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 year ended March 31, 2008, and provided an update on recent business developments and their expected contribution to future results. Full-Year Fiscal 2008 Financial Results Marine freight revenue (excluding fuel surcharge, outside charter and other revenue) increased by $6.7 million, or 10.5%, to $70.3 million in fiscal year 2008, from $63.6 million in fiscal year 2007. Marine freight revenue per day increased by $2,180, or 9.4%, to $25,359 in fiscal year 2008, from $23,179 in fiscal year 2007. 1 Vessel margin per day (after expensed winter work) increased by $1,131, or 21.2%, to $6,470 in fiscal year 2008, from $5,339 in fiscal year 2007. 1 Laurence S. Levy, Chairman and CEO of Rand, commented, �Despite the fact that our financial results in fiscal year 2008 were impacted by the strike at Wisconsin and Michigan Steamship (�WMS�), we nevertheless enjoyed a material increase in vessel margin1, primarily due to an increase in freight rates, a significant improvement in the performance of our U.S. fleet and the continued strong performance of our Canadian fleet.� �We are also pleased to announce that we have met or exceeded our previously stated targets for revenue per day1, vessel margin per day, and public company cash expenses in fiscal 2008, and we continue to expect that our G&A expenses will grow at a lesser rate than our revenues, further boosting our future operating margins,� Mr. Levy continued. For the year ended March 31, 2008, excluding the Variable Interest Entity (�VIE�), earnings before interest, taxes, depreciation and amortization (�EBITDA�), was a loss of $1.2 million, compared to income of $3.6 million in fiscal year 2007. Fiscal year 2008 results were impacted by a loss of $4.7 million related to the WMS vessels,�versus breakeven for the twelve months ended March 31, 2007. This decrease was largely attributable to the strike associated with the three vessels previously operated under the time charter with WMS, which lasted from May through August of 2007 and impacted the Company�s full sailing season. An additional impact on fiscal year 2008 results was a $1.6 million charge to EBITDA, associated with previously announced one-time expenses related to improving management infrastructure, upgrading business software and IT, further improving internal controls, Voyageur transaction costs and a prior period restricted stock grant. 1 Excluding the three vessels previously operated under a time charter with Wisconsin and Michigan Steamship (�WMS�), the two conventional bulk carriers acquired in late August from the Voyageur group of companies, as well as all outside charter and contract of affreightment revenues. Fourth Quarter Fiscal 2008 Financial Results Marine freight revenue increased 2.8% to $3.0 million in the fiscal fourth quarter, which is the Company�s winter lay-up quarter, during which time the Company�s vessels are not operational. Excluding the VIE, the Company incurred an EBITDA loss of $9.0 million for the quarter ended March 31, 2008 versus a loss of $8.8 million for the quarter ended March 31, 2007. Vessel margins were constant between the quarter ended March 31, 2007 and March 31, 2008, despite the fact that the Company added five vessels during the quarter ended March 31, 2008 versus March 31, 2007, resulting in an increase in winterwork expense of over $1.2 million. G&A expenses increased by 6.1% to $3.1 million in the fourth quarter of fiscal year 2008 versus $3.0 million for the fourth quarter of fiscal year 2007. During the fourth quarter of fiscal year 2008, the Company hired 104 new employees to crew the three vessels that it purchased from WMS and to staff the two Voyageur vessels given the termination of the crew manning agreement. Management notes that substantially all of the integration work associated with the WMS acquisition and the remaining Voyageur vessels is complete as of March 31, 2008. Subsequent Developments Subsequent to quarter end, Rand completed the repowering of the Saginaw, one of its Canadian-flagged vessels, with a new highly automated emissions-compliant power plant. The vessel is now fully operational and the repowering is expected to improve