Quality Distribution, Inc. Announces Third Quarter Results
TAMPA, Fla., Nov. 7 /PRNewswire-FirstCall/ — Quality Distribution, Inc. (the “Company”) today reported the results for its third quarter ended September 30, 2007. The total revenue for the quarter was $192.2 million, a 1.1% increase over third quarter revenues of $190.0 million last year. Total revenue for the nine months ended September 30, 2007, increased 1.1% to $565.0 million from $559.1 million last year. Revenue excluding fuel surcharge was $167.6 million for the quarter, a 1.8% increase over $164.7 million last year. For the nine month period ended September 30, 2007 revenue excluding fuel surcharge was $497.5 million, an increase of 1.2% over the same period last year.
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The Company continued to generate strong cash flow during the quarter as total funded debt, net of cash, decreased $8.1 million, from $276.6 million at June 30, 2007 to $268.5 million at September 30, 2007.
Income before taxes decreased from $5.9 million for the quarter ended September 30, 2006 to $3.3 million for the same period this year. The decrease in pre-tax income is primarily related to credits to our insurance expense and selling and administrative expenses last year, that did not occur in the current year.
Net income for the quarter ended September 30, 2007 was $1.4 million, or $0.07 earnings per fully diluted share (“EPS”), as compared with net income of $38.0 million or $1.94 EPS in the third quarter of last year. Net income for the nine months ended September 30, 2007 was $3.5 million, or $0.18 EPS, as compared with net income of $48.0 million, or $2.46 EPS last year. Net income for both the third quarter and the nine month period for last year were significantly influenced by the fact that we recorded as part of our provision for income taxes, a net non-cash benefit of $32.1 million ($1.64 per fully diluted share) resulting from the release of the Company’s deferred tax valuation allowance.
Applying an expected annual 39% tax rate to pre-tax income for the third quarter of 2007 would have resulted in tax expense of $1.3 million, and net income of $2.0 million, or EPS of $0.10. Applying the same 39% tax rate to the third quarter pre-tax income for last year would have resulted in tax expense of $2.3 million, and net income of $3.6 million, or EPS of $0.18.
As previously announced, the company expects to close its acquisition of Boasso America Corporation (“Boasso”) in the fourth quarter. 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.
Commenting on the results and acquisitions, President and Chief Executive Officer Gary Enzor stated, “Despite today’s tough economic environment we grew revenues excluding fuel surcharge by 1.8% and reduced our net debt by $8.1 million. The Brite Clean acquisition has been a catalyst for profit improvement in our tank wash business and the Boasso acquisition, which we plan to close this quarter, will be an excellent growth vehicle during 2008. Although we are disappointed with our earnings level during the quarter, we believe we enter 2008 with a much stronger company. Over the last 24 months, through acquisitions and the conversion of a number of affiliates to company controlled terminals, we have transformed our model to one where the majority of our revenue will be directly controlled by the Company. We believe this focus on more network control will help us both reduce deadhead miles and increase driver productivity, which will ultimately translate into improved profitability. At the same time, we continue to retain our asset-light, variable cost model because the vast majority of our drivers continue to be owner operators or work for our affiliates. This structure reduces the Company’s capital requirements for tractors and provides us the ability to flex with demand changes.”
Timothy Page, Chief Financial Officer added, “In connection with the pending acquisition of Boasso, we intend to restructure our credit facilities. The proceeds from the refinancing will be used to fund the acquisition of Boasso and replace our existing revolver and term loan. Besides extending the maturities of our existing Senior Credit Facility, this refinancing will provide additional borrowing availability and is expected to yield a reduction in our blended cost of capital.”
