International Shipholding Corporation Reports Third Quarter 2012 Results
Declares third quarter dividend of $0.25 per share
Provides 2013 pro forma guidance for net income of $18 to $20 million and EBITDA of $65 to $75 million
Third Quarter 2012 Highlights
Reported adjusted net income of $2.9 million for the three months ended September 30, 2012, excluding a non-cash foreign currency exchange loss of $1.1 million.
Declared a third quarter dividend of $0.25 per share payable on December 3, 2012 to stockholders of record as of November 16, 2012.
Acquired a railroad car repair facility in Mobile, Alabama for approximately $4.5 million in cash.
October 2012 Highlights
As previously announced, entered into a definitive agreement to acquire U.S. United Ocean Services, LLC for approximately $111 million cash with the closing expected to occur in the fourth quarter of 2012, subject to the satisfaction of closing conditions.
As previously announced, acquired a 1999-built Pure Car Truck Carrier ("PCTC") in a transaction valued at $27.5 million to be reflagged under the U.S. Flag and deployed on a long-term time charter with a strong, creditworthy counterparty.
The Company reported net income of $1.8 million for the three months ended September 30, 2012, which included a non-cash foreign currency exchange loss of $1.1 million attributed to a yen-denominated loan facility. For the comparable three months ended September 30, 2011, the Company reported net income of $2.9 million, which included a non-cash foreign currency exchange loss of $2.7 million, also attributed to the yen-denominated loan facility.
Mr. Niels M. Johnsen, Chairman and Chief Executive Officer, stated, "In the third quarter, we continued our accretive growth strategies and took advantage of market opportunities. This month, we entered into an agreement to acquire United Ocean Services in a transaction that is expected provide us with additional fixed revenue and to be immediately accretive to our earnings and operating cash flow. Additionally, we added a modern, higher specification vessel to our fleet by acquiring a 1999-built PCTC while monetizing a legacy PCTC asset. Our recent transactions demonstrate our ability to identify opportunities that increase our contracted revenue stream, enhance our presence in niche markets and realize value in our fleet."
"During a quarter in which we continued to successfully execute our accretive growth strategies for the benefit of our shareholders, we also continued to provide returns through a quarterly dividend payment. In line with our 2012 annual dividend target of $1.00 per share, our Board of Directors declared a third quarter payment of $0.25 per share."
Operating income for the three months ended September 30, 2012, was $4.0 million as compared to $8.6 million for the comparable 2011 period. The Company's gross voyage profit representing the operating results of its five reporting segments was $15.8 million compared to $20.2 million in the 2011 three month period. The comparable results by reporting segment are shown below:
(all amounts in millions)
Gross Voyage Profit
(See below Exhibit 99.2 to reconcile numbers presented above to GAAP figures.)
Gross voyage profit for the U.S. Flag Time Charter segment was lower due primarily to the expiration of three operating contracts with the Military Sealift Command (MSC) which occurred near the end of the first quarter of 2012 and scheduled off-hire maintenance periods. This was partially offset by higher supplemental cargo volumes and the results of the ice strengthened multipurpose vessel which operated on time charter to the MSC. In mid-September 2012, the MSC terminated this contract at the convenience of the government. The Company is currently evaluating its available employment options for this vessel. The lower International Flag Time Charter segment results reflect the fleet reduction following the first quarter sale of two of its Pure Car Truck Carriers. In addition, the depressed rate levels in the dry bulk market continue to impact this segment. The Contract of Affreightment segment reported higher results from lower operating costs while the Rail Ferry segment results were lower primarily driven by rail outages in Mexico from inclement weather conditions.
Administrative and general expenses were approximately $875,000 higher for the quarter ended September 30, 2012, compared to the same period in 2011. Non-recurring expenses associated with the United Ocean Services' acquisition negotiations, as well as employee bonus accruals, not accrued during the 2011 comparable period, were the primary drivers. For the year to date period the Company's 2012 administrative and general expenses are at 2011 levels.
Interest and Other
During the three month period ended September 30, 2012, the Japanese Yen strengthened in relation to the U.S. Dollar from 79.81 to 77.93, producing a non-cash charge to earnings of $1.1 million. Lower interest expense reflect debt retirement using proceeds from the sale of assets.
The results from the Company's investments in 50% or less owned ventures improved in the three months ended September 30, 2012, when compared to the same period in 2011. The results from the Company's 25% investment in the company owning ten mini-bulkers had non-recurring mark to market adjustments on an ineffective interest rate swap contract reported in the 2011 period, while the current year's results reflect operating income slightly above breakeven levels.
The Company's working capital at September 30, 2012, was approximately $2.3 million. The lower working capital is attributable to the purchase of the rail repair yard during the quarter. Cash and cash equivalent balances were approximately $12.7 million at September 30, 2012.
The Company's Board of Directors declared a $0.25 dividend payable on December 3, 2012, for each share of common stock owned on the record date of November 16, 2012. All future dividend declarations and amounts remain subject to the discretion of the Company's Board of Directors.
