Quality Distribution, Inc. Reports Results for the Quarter and Year Ended December 31, 2003
TAMPA, Fla.--March 29, 2004--Quality Distribution, Inc. (the "Company") today reported a net loss per diluted share of $4.95 for the fourth quarter of 2003, compared to a net loss per diluted share of $2.56 for the fourth quarter of 2002. For the year 2003, the Company reported a net loss per diluted share of $12.51, compared to a net loss per diluted share of $16.63 for 2002.Revenue for the quarter ended December 31, 2003 increased $13.3 million, or 10.5%, to $139.4 million from $126.1 million for the same period in 2002. These increases were largely attributable to increases in demand from existing customers, new business secured in 2003 and the addition of new affiliates joining the Company. During the latter part of 2002 and throughout 2003, a total of ten new affiliates joined the Company providing approximately $6.5 million of incremental transportation revenue in the fourth quarter of 2003 and $18.8 million incremental revenue for the entire year. Fuel surcharge was higher in the fourth quarter of 2003 by $0.8 million as a result of higher fuel prices and volume increases.
Results for the fourth quarter of 2003 include a charge of $59.4 million for the conversion of preferred stock into common stock and a $4.7 million gain on the early extinguishment of debt, both in connection with the Company's initial public offering and concurrent debt refinancing in November of 2003. The fourth quarter results also include $12.3 million of insurance charges, of which $8.2 million relates to previously disclosed irregularities at Power Purchasing, Inc. ("PPI"), a non-core insurance subsidiary, a $2.3 million charge for pre-merger insurance claims, a $0.7 million restructuring charge to achieve additional cost savings, and a $0.5 million reduction to income tax expense. Results for the fourth quarter of 2002 have been restated to reflect a $0.9 million charge for the irregularities at PPI and also include a $2.3 million charge for pre-merger insurance claims and a $0.8 million restructuring charge.
Operating income (loss) for the quarters ended December 31, 2003 and 2002 was ($5.7) million and $1.9 million, respectively. Operating income (loss) was negatively impacted by the aforementioned items and positively impacted by higher revenue, cost reductions and the impact of several conversions of company terminals to affiliate operations during 2003.
Interest expense was $8.0 million for the quarter ended December 31, 2003 compared to $6.5 million for the same period last year. This $1.5 million increase primarily resulted from the recognition of interest expense on preferred stock beginning in July 2003 in connection with the adoption of SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of Both Debt and Equity." This preferred stock was converted to common stock on November 13, 2003, and accordingly, interest expense ceased accruing on that date.
Revenue for the year ended December 31, 2003 increased $48.7 million, or 9.4%, to $565.4 million. Fuel surcharge was higher for the entire year of 2003 by $9.6 million as a result of higher fuel prices and volume increases. In addition to the fourth quarter charges outlined above, results for the year ended December 31, 2003 were additionally impacted by $5.7 million of insurance related charges for the first nine months of 2003 relating to irregularities at PPI, and a foreign currency translation loss of $0.9 million. The results for the first nine months of 2002 were restated to reflect a charge of $4.0 million for PPI irregularities and also were impacted by a refinancing charge of $10.1 million, a write-down of goodwill of $24.0 million and a restructuring charge of $1.0 million.
Operating income for the year ended December 31, 2003 and 2002 was $18.8 million and $22.4 million, respectively. This change was driven by higher revenue and cost reduction initiatives largely implemented at the end of 2002 and the charges and other items mentioned above. For the year ended December 31, 2003, interest expense was $30.0 million, a $4.0 million decline from $34.0 million reported for the prior year. This decrease in interest expense was attributable to reductions in debt, lower interest rates and the amortization of deferred gains on the 2002 debt restructuring, which combined more than offset the recognition of $3.5 million interest on preferred stock in 2003 resulting from the adoption of SFAS No. 150.
