August 10, 2010
Rand Logistics reports increased revenue
Great Lakes ship operator Rand Logistics, Inc. (Nasdaq:RLOG) today announced financial and operational results for the first quarter of fiscal year 2011, ended June 30, 2010.
Marine freight revenue (excluding fuel and other surcharges, and outside charter revenue) was $28.4 million, an increase of $4.3 million or 17.6 percent, from $24.1 million. This increase was attributable to an increase in the number of sailing days, a continued product mix improvement, a stronger Canadian dollar, improved productivity by several vessels and price increases.
Marine freight revenue per sailing day increased by $1,292 or 4.9 percent, to $27,767 from $26,475.
Vessel operating expenses per sailing day increased by $3,484 or 17.8 percent, to $23,096 from $19,612. This increase was primarily attributable to increased fuel costs, increased costs from operating our vessels for 111 additional sailing days and a stronger Canadian dollar.
Operating income plus depreciation, amortization and a one-time amendment fee in fiscal 2010 increased by $1.9 million or 26.8 percent, to $8.8 million versus $6.9 million.
Scott Bravener, President of Lower Lakes, stated, "We experienced an overall increase in demand in our markets during the fiscal first quarter, as compared to the same period last year, when a weakened economy delayed the start of the 2009 sailing season. A stronger steel industry significantly increased shipments of ore, and to a lesser extent coal and aggregates used by the steel industry in our markets, offset by modest reductions in shipments in our grain and salt markets compared to last year. Overall, we are satisfied with our fiscal first quarter operating performance as we continued to achieve operational improvements within the fleet. We were, however, disappointed that these improvements were partially offset by a major mechanical incident on one of our vessels. We incurred approximately $400,000 in excess repair expenses related to this incident. Of greater impact to the quarterly financial performance was the foregone revenue and profit from the affected vessel not operating for approximately 43 days, as well as the inefficiencies created in our trade patterns resulting from our having to substitute other less optimal vessels into the trade routes."
"With few exceptions, our vessels were operating on April 1, 2010, and our total sailing days for the quarter equaled 1,023 versus a theoretical maximum of 1,092, a substantial increase from the 912 days sailed in the comparable quarter last year. In general, our customer demand and visibility has improved meaningfully as compared with the same period last year, although tonnage volumes for certain of the commodities that we carry are still meaningfully less than the trailing five-year average. We continue to pursue additional long term contractual business which will allow us to further increase vessel utilization and allow for further growth as the economy continues to rebound. Based on current customer demand, we remain confident in our ability to operate our fleet in fiscal 2011 closer to our 3,300 day theoretical maximum as compared to fiscal 2010, which will enable us to continue improving the efficiency of our vessels," Mr. Bravener concluded.
Laurence S. Levy, Chairman and CEO of Rand, commented, "We were very pleased to recently announce our plans to convert our last steam powered vessel, the SS Michipicoten, to diesel power. We expect to begin this project in December 2010 and estimate that it will take approximately 120 days to complete. Based on our experience with a similar vessel repowering in 2008, we estimate that this U.S. $15 million investment will generate an annual return on invested funds in the mid teens which significantly exceeds our marginal cost of capital. We are financing this project with a CDN $20 million incremental term loan provided by certain of our existing lenders. As previously stated, subsequent to the repowering of the Michipicoten, we are projecting to generate between $0.90 and $1.00 of free cash flow per share per year, assuming no drastic deterioration in economic conditions. We are currently evaluating a number of potential attractive investment opportunities to deploy capital, and would expect each of these opportunities to allow us to generate unlevered returns in the mid-teens level and therefore would be accretive to the $0.90 to $1.00 free cash flow guidance that we have already presented."