RLOGU Rand Logistics Unit 10/26/08 (MM)

Rand Logistics Inc. (Nasdaq: RLOG; RLOGW; RLOGU) (�Rand�) today announced operational and financial results for the fiscal third quarter ended December 31, 2007, and provided an update on recent business developments and their expected contribution to future results. Business Highlights Rand recently exercised its option and purchased three vessels it previously operated under a time charter from Wisconsin and Michigan Steamship (�WMS�) for approximately $20 million in cash including transaction expenses. This acquisition represents a significant opportunity for future profit growth through the elimination of duplicate overhead and the full integration of the vessels into Rand�s fleet, resulting in more cost efficient operations. Going forward, the results of the three vessels will be consolidated into Rand�s financial statements, eliminating the Variable Interest Entity line item. Rand has announced that it has begun an approximately $13 million project to repower the Saginaw, one of its Canadian-flagged vessels, with a new highly automated emissions-compliant power plant. The repowering is expected to improve operating margins due to an increase in speed, and a reduction in fuel consumption, labor, maintenance and other operating costs. Management estimates that the investment will generate an annual mid-teens return on investment and will be completed in April 2008. The Company recently announced that it has amended its credit facility with GE Capital, increasing its borrowing capacity to approximately $100 million. The additional capital will be used to finance the WMS acquisition, the Saginaw repowering project and will provide additional liquidity for future capital investments. Rand has decided to permanently retire the Calumet, the oldest and smallest vessel in its fleet. The capital investment required to enable the vessel to generate a satisfactory rate of return over the next five years was not justifiable. In addition, one of the three vessels purchased from WMS has been transferred to Canadian registry. The removal of the Calumet and one of the WMS vessels from the U.S. market reduces 3.0 million tons of capacity. The retirement of the Calumet will not have a material impact on Rand�s cash flow. During the nine months ended December 31, 2007, the Company incurred $1.2 million in one-time G&A expenses to improve its management infrastructure, upgrade business software and IT, and further improve internal controls. With this enhanced infrastructure in place, the Company now has the capacity to expand without substantially increasing overhead costs. Management believes that it has now substantially completed the necessary infrastructure investments. Rand Chairman and Chief Executive Officer Laurence S. Levy commented, �The successful implementation of several strategic initiatives is the result of the continued execution of our business plan and the hard work of all our employees. We are pleased to be able to demonstrate the strength of our business and are excited about the growth opportunities that lie ahead.� Third Quarter Fiscal 2008 Financial Results In the fiscal third quarter ended December 31, 2007, revenue increased 38% to $35.9 million, compared to $26.1 million in the prior year period, primarily due to increased freight rates, better operating efficiencies and the acquisition of the two Voyageur vessels. The increase in revenues was partially offset by a decrease in revenues from the three WMS vessels due to difficulties in assembling qualified crews to operate the vessels subsequent to the end of the previously announced work stoppage. These three vessels contributed $6.3 million of revenue during the period, compared to $7.5 million in the prior year period. Excluding the VIE, earnings before interest, taxes, depreciation and amortization (�EBITDA�) for the fiscal third quarter ended December 31, 2007, was $1.9 million, compared to $2.7 million in the prior year quarter. The decline in EBITDA was primarily due to: A loss of $1.1 million from the three vessels operated under the time charter with WMS for