Quality Distribution, Inc. Announces Second Quarter Results
TAMPA, Fla., Aug. 8 /PRNewswire-FirstCall/ — Quality Distribution, Inc. (the “Company”) today reported the highest total revenues and highest transportation revenues in its history. The total revenue for the quarter was $194.6 million, a 2.3% increase over second quarter revenues of $190.3 million last year. Transportation revenues increased 1.6% from the prior-year quarter primarily resulting from an increase in prices. Total revenue for the six months ended June 30, 2007, increased to $372.7 million from $369.0 million last year, with transportation revenues increasing by 0.7%.
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Operating income for the quarter ended June 30, 2007 was $11.9 million versus $5.5 million for the first quarter of this year an increase of 115% on revenue growth of 9.3%. The improved margins are a result of a decrease in insurance expense in the quarter and a general improvement in operating margins in both our trucking and tank wash businesses as both began to recover from a weak 4th and 1st quarter.
Net income for the quarter ended June 30, 2007 was $2.2 million, or $0.12 earnings per fully diluted share (“EPS”), as compared with net income of $5.5 million or $0.28 EPS in the second quarter of last year. Net income for the six months ended June 30, 2007 was $2.1 million, or $0.11 EPS, as compared with net income of $10.0 million, or $0.51 EPS last year.
The company’s reported EPS was adversely impacted by a higher than normal effective tax rate in the 2nd quarter of 48.8%. The quarterly rate was affected by certain permanent tax items, the impact of which will be mitigated on a full year basis such that the Company expects its annual effective tax rate to be in the range of 36% to 39%. Applying an annual 39% tax rate to pre-tax income for the second quarter 2007 results in an EPS of $0.14 as compared to an EPS of $0.18 for the comparable period last year. Included in the quarter was a pre-tax charge of approximately $300,000 ($0.01 EPS assuming a 39% effective tax rate) related to the Company’s relocation of its corporate headquarters to a new facility in Tampa, FL.
As previously announced, effective May 1, 2007 the Company acquired the assets of Brite Clean, a leading tank wash operation with annual revenues of approximately $12 million, and facilities located in Carteret, NJ, Bensalem, PA, Houston, TX and Chicago, IL.
The Company also announced on August 2, 2007 that it has entered into an agreement to acquire 100% of the outstanding stock of Boasso America Corporation (“Boasso”) for approximately $60 million, subject to purchase price adjustments. Boasso, headquartered in Chalmette, LA, is a leading provider of ISO tank container and depot services. This acquisition will add six additional locations in Chalmette, LA, Houston, TX, Charleston, SC, Chicago, IL, Detroit, MI and Jacksonville, FL to the Company’s network of tank container service centers. For its most recent fiscal year ended March 31, 2007, Boasso had revenues in excess of $70 million. The Company expects the acquisition to be immediately accretive to earnings and to close during the fourth quarter.
Commenting on the results and acquisitions, President and Chief Executive Officer Gary Enzor stated, “Demand began to recover in the 2nd quarter and based on feedback from our customers, we anticipate that the 2nd half of this year will show an improvement over the first half of this year. We are also pleased to announce the signing of a purchase agreement to acquire Boasso. This acquisition significantly increases our presence in the chemical import/export market, a market that has historically grown at rates in excess of three times the overall market for bulk tank transportation and is a business that has operating margins that are typically higher than those of our core businesses.”
Timothy Page, Chief Financial Officer added, “The Brite Clean acquisition we concluded on May 1st of this year has had an immediate positive impact on our earnings as we were able to consolidate several existing facilities with the new Brite Clean locations. Additionally, we have undertaken a number of initiatives to improve margins in both our trucking and tank wash businesses and expect to see improving margins in the 2nd half of this year and going forward.”
