10-K

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                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, 2004

                                       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
6.0% Convertible Exchangeable Preferred Stock            New York Stock Exchange
        7 3/4% Senior Notes Due 2007                     New York Stock Exchange


     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 [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation 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 is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant, as of the last business day of the registrant's most recently
completed second fiscal quarter.



                         DATE                        AMOUNT
                         ----                        ------
                                               
                    June 30, 2004                 $62,146,604


     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

      Common stock, $1 par value........6,082,887 shares outstanding as of
                                        February 25, 2005

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive proxy statement dated March 14,
2005, have been incorporated by reference into Part III of this Form 10-K.

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                                     PART I

ITEM 1. BUSINESS

GENERAL

          In this report, the terms "we," "us," "our," and "the Company" refer
to International Shipholding Corporation and its subsidiaries. Through our
subsidiaries, we operate a diversified fleet of U.S. and foreign flag vessels
that provide international and domestic maritime transportation services to
commercial and governmental customers primarily under medium- to long-term
charters or contracts. At December 31, 2004, we owned and/or operated 35
ocean-going vessels, 917 LASH (Lighter Aboard SHip) barges, and related
shoreside handling facilities. We also own 32 over-the-road haul-away car
carrying trucks.

          Our fleet includes (i) four U.S. flag Pure Car/Truck Carriers
("PCTCs") specifically designed to transport fully assembled automobiles, trucks
and larger vehicles and two foreign flag PCTCs with the capability of
transporting heavy weight and large dimension trucks and buses, as well as
automobiles; (ii) one Breakbulk/Multi-Purpose vessel, two Container vessels and
one Tanker vessel, which are used to transport supplies for the Indonesian
operations of a mining company; (iii) two U.S. flag Molten Sulphur vessels,
which are used to carry molten sulphur from Louisiana and Texas to a processing
plant on the Florida Gulf Coast; (iv) two Special Purpose vessels modified as
Roll-On/Roll-Off vessels ("RO/ROs") to transport loaded rail cars between U.S.
Gulf and Mexico; (v) one U.S. flag conveyer-equipped self-unloading Coal
Carrier, which carries coal in the coastwise and near-sea trade; (vi) three
RO/RO vessels that permit rapid deployment of rolling stock, munitions, and
other military cargoes requiring special handling; (vii) two Container vessels
we time charter; (viii) two Cape-Size Bulk Carriers in which we own a 50%
interest; and (ix) nine Cement Carriers in which we own a 26.1% interest.

          Our fleet also includes three LASH vessels, one Dockship, and 917 LASH
barges. In our transoceanic liner services, we use the LASH system primarily to
gather cargo on rivers and in harbors that are too shallow for traditional
vessels.

          Our fleet is deployed by our principal operating subsidiaries, Central
Gulf Lines, Inc. ("Central Gulf"), LCI Shipholdings, Inc. ("LCI") which includes
a transatlantic liner service doing business as "Forest Lines," Waterman
Steamship Corporation ("Waterman"), and CG Railway, Inc. ("CG Railway"). Other
of our subsidiaries provide ship charter brokerage, agency and other specialized
services.

          We have five operating segments, Liner Services, Time Charter
Contracts, Contracts of Affreightment ("COA"), Rail-Ferry Service, and Other, as
described below. For additional information about our operating segments see
Note K - Significant Operations of the Notes to the Consolidated Financial
Statements contained in this Form 10-K on page F-22. In addition to our five
operating segments, we have investments in several unconsolidated entities of
which we own 50% or less and do not exercise significant influence over
operating and financial activities.

          Liner Services. In our Liner Services segment we operate four vessels,
including a Dockship that positions barges for pick-up and discharge, on
established trade routes with regularly scheduled sailing dates. We receive
revenues for the carriage of cargo within the established trading area and pay
the operating and voyage expenses incurred. Our Liner Services include a U.S.
flag Liner Service between U.S. Gulf and East Coast ports and ports in the Red
Sea and in South Asia, and a foreign flag transatlantic Liner Service operating
between U.S. Gulf and East Coast ports and ports in northern Europe.

          Time Charter Contracts. Time Charters are contracts by which the
charterer obtains the right for a specified time period to direct the movements
and utilization of the vessel in exchange for payment of a specified daily rate,
but we retain operating control over the vessel. Typically, we fully equip the
vessel and are responsible for normal operating expenses, repairs, crew wages,
and insurance, while the charterer is responsible for voyage expenses, such as
fuel, port, and stevedoring expenses. Our Time Charter Contracts include
charters of three RO/RO vessels to the United States Navy's Military Sealift
Command ("MSC") for varying terms. Also included in this segment are contracts
with ship operators for six PCTCs, with an electric utility for a
conveyor-equipped, self-unloading coal carrier and with a mining company to
provide transportation services at its mine in Papua, Indonesia.

          Contracts of Affreightment ("COA"). COAs are contracts by which we
undertake to provide space on our vessels for the carriage of specified goods or
a specified quantity of goods on a single voyage or series of voyages over a
given period of time between named ports or within certain geographical areas in
return for the payment of an agreed amount per unit of cargo carried. Generally,
we are responsible for all operating and voyage expenses. Our COA segment
includes a molten sulphur transportation contract.

          Rail-Ferry Service. In the beginning of 2001, we began a new service,
through our subsidiary CG Railway, carrying loaded rail cars between U.S. Gulf
and Mexico. This service uses our two Special Purpose vessels, which were
modified to enable them to carry standard size railroad cars. Each vessel has a
capacity for 60 standard size rail cars. In 2005, we intend to add a second deck
to each vessel in order to essentially double their capacity. We expect the
vessels to


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begin shipyard work in mid-2005 and fully return to service in the second half
of 2005. In the fourth quarter of 2004, we announced our decision to relocate
our Rail-Ferry Service's domestic operations from the port of Mobile to the port
of New Orleans. As part of the incentive to relocate, the state of Louisiana and
the City of New Orleans agreed to finance part of the terminal and
infrastructure cost associated with the move. In return, we have agreed that our
operations will remain at the port of New Orleans for a minimum of ten years.

          Other. This segment consists of operations that include more
specialized services than the former four segments and subsidiaries that provide
ship charter brokerage and agency services. Also included in this segment is our
over-the-road car transportation truck company.

          Unconsolidated Entities. We have a 26.1% interest in a company owning
and operating nine Bulk Cement Carriers. We also have a 50% interest in a
company owning two Cape-Size Bulk Carriers and a 50% investment in a company
that operates a terminal in Coatzacoalcos, Mexico for our Rail-Ferry Service.

BUSINESS STRATEGY

          Our strategy is to (i) identify customers with high credit quality and
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) provide our customers
with reliable, high quality service at a reasonable cost.

          Because our strategy is to seek medium- to long-term contracts and
because we have diversified customer and cargo bases, we are generally insulated
from the cyclical nature of the shipping industry. However, of our five
operating segments, our Liner Service and Rail-Ferry Service segments are the
most susceptible to the shipping industry's cyclical nature and are impacted by,
among other things, fluctuations in the worldwide supply of and demand for
vessel capacity fuel oil cost and the seasonal demands for certain cargoes that
we ship.

          We believe that our strategy has produced relatively stable operating
cash flows for an industry that tends to be cyclical and valuable long-term
relationships with our customers. We plan to continue this strategy by expanding
our relationships with existing customers, seeking new customers, and
selectively pursuing acquisitions.

HISTORY

          The Company was originally founded as Central Gulf Steamship
Corporation in 1947 by the late Niels F. Johnsen and his sons, Niels W. Johnsen,
a director of the Company, and Erik F. Johnsen, our Chairman and Chief Executive
Officer. Central Gulf was privately held until 1971 when it merged with Trans
Union Corporation ("Trans Union"). In 1978, International Shipholding
Corporation was formed to act as a holding company for Central Gulf, LCI, and
certain other affiliated companies in connection with the 1979 spin-off by Trans
Union of our common stock to Trans Union's stockholders. In 1986, we acquired
the assets of Forest Lines, and in 1989, we acquired Waterman. Since our
spin-off from Trans Union, we have continued to act solely as a holding company,
and our only significant assets are the capital stock of our subsidiaries.

COMPETITIVE STRENGTHS

          Diversification. Our strategy for many years has been to seek and
obtain contracts that contribute to a diversification of operations. These
diverse operations vary from chartering vessels to the United States government,
to chartering vessels for the transportation of automobiles and military
vehicles, transportation of paper, steel, wood and wood pulp products, carriage
of supplies for a mining company, transporting molten sulphur, transporting coal
for use in generating electricity, and transporting standard size railroad cars.
In recent years, we have upgraded our fleet and brought the average age of our
vessels down to approximately 15.4 years as compared with approximately 17.7
years in 2000. As a result, our management believes that the outlook for
fulfilling current contracts, obtaining extensions through the exercise of
options by current customers, and obtaining new contracts is good.

          Stable Cash Flow. We believe that our historical cash flows have been
relatively stable for an industry that tends to be cyclical, because of the
length and structure of our contracts, the creditworthiness of our customers and
our diversified customer and cargo bases. Our cash flow from operations was
approximately $24.4 million, $38.6 million and $18.4 million for the years ended
December 31, 2004, 2003 and 2002, respectively. Our medium- to long-term
charters provide for a daily charter rate that is payable whether or not the
charterer utilizes the vessel. These charters generally require the charterer to
pay certain voyage operating costs, including fuel, port, and stevedoring
expenses, and often include cost escalation features covering certain of our
expenses. In addition, our COAs guarantee a minimum amount of cargo for
transportation, and our diversified cargo and customer bases have contributed to
the stability of our operating cash flow. We also believe that the high credit
quality of most of our customers and the length of our contracts help reduce the
effects of the cyclical nature of the shipping industry.

          Longstanding Customer Relationships. We currently have medium- to
long-term time charters with, or contracts to carry cargo for, the MSC (10% of
our fiscal year 2004 revenues) and a variety of high credit quality commercial
customers


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that include International Paper Company (2.3% of our fiscal year 2004
revenues), P.T. Freeport Indonesia (5.7% of our fiscal year 2004 revenues),
Toyota Motor Corporation (5.3% of our fiscal year 2004 revenues) and Hyundai
Motor Company (5.7% of our fiscal year 2004 revenues). Most of these companies
have been customers of ours for over ten years. Substantially all of our current
cargo contracts and charter agreements are renewals or extensions of previous
agreements. In recent years, we have been successful in winning extensions or
renewals of substantially all of the contracts rebid by our commercial
customers, and we have been operating vessels for the MSC for more than 30
years. We believe that our longstanding customer relationships are in part due
to our excellent reputation for providing quality specialized maritime service
in terms of on-time performance, low cargo loss, minimal damage claims and
reasonable rates.

          Experienced Management Team. Our management team has substantial
experience in the shipping industry. Our Chairman has served the Company in
various management capacities since its founding in 1947. In addition, our
President, Executive Vice President, and Chief Financial Officer have over 95
years of collective experience with the Company. We believe that the experience
of our management team is important to maintaining long-term relationships with
our customers.

TYPES OF SERVICE

          Through our principal operating subsidiaries, we provide specialized
maritime transportation services to our customers primarily under medium- to
long-term contracts. Our five operating segments, Liner Services, Time Charter
Contracts, Contracts of Affreightment, Rail-Ferry Service, and Other are
described below:

     LINER SERVICES

     LASH Vessels

          Foreign Flag.  We operate two foreign flag LASH vessels and a
     self-propelled, semi-submersible feeder vessel on a scheduled transatlantic
     liner service under the name "Forest Lines." One of the two foreign flag
     LASH vessels is under an operating lease through 2007. Each Forest Lines
     LASH vessel normally makes 10 round trip sailings per year between U.S.
     Gulf and East Coast ports and ports in northern Europe. After the first
     quarter of 2005, we will no longer sail to the East Coast ports. We
     continue to diversify our eastbound cargo among various commercial shippers
     and now carry significant quantities of rice and petroleum coke as well as
     paper products. Our contract with International Paper Company for eastbound
     cargo space 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. Our current contract with International Paper Company was
     for a ten-year term ending in 2002, and was extended for an additional
     three-year period ending in December of 2005 with mutual options to extend
     on a year-to-year basis.

          Over the years, we have established a base of commercial shippers to
     which we provide space on the westbound Forest Lines service. The principal
     westbound cargoes are steel and other metal products, high-grade paper and
     wood products, and other general cargo. Over the last five years, the
     westbound utilization rate for these vessels averaged approximately 86.5%
     per year.

          U.S. Flag.  Waterman previously operated a U.S. flag Liner Service
     between U.S. Gulf and East Coast ports and ports in South Asia using four
     U.S. flag LASH vessels, as well as one FLASH vessel that was used as a
     feeder vessel in Southeast Asia. In June of 2001, we adopted a plan to
     separate this service from the balance of our operations and dispose of
     these assets. All of these vessels were sold by the end of 2002.

          During 2002, we reactivated a U.S. flag Liner Service between the U.S.
     Gulf and East Coast ports and ports in the Red Sea and Middle East due to
     several changes in circumstances that occurred after our decision in 2001
     to suspend the previous service. We concluded that there would be adequate
     cargo volume for shipment on U.S. flag vessels to the service area to
     justify maintaining the service. As a result, we recommissioned one of our
     foreign flag LASH vessels, which had been idle and scheduled for disposal,
     together with a number of LASH barges. After its upgrade, the foreign flag
     vessel entered our Forest Lines service in November of 2002, replacing one
     of the vessels operating in that service. The replaced vessel transferred
     to U.S. flag for use in the renewed U.S. flag Liner Service, which
     commenced operation in November of 2002.

          The Maritime Security Act of 1996 ("MSA"), which provides for a
     program for certain U.S. flag vessels, was signed into law in October of
     1996. Under this program, the Maritime Security Program ("MSP"), each
     participating vessel is eligible to receive an annual payment of $2.1
     million, which is subject to annual appropriations and not guaranteed. In
     2003, Congress authorized an extension of the MSP through 2015, increased
     the number of ships industry-wide eligible to participate in the program
     from 47 to 60, and increased the annual payment per vessel, all to be
     effective on October 1, 2005. Annual payments for each vessel in the new
     program will be $2.6 million in years 2006 to 2008, $2.9 million in years
     2009 to 2011, and $3.1 million in years 2012 to 2015. As of December 31,
     2004, our Waterman U.S. flag LASH vessel mentioned earlier, and four PCTCs
     and two Container ships included in the Time Charter Contracts segment have
     qualified for participation, the terms of which were extended in October of
     2004 through September 30, 2015. On January 12, 2005, we were awarded one
     additional MSP contract, effective October


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     1, 2005, for a net total of eight MSP contracts. We are currently exploring
     our options to fulfill the contract requirement.

     TIME CHARTER CONTRACTS

     Military Sealift Command Charters

          We have had contracts with the MSC (or its predecessor) almost
     continuously for over 30 years. In 1983, Waterman was awarded a contract to
     operate three U.S. flag RO/RO vessels under time charters to the MSC for
     use by the United States Navy in its maritime prepositioning ship ("MPS")
     program. These vessels represent three of the sixteen MPS vessels currently
     in the MSC's worldwide fleet providing support to the U.S. Marine Corps.
     These ships are designed primarily to carry rolling stock and containers,
     and each can 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. In 1993, the Company reached an agreement with the MSC
     to make certain reductions in future charter hire payments in consideration
     of fixing the period of these charters for the full 25 years. The charters
     and related operating agreements will expire in 2009 and 2010.

     Pure Car/Truck Carriers

          U.S. Flag.  We currently operate four U.S. flag PCTCs. In 1986, we
     entered into multi-year charters to carry Toyota and Honda automobiles from
     Japan to the United States. To service these charters, we had constructed
     two car carriers that were specially designed to carry 4,000 and 4,660
     fully assembled automobiles, respectively. Both vessels were built in Japan
     and were registered under the U.S. flag. In 2000 and 2001, we replaced
     these two vessels with larger PCTCs, which are under their initial
     contracts through 2010 and 2011 with the same Japanese shipping company,
     which had been nominated by Toyota Motor Corporation as our vessel's
     timecharterer. Both of these contracts may be extended beyond the initial
     term at the option of the shipping company.

          In 1998, we acquired a 1994-built U.S. flag PCTC. Immediately after
     being delivered to us in April of 1998, this vessel entered a long-term
     charter through 2008 with the same Japanese shipping company. In 1999, we
     acquired the fourth vessel, a newly built U.S. flag PCTC, which immediately
     after being delivered to us in September of 1999 entered a long-term
     charter through 2011 with the same Japanese shipping company. Both of these
     contracts may be extended beyond the initial term at the option of the
     shipping company. These last two PCTCs were subsequently sold to
     unaffiliated parties and leased back under operating leases expiring in
     2009 and 2013, respectively.

          Foreign Flag.  In 1988, we had two new car carriers constructed by a
     shipyard affiliated with Hyundai Motor Company, each with a carrying
     capacity of 4,800 fully assembled automobiles, to transport Hyundai
     automobiles from South Korea primarily to the United States and Europe
     under two long-term charters. In 1998 and 1999, we sold these car carriers
     and replaced them with two newly built PCTCs, each with the capacity to
     carry heavy and large size rolling stock in addition to automobiles and
     trucks. We immediately entered into a long-term charter of these vessels
     through 2018 and 2019 to a Korean shipping company. One of these PCTCs was
     subsequently sold to an unaffiliated party and leased back under an
     operating lease through 2016, and we have an option to purchase the vessel
     thereafter.

          Under each of our PCTC charters, the charterers are responsible for
     voyage operating costs such as fuel, port, and stevedoring expenses, while
     we are responsible for other operating expenses including crew wages,
     repairs, and insurance. During the terms of these charters, we are entitled
     to our full fee irrespective of the number of voyages completed or the
     number of cars carried per voyage.

          In the fourth quarter of 2002, the Korean shipping company, the
     charterer of our foreign flag PCTCs, sold its car carrier division to a
     joint venture controlled by Wallenius Lines AB, Wilhelm Wilhelmsen ASA and
     Hyundai Motor Company. We were not impacted by the transaction as all terms
     and conditions of the charter parties remain in effect.

     Coal Carrier

          In late 1995, we purchased an existing U.S. flag conveyor-equipped,
     self-unloading Coal Carrier that was chartered to a New England electric
     utility under a 15-year time charter expiring in 2010 to carry coal in the
     coastwise and near-sea trade. Since the base charter provides approximately
     60% utilization, the ship will also be used, from time to time during this
     charter period, to carry coal and other bulk commodities in the spot market
     for the account of other charterers. The utility company filed for
     bankruptcy protection in July of 2003. However, in November of 2004, the
     bankruptcy court approved the utility company's sale of a substantial
     portion of its generation assets to a third party. Pursuant to the asset
     purchase agreement, which became effective on January 1, 2005, the third
     party has assumed the charter in place of the utility company.


                                       5



     Southeast Asia Transportation Contract

          The contract to transport supplies for a mining company in Indonesia
     is serviced by a Breakbulk/Multi-Purpose vessel, a small Tanker, and two
     Container vessels.

     CONTRACTS OF AFFREIGHTMENT

          In 1994, we entered into a 15-year transportation contract with
     Freeport-McMoRan Sulphur LLC, a sulphur transporter for which we had built
     a 28,000 DWT Molten Sulphur Carrier that carries molten sulphur from
     Louisiana and Texas to a fertilizer plant on the Florida Gulf Coast. Under
     the terms of this contract, we are guaranteed the transportation of a
     minimum of 1.8 million tons of molten sulphur per year. The contract also
     gives the charterer three five-year renewal options. The vessel was
     delivered and began service during late 1994. During the second quarter of
     2002, the contract was assigned by Freeport-McMoRan Sulphur LLC to Gulf
     Sulphur Services Ltd. The terms of the contract were not affected by the
     assignment.

     RAIL-FERRY SERVICE

          Commencing in 2001, we began a new service, through our subsidiary CG
     Railway, carrying loaded rail cars between the U.S. Gulf and Mexico. This
     new service uses our two Special Purpose vessels, which were modified to
     enable them to carry standard size railroad cars. Each vessel has a
     capacity of 60 standard size rail cars. With departures every four days
     from Coatzacoalcos, Mexico and Mobile, Alabama, respectively, it offers
     with each vessel a three-day transit between these ports and provides
     approximately 90 trips per year in each direction. In 2005, we intend to
     add a second deck to each vessel in order to essentially double their
     capacity. We expect the vessels to begin shipyard work in mid-2005 and
     fully return to service in the second half of 2005. In the fourth quarter
     of 2004, we announced our decision to relocate our Rail-Ferry Service's
     domestic operations from the port of Mobile to the port of New Orleans. As
     part of the incentive to relocate, the state of Louisiana and the City of
     New Orleans agreed to finance part of the terminal and infrastructure cost
     associated with the move. In return, we have agreed that our operations
     will remain at the port of New Orleans for a minimum of ten years.

     OTHER

          We lease a cargo transfer facility at the river port of Memphis,
     Tennessee, and several of our subsidiaries provide ship charter brokerage,
     agency, and other specialized services to our operating 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 our operations by
     allowing us to avoid reliance on third parties to provide these essential
     shipping services. Also included in this segment is our over-the-road car
     transportation truck company.

MARKETING

          We maintain marketing staffs in New York and New Orleans, and a
network of marketing agents in major cities around the world who market our
liner, charter, and contract services. We market our transatlantic LASH Liner
Service under the trade name "Forest Lines," and our U.S. flag LASH Liner
Service between the U.S. Gulf and East Coast ports and ports in the Red Sea and
Middle East under the Waterman house flag. We market our Rail-Ferry Service
under the name "CG Railway." We advertise our services in trade publications in
the United States and abroad.

INSURANCE

          We maintain protection and indemnity ("P&I") insurance to cover
liabilities arising out of our ownership and operation of vessels with the
Standard Steamship Owners' Protection & Indemnity Association (Bermuda) Ltd.,
which is a mutual shipowners' insurance organization commonly referred to as a
P&I club. The club is a participant in and subject to the rules of its
respective international group of P&I associations. The premium terms and
conditions of the P&I coverage provided to us are governed by the rules of the
club.

          We maintain hull and machinery insurance policies on each of our
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 U.S., British, and French
insurance markets. We maintain war risk insurance on each of our vessels in an
amount equal to each vessel's total insured hull value. War risk insurance is
placed through U.S., British, 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 P&I
club. Our war risk insurance also covers liability to third parties caused by
war or terrorism and damages to our land-based assets caused by war, but does
not cover damage to our land-based assets caused by terrorism.


                                       6



          The P&I insurance also covers our vessels against liabilities arising
from the discharge of oil or hazardous substances in U.S., international, and
foreign waters.

          We also maintain loss of hire insurance with U.S., British, and French
insurance markets to cover our 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 and war risk policy.

          Insurance coverage for shoreside property, shipboard consumables and
inventory, spare parts, workers' compensation, office contents, and general
liability risks is maintained with underwriters in U.S. and British markets.

          Insurance premiums for the coverage described above vary from year to
year depending upon our loss record and market conditions. In order to reduce
premiums, we maintain certain deductible and co-insurance provisions that we
believe are prudent and generally consistent with those maintained by other
shipping companies (See Note D - Self-Retention Insurance of the Notes to the
Consolidated Financial Statements contained in this Form 10-K on page F-14).

NEW TAX LEGISLATION

          Under previous United States tax law, U.S. companies like us and their
domestic subsidiaries generally have been taxed on all income, including in our
case income from shipping operations, whether derived in the United States or
abroad. With respect to any foreign subsidiary in which we hold more than a 50
percent interest (referred to in the tax laws as a controlled foreign
corporation, or "CFC"), we are treated as having received a current taxable
distribution of our pro rata share of income derived from foreign shipping
operations.

          The American Jobs Creation Act of 2004 ("Jobs Creation Act"), which
became effective for us on January 1, 2005, changed the United States tax
treatment of our U.S. flag vessels in foreign operations and foreign flag
shipping operations.

          During December of 2004, we made an election under the Jobs Creation
Act to have our U.S. flag operations (other than those of two ineligible vessels
used exclusively in United States coastwise commerce) taxed under a new "tonnage
tax" regime rather than under the usual U.S. corporate income tax regime. As a
result of that election, going forward our gross income for United States income
tax purposes with respect to our eligible U.S. flag vessels will not include (1)
income from qualifying shipping activities in U.S. foreign trade (i.e.,
transportation between the U.S. and foreign ports or between foreign ports), (2)
income from cash, bank deposits and other temporary investments that are
reasonably necessary to meet the working capital requirements of our qualifying
shipping activities, and (3) income from cash or other intangible assets
accumulated pursuant to a plan to purchase qualifying shipping assets.

          Under the tonnage tax regime, our taxable income with respect to the
operations of our eligible U.S. flag vessels will be based on a "daily notional
taxable income," which will be taxed at the highest corporate income tax rate.
The daily notional taxable income from the operation of a qualifying vessel will
be 40 cents per 100 tons of the net tonnage of the vessel (up to 25,000 net
tons), and 20 cents per 100 tons of the net tonnage of the vessel in excess of
25,000 net tons. The taxable income of each qualifying vessel will be the
product of its daily notional taxable income and the number of days during the
taxable year that the vessel operates in United States foreign trade.

          Under the Jobs Creation Act, the taxable income from the shipping
operations of our CFCs will generally no longer be subject to current United
States income tax but will be deferred until repatriated. The year ended
December 31, 2004 includes an addition to net income in the amount of $7.7
million reflecting a reduction in our net deferred tax provision brought about
by the enactment of the Jobs Creation Act during the fourth quarter of 2004.
Passage of this new tax act, and our election in December of 2004 for our
qualified domestic operations to be taxed under the tonnage tax provision of the
new law, rendered certain net deferred tax provisions booked in prior years
unnecessary. Our effective tax rate and tax provisions will be materially lower
in future years.

REGULATION

          Our operations between the United States and foreign countries are
subject to the Shipping Act of 1984 (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, the Act to Prevent
Pollution from Ships, and the Comprehensive Environmental Response Compensation
and Liability Act, all of which are administered by the U.S. Coast Guard and
other federal agencies, and certain other international, federal, state, and
local laws and regulations, including international conventions and laws and
regulations of the flag nations of our vessels. Pursuant to the requirements of
the Shipping Act, we have on file with the Federal Maritime Commission tariffs
reflecting the outbound and inbound rates currently charged by us to transport
cargo between the United States and foreign countries as a common carrier in
connection with our liner services. These tariffs are filed by us either
individually or in connection with our participation as a member of rate or
conference agreements, which are agreements that (upon becoming effective
following filing 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


                                       7



decrease. On October 16, 1998, the Ocean Shipping Reform Act of 1998 was
enacted, and it amended the Shipping Act of 1984 to promote the growth and
development of United States exports through certain reforms in the regulation
of ocean transportation. This legislation, in part, repeals the requirement that
a common carrier or conference file tariffs with the Federal Maritime
Commission, replacing it with a requirement that tariffs be open to public
inspection in an electronically available, automated tariff system. Furthermore,
the legislation requires that only the essential terms of service contracts be
published and made available to the public.

          On October 8, 1996, Congress adopted the Maritime Security Act of
1996, which created the MSP and authorized the payment of $2.1 million per year
per ship for 47 U.S. flag ships through fiscal year 2005. This program
eliminates the trade route restrictions imposed by the previous federal program
and provides flexibility to operate freely in the competitive market. On
December 20, 1996, Waterman entered into four MSP contracts with MarAd, and
Central Gulf entered into three MSP contracts with MarAd. By law, the MSP is
subject to annual appropriations. In the event that sufficient appropriations
are not made for the MSP by Congress in any fiscal year, the Maritime Security
Act of 1996 permits MSP contractors, such as Waterman and Central Gulf, to
re-flag their vessels under foreign registry expeditiously. In 2003, Congress
authorized an extension of the MSP through 2015, increased the number of ships
industry-wide eligible to participate in the program from 47 to 60, and
increased MSP payments to companies in the program, all to be effective on
October 1, 2005. Annual payments for each vessel in the new MSP program will be
$2.6 million in years 2006 to 2008, $2.9 million in years 2009 to 2011, and $3.1
million in years 2012 to 2015. On October 15, 2004, Waterman and Central Gulf
each filed applications to extend their MSP contracts for another 10 years
through September 30, 2015, all seven of which were effectively grandfathered in
the MSP reauthorization. Simultaneously, we offered additional ships for
participation in the MSP. On January 12, 2005, MarAd awarded Central Gulf four
MSP contracts and Waterman four MSP contracts, effective October 1, 2005, for a
net increase of one MSP contract. We are currently exploring our options to
fulfill the contract requirement.

          Our Molten Sulphur Carrier was constructed with the aid of Title XI
loan guarantees administered by MarAd, the receipt of which obligated us to
comply with various dividend and other financial restrictions. In late 2004, we
paid down all of our outstanding Title XI debt on this vessel and we are no
longer bound by the dividend and financial restrictions of the Maritime
Administration.

          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, terms of
our RO/RO operating contract call for significant early termination penalties.

          Certain laws governing our operations, as well as our molten sulphur
transportation contract, require us to be as much as 75% owned by U.S. citizens.
We monitor our stock ownership to verify our continuing compliance with these
requirements and have never had more than 1% of our capital stock held of record
by non-U.S. citizens (including corporations or other entities controlled by
non-U.S. citizens). Our certificate of incorporation allows our board of
directors to restrict the acquisition of our capital stock by non-U.S. citizens.
Under our certificate of incorporation, our board of directors may, in the event
of a transfer of our capital stock that would result in non-U.S. citizens owning
more than 23% (the "permitted amount") of our total voting power, declare such
transfer to be void and ineffective. In addition, our board of directors may, in
its sole discretion, deny voting rights and withhold dividends with respect to
any shares of our capital stock owned by non-U.S. citizens in excess of the
permitted amount. Furthermore, our board of directors is entitled under our
certificate of incorporation to redeem shares owned by non-U.S. citizens in
excess of the permitted amount in order to reduce the ownership of our capital
stock by non-U.S. citizens to the permitted amount.

          We are required by various governmental and quasi-governmental
agencies to obtain permits, licenses, and certificates with respect to our
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. We believe that
we have, or can readily obtain, all permits, licenses, and certificates
necessary to permit our vessels to operate.

          The International Maritime Organization ("IMO") amended the
International Convention for the Safety of Life at Sea ("SOLAS"), to which the
United States is a party, to require nations that are parties to SOLAS to
implement the International Safety Management ("ISM") Code. The ISM Code
requires that responsible companies, including owners and/or operators of
vessels engaged on foreign voyages, develop and implement a safety management
system to address safety and environmental protection in the management and
operation of vessels. Companies and vessels to which the ISM Code applies are
required to receive certification and documentation of compliance. Vessels
operating without such certification and documentation in the U.S. and ports of
other nations that are parties to SOLAS may be denied entry into ports, detained
in ports or fined. We implemented a comprehensive safety management system and
obtained timely IMO


                                       8



certification and documentation for our companies and all of our vessels. In
addition, our ship management subsidiary, LMS Shipmanagement, Inc., is certified
under the ISO 9002 Quality Standard.