the three months ended December 31, 2007, due to the previously announced work stoppage, versus a profit of $1.2 million for the three months ended December 31, 2006; and, A $0.3 million charge to EBITDA associated with one-time expenses related to improving management infrastructure, upgrading business software and IT, and further improving internal controls. Year To Date Fiscal 2008 Financial Results For the nine months ended December 31, 2007, total revenues were $90.0 million, an increase of approximately 19% compared to $75.7 million for the first nine months of fiscal 2007. Excluding the VIE, EBITDA for the first nine months of fiscal 2008 was $7.8 million compared to $12.4 million in the prior year. Fiscal 2008 year-to-date EBITDA was impacted by: A loss of $3.4 million from the three vessels operated under the time charter with WMS for the nine months ended December 31, 2007, versus a profit of $2.6 million for the nine months ended December 31, 2006; and, A $1.2 million charge to EBITDA for the nine months ended December 31, 2007, associated with one-time expenses related to improving management infrastructure, upgrading business software and IT, and further improving internal controls. Scott Bravener, President of Lower Lakes stated, �Despite the effect of the WMS work stoppage, we continued to see significant margin improvement at the vessel operating level due to freight rate increases, ongoing investments in our infrastructure and vessel upgrades. For example, capital investments together with an increased focus on training and procedures for our U.S.-flagged vessels in early 2007 contributed to a 77% increase in operating margin for the nine months ended December 31, 2007, over the prior year period. �In addition, our significant investments in IT, software and key administrative staff have set the foundation for additional efficiency going forward,� Bravener continued. �Public company G&A expense declined by 30% in the third quarter due to further efficiencies at the corporate operating level. Importantly, we expect our G&A expenses will not grow at the same rate as our business, further boosting our future operating margins.� Outlook Laurence Levy concluded, �We are very positive about the outlook for the Company in the near and long term. The underlying economics of the business remain strong. We operate in an industry with high barriers to entry and where freight demand significantly exceeds available capacity. In addition, our diversified cargo base and strong network of blue-chip customers uniquely positions Rand to weather any near-term macro-economic challenges. Lastly, our low cost operating structure and long-term contractual revenue provide strong cash flow visibility and a clear path to profitability. Concurrently, we continue to explore attractive, financially prudent acquisition opportunities to complement our organic growth initiatives.� Rand Logistics, Inc. Summary Statement of Operations (unaudited) � � � � � � Three months ended Three months ended Nine months ended Nine months ended � � 31-Dec-07 � 31-Dec-06 31-Dec-07 � 31-Dec-06 Revenue - Company operated vessels 31,840 24,767 81,327 70,726 Revenue - Outside voyage charter revenue � 4,077 � 1,337 8,697 � 5,011 35,917 26,104 90,024 75,737 Expenses Outside voyage charter fees 4,034 1,310 8,605 4,935 Vessel operating expenses 26,281 19,819 63,381 52,304 Non operational repairs and maintenance � 7 � 40 101 � 97 � � 30,322 � 21,169 72,087 � 57,336 Income before general and administrative, depreciation, amortization of drydock costs and intangibles, other income and expenses and income taxes � 5,595 � 4,935 17,937 � 18,401 � General and administrative 2,648 1,955 7,391 4,914 Depreciation and amortization of drydock costs and intangibles 2,744 1,840 7,535 5,079 Write-off of retired vessel to salvage value 1,687 - 1,687 - Loss (gain) on foreign exchange � 11 � 88 (208) � 178 � � 7,090 � 3,883 16,405 � 10,171 Income before interest, other income and expenses and income taxes � (1,495) � 1,052 1,532 � 8,230 � Net income � (2,178) � 232 (4,015) � 2,900 Net income (loss) per share � basic (0.18) 