updated 3/9/2011 4:18:26 PM ET 2011-03-09T21:18:26

Company Reports Fourth Quarter Net Loss of $(0.51) per Diluted Share

Adjusted Earnings of $0.06 per Diluted Share Generated in Q4 2010

Fourth Quarter Revenue Up 9.6% vs. Prior Year Period

TAMPA, Fla., March 9, 2011 (GLOBE NEWSWIRE) -- Quality Distribution, Inc. (Nasdaq:QLTY) ("Quality" or the "Company"), which operates the largest chemical bulk tank truck network and is the largest provider of intermodal tank container and depot services in North America, today reported a net loss of $10.7 million, or $(0.51) per diluted share, for the fourth quarter ended December 31, 2010, compared to net income of $4.6 million, or $0.21 per diluted share, in the fourth quarter ended December 31, 2009. Net loss for the year ended December 31, 2010 was $7.4 million, or $(0.36) per diluted share compared to a net loss of $180.5 million, or $(9.28) per diluted share, for 2009.

Adjusted net income for the fourth quarter of 2010 was $1.3 million, or $0.06 per diluted share, compared to adjusted net income of $0.2 million, or $0.01 per diluted share, for the same quarter in 2009. Adjusted net income for the fourth quarter of 2010 was derived by excluding approximately $9.1 million of charges associated with the Company's debt refinancing, $3.2 million of restructuring costs, and $0.7 million of costs associated with an unconsummated stock offering, and then applying a normalized tax rate of 39% to the adjusted income.

Adjusted net income for the year ended December 31, 2010 was $6.5 million, or $0.30 per diluted share, compared to adjusted net income of $1.3 million, $0.07 per diluted share, for the same period in 2009. Adjusted net income for the year ended December 31, 2010 was derived by excluding the fourth quarter costs previously noted, as well as $4.6 million of restructuring costs incurred in the first nine months of 2010, and then applying a normalized tax rate of 39%. These adjustment items are excluded as Quality does not consider the costs to be part of regular operating activities. A reconciliation of net (loss) income to adjusted net income is included in the attached financial exhibits.

Gary Enzor, Chief Executive Officer, commented, "I am very pleased with our fourth quarter and full year results, which reflect continued year over year increases in revenue and earnings. Demand for our services continues to show improvement, and we are realizing the earnings power of our asset-light business model."

Total revenue for the fourth quarter ended December 31, 2010 was $165.8 million, an increase of 9.6% versus the same quarter last year. Excluding fuel surcharges, revenue for the fourth quarter of 2010 increased 7.0% compared to the prior-year quarter. This increase was driven primarily by higher volumes resulting from a 5.3% increase in loads and a 2.8% increase in miles driven within the chemicals business, as well as a 15.2% increase in revenues from Boasso's intermodal and depot business.

Total revenue for the year ended December 31, 2010 was $686.6 million, an increase of 11.9% versus the same period last year. Excluding fuel surcharge, revenue increased 8.3% for the full year 2010 compared to the prior year. This increase was primarily due to higher volumes resulting from a 5.4% increase in loads and a 5.6% increase in miles driven within the chemicals business, as well as a 24.6% increase in revenues from Boasso's intermodal and depot business.

Adjusted EBITDA for the fourth quarter of 2010 was $14.7 million, up 6.7% versus the comparable prior-year period, driven primarily from higher volumes and an improvement in operating results at Boasso. Adjusted EBITDA for the year ended December 31, 2010 was $62.7 million, up 21.7% from 2009. A reconciliation of net (loss) income to adjusted EBITDA is included in the attached financial exhibits. 

Gary Enzor commented further, "Both our logistics and intermodal operations showed excellent results in 2010 and we will continue to leverage our asset-light business model to drive bottom line results. We are optimistic about 2011 and look forward to pursuing our multifaceted growth strategy and delivering enhanced value to our shareholders."

Significant Transactions

In November 2010, Quality issued $225.0 million in aggregate principal amount of 9.875% Second-Priority Senior Secured Notes due 2018 at an issue price of 99.324% of par. The proceeds from these notes were used to pay down a portion of Quality's outstanding borrowings under its ABL Facility and to repay or redeem its other existing notes, other than a portion of its 11.75% Senior Subordinated PIK Notes ("2013 PIK Notes"), on December 3, 2010. Quality repurchased and redeemed an additional $12.5 million of its 2013 PIK Notes later in December 2010 and in January 2011.

