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 known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from the anticipated results expressed or implied by such forward-looking statements. 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; (3) estimated proceeds from sale of assets and the anticipated cost of constructing or purchasing new or existing vessels; (4) estimated fair values of financial instruments, such as interest rate, commodity and currency swap agreements; (5) estimated losses (including independent actuarial estimates) under self-insurance arrangements, as well as estimated gains or losses on certain contracts, trade routes, lines of business or asset dispositions; (6) estimated losses attributable to asbestos claims; (7) estimated obligations, and the timing thereof, to the U.S. Customs Service relating to foreign repair work; (8) the adequacy of our capital resources and the availability of additional capital resources on commercially acceptable terms; (9) our ability to remain in compliance with our debt covenants; (10) anticipated trends in government sponsored cargoes; (11) our ability to effectively service our debt; (12) financing opportunities and sources (including the impact of financings on our financial position, financial performance or credit ratings), (13) anticipated future operating and financial performance, financial position and liquidity, growth opportunities and growth rates, acquisition and divestiture opportunities, business prospects, regulatory and competitive outlook, investment and expenditure plans, investment results, pricing plans, strategic alternatives, business strategies, and other similar statements of expectations or objectives, and (14) 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.

Our forward-looking statements are based upon our judgment and assumptions as of the date such statements are made concerning future developments and events, many of which are outside of our control. These forward looking statements, and the assumptions upon which such statements are based, are inherently speculative and are subject to uncertainties that could cause our actual results to differ materially from such statements. 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 repay existing debt or support operations, including 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 administrative and general expenses and costs associated with operating certain of our vessels; (v) manage our growth in terms of implementing internal controls and information systems and hiring or retaining key personnel, among other things, and (vi) 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.

Other factors include (vii) changes in cargo, charter hire, fuel, and vessel utilization rates; (viii) the rate at which competitors add or scrap vessels in the markets as well as demolition scrap prices and the availability of scrap facilities in the areas in which we operate; (ix) 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;
(x) 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; (xi) changes in accounting policies and practices adopted voluntarily or as required by accounting principles generally accepted in the United States; (xii) changes in laws and regulations such as those related to government assistance programs and tax rates; (xiii) the frequency and severity of claims against us, and unanticipated outcomes of current or possible future legal proceedings; (xiv) unplanned maintenance and out-of-service days on our vessels; (xv) the ability of customers to fulfill obligations with us; (xvi) the performance of unconsolidated subsidiaries;
(xvii); political events in the United States and abroad, including terrorism, and the U.S. military's response to those events; (xviii) election results, regulatory activities and the appropriation of funds by the U.S. Congress; (xix) unanticipated trends in operating expenses such as fuel and labor costs and our ability to recover these fuel costs through fuel surcharges; and (xx) other economic, competitive, governmental, and technological factors which may affect our operations

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. You are further cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this report. We undertake no obligation to update any of our forward-looking statements for any reason.

Overview of First Quarter 2009

Overall Strategy

The company operates 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 contracts. Our business strategy consists of identifying growth opportunities as market needs change, utilizing our extensive experience to meet those needs, and continuing to maintain a diverse portfolio of medium to long-term contracts, as well as protect our long-standing customer base by providing quality transportation services.

Financial Discipline & Strong Balance Sheet

We continue to improve our financial position in the first quarter of 2009.
††† We continue to maintain a working capital ratio greater than 2 to 1.

††† Payment of cash dividends of $0.50 per share during the quarter.

Consolidated Financial Performance - First Quarter 2009 vs. First Quarter 2008

Our overall performance for the first quarter of 2009 improved significantly as compared to the same period in 2008. This was supported by significant improvements in the carriage of supplemental cargoes on our U.S. Flag PCTCs.
††† Revenue growth of $34.4 million

††† Consolidated gross voyage profit grew by $6.5 million

††† Administrative expenses increased by 25% primarily due to continued charges associated with an unaffiliated shipping company's unsolicited conditional offer to purchase the Company's outstanding shares. We expect administrative expenses to begin to normalize starting in the second quarter of 2009.

††† Interest expense decreased by $590,000, reflecting lower principal balances.

††† Consolidated net income increased from $4.8 million to $9.5 million.