0.03 (0.36) 0.42 Net income (loss) per share � diluted (0.18) 0.03 (0.36) 0.35 Conference Call Management will host a conference call to discuss the results at 8:30 a.m. ET on Thursday, February 14, 2008. Interested parties may participate in the conference call by dialing 800-257-6566 (303-205-0033 for international callers). When prompted, ask for the "Rand Logistics Third Quarter Fiscal 2008 Earnings Conference Call." A phone replay will be available from 10:30 a.m. ET on Thursday, February 14, 2008, until midnight ET on Friday, February 22, 2008. Dial (800) 405-2236 (305-590-3000 for international callers) and enter the code 11108709# to access the phone replay. Additionally, the conference call will be webcast simultaneously on the Thomson Streetevents website at www.streetevents.com. Reconciliation of Non-GAAP Measure to GAAP EBITDA represents earnings before interest, income tax expense, depreciation and amortization, loss on asset disposal, and loss (gain) on foreign exchange. EBITDA is not a measure of performance or liquidity calculated in accordance with generally accepted accounting principles (�GAAP�), is unaudited and should not be considered an alternative to, or more meaningful than, net income or income from operations as an indicator of our operating performance, or cash flows from operating activities, as measures of liquidity. EBITDA has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation. A reconciliation of GAAP net income to EBITDA is included in the financial tables accompanying this release. About Rand Logistics Rand Logistics, Inc. is a leading provider of bulk freight shipping services throughout the Great Lakes region. Through its subsidiaries, the Company operates a fleet of ten self-unloading bulk carriers, including nine River Class vessels and one River Class integrated tug/barge unit, and three conventional bulk carriers, of which one is operated under a contract of affreightment. The Company is the only carrier able to offer significant domestic port-to-port services in both Canada and the U.S. on the Great Lakes. The Company�s vessels operate under the U.S. Jones Act � which dictates that only ships that are built, crewed and owned by U.S. citizens can operate between U.S. ports � and the Canada Marine Act � which requires Canadian commissioned ships to operate between Canadian ports. Forward-Looking Statements This press release may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) concerning the Company and its operating subsidiaries. Forward-looking statements are statements that are not historical facts, but instead statements based upon the current beliefs and expectations of management of the Company. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from the results included in such forward-looking statements. Rand Logistics, Inc. Consolidated Statements of Operations (U.S. Dollars in Thousands except Earnings Per Share Figures) � � Three months ended December 31, 2007 � Three months ended December 31, 2006 � Nine months ended December 31, 2007 � Nine months ended December 31, 2006 � � (unaudited) � (unaudited) � (unaudited) � (unaudited) REVENUE � 35,917 � � � 26,104 � � 90,024 � � � 75,737 � � EXPENSES Outside voyage charter fees 4,034 1,310 8,605 4,935 Vessel operating expenses 26,281 19,819 63,381 52,304 Repairs and maintenance 7 40 101 97 General and administrative 2,648 1,955 7,391 4,914 Depreciation 1,719 1,408 4,882 3,737 Amortization of drydock costs 376 83 1,149 251 Amortization of intangibles 633 295 1,392 1,001 Amortization of chartering agreement costs 16 54 112 90 Write-off of retired vessel to salvage value 1,687 - 1,687 - (Gain) loss on foreign exchange � 11 � � � 88 � � (208 ) � � 178 � � � 37,412 � � � 25,052 � � 88,492 � � � 67,507 � INCOME BEFORE OTHER INCOME AND EXPENSES AND INCOME TAXES � � � � 1,052 � � 1,532 � � � 8,230 � � OTHER INCOME AND EXPENSES Interest expense 1,369 1,166 3,486 2,875 Interest income (53 ) (135 ) (195 ) (223 ) Loss on interest rate swap contract � 35 � � � - � � 43 � � � - � � � 1,351 � � � 1,031 � � 3,334 � � � 2,652 � (2,846 ) 21 (1,802 ) 5,578 INCOME BEFORE INCOME