On February 9, 2011, Quality sold 2,000,000 shares of its common stock in a public offering at $9.50 per share and received net proceeds, after fees and expenses, of $17.5 million. Quality intends to utilize the net proceeds from the common stock offering to redeem at par, plus accrued and unpaid interest, $17.5 million of its 2013 PIK Notes upon the expiration of the 30-day required notification period under the indenture on March 11, 2011. In conjunction with the Company's public sale of shares, certain affiliates of Apollo Management, L.P. ("Apollo") sold 2,000,000 shares and also granted underwriters an over-allotment option to purchase up to 600,000 shares of additional common stock. The underwriters fully exercised this option, and Apollo presently owns approximately 33.5% of the Company's outstanding shares, down from 48.9% prior to the offering.

"As a result of our solid free cash flow generation, we ended 2010 in a strong liquidity position, with $79.6 million of availability under our asset-based revolving credit facility," said Joe Troy, Chief Financial Officer. "We have made great strides toward strengthening our balance sheet over the last six months, which puts us in a better position to pursue and achieve our growth initiatives."

Quality will host a conference call for investors to discuss these results on Thursday, March 10, 2011 at 10:00 a.m. Eastern Time. The toll free dial-in number is 888-599-8692; the toll number is 913-981-5580; the passcode is 2374710. A replay of the call will be available through April 9, 2011, by dialing 888-203-1112; passcode: 2374710. A webcast of the conference call may be accessed in the Investor Relations section of Quality's website at www.qualitydistribution.com. Copies of this earnings release and other financial information about Quality may be accessed in the Investor Relations section of Quality's website. The Company regularly posts or otherwise makes available information on the Investor Relations section that may be important to investors.

Headquartered in Tampa, Florida, Quality operates the largest chemical bulk tank truck network in North America through its wholly owned subsidiary, Quality Carriers, Inc., and is the largest North American provider of intermodal tank container and depot services through its wholly owned subsidiary, Boasso America Corporation. Quality Carriers' network of independent affiliates and independent owner-operators provides nationwide bulk transportation and related services. Quality 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.

The Quality Distribution, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5285

This press release and the oral public statements made by a Quality representative during the webcast announced in this press release may contain 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, additional risks and uncertainties regarding forward-looking statements include the effect of local and national economic, credit and capital market conditions on the economy in general, and on the particular industries in which we operate, including excess capacity in the industry, the availability of qualified drivers, changes in fuel and insurance prices, interest rate fluctuations, and downturns in customers' business cycles and shipping requirements; our substantial leverage, our ability to make required payments and restrictions contained in our debt arrangements; competition and rate fluctuations; our reliance on independent affiliates and independent owner-operators; the loss of or material reduction in the services to one or more of our major customers; our liability as a self-insurer to the extent of our deductibles as well as changing conditions and pricing in the insurance marketplace; changes in health insurance benefit regulations; changes in the future, or our inability to comply with, governmental regulations and legislative changes affecting the transportation industry; increased unionization, which could increase our operating costs or constrain operating flexibility; our ability to comply with current and future environmental regulations and the increasing costs relating to environmental compliance; potential disruption at U.S. ports of entry; diesel fuel prices and our ability to recover costs through fuel surcharges; our ability to attract and retain qualified drivers; terrorist attacks and the cost of complying with existing and future anti-terrorism security measures; our dependence on senior management; the potential loss of our ability to use net operating losses to offset future income; potential future impairment charges; the interests of our largest shareholder, which may conflict with your interests; our ability to successfully identify acquisition opportunities, consummate such acquisitions and integrate acquired businesses; adverse weather conditions; the impact of our restructuring on our operations and costs; our liability for our proportionate share of unfunded vested benefit liabilities in the event of our withdrawal from any of our multi-employer pension plans; and changes in planned or actual capital expenditures due to operating needs, changes in regulation, covenants in our debt arrangements and other expenses, including interest expenses. Readers are urged to carefully review and consider the various disclosures, including but not limited to risk factors contained in Quality Distribution, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2009 and its Quarterly Reports on Form 10-Q, as well as other reports filed with the Securities and Exchange Commission. Quality disclaims any obligations to update any forward-looking statement as a result of developments occurring after the date of this release.

