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1


INTERNATIONAL SHIPHOLDING CORPORATION AND SUBSIDIARIES

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003
---------------

__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number: 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 Identification
incorporation or organization) Number)

650 Poydras Street New Orleans, Louisiana 70130
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

(504) 529-5461
- --------------------------------------------------------------------------
(Registrant's telephone number, including area code)


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 for the past 90 days. YES ___x___ NO _______


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

Common Stock $1 Par Value 6,082,887 shares (June 30, 2003)
---------------------------- ------------------ ----------------

2

PART I - FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

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

Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ---------

Revenues $ 67,505 $ 56,664 $132,311 $117,116

Operating Expenses:
Voyage Expenses 52,013 42,758 101,631 92,451
Vessel and Barge Depreciation 5,138 4,829 9,792 9,659
Impairment Loss - (151) - (97)
--------- --------- --------- ---------
Gross Voyage Profit 10,354 9,228 20,888 15,103
--------- --------- --------- ---------
Administrative and
General Expenses 4,000 3,799 8,011 8,245
Gain on Sale of Other Assets (39) (513) (43) (493)
--------- --------- --------- ---------
Operating Income 6,393 5,942 12,920 7,351
--------- --------- --------- ---------
Interest and Other:
Interest Expense 3,171 4,482 6,652 9,102
Investment Income (302) (140) (530) (452)
Other Income (81) - (103) (1,282)
(Gain) Loss on Early
Extinguishment of Debt - - (1,260) 48
--------- --------- --------- ---------
2,788 4,342 4,759 7,416
--------- --------- --------- ---------
Income (Loss) Before Provision
(Benefit) for Income Taxes and
Equity in Net Income of
Unconsolidated Entities 3,605 1,600 8,161 (65)
--------- --------- --------- ---------
Provision (Benefit) for
Income Taxes:
Current 164 - 164 -
Deferred 1,085 558 2,672 (18)
State 26 38 68 38
--------- --------- --------- ---------
1,275 596 2,904 20
--------- --------- --------- ---------
Equity in Net Income of
Unconsolidated Entities
(Net of Applicable Taxes) 160 112 227 281
--------- --------- --------- ---------
Net Income $ 2,490 $ 1,116 $ 5,484 $ 196
========= ========= ========= =========
Basic and Diluted Earnings
Per Share:
Net Income $ 0.41 $ 0.18 $ 0.90 $ 0.03
========= ========= ========= =========

Weighted Average Shares of
Common Stock Outstanding 6,082,887 6,082,887 6,082,887 6,082,887


The accompanying notes are an integral part of these statements.


3


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


June 30, December 31,
ASSETS 2003 2002
------------ ------------

Current Assets:
Cash and Cash Equivalents $ 3,008 $ 4,419
Restricted Cash 8,220 8,096
Marketable Securities 2,407 2,211
Accounts Receivable, Net of Allowance
for Doubtful Accounts of $381 and $332
in 2003 and 2002, Respectively:
Traffic 19,220 16,341
Agents' 3,720 4,343
Claims and Other 17,045 9,408
Federal Income Taxes Receivable 5,239 5,755
Deferred Income Tax 576 576
Net Investment in Direct Financing Lease 2,031 1,944
Other Current Assets 3,771 6,212
Material and Supplies Inventory, at
Lower of Cost or Market 3,416 3,492
Current Assets Held for Disposal 356 2,762
------------ ------------
Total Current Assets 69,009 65,559
------------ ------------
Marketable Equity Securities - 200
------------ ------------
Investment in Unconsolidated Entities 8,535 8,251
------------ ------------
Net Investment in Direct Financing Lease 50,236 51,264
------------ ------------
Vessels, Property, and Other
Equipment, at Cost:
Vessels and Barges 336,934 336,755
Other Equipment 6,331 5,507
Terminal Facilities 329 336
Furniture and Equipment 5,655 9,042
------------ ------------
349,249 351,640
Less - Accumulated Depreciation (117,137) (110,535)
------------ ------------
232,112 241,105
------------ ------------
Other Assets:
Deferred Charges, Net of Accumulated
Amortization of $15,394 and $13,572
in 2003 and 2002, Respectively 12,755 14,628
Acquired Contract Costs, Net of Accumulated
Amortization of $20,703 and $19,976
in 2003 and 2002, Respectively 9,823 10,550
Due from Related Parties 2,535 2,609
Other 12,730 12,586
------------ ------------
37,843 40,373
------------ ------------

$ 397,735 $ 406,752
============ ============


The accompanying notes are an integral part of these statements.


4


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


June 30, December 31,
LIABILITIES AND STOCKHOLDERS' INVESTMENT 2003 2002
------------ ------------

Current Liabilities:
Current Maturities of Long-Term Debt $ 21,032 $ 21,362
Accounts Payable and Accrued Liabilities 32,751 34,252
------------ ------------
Total Current Liabilities 53,783 55,614
------------ ------------
Billings in Excess of Income Earned
and Expenses Incurred 2,039 1,207
------------ ------------
Long-Term Debt, Less Current Maturities 175,946 192,297
------------ ------------
Other Long-Term Liabilities:
Deferred Income Taxes 18,821 14,358
Claims and Other 25,629 28,049
------------ ------------
44,450 42,407
------------ ------------
Commitments and Contingent Liabilities

Stockholders' Investment:
Common Stock 6,756 6,756
Additional Paid-In Capital 54,450 54,450
Retained Earnings 69,923 64,439
Less - Treasury Stock (8,704) (8,704)
Accumulated Other Comprehensive Loss (908) (1,714)
------------ ------------
121,517 115,227
------------ ------------

$ 397,735 $ 406,752
============ ============


The accompanying notes are an integral part of these statements.


