September 27, 2010
Operating incidents hit Rand Logistics earnings
Great Lakes vessel operator Rand Logistics, Inc. (Nasdaq:RLOG) says its 2011 financial results will be worse than expected.
It has been hit by what it calls "several unrelated operating incidents." Their financial impact, including the insurance deductibles for repair costs, the foregone time and revenue, and the inefficiencies created in trade patterns, will result in a shortfall in the company's forecast FY 2011 financial results.
"Given the unprecedented number and timing of these incidents and the company's expectation that the overall impact is non-recurring," says the company, "they do not affect management's prior guidance of $0.90 to $1.00 of free cash flow per share commencing with the repowered Michipicoten reentering service in the spring of 2011, assuming no drastic change in economic conditions.
Scott Bravener, President of Lower Lakes, stated, "We are extremely disappointed with the unprecedented number and the financial impact of the operating incidents that have occurred during the current sailing season. Our review of the Saginaw incident in our first fiscal quarter and the recent incidents has revealed no common deficiency in maintenance, oversight or processes. Including our upcoming winter investments, we will have spent approximately $60 million on fleet modernization over the last five years and four of our vessels will have been repowered since 2000. We have evaluated, and continue to review, all aspects of our operations, oversight and maintenance procedures to minimize the risk and cost of future incidents. While we cannot eliminate all incidents, I believe that we have the processes in place to reduce their future occurrence to a level consistent with our historic experience."
According to an SEC filing, the "Saginaw incident," referred to by Mr. Bravener, was a boom hoist failure that resulted in the unloading boom collapsing over the ship's side. It resulted in approximately 43 days of downtime in the quarter and approximately $400,000 in excess repair costs.