Tuesday, August 16, 2016 Rand Logistics (RLOG) issued an 8K
announcing it’s currently in default under the Credit Agreement dated as of
March 27, 2015. Further, the first fiscal quarter ended June 30, 2016 financial
results were released today. RLOG closed down today at $0.81 or 14 M market
cap down 16%. Rand Logistics is a bulk carrier shipping company in the Great Lakes.
It transports construction aggregates, salt, grain, iron ore, and other dry
bulk commodities.
For the quarter ending 06/30/16, RLOG reported EBITDA of $11.2 million down 6.3% versus $12 million
in the prior year period. Net income per share before impairment charge and
restructuring was $0.07 for the quarter ended June 30, 2016. Net income is $1.3
million before impairment charge on a retired vessel and restructuring reserve
of $4.3 million compared to net income of $2.6 million in the prior year period.
During today’s conference call management was optimistic on a new credit
waiver. The main concern was to increase credit flexibility.
“The
current covenant levels were set in early 2014 when the Canadian and U.S.
dollars were at par. Since then, the Canadian dollar has declined by over 30%.
Every one penny move in relation to U.S. versus the Canadian dollar equates to
approximately $275,000 of reported U.S. EBITDA. This has resulted in a $6.5
million annual reduction to our earnings at current levels and has made our
covenants which are measured in U.S. dollars, tight each quarter. As part of
our discussion with our lenders, we are seeking to amend our covenants to
provide more quarterly cushion and offset the impact in the decline of the
Canadian dollar. We anticipate reaching a resoluti/on in the next week and
releasing our 10-Q at that time.”
Customer demand for 2016 is expected to reach forecasts and to sail at least 3,405 days this fiscal year. Management remains optimistic about
demand for the remainder of 2016. “Based on customer conversations, we are
optimistic about our future aggregates demand due to a recently approved
legislative bill in Michigan, which is aimed at increasing funding for roads
and infrastructure. We anticipate that this is likely to have a positive impact
on aggregate demand for the foreseeable future.” Additionally, management is
increasing their previously disclosed cost savings targets by $1 to $3 million
to reach $5 million of annual savings. This is to be recognized over the next
12 months. The cost savings program is part of an initiative to improve return
on invested capital and reduce debt outstanding.
RLOG