          More recently, in 2003, SOLAS was again amended to require parties to
the convention to implement the International Ship and Port Facility Security
("ISPS") Code. The ISPS Code requires owners and operators of vessels engaged on
foreign voyages to conduct vulnerability assessments and to develop and
implement company and vessel security plans, as well as other measures, to
protect vessels, ports and waterways from terrorist and criminal acts. In the
U.S., these provisions were implemented through the Maritime Transportation
Security Act of 2002 ("MTSA"). These provisions became effective on July 1,
2004. As with the ISM Code, companies and vessels to which the ISPS Code applies
must be certificated and documented. Vessels operating without such
certification and documentation in the U.S. and ports of other nations that are
parties to SOLAS may be denied entry into ports, detained in ports or fined.
Vessels subject to fines in the U.S. are liable in rem, which means vessels may
be subject to arrest by the U.S. government. For U.S. flag vessels, company and
vessel security plans must be reviewed and approved by the U.S. Coast Guard. We
have conducted the required security assessments and submitted plans for review
and approval as required, and we believe that we are in compliance in all
material respects with all ISPS Code and MTSA security requirements.

          The Coast Guard and Maritime Transportation Act of 2004, signed into
law on August 9, 2004, amended the Oil Pollution Act of 1990 ("OPA") to require
owners or operators of all non-tank vessels of 400 gross tons or greater to
develop and submit plans for responding, to the maximum extent practicable, to
worst case discharges and substantial threats of discharges of oil from these
vessels. This statute extends to all types of vessels of 400 gross tons or
greater the vessel response planning requirements of the OPA that had previously
only applied to tank vessels. The statute requires plans to be submitted by
August 9, 2005. We are awaiting regulations implementing this requirement, and
expect to comply in all respects.

          Also, under the OPA, vessel owners, operators and bareboat charterers
are responsible parties that are jointly, severally and strictly liable for all
response costs and other damages arising from oil spills from their vessels in
waters subject to U.S. jurisdiction, with certain limited exceptions. Other
damages include, but are not limited to, natural resource damages, real and
personal property damages, and other economic damages such as net loss of taxes,
royalties, rents, profits or earning capacity, and loss of subsistence use of
natural resources. For non-tank vessels, the OPA limits the liability of
responsible parties to the greater of $600 per gross ton or $500,000. The limits
of liability do not apply if it is shown that the discharge was proximately
caused by the gross negligence or willful misconduct of, or a violation of a
federal safety, construction or operating regulation by, the responsible party,
an agent of the responsible party or a person acting pursuant to a contractual
relationship with the responsible party. Further, the limits do not apply if the
responsible party fails or refuses to report the incident, or to cooperate and
assist in oil spill removal activities. Additionally, the OPA specifically
permits individual states to impose their own liability regimes with regard to
oil discharges occurring within state waters, and some states have implemented
such regimes.

          Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") also applies to owners and operators of vessels, and contains a
similar liability regime for cleanup and removal of hazardous substances and
natural resource damages. Liability under CERCLA is limited to the greater of
$300 per gross ton or $5 million.

          Under the OPA, vessels are required to establish and maintain with the
U.S. Coast Guard evidence of financial responsibility sufficient to meet the
highest limit of their potential liability under the act. Under Coast Guard
regulations, evidence of financial responsibility may be demonstrated by
insurance, surety bond, self-insurance or guaranty. An owner or operator of more
than one vessel must demonstrate financial responsibility for the entire fleet
in an amount equal to the financial responsibility of the vessel having greatest
maximum liability under the OPA and CERCLA. We insure each of our vessels with
pollution liability insurance in the amounts required by law. A catastrophic
spill could exceed the insurance coverage available, in which event our
financial condition and results of operations could be adversely affected.

          While the U.S. is not a party, for our vessels operating in foreign
waters, many countries have ratified and follow the liability plan adopted by
the IMO as set out in the International Convention on Civil Liability for Oil
Pollution Damage of 1969 (the "1969 Convention") and the Convention for the
Establishment of an International Fund for Oil Pollution of 1971. Under these
conventions, the registered owner of a vessel is strictly liable for pollution
damage caused in the territorial seas of a state party by the discharge of
persistent oil, subject to certain complete defenses. Liability is limited to
approximately $183 per gross registered ton (a unit of measurement of the total
enclosed spaces in a vessel) or approximately $19.3 million, whichever is less.
If a country is a party to the 1992 Protocol to the International Convention on
Civil Liability for Oil Pollution Damage (the "1992 Protocol"), the maximum
liability limit is $82.7 million. The limit of liability is tied to a unit of
account that varies according to a basket of currencies. The right to limit
liability is forfeited under the 1969 Convention when the discharge is caused by
the owner's actual fault, and under the 1992 Protocol, when the spill is caused
by the owner's intentional or reckless misconduct. Vessels operating in waters
of states that are parties to these conventions must provide evidence of
insurance covering the liability of the owner. In jurisdictions that are not
parties to these conventions, various legislative schemes or common law govern.
We believe that our pollution insurance policy covers the liability under the
IMO regimes.


                                       9



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. Our strategy is to reduce competitive pressures and the effects of
cyclical market conditions by operating specialized vessels in niche market
segments and deploying a substantial number of our vessels under medium- to
long-term charters or contracts with creditworthy customers and on trade routes
where we have established market share. We also seek to compete effectively in
the traditional areas of price, reliability, and timeliness of service.
Competition principally comes from numerous break bulk vessels and,
occasionally, container ships.

          Approximately 16% of our 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. We compete with all U.S. flag companies, including P&O
Nedlloyd, APL Limited, and Maersk Sealand Service, Inc. for the MSC work and the
Public Law-480 cargo. Additionally, our principal foreign competitors include
Indotrans (Swire), Star Shipping AS, and the Shipping Corporation of India.

          Our LASH Liner Services face competition from foreign flag liner
operators and, to a lesser degree, from U.S. flag liner operators. In addition,
during periods in which we participate in conference agreements or rate
agreements, competition includes other participants with whom we may agree to
charge the same rates and non-participants charging lower rates.

          Because our LASH barges are used primarily to transport large unit
size items, such as forest products and steel that cannot be transported as
efficiently in container ships, our LASH fleet often has a competitive advantage
over these vessels for this type of cargo. In addition, we believe that the
ability of our LASH system to operate in shallow harbors and river systems and
our specialized knowledge of these harbors and river systems give us a
competitive advantage over operators of container ships and break bulk vessels
that are too large to operate in these areas.

          Our PCTCs operate worldwide in markets where foreign flag vessels with
foreign crews predominate. We believe that our U.S. flag PCTCs can continue to
compete effectively if we continue to receive the cooperation of our seamen's
unions in controlling costs and if we continue to participate in the Maritime
Security Program.

RISK FACTORS

          We are highly leveraged. We are highly leveraged and devote a
substantial portion of our operating income to debt service. To date, we have
been able to generate sufficient cash from operations, including planned sales
of assets and sale leaseback transactions, to meet annual interest and principal
payments on our indebtedness. However, following the completion in January of
2005 of our convertible exchangeable preferred stock offering, our combined debt
service and preferred stock dividend requirements will be greater than they have
been in the past, and our ability to satisfy our debt obligations will depend
upon our future operating performance, which will be affected by prevailing
economic conditions and financial, business and other factors, many of which are
beyond our control. If our cash flow and capital resources are insufficient to
fund our debt service and preferred stock dividend obligations, we may be forced
to reduce or delay capital expenditures, sell assets, obtain additional equity
capital or restructure our debt. There can be no assurance that we will be able
to generate sufficient operating cash flows to service our debt and meet our
preferred stock dividend requirements.

          Subject to compliance with various financial and other covenants
imposed by the agreements governing our existing indebtedness and that of our
subsidiaries, we may incur additional indebtedness from time to time, thus
increasing our leverage. We have met the minimum working capital and net worth
requirements of our debt agreements during the period covered by the agreements,
once amended effective June of 2001 and March of 2002. In order to purchase two
Container vessels prior to December 31, 2004, we drew $20 million on our credit
facility in late 2004 and repaid that amount early in January of 2005 with a
portion of the proceeds from the sale of our convertible exchangeable preferred
stock. Having these draws outstanding on our credit facility as of December 31,
2004, caused us to be in "non-compliance" with our leverage ratio as stated in
the agreements at December 31, 2004. However, prior to December 31, 2004, we
obtained waivers from our lenders with respect to this matter of
"non-compliance" with the leverage requirements. We had originally anticipated
closing our preferred stock offering prior to December 31, 2004. If the closing
had occurred prior to December 31, we would have met all financial and other
covenants, including the leverage requirements. We are currently in compliance
again with all our restrictive covenants and believe we will continue to meet
these requirements throughout 2005, although we can give no assurance to that
effect.

          The degree to which we are leveraged could have important adverse
consequences. Among other things, high leverage may: (i) impair our ability to
obtain additional financing for working capital, capital expenditures, vessel
and other acquisitions, and general corporate purposes; (ii) require us to
dedicate a substantial portion of our cash flow from operations to the payment
of principal and interest; (iii) limit the funds available to meet our preferred
stock dividend


                                       10



requirements; (iv) place us at a competitive disadvantage to less
highly-leveraged competitors; and (v) make us more vulnerable to economic
downturns and limit our ability to withstand competitive pressures.

          A default under one of our debt agreements may result in a default
under one or more of our other debt agreements. Our debt obligations are
represented by separate agreements with different lenders. A default under any
agreement can result in the acceleration of principal and interest, and in some
cases penalties, under that agreement. In some cases, a default under one
agreement may create an event of default under other agreements, resulting in
the acceleration of principal, interest and penalties under such other
agreements even though we are otherwise in compliance with all payment and other
obligations under those agreements. Thus, an event of default under a single
agreement, including one that is technical in nature or otherwise not material,
may create an event of default under multiple lending agreements, which could
result in the acceleration of significant indebtedness under multiple agreements
that we may not be able to pay or refinance at that time.

          The agreements governing certain of our debt instruments impose
restrictions on our business. The agreements governing certain of our debt
instruments contain a number of covenants imposing restrictions on our business.
The restrictions these covenants place on us include limitations on our ability
to: (i) redeem and pay dividends on our capital stock; (ii) make investments;
(iii) engage in transactions with affiliates; and (iv) create or permit to exist
liens on our assets. These agreements also require us to meet a number of
financial ratios. As a result of these covenants, our ability to respond to
changes in business and economic conditions and to secure additional financing,
if needed, may be significantly restricted, and we may be prevented from
engaging in transactions that otherwise might be considered beneficial to the
Company.

          In addition, the breach of any of these covenants could result in a
default under several other of these agreements. Upon the occurrence of an event
of default under any such agreement, the lenders could elect to declare all
amounts outstanding to be immediately due and payable. If we were unable to
repay those amounts, such lenders could proceed against the collateral securing
that indebtedness. If amounts outstanding under such agreements were to be
accelerated, there can be no assurance that our assets would be sufficient to
generate sufficient cash flow to repay the accelerated indebtedness.

          Our business and operations are highly-regulated. Our business is
materially affected by government regulation in the form of international
conventions, national, state and local laws and regulations, and laws and
regulations of the flag nations of our vessels, including laws relating to the
discharge of materials into the environment. Because such conventions, laws and
regulations are often revised, we are unable to predict the ultimate costs of
compliance. In addition, we are required by various governmental and
quasi-governmental agencies to obtain and maintain certain permits, licenses and
certificates with respect to our operations. In certain instances, the failure
to obtain or maintain such permits, licenses or certificates could have a
material adverse effect on our business. In the event of war or national
emergency, our U.S. flag vessels are subject to requisition by the United States
without any guarantee of compensation for lost profits, although the United
States government has traditionally paid fair compensation in such
circumstances.

          If sufficient appropriations under the Maritime Security Act of 1996
are not made in any fiscal year, we may not continue to receive annual payments
with respect to certain of our vessels. The Maritime Security Act of 1996, which
provides for a program for certain U.S. flag vessels, was signed into law in
October of 1996. Under this program, each participating vessel is eligible to
receive an annual payment of $2.1 million through the government's fiscal year
2005. In 2003, Congress authorized an extension of the program through 2015,
increased the number of ships eligible industry-wide to participate in the
program from 47 to 60, and increased payments to companies in the program, all
to be effective on October 1, 2005. Annual payments for each vessel in the MSP
are $2.6 million in years 2006 to 2008, $2.9 million in years 2009 to 2011, and
$3.1 million in years 2012 to 2015.

          As of December 31, 2004, seven of our vessels operated under MSP
contracts, the terms of which were extended in October of 2004 through September
30, 2015. On January 12, 2005, we were awarded one additional MSP contract,
effective October 1, 2005, for a total of eight MSP contracts. We are currently
exploring our options to fulfill the contract requirement. Payments under this
program are subject to annual appropriation by Congress and are not guaranteed.
Congress may not make sufficient appropriations under the program in one or more
fiscal years and, as a result, we can provide no assurance as to our continued
receipt, in full or in part, of the annual payments.

          An increase in the supply of vessels without a corresponding increase
in demand for vessels could cause our charter and cargo rates to decline, which
could have a material adverse effect on our revenues and earnings. Historically,
the shipping industry has been cyclical. The profitability and asset values of
companies in the industry have fluctuated in part because of changes in the
supply and demand of vessels. The supply of vessels generally increases with
deliveries of new vessels and decreases with the scrapping of older vessels. If
the number of new vessels delivered exceeds the number of vessels being
scrapped, vessel capacity will increase. If the supply of vessels increases and
the demand for vessels does not, the charter and cargo rates for our vessels
could decline significantly. A decline in our charter and cargo rates could have
a material adverse effect on our revenues and earnings.


                                       11



          The revenues of our liner services segment are subject to seasonal and
cyclical variations, which may cause material fluctuations in our reported
earnings. The demand for certain cargoes carried in our Liner Services, such as
agricultural products, steel and forest products, and the corresponding demand
for Liner Services to ship these cargoes, has historically exhibited seasonal
and cyclical variations. As a result, the revenues of our Liner Services segment
are subject to seasonal and cyclical variations, which may cause material
fluctuations in our revenues and earnings on a quarterly or annual basis, or
both.

          We are dependent on government charters and contracts. We have various
charters or contracts with agencies of the United States government. Companies
engaged in government contracting are subject to certain unique business risks,
including dependence on congressional appropriations and administrative
allotment of funds, and changing policies and regulations. Because government
contracts are usually awarded for relatively short periods of time and are
subject to renewal options in favor of the government, the stability and
continuity of this type of business depends on the periodic exercise by the
government of contract renewal options. Further, government contracting laws
provide that the United States government is to do business only with
responsible contractors. In this regard, federal agencies have the authority
under certain circumstances to suspend or debar a contractor from further
government contracting for periods of time in order to protect the government's
interest. While we have never been suspended or debarred from government
contracting, nor have we ever been the subject of any proceeding for such a
purpose, there can be no assurance that we will not be suspended or debarred, or
subject to such proceeding, in the future.

          Our Rail-Ferry Service has been unprofitable to date, and we can give
no assurance as to its future profitability. Our Rail-Ferry Service began
operating in February of 2001. The introduction of this service in a competitive
market contributed $7.5 million to our net loss in fiscal year 2001, and had
losses of $3.7 million, $2.9 million and $4.3 million in fiscal years 2002, 2003
and 2004, respectively.

          We intend to add a second cargo deck to each of the two vessels
operating in this service in order to essentially double their capacity and
improve our operating margin. We expect the vessels to begin shipyard work in
mid-2005 and fully return to service in the second half of 2005. We believe that
these additions will significantly reduce our cost per unit of cargo carried,
but that will occur only if we are able to book substantially all of the
additional capacity, and we can give no assurance at this time that we will be
successful in doing so.

          We are subject to the risk of continuing high prices, and increasing
prices, of the fuel we consume in our Liner and Rail-Ferry operations. We are
exposed to commodity price risks with respect to fuel consumption in our Liner
and Rail-Ferry operations, and we can give no assurance that we will be able to
offset higher fuel costs due to the competitive nature of these operations.
Moreover, while we entered into hedging arrangements with respect to a portion
of our 2003 fuel requirements and a small portion of our 2004 fuel requirements
for our Liner and Rail-Ferry segments to reduce our exposure to increases in
fuel prices, we currently have no hedging arrangements in place with respect to
our estimated 2005 fuel requirements. We currently have fuel surcharges in
place, however, a material increase in current fuel prices that we cannot
recover through these fuel cost surcharges could adversely affect our results of
operations and financial condition. For an analysis of the effect of our
operating costs and earnings per share of an increase in fuel prices, see Item
7a. Quantitative and Qualitative Disclosures About Market Risk on page 26.

          We operate in a highly competitive industry. The shipping industry is
intensely competitive and can be influenced by economic and political events
that are outside the control of shipping companies. There can be no assurance
that we will be able to renew expiring charters on economically attractive
terms, maintain attractive freight rates, pass cost increases through to our
customers or otherwise successfully compete against our competitors.

          We are subject to the control of our principal stockholders. Four of
our directors, Niels W. Johnsen, Erik F. Johnsen, Niels M. Johnsen and Erik L.
Johnsen, and their family members and affiliated entities, beneficially owned an
aggregate of 38.34% (which includes currently exercisable options to acquire
400,000 shares) of the common stock of the Company as of December 31, 2004. As a
result, the Johnsen family has the power to determine many of our policies, the
election of our directors and officers, and the outcome of various corporate
actions requiring shareholder approval.

          Operating hazards may increase our operating costs; our insurance
coverage is limited. Our vessels are subject to operating risks such as: (i)
catastrophic marine disaster; (ii) adverse weather conditions; (iii) mechanical
failure; (iv) collisions; (v) hazardous substance spills; (vi) war, terrorism
and piracy; and (vii) navigation and other human errors. The occurrence of any
of these events may result in damage to or loss of our vessels and our vessels'
cargo or other property, and in injury to personnel. Such occurrences may also
result in a significant increase in our operating costs or liability to third
parties. In addition, such occurrences may result in our company being held
strictly liable for pollution damages under the Oil Pollution Act of 1990, the
Comprehensive Environmental Response Compensation and Liability Act or one of
the international conventions to which our vessels operating in foreign waters
may be subject.

          We maintain insurance coverage against certain of these risks, which
our management considers to be customary in the industry. We cannot assure you,
however, that we will be able to renew our existing insurance coverage at
commercially reasonable rates or that such coverage will be adequate to cover
future claims that may arise. In addition, the terrorist attacks that occurred
in the U.S. on September 11, 2001, as well as the potential for future attacks,
compliance with recently


                                       12



enacted maritime security laws and other factors, have caused significant
increases in the cost of our war risk insurance coverage, which covers damages
to our vessels and liability to third parties arising from acts of terrorism.

          We are subject to risks associated with operating internationally. Our
international shipping operations are subject to risks inherent in doing
business in countries other than the United States. These risks include, among
others: (i) economic, political and social instability; (ii) potential vessel
seizure, expropriation of assets and other governmental actions, which are not
covered by our insurance; (iii) currency restrictions and exchange rate
fluctuations; (iv) potential submission to the jurisdiction of a foreign court
or arbitration panel; and (v) import and export quotas, the imposition of
increased environmental and safety regulations and other forms of public and
governmental regulation. Many of these risks are beyond our control, and we
cannot predict the nature or the likelihood of any such events. However, if such
an event should occur, it could have a material adverse effect on our financial
condition and results of operations.

          Our vessels could be seized by maritime claimants, which could result
in a significant loss of earnings and cash flow for the related off-hire period.
Crew members, suppliers of goods and services to a vessel, shippers of cargo and
other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts or claims for damages. In many jurisdictions, a maritime
lienholder may enforce its lien by either arresting or attaching a vessel
through foreclosure proceedings. The arrest or attachment of one or more of our
vessels could result in a significant loss of earnings and cash flow for the
related off-hire period.

          In addition, international vessel arrest conventions and certain
national jurisdictions allow so-called "sister ship" arrests, that allow the
arrest of vessels that are within the same legal ownership as the vessel which
is subject to the claim or lien. Certain jurisdictions go further, permitting
not only the arrest of vessels within the same legal ownership, but also any
"associated" vessel. In nations with these laws, an "association" may be
recognized when two vessels are owned by companies controlled by the same party.
Consequently, a claim may be asserted against us, any of our subsidiaries or our
vessels for the liability of one or more of the other vessels we own.

          A substantial number of our employees are unionized; in the event of a
strike or other work stoppage our business and operations may be adversely
affected. As of December 31, 2004, all of our shipboard personnel and certain of
our shoreside personnel were covered by collective bargaining agreements. While
we have experienced no strikes, work stoppages or other significant labor
problems during the last ten years, we cannot assure you that such events will
not occur in the future. In the event we experience one or more strikes, work
stoppages or other labor problems, our business and operations and, in turn, our
results of operations, may be materially and adversely affected.

          We may not be able to renew our time charters and contracts when they
expire. There can be no assurance that any of our existing time or bareboat
charters or contracts of affreightment will be renewed or, if renewed, that they
will be renewed at favorable rates. If upon expiration of our existing charters
and contracts, we are unable to obtain new charters or contracts at rates
comparable to those received under the expired charters or contracts, our
revenues and earnings may be adversely affected.

          Older vessels have higher operating costs and are less desirable to
charterers. The average age of the vessels in our fleet is approximately 15.4
years. In general, capital expenditures and other costs necessary for
maintaining a vessel in good operating condition increase as the age of the
vessel increases. Accordingly, it is likely that the operating costs of our
older vessels will increase. In addition, changes in governmental regulations
and compliance with classification society standards may require us to make
expenditures for new equipment. In order to add such equipment, we may be
required to take our vessels out of service, thereby reducing our revenues.
Moreover, customers generally prefer modern vessels over older vessels, which
places the older vessels at a competitive disadvantage, especially in weak
markets. There can be no assurance that market conditions will justify the
expenditures necessary to maintain our older vessels in good operating condition
or enable us to operate our older vessels profitably during the remainder of
their estimated useful lives.

          We face periodic drydocking costs for our vessels, which can be
substantial. Vessels must be drydocked periodically. The cost of repairs and
renewals required at each drydock are difficult to predict with certainty and
can be substantial and our insurance does not cover these costs.

EMPLOYEES

          As of December 31, 2004, we employed approximately 427 shipboard
personnel and 167 shoreside personnel. We consider relations with our employees
to be excellent.

          All of our shipboard personnel and certain of our shoreside personnel
are covered by collective bargaining agreements. Some of these agreements relate
to particular vessels and have terms corresponding with the terms of their
respective vessel's charter, including agreements relating to two of our vessels
that are up for renewal in mid-2005. Moreover, the collective bargaining
agreements covering seven of our vessels operated under MSP contracts will be
subject to renegotiation in the second half of 2005. In addition, 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. We have experienced no strikes or other significant labor
problems during the last ten years.


                                       13



AVAILABLE INFORMATION

          Our internet address is www.intship.com. We make available free of
charge through our website our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the SEC. The information found on our website is not part of this
or any other report.

ITEM 2. PROPERTIES

VESSELS AND BARGES

          Of the 35 ocean-going vessels in our fleet at December 31, 2004, 13
were 100% owned by us, nine were 26.1% owned by us, two were 50% owned by us,
six were leased by us, and five were operated by us under operating contracts.
Of the 917 LASH barges we own, 855 are operated in conjunction with our LASH
vessels. The remaining 62 LASH barges are not required for current vessel
operations. All of our LASH barges are registered under the U.S. flag. Also
included in our fleet are 32 over-the-road haul-away car carrying trucks.

          All of the vessels owned, operated, or leased by us are in good
condition except for the 62 LASH barges not required for current vessel
operations. Under governmental regulations, insurance policies, and certain of
our financing agreements and charters, we are required to maintain our vessels
in accordance with standards of seaworthiness, safety, and health prescribed by
governmental regulations or promulgated by certain vessel classification
societies. We have implemented the quality and safety management program
mandated by the IMO and have obtained certification of all vessels currently
required to have a Safety Management Certificate. Vessels in the fleet are
maintained in accordance with governmental regulations and the highest
classification standards of the American Bureau of Shipping, Det Norske Veritas,
or Lloyd's Register classification societies.

          Certain of the vessels and barges owned by our subsidiaries are
mortgaged to various lenders to secure such subsidiaries' long-term debt (See
Note C - Long-Term Debt of the Notes to the Consolidated Financial Statements
contained in this Form 10-K on page F-13).

OTHER PROPERTIES

          We lease our corporate headquarters in New Orleans, our administrative
and sales office in New York, and office space in Nashville and Shanghai.
Additionally, we lease a totally enclosed multi-modal cargo transfer terminal in
Memphis, Tennessee, under a lease that expires in May of 2008. In 2004, the
aggregate annual rental payments under these operating leases totaled
approximately $1.4 million.

          We own a facility in Jefferson Parish, Louisiana that is used
primarily for the maintenance and repair of barges.

ITEM 3. LEGAL PROCEEDINGS

          We have been named as a defendant in numerous lawsuits claiming
damages related to occupational diseases, primarily related to asbestos and
hearing loss. We believe that most of these claims are without merit, and that
insurance and the indemnification of a previous owner of one of our subsidiaries
mitigate our exposure.

          In the normal course of our operations, we become involved in various
litigation matters including, among other things, claims by third parties for
alleged property damages, personal injuries and other matters. While the outcome
of such claims cannot be predicted with certainty, we believe that our insurance
coverage and reserves with respect to such claims are adequate and that such
claims should not have a material adverse effect on our business or financial
condition (See Note H - Commitments and Contingencies of the Notes to the
Company's Consolidated Financial Statements contained in this Form 10-K on page
F-19).

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.


                                       14



ITEM 4a. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT

          Set forth below is information concerning the directors and executive
officers of the Company. Directors are elected by the shareholders for one-year
terms. Executive officers serve at the pleasure of the Board of Directors.



Name                                      Current Position
- ----                                      ----------------
                          
Erik F. Johnsen              Chairman and Chief Executive Officer
Niels M. Johnsen             President and Director
Erik L. Johnsen              Executive Vice President and Director
Gary L. Ferguson             Vice President and Chief Financial Officer
Niels W. Johnsen             Director
Harold S. Grehan, Jr.        Director
Raymond V. O'Brien, Jr.      Director
Edwin Lupberger              Director
Edward K. Trowbridge         Director
H. Merritt Lane, III         Director


          Erik F. Johnsen, 79, is the Chairman and Chief Executive Officer of
the Company. He served as the President, Chief Operating Officer, and Director
of the Company since its commencement of operations in 1979 until April of 2003
when he assumed his current position. Until April of 1997, Mr. Johnsen also
served as the President and Chief Operating Officer of each of the Company's
principal subsidiaries, except Waterman, for which he served as Chairman of the
Executive Committee. Along with his brother, Niels W. Johnsen, he was one of the
founders of Central Gulf in 1947 and served as its President from 1966 until
April of 1997.

          Niels M. Johnsen, 59, is President of the Company. Mr. Johnsen has
served as a Director of the Company since April of 1988. He joined Central Gulf
on a full time basis in 1970 and held various positions with the Company before
being named President in April of 2003. He has also served as chairman of each
of the Company's principal subsidiaries, except Waterman, since April of 1997.
He is also President of Waterman and N. W. Johnsen & Co., Inc., subsidiaries of
the Company engaged in LASH liner service and ship and cargo charter brokerage,
respectively. In 2002, he became a trustee and director of Atlantic Mutual
Companies. He is the son of Niels W. Johnsen.

          Erik L. Johnsen, 47, is Executive Vice President of the Company. He
joined Central Gulf in 1979 and held various positions with the Company before
being named Executive Vice President in April of 1997. He has served as a
Director of the Company since 1994. He has also served as the President of each
of the Company's principal subsidiaries, except Waterman, since April of 1997,
and as Executive Vice President of Waterman since September of 1989. He is
responsible for all operations of the Company's vessel fleet and leads the
Company's Ship Management Group. He is the son of Erik F. Johnsen.

          Gary L. Ferguson, 64, 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.

          Niels W. Johnsen, 82, is a Director of the Company. He served as the
Chairman and Chief Executive Officer of the Company from its commencement of
operations in 1979 until April of 2003 and served as Chairman and Chief
Executive Officer of each of the Company's principal subsidiaries until April of
1997. He previously served as Chairman of Trans Union's ocean shipping group of
companies from December of 1971 through May of 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 former director of Reserve
Fund, Inc., a money market fund and a former trustee of Atlantic Mutual
Companies, an insurance company. He is the brother of Erik F. Johnsen.

          Harold S. Grehan, Jr., 77, is a Director 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. Mr. Grehan retired from
the Company at the end of 1997, and continued to serve as a Director since that
time.

          Raymond V. O'Brien, Jr., 77, has served as a Director of the Company
since 1979 and in early 2003 was named Chairman of the Compensation Committee of
the Board of Directors. He is a former director of Emigrant Savings Bank. He
served as Chairman of the Board and Chief Executive Officer of the Emigrant
Savings Bank from January of 1978 through December of 1992.

          Edwin Lupberger, 68, has served as a Director of the Company since
April of 1988 and in early 2003 was named Chairman of the Audit Committee of the
Board of Directors. He is the President of Nesher Investments, LLC. Mr.
Lupberger served as the Chairman of the Board and Chief Executive Officer of
Entergy Corporation from 1985 to 1998.


                                       15



          Edward K. Trowbridge, 76, has served as a Director of the Company
since April of 1994 and in early 2003 was named Chairman of the Nominating and
Governance Committee of the Board of Directors. He served as Chairman of the
Board and Chief Executive Officer of the Atlantic Mutual Companies from July of
1988 through November of 1993.

          H. Merritt Lane, III, 43, has served as a Director of the Company
since March of 2004. He has served as President and Chief Executive Officer of
Canal Barge Company, Inc. since January of 1994 and as director of that company
since 1988.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
     ISSUER PURCHASES OF EQUITY SECURITIES

COMMON STOCK PRICES AND DIVIDENDS FOR EACH QUARTERLY PERIOD OF 2003 AND 2004

(Source: New York Stock Exchange)



                              Dividends
    2003       High    Low       Paid
- -----------   -----   -----   ---------
                     
1st Quarter    6.70    5.80      N/A
2nd Quarter   10.91    6.75      N/A
3rd Quarter   12.95    9.70      N/A
4th Quarter   15.37    9.25      N/A




                              Dividends
    2004       High    Low       Paid
- -----------   -----   -----   ---------
                     
1st Quarter   15.59   13.60      N/A
2nd Quarter   17.10   14.10      N/A
3rd Quarter   16.90   13.40      N/A
4th Quarter   16.40   13.01      N/A


Approximate Number of Common Stockholders of Record at February 25, 2005: 526

          In accordance with New York Stock Exchange rules, Erik F. Johnsen, our
Chief Executive Officer, has certified to the NYSE that, as of April 30, 2004,
he was not aware of any violation by us of the NYSE's corporate governance
listing standards. The certification is to be submitted to the NYSE each year no
later than 30 days after our annual shareholders meeting.

