Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2014

Summary Of Significant Accounting Policies [Abstract]

Organization And Basis Of Presentation

Organization and Basis of Presentation - International Shipholding Corporation (a Delaware corporation) and its majority-owned subsidiaries, referred to in this report using the terms “we,” “us,” “our,” and “the Company”, operate a diversified fleet of U.S. and International Flag vessels that provide domestic and international maritime transportation services to commercial customers and agencies of the United States government primarily under medium to long-term charters or contracts of affreightment.  At December 31, 2014, our fleet consisted of 54 ocean-going vessels and related shoreside facilities.  Our core business strategy consists of identifying growth opportunities in niche markets as market needs change, utilizing our extensive experience to meet those needs, and continuing to maintain a diverse ortfolio of medium to long-term contracts, as well as protect our long-standing customer base by providing quality transportation services. From time to time, we augment our core business strategy with opportunistic transactions involving short term spot market contracts.  The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. 

Certain previously reported amounts have been reclassified to conform to the 2014 presentation.  Specifically, drydock amortization is presented in amortization expense, which was previously recorded as part of the voyage expenses, and miscellaneous depreciation expense, which was previously recorded as part of voyage expense and administrative and general expense, is now included in other depreciation expense in the Consolidated Statements of Income and other tables herein (See Note F – Goodwill, Other Intangible Assets, and Deferred Charges and Note G – Property, Plant and Equipment).

Consolidation

Consolidation - The accompanying financial statements include the accounts of International Shipholding Corporation and its’ majority owned subsidiaries.  Intercompany accounts and transactions have been eliminated in consolidation.  Our policy is to consolidate all subsidiaries in which we hold a greater than 50% voting interest or otherwise control its operating and financial activities.  We use the equity method to account for investments in entities in which we hold a 20% to 50% voting interest and have the ability to exercise significant influence over their operating and financial activities.

Financial Statement Preparation

Financial Statement Preparation - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Revenue And Expense Recognition

Revenue and Expense Recognition - Revenue for our Rail-Ferry, Jones Act, and Specialty segments’ voyages is recorded over the duration of the voyage. Our voyage expenses are estimated at the beginning of the voyages based on historical actual costs or from industry sources familiar with those types of charges. As the voyage progresses, these estimated costs are revised with actual charges and timely adjustments made. The expenses are ratably expensed over the voyage based on the number of days in progress at the end of the period. Based on our experience, we believe there is not a material difference between recording estimated expenses ratably over the voyage versus recording expenses as incurred. Revenues and expenses relating to our other segments’ voyages, which require limited estimates or assumptions, are recorded when earned or incurred during the reporting period.

The Maritime Security Act, which established the MSP, was signed into law in October of 1996 and has been extended to 2025.  We recognize MSP revenue on a monthly basis over the duration of the qualifying contracts.  The carrying amount approximates fair value for these instruments.  As of December 31, 2014, four of our PCTCs, two of our Container vessels, and one Multi-Purpose vessel were qualified and received contracts for MSP participation.  Each of these vessels earned approximately $3.1 million in 2014, $2.8 million in 2013, and $3.1 million in 2012.

Income Taxes

Income Taxes - Income taxes are accounted for in accordance with ASC Topic 740.  Provisions for income taxes include deferred income taxes for temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes.  Deferred income taxes are computed using enacted tax rates that are expected to be in effect when the temporary differences reverse.  A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or the entire deferred tax asset will not be realized.  The Company records uncertain tax positions within income tax expense and classifies interest and penalties related to income taxes as income tax expense.

Certain foreign operations are not subject to income taxation under pertinent provisions of the laws of the country of incorporation or operation.  However, pursuant to existing U.S. tax laws, earnings from certain of our foreign operations are subject to U.S. income taxes when those earnings are repatriated to the U.S.

The Jobs Creation Act, which first applied to us on January 1, 2005, changed the U.S. tax treatment of the foreign operations of our U.S. flag vessels and our International Flag shipping operations.  We made an election under the Jobs Creation Act to have our qualifying U.S. Flag operations taxed under the “tonnage tax” regime rather than under the usual U.S. corporate income tax regime (See Note J – Income Taxes).