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In 000's) Except Per Share Data
Unaudited
     
  Three months ended

 December 31,
Year ended

 December 31,
 
   2010   2009   2010   2009   
           
OPERATING REVENUES:          
Transportation $ 117,380 $ 111,104 $ 498,446 $ 454,658  
Service revenue  27,917  24,713  107,474  104,954  
Fuel surcharge  20,468  15,469  80,678  53,997  
Total operating revenues  165,765  151,286  686,598  613,609  
OPERATING EXPENSES:          
Purchased transportation  114,826  100,270  476,307  373,539  
Compensation  14,584  15,164  57,563  76,955  
Fuel, supplies and maintenance 12,845  12,857  49,852  62,448  
Depreciation and amortization  3,765  4,524  16,004  20,218  
Selling and administrative  4,219  4,958  19,339  24,572  
Insurance costs  3,859  3,043  15,546  14,119  
Taxes and licenses  530  482  2,218  3,578  
Communications and utilities  811  1,125  4,119  7,910  
Loss on disposal of property and equipment  145  436  1,136  450  
Gain on sale of tank wash assets  --  (7,130)  --  (7,130)  
Impairment charges  --  --  --  148,630  
Restructuring costs  3,190  1,391  7,779  3,496  
Total operating expenses  158,774  137,120  649,863  728,785  
           
Operating income (loss)  6,991  14,166  36,735  (115,176)  
           
Interest expense  10,129  8,355  36,170  28,335  
Interest income  (147)  (77)  (622)  (288)  
Gain on extinguishment of debt  --  (1,195)  --  (1,870)  
Write-off of debt issuance costs  7,391  20  7,391  20  
Other expense  567  2,196  791  1,912  
(Loss) income before income taxes  (10,949)  4,867  (6,995)  (143,285)  
 (Benefit from) provision for income taxes  (268)  298  411  37,249  
Net (loss) income $ (10,681) $ 4,569 $ (7,406) $ (180,534)  
           
PER SHARE DATA:          
Net (loss) income per common share          
Basic $ (0.51) $ 0.23 $ (0.36) $ (9.28)  
Diluted $ (0.51) $ 0.21 $ (0.36) $ (9.28)  
           
Weighted average number of shares          
Basic  20,918  19,679  20,382  19,449  
Diluted  20,918  21,322  20,382  19,449  

  

QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In 000's)
Unaudited
 

 
December 31,

2010
December 31,

2009
     
ASSETS    
Current assets:    
Cash and cash equivalents $ 1,753 $ 5,633
Accounts receivable, net  80,895  69,625
Prepaid expenses  6,911  8,584
Deferred tax asset, net  3,848  5,506
Other  4,891  4,420
Total current assets  98,298  93,768
Property and equipment, net 113,419  127,329
Goodwill  27,023  27,023
Intangibles, net  16,924  18,467
Other assets  15,671  13,029
Total assets $ 271,335 $ 279,616
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS'

DEFICIT
Current liabilities:    
Current maturities of indebtedness $ 3,991 $ 19,866
Current maturities of capital lease obligations  4,572  5,322
Accounts payable  7,200  6,182
Independent affiliates and independent owner-operators payable  11,059  9,734
Accrued expenses  24,363  21,378
Environmental liabilities  3,687  3,408
Accrued loss and damage claims  8,471  8,862
Total current liabilities  63,343  74,752
     
Long-term indebtedness, less current maturities  300,491  284,253
Capital lease obligations, less current maturities  8,278  11,843
Environmental liabilities  7,255  8,241
Accrued loss and damage claims  10,454  10,534
Other non-current liabilities  26,060  28,896
Total liabilities  415,881  418,519
     
Redeemable noncontrolling interest  1,833  1,833
     
SHAREHOLDERS' DEFICIT    
Common stock 371,288  364,046
Treasury stock  (1,593)  (1,580)
Accumulated deficit  (301,974)  (294,568)
Stock recapitalization  (189,589)  (189,589)
Accumulated other comprehensive loss  (26,194)  (25,587)
Stock purchase warrants  1,683 6,696
Stock subscriptions receivable    --  (154)
Total shareholders' deficit  (146,379)  (140,736)
Total liabilities, redeemable noncontrolling interest and

shareholders' deficit
$ 271,335 $ 279,616

  

