Such statements include, without limitation, statements regarding (i) 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; (ii) estimated scrap values of assets; (iii) estimated proceeds from sales of assets and the anticipated cost of constructing or purchasing new or existing vessels ; (iv) estimated fair values of financial instruments, such as interest rate, commodity and currency swap agreements; (v) 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; (vi) estimated losses attributable to asbestos claims; (vii) estimated obligations, and the timing thereof, to the U.S. Customs Service relating to foreign repair work;
(viii) the adequacy of our capital resources and the availability of additional capital resources on commercially acceptable terms; (ix) our ability to remain in compliance with our debt covenants; (x) anticipated trends in government sponsored cargoes; (xi) our ability to effectively service our debt; (xii) financing opportunities and sources (including the impact of financings on our financial position, financial performance or credit ratings); (xiii) 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 (xiv) 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 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 general and administrative expenses and costs associated with operating certain of our vessels; (v) and 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 (i) changes in cargo, charterhire, fuel, and vessel utilization rates; (ii) 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 which we operate; (iii) 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; (iv) 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; (v) changes in accounting policies and practices adopted voluntarily or as required by accounting principles generally accepted in the United States; (vi) changes in laws and regulations such as those related to government assistance programs and tax rates; (vii) the frequency and severity of claims against us, and unanticipated outcomes of current or possible future legal proceedings; (viii) unplanned maintenance and out-of-service days on our vessels; (ix) the ability of customers to fulfill obligations with us;
(x) the performance of unconsolidated subsidiaries; and (xi) other economic, competitive, governmental, and technological factors which may affect our operations. For additional information, see the description of our business included above, as well as Item 7 of this report. Due to these uncertainties, there can be no assurance that our anticipated results will occur, that our judgments or assumptions will prove correct, or that unforeseen developments will not occur. Accordingly, you are cautioned not to place undue reliance upon any of our forward-looking statements, which speak only as of the date made. Additional risks that we currently deem immaterial or that are not presently known to us could also cause our actual results to differ materially from those expected in our forward-looking statements. 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.

Voyage Revenue and Expense Recognition
Revenues and expenses relating to our Rail-Ferry Service segment voyages are recorded over the duration of the voyage. Our voyage expenses are estimated at the beginning of the voyages based on historical actual costs or from industry sources familiar with those types of charges. As the voyage progresses, these estimated costs are revised with actual charges and timely adjustments are made. The expenses are ratably expensed over the voyage based on the number of days in progress at the end of the period. We believe there is no material difference between recording estimated expenses ratably over the voyage versus recording expenses as incurred. Revenues and expenses relating to our other segments' voyages, which require no estimates or assumptions, are recorded when earned or incurred during the reporting period.

Depreciation
Provisions for depreciation are computed on the straight-line method based on estimated useful lives of our depreciable assets. Various methods are used to estimate the useful lives and salvage values of our depreciable assets and due to the capital intensive nature of our business and our large base of depreciable assets, changes in such estimates could have a material effect on our results of operations.

Drydocking Costs
We defer certain costs related to the drydocking of our vessels. Deferred drydocking costs are capitalized as incurred and amortized on a straight-line basis over the period between drydockings (generally two to five years). Because drydocking charges can be material in any one period, we believe that the acceptable deferred method provides a better matching for the amortization of those costs over future revenue periods benefiting from the drydocking of our vessel. We capitalize only those costs that are incurred to meet regulatory requirements or upgrades, or that add economic life to the vessel. Normal repairs, whether incurred as part of the drydocking or not, are expensed as incurred.

Income Taxes
Income taxes are accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Provisions for income taxes include deferred income taxes that are provided on items of income and expense, which affect taxable income in one period and financial income in another. Certain foreign operations are not subject to income taxation under pertinent provisions of the laws of the country of incorporation or operation. However, pursuant to existing U.S. Tax Laws, earnings from certain of our foreign operations are subject to U.S. income taxes when those earnings are repatriated to the U.S. We have indefinitely re-invested earnings of $24,135,275 and $7,130,000 of 2008 and 2007 foreign earnings, respectively, and accordingly, have not provided deferred taxes in the amount of $8,447,346 and $2,495,000 against those earnings. The Jobs Creation Act, which first applied to us on January 1, 2005, changed the United States tax treatment of the foreign operations of our U.S. flag vessels and our international flag shipping operations. We made an election under the Jobs Creation Act to have our qualifying U.S. flag operations taxed under a "tonnage tax" rather than under the usual U.S. corporate income tax regime.
On July 13, 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, Accounting for Income Taxes ("FIN 48")", to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted FIN 48 on January 1, 2007.

