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 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 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, 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, drydocking and out-of-service days on our vessels, or other similar events giving rise to unanticipated capital or operating expenses; (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 piracy, 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.

Executive Summary Overview of Second Quarter 2009

Overall Strategy

The company operates a diversified fleet of U.S. and International 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 and utilizing our extensive experience to meet those needs, and continuing to maintain a diverse portfolio of medium to long-term contracts under which we can provide our long-standing customers with quality transportation services.

Financial Discipline and Strong Balance Sheet

We continued to improve our financial position in the second quarter of 2009.

††† Consolidated cash and cash equivalents increased to $56.9 million at June 30, 2009 as compared to $17.0 million for the same period in 2008.

††† Consistent operating cash flow due to fixed time-charter contracts.

††† Maintained a working capital ratio of greater than 2 to 1.

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

††† Long-term Debt to Equity Ratio of 56.2%

††† Leverage ratio of 1.8 to 1

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

Our overall performance for the second quarter of 2009 improved significantly as compared to the same period in 2008, after excluding the gain on the sale of a Panamax Bulk Carrier for $15.1 million in the second quarter of 2008. The results were primarily driven by significant improvements in the carriage of supplemental cargoes on our U.S. Flag PCTCs. While the carriage of the supplemental cargoes results are a marked improvement from the prior year, these levels may not be sustainable for the third quarter.

††† Revenue growth of $38.7 million.

††† Consolidated gross profit increased by $7.6 million despite of an impairment charge of $2.9 million.

††† 4% reduction in administrative and general expenses.

†††††† Decrease in interest expense of $174,000 primarily due to lower principal balances.

Segment Performance - Second Quarter 2009 vs. Second Quarter 2008

Rail-Ferry

? Gross profit of $118,000 for the quarter as compared $915,000 from the previous year due to a decrease in volumes.

Time Charter Contracts

? Improvement in gross profit of $8.1 million, driven by supplemental cargoes, despite an increase in the number of off-hire days. ? Fixed time-charter rate which provides consistent operating cash flow. ? Impairment charge of $2.9 million resulting from the early redelivery of one of our two International flag container vessels.

Contract of Affreightment ("COA")

††† Increase of $700,000 in gross profits primarily due to lower operating cost.

††† Guaranteed minimum tonnage for the contract year.

                             RESULTS OF OPERATIONS

                         SIX MONTHS ENDED JUNE 30, 2009
                 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2008
                                    Time Charter                     Rail-Ferry
(All Amounts in Thousands)           Contracts           COA          Service          Other         Total
2009
Revenues from External Customers   $      172,580     $   8,847     $     14,504     $   1,962     $ 197,893
Voyage Expenses                           131,910         7,710           12,900         2,423       154,943
Vessel Depreciation                         7,463             -            2,926             5        10,394
Impairment Loss                             2,899             -                -             -         2,899
Gross Voyage Profit (Loss)                 30,308         1,137           (1,322 )        (466 )      29,657
2008
Revenues from External Customers   $       93,975     $   9,860     $     19,138     $   1,881     $ 124,854
Voyage Expenses                            75,126         9,027           16,210           647       101,010
Vessel Depreciation                         7,426             -            2,707             7        10,140
Gross Voyage Profit (Loss)                 11,423           833              221         1,227        13,704

Gross voyage profit increased from $13.7 million in the first six months of 2008 to $29.7 million in the first six months of 2009. Revenues increased from $124.9 million in the first six months of 2008 to $197.9 million in the first six months of 2009. Voyage expenses increased from $101.0 million in the first six months of 2008 to $154.9 million in the first six months 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 $11.4 million in the first six months of 2008 to $30.3 million in the first six months 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 $94.0 million in the first six months of 2008 to $172.6 million in the first six months of 2009. Offsetting this increase in gross voyage profit is an impairment charge of $2.9 million taken on one of our International flag container vessels. This impairment loss was determined after the early termination on one of our International flag container vessel. The Company and the Charterer agreed to the early termination in exchange for an increase in charter hire on the remaining International flag container vessel. While we have recognized this impairment, we will continue to pursue various options with respect to this vessel, including other potential commercial uses for the vessel and the possibility of selling or disposing of the vessel.

In addition, one of our vessels used to service operations in Indonesia experienced a significant amount of non-operating time resulting from unscheduled repairs. This vessel was eventually removed from the service and is currently being evaluated for other commercial uses. If we are unable to employ the vessel, then an impairment charge may be required in future periods. The vessel's net book value as of June 30, 2009 is $4.0 million.

Contracts of Affreightment: Gross voyage profit increased from $833,000 in the first six months of 2008 to $1.1 million in the first six months of 2009 primarily due to lower fuel cost in 2009.