operating margins going forward, due to an increase in speed, and a reduction in fuel consumption, labor, maintenance and other operating costs. Management estimates that the repowering will generate an annual mid-teens return on investment. Scott Bravener, President of Lower Lakes stated, �We are pleased to have completed the successful repowering of the Saginaw. This project, which was completed on budget, demonstrates our commitment to make continuing investments in our fleet, to provide the best available service to our customers. We anticipate this fully operational vessel will contribute to operating margin improvements going forward, as it adds necessary capacity to our fleet to meet the steadily growing demand for transportation services on the Great Lakes.� In April, Rand announced the appointment of Michael D. Lundin as an independent member of its Board of Directors. Lundin is the former President and Chief Executive Officer of the Oglebay Norton Company, a miner, processor, transporter and marketer of industrial minerals and aggregates. This latest appointment expands Rand�s Board to six members, including four non-management independent directors. Outlook Rand enters Fiscal 2009 in a position to capitalize on consistent favorable demand for transportation services on the Great Lakes. Mr. Levy concluded, �Our ongoing operational improvements, strategic acquisitions and vessel upgrades, in conjunction with the elimination of non-recurring IT and infrastructure expenses should continue to drive profit growth, as we maintain a leadership position in an industry with high barriers to entry and significant demand. Rand is in a unique position to take advantage of the strong demand for capacity and the firm freight rate environment. Our vessels are fully committed for the current fiscal year. We are excited about the outlook of our business for this year and beyond. Based on our preliminary actual results thus far in fiscal 2009, we are confident that our operations for the quarter ended June 30, 2008 will demonstrate Rand�s inherent earnings capability. We anticipate a significant increase in Rand�s earnings from those reported in the comparable quarter last year.� Rand Logistics, Inc. Summary Statement of Operations (U.S. Dollars 000's except for Earnings Per Share figures) � � Year ended Year ended � � 31-Mar-08 � 31-Mar-07 Revenue - Company operated vessels 85,239 74,175 Revenue - Outside voyage charter revenue � 9,530 � � 5,011 � 94,769 79,186 Expenses Outside voyage charter fees 9,436 4,935 Vessel operating expenses 69,117 57,474 Non operational repairs and maintenance � 3,844 � � 3,382 � � � 82,397 � � 65,791 � Income before general and administrative, depreciation, amortization of drydock costs and intangibles, other income and expenses and income taxes � 12,372 � � 13,395 � � General and administrative 10,678 8,069 Depreciation and amortization of drydock costs and intangibles 10,153 7,107 Gain on sale of vessels by variable interest entity (667 ) - Loss on retirement of owned vessel 1,735 - Loss (gain) on foreign exchange � (163 ) � 128 � � � 21,736 � � 15,304 � Income before interest, other income and expenses and income taxes � (9,364 ) � (1,909 ) � Net income � (14,518 ) � (4,521 ) Net income (loss) per share � basic (1.28 ) (0.63 ) Net income (loss) per share � diluted (1.28 ) (0.63 ) Conference Call Management will host a conference call to discuss the results at 5:00 p.m. ET on Thursday, June 26, 2008. Interested parties may participate in the conference call by dialing 866-249-5225 (303-262-2141 for international callers). When prompted, ask for the "Rand Logistics Fiscal Year 2008 Earnings Conference Call." A phone replay will be available from 8:00 p.m. ET on Thursday, June 26, 2008, until 11:59 p.m. ET on Saturday, July 5, 2008. Dial (800) 405-2236 (305-590-3000 for international callers) and enter the code 11116280# to access the phone replay. The conference call will be webcast simultaneously on the Rand Logistics Inc. website at www.randlogisticsinc.com under Investors: Webcasts & Presentations. The webcast replay will be archived for 12 months. 