          The Chief Executive Officer and Chief Financial Officer certifications
required for 2003 by Section 302 of the Sarbanes-Oxley Act of 2002 were included
as exhibits to our 2003 Form 10-K.

ITEM 6. SELECTED FINANCIAL DATA

                 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 representation 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 AND PER SHARE DATA)


                                       16





                                                                       Year Ended December 31,
                                                   --------------------------------------------------------------
                                                    2004 (1)       2003         2002       2001 (2)       2000
                                                   ----------   ----------   ----------   ----------   ----------
                                                                                        
INCOME STATEMENT DATA:
   Revenues                                        $  263,490   $  257,813   $  227,412   $  304,370   $  357,105
   Impairment Loss                                         --           --           66      (81,038)          --
   Gross Voyage Profit (Loss)                          28,117       33,235       30,399      (53,808)      49,475
   Operating Income (Loss)                             11,874       19,587       15,325      (73,885)      32,515
   Net Income (Loss)                                   12,785        5,491         (136)     (64,419)         836
   Basic and Diluted Net Income (Loss) Per Share         2.10         0.90        (0.02)      (10.59)        0.14

BALANCE SHEET DATA:
   Working Capital                                     17,650       10,248        1,849       25,631       28,183
   Total Assets                                       385,048      382,451      406,752      461,722      695,176
   Long-Term Debt, Less Current Maturities
      (including Capital Lease Obligations)           168,622      164,144      192,297      240,276      359,864
   Stockholders' Investment                           135,454      121,367      115,227      114,905      181,532

OTHER DATA:
   Cash Flow from Operations                           24,447       38,616       18,439       21,318       41,059
   Cash Flow from Investing Activities                (21,047)       1,772        9,456       81,808       (5,664)
   Cash Flow from Financing Activities                 (1,768)     (35,926)     (48,626)     (93,169)     (37,150)
   Cash Dividends Per Share of Common Stock (3)            --           --           --        0.125         0.25
   Weighted Average Shares of Common Stock
      Outstanding:
      Basic                                         6,082,887    6,082,887    6,082,887    6,082,887    6,082,954
      Diluted                                       6,092,302    6,082,887    6,082,887    6,082,887    6,082,954


(1)  Results for 2004 were significantly impacted by certain income tax
     adjustments relating to the Jobs Creation Act.

(2)  Results for 2001 reflect an Impairment Loss of approximately $81.0 Million,
     in accordance with FASB Statement No. 121, "Accounting for the Impairment
     of Long-lived Assets". This non-cash charge was made to write down certain
     assets to estimated market value as part of the reclassification of our
     U.S. flag LASH Service, our Cape-Size Bulk Carrier and certain Special
     Purpose barges to "Assets Held for Disposal" and impairment charges
     recorded on our foreign flag LASH Liner Service.

(3)  For 2001, cash dividends represent payments applicable for only first and
     second quarters.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

                   NOTICE REGARDING FORWARD-LOOKING STATEMENTS

          Certain statements made by us or on our behalf in this Form 10-K or
elsewhere that are not based on historical facts are intended to be
forward-looking statements within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995, and as such may involve
known and unknown risks, uncertainties, and other factors that may cause our
actual results to be materially different from the anticipated future results
expressed or implied by such forward-looking statements.

          Such statements include, without limitation, statements regarding (1)
estimated fair values of capital assets, the recoverability of the cost of those
assets, the estimated future cash flows attributable to those assets, and the
appropriate discounts to be applied in determining the net present values of
those estimated cash flows; (2) estimated scrap values of assets held for
disposal; (3) estimated fair values of financial instruments, such as interest
rate and commodity swap agreements; (4) estimated losses (including independent
actuarial estimates) under self-insurance arrangements, as well as estimated
losses on certain contracts, trade routes, lines of business or asset
dispositions; (5) estimated losses attributable to asbestos claims; (6)
estimated obligations, and the timing thereof, to the U.S. Customs Service
relating to foreign repair work; (7) the adequacy of our capital resources and
the availability of additional capital resources on commercially acceptable
terms; (8) our ability to remain in compliance with our debt covenants; (9)
anticipated trends in government


                                       17



sponsored cargoes; (10) our ability to maintain or increase our government
subsidies; (11) the anticipated improvement in the results of our Rail-Ferry
Service; (12) the estimated effect on our results of operations of the American
Jobs Creation Act of 2004; and (13) assumptions underlying any of the foregoing.
Forward-looking statements may include the words "may," "will," "estimate,"
"intend," "continue," "believe," "expect," "plan" or "anticipate" and other
similar words.

          Although we believe that the expectations expressed in our
forward-looking statements are reasonable, actual results could differ from
those projected or assumed in our forward-looking statements, and those
variations could be material. Our future financial condition and results of
operations, as well as any forward-looking statements, are subject to change and
are subject to inherent risks and uncertainties. Important factors that could
cause our actual results to differ materially from our expectations may include,
without limitation, our ability to (i) identify customers with marine
transportation needs requiring specialized vessels or operating techniques; (ii)
secure financing on satisfactory terms to acquire, modify, or construct vessels
if such financing is necessary to service the potential needs of current or
future customers; (iii) obtain new contracts or renew existing contracts which
would employ certain of our vessels or other assets upon the expiration of
contracts currently in place, on favorable economic terms; (iv) manage the
amount and rate of growth of our general and administrative expenses and costs
associated with operating certain of our vessels; (v) and manage our growth in
terms of implementing internal controls and information systems and hiring or
retaining key personnel, among other things.

          Other factors include (vi) changes in cargo, charterhire, fuel, and
vessel utilization rates which could increase or decrease our gross voyage
profit from our Liner Services; (vii) the rate at which competitors add or scrap
vessels in the markets in which we operate; (viii) changes in interest rates
which could increase or decrease the amount of interest we incur on borrowings
with variable rates of interest, and the availability and cost of capital to us;
(ix) the impact on our financial statements of nonrecurring accounting charges
that may result from our ongoing evaluation of business strategies, asset
valuations, and organizational structures; (x) changes in accounting policies
and practices adopted voluntarily or as required by accounting principles
generally accepted in the United States; (xi) changes in laws and regulations
such as those related to government assistance programs and tax rates; (xii) the
frequency and severity of claims against us, and unanticipated outcomes of
current or possible future legal proceedings; (xiii) unplanned maintenance and
out-of-service days on our vessels; (xiv) the ability of customers to fulfill
obligations with us; (xv) the performance of unconsolidated subsidiaries; (xvi)
our ability to effectively handle our substantial leverage by servicing and
meeting the covenant requirements in each of our debt instruments, thereby
avoiding any defaults under those instruments and avoiding cross defaults under
others; and (xvii) other economic, competitive, governmental, and technological
factors which may affect our operations.

          We caution readers that we assume no obligation to update or publicly
release any revisions to forward-looking statements made in this report or
elsewhere by us or on our behalf.

                          CRITICAL ACCOUNTING POLICIES

          Set forth below is a discussion of the accounting policies and related
estimates that we believe are the most critical to understanding our
consolidated financial statements, financial condition, and results of
operations and which require complex management judgments, uncertainties and/or
estimates. Information regarding our other accounting policies is included in
the Notes to Consolidated Financial Statements.

VOYAGE REVENUE AND EXPENSE RECOGNITION

          Revenues and expenses relating to our Liner and Rail-Ferry segments'
voyages are recorded over the duration of the voyage. Revenues and expenses
relating to our other segments' voyages, which require no estimates or
assumptions, are recorded when earned or incurred during the reporting period.
On our Liner Services, the voyage revenues are known at the beginning of the
vessel's voyage and are reported through the date of the financial statements
based on the relative transit time, which is the time between the vessel's
loading port to the vessel's discharge port. Variances from initial revenue
estimates are generally not material. Voyage expenditures are estimated at the
beginning of the vessel's voyage based on historical cost standards and current
estimates received from our vendors and port agents. Provisions for loss voyages
are recorded when contracts for the voyages are fixed and when losses become
apparent for voyages in progress. During the course of the vessel's voyage,
typically 30 to 60 days, actual costs replace the original estimates and become
part of the historical cost standards. Because of our on-going voyage review
process, all variances from our original revenue and expense estimates are
reported timely and generally are not material or recurring.

DEPRECIATION

          Provisions for depreciation are computed on the straight-line method
based on estimated useful lives of our depreciable assets. Various methods are
used to estimate the useful lives and salvage values of our depreciable assets
and


                                       18



due to the capital intensive nature of our business and our large base of
depreciable assets, changes in such estimates could have a material effect on
our results of operations.

DRYDOCKING COSTS

          We defer certain costs related to the drydocking of our vessels.
Deferred drydocking costs are capitalized as incurred and amortized on a
straight-line basis over the period between drydockings (generally two to five
years). Because drydocking charges can be material in any one period, we believe
that the acceptable deferred method provides a better matching for the
amortization of those costs over future revenue periods benefiting from the
drydocking of our vessel.

INCOME TAXES

          Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Provisions for income taxes include deferred income taxes that 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. In December of 2004, we made an election under the
Jobs Creation Act to have our U.S. flag operations (other than those of two
ineligible vessels used exclusively in United States coastwise commerce) taxed
under a new "tonnage tax" regime rather than under the usual U.S. corporate
income tax regime effective January 1, 2005. Under the Jobs Creation Act, the
taxable income from the shipping operations of our CFCs will generally no longer
be subject to current United States income tax but will be deferred until
repatriated. As a result, our effective tax rate and tax provisions will be
materially lower in future years.

SELF-RETENTION INSURANCE

          We maintain provisions for estimated losses under our self-retention
insurance based on estimates of the eventual claims settlement costs. Our policy
is to establish self-insurance provisions for each policy year based on
independent actuarial estimates, and to maintain the provisions at those levels
for the estimated run-off period, approximately two years from the inception of
that period. We believe most claims will be reported, or estimates for existing
claims will be revised, within this two-year period. Subsequent to this two-year
period, self-insurance provisions are adjusted to reflect our current estimate
of loss exposure for the policy year. Our estimates are determined based on
various factors, such as (1) severity of the injury (for personal injuries) and
estimated potential liability based on past judgments and settlements, (2)
advice from legal counsel based on its assessment of the facts of the case and
its experience in other cases, (3) probability of pre-trial settlement which
would mitigate legal costs, (4) historical experience on claims for each
specific type of cargo (for cargo damage claims), and (5) whether our seamen are
employed in permanent positions or temporary revolving positions. It is
reasonably possible that changes in our estimated exposure may occur from time
to time. However, if during this two-year period our estimate of loss exposure
exceeds the actuarial estimate, then additional loss provisions are recorded to
increase the self-insurance provisions to our estimate of the eventual claims'
settlement cost. The measurement of our exposure for self-insurance liability
requires management to make estimates and assumptions that affect the amount of
loss provisions recorded during the reporting period. Actual results could
differ materially from those estimates.

ASBESTOS CLAIMS

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

PENSION AND POSTRETIREMENT BENEFITS

          Our pension and postretirement benefit costs are calculated using
various actuarial assumptions and methodologies as prescribed by SFAS No. 87,
"Employers' Accounting for Pensions" and SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions." These assumptions include
discount rates, health care cost trend rates, inflation, rate of compensation
increases, expected return on plan assets, mortality rates, and other factors.
We believe that the assumptions utilized in recording the obligations under our
plans are reasonable based on input from our outside actuary and information as
to historical experience and performance. Differences in actual experience or
changes in assumptions may affect our pension and postretirement obligations and
future expense.


                                       19



                              RESULTS OF OPERATIONS

          Our 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, our 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 our 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.

EXECUTIVE SUMMARY

          The Company's results for the twelve months ended December 31, 2004
showed net income of $12.8 million compared to net income of $5.5 million for
the same period of 2003. Included in the 2004 results is an addition to net
income of $7.7 million resulting from the enactment, in the fourth quarter, of
the Jobs Creation Act. The Company elected, under the Jobs Creation Act, for its
qualified domestic operations to be treated under a notional tax (see Item 1.
Business - New Tax Legislation on page 7 for further explanation), which
rendered certain net preferred tax provisions booked in prior years unnecessary.

          In 2004 and the fourth quarter, in particular, was eventful for the
Company. In October, the Company's seven vessels participating in the MSP were
extended in the program through September 2015. Additionally, we learned in
January of 2005 that we were awarded an eighth MSP contract effective in October
of 2005. We are currently exploring our options to fulfill the contract
requirement. As a result of actions taken by the bankruptcy courts in November
of 2004, our U.S. flag Coal Carrier's contract was assumed by Virginia Power
Energy Marketing, Inc., a subsidiary of Dominion Resources, Inc., from our
previous charterer, USGen New England, Inc. ("USGenNE"). The original terms of
the contract were maintained. In the fourth quarter of 2004, the Company
purchased two used Container vessels, which replaced chartered vessels under the
Company's MSP contracts. During the fourth quarter of 2004, the Company
concluded its intentions to add a second cargo deck to each of the two vessels
operating in the Rail-Ferry Service. The work is expected to be completed in the
second half of 2005 with only minimal delay to the service. Both the purchase of
the Container vessels and the projected cost of the Rail-Ferry Service addition
will be financed by the proceeds of the Company's $40 million preferred stock
offering, which was completed on January 6, 2005. While these events that took
place during the fourth quarter provide a positive momentum into 2005, our 2004
earnings reflect inconsistent results within our various segments.

          While the 2004 results of our Liner Services did not meet our
expectations they did surpass those results posted in 2003. We expected, and
experienced, improved cargo volumes in both our U.S. flag and foreign flag LASH
services. The results of our U.S. flag PCTC's were negatively impacted by a
lower volume of supplemental cargoes.

          The results of our U.S. flag Coal Carrier suffered as a result of
out-of-service days for upgrade and drydocking work.

          Our Rail-Ferry Service was impacted by weather related delays, higher
fuel costs and machinery problems. Prior to committing to the addition of the
second decks, these vessels underwent extensive machinery overhauls, and the
Company believes these machinery maintenance issues have been resolved.

          The investment we have made in companies owning Capesize Bulk Carriers
and owning and operating Cement Carriers contributed significant returns in
2004. The bullish markets for these types of vessels are expected to continue in
2005.

                          YEAR ENDED DECEMBER 31, 2004
                    COMPARED TO YEAR ENDED DECEMBER 31, 2003

GROSS VOYAGE PROFIT

          Gross voyage profit decreased 15.4% from $33.2 million in 2003 to
$28.1 million in 2004. The changes associated with each of our segments are
discussed below.

          Liner Service: Gross voyage results for this segment improved from a
loss of $4.2 million in 2003 to a loss of $1.6 million in 2004. The improvement
was primarily a result of higher cargo volumes in 2004 compared to 2003 for both
our


                                       20



U.S. flag LASH Liner Service and foreign flag LASH Liner Service resulting
primarily from the repeal of steel tariffs which increased inbound steel
tonnage. Additionally, the U.S. flag LASH Liner Service experienced more
profitable cargo mix in 2004 as compared to 2003.

          Time Charter Contracts: The decrease in this segment's gross voyage
profit from $33 million in 2003 to $27 million in 2004 was attributable
primarily to our U.S. flag PCTCs carrying lower volumes of supplemental cargoes,
which provide revenues in addition to those provided by the time charter
agreements, during 2004 as compared to 2003. Our U.S. flag PCTCs carried lower
volumes of supplemental cargoes during 2004. The gross voyage profit from our
U.S. flag Coal Carrier was reduced approximately $1.9 million by an accelerated
drydocking due to required repair and upgrade work resulting in sixty-four
out-of-service days during 2004.

          Contracts of Affreightment: Gross voyage profit for this segment was
approximately the same for 2004 compared to 2003. This segment experienced an
increase in cargo volume in 2004 but also experienced higher operating costs as
a result of machinery deficiencies, which contributed approximately $100,000 to
the segment's operating costs, and weather delays resulting from hurricanes in
the Gulf of Mexico, which contributed approximately $314,000 to the segment's
operating costs.

          Rail-Ferry Service: Gross voyage loss for this segment increased from
a loss of $2.9 million in 2003 to a loss of $4.3 million in 2004. This service
experienced higher operating costs due to unanticipated maintenance problems
(which contributed approximately $570,000 to the segment's operating costs),
higher fuel costs (which contributed approximately $580,000 to the segment's
operating costs), and weather delays as a result of hurricanes in the Gulf of
Mexico (which contributed approximately $160,000 to the segment's operating
costs).

          Other: Gross voyage profit for this segment decreased from $1.8
million in 2003 to $1.7 million in 2004. The decrease resulted primarily from a
casualty on one of our vessels that our insurance subsidiary covered for the
policy year ended June 26, 2004.

OTHER INCOME AND EXPENSES

          In 2004, we had no sales of significant assets. Gain on sale of other
assets of $1.4 million in 2003 primarily related to the sale of our
Multi-Purpose vessel, which completed its commitment under charter with the MSC
and was no longer needed for operations, and the sale of Special Purpose barges
no longer needed for current operations.

          Interest expense decreased 15.4% from $12.5 million in 2003 to $10.6
million in 2004. Decreases due to regularly scheduled payments on outstanding
debt accounted for $854,000 of the difference. Reduced cost from the early
repayment of our 7 3/4% Senior Notes due in 2007, as well as other early debt
retirements, accounted for approximately $1 million of the decrease.

          Investment income decreased from $2.2 million in 2003 to $691,000 in
2004 primarily as a result of $1.4 million of dividends received in 2003 from
our investment in bulk carrier companies accounted for under the cost method. We
sold our investment in these bulk carrier companies at the end of 2003. The
decrease also resulted from lower interest rates earned on invested funds in the
current period, partially offset by higher invested balances.

          Loss on early extinguishment of debt of $361,000 reported in 2004 was
due to the early retirement of debt associated with our Molten Sulphur Carrier,
as well as the retirement at a slight premium of $410,000 of our 7 3/4% Senior
Notes due in 2007. The loss of $1.3 million in 2003 resulted from a "make-whole"
prepayment penalty and write-off of deferred financing charges associated with
the necessary prepayment of our Coal Carrier loan to cure a technical default
(See USGenNE Bankruptcy Filing in Liquidity and Capital Resources). This was
partially offset by the retirement at a discount of approximately $10.7 million
of our 7 3/4% Senior Notes due in 2007 (See Note A - Summary of Significant
Accounting Policies of the Notes to the Consolidated Financial Statements
contained in this Form 10-K on page F-8).

INCOME TAXES

          We had a tax benefit for federal income taxes of $7.2 million in 2004
and a tax provision of $2.8 million in 2003. The statutory rate was 35% for both
years. Year 2004 included an addition to net income in the amount of $7.7
million reflecting a reduction in our net deferred tax provision brought about
by the enactment of the Jobs Creation Act during the fourth quarter of 2004.
Passage of this new tax act, and our election in December of 2004 for our
qualified domestic operations to be taxed under the tonnage tax provision of the
new law, rendered certain net deferred tax provisions booked in prior years
unnecessary. For a discussion of the Jobs Creation Act and its estimated effect
on our results of operations, see Note F - Income Taxes of the Notes to the
Consolidated Financial Statements contained in this Form 10-K on page F-17.

EQUITY IN NET INCOME OF UNCONSOLIDATED ENTITIES

          Equity in net income of unconsolidated entities, net of taxes,
increased from $422,000 in 2003 to $4.6 million in 2004. The improvement was
primarily related to our 50% investment in a company owning two Cape-Size Bulk
Carriers and our minority interest in companies owning and operating Cement
Carriers. Our investment in the Cape-Size Bulk


                                       21



Carrier company, which was acquired in November of 2003, contributed $3.8
million net of taxes in 2004 compared with $80,000 in 2003. Our investment in
the Cement Carrier company contributed $827,000 net of taxes in 2004 compared to
$339,000 net of taxes in 2003. The increase in 2004 resulted primarily from
higher charter rates.

                          YEAR ENDED DECEMBER 31, 2003
                    COMPARED TO YEAR ENDED DECEMBER 31, 2002

GROSS VOYAGE PROFIT

          Gross voyage profit increased 9.3% from $30.4 million in 2002 to $33.2
million in 2003. The changes associated with each of our segments are discussed
below.

          Liner Service: Gross voyage loss for this segment improved from a loss
of $4.9 million in 2002 to a loss of $4.2 million in 2003. Our U.S. flag LASH
Liner Service's gross voyage loss improved from a loss of $3.6 million in 2002
to a profit of $131,000 in 2003 primarily due to expenses, included in 2002,
associated with winding down the previous four-vessel service, while 2003
results reflect the current one-vessel operation. As a partial offset, our
foreign flag LASH Liner Service's gross voyage profit decreased from $2.7
million in 2002 to $1 million in 2003 primarily due to lower cargo volume and
higher than anticipated operating costs in 2003. Additionally, depreciation on
this segment's assets and operating lease expense increased from $3.7 million in
2002 to $5.4 million in 2003 due to upgrade work performed in late 2002 on one
of our LASH vessels.

          Time Charter Contracts: This segment's gross voyage profit decreased
from $34.5 million in 2002 to $33 million in 2003. Unanticipated vessel repairs
resulting from machinery deficiencies on one of our Multi-Purpose vessels in the
third quarter contributed to the decrease in gross voyage profit. The cost of
the repairs and resulting vessel downtime impacted this segment by approximately
$1.1 million. Additionally, vessel and barge depreciation increased resulting
from a reduction in the estimated useful life of one of our Multi-Purpose
vessel, which was sold during the fourth quarter of 2003. Partially offsetting
this decrease was our Coal Carrier operating on time charter to USGenNE, which
experienced higher results due to the vessel being utilized for all but two days
during 2003 under its basic time charter contract as compared to 2002 when it
was out of service thirty-three days for repairs and during which it operated 91
days in the spot market at lower rates as compared to its basic charter.

          Contracts of Affreightment: Gross voyage profit decreased from $6
million in 2002 to $5.5 million in 2003 primarily due to higher operating costs
in 2003 and from a payment received in 2002 for loss of hire from an insurance
claim relating to pre-existing damages identified during a scheduled drydocking.

          Rail-Ferry Service: Gross voyage loss for this segment improved from a
loss of $3.7 million in 2002 to a loss of $2.9 million in 2003. The improvement
was a result of higher cargo volume during 2003.

          Other: This segment's gross voyage profit improved from a loss of $1.4
million in 2002 to a profit of $1.8 million in 2003. Contributing to the
improved results was the closing of our Singapore office, which operated at a
loss during 2002, and the improved results of our insurance subsidiary, which
operates solely to cover self-retained insurance risks. The results of 2003
benefited from a full year's operation of our 50% owned car transportation truck
company as well as the results of two chartered vessels that we are operating
under MSP contracts, which only operated for half of 2002.

OTHER INCOME AND EXPENSES

          Gain on sale of vessels and other assets of $1.4 million in 2003
primarily related to the sale of our Multi-Purpose vessel, which completed its
commitment under charter with the MSC and was no longer needed for operations,
and the sale of Special Purpose barges no longer needed for current operations.
The net gain of $557,000 in 2002 primarily related to the sale of certain
contract rights that were no longer beneficial to us and the sale of certain
assets no longer needed for operations.

          Interest expense decreased 29.3% from $17.7 million in 2002 to $12.5
million in 2003. Decreases due to lower outstanding debt balances and lower
interest rates accounted for $1.7 million of the total difference. Approximately
$3.5 million of the decrease resulted from the early repayment of our 9% Senior
Notes and repurchases of our 7 3/4% Senior Notes, which was partially offset by
the cost of new financings used to repurchase some of the Notes.

          Investment income increased from $656,000 in 2002 to $2.2 million in
2003 primarily as a result of higher dividend income received in 2003 from our
investment in certain bulk carrier companies accounted for under the cost
method, and interest earned on a receivable which resulted from the fourth
quarter 2002 sale and leaseback of one of our foreign flag LASH vessels. This
was partially offset by lower invested balances and lower interest rates earned
on invested funds in the current period.

          Other income of $1.5 million in 2002 was a result of interest
collected in 2002 on foreign tax refunds.


                                       22



          Loss on early extinguishment of debt of $1.3 million in 2003 resulted
from a "make-whole" prepayment penalty and write-off of deferred financing
charges associated with the necessary prepayment of our Coal Carrier loan to
cure a technical default (See USGenNE Bankruptcy Filing in Liquidity and Capital
Resources). This was partially offset by a discount on the retirement of
approximately $10.7 million of our 7 3/4% Senior Notes due in 2007 (See Note A -
Summary of Significant Accounting Policies of the Notes to the Consolidated
Financial Statements contained in this Form 10-K on page F-8).

INCOME TAXES

          We had a tax provision for federal income taxes of $2.8 million in
2003 and a tax benefit of $170,000 in 2002. The statutory rate was 35% for both
years.

EQUITY IN NET INCOME OF UNCONSOLIDATED ENTITIES

          Equity in net income of unconsolidated entities, net of taxes, of
$422,000 for 2003 and $555,000 for 2002, was primarily related to our investment
in companies owning and operating cement-carrying vessels. The decrease in the
equity in net income of 2003 was primarily due to a write off of an
uncollectable charterhire receivable by one of these companies.

                         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 our Consolidated Financial Statements.

          Our working capital increased from $10.2 million at December 31, 2003,
to $17.7 million at December 31, 2004. Of the $39.7 million in current
liabilities at December 31, 2004, $9.5 million related to current maturities of
long-term debt. Cash and cash equivalents increased during 2004 by $1.6 million
to a total of $10.5 million. This increase was due to cash provided by operating
activities of $24.4 million, partially offset by cash used for investing
activities of $21 million and for financing activities of $1.8 million.

          Operating activities generated a positive cash flow after adjusting
net income of $12.8 million for non-cash provisions such as depreciation and
amortization. Cash provided by operating activities also included a decrease in
accounts receivable of $7 million primarily due to the timing of collections of
receivables from the MSC and U.S. Department of Transportation, slightly offset
by a decrease in accounts payable and accrued liabilities of $3.1 million
primarily due to the timing of payments to U.S. Customs in 2004. Also included
was cash used of $7.5 million primarily to cover payments for vessel drydocking
costs in 2004.

          Cash used for investing activities of $21 million included purchases
of two Container vessels and non-vessel related assets used by our over-the-road
car transportation truck company, offset by cash distributions received from our
investments in unconsolidated entities.

          Cash used for financing activities of $1.8 million included $12.7
million used for regularly scheduled payments of debt, $9 million used to repay
draws on our line of credit made during the year, $5.3 million used for early
repayment of two of our debt obligations, and $2.9 million used for additional
payments on our Title XI loan, which was partially offset by draws on our line
of credit of $29 million.

          At December 31, 2004, $29.8 million was available on our $50 million
revolving credit facility, of which $20 million was repaid in January of 2005
from the proceeds of our preferred stock offering. The facility expires in
December of 2009.

PREFERRED STOCK OFFERING

          On January 6, 2005, we announced the completion of our public offering
of 800,000 shares of 6.0% convertible exchangeable preferred stock with a
liquidation preference of $50 per share, or $40 million in total. The preferred
stock will accrue cash dividends from the date of issuance at a rate of 6.0% per
annum. The preferred stock is initially convertible into two million shares of
our common stock, equivalent to an initial conversion price of $20.00 per share
of our common stock and reflecting a 34% conversion premium to the $14.90 per
share closing price of our common stock on the New York Stock Exchange on
December 29, 2004. All shares of the preferred stock, which is a new series of
our capital stock, were sold.

DEBT AND LEASE OBLIGATIONS

          We operate several vessels under operating leases, including three
PCTCs, one LASH vessel, one Breakbulk/Multi Purpose vessel, a Container vessel
and a Tanker vessel. We also conduct certain of our operations from leased
office facilities and use certain transportation and other equipment under
operating leases.


                                       23



          The following is a summary of the scheduled maturities by period of
our debt and lease obligations that were outstanding as of December 31, 2004:



     DEBT AND LEASE OBLIGATIONS (000'S)           2005      2006      2007      2008      2009    THEREAFTER
     ----------------------------------         -------   -------   -------   -------   -------   ----------
                                                                                
Long-term debt (including current maturities)   $ 9,468   $ 9,468   $80,001   $ 7,468   $27,468    $ 44,325
Operating leases                                 18,954    19,088    18,963    16,907    15,936      75,622
                                                -------   -------   -------   -------   -------    --------
   Total by period                              $28,422   $28,556   $98,964   $24,375   $43,404    $119,947
                                                =======   =======   =======   =======   =======    ========


          Included in the table above in year 2009 is $20 million that we drew
on our credit facility in late 2004 and repaid in January of 2005.

DEBT COVENANT COMPLIANCE STATUS

          We have met the minimum working capital and net worth requirements of
our debt agreements during the period covered by the agreements, once amended
effective June of 2001 and March of 2002. In order to purchase two Container
vessels prior to December 31, 2004, we drew $20,000,000 on our credit facility
in late 2004 and repaid that amount early in January of 2005 with a portion of
the proceeds from the sale of our convertible exchangeable preferred stock.
Having these draws outstanding on our credit facility as of December 31, 2004,
caused us to be in "non-compliance" with our leverage ratio as stated in the
agreements at December 31, 2004. However, prior to December 31, 2004, we
obtained waivers from our lenders with respect to this matter of
"non-compliance" with the leverage requirements. We had originally anticipated
closing our preferred stock offering prior to December 31, 2004. If the closing
had occurred prior to December 31, we would have met all financial and other
covenants, including the leverage requirements. We are currently in compliance
again with all our restrictive covenants and believe we will continue to meet
these requirements throughout 2005, although we can give no assurance to that
effect.

          If our cash flow and capital resources are not sufficient to fund our
debt service obligations or if we are unable to meet our covenant requirements,
we may be forced to reduce or delay capital expenditures, sell assets, obtain
additional equity capital, enter into additional financings of our unencumbered
vessels or restructure debt.

RAIL-FERRY SERVICE RESULTS

          Our Rail-Ferry Service provides a unique combination of rail and water
ferry service between the U.S. Gulf and Mexico. As with any innovative venture,
we expected and have experienced an adjustment period for the market to embrace
our alternative service. Low operating profit margins are inherent in the
rail-ferry business. Accordingly, high cargo volumes are necessary to achieve
meaningful levels of cash flow and profitability. The capacity of the vessels
operating in our rail-ferry service has limited the revenues and, in turn, the
cash flow and gross profits that can be generated by our Rail-Ferry Service
segment.