5


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

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

Unrealized Holding
Gain on 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 the
Period Ended
June 30, 2003 - - 5,484 - - 5,484

Other Comprehensive
Income (Loss):
Unrealized Holding
Gain on Marketable
Securities, Net of
Deferred Taxes
of $97 - - - - 181 181

Unrealized Holding
Gain on Derivatives,
Net of Deferred
Taxes of $337 - - - - 625 625
--------
Total Comprehensive Income 6,290
----------------------------------------------------------
Balance at
June 30, 2003 $6,756 $54,450 $69,923 ($8,704) ($908) $121,517
==========================================================


The accompanying notes are an integral part of these statements.


6


INTERNATIONAL SHIPHOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All Amounts in Thousands)
(Unaudited)

Six Months Ended June 30,
2003 2002
------------ ------------

Cash Flows from Operating Activities:
Net Income $ 5,484 $ 196
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 10,195 10,173
Amortization of Deferred Charges
and Other Assets 3,730 3,840
Provision (Benefit) for Deferred
Income Taxes 2,672 (18)
Equity in Net Income of Unconsolidated
Entities (227) (281)
Gain on Sale of Other Assets (43) (493)
Impairment Loss - (97)
(Gain) Loss on Early Extinguishment of Debt (1,260) 48
Changes in:
Accounts Receivable (8,295) 14,827
Inventories and Other Current Assets 3,095 (1,270)
Other Assets 1,593 2,085
Accounts Payable and Accrued Liabilities 1,291 (10,451)
Federal Income Taxes Payable 1,760 (486)
Billings in Excess of Income Earned
and Expenses Incurred (1,226) (1,072)
Other Long-Term Liabilities (3,344) (1,833)
------------ ------------
Net Cash Provided by Operating Activities 15,425 15,168
------------ ------------
Cash Flows from Investing Activities:
Net Investment in Direct Financing Lease 941 859
Additions to Vessels and Other Property (2,837) (78)
Additions to Deferred Charges (287) (2,028)
Proceeds from Sale of Vessels and Other
Property 478 12,046
Purchase of and Proceeds from Short
Term Investments 54 (31)
Proceeds from Sale of Marketable
Equity Securities 200 -
Investment in Unconsolidated Entities 128 (941)
Partial Sale of Unconsolidated Entities 15 110
Net Increase in Restricted Cash Account (124) (1,467)
Other Investing Activities (18) 42
------------ ------------
Net Cash (Used) Provided by Investing
Activities (1,450) 8,512
------------ ------------
Cash Flows from Financing Activities:
Proceeds from Issuance of Debt 17,000 11,500
Repayment of Debt and Capital Lease
Obligations (33,700) (42,928)
Additions to Deferred Financing Charges (66) (7)
Other Financing Activities 1,380 (86)
------------ ------------
Net Cash Used by Financing Activities (15,386) (31,521)
------------ ------------
Net Decrease in Cash and Cash Equivalents (1,411) (7,841)
Cash and Cash Equivalents at Beginning of Period 4,419 25,150
------------ ------------
Cash and Cash Equivalents at End of Period $ 3,008 $ 17,309
============ ============


The accompanying notes are an integral part of these statements.


7

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2003
(Unaudited)

Note 1. Basis of Preparation

We have prepared the accompanying unaudited interim financial statements
pursuant to the rules and regulations of the Securities and Exchange
Commission, and we have omitted certain information and footnote disclosures
required by generally accepted accounting principles for complete financial
statements. We suggest that you read these interim statements in conjunction
with the financial statements and notes thereto included in our Form 10-K for
the year ended December 31, 2002. We have made certain reclassifications to
prior period financial information in order to conform to current year
presentation.
The foregoing 2003 interim results are not necessarily indicative of the
results of operations for the full year 2003. Interim statements are subject
to possible adjustments in connection with the annual audit of our accounts for
the full year 2003, although management believes that all adjustments necessary
for a fair presentation of the information shown have been made in the interim
statements.
Our policy is to consolidate all subsidiaries in which we hold a greater
than 50% voting interest. 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.
We have eliminated all significant intercompany accounts and
transactions.

Note 2. Operating Segments
Our four operating segments, LINER SERVICES, TIME CHARTER CONTRACTS,
CONTRACTS OF AFFREIGHTMENT, and RAIL-FERRY SERVICE, are identified primarily
by the characteristics of the contracts and terms under which our vessels
and barges are operated. We report in the OTHER category results of several
of our subsidiaries that provide ship charter brokerage, agency, and other
specialized services primarily to our operating segments. We manage each
reportable segment separately, as each requires different resources depending
on the nature of the contract or terms under which each vessel within the
segment operates.
We do not allocate administrative and general expenses, investment
income, other income, equity in net income of unconsolidated entities, or
income taxes to our segments. Intersegment revenues are based on market prices
and include revenues earned by subsidiaries that provide specialized services
to the operating segments.

8

The following table presents information about segment profit and loss
for the six months ended June 30, 2003 and 2002:



(All Amounts in Thousands)
Time
Liner Charter Contracts of Rail-Ferry
Services Contracts Affreightment Service Other Elim. Total
- -------------------------------------------------------------------------------

2003
Revenues from external
customers $39,950 $66,614 $8,017 $7,380 $10,350 - $132,311
Intersegment
revenues - - - - 6,883 (6,883) -
Vessel and barge
depreciation 1,642 5,318 1,208 1,458 166 - 9,792
Gross voyage
(loss) profit (545) 19,237 2,481 (1,149) 864 - 20,888
Interest expense 529 3,932 965 1,157 69 - 6,652
Gain on sale of
other assets - - - - 43 - 43
Segment (loss) profit
before administrative
and general expenses,
investment income,
other income, equity
in net income of
unconsolidated entities,
and taxes (1,074) 15,305 1,516 (2,306) 838 - 14,279
- -------------------------------------------------------------------------------
2002
Revenues from external
customers $41,195 $62,682 $7,763 $4,853 $623 - $117,116
Intersegment
revenues - - - - 8,600 (8,600) -
Vessel and barge
depreciation 1,791 4,862 1,208 1,458 340 - 9,659
Impairment loss (97) - - - - - (97)
Gross voyage
(loss) profit (376) 16,469 3,266 (2,066) (2,190) - 15,103
Interest expense 1,032 5,497 1,113 1,398 62 - 9,102
Gain on sale of
other assets - - - - 493 - 493
Segment (loss) profit
before administrative
and general expenses,
investment income,
other income, equity
in net income of
unconsolidated entities,
and taxes (1,408) 10,972 2,153 (3,464) (1,759) - 6,494
- -------------------------------------------------------------------------------