The Company remains optimistic regarding the outlook for its business in 2004. It has already added two additional affiliate partners since the beginning of the year. Commenting on the results and outlook, President and Chief Executive Officer Tom Finkbiner said, "We are very pleased with the strong year over year revenue growth in the fourth quarter of 2003 and continue to see these trends carrying into 2004. We are also very encouraged by the number of new affiliates that have joined our ranks in 2003 demonstrating the overall strength of our affiliate model. The efforts we have taken over the past several years have positioned us as a strong and lean competitor, allowing us to take advantage of the significant opportunities in the marketplace. I am very optimistic that Quality Distribution will continue to grow its business and will improve its operating margins during 2004."
As previously announced, the Company will host an investor conference call for investors to discuss these results today at 4:30 p.m. EST. The dial in number is 800-967-7185 toll free; the pass code is 751642. A replay of the call will be available until April 15, 2004 by dialing 888-203-1112; the pass code is 751642. Copies of this press 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 operates approximately 3,500 tractors and 8,250 trailers through three principal transportation subsidiaries: Quality Carriers, TransPlastics, and Quebec based Levy Transport. The Company also provides other bulk transportation services, including tank cleaning and freight brokerage. Quality Distribution is an American Chemistry Council Responsible Care(R) Partner and is a core carrier for many of the Fortune 500 companies who are engaged in chemical production and processing.
This press 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 new information or additional issues that may come to the attention of the audit committee and its outside advisors in connection with the PPI irregularities, the final outcome of the state regulatory investigations relating to the insurance irregularities and any other governmental investigations or legal proceedings initiated against the Company and the reaction of the Company's lenders, investors, drivers and affiliate owner-operators to the insurance irregularities and restatements. Other important factors that may cause actual results to differ materially from the forward-looking statements include the Company's substantial leverage, economic factors, downturns in customers' business cycles, dependence on affiliates and owner-operators, change in government regulation, fluctuations in fuel pricing or availability, increases in interest rates, and the availability of qualified drivers. Readers are urged to carefully review and consider the various disclosures made by the Company in this press release and the risk factors disclosed in the Company's Registration Statement on Form S-1 declared effective on November 6, 2003 and 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 press release.
QUALITY DISTRIBUTION, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In 000's)
Unaudited
December December
31, 31,
2003 2002
---------------------
(Re-stated)
ASSETS
Current assets:
Cash and cash equivalents $955 $661
Accounts receivable, net 74,944 74,423
Inventories 819 898
Prepaid expenses 3,566 5,166
Prepaid tires 7,978 7,894
Other 1,912 1,846
------------------
Total current assets 90,174 90,888
Property, plant and equipment, net 137,961 153,561
Goodwill 131,232 130,732
Intangibles, net 1,402 1,585
Other assets 10,922 4,820
------------------
Total assets $371,691 $381,586
==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of indebtedness $1,759 $3,251
Accounts payable and accrued expenses 73,230 61,660
Affiliates and independent
owner-operators payable 7,319 10,604
Income taxes payable 518 1,569
------------------
Total current liabilities 82,826 77,084
Long-term debt, less current maturities 272,750 394,362
Environmental liabilities 19,689 27,324
Other non-current liabilities 13,712 17,656
Deferred tax liability 1,552 1,361
------------------
Total liabilities 390,529 517,787
Mandatority redeemable preferred
stock - 62,675
Minority interest in subsidiary 1,833 1,833
Commitments and contingencies
Stockholders' deficit (20,671)(200,709)
------------------
Total liabilities and stockholders'
deficit $371,691 $381,586
==================
QUALITY DISTRIBUTION, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000's) Except Per Share Data
Unaudited
Three months ended Twelve months
ended ended
December 31, December 31,
---------------------------------------
