TAMPA, Fla., Feb. 26 /PRNewswire-FirstCall/ -- Quality Distribution Inc. (NASDAQ:QLTY) (the "Company") today announced results for its fourth quarter ended December 31, 2006. Net income for the quarter ended December 31, 2006 was $6.2 million or $0.31 earnings per fully diluted share ("EPS"), as compared to $6.2 million or $0.32 EPS for the same period last year. Included in net income this quarter and recorded as part of our provision for income taxes was a net non-cash tax benefit of $6.7 million ($0.34 per fully diluted share) resulting from an additional release of the Company's deferred tax valuation allowance. For the year ended December 31, 2006, net income was $54.2 million or $2.77 EPS, as compared to $11.9 million, or $0.62 EPS for the same period last year. The year to date release of the deferred tax valuation allowance was $45.8 million ($2.34 per fully diluted share).
(Logo: http://www.newscom.com/cgi-bin/prnh/20041104/FLTH034LOGO ) Net income for the fourth quarter ended December 31, 2006, as adjusted for a normalized 35% tax rate ("tax effected net income") would have been $0.8 million or $0.04 EPS as compared to a tax effected net income of $3.7 million or $0.19 EPS for the same period last year. Tax effected net income for the year ended December 31, 2006 increased 48.7% to $11.8 million or $0.60 EPS as compared to $7.9 million or $0.41 EPS for the same period last year. The Company believes that the 35% normalized tax rate is a methodology for calculating tax effected net income that is consistent with that used by investors and research analysts in evaluating the Company's financial performance. Operating margin increased to 6.6% in 2006, from 5.9% in 2005.
Total revenue for the quarter ended December 31, 2006 was $171.1 million, a 2.4% decrease over the $175.3 million of revenue recorded during the same period in the prior year. Revenue (excluding fuel surcharges) decreased 1.1% to $152.4 million in the fourth quarter of this year as compared to $154.0 million for the fourth quarter of last year. Transportation revenues were down $1.0 million, a 0.8% decrease over the prior year quarter. The decrease was primarily attributable to softer than anticipated seasonal demand, and decreased load count that was spread across most of our customer base.
Total revenue for the year ended December 31, 2006 was $730.2 million, a 7.7% increase over the $678.1 million of revenue recorded last year, representing the fourth consecutive year over year increase. Revenue (excluding fuel surcharges) increased 4.9% to $643.9 million in 2006 as compared to $613.8 million last year. Transportation revenues were $577.2 million, a 5.6% increase over the prior year, primarily due to rate increases and an increase in the number of miles driven.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter was $12.8 million as compared to $16.6 million in the same period last year. For the year ended December 31, 2006, EBITDA was $63.3 million as compared to $56.8 million for the same period last year.
In spite of the lower than expected fourth quarter earnings, we continue to generate strong free cash flow. Our total debt, net of cash, decreased $8.7 million during the fourth quarter and $15.2 million as compared to year- end 2005. The decrease in overall debt is primarily due to cash flow generation from our operating results and improvements in the management of our accounts receivables resulting in a decrease in our days sales outstanding (DSO) during fiscal 2006.
Commenting on the results, Chairman and Chief Executive Officer Jerry Detter stated, "While we were disappointed that demand softened to a greater degree than expected in the fourth quarter and earnings were well below our expectations, we nonetheless feel that 2006 was in many ways a transformational year for the Company. Safety is our number one priority and throughout 2006 we saw an improved loss experience and a significant reduction in our insurance costs. Tax effected EPS increased almost 50% over last year and is 300% greater than two years ago. We implemented the first company-wide training programs for our terminal managers and dispatchers, a program that we believe will produce long-term positive benefits for the Company in reduced driver turnover, improved productivity and morale and better asset utilization. We invested in upgrading many of our terminals, purchased new trailers, and invested in rebuilding a number of our tank wash facilities." As a result of the reversal of the deferred tax valuation allowance discussed earlier in the release, the Company estimates that its 2007 effective tax rate for Generally Accepted Accounting Principles (GAAP) purposes will be approximately 39%, as compared to the historical rate of approximately 10%. It is important to note that while the Company's effective tax rate for GAAP purposes will increase, this change will not impact the usage of the Company's net operating loss carryforward (NOL) of $74 million as of December 31, 2006 and will have no effect on the Company's cash tax expense or free cash flow generation. The Company believes that there are no practical limitations on the usage of the NOL and expects that it will be fully utilized over the next several years.