          We intend to add a second deck to each of the two vessels operating in
our Rail-Ferry Service in order to essentially double their capacity. We believe
that these additions will significantly reduce our cost per unit of cargo
carried and significantly increase our cash flow, but only if we are able to
book substantially all of the additional capacity, and we can give no assurance
at this time that we will be successful in doing so. If market conditions
adversely affect those expectations, we believe we could find alternative
placement for the two vessels supporting the service. We expect the vessels to
begin shipyard work in mid-2005 and fully return to service in the second half
of 2005.

USGenNE BANKRUPTCY FILING

          As previously discussed, we charter our Coal Carrier to USGenNE. In
July of 2003, USGenNE filed for bankruptcy protection under Chapter 11 of the
United States Bankruptcy Code and subsequently requested an extension of time to
submit its bankruptcy plan until March 1, 2005, and an extension until May 1,
2005, to obtain acceptance to its plan. Upon the acquisition of our vessel, we
had issued $50 million in notes, which had an outstanding balance of
approximately $17 million at the time of the bankruptcy filing. Although the
notes were non-recourse to the Company, the indenture under which they were
issued provided that USGenNE's bankruptcy filing was an event of default under
the notes as well as a cross-default on certain of our other credit facilities.
During 2003, we secured alternative financing, which was used to pay the notes
in full in addition to a "make-whole" prepayment penalty. The payment of the
notes in 2003 cured the cross-defaults under the other credit facilities.
Therefore, we are no longer in default under any of our credit facilities.

          In November of 2004, the bankruptcy courts approved USGenNE's sale of
a substantial portion of its generation assets to Dominion Energy New England,
Inc., a subsidiary of Dominion Resources, Inc. Pursuant to the asset purchase
agreement, which became effective on January 1, 2005, Virginia Power Energy
Marketing, Inc., another subsidiary of Dominion Resources, Inc., has assumed the
charter in place of USGenNE for the full period through 2010 and under the same
terms.


                                       24



MARITIME SECURITY PROGRAM CONTRACTS

          In 2003, Congress authorized an extension of the MSP through 2015,
increased the number of ships industry-wide eligible to participate in the
program from 47 to 60, and increased MSP payments to companies in the program,
all to be effective on October 1, 2005. Annual payments for each vessel in the
new MSP program will be $2.6 million in years 2006 to 2008, $2.9 million in
years 2009 to 2011, and $3.1 million in years 2012 to 2015. On October 15, 2004,
we filed applications to extend our seven MSP contracts for another 10 years,
all of which were effectively grandfathered in the MSP reauthorization. On
January 12, 2005, we were awarded one additional MSP contract, effective October
1, 2005, for a net total of eight MSP contracts. We are currently exploring our
options to fulfill the contract requirement.

DIVIDEND PAYMENTS

          The preferred stock will accrue cash dividends from the date of
issuance at a rate of 6.0% per annum, which are payable quarterly, commencing
March 31, 2005. The payment of preferred stock dividends is at the discretion of
our board of directors. As a result of our preferred stock offering, we are
restricted from paying common stock dividends and acquiring any of our common
stock prior to December 31, 2007.

ENVIRONMENTAL ISSUE

          We have not been notified that we are a potentially responsible party
in connection with any environmental matters, and we have determined that we
have no known risks for which assertion of a claim is probable that are not
covered by third party insurance, provided for in our self-retention insurance
reserves or otherwise indemnified. Our environmental risks primarily relate to
oil pollution from the operation of our vessels. We have pollution liability
insurance coverage with a limit of $1 billion per each occurrence, with a
deductible amount of $25,000 for each incident.

NEW ACCOUNTING PRONOUNCEMENTS

          In January of 2003, the FASB issued Financial Accounting Series
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 requires a variable interest entity to be consolidated by the primary
beneficiary of the entity, where the company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns, or both. In general, a
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. FIN 46
also requires disclosures about variable interest entities that the company is
not required to consolidate but in which it has a significant variable interest.
We have investments in certain unconsolidated entities in which we have less
than 100% ownership. We have evaluated these investments and determined that we
do not have any investments in variable interest entities. Therefore, the
adoption of FIN No. 46 as of January 1, 2004 did not have an impact on the
financial statements.

          In December of 2004, the FASB issued Statement No. 123 (revised 2004),
"Share-Based Payment," which is a revision of FASB Statement No. 123,
"Accounting for Stock-Based Compensation." Statement No. 123(R) supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and amends FASB
Statement No. 95, "Statement of Cash Flows." Statement No. 123(R) requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values. Pro forma
disclosures are no longer an alternative. Statement No. 123(R) is effective for
periods beginning after June 15, 2005. We plan to adopt SFAS 123(R) on July 1,
2005.

          Statement No. 123(R) permits public companies to adopt its
requirements using either a modified prospective method or a modified
retrospective method. Under the modified prospective method, companies are
required to record compensation cost for new and modified awards over the
related vesting period of such awards prospectively and record compensation cost
prospectively for the unvested portion, at the date of adoption, of previously
issued and outstanding awards over the remaining vesting period of such awards.
No change to prior periods presented is permitted under the modified prospective
method. Under the modified retrospective method, companies record compensation
costs for prior periods retroactively through restatement of such periods using
the pro forma amounts previously disclosed in the footnotes. Also, in the period
of adoption and after, companies record compensation cost based on the modified
prospective method. We have not yet determined the method of adoption we will
use.

          As permitted by Statement No. 123, we account for share-based payments
to employees using APB Opinion No. 25 and no compensation expense has been
recognized for employee options granted under the Stock Incentive Plan.
Accordingly, the adoption of Statement No. 123(R)'s fair value method will have
an impact on our results of operations, although it will have no impact on our
overall financial position. However, the impact of adoption of Statement No.
123(R) cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future. However, had we adopted Statement
No. 123(R) in prior periods, there would have been no impact as described in the
disclosure of pro forma net income and earnings per share in Note E - Employee
Benefit Plans of the Notes to the Consolidated Financial Statements contained in
this Form 10-K on page F-14.


                                       25



ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          In the ordinary course of our business, we are exposed to foreign
currency, interest rate, and commodity price risk. We utilize derivative
financial instruments including interest rate swap agreements, forward exchange
contracts and commodity swap agreements to manage certain of these exposures. We
hedge only firm commitments or anticipated transactions and do not use
derivatives for speculation. We neither hold nor issue financial instruments for
trading purposes.

INTEREST RATE RISK

          The fair value of our cash and short-term investment portfolio at
December 31, 2004, approximated carrying value due to its short-term duration.
The potential decrease in fair value resulting from a hypothetical 10% increase
in interest rates at year-end for our investment portfolio is not material.

          The fair value of long-term debt, including current maturities, was
estimated to be $181.4 million compared to a carrying value of $178 million. The
potential increase in fair value resulting from a hypothetical 10% adverse
change in the borrowing rates applicable to our long-term debt at December 31,
2004, would be approximately $1.2 million or 0.6% of the carrying value.

COMMODITY PRICE RISK

          As of December 31, 2004, we have no commodity swap agreements to
manage our exposure to price risk related to the purchase of the estimated 2005
fuel requirements for our Liner Services or Rail-Ferry Service segment. If we
had such an arrangement, it would be structured to reduce our exposure to
increases in fuel prices, however, it would also limit the benefit we might
otherwise receive from any price decreases associated with this commodity. A 20%
increase in the price of fuel for the period January 1, 2004 through December
31, 2004 would have resulted in an increase of approximately $2.8 million in our
fuel costs for the same period, and in a corresponding decrease of approximately
$0.45 in our earnings per share based on the shares of our common stock
outstanding as of December 31, 2004, assuming that none of the price increase
could have been passed on to our customers through fuel cost surcharges during
the same period.

FOREIGN EXCHANGE RATE RISK

          We have entered into foreign exchange contracts to hedge certain firm
purchase and sale commitments with varying maturities throughout 2005. The
exchange rates at which these hedges were entered into did not materially differ
from the exchange rates in effect at December 31, 2004. The potential fair value
of these contracts that would have resulted from a hypothetical 10% adverse
change in the exchange rates applicable to these contracts at December 31, 2004,
is a liability of approximately $178,000 assuming that none of the rate
increases could have been passed on to our customers through currency
surcharges.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The information called for by Item 8 begins on page F-1 of this Form
10-K.


                                       26



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
     FINANCIAL DISCLOSURE

          None.

ITEM 9a. CONTROLS AND PROCEDURES

          As of the end of the period covered by this report, we conducted an
evaluation of the effectiveness of our "disclosure controls and procedures," as
that phrase is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934. The evaluation was carried out under the supervision and
with the participation of our management, including our Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO").

          Based on that evaluation, our CEO and CFO have concluded that our
disclosure controls and procedures are effective as of the end of the period
covered by this report in timely alerting them to material information required
to be disclosed in our periodic filings with the Securities and Exchange
Commission ("SEC"), and in ensuring that the information required to be
disclosed in those filings is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.

          There have been no changes in our internal control over financial
reporting that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

ITEM 9b. OTHER INFORMATION

          None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          We have adopted a written Code of Business Conduct and Ethics
applicable to all officers, directors and employees, including our principal
executive officer, principal financial officer and principal accounting officer.
Interested persons may obtain a copy of our Code of Business Conduct and Ethics
without charge by writing to International Shipholding Corporation, Attention:
Gary L. Ferguson, Vice President, 1700 Poydras Center, 650 Poydras Street, New
Orleans, LA 70130.

          The information relating to Directors and Executive Officers called
for by Item 10 is incorporated herein by reference to Item 4a, Executive
Officers and Directors of the Registrant. The information relating to compliance
with Section 16(a) of the Securities Exchange Act of 1934 called for by Item 10
is included on page 11 of our definitive proxy statement dated March 14, 2005,
filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, and is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

          The information called for by Item 11 is included on pages 8, 9 and 10
of our definitive proxy statement dated March 14, 2005, 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 our definitive proxy statement dated March 14, 2005, filed pursuant to
Section 14(a) of the Securities Exchange Act of 1934, and is incorporated herein
by reference.


                                       27



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The information called for by Item 13 is included on pages 2, 3, 4, 5
and 11 of our definitive proxy statement dated March 14, 2005 filed pursuant to
Section 14(a) of the Securities Exchange Act of 1934, and is incorporated herein
by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

          The information called for by Item 14 is included on page 7 of our
definitive proxy statement dated March 14, 2005 filed pursuant to Section 14(a)
of the Securities Exchange Act of 1934, and is incorporated herein by reference.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

     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 on
          pages F-1 through F-29 of this Form 10-K.

          Report of Independent Registered Public Accounting Firm

          Consolidated Statements of Income for the years ended December 31,
          2004, 2003, and 2002

          Consolidated Balance Sheets at December 31, 2004 and 2003

          Consolidated Statements of Changes in Stockholders' Investment for the
          years ended December 31, 2004, 2003, and 2002

          Consolidated Statements of Cash Flows for the years ended December 31,
          2004, 2003, and 2002

          Notes to Consolidated Financial Statements

     2.   Financial Statement Schedules

          The following financial statement schedules are included on pages S-1
          through S-3 of this Form 10-K.

          Report of Independent Registered Public Accounting Firm

          Schedule II -- Valuation and Qualifying Accounts and Reserves

          All other financial statement schedules are not required under the
          related instructions or are inapplicable and therefore have been
          omitted.

     3.   Exhibits

           (3.1)   Restated Certificate of Incorporation of the Registrant
                   (filed with the Securities and Exchange Commission as Exhibit
                   3.1 to the Registrant's Form 10-Q for the quarterly period
                   ended September 30, 2004 and incorporated herein by
                   reference)

           (3.2)   By-Laws of the Registrant (filed with the Securities and
                   Exchange Commission as Exhibit 3.2 to the Registrant's Form
                   10-Q for the quarterly period ended September 30, 2004 and
                   incorporated herein by reference)

           (3.3)   Certificate of Designations of the 6.0% Convertible
                   Exchangeable Preferred Stock of the Registrant filed with the
                   Delaware Secretary of State on January 5, 2005 (filed with
                   the Securities and Exchange Commission as Exhibit 3.1 to the
                   Registrant's Current Report on Form 8-K dated January 6, 2005
                   and filed with the Securities and Exchange Commission on
                   January 7, 2005 and incorporated herein by reference)

           (4.1)   Specimen of Common Stock Certificate (filed as an exhibit to
                   the Registrant's Form 8-A filed with the Securities and
                   Exchange Commission on April 25, 1980 and incorporated herein
                   by reference)

           (4.2)   Indenture between the Registrant and The Bank of New York, as
                   Trustee, with respect to the 7 3/4% Senior Notes due October
                   15, 2007 (filed with the Securities and Exchange Commission
                   as Exhibit 4.2 to the Registrant's Form 10-Q for the
                   quarterly period ended September 30, 2004 and incorporated
                   herein by reference)


                                       28



           (4.3)   Form of 7 3/4% Senior Note due October 15, 2007 (included in
                   Exhibit 4.2 hereto and incorporated herein by reference)

           (4.4)   Indenture, dated as of January 6, 2005, by and between the
                   Registrant and The Bank of New York, as Trustee, with respect
                   to the 6.0% Convertible Subordinated Notes due 2014 (filed
                   with the Securities and Exchange Commission as Exhibit 4.1 to
                   the Registrant's Current Report on Form 8-K dated January 6,
                   2005 and filed with the Securities and Exchange Commission on
                   January 7, 2005 and incorporated herein by reference)

           (4.5)   Form of 6.0% Convertible Subordinated Note due 2014 (included
                   in Exhibit 4.4 hereto and incorporated herein by reference)

           (4.6)   Specimen of 6.0% Convertible Exchangeable Preferred Stock
                   Certificate (filed with the Securities and Exchange
                   Commission as Exhibit 4.6 to Pre-Effective Amendment No. 3,
                   dated December 23, 2004 and filed with the Securities and
                   Exchange Commission on December 23, 2004, to the Registrant's
                   Registration Statement on Form S-1 (Registration No.
                   333-120161) and incorporated herein by reference)

           (4.7)   Certificate of Designations of the 6.0% Convertible
                   Exchangeable Preferred Stock of the Registrant filed with the
                   Delaware Secretary of State on January 5, 2005 (filed as
                   Exhibit 3.3 hereto and incorporated herein by reference)

          (10.1)   Credit Agreement, dated as of November 14, 2002, by and among
                   LCI Shipholdings, Inc., as Borrower, the banks and financial
                   institutions listed therein, as Lenders, Den Norske Bank ASA,
                   as Arranger, Agent and Security Trustee, and the Registrant,
                   as Guarantor (filed with the Securities and Exchange
                   Commission as Exhibit 10.1 to Pre-Effective Amendment No. 2,
                   dated December 10, 2004 and filed with the Securities and
                   Exchange Commission on December 10, 2004, to the Registrant's
                   Registration Statement on Form S-1 (Registration No.
                   333-120161) and incorporated herein by reference)

          (10.2)   Credit Agreement, dated as of September 30, 2003, by and
                   among LCI Shipholdings, Inc. and Central Gulf Lines, Inc., as
                   Joint and Several Borrowers, the banks and financial
                   institutions listed therein, as Lenders, HSBC Bank PLC, as
                   Facility Agent, Den Norske Bank ASA, as Documentation Agent,
                   Deutsche Schiffsbank AG, as Security Trustee, and the
                   Registrant, as Guarantor (filed with the Securities and
                   Exchange Commission as Exhibit 10.2 to Pre-Effective
                   Amendment No. 2, dated December 10, 2004 and filed with the
                   Securities and Exchange Commission on December 10, 2004, to
                   the Registrant's Registration Statement on Form S-1
                   (Registration No. 333-120161) and incorporated herein by
                   reference)

          (10.3)   Credit Agreement, dated as of December 6, 2004, by and among
                   LCI Shipholdings, Inc., Central Gulf Lines, Inc. and Waterman
                   Steamship Corporation, as Borrowers, the banks and financial
                   institutions listed therein, as Lenders, Whitney National
                   Bank, as Administrative Agent, Security Trustee and Arranger,
                   and the Registrant, Enterprise Ship Company, Inc., Sulphur
                   Carriers, Inc., Gulf South Shipping PTE Ltd. and CG Railway,
                   Inc., as Guarantors (filed with the Securities and Exchange
                   Commission as Exhibit 10.3 to Pre-Effective Amendment No. 2,
                   dated December 10, 2004 and filed with the Securities and
                   Exchange Commission on December 10, 2004, to the Registrant's
                   Registration Statement on Form S-1 (Registration No.
                   333-120161) and incorporated herein by reference)

          (10.4)   Consulting Agreement, dated January 1, 2005, between the
                   Registrant and Niels W. Johnsen

          (10.5)   International Shipholding Corporation Stock Incentive Plan

          (10.6)   Form of Stock Option Agreement for the Grant of Non-Qualified
                   Stock Options under the International Shipholding Corporation
                   Stock Incentive Plan

          (10.7)   Description of Non-Management Director Compensation

          (10.8)   Description of Life Insurance Benefits Provided by the
                   Registrant to Niels W. Johnsen and Erik F. Johnsen

          (21.1)   Subsidiaries of International Shipholding Corporation

          (31.1)   Certification of Chief Executive Officer Pursuant to Section
                   302 of the Sarbanes-Oxley Act of 2002

          (31.2)   Certification of Chief Financial Officer Pursuant to Section
                   302 of the Sarbanes-Oxley Act of 2002

          (32.1)   Certification of Chief Executive Officer Pursuant to 18
                   U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002

          (32.2)   Certification of Chief Financial Officer Pursuant to 18
                   U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
                   Sarbanes-Oxley Act of 2002

(c) The Index of Exhibits and required Exhibits are included following the
certifications beginning at page 32 of this Report.


                                       29



                                   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)


March 9, 2005   By /s/ Gary L. Ferguson
                   ------------------------------------------
                   Gary L. Ferguson
                   Vice President and Chief Financial 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)


March 9, 2005   By /s/ Erik F. Johnsen
                   ------------------------------------------
                   Erik F. Johnsen
                   Chairman of the Board, Director and
                   Chief Executive Officer


March 9, 2005   By /s/ Niels M. Johnsen
                   ------------------------------------------
                   Niels M. Johnsen
                   President and Director


March 9, 2005   By /s/ Erik L. Johnsen
                   ------------------------------------------
                   Erik L. Johnsen
                   Executive Vice President and Director


March 9, 2005   By /s/ Niels W. Johnsen
                   ------------------------------------------
                   Niels W. Johnsen
                   Director


March 9, 2005   By /s/ Harold S. Grehan, Jr.
                   ------------------------------------------
                   Harold S. Grehan, Jr.
                   Director


March 9, 2005   By /s/ Raymond V. O'Brien, Jr.
                   ------------------------------------------
                   Raymond V. O'Brien, Jr.
                   Director


                                       30




March 9, 2005   By /s/ Edwin Lupberger
                   ------------------------------------------
                   Edwin Lupberger
                   Director


March 9, 2005   By /s/ Edward K. Trowbridge
                   ------------------------------------------
                   Edward K. Trowbridge
                   Director


March 9, 2005   By /s/ H. Merritt Lane, III
                   ------------------------------------------
                   H. Merritt Lane, III
                   Director


March 9, 2005   By /s/ Gary L. Ferguson
                   ------------------------------------------
                   Gary L. Ferguson
                   Vice President and Chief Financial Officer


March 9, 2005   By /s/ Manny G. Estrada
                   ------------------------------------------
                   Manny G. Estrada
                   Vice President and Controller


                                       31



                                  EXHIBIT INDEX



Exhibit
 Number
- -------
       
  (3.1)   Restated Certificate of Incorporation of the Registrant (filed with
          the Securities and Exchange Commission as Exhibit 3.1 to the
          Registrant's Form 10-Q for the quarterly period ended September 30,
          2004 and incorporated herein by reference)

  (3.2)   By-Laws of the Registrant (filed with the Securities and Exchange
          Commission as Exhibit 3.2 to the Registrant's Form 10-Q for the
          quarterly period ended September 30, 2004 and incorporated herein by
          reference)

  (3.3)   Certificate of Designations of the 6.0% Convertible Exchangeable
          Preferred Stock of the Registrant filed with the Delaware Secretary of
          State on January 5, 2005 (filed with the Securities and Exchange
          Commission as Exhibit 3.1 to the Registrant's Current Report on Form
          8-K dated January 6, 2005 and filed with the Securities and Exchange
          Commission on January 7, 2005 and incorporated herein by reference)

  (4.1)   Specimen of Common Stock Certificate (filed as an exhibit to the
          Registrant's Form 8-A filed with the Securities and Exchange
          Commission on April 25, 1980 and incorporated herein by reference)

  (4.2)   Indenture between the Registrant and The Bank of New York, as Trustee,
          with respect to the 7 3/4% Senior Notes due October 15, 2007 (filed
          with the Securities and Exchange Commission as Exhibit 4.2 to the
          Registrant's Form 10-Q for the quarterly period ended September 30,
          2004 and incorporated herein by reference)

  (4.3)   Form of 7 3/4% Senior Note due October 15, 2007 (included in Exhibit
          4.2 hereto and incorporated herein by reference)

  (4.4)   Indenture, dated as of January 6, 2005, by and between the Registrant
          and The Bank of New York, as Trustee, with respect to the 6.0%
          Convertible Subordinated Notes due 2014 (filed with the Securities and
          Exchange Commission as Exhibit 4.1 to the Registrant's Current Report
          on Form 8-K dated January 6, 2005 and filed with the Securities and
          Exchange Commission on January 7, 2005 and incorporated herein by
          reference)

  (4.5)   Form of 6.0% Convertible Subordinated Note due 2014 (included in
          Exhibit 4.4 hereto and incorporated herein by reference)

  (4.6)   Specimen of 6.0% Convertible Exchangeable Preferred Stock Certificate
          (filed with the Securities and Exchange Commission as Exhibit 4.6 to
          Pre-Effective Amendment No. 3, dated December 23, 2004 and filed with
          the Securities and Exchange Commission on December 23, 2004, to the
          Registrant's Registration Statement on Form S-1 (Registration No.
          333-120161) and incorporated herein by reference)

  (4.7)   Certificate of Designations of the 6.0% Convertible Exchangeable
          Preferred Stock of the Registrant filed with the Delaware Secretary of
          State on January 5, 2005 (filed as Exhibit 3.3 hereto and incorporated
          herein by reference)

 (10.1)   Credit Agreement, dated as of November 14, 2002, by and among LCI
          Shipholdings, Inc., as Borrower, the banks and financial institutions
          listed therein, as Lenders, Den Norske Bank ASA, as Arranger, Agent
          and Security Trustee, and the Registrant, as Guarantor (filed with the
          Securities and Exchange Commission as Exhibit 10.1 to Pre-Effective
          Amendment No. 2, dated December 10, 2004 and filed with the Securities
          and Exchange Commission on December 10, 2004, to the Registrant's
          Registration Statement on Form S-1 (Registration No. 333-120161) and
          incorporated herein by reference)

 (10.2)   Credit Agreement, dated as of September 30, 2003, by and among LCI
          Shipholdings, Inc. and Central Gulf Lines, Inc., as Joint and Several
          Borrowers, the banks and financial institutions listed therein, as
          Lenders, HSBC Bank PLC, as Facility Agent, Den Norske Bank ASA, as
          Documentation Agent, Deutsche Schiffsbank AG, as Security Trustee, and
          the Registrant, as Guarantor (filed with the Securities and Exchange
          Commission as Exhibit 10.2 to Pre-Effective Amendment No. 2, dated
          December 10, 2004 and filed with the Securities and Exchange
          Commission on December 10, 2004, to the Registrant's Registration
          Statement on Form S-1 (Registration No. 333-120161) and incorporated
          herein by reference)

 (10.3)   Credit Agreement, dated as of December 6, 2004, by and among LCI
          Shipholdings, Inc., Central Gulf Lines, Inc. and Waterman Steamship
          Corporation, as Borrowers, the banks and financial institutions listed
          therein, as Lenders, Whitney National Bank, as Administrative Agent,
          Security Trustee and Arranger, and the Registrant, Enterprise Ship
          Company, Inc., Sulphur Carriers, Inc., Gulf South Shipping PTE Ltd.
          and CG Railway, Inc., as Guarantors (filed with the Securities and
          Exchange Commission as Exhibit 10.3 to Pre-Effective Amendment No. 2,
          dated December 10, 2004 and filed with the Securities and Exchange
          Commission on December 10, 2004, to the Registrant's Registration
          Statement on Form S-1 (Registration No. 333-120161) and incorporated
          herein by reference)

 (10.4)   Consulting Agreement, dated January 1, 2005, between the Registrant
          and Niels W. Johnsen

 (10.5)   International Shipholding Corporation Stock Incentive Plan



                                       32



       
 (10.6)   Form of Stock Option Agreement for the Grant of Non-Qualified Stock
          Options under the International Shipholding Corporation Stock
          Incentive Plan

 (10.7)   Description of Non-Management Director Compensation

 (10.8)   Description of Life Insurance Benefits Provided by the Registrant to
          Niels W. Johnsen and Erik F. Johnsen

 (21.1)   Subsidiaries of International Shipholding Corporation

 (31.1)   Certification of Chief Executive Officer Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002

 (31.2)   Certification of Chief Financial Officer Pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002

 (32.1)   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
          1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002

 (32.2)   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
          1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002




                                       33



                          INDEX OF FINANCIAL STATEMENTS

                                                                          
Report of Independent Registered Public Accounting Firm...................   F-2

Consolidated Statements of Income for the years ended
   December 31, 2004, 2003, and 2002......................................   F-3

Consolidated Balance Sheets at December 31, 2004 and 2003.................   F-4

Consolidated Statements of Changes in Stockholders' Investment
   for the years ended December 31, 2004, 2003 and 2002...................   F-6

Consolidated Statements of Cash Flows for the years ended
   December 31, 2004, 2003, and 2002......................................   F-7

Notes to Consolidated Financial Statements................................   F-8




                                       F-1



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
International Shipholding Corporation

We have audited the accompanying consolidated balance sheets of International
Shipholding Corporation as of December 31, 2004 and 2003, 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, 2004. 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 conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of International
Shipholding Corporation at December 31, 2004 and 2003, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2004, in conformity with U.S generally accepted
accounting principles.


                                        /s/ Ernst & Young LLP

New Orleans, Louisiana
February 25, 2005


                                       F-2



                      INTERNATIONAL SHIPHOLDING CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                  (All Amounts in Thousands Except Share Data)



                                                                   Year Ended December 31,
                                                            ------------------------------------
                                                               2004         2003         2002
                                                            ----------   ----------   ----------
                                                                             
Revenues                                                    $  263,490   $  257,813   $  227,412

Operating Expenses:
   Voyage Expenses                                             216,438      204,444      177,939
   Vessel and Barge Depreciation                                18,935       20,134       19,140
   Impairment Loss                                                  --           --          (66)
                                                            ----------   ----------   ----------
Gross Voyage Profit                                             28,117       33,235       30,399
                                                            ----------   ----------   ----------
Administrative and General Expenses                             16,236       15,041       15,631
Loss (Gain) on Sale of Other Assets                                  7       (1,393)        (557)
                                                            ----------   ----------   ----------
Operating Income                                                11,874       19,587       15,325
                                                            ----------   ----------   ----------

Interest and Other:
   Interest Expense                                             10,585       12,514       17,706
   Impairment Loss on Investment                                    --           --          598
   Loss on Sale of Investment                                      623           --           --
   Investment Income                                              (691)      (2,162)        (656)
   Other Income                                                     --           --       (1,498)
   Loss (Gain) on Early Extinguishment of Debt                     361        1,310          (65)
                                                            ----------   ----------   ----------
                                                                10,878       11,662       16,085
                                                            ----------   ----------   ----------
Income (Loss) Before (Benefit) Provision for Income Taxes
   and Equity in Net Income of Unconsolidated Entities             996        7,925         (760)
                                                            ----------   ----------   ----------

(Benefit) Provision for Income Taxes:
   Current                                                          --          183           --
   Deferred                                                     (7,166)       2,634         (170)
   State                                                            23           39          101
                                                            ----------   ----------   ----------
                                                                (7,143)       2,856          (69)
                                                            ----------   ----------   ----------
Equity in Net Income of Unconsolidated
   Entities (Net of Applicable Taxes)                            4,646          422          555
                                                            ----------   ----------   ----------
Net Income (Loss)                                           $   12,785   $    5,491   $     (136)
                                                            ==========   ==========   ==========

Basic and Diluted Earnings Per Share:
   Net Income (Loss)                                        $     2.10   $     0.90   $    (0.02)
                                                            ==========   ==========   ==========

Weighted Average Shares of Common Stock Outstanding:
   Basic                                                     6,082,887    6,082,887    6,082,887
   Diluted                                                   6,092,302    6,082,887    6,082,887


        The accompanying notes are an integral part of these statements.


                                       F-3



                      INTERNATIONAL SHIPHOLDING CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           (All Amounts in Thousands)



                                                                 December 31,   December 31,
ASSETS                                                               2004           2003
                                                                 ------------   ------------
                                                                          
Current Assets:
   Cash and Cash Equivalents                                       $  10,513      $   8,881
   Restricted Cash                                                        --            816
   Marketable Securities                                               6,138          2,650
   Accounts Receivable, Net of Allowance for Doubtful Accounts
      of $146 and $327 in 2004 and 2003, Respectively:
      Traffic                                                         20,953         23,070
      Agents'                                                          3,509          4,119
      Claims and Other                                                 5,135          9,438
   Federal Income Taxes Receivable                                       459             --
   Deferred Income Tax                                                   187            144
   Net Investment in Direct Financing Lease                            2,337          2,128
   Other Current Assets                                                4,756          6,295
   Material and Supplies Inventory, at Lower of Cost or Market         3,239          3,177
   Current Assets Held for Disposal                                       89             89
                                                                   ---------      ---------
Total Current Assets                                                  57,315         60,807
                                                                   ---------      ---------

Investment in Unconsolidated Entities                                 11,115          8,413
                                                                   ---------      ---------

Net Investment in Direct Financing Lease                              46,776         49,136
                                                                   ---------      ---------

Vessels, Property, and Other Equipment, at Cost:
   Vessels and Barges                                                348,307        324,413
   Other Equipment                                                     7,082          5,233
   Terminal Facilities                                                   140            345
   Furniture and Equipment                                             3,484          4,304
                                                                   ---------      ---------
                                                                     359,013        334,295
Less -  Accumulated Depreciation                                    (129,560)      (111,154)
                                                                   ---------      ---------
                                                                     229,453        223,141
                                                                   ---------      ---------

Other Assets:
   Deferred Charges, Net of Accumulated Amortization
      of $16,374 and $14,614 in 2004 and 2003, Respectively           14,809         12,319
   Acquired Contract Costs, Net of Accumulated Amortization
      of $22,886 and $21,430 in 2004 and 2003, Respectively            7,640          9,095
   Restricted Cash                                                     6,541          6,590
   Due from Related Parties                                            2,535          2,535
   Other                                                               8,864         10,415
                                                                   ---------      ---------
                                                                      40,389         40,954
                                                                   ---------      ---------

                                                                   $ 385,048      $ 382,451
                                                                   =========      =========


        The accompanying notes are an integral part of these statements.


