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.