The following table presents information about segment profit and loss
for the three months ended June 30, 2003 and 2002:



(All Amounts in Thousands)
Time
Liner Charter Contracts of Rail-Ferry
Services Contracts Affreightment Service Other Elim. Total
- -------------------------------------------------------------------------------

2003
Revenues from external
customers $19,809 $33,882 $4,013 $4,209 $5,592 - $67,505
Intersegment
revenues - - - - 3,386 (3,386) -
Vessel and barge
depreciation 823 2,887 604 729 95 - 5,138
Gross voyage
(loss) profit (536) 9,520 1,232 (416) 554 - 10,354
Interest expense 245 1,868 468 549 41 - 3,171
Gain on sale of
other assets - - - - 39 - 39
Segment (loss) profit
before administrative
and general expenses,
investment income,
other income, equity
in net income of
unconsolidated entities,
and taxes (781) 7,652 764 (965) 552 - 7,222
- -------------------------------------------------------------------------------
2002
Revenues from external
customers $17,682 $32,348 $4,135 $2,834 ($335) - $56,664
Intersegment
revenues - - - - 3,421 (3,421) -
Vessel and barge
depreciation 896 2,431 604 729 169 - 4,829
Impairment loss (151) - - - - - (151)
Gross voyage
profit (loss) 842 9,351 1,682 (939) (1,708) - 9,228
Interest expense 454 2,776 543 680 29 - 4,482
Gain on sale of
other assets - - - - 513 - 513
Segment profit (loss)
before administrative
and general expenses,
investment income,
other income, equity
in net income of
unconsolidated entities,
and taxes 388 6,575 1,139 (1,619) (1,224) - 5,259
- -------------------------------------------------------------------------------



9
The following is a reconciliation of the totals reported for the
operating segments to the applicable line items in the consolidated financial
statements:




(All Amounts
in Thousands) Three Months Ended June 30, Six Months Ended June 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------

Total profit for
reportable segments $7,222 $5,259 $14,279 $6,494
Unallocated amounts:
Administrative and
general expenses (4,000) (3,799) (8,011) (8,245)
Investment income 302 140 530 452
Other income 81 - 103 1,282
Gain (loss) on early
extinguishment of debt - - 1,260 (48)
---------- ---------- ---------- ----------
Income (loss) before
provision (benefit) for
income taxes and equity
in net income of
unconsolidated entities $3,605 $1,600 $8,161 ($65)
========== ========== ========== ==========



Note 3. 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 were excluded from the
computation of diluted earnings per share in the three and six months ended
June 30, 2003 and 2002, as the effect would have been antidilutive.

Note 4. Coal Carrier Contract
As previously reported, our wholly owned subsidiary, Enterprise Ship
Company, Inc. ("Enterprise"), time charters the U.S. Flag coal carrier,
ENERGY ENTERPRISE, to US Generating New England, Inc. ("USGenNE"), an indirect
subsidiary of PG&E Corporation. On July 8, 2003, USGenNE filed a petition for
bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.
At that time, USGenNE was current in all its obligations to Enterprise under
the time charter, although several invoices for both pre- and post-petition
obligations for charter hire and related expenses recently had been, or
shortly after the bankruptcy filing were, submitted to USGenNE. Subsequent
to the Chapter 11 filing, USGenNE informed us that it would pay in due course
all obligations incurred post-petition under the time charter, including the
post-petition periods covered by the recently submitted invoices, but would
not, at least initially, pay the aforementioned unpaid invoices that were
incurred pre-petition, including the pre-petition periods covered by those
invoices. To date, USGenNE has paid in full $2.873 Million of post-petition
charter hire which covers a period that is approximately 4.25 days beyond the
contractually required 240 days of use in charter year number 8. Further,
even though USGenNE is not obligated to use the vessel for the balance of
charter year number 8, it has discussed with the Company's management the
possible use of the vessel beyond the contractually required 240 days in
charter year number 8. The aggregate pre-petition amount owed to us by
USGenNE, which may become an unsecured claim in the bankruptcy proceeding,
is approximately $850,000. At this time we can give no assurance whether or
when that amount will be paid, or whether USGenNE will use the vessel beyond
August 31, 2003. In the event the charter is ultimately rejected,
management believes the vessel can be utilized in alternative employment
without incurring a material impairment to the vessel's carrying value,
although we can give no assurance at this time.

10

In connection with the financing of the acquisition of the ENERGY
ENTERPRISE, Enterprise issued $50 Million in notes (the "Enterprise Notes")
which were held by four institutions and had an outstanding principal
balance of approximately $17 Million at the time of USGenNE's bankruptcy
filing. Although the Enterprise Notes were non-recourse to the Company and
its other affiliates, the indenture under which the Enterprise Notes were
issued provided that USGenNE's bankruptcy filing was an event of default,
which automatically accelerated the maturity of principal and interest on
the Enterprise Notes as well as requiring a "make-whole" prepayment penalty
and a write-off of deferred charges totaling approximately $2.6 Million.
Management notified the indenture trustee of the event of default on July 15,
2003. Management successfully secured financing from certain of its lenders
which, together with other funds available to the Company, were used to pay
in full the Enterprise Notes, including the required "make-whole" prepayment
penalty, and all amounts due to the trustee under the related indenture.
The indenture and related documents have therefore been terminated, satisfied
and discharged in full, and the Enterprise Notes have been paid in full and
cancelled, all as of August 14, 2003.
Notwithstanding the non-recourse nature of the Enterprise Notes, the
automatic acceleration of the Enterprise Notes triggered cross-default
provisions in certain of the Company's other credit and sale/leaseback
facilities. On July 25, 2003, the Company sent notices to each of the
required parties under those facilities advising them of the event of default
under the Enterprise indenture and advising them of the resulting
cross-default under each of their respective facilities. However, no action
was taken by any trustee, debt holder, owner or owner/trustee under any of
the affected facilities. Further, the termination, satisfaction and
discharge of the indenture under which the Enterprise Notes were issued, and
the payment in full of the Enterprise Notes and their cancellation, has cured
the cross-default under those facilities. Therefore, the Company is no longer
in default under any of its credit or sale/leaseback facilities. The Company
has notified all parties under the affected credit and sale/leaseback
facilities that the cross defaults no longer exist.

