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TAMPA, Fla., Nov. 7 /PRNewswire-FirstCall/ -- Quality Distribution, Inc. (Nasdaq: QLTY - ; 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.
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 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® facilities. Quality Distribution, Inc. is an American Chemistry Council Responsible Care® 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