Rail-Ferry Service: Gross voyage profit decreased from $221,000 in the first six months of 2008 to a loss of $1.3 million in the first six months of 2009 due to a decrease in volume and rates. Revenues for this segment decreased from $19.1 million in the first six months of 2008 to $14.5 million in the first six months of 2009 also due to a drop in volume and rates due to the current economic conditions.

Other: Gross profit decreased from a $1.2 million profit in the first six months of 2008 to a $466,000 loss in the first six months of 2009. This decrease was primarily due to 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 $9.9 million in the first six
months of 2008 to $10.9 million in the first six months of 2009 primarily due to
the addition of our executive stock compensation program in April 2008 and
increased accrued vacation benefits.

The following table shows the significant A&G components for the first six
months of 2009 and 2008 respectively.
                                 Year to Date as of
(All Amounts in Thousands)            June 30,
        A&G Account               2009          2008        Variance

Wages & Benefits               $     5,261     $ 4,889     $      372
Executive Stock Compensation           752         148            604
Professional Services                  541         614            (73 )
Office Building Expenses               659         596             63
Other                                3,306       3,659           (353 )
Consulting Fees *                      421           -            421
TOTAL:                         $    10,940     $ 9,906     $    1,034

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

Interest expense decreased from $3.6 million in the first six months of 2008 to $2.9 million in the first six months of 2009 primarily due to lower interest rates and principal balances.

Investment Loss (Income) decreased from $437,000 income in the first six months of 2008 to a loss of $332,000 in the first six months of 2009 due to an impairment charge of $735,000 related to certain investments which we determined had other than temporary impairment. Management feels that while these adjustments have been made, these unrealized losses were due to overall market conditions seen in the past eighteen months.

Income Taxes

We recorded a benefit for income taxes of $1.9 million on our $15.5 million of income from continuing operations before income from unconsolidated entities in the first six months of 2009, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For the first six months of 2008, our benefit was $1.8 million on our $858,000 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 $17.8 million in the first six months of 2008 to $2.8 million in the same period 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 second quarters of 2009 and 2008, our portion of the earnings on this investment was $1.6 million and $17.6 million, respectively. Excluding the gain of $15.1 million on the sale of one of the Panamax Bulk Carriers in the second quarter of 2008, Dry Bulk recorded a slight improvement year on year for the six months ending June 30 2009.

                             RESULTS OF OPERATIONS

                        THREE MONTHS ENDED JUNE 30, 2009
                COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2008
                                    Time Charter                     Rail-Ferry
(All Amounts in Thousands)           Contracts           COA          Service          Other          Total
2009
Revenues from External Customers   $       86,180     $   4,772     $      8,119     $      744     $  99,815
Voyage Expenses                            65,694         4,073            6,536            559        76,862
Vessel Depreciation                         3,757             -            1,465              3         5,225
Impairment Loss                             2,899             -                -              -         2,899
Gross Voyage Profit (Loss)                 13,830           699              118            182        14,829
2008
Revenues from External Customers   $       44,551     $   5,012     $     10,889     $      697     $  61,149
Voyage Expenses                            35,141         4,993            8,632            136        48,902
Vessel Depreciation                         3,713             -            1,342              4         5,059
Gross Voyage Profit (Loss)                  5,697            19              915            557         7,188

Gross voyage profit increased from $7.2 million in the second quarter of 2008 to $14.8 million in the second quarter of 2009. Revenues increased from $61.1 million in the second quarter of 2008 to $99.8 million in the second quarter of 2009. Voyage expenses increased from $48.9 million in the second quarter of 2008 to $76.9 million in the second 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 second quarter of 2008 to $13.8 million in the second 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 $44.6 million in the second quarter of 2008 to $86.2 million in the second quarter of 2009. Offsetting this increase in gross voyage profit is an impairment charge of $2.9 million taken on one of our International flag container vessels. This impairment loss was determined after the early termination on one of our International flag container vessel. The Company and the Charterer agreed to the early termination in exchange for an increase in charter hire on the remaining International flag container vessel. While we have recognized this impairment, we will continue to pursue various options with respect to this vessel, including other potential commercial uses for the vessel and the possibility of selling or disposing of the vessel.

In addition, one of our vessels used to service operations in Indonesia experienced a significant amount of non-operating time resulting from unscheduled repairs. This vessel was eventually removed from the service and is currently being evaluated for other commercial uses. If we are unable to employ the vessel, then an impairment charge may be required in future periods. The vessel's net book value as of June 30, 2009 is $4.0 million.

Contracts of Affreightment: Gross voyage profit increased from $19,000 in the second quarter of 2008 to $699,000 in the second quarter of 2009 primariliy due to reduced fuel costs.