Note 5. New Accounting Pronouncements
In April of 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections" which is effective for fiscal years
beginning after May 15, 2002. This statement, among other matters, revises
current guidance with respect to gains and losses on early extinguishment of
debt. Under SFAS No. 145, gains and losses on early extinguishment of debt
are no longer treated as extraordinary items unless they meet the criteria for
extraordinary treatment in Accounting Principles Board ("APB") Opinion No. 30.
We adopted SFAS No. 145 effective January 1, 2003, and reclassified gains and
losses on early extinguishment of debt reported in prior period income
statements, as those amounts no longer qualify for extraordinary treatment
under SFAS No. 145. We reported gains (losses) related to the early
extinguishment of debt of $1,260,000 and ($48,000) for the six months ended
June 30, 2003, and 2002, respectively.
In July of 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which supersedes Emerging Issues
Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a

11

Restructuring)." SFAS No. 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is
incurred. Under EITF Issue No. 94-3, a liability for an exit cost was
recognized at the date of an entity's commitment to an exit or disposal plan.
The provisions of SFAS No. 146 are effective for exit and disposal activities
that are initiated after December 31, 2002. We adopted SFAS No. 146
effective January 1, 2003, which had no material effect on our financial
position.
In December of 2002, the FASB issued SFAS No. 148, "Accounting for Stock-
Based Compensation-Transition and Disclosure," which amends SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. Additionally, SFAS
No. 148 amends the disclosure requirements of SFAS No. 123 to require more
prominent and more frequent disclosures in financial statements of the
effects of stock-based compensation. The transition guidance and annual
disclosure provisions of SFAS No. 148 are effective for fiscal years
ending after December 15, 2002. The interim disclosure provisions are
effective for financial reports containing financial statements for interim
periods beginning after December 15, 2002. We continue to apply APB No. 25,
"Accounting for Stock Issued to Employees," in accounting for our stock-based
compensation. Therefore, the alternative methods of transition referred to
above do not apply. We have adopted the disclosure requirements of SFAS
No. 148. If compensation expense had been determined using the fair value
method in SFAS No. 123, our net income (loss) and earnings (loss) per share
for the three months and six months ended June 30, 2003 and 2002 would have
agreed to the actual amounts reported due to all outstanding stock options
being fully vested and no options being granted during these periods.
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 a
company if that 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. The provisions of FIN 46 are
effective immediately for those variable interest entities created after
January 31, 2003 and existing variable interest entities in the first fiscal
year or interim period beginning after June 15, 2003. We are still evaluating
the effect of adoption of this Interpretation.
In April of 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS No. 149 is
intended to result in more consistent reporting of contracts as either
freestanding derivative instruments subject to SFAS No. 133 in its entirety,
or as hybrid instruments with debt host contracts and embedded derivative
features. The Statement is effective for contracts entered into or modified
after June 30, 2003, and hedging relationships designated after June 30, 2003.
We do not believe that the adoption of SFAS No. 149 will have a material impact
on our financial position or results of operations.

12

In May of 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
SFAS No. 150 requires an issuer to classify the following instruments as
liabilities: (a) a financial instrument issued in the form of shares that is
mandatorily redeemable that embodies an unconditional obligation requiring the
issuer to redeem it by transferring its assets at a specified date or upon an
event that is certain to occur, (b) a financial instrument other than an
outstanding share that embodies an obligation to repurchase the issuer's equity
shares, or is indexed to such an obligation, and that requires the issuer to
settle the obligation by transferring assets, and (c) a financial instrument
that embodies an unconditional obligation that the issuer must or may settle by
issuing a variable number of its equity shares. SFAS No. 150 does not apply to
features embedded in a financial instrument that is not a derivative in its
entirety. This Statement is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003, except for mandatorily
redeemable financial instruments of nonpublic entities. Because we do not have
any such instruments outstanding, the adoption of SFAS No. 150 is not expected
to materially impact our financial position or results of operations.



ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Forward-Looking Statements
- ---------------------------
Certain statements made by us or on our behalf in this report 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. Forward-looking statements
are based on beliefs and assumptions about future events that are inherently
unpredictable and are therefore subject to significant risks and uncertainties.
In this report, the terms "we," "us," "our," and "the Company" refer to
International Shipholding Corporation and its subsidiaries.
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 and
asset dispositions; (5) estimated obligations, and the timing thereof, to U.S.
Customs relating to foreign repair work; (6) the adequacy and availability of
capital resources on commercially acceptable terms; (7) our ability to remain
in compliance with our debt covenants; (8) anticipated trends in government
sponsored cargoes; (9) our ability to maintain our government subsidies; and
(10) the anticipated improvement in the results of our Mexican service.
We caution readers that certain important factors have affected, and are
likely in the future to affect, our ability to achieve our expectations in
those areas and in others, including our actual consolidated results of

