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June 17, 2010

Great Lakes operator "cautiously optimistic"

Laurence S. Levy, Chairman and CEO of Great Lakes bulker operator Rand Logistics, Inc. (Nasdaq:RLOG), believes that total vessel sailing days for FY 2011 will be "markedly improved" over FY 2010 and is "cautiously optimistic" about prospects for FY 2011.

Rand Logistics operates eight Canadian flag bulkers (five of them self-unloaders) and five U.S.-flag self unloaders, one of which is an ATB.

Yesterday the company announced financial and operational results for the fiscal year ended March 31, 2010.

Marine freight revenue (excluding fuel and other surcharges, and outside charter revenue) was $85.1 million, a decrease of $0.7 million or 0.8 percent from $85.8 million. This primarily reflected a weaker average Canadian dollar during the revenue earning period. Total sailing days equaled 3,143 versus 3,148.

Marine freight revenue per sailing day decreased by $179 or 0.7 percent to $27,087 from $27,266.

Vessel operating expenses per sailing day decreased by $5,183 or 20.1 percent to $20,658 from $25,841. The decrease was primarily attributable to reduced fuel costs, and to a lesser extent, cost reductions achieved during the fiscal year ended March 31, 2010.

Operating income plus depreciation, amortization and a one-time loan amendment fee increased by $1.2 million or 6.2 percent to $21.1 million versus $19.9 million.

Income before taxes increased by $4.0 million, from $141,000 to $4.1 million.

Management Comments

Scott Bravener, President of Lower Lakes stated, "We are very pleased with our operating performance, particularly considering that volumes of certain commodities transported on the Great Lakes were down by 20% to almost 50% in the 2009 sailing season, versus the prior year. The overall reduction in demand from our customers in the first half of the fiscal year, due to the weakened economy and the resultant delayed openings of our customers' facilities for the 2009 sailing season, reduced our vessel scheduling flexibility and decreased the overall operating efficiency of our fleet. In combination with increased customer demand in the second half of the fiscal year, favorable weather conditions on the Great Lakes during the October to December period, and unusually strong customer demand in January 2010, when our vessels sailed for an unbudgeted 111 days, marine freight revenue recovered and exceeded the second half performance of the prior fiscal year. For the full year, marine freight revenue almost achieved prior year levels, despite the adverse market conditions and a weaker Canadian dollar."

"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. We believe that the successful renewal of our customer contracts that were due to expire at the end of fiscal year 2010, combined with additional business we have already secured, will allow us to increase our number of sailing days in fiscal 2011 closer to our 3,300 day theoretical maximum, and will enable us to improve the efficiency of our vessels. These factors provide the potential for substantial operating leverage and profit improvement," Mr. Bravener concluded.

Outlook

Laurence S. Levy, Chairman and CEO of Rand commented, "Thus far in the 2010 sailing season, vessel sailing days have improved meaningfully, as compared to last year. This improvement is a result of increased demand for certain commodities that we carry and new business secured this past winter. Based on business in hand, we believe that total vessel sailing days for fiscal year 2011 will be markedly improved over fiscal year 2010. We are pleased that our business visibility has returned to more traditional levels. We remain cautiously optimistic about our prospects for fiscal year 2011 although we continue to believe that the markets we serve are fragile, and that the recovery will be gradual, muted and uneven. Barring a further downturn in the economy or a significant adverse change in exchange rates, we believe that our fiscal year 2010 results reflect the floor of the company's earnings."

"We continue to evaluate a number of investment opportunities that we believe will yield mid-teens unlevered returns on invested capital," he continued. "We intend to continue to use the excess free cash flow that the business is generating to repay debt and to invest in high return on invested capital projects that maximize the operating efficiency of our vessels."


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