International Shipholding Corp. Reports Operating Results (10-Q)
International Shipholding Corp. has a market cap of $179.6 million; its shares were traded at around $24.14 with a P/E ratio of 3.8 and P/S ratio of 0.5. The dividend yield of International Shipholding Corp. stocks is 6.3%.ISH is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Net income for the second quarter of 2010 was $9.6 million as compared to $10.7 million for the same period in 2009, including an impairment loss of $2.9 million in 2009 for the write down of one of our International flag Container vessels. Total gross voyage profit improved by $3.8 million year on year, with prior year gross voyage profit being reduced by a $2.9 million impairment charge. The improvement in gross voyage profit resulted in part from the addition of one International flag Pure Car Truck Carrier Newbuilding, which began service at the end of March 2010, extension of the depreciable life on our Coal Carrier and increased operating days on our Military Sealift Command Vessels and vessels servicing our Indonesian customer. This improvement was partially offset by lower supplemental cargo volumes and the redelivery of one of our chartered in International flag Pure Car Truck Carriers. The improvement to gross voyage profit was offset by higher administrative and general expenses, interest expense and a foreign exchange loss on the revaluation of a Yen denominated loan facility related to the aforementioned International flag Pure Car Truck Carrier Newbuilding. Other items impacting the second quarter 2010 include:
Time Charter Contracts-InternationalFlag: Revenues increases from $12.7 million in the second quarter of 2009 to $15.0 million in the second quarter of 2010. Gross voyage profit increased $6.5 million in the second quarter of 2010. The improvement in revenue and gross voyage profit was primarily due to more operating days on vessels servicing our Indonesian customer and the initial employment of the PCTC Newbuilding commencing in late March, 2010, with gross voyage profit also improving due to a $2.9 million impairment charge in the prior year period.
Rail-Ferry Service: Gross voyage profit decreased from $242,000 in the second quarter of 2009 to a loss of $1.4 million in the second quarter of 2010 while revenues for this segment decreased from $8.2 million in the second quarter of 2009 to $6.3 million in the second quarter of 2010, both due primarily to a drop in northbound cargo volumes caused primarily by the loss of a major customer in December 2009. The Company continues to work on its marketing strategy and its plan to increase northbound volumes (See Risk Factors, starting on page 33).
Administrative and general expenses increased from $4.7 million in the second quarter of 2009 to $5.4 million in the second quarter of 2010 primarily due to higher share prices associated with awards under our executive stock compensation program, and the reversal of previously accrued expenses of $500,000 in the second quarter of 2009 associated with an unaffiliated shipping company s unsolicited conditional offer to acquire the Company s outstanding shares in 2009.
We recorded a benefit for income taxes of $30,000 on our $9.1 million of income before income from unconsolidated entities and a benefit of $226,000 on our $8.6 million of income before income from unconsolidated entities for the three months ended June 30, 2010 and 2009 respectively. The income tax benefit for both periods reflects tax losses on operations taxed at the U.S. Corporate statutory rate. The decrease in our tax benefit is primarily the result of an increase in gross profit related to the US flag Coal Carrier partially offset by a decrease in gross profit in our Rail Ferry service. For further information on certain tax laws and elections, see our annual report on Form 10-K for the year ended December 31, 2009, including Note G to the financial statements. Our qualifying U.S. flag operations continue to be taxed under the “tonnage tax” laws.
Equity in net income of unconsolidated entities, net of taxes, decreased from $1.8 million in the second quarter of 2009 to $448,000 in the second quarter of 2010. This decrease is due to income taxes on our related party controlled foreign entities (see Income Taxes above). Equity in net income of unconsolidated entities net of taxes, for the first six months of 2010 was further impacted by our 25% investment in Oslo Bulk during December 2009. Our portion of the earnings of this investment was a $681,000 loss for the six months ended June 30, 2010, primarily related to the mark-to-market adjustment of an interest rate swap contract. Although the terms of Oslo Bulk s interest rate swap contract match the terms of the loan, the swap did not qualify for hedge accounting treatment due to the lack of documentation at the inception of the contract entered into in 2008, prior to our investment in Oslo Bulk. Although U.S. GAAP requires recording the mark-to-market revaluation of this derivative instrument through earnings, we expect the instrument to be an effective economic hedge of Oslo Bulk s interest cost.
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