The Company will host a conference call for investors to discuss these results on November 8, 2007 at 11:00 a.m. Eastern Time. The toll free dial-in number is 800-545-9704; the toll number is 913-981-5510; the passcode is 4597249. A replay of the call will be available until December 8, 2007, by dialing 888-203-1112; passcode; 4597249. 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 ended Nine months ended September 30, September 30, 2007 2006 2007 2006 OPERATING REVENUES: Transportation $148,900 $149,150 $442,656 $440,776 Other service revenue 18,736 15,524 54,847 50,731 Fuel surcharge 24,545 25,354 67,483 67,549 Total operating revenues 192,181 190,028 564,986 559,056 OPERATING EXPENSES: Purchased transportation 118,653 128,973 358,027 380,363 Compensation 22,302 19,052 62,558 55,326 Fuel, supplies and maintenance 21,429 15,064 57,056 38,803 Depreciation and amortization 4,332 3,873 12,562 11,661 Selling and administrative 7,442 4,875 21,314 15,626 Insurance claims 3,239 2,232 14,321 10,160 Taxes and licenses 1,105 1,018 2,729 2,663 Communications and utilities 2,952 2,012 8,081 6,867 Loss (gain) on disposal of property and equipment 219 (697) 418 (920) Total operating expenses 181,673 176,402 537,066 520,549 Operating income 10,508 13,626 27,920 38,507 Interest expense 7,651 7,903 23,403 23,168 Interest income (198) (260) (573) (1,370) Other (income) expense (279) 95 (638) (262) Income before taxes 3,334 5,888 5,728 16,971 Provision (benefit) for income taxes 1,982 (32,139) 2,229 (31,070) Net income $1,352 $38,027 $3,499 $48,041 PER SHARE DATA: Net income per common share Basic $0.07 $2.01 $0.18 $2.54 Diluted $0.07 $1.94 $0.18 $2.46 Weighted average number of shares Basic 19,357 18,874 19,353 18,910 Diluted 19,488 19,569 19,488 19,548 QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In 000′s) Unaudited September 30, December 31, 2007 2006 ASSETS Current assets: Cash and cash equivalents $9,981 $6,841 Accounts receivable, net 93,560 85,482 Prepaid expenses 6,542 6,101 Prepaid tires 7,295 7,517 Deferred tax asset, net 18,320 18,320 Other 6,401 9,214 Total current assets 142,099 133,475 Property and equipment, net 113,375 116,964 Assets held-for-sale 351 381 Goodwill 141,098 138,980 Intangibles, net 1,586 635 Non-current deferred tax asset, net 19,703 19,578 Other assets 8,775 11,249 Total assets $426,987 $421,262 LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS’ EQUITY Current liabilities: Current maturities of indebtedness $1,400 $1,400 Current maturities of capital lease obligations 1,303 1,178 Accounts payable 11,954 13,957 Affiliates and independent owner-operators payable 14,950 11,025 Accrued expenses 26,713 21,197 Environmental liabilities 7,012 5,995 Accrued loss and damage claims 10,172 11,533 Total current liabilities 73,504 66,285 Long-term indebtedness, less current maturities 271,958 272,826 Capital lease obligations, less current maturities 3,788 3,718 Environmental liabilities 3,545 5,831 Accrued loss and damage claims 15,495 20,633 Other non-current liabilities 16,644 14,249 Deferred tax liability 832 724 Total liabilities 385,766 384,266 Minority interest in subsidiary 1,833 1,833 SHAREHOLDERS’ EQUITY Common stock, no par value; 29,000 authorized, 19,344 issued at September 30, 2007 and 19,210 issued at December 31, 2006 361,281 359,995 Treasury stock, 158 and 172 shares at September 30, 2007 and December 31, 2006, respectively (1,564) (1,527) Accumulated deficit (111,695) (114,866) Stock recapitalization (189,589) (189,589) Accumulated other comprehensive loss (18,775) (18,531) Stock purchase warrants — 21 Stock subscriptions receivable (270) (340) Total shareholders’ equity 39,388 35,163 Total liabilities, minority interest and shareholders’ equity $426,987 $421,262 QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In 000′s) Unaudited Nine Months Ended September 30, 2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,499 $48,041 Adjustments to reconcile to net cash and cash equivalents provided by operating activities: Depreciation and amortization 12,562 11,661 Bad debt expense (recoveries) 792 (487) Loss (gain) on disposal of property and equipment 418 (920) Interest income on repayment of stock subscription — (690) Stock based compensation 1,227 2,255 Amortization of deferred financing costs 1,375 1,361 Amortization of bond discount 182 182 Minority dividends 109 109 Deferred taxes 848 (32,190) Changes in assets and liabilities: Accounts and other receivables (9,228) 4,706 Prepaid expenses (286) 508 Prepaid tires (129) (448) Other assets (87) (7,845) Accounts payable (1,918) (9,106) Accrued expenses 5,754 3,214 Environmental liabilities (1,270) (5,199) Accrued loss and damage claims (6,500) (1,578) Affiliates and independent owner-operators payable 3,925 2,983 Other liabilities 388 (540) Net cash provided by operating activities 11,661 16,017 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (6,728) (10,692) Acquisition of business and assets (4,004) (5,506) Proceeds from sales of property and equipment 5,471 5,466 Net cash used in investing activities (5,261) (10,732) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt (1,050) (1,050) Principal payments on capital lease obligations (899) (111) Proceeds from revolver 35,700 159,000 Payments on revolver (35,700) (165,200) Payments on acquisition notes (321) — Deferred financing costs (153) — Stock offering costs (787) — Change in book overdraft (70) 3,378 Minority dividends (109) (109) Proceeds from purchase of stock options 70 186 Net cash used in financing activities (3,319) (3,906) Effect of exchange rate changes on cash 59 (63) Net increase in cash and cash equivalents 3,140 1,316 Cash and cash equivalents, beginning of period 6,841 1,636 Cash and cash equivalents, end of period $9,981 $2,952
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Quality Distribution, Inc.
CONTACT: Timothy B. Page, Senior Vice President and Chief FinancialOfficer, Quality Distribution, Inc., 1-800-282-2031 ext. 7376
Web site: http://www.qualitydistribution.com/