-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, j1ytyk+ByqC+t9z/lyXC01ZvyoqYHSXJ+xwHj2UJXw6Sdym0091jlU6PEo9fcCn2 nqSIsqOH0IUs7loYcR6JUg== 0000278041-94-000009.txt : 19940328 0000278041-94-000009.hdr.sgml : 19940328 ACCESSION NUMBER: 0000278041-94-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL SHIPHOLDING CORP CENTRAL INDEX KEY: 0000278041 STANDARD INDUSTRIAL CLASSIFICATION: 4412 IRS NUMBER: 362989662 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-10852 FILM NUMBER: 94517784 BUSINESS ADDRESS: STREET 1: 650 POYDRAS ST STE 1700 CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5045295461 10-K 1 1993 FORM 10K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR __TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From _________ to _________ Commission File No. 2-63322 INTERNATIONAL SHIPHOLDING CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-2989662 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 650 Poydras Street, New Orleans, Louisiana 70130 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (504) 529-5461 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ___________________ _____________________ Common Stock, $1 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Name of each exchange Title of each class on which registered ___________________ ____________________ 9% Senior Notes Due 2003 New York Stock Exchange Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ____ State the aggregate market value of the voting stock held by non-affiliates of the registrant. Date Amount ____ _______ March 1, 1994 $81,982,688 Indicate the number outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common stock, $1 par value _____ 5,346,611 shares outstanding as of March 1, 1994 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the fiscal year ended December 31, 1993, have been incorporated by reference into Part I and II of this Form 10-K. Portions of the registrant's definitive proxy statement dated March 11, 1994 have been incorporated by reference into Part III of this Form 10-K.
International Shipholding Corporation Form 10-K Table of Contents PAGE _____ PART I. ITEM 1. BUSINESS 2 General 2 History 4 Liner Services/Contracts of Affreightment 4 Military Sealift Command 6 Pure Car Carriers 8 Domestic Transportation and Services 8 Investments in Specialized Vessels 9 Ancillary Services 10 Marketing 10 Insurance 10 Regulation 11 Competition 14 Employees 15 ITEM 2. PROPERTIES 15 ITEM 3. LEGAL PROCEEDINGS 16 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 17 ITEM 4a.EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT 17 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS 19 ITEM 6. SELECTED FINANCIAL DATA 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 19 PART III. ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 20 ITEM 11.EXECUTIVE COMPENSATION 20 ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 20 ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 20 PART IV. ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. 21 SIGNATURES 24 2 PART I ITEM 1. BUSINESS GENERAL The Company, through its subsidiaries, operates a diversified fleet of U. S., and foreign flag vessels that provide international and domestic maritime transportation services to commercial customers and agencies of the United States government primarily under medium- to long-term charters or contracts. The Company's fleet consists of 27 ocean-going vessels, 14 towboats, 129 river barges, 1,650 LASH barges and related shoreside handling facilities. The Company's strategy is to (i) identify customers with marine transportation needs requiring specialized vessels or operating techniques, (ii) seek medium- to long-term charters or contracts with those customers and, if necessary, modify, acquire or construct vessels to meet the requirements of those charters or contracts, and (iii) secure financing for the vessels predicated primarily on those charter or contract arrangements. The Company believes that this strategy has produced valuable long-term relationships with its customers and stable operating cash flows. The Company is the only significant operator of the LASH (lighter aboard ship) system, which it pioneered in 1969. The Company's fleet includes ten large LASH vessels, four LASH feeder vessels and 1,650 LASH barges. In its liner services, the Company uses the LASH system primarily to gather cargo on rivers, in island chains and in harbors that are too shallow for traditional vessels and to transport to and from those areas large items, such as forest products, natural rubber and steel, that cannot be transported efficiently in containerized vessels. In addition, the LASH system enables barges to be rapidly loaded onto and unloaded from the large LASH vessels without shoreside support facilities while minimizing the number of times that the cargo is handled. Because the Company's LASH barges are used primarily to transport large items, the Company's LASH fleet often has a competitive advantage over containerized vessels. Additionally, because containerized and breakbulk vessels cannot operate in certain of the areas where the Company's LASH system operates, the Company often has a competitive advantage over such vessels. The Company's diversified ocean-going fleet also includes (i) two foreign flag and two U.S. flag pure car carriers that are specially designed to transport automobiles; (ii) the only two U.S. flag ice- strengthened multi-purpose vessels, which supply Pacific rim military bases and scientific operations in the Arctic and Antarctic; (iii) three roll-on/roll-off vessels that permit rapid deployment of rolling stock, munitions and other military cargoes requiring special handling; and (iv) two PROBO vessels that can carry various refined petroleum products and dry bulk cargoes on back-to-back voyages because of their ability to rapidly self-clean their cargo holds between voyages with minimal shoreside support. The Company also 3 operates 14 inland waterway towboats and 111 super- jumbo river barges that, together with shoreside unloading facilities owned and operated by the Company, transport coal from Indiana to Gulf County, Florida for an electric utility. The Company currently has under construction a molten sulphur carrier that is scheduled for delivery in mid-1994, which will be used to carry molten sulphur from Port Sulphur, Louisiana to a processing plant on the Florida Gulf Coast. Through its principal operating subsidiaries, Central Gulf Lines, Inc. ("Central Gulf"), LCI Shipholdings, Inc. ("LCI"), Forest Lines Inc. ("Forest Lines") and Waterman Steamship Corporation ("Waterman"), the Company engages primarily in four types of services, including (i) a foreign flag LASH liner service between U. S. Gulf and East Coast ports and ports in northern Europe, and a subsidized U. S. flag LASH liner service between U. S. Gulf and East Coast ports and ports in South Asia, the Middle East and northern Africa, (ii) time charters to and other contracts with the Military Sealift Command ("MSC") for use in its military prepositioning program and to service scientific operations in the Arctic and Antarctic; (iii) time charters to transport Toyota and Honda automobiles from Japan to the United States and Hyundai automobiles from Korea primarily to the United States and Europe; and (iv) domestic transportation and services, primarily involving its coal and sulphur contracts and its ownership of an inter-modal transfer and warehouse facility in Memphis, Tennessee. The Company also operates a cape-size bulk carrier and has investments in several foreign entities that own and operate specialized bulk carriers. The Company currently has time charters or contracts to carry cargoes of commercial customers that include International Paper Company, Freeport-McMoRan, Inc., The Goodyear Tire and Rubber Company, Toyota Motor Corporation, Honda Motor Co., Ltd. and Hyundai Motor Company. The Company is one of the largest charterers of vessels to the MSC and operates nine vessels for the MSC under charters or contracts that typically contain options permitting the customer to extend the charter or contract on similar terms and conditions for one or more extension periods. With one exception, the MSC has always exercised its renewal options on the Company's charters or contracts, and the Company generally has been successful in winning charter or contract renewals when they are rebid. The Company also operates a U. S. flag LASH liner service under an operating differential subsidy agreement with MarAd that expires at the end of 1996. The Company's business historically has generated stable cash flows because most of its medium- to long- term charters provide for a daily charter rate that is owed whether or not the charterer utilizes the vessel (unless the vessel is unavailable for the charterer's use) and most of its medium- to long-term contracts guarantee a minimum amount of cargo for transportation. The Company is partially insulated from increases in certain operating expenses because time charters generally require the charterer to pay certain voyage costs, including fuel, port and 4 stevedoring expenses, and often include cost escalation features covering certain of the expenses paid by the Company. HISTORY Central Gulf was founded in 1947 by the late Niels F. Johnsen and his sons, Niels W. Johnsen, the Company's current Chairman, and Erik F. Johnsen, its current President. Central Gulf was privately held until 1971 when it was acquired by Trans Union Corporation. In 1978, the Company was formed to act as a holding company for Central Gulf, LCI and other affiliated companies in connection with the 1979 spin- off by Trans Union of the Company's common stock to Trans Union's stockholders. In 1986, the Company acquired the assets of Forest Lines, and, in 1989, the Company acquired the stock of Waterman, which was then a publicly held company. Since its spin-off from Trans Union, the Company has continued to act solely as a holding company, and its only significant assets consist of the capital stock of its subsidiaries. LINER SERVICES/CONTRACTS OF AFFREIGHTMENT Foreign Flag. The Company operates two foreign flag LASH vessels, the Acadia Forest and the Rhine Forest, and a self-propelled, semi-submersible feeder vessel, the Spruce, on a scheduled foreign flag liner service under the name "Forest Lines". Forest Lines normally makes 11 round trip sailings per LASH vessel per year between U. S. Gulf and East coast ports and ports in northern Europe. Approximately one-half of the aggregate eastbound cargo space is reserved for International Paper Company under a long-term contract of affreightment. The remaining space is provided on a voyage affreightment basis to commercial shippers. Historically, approximately 20% has been used by other paper manufacturers, including Georgia-Pacific Corporation and Weyerhaeuser Company. Although such space is provided from voyage to voyage, the Company has had a continuing relationship with Georgia-Pacific and Weyerhaeuser since 1969. The remaining 30% has been used by various commercial shippers to carry general cargo. Since 1969, when the foreign flag LASH liner service commenced operation, the vessels generally have been fully utilized on their eastbound voyages. The Company has had ocean transportation contracts with International Paper since 1969 when the Company had two LASH ships built to accommodate International Paper's trade. The Company's contract of affreightment with International Paper is for the carriage of wood pulp, liner board and other forest products, the characteristics of which are well suited for transportation by LASH vessels because the LASH system minimizes damage to such cargo by reducing the number of times that the cargo is handled. In addition, the LASH system permits the Company to load and unload these products at the shipper's and the 5 receiver's facilities, which are generally located on river systems that container and breakbulk vessels do not serve. During 1993, the Company renewed its contract with International Paper for an additional ten-year term ending in 2003. Under the contract of affreightment with International Paper, the Company has retained each vessel's cargo capacity on its westbound service. Over the years the Company has established a solid base of commercial shippers to which it provides space on the westbound voyages. The principal cargoes carried by the Company on the westbound service are high-grade paper products, aluminum slabs, steel products and other general cargo. Over the last five years, the westbound utilization rate for these vessels averaged approximately 82% per year. U. S. Flag. Waterman is a party to an operating differential subsidy agreement with the U. S. Maritime Administration, an agency of the Department of Transportation ("MarAd"), that permits the Company to operate U. S. flag vessels on designated international trade routes and receive subsidy payments from the United States government approximating the excess of certain vessel expenses, primarily wages, over comparable costs of the Company's principal foreign flag competitors on the same trade routes. Under the subsidy agreement, which expires on December 31, 1996, the Company operates the U. S. flag LASH vessels Sam Houston, Green Island, Robert E. Lee and Stonewall Jackson on a scheduled liner service that makes approximately 16 voyages per year (four per vessel) between U. S. Gulf and Atlantic ports and ports in the Red Sea, Persian Gulf and Indian Ocean (Trade Route No. 18) and ports in Indonesia, Malaysia and Singapore (Trade Route No. 17). The subsidy agreement also permits the Company to make per year up to 18 calls to Egyptian ports on the Mediterranean and up to 12 calls to south and east Africa ports. The Company also operates the foreign flag FLASH vessels Pine Forest, FLASH I and FLASH II as feeder vessels in this service in southeast Asia. In 1993, the Company received approximately $19.3 million under its subsidy agreement. See "Item 1. Business - Regulation" for a discussion of the subsidy program. On the eastbound portion of this service, a significant part of each vessel's cargo traditionally has been shipped to lesser developed countries under the Public Law-480 program, pursuant to which the United States government sells or donates surplus food products for export to developing countries. 75% of this cargo is reserved for carriage by U.S. flag vessels, if they are available at reasonable rates. Awards under the Public Law-480 program are made on a voyage-to-voyage basis through periodic competitive bidding. The remaining eastbound cargo consists of general cargo, including some military equipment. Over the last five years, these vessels generally have been fully utilized on their eastbound voyages. On the westbound portion of this service, the Company provides a significant portion of its cargo space to Goodyear for the transportation of natural rubber under a contract of affreightment expiring in February 1996. Space is also provided on a 6 voyage-to-voyage basis to other importers of natural rubber, including Uniroyal Goodrich Tire Co., Bridgestone/Firestone, Inc. and certain members of the Rubber Trade Association. The Company has had a continuing relationship with such companies and the Association since the early 1970s. The Company's LASH barges are ideally suited for large shipments of natural rubber because damage to rubber due to compression is minimal as compared to the damage that can occur when shipments are made in traditional breakbulk vessels. As a result, Waterman is the largest U.S. flag carrier of natural rubber from southeast Asia to the United States. The remaining westbound cargo generally consists of coffee, jute, guar, piece goods and other general cargo. Over the last five years, these vessels generally have been fully utilized on their westbound voyages. MILITARY SEALIFT COMMAND General. The Company has had contracts with the MSC (or its predecessor) almost continuously for several decades. At the present time, the Company's subsidiaries have nine vessels under contract to the MSC. These vessels are employed in the MSC's prepositioning programs, which strategically place military cargo throughout the world, or are chartered to the MSC to service long-term scientific operations. The Company believes that the demand for military prepositioning vessels will increase during the next decade, notwithstanding planned reductions in overall military spending, because these vessels are vital to the military's ability to respond quickly to international incidents throughout the world without incurring the significant costs of operating foreign bases, some of which also may not be available because of changing political situations. MSC charters and contracts are awarded through competitive bidding, for fixed terms with options allowing the MSC to extend the charters or contracts for additional periods. With one exception, the MSC has always exercised its extension options, and the Company generally has been successful in winning renewals when the charters and contracts are rebid. All charters and contracts require the MSC to pay certain voyage costs, including fuel, port and stevedoring expenses, and certain charters and contracts include cost escalation features covering certain of the expenses paid by the Company. LASH Vessels. The Company charters four U. S. flag LASH vessels, the Jeb Stuart, Austral Rainbow, Green Valley and Green Harbour, to the MSC under time charters that expire in April 1994, September 1994, November 1994 and December 1994, respectively, and provide the MSC with options to renew each contract for one or two additional 17-month periods. These vessels are in the MSC's prepositioning force and are stationed in the Indian Ocean area. Ice-Strengthened Multi-purpose Vessels. The Company owns and