GMR Email 3-8-09 4Q 2008 Earnings Update

To: Friends and Family

I am still a believer, especially with the stock below $7.00/share. GMR's earnings on the surface were bad because of some one time severance charges as part of the merger which I think may be part of the reason for the selloffs of late, but the ongoing expectations are for an even lower base of SG&A costs which should push EBITDA margins north of 50% permanently. Looking at the 4Q alone, adjusted EBITDA was 53% of revenues or $47MM. This number only includes a few days of Arlington results as well. So on a pro forma basis EBITDA is going to be more like $55-60MM with about $10MM of capex (conservative) and $8MM of interest per quarter. So, quarterly free cash flow will be in the range of $37-$42MM which should more than cover the $28.9MM required to meet the $0.50 dividend payment/quarter on the post acquisition 57.9MM shares. There is also over $100MM of cash on the books now too to cover any short falls. Also, very important I think, is the company paid its full dividend for the quarter last week, even though most of its competitors have cut theirs. If GMR were to cut the divy the time to do that was last week as almost all the other divy paying companies have done. This is uplifting news. A few other points...

gross PP&E is now on the books at $1.5Billion and net PP&E at $1.3Billion. With the stock currently at $6.86 ($400MM market cap) and net debt outstanding of $886MM the enterprise value of the company is $1.28Billion. That means the stock is currently trading under its gross and net pp&e book values as well. Another positive fundamental metric.

The one thing that has me not all out loading up on shares is the latest S3 filing by the company up to $500MM. I suspect the company is going to issue more debt to either make another acquisition, buy back shares, buy more tankers or a combo of a few. The company is already levered over 4x EBITDA, so that may be spooking investors as well, especially in the current times of deleveraging. The filing is just the start of the process, so who knows if it will ever get done and for how much, but nevertheless it is interesting they have filed to take some sort of cash raising. The existing debt doesnt start to become due until 2011. The difference between GMR's debt and most other companies is it is backed by their tankers, so they get ridiculously low interest rates. Current average rate on existing debt is below 5%. So, more debt isn't necessarily bad, it's just something that I need to follow...especially to find out its usage.

Overall I am happy with the results and am looking to lock in some good shares at these low prices. My valuation models have the stock worth anywhere from $4 to $22 depending on future growth rates. But, my conservative average price is $10.63/share. With the current $2.00 dividend yield over 25% and expected payment continuation, I see no reason to not start buying shares. A 25% annual return over the long run should be well worth any short term downside in price, if that should continue. The risk/reward is now skewed heavily to the upside, unless something happens with the oil market or international shipping laws.

Good Luck. Next update when any major news comes out.