                                       F-4



                      INTERNATIONAL SHIPHOLDING CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                  (All Amounts in Thousands Except Share Data)



                                                            DECEMBER 31,   December 31,
                                                                2004           2003
                                                            ------------   ------------
                                                                     
LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current Liabilities:
   Current Maturities of Long-Term Debt                       $  9,468       $ 14,866
   Accounts Payable and Accrued Liabilities                     30,197         35,510
   Federal Income Tax Payable                                       --            183
                                                              --------       --------
Total Current Liabilities                                       39,665         50,559
                                                              --------       --------

Billings in Excess of Income Earned and Expenses Incurred        4,723          5,271
                                                              --------       --------

Long-Term Debt, Less Current Maturities                        168,622        164,144
                                                              --------       --------

Other Long-Term Liabilities:
   Deferred Income Taxes                                        15,222         19,565
   Other                                                        21,362         21,545
                                                              --------       --------
                                                                36,584         41,110
                                                              --------       --------

Commitments and Contingent Liabilities

Stockholders' Investment:
   Common Stock, $1.00 Par Value, 10,000,000 Shares
      Authorized, 6,756,330 Shares Issued at
      December 31, 2004 and 2003                                 6,756          6,756
   Additional Paid-In Capital                                   54,450         54,450
   Retained Earnings                                            82,715         69,930
   Less - 673,443 Shares of Common Stock in Treasury,
      at Cost, at December 31, 2004 and 2003                    (8,704)        (8,704)
   Accumulated Other Comprehensive Income (Loss)                   237         (1,065)
                                                              --------       --------
                                                               135,454        121,367
                                                              --------       --------
                                                              $385,048       $382,451
                                                              ========       ========


        The accompanying notes are an integral part of these statements.


                                       F-5



                      INTERNATIONAL SHIPHOLDING CORPORATION
         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT
                           (All Amounts in Thousands)



                                                                                                          Accumulated
                                                                      Additional                              Other
                                                             Common     Paid-In     Retained   Treasury   Comprehensive
                                                             Stock      Capital     Earnings     Stock    Income (Loss)     Total
                                                             ------   ----------    --------   --------   -------------   ---------
                                                                                                        
Balance at December 31, 2001                                 $6,756     $54,450     $64,575    $(8,704)      $(2,172)     $114,905

Comprehensive Income:
   Net Loss for Year Ended December 31, 2002                     --          --        (136)        --            --          (136)
   Other Comprehensive Income (Loss):
      Unrealized Holding Loss on Marketable Securities,
         Net of Deferred Taxes of ($194)                         --          --          --         --          (362)         (362)
      Recognition of Unrealized Holding Loss on Marketable
         Securities, Net of Deferred Taxes of $248               --          --          --         --           461           461
      Net Change in Fair Value of Derivatives, Net of
         Deferred Taxes of $193                                  --          --          --         --           359           359
                                                                                                                          --------
Total Comprehensive Income                                                                                                     322
                                                             ------     -------     -------    -------       -------      --------
Balance at December 31, 2002                                 $6,756     $54,450     $64,439    $(8,704)      $(1,714)     $115,227
                                                             ------     -------     -------    -------       -------      --------

Comprehensive Income:
   Net Income for Year Ended December 31, 2003                   --          --       5,491         --            --         5,491
   Other Comprehensive Income (Loss):
      Unrealized Holding Gain on Marketable Securities,
         Net of Deferred Taxes of $207                           --          --          --         --           387           387
      Net Change in Fair Value of Derivatives, Net of
         Deferred Taxes of $141                                  --          --          --         --           262           262
                                                                                                                          --------
Total Comprehensive Income                                                                                                   6,140
                                                             ------     -------     -------    -------       -------      --------
Balance at December 31, 2003                                 $6,756     $54,450     $69,930    $(8,704)      $(1,065)     $121,367
                                                             ------     -------     -------    -------       -------      --------

COMPREHENSIVE INCOME:
   NET INCOME FOR YEAR ENDED DECEMBER 31, 2004                   --          --      12,785         --            --        12,785
   OTHER COMPREHENSIVE INCOME (LOSS):
      RECOGNITION OF UNREALIZED HOLDING LOSS ON MARKETABLE
         SECURITIES, NET OF DEFERRED TAXES OF $216               --          --          --         --           402           402
      UNREALIZED HOLDING GAIN ON MARKETABLE SECURITIES,
         NET OF DEFERRED TAXES OF $118                           --          --          --         --           220           220
      NET CHANGE IN FAIR VALUE OF DERIVATIVES, NET OF
         DEFERRED TAXES OF $366                                  --          --          --         --           680           680
                                                                                                                          --------
TOTAL COMPREHENSIVE INCOME                                                                                                  14,087
                                                             ------     -------     -------    -------       -------      --------
BALANCE AT DECEMBER 31, 2004                                 $6,756     $54,450     $82,715    $(8,704)      $   237      $135,454
                                                             ======     =======     =======    =======       =======      ========


        The accompanying notes are an integral part of these statements.


                                      F-6



                     INTERNATIONAL SHIPHOLDING CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                          (All Amounts in Thousands)



                                                                           Year Ended December 31,
                                                                      -------------------------------
                                                                         2004       2003      2002
                                                                      --------   ---------   --------
                                                                                    
Cash Flows from Operating Activities:
   Net Income (Loss)                                                    12,785       5,491       (136)
   Adjustments to Reconcile Net Income (Loss) to Net Cash
      Provided by Operating Activities:
         Depreciation                                                   19,420      20,855     20,123
         Amortization of Deferred Charges and Other Assets               7,844       7,525      7,994
         (Benefit) Provision for Deferred Federal Income Taxes          (7,166)      2,634       (170)
         Equity in Net Income of Unconsolidated Entities                (4,646)       (422)      (555)
         Loss (Gain) on Sale of Other Assets                                 7      (1,393)      (557)
         Impairment Loss                                                    --          --        (66)
         Impairment Loss on Investment                                      --          --        598
         Loss (Gain) on Early Extinguishment of Debt                       361       1,310        (65)
         Loss on Sale of Investment                                        623          --         --
      Changes in:
         Accounts Receivable                                             7,031      (7,390)    14,540
         Inventories and Other Current Assets                            1,308         231       (397)
         Deferred Drydocking Charges                                    (7,450)     (2,210)    (2,906)
         Other Assets                                                    1,277       2,668      3,035
         Accounts Payable and Accrued Liabilities                       (3,089)      3,536    (15,054)
         Federal Income Taxes Payable                                   (1,066)      8,379       (564)
         Billings in Excess of Income Earned and Expenses Incurred        (548)      3,270       (558)
         Other Long-Term Liabilities                                    (2,244)     (5,868)    (6,823)
                                                                      --------   ---------   --------
Net Cash Provided by Operating Activities                               24,447      38,616     18,439
                                                                      --------   ---------   --------

Cash Flows from Investing Activities:
         Net Investment in Direct Financing Lease                        2,151       1,944      1,775
         Additions to Vessels and Other Assets                         (25,565)     (5,360)    (8,558)
         Proceeds from Sale of Vessels and Other Assets                     --       3,299     18,110
         Purchase of and Proceeds from Short Term Investments           (3,155)        126        327
         Proceeds from Sale of Marketable Equity Securities                 --         200         --
         Distributions from (Investment in) Unconsolidated Entities      4,542      (3,362)    (2,151)
         Partial Sale of Unconsolidated Entities                            --       4,223        110
         Net Decrease (Increase) in Restricted Cash Account                865         690       (567)
         Other Investing Activities                                        115          12        410
                                                                      --------   ---------   --------
Net Cash (Used) Provided by Investing Activities                       (21,047)      1,772      9,456
                                                                      --------   ---------   --------

Cash Flows from Financing Activities:
         Proceeds from Issuance of Debt                                 29,000     139,000     41,500
         Repayment of Debt                                             (29,920)   (173,675)   (89,976)
         Additions to Deferred Financing Charges                          (766)     (1,054)      (264)
         Other Financing Activities                                        (82)       (197)       114
                                                                      --------   ---------   --------
Net Cash Used by Financing Activities                                   (1,768)    (35,926)   (48,626)
                                                                      --------   ---------   --------

Net Increase (Decrease) in Cash and Cash Equivalents                     1,632       4,462    (20,731)
Cash and Cash Equivalents at Beginning of Year                           8,881       4,419     25,150
                                                                      --------   ---------   --------

Cash and Cash Equivalents at End of Year                              $ 10,513   $   8,881   $  4,419
                                                                      ========   =========   ========


        The accompanying notes are an integral part of these statements.


                                      F-7



                      INTERNATIONAL SHIPHOLDING CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

          The accompanying consolidated financial statements include the
accounts of International Shipholding Corporation (a Delaware corporation) and
its majority-owned subsidiaries. In this report, the terms "we," "us," "our,"
and "the Company" refer to International Shipholding Corporation and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.

          Our policy is to consolidate all subsidiaries in which we hold a
greater than 50% voting interest or otherwise exercise significant influence
over operating and financial activities. We use the equity method to account for
investments in entities in which we hold a 20% to 50% voting interest and the
cost method to account for investments in entities in which we hold less than
20% voting interest and in which we cannot exercise significant influence over
operating and financial activities.

          Certain reclassifications have been made to the prior period financial
information in order to conform to current year presentation.

NATURE OF OPERATIONS

          Through our subsidiaries, we operate a diversified fleet of U.S. and
international flag vessels that provide domestic and international maritime
transportation services to commercial customers and agencies of the United
States government primarily under medium- to long-term charters or contracts. At
December 31, 2004, our fleet consisted of 35 ocean-going vessels, 917 LASH
(Lighter Aboard SHip) barges, 32 over-the-road Haul-Away car carrying trucks,
and related shoreside handling facilities. Our strategy is to (i) identify
customers with high credit quality and 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,
(iii) secure financing for the vessels predicated primarily on those charter or
contract arrangements, and (iv) provide our customers with reliable, high
quality service at a reasonable cost.

USE OF ESTIMATES

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

VOYAGE REVENUE AND EXPENSE RECOGNITION

          Revenues and expenses relating to our Liner and Rail-Ferry segments'
voyages are recorded over the duration of the voyage. Revenues and expenses
relating to our other segments' voyages, which require no estimates or
assumptions, are recorded when earned or incurred during the reporting period.
On our Liner Services, the voyage revenues are known at the beginning of the
vessel's voyage and are reported through the date of the financial statements
based on the relative transit time, which is the time between the vessel's
loading port to the vessel's discharge port. Voyage expenditures are estimated
at the beginning of the vessel's voyage based on historical cost standards and
current estimates received from our vendors and port agents. Provisions for loss
voyages are recorded when contracts for the voyages are fixed and when losses
become apparent for voyages in progress.

MARITIME SECURITY PROGRAM

          The Maritime Security Act ("MSA"), which provides for a program, the
Maritime Security Program ("MSP"), for certain U.S. flag vessels, was signed
into law in October of 1996. As of December 31, 2004, our U.S. flag LASH vessel,
four of our Pure Car/Truck Carriers ("PCTCs"), and two Container vessels that we
purchased in December of 2004 were qualified and received contracts for MSA
participation. Under the MSP program, each participating vessel is eligible to
receive an annual payment of $2,100,000, which is subject to annual
appropriations and not guaranteed. In 2003, Congress authorized an extension of
the MSP through 2015, increased the number of ships eligible to participate in
the program from 47 to 60, and increased MSP payments to companies in the
program, all to be effective on October 1, 2005. On October 15, 2004, we filed
applications to extend our MSP contracts for another 10 years through September
30, 2015, and all seven of our vessels were effectively grandfathered in the MSP
reauthorization. Simultaneously, we offered additional ships for participation
in the MSP. On January 12, 2005 we were awarded one additional MSP contract,
effective


                                       F-8



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

October 1, 2005, for a total of eight MSP contracts. We are currently exploring
our options to fulfill the contract requirement. Annual payments for each vessel
in the new MSP program are $2,600,000 in years 2006 to 2008, $2,900,000 in years
2009 to 2011, and $3,100,000 in years 2012 to 2015. We recognize Maritime
Security Program revenue on a monthly basis over the duration of the qualifying
contracts.

CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES

          We consider highly liquid debt instruments with a maturity of three
months or less to be cash equivalents. We have categorized all marketable
securities as available-for-sale. The carrying amount approximates fair value
for each of these instruments.

INVENTORIES

          Inventories are stated at the lower of cost or market. The base-stock
method is used for our vessels, and the first-in, first-out ("FIFO") method is
used for fuel.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

          We provide an allowance for doubtful accounts for accounts receivable
balances estimated to be non-collectible. These provisions are maintained based
on identified specific accounts, past experiences, and current trends, and
require management's estimates with respect to the amounts that are
non-collectible.

PROPERTY

          For financial reporting purposes, vessels are depreciated over their
estimated useful lives using the straight-line method. Estimated useful lives of
Vessels and Barges, Other Equipment, Terminal Facilities, and Furniture and
Equipment are as follows:



                            Years
                            -----
                         
2 LASH Vessels                30
3 Pure Car/Truck Carriers     20
1 Coal Carrier                15
7 Other Vessels *             25
Other Equipment              3-12
Terminal Facilities          5-10
Furniture and Equipment      3-10


*    Includes two Special Purpose vessels, a Dockship, a Molten Sulphur Carrier,
     and three Container vessels.

          At December 31, 2004, our fleet of 35 vessels also included (i) three
Roll-On/Roll-Off ("RO/RO") vessels, which we operate, (ii) a
Breakbulk/Multi-Purpose vessel, a Tanker and a Container vessel, which we
charter in for one of our services, (iii) three PCTCs which we charter in for
our Time Charter contracts, (iv) one LASH vessel which we charter in for our
Transatlantic service, (v) one Molten Sulphur Tanker, which we charter in for
our Contract of Affreightment, (vi) two Cape-Size Bulk Carriers in which we own
a 50% interest, and (vii) nine Cement Carriers in which we own a 26.1% interest.
We also own 32 over-the-road haul-away car carrying trucks.

          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 2004, 2003 or 2002.

          At December 31, 2004, our fleet also included 917 LASH barges. We
group our LASH barges, excluding those held for disposal, 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. From time to time, we
dispose 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.

          We are still in the process of disposing of 18 LASH barges, which are
not needed for current operations. These assets are included in our balance
sheet as Current Assets Held for Disposal. During 2004, we purchased two used
Container vessels. These vessels will enable us to continue two of our MSP
contracts that were previously maintained by two chartered container vessels. In
2005, we intend to add a second deck to each of the two Special Purpose vessels


                                      F-9



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

operating in our Rail-Ferry Service in order to essentially double their
capacity. We expect the vessels to begin shipyard work in mid-2005 and fully
return to service in the second half of 2005.

          During 2003, we recognized a net gain on the sale of assets of
$1,393,000 primarily as a result of a gain of $756,000 on the sale of the
remaining Special Purpose barges, a gain of $482,000 from the sale of our
Multi-Purpose vessel, which completed its commitment under charter with the MSC
and was no longer needed for operations, a gain of $115,000 relating to the sale
of certain of our investments in unconsolidated entities, and the gain of
$40,000 for the sale of terminal land and facility no longer needed for
operations.

          During 2002, we recognized a net gain on sale of assets of $557,000
primarily as a result of a gain of $500,000 on the sale of certain contract
rights that were no longer beneficial to us and a gain of $57,000 on the sale of
certain assets no longer needed for operations.

          We monitor all of our fixed assets for impairment and perform an
impairment analysis in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," when triggering events or circumstances indicate a fixed
asset may be impaired.

DRYDOCKING COSTS

          We defer certain costs related to the drydocking of our vessels.
Deferred drydocking costs are capitalized as incurred and amortized on a
straight-line basis over the period between drydockings (generally two to five
years) (See Note J).

DEFERRED FINANCING CHARGES AND ACQUIRED CONTRACT COSTS

          We amortize our deferred financing charges and acquired contract costs
on a straight-line basis over the terms of the related financing and contracts
(See Note J).

SELF-RETENTION INSURANCE

          We maintain provisions for estimated losses under our self-retention
insurance program based on estimates of the eventual claims settlement costs.
Our policy is to establish self-insurance provisions for each policy year based
on independent actuarial estimates, and to maintain the provisions at those
levels for the estimated run-off period, approximately two years from the
inception of that period. We believe most claims will be reported, or estimates
for existing claims will be revised, within this two-year period. Subsequent to
this two-year period, self-insurance provisions are adjusted to reflect our
current estimate of loss exposure for the policy year. However, if during this
two-year period our estimate of loss exposure exceeds the actuarial estimate,
then additional loss provisions are recorded to increase the self-insurance
provisions to our estimate of the eventual claims' settlement cost. The
measurement of our exposure for self-insurance liability requires management to
make estimates and assumptions that affect the amount of loss provisions
recorded during the reporting period. Actual results could differ materially
from those estimates (See Note D).

ASBESTOS CLAIMS

          We maintain provisions for estimated losses for asbestos claims based
on estimates of eventual claims settlement costs. Our policy is to establish
provisions based on a range of estimated exposure. We estimate this potential
range of exposure using input from legal counsel and internal estimates based on
the individual deductible levels for each policy year. We are also indemnified
for certain of these claims by the previous owner of one of our wholly-owned
subsidiaries. The measurement of our exposure for asbestos liability requires
management to make estimates and assumptions that affect the amount of loss
provisions recorded during the period. Actual results could differ from those
estimates.

INCOME TAXES

          Income taxes are accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes." Provisions for income taxes include deferred
income taxes that are provided on items of income and expense, which affect
taxable income in one period and financial statement 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.

          The recently enacted American Jobs Creation Act of 2004 ("Jobs
Creation Act"), which became effective for our company on January 1, 2005, will
change the United States tax treatment of our U.S. flag vessels in foreign
operations and our foreign flag shipping operations. We have made an election
under the Jobs Creation Act to have our qualifying U.S. flag operations taxed
under a new "tonnage tax" regime rather than under the usual U.S. corporate
income tax regime.


                                      F-10



                     INTERNATIONAL SHIPHOLDING CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

Effective January 1, 2005, the U.S. tax on these operations will be based on the
tonnage of the vessels, rather than their contribution to our income or profits
(See Note F).

FOREIGN CURRENCY TRANSACTIONS

          Certain of our revenues and expenses are converted into or denominated
in foreign currencies, primarily Singapore Dollar, Indonesian Rupiah, Euro,
British Pound, Mexican Peso, Indian Rupee, and Japanese Yen. All exchange
adjustments are charged or credited to income in the year incurred. Exchange
losses of $20,000, $96,000 and $227,000 were recognized for the years ended
December 31, 2004, 2003 and 2002, respectively.

DIVIDEND POLICY

          On January 6, 2005, we announced the completion of our public offering
of 6% convertible exchangeable preferred stock and will accrue cumulative
quarterly cash dividends from the date of issuance at a rate of 6% per annum,
commencing March 31, 2005. The payment of preferred stock dividends is at the
discretion of our board of directors. Through our preferred stock offering, we
are restricted from paying common stock dividends and acquiring any of our
common stock prior to December 31, 2007.

EARNINGS PER SHARE

          Basic and diluted earnings per share were computed based on the
weighted average number of common shares issued and outstanding during the
relevant periods. Stock options covering 475,000 shares (See note E) were
included in the computation of diluted earnings per share in the year ended
December 31, 2004, but were excluded from the computation of diluted earnings
per share in the years ended December 31, 2003 and 2002, as the effect would
have been antidilutive.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

          Under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, in order to consider a derivative instrument as a
hedge, (i) we must designate the instrument as a hedge of future transactions,
and (ii) the instrument must reduce our exposure to the applicable risk. If the
above criteria are not met, we must record the fair market value of the
instrument at the end of each period and recognize the related gain or loss
through earnings. If the instrument qualifies as a hedge, net settlements under
the agreement are recognized as an adjustment to earnings, while changes in the
fair market value of the hedge are recorded through Stockholders' Investment in
Other Comprehensive Income (Loss). We recognize the fair market value of the
hedge through earnings at the time of maturity, sale or termination of the
hedge. We currently employ, or have employed in the past, interest rate swap
agreements, foreign currency contracts, and commodity swap contracts (See Note
N).

STOCK-BASED COMPENSATION

          We account for stock-based compensation using Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense is recognized for employee stock options
issued under the Stock Incentive Plan if the exercise price of the options
equals the market price of our stock on the date of grant (See Note E).

PENSION AND POSTRETIREMENT BENEFITS

          Our pension and postretirement benefit costs are calculated using
various actuarial assumptions and methodologies as prescribed by SFAS No. 87,
"Employers' Accounting for Pensions" and SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions." These assumptions include
discount rates, health care cost trend rates, inflation, rate of compensation
increases, expected return on plan assets, mortality rates, and other factors.
We believe that the assumptions utilized in recording the obligations under our
plans are reasonable based on input from our outside actuary and information as
to historical experience and performance. Differences in actual experience or
changes in assumptions may affect our pension and postretirement obligations and
future expense.

NEW ACCOUNTING PRONOUNCEMENTS

          In January of 2003, the FASB issued Financial Accounting Series
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 requires a variable interest entity to be consolidated by the primary
beneficiary of the entity, where the company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns, or both. In general, a
variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights


                                      F-11



                     INTERNATIONAL SHIPHOLDING CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

or (b) has equity investors that do not provide sufficient financial resources
for the entity to support its activities. FIN 46 also requires disclosures about
variable interest entities that the company is not required to consolidate but
in which it has a significant variable interest. We have investments in certain
unconsolidated entities in which we have less than 100% ownership. We have
evaluated these investments and determined that we do not have any investments
in variable interest entities. Therefore, the adoption of FIN No. 46 as of
January 1, 2004 did not have an impact on the financial statements.

          In December of 2004, the FASB issued Statement No. 123 (revised 2004),
"Share-Based Payment," which is a revision of FASB Statement No. 123,
"Accounting for Stock-Based Compensation." Statement No. 123(R) supersedes APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and amends FASB
Statement No. 95, "Statement of Cash Flows." Statement No. 123(R) requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values. Pro forma
disclosures are no longer an alternative. Statement No. 123(R) is effective for
periods beginning after June 15, 2005. We plan to adopt SFAS 123(R) on July 1,
2005.

          Statement No. 123(R) permits public companies to adopt its
requirements using either a modified prospective method or a modified
retrospective method. Under the modified prospective method, companies are
required to record compensation cost for new and modified awards over the
related vesting period of such awards prospectively and record compensation cost
prospectively for the unvested portion, at the date of adoption, of previously
issued and outstanding awards over the remaining vesting period of such awards.
No change to prior periods presented is permitted under the modified prospective
method. Under the modified retrospective method, companies record compensation
costs for prior periods retroactively through restatement of such periods using
the pro forma amounts previously disclosed in the footnotes. Also, in the period
of adoption and after, companies record compensation cost based on the modified
prospective method. We have not yet determined the method of adoption we will
use.

          As permitted by Statement No. 123, we account for share-based payments
to employees using APB Opinion No. 25 and no compensation expense has been
recognized for employee options granted under the Stock Incentive Plan.
Accordingly, the adoption of Statement No. 123(R)'s fair value method will have
an impact on our results of operations, although it will have no impact on our
overall financial position. However, the impact of adoption of Statement No.
123(R) cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future. However, had we adopted Statement
No. 123(R) in prior periods, there would have been no impact as described in the
disclosure of pro forma net income and earnings per share in Note E.

NOTE B - ISSUANCE OF CONVERTIBLE EXCHANGEABLE PREFERRED STOCK

          In January of 2005, we issued 800,000 shares of 6.0% convertible
exchangeable preferred stock, $1.00 par value, at a price of $50.00 per share.
The proceeds of the preferred stock offering, after deducting all associated
costs, were $37,987,000. Cash dividends are cumulative and payable quarterly in
arrears at an annual rate of 6% per share, when and as declared by our Board of
Directors.

          Each share of the preferred stock has a liquidation preference of $50
per share and may be converted into shares of our common stock based on the
initial conversion price of $20.00 per share, subject to adjustment upon the
occurrence of certain events. We may elect to redeem the preferred stock, in
whole or in part, for cash at any time on or after December 31, 2006, provided
that prior to December 31, 2007, we may elect to redeem the preferred stock only
if the closing price of our common stock has exceeded 150% of the conversion
price of the preferred stock for at least 20 trading days during any 30-day
trading period ending within five trading days prior to notice of redemption. We
may also elect to redeem the preferred stock for cash upon a change in control
of our company. In addition, upon a change in control of our company and to the
extent we have not exercised our change in control redemption option, preferred
stockholders may require us to redeem for cash any or all of the shares of the
preferred stock at the liquidation preference of the preferred stock, plus any
accrued and unpaid cash dividends to, but not including, the date of redemption.
Preferred stockholders have no other rights to require us to redeem the
preferred stock.

          At our option, we may exchange the preferred stock in whole, but not
in part, on any dividend payment date beginning on March 31, 2006 and prior to
December 31, 2014, for our 6.0% convertible subordinated notes due 2014. If we
elect to exchange the preferred stock for the notes, the exchange rate will be
$50 principal amount of the notes for each share of preferred stock. The notes,
if issued, will mature on December 31, 2014 and will have terms substantially
similar to those of the preferred stock.

          The preferred stock has no maturity date and no voting rights prior to
conversion to common stock. The notes, if issued, will have no voting rights
prior to conversion to common stock.


                                      F-12



                     INTERNATIONAL SHIPHOLDING CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE C - LONG-TERM DEBT



                                                                                      (All Amounts in Thousands)

                                                    Interest Rate                        Total Principal Due
                                            ---------------------------              ---------------------------
                                            DECEMBER 31,   December 31,   Maturity   DECEMBER 31,   December 31,
Description                                     2004           2003         Date         2004           2003
- -----------                                 ------------   ------------   --------   ------------   ------------
                                                                                     
Unsecured Senior Notes - Fixed Rate             7.75%          7.75%        2007       $ 70,925       $ 71,296
Variable Rate Notes Payable:
                                            3.6875-4.00%       2.66%        2013         81,665         89,133
                                                 N/A           3.92%        2006             --          2,500
                                                3.92%      2.9375-3.00%     2007          5,500          7,500
U.S. Government Guaranteed Ship
   Financing Notes and Bonds - Fixed Rate        N/A           8.30%        2009             --          8,581
Line of Credit                                 4.3063%          N/A         2009         20,000             --
                                                                                       --------       --------
                                                                                       $178,090       $179,010
   Less Current Maturities                                                               (9,468)       (14,866)
                                                                                       --------       --------
                                                                                       $168,622       $164,144
                                                                                       ========       ========


          During 2004, we retired $410,000 of the 7 3/4% Notes at a discount and
retired certain other outstanding debt prior to maturity. In 2003, we retired
$10,685,000 of the 7 3/4% Notes at a discount. Additionally in 2003, we secured
financing of $91,000,000, which was used to retire certain of our outstanding
debt, including a loan on our Coal Carrier on which we incurred a make-whole
premium upon retirement. During 2002, we retired the remaining balance of
$39,085,000 of the 9% Senior Notes at a slight discount and retired $1,052,000
of the 7 3/4% Senior Notes at a discount. Upon retirement of this indebtedness,
we recorded a net Loss on Early Extinguishment of Debt for the years ended
December 31, 2004 and 2003, of approximately $361,000 and $1,310,000,
respectively and a Gain on Early Extinguishment of Debt for the year ended
December 31, 2002, of approximately $65,000.

          The aggregate principal payments required as of December 31, 2004, for
each of the next five years are $9,468,000 in 2005, $9,468,000 in 2006,
$79,893,000 in 2007, primarily due to the maturity of our 7 3/4% Senior Notes,
$7,468,000 in 2008, and $27,468,000 in 2009. In addition to regularly scheduled
principal payments, the $27,468,000 required in 2009 includes repayment of the
$20,000,000 drawn on our line of credit as of December 31, 2004.

          Seven vessels with an aggregate net book value of $191,618,000 as of
December 31, 2004, and 550 of our LASH barges having an aggregate net book value
of $3,571,000 as of December 31, 2004, are mortgaged as security for certain of
our debt agreements. Additional collateral includes a security interest in
certain operating contracts and receivables. Our remaining indebtedness is
unsecured. Most of these agreements, among other things, impose defined minimum
working capital and net worth requirements, impose leverage requirements, impose
restrictions on the payment of dividends, and prohibit us from incurring,
without prior written consent, additional debt or lease obligations, except as
defined. We have met the minimum working capital and net worth requirements of
our debt agreements during the period covered by the agreements, once amended
effective June of 2001 and March of 2002. In order to purchase two Container
vessels prior to December 31, 2004, we drew $20,000,000 on our credit facility
in late 2004 and repaid that amount early in January of 2005 with a portion of
the proceeds from the sale of our convertible exchangeable preferred stock.
Having these draws outstanding on our credit facility as of December 31, 2004,
caused us to be in "non-compliance" with our leverage ratio as stated in the
agreements at December 31, 2004. However, prior to December 31, 2004, we
obtained waivers from our lenders with respect to this matter of
"non-compliance" with the leverage requirements. We had originally anticipated
closing our preferred stock offering prior to December 31, 2004. If the closing
had occurred prior to December 31, we would have met all financial and other
covenants, including the leverage requirements. We are currently in compliance
again with all our restrictive covenants and believe we will continue to meet
these requirements throughout 2005, although we can give no assurance to that
effect.

          The most restrictive of our credit agreements prohibit the declaration
or payment of dividends unless (1) the total of (a) all dividends paid,
distributions on, or other payments made with respect to our capital stock
during the period beginning January 1, 1999, and ending on the date of dividend
declaration or other payment and (b) all investments other than our Qualified
Investments (as defined) and certain designated subsidiaries do not exceed the
sum of $10,000,000 plus 50% (or,


                                      F-13



                     INTERNATIONAL SHIPHOLDING CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

in case of a loss, minus 100%) of our consolidated net income during the period
described above plus the net cash proceeds received from our issuance of common
stock during the above period, and (2) no default or event of default has
occurred.

          Certain of our loan agreements also restrict the ability of our
subsidiaries to make dividend payments, loans, or advances, the most restrictive
of which contain covenants that prohibit payments of dividends, loans, or
advances to us from Cape Holding, Ltd., our wholly-owned subsidiary, prior to
the issuance of audited financial statement. Certain other loan agreements
restrict the ability of our subsidiaries to dispose of collateralized assets or
any other asset which is substantial in relation to our assets taken as a whole
without the approval from the lender. We have consistently remained in
compliance with these provisions of the loan agreements.