Self-Retention Insurance
As explained further in Note E to the Notes to our Consolidated Financial Statements contained elsewhere in this report, we maintain provisions for estimated losses under our self-retention insurance based on estimates of the eventual claims settlement costs. Our policy is to establish self-insurance provisions for Hull and Machinery and Loss of Hire for each policy year based on our estimates of eventual claims' settlement cost. Our estimates are determined based on various factors, such as (1) severity of the injury (for personal injuries) and estimated potential liability based on past judgments and settlements, (2) advice from legal counsel based on its assessment of the facts of the case and its experience in other cases, (3) probability of pre-trial settlement which would mitigate legal costs, (4) historical experience on claims for each specific type of cargo (for cargo damage claims), and (5) whether our seamen are employed in permanent positions or temporary revolving positions. It is reasonably possible that changes in our estimated exposure may occur from time to time. The measurement of our exposure for self-insurance liability requires management to make estimates and assumptions that affect the amount of loss provisions recorded during the reporting period. Actual results could differ materially from those estimates.

Asbestos Claims
We maintain provisions for estimated losses for asbestos claims based on estimates of eventual claims settlement costs. Our policy is to establish provisions based on a range of estimated exposure. We estimate this potential range of exposure using input from legal counsel and internal estimates based on the individual deductible levels for each policy year. We believe that insurance and the indemnification of a previous owner of one of our wholly-owned subsidiaries may mitigate our exposure. The measurement of our exposure for asbestos liability requires management to make estimates and assumptions that affect the amount of the loss provisions recorded during the period. Our estimates and assumptions are formed from variables such as the maximum deductible levels in a claim year, the amount of the indemnification recovery and the claimant's employment history with the company. Actual results could differ materially from those estimates.

Pension and Postretirement Benefits
Our pension and postretirement benefit costs are calculated using various actuarial assumptions and methodologies as prescribed by SFAS No. 87, "Employers' Accounting for Pensions" and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." These assumptions include discount rates, health care cost trend rates, inflation, rate of compensation increases, expected return on plan assets, mortality rates, and other factors. We believe that the assumptions utilized in recording the obligations under our plans are reasonable based on input from our outside actuary and information as to historical experience and performance. Differences in actual experience or changes in assumptions may affect our pension and postretirement obligations and future expense.
In September of 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106 and
132(R)." This statement requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under SFAS No. 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized in Other Comprehensive Income, net of tax effects, until they are amortized as a component of net periodic benefit cost. In addition, the measurement date, the date at which plan assets and the benefit obligation are measured, is required to be the company's fiscal year end.

2008 Consolidated Financial Performance
Overall results in 2008 improved significantly compared to 2007. This was supported by improvements in our Rail-Ferry and Time Charter segments. The increased carriage of supplemental cargoes on our U.S. flag PCTC's was the primary factor strengthening the results of our Time Charter segment.
††† Consolidated gross voyage profit grew from $28.8 million for the full year 2007 to $41.7 million for the full year 2008.

††† Income from unconsolidated entities includes a after-tax gain of $15.9 million on the sale of a Panamax Bulk Carrier in 2008

††† Consolidated net income increased to $39.1 million compared with $17.4 million for 2007.

††† Administrative expenses increased by 18% from 2007 to 2008, over half of which was due to non-ordinary charges, primarily associated with an unaffiliated shipping company's unsolicited conditional offer to purchase the Company's outstanding shares.

Financial Discipline & Strong Balance Sheet We continued to improve our financial position in 2008.
††† Improved operating cash flow from $20.2 million in 2007 to $42.2 million in 2008.

††† Consolidated cash and cash equivalents increased to $51.8 million at December 31, 2008 from $14.1 million at December 31, 2007, largely as a result of the vessel sale noted above and increased gross voyage revenues.

††† Working capital ratios increased from 2007 to 2008.

††† Repurchased 471,572 shares of common stock.

††† Redemption of $17.3 million of preferred stock.

Segment Performance

Rail-Ferry

§ Improvement in gross profits from a loss of $1.6 million for 2007 to $1.9 million profit in 2008
§ Carriage of 16,300 Rail Cars in 2008, up from 9,600 Rail Cars carried in 2007.
† Average capacity utilization of 75% in 2008.

Time Charter Contracts
§ Improvement in gross profit from $25.2 million in 2007 to $35.7 million in 2008.
††† Significant increases in our supplemental cargo volume.

