411
Identifiable Intangible Assets		490
Total Assets Acquired		4,150
Misc. Payables & Accrued Expenses		(383	)
Long Term Debt		(3,490	)
Deferred Tax Liability		(453	)
Total Liabilities Assumed		(4,326	)
Net Liabilities Assumed		(176	)
Total Consideration Transferred		(623	)
Goodwill*	$	799

* Goodwill is the sum of the consideration transferred and the net liabilities assumed and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Our above-described goodwill will not be amortized nor do we expect it to be deductible for tax purposes. Specifically, the goodwill recorded as part of the acquisition of the Acquired Companies includes the following:

the expected synergies and other benefits that we believe will result from combining the operations of the Acquired Companies with our existing Rail-Ferry operations.

any intangible assets that do not qualify for separate recognition, including an assembled workforce of the acquired companies, and

the anticipated higher rate of return of the Acquired Companies existing businesses as going concerns compared to the anticipated rate of return if we had acquired all of the net assets separately.

Dry Bulk Cape Holding, Inc. Step Acquisition

On March 25, 2011, Cape Holding, Ltd. (one of our indirect wholly-owned subsidiaries) and DryLog Ltd. completed a transaction that restructured their respective 50% interests in Dry Bulk.

Prior to this transaction, Dry Bulk controlled through various subsidiaries two Capesize vessels and two Handymax Newbuildings. In connection with this transaction, (i) Cape Holding, Ltd. increased its ownership in Dry Bulk from 50% to 100% and (ii) in consideration, DryLog Ltd. received ownership of two former Dry Bulk subsidiaries holding one Capesize vessel and one shipbuilding contract relating to a Handymax vessel scheduled to be delivered in the second quarter of 2012. Following the transfer of these subsidiaries, Dry Bulk continues to control through two subsidiaries, one Cape Size vessel and one Handymax vessel which delivered from the shipyard in January of 2012. As a result of completing this transaction, we now own 100% of Dry Bulk and have complete control of the two remaining vessels.

During the first quarter of 2011, we retained an independent, third party firm with shipping industry experience to assist us in determining the fair value of Dry Bulk and the fair value of our previous 50% interest in Dry Bulk.

At the time of the acquisition, the assets of Dry Bulk consisted of cash, trade receivables, prepayments, inventory, two Capesize vessels, two Handymax vessels under construction and time charter agreements on the two Capesize vessels which were to expire in early 2013 and are currently fixed at attractive time charter rates. Current liabilities consisted primarily of accrued interest on debt and the non-current liabilities consisting primarily of floating rate bank borrowings. With the exception of the Capesize vessels and the intangible value assigned to the above-market time charter contracts, the fair value of all assets and liabilities were equal to the carrying values.

As of March 31, 2011, the combined appraised value for both Capesize vessels was $84.0 million as compared to the book value of approximately $53.6 million. In determining the appraised fair value of the Capesize vessels, the cost and comparable sales approaches were used with equal weight applied to each approach. In addition to the fair value adjustment on the Capesize vessels, an intangible asset was established reflecting the difference between the existing value of the time charter contracts in place as compared to current market rates for similar vessels under short-term contracts, discounted back to present value. Based on the income approach, the fair value of the intangible asset was calculated to be $5.2 million and will be amortized over the remaining life of the contract, which is set to expire on January 7, 2013. As a result of the combined fair value adjustments noted above, we concluded that the total fair value of the net assets of Dry Bulk acquired was $69.0 million.

In order to arrive at the fair value of our existing interest in Dry Bulk, 50% of the total fair value of $69.0 million was discounted by 5.1%, reflecting our lack of control of Dry Bulk as a 50% owner. The discount rate of 5.1% was derived from a sample of recent industry data. As a result, we concluded that the fair value of our existing 50% interest was $32.7 million.

Under Accounting Standards Codification 805, a step up to fair value is required when an equity interest changes from a non-controlling interest to a controlling interest (step acquisition). Based on the step up from a 50% interest to a 100% interest in Dry Bulk, a gain of approximately $18.3 million was generated by taking the difference between the fair value of our previously held 50% interest less the book value of the previously held interest. This calculation is shown below:

(Amounts in thousands)

Fair Value of Previously Held 50% Interest	$	32,700
Less: Book Value of Previously Held Interest		(14,400	)
Gain on Previously Held 50% Interest	$	18,300

We also recognized a bargain purchase gain of $0.5 million with respect to the step up to fair value of the 50% interest we acquired, calculated as follows:

(Amounts in thousands)

Fair Value of Net Assets Acquired	$	69,000
Less: Fair Value of Purchase Consideration		(35,800	)
Less: Fair Value of Previously Held 50% Interest		(32,700	)
Bargain Purchase Gain	$	500

Previously, we accounted for our non-controlling interest in Dry Bulk under the equity method. We now include the financial results of Dry Bulk in our consolidated financial results, which include revenues and net loss/income for Dry Bulk for the year to date results. Since the acquisition of Dry Bulk, our consolidated financial results included revenue and net income of $7.3 million and $2.0 million, respectively. Assuming we recorded this transaction on January 1, 2010, our consolidated financial results for the year ending December 31, 2010 and December 31, 2011 would not have been materially different from what we actually reported. As such, we have not disclosed in this report any proforma financial information for either of these earlier periods.