Segment Performance - First Quarter 2009 vs. First Quarter 2008

Rail-Ferry
††† Gross profits fell to a loss of $1.4 million primarily due a reduction in volumes and net contributions.

Time Charter Contracts
††† Improvement in gross profit of $10.8 million, despite an increase in the number of scheduled off-hire days.

§ Significant improvements in our supplemental cargo volume. § Fixed time-charter rates which provide consistent operating cash flow.

Contract of Affreightment ("COA")
††† Decrease of $0.4 million in gross profits primarily due to drop in tonnage carried.

††† Guaranteed minimum tonnage for the contract year.

Other
††† Net income from unconsolidated entities decreased $240,000 primarily due to a reduction in the results of our 50% interest in Dry Bulk due to having one less vessel in its fleet and a small foreign exchange loss on the devaluation of the Mexican peso.

                             RESULTS OF OPERATIONS

                       THREE MONTHS ENDED MARCH 31, 2009
               COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2008
                                    Time Charter                     Rail-Ferry
(All Amounts in Thousands)           Contracts           COA          Service          Other         Total
2009
Revenues from External Customers   $       86,403     $   4,075     $      6,384     $   1,216     $  98,078
Voyage Expenses                            66,220         3,636            6,363         1,862        78,081
Vessel and Barge Depreciation               3,706             -            1,461             2         5,169
Gross Voyage Profit (Loss)                 16,477           439           (1,440 )        (648 )      14,828
2008
Revenues from External Customers   $       49,425     $   4,847     $      8,249     $   1,184     $  63,705
Voyage Expenses                            39,988         4,032            7,578           510        52,108
Vessel and Barge Depreciation               3,713             -            1,365             3         5,081
Gross Voyage Profit (Loss)                  5,724           815             (694 )         671         6,516

Gross voyage profit increased from $6.5 million in the first quarter of 2008 to $14.8 million in the first quarter of 2009. Revenues increased from $63.7 million in the first quarter of 2008 to $98.1 million in the first quarter of 2009. Voyage expenses increased from $52.1 million in the first quarter of 2008 to $78.1 million in the first quarter of 2009. The changes of revenue and expenses associated with each of our segments are discussed within the following analysis below.

Time Charter Contracts: The increase in this segment's gross voyage profit from $5.7 million in the first quarter of 2008 to $16.5 million in the first quarter of 2009 was primarily due to an increase in the carriage of supplemental cargoes on our U.S. flag Pure Car Truck Carriers, which caused revenues to increase for this segment from $49.4 million in the first quarter of 2008 to $86.4 million in the first quarter of 2009. This improvement in revenues is the result of the aforementioned increase in supplemental cargoes. As referenced in Note 1, revenues and voyage expenses for 2008 have been reclassified to match the current process we use to book voyage revenue from supplemental cargoes. The reclassification of the first quarter 2008 results was an increase of $7.9 million for both revenues and voyage expenses. Gross profit for the prior period remains unchanged.

Contracts of Affreightment: Gross voyage profit decreased from $815,000 in the first quarter of 2008 to $439,000 in the first quarter of 2009 due to reduced tonnage.

Rail-Ferry Service: Gross voyage loss increased from $694,000 in the first quarter of 2008 to $1.4 million in the first quarter of 2009 due to a decrease in volume and rates. Revenues for this segment decreased from $8.2 million in the first quarter of 2008 to $6.4 million in the first quarter of 2009 also due to a drop in volume and rates due to the current economic conditions.

Other: Gross profit decreased from a $671,000 profit in the first quarter of 2008 to a $648,000 loss in the first quarter of 2009. This decrease was primarily due to upward revisions in estimates related to vacation benefit accruals, foreign currency exchange losses related to our unconsolidated entity in Mexico, and 2007 adjusted earnings for Dry Bulk, which were recorded in 2008.

Other Income and Expense

Administrative and general expenses increased from $5.0 million in the first quarter of 2008 to $6.3 million in the first quarter of 2009 primarily due to the addition of our executive stock compensation program in April 2008, vacation and severance benefits, and fees associated with an unaffiliated shipping company's unsolicited conditional offer to purchase the Company's outstanding shares. The offer was initiated in September 2008 and withdrawn in January 2009.

