TAMPA, Fla., March 12 /PRNewswire-FirstCall/ --
Quality Distribution, Inc. (NASDAQ:QLTY) (the "Company") today reported the results for its fourth quarter and fiscal year ended December 31, 2007. Total revenue for the quarter increased 9.0% over the fourth quarter of 2006 from $171.1 million to $186.6 million. Total revenue for the year increased by 2.9% from $730.2 million last year to $751.6 million in 2007. Revenue excluding fuel surcharge was $159.4 million for the fourth quarter 2007 and $656.9 million for the year 2007.
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The Company incurred a net loss for fourth quarter of 2007 of $11.2 million, or ($0.58) per fully diluted share, as compared to net income for the same period of last year of $6.1 million, or $0.31 per fully diluted share. Applying a normalized tax rate of 39% to both periods would have resulted in a fully diluted loss per share for the fourth quarter 2007 of ($0.49), as compared with fully diluted earnings per share of $0.03 for the fourth quarter of 2006. Net income for 2006 was significantly influenced by the fact that we recorded as part of our provision for income taxes, a non cash benefit of $45.8 million, resulting from the release of the Company's deferred tax valuation allowance.
As stated in our earnings pre-release on February 12, 2008, in addition to a weakening economic environment, the Company's fourth quarter of 2007 was negatively impacted by several factors: the recent refinancing of our senior credit facility resulted in a $1.2 million non-cash charge to write off the remaining deferred financing costs related to the Company's previous senior credit facility, a $1.6 million charge related to unconsummated acquisition and re-financing activities during the year, a $0.8 million charge for bridge commitment fees related to the Boasso acquisition, and $4.8 million of incremental charges related to the adverse development of several large casualty claims that were settled at the end of the fourth quarter. The total pre-tax impact of these charges on the fourth quarter was approximately $8.4 million. Conversely, in the fourth quarter of last year, several unusual events had a net positive impact of $4.7 million on pretax income, including: a gain on the sale of real estate of approximately $4.3 million, a credit to insurance expense of $0.7 million related to the recovery of monies from an early 1990s claim, and better than normalized insurance claims experience of $0.7 million, which were offset by a $1.0 million charge for the write off of costs related to a planned secondary offering. After the adjustments mentioned above, there was a net decrease in the pre-tax income of our core business of $3.6 million (or ($0.12) tax effected EPS) in the fourth quarter of this year as compared to the fourth quarter of last year. The primary factors attributable to the reduction in quarterly year over year profitability were increased depreciation and lease costs related to updating our fleet over the past two years, loss on sale and/or impairment of obsolete revenue equipment and reduced margins due to affiliate conversions which take twelve to eighteen months to stabilize.
As previously announced, on December 18, 2007, the Company acquired 100% of the outstanding capital stock of Boasso America Corporation ("Boasso") for an aggregate purchase price of $58.8 million less the outstanding debt of Boasso, and subject to a working capital adjustment. The fourth quarter and annual results include two weeks of results from the Boasso acquisition.
Commenting on the results and acquisitions, President and Chief Executive Officer Gary Enzor stated, "As we stated in our earnings pre-release of February 12, 2008, we are very disappointed with our Q4 and full year 2007 results. We are committed to taking actions necessary to improve results."
Mr Enzor added: "We are very pleased with the Boasso acquisition: Boasso's revenue for January and February 2008 has increased 10% as compared with the same periods last year. We expect Boasso to continue performing at these levels and in addition we expect to realize operating leverage as Quality Distribution's approximately $8 million of ISO container revenue is absorbed into Boasso's more robust and more profitable operating model. Furthermore, Boasso is scheduled to open a major new ISO container operation in Newark, New Jersey this summer, a location we expect to contribute significant revenue and bottom line growth."
Timothy Page, Chief Financial Officer stated, "As for the rest of Quality Distribution, revenue (excluding fuel surcharge and Boasso) in our core trucking business is up 2% above last year through the end of February. Total revenue (excluding fuel surcharge and Boasso) is up 2.8%. While not meeting our expectations, we are pleased that given the weak economy and a significant housing sector related revenue decline with our largest customer, our transportation revenue is up versus last year."
Mr. Page added, "The proceeds from the refinancing of our credit facility were primarily used to fund the acquisition of Boasso. Besides extending the maturities of our existing Senior Credit Facility, this refinancing provides us with additional borrowing availability and along with the recent declines in LIBOR rates is expected to yield a reduction in our blended cost of capital."