operates the only two U.S. flag ice- strengthened multi-purpose vessels, the Green Wave and the Green Ridge. These vessels are capable of transporting containerized and 7 breakbulk cargo and are used by the MSC to resupply Pacific rim military bases and to supply scientific projects in the Arctic and Antarctic. A renewal charter has been entered into for the Green Wave that will begin upon termination of the current charter and will extend through March 1995. The renewed charter may be extended for two additional 17-month periods at the option of the MSC. In December 1992, the Green Ridge commenced a new time charter with the MSC that will expire in June 1994 and may be extended for two additional 17-month periods at the option of the MSC. Roll-On/Roll-Off Vessels. In 1983 Waterman was awarded a contract to operate three U. S. flag roll- on/roll-off vessels under time charters to the MSC for use by the United States Navy in its maritime prepositioning ship ("MPS") program. These roll- on/roll-off vessels represent three out of the four MPS vessels currently in the MSC's Atlantic fleet, which provides support for the U. S. Marine Corps. These ships, the Sgt. Matej Kocak, Pfc. Eugene A. Obregon and Maj. Stephen W. Pless, are designed primarily to carry rolling stock and containers, and can each carry support equipment for 17,000 military personnel. Waterman sold the three vessels to unaffiliated corporations shortly after being awarded the contract, but retained the right to operate the vessels under operating agreements. The MSC time charters commenced in late 1984 and early 1985 for initial five-year periods and were renewable at the MSC's option for additional five-year periods up to a maximum of twenty- five years. These vessels are currently operating in the first five-year option period (the sixth through tenth years of the time charters). In 1993, the Company reached agreement with MSC to make certain reductions in future charter hire payments in consideration of fixing the period of these charters for the full twenty-five years. The charters will now terminate in the years 2009 and 2010. The operating agreements are for corresponding periods and are renewed as the charters are renewed. Until mid-June 1993, the Company also operated a roll-on/roll-off vessel, the Rover, which was designed primarily for horizontal and crane loading of rolling stock and containers. The Rover had been operated under a time charter to the MSC since 1984. Upon expiration of this charter in June 1993, the vessel had reached the end of its economic useful life and was sold for demolition for $1.9 million (as compared to a book value of $1.8 million). A portion of the proceeds was used to repay the remaining $1.0 million debt that was secured by a mortgage on the Rover. Semi-submersible barge. In late 1989, the Company acquired and commenced operation of a U. S. flag semi- submersible barge, the Caps Express. The Caps Express was initially deployed under a charter to the MSC and was used extensively in Operation Desert Shield/Desert Storm. The charter expired in April 1991 and the MSC did not exercise its renewal option under the charter. Since that time, the Caps Express has been operated in the commercial market. 8 PURE CAR CARRIERS U. S. Flag. In 1986, the Company entered into multi-year charters to carry Toyota and Honda automobiles from Japan to the United States. To service these charters, the Company had constructed two U. S. flag pure car carriers, the Green Bay and Green Lake, which are specially designed to carry 4,000 and 4,660 automobiles, respectively. Both vessels were built in Japan, but are registered under the U.S. flag, making them two of only four U.S. flag pure car carriers in the Japanese trade. In order to be competitive with foreign flag vessels operated by foreign crews, the Company worked in close cooperation with the unions representing the Company's U.S. citizen shipboard personnel. Service under these charters commenced in the fourth quarter of 1987. These charters were recently renewed for additional multi- year terms. Foreign Flag. Since 1988, the Company has transported Hyundai automobiles from Korea primarily to the Untied States and Europe under two long-term charters. To service these charters, the Company had two new foreign flag pure car carriers, the Cypress Pass and Cypress Trail, constructed by a shipyard affiliated with Hyundai. Each of the vessels has a carrying capacity of 4,800 automobiles. Under each of the car carrier charters, the charterers are responsible for voyage costs including fuel, port and stevedoring expenses while the Company is responsible for normal operating expenses including crew wages, repairs and insurance. The Hyundai charters also include escalation features covering certain of the expenses paid by the Company. During the terms of these charters, the Company is entitled to its full fee irrespective of the number of voyages completed or the number of cars carried per voyage. DOMESTIC TRANSPORTATION AND SERVICES Coal. In 1981, the Company entered into a 22-year contract expiring in 2004 with a Florida based rural electric generation and transmission cooperative for the transportation of coal from Mt. Vernon, Indiana to Gulf County, Florida. Under this contract, which was awarded pursuant to competitive bidding, the Company is annually guaranteed transportation of a minimum of 2.7 million tons of coal through its operation of 14 chartered towboats, 108 chartered super-jumbo river barges and three such barges that it owns. Under this contract, the Company has typically transported three million tons of coal per year. To protect both parties against cost variations, the contract contains escalation and de-escalation clauses designed to adjust the contract price for fluctuations in fuel costs, wages and other operating expenses. The Company is also responsible for unloading the barges at the discharge point in Gulf County, Florida and transferring the coal into railcars. To 9 facilitate this process, the Company owns and operates an automated terminal facility. The terminal can be operated by relatively few employees and is capable of loading and unloading three times the amount of coal currently transported through the facility under the contract. Molten Sulphur. The Company recently entered into a 15-year transportation contract with an affiliate of Freeport-McMoRan, Inc. for which it is having built a 24,000 deadweight ton molten sulphur carrier that will carry molten sulphur from a sulphur mine in south Louisiana to a fertilizer plant on the Florida Gulf Coast. Under the terms of this contract, the Company will be guaranteed the transportation of a minimum of 1.8 million tons of sulphur per year. The contract also gives Freeport three five-year renewal options. The vessel is now under construction and is expected to be delivered and begin service late summer 1994. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." LITCO Facility. During 1991, the Company entered into an agreement with Cooper/T. Smith Stevedoring pursuant to which the Company acquired a 50% interest in a newly constructed, all weather rapid cargo transfer facility in the river port of Memphis, Tennessee for handling LASH barges transported by subsidiaries of the Company in its U. S. and foreign flag LASH liner services. The terminal began operation in May 1992 and provides 287,500 square feet of enclosed warehouse and loading/discharging stations for LASH barge, rail, truck and heavy-lift operations. In June 1993, the Company purchased the other 50% interest for $1.9 million from Cooper/T. Smith Stevedoring, which will continue to manage the facility under a management agreement with the Company. INVESTMENTS IN SPECIALIZED VESSELS Liquid Petroleum Gas. In 1985, the Company purchased a one-third interest in A/S Havtor, a Norwegian company that owns interests in and charters- out on a long-term basis vessels specializing in the transportation of liquid petroleum gas and various chemical products. During the three months ended March 31, 1993, the Company sold an 18.5% interest in A/S Havtor for $7.6 million, thereby reducing its interest to approximately 14.8%. Of the $7.6 million sales price, $2.8 million was paid in cash and $4.8 million was represented by a promissory note payable on or before June 30, 1996 and bearing interest at 7.5% per annum. The Company also has a 14% equity interest in A/S Havtor Management, a Norwegian ship management company affiliated with A/S Havtor. During 1990, the Company increased its participation in the liquid petroleum gas market by acquiring a 10% interest in a 56,000 cubic meter liquid petroleum gas carrier that was delivered and began operation during 1993. 10 Combination Dry Cargo/Petroleum Products. LCI holds a 50% equity interest in two foreign entities, one of which owns two combination dry cargo/petroleum products (PROBO) vessels, and the other of which operates the vessels under long-term charters to a European marketing and profit-sharing pool consisting of these two vessels and four identical sister ships. Under these charters, the pool operates and markets the vessels in exchange for monthly payments that are periodically adjusted under a profit-sharing formula. PROBO vessels are able to carry various refined petroleum products and drybulk cargoes on back-to-back voyages because of their ability to rapidly self-clean their cargo holds between voyages with minimal shoreside support. ANCILLARY SERVICES The Company has several subsidiaries providing ship charter brokerage, agency, barge fleeting and other specialized services to the Company's subsidiaries and, in the case of ship charter brokerage and agency services, to unaffiliated companies. The income produced by these services substantially covers the related overhead expenses. These services facilitate the Company's operations by allowing it to avoid reliance on third parties to provide these essential shipping services. The Company also has a 50% equity interest in a firm offering ship management services in Singapore. MARKETING The Company maintains marketing staffs in Washington, D. C., New York, New Orleans, Houston, Chicago, Baltimore, San Francisco, Rotterdam and Singapore and maintains a network of marketing agents in major cities around the world who market the Company's liner, charter and contract services. The Company markets its foreign flag LASH liner service under the trade name "Forest Lines", and its U.S. flag LASH liner service between the U. S. Gulf and Atlantic coast ports and South Asia ports under the Waterman house flag. The Company advertises its service in trade publications in the United States and abroad. INSURANCE The Company maintains protection and indemnity ("P&I") insurance to cover liabilities arising out of the ownership or operation of vessels with Assuranceforeningen GARD and the Standard Steamship Owners' Protection & Indemnity Association (Bermuda) Ltd., which are mutual shipowners' insurance organizations commonly referred to as P&I clubs. Both clubs are participants in and subject to the rules of their respective international group of P&I associations. The premium terms and conditions of the P&I coverage provided to the Company are governed by the rules of each club. 11 The Company maintains hull and machinery insurance policies on each of its vessels in amounts related to the value of each vessel. This insurance coverage, which includes increased value, freight and time charter hire, is maintained with a syndicate of hull underwriters from the United States, British, French and Scandinavian insurance markets. The Company maintains war risk insurance on each of the Company's vessels in an amount equal to each vessel's total insured hull value. War risk insurance is placed through underwriters from British, U.S. and French insurance markets and covers physical damage to the vessels and P&I risks for which coverage would be excluded by reason of war exclusions under either the hull policies or the rules of the applicable P&I club. The Company also maintains loss of hire insurance with underwriters from the U.S. and the Norwegian markets to cover its loss of revenue in the event that a vessel is unable to operate for a certain period of time due to loss or damage arising from the perils covered by the hull and machinery policy. Insurance coverage for shoreside property, shipboard consumables and inventory, spare parts, workers' compensation, office contents, and general liability risks are maintained with underwriters in the United States and British markets. The Company also carries insurance to meet liabilities that could arise from the discharge of oil or hazardous substances in U.S., international and foreign waters. Insurance premiums for the coverage described above vary from year to year depending upon the Company's loss record and market conditions. In order to reduce premiums, the Company maintains certain deductible and co-insurance provisions that it believes are prudent and generally consistent with those maintained by other shipping companies and in recent years has increased the self-insurance portion under its insurance program. REGULATION The Company's operations between the United States and foreign countries are subject to the Shipping Act of 1916, as amended (the "Shipping Act"), which is administered by the Federal Maritime Commission, and certain provisions of the Federal Water Pollution Control Act, the Oil Pollution Act of 1990 and the Comprehensive Environmental Response Compensation and Liability Act, all of which are administered by the U. S. Coast Guard, and certain other international, federal, state and local laws and regulations, including international conventions and laws and regulations of the flag nations of its vessels. Pursuant to the requirements of the Shipping Act, the Company has on file with the Federal Maritime Commission tariffs reflecting the outbound and inbound prices currently charged by the Company to transport cargo between the United States and foreign countries as a common carrier. These tariffs are filed by the Company either individually or in connec- tion with its participation as a member of rate or conference agreements, which are agreements that (upon becoming effective following filing 12 with the Federal Maritime Commission) permit the members to agree concertedly upon rates and practices relating to the carriage of goods in U. S. and foreign ocean commerce. Tariffs filed by a company unilaterally or collectively under rate or conference agreements are subject to Federal Maritime Commission approval. Once a rate or conference agreement is filed, rates may be changed in response to market conditions on 30 days' notice, with respect to a rate increase, and one day's notice, with respect to a rate decrease. The Merchant Marine Act of 1936, as amended (the "Merchant Marine Act") authorizes the Federal govern- ment to pay an operating differential subsidy ("ODS") to U. S. flag vessels employed in the foreign trade of the United States. Under the subsidy program, MarAd is authorized to pay qualified U.S. flag operators (i) the differential between U. S. and foreign crew wage costs and (ii) the differential between U.S. and foreign costs of protection and indemnity insurance, hull and machinery insurance, and maintenance and repairs not compensated by insurance, so that U.S. ships can compete on an equal footing with their lower-cost foreign competitors. To qualify for the subsidy, vessels must be built in the United States, documented under the U.S. flag and be at least 75% owned by U.S. citizens. Under subsidy contracts, which are typically 20 years in length, operators provide service on "essential trade routes" as determined by MarAd. Each subsidized operator is required to employ its vessels between a stated minimum and maximum number of sailings each year. Currently, four liner operators, including Waterman, and 13 bulk carrier operators hold subsidy contracts for a total of 54 liner and 29 bulk ships. Total U.S. governmental subsidy appropriations for the fiscal year ending September 30, 1994 were $240.9 million, and $214.0 million has been requested for the fiscal year ending September 30, 1995. Approximately 85% of the aggregate subsidy is paid to offset crew wage differentials. Since 1981, the Federal government has entered into no new subsidy contracts. In 1991, the Bush administration announced that current contracts would be honored, but no new contracts would be entered into as the old contracts expire. Waterman's subsidy contract expires on December 31, 1996, and all other subsidy agreements with U.S. flag liner operators expire on December 31, 1997. Recently, the Clinton administration proposed a new ten year Maritime Security Program ("MSP") to be funded at a level of approximately $1 billion. Under this proposal, direct payments for U.S. flag vessels operating in foreign trade would be authorized, beginning in fiscal year 1995 and ending in fiscal year 2004, provided the vessels remain in active commercial service under the American flag and are available to the Secretary of Defense in times of emergency. In addition, the proposal would allow current ODS ship operators, such as Waterman, to keep ships under the ODS program until existing ODS contracts expire, but they may also apply for inclusion of other vessels under the MSP. Annual payments under the MSP would no longer be based on a wage differential, as they are under the current ODS program, but are fixed amounts, not to exceed $2.5 million per ship for the first three years of the program and $2.0 million per ship for each of the remaining years. Restrictions on 13 vessel acquisition, trade routes and foreign vessel operators would also be relaxed for ship operators under both programs. A bill similar to the administra- tion bill overwhelmingly passed the House