Commenting on the outlook for 2013, Manny Estrada, Chief Financial Officer, said, "Following the completion of our pending acquisition of U.S. United Ocean Services, LLC ("UOS"), we expect our full year 2013 pro forma net income will be $18 to $20 million and our EBITDA will be $65 to $75 million. Both measures represent a significant improvement over our expected full year 2012 results. When setting our 2013 guidance, management took into account the additional contracted revenue from the operations of UOS, as well as our expectations for conditions in the dry bulk market."
On a pro forma basis the Company currently anticipates that approximately 68% of its revenue in 2013 will be fixed and 32% will be variable. The Company further expects that the majority of its fixed revenue will be generated by its PCTC fleet and the newly acquired UOS vessels, which operate under medium to long-term contracts, whereas variable revenue will be generated primarily from the transportation of supplemental cargo on the U.S. Flag PCTC's, from revenue sharing agreements in place with its fleet of international Handysize dry bulk vessels and the rail ferry operations. Supplemental cargo and Handysize dry bulk operations are expected to perform largely in line with 2012.
All 2013 outlook figures included in this release assume the timely completion of our pending acquisition of UOS and exclude the effects of special items (including foreign currency exchange losses or gains), future changes in regulation, any changes in operating or capital plans, and any future acquisitions, divestitures, buybacks or other similar business transactions.In addition, all outlook figures are based on acquisition-related fair value estimates for UOS that remain subject to finalization.All assets and liabilities of UOS have been assigned a fair value pursuant to applicable accounting rules; however, such fair value assignments for UOS have not been finalized and are subject to further adjustment before becoming final.For purposes of this outlook section, EBITDA means earnings before interest, taxes, depreciation and amortization.
In connection with this earnings release, management will host an earnings conference call on Friday, October 26, 2012, at 10:00 AM ET. To participate in the conference call, please dial (888) 262-8720 (domestic) or (913) 312-0666 (international). Participants can reference the International Shipholding Corporation Third Quarter 2012 Earnings Call or passcode 6625854. Please dial in approximately 5 minutes prior to the call.
The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of the Company's website, www.intship.com. Please allow extra time prior to the call to visit the Company's website and download any software that may be needed to listen to the webcast.
A replay of the conference call will be available through November 2, 2012, at (877) 870-5176 (domestic) or (858) 384-5517 (international). The passcode for the replay is 6625854.
About International Shipholding
ISH, through its subsidiaries, operates a diversified fleet of U.S. and international flag vessels that provide worldwide and domestic maritime transportation services to commercial and governmental customers primarily under medium to long-term charters and contracts. www.intship.com
Caution concerning forward-looking statements
Except for the historical and factual information contained herein, the matters set forth in this release, including statements regarding our 2013 guidance, the expected timing and benefits of the UOS acquisition and other statements identified by words such as "estimates," "expects," "anticipates," "plans," and similar expressions, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations only, and are subject to a number of risks and uncertainties, many of which are beyond our control. Actual events and results may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: our ability to maximize the usage of our newly-purchased and incumbent vessels and other assets on favorable economic terms, including our ability to renew our time charters and contracts when they expire and to maximize our carriage of supplemental cargoes; our ability to consummate our pending acquisition of UOS, including receiving financing and all required regulatory approvals or clearances; our ability to effectively handle our leverage by servicing and complying with each of our debt instruments; changes in domestic or international transportation markets that reduce the demand for shipping generally or our vessels in particular; industry-wide changes in cargo freight rates, charter rates, vessel design, vessel utilization or vessel valuations, or in charter hire, fuel or other operating expenses; the possibility that the anticipated benefits from the UOS acquisition cannot be fully realized or may take longer to realize than expected or the possibility that costs or difficulties related to the acquisition will be greater than expected; political events in the United States and abroad, including election results, the appropriation of funds by the U.S. Congress, and terrorism, piracy and trade restrictions; the effects of more general factors, such as changes in interest rates, in tax laws or rates, in foreign currency rates, or in general market, labor or economic conditions; and each of the other economic, competitive, governmental, and technological factors detailed in our reports filed with the Securities and Exchange Commission. You should be aware that new factors may emerge from time to time and it is not possible for us to identify all such factors nor can we predict the impact of each such factor on our business or the extent to which any one or more factors may cause actual results to differ from those reflected in any forward-looking statements. Accordingly, you are cautioned not to place undue reliance upon any of our forward-looking statements, which speak only as of the date made. We undertake no obligation to update or revise for any reason any forward-looking statements made by us or on our behalf, whether as a result of new information, future events or developments, changed circumstances or otherwise.
INTERNATIONAL SHIPHOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(All Amounts in Thousands Except Share Data)
Three Months Ended September 30,
Nine Months ended September 30,
Administrative and General Expenses
Gain on Dry Bulk Transaction
(Gain) Loss on Sale/Purchase of Other Assets
Total Operating Expenses
Interest and Other:
Gain on Sale of Investment
Other Income from Vessel Financing
Foreign Exchange Loss (Gain)
Income Before Provision for Income Taxes and
Equity in Net (Loss) Income of Unconsolidated Entities
(Benefit) Provision for Income Taxes:
Equity in Net Income of Unconsolidated
Entities (Net of Applicable Taxes)
Basic and Diluted Earnings Per Common Share:
Basic Earnings Per Common Share:
Diluted Earnings Per Common S