†††† † Fixed time-charter rate which provides consistent operating cash flow.

Contract of Affreightment ("COA")
††† Partly as a result of our 2007 sale transaction of our molten sulphur vessel described further herein, the segment experienced a decrease of $2.5 million in gross profits, partially offset by lower taxes.

††† Higher fuel cost in 2008 versus 2007.

Other
††† Net income from unconsolidated entities increased to $20.9 million in 2008 from $6.6 million for the 2007 full year, driven principally by the after-tax gain on the sale of a Panamax Bulk Carrier of $15.9 million in 2008.

††† Foreign exchange loss in 2008 on the devaluation of the Mexican peso of approximately $400,000.

                          YEAR ENDED DECEMBER 31, 2008
                    COMPARED TO YEAR ENDED DECEMBER 31, 2007

                                    Time Charter                     Rail-Ferry
(All Amounts in Thousands)           Contracts           COA          Service          Other         Total
2008
Revenues from External Customers   $      218,805     $  19,195     $     39,410     $   4,491     $ 281,901
Voyage Expenses                           168,479        17,553           32,136         2,072       220,240
Gross Voyage Profit                        35,735         1,642            1,909         2,407        41,693
2007
Revenues from External Customers   $      178,336     $  16,652     $     21,235     $   1,890     $ 218,113
Voyage Expenses                           137,828        10,940           18,406           841       168,015
Gross Voyage Profit (Loss)                 25,198         4,100           (1,566 )       1,044        28,776

The changes of revenue and expenses associated with each of our segments are discussed within the gross voyage analysis below.

Time Charter Contracts: The increase in this segment's gross voyage profit from $25.2 million in 2007 to $35.7 million in 2008 was due to an increase in the carriage of supplemental cargoes on our U.S. flag Pure Car Truck Carriers. Revenues for the segment increased from $178.3 million in 2007 to $218.8 million in 2008. This improvement in revenues is the result of the aforementioned increase in supplemental cargoes and operating one additional International flag Pure Car Truck Carrier for the full year 2008 as compared to approximately half of 2007.
Contract of Affreightment: The decrease in this segment's gross voyage profit from $4.1 million in 2007 to $1.6 million in 2008 was primarily due to an increase in costs associated with operating the segment's vessel under an operating lease in 2008. The vessel, which was fully depreciated for tax purposes, was sold in 2007. The benefits derived under an operating lease are reflected in a lower net effective tax rate. The increase in revenue from $16.7 million in 2007 to $19.2 million in 2008 was due to increased voyages and freight rate escalation for increasing fuel costs in 2008.
Rail-Ferry Service: Gross voyage results for this segment improved from a loss of $1.6 million in 2007 to a profit of $1.9 million in 2008. This increase was due to additional sailings in 2008 as well as increased cargo volumes which were carried as a result of the addition of second decks on each rail-ferry vessel. Operation of the vessels with the second decks began in the third quarter of 2007. Revenues for this segment increased from $21.2 million in 2007 to $39.4 million in 2008 due to the additional sailings and increased cargo volumes utilizing second deck capacity.
Other: Gross voyage profit for this segment increased from $1.0 million in 2007 to $2.4 million in 2008. This increase was primarily due to 2007 adjusted earnings recorded in 2008 for Dry Bulk's subsidiary companies (which is discussed further below).

Other Income and Expenses
Administrative and general expenses (A&G) increased 18% from $18.2 million in 2007 to $21.4 million in 2008. A substantial portion of this increase was due to fees related to non-ordinary charges associated with advisory and legal costs resulting from an unaffiliated shipping company's unsolicited conditional offer to purchase the Company's outstanding shares, employee relocation expenses associated with the move of the Company's headquarters to Mobile, Alabama, and amortization of stock grants awarded to Executive Officers. Excluding these expenses A&G increased 7.6%.

The following table shows the significant A&G components for the twelve months ending December 31, 2008 and 2007 respectively:

(All amounts in thousands)        Year Ended December 31,
         A&G Account                2008             2007         Variance

Wages and Benefits              $     10,668       $  10,312     $      356
 Executive Stock Compensation            873               -            873
Accounting / Legal Fees                1,528           1,472             56
Office Building Expense                1,159           1,114             45
Other                                  5,316           4,450            865
                                      19,544          17,348          2,195
Non-Ordinary Expenses                  1,870             810          1,060

TOTAL:                          $     21,414       $  18,158     $    3,255

Interest expense decreased 29.6% from $9.8 million in 2007 to $6.9 million in 2008. The decrease was primarily due to the retirement of all the remaining outstanding obligations of our 7¾% Senior Unsecured Notes ("Notes") in October of 2007. We recognized an impairment loss of $369,000 on the Company's investment in marketable securities in the fourth quarter of 2008. The charge reflects investments in certain equity securities whose market values have been materially impacted by current economic conditions.
Investment income decreased from $2.6 million in 2007 to $894,000 in 2008. The decrease was primarily due to a lower rate of return on our short-term investments.