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 eight 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 000's except for Earnings Per Share figures) � � Year ended � Year Ended � � March 31, 2008 � � March 31, 2007 � REVENUE � 94,769 � � 79,186 � � EXPENSES Outside voyage charter fees � 9,436 4,935 Vessel operating expenses � 69,117 57,474 Repairs and maintenance � 3,844 3,382 General and administrative � 10,678 8,069 Depreciation � 6,428 5,142 Amortization of drydock costs � 1,476 388 Amortization of intangibles � 1,912 1,433 Amortization of chartering agreement costs 337 144 Gain on sale of vessels by variable interest entity (667 ) - Loss on retirement of owned vessel 1,735 - (Gain) loss on foreign exchange � (163 ) � 128 � � � 104,133 � � 81,095 � INCOME BEFORE OTHER INCOME AND EXPENSES AND INCOME TAXES � (9,364 ) � (1,909 ) � OTHER INCOME AND EXPENSES Interest expense � 4,883 3,778 Interest income � (235 ) (349 ) Loss on interest rate swap contract � 1,338 135 Loss on extinguishment of debt � 753 - Loss on deconsolidation of VIE � 302 � � - � � � 7,041 � � 3,564 � � INCOME BEFORE INCOME TAXES � (16,405 ) � (5,473 ) PROVISION (RECOVERY) FOR INCOME TAXES Current � 372 277 Deferred � (5,360 ) � (2,437 ) NET INCOME BEFORE MINORITY INTEREST (11,417 ) (3,313 ) MINORITY INTEREST � (176 ) � (224 ) NET INCOME � (11,241 ) � (3,089 ) PREFERRED STOCK DIVIDENDS 1,295 1,182 COMMON STOCK DIVIDEND OF VIE � - � � 250 � STOCK WARRANT INDUCEMENT DISCOUNT � 1,982 � � - � NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDERS � (14,518 ) � (4,521 ) � Net (loss) earnings per share basic ($1.28 ) ($0.63 ) Net (loss) earnings per share diluted ($1.28 ) ($0.63 ) Weighted average shares basic 11,355,068 7,225,083 Weighted average shares diluted 11,355,068 7,225,083 Rand Logistics, Inc. Selected Financial Information Reconciliation of Income before Interest, Other Income and Expenses and Income Taxes to EBITDA (U.S. Dollars 000's) � � Year ended March 31, 2008 � Year ended March 31, 2007 � � � � Rand Logistics Inc. Impact of FIN46R Consolidated Rand Logistics Inc. Impact of FIN46R Consolidated � � � � � � � � � � � � Income (loss) before interest, other income and expenses and income taxes (11,872) 2,508 (9,364) (2,989) 1,080 (1,909) � Loss (gain) on foreign exchange (163) (163) 128 128 Gain on sale of vessels by variable interest entity (667) (667) Loss on retirement of owned vessel 1,735 1,735 Depreciation and amortization of dry-dock costs and intangibles � 9,101 � 1,052 � 10,153 � 6,456 � 651 � 7,107 � EBITDA (1,199) � 2,893 � 1,694 � 3,595 � 1,731 � 5,326 Rand Logistics, Inc. Consolidated Balance Sheets (U.S. Dollars 000's) � � March 31, � March 31, 2008 2007 ASSETS � � � � CURRENT Cash and cash equivalents $ 5,626 $ 7,207 Accounts receivable 3,468 2,702 Prepaid expenses and other current assets 3,122 3,122 Income taxes receivable 193 263 Deferred income taxes � � 1,355 � � 1,219 Total current assets 13,764 14,513 � BLOCKED ACCOUNT - 2,700 PROPERTY AND EQUIPMENT, NET 96,349 66,859 DEFERRED INCOME TAXES 20,318 13,574 DEFERRED DRYDOCK COSTS, NET 9,082 5,895 INTANGIBLE ASSETS, NET 17,979 13,334 GOODWILL � � 10,193 � � 6,363 � Total assets � $ 167,685 � $ 123,238 LIABILITIES CURRENT Bank indebtedness $ 269 $ 5,097 Accounts payable 14,985 11,445 Accrued liabilities 7,243 3,237 Acquired Management Bonus Program 3,000 - Interest rate swap contract 1,274 135 Income taxes payable 422 385 Deferred income taxes 1,508 589 Current portion of long-term debt � � 3,521 � � 4,398 Total current liabilities 32,222 25,286 LONG-TERM DEBT 66,896 34,864 ACQUIRED MANAGEMENT BONUS PROGRAM - 3,000 DEFERRED INCOME TAXES � � 14,703 � � 13,624 � Total liabilities � � 113,821 � � 76,774 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $.0001 par value, � � Authorized 1,000,000 shares, Issued and outstanding 300,000 shares � 14,900 14,900 Common stock, $.0001 par value � � Authorized 50,000,000 shares, Issued and outstanding 12,092,142 shares � 1 1 Additional paid-in capital 58,350 38,407 Accumulated deficit (20,465) (5,947) Accumulated other comprehensive income (loss) 1,078 (1,073) Minority interest of variable interest entity � � - � � 176 � � Total stockholders� equity � � 53,864 � � 46,464 Total liabilities and stockholders� equity � $ 167,685 � $ 123,238