International Shipholding Corporation Reports Q1 2011
Mobile, Alabama, April 27, 2011 – International Shipholding Corporation (NYSE: ISH) announced the financial results for the quarter ended March 31, 2011.
First Quarter 2011 Highlights
• Acquisition of the 100% equity interest of a Capesize Vessel and a Handymax Vessel, under construction, through a non-monetary transaction with a joint venture partner (“Dry Bulk transaction”)
• Permanent financing for three Handysize Bulk Carriers
The Company reported net income of $24.1 million for the three months ended March 31, 2011, which included a gain on the Dry Bulk transaction of $18.7 million. For the comparable three months ended March 31, 2010, the Company reported net income of $10.6 million, which included a gain of $1.4 million on the sale of a Panamax Bulk Carrier. Excluding the non-recurring transactions, net income for the first quarter of 2011 was $5.4 million as compared to $9.2 million for the comparable quarter in 2010.
Mr. Niels M. Johnsen, Chairman and Chief Executive Officer, stated: “We are pleased with our performance for the quarter as our fleet of diversified vessels continued to operate as expected. Importantly, we also further increased the percentage of direct ownership in our fleet by entering into the Dry Bulk transaction to take a 100% equity stake in a Capesize vessel and a Handymax newbuilding scheduled for delivery in the first quarter of 2012. Through this transaction we were able to recognize the value of these assets which represents the basis for a $18.7 million gain. Additionally, we exercised our previously negotiated early buy-out options to purchase two car carriers from the current lessor and intend to utilize our current cash position to partially fund this transaction.”
“The Company continued to execute its growth strategy. In addition to increasing the ownership percentage of our fleet during the quarter, our Oslo Bulk Joint Venture took delivery of two mini bulkers as scheduled. Of the ten vessels purchased for this joint venture, eight have been delivered and we expect the remaining two ships to deliver as planned during the second and third quarter.”
“We remain committed to providing our shareholders with dividends and in keeping with that policy our Board has declared a first quarter dividend payment of $0.375 per share.”
Operating income for the three months ended March 31, 2011 was $22.9 million including the $18.7 million gain from the Dry Bulk transaction. Excluding the gain, Operating Income was $4.1 million as compared to $6.9 million for the comparable period in 2010 which excludes the gain from the sale of the vessel. The Company’s Gross Voyage Profit, which represents the operating results of its five segments, decreased from $14.2 million in the 2010 first quarter to $10.0 million in this reporting quarter. The Company’s U.S. Flag Time Charter segment results were lower primarily due to the lower supplemental cargo volumes. The 2010 first quarter supplemental cargo volumes were above historical levels. The International Flag Time Charter segment results were higher in the first quarter of 2011 primarily attributable to the operation of its three Handysize vessels, which began service during the quarter, partially offset by lower results from its Indonesian contract. The results in the first quarter of 2011 of the Contract of Affreightment segment were at comparable levels to those of the 2010 first quarter. The Company’s Rail Ferry segment reported higher results for the quarter as compared to the first quarter of 2010. Northbound cargo volumes improved, primarily due to the carriage of seasonal cargoes, while southbound cargoes were at maximum capacity. Additionally, with the lower asset values, as a result of the 2010 impairment charge, depreciation on the vessels operating in this segment was lower by approximately $500,000. The Company’s other segment, consisting mainly of chartering brokerage and agency services, had higher results in this first quarter of 2011 as compared to the 2010 first quarter primarily due to an increase in chartering brokerage income. Partially offsetting the drop in Gross Voyage Profit results of the Company’s operating segment was slightly lower administrative and general expenses.
Interest and Other
Interest expense for the three months ended March 31, 2011 increased from the comparable period in 2010. The increase is attributable to the additional debt associated with the three Handysize Bulk Carriers placed in service during this quarter and the International Flag PCTC placed in service after the 2010 first quarter. Partially offsetting the increased cost of the additional debt was a lower swap interest rate on one of the loans. The foreign exchange gain of $1.5 million is the result of the stronger U.S. dollar versus the Japanese Yen and its impact on our Yen-denominated facility. The Yen was revalued, as of March 31, 2011, at a 83.19 Yen to $1 USD exchange rate.
Federal Income Tax
The Company’s first quarter income tax provision was $208,000 as compared to a benefit of $612,000 for the 2010 comparable first quarter. The Company has no deferred tax balance, thus any losses from its on-going operations require valuation allowances which effectively eliminate tax benefits.
The Company’s working capital at March 31, 2011 was approximately $37 million, an increase of approximately $22 million from the December 31, 2010 balances. Repayment, during the quarter, of construction installment payments from the permanent financing facility on three Handysize vessels is the primary reason for the improved working capital position. Cash, cash equivalents and marketable securities were at approximately $63 million at March 31, 2011. We expect to utilize some of this balance over the next two quarters to fund equity positions in the acquisitions of the two car carriers which the Company has exercised its early buy-out options to purchase from its lessor.
The Company’s Board of Directors authorized the payment of a $0.375 dividend payable on June 1, 2011, for each share of common stock owned on the record date of May 16, 2011. All future dividend declarations and amounts remain subject to the discretion of International Shipholding Corporation’s Board of Directors.