of Representatives last year. Action on the administration bill is expected this year in the Senate. However, there can be no assurance that a maritime reform bill will be adopted by Congress or, if adopted, that it will be signed by the President. Therefore, it is possible that the existing ODS program will be terminated and not be replaced by a new program. Seven of the Company's U.S. flag LASH vessels were constructed with the aid of construction differential subsidies and Title XI loan guarantees administered by MarAd, the receipt of which obligates the Company to comply with various dividend and other financial restrictions. Vessels constructed with the aid of construction differential subsidies may not be operated in domestic coastwise trade or domestic trade with Hawaii, Puerto Rico or Alaska without the permission of MarAd and without repayment of the construction differential subsidy under a formula established by law. Recipients of Title XI loan guarantees must pay an annual fee of up to 1% of the loan amount. Under the Merchant Marine Act, U.S. flag vessels are subject to requisition or charter by the United States whenever the President declares that the national security requires such action. The owners of any such vessels must receive just compensation as provided in the Merchant Marine Act, but there is no assurance that lost profits, if any, will be fully recovered. In addition, during any extension period under each MSC charter or contract, the MSC has the right to terminate the charter or contract on 30 days' notice. However, the MSC has never exercised such termination right with respect to the Company. Certain of the Company's operations, including its subsidized U.S. flag LASH liner service and its carriage of U.S. foreign aid cargoes, as well as the Company's coal and molten sulphur transportation contracts and its Title XI financing arrangements, require the Company to be as much as 75% owned by U.S. citizens. The Company monitors its stock ownership to verify its continuing compliance with these requirements and has never had more than 1% of its common stock held of record by non-U.S. citizens. However, the Company's charter and stock transfer procedures do not prohibit the acquisition of its common stock by non-U.S. citizens and no assurance can be given that the Company will remain in compliance with these requirements in the future. The Company is required by various governmental and quasi-governmental agencies to obtain permits, licenses and certificates with respect to its vessels. The kinds of permits, licenses and certificates required depend upon such factors as the country of registry, the commodity transported, the waters in which the vessel operates, the nationality of the vessel's crew, the age of the vessel and the status of the Company as owner or charterer. The Company believes that it has or can 14 readily obtain all permits, licenses and certificates necessary to permit its vessels to operate. COMPETITION The shipping industry is intensely competitive and is influenced by events largely outside the control of shipping companies. Varying economic factors can cause wide swings in freight rates and sudden shifts in traffic patterns. Vessel redeployments and new vessel construction can lead to an overcapacity of vessels offering the same service or operating in the same market. Changes in the political or regulatory environment can also create competition that is not necessarily based on normal considerations of profit and loss. The Company's strategy is to reduce competitive pressures and the effects of cyclical market conditions by operating specialized vessels in identifiable market segments and deploying a substantial number of its vessels under medium-to long-term charters or contracts and on trade routes where it has established market shares. The Company also seeks to compete effectively in the traditional areas of price, reliability and timeliness of service. Competition principally comes from numerous breakbulk vessels and, occasionally, containerized vessels. Much of the Company's revenue is generated by contracts with the MSC and contracts to transport Public Law-480 U.S. government-sponsored cargo, a cargo preference program requiring that 75% of all foreign aid "Food for Peace" cargo must be transported on U.S. flag vessels, if they are available at reasonable rates. The Company competes with all U.S. flag companies, including Overseas Shipholding Group, Inc., OMI Corporation, Marine Transport Lines, Inc., Farrell Lines, Inc., Lykes Brothers Steamship Company, Sea-Land Service, Inc. and American President Lines, Inc. for the MSC work and the Public Law-480 cargo. Additionally, the Company's principal foreign competitors include Hoegh Lines, Star Shipping, Wilhelmsen Lines, and the Shipping Corporation of India. The Company's foreign flag LASH liner service faces competition from foreign flag liner operators and, to a lesser degree, from U. S. flag liner operators, including those receiving operating differential subsidies. In addition, during periods in which the Company participates in conference agreements or rate agreements, competition includes not only the other participants obligated to charge the same rates, but also non-participants charging lower rates. Because the Company's LASH barges are used primarily to transport large items, such as forest products, natural rubber and steel, that cannot be transported as efficiently in containerized vessels, the Company's LASH fleet often has a competitive advantage over these vessels for this type of cargo. In addition, the 15 Company believes that the ability of its LASH system to operate in shallow harbors and river systems and its specialized knowledge of these harbors and river systems give it a competitive advantage over operators of containerized and breakbulk vessels, which vessels are too large to operate in these areas. The Company's U.S. and foreign flag pure car carriers operate worldwide in markets where foreign flag vessels with foreign crews predominate. The Company believes that its U.S. flag pure car carriers can continue to compete effectively if it continues to receive the cooperation of its unions in controlling costs. EMPLOYEES The Company employs approximately 425 shipboard personnel and 375 shoreside personnel. The Company considers relations with its employees to be excellent. All of the Company's U.S. shipboard personnel and certain Shoreside personnel are covered by collective bargaining agreements. Central Gulf, Waterman and other U.S. shipping companies are subject to collective bargaining agreements for shipboard personnel in which the shipping companies servicing U.S. Gulf and East coast ports also must make contributions to pension plans for dockside workers. The Employee Retirement Income Security Act of 1974, as amended, provides for liabilities for withdrawal from a multi-employer pension plan if an employer reduces its operations below a minimum level. It is possible that the failure or withdrawal of any shipping company employer may cause other employers (such as the Company) to increase their plan contributions or result in additional potential liability. The Company has experienced no strikes or other significant labor problems during the last ten years. ITEM 2. PROPERTIES Vessels. Of the 27 ocean-going vessels in the Company's fleet, 20 are owned by the Company, two are leased, three are operated under operating contracts and two are owned and operated by a Norwegian partnership in which the Company has a 50% interest. Of the 1,650 LASH barges operated in conjunction with the Company's LASH and FLASH vessels, the Company owns 1,330 barges and leases 320 barges under leases with 12- year terms expiring in late 2003 and early 2004. The Company also owns approximately 50 additional LASH barges, which are not required for current vessel operations. All of the Company's barges are registered under the U.S. flag. The Company time charters-in 108 super-jumbo river barges (and owns three such barges) and 14 towboats specially built to meet the requirements of the Company's coal transportation contract. The Company also owns 18 standard river barges which are re-chartered to unaffiliated companies on a short-term basis. Until May 1993, these barges were bareboat chartered-in from 16 affiliates of the Company. Upon the expiration of these bareboat charters, the Company purchased the barges from these affiliates for $1.6 million in the aggregate. Except for the approximately 50 LASH barges that are not required for the Company's operations, all of the vessels owned, operated or leased by the Company are in good condition. Since 1988, the Company has completed life extension work on six LASH vessels, completed the refurbishment of approximately 1,300 related barges and acquired 167 LASH barges at a total cost of $118.7 million. Management believes that the useful lives of these vessels have been extended by this work through at least 2003. Under governmental regulations, insurance policies and certain of the Company's financing agreements and charters, the Company is required to maintain its vessels in accordance with standards of seaworthiness, safety and health prescribed by governmental regulations or promulgated by certain vessel classification societies. Vessels in the fleet are maintained in accordance with governmental regulations and the highest class- ification standards of the American Bureau of Shipping or, for certain vessels of foreign registry, of Norwegian Veritas or Lloyds Register classification societies. Certain of the vessels and barges owned by the Company's subsidiaries are mortgaged to various lenders to secure such subsidiaries' long-term debt. See Note B of the Notes to the Company's Consolidated Financial Statements included elsewhere herein. Other Properties. The Company leases its corporate headquarters in New Orleans, its administrative and sales office in New York and office space in Houston, Chicago and Washington, D. C. The Company also leases space in St. Charles and Orleans Parishes, Louisiana for the fleeting of barges. Additionally, the Company leases a terminal in Memphis, Tennessee that is a totally enclosed multi-modal cargo transfer facility. In 1993, the aggregate annual rental payments under these operating leases were approximately $ 1.8 million. The Company owns two separate facilities in St. Charles Parish, Louisiana and one facility in Jefferson Parish, Louisiana that are used primarily for the storage and fleeting of barges. The Company also owns a terminal in Gulf County, Florida that is used in its coal transportation contract. ITEM 3. LEGAL PROCEEDINGS The Company is a defendant in various lawsuits that have arisen in the ordinary course of its business in which claimants seek damages of various amounts for personal injuries, property damage and other matters. All material claims asserted under lawsuits of this nature are covered by insurance. 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 4a. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT Set forth below is information concerning the directors and executive officers of the Company.
Name Current Position ____ _________________ Niels W. Johnsen Chairman and Chief Executive Officer Erik F. Johnsen President, Chief Operating Officer and Director Harold S. Grehan, Jr. Vice President and Director Niels M. Johnsen Vice President and Director Erik L. Johnsen Vice President Stanley E. Morrison Treasurer Gary L. Ferguson Vice President and Chief Financial Officer Laurance Eustis Director Raymond V. O'Brien, Jr. Director Edwin Lupberger Director
Niels W. Johnsen, 71, has been the Chairman and Chief Executive Officer of the Company since its commencement of operations in 1979 and is also Chairman and Chief Executive Officer of each of the Company's principal subsidiaries. He previously served as Chairman of Trans Union Corporation's ocean shipping group of companies from December 1971 through May 1979. He was one of the founders of Central Gulf in 1947 and held various positions with Central Gulf until Trans Union acquired Central Gulf in 1971. He is also a director and trustee of Atlantic Mutual Companies, an insurance company and a director of Reserve Fund, Inc., a money market fund. Erik F. Johnsen, 68, has been the President, Chief Operating Officer and Director of the Company since its commencement of operations in 1979 and is also the President and Chief Operating Officer of each of the Company's principal subsidiaries except Waterman where he is Chairman of the Executive Committee. Along with his brother, Niels W. Johnsen, he was one of the founders of Central Gulf in 1947 and has served as its President since 1966. Mr. Johnsen is also a director of First Commerce Corporation, a bank holding company. 18 Harold S. Grehan, Jr., 66, is Vice President of the Company. He joined Central Gulf in 1958 and became Vice President in 1959, Senior Vice President in 1973 and Executive Vice President and Director in 1979. He participated in the development of the Company's LASH program and has direct responsibility for conventional and LASH vessel traffic movements. Niels M. Johnsen, 48, is Vice President of the Company. Mr. Johnsen has served as a director of the Company since April 1988. He joined Central Gulf on a full time basis in 1970 and held various positions with the Company before being named Vice President in 1986. He is also President of N. W. Johnsen & Co., Inc., a subsidiary of the Company engaged in ship and cargo charter brokerage. He is the son of Niels W. Johnsen. Erik L. Johnsen, 36, is Vice President of the Company. He joined Central Gulf in 1979 and held various positions with the Company before being named Vice president in 1987. He is also President of Sulphur Carriers, Inc., a wholly- owned subsidiary of the Company. He is the son of Erik F. Johnsen. Stanley E. Morrison, 66, is Treasurer of the Company, a position he assumed when he joined Central Gulf in 1959. Gary L. Ferguson, 53, is Vice President and Chief Financial Officer of the Company. He joined Central Gulf in 1968 where he held various positions with the Company prior to being named Controller in 1977, and Vice President and Chief Financial Officer in 1989. Laurance Eustis, 80, has served as a director of the Company since 1979. He is the Chairman of the Board of Eustis Insurance, Inc., mortgage banking and general insurance, located in New Orleans, Louisiana. Mr. Eustis is also a director of First Commerce Corporation, a bank holding company, and Pan American Life Insurance Company. Raymond V. O'Brien, Jr., 66, has served as a director of the Company since 1979. He is a director of Emigrant Savings Bank and Community Preservation Corporation, New York, New York. Edwin Lupberger, 57, has served as a director of the Company since April 1988. Mr. Lupberger is the Chairman of the Board, Chief Executive Officer and Director of Entergy Corporation ("Entergy"), Arkansas Power & Light Company, Louisiana Power & Light Company, Mississippi Power & Light Company and New Orleans Public Service, Inc.; Chairman of the Board and director of System Energy Resources, Inc., each of which is a wholly-owned subsidiary of Entergy. He also is a director of First Commerce Corporation, a bank holding company. 19 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. The information called for by Item 5 is included in the 1993 Annual Report to Shareholders in the section entitled "Common Stock Prices and Dividends for Each Quarterly Period of 1992 and 1993" and is incorporated herein by reference to page 19 of Exhibit 13 filed with this 10-K. ITEM 6. SELECTED FINANCIAL DATA The information called for by Item 6 is included in the 1993 Annual Report to Shareholders in the section entitled "Summary of Selected Consolidated Financial Data" and is incorporated herein by reference to page 1 of Exhibit 13 filed with this 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information called for by Item 7 is included in the 1993 Annual Report to Shareholders in the section entitled "Management Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference to pages 2 through 4 of Exhibit 13 filed with this 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated balance sheets as of December 31, 1993, and December 31, 1992, and the related consolidated statements of income, changes in stockholders' investment and cash flows for each of the three years in the period ended December 31, 1993 are included in the 1993 Annual Report to the Shareholders and are incorporated herein by reference to pages 5 through 9 of Exhibit 13 filed with this 10-K. Such statements have been audited by Arthur Andersen & Co., independent public accountants, as set forth in their report included in such Annual Report and incorporated herein by reference to page 20 of Exhibit 13 filed with this 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 20 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information called for by Item 10 is incorporated herein by reference to Item 4a, Executive Officers and Directors of the Registrant. ITEM 11. EXECUTIVE COMPENSATION The information called for by Item 11 is included on pages 6, 7 and 8 of the Company's definitive proxy statement dated March 11, 1994, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information called for by Item 12 is included on pages 2, 3, 4 and 5 of the Company's definitive proxy statement dated March 11, 1994, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information called for by Item 13 is included on pages 2, 3, 4, 5, 8 and 9 of the Company's definitive proxy statement dated March 11, 1994, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, and is incorporated herein by reference. 