TAXES � � � � � � � PROVISION (RECOVERY) FOR INCOME TAXES Current 76 (68 ) 43 (57 ) Deferred � (833 ) � � (245 ) � (462 ) � � 1,960 � NET INCOME BEFORE MINORITY INTEREST (2,089 ) 334 (1,383 ) 3,675 MINORITY INTEREST � (228 ) � � (443 ) � (259 ) � � (360 ) NET INCOME � (1,861 ) � � 777 � � (1,124 ) � � 4,035 � PREFERRED STOCK DIVIDENDS 317 295 909 885 COMMON STOCK DIVIDEND OF VIE � - � � � 250 � � - � � � 250 � STOCK WARRANT INDUCEMENT DISCOUNT � - - � � � - � � 1,982 � � � - � NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDERS � (2,178 ) � � 232 � � (4,015 ) � � 2,900 � � Net (loss) earnings per share basic ($0.18 ) $ 0.03 ($0.36 ) $ 0.42 Net (loss) earnings per share diluted ($0.18 ) $ 0.03 ($0.36 ) $ 0.35 Weighted average shares basic 12,092,142 8,003,754 11,109,942 6,937,185 Weighted average shares diluted 12,092,142 12,466,881 11,109,942 10,830,400 Rand Logistics, Inc. Selected Financial Information (unaudited) Reconciliation of Income before Interest, Other Income and Expenses and Income Taxes to EBITDA � � � � Rand Logistics three months ended � Variable Interest Entity three months ended � Consolidated three months ended � Rand Logistics three months ended � Variable Interest Entity three months ended � Consolidated three months ended 31-Dec-07 � 31-Dec-07 � 31-Dec-07 � 31-Dec-06 � 31-Dec-06 � 31-Dec-06 � Income before interest, other income and expenses and income taxes (2,055) 560 (1,495) 962 90 1,052 � Loss (gain) on foreign exchange 11 0 11 88 0 88 Write-off of retired vessel to salvage value 1687 0 1,687 0 0 0 Depreciation and amortization of dry-dock costs and intangibles � 2,235 � 509 � 2,744 � 1,601 � 239 � 1,840 � EBITDA 1,878 � 1,069 � 2,947 � 2,651 � 329 � 2,980 Rand Logistics nine months ended Variable Interest Entity nine months ended Consolidated nine months ended Rand Logistics nine months ended Variable Interest Entity nine months ended Consolidated nine months ended 31-Dec-07 31-Dec-07 31-Dec-07 31-Dec-06 31-Dec-06 31-Dec-06 � Income before interest, other income and expenses and income taxes (293 ) 1,825 1,532 7,564 666 8,230 � Loss (gain) on foreign exchange (208 ) 0 (208 ) 178 0 178 Write-off of retired vessel to salvage value 1687 0 1,687 0 0 0 Depreciation and amortization of dry-dock costs and intangibles 6,590 � 945 7,535 � 4,680 398 5,078 � EBITDA 7,776 � 2,770 10,546 � 12,422 1,064 13,486 Rand Logistics, Inc. Consolidated Balance Sheets U.S. Dollars in Thousands � � December 31, � March 31, 2007 2007 ASSETS (unaudited) � � (audited) CURRENT Cash and cash equivalents $ 3,150 $ 7,207 Blocked Account 2,700 - Accounts receivable 16,943 2,702 Prepaid expenses and other current assets 3,848 3,122 Income taxes receivable 263 263 Deferred income taxes � � 1,238 � � 1,219 Total current assets 28,142 14,513 � BLOCKED ACCOUNT - 2,700 PROPERTY AND EQUIPMENT, NET 83,622 66,859 DEFERRED INCOME TAXES 14,408 13,574 DEFERRED DRYDOCK COSTS, NET 7,412 5,895 INTANGIBLE ASSETS, NET 16,468 13,334 GOODWILL � � 11,711 � � 6,363 $ 161,763 $ 123,238 Total assets � � � � � � LIABILITIES CURRENT Bank indebtedness $ 2,823 $ 5,097 Accounts payable 12,342 11,445 Accrued liabilities 6,178 3,237 Acquired Management Bonus Program 3,000 - Interest rate swap contract 187 135 Income taxes payable 338 385 Deferred income taxes 969 589 Current portion of long-term debt � � 17,994 � � 4,398 Total current liabilities 43,831 25,286 LONG-TERM DEBT 38,823 34,864 ACQUIRED MANAGEMENT BONUS PROGRAM - 3,000 DEFERRED INCOME TAXES � � 14,397 � � 13,624 97,051 76,774 Total liabilities � � � � � � COMMITMENTS AND CONTINGENCIES - STOCKHOLDERS' EQUITY Preferred stock, $.0001 par value, 14,900 14,900 Authorized 1,000,000 shares, Issued and outstanding 300,000 shares Common stock, $.0001 par value 1 1 Authorized 50,000,000 shares, Issued and outstanding 12,092,142 shares Additional paid-in capital 58,232 38,407 Accumulated deficit (9,962) (5,947) Accumulated other comprehensive income (loss) 1,625 (1,073) Minority interest of variable interest entity � � (84) � � 176 64,712 46,464 Total stockholders� equity � � � � � � Total liabilities and stockholders� equity � $ 161,763 � $ 123,238