13

operations. Such factors may, and in some cases are likely to, cause future
results to differ materially from those expressed in or implied by any forward-
looking statements made in this report or elsewhere by us or on our behalf.
Such factors include, without limitation, (1) political events in the United
States and abroad, including terrorism, and the U.S. military's response to
those events; (2) election results, regulatory activities and the appropriation
of funds by the U.S. Congress; (3) charter hire rates and vessel utilization
rates; (4) unanticipated trends in operating expenses such as fuel and labor
costs; (5) trends in interest rates, and the availability and cost of capital
to us; (6) the frequency and severity of claims against us, and unanticipated
court results and changes in laws and regulations; (7) our success in renewing
existing contracts and securing new ones, in each case on favorable economic
terms; (8) unplanned maintenance and out-of-service days; (9) the ability of
customers to fulfill obligations with us; (10) the uncertain future of our
Coal Carrier contract; (11) the performance of our unconsolidated
subsidiaries; and (12) 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.
A more complete description of certain of these important factors is
contained in our Form 10-K filed with the Securities and Exchange Commission
for the year ended December 31, 2002.


General
- --------
Our vessels are operated under a variety of charters, liner services, 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 performance
than revenues. Accordingly, the discussion below addresses variations in gross
voyage profits rather than variations in revenues.


RESULTS OF OPERATIONS
-----------------------
SIX MONTHS ENDED JUNE 30, 2003
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2002

Gross Voyage Profit
- --------------------
Gross voyage profit increased 38.3% from $15.1 Million in the first six
months of 2002 to $20.9 Million in the first six months of 2003. The changes
associated with each of our segments are discussed below.

14

LINER SERVICES: Gross voyage loss for this segment increased from a
loss of $376,000 in the first six months of 2002 to a loss of $545,000 in the
first six months of 2003. During the first six months of 2003, our Foreign
Flag LASH Liner Service experienced lower volume of cargoes. This decrease was
partially offset by the results of our new U.S. Flag LASH Liner service, which
commenced operations in November of 2002 and a reduction in vessel and barge
depreciation, from $1.8 Million in the first six months of 2002 to $1.6 Million
in the first six months of 2003. The first six months of 2002 included
depreciation on our Foreign Flag LASH vessel, which was sold and leased back in
the fourth quarter of 2002. The lease qualified for treatment as an operating
lease and the lease payments are included in voyage expenses in 2003.
Offsetting this decrease in the first six months of 2003 is depreciation on
capitalized costs associated with upgrade work performed on one of our Foreign
Flag LASH vessels in the fourth quarter of 2002.
TIME CHARTER CONTRACTS: The increase in this segment's gross voyage
profit from $16.5 Million in the first six months of 2002 to $19.2 Million in
the first six months of 2003 was attributable primarily to the fact that our
Coal Carrier operating in the coast-wise trade was utilized for all but two
days under its time charter contract as compared to the same period of
the previous year when it was out of service fourteen days for repairs and
during which it operated sixty days in the spot market at lower rates as
compared to its primary charterhire. The vessel's primary charterhire covers
about 67% of its operating days during the contract year number 8 with the
balance of its time spent in the spot commercial market unless the charterer
exercises its option to utilize the vessel beyond the primary charterhire
period at reduced rates (see Part II, Item 3 for further discussion on the
Coal Carrier Contract). Offsetting this increase in gross voyage profit
was an increase in vessel and barge depreciation resulting from a change
in the estimated useful life of one of our Ice Strengthened Multi-Purpose
vessels, which was shortened due to its uncertain future deployment.
CONTRACTS OF AFFREIGHTMENT: The decrease in this segment's gross voyage
profit from $3.3 Million in the first six months of 2002 to $2.5 Million in the
first six months of 2003 resulted from 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 $2.1 Million in the first six months of 2002 to a loss of $1.1 Million
in the first six months of 2003. The improvement was a result of higher cargo
volume during 2003.
OTHER: Gross voyage profit for this segment improved from a loss of
$2.2 Million in the first six months of 2002 to a profit of $864,000 in the
first six months of 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. Additionally, included in the first six months of
2003 are the results of two vessels operating under Maritime Security Program
contracts, which are assigned to two container vessels under a bareboat-in,
time charter-out arrangement.

15

Other Income and Expense
- -------------------------
Administrative and general expenses decreased 2.8% from $8.2 Million in
the first six months of 2002 to $8 Million in the first six months of 2003.
The decrease in the current period is primarily a result of severance payments
related to non-recurring staff reductions, which were recognized in the first
quarter of 2002.
Interest expense decreased 26.9% from $9.1 Million in the first six
months of 2002 to $6.7 Million in the first six months of 2003. Decreases due
to regularly scheduled payments on outstanding debt and lower interest rates
accounted for $1.1 Million of the total difference. Approximately $1.3 Million
of the decrease resulted from the early repayment of our 9% Senior Notes and
repurchases of our 7.75% Senior Notes, which was partially offset by the cost
of new financings used to repurchase the Notes.
Investment income of $530,000 earned during the first six months of 2003
was slightly higher than the $452,000 in the first six months of 2002 primarily
as a result of interest earned on a receivable which resulted from the fourth
quarter of 2002 sale and leaseback of one of our Foreign Flag LASH vessels, and
higher dividend income received in 2003 from our investment in certain bulk
carrier companies accounted for under the cost method. This was offset by
lower invested balances and lower interest rates earned on invested funds in
the current period.
Other income decreased from $1.3 Million in the first six months of 2002
to $103,000 in the first six months of 2003 primarily as a result of interest
collected in 2002 on foreign tax refunds.
Gain on early extinguishment of debt of $1,260,000 in the first six
months of 2003 resulted from the retirement at a discount of approximately $7.9
Million of our 7.75% Senior Notes due in 2007. The loss of $48,000 reported
in the first six months of 2002 resulted primarily from the retirement at a
slight premium of approximately $11.4 Million of our 9% Senior Notes due in
2003. The 9% Senior Notes were fully retired by the end of 2002.

Income Taxes
- -------------
We had a tax provision of $2.9 Million for the first six months of 2003
and $20,000 for the first six months of 2002 at the statutory rate of 35% for
both periods.

