NOTE C - SIGNIFICANT OPERATIONS

Major Customers

At the beginning of 2015, we had seven PCTCs that carried automobiles for customers worldwide, of which six were chartered to a major Japanese shipping company. Gross revenues from this customer were approximately $34.4 million and $37.9 million for the years ending December 31, 2015 and 2014, respectively. All of the aforementioned revenues are included in our PCTC Segment. As of December 31, 2015, we had sold two of these PCTCs – see Note G – Gain on Sale of Assets and Note E – Assets Held for Sale, respectively, for additional information.

During 2015 and 2014, we had eight vessels that qualified under the MSP program. The MSP revenue was approximately $22.9 million and $24.5 million for the years ending December 31, 2015 and 2014, respectively. These revenues are included in our PCTC and Specialty Contracts segments. In 2015, we sold one of these PCTC vessels and redelivered two of the container vessels due to the expiration of that contract.

Our U.S. flag PCTCs also carry supplemental cargo. Gross revenues from these cargoes were approximately $28.0 million and $16.1 million for the years ending December 31, 2015 and 2014, respectively.

We have two special purpose vessels that carry rail cars between the U.S. Gulf Coast and Mexico. Gross revenues from these two vessels are included in our Rail-Ferry segment and were approximately $31.0 million and $32.5 million for the years ending December 31, 2015 and 2014, respectively.

We have six Jones Act vessels that carry coal for TECO and phosphate rock and fertilizer for Mosaic. The revenue from these customers were approximately $19.4 million and $28.4 million, respectively, for the year ending December 31, 2015 and $47.0 million and $30.8 million for the year ended December 31, 2014, respectively.

Concentrations

A significant portion of our traffic receivables is due from contracts with the United States government.

With only minor exceptions related to personnel aboard certain international-flagged vessels, all of our shipboard personnel are covered by collective bargaining agreements under multiple unions. The percentage of the Company’s total work force, including office personnel, that is covered by these agreements is approximately 62% at December 31, 2015.

Geographic Information

We have operations in several principal markets, including international service between U.S. Gulf Coast, U.S. East Coast, and U.S. West Coast ports and ports in Mexico, the Middle East and the Far East, and domestic transportation services along the U.S. Gulf Coast and East Coast. We assign our revenues to regions based on the location of the customer. Because we operate internationally, most of our assets are not restricted to specific locations. Accordingly, an allocation of identifiable assets to specific geographic areas is not applicable. Revenues attributable to the major geographic areas of the world are presented in the following table for the years ended December 31, 2015 and 2014:



(All Amounts in Thousands)
		2015		2014
United States	$	162,295	$	183,748
Asian Countries		53,107		62,763
Mexico		31,001		32,401
Europe		12,702		15,143
Other Countries		369		779
Total	$	259,474	$	294,834

Operating Segments

Prior to adopting our Strategic Plan on October 21, 2015, we operated six separate segments. Although the implementation of our Strategic Plan has reduced the number of our vessels and operating segments, we do not believe that the plan has significantly changed our business strategy or our historical practices.

For the year ended December 31, 2015, we reported our operating results in the following six segments:

· Jones Act

· Pure Car Truck Carriers

· Dry Bulk Carriers

· Rail-Ferry

· Specialty Contracts

· Other

Jones Act: The Merchant Marine Act of 1920, or the MMA, regulates maritime commerce in U.S. waters between U.S. ports. Section 27 of the MMA, better known as the Jones Act, requires that all goods transported by water between U.S. ports must, subject to certain limitations, be carried aboard U.S. Flag vessels that are constructed in the U.S., crewed by U.S. citizens, and owned predominantly by U.S. citizens. Vessels deployed under our Jones Act segment serve both Eastern U.S. coasts and the Gulf of Mexico and operate as the primary marine transporter of coal for TECO and the primary marine transporter of unfinished phosphate rock for Mosaic.

Under our Jones Act segment, we deploy (i) two bulk carriers, three integrated tug/barge units, each consisting of one tug and one barge, and one harbor tug acquired, (ii) one belt self-unloading coal carrier to transport coal under a time charter, and (iii) one vessel that transports molten sulphur under a contract of affreightment through December 31, 2017. The UOS fleet primarily transports coal for TECO and phosphate rock and fertilizer for Mosaic. The two integrated tug/barge units operate under contracts of affreightment with TECO and Mosaic. We have one integrated tug/barge unit and a harbor tug which are currently inactive. Additionally, we also own one additional tug unit acquired from UOS which is currently inactive and held for sale. Trade for this segment is primarily driven by coal, petroleum coke, phosphate rock, sulphur and fertilizer.