2003 2002 2003 2002
---------------------------------------
(Restated)
Operating revenues:
Transportation $119,176 $106,477 $479,719 $441,867
Other service revenues 16,737 16,978 70,110 68,862
Fuel surcharge 3,484 2,650 15,611 6,031
---------------------------------------
Total operating revenues 139,397 126,105 565,440 516,760
Operating expenses:
Purchased transportation 92,034 74,155 360,303 301,921
Compensation 14,666 15,793 60,588 69,104
Fuel, supplies and maintenance 8,539 11,164 38,312 43,234
Depreciation and amortization 5,765 8,541 28,509 31,823
Selling and administrative 3,066 4,276 12,548 13,575
Insurance claims 15,350 3,971 32,209 18,427
Taxes and licenses 1,014 871 4,267 4,231
Communication and utilities 1,700 1,913 6,925 7,479
Loss on sale of property and
equipment 21 399 10 486
CLC expenses 2,250 2,278 2,250 2,278
Restructuring expenses 725 835 725 1,804
---------------------------------------
Operating (loss) income (5,733) 1,909 18,794 22,398
Interest expense 7,962 6,452 29,984 33,970
Interest expense, transaction
fees -- -- 700 10,077
Interest expense, preferred
stock conversion 59,395 -- 59,395 --
Foreign currency transaction
loss -- -- 937 --
Gain on debt extinguishment (4,733) -- (4,733) --
Other (income) expense (88) 22 (288) 6
---------------------------------------
Loss before income taxes (68,269) (4,565) (67,201) (21,655)
Income tax (benefit) provision (459) 1,028 (99) 1,443
---------------------------------------
Net loss from continuing
operations (67,810) (5,593) (67,102) (23,098)
Discontinued operations:
Loss from operations of
discontinued division, net
of tax -- -- -- (1,386)
Loss on disposal of
discontinued division, net
of tax -- (712) -- (1,527)
---------------------------------------
Total loss from discontinued
operations -- (712) -- (2,913)
---------------------------------------
Loss before cumulative effect
of change in accounting
principle (67,810) (6,305) (67,102) (26,011)
Cumulative effect of a change
in accounting principle, net
of tax -- -- -- (23,985)
---------------------------------------
Net loss (67,810) (6,305) (67,102) (49,996)
Preferred stock and minority
stock dividends (58) (2,274) (4,540) (6,021)
---------------------------------------
Net loss attributable to common
stockholders $(67,868) $(8,579)$(71,642) $(56,017)
=======================================
Per share data:
Basic:
Net loss from continuing
operations per common
stockholder $(4.95) $(2.35) $(12.51) $(8.64)
Loss on discontinued
operations -- (0.21) -- (0.87)
Cumulative effect of
change in accounting
principle -- -- -- (7.12)
---------------------------------------
Net loss per common
stockholders $(4.95) $(2.56) $(12.51) $(16.63)
=======================================
Diluted:
Net loss from continuing
operations per common
stockholder $(4.95) $(2.35) $(12.51) $(8.64)
Loss on discontinued
operations -- (0.21) -- (0.87)
Cumulative effect of
change in accounting
principle -- -- -- (7.12)
---------------------------------------
Net loss per common
stockholders $(4.95) $(2.56) $(12.51) $(16.63)
=======================================
Weighted average number of
shares - basic 13,700 3,343 5,729 3,369
Weighted average number of
shares - diluted 13,700 3,343 5,729 3,369
QUALITY DISTRIBUTION, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In 000's)
Unaudited
Twelve months ended
December 31,
---------------------
2003 2002
---------------------
(Restated)
Cash flows from operating activities:
Net loss $(67,102) $(49,996)
Cumulative effect of change in accounting
principle -- 23,985
Adjustments for non-cash charges 93,342 55,020
Changes in assets and liabilities (8,891) (3,177)
---------------------
Net cash provided by operating activities 17,349 25,832
---------------------
Cash flows from investing activities:
Capital expenditures (14,992) (15,286)
Proceeds from asset dispositions 2,611 8,117
---------------------
Net cash used in investing activities (12,381) (7,169)
---------------------
Cash flows from financing activities:
Net payments on the revolver (3,230) (4,500)
Issuance of preferred stock -- 10,000
Increase (decrease) in bank overdraft 1 (5,836)
Payment of debt obligations (373,702) (12,984)
Proceeds from issuance of stock and long term
debt 385,288 --
Financing fees (12,923) (5,501)
Other (167) (1,177)
---------------------
Net cash used in financing activities (4,733) (19,998)
---------------------
Net increase (decrease) in cash 235 (1,335)
Effect of exchange rate changes on cash 59 (216)
Cash, beginning of period 661 2,212
---------------------
Cash, end of period $955 $661
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