          The amounts of potentially restricted net assets were as follows:



                                                      (All Amounts in Thousands)

                                                     DECEMBER 31,   December 31,
                                                         2004           2003
                                                     ------------   ------------
                                                              
Sulphur Carriers, Inc.                                     --          $26,553
                                                          ---          -------
   Total Restricted Net Assets                             --          $26,553
                                                          ===          =======


          At December 31, 2004 and 2003, we had available a line of credit
totaling $50,000,000 and $15,000,000, respectively. As of December 31, 2004, the
balance outstanding on our line of credit was $20,000,000, which was repaid in
January of 2005. As of December 31, 2003, we had no balance outstanding on our
line of credit.

NOTE D - SELF-RETENTION INSURANCE

          Under our insurance program, we are self-insured for Hull and
Machinery claims between $150,000 and $1,000,000 and Loss of Hire claims in
excess of 14 days up to an aggregate stop loss amount of $2,000,000. If the
aggregate claim amounts exceed $2,000,000, the Hull and Machinery deductible
reverts to $150,000 for each claim and the Loss of Hire claim level remains at
14 days. We have obtained third party coverage for individual Hull and Machinery
claims exceeding $1,000,000 and Loss of Hire claims exceeding 14 days.
Protection and Indemnity claims, including cargo and personal injury claims, are
not included in our self-retention insurance program, and we have obtained third
party insurance coverage for these claims with a deductible level of $25,000 per
incident for all vessels. The independent actuarial estimates of our
self-insurance exposure are approximately $775,000 below the aggregate
$2,000,000 stop loss amount for the policy year beginning June 27, 2004.

          The current portions of the liabilities for self-insurance exposure
were $1,515,000 and $3,668,000 at December 31, 2004 and 2003, respectively, and
the noncurrent portions of these liabilities were $1,435,000 and $675,000 at
December 31, 2004 and 2003, respectively.

NOTE E - EMPLOYEE BENEFIT PLANS

PENSION AND POSTRETIREMENT BENEFITS

          Our defined benefit 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 highest sixty
consecutive months of compensation. Our funding policy is based on minimum
contributions required under ERISA as determined through an actuarial
computation. Plan assets consist primarily of investments in equity and fixed
income mutual funds and money market holdings. The target asset allocation range
is 40% in fixed income investments and 60% in equity investments. The asset
allocation on December 31, 2004 was 41% in fixed income investments and 59% in
equity investments. The asset allocation on December 31, 2003 was 36% in fixed
income investments and 64% in equity investments. The plan's prohibited
investments include selling short, commodities and futures, letter stock,
unregistered securities, options, margin transactions, derivatives, leveraged
securities, and International Shipholding Corporation securities. The plan's
diversification strategy includes limiting equity securities in any single
industry to 25% of the equity portfolio market value, limiting the equity
holdings in any single corporation to 10% of the market value of the equity
portfolio, and diversifying the fixed income portfolio so that no one issuer
comprises more than 10% of the aggregate fixed income portfolio, except for
issues of the U.S. Treasury or other Federal Agencies. The plan's assumed future
returns are based primarily on the asset allocation and on the historic returns
for the plan's asset classes determined from both actual


                                      F-14



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

plan returns and, over longer time periods, market returns for those asset
classes. As of December 31, 2004, the plan has assets of $19,119,000 and a
projected pension obligation of $22,461,000.

          Our postretirement benefit plans currently provide medical, dental,
and life insurance benefits to eligible retired employees and their eligible
dependents. The measurement date for both plans is December 31. The following
table sets forth the plans' changes in the benefit obligations and fair value of
assets and a statement of the funded status:



                                                        Pension Plan         Postretirement Benefits
                                                   -----------------------   -----------------------
                                                   Year Ended December 31,   Year Ended December 31,
(All Amounts in Thousands)                              2004      2003            2004      2003
                                                      -------   -------         -------   -------
                                                                              
CHANGE IN BENEFIT OBLIGATION
Benefit Obligation at Beginning of Year               $20,266   $18,372         $ 9,687   $ 9,024
Service Cost                                              548       469              77        67
Interest Cost                                           1,229     1,194             550       595
Actuarial Loss                                          1,394     1,119             133       635
Benefits Paid                                            (976)     (888)           (555)     (634)
Impact of Plan Amendments                                  --        --            (254)       --
                                                      -------   -------         -------   -------
Benefit Obligation at End of Year                      22,461    20,266           9,638     9,687
                                                      =======   =======         =======   =======

CHANGE IN PLAN ASSETS
Fair Value of Plan Assets at Beginning of Year         17,828    15,535              --        --
Actual Return on Plan Assets                            1,857     3,181              --        --
Employer Contribution                                     410        --             555       634
Benefits Paid                                            (976)     (888)           (555)     (634)
                                                      -------   -------         -------   -------
Fair Value of Plan Assets at End of Year               19,119    17,828              --        --
                                                      =======   =======         =======   =======
Funded Status                                          (3,342)   (2,438)         (9,638)   (9,687)
Unrecognized Net Actuarial Loss                         3,935     3,090           2,257     2,198
Unrecognized Prior Service Cost                            --         7            (232)       --
                                                      -------   -------         -------   -------
Prepaid Cost (Benefit Obligation) at End of Year      $   593   $   659         $(7,613)  $(7,489)
                                                      =======   =======         =======   =======
KEY ASSUMPTIONS
Discount Rate                                            5.75%     6.25%           5.75%     6.25%
Rate of Compensation Increase                            5.50%     5.50%            N/A       N/A


          The accumulated benefit obligation for the pension plan was
$19,061,000 and $17,313,000 at December 31, 2004 and 2003, respectively.

          The following table provides the components of net periodic benefit
cost for the plans:



                                                Pension Plan        Postretirement Benefits
                                          -----------------------   -----------------------
                                          Year Ended December 31,   Year Ended December 31,
(All Amounts in Thousands)                     2004      2003              2004   2003
                                             -------   -------            -----   ----
                                                                      
COMPONENTS OF NET PERIODIC BENEFIT COST
Service Cost                                 $   548   $   469            $  77   $ 67
Interest Cost                                  1,229     1,194              550    595
Expected Return on Plan Assets                (1,395)   (1,201)              --     --
Amortization of Prior Service Cost                 8         8              (21)    --
Amortization of Net Actuarial Loss                86       188               73     67
                                             -------   -------            -----   ----
Net Periodic Benefit Cost                    $   476   $   658            $ 679   $729
                                             =======   =======            =====   ====



                                     F-15



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

                                          
KEY ASSUMPTIONS
Discount Rate                    6.25%  6.75%  6.25%  6.75%
Expected Return on Plan Assets   8.00%  8.00%   N/A    N/A
Rate of Compensation Increase    5.50%  5.50%   N/A    N/A



          For measurement purposes, the health and dental care cost trend rate
was assumed to be 8% for 2004, decreasing steadily by .50 per year over the next
six years to a long-term rate of 5%. The health and dental care cost trend rate
for employees over 65 was assumed to be 10% decreasing steadily by .50% per year
over the next ten years to a long-term rate of 5%. A one percent change in the
assumed health care cost trend rates would have the following effects:



(All Amounts in Thousands)                                            1% Increase   1% Decrease
                                                                      -----------   -----------
                                                                              
Change in total service and interest cost components
   for the year ended December 31, 2004                                  $   63        $ (52)
Change in postretirement benefit obligation as of December 31, 2004       1,026         (866)


          Crew members on our U.S. flag vessels belong to union-sponsored
pension plans. We contributed approximately $1,499,000, $1,472,000, and
$1,440,000 to these plans for the years ended December 31, 2004, 2003, and 2002,
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 us to determine whether there may be unfunded vested
benefits.

          We continue to evaluate ways in which we 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 reported obligation and annual expense.

          In December of 2003, the Medicare Prescription Drug, Improvements, and
Modernization Act of 2003 ("Act") was signed into law. In addition to including
numerous other provisions that have potential effects on an employer's retiree
health plan, the Medicare law included a special subsidy for employers that
sponsor retiree health plans with prescription drug benefits that are at least
as favorable as the new Medicare Part D benefit. In May of 2004, the FASB issued
FASB Staff Position ("FSP") 106-2, "Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvements, and Modernization Act
of 2003," that provides guidance on the accounting for the effects of the Act
for employers that sponsor postretirement health care plans that provide drug
benefits. We are still evaluating whether our plan is actuarially equivalent,
although its impact on our financial position and results of operations is not
material.

401(k) SAVINGS PLAN

          We provide a 401(k) tax-deferred savings plan to all full-time
employees who have completed at least 1,000 hours of service. We match 50% of
the employee's first $2,000 contributed to the plan annually. We contributed
$102,000, $87,000 and $171,000 to the plan for the years ended December 31,
2004, 2003 and 2002, respectively.

STOCK INCENTIVE PLAN

          In April of 1998, we established a stock-based compensation plan, the
Stock Incentive Plan (the "Plan"). The purpose of the Plan is to increase
shareholder value and to advance the interest of the Company by furnishing a
variety of economic incentives designed to attract, retain, and motivate key
employees and officers and to strengthen the mutuality of interests between such
employees, officers, and our shareholders. Incentives consist of opportunities
to purchase or receive shares of common stock in the form of incentive stock
options, non-qualified stock options, restricted stock, or other stock-based
awards. Under the Plan, we may grant incentives to our eligible Plan
participants for up to 650,000 shares of common stock. The exercise price of
each option equals the market price of our stock on the date of grant. In July
of 1999, options to purchase 475,000 shares of common stock were granted to
certain qualified participants at an exercise price of $14.125 per share. The
stock options are due to expire on April 14, 2008. All options vested
immediately upon the grant date and were exercisable at December 31, 2004. No
options were granted, exercised or forfeited during 2004, 2003, or 2002.

          We account for stock-based compensation in accordance with APB Opinion
No. 25. Accordingly, no compensation expense has been recognized for employee
options granted under the Plan. If we had determined compensation cost for the
Plan based on the fair value at the grant dates for awards under the Plan
consistent with the fair value method included in SFAS No. 123 "Accounting for
Stock-Based Compensation," our net income and earnings per


                                     F-16



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

share for the years ended December 31, 2004, 2003, and 2002 would have agreed to
the actual amounts reported since no stock options were granted for these years
and all options outstanding vested in 1999.

LIFE INSURANCE

          We have agreements with the former Chairman and current Chairman of
the Company whereby their estates will be paid approximately $822,000 and
$626,000, respectively upon death. We reserved amounts to fund a portion of
these death benefits, which amounted to $1,000,000 and hold an insurance policy,
which covers any remaining liability. The cash surrender value of the insurance
policy was approximately $132,000 and $134,000 as of December 31, 2004 and 2003,
respectively.

NOTE F - INCOME TAXES

          Our Federal income tax returns are filed on a consolidated basis and
include the results of operations of our wholly-owned U.S. subsidiaries.
Pursuant to the Tax Reform Act of 1986, the earnings (losses) of foreign
subsidiaries, which were $4,155,000 in 2004, $553,000 in 2003, and ($606,000) in
2002, are also included in our Federal income tax returns.

          Prior to 1987, deferred income taxes were not provided on
undistributed foreign earnings of $6,689,000, all of which are expected to
remain invested abroad indefinitely. In accordance with the Tax Reform Act of
1986, commencing in 1987, shipping income, as defined under the U.S. Subpart F
income tax provisions, generated from profitable controlled foreign subsidiaries
are subject to Federal income taxes.

          Components of the net deferred tax liability/(asset) are as follows:



                                                     DECEMBER 31,   December 31,
(All Amounts in Thousands)                               2004           2003
                                                     ------------   ------------
                                                              
Liabilities:
   Fixed Assets                                        $ 29,731       $ 38,864
   Deferred Charges                                       2,056          2,515
   Unterminated Voyage Revenue/Expense                      884          1,182
   Intangible Assets                                         --          3,183
   Deferred Insurance Premiums                               --            691
   Deferred Intercompany Transactions                        --          2,530
   Other Liabilities                                      4,551            921
                                                       --------       --------
Total Liabilities                                        37,222         49,886
                                                       --------       --------
Assets:
   Insurance and Claims Reserve                             (37)        (3,565)
   Deferred Intercompany Transactions                    (2,530)        (2,530)
   Post-Retirement Benefits                                (357)        (2,581)
   Alternative Minimum Tax Credit                        (4,577)        (4,596)
   Net Operating Loss Carryforward/
      Unutilized Deficit                                (13,954)       (11,706)
   Valuation Allowance                                    4,330             --
   Other Assets                                          (5,062)        (5,487)
                                                       --------       --------
Total Assets                                            (22,187)       (30,465)
                                                       --------       --------
Total Deferred Tax Liability, Net                      $ 15,035       $ 19,421
                                                       ========       ========


          The following is a reconciliation of the U.S. statutory tax rate to
our effective tax rate - expense (benefit):



                                                      Year Ended December 31,
                                                     -------------------------
                                                       2004      2003    2002
                                                     -------    -----   ------
                                                               
Statutory Rate                                         35.00%   35.00%  (35.00%)
State Income Taxes                                      2.35%    0.49%   12.30%
Jobs Creation Act Adjustment                         (776.11%)     --       --
Other, Primarily Non-deductible Expenditures           21.50%    0.55%   13.66%
                                                     -------    -----   ------
                                                     (717.26%)  36.04%   (9.04%)
                                                     =======    =====   ======



                                     F-17



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

          Foreign income taxes of $410,000, $563,000 and $754,000 are included
in our consolidated statements of income in the Provision for Income Taxes for
the years ended December 31, 2004, 2003 and 2002, respectively. We pay foreign
income taxes in Indonesia.

          We have not recognized a deferred tax liability of $681,000 for
undistributed earnings of certain non-U.S. subsidiaries because we consider
those earnings to be indefinitely invested abroad. As of December 31, 2004, the
undistributed earnings of these subsidiaries were $1,946,000.

          Under previous United States tax law, U.S. companies like us and their
domestic subsidiaries generally have been taxed on all income, including in our
case income from shipping operations, whether derived in the United States or
abroad. With respect to any foreign subsidiary in which we hold more than a 50
percent interest (referred to in the tax laws as a controlled foreign
corporation, or "CFC"), we are treated as having received a current taxable
distribution of our pro rata share of income derived from foreign shipping
operations.

          The Jobs Creation Act, which became effective for us on January 1,
2005, changed the United States tax treatment of our U.S. flag vessels in
foreign operations and our foreign flag shipping operations.

          In December of 2004, we made an election under the Jobs Creation Act
to have our U.S. flag operations (other than those of two ineligible vessels
used exclusively in United States coastwise commerce) taxed under a new "tonnage
tax" regime rather than under the usual U.S. corporate income tax regime. As a
result of that election, our gross income for United States income tax purposes
with respect to our eligible U.S. flag vessels will not include (1) income from
qualifying shipping activities in U.S. foreign trade (i.e., transportation
between the U.S. and foreign ports or between foreign ports), (2) income from
cash, bank deposits and other temporary investments that are reasonably
necessary to meet the working capital requirements of our qualifying shipping
activities, and (3) income from cash or other intangible assets accumulated
pursuant to a plan to purchase qualifying shipping assets.

          Under the tonnage tax regime, our taxable income with respect to the
operations of our eligible U.S. flag vessels will be based on a "daily notional
taxable income," which will be taxed at the highest corporate income tax rate.
The daily notional taxable income from the operation of a qualifying vessel will
be 40 cents per 100 tons of the net tonnage of the vessel up to 25,000 net tons,
and 20 cents per 100 tons of the net tonnage of the vessel in excess of 25,000
net tons. The taxable income of each qualifying vessel will be the product of
its daily notional taxable income and the number of days during the taxable year
that the vessel operates in United States foreign trade.

          We have recorded a reduction in our deferred tax provision of
$12,058,000 relating to the write off of deferred tax assets and liabilities
that will no longer reverse as a result of the election of the tonnage tax
regime.

          Under the Jobs Creation Act, the taxable income from shipping
operations of the Company's CFCs will generally no longer be subject to current
United States income tax but will be deferred until repatriated. In December of
2004, we established a valuation allowance of $4,330,000 on the net deferred tax
asset associated with the foreign deficit carryforwards that were no longer
supportable as a result of the Jobs Creation Act, the impact of which is
included in our deferred tax provision. Foreign tax credits of $4,066,000 are
available to offset future taxable income of the CFCs if that income is
repatriated.

NOTE G - TRANSACTIONS WITH RELATED PARTIES

          We own a 26.1% interest in Belden Cement Holding, Inc. ("BCH") (See
Note L). At December 31, 2004 and 2003, we had long-term receivables of
$2,385,000 from BCH and $150,000 from Echelon Shipping, Inc. ("Echelon"), a
wholly-owned subsidiary of BCH. These long-term receivables are included in Due
from Related Parties. Interest income on these receivables is earned at a rate
of 6% per year. In February of 2005, we received in cash $2,250,000 from BCH and
$150,000 from Echelon.

          A son of our Chairman of the Board serves as our Secretary and is a
partner in the law firm of Jones, Walker, Waechter, Poitevent, Carrere and
Denegre, which has represented us since our inception. A son of one of our
Directors serves as our Assistant Secretary and is a partner in the same law
firm. Fees paid to the firm for legal services rendered to us were approximately
$1,001,000, $1,030,000, and $738,000 for the years ended December 31, 2004,
2003, and 2002, respectively.


                                      F-18



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE H - COMMITMENTS AND CONTINGENCIES

COMMITMENTS

          As of December 31, 2004, 18 vessels that we own or operate were under
various contracts extending beyond 2004 and expiring at various dates through
2019. Certain of these agreements also contain options to extend the contracts
beyond their minimum terms.

          At December 31, 2004, our unrestricted subsidiary, through its 50%
ownership, guarantees a portion of the outstanding debt of an invested bulk
carrier company. The guarantee is for the full remaining term of the associated
debt, which was 7 years as of December 31, 2004. Performance by our unrestricted
subsidiary would be required under the guarantee in the event of default by the
bulk carrier company on its third party debt. This represents non-recourse debt
to International Shipholding Corporation, the parent of the unrestricted
subsidiary. The portion of the outstanding debt that the unrestricted subsidiary
guaranteed was $29,619,000 and $31,775,000 at December 31, 2004 and 2003,
respectively. The estimated fair value of the non-contingent portion of the
guarantee is immaterial. (See Note L for further discussion of our investment in
the bulk carrier companies).

          We also maintain lines of credit totaling approximately $200,000 to
cover standby letters of credit required on certain of our contracts.

CONTINGENCIES

          We have been named as a defendant in numerous lawsuits claiming
damages related to occupational diseases, primarily related to asbestos and
hearing loss. We believe that most of these claims are without merit, and that
insurance and the indemnification of a previous owner of one of our subsidiaries
mitigate our exposure. Our overall exposure to the numerous lawsuits in question
has been estimated by our lawyers and internal staff to be between approximately
$450,000 and $1,500,000, and we believe that those estimates are reasonable. Our
reserves for these lawsuits at December 31, 2004 and 2003 were approximately
$800,000 and $1,000,000, respectively. There is a reasonable possibility that
there will be additional claims associated with occupational diseases asserted
against us. However, we do not believe that it is reasonably possible that our
exposure from those claims will be material because (1) the lawsuits filed since
1989 claiming damages related to occupational diseases in which we have been
named as a defendant have primarily involved seamen that served on-board our
vessels and the number of such persons still eligible to file a lawsuit against
us is diminishing and (2) such potential additional claims, if pursued, would be
covered under an indemnification agreement with a previous owner of one of our
subsidiaries and/or under one or more of our existing insurance policies with
deductibles ranging from $5,000 to $25,000 per claim.

          In the normal course of our operations, we become involved in various
litigation matters including, among other things, claims by third parties for
alleged property damages, personal injuries, and other matters. While we believe
that we have meritorious defenses against these claims, our management has used
significant estimates in determining our potential exposure. Our estimates are
determined based on various factors, such as (1) severity of the injury (for
personal injuries) and estimated potential liability based on past judgments and
settlements, (2) advise from legal counsel based on its assessment of the facts
of the case and its experience in other cases, (3) probability of pre-trial
settlement which would mitigate legal costs, (4) historical experience on claims
for each specific type of cargo (for cargo damage claims), and (5) whether our
seamen are employed in permanent positions or temporary revolving positions. It
is reasonably possible that changes in our estimated exposure may occur from
time to time. As is true of all estimates based on historical experience, these
estimates are subject to some volatility. However, because our total exposure is
limited by our aggregate stop loss levels (see Note D for further discussion of
our self-retention insurance program), we believe that our exposure is within
our estimated levels. Where appropriate, we have recorded provisions, included
in Other Long-Term Liabilities: Other, to cover our potential exposure and
anticipated recoveries from insurance companies, included in Other Assets.
Although it is difficult to predict the costs of ultimately resolving such
issues, we have determined that our current insurance coverage is sufficient to
limit any additional exposure to an amount that would not be material to our
financial position. Therefore, we do not expect such changes in these estimates
to have a material effect on our financial position or results of operations.

          One of our subsidiaries time charters our U.S. flag Coal Carrier to US
Generating New England, Inc. ("USGenNE"). In July of 2003, USGenNE filed a
petition for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code and subsequently requested from the court an extension of time
to submit its bankruptcy plan until March 1, 2005, and an extension of time
until May 1, 2005, to solicit acceptance of its plan. At the time of the filing
of the bankruptcy petition, USGenNE owed us approximately $850,000 of
pre-petition invoices covering charter hire and related expenses. In November of
2004, the bankruptcy court approved USGenNE's sale of a substantial portion of
its generation assets to Dominion Energy New England, Inc., a subsidiary of
Dominion Resources, Inc. Pursuant to the asset purchase


                                      F-19



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

agreement, which became effective on January 1, 2005, Virginia Power Energy
Marketing, Inc., another subsidiary of Dominion Resources, Inc., has assumed the
charter in place of USGenNE and has subsequently paid the outstanding
pre-petition invoices.

NOTE I - LEASES

DIRECT FINANCING LEASE

          In 1999, we entered into a direct financing lease of a foreign flag
PCTC expiring in 2019. The schedule of future minimum rentals to be received
under this direct financing lease in effect at December 31, 2004, is as follows:



                                                               Receivables Under
(All Amounts in Thousands)                                      Financing Lease
                                                               -----------------
                                                            
Year Ended December 31,
   2005                                                             $  8,432
   2006                                                                8,431
   2007                                                                8,431
   2008                                                                8,455
   2009                                                                7,853
   Thereafter                                                         67,021
                                                                    --------
Total Minimum Lease Payments Receivable                              108,623
Estimated Residual Value of Leased Property                            2,051
Less Unearned Income                                                 (61,561)
                                                                    --------
Total Net Investment in Direct Financing Lease                        49,113
Current Portion                                                       (2,337)
                                                                    --------
Long-Term Net Investment in Direct Financing Lease at
   December 31, 2004                                                $ 46,776
                                                                    ========


          The schedule of future minimum rentals to be received under this
direct financing lease in effect at December 31, 2003, was as follows:



                                                               Receivables Under
(All Amounts in Thousands)                                      Financing Lease
                                                               -----------------
                                                            
Year Ended December 31,
   2004                                                             $  8,455
   2005                                                                8,432
   2006                                                                8,431
   2007                                                                8,431
   2008                                                                8,455
   Thereafter                                                         74,874
                                                                    --------
Total Minimum Lease Payments Receivable                              117,078
Estimated Residual Value of Leased Property                            2,051
Less Unearned Income                                                 (67,865)
                                                                    --------
Total Net Investment in Direct Financing Lease                        51,264
Current Portion                                                       (2,128)
                                                                    --------
Long-Term Net Investment in Direct Financing Lease at
   December 31, 2003                                                $ 49,136
                                                                    ========


OPERATING LEASES

          During 2000, we entered into a sale-leaseback agreement for one of our
Breakbulk/Multi-Purpose vessels, which is classified as an operating lease.
During 2001, we entered into two sale-leasebacks, covering one of our U.S. flag
PCTCs and one of our foreign flag PCTCs. The gains on these sale-leasebacks are
being deferred over the term lives of the leases. We renegotiated a capital
lease agreement for one of our U.S. flag PCTCs in December of 2001 and
subsequently reclassified the lease to an operating lease. This reclassification
resulted in a gain of $5,309,000, which is being deferred over the remaining
term life of the lease. During 2002, we entered into a sale-leaseback for one of
our LASH vessels, which was


                                      F-20



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

also classified as an operating lease. The terms of the leases are 5 years for
the Breakbulk vessel, 12 years for the U.S. flag PCTC, 15 years for the foreign
flag PCTC, 10 years for the U.S. flag PCTC reclassified as an operating lease in
2001, and 5 years for the LASH vessel.

          Most of the operating lease agreements have a fair value renewal
option and a fair value purchase option, with the exception of the operating
lease for the Breakbulk vessel. Most of these agreements impose defined minimum
working capital and net worth requirements, impose restrictions on the payment
of dividends, and prohibit us from incurring, without prior written consent,
additional debt or lease obligations, except as defined. Under one of our
operating lease agreements, a deposit was made into a bank reserve account to
meet the requirements of the lease agreement. The owner of the vessel has the
ability to draw on this amount to cover operating lease payments if such
payments become overdue. The escrow amounts totaled $6,541,000 and $6,590,000 at
December 31, 2004 and 2003, respectively, and are included in Restricted Cash.
The vessels under these leases, with the exception of the LASH vessel, are
operated under fixed charter agreements covering the terms of the respective
leases. We also conduct certain of our operations from leased office facilities
and use certain transportation and other equipment under operating leases
expiring at various dates through 2008.

          Rent expense related to operating leases totaled approximately
$28,623,000, $30,079,000 and $26,471,000 for the years ended December 31, 2004,
2003 and 2002, respectively. The following is a schedule, by year, of future
minimum payments required under operating leases that have initial
non-cancelable terms in excess of one year as of December 31, 2004:



                                         Payments Under Operating Leases
                                ------------------------------------------------
                                U.S. flag   Foreign    LASH     Other
(All Amounts in Thousands)        PCTCs       PCTC    Vessel   Leases     Total
                                ---------   -------   ------   ------   --------
                                                         
Year Ended December 31,
   2005                          $ 8,898    $ 6,340   $1,920   $1,013   $ 18,171
   2006                            9,596      6,340    1,920    1,232     19,088
   2007                            9,596      6,340    1,760    1,266     18,962
   2008                            9,596      6,340       --      971     16,907
   2009                            9,596      6,340       --       --     15,936
   Thereafter                     34,412     41,210       --       --     75,622
                                 -------    -------   ------   ------   --------
Total Future Minimum Payments    $81,694    $72,910   $5,600   $4,482   $164,686
                                 =======    =======   ======   ======   ========


NOTE J - DEFERRED CHARGES AND ACQUIRED CONTRACT COSTS

          Deferred charges and acquired contract costs are comprised of the
following:



                                                     DECEMBER 31,   December 31,
(All Amounts in Thousands)                               2004           2003
                                                     ------------   ------------
                                                              
Drydocking Costs                                        $12,129        $ 9,765
Financing Charges and Other                               2,680          2,554
Acquired Contract Costs                                   7,640          9,095
                                                        -------        -------
                                                        $22,449        $21,414
                                                        =======        =======


          The Acquired Contract Costs represent the portion of the purchase
price paid for Waterman Steamship Corporation applicable primarily to that
company's three U.S. flag RO/RO vessels under maritime prepositioning ship
contract agreements, which expire in 2010.


                                      F-21



                      INTERNATIONAL SHIPHOLDING CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE K - SIGNIFICANT OPERATIONS

MAJOR CUSTOMERS

          We have several medium- to long-term contracts related to the
operations of various vessels (See Note H), from which revenues represent a
significant amount of our total revenue. Revenues from the contracts with the
MSC were $27,017,000, $35,874,000 and $34,543,000 for the years ended December
31, 2004, 2003 and 2002, respectively.

          Until early 2002, we operated four U.S. flag LASH vessels in a liner
service, of which three vessels were entered into the Maritime Security Program
(See Note A - "Maritime Security Program"). These four vessels were sold during
2002. In November of 2002, we began operating one U.S. flag LASH vessel with
Maritime Security Program payments on a liner service. Revenues, including
Maritime Security Program revenue, from both operations were $30,008,000,
$26,790,000 and $19,466,000 for the years ended December 31, 2004, 2003 and
2002, respectively.

          We have four U.S. flag PCTCs, also under the MSA, which carry
automobiles from Japan to the United States for a Japanese charterer. Revenues,
including Maritime Security Program revenue, were $36,831,000, $39,516,000 and
$38,566,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

          We provide space on our westbound foreign flag LASH liner service to
several commercial shippers. The westbound cargoes included steel and other
metal products, high-grade paper and wood products, and other general cargo.
Revenues were $38,823,000, $26,002,000 and $26,306,000 for the years ended
December 31, 2004, 2003 and 2002, respectively.

CONCENTRATIONS

          A significant portion of our traffic receivables are due from
contracts with the MSC and transportation of government sponsored cargo. There
are no concentrations of receivables from customers or geographic regions that
exceed 10% of stockholders' investment at December 31, 2004 or 2003.

          With only minor exceptions related to personnel aboard certain foreign
flag vessels, most of our shipboard personnel are covered by collective
bargaining agreements under multiple unions.

GEOGRAPHIC INFORMATION

          We have operations in several principal markets, including
international service between the U.S. Gulf and East Coast ports and ports in
the Middle East, Far East, and northern Europe, and domestic transportation
services along the U.S. Gulf and East Coast. Revenues attributable to the major
geographic areas of the world are presented in the following table. Revenues for
the Time Charter Contracts, Contracts of Affreightment, Rail-Ferry Service, and
Other are assigned to regions based on the location of the customer. Revenues
for the Liner Services are presented based on the location of the ports serviced
by this segment. Because we operate internationally, most of our assets are not
restricted to specific locations. Accordingly, an allocation of identifiable
assets to specific geographic areas is not applicable.



                                                                   Year Ended December 31,
                                                               ------------------------------
(All Amounts in Thousands)                                       2004       2003       2002
                                                               --------   --------   --------
                                                                            
United States                                                  $ 90,894   $108,726   $ 88,230
Asian Countries                                                  59,309     56,473     62,842
Rail-Ferry Service Operating Between U.S. Gulf and Mexico        15,880     15,537     11,240
Liner Services Operating Between:
   U.S. Gulf / East Coast Ports and Ports in Middle East         30,008     26,790     19,466
   U.S. Gulf / East Coast Ports and Ports in Northern Europe     65,705     48,845     44,837

Other Countries                                                   1,694      1,442        797
                                                               --------   --------   --------
   Total Revenues                                              $263,490   $257,813   $227,412
                                                               ========   ========   ========


OPERATING SEGMENTS

          Our operating segments are identified primarily based on the
characteristics of the contracts or terms under which the fleet of vessels and
barges are operated. Each of the reportable segments is managed separately as
each requires different resources depending on the nature of the contract or
terms under which each vessel within the segment operates. Our operating
segments are identified and described below.