21 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following financial statements, schedules and exhibits are filed as part of this report: (a) 1. Financial Statements ____________________ The following financial statements and related notes are included in the Company's 1993 Annual Report to Shareholders and are incorporated herein by reference to pages 5 through 20 of Exhibit 13 filed with this 10-K. Consolidated Balance Sheets at December 31, 1993 and 1992 Consolidated Statements of Income for the years ended December 31, 1993, 1992, and 1991 Consolidated Statements of Changes in Stockholders' Investment for the years ended December 31, 1993, 1992 and 1991 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements Report of Independent Public Accountants 2. Financial Statement Schedules _____________________________ The list of financial statement schedules required by Item 8 and Item 14 are incorporated herein by reference to pages 27, 28, 29 and 30 of this document. Report of Independent Public Accountants on Supplemental Schedules Supplemental Schedules (Consolidated) Schedule V - Property Schedule VI - Accumulated Depreciation Schedule X - Supplemental Income Statement Information 22 3. Exhibits ________ (3) Restated Certificate of Incorporation,as amended, and By-Laws of the Registrant (filed with the Securities and Exchange Commission as Exhibit 3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference) (4) Specimen of Common Stock Certificate (filed as an exhibit to the Company's Form 8-A filed with the Securities and Exchange Commission on April 25, 1980 and incorporated herein by reference) (4.1) Form of Indenture between the Company and The Bank of New York, as Trustee with respect to the 9% Senior Notes (filed with the Securities and Exchange Commission on May 5, 1993 as Exhibit 4(c) to the Company's Registration Statement on Form S-2 [Registration No. 33-62168] and incorporated herein by reference) (4.2) Form of 9% Senior Note (filed with the Securities and Exchange Commission on May 5, 1993 as Exhibit 4(d) to the Company's Registration Statement on Form S-2 [Registration No. 33-62168] and incorporated herein by reference) (11) Statement regarding Computation of Earnings per Share (13) 1993 Annual Report to Shareholders (21) Subsidiaries of International Shipholding Corporation (b) No reports on Form 8-K were filed during the last quarter of the period covered by this Report. 23 (c) The Index of Exhibits and required Exhibits are included following the Financial Statement Schedules beginning at page 31 of this Report. (d) The Index to Consolidated Financial Statements and Supplemental Schedules are included following the signatures beginning at page 26 of this Report. 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERNATIONAL SHIPHOLDING CORPORATION (Registrant) /s/ Gary L. Ferguson March 23, 1994 By ______________________________ Gary L. Ferguson Vice President, Chief Financial Officer and Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. INTERNATIONAL SHIPHOLDING CORPORATION (Registrant) /s/ Niels W. Johnsen March 23, 1994 By ____________________________ Niels W. Johnsen Chairman of the Board, Director and Chief Executive Officer /s/ Erik F. Johnsen March 23, 1994 By _____________________________ Erik F. Johnsen President and Director /s/ Harold S. Grehan, Jr. March 23, 1994 By _____________________________ Harold S. Grehan, Jr. Vice President and Director /s/ Laurance Eustis March 23, 1994 By __________________________ Laurance Eustis Director 25 /s/ Edwin Lupberger March 23, 1994 By __________________________ Edwin Lupberger Director /s/ Raymond V. O'Brien, Jr. March 23, 1994 By ___________________________ Raymond V. O'Brien, Jr. Director /s/ Niels M. Johnsen March 23, 1994 By ___________________________ Niels M. Johnsen Vice President and Director /s/ Gary L. Ferguson March 23, 1994 By ____________________________ Gary L. Ferguson Vice President, Chief Financial Officer and Principal Accounting Officer 26 INTERNATIONAL SHIPHOLDING CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Page Number ______ Report of Independent Public Accountants on Supplemental Schedules 27 Supplemental Schedules (Consolidated) Schedule V - Property 28 Schedule VI - Accumulated Depreciation 29 Schedule X - Supplemental Income Statement Information 30
All other schedules are not submitted because they are not applicable or because the required information is included in the financial statements or notes thereto. 27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES To International Shipholding Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in the Company's 1993 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 18, 1994. Our audit was made for the purpose of forming an opinion on those financial statements taken as a whole. Schedules V, VI, and X are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements taken as a whole. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. New Orleans, Louisiana January 18, 1994 28 SCHEDULE V INTERNATIONAL SHIPHOLDING CORPORATION PROPERTY (All Amounts in Thousands)
Vessels Other Furniture and Marine Terminal and Total Barges Equipment Facilities Land Equipment Property _____________________________________________________________________________________ Balance at December 31, 1990 344,770 6,524 13,205 2,483 5,159 372,141 _______ _______ _______ _______ _______ _______ Additions at Cost 30,315 823 -- -- 680 31,818 Retirements or Sales (176) (2,677) -- (357) (48) (3,258) _______ _______ _______ _______ _______ _______ Balance at December 31, 1991 374,909 4,670 13,205 2,126 5,791 400,701 _______ _______ _______ _______ _______ _______ Additions at Cost 61,735 550 16 402 2,165 64,868 Retirements or Sales (3,027) (1,087) -- -- (95) (4,209) _______ _______ _______ _______ _______ ________ Balance at December 31, 1992 433,617 4,133 13,221 2,528 7,861 461,360 _______ _______ _______ _______ _______ _______ Additions at Cost 14,184 (287) 4,300 (211) 2,409 20,395 Retirements or Sales (15,372) (4) -- -- (594) (15,970) _______ _______ _______ _______ _______ ________ Balance at December 31, 1993 $432,429 $ 3,842 $17,521 $ 2,317 $ 9,676 $465,785 ======== ======= ======= ======= ======= ========
29 SCHEDULE VI INTERNATIONAL SHIPHOLDING CORPORATION ACCUMULATED DEPRECIATION (All Amounts in Thousands)
Vessels Other Furniture Total and Marine Terminal and Accumulated Barges Equipment Facilities Equipment Depreciation ____________________________________________________________________________ Balance at December 31, 1990 120,552 5,422 5,233 2,933 134,140 _______ _______ _______ _______ ________ Provisions 22,723 541 611 695 24,570 Retirements or Sales -- (2,677) -- (34) (2,711) _______ _______ _______ _______ ________ Balance at December 31, 1991 143,275 3,286 5,844 3,594 155,999 _______ _______ _______ _______ ________ Provisions 21,255 303 613 643 22,814 Retirements or Sales (1,237) (65) -- (56) (1,358) _______ _______ _______ _______ ________ Balance at December 31, 1992 163,293 3,524 6,457 4,181 177,455 _______ _______ _______ _______ ________ Provisions 22,708 420 589 1,161 24,878 Retirements or Sales (11,845) (3) -- (561) (12,409) _______ _______ _______ _______ ________ Balance at December 31, 1993 $174,156 $ 3,941 $ 7,046 $ 4,781 $189,924 ======== ======= ======= ======= ========
30 SCHEDULE X INTERNATIONAL SHIPHOLDING CORPORATION SUPPLEMENTARY INCOME STATEMENT INFORMATION (All Amounts in Thousands)
Year Ended December 31, 1993 1992 1991 ------------------------ Maintenance and Repair $ 14,381 $ 14,585 $ 14,660 ======== ======== ========
31 INTERNATIONAL SHIPHOLDING CORPORATION EXHIBIT INDEX Page Exhibit Number _______ ______ (3) Restated Certificate of Incorporation, as amended, and By-Laws of the Registrant (filed with the Securities and Exchange Commission as Exhibit 3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference) -- (4) Specimen of Common Stock certificate (filed as an exhibit to the Company's Form 8-A filed with the Securities and Exchange Commission on April 25, 1980 and incorporated herein by reference) -- (4.1) Form of Indenture between the Company and The Bank of New York, as Trustee with respect to the 9% Senior Notes (filed with the Securities and Exchange Commission on May 5, 1993 as Exhibit 4(c) to the Company's Registration Statement on Form S-2 [Registration No. 33-62168] and incorporated herein by reference) -- (4.2) Form of 9% Senior Note (filed with the Securities and Exchange Commission on May 5, 1993 as Exhibit 4(d) to the Company's Registration Statement on Form S-2 [Registration No. 33-62168] and incorporated herein by reference) -- (11) Statement Regarding Computation of Earnings per Share, included herein -- (13) 1993 Annual Report to Shareholders, included herein -- (21) Subsidiaries of International Shipholding Corporation, included herein -- EX-13 2 1993 ANNUAL REPORT TO SHAREHOLDERS 1 INTERNATIONAL SHIPHOLDING CORPORATION SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA The following summary of selected consolidated financial data is not covered by the auditors' report appearing elsewhere herein. However, in the opinion of management the summary of selected consolidated financial data includes all adjustments necessary for a fair presentation of each of the years presented. This summary should be read in conjunction with the consolidated financial statements and the notes thereto appearing elsewhere in this annual report. (All Amounts in Thousands Except Share, Per Share Data and Ratios)
Year Ended December 31, 1993 1992 1991 1990 1989 _________ _________ __________ __________ ________ Revenues $341,651 $324,608 $328,429 $327,453 $268,955 Gross Voyage Profits $ 64,318 $ 57,581 $ 61,303 $ 61,485 $ 56,955 Income Before Extraordinary Item and Cumulative Effect $ 7,645 $ 6,499 $ 15,233 $ 15,065 $ 12,597 Extraordinary Item $ (1,716) -- -- -- -- Cumulative Effect of Accounting Change -- $ (3,218) -- -- -- Net Income $ 5,929 $ 3,281 $ 15,233 $ 15,065 $ 12,597 Earnings Per Common and Common Equivalent Shares: Before Extraordinary Item and Cumulative Effect $ 1.26 $ 0.96 $ 2.66 $ 2.62 $ 2.24 Extraordinary Item $ (0.33) -- -- -- -- Cumulative Effect of Accounting Change -- $ (0.63) -- -- -- Net Income $ 0.93 $ 0.33 $ 2.66 $ 2.62 $ 2.24 Weighted Average of Common and Common Equivalent Shares 5,220,207 5,138,866 5,125,546 5,156,879 4,864,542 Total Assets $ 518,700 $ 519,963 $ 496,994 $ 473,582 $ 422,264 Long-Term Debt (including Capital Lease Obligations) $ 240,132 $ 231,148 $ 200,472 $ 208,048 $ 192,135 Redeemable Preferred Stock -- $ 13,548 $ 13,290 $ 13,034 $ 12,778 Common Stockholders' Investment $ 134,497 $ 124,004 $ 123,408 $ 110,789 $ 99,631 Ratio of Long-Term Debt and Capital Lease Obligations to Common Stockholders' Investment 1.79:1 1.86:1 1.62:1 1.88:1 1.93:1 Working Capital $ 17,649 $ 7,920 $ 28,327 $ 11,933 $ 19,605 Cash Dividends Per Common Share $ 0.20 $ 0.20 $ 0.20 $ 0.20 $ 0.20
2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's vessels are operated under a variety of charters and contracts. The nature of these arrangements is such that, without a material variation in gross voyage profits (total revenues less voyage expenses and vessel and barge depreciation), the revenues and expenses attributable to a vessel deployed under one type of charter or contract can differ substantially from those attributable to the same vessel if deployed under a different type of charter or contract. Accordingly, depending on the mix of charters or contracts in place during a particular accounting period, the Company's revenues and expenses can fluctuate substantially from one period to another even though the number of vessels deployed, the number of voyages completed, the amount of cargo carried and the gross voyage profit derived from the vessels remain relatively constant. As a result, fluctuations in voyage revenues and expenses are not necessarily indicative of trends in profitability, and management believes that gross voyage profit is a more appropriate measure of operating performance than revenues. Accordingly, the discussion below addresses variations in gross voyage profits rather than variations in revenues. RESULTS OF OPERATIONS Year Ended December 31, 1993 Compared to Year Ended December 31, 1992 GROSS VOYAGE PROFIT. Gross voyage profit increased 11.7% to $64.3 million in 1993 as compared to $57.6 million in 1992. Positively affecting 1993 results was the deployment of the Jeb Stuart on charter to the Military Sealift Command ("MSC") beginning in late 1992. The vessel was previously named the Atlantic Forest and was deployed on less favorable terms through May 1992 at which time it was taken out of service for drydocking and prepositioning to prepare for the MSC charter. Additionally, gross voyage profit was favorably affected by an improved volume of westbound cargo in the Company's foreign flag LASH Trans-Atlantic liner service during 1993 as compared to 1992. Offsetting these positive results was time lost to perform extended maintenance on one of the Company's foreign flag bulk carriers which caused the vessel to be out of service for 99 days, most of which occurred during the third quarter of 1993. Through mid 1993, the Company also operated a roll- on/roll-off ("Ro/Ro") vessel, the Rover. The Rover had been operated under a time charter to the MSC since 1984. Upon expiration of this charter in June 1993, the vessel had reached the end of its economic useful life and was sold for demolition for $1.9 million (as compared to a net book value of $1.8 million). A portion of the proceeds was used to repay the remaining $1.0 million debt that was secured by a mortgage on the Rover. The Company currently charters nine vessels to the MSC. During 1993, the MSC exercised the first of two seventeen month option periods on three of these vessels. These option periods extend until the second half of 1994. Three vessels are currently operating under their initial charter period with renewal options exercisable by the MSC in April 1994, June 1994 and March 1995. In 1993, the Company reached agreement with MSC for three Ro/Ro vessels on long-term charter to make reductions in the future charter hire payments in consideration of fixing the period of these charters for the full twenty-five years. The charters will now terminate in the years 2009 and 2010. Vessel and barge depreciation expense increased by 7.3% to $23.9 million during 1993 as compared to $22.3 million in 1992 primarily due to additions to the Company's LASH barge fleet and capitalized costs associated with the barge refurbishment program during 1992. OTHER INCOME AND EXPENSES. Administrative and general expenses increased 6.3% to $28.2 million during 1993 as compared to $26.5 million in 1992. This increase resulted primarily from the expensing of approximately $1.0 million of costs that related to a proposed acquisition that was not consummated. Due to the passage of time, the Company expensed the related costs. Bonuses paid to shoreside employees were higher in 1993 than in 1992. The increases were partially offset by reduced costs in other areas stemming from continuing cost reduction efforts throughout the Company. Interest expense decreased to $21.2 million in 1993 as compared to $21.7 million in 1992, primarily because of lower interest rates on variable rate loans, regularly scheduled debt payments of $36.9 million, and prepayment of $58.9 million of debt during 1993 from the proceeds of the Company's $100 million, 9% Senior Unsecured Notes issued in July, 1993. This reduction was partially offset by interest incurred on the $100 million Senior Notes. The Company's share of losses from unconsolidated entities increased from $1.4 million in 1992 to $2.3 million in 1993, primarily as a result of a weakened market for the liquified petroleum gas carriers owned and operated by A/S Havtor and A/S Havtor Management, which are Norwegian companies in which the Company has an interest. During the first quarter of 1993 the Company reported an after tax loss of $1.5 million from these interests. However, during the first quarter of 1993, the Company sold an 18.5% direct interest in A/S Havtor for $7.6 million, of which $2.8 million was received in cash and $4.8 million was received in the form of a promissory note. The transaction reduced the Company's direct interest in A/S Havtor to 14.8% and resulted in a gain before taxes of $1.4 million. A provision for doubtful accounts equal to the pre-tax gain of $1.4 million was recorded in 1993, which will have the effect of deferring recognition of the gain until receipt of the proceeds from the promissory note, which matures in mid-1996. Since the Company is no longer represented on the board of directors of A/S Havtor or A/S Havtor Management, has no substantive control or input regarding their operations, and holds direct and indirect ownership interest in each that are less than 20%, the investments have been accounted for commencing April 1, 1993 under the cost method of accounting which permits recognition of income only upon distribution of dividends or sale of its interest. INCOME TAXES. During 1993 the Company provided $6.6 million for federal income taxes at the statutory rate of 35% as compared to a provision of $4.4 million at the statutory rate of 34% during 1992. The Revenue Reconciliation Act of 1993 provided a tax rate of 35% on taxable income in excess of $10 million per year beginning 3 January 1, 1993. The higher tax rate resulted in an adjustment of $764,000 as required by FASB Statement No. 109 for tax provisions made prior to 1993. The Company's deferred tax liabilities were increased accordingly in the balance sheet. Income of unconsolidated entities is shown net of applicable taxes. EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. During 1993 the Company recognized an extraordinary loss of $1.7 million, net of taxes, resulting from prepayment penalties and the write-off of deferred loan costs associated with the early