The Company will host a conference call for investors to discuss these results on August 9, 2007 at 11:00 a.m. Eastern Time. The toll free dial-in number is 888-390-0675; the toll number is 210-234-0033; the passcode is 7366. A replay of the call will be available until September 9, 2007, by dialing 800-839-8789; passcode; 7366. 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; 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 Six months ended ended June 30, June 30, 2007 2006 2007 2006 OPERATING REVENUES: Transportation $151,683 $149,317 $293,756 $291,626 Other service revenues 19,065 17,237 36,033 35,207 Fuel surcharge 23,884 23,724 42,938 42,195 Total operating revenues 194,632 190,278 372,727 369,028 OPERATING EXPENSES: Purchased transportation 123,427 129,809 239,374 251,390 Compensation 20,587 18,393 40,256 36,274 Fuel, supplies and maintenance 19,375 12,796 35,549 23,739 Depreciation and amortization 4,183 3,851 8,230 7,788 Selling and administrative 7,406 5,486 13,872 10,751 Insurance claims 4,444 4,044 11,082 7,928 Taxes and licenses 843 855 1,624 1,645 Communications and utilities 2,497 2,307 5,129 4,855 Loss (gain) on disposal of property and equipment (10) (66) 199 (223) Total operating expenses 182,752 177,475 355,315 344,147 Operating income 11,880 12,803 17,412 24,881 Interest expense 8,075 7,913 15,752 15,265 Interest income (176) (892) (375) (1,110) Other income (396) (219) (359) (357) Income before taxes 4,377 6,001 2,394 11,083 Provision for income taxes 2,135 467 247 1,069 Net income $2,242 $5,534 $2,147 $10,014 PER SHARE DATA: Net income per common share Basic $0.12 $0.29 $0.11 $0.53 Diluted $0.12 $0.28 $0.11 $0.51 Weighted average number of shares Basic 19,354 18,895 19,351 18,929 Diluted 19,480 19,734 19,478 19,616 QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In 000′s) Unaudited June 30, December 31, 2007 2006 ASSETS Current assets: Cash and cash equivalents $2,878 $6,841 Accounts receivable, net 95,356 85,482 Prepaid expenses 7,881 6,101 Prepaid tires 7,488 7,517 Deferred tax asset, net 18,320 18,320 Other 5,922 9,214 Total current assets 137,845 133,475 Property and equipment, net 115,754 116,964 Assets held-for-sale 367 381 Goodwill 140,404 138,980 Intangibles, net 1,370 635 Non-current deferred tax asset, net 20,740 19,578 Other assets 8,925 11,249 Total assets $425,405 $421,262 LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY Current liabilities: Current maturities of indebtedness $2,664 $2,578 Accounts payable 13,382 13,957 Affiliates and independent owner-operators payable 14,927 11,025 Accrued expenses 21,585 21,197 Environmental liabilities 7,021 5,995 Accrued loss and damage claims 9,468 11,533 Total current liabilities 69,047 66,285 Long-term indebtedness, less current maturities 276,791 276,544 Environmental liabilities 4,337 5,831 Accrued loss and damage claims 18,232 20,633 Other non-current liabilities 16,685 14,249 Deferred tax liability 787 724 Total liabilities 385,879 384,266 Minority interest in subsidiary 1,833 1,833 SHAREHOLDERS’ EQUITY Common stock, no par value; 29,000 authorized, 19,337 issued at June 30, 2007 and 19,210 issued at December 31, 2006 360,862 359,995 Treasury stock, 155 and 172 shares at June 30, 2007 and December 31, 2006, respectively (1,494) (1,527) Accumulated deficit (113,047) (114,866) Stock recapitalization (189,589) (189,589) Accumulated other comprehensive loss (18,699) (18,531) Stock purchase warrants — 21 Stock subscriptions receivable (340) (340) Total shareholders’ equity 37,693 35,163 Total liabilities, minority interest and shareholders’ equity $425,405 $421,262 QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In 000′s) Unaudited Six Months Ended June 30, 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,147 $10,014 Adjustments to reconcile to net cash and cash equivalents used in operating activities: Depreciation and amortization 8,230 7,788 Bad debt expense 441 (236) Foreign currency transaction gain (247) (178) Loss (gain) on disposal of property and equipment 199 (223) Interest income on repayment of stock subscription — (690) Stock based compensation 807 1,473 Amortization of deferred financing costs 899 901 Amortization of bond discount 121 122 Minority dividends 72 72 Deferred taxes (193) — Changes in assets and liabilities: Accounts and other receivables (10,315) 1,355 Prepaid expenses (1,650) (159) Prepaid tires (106) (465) Other assets 51 (4,921) Accounts payable and accrued expenses 1,098 (12,107) Environmental liabilities (468) (3,616) Accrued loss and damage claims (4,466) 150 Affiliates and independent owner-operators payable 3,902 2,751 Other liabilities 753 180 Net cash provided by operating activities 1,275 2,211 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,415) (8,095) Acquisition of business and assets (3,032) (4,630) Proceeds from sales of property and equipment 4,243 3,330 Net cash used in investing activities (3,204) (9,395) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt and capital lease obligations (1,303) (757) Proceeds from revolver 26,800 113,900 Payments on revolver (26,300) (115,100) Change in book overdraft (1,284) 9,402 Minority dividends (72) (72) Proceeds from purchase of stock options 72 101 Net cash (used in) provided by financing activities (2,087) 7,474 Effect of exchange rate changes on cash 53 70 Net (decrease) increase in cash and cash equivalents (3,963) 360 Cash and cash equivalents, beginning of period 6,841 1,636 Cash and cash equivalents, end of period $2,878 $1,996
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Quality Distribution, Inc.
CONTACT: Timothy B. Page, Senior Vice President and Chief FinancialOfficer, +1-800-282-2031 ext. 7376
Web site: http://www.qualitydistribution.com/