Rail-Ferry Service: Gross voyage profit decreased from $915,000 in the second quarter of 2008 to $118,000 in the second quarter of 2009 due to a decrease in volume and rates. Revenues for this segment decreased from $10.9 million in the second quarter of 2008 to $8.1 million in the second quarter of 2009 also due to a drop in volume and rates due to the current economic conditions.

Other: Gross profit decreased from $557,000 in the second quarter of 2008 to $182,000 in the second quarter of 2009. This decrease was due to a decline in Brokerage revenue in the second quarter of 2009 attributable to the weak economy.

Other Income and Expense

Administrative and general expenses decreased from $4.9 million in the second
quarter of 2008 to $4.7 million in the second quarter of 2009 primarily due to
reductions in legal and financial services expenses and the reversal of
previously accrued expenses associated with an unaffiliated company's offer to
purchase the company, partially offset by higher executive stock compensation.

 The following table shows the significant A&G components for the second quarter
of 2009 and 2008 respectively.
                                 Three Months Ended
(All Amounts in Thousands)            June 30,
        A&G Account               2009          2008       Variance

Wages & Benefits               $    2,512      $ 2,457     $       55
Executive Stock Compensation          468          148            320
Professional Services                 172          234            (62 )
Office Building Expenses              327          282             45
Other                               1,654        1,748            (94 )
Consulting Fees *                    (463 )          -           (463 )
TOTAL:                         $    4,670      $ 4,869     $     (199 )

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

Interest expense decreased from $1.6 million in the second quarter of 2008 to $1.4 million in the second quarter of 2009 primarily due lower interest rates and principal balances.

Investment Loss (Income) decreased from $192,000 income in the second quarter of 2008 to a loss of $141,000 in the second quarter of 2009 due to an impairment charge of $293,000 related to certain investments which we determined had other than temporary impairment. Management feels that while these adjustments have been made, these unrealized losses were due to overall market conditions seen in the past eighteen months.

Income Taxes

We recorded a benefit for income taxes of $226,000 on our $8.6 million of income from continuing operations before income from unconsolidated entities in the second quarter of 2009, reflecting tax losses on operations taxed at the U.S. corporate statutory rate. For the second quarter of 2008, our benefit was $605,000 on our $844,000 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 $16.6 million in the second quarter of 2008 to $1.8 million in the second quarter of 2009. However, excluding the gain of $15.1 million on the sale of one of Dry Bulk's Panamax Bulk Carriers in the second quarter of 2008, our results were comparable.

The following discussion should be read in conjunction with the more detailed Consolidated Balance Sheets and Consolidated Statements of Cash Flows included elsewhere herein as part of our 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 $63.6 million at June 30, 2009. This increase was primarily due to an increase in supplemental cargo receivables. Cash and cash equivalents increased in the first six months of 2009 by $5.1 million to a total of $56.9 million, and marketable securities increased during this period with the purchase of $10.5 million of short-term corporate bonds to $13.2 million. The increase to cash and cash equivalents was a result of cash provided by operating activities of $29.1 million, partially offset by cash used by financing activities of $5.8 million, and cash used by investing activities of $18.2 million. Total current liabilities of $50.2 million as of June 30, 2009 included current maturities of long-term debt of $13.1 million.

Operating activities generated a positive cash flow of $29.1 million after adjusting net income of $20.1 million for the first six months of 2009 for non-cash provisions such as depreciation and amortization: a $2.9 million impairment loss on one of our International flag container vessels, and amortization of deferred charges, offset by the deduction of the non-cash $2.8 million from the equity in net income of these unconsolidated entities and an increase in accounts receivables in supplemental cargoes. Net cash provided by operating activities also included cash dividends of $2.0 million from our investment in unconsolidated entities.

Net cash used by investing activities of $18.2 million included principal payments received under direct financing leases of $3.9 million, offset by capital improvements of $11.9 million and the purchase of short-term corporate bonds of $10.5 million.

Net cash used for financing activities of $5.8 million included regularly scheduled debt payments of $6.5 million, cash dividends paid of $7.3 million, offset by proceeds from new debt of $8.0 million.

In March 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 June 30, 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.

We signed a commitment with Regions Bank on July 15, 2009 for a five year facility to finance up to $40 million for the purchase of additional vessels. The Company intends to use this financing to fulfill the additional requirements under the Indonesion mining contract.

Debt and Lease Obligations - As of June 30, 2009, we held three vessels under operating contracts, six vessels under bareboat charter or lease agreements and five vessels under time charter agreements. The types of vessels held under these agreements include four Pure Car/Truck Carriers, three Breakbulk/Multi Purpose vessels, three Roll-On/Roll-Off vessels, two Container vessels and a . . .