The following table shows the significant A&G components for the first quarter of 2009 and 2008 respectively:

(Amounts in Thousands)           Three Months Ended March 31,
        A&G Account                2009                2008          Variance

Wages & Benefits               $       2,876       $       2,432     $      444
Executive Stock Compensation             284                   -            284
Professional Services                    482                 380            102
Office Building Expenses                 332                 314             18
Other                                  1,392               1,911           (519 )
Consulting Fees *                        904                   -            904
TOTAL:                         $       6,270       $       5,037     $    1,233

* Fees associated with unaffiliated company's offer to purchase the company.

Interest expense decreased from $2.1 million in the first quarter of 2008 to $1.5 million in the first quarter of 2009 primarily due lower principal balances.

Income Taxes

We recorded a benefit for federal income taxes of $1.7 million on our $6.9 million of income from continuing operations before income from unconsolidated entities in the first three months of 2009, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For the first three months of 2008, our benefit was $1.2 million on our $1.7 million loss from continuing operations before income from unconsolidated entities. For further information on certain tax laws and elections, see our annual report on Form 10-K for the year ended December 31, 2008, 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

Equity in net income of unconsolidated entities, net of taxes, decreased from $1.2 million in the first quarter of 2008 to $961,000 in the first quarter of 2009. The results were driven by our 50% investment in Dry Bulk, a company which owns and operates two Cape-Size Bulk Carriers and one Panamax Bulk Carrier and which has two Handymax Bulk Carrier Newbuildings on order for delivery in 2012. For the first quarters of 2009 and 2008, our portion of the earnings of this investment was $1.0 million and $1.2 million, respectively, due to Dry Bulk having one less vessel in its fleet in 2009 due to the sale of a Panamax Bulk Carrier in June 2008. Equity in net income of unconsolidated entities, net of taxes, for the first quarter of 2009 was further impacted by a foreign currency exchange loss due to the weakening of the Mexican peso for our 49% interest in a company that operates the rail terminal in Coatzacoalcos, Mexico that is used by our Rail-Ferry service.

The following discussion should be read in conjunction with the more detailed Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows included elsewhere herein as part of our Condensed Consolidated Financial Statements.

Our working capital (which we define as the difference between our total current assets and total current liabilities) increased from $50.5 million at December 31, 2008, to $53.1 million at March 31, 2009. This increase was primarily due to an increase in supplemental cargo receivables. Cash and cash equivalents decreased in the first three months of 2009 by $6.9 million to a total of $44.9 million. This decrease was a result of cash used by operating activities of $493,000, cash used by financing activities of $7.0 million, and cash provided by investing activities of $555,000. Total current liabilities of $42.3 million as of March 31, 2009 included current maturities of long-term debt of $13.0 million.

Operating activities generated a negative cash flow of $493,000 after adjusting net income of $9.5 million for the first three months of 2009 for non-cash provisions such as depreciation and amortization, offset by the deduction of the non-cash $961,000 from the equity in net income of these unconsolidated entities and a large increase in accounts receivables in supplemental cargoes. Net cash used by operating activities also included cash dividends of $1.0 million from our investment in unconsolidated entities.

Cash provided by investing activities of $556,000 included principal payments received under Direct Financing Leases of $2.0 million, partially offset by capital improvements of $1.6 million.

Cash used for financing activities of $7.0 million included regularly scheduled debt payments of $3.3 million and cash dividends paid of $3.6 million.

In March of 2008, we signed an agreement with Regions Bank to provide us with an unsecured revolving line of credit for $35 million. This facility replaced the prior secured revolving line of credit for the like amount. As of March 31, 2009, $6.4 million of the $35 million revolving credit facility, which expires in April of 2011, was pledged as collateral for letters of credit, and the remaining $28.6 million was available.

Debt and Lease Obligations - As of March 31, 2009, we held three vessels under operating contracts, six vessels under bareboat charter or lease agreements and four vessels under time charter agreements. The types of vessels held under these agreements include four Pure Car/Truck Carriers, two Breakbulk/Multi Purpose vessels, three Roll-On/Roll-Off vessels, two Container vessels and a Tanker vessel operating in our Time Charter segment, and a Molten Sulphur Carrier operating in our Contracts of Affreightment segment. We also conduct certain of our operations from leased office facilities. Refer to our 2008 form 10-K for a schedule of our contractual obligations.