Timothy Page, Chief Financial Officer added, "While we expected that our fourth quarter results for this year would be below last year's hurricane- influenced record levels, we did not anticipate the extent to which our load counts would be down. In the fourth quarter last year, both volume and rate were positively impacted by the aftermath of hurricanes Katrina and Wilma due to rail and traffic diversions and from supply disruptions in the Gulf region. Margins suffered not only from the reduced level of activity, but also from the quality of the freight that was available. Our fourth quarter results this year contain $4.2 million of gains on sales of properties, and were negatively impacted by $2.1 million of costs associated with environmental remediation projects and $1.0 million for expenses related to the filing of a shelf registration statement and expenses for potentially issuing new shares." Page continued, "Demand has shown signs of recovery in the past few weeks, but ran at levels below our expectations for the first six weeks of 2007. We are focused on a number of initiatives to drive additional demand, improve productivity, reduce costs and continue to pay down debt." The Company will host a conference call for investors to discuss these results on February 27, 2007 at 11:00 a.m. Eastern Time. The dial-in number is 866-454-4203 toll free; the passcode is 7375904. A replay of the call will be available until April 30 2007, by dialing 888-203-1112; passcode 7375904. Copies of this earnings release and other financial information about the Company may be accessed on the "QDI Main / News and Publications" and "Investors" sections of the Company's website at http://www.qualitydistribution.com/.
Headquartered in Tampa, Florida, Quality Distribution, Inc. through its subsidiary, Quality Carriers, Inc., and through its affiliates and owner- operators, provides bulk transportation and related services. The Company also provides tank cleaning services to the bulk transportation industry through its QualaWash(R) facilities. Quality Distribution, Inc. is an American Chemistry Council Responsible Care(R) Partner and is a core carrier for many of the Fortune 500 companies that are engaged in chemical production and processing.
This release contains certain forward-looking information that is subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995 and is subject to certain risks and uncertainties that could cause actual results to differ materially from those expected or projected in the forward-looking statements. Without limitation, these risks and uncertainties include the Company's substantial leverage; economic factors; downturns in customers' business cycles or in the national economy; the cyclical nature of the transportation industry; claims exposure and insurance costs; adverse weather conditions; dependence on affiliates and owner-operators; changes in government regulation including transportation, environmental and anti-terrorism laws; the Company's environmental remediation costs; fluctuations in fuel pricing or availability; increases in interest rates; changes in senior management; its ability to achieve projected operating objectives and debt reduction in 2007; its ability to successfully integrate acquired businesses or integrate affiliate businesses converted to Company-controlled operations; the loss of the Company's ability to use net operating losses; and the Company's ability to attract and retain qualified drivers. Readers are urged to carefully review and consider the various disclosures, including but not limited to risk factors, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2005 and its quarterly reports on Form 10-Q, for the first, second, and third quarters of 2006 as well as other periodic reports filed with the Securities and Exchange Commission. The Company disclaims any obligations to update any forward-looking statement as a result of developments occurring after the date of this release.
Contact:
Timothy B. Page
Senior Vice President and Chief Financial Officer
1-800-282-2031 ext. 7376 QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000's) Except Per Share Data
Unaudited Three months ended Year ended
December 31 December 31
2006 2005 2006 2005 OPERATING REVENUES:
Transportation $136,462 $137,501 $577,241 $546,527
Other service
revenues 15,914 16,500 66,642 67,247
Fuel surcharge 18,727 21,280 86,276 64,302
Total operating
revenues 171,103 175,281 730,159 678,076
OPERATING EXPENSES:
Purchased
transportation 113,323 122,278 493,686 471,238
Compensation 17,881 16,056 73,207 62,558
Fuel, supplies
and maintenance 14,992 9,848 53,795 35,897
Depreciation and
amortization 4,049 3,850 15,710 16,714