          Liner Services: In our liner services segment we operate four vessels,
including one "dockship" that positions barges for pick-up and discharge, on
established trade routes with regularly scheduled sailing dates. We receive
revenues


                                      F-22



                     INTERNATIONAL SHIPHOLDING CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

for the carriage of cargo within the established trading areas and pay the
operating and voyage expenses incurred. Our Liner Services include a U.S. flag
service between U.S. Gulf and East Coast ports and ports in the Red Sea, Middle
East, and South Asia, and a foreign flag transatlantic service operating between
U.S. Gulf and East Coast ports and ports in northern Europe.

          Time Charter Contracts: Time charters are contracts by which our
charterer obtains the right for a specified period to direct the movements and
utilization of the vessel in exchange for payment of a specified daily rate, but
we retain operating control over the vessel. Typically, we fully equip the
vessel and are responsible for normal operating expenses, repairs, crew wages,
and insurance, while the charterer is responsible for voyage expenses, such as
fuel, port and stevedoring expenses. Our Time Charter Contracts include
contracts with Far Eastern shipping companies for six PCTCs, with an electric
utility for a conveyor-equipped, self-unloading Coal Carrier, and with a mining
company providing ocean transportation services at its mine in Papua, Indonesia.
Also included in this segment are contracts under which the MSC charters three
RO/ROs that are under an operating contract. The MSC's charter contract with the
Multi-Purpose vessel expired in December of 2002, but the vessel continued to
operate under charter to the MSC on a voyage-to-voyage basis until the vessel
was scrapped in December of 2003.

          Contracts of Affreightment ("COA"): These are contracts by which we
undertake to provide space on our vessels for the carriage of specified goods or
a specified quantity of goods on a single voyage or series of voyages over a
given period of time between named ports or within certain geographical areas in
return for the payment of an agreed amount per unit of cargo carried. Generally,
we are responsible for all operating and voyage expenses. Our COA segment
includes a sulphur transportation contract.

          Rail-Ferry Service: In the beginning of 2001, we began a new service
carrying loaded rail cars between the U.S. Gulf and Mexico. Our two Special
Purpose vessels are employed with this service, each having a capacity for 60
standard size rail cars. With departures every four days from Coatzacoalcos,
Mexico and Mobile, Alabama it offers with each vessel a three-day transit
between these ports and provides a total of 90 trips per year in each direction.
In the fourth quarter of 2004, we announced our decision to relocate our
Rail-Ferry Service's domestic operations from the port of Mobile to the port of
New Orleans. As part of the incentive to relocate, the state of Louisiana and
the City of New Orleans agreed to finance part of the terminal and
infrastructure cost associated with the move. In return, we have agreed that our
operations will remain at the port of New Orleans for a minimum of ten years.

          Other: This segment consists of operations that include more
specialized services than the former four segments and subsidiaries that provide
ship charter brokerage and agency services, as well as our over-the-road car
transportation truck company. Also included in the Other category are corporate
related items, results of insignificant operations, and income and expense items
not allocated to reportable segments.

          The following table presents information about segment profit and loss
and segment assets. We do not allocate investment income, other income, losses
or gains on early extinguishment of debt, administrative and general expenses,
equity in unconsolidated entities, or income taxes to our segments. Intersegment
revenues are based on market prices and include revenues earned by our
subsidiaries that provide specialized services to the operating segments.
Expenditures for segment assets represent cash outlays during the periods
presented, including purchases of assets, improvements to assets, and drydock
payments.



                                     Liner    Time Charter             Rail-Ferry
(All Amounts in Thousands)         Services     Contracts      COA       Service     Other    Elimination     Total
                                   --------   ------------   -------   ----------   -------   -----------   --------
                                                                                       
2004
REVENUES FROM EXTERNAL CUSTOMERS   $95,713      $113,954     $16,562    $15,881     $21,380          --     $263,490
INTERSEGMENT REVENUES                   --            --          --         --      12,264    $(12,264)          --
DEPRECIATION AND AMORTIZATION        5,279        13,879       2,709      4,090         822          --       26,779
GROSS VOYAGE (LOSS) PROFIT          (1,563)       26,914       5,411     (4,304)      1,659          --       28,117
INTEREST EXPENSE                       738         6,421       1,410      1,826         190          --       10,585
LOSS ON SALE OF OTHER ASSETS            --            --          --         --          (7)         --           (7)
SEGMENT (LOSS) PROFIT               (2,301)       20,493       4,001     (6,130)      1,462          --       17,525
SEGMENT ASSETS                      23,126       182,447      37,971     49,839       5,295          --      298,678
EXPENDITURES FOR SEGMENT ASSETS        988        29,946           6        232       1,843          --       33,015



                                      F-23



                     INTERNATIONAL SHIPHOLDING CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



                                     Liner    Time Charter             Rail-Ferry
(All Amounts in Thousands)         Services     Contracts      COA       Service     Other    Elimination     Total
                                   --------   ------------   -------   ----------   -------   -----------   --------
                                                                                       
2003
Revenues from External Customers   $75,635      $129,685     $16,189    $15,537     $20,767          --     $257,813
Intersegment Revenues                   --            --          --         --      13,551    $(13,551)          --
Depreciation and Amortization        5,108        15,144       2,799      4,101         507          --       27,659
Gross Voyage (Loss) Profit          (4,199)       33,048       5,495     (2,926)      1,817          --       33,235
Interest Expense                     1,039         7,152       1,800      2,322         201          --       12,514
Gain on Sale of Other Assets            --           482          --         --         911          --        1,393
Segment (Loss) Profit               (5,238)       26,378       3,695     (5,248)      2,527          --       22,114
Segment Assets                      27,196       167,803      40,637     53,519       4,536          --      293,691
   Property                         22,792       154,699      39,464     50,909       4,413          --      272,277
   Deferred Charges                  4,404        13,104       1,173      2,610         123          --       21,414
Expenditures for Segment Assets      4,077           611          --         --       2,882          --        7,570

2002
Revenues from External Customers   $65,146      $128,279     $15,370    $11,240     $ 7,377          --     $227,412
Intersegment Revenues                   --            --          --         --      16,055    $(16,055)          --
Depreciation and Amortization        5,062        14,242       2,868      4,116         846          --       27,134
Impairment Loss                        (52)           --          --         --         118          --           66
Gross Voyage (Loss) Profit          (4,910)       34,465       5,962     (3,673)     (1,445)         --       30,399
Interest Expense                     1,794        10,192       2,338      3,221         161          --       17,706
Gain on Sale of Other Assets            --            --          --         --         557          --          557
Impairment Loss on Investment           --            --          --         --        (598)         --         (598)
Segment (Loss) Profit               (6,704)       24,273       3,624     (6,894)     (1,647)         --       12,652
Segment Assets                      29,507       184,196      43,784     57,224       2,836          --      317,547
Expenditures for Segment Assets      7,997           985       1,193         47       1,242          --       11,464


          Following is a reconciliation of the totals reported for the operating
segments to the applicable line items in the consolidated financial statements:



                                                                Year Ended December 31,
                                                            ------------------------------
(All Amounts in Thousands)                                    2004       2003       2002
                                                            --------   --------   --------
                                                                         
Profit or Loss:
Total Profit for Reportable Segments                        $ 17,525   $ 22,114   $ 12,652
Unallocated Amounts:
   Administrative and General Expenses                       (16,236)   (15,041)   (15,631)
   Loss on Sale of Investment                                   (623)        --         --
   Investment Income                                             691      2,162        656
   Other Income                                                   --         --      1,498
   (Loss) Gain on Early Extinguishment of Debt                  (361)    (1,310)        65
                                                            --------   --------   --------
Income (Loss) Before (Benefit) Provision for Income Taxes
   and Equity in Net Income of Unconsolidated Entities      $    996   $  7,925   $   (760)
                                                            ========   ========   ========



                                      F-24



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



                                                     DECEMBER 31,   December 31,
                                                         2004           2003
                                                     ------------   ------------
                                                              
Assets:
Total Assets for Reportable Segments                   $298,678       $293,691
Unallocated Amounts:
   Current Assets                                        57,315         60,807
   Investment in Unconsolidated Entities                 11,115          8,413
   Restricted Cash                                        6,541          6,590
   Due from Related Parties                               2,535          2,535
   Other Assets                                           8,864         10,415
                                                       --------       --------
Total Assets                                           $385,048       $382,451
                                                       ========       ========


NOTE L - UNCONSOLIDATED ENTITIES

CEMENT CARRIER COMPANY

     Prior to December of 2004, we had a 30% interest in BCH, a Cement Carrier
company which owns and operates nine Cement Carriers. During December of 2004,
one of the shareholders of BCH exercised its option to purchase additional
shares of common stock, which upon exercise brought our ownership down to 26.1%.
This investment is accounted for under the equity method, and our share of
earnings or losses is reported in our consolidated statements of income net of
taxes. Our portion of the combined earnings of this investment, net of taxes,
was $827,000, $339,000 and $550,000 for the years ended December 31, 2004, 2003
and 2002, respectively. No distributions were made during 2004, 2003 and 2002.
In January of 2005, we received dividends of $783,000. The aggregate amount of
consolidated retained earnings that represented undistributed earnings of this
investment as of December 31, 2004 was approximately $1,900,000.

     The unaudited condensed financial position and results of operations of BCH
are summarized below:



                                                     DECEMBER 31,   December 31,
(Amounts in Thousands)                                   2004           2003
                                                     ------------   ------------
                                                              
Current Assets                                          $13,178        $ 3,285
Noncurrent Assets                                       $68,643        $63,027
Current Liabilities                                     $15,366        $16,263
Noncurrent Liabilities                                  $49,729        $39,094




                                                       Year Ended December 31,
                                                     ---------------------------
(Amounts in Thousands)                                 2004      2003      2002
                                                     -------   -------   -------
                                                                
Operating Revenues                                   $27,405   $20,293   $18,822
Operating Income                                     $18,512   $14,780   $13,969
Net Income                                           $ 5,006   $ 1,739   $ 2,782


CAPE-SIZE BULK CARRIERS

     During 2000 and 2001, we acquired a 12.5% interest in Bulk Venture, Ltd.
for $1,656,000, which owned two Cape-Size Bulk Carrier vessels. We received
dividends of $475,000 and $56,000 in 2003 and 2002, respectively. During 2003,
we sold our interest in Bulk Venture, Ltd. for $2,207,000, of which $1,906,000
was received in cash in 2003 and $42,000 was received in cash in 2004, resulting
in a gain of approximately $292,000. We also received $259,000 in 2004
representing dividends earned in 2003.

     During 2001 and 2002, we acquired a 12.5% interest in Bulk Africa, Ltd. for
$1,444,000, which owned a Cape-Size Bulk Carrier vessel. No dividends were
received during 2002. We received dividends of $388,000 in 2003. During 2003, we
sold our interest in Bulk Africa, Ltd. for $1,423,000, of which $1,191,000 was
received in cash in 2003 and $232,000 was received in cash in 2004, resulting in
a loss of approximately $21,000.

     During 2001 and 2002, we acquired a 12.5% interest in Bulk Australia, Ltd.
for $1,477,000, which owned a Cape-Size Bulk Carrier vessel. No dividends were
received during 2002. During 2003, we received a partial refund for additional


                                      F-25



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

funding of $128,000. We received dividends of $300,000 in 2003. During 2003, we
sold our interest in Bulk Australia, Ltd. for $1,322,000, of which $1,111,000
was received in cash in 2003 and $211,000 was received in cash in 2004,
resulting in a loss of approximately $27,000.

     The investments described above were accounted for under the cost method of
accounting and accordingly income was recognized only upon distribution of
dividends or sale of investment.

     In the fourth quarter of 2003, we acquired a 50% investment in Dry Bulk
Cape Holding Inc. ("Dry Bulk") for $3,479,000, which owns two of the
aforementioned Cape-Size Bulk Carrier vessels. This investment is accounted for
under the equity method and our share of earnings or losses is reported in our
consolidated statements of income net of taxes. For the years ended December 31,
2004 and 2003, our portions of earnings net of taxes were $3,770,000 and
$80,000, respectively. No distributions were made during 2003. We received
dividends of $4,100,000 in 2004.

     In January of 2005, we were granted an option to purchase an additional 1%
of Dry Bulk. The other unaffiliated 50% owner of Dry Bulk was granted a similar
option.

     The unaudited condensed financial position and results of operations of Dry
Bulk are summarized below:



                                                     DECEMBER 31,   December 31,
(Amounts in Thousands)                                   2004           2003
                                                     ------------   ------------
                                                              
Current Assets                                           1,766          1,264
Noncurrent Assets                                       70,192         73,329
Current Liabilities                                      8,626          7,622
Noncurrent Liabilities                                  52,286         59,237




                                                         Year Ended December 31,
                                                         -----------------------
(Amounts in Thousands)                                     2004     2003   2002
                                                          ------   -----   ----
                                                                  
Operating Revenues                                        18,790   1,255    N/A
Operating Income                                          13,594     827    N/A
Net Income                                                10,303     306    N/A


MANAGEMENT COMPANY

     During 2000, CG Railway, Inc., our wholly-owned subsidiary, acquired a 50%
interest in Terminales Transgolfo for $100,000, which operates a port in
Coatzacoalcos, Mexico, for our Rail-Ferry Service. During 2001, we made an
additional investment in Terminales Transgolfo of approximately $128,000. The
investment is accounted for under the equity method, and our share of earnings
or losses is reported in our consolidated statements of income net of taxes. No
distributions were made during 2004, 2003 and 2002.

NOTE M - SUPPLEMENTAL CASH FLOW INFORMATION



                                                       Year Ended December 31,
                                                     ---------------------------
(All Amounts in Thousands)                             2004      2003      2002
                                                     -------   -------   -------
                                                                
Cash Payments:
   Interest Paid                                     $10,370   $12,339   $18,938
   Taxes Paid                                        $ 1,072   $   482   $   773


     During 2002, we entered into a sale-leaseback for one of our LASH vessels
for $10,000,000 of which $5,000,000 was received in cash and $5,000,000 in the
form of a five-year promissory note. A portion of the note, approximately
$2,000,000, is being repaid in twenty quarterly installments in addition to
approximately $3,000,000 being repaid at the end of the lease. Interest on the
note was at 4.845% for the first two years and is 4.72% for each of the three
years thereafter.

     During 2003, we sold our coal transfer terminal facility and related land
for $2,500,000 of which $500,000 was received in cash and $2,000,000 in the form
of a five-year promissory note. The note is being repaid in ten semi-annual
installments of $200,000, in addition to interest at 6%.


                                      F-26



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVES

     The estimated fair values of our financial instruments and derivatives are
as follows (asset/(liability)):



                                       DECEMBER 31,            December 31,
                                           2004                    2003
                                  ---------------------   ---------------------
                                   CARRYING      FAIR      Carrying      Fair
(All Amounts in Thousands)          AMOUNT      VALUE       Amount      Value
                                  ---------   ---------   ---------   ---------
                                                          
Interest Rate Swap Agreements            --          --   ($  1,050)  ($  1,050)
Foreign Currency Contracts        ($      5)  ($      5)  ($     46)  ($     46)
Long-Term Debt                    ($178,090)  ($181,433)  ($179,010)  ($182,057)


     Disclosure of the fair value of all balance sheet classifications,
including but not limited to certain vessels, property, equipment, direct
financing leases, or intangible assets, which may have a fair value in excess of
historical cost, is not required. Therefore, this disclosure does not purport to
represent our 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:

INTEREST RATE SWAP AGREEMENTS

     We have historically entered into interest rate swap agreements to manage
well-defined interest rate risks. During September of 1999, we entered into an
interest rate swap agreement with a commercial bank to reduce the possible
impact of higher interest rates in the long-term market by utilizing the fixed
rate available with the swap. The contract amount totaled $19,920,000 at
December 31, 2003 and expired in September of 2004. We were the fixed rate
payor, and HSBC Bank plc was the floating rate payor. The fixed rate was 7.7%
and the floating rate was 2.18% at December 31, 2003. We designated this
interest rate swap agreement as an effective hedge. Settlements of this
agreement were made semi-annually and resulted in increases to interest expense
of $1,074,000, $1,159,000 and $1,128,000 in 2004, 2003 and 2002, respectively.
There were no outstanding interest rate swap agreements at December 31, 2004.

FOREIGN CURRENCY CONTRACTS

     We enter into forward exchange contracts to hedge certain firm purchase and
sale commitments denominated in foreign currencies. The purpose of our foreign
currency hedging activities is to protect us from the risk that the eventual
dollar cash inflows or outflows resulting from revenue collections from foreign
customers and purchases from foreign suppliers will be adversely affected by
changes in exchange rates. The term of the currency contracts is rarely more
than one year. Due to the immaterial nature of these contracts, we have not
designated the foreign currency contracts as hedges. Therefore, the changes in
the fair market value of these hedges are recorded through earnings.

     During 2003, we entered into two forward purchase contracts. One contract
was for Mexican Pesos for $420,000 U.S. Dollar equivalents beginning in January
of 2004 and expired in July of 2004. The other contract was for Indonesian
Rupiah for $600,000 U.S. Dollar equivalents beginning in January of 2004 and
expired in December of 2004. There were no forward purchase contracts as of
December 31, 2004. As of December 31, 2004 and 2003, we were a party to forward
sales contracts in various currencies totaling $1,722,000 and $2,974,000 U.S.
Dollar equivalents, respectively.

COMMODITY SWAP CONTRACTS

     We have historically entered into commodity swap contracts for portions of
our estimated fuel purchases to manage the risk associated with changes in fuel
prices. During 2003, we entered into three commodity swap agreements, one with a
financial institution and two with an energy trading corporation. One of the
contracts was effective for one year beginning in January of 2003 and expired
December 31, 2003 and was for 9,198 tons of fuel. The other two contracts were
effective for nine months beginning in April of 2003 and expired December 31,
2003 and were for 13,500 and 9,000 tons of fuel, respectively. The contracts
required that a payment be made for the difference between the contract rates of
$124.00 to $158.75 per ton and the market rate for the fuel on each settlement
date. These contracts covered approximately 92% of our Liner Service segment's
2003 fuel purchases and 79% of our Rail-Ferry Service segment's 2003 fuel
purchases.


                                      F-27



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     During 2004, we entered into two commodity swap agreements with two energy
trading corporations. The contracts were each effective for one month during
2004. One of the contracts was effective during the month of February and the
other effective during the month of November and were for 3,000 and 2,000 tons
of fuel, respectively. The contracts required that a payment be made for the
difference between the contract rates of $140 and $206.50 per ton, respectively
and the market rate for the fuel on each settlement date. These contracts
covered approximately 4% of our Liner Service segment's 2004 fuel purchases and
16% of our Rail-Ferry Service segment's 2004 fuel purchases. As of December 31,
2004, there are no outstanding commodity swap contracts with respect to 2005
fuel purchases.

     We designated these commodity swap contracts as effective hedges. Monthly
settlements of these agreements were recorded as an adjustment to voyage
expenses. We recorded an increase to voyage expenses of $114,000 in 2004 and
made a net positive adjustment to voyage expense of $2,190,000 in 2003 and
$1,024,000 in 2002.

     In 2003, we were required to record deposits representing performance bonds
required on certain of our commodity swap agreements. The amount was $816,000 at
December 31, 2003, and was returned to us in January of 2004 as there were no
commodity swap agreements in place at December 31, 2003 and 2004.

LONG-TERM DEBT

     The fair value of our debt is estimated based on the quoted market price
for the publicly listed Senior Notes and the current rates offered to us on
other outstanding obligations.

AMOUNTS DUE FROM RELATED PARTIES

     The carrying amount of these notes receivable approximated fair market
value as of December 31, 2004 and 2003. Fair market value takes into
consideration the current rates at which similar notes would be made.

RESTRICTED CASH

     The carrying amount of these investments approximated fair market value as
of December 31, 2004 and 2003, based upon current rates offered on similar
instruments.

NOTE O - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Following are the components of the consolidated balance sheet
classification Accounts Payable and Accrued Liabilities:



                                                     DECEMBER 31,   December 31,
(All Amounts in Thousands)                               2004           2003
                                                     ------------   ------------
                                                              
Accrued Voyage Expenses                                 $21,262        $19,260
Trade Accounts Payable                                    2,820          5,374
Accrued Customs Liability                                 1,737          3,487
Self-Insurance Liability                                  1,515          3,668
Accrued Interest                                          1,218          1,672
Accrued Salaries and Benefits                             1,109            999
Accrued Supplemental P&I Insurance Premiums                 536             --
Other Short-Term Liabilities                                 --          1,050
                                                        -------        -------
                                                        $30,197        $35,510
                                                        =======        =======



                                      F-28



                      INTERNATIONAL SHIPHOLDING CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE P - QUARTERLY FINANCIAL INFORMATION - (UNAUDITED)



                                                                        Quarter Ended
                                                           ---------------------------------------
                                                           March 31   June 30   Sept. 30   Dec. 31
                                                           --------   -------   --------   -------
                                                               (All Amounts in Thousands Except
                                                                         Share Data)
                                                                               
2004 REVENUES                                               $65,843   $64,843    $68,797   $64,007
     EXPENSES                                                56,097    56,987     63,406    58,883
     GROSS VOYAGE PROFIT                                      9,746     7,856      5,391     5,124
     NET INCOME                                               2,897     1,828        220     7,840 (1)
     BASIC AND DILUTED EARNINGS PER COMMON SHARE:
        NET INCOME                                             0.48      0.30       0.04      1.29 (1)

2003 Revenues                                               $64,806   $67,505    $63,550   $61,952
     Expenses                                                54,350    57,266     57,192    55,770
     Gross Voyage Profit                                     10,456    10,239      6,358     6,182
     Net Income (Loss)                                        2,994     2,490     (1,644)    1,651
     Basic and Diluted Earnings (Loss) per Common Share:
        Net Income (Loss)                                      0.49      0.41      (0.27)     0.27

2002 Revenues                                               $60,452   $56,664    $49,900   $60,396
     Expenses                                                54,523    47,587     44,318    50,651
     Impairment Loss                                             54      (151)         3        28
     Gross Voyage Profit                                      5,875     9,228      5,579     9,717
     Net (Loss) Income                                         (920)    1,116     (1,125)      793
     Basic and Diluted (Loss) Earnings per Common Share:
        Net (Loss) Income                                     (0.15)     0.18      (0.18)     0.13


- ----------
(1)  The net income and earnings per share in the fourth quarter of 2004 were
     significantly impacted by certain income tax adjustments relating to the
     Jobs Creation Act (See Note F - Income Taxes).


                                      F-29



               INDEX OF SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES

                                                                          
Report of Independent Registered Public Accounting Firm...................   S-2

Schedule II - Valuation and Qualifying Accounts and Reserves..............   S-3




                                      S-1



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
International Shipholding Corporation

We have audited the consolidated financial statements of International
Shipholding Corporation as of December 31, 2004 and 2003, and for each of the
three years in the period ended December 31, 2004, and have issued our report
thereon dated February 25, 2005 (included elsewhere in this Form 10-K). Our
audits also included the financial statement schedule listed in Item 15(a) of
this Form 10-K. This schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.


                                        /s/ Ernst & Young LLP

New Orleans, Louisiana


                                      S-2



February 25, 2005

                      INTERNATIONAL SHIPHOLDING CORPORATION
          Schedule II - Valuation and Qualifying Accounts and Reserves
                             (Amounts in Thousands)



                                                             ADDITIONS               DEDUCTIONS
                                      BALANCE AT    ---------------------------   for purpose for   BALANCE AT
                                     BEGINNING OF   Charged to     Charged to      which accounts     END OF
                                        PERIOD        expense    Other accounts     were set up       PERIOD
                                     ------------   ----------   --------------   ---------------   ---------
                                                                                     
December 31, 2002:
   Self-Retention Reserves              $ 4,143       $ 6,450          $--            $ 3,503         $ 7,090
   Non Self-Retention Reserves            1,042           741           --                904             879
   Postretirement Benefits                7,834           343           --                399           7,778
   Custom Reserves                        7,628         1,157           --              4,877           3,908
   Other Reserves                         3,115           595           --              2,134           1,576
                                        -------       -------          ---            -------         -------
Total                                   $23,762       $ 9,286          $--            $11,817         $21,231

December 31, 2003:
   Self-Retention Reserves              $ 7,090       $ 4,302          $--            $ 7,050         $ 4,342
   Non Self-Retention Reserves              879         4,092           --              4,162             809
   Postretirement Benefits                7,778            59           --                383           7,454
   Custom Reserves                        3,908         1,264           --              1,685           3,487
   Other Reserves                         1,576           980           --                804           1,752
                                        -------       -------          ---            -------         -------
Total                                   $21,231       $10,697          $--            $14,084         $17,844

December 31, 2004:
   Self-Retention Reserves              $ 4,342       $ 5,314          $--            $ 6,708         $ 2,948
   Non Self-Retention Reserves              809           567           --                698             678
   Postretirement Benefits                7,454           122           --                 --           7,576
   Custom Reserves                        3,487         1,457           --              3,206           1,738
   Allowance for Doubtful Accounts           --                                                            --
   Other Reserves                         1,752           713           --              1,373           1,092
                                        -------       -------          ---            -------         -------
Total                                   $17,844       $ 8,173          $--            $11,985         $14,032



                                      S-3

EX-10.4

                                NIELS W. JOHNSEN
                              CONSULTING AGREEMENT

     This will confirm that International Shipholding Corporation has agreed to
retain you as a consultant commencing January 1, 2005 through December 31, 2005,
for a fee of $125,000, payable in 12 monthly installments of $10,416.67, plus
reasonable out-of-pocket expenses. At the end of the period, this Agreement is
automatically extended on a month-by-month basis. Either party on a 90-day
notice may cancel this Agreement. Please sign below to acknowledge your
agreement to this consulting arrangement.

                                        Sincerely,


                                        /s/ E. F. Johnsen
                                        ----------------------------------------
                                        E. F. Johnsen
                                        Chairman of the Board


AGREED AND ACCEPTED:


/s/ N. W. Johnsen
- -------------------------------------
N. W. Johnsen

Date : 12/21/04

EX-10.5

                      INTERNATIONAL SHIPHOLDING CORPORATION
                              STOCK INCENTIVE PLAN

     1. PURPOSE. The purpose of the Stock Incentive Plan (the "Plan") of
International Shipholding Corporation ("ISC") is to increase shareholder value
and to advance the interests of ISC and its subsidiaries (collectively, the
"Company") by furnishing a variety of economic incentives (the "Incentives")
designed to attract, retain and motivate key employees and officers and to
strengthen the mutuality of interests between such employees, officers and ISC's
shareholders. Incentives consist of opportunities to purchase or receive shares
of common stock, $1.00 par value per share, of ISC (the "Common Stock"), on
terms determined under the Plan. As used in the Plan, the term "subsidiary"
means any corporation of which ISC owns (directly or indirectly) within the
meaning of Section 425(f) of the Internal Revenue Code of 1986, as amended (the
"Code"), 50% or more of the total combined voting power of all classes of stock.

     2.   ADMINISTRATION.

          2.1. COMPOSITION. The Plan shall be administered by the Compensation
     Committee of the Board of Directors of ISC or by a subcommittee thereof
     (the "Committee"). The Committee shall consist of not fewer than two
     members of the Board of Directors, each of whom shall (a) qualify as a
     "non-employee director" under Rule 16b-3 under the Securities Exchange Act
     of 1934 (the "1934 Act") or any successor rule, and (b) qualify as an
     "outside director" under Section 162(m) of the Code.

          2.2. AUTHORITY. The Committee shall have plenary authority to award
     Incentives under the Plan, to interpret the Plan, to establish any rules or
     regulations relating to the Plan that it determines to be appropriate, to
     enter into agreements with participants as to the terms of the Incentives
     (the "Incentive Agreements") and to make any other determination that it
     believes necessary or advisable for the proper administration of the Plan.
     Its decisions in matters relating to the Plan shall be final and conclusive
     on the Company and participants. The Committee may delegate its authority
     hereunder to the extent provided in Section 3 hereof.

     3. ELIGIBLE PARTICIPANTS. Key employees and officers of the Company
(including officers who also serve as directors of the Company) shall become
eligible to receive Incentives under the Plan when designated by the Committee.
Employees may be designated individually or by groups or categories, as the
Committee deems appropriate. With respect to participants not subject to Section
16 of the 1934 Act or Section 162(m) of the Code, the Committee may delegate to
appropriate personnel of the Company its authority to designate participants, to
determine the size and type of Incentives to be received by those participants
and to determine or modify performance objectives for those participants.

     4. TYPES OF INCENTIVES. Incentives may be granted under the Plan to
eligible participants in any of the following forms, either individually or in
combination, (a) incentive



stock options and non-qualified stock options; (b) restricted stock; and (c)
other stock-based awards ("Other Stock-Based Awards").

     5.   SHARES SUBJECT TO THE PLAN.

          5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
     9.5, a total of 650,000 shares of Common Stock are authorized to be issued
     under the Plan. Incentives with respect to no more than 500,000 shares of
     Common Stock may be granted through the Plan to a single participant in one
     calendar year. In the event that an Incentive granted hereunder expires or
     is terminated or cancelled prior to exercise or payment, any shares of
     Common Stock that were issuable thereunder may again be issued under the
     Plan. In the event that shares of Common Stock are issued as Incentives
     under the Plan and thereafter are forfeited or reacquired by the Company
     pursuant to rights reserved upon issuance thereof, such forfeited and
     reacquired shares may again be issued under the Plan. If an Other
     Stock-Based Award is to be paid in cash by its terms, the Committee need
     not make a deduction from the shares of Common Stock issuable under the
     Plan with respect thereto. If and to the extent that an Other Stock-Based
     Award may be paid in cash or shares of Common Stock, the total number of
     shares available for issuance hereunder shall be debited by the number of
     shares payable under such Incentive, provided that upon any payment of all
     or part of such Incentive in cash, the total number of shares available for
     issuance hereunder shall be credited with the appropriate number of shares
     represented by the cash payment, as determined in the sole discretion of
     the Committee. Additional rules for determining the number of shares
     granted under the Plan may be made by the Committee, as it deems necessary
     or appropriate.

          5.2. TYPE OF COMMON STOCK. Common Stock issued under the Plan may be
     authorized and unissued shares or issued shares held as treasury shares.