payment of high interest debt and the redemption of preferred stock from the proceeds of the Company's $100 million Senior Notes issued in July 1993. See Liquidity and Capital Resources. Year Ended December 31, 1992 Compared to Year Ended December 31, 1991 GROSS VOYAGE PROFIT. Gross voyage profit decreased 6.1% to $57.6 million in 1992 as compared to $61.3 million in 1991. Results in 1992 compared unfavorably with 1991 primarily due to the participation of most of the Company's U.S. flag fleet in Operation Desert Shield/Desert Storm early in 1991. Additionally, the gross voyage profit of the Company's foreign flag LASH vessels was below the 1991 level primarily due to the reduced volume of westbound cargoes and, to a lesser extent, a softening of freight rates. Results in 1992 were also affected by the loss of approximately 340 days, primarily due to vessel drydocking and positioning for charters. This compared favorably with approximately 490 drydocking and positioning days in 1991. The increased out of service days for drydocking and positioning in 1991 and 1992 resulted primarily from the preparation for certain MSC charters. During 1989, 1990, 1991 and 1992, the Company invested an aggregate of $96.9 million in extensive LASH barge refurbishment and LASH vessel life extension programs. The increase in depreciation expense that resulted from this additional capital investment was more than offset in 1992 by the reduction in depreciation expense caused by an extension of the useful lives of the refurbished vessels and barges. Accordingly, vessel and barge depreciation expense declined by 6.2% to $22.3 million in 1992 as compared to $23.8 million in 1991. OTHER INCOME AND EXPENSES. Administrative and general expense decreased 4.7% to $26.5 million in 1992 as compared to $27.8 million in 1991 primarily due to overall cost reduction efforts, including certain salary and wage limitations that were placed in force in 1992. Interest expense increased to $21.7 million in 1992 from $20.6 million in 1991, primarily reflecting additional financing associated with the Company's LASH barge refurbishment and vessel life extension programs. This increase was partially offset by a reduction in interest rates on variable rate loans and reduced balances on other outstanding debt. During 1992, the Company received and recorded as income approximately $2.1 million from the settlement of Waterman's 1981 transfer of investment tax credit benefits. During 1992, the Company's investment in unconsolidated entities reflected a net loss of $1.4 million as compared to net income of $4.7 million in 1991. This reduction primarily reflected a weakened market for the liquified petroleum gas carriers operated by A/S Havtor and related entities. As described above, the Company reduced its interest in A/S Havtor during the first quarter of 1993, and, commencing April 1, 1993, its investment in A/S Havtor has been accounted for using the cost method. INCOME TAXES. During 1992, the Company provided $4.4 million for federal income taxes at the statutory rate of 34%, as compared to a provision of $4.8 million at the same rate in 1991. Income of unconsolidated entities is shown net of applicable taxes. CUMULATIVE EFFECT OF ACCOUNTING CHANGE. In December 1990, the Financial Accounting Standards Board issued Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which required that the expected cost of postretirement benefits be charged to expense during the years in which the employees render service. The Company elected early implementation, effective January 1, 1992, which resulted in a cumulative adjustment for years prior to 1992 of $3.2 million, net of taxes, and was reported as a cumulative effect of a change in accounting principle in the first quarter of 1992. OPERATING DIFFERENTIAL SUBSIDY For the years ended December 31, 1993, 1992 and 1991, the Company received aggregate operating differential subsidy payments of $19.3 million, $19.7 million and $19.2 million, respectively. The Company's subsidy agreement expires on December 31, 1996, and all other subsidy agreements with U.S. flag liner operators expire on December 31, 1997. It is not clear at this point whether the subsidies will be renewed. If the subsidy program is not renewed the Company will be required to consider various options for its U. S. Flag vessels receiving Operating Differential Subsidy, including vessel modifications that would increase fuel efficiency, reduction of crew size and wages to more closely approximate those of non-subsidized vessels, reduction of other operating expenses, and/or transfer to foreign flag operations with foreign crews. LIQUIDITY AND CAPITAL RESOURCES The following discussion should be read in conjunction with the more detailed Consolidated Balance Sheets and Consolidated Statements of Cash Flows included elsewhere herein as part of the Company's Consolidated Financial Statements. The Company's working capital increased from $7.9 million at December 31, 1992 to $17.6 million at December 31, 1993, after provision for current maturities of long-term debt of $25.9 million and capital lease obligations of $5.0 million. Cash and cash equivalents increased during 1993 by $1.9 million to a total of $32.8 million. Accounts payable and accrued expenses increased $10.5 million or 26.9%. Approximately $6.4 million of that increase resulted from timing differences associated with the status of various voyages at the end of the respective periods. Voyage expenses increase as a voyage progresses, thereby increasing accrued liabilities while decreasing billings in excess of income earned and expenses incurred. Positive cash flows were achieved from operating activities during 1993 in the amount of $55.1 million. The major source of cash from operations was net income, adjusted for non-cash provisions such as depreciation, amortization and deferred income taxes. Net cash used for investing activities amounted to $34.3 million during 1993. 4 Capital investments included $6.2 million for the refurbishment of LASH barges, $1.6 million for the purchase of river barges, $1.7 million for construction costs of a molten sulphur carrier, and $2.5 million in other miscellaneous items. Also, the Company added $24.3 million of deferred charge items including $18.9 million for drydocking and prepositioning and $3.5 million incurred in transaction expenses associated with the issue of $100 million Senior Notes in July, 1993. Net cash received from investments in and advances to unconsolidated entities of $377,000 consisted primarily of cash received from the aforementioned sale of an 18.5% interest in A/S Havtor and cash distributions from the operations of the two PROBO vessels, net of cash used to acquire an additional 11% interest in the foreign entities that own and operate the two PROBO vessels. See Notes K and L of the Notes to the Company's Consolidated Financial Statements included elsewhere herein. Cash in the amount of $1.6 million was also utilized in 1993 for the purchase of the remaining 50% ownership interest in a company which operates a LASH barge intermodal terminal located in Memphis, Tennessee. This increased the Company's interest from 50% to 100%. Partially offsetting these uses was $3.2 million representing the proceeds from the sale of the Rover and some surplus LASH barges. Net cash used for financing activities during 1993 totalled $18.9 million. Proceeds from the issuance of debt obligations of $146.7 million included $1.2 million received from a medium-term loan associated with the purchase of 39 river barges, $7.0 million received from a medium-term loan associated with the barge refurbishment program, $100 million received from the issuance of the 9% Senior Notes and $30 million drawn under lines of credit. In late 1992 the Company received $8.5 million from short-term financing for the construction of a sulphur carrier vessel. In early 1993 this amount was repaid and $8.5 million was drawn under an interim financing agreement. Proceeds totalling $4.3 million were also received from the issuance of 427,500 shares of common stock upon the exercise of warrants previously granted to certain holders of the Company's preferred stock. The exercise price for these warrants was $10.12 per share. Cash used for financing activities included regularly scheduled principal payments of $36.9 million for debt and capital lease obligations, prepayment of $63.8 million in term debt and repayment of $45 million drawn under lines of credit. Additionally $1.9 million was used to meet preferred and common stock dividend requirements, and $13.8 million was used to redeem all of the Company's outstanding preferred stock. On July 9, 1993 the Company issued $100 million of 9% Senior Notes due 2003. The proceeds of this unsecured financing were used to redeem $12.4 million of 14% senior subordinated notes, redeem $13.8 million of outstanding preferred stock, and repay $46.5 million of floating rate bank debt and certain fixed rate debt in order to more evenly distribute future amortization requirements. The Company also placed $5.0 million in escrow for future payments on a fixed rate note. Additionally $6.6 million was used to pay accrued interest and transaction expenses, including prepayment penalties. The balance of the proceeds will be used to finance a portion of the new molten sulphur carrier and other potential investments. The Company's newbuilding molten sulphur carrier, Hull No. 294, is scheduled for delivery in late summer 1994. Through 1993 the Company had incurred $13.9 million of the estimated delivered cost of approximately $58 million. Of these costs, $1.7 million was paid during 1993 and the balance was paid in 1992. Capitalized interest related to this construction totalled $918,000 in 1993. Interim construction financing on a variable rate basis has been arranged through a pool of commercial banks and is expected to be repaid with permanent financing after construction is completed. At the Company's option, the construction loan can be converted to a three-year term loan with the same banks when the vessel commences operation. Draws on the construction loan total $8.7 million with additional draws anticipated in early 1994. During 1993 the Company received a commitment for a Title XI guarantee to cover the permanent financing of this vessel although no decision has been made yet to use this type of financing. The Company reacquired, as of January 1, 1993, an 11% interest in the foreign entities that own and operate the Company's two PROBO vessels, which had been sold in January 1991. The additional 11% was acquired for $6.4 million, of which $3.5 million was a cash payment and $2.9 million was paid through liquidation of notes receivable due from the sellers. The acquisition increased the Company's interest in such foreign entities to 50%. As of January 1, 1993, the Company also sold an 18.5% interest in A/S Havtor as further discussed in the Results of Operations. In the third quarter of 1988, the Board of Directors declared a quarterly dividend of $.05 per share and has continued quarterly dividends in the same amount for each quarterly period through the first quarter 1994. The Board has expressed its intent to continue to declare similar quarterly dividends in the future, subject to the ability of the Company's operating subsidiaries to continue to achieve satisfactory earnings. Dividends on common stock at the current rate of $.05 per share amount to an annual cash requirement of approximately $1.1 million. Management believes that normal operations will provide sufficient working capital and cash flows to meet debt service and dividend requirements during the foreseeable future. During 1992, the Financial Accounting Standards Board issued Statement No. 109, "Accounting for Income Taxes". This statement was adopted effective January 1, 1993 and had no impact on the Company's financial position or results of operations primarily because the Company had adopted FASB Statement No. 96 during 1988. The Financial Accounting Standards Board also issued Statement No. 112, "Employers' Accounting for Postemployment Benefits", during 1992. Adoption of the statement which is required in 1994, is not anticipated to have a material effect on the Company's financial position or results of operations. To meet short-term requirements when fluctuations occur in working capital, the Company has available three lines of credit totalling $15 million, which were fully drawn on an interim basis at December 31, 1992. This amount was repaid in early 1993. At December 31, 1993, the lines were undrawn. The Company has not been notified that it is a potentially responsible party in connection with any environmental matters. 5 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, December 31, 1993 1992 ASSETS ___________ ___________ (All Amounts In Thousands) Current Assets: Cash and Cash Equivalents $ 32,770 $ 30,879 Accounts Receivable, Net of Allowance for Doubtful Accounts of $470 and $475 in 1993 and 1992, Respectively: Traffic 28,303 28,519 Agents' 8,346 7,708 Claims and Other 9,485 8,349 Net Investment in Direct Financing Leases 2,257 2,315 Current Deferred Income Taxes 1,955 -- Other Current Assets 6,666 3,258 Material and Supplies Inventory, At Cost 7,853 7,625 ________ _______ Total Current Assets 97,635 88,653 ________ _______ Investments In and Advances to Unconsolidated Entities 30,367 34,213 ________ _______ Net Investment in Direct Financing Leases 28,775 31,031 ________ _______ Vessels, Property and Other Equipment, At Cost: Vessels and Barges 432,429 433,617 Other Marine Equipment 3,842 4,133 Terminal Facilities 17,521 13,221 Land 2,317 2,528 Furniture and Equipment 9,676 7,861 ________ ________ 465,785 461,360 Less - Accumulated Depreciation (189,924) (177,455) ________ _______ 275,861 283,905 ________ _______ Other Assets: Deferred Charges in Process of Amortization 41,992 36,224 Acquired Contract Costs, Net of Accumulated Amortization of $ 12,122 and $9,559 in 1993 and 1992, Respectively 26,781 29,344 Due from Related Parties, Net of Allowance for Doubtful Accounts of $1,385 and $ 0 in 1993 and 1992, Respectively 4,360 305 Other 12,929 16,288 ________ _______ 86,062 82,161 ________ _______ $518,700 $519,963 ======== ========
[FN] The accompanying notes are an integral part of these statements. 6
December 31, December 31, LIABILITIES AND STOCKHOLERS' 1993 1992 INVESTMENT ___________ ___________ (All Amounts in Thousands Except Per Share Data) Current Liabilities: Current Maturities of Long-Term Debt $ 25,879 $ 39,865 Current Maturities of Capital Lease Obligations and Redeemable Preferred Stock 5,000 6,024 Accounts Payable and Accrued Liabilities 49,447 38,953 Current Deferred Income Tax Liability -- 2,235 Current Liabilities to be Refinanced (340) (6,344) ________ ________ Total Current Liabilities 79,986 80,733 ________ ________ Current Liabilities to be Refinanced 340 6,344 ________ ________ Billings in Excess of Income Earned and Expenses Incurred 4,133 10,564 ________ ________ Long-Term Capital Lease Obligations, Less Current Maturities 27,020 32,280 ________ ________ Long-Term Debt, Less Current Maturities 213,112 198,868 ________ ________ Reserves and Deferred Credits: Deferred Income Taxes 35,613 24,057 Claims and Other 23,999 31,315 ________ ________ 59,612 55,372 ________ ________ Commitments and Contingencies Cumulative Redeemable Preferred Stock, Less Current Maturities and Excess of Redemption Value Over Fair Value _ 11,798 ________ ________ Stockholders' Investment: Common Stock, $1.00 Par Value, 10,000,000 Shares Authorized, 5,405,366 and 4,977,866 Shares Issued at December 31, 1993 and 1992, Respectively 5,405 4,978 Additional Paid-in Capital 54,450 48,216 Retained Earnings 75,775 71,943 Less - 58,755 Shares of Common Stock in Treasury,at cost, at December 31, 1993 and 1992 (1,133) (1,133) ________ ________ 134,497 124,004 ________ ________ $518,700 $519,963 ======== ========
[FN] The accompanying notes are an integral part of these statements. 7 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Per Share Data) Year Ended December 31, 1993 1992 1991 _________ _________ _________ Revenues $322,313 $304,872 $309,270 Operating Differential Subsidy 19,338 19,736 19,159 _________ _________ _________ 341,651 324,608 328,429 _________ _________ _________ Operating Expenses: Voyage Expenses 253,386 244,711 243,344 Vessel and Barge Depreciation 23,947 22,316 23,782 _________ _________ _________ Gross Voyage Profit 64,318 57,581 61,303 Administrative and General Expenses 28,206 26,540 27,846 Gain(Loss) on Sale of Assets 374 (106) -- _________ _________ _________ Operating Income 36,486 30,935 33,457 _________ _________ _________ Interest: Interest Expense 21,245 21,679 20,563 Investment Income (1,748) (1,135) (2,062) _________ _________ _________ 19,497 20,544 18,501 _________ _________ _________ Other Income -- 2,059 -- _________ _________ _________ Unconsolidated Entities (Net of Applicable Taxes): Equity in Net Income (Loss) of Unconsolidated Entities (2,289) (1,421) 4,697 Equity in Gain on Sale of Vessel -- -- 806 Gain on Sale of Equity Interests 900 -- -- Provision for Doubtful Accounts (900) -- -- _________ _________ _________ (2,289) (1,421) 5,503 _________ _________ _________ Income Before Provision for Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change 14,700 11,029 20,459 _________ _________ _________ Provision for Income Taxes: Current 714 2,841 3,004 Deferred 5,851 1,562 1,822 State 490 127 400 _________ ________ _________ 7,055 4,530 5,226 _________ _________ _________ Income Before Extraordinary Item and Cumulative Effect of Accounting Change 7,645 6,499 15,233 _________ _________ _________ Extraordinary Loss on Early Extinguishment of Debt (Net of Income Tax Benefit of $924) (1,716) -- -- Cumulative Effect of Accounting Change (Net of Income Tax Benefit of $1,657) -- (3,218) -- _________ _________ _________ Net Income $ 5,929 $ 3,281 $ 15,233 Less: Preferred Stock Dividends 868 1,444 1,440 Accretion of Discount on Preferred Stock 202 257 257 _________ _________ _________ Net Income Applicable to Common and Common Equivalent Shares $ 4,859 $ 1,580 $ 13,536 ======= ======== ======== Earnings Per Share: Income Before Extraordinary Loss and Cumulative Effect of Accounting Change $ 1.26 $ .96 $ 2.66 Extraordinary Loss $ (0.33) $ -- $ -- Cumulative Effect of Accounting Change $ -- $ (.63) $ -- -------- -------- -------- Net Income $ 0.93 $ 0.33 $ 2.66 ======== ======== ========