In the unanticipated event that our cash flow and capital resources are not sufficient to fund our debt service obligations, we could be forced to reduce or delay capital expenditures, sell assets, obtain additional equity capital, borrow money, or restructure our debt. We believe we have sufficient liquidity despite the recent disruption of the capital and credit markets and can continue to fund working capital and capital investment liquidity needs through cash flow from operations. While not significant to date, the disruption in capital and credit markets may result in increased borrowing costs associated with short-term and long-term debt. We have $9.8 million of debt maturities due remaining in 2009, $54.6 million due in 2010, $10.6 million due in 2011, $23.0 million due in 2012 and $24.6 million due in 2013. The 2010 amount includes a balloon payment of approximately $40 million on a PCTC, including an agreement granting the Charterer a vessel purchase option for the like amount.

Bulk Carriers - We have a 50% interest in Dry Bulk, which owns 100% of subsidiary companies which own two Cape-Size Bulk Carriers and one Panamax-Size Bulk Carrier. This investment is accounted for under the equity method and our share of earnings or losses are reported in our consolidated statements of income net of taxes. Dry Bulk's subsidiary companies have entered into a ship purchase agreement with a Japanese company for newbuldings of two Handymax Bulk Carriers, scheduled to be delivered in 2012. Total investment in the newbuildings is anticipated to be approximately $74.0 million, of which our share would be 50% or approximately $37.0 million. During the period of construction up to delivery, where 50% of the projected overall costs will be expended, Dry Bulk plans to finance the interim construction costs with equity contributions of up to 15% with the 85% balance of the cost being financed with a bank financed bridge loan. While it is anticipated that the required equity contributions will be covered by Dry Bulk's subsidiary companies' earnings, if they are not, our anticipated share of these interim equity contributions could be approximately $2.7 million, of which we have already funded $354,000. Upon completion and delivery, Dry Bulk plans to establish permanent long-term financing.

Dividend Payments - On January 29, 2009 our Board approved a 2009 first quarter payment of a $.50 cash dividend for each share of common stock held on the record date of February 15, 2009, which was paid on March 2, 2009. During its April 29, 2009 Meeting, the Board approved and declared a second quarter cash dividend of $.50 per share, payable on June 1, 2009 to shareholders of record as of May 14, 2009.

Environmental Issues - 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, third party indemnification or our self-retention insurance reserves. 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 occurrence, with deductible amounts not exceeding $500,000 for each incident.

In January 2008 we were notified that the United States Coast Guard was conducting an investigation on the SS MAJOR STEPHEN W. PLESS regarding an alleged discharge of untreated bilge water by one or more members of the crew. The USCG has inspected the ship and interviewed various crew members. The United State Attorney's Office is completing its discovery process. We believe at this time that we are not a target of this investigation.

New Accounting Pronouncements - In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging activities" - an amendment of FASB Statement No. 133. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008. We adopted SFAS No. 161 on January 1, 2009 and the adoption had no effect on our consolidated financial position and results of operation.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No. 162 identifies the sources of accounting principles and provides entities with an updated framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. SFAS No. 162 is effective for fiscal years beginning after November 15, 2008. We adopted SFAS No. 162 on January 1, 2009 and the adoption had no effect on our consolidated financial position and results of operation.

In December 2007, the FASB issued SFAS No. 141 (Revised), "Business Combinations" (SFAS No. 141 (R)). SFAS No. 141 (R) is a revision of SFAS No. 141, but retains the fundamental requirements that the acquisition method of accounting (purchase method) be used for all business combinations. SFAS No. 141 (R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS No. 141 (R) requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired to be measured at fair value at the acquisition date. In addition, acquisition related costs must be expensed in the periods in which the costs are incurred and the services received. SFAS No. 141 (R) is effective for fiscal years beginning on or after December 15, 2008. We adopted SFAS No. 141(R) on January 1, 2009 and the adoption had no effect on our consolidated financial position and results of operation.