Cash And Cash Equivalents

Cash and Cash Equivalents - We consider highly liquid debt instruments and money market funds with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts Receivable - We provide an allowance for doubtful accounts for accounts receivable balances estimated to be non-collectible.  These provisions are maintained based on identified specific accounts, past experiences, and current trends, and require management’s estimates with respect to the amounts that are non-collectible. Accounts receivable balances are written off against our allowance for doubtful accounts when deemed non-collectible.

Inventories

Inventories - The Company values spare parts and warehouse inventories at the lower of cost or market, using the first-in, first-out (FIFO) method of accounting. Fuel inventory is based on the average inventory method of accounting. As of December 31, 2014 and 2013, our inventory balances were approximately $9.8 million and $11.3 million, respectively. Our inventory consists of three major classes, the break out of which is included in the following table:

(All Amounts in Thousands)	For the Years Ended December 31,
Inventory Classes		2014		2013
Spare Parts Inventory	$	3,253	$	3,968
Fuel Inventory		3,967		4,663
Warehouse Inventory		2,540		2,691
	$	9,760	$	11,322

Vessels, Property And Other Equipment

Vessels, Property and Other Equipment - For financial reporting purposes, vessels are depreciated over their estimated useful lives using the straight-line method to the estimated salvage value. 

Estimated useful lives (in years) of Vessels, Leasehold Improvements, and Furniture and Equipment from now or when built are as follows:

Jones Act
	1	Coal Carrier	15
	2	Bulk Carriers	25
	1	Harbor Tug	20
	3	ATB Barge and Tug Units	9-30
	1	ITB Barge and Tug Unit	9-30
Pure Car Truck Carriers
	5	Pure Car/Truck Carriers	20-25
Rail Ferry
	2	Special Purpose Vessels	25
		Building	15-25
Dry Bulk Carriers
	5	Bulk Carriers	25
Specialty Contracts
	1	Special Purpose Vessel	25
Other
		Leasehold Improvements	10-20
		Other Equipment	3-12
		Furniture and Equipment	3-10

At December 31, 2014, our fleet of 54 vessels also included (i) a Molten Sulphur Carrier, two Multi-Purpose vessels, five Container vessels, which we charter in one of our services, (ii) two Pure Car Truck Carriers, (iii) two Tankers, (iv) sixteen Mini-Bulker Carriers, (v) two Chemical and two Asphalt Tankers, and (vi) one Multi-Purpose heavy lift vessel.  Included in the assets above, one ATB Barge and Tug Unit and three Handysize Bulk Carriers are held for sale and depreciation has been ceased as of December 31, 2014.

Costs of all major property additions and betterments are capitalized.  Ordinary maintenance and repair costs are expensed as incurred.  Interest and finance costs relating to vessels and other equipment under construction are capitalized to properly reflect the cost of assets acquired.  Capitalized interest totaled $120,000,  $52,000 and $120,000 for the years ended December 31, 2014, 2013 and 2012, respectively.  Capitalized interest was calculated based on our weighted-average interest rate on our outstanding debt.

We monitor our fixed assets for impairment and perform an impairment analysis in accordance with Accounting Standards Codification (“ASC”) Topic 360 when triggering events or circumstances indicate a fixed asset or asset group may be impaired.  Such events or circumstances may include a decrease in the market price of the long-lived asset or asset group or a significant change in the way the asset is being used. Once a triggering event or circumstance is identified, an analysis is done which shows the net book value of the asset as compared to the estimated undiscounted future cash flows the asset will generate over its remaining useful life. It is possible that our asset impairment review would include a determination of the asset’s fair value based on a third-party evaluation or appraisal. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset or asset group exceeds its fair value. Assets to be disposed of are reported at the lower of the carrying value or the fair value less costs to sell. We recorded impairment charges of $38.2 million during 2014 related to five vessels that met the held for sale criteria in the fourth quarter (See Note H – Impairment of Long Lived Assets).