Equity in Net Income of Unconsolidated Entities
- ------------------------------------------------
Equity in net income of unconsolidated entities, net of taxes, of
$227,000 and $281,000 for the first six months of 2003 and 2002, respectively,
was primarily related to our minority interest in companies owning and
operating cement carrying vessels.


THREE MONTHS ENDED JUNE 30, 2003
COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2002

Gross Voyage Profit
- --------------------
Gross voyage profit increased 12.2% from $9.2 Million in the second
quarter of 2002 to $10.4 Million in the second quarter of 2003. The changes
associated with each of our segments are discussed below.

16

LINER SERVICES: This segment's gross voyage profit decreased from a
profit of $842,000 in the second quarter of 2002 to a loss of $536,000 in the
second quarter of 2003. During the second quarter of 2003, our Foreign Flag
LASH Liner Service experienced lower volume of cargoes.
TIME CHARTER CONTRACTS: The increase in this segment's gross voyage
profit from $9.4 Million in the second quarter of 2002 to $9.5 Million in the
second quarter of 2003 was attributable primarily to an increase in military
cargo volume in the second quarter of 2003 compared to the same period in 2002
and costs recorded in the second quarter of 2002 relating to our Cape-Size Bulk
Carrier, which we no longer own or operate. These were partially offset by an
increase in vessel and barge depreciation resulting from a change in the
estimated useful life of one of our Ice Strengthened Multi-Purpose vessels,
which was shortened due to its uncertain future deployment.
CONTRACTS OF AFFREIGHTMENT: The decrease in this segment's gross voyage
profit from $1.7 Million in the second quarter of 2002 to $1.2 Million in the
second quarter of 2003 resulted from higher operating costs in 2003.
RAIL-FERRY SERVICE: Gross voyage loss for this segment improved from a
loss of $939,000 in the second quarter of 2002 to a loss of $416,000 in the
second quarter of 2003. The improvement was a result of higher cargo volume.
OTHER: Gross voyage profit for this segment improved from a loss of
$1.7 Million in the second quarter of 2002 to a profit of $554,000 in the
second quarter of 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. Additionally, included in the second quarter of 2003
are the results of two vessels operating under Maritime Security Program
contracts, which are assigned to two container vessels under a bareboat-in,
time charter-out arrangement.

Other Income and Expense
- -------------------------
Administrative and general expenses increased 5.3% from $3.8 Million in
the second quarter of 2002 to $4 Million in the second quarter of 2003. The
increase in the current period is primarily a result of staff bonuses earned in
the second quarter of 2003.
Interest expense decreased 29.3% from $4.5 Million in the second quarter
of 2002 to $3.2 Million in the second quarter of 2003. Decreases due to
regularly scheduled payments on outstanding debt and lower interest rates
accounted for approximately $700,000 of the total difference. Approximately
$600,000 of the decrease resulted from the early repayment of our 9% Senior
Notes and repurchases of our 7.75% Senior Notes, which was partially offset by
the cost of new financings used to repurchase the Notes.
Investment income of $302,000 earned during the second quarter of 2003
was higher than the $140,000 in the second quarter of 2002 primarily as a
result of interest earned on a receivable which resulted from the fourth
quarter of 2002 sale and leaseback of one of our Foreign Flag LASH vessels,
and higher dividend income received in 2003 from our investment in certain bulk
carrier companies accounted for under the cost method. These were partially
offset by lower invested balances and lower interest rates earned on invested
funds in the current period.

17

Income Taxes
- -------------
We had a tax provision of $1.3 Million for the second quarter of 2003 and
$596,000 for the second quarter of 2002 at the statutory rate of 35% for both
periods.

Equity in Net Income of Unconsolidated Entities
- ------------------------------------------------
Equity in net income of unconsolidated entities, net of taxes, of
$160,000 and $112,000 for the second quarter of 2003 and 2002, respectively,
was primarily related to our minority interest in companies owning and
operating cement carrying vessels.


LIQUIDITY AND CAPITAL RESOURCES
---------------------------------

The following discussion should be read with the more detailed
Consolidated Condensed Balance Sheets and Consolidated Statements of Cash Flows
included elsewhere herein as part of our Consolidated Financial Statements.
Our working capital increased from $9.9 Million at December 31, 2002, to
$15.2 Million at June 30, 2003. Of the $53.8 Million in current liabilities,
$21 Million related to the current maturities of long-term debt at June 30,
2003. Cash and cash equivalents decreased during the first six months of
2003 by $1.4 Million from $4.4 Million at December 31, 2002, to $3 Million at
June 30, 2003. The decrease was due to cash used for investing activities of
$1.5 Million and financing activities of $15.4 Million, partially offset by
cash provided by operating activities of $15.4 Million.
Operating activities generated a positive cash flow after adjusting the
net income of $5.5 Million for non-cash provisions such as depreciation and
amortization. Cash used for investing activities of $1.5 Million was primarily
to cover payments for vessel upgrades.
Cash used for financing activities of $15.4 Million included $6.5 Million
used to repurchase $7.9 Million of our 7.75% Senior Notes at a discount, $9.8
Million used for regularly scheduled payments of debt, and $16 Million used to
repay draws on our line of credit. These uses were partially offset by
proceeds of $17 Million from draws on our line of credit.
As of June 30, 2003, $5.5 Million was available on our $10 Million
revolving credit facility, which expires in April of 2005. During the first
quarter of 2003, we entered into an agreement for a $5 Million overline credit
facility, which expires in December of 2003. This overline credit facility was
fully available as of June 30, 2003.
Debt and Lease Obligations - We have several vessels under operating
leases, including three Pure Car/Truck Carriers, one LASH vessel, one Ice
Strengthened Breakbulk/Multi Purpose vessel, a Container vessel and a Tanker
vessel. Our obligations associated with these leases are disclosed in the
table below.
The following is a summary of our debt and lease obligations as of June
30, 2003:



July 1-
Debt and Lease Dec. 31,
Obligations (000's) 2003 2004 2005 2006 2007 Thereafter
- -------------------------------------------------------------------------------

Long-term debt $ 11,525 $ 19,043 $ 21,809 $ 18,496 $ 87,777 $ 38,500
Operating leases 11,664 23,329 17,941 17,856 17,856 107,495
------------------------------------------------------
Total by period $ 23,189 $ 42,372 $ 39,750 $ 36,352 $105,633 $145,995
======================================================


18

Included in the table above in year 2007 is $2.8 Million of our 7.75%
Senior Notes that we repurchased at a discount in July of 2003.
Debt Covenant Compliance Status - We have met all of the financial
covenants under our various debt agreements, after they were amended for the
full year 2002. We have met, as of June 30, 2003, the more restrictive
financial covenants that became effective in 2003, and believe we will continue
to meet them in 2003, although we cannot give assurances at this time.
If our cash flow and capital resources are not sufficient to fund our
debt service obligations, 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.
Mexican Service Results - We expect the results of the Mexican Service to
continue to improve and to contribute to our cash flows. If outside market
conditions impact those projections, we believe we could find alternative
placement for the two vessels supporting the service.
Dividend Payments - In view of the impairment loss recognized on Assets
Held for Disposal during 2001, and to comply with certain financial covenants
under our debt agreements, the suspension of quarterly dividend payments on our
common shares of stock remains in effect.
Environmental Issues - We have not been notified that we are a
potentially responsible party in connection with any environmental matters.


NEW ACCOUNTING PRONOUNCEMENTS
-------------------------------

In April of 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" which is effective for fiscal years beginning after May 15, 2002.
This statement, among other matters, revises current guidance with respect to
gains and losses on early extinguishment of debt. Under SFAS No. 145, gains
and losses on early extinguishment of debt are no longer treated as
extraordinary items unless they meet the criteria for extraordinary treatment
in APB Opinion No. 30. We adopted SFAS No. 145 effective January 1, 2003,
and reclassified gains and losses on early extinguishment of debt reported
in prior period income statements, as those amounts no longer qualify for
extraordinary treatment under SFAS No. 145. We reported gains (losses)
related to the early extinguishment of debt of $1,260,000 and ($48,000) for
the six months ended June 30, 2003, and 2002, respectively.
In July of 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which supersedes EITF Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability
is incurred. Under EITF Issue No. 94-3, a liability for an exit cost was
recognized at the date of an entity's commitment to an exit or disposal
plan. The provisions of SFAS No. 146 are effective for exit and disposal
activities that are initiated after December 31, 2002. We adopted SFAS No. 146
effective January 1, 2003, which had no material effect on our financial
position.

19

In December of 2002, the FASB issued SFAS No. 148, "Accounting for Stock-
Based Compensation-Transition and Disclosure," which amends SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. Additionally, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require more prominent
and more frequent disclosures in financial statements of the effects of stock-
based compensation. The transition guidance and annual disclosure provisions
of SFAS No. 148 are effective for fiscal years ending after December 15, 2002.
The interim disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning after December
15, 2002. We continue to apply APB No. 25, "Accounting for Stock Issued to
Employees," in accounting for our stock-based compensation. Therefore, the
alternative methods of transition referred to above do not apply. We have
adopted the disclosure requirements of SFAS No. 148. If compensation expense
had been determined using the fair value method in SFAS No. 123, our net income
(loss) and earnings (loss) per share for the three months and six months ended
June 30, 2003 and 2002 would have agreed to the actual amounts reported due to
all outstanding stock options being fully vested and no options being granted
during these periods.
In January of 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities." FIN 46 requires a variable interest entity to be
consolidated by a company if that 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. The provisions of FIN 46 are effective immediately for
those variable interest entities created after January 31, 2003 and existing
variable interest entities in the first fiscal year or interim period beginning
after June 15, 2003. We are still evaluating the effect of adoption of this
interpretation.
In April of 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS No. 149 is
intended to result in more consistent reporting of contracts as either
freestanding derivative instruments subject to SFAS No. 133 in its entirety, or
as hybrid instruments with debt host contracts and embedded derivative
features. The Statement is effective for contracts entered into or modified
after June 30, 2003, and hedging relationships designated after June 30, 2003.
We do not believe that the adoption of SFAS No. 149 will have a material impact
on our financial position or results of operations.
In May of 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
SFAS No. 150 requires an issuer to classify the following instruments as
liabilities: (a) a financial instrument issued in the form of shares that is
mandatorily redeemable that embodies an unconditional obligation requiring
the issuer to redeem it by transferring its assets at a specified date or upon
an event that is certain to occur, (b) a financial instrument other than an
outstanding share that embodies an obligation to repurchase the issuer's equity
shares, or is indexed to such an obligation, and that requires the issuer to
settle the obligation by transferring assets, and (c) a financial instrument
that embodies an unconditional obligation

20

that the issuer must or may settle by issuing a variable number of its equity
shares. SFAS No. 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety. This Statement is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities. Because we do not have any such
instruments outstanding, the adoption of SFAS No. 150 is not expected to
materially impact our financial position or results of operations.


ITEM 3.