We own all of the aforementioned vessels with the exception of the molten sulphur carrier, which we operate under a sale/leaseback arrangement - see Note P - Leases.

Pure Car Truck Carriers: Under our Pure Car Truck Carriers segment, we currently deploy five PCTCs, four of which are U.S. flag vessels and one of which is an international-flagged vessel. These vessels transport all types of vehicles, from fully assembled passenger cars to construction machinery and equipment, in large numbers on multiple internal decks.

All of our PCTCs operate under time charters. Under these contracts, we fully equip the vessel and are responsible for normal operating expenses, repairs, crew wages, and insurance, while the charterer is responsible for voyage expenses, such as fuel, port and stevedoring expenses. In addition to contractually fixed time charter hire income, we also earn from time to time supplemental voyage income as a result of chartering back our U.S. flag PCTCs for the carriage of supplemental cargo when available.

We have operated PCTCs since 1986, which is when we entered into contracts with major Japanese companies. We own our international-flagged PCTC, which is employed under a long-term time charter contract. We own two of our four U.S. flag PCTCs and lease the other two U.S. flag PCTCs, which include buy back options in 2018 and 2019.

Dry Bulk Carriers: During 2015, the vessels we operated in this segment included (i) one supramax bulk carrier, which we operated in a revenue-sharing agreement with European partners, (ii) three handysize bulk carriers, and (iii) a capesize bulk carrier, which was under a 12-16 month time charter contract through the end of 2015. Under our revenue-sharing agreements, we and the other participating vessel owners received monthly distributions of net cash flow from voyage profits based on a participating vessel’s performance capability compared with other participating vessels under the revenue-sharing agreement. As of December 31, 2015, we had sold the supramax bulk carrier and one of the handysize bulk carriers. Subsequent to December 31, 2015, we sold the remaining two handysize bulk carriers and the capesize bulk carrier; these vessels were included in assets held for sale as of the balance sheet date – see Note E – Assets Held for Sale and Note Y – Subsequent Events.

At December 31, 2015, we had a 25.00% and a 23.68% interest in fifteen mini-bulk carriers. These mini-bulkers were deployed in the spot market or on short- to medium-term time charters, which we included in assets held for sale – see Note E – Assets Held for Sale. During the first quarter of 2016, we exchanged these investments for a 2008 mini-bulk carrier that we intend to use to service the contract in our Indonesian operations – refer to Note Y – Subsequent Events.

Rail-Ferry: Our Rail-Ferry segment uses our two roll-on/roll-off special purpose double-deck vessels, which carry loaded rail cars between the U.S. Gulf Coast and Mexico in a regularly scheduled waterborne service. The service provides departures every four days from Mexico and the U.S. Gulf Coast, respectively, for a three-day transit between ports. Since 2007, we have conducted these operations out of our terminal in Mobile, Alabama and a terminal in Coatzacoalcos, Mexico. We own a 49% interest in Terminales Transgolfo, S.A. de C.V., which owns and operates the rail terminal in Coatzacoalcos, Mexico.

We believe this unique service provides a cost effective alternative route between the Eastern United States providing more efficient direct service and the option of not crossing the Texas-Mexican border. Trade for this segment is primarily driven by commodities such as forest products, sugar, metals, minerals, plastics and chemicals.

Specialty Contracts: Our Specialty Contracts segment is comprised of vessels not otherwise described above, operating under unique contracts. During 2015, this segment included (i) two container vessels, which were on time charter to another shipping company until the contract expired at the end of 2015, (ii) two multi-purpose vessels, two tankers, and two container vessels which have serviced our contract since 1995 to transport fuel and supplies for an Indonesian mining company, (iii) two multi-purpose heavy lift dry cargo vessels, which are time chartered to another shipping company, and (iv) one multi-purpose ice strengthened vessel deployed on a bareboat charter. As of December 31, 2015, the two container vessels had been redelivered upon the expiration of their contract.

During 2015, we held a 30% interest in Saltholmen Shipping Ltd and Brattholmen Shipping Ltd, which were organized to purchase and operate two newbuilding chemical tankers and two asphalt tankers, respectively. These vessels were immediately employed on long-term bareboat charters. As of December 31, 2015, these investments were included in assets held for sale and were subsequently sold in the first quarter of 2016 – refer to Note Y – Subsequent Events.

Other: This segment consists of operations that include ship and cargo charter brokerage and agency services provided to unaffiliated companies and our operating companies, and other specialized services provided to our operating subsidiaries. These services facilitate our operations by allowing us to avoid reliance on third parties to provide these essential services. Also reported within this segment are corporate-related items, and income and expense items not allocated to our other reportable segments.