[FN] The accompanying notes are an integral part of these statements. 8 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'INVESTMENT
Additional Common Paid-In Retained Treasury (All Amounts in Thousands) Stock Capital Earnings Stock Total _________ _________ ________ ________ _______ Balance at December 31, 1990 $ 4,978 $48,216 $58,795 $(1,200) $110,789 Net Income for Year Ended December 31, 1991 -- -- 15,233 -- 15,233 Preferred Stock Dividends -- -- (1,440) -- (1,440) Accretion of Discount on Preferred Stock -- -- (257) -- (257) Cash Dividends -- -- (984) -- (984) Distribution of Treasury Stock -- -- -- 67 67 _______ _______ _______ ________ ________ Balance at December 31, 1991 $ 4,978 $48,216 $71,347 $(1,133) $123,408 Net Income for Year Ended December 31, 1992 -- -- 3,281 -- 3,281 Preferred Stock Dividends -- -- (1,444) -- (1,444) Accretion of Discount on Preferred Stock -- -- (257) -- (257) Cash Dividends -- -- (984) -- (984) (984) _______ _______ _______ ________ ________ Balance at December 31, 1992 $ 4,978 $48,216 $71,943 $(1,133) $124,004 Net Income for Year Ended December 31, 1993 -- -- 5,929 -- 5,929 Preferred Stock Dividends -- -- (868) -- (868) Accretion of Discount on Preferred Stock -- -- (202) -- (202) Cash Dividends -- -- (1,027) -- (1,027) Issuance of Stock, 427,500 Shares Pursuant to Exercise of Warrants 427 6,234 -- -- 6,661 _______ _______ _______ ________ ________ Balance at December 31,1993 $ 5,405 $54,450 $75,775 $(1,133) $134,497 ======= ======= ======= ======== ========
[FN] The accompanying notes are an integral part of these statements. 9 INTERNATIONAL SHIPHOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW
Year Ended December 31, 1993 1992 1991 _______ ________ ________ (All Amounts in Thousands) Cash Flows from Operating Activities: Net Income $ 5,929 $ 3,281 $ 15,233 Adjustment to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation 24,895 23,172 24,679 Amortization of Deferred Charges and Other Assets 19,785 19,043 15,346 Provision for Deferred Income Taxes 5,851 1,562 1,822 Extraordinary Loss 1,716 -- -- Cumulative Effect of Accounting Change -- 3,218 -- Equity in Unconsolidated Entities 2,289 1,421 (4,697) (Gain) Loss on Sale of Vessels and Other Property (374) 106 (1,153) Changes in: Reserve for Claims and Other Deferred Credits (5,926) (4,919) 2,948 Net Investment in Direct Financing Leases 2,314 2,140 2,350 Unearned Income (6,431) 6,339 (1,143) Other Assets 3,267 1,702 (2,313) Accounts Receivable (534) (1,673) 3,470 Inventories and Other Current Assets (1,551) 1,160 (25) Accounts Payable and Accrued Liabilities 3,855 (2,293) (12,533) _________ _________ _________ Net Cash Provided by Operating Activities 55,085 54,259 43,984 _________ _________ _________ Cash Flows from Investing Activities: Purchase of Vessels and Other Property (12,044) (60,963) (31,484) Additions to Deferred Charges (24,251) (23,614) (23,795) Proceeds from Sale of Vessels and Other Property 3,201 1,717 464 Investment in and Advances to Unconsolidated Entities 377 (1,857) 5,977 Other Investing Activities -- -- (14) Purchase of LITCO (1,606) -- -- _________ _________ _________ Net Cash Used by Investing Activities (34,323) (84,717) (48,852) _________ _________ _________ Cash Flows from Financing Activities: Proceeds from Issuance of Debt and Capital Lease Obligations 146,748 113,540 48,189 Reduction of Debt and Capital Lease Obligations (154,224) (87,612) (35,946) Redemption of Preferred Stock (13,750) -- -- Preferred and Common Stock Dividends Paid (1,895) (2,428) (2,422) Proceeds from Issuance of Common Stock 4,250 -- -- _________ _________ _________ Net Cash (Used in) Provided by Financing Activities (18,871) 23,500 9,821 _________ _________ _________ Net Increase (Decrease) in Cash and Cash Equivalents 1,891 (6,958) 4,953 Cash and Cash Equivalents at Beginning of Year 30,879 37,837 32,884 _________ _________ _________ Cash and Cash Equivalents at End of Year $ 32,770 $ 30,879 $ 37,837 ========= ========= =========
[FN] The accompanying notes are an integral part of these statements. 10 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation __________________ The accompanying financial statements include the accounts of International Shipholding Corporation and its consolidated subsidiaries (the Company). All significant intercompany accounts and transactions have been eliminated. The Company uses the cost method to account for investments in entities in which it holds less than a 20% voting interest and in which the Company cannot exercise significant influence over operating and financial activities. The Company uses the equity method to account for investments in entities in which it holds a 20% to 50% voting interest. Certain reclassifications have been made to the prior period financial information in order to conform to current year presentation. Voyage Accounting ________________ Revenues and expenses relating to voyages are recorded on the percentage-of-completion method, except that provisions for loss voyages are recorded when contracts for the voyages are fixed or when losses become apparent for voyages in progress. Vessels and Other Property _______________________ 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, barges and other equipment under construction are capitalized to properly reflect the cost of assets acquired. No interest was capitalized in 1991. Capitalized interest totaled $918,000 and $136,000 for the years ended December 31, 1993, and 1992, respectively. Assets under capital leases are recorded on the balance sheet under the caption Vessels, Property and Other Equipment (See Note G). For financial reporting purposes, vessels are generally depreciated over their estimated useful life of 25 years from construction using the straight-line method. As a result of major capital improvements during 1990, 1991 and early 1992, the useful lives of the Company's LASH vessels have been extended from 25 to 30 years. The two pure car carriers are being depreciated over estimated useful lives of 20 years. The coal terminal is being depreciated over 22 years and the LITCO terminal is being depreciated over 11 years. Other marine equipment is being depreciated predominantly over a four year period. The Company groups all LASH barges into pools with estimated useful lives corresponding to the remaining useful lives of the vessels with which they are utilized. Major barge refurbishments are capitalized and included in the aforementioned group of barge pools. The estimated useful lives of the pools have been extended through 2003 in accordance with the extension of the vessel lives. The Company refurbished a major portion of these barges during 1990 through 1992 to allow utilization through 2003. From time to time, the Company disposes of barges in the ordinary course of business. In these cases, proceeds from the disposition are credited to the remaining net book value of the respective pool and future depreciation charges are adjusted accordingly. Financial Instruments __________________ A significant portion of the Company's traffic receivables are due from the United States Government arising primarily from contracts with the U.S. Military Sealift Command (See Note I) and transportation of government sponsored cargo. There are no other concentrations of receivables from customers or geographic regions that exceed 10% of stockholders' investment at December 31, 1993 or 1992. During 1993 the Company entered into interest rate conversion agreements with two commercial banks. The floating rate payor is the Company, and the commercial banks are the fixed rate payors. The floating rate and fixed rates at December 31, 1993 were 3.5% and 4.72%, respectively. The contract amounts totaled $100,000,000 at December 31, 1993 and will expire in August 1996. The Company recognized $ 475,000 of interest income associated with these agreements during 1993. Income Taxes ____________ Deferred income taxes are provided on items of income and expense which affect taxable income in one period and financial income in another. 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 foreign operations are subject to U.S. income taxes (See Note D). Foreign Currency Translation ________________________ All exchange adjustments are charged or credited to income in the year incurred. Exchange losses of $359,000, $35,000, and $466,000 were recognized for the years ended December 31, 1993, 1992 and 1991, respectively. Dividend Policy _____________ The Board of Directors declared and paid dividends of $.05 per share for each quarter in 1993, 1992 and 1991. Subsequent to year end a dividend of $.05 per common share was declared to be paid in the first quarter of 1994. The payment of dividends is subject to restrictions set forth in certain of the Company's debt instruments. The Company paid dividends on its common stock in the amount of $1,027,000 in 1993 and $984,000 during both 1992 and 1991. Such amounts did not exceed restrictions set forth in these agreements or its other debt instruments. Net Income per Common Share ___________________________ Primary earnings per common share are based on the weighted average number of shares outstanding during the period after consideration of the dilutive effect of stock warrants based on the average market price of common stock for the period. The primary weighted average number of common shares outstanding were 5,220,207, 5,138,866, and 5,125,546 for the years ended December 31, 1993, 1992 and 1991, respectively. 11 Operating Differential Subsidy Agreements ____________________________________ The Company operates a fleet of four U.S. Flag vessels under an operating differential subsidy ("ODS") agreement with the U.S. Maritime Administration ("MarAd"), an agency of the Department of Transportation ("DOT") under Title VI of the Merchant Marine Act of 1936, as amended. Under this agreement, MarAd agrees to pay the excess of certain vessel expenses over comparable vessel expenses of principal foreign competitors in each respective trade route through the scheduled termination date of December 31, 1996. These vessels are employed in a liner service between ports on the U.S. Gulf/U.S. Atlantic Coast and South Asia (Trade Routes 18 and 17). Traffic accounts receivable include $3,486,000 and $3,424,000 due from MarAd under these ODS agreements at December 31, 1993 and 1992, respectively. Subsidy billings are based on rates furnished by MarAd. Self-Retention Insurance ____________________ Effective December 1, 1993, the Company became self-insured for most Personal Injury and Cargo claims under $ 1,000,000: and for Hull claims under $ 2,500,000. The Company maintains insurance for claims over the above amounts and maintains Stop Loss insurance to cover claims below $ 1,000,000 and $ 2,500,000. Under the Stop Loss insurance, the Company is responsible for all claims under $ 1,000,000 and $ 2,500,000 until the total amount of claims between primary deductibles and the above amounts reach $ 10,000,000 in the aggregate per year. Primary deductibles are $25,000 for Hull, Personal Injury and Cargo, and $1,000 for LASH barges. After the Company has retained $10,000,000 in the aggregate, all additional claims are recoverable from underwriters. From February 20, 1992 until December 1, 1993, the Company was self-insured for most personal injury and cargo claims under $250,000. Provisions for losses are recorded based on the Company's estimate of the eventual settlement costs. NOTE B - LONG-TERM DEBT
(All Amounts in Thousands) December 31, Balance at December 31, Description 1993 1992 Due 1993 1992 ___________ ____ ____ ___ ____ ____ Unsecured Senior Notes - Fixed Rate 9.00% -- 2003 $100,000 -- Unsecured Subordinated Debt - Fixed Rate -- 14.00% 1997 -- $ 15,500 Fixed Rate Notes Payable 8.25-10.50% 8.25-10.50% 1999-2002 82,374 80,915 Variable Rate Notes Payable 4.4946-7.57% 4.41-10.0% 1994-1998 42,739 108,113 U.S. Government Guaranteed Ship Financing Notes and Bonds - Fixed Rate 6.58-7.50% 6.58-9.15% 2000 13,878 34,205 ________ ________ 238,991 238,733 Less Current Maturities (25,879) (39,865) ________ ________ $213,112 $198,868 ======== ========
The aggregate principal payments required for each of the next five years are $25,879,000 in 1994, $23,545,000 in 1995, $33,199,000 in 1996, $18,537,000 in 1997, and $17,056,000 in 1998. Certain of the vessels and barges owned by the Company are mortgaged under debt agreements. Additional collateral includes a security interest in certain operating contracts and receivables. Most of these agreements, among other things, impose minimum working capital and net worth requirements, as defined, impose restrictions on the payment of dividends (see Note A), and prohibit the Company from incurring, without prior written consent, additional debt or lease obligations, except as defined. The Company has consistently met the minimum working capital and net worth requirements during the periods covered by the agreements and is in compliance with these requirements as of December 31, 1993. Under the most restrictive of its credit agreements, the Company cannot declare or pay dividends unless (1) the total of (a) all dividends paid, distributions on or other payments made with respect to the Company's capital stock during the period beginning October 1, 1989 and ending on the date of dividend declaration or other payment and (b) all investments other than Qualified Investments (as defined) of the Company and certain designated subsidiaries will not exceed the sum of $3,000,000 plus 50% (or, in case of a loss, minus 100%) of the Company's consolidated net income during the period described above plus the net cash proceeds received from the issuance of common stock by the Company during the above period, and (2) no default or event of default has occurred. Certain loan agreements also restrict the ability of the Company's subsidiaries to make dividend payments, loans or advances, the most restrictive of which contain covenants that restrict payments of dividends, loans or advances to the Company from Central Gulf Lines, Inc. and Waterman Steamship Corporation unless certain financial ratios are maintained. As long as those ratios are maintained, there is no restriction on loans or advances to the Company from those two subsidiaries; however, dividends generally are restricted to 40% of the most recent four quarters' net income. Further, Sulphur Carriers, Inc. is prohibited under a credit agreement from making any loans or advances to ISC. The amounts of restricted assets for unconsolidated and consolidated subsidiaries as of December 31, were as follows:
(In Thousands) 1993 1992 __________ _________ Central Gulf Lines, Inc. $ 49,701 $ 52,770 Waterman Steamship Corporation 53,345 53,140 New Combo, Inc. 313 839 Allied Ocean Carriers, Inc. 837 570 Sulphur Carriers, Inc. 5,965 287 _________ _________ Total restricted net assets $ 110,161 $ 107,606 ========= =========
12 On July 9, 1993 the Company issued $100 million of 9% Unsecured Senior Subordinated Notes due 2003. The proceeds of this financing have been used to redeem $12.4 million of 14% senior subordinated notes, redeem $13.8 million of outstanding preferred stock, and repay $46.5 million of floating rate bank debt under which certain vessels and barges were previously mortgaged. Additionally, $6.6 million has been used to pay accrued interest and transaction expenses including prepayment penalties. The transaction expenses were capitalized and are being written off over the life of the loan and prepayment penalties have been recorded as an extraordinary loss due to the early extinguishment of debt and totaled $1.716 million, $0.33 per share, net of a tax benefit of $0.924 million. The balance of proceeds received from the notes issued will be used to finance a portion of the new molten sulphur carrier and other potential investments. The Company has available three lines of credit totaling $15,000,000 none of which were drawn at December 31, 1993. These lines of credit are used to meet short-term requirements when fluctuations occur in working capital. The Company is required to maintain a $375,000 compensating balance for one of the lines of credit. This balance is included in Cash and Cash Equivalents. Under certain of the above described loan agreements, deposits are made into bank retention accounts to meet the requirements of the applicable agreements. At December 31, 1993 and 1992 these escrowed amounts, which are included in Cash and Cash Equivalents, totaled $5,773,000 and $4,612,000, respectively. NOTE C - PENSION PLAN AND POSTRETIREMENT BENEFITS The Company's retirement plan covers all full-time employees of domestic subsidiaries who are not otherwise covered under union-sponsored plans. The benefits are based on years of service and the employee's compensation during the last five years of employment. The Company's funding policy is based on minimum contributions required under ERISA as determined through an actuarial computation. Plan assets consist primarily of investments in certain bank common trust funds of trust quality assets and money market holdings. The following table sets forth the plan's funded status and pension costs recognized by the Company at December 31, 1993 and 1992.