Assets Held For Sale

Assets Held for Sale – As a result of continued evaluation of strategic alternatives, during the fourth quarter 2014, we committed to a plan to sell three Handysize vessels and one Tug-Barge unit which was inactive.  Upon approval of this plan, the assets met all of the criteria under ASC 360 to qualify as assets held for sale.  The three Handysize vessels and the related equipment have a fair value less cost to sell of approximately $48.7 million which is classified as long term assets held for sale.  Each of these vessels has long term debt instruments associated with them totaling approximately $41.4 million which will be paid off at the time of sale.  Additionally, the three Handysize vessels have inventory of approximately $0.5 million which was included in current assets held for sale.  The Tug-Barge unit has a fair value less cost to sell of approximately $6.4 million which was included in current assets held for sale.

Drydocking Costs

Drydocking Costs - We defer certain costs related to the drydocking of our vessels.  Deferred drydocking costs are capitalized as incurred and amortized on a straight-line basis over the period between drydockings (generally two to five years). Because drydocking charges can be material in any one period, we believe that the capitalization and amortization of these costs over the drydocking period provides a better matching with the future revenue generated by our vessels. We capitalize only those costs that are incurred to meet regulatory requirements. Normal repairs, whether incurred as part of the drydocking or not, are expensed as incurred (See Note F – Goodwill, Other Intangible Assets, and Deferred Charges).

Goodwill And Intangible Assets

Goodwill and Intangible Assets - Under FASB ASC 350, Intangibles – Goodwill and Other, goodwill and indefinite-lived intangible assets are reviewed at least annually for impairment.  Intangible assets with definite lives are amortized using the straight line method over their individual useful lives.  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.   At December 31, 2014 and 2013, our Goodwill balances were $2.7 million. Goodwill is monitored for impairment, and we perform an impairment analysis on an annual basis or whenever events or circumstances indicate that interim impairment testing is necessary (See Note B–Acquisitions).

Deferred Financing Charges

Deferred Financing Charges - We amortize our deferred financing charges over the terms of the related financing agreements and contracts using the effective interest method (See Note F – Goodwill, Other Intangible Assets, and Deferred Charges).

Self-Retention Insurance

Self-Retention Insurance - We maintain provisions for estimated losses under our self-retention insurance program based on estimates of the eventual claims settlement costs.  The measurement of our exposure for self-insurance liability requires management to make estimates and assumptions that affect the amount of loss provisions recorded during the reporting period.  Actual results could differ materially from those estimates (See Note P – Self-Retention Insurance).

Asbestos Claims

Asbestos Claims - We maintain provisions for estimated losses for asbestos claims based on estimates of eventual claims settlement costs.  Our policy is to establish provisions based on a range of estimated exposure.  We estimate this potential range of exposure using input from legal counsel and internal estimates based on the individual deductible levels for each policy year. We believe that insurance and the indemnification of a previous owner of one of our wholly-owned subsidiaries will partially mitigate our exposure.  The measurement of our exposure for asbestos liability requires management to make estimates and assumptions that affect the amount of the loss provisions recorded during the period.  Our estimates and assumptions are formed from variables such as the maximum deductible levels in a claim year, the amount of the indemnification recovery and the claimant's employment history with the Company.  Actual results could differ materially from those estimates.

Foreign Currency Transactions

Foreign Currency Transactions - Certain of our revenues and expenses are converted into or denominated in foreign currencies, primarily the Singapore Dollar, Indonesian Rupiah, Euro, British Pound, Mexican Peso, Australian Dollar, and Japanese Yen.  All exchange adjustments are charged or credited to income in the period incurred. Excluding the foreign exchange losses related to the Yen-denominated loan facility, we recognized an exchange gain of approximately $296,000,  $412,000 and $10,000 for the years ended December 31, 2014, 2013 and 2012, respectively, on foreign currency transactions related to operations.

In addition to the foreign currency operational transactions, we also recorded a non-cash foreign exchange loss of $0.2 million in 2014 and non-cash foreign exchange gains of $5.9 million and $5.5 million for the years ending December 31,  2013 and 2012, respectively, reflecting the periodic re-measurement of a Yen-denominated credit facility to U.S. Dollars. These gains/losses are reflected in our Consolidated Statements of Income as “Interest and Other”.  In the fourth quarter of 2013, we entered into several Yen foreign exchange contracts which effectively locked in our Yen to U.S. dollar exchange rate at 102.53 to 1 USD.