The following table presents information about segment profit and loss and segment assets. We do not allocate to our segments (i) administrative and general expenses, (ii) (gain) loss on sale of other assets, (iii) derivative (gain) loss, (iv) income taxes, (v) impairment loss, (vi) loss of extinguishment of debt, (vii) other income from vessel financing, (viii) investment income, and (ix) foreign exchange loss. Intersegment revenues are based on market prices and include revenues earned by our subsidiaries that provide specialized services to our operating companies. Finally, we use “gross voyage profit” as the primary measure for our segments’ profitability to assist our chief operating decision makers in monitoring and managing our business. Due to the diversity across our segments, we believe the most efficient way of measuring contribution margins is by measuring gross voyage profit by segment. Gross voyage profit is the sum of revenue less voyage expense less amortization expense, plus the results from our unconsolidated entities. Expenditures for segment assets represent cash outlays during the periods presented, including purchases of assets, improvements to assets, and drydock payments.



(All Amounts in Thousands)				Pure Car
	Jones			Truck			Dry Bulk			Rail			Specialty
	Act			Carriers			Carriers			Ferry			Contracts			Other		Total
2015
Revenue	$	86,898		$	83,283		$	13,208		$	34,005		$	41,827		$	253	$	259,474
Voyage Expenses		73,373			65,078			9,439			26,459			33,871			(639)		207,581
Amortization Expense		12,269			2,606			201			909			213			-		16,198
(Income) Loss of Unconsolidated Entities		-			-			4,770			393			(1,114)			-		4,049
Gross Voyage Profit (Loss) (excluding Depreciation Expense)	$	1,256		$	15,599		$	(1,202)		$	6,244		$	8,857		$	892	$	31,646
Gross Voyage Profit (Loss) Margin		1	%		19	%		(9)	%		18	%		21	%		-		12	%

Segment Assets	$	86,653		$	82,756		$	34,731		$	46,758		$	39,731		$	7,236	$	297,865
Expenditures for Segment Assets	$	17,288		$	3,589		$	-		$	3,921		$	1,215		$	11,047	$	37,060

2014
Revenue	$	124,854		$	78,081		$	18,045		$	34,577		$	39,765		$	(488)	$	294,834
Voyage Expenses		82,913			65,696			13,327			28,743			33,973			(1,612)		223,040
Amortization Expense		15,813			2,606			236			994			2,433			25		22,107
(Income) Loss of Unconsolidated Entities		-			-			468			193			(671)			-		(10)
Gross Voyage Profit (excluding Depreciation Expense)	$	26,128		$	9,779		$	4,014		$	4,647		$	4,030		$	1,099	$	49,697
Gross Voyage Profit Margin		21	%		13	%		22	%		13	%		10	%		-		17	%

Segment Assets	$	141,705		$	160,020		$	134,729		$	48,449		$	57,267		$	2,720	$	544,890
Expenditures for Segment Assets	$	9,528		$	62,155		$	1,949		$	363		$	495		$	5,211	$	79,701

Following is a reconciliation of the totals reported for the operating segments to the applicable line items in the Consolidated Balance Sheets as of December 31, 2015 and 2014:



(All Amounts in Thousands)
		2015		2014
Total Assets for Reportable Segments	$	297,865	$	544,890

Current Assets		46,269		65,554
Other Assets		2,168		4,843

Total Assets	$	346,302	$	615,287

Following is a reconciliation of the totals reported for the operating segments to the applicable line items in the Consolidated Statements of Operations for the years ended December 31, 2015 and 2014:



(All Amounts in Thousands)
		2015		2014
Gross Voyage Profit	$	31,646	$	49,697

Vessel Depreciation		21,395		26,233
Other Depreciation		1,607		751

Gross Profit		8,644		22,713

Other Operating Expenses:
Administrative and General Expenses		22,832		20,985
Impairment Loss		154,463		38,213
(Gain) Loss on Sale of Other Assets		(4,543)		2
Less: Net Income (Loss) of Unconsolidated Entities		(4,049)		10
Total Other Operating Expenses		168,703		59,210

Operating Income (Loss)		(160,059)		(36,497)

Interest Expense		(13,342)		(9,737)
Derivative Income (Loss)		(2,991)		132
Loss on Extinguishment of Debt		(585)		(225)
Other Income from Vessel Financing		1,833		1,858
Investment Income		30		373
Foreign Exchange Gain (Loss)		(91)		(184)

Loss before Income Taxes	$	(175,205)	$	(44,280)