     6. STOCK OPTIONS. A stock option is a right to purchase shares of Common
Stock from ISC. Stock options granted under this Plan may be incentive stock
options or non-qualified stock options. Any option that is designated as a
non-qualified stock option shall not be treated as an incentive stock option.
Each stock option granted by the Committee under this Plan shall be subject to
the following terms and conditions:

          6.1. PRICE. The exercise price per share shall be determined by the
     Committee, subject to adjustment under Section 9.5; provided that in no
     event shall the exercise price be less than the Fair Market Value of a
     share of Common Stock on the date of grant, except that in connection with
     an acquisition, consolidation, merger or other extraordinary transaction,
     options may be granted at less than the then Fair Market Value in order to
     replace options previously granted by one or more parties to such
     transaction (or their affiliates) so long as the aggregate spread on such
     replacement options for any recipient of such options is equal to or less
     than the aggregate spread on the options being replaced.


                                      -2-



          6.2. NUMBER. The number of shares of Common Stock subject to the
     option shall be determined by the Committee, subject to Section 5.1 and
     subject to adjustment as provided in Section 9.5.

          6.3. DURATION AND TIME FOR EXERCISE. The term of each stock option
     shall be determined by the Committee. Each stock option shall become
     exercisable at such time or times during its term as shall be determined by
     the Committee. Notwithstanding the foregoing, the Committee may accelerate
     the exercisability of any stock option at any time, in addition to the
     automatic acceleration of stock options under Section 9.11.

          6.4. MANNER OF EXERCISE. A stock option may be exercised, in whole or
     in part, by giving written notice to the Company, specifying the number of
     shares of Common Stock to be purchased. The exercise notice shall be
     accompanied by the full purchase price for such shares. The option price
     shall be payable in United States dollars and may be paid by (a) cash; (b)
     uncertified or certified check; (c) unless otherwise determined by the
     Committee, by delivery of shares of Common Stock held by the optionee for
     at least six months, which shares shall be valued for this purpose at the
     Fair Market Value on the business day immediately preceding the date such
     option is exercised; (d) through arrangements with a brokerage firm
     approved by the Company under which such firm, on behalf of the optionee,
     will pay the exercise price to the Company and the Company will promptly
     deliver to such firm the number of shares of Common Stock subject to the
     option so that the firm may sell such shares, or a portion thereof, for the
     account of the optionee, or (e) in such other manner as may be authorized
     from time to time by the Committee.

          6.5. INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to
     the contrary, the following additional provisions shall apply to the grant
     of stock options that are intended to qualify as Incentive Stock Options
     (as such term is defined in Section 422 of the Code):

               A. Any Incentive Stock Option agreement authorized under the Plan
          shall contain such other provisions as the Committee shall deem
          advisable, but shall in all events be consistent with and contain or
          be deemed to contain all provisions required in order to qualify the
          options as Incentive Stock Options.

               B. All Incentive Stock Options must be granted within ten years
          from the date on which this Plan is adopted by the Board of Directors.

               C. Unless sooner exercised, all Incentive Stock Options shall
          expire no later than ten years after the date of grant.

               D. No Incentive Stock Options shall be granted to any participant
          who, at the time such option is granted, would own (within the meaning
          of Section 422 of the Code) stock possessing more than 10% of the
          total combined voting power of all classes of stock of the employer
          corporation or of its parent or subsidiary corporation.


                                      -3-



               E. The aggregate Fair Market Value (determined with respect to
          each Incentive Stock Option as of the time such Incentive Stock Option
          is granted) of the Common Stock with respect to which Incentive Stock
          Options are exercisable for the first time by a participant during any
          calendar year (under the Plan or any other plan of ISC or any of its
          subsidiaries) shall not exceed $100,000. To the extent that such
          limitation is exceeded, such options shall not be treated, for federal
          income tax purposes, as Incentive Stock Options.

     7.   RESTRICTED STOCK.

          7.1. GRANT OF RESTRICTED STOCK. The Committee may award shares of
     restricted stock to such officers and key employees as the Committee
     determines pursuant to the terms of Section 3. An award of restricted stock
     shall be subject to such restrictions on transfer and forfeitability
     provisions and such other terms and conditions as the Committee may
     determine, subject to the provisions of the Plan. An award of restricted
     stock may also be subject to the attainment of specified performance goals
     or targets. To the extent restricted stock is intended to qualify as
     performance-based compensation under Section 162(m) of the Code, it must be
     granted subject to the attainment of performance goals as described in
     Section 7.2 below and meet the additional requirements imposed by Section
     162(m).

          7.2 PERFORMANCE-BASED RESTRICTED STOCK. To the extent that restricted
     stock granted under the Plan is intended to vest based upon the achievement
     of pre-established performance goals rather than solely upon continued
     employment over a period of time, the performance goals pursuant to which
     the restricted stock shall vest shall be any or a combination of the
     following performance measures: earnings per share, return on assets, an
     economic value added measure, shareholder return, earnings, stock price,
     return on equity, return on total capital, reduction of expenses or
     increase in cash flow of ISC, a division of ISC or a subsidiary. For any
     performance period, such performance objectives may be measured on an
     absolute basis or relative to a group of peer companies selected by the
     Committee, relative to internal goals or relative to levels attained in
     prior years. The Committee may not waive any of the pre-established
     performance goal objectives, except that such objectives shall be waived as
     provided in Section 9.11 hereof, or as may be provided by the Committee in
     the event of death, disability or retirement.

          7.3. THE RESTRICTED PERIOD. At the time an award of restricted stock
     is made, the Committee shall establish a period of time during which the
     transfer of the shares of restricted stock shall be restricted (the
     "Restricted Period"). The Restricted Period shall be a minimum of three
     years, except that if the vesting of the shares of restricted stock is
     based upon the attainment of performance goals, a minimum Restricted Period
     of one year is permitted. Each award of restricted stock may have a
     different Restricted Period. The expiration of the Restricted Period shall
     also occur as provided under Section 9.3 and under the conditions described
     in Section 9.11 hereof.


                                      -4-



          7.4. ESCROW. The participant receiving restricted stock shall enter
     into an Incentive Agreement with the Company setting forth the conditions
     of the grant. Certificates representing shares of restricted stock shall be
     registered in the name of the participant and deposited with the Company,
     together with a stock power endorsed in blank by the participant. Each such
     certificate shall bear a legend in substantially the following form:

          The transferability of this certificate and the shares of Common Stock
          represented by it are subject to the terms and conditions (including
          conditions of forfeiture) contained in the International Shipholding
          Corporation Stock Incentive Plan (the "Plan"), and an agreement
          entered into between the registered owner and International
          Shipholding Corporation thereunder. Copies of the Plan and the
          agreement are on file at the principal office of the Company.

          7.5. DIVIDENDS ON RESTRICTED STOCK. Any and all cash and stock
     dividends paid with respect to the shares of restricted stock shall be
     subject to any restrictions on transfer, forfeitability provisions or
     reinvestment requirements as the Committee may, in its discretion,
     prescribe in the Incentive Agreement.

          7.6. FORFEITURE. In the event of the forfeiture of any shares of
     restricted stock under the terms provided in the Incentive Agreement
     (including any additional shares of restricted stock that may result from
     the reinvestment of cash and stock dividends, if so provided in the
     Incentive Agreement), such forfeited shares shall be surrendered and the
     certificates cancelled. The participants shall have the same rights and
     privileges, and be subject to the same forfeiture provisions, with respect
     to any additional shares received pursuant to Section 9.5 due to a
     recapitalization, merger or other change in capitalization.

          7.7. EXPIRATION OF RESTRICTED PERIOD. Upon the expiration or
     termination of the Restricted Period and the satisfaction of any other
     conditions prescribed by the Committee, the restrictions applicable to the
     restricted stock shall lapse and a stock certificate for the number of
     shares of restricted stock with respect to which the restrictions have
     lapsed shall be delivered, free of all such restrictions and legends,
     except any that may be imposed by law, to the participant or the
     participant's estate, as the case may be.

          7.8. RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions of
     the Plan and subject to any restrictions on the receipt of dividends that
     may be imposed in the Incentive Agreement, each participant receiving
     restricted stock shall have all the rights of a shareholder with respect to
     shares of stock during the Restricted Period, including without limitation,
     the right to vote any shares of Common Stock.

     8.   OTHER STOCK-BASED AWARDS.

          8.1 TERMS OF OTHER STOCK-BASED AWARDS. The Committee is hereby
     authorized to grant to eligible employees in lieu of a portion of salary or
     bonus an "Other


                                      -5-



     Stock-Based Award", which shall consist of an award, other than an award
     described in Section 6 or 7 hereof, the value of which is based in whole or
     in part on the value of shares of Common Stock. Other Stock-Based Awards
     may be awards of shares of Common Stock or may be denominated or payable
     in, valued in whole or in part by reference to, or otherwise based on or
     related to, shares of Common Stock (including, without limitation,
     securities convertible or exchangeable into or exercisable for shares of
     Common Stock), as deemed by the Committee consistent with the purposes of
     the Plan. The Committee shall determine the terms and conditions of any
     such Other Stock-Based Award and may provide that such awards would be
     payable in whole or in part in cash. Except in the case of an Other
     Stock-Based Award granted in assumption of or in substitution for an
     outstanding award of a company acquired by the Company or with which the
     Company combines, the price at which securities may be purchased pursuant
     to any Other Stock-Based Award granted under this Plan, or the provision,
     if any, of any such award that is analogous to the purchase or exercise
     price, shall not be less than 100% of the Fair Market Value of the
     securities to which such award relates on the date of grant.

          8.2 DIVIDEND EQUIVALENTS. In the sole and complete discretion of the
     Committee, an Other Stock-Based Award under this Section 8 may provide the
     holder thereof with dividends or dividend equivalents, payable in cash or
     shares of Common Stock on a current or deferred basis.

          8.3 PERFORMANCE GOALS. Other Stock-Based Awards intended to qualify as
     "performance-based compensation" under Section 162(m) of the Code shall be
     paid based upon the achievement of pre-established performance goals. The
     performance goals pursuant to which Other Stock-Based Awards granted under
     the Plan shall be earned shall be any or a combination of the following
     performance measures: earnings per share, return on assets, an economic
     value added measure, shareholder return, earnings, stock price, return on
     equity, return on total capital, reduction of expenses or increase in cash
     flow of the Company, a division of the Company or a subsidiary. For any
     performance period, such performance goals may be measured on an absolute
     basis or relative to a group of peer companies selected by the Committee,
     relative to internal goals or relative to levels attained in prior years.
     The Committee may not waive any of the pre-established performance goal
     objectives if such Other Stock-Based Award is intended to constitute
     "performance-based compensation" under Section 162(m), except that such
     objectives shall be waived as provided in Section 9.11 hereof, or as may be
     provided by the Committee in the event of death, disability or retirement.

          8.4. NOT A SHAREHOLDER. The grant of an Other Stock-Based Award to a
     participant shall not create any rights in such participant as a
     shareholder of the Company, until the issuance of shares of Common Stock
     with respect to an award, at which time such stock shall be considered
     issued and outstanding.


                                      -6-



     9.   GENERAL.

          9.1. DURATION. Subject to Section 9.10, the Plan shall remain in
     effect until all Incentives granted under the Plan have either been
     satisfied by the issuance of shares of Common Stock or the payment of cash
     or been terminated under the terms of the Plan and all restrictions imposed
     on shares of Common Stock in connection with their issuance under the Plan
     have lapsed.

          9.2. TRANSFERABILITY. No Incentives granted hereunder may be
     transferred, pledged, assigned or otherwise encumbered by a participant
     except: (a) by will; (b) by the laws of descent and distribution; (c)
     pursuant to a domestic relations order, as defined in the Code, if
     permitted by the Committee and so provided in the Incentive Agreement or an
     amendment thereto; or (d) as to options only, if permitted by the Committee
     and so provided in the Incentive Agreement or an amendment thereto, (i) to
     Immediate Family Members, (ii) to a partnership in which Immediate Family
     Members, or entities in which Immediate Family Members are the sole owners,
     members or beneficiaries, as appropriate, are the sole partners, (iii) to a
     limited liability company in which Immediate Family Members, or entities in
     which Immediate Family Members are the sole owners, members or
     beneficiaries, as appropriate, are the sole members, or (iv) to a trust for
     the sole benefit of Immediate Family Members. "Immediate Family Members"
     shall be defined as the spouse and natural or adopted children or
     grandchildren of the participant and their spouses. To the extent that an
     Incentive Stock Option is permitted to be transferred during the lifetime
     of the participant, it shall be treated thereafter as a nonqualified stock
     option. Any attempted assignment, transfer, pledge, hypothecation or other
     disposition of Incentives, or levy of attachment or similar process upon
     Incentives not specifically permitted herein, shall be null and void and
     without effect.

          9.3. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. In the event that a
     participant ceases to be an employee of the Company for any reason,
     including death, disability, early retirement or normal retirement, any
     Incentives may be exercised, shall vest or shall expire at such times as
     may be determined by the Committee in the Incentive Agreement. The
     Committee has complete authority to modify the treatment of an Incentive in
     the event of termination of employment of a participant by means of an
     amendment to the Incentive Agreement. Consent of the participant to the
     modification is required only if the modification materially impairs the
     rights previously provided to the participant in the Incentive Agreement.

          9.4. ADDITIONAL CONDITION. Anything in this Plan to the contrary
     notwithstanding: (a) the Company may, if it shall determine it necessary or
     desirable for any reason, at the time of award of any Incentive or the
     issuance of any shares of Common Stock pursuant to any Incentive, require
     the recipient of the Incentive, as a condition to the receipt thereof or to
     the receipt of shares of Common Stock issued pursuant thereto, to deliver
     to the Company a written representation of present intention to acquire the
     Incentive or the shares of Common Stock issued pursuant thereto for his own
     account for investment and not for distribution; and (b) if at any time the
     Company further determines, in its sole discretion, that the listing,
     registration or qualification (or


                                      -7-



     any updating of any such document) of any Incentive or the shares of Common
     Stock issuable pursuant thereto is necessary on any securities exchange or
     under any federal or state securities or blue sky law, or that the consent
     or approval of any governmental regulatory body is necessary or desirable
     as a condition of, or in connection with the award of any Incentive, the
     issuance of shares of Common Stock pursuant thereto, or the removal of any
     restrictions imposed on such shares, such Incentive shall not be awarded or
     such shares of Common Stock shall not be issued or such restrictions shall
     not be removed, as the case may be, in whole or in part, unless such
     listing, registration, qualification, consent or approval shall have been
     effected or obtained free of any conditions not acceptable to the Company.

          9.5. ADJUSTMENT. In the event of any merger, consolidation or
     reorganization of the Company with any other corporation or corporations,
     there shall be substituted for each of the shares of Common Stock then
     subject to the Plan, including shares subject to restrictions, options or
     achievement of performance objectives, the number and kind of shares of
     stock or other securities to which the holders of the shares of Common
     Stock will be entitled pursuant to the transaction. In the event of any
     recapitalization, stock dividend, stock split, combination of shares or
     other change in the Common Stock, the number of shares of Common Stock then
     subject to the Plan, including shares subject to outstanding Incentives,
     shall be adjusted in proportion to the change in outstanding shares of
     Common Stock. In the event of any such adjustments, the purchase price of
     any option, the performance objectives of any Incentive, and the shares of
     Common Stock issuable pursuant to any Incentive shall be adjusted as and to
     the extent appropriate, in the reasonable discretion of the Committee, to
     provide participants with the same relative rights before and after such
     adjustment. No substitution or adjustment shall require the Company to
     issue a fractional share under this Plan and the substitution or adjustment
     shall be limited by deleting any fractional share.

          9.6. INCENTIVE AGREEMENTS. The terms of each Incentive shall be stated
     in an agreement approved by the Committee.

          9.7. WITHHOLDING.

               A. The Company shall have the right to withhold from any payments
          made under the Plan or to collect as a condition of payment, any taxes
          required by law to be withheld. At any time that a participant is
          required to pay to the Company an amount required to be withheld under
          applicable income tax laws in connection with the issuance of Common
          Stock, the lapse of restrictions on Common Stock or the exercise of an
          option, the participant may, subject to disapproval by the Committee,
          satisfy this obligation in whole or in part by electing (the
          "Election") to have the Company withhold shares of Common Stock having
          a value equal to the amount required to be withheld. The value of the
          shares to be withheld shall be based on the Fair Market Value of the
          Common Stock on the date that the amount of tax to be withheld shall
          be determined ("Tax Date").


                                      -8-



               B. Each Election must be made prior to the Tax Date. The
          Committee may disapprove of any Election, may suspend or terminate the
          right to make Elections, or may provide with respect to any Incentive
          that the right to make Elections shall not apply to such Incentive. If
          a participant makes an election under Section 83(b) of the Internal
          Revenue Code with respect to shares of restricted stock, an Election
          is not permitted to be made.

          9.8. NO CONTINUED EMPLOYMENT. No participant under the Plan shall have
     any right, because of his or her participation, to continue in the employ
     of the Company for any period of time or to any right to continue his or
     her present or any other rate of compensation.

          9.9. DEFERRAL PERMITTED. Payment of cash or distribution of any shares
     of Common Stock to which a participant is entitled under any Incentive
     shall be made as provided in the Incentive Agreement. Payment may be
     deferred at the option of the participant if provided in the Incentive
     Agreement.

          9.10. AMENDMENTS TO OR TERMINATION OF THE PLAN.

               A. The Board may amend, suspend or terminate the Plan or any
          portion thereof at any time, provided that no amendment shall be made
          without stockholder approval if such approval is necessary to comply
          with any tax or regulatory requirement, including any approval
          necessary to qualify Incentives as "performance- based" compensation
          under Section 162(m) or any successor provision, if such qualification
          is deemed necessary or advisable by the Committee.

               B. Any provision of this Plan or any Incentive Agreement to the
          contrary notwithstanding, the Committee may cause any Incentive
          granted hereunder to be cancelled in consideration of a cash payment
          or alternative Incentive made to the holder of such cancelled
          Incentive equal in value to such cancelled Incentive. The
          determinations of value under this subparagraph shall be made by the
          Committee in its sole discretion.

          9.11. CHANGE OF CONTROL; TENDER OFFER OR EXCHANGE OFFER.

               A. "Change of Control" shall mean:

                    1. the acquisition by any individual, entity or group
               (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934
               Act of beneficial ownership (within the meaning of Rule 13d-3
               promulgated under the 1934 Act) of more than 30% of the
               outstanding shares of the Common Stock; provided, however, that
               for purposes of this subsection 1., the following shall not
               constitute a Change of Control:


                                      -9-



                         (a) any acquisition of Common Stock directly from ISC,

                         (b) any acquisition of Common Stock by ISC,

                         (c) any acquisition of Common Stock by any employee
                    benefit plan (or related trust) sponsored or maintained by
                    ISC or any corporation controlled by ISC, or

                         (d) any acquisition of Common Stock by any corporation
                    pursuant to a transaction that complies with clauses (a),
                    (b) and (c) of subsection (A)(3) of this Section 9.11; or

                    2. individuals who, as of the date of adoption of the Plan
               by the Board of Directors of ISC (the "Adoption Date"),
               constitute the Board (the "Incumbent Board") cease for any reason
               to constitute at least a majority of the Board; provided,
               however, that any individual becoming a director subsequent to
               the Adoption Date whose election, or nomination for election by
               the Company's shareholders, was approved by a vote of at least a
               majority of the directors then comprising the Incumbent Board
               shall be considered a member of the Incumbent Board, unless such
               individual's initial assumption of office occurs as a result of
               an actual or threatened election contest with respect to the
               election or removal of directors or other actual or threatened
               solicitation of proxies or consents by or on behalf of a person
               other than the Incumbent Board; or

                    3. approval by the stockholders of ISC of a reorganization,
               merger or consolidation, or sale or other disposition of all of
               substantially all of the assets of the Company (a "Business
               Combination"), in each case, unless, following such Business
               Combination,

                         (a) all or substantially all of the individuals and
                    entities who were the beneficial owners of ISC's outstanding
                    common stock and ISC's voting securities entitled to vote
                    generally in the election of directors immediately prior to
                    such Business Combination have direct or indirect beneficial
                    ownership, respectively, of more than 50% of the then
                    outstanding shares of common stock, and more than 50% of the
                    combined voting power of the then outstanding voting
                    securities entitled to vote generally in the election of
                    directors, of the corporation resulting from such Business
                    Combination (which, for purposes of this paragraph (a) and
                    paragraphs (b) and (c), shall include a corporation which as
                    a result of such transaction controls the Company or all or
                    substantially all of the Company's assets either directly or
                    through one or more subsidiaries), and


                                      -10-



                         (b) except to the extent that such ownership existed
                    prior to the Business Combination, no person (excluding any
                    corporation resulting from such Business Combination or any
                    employee benefit plan or related trust of the Company or
                    such corporation resulting from such Business Combination)
                    beneficially owns, directly or indirectly, 30% or more of
                    the then outstanding shares of common stock of the
                    corporation resulting from such Business Combination or 30%
                    or more of the combined voting power of the then outstanding
                    voting securities of such corporation, and

                         (c) at least a majority of the members of the board of
                    directors of the corporation resulting from such Business
                    Combination were members of the Incumbent Board at the time
                    of the execution of the initial agreement, or of the action
                    of the Board, providing for such Business Combination; or

                    4. approval by the shareholders of the Company of a complete
               liquidation or dissolution of the Company.

               B. Upon a Change of Control, all outstanding options shall
          automatically become fully exercisable, all restrictions or
          limitations on any Incentives shall lapse and all performance criteria
          and other conditions relating to the payment of Incentives shall be
          deemed to be achieved or waived by the Company, without the necessity
          of any action by any person.

          9.12. DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market Value" of
     Common Stock shall be determined for purposes of this Plan, it shall be the
     closing sale price on the consolidated transaction reporting system for New
     York Stock Exchange issues on the date of reference for a share of the
     Common Stock, or if no sale of the Common Stock shall have been made on
     that day, on the next preceding day on which there was a sale of the Common
     Stock.


                                      -11-

EX-10.6

                         FORM OF STOCK OPTION AGREEMENT
                                FOR THE GRANT OF
                      NON-QUALIFIED STOCK OPTIONS UNDER THE
                      INTERNATIONAL SHIPHOLDING CORPORATION
                              STOCK INCENTIVE PLAN

     THIS AGREEMENT is effective as of _____________ by and between
International Shipholding Corporation, a Delaware corporation ("the Company"),
and ____________ ("Optionee").

     WHEREAS Optionee is a key employee of the Company and the Company considers
it desirable and in its best interest that Optionee be given an inducement to
acquire a proprietary interest in the Company and an added incentive to advance
the interests of the Company by possessing an option to purchase shares of the
common stock of the Company, $1.00 par value per share (the "Common Stock") in
accordance with the International Shipholding Corporation Stock Incentive Plan
(the "Plan"), which was adopted by the Board of Directors and approved by the
stockholders.

     NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:

                                       I.

                                 Grant of Option

     The Company hereby grants to Optionee effective ___________ (the "Date of
Grant"), the right, privilege and option to purchase _____________ shares of
Common Stock (the "Option") at an exercise price of ________ per share (the
"Exercise Price"). The Option is a non-qualified stock option and shall not be
treated as an incentive stock option under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").

                                       II.

                                Time of Exercise

     2.1 Subject to the provisions of the Plan and the other provisions of this
Agreement, the Optionee shall be entitled to exercise his Option at any time
beginning on the date hereof and ending on ________________.

     2.2 If Optionee's employment is terminated, other than as a result of
death, disability or retirement on or after reaching age 65 or early retirement
with the approval of the Board of Directors, the Option must be exercised within
30 days of the date on which Optionee ceases to be an employee.


                                       -1-



     2.3 If an Optionee ceases to be an employee because of disability within
the meaning of Section 22(e)(3) of the Code or retirement, as described in
Section 2.2, the Option must be exercised within one year from the date on which
Optionee ceases to be an employee, but in no event later than ____________.

     2.4 In the event of Optionee's death, the Option must be exercised by his
estate, or by the person to whom such right devolves from him by reason of his
death within one year from the date of death, but in no event later than
___________.

                                      III.

                          Method of Exercise of Option

     Optionee may exercise all or a portion of the Option by delivering to the
Company a signed written notice of his intention to exercise the Option,
specifying therein the number of shares to be purchased, and accompanied by
payment of the exercise price as provided in the Plan. Upon receiving such
notice and payment, the appropriate officer of the Company shall cause the
transfer of title of the shares purchased to Optionee on the Company's stock
records and cause to be issued to Optionee a stock certificate for the number of
shares being acquired. Optionee shall not have any rights as a shareholder until
the stock certificate is issued to him.

                                       IV.

                       No Contract of Employment Intended

     Nothing in this Agreement shall confer upon Optionee any right to continue
in the employ of the Company or any of its subsidiaries, or to interfere in any
way with the right of the Company or any of its subsidiaries to terminate
Optionee's employment relationship with the Company or any of its subsidiaries
at any time.

                                       V.

                                 Binding Effect

     This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.


                                       -2-



                                       VI.

                               Non-Transferability

     The Option granted hereby may not be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise, other than by will
or by the laws of descent and distribution and shall not be subject to
execution, attachment or similar process.

                                      VII.

                             Inconsistent Provisions

     The Option granted hereby is subject to the provisions of the Plan as in
effect on the date hereof and as it may be amended. In the event any provision
of this Agreement conflicts with such a provision of the Plan, the Plan
provision shall control.


                                       -3-

EX-10.7

                    COMPENSATION OF NON-MANAGEMENT DIRECTORS

     Each member of the Board of Directors of International Shipholding
Corporation who is not a member of management, other than Niels W. Johnsen,
receives an annual fee of $25,000 per year plus $1,000 for each meeting of the
Board or a committee thereof attended.

EX-10.8

                 LIFE INSURANCE BENEFITS PROVIDED BY THE COMPANY
                     TO NIELS W. JOHNSEN AND ERIK F. JOHNSEN

     International Shipholding Corporation (the "Company") has agreements with
Erik F. Johnsen, Chairman of the Board of Directors and Chief Executive Officer,
and Niels W. Johnsen, a Director and former Chairman, whereby their estates will
be paid approximately $822,000 and $626,000, respectively upon death. The
Company maintains an insurance policy and has established reserves sufficient to
cover these benefits.

EX-21.1

                                                                      EXHIBIT 21

                      INTERNATIONAL SHIPHOLDING CORPORATION
                         SUBSIDIARIES OF THE REGISTRANT
                             AS OF DECEMBER 31, 2004



                                                       Jurisdiction Under
                                                         Which Organized
                                                     ----------------------
                                                  
International Shipholding Corporation (Registrant)   Delaware

   Waterman Steamship Corporation                    New York
      Sulphur Carriers, Inc.                         Delaware

   Central Gulf Lines, Inc.                          Delaware
      Enterprise Ship Company, Inc.                  Delaware
      Material Transfer, Inc.                        Delaware
         Grace Intermodal, Inc. (1)                  Delaware

   CG Railway, Inc.                                  Delaware
         Terminales Transgolfo, S.A. de C.V(2)       Mexico

   Bay Insurance Company Limited                     Bermuda

   LCI Shipholdings, Inc.                            Marshall Islands
      Cape Holding, Ltd.                             Cayman Islands
         Dry Bulk  Cape Holding, Inc. (5)            Panama
            Dry Bulk Africa, LTD. (5)                British Virgin Islands
            Dry Bulk Australia, LTD. (5)             British Virgin Islands
      Gulf South Shipping Pte. Ltd.                  Singapore
      Marco Shipping Co. Pte. Ltd.                   Singapore
         Marcoship Agencies SDN. BHD.                Malaysia
      Belden Cement Holding Inc. (3)                 Panama
         Belden Shipping Pte Ltd (3)                 Singapore
         Echelon Shipping Inc. (3)                   Panama
         Yakumo Shipping Inc. (3)                    Panama
         Tilbury Shipping Inc. (3)                   Panama
         Emblem Shipping Inc. (3)                    Panama
         Shining Star Shipping Inc. (3)              Panama
         Belden Management Inc. (3)                  Panama
         Mattea Shipping, Inc. (3)                   Panama
         Minardi Shipping Inc. (3)                   Panama
         Chariot Shipping Inc. (3)                   Panama
         Epson Shipping Inc. (3)                     Panama

   N. W. Johnsen & Co., Inc.                         New York

   LMS Shipmanagement, Inc.                          Louisiana
      LMS Manning, Inc. (4)                          Philippines

   Lash Intermodal Terminal Co., LLC                 Delaware


(1)  50% owned by Material Transfer, Inc.

(2)  50% owned by CG Railway, Inc.

(3)  26.1% owned by LCI Shipholdings, Inc.

(4)  48% owned by LMS Shipmanagement, Inc.

(5)  50% owned by Cape Shipholding, Inc

     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.

EX-31.1

                                                                    EXHIBIT 31.1

                                  CERTIFICATION

I, Erik F. Johnsen, certify that:

1.   I have reviewed this annual report on Form 10-K of International
     Shipholding Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) [omitted in accordance with
     Section III.E of SEC Release No. 34-47986] for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   [omitted in accordance with Section III.E of SEC Release No.
          34-47986];

     c)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors:

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date: March 9, 2005


/s/ Erik F. Johnsen
- -------------------------------------
Erik F. Johnsen
Chairman of the Board of Directors
and Chief Executive Officer
International Shipholding Corporation

EX-31.2

                                                                    EXHIBIT 31.2

                                  CERTIFICATION

I, Gary L. Ferguson, certify that:

1.   I have reviewed this annual report on Form 10-K of International
     Shipholding Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) [omitted in accordance with
     Section III.E of SEC Release No. 34-47986] for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     b)   [omitted in accordance with Section III.E of SEC Release No.
          34-47986];

     c)   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of the registrant's board
     of directors:

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.

Date: March 9, 2005


/s/ Gary L. Ferguson
- ------------------------------------------
Gary L. Ferguson
Vice President and Chief Financial Officer
International Shipholding Corporation

EX-32.1

                                                                    EXHIBIT 32.1

             CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350
       (ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

     In connection with the Annual Report on Form 10-K of International
Shipholding Corporation (the "Company") for the period ending December 31, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Erik F. Johnsen, as Chairman and Chief Executive Officer of the
Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
his knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

Dated: March 9, 2005


                                        /s/ Erik F. Johnsen
                                        ----------------------------------------
                                        Erik F. Johnsen
                                        Chairman of the Board and
                                        Chief Executive Officer

     A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.

     This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

                                                                    EXHIBIT 32.2

             CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350
       (ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

     In connection with the Annual Report on Form 10-K of International
Shipholding Corporation (the "Company") for the period ending December 31, 2004
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Gary L. Ferguson, as Chief Financial Officer of the Company, hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

Dated: March 9, 2005


                                      /s/ Gary L. Ferguson
                                      ------------------------------------------
                                      Gary L. Ferguson
                                      Vice President and Chief Financial Officer

     A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.

     This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.