In the fourth quarter of 2007, the Company changed its accounting policy for tires. Prior to the change, the cost of original and replacement tires mounted on equipment were reported as prepaid tires and amortized based on estimated usage. Under the new policy, the Company capitalizes the cost of tires mounted on equipment as a part of the total equipment cost and depreciates the cost over the useful life of the related equipment. This change in policy is consistent with industry practice, and did not have a material impact on the Company's pre-tax results in 2006 and 2007. The Company has reported this change retrospectively applying the new policy to all prior period financial statements presented.
The Company will host a conference call for investors to discuss these results on March 13, 2008 at 11:00 a.m. Eastern Time. The toll free dial-in number is 888-240-9352; the toll number is 913-981-5525; the passcode is 4790489. https://cis.premconf.com/sc/scw.dll/usr?cid=vlllrwznnzzvlcmdcA replay of the call will be available until April 12, 2008 by dialing 888-203-1112; passcode; 4790489. Copies of this earnings release and other financial information about the Company may be accessed in the Investor Relation section of the Company's website at http://www.qualitydistribution.com/.
Headquartered in Tampa, Florida, QDI, through its subsidiaries, Quality Carriers, Inc. and Boasso America Corporation, and through its affiliates and owner-operators, provides bulk transportation and related services. QDI also provides tank cleaning services to the bulk transportation industry through its QualaWash(R) facilities. QDI 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; potential disruption at U.S. ports of entry; changes in senior management; the Company's ability to achieve projected operating objectives and debt reduction in 2008; its ability to successfully integrate acquired businesses or integrate affiliate businesses converted to Company-controlled operations; 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, 2006 and its quarterly reports on Form 10-Q, 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
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,
2007 2006 2007 2006
OPERATING REVENUES:
Transportation $138,020 $136,463 $580,676 $577,239
Other service revenue 21,374 15,913 76,221 66,644
Fuel surcharge 27,178 18,727 94,661 86,276
Total operating revenues 186,572 171,103 751,558 730,159
OPERATING EXPENSES:
Purchased transportation 113,504 113,323 471,531 493,686
Compensation 23,262 17,881 85,820 73,207
Fuel, supplies and
maintenance 24,771 14,900 81,316 53,324
Depreciation and
amortization 4,584 4,198 17,544 16,353
Selling and administrative 9,977 8,416 31,291 24,042
Insurance claims 9,562 3,147 23,883 13,307
Taxes and licenses 1,251 1,149 3,980 3,812
Communications and
utilities 3,300 2,176 11,381 9,043
Loss (gain) on disposal
of property and equipment 183 (4,243) 601 (5,163)
Impairment on property
and equipment 358 270 358 270
Total operating
expenses 190,752 161,217 727,705 681,881
Operating income (loss) (4,180) 9,886 23,853 48,278
Interest expense 7,939 7,787 31,342 30,955
Interest income (245) (197) (818) (1,567)
Write off of debt
issuance costs 2,031 -- 2,031 --
Other expense 1,578 1,150 940 888
Income (loss) before
taxes (15,483) 1,146 (9,642) 18,002
Benefit from income
taxes (4,308) (4,963) (2,079) (38,168)
Net income (loss) $(11,175) $6,109 $(7,563) $56,170
PER SHARE DATA:
Net income (loss) per
common share
Basic $(0.58) $0.32 $(0.39) $2.97
Diluted $(0.58) $0.31 $(0.39) $2.87
Weighted average number
of shares
Basic 19,335 18,930 19,336 18,920
Diluted 19,335 19,629 19,336 19,571
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In 000's)
Unaudited
December 31, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $9,711 $6,841
Accounts receivable, net 99,081 85,482
Prepaid expenses 8,150 6,101
Deferred tax asset, net 20,483 18,320
Other 6,258 9,214
Total current assets 143,683 125,958
Property and equipment, net 121,992 119,338
Goodwill 173,575 138,980
Intangibles, net 24,167 635
Non-current deferred tax asset, net 16,203 21,713
Other assets 14,356 11,249
Total assets $493,976 $417,873
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of indebtedness $413 $1,400
Current maturities of capital lease
obligations 1,451 1,178
Accounts payable 17,428 13,957
Affiliates and independent owner-operators
payable 12,597 11,025
Accrued expenses 25,957 21,197
Environmental liabilities 4,751 5,995
Accrued loss and damage claims 13,438 11,533
Income taxes payable 555 --
Total current liabilities 76,590 66,285
Long-term indebtedness, less current
maturities 343,575 272,826
Capital lease obligations, less current
maturities 3,832 3,718
Environmental liabilities 6,418 5,831
