Note 2. Acquisitions

U.S. United Ocean Services, LLC Acquisition

On November 30, 2012, (“the acquisition date”) we acquired 100% of the membership interests of U.S. United Ocean Services, LLC (“UOS”). The total consideration of approximately $114.7 million consisted of a $112.2 million cash payment and a post-closing settlement payment of about $2.5 million in first quarter of 2013. In fourth quarter of 2012, acquisition expenses of approximately $1.8 million related to legal, consulting, and valuation fees were reflected in our statements of income as “Administrative and General Expenses”.

Founded in 1959, UOS provides marine transportation services for dry bulk and break-bulk commodities in the United States. We believe UOS operates the largest dead weight 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.

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



		Amount Recognized as of Acquisition Date
Description		(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		(5,469)
Other Long Term Liability		(1,945)
Total Liabilities Assumed		(7,414)
Net Assets Acquired		112,776
Total Consideration Transferred		(114,717)
Goodwill*	$	1,941

* 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, 2012. 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 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, 2012, 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 nine months ended September 30, 2012, (unaudited and in thousands, except share amounts):


		Three Months Ending		Nine Months Ending
		September 30, 2012		September 30, 2012
		Pro Forma		Pro Forma
Revenues	$	82,270	$	246,809
Net earnings attributable to ISH	$	7,691	$	23,074
Net earnings per share attributable to ISH common stockholders:
Basic	$	3.20	$	3.21
Diluted	$	3.20	$	3.20
Weighted average shares of common stock outstanding
Basic		7,203,860		7,192,818
Diluted		7,220,901		7,208,886

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. The total consideration of approximately $4.5 million consisted of a $623,000 cash payment, the assumption of $3.5 million in debt, which was repaid in full in 2012 and $383,000 in miscellaneous payables. In third quarter of 2012, acquisition expenses of approximately $40,000 related to legal fees incurred in due diligence were reflected in our statements of income as “Administrative and General Expenses”. FSI and Tower own and operate a certified rail-car repair facility near the port of Mobile, Alabama. The pro forma effect of this acquisition was not material.

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



		Amount Recognized as of Acquisition Date
Description		(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		(412)
Long Term Debt		(3,490)
Deferred Tax Liability		(453)
Total Liabilities Assumed		(4,355)
Net Liabilities Assumed		(205)
Total Consideration Transferred		(623)
Goodwill*	$	828

·	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.