Dividend Policy

Dividend Policy - The payment of dividends is at the discretion of our Board of Directors.  On October 29, 2008, our Board of Directors authorized the reinstitution of a quarterly common stock cash dividend program beginning in the fourth quarter of 2008. 

Dividends are payable quarterly, in respect of our Series A and Series B Preferred shares, respectively, when and if declared by our Board of Directors (See Note U – Preferred Stock).

Earnings Per Share

Earnings Per Share - Basic earnings per share is computed based on the weighted average number of common shares issued and outstanding during the relevant periods.  Diluted earnings per share also reflect the effect of dilutive potential common shares, including shares issuable under restricted stock units using the treasury stock method (See Note V – Earnings Per Share).

Derivative Instruments And Hedging Activities

Derivative Instruments and Hedging Activities - Under ASC Topic 815, in order to consider a derivative instrument as a hedge, (i) we must designate the instrument as a hedge of future transactions, and (ii) the instrument must reduce our exposure to the applicable risk.  If the above criteria are not met, we record the fair market value of the instrument at the end of each period and recognize the related gain or loss through earnings.  If the instrument qualifies as a hedge, net settlements under the agreement are recognized as an adjustment to earnings, while changes in the fair value of the hedge are recorded through Stockholders’ Equity in Other Comprehensive Income (Loss).  We currently employ, or have employed in the recent past, interest rate swap agreements and foreign currency contracts (See Note M – Fair Value of Financial Instruments, Derivatives and Marketable Securities).

Stock-Based Compensation

Stock-Based Compensation - Under ASC Topic 505, we determine stock based compensation cost based on the grant date fair value of awards and record compensation expense over the vesting period of such awards.  The compensation cost related to our restricted stock is determined based on the average stock price on the date of grant and is amortized over the vesting period (See Note S – Stock-Based Compensation).

Pension And Postretirement Benefits

Pension and Postretirement Benefits - Our pension and postretirement benefit costs are calculated using various actuarial assumptions and methodologies.  These assumptions include discount rates, health care cost trend rates, inflation, rate of compensation increases, expected return on plan assets, mortality rates, and other factors.  We believe that the assumptions utilized in recording the obligations under our plans are reasonable based on input from our outside actuary and information as to historical experience and performance.  Differences in actual experience or changes in assumptions may affect our pension and postretirement obligations and future expense. 

We account for our pension and postretirement benefit plans in accordance with ASC Topic 715.  This statement requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans.  Under ASC Topic 715, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized in Other Comprehensive Income (Loss), until they are amortized as a component of net periodic benefit cost.  In addition, the measurement date, the date at which the plan assets and the benefit obligation are measured, is required to be the Company’s fiscal year end.  This standard does not change the determination of net periodic benefit cost included in net income or the measurement issues associated with benefit plan accounting. 

For the period ended December 31, 2014, the effect of the adjustment to our status was an increase in the liability of $2.1 million and an increase in Other Comprehensive Loss of $2.8 million.  As of December 31, 2014, our pension plan was underfunded by approximately $963,000  (See Note L – Employee Benefit Plans).

Recent Accounting Pronouncements

Recent Accounting Pronouncements–  In April  2014, the FASB issued ASU 2014-8, “Presentation of Financial Statements and Property Plant and Equipment”, which changes the definition of discontinued operations.  The guidance permits only those disposed components (or components held-for-sale) representing a strategic shift that have (or will have) a major effect on operations and financial results to be reported in discontinued operations.  The new standard is effective prospectively for disposals (or classifications as held-for-sale) that occur after December 31, 2014.  Earlier adoption is permitted.  The Company elected to early adopt the accounting guidance during 2014.

In May 2014, the Financial Accounting Standard Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers”, to amend Accounting Standards Codification Topic 605, “Revenue Recognition”.  The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  ASU 2014-09 is effective for annual reporting periods beginning on or after December 15, 2016.  Early adoption is not permitted.  We are currently evaluating the impact of the adoption of this standard.

In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation”, to give explicit guidance on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of an award.  ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015.  Earlier adoption is permitted.  The effective date is the same for both public business entities and all other entities.  We are currently evaluating the impact of the adoption of this standard.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern”, to give explicit guidance on managements’ requirement to analyze whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable).  ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.  We are currently evaluating the impact of the adoption of this standard.