Accrued loss and damage claims 18,474 20,633
Other non-current liabilities 15,954 14,249
Deferred tax liability -- 724
Total liabilities 464,843 384,266
Minority interest in subsidiary 1,833 1,833
SHAREHOLDERS' EQUITY
Common stock 361,617 359,995
Treasury stock (1,564) (1,527)
Accumulated deficit (126,146) (118,255)
Stock recapitalization (189,589) (189,589)
Accumulated other comprehensive loss (16,748) (18,531)
Stock purchase warrants -- 21
Stock subscriptions receivable (270) (340)
Total shareholders' equity 27,300 31,774
Total liabilities, minority interest
and shareholders' equity $493,976 $417,873
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
Unaudited
Year ended
December 31,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(7,563) $56,170
Adjustments to reconcile to net cash and
cash equivalents provided by operating
activities:
Deferred income tax (provision) benefit (6,053) 4,661
Depreciation and amortization 17,544 16,353
Bad debt expense (recoveries) 796 (361)
Loss (gain) on disposal of property and equipment 601 (5,163)
Impairment loss on property and equipment 358 270
Interest income on repayment of stock subscription -- (690)
Write-off of deferred financing costs 2,031 --
Stock based compensation 1,563 3,005
Amortization of deferred financing costs 1,865 1,824
Amortization of bond discount 279 243
Write-off of stock offering costs -- 986
Minority dividends 145 145
Release of deferred tax valuation allowance 1,403 (45,226)
Changes in assets and liabilities:
Accounts and other receivables (2,545) 16,185
Prepaid expenses (309) (728)
Other assets 910 (4,846)
Accounts payable (288) (5,082)
Accrued expenses 2,784 (1,833)
Environmental liabilities (657) (5,333)
Accrued loss and damage claims (1,155) (2,464)
Affiliates and independent owner-operators
payable 816 (954)
Other liabilities 545 1,074
Current income taxes 982 --
Net cash provided by operating activities 14,052 28,236
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,557) (14,870)
Acquisition of businesses and assets (6,836) (6,447)
Acquisition of Boasso America Corporation (53,415) --
Cash acquired from Boasso America Corporation 1,015 --
Proceeds from sales of property and equipment 6,394 10,726
Net cash used in investing activities (63,399) (10,591)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 46,809 --
Principal payments on long-term debt (65,450) (1,400)
Principal payments on capital lease obligations (1,204) (363)
Proceeds from revolver 123,030 209,500
Payments on revolver (41,400) (222,500)
Payments on acquisition notes (592) --
Deferred financing fees (9,170) --
Stock offering costs (787) (199)
Change in book overdraft 1,033 2,430
Minority dividends (145) (145)
Other stock transactions 70 203
Net cash provided by (used in) financing
activities 52,194 (12,474)
Effect of exchange rate changes on cash 23 34
Net increase in cash and cash equivalents 2,870 5,205
Cash and cash equivalents, beginning of year 6,841 1,636
Cash and cash equivalents, end of period $9,711 $6,841
RECONCILIATION OF NET INCOME (LOSS) TO TAX EFFECTED NET INCOME (LOSS) AND
RECONCILIATION OF NET INCOME (LOSS) PER SHARE TO TAX EFFECTED NET INCOME
(LOSS) PER SHARE
For the Three Months and Year Ended December 31, 2007 and 2006
(In 000's)
Unaudited
Tax Effected Net Income (Loss) and Tax Effected Net Income (Loss) 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 39% tax
rate for calculating the (benefit from) provision for income taxes to
normalize the Company's tax rate to that of comparable transportation
companies. Tax Effected Net Income (Loss) and Tax Effected Net Income
(Loss) Per Share are not a measure of financial performance or liquidity
under United States Generally Accepted Accounting Principles ("GAAP").
Tax Effected Net Income (Loss) and Tax Effected Net Income (Loss) 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 (Loss) Reconciliation: Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
Net income ((loss) $(11,175) $6,109 $(7,563) $56,170
Net income (loss) per common share:
Basic $(0.58) $0.32 $(0.39) $2.97
Diluted $(0.58) $0.31 $(0.39) $2.87
Adjustments to net income (loss):
(Benefit from) provision for
income taxes (4,308) (4,963) (2,079) (38,168)
Income (loss) before income taxes (15,483) 1,146 (9,642) 18,002
(Benefit from) provision for
income taxes at 39% (6,038) 447 (3,760) 7,021
Tax effected net income (loss) $(9,445) $669 $(5,882) $10,981
Tax effected net income (loss)
per common share:
Basic $(0.49) $0.04 $(0.30) $0.58
Diluted $(0.49) $0.03 $(0.30) $0.56
Weighted average number of shares:
Basic 19,335 18,930 19,336 18,920
Diluted 19,335 19,629 19,336 19,571
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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/