Selling and
administrative 8,416 4,419 24,042 20,433
Insurance claims 3,147 3,247 13,307 19,183
Taxes and licenses 1,149 661 3,812 2,894
Communications
and utilities 2,176 2,280 9,043 7,932
Loss (gain) on
disposal of property
and equipment (4,243) (45) (5,163) 288
Impairment on property
and equipment 270 75 270 75
PPI class action
settlement and
related expenses - - - 1,039
Total operating
expenses 161,160 162,669 681,709 638,251 Operating income 9,943 12,612 48,450 39,825 Interest expense 7,787 7,160 30,955 26,957
Interest income (197) (87) (1,567) (245)
Write off of debt
issuance costs - - - 1,110
Other (income) expense 1,150 (100) 888 (222)
Income before taxes 1,203 5,639 18,174 12,225
(Benefit) / provision
for income taxes (4,963) (550) (36,033) 352
Net income $6,166 $6,189 $54,207 $11,873 PER SHARE DATA:
Net income per
common share
Basic $0.33 $0.33 $2.87 $0.63
Diluted $0.31 $0.32 $2.77 $0.62 Weighted average
number of shares
Basic 18,930 18,952 18,920 18,934
Diluted 19,629 19,161 19,571 19,301 QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In 000's)
Unaudited December 31, December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $6,841 $1,636
Accounts receivable, net 85,482 101,353
Prepaid expenses 6,101 5,336
Prepaid tires 7,517 7,360
Deferred tax asset, net 18,320 -
Other 9,214 5,017
Total current assets 133,475 120,702
Property and equipment, net 116,964 115,199
Assets held-for-sale 381 158
Goodwill 138,980 133,138
Intangibles, net 635 1,165
Non-current deferred tax asset, net 19,578 -
Other assets 11,249 12,043
Total assets $421,262 $382,405 LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of indebtedness $2,578 $1,515
Accounts payable 13,957 16,609
Affiliates and independent owner-operators
payable 11,025 11,979
Accrued expenses 21,197 22,046
Environmental liabilities 5,995 8,516
Accrued loss and damage claims 11,533 9,598
Total current liabilities 66,285 70,263
Long-term indebtedness, less current maturities 276,544 287,601
Environmental liabilities 5,831 8,643
Accrued loss and damage claims 20,633 25,032
Other non-current liabilities 14,249 10,213
Deferred tax liability 724 930
Total liabilities 384,266 402,682
Minority interest in subsidiary 1,833 1,833
SHAREHOLDERS' EQUITY / (DEFICIT)
Common stock, no par value; 29,000 authorized,
19,210 issued at December 31, 2006 and 19,123
issued at December 31, 2005 359,995 359,160
Treasury stock, 172 and 93 shares at
December 31, 2006 and December 31,
2005, respectively (1,527) (202)
Accumulated deficit (114,866) (168,938)
Stock recapitalization (189,589) (189,589)
Accumulated other comprehensive loss (18,531) (19,079)
Stock purchase warrants 21 54
Unearned compensation, restricted stock
and stock units - (1,975)
Stock subscriptions receivable (340) (1,541)
Total shareholders' equity / (deficit) 35,163 (22,110)
Total liabilities, minority interest and
shareholders' equity / (deficit) $421,262 $382,405 QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
Unaudited Year ended
December 31,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $54,207 $11,873
Adjustments to reconcile to net cash and
cash equivalents used in
Operating activities:
Deferred income taxes (38,430) (266)
Depreciation and amortization 15,710 16,714
Bad debt expense (121) 1,219
Foreign currency transaction gain (47) (165)
(Gain) loss on disposal of
property and equipment (5,163) 288
Impairment loss on property and equipment 270 75
Interest income on repayment of
stock subscription (690) -
Write-off of deferred financing costs - 1,110
Stock based compensation 3,005 1,077
Amortization of deferred financing costs 1,824 1,855
Amortization of bond discount 243 233
Write-off of stock offering costs 986 -
Minority dividends 145 145
Changes in assets and liabilities:
Accounts and other receivables 15,992 (1,736)
Prepaid expenses (728) (491)
Prepaid tires (639) (421)
Other assets (4,846) (3,919)
Accounts payable and accrued expenses (6,915) (6,508)
Environmental liabilities (5,333) (8,439)
Accrued loss and damage claims (2,464) (3,946)
Affiliates and independent
owner-operators payable (954) 1,996
Other liabilities 1,074 (207)
Current income taxes - (2,427)
Net cash provided by operating activities 27,126 8,060 CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,760) (14,876)
Acquisition of business and assets (6,447) (4,466)
Proceeds from sales of property and equipment 10,726 4,258
Net cash used in investing activities (9,481) (15,084) CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 83,300
Principal payments on long-term debt and
capital lease obligations (1,763) (78,927)
Proceeds from revolver 209,500 140,600
Payments on revolver (222,500) (133,400)
Deferred financing fees - (3,231)