QUANTITATIVE AND QUALITATIVE INFORMATION 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 forward exchange contracts, interest rate swap
agreements, 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 long-term debt at June 30, 2003,
including current maturities, was estimated to be $200.1 Million compared to
a carrying value of $197 Million. The potential increase in fair value
resulting from a hypothetical 10% decrease in the average interest rates
applicable to our long-term debt at June 30, 2003, would be approximately $2.3
Million or 1.2% of the carrying value.
The fair value of the interest rate swap agreement discussed in our Form
10-K was a liability of $1.6 Million at June 30, 2003, estimated based on the
amount that the banks would receive or pay to terminate the swap agreement at
the reporting date taking into account current market conditions and interest
rates. A hypothetical 10% decrease in interest rates as of June 30, 2003,
would have resulted in a $25,000 increase in the fair value of the liability.
Commodity Price Risk. In addition to the commodity swap agreements
discussed in our Form 10-K, we entered into three additional agreements in 2003
at various contract prices ranging from $124 to $158.75 per metric ton of fuel.
The fair value of the commodity swap agreements was an asset of $1.1 Million at
June 30, 2003, estimated based on the difference between price per ton of fuel
and the contract delivery price per ton of fuel times the quantity applicable
to the agreements. A hypothetical 10% decrease in the fuel price per ton of
fuel as of June 30, 2003, would have resulted in a $600,000 decrease in the
fair value of the asset.
Foreign Exchange Rate Risk. There were no material changes in market
risk exposure for the foreign currency risk described in our Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
2002.

21

ITEM 4.

CONTROLS AND PROCEDURES

(a) 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-14(c) and 15d-14(c) 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, the CEO and CFO have concluded that our
disclosure controls and procedures are effective 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.
(b) Subsequent to the date of the evaluation, there were no significant
changes in our internal controls or in other factors that could significantly
affect the internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.



PART II - OTHER INFORMATION

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

As previously reported, our wholly owned subsidiary, Enterprise Ship
Company, Inc. ("Enterprise"), time charters the U.S. Flag coal carrier,
ENERGY ENTERPRISE, to US Generating New England, Inc. ("USGenNE"), an indirect
subsidiary of PG&E Corporation. On July 8, 2003, USGenNE filed a petition for
bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.
At that time, USGenNE was current in all its obligations to Enterprise under
the time charter, although several invoices for both pre- and post-petition
obligations for charter hire and related expenses recently had been, or
shortly after the bankruptcy filing were, submitted to USGenNE. Subsequent
to the Chapter 11 filing, USGenNE informed us that it would pay in due course
all obligations incurred post-petition under the time charter, including the
post-petition periods covered by the recently submitted invoices, but would
not, at least initially, pay the aforementioned unpaid invoices that were
incurred pre-petition, including the pre-petition periods covered by those
invoices. To date, USGenNE has paid in full $2.873 Million of post-petition
charter hire which covers a period that is approximately 4.25 days beyond the
contractually required 240 days of use in charter year number 8. Further,
even though USGenNE is not obligated to use the vessel for the balance of
charter year number 8, it has discussed with the Company's management the
possible use of the vessel beyond the contractually required 240 days in
charter year number 8. The aggregate pre-petition amount owed to us by
USGenNE, which may become an unsecured claim in the bankruptcy proceeding,
is approximately $850,000. At this time we can give no assurance whether or
when that amount will be paid, or whether USGenNE will use the

22

vessel beyond August 31, 2003. In the event the charter is ultimately
rejected, management believes the vessel can be utilized in alternative
employment without incurring a material impairment to the vessel's carrying
value, although we can give no assurance at this time.
In connection with the financing of the acquisition of the ENERGY
ENTERPRISE, Enterprise issued $50 Million in notes (the "Enterprise Notes")
which were held by four institutions and had an outstanding principal
balance of approximately $17 Million at the time of USGenNE's bankruptcy
filing. Although the Enterprise Notes were non-recourse to the Company and
its other affiliates, the indenture under which the Enterprise Notes were
issued provided that USGenNE's bankruptcy filing was an event of default,
which automatically accelerated the maturity of principal and interest on
the Enterprise Notes as well as requiring a "make-whole" prepayment penalty
and a write-off of deferred charges totaling approximately $2.6 Million.
Management notified the indenture trustee of the event of default on July 15,
2003. Management successfully secured financing from certain of its lenders
which, together with other funds available to the Company, were used to pay
in full the Enterprise Notes, including the required "make-whole" prepayment
penalty, and all amounts due to the trustee under the related indenture.
The indenture and related documents have therefore been terminated, satisfied
and discharged in full, and the Enterprise Notes have been paid in full and
cancelled, all as of August 14, 2003.
Notwithstanding the non-recourse nature of the Enterprise Notes, the
automatic acceleration of the Enterprise Notes triggered cross-default
provisions in certain of the Company's other credit and sale/leaseback
facilities. On July 25, 2003, the Company sent notices to each of the
required parties under those facilities advising them of the event of default
under the Enterprise indenture and advising them of the resulting
cross-default under each of their respective facilities. However, no action
was taken by any trustee, debt holder, owner or owner/trustee under any of
the affected facilities. Further, the termination, satisfaction and
discharge of the indenture under which the Enterprise Notes were issued, and
the payment in full of the Enterprise Notes and their cancellation, has cured
the cross-default under those facilities. Therefore, the Company is no longer
in default under any of its credit or sale/leaseback facilities. The Company
has notified all parties under the affected credit and sale/leaseback
facilities that the cross defaults no longer exist.



ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The matters voted upon and results of the voting at the Company's Annual
Meeting of Shareholders held on April 23, 2003, were reported in response to
Item 4 of the Company's Form 10-Q filed with the Securities and Exchange
Commission for the quarterly period ended March 31, 2003, and are incorporated
herein by reference.

23

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBIT INDEX
Exhibit Number Description
Part II Exhibits: 3 Restated Certificate of
Incorporation, as amended, and
By-Laws of the Registrant
(filed with the Securities and
Exchange Commission as Exhibit
3 to the Registrant's Form
10-Q for the quarterly period
ended June 30, 1996, and
incorporated herein by
reference)

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

(b) On July 10, 2003, we filed a current report on Form 8-K to report that
one of the Company's customers that charters our coal carrier filed for
Chapter 11 bankruptcy court protection.

On July 24, 2003, we filed a current report on Form 8-K to furnish the
public announcement of second quarter 2003 earnings.


24

SIGNATURES
Pursuant to the requirements of the Securities and 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


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


Date August 14, 2003
___________________________