Income Taxes
We recorded a benefit for federal income taxes of $877,000 on $12.4 million of income from continuing operations before income from unconsolidated entities in 2008, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For 2007, our benefit was $1.4 million on our $3.8 million of income from continuing operations before income from unconsolidated entities. Our tax benefit decreased from the comparable prior year primarily as a result of improved earnings from our Rail Ferry segment which are taxed at the 35% statutory rate.

Equity in Net Income of Unconsolidated Entities Equity in net income of unconsolidated entities, net of taxes, increased from $6.6 million in 2007 to $20.9 million in 2008.
The improved results came from our 50% investment in Dry Bulk Cape Holding Ltd ("Dry Bulk"), which owns 100% of subsidiary companies currently owning two Capesize Bulk Carriers and one Panamax Bulk Carrier, which contributed $21.2 million in 2008 compared to $6.7 million in 2007. This increase was primarily due to a gain on the sale of one of Dry Bulk's subsidiaries' vessels, a Panamax Bulk Carrier, of approximately $15.9 million in June 2008.
During the second quarter of 2007, Dry Bulk's subsidiary companies entered into a ship purchase agreement with Mitsui & Co. of Japan for two newbuildings Handymax Bulk Carriers to be delivered in the first half of 2012. Total investment in the newbuildings is anticipated to be approximately $74.0 million, of which the Company's share would be 50% or approximately $37.0 million. We expect to make our interim construction payments with cash generated from Dry Bulk's subsidiary companies' operations. A decision on any long-term financing is expected to be determined at delivery. Our 50% share of the initial contract payment of $750,000 was made in May of 2007. For more information, see below "Liquidity and Capital Resources - Bulk Carriers."

Discontinued Operations
In the third quarter of 2007, we elected to discontinue our International LASH service by the end of 2007. During the first two months of 2008, we sold the one remaining LASH vessel and the majority of LASH barges, with the remaining LASH barges under contract to be sold by the end of the first quarter of 2008. The after-tax gain of $9.9 million recorded in 2007 reflects a gain of $7.3 million on the sale of two LASH Vessels and $2.6 million on the sale of LASH barges. The gain of $4.6 million recorded in 2008 reflects the gain from the sale of one LASH Vessel and remaining LASH barges. During 2008 there were no revenues associated with the discontinued LASH services, as compared to $42.0 million for 2007. Profit from operations before taxes were $220,000 in 2008, compared to a $4.2 million loss in 2007.
Our U.S. flag LASH service and International LASH service were reported in "Continuing Operations" as a part of our Liner segment in periods prior to June 30, 2007. The financial results for all periods presented have been restated to remove the effects of both of those operations from "Continuing Operations".

                          YEAR ENDED DECEMBER 31, 2007
                    COMPARED TO YEAR ENDED DECEMBER 31, 2006

                                    Time Charter                     Rail-Ferry
(All Amounts in Thousands)           Contracts           COA          Service          Other         Total
2007
Revenues from External Customers   $      178,336     $  16,652     $     21,235     $   1,890     $ 218,113
Voyage Expenses                           137,828        10,940           18,406           841       168,015
Gross Voyage Profit (Loss)                 25,198         4,100           (1,566 )       1,044        28,776
2006
Revenues from External Customers   $      166,615     $  16,081     $     18,427     $   2,375     $ 203,498
Voyage Expenses                           124,289         9,522           19,734         1,967       155,512
Impairment Loss                                 -             -           (8,866 )           -        (8,866 )
Gross Voyage Profit (Loss)                 28,517         4,142          (14,002 )         397        19,054

Gross voyage profit increased from $19.1 million in 2006 to $28.8 million in 2007. The gross profit in 2006 included a pre-tax impairment loss of $8.9 million on our investment in the Rail-Ferry Service's terminal in New Orleans. Excluding this loss, gross voyage profit increased from $27.9 million in 2006 to the above mentioned $28.8 million in 2007. Revenues increased from $203.5 million in 2006 to $218.1 million in 2007. Voyage expenses increased from . . .