Stock offering costs (199) -
Change in book overdraft 2,430 (2,415)
Minority dividends (145) (145)
Other stock transactions 203 76
Net cash (used in) provided by
financing activities (12,474) 5,858
Effect of exchange rate changes on cash 34 102
Net increase (decrease) in cash and
cash equivalents 5,205 (1,064)
Cash and cash equivalents, beginning of year 1,636 2,700
Cash and cash equivalents, end of period $6,841 $1,636 Reconciliation of EBITDA to Net Income
(In 000's)
Unaudited EBITDA represents net income attributable to common shareholders before interest expense, provision for taxes, and depreciation and amortization. We believe that financial information based on the United States generally accepted accounting principles ("GAAP") for highly leveraged businesses, such as ours, should be supplemented by EBITDA so that investors better understand our financial information in connection with their analysis of our business. EBITDA is a component of the measure used by our management to facilitate internal comparisons to competitors' results and the bulk transportation industry in general. This measure is especially important given the recent trends of increased merger and acquisition activity and financial restructurings within the industry, which has led to significant variations among companies with respect to capital structures and cost of capital (which affect interest expense) and differences in taxation and book depreciation of facilities and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Accordingly, EBITDA allows analysts, investors and other interested parties in the bulk transportation industry to facilitate company to company comparisons by eliminating some of the foregoing variations. Total EBITDA may not, however, be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative measure. EBITDA is not a measure of financial performance or liquidity under GAAP. EBITDA should not be considered in isolation or as a substitute for consolidated statements of operations and cash flow data prepared in accordance with GAAP as an indication of our operating performance or liquidity.
Three months Three months
ended ended Year ended Year ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005 Net income $6,166 $6,189 $54,207 $11,873
(Benefit) provision
for income taxes (4,963) (550) (36,033) 352
Interest expense 7,787 7,160 30,955 26,957
Interest income (197) (87) (1,567) (245)
Write off of debt
issuance costs - - - 1,110
Depreciation and
amortization 4,049 3,850 15,710 16,714 EBITDA $ 12,842 $ 16,562 $63,272 $56,761
RECONCILIATION OF NET INCOME TO TAX EFFECTED NET INCOME AND RECONCILIATION OF NET INCOME PER SHARE TO TAX EFFECTED NET INCOME PER SHARE
For the Three Months and Year Ended December 31, 2006 and 2005
(In 000's)
Unaudited Tax Effected Net Income and Tax Effected Net Income Per Share (as defined) is presented herein because they are important metrics used by management to evaluate and understand the performance of the ongoing operations of the Company's business. Management uses a 35% tax rate for calculating the provision for income taxes to normalize the Company's tax rate to that of comparable transportation companies. Tax Effected Net Income and Tax Effected Net Income Per Share are not a measure of financial performance or liquidity under United States Generally Accepted Accounting Principles ("GAAP"). Tax Effected Net Income and Tax Effected Net Income Per Share should not be considered in isolation or as a substitute for the consolidated statements of operations and cash flow data prepared in accordance with GAAP as an indication of the Company's operating performance or liquidity.
Net Income Reconciliation:
Three months ended Year ended
December 31, December 31,
2006 2005 2006 2005 Net income $6,166 $6,189 $54,207 $ 11,873 Net income per
common share:
Basic $0.33 $0.33 $2.87 $0.63
Diluted $0.31 $0.32 $2.77 $0.62 Adjustments to net income:
(Benefit) provision
for income taxes (4,963) (550) (36,033) 352
Income before
income taxes 1,203 5,639 18,174 12,225 Provision for income
taxes at 35% 421 1,974 6,361 4,279
Tax effected net income $782 $3,665 $11,813 $7,946 Tax effected net income
per common share:
Basic $0.04 $0.19 $0.62 $0.42
Diluted $0.04 $0.19 $0.60 $0.41
Weighted average
number of shares:
Basic 18,930 18,952 18,920 18,934
Diluted 19,629 19,161 19,571 19,301
http://www.newscom.com/cgi-bin/prnh/20041104/FLTH034LOGO http://photoarchive.ap.org/ DATASOURCE: Quality Distribution, Inc.
CONTACT: Timothy B. Page, Senior Vice President and Chief Financial Officer, Quality Distribution, Inc., +1-800-282-2031 ext. 7376 Web site: http://www.qualitydistribution.com/
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