Actuarial Present Value of Benefit Obligations: December 31, December 31, 1993 1992 (All Amounts in Thousands) ___________ _____________ Vested Benefit Obligation $ 7,914 $ 7,199 ======= ======= Accumulated Benefit Obligation $ 8,060 $ 7,297 ======= ======= Projected Benefit Obligation $(9,320) $(8,232) Plan Assets at Fair Value 10,125 8,760 _______ _______ Projected Benefit Obligation Less Than Plan Assets $ 805 $ 528 Unrecognized Net Gain (877) (921) Prior Service Cost Not Yet Recognized in Net Periodic Pension Cost 106 123 Unrecognized Net Obligation Being Recognized Over 15 Years 520 594 _______ _______ Accrued Pension Asset $ 554 $ 324 ======= =======
Net Periodic Pension Cost: 1993 1992 1991 ____ ____ ____ Service Cost $ 396 $ 387 $ 384 Interest Cost on Projected Benefit Obligation 630 589 538 Actual Return on Plan Assets (1,033) (293) (1,460) Net Amortization and Deferral 343 (362) 1,024 ______ ______ ______ Net Periodic Pension Cost $ 336 $ 321 $ 486 ====== ====== ======
Actuarial assumptions used to develop the components of pension expense for the years ended December 31, 1993, 1992 and 1991 were as follows:
1993 1992 1991 ____ ____ ____ Discount Rate 7.5% 8.0% 8.0% Rate of Increase in Future Compensation Levels 6.0% 6.0% 6.0% Expected Long-term Rate of Return on Assets 8.5% 8.5% 8.5%
Crew members on the Company's U.S. flag vessels belong to union-sponsored pension plans. The Company contributed approximately $2,495,000, $2,248,000 and $2,021,000 to these plans for the years ended December 31, 1993, 1992 and 1991, respectively. These contributions are in accordance with provisions of negotiated labor contracts and generally are based on the amount of straight pay received by the union members. Information from the plans' administrators is not available to permit the Company to determine whether there may be unfunded vested benefits. In December 1990, the Financial Accounting Standards Board issued Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". This new standard requires that the expected cost of these benefits must be charged to expense during the years that the employees render service and must be adopted for fiscal years beginning after December 15, 1992. The Company elected early implementation effective January 1, 1992 which has resulted in a cumulative adjustment for years prior to 1992 of $4,875,000 (with a tax benefit of $1,657,000) and has been reported as a cumulative effect of a change in accounting principle in 1992. This negative impact of $3,218,000 on 1992 reported financial position and results of operations resulted from the significant change in the Company's previous policy of recognizing these benefit costs on a cash basis rather than when service is rendered. The change to the new accounting standard resulted in a reported annual expense amount of $455,000 and $438,000 for 1993 and 1992, respectively. On a cash basis, annual expenses related to the above benefits approximated $458,000 in 1991. 13 The Company's postretirement benefit plans currently provide medical, dental and life insurance benefits to eligible retired employees and their eligible dependents. The following table sets forth the plans' combined funded status reconciled with the amount included in the Company's balance sheet classification Reserves and Deferred Credits at December 31, 1993 and 1992 (All Amounts in Thousands):
Accumulated Postretirement Benefit Obligation: 1993 1992 ____ ____ Retirees $(3,626) $(3,241) Fully eligible active plan participants (1,406) (1,455) Other active plan participants (1,467) (400) _________ _________ (6,499) (5,096) Plan Assets at Fair Value -- -- ________ _________ Accumulated Postretirement Benefit Obligation in Excess of Plan Assets (6,499) (5,096) Prior Service Cost not yet recognized in expense 1,250 -- Unrecognized Transition Obligation -- -- _______ _______ Accrued Postretirement Benefit Cost in the Balance Sheet $(5,249) $(5,096) ======== ========
Net post retirement benefit cost includes the following components: 1993 1992 ____ ____ Service Cost $ 10 $ 9 Interest Cost on Accumulated Postretirement Benefit Obligation 445 429 Return on Assets -- -- Net Amortization -- -- ______ _____ Net Postretirement Benefit Cost $ 455 $ 438 ====== ======
The accumulated postretirement benefit obligation was computed using an assumed discount rate of 7.5%. The health care cost trend rate was assumed to be 14% for years 1993 through 1995, then the trend rate was assumed to decline by 3.0% every three years until the year 2002 at which time the rate remains 5.0%. The dental care cost trend rate was assumed to be 8.0% for years 1993 through 1995, then the trend rate was assumed to decline by 1.0% every 3 years until the year 2002 at which time the rate remains 5.0%. If the health and dental care cost trend rate were increased one percent for all future years, the accumulated postretirement benefit obligation as of December 31, 1993 would have increased approximately $717,000 or 11%. The effect of this change on the aggregate of service and interest cost for 1993 would have been an increase of approximately $32,000 or 7%. The Company continues to evaluate ways in which it can better manage these benefits and control the costs. Any changes in the plan or revisions to assumptions that affect the amount of expected future benefits may have a significant effect on the amount of the reported obligation and annual expense. In November 1992, the Financial Accounting Standards Board issued Statement 112, "Employers' Accounting for Postretirement Benefits", which requires adoption for fiscal years beginning after December 15, 1993. The new standard requires an obligation to be recorded if the following four conditions are met: (1) the obligation is attributable to employees' services already rendered, (2) employees' rights to those benefits accumulate or vest, (3) payment of the benefit is probable and (4) the amount of the benefit can be reasonably estimated. This is a change from the Company's current policy of recognizing these costs on a cash basis. Adoption is not anticipated to have a material impact on the Company's financial position or results of operations. NOTE D - INCOME TAXES The Federal income tax returns of the Company are filed on a consolidated basis and include the results of operations of its wholly-owned U.S. subsidiaries. Pursuant to the Tax Reform Act of 1986, the earnings of foreign subsidiaries ($11,904 in 1993, $43,425 in 1992 and $4,249,840 in 1991) are also included. Prior to 1987, deferred income taxes were not provided on undistributed foreign earnings of $6,689,245, all of which are expected to remain invested indefinitely. In accordance with the Tax Reform Act of 1986, commencing in 1987 earnings generated from profitable controlled foreign subsidiaries are subject to Federal income taxes. In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which superseded accounting standards for income taxes which the Company adopted in 1988. The Company adopted Statement No. 109 effective January 1, 1993 and adoption had no impact on the Company's financial position or results of operations. Components of the net deferred tax liability/(asset) are as follows:
December 31, December 31, 1993 1992 ____________ ____________ (All Amounts in Thousands) Gross Liabilities: Fixed Assets $33,102 $32,630 Deferred Charges 9,465 6,880 Unterminated voyage revenue/expense 2,603 2,639 Intangible Assets 9,373 9,977 Other liabilities 2,274 1,001 Gross Assets: Insurance and claims reserve (4,876) (6,240) Net operating loss carryforward/ unutilized deficit (9,509) (12,540) Valuation Allowance 879 879 Other assets (9,653) (8,934) ________ _________ Total deferred tax liability, net $33,658 $26,292 ======= =======
Deferred tax liability increased during 1993 due to the recognition of the deferred federal income tax expense of $5,851,000. In addition the Company reclassified a deferred tax liability of $1,890,000 from Investments in and Advances to Unconsolidated Entities upon the sale of an 18.5% interest in A/S Havtor as further discussed in Note K. A deferred tax asset of $375,000 was included in the assets acquired from LITCO as further discussed in Note K. 14 The following is a reconciliation of the U. S. statutory tax rate to the Company's effective tax rate for the years ended December 31, 1993, 1992 and 1991:
Year Ended December 31, _________________________ 1993 1992 1991 ____ ____ ____ Statutory Rate 35.0% 34.0% 34.0% State Income Taxes 3.3% 1.2% 1.9% Goodwill Amortization -- 1.8% .6% Investment Tax Credit Amortization -- -- (.9%) (Income) Loss of Unconsolidated Entities 5.1% 3.0% (7.7%) Gain on Sale of Vessel -- -- (2.0%) Tax Rate Adjustment 5.2% -- -- Other (.6%) 1.1% (.4%) ----- ----- ----- 48.0% 41.1% 25.5% ===== ===== =====
The Company has available at December 31, 1993, unused operating loss carryforwards of $ 21.2 million and unused foreign deficits of $5.9 million. The operating loss carryforwards will expire in 2001. On August 10, 1993, the Revenue Reconciliation Bill of 1993 was signed by the President providing for an effective tax rate of 35%. The effect of this increase from 34% to 35% was to increase the deferred tax liability by $764,000 for periods prior to January 1, 1993. This increase was recorded as an increase to the Provision for Income Taxes for 1993 as well as an increase to the Deferred Income Taxes shown on the Balance Sheet. NOTE E - TRANSACTIONS WITH RELATED PARTIES The Company was a party to agreements with certain corporations controlled by members of the Company's management to charter 39 river barges owned by such corporations for use in the Company's domestic and international operations. The Company paid $440,000 for the period ended April 30, 1993 and $1,342,000 and $1,338,000 for the years ended 1992 and 1991 in barge rentals under the agreements. The Company purchased these barges for $1.6 million in the aggregate in May of 1993. During 1991, the Company paid a barge operating company approximately $767,000 to supervise its Mississippi River towing operation in connection with its coal transportation contract. A member of the Company's management was a director of this corporation through July, 1991. During 1990, the Company sold one if its subsidiaries to a former employee at a sales price of $500,000. Collections on this receivable were $101,000, $92,000 and $83,000 in 1993, 1992 and 1991, respectively. At the end of 1993, the Company sold another subsidiary to the same party for a sales price of $692,000. The total receivable due from this related party at December 31, 1993 was $965,000 and is to be received over a 10 year period with an interest rate of 6% for the first five years and LIBOR plus 2% thereafter. During 1992, the Company sold one of its subsidiaries to a former employee at a sales price of $250,000. No material gain or loss was recognized on this transaction. Since the Company's inception, the legal firm of Jones, Walker, Waechter, Poitevent, Carrere and Denegre has been utilized for various legal services. During 1992, a son of the President of the Company became a partner of the firm. The Company made payments to the firm totaling approximately $1,781,000 and $1,851,000 for the years ending 1993 and 1992, respectively. Combined amounts due to related parties associated with the above listed transactions were $43,000 at December 31, 1993 and were included in Accounts Payable and Accrued Liabilities. No amounts were due at December 31, 1992. Combined amounts due from related parties associated with the above listed transactions were $ 965,000 and $305,000 at December 31, 1993 and 1992, respectively and were included in Due From Related Parties. The total amount in Due From Related Parties also includes a receivable in the amount of $4,780,000, net of an allowance of $1,385,000 as further discussed in Note K. NOTE F - COMMITMENTS AND CONTINGENCIES The Company has entered into a long-term transportation contract with a natural resources company for which it is having built a 24,000 Deadweight Ton Molten Sulphur Carrier vessel which will be employed to carry molten sulphur from Louisiana to Florida. The vessel, now known as Hull 294, is now under construction in a shipyard in Louisiana and is expected to deliver in late summer 1994 at which time it will begin service under the aforementioned transportation contract. The Company has received interim financing commitments of up to $43,000,000 from U.S. banks to fund approximately 75% of the total construction cost of the vessel. At December 31, 1993 the Company had received $8,662,000 of interim financing on this commitment which represented 75% of the construction costs incurred to date. As of December 31, 1993, 17 of the 24 ocean-going vessels that the Company owns or operates were under various contracts extending beyond 1993 and expiring at various dates through 2010. Certain of these agreements also contain options to extend the contracts beyond their minimum terms. The Company acts as a 10% guarantor for repayment of funds borrowed by a limited partnership in which the Company holds a 10% interest as further discussed in Note K. The Company's share of the guarantee is approximately $3,500,000. The Company also maintains a $600,000 line of credit to cover standby letters of credit for membership in various shipping conferences. The Company has an agreement with the Seamen's Church Institute of New York and New Jersey to aid in paying the cost of a new building. The Company is committed to contribute annual installments of $60,000 through 1995. 15 NOTE G - LEASES In 1988, the Company entered into direct financing leases of two foreign flag pure car carriers expiring in the year 2000. The schedule of future minimum rentals to be received under these direct financing leases in effect at December 31, 1993 is as follows:
Receivables Under (All Amounts in Thousands) Financing Leases -------------------- Year Ended December 31, 1994 $ 6,024 1995 5,668 1996 5,328 1997 4,972 1998 4,621 Thereafter 5,579 ------ Total Minimum Lease Payments Receivable 32,192 Estimated Residual Values of Leased Properties 18,000 Less Unearned Income (19,160) ------- Total Net Investment in Direct Financing Leases 31,032 Current Portion (2,257) ------- Long-term Net Investment in Direct Financing Leases at December 31, 1993 $ 28,775 ========
The Company is also a party to a capital lease agreement for two LASH vessels. The term of the lease is twenty years. Upon expiration of the lease in the Fourth Quarter of 1994, the Company has a right of first refusal to purchase these leased capital assets at their fair market value. The Company entered into sale-leaseback agreements in 1991 and 1992 for a group of the Company's LASH barges. These leases meet the required criteria for a capital lease and are accounted for as such. The terms of the leases are 12 years. The aforementioned capital leases are included in Vessels, Property and Other Equipment as follows:
(All Amounts in Thousands) 1993 1992 ______ ______ Vessels and LASH barges $ 45,779 $ 45,779 Less Accumulated Depreciation 17,341 12,319 ________ ________ Total $ 28,438 $ 33,460 ======== ========
The following is a schedule, by year, of future minimum lease payments under capital leases, together with the present value of the minimum payments as of December 31, 1993:
Payments Under (All Amounts in Thousands) Capital Leases Year Ended December 31, ______________ 1994 $ 12,390 1995 3,705 1996 3,705 1997 4,061 1998 4,450 Thereafter 19,687 _________ $ 47,998 Less - Amount Representing Interest (15,978) _________ Present Value of Future Minimum Payments (Based on a Weighted Average of 10.0%) $ 32,020 =========
The following is a schedule, by year, of future minimum payments required under operating leases that have initial or remaining non-cancellable terms in excess of one year as of December 31, 1993:
Payments Under (All Amounts in Thousands) Operating Leases Year Ended December 31, ________________ 1994 $ 2,503 1995 2,173 1996 2,034 1997 2,000 1998 1,382 Thereafter 2,316 ________ Total Future Minimum Payments $12,408 ========
NOTE H - DEFERRED CHARGES The Company defers certain costs related to the acquisition of vessel operating contracts, the cost of placing vessels in service, and the drydocking of vessels. The costs of acquiring vessel operating contracts and vessel prepositioning are amortized over the applicable contract periods. Deferred drydocking costs are amortized over the period between drydockings (generally two to five years). Financing charges are amortized over the life of the applicable debt involved. Deferred costs are comprised of the following:
Year Ended December 31, (All Amounts in Thousands) 1993 1992 ______ _______ Drydocking $32,722 $27,357 Prepositioning 832 2,168 Financing Charges and Other 8,438 6,699 _______ _______ $41,992 $36,224 ======= =======
The Company amortizes acquired contract cost over the contracts' useful lives using the straight-line method of amortization. The acquired contract cost represents the portion of the purchase price paid for Waterman Steamship Corporation applicable primarily to that company's maritime prepositioning ship contracts and operating differential subsidy agreements. These costs are being amortized over useful lives ranging from seven to 21 years from the acquisition date. 16 NOTE I - SIGNIFICANT OPERATIONS The Company has several medium to long-term contracts regarding the operations of various vessels (See Note F), from which revenues represent a significant amount of the Company's total revenue. Revenues from the contracts with the United States Military Sealift Command were $82,239,000, $68,222,000, and $65,607,000 for the years ended December 31, 1993, 1992 and 1991, respectively. Additionally, the Company operates four U.S. Flag LASH vessels on subsidized liner service between the U.S. Gulf and South Asia (Trade Routes 18 and 17). Revenues, including ODS, from this operation were $143,811,000, $140,671,000 and $145,865,000 for the years ended December 31, 1993, 1992 and 1991, respectively. NOTE J - REDEEMABLE PREFERRED STOCK In 1987 and 1989, the Company issued 85,000 and 25,000 shares, respectively, of cumulative redeemable preferred stock, together with warrants to purchase shares of common stock. The coupon rate and warrants were adjustable under certain conditions. As of 1993, the coupon rate on the preferred stock ranged from 8.822% to 10.898%, and the number of shares of common stock purchasable under the warrants totaled 427,500. During 1993, the Company redeemed the remaining preferred stock outstanding of $13.750 million at a total redemption cost including accrued interest and prepayment penalties of $14.178 million. The warrant holders exercised their rights under the warrants to purchase the 427,500 shares of common stock at an exercise price of $10.12 per share. NOTE K - UNCONSOLIDATED ENTITIES At December 31, 1992, the Company held a one-third interest in A/S Havtor, a Norwegian company that manages and charters-out vessels specializing in the transportation of liquid petroleum gas and various chemical products. During the first quarter of 1993, the Company sold an 18.5% direct interest in A/S Havtor for a sales price of approximately $7,557,000 of which $2,777,000 was received in cash and $4,780,000 was received in the form of a promissory note. The transaction reduced the Company's direct interest in A/S Havtor to 14.8% and resulted in an after tax gain of approximately $900,000. Payment of principal and interest on the note receivable is due upon maturity in mid-1996. The note is included in Due From Related Parties, net of an allowance for doubtful accounts equal to the after tax gain of $ 900,000, which will have the effect of deferring recognition of the gain until receipt of the proceeds from the promissory note. Since the Company is no longer represented on the board of directors of A/S Havtor or A/S Havtor Management, has no substantive control or input regarding their operations and its direct and indirect ownership in both is now below 20%, the investments have been accounted for since April 1, 1993 under the cost method of accounting, which permits recognition of income only upon distribution of dividends or sale of interest. The Company's investment in A/S Havtor approximated $3,400,000 and $8,700,000 at December 31, 1993 and 1992, respectively. Undistributed earnings for the investment included in the Company's retained earnings at December 31, 1993 and 1992 were $2,468,000 and $7,100,000, respectively. No dividends were received in 1993, 1992 or 1991. The Company also has a 14% equity interest in A/S Havtor Management, a Norwegian ship management company affiliated with A/S Havtor. The Company's investment in A/S Havtor Management approximated $3,200,000 and $3,800,000 at December 31, 1993 and 1992, respectively. Undistributed earnings from the investment included in the Company's retained earnings at December 31, 1993 and 1992 were $3,000,000 and $3,500,000, respectively. No dividends were received in the years 1993, 1992 or 1991. Following is a summary of combined financial data of A/S Havtor and A/S Havtor Management for the periods indicated:
September 30, 1992 1991 ______ ______ (Audited) (All Amounts in Thousands) Current Assets $ 32,444 $ 27,825 Non-current Assets 62,013 78,314 -------- -------- Total Assets $ 94,457 $106,139 ======== ======== Current Liabilities $ 1,750 $ 5,292 Non-current Liabilities 20,062 23,345 Equity 72,645 77,502 -------- -------- Total Liabilities and Shareholder's Equity $ 94,457 $106,139 ======== ========
Twelve Months Ended September 30, 1992 1991 ____ ____ (Audited) Gross Revenues/Equity in Earnings (Losses) of Investees $(4,215) $42,476 ======== ======= Gross Profit (Loss) $(7,266) $39,751 ======== ======= Net Income (Loss) $(5,487) $20,031 ======== =======
At December 31, 1992, the Company held a 39% equity interest in a foreign entity, Bulkowner's 1984, which was formed to construct and own two newly-built combination dry cargo/ petroleum products PROBO vessels which delivered in 1989. In January 1991, the Company sold 4% of its interest in Bulkowner's 1984 to A/S Havtor and 7% of its interest in Bulkowner's 1984 to A/S Havtor Management for a sales price of approximately $7,100,000. The transaction resulted in a gain before taxes of $1,200,000 and net cash flow before income taxes of $3,500,000. During the first quarter of 1993, the Company reacquired this 11% interest in Bulkowner's 1984. This additional interest was acquired for approximately $6,359,000 of which $3,463,000 was a cash payment and $2,896,000 was paid through cancellation of notes receivable due from the sellers that previously had been delivered to the Company as partial consideration for the 1991 sale of the 4% and 7% interests in Bulkowner's 1984 described above. The acquisition increased the Company's interest to 50%. The Company's investment in ($9.6 million) and advances to ($13.0 million) Bulkowner's 1984 approximated $22,600,000 at December 31, 1993. 17 Following is a summary of unaudited financial data of Bulkowner's 1984:
October 31, 1993 1992 ________ ________ (All Amounts in Thousands) Current Assets $23,048 $22,326 Non-current Assets 45,497 48,422 ______ _______ Total Assets $68,545 $70,748 ======= ======= Current Liabilities $ 2,785 $14,761 Non-current Liabilities 59,226 47,053 Equity 6,534 8,934 ------- ------- Total Liabilities and Shareholder's Equity $68,545 $70,748 ======= =======
Twelve Months Ended October 31, 1993 1992 1991 _________ _________ _________ Gross Revenues $8,809 $8,252 $11,132 ======= ======== ======== Gross Profit $3,919 $2,792 $6,571 ======== ======== ======== Net Income $1,126 $ 33 $1,975 ======== ======== ========
During 1990, the Company agreed to participate in a limited partnership (10% interest) with certain Norwegian interests to construct and own a Liquified Petroleum Gas (LPG) carrier which was delivered in April 1993. The Company has contributed $ 2,092,000 in equity funds as of December 31, 1993. The Company is also acting as a 10% guarantor for repayment of funds borrowed to construct the LPG carrier. The Company's share of the guarantee is approximately $ 3,500,000. The Company has a 50% interest in a foreign entity, Marco Shipping Company, (PTE.), Ltd. ("Marco"), which acts in an agent capacity on behalf of the Company. The Company's investment in Marco at December 31, 1993 approximated $170,000. During 1993, the Company purchased the remaining 50% interest in a LASH barge intermodal company ("LITCO") for $1.9 million. The acquisition has been accounted for as a purchase and the results of LITCO have been included in the accompanying consolidated financial statements since the date of acquisition. The cost of the acquisition has been allocated on the basis of the estimated fair market value of the assets acquired and the liabilities assumed. This allocation resulted in goodwill of approximately $324,000 which is being amortized over 10 years. Income of foreign unconsolidated entities is recorded net of applicable taxes of approximately $2,586,000 in 1991. In 1992 and 1993, a loss from unconsolidated entities is recorded net of applicable tax benefits of approximately $701,000 and $1,405,000, respectively. Investments in and advances to unconsolidated entities is shown net of deferred taxes of $4,538,000 and $8,142,000 at December 31, 1993 and 1992, respectively. NOTE L - CASH FLOW INFORMATION
Year Ended December 31, (All Amounts in Thousands) 1993 1992 1991 ____ ____ ____ Non-Cash Investing and Financing Activities: Accounts Payable to be Refinanced $ 340 $ 6,344 $33,372 Owner Financed Vessel and Deferred Charge Acquisition -- -- 574 Cash Payments: Interest Paid Net of Capitalized Interest 20,510 20,005 22,527 Taxes Paid 3,087 4,596 8,590
As discussed in Note K, during 1993 the Company reacquired an 11% interest in a foreign entity, Bulkowner's 1984. Notes receivable from the sellers in the amount of $2,896,000 were canceled as a part of the purchase price. The Company also sold an interest in A/S Havtor in 1993 for $7,557,000 of which $2,777,000 was received in cash and $4,780,000 in the form of a promissory note which is included in Other Assets: Due from Related Parties. For purposes of the accompanying statement of cash flows, the Company considers highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. NOTE M - FAIR VALUE OF FINANCIAL INSTRUMENTS In December 1991, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments", which is effective for financial statements issued for fiscal years ending after December 15, 1992. This statement requires all entities to disclose the fair value of certain financial instruments, both assets and liabilities recognized and not recognized in the statement of financial position, for which it is practicable to estimate fair value. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Debt ____ The fair value of the Company's debt is estimated based on the current rates offered to the Company. At December 31, 1993 the estimated fair value of the Company's outstanding debt is $242,416,000 as compared to a carrying value of $238,991,000. At December 31, 1992 the estimated fair value of the Company's outstanding debt was $241,661,000 as compared to a carrying value of $238,733,000. Interest Rate Swap Agreement __________________________ The fair value of interest rate swaps is the estimated amount that the Bank would receive or pay to terminate the swap agreements at the reporting date, taking into account current market conditions and interest rates. At December 31, 1993 the carrying value of the net unrealized gains approximated $598,000 as compared to a fair value of $633,000. FASB 107 does not require disclosure of the fair value of all balance sheet classifications including, but not limited to certain vessels, property, plant and equipment, direct financing leases or intangible assets which may have a fair value in excess of historical cost. Therefore, this statement does not purport to represent the fair value of the Company. 19 NOTE N - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Detailed below are the components of the Balance Sheet classification Accounts Payable and Accrued Liabilities for the periods indicated.
1993 1992 (All Amounts in Thousands) ______ ______ Trade Accounts Payable $ 5,572 $ 4,894 Accrued Salaries and Benefits 1,678 303 Accrued Voyage Expenses 34,492 28,711 Accrued Interest 7,705 5,340 Taxes Payable -- (295) _______ _______ $49,447 $38,953 ======= =======
NOTE O - QUARTERLY FINANCIAL INFORMATION - (Unaudited)
Quarter Ended March 31 June 30 Sept. 30 Dec. 31 ________ _______ ________ _______ (All amounts in thousands except per share data) 1993 Revenue $83,997 $89,843 $82,214 $85,597 Expense 68,266 72,623 66,876 69,568 Gross Voyage Profit 15,731 17,220 15,338 16,029 Income Before Extraordinary Item 1,056 3,184 1,465 1,940 Extraordinary Item -- (1,703) 110 (123) Net Income 1,056 1,481 1,575 1,817 Earnings per Common and Common Equivalent Share: Primary: Income Before Extraordinary Item 0.12 0.54 0.24 0.36 Extraordinary Item -- (0.33) 0.02 (0.02) Net Income 0.12 0.21 0.26 0.34 1992 Revenue $76,627 $81,694 $82,395 $83,892 Expense 62,239 66,829 69,456 68,503 Gross Voyage Profit 14,388 14,865 12,939 15,389 Income Before Cumulative Effect of Accounting Change 2,282 1,901 1,919 397 Cumulative Effect of Accounting Change (3,218) -- -- -- Net Income (936) 1,901 1,919 397 Earnings per Common and Common Equivalent Share: Primary: Income Before Cumulative Effect of Accounting Change 0.37 0.29 0.30 0.00 Cumulative Effect of Accounting Change (0.63) -- -- -- Net Income (0.26) 0.29 0.30 0.00 1991 Revenue $89,372 $82,383 $79,532 $77,142 Expense 72,004 66,108 66,277 62,737 Gross Voyage Profit 17,368 16,275 13,255 14,405 Net Income 4,713 3,573 3,422 3,525 Earnings per Common and Common Equivalent Share: Primary: Net Income 0.85 0.62 0.59 0.61
[FN] First quarter of 1992 amounts have been restated to reflect the cumulative effect of an accounting change. COMMON STOCK PRICES AND DIVIDENDS FOR EACH QUARTERLY PERIOD OF 1992 AND 1993 (Source: New York Stock Exchange)
Cash Dividends 1992 High Low Paid - ------- ------- ------ --------------- 1st Quarter 24 3/4 21 1/4 .05/Share 2nd Quarter 24 7/8 20 7/8 .05/Share 3rd Quarter 21 7/8 18 .05/Share 4th Quarter 19 7/8 16 1/2 .05/Share
Cash Dividends 1993 High Low Paid - ------ ____ ____ _________ 1st Quarter 21 1/2 18 1/8 .05/Share 2nd Quarter 23 7/8 20 7/8 .05/Share 3rd Quarter 23 1/4 19 3/8 .05/Share 4th Quarter 22 5/8 18 1/2 .05/Share
Approximate Number of Common Stockholders of Record at March 1, 1994 - 994 20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Stockholders of International Shipholding Corporation: We have audited the accompanying consolidated balance sheets of International Shipholding Corporation (a Delaware corporation) and subsidiaries (the Company) as of December 31, 1993 and 1992, and the related consolidated statements of income, changes in stockholders' investment and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of A/S Havtor and subsidiaries and A/S Havtor Management and subsidiaries ("Havtor"), the investment in which is reflected in the accompanying financial statements using the equity method of accounting through March 31, 1993 (see Note K). The combined investment in Havtor represents 2.4% of consolidated total assets as of December 31, 1992, and the equity in the combined Havtor net income (loss) represents (18.9%) and 30.3% of the Company's consolidated income before extraordinary loss and cumulative effect of accounting change, for the years ended December 31, 1992 and 1991, respectively. The statements of Havtor for 1992 and 1991 were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to the amounts included for Havtor, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of the other auditors for 1992 and 1991, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Shipholding Corporation and subsidiaries as of December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Note C to the financial statements, the Company changed its method of accounting for postretirement benefits in 1992 to comply with provisions of Statement No. 106 of the Financial Accounting Standards Board. Arthur Andersen & Co. New Orleans, Louisiana January 18, 1994 EX-11 3 EARNINGS PER SHARE CALCULATIONS Exhibit 11
Year Ended December 31, ______________________ 1993 1992 1991 ____ ____ ____ Primary: Average Shares Outstanding 5,087,769 4,919,111 4,916,590 Net Effect of Dilutive Stock Warrants - Based on the Treasury Stock Method Using Average Market Price 132,438 219,755 208,856 ---------- --------- --------- Common and Common Equivalent Shares 5,220,207 5,138,866 5,125,446 ========= ========= ========= Fully Diluted: Average Shares Outstanding 5,087,769 4,919,111 4,916,590 Net Effect of Dilutive Stock Warrants - Using Ending Market Price Unless Average Market Price is Higher 132,438 219,755 230,850 --------- --------- --------- ________ Common and Common Equivalent Shares 5,220,207 5,138,866 5,147,440 ========= ========= ========= Income before Extraordinary Item and Cumulative Effect of Accounting Change $7,645,000 $6,499,000 $15,233,000 Extraordinary Item (1,716,000) -- -- Cumulative Effect of Accounting Change -- (3,218,000) -- ----------- ---------- ---------- Net Income $5,929,000 $3,281,000 $15,233,000 Plus(Less): Preferred Stock Dividends (868,000) (1,444,000) (1,440,000) Accretion of Discount on Preferred Stock (202,000) (257,000) (257,000) Interest on Warrant Put Rights -- 119,000 136,000 ----------- ---------- ---------- Net Income Applicable to Common and Common Equivalent Shares $4,859,000 $1,699,000 $13,672,000 ========== ========== =========== Per Share Amount: Income before Extraordinary Item and Cumulative Effect of Accounting Change $ 1.26 $ 0.96 $ 2.66 Extraordinary Item $ (0.33) $ -- $ -- Cumuative Effect of Accounting Change $ -- $ (0.63) $ -- ---------- ---------- ----------- Net Income $ 0.93 $ 0.33 $ 2.66 ========== ========== ===========
EX-21 4 SUBSIDIARIES OF THE REGISTRANT AT 12/31/93 EXHIBIT 21 INTERNATIONAL SHIPHOLDING CORPORATION SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1993
Jurisdiction Under Which Organized __________________ International Shipholding Corporation (Registrant) Delaware International Shipholding Corporation (1) New York Waterman Steamship Corporation New York Central Gulf Lines,Inc. Delaware Florida Barge Lines Corporation Delaware Material Transfer, Inc. Delaware LCI Shipholdings, Inc. Liberia Bay Insurance Company Ltd. Bermuda Gulf South Shipping Pte. Ltd. Singapore Adrian Shipping (Bermuda), Ltd. Bermuda Cypress Auto Carriers, Inc. Liberia New Combo, Inc. Liberia Bulkowner's 1984 (2) Liberia New Combo Ships Pte. Ltd. (2) Singapore Marco Shipping Co. Pte. Ltd. (2) Singapore Marcoship Agencies Malaysia Forest Lines Inc. Liberia N. W. Johnsen & Co., Inc. New York St. Rose Fleeting Company, Inc. Louisiana Lash Marine Services, Inc. Louisiana Sulphur Carriers, Inc. Delaware Allied Ocean Carriers, Inc. Liberia Am Sea Acquisition Corp. Delaware Lash Intermodal Terminal Company Delaware Resource Carriers, Inc. Delaware A/S Havtor (3) Norwegian A/S Havtor Management (4) Norwegian K/S Havgas Partners (5) Norwegian
[FN] (1) New York name-holding corporation (2) 50% owned by the Registrant (3) 14.8% owned by the Registrant (4) 14.2% owned by the Registrant (5) 10% owned by the Registrant All of the subsidiaries listed above are wholly-owned subsidiaries and are included in the consolidated financial statements incorporated by reference herein unless otherwise indicated. -----END PRIVACY-ENHANCED MESSAGE-----