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS), EBITDA AND ADJUSTED EBITDA AND RECONCILIATION OF NET INCOME (LOSS) PER SHARE TO ADJUSTED NET INCOME (LOSS) PER SHARE
For the Three Months and the Year Ended December 31, 2010 and 2009
(In 000's)
Unaudited

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share, EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under United States Generally Accepted Accounting Principles ("GAAP"). Adjusted Net Income (Loss), Adjusted Net Income (Loss) per Share, EBITDA and Adjusted EBITDA are presented herein because they are important metrics used by management to evaluate and understand the performance of the ongoing operations of Quality's business. For Adjusted Net Income (Loss), management uses a 39% tax rate for calculating the provision for income taxes to normalize Quality's tax rate to that of competitors, and to compare Quality's reporting periods with different effective tax rates. In addition, in arriving at Adjusted Net Income and Adjusted Net Income per Share, we adjust for significant items that are not part of regular operating activities. These adjustments include restructuring charges related to a plan of restructure which began in the second quarter of 2008 and which we concluded in the fourth quarter of 2010, an impairment charge and gain on early extinguishment of debt, gain on sale of tank wash assets, write-off of debt issuance costs, write-off of unconsummated stock offering costs, excess interest from our recent debt refinancing, and other refinancing costs.

EBITDA is a component of the measure used by our management to facilitate internal comparisons to competitors' results and the bulk transportation industry in general. We believe that financial information based on GAAP for highly leveraged businesses, such as ours, should be supplemented by EBITDA so investors better understand our financial information in connection with their evaluation of our business. This measure is especially important given the recent trends of increased merger and acquisition activity and financial restructurings within the industry, which has led to significant variations among companies with respect to capital structures and cost of capital (which affect interest expense) and differences in taxation and book depreciation of facilities and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Accordingly, EBITDA allows analysts, investors and other interested parties in the bulk transportation industry to facilitate company to company comparisons by eliminating some of the foregoing variations. EBITDA as used herein may not, however, be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative measure. To calculate EBITDA, Net Income (Loss) is adjusted for provision for (benefit from) income tax, depreciation and amortization and interest expense. To calculate Adjusted EBITDA, we calculate EBITDA from Net Income (Loss), which is then further adjusted for significant items that are not part of regular operating activities, including the restructuring charges related to a plan of restructure which began in the second quarter of 2008 and which we concluded in 2010, an impairment charge, gain on early extinguishment of debt, gain on sale of tank wash assets, write-off of debt issuance costs, write-off of unconsummated stock offering costs, other refinancing costs and other non-cash items such as non-cash stock-based compensation, to arrive at Adjusted EBITDA. Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for the consolidated statements of operations prepared in accordance with GAAP, or as an indication of Quality's operating performance or liquidity.

Net (Loss) Income Reconciliation:  Three months ended

December 31, 
Year ended

December 31, 
  2010 2009 2010 2009
Net (loss) income  $ (10,681)  $ 4,569  $ (7,406)  $ (180,534)
         
Net (loss) income per common share:        
Basic  $ (0.51) $0.23  $ (0.36)  $ (9.28)
Diluted  $ (0.51) $0.21  $ (0.36)  $ (9.28)
         
Weighted average number of shares: 20,918 19,679 20,382 19,449
Basic 20,918 21,322 20,382 19,449
Diluted        
         
Adjustments to net (loss) income:        
(Benefit from) provision for income taxes  (268)  298 411 * 37,249
Gain on sale of tank wash assets  --   (7,130) --  (7,130)
Gain on extinguishment of debt  --   (1,195) --  (1,870)
Write-off of debt issuance costs  7,391  20 7,391  20
Costs associated with unconsummated stock offering  735  --  735  -- 
Refinancing costs  --   2,323 --  2,323
Restructuring costs  3,190  1,391 7,779  3,496
Excess interest from debt refinancing  1,728  --  1,728  -- 
Impairment of goodwill and intangibles  --   --  --  148,630
Adjusted income before income taxes 2,095 276 10,638 2,184
Provision for income taxes at 39%  817 108 4,149 852
Adjusted net income  $1,278 $168 $6,489 $1,332
         
Adjusted net income per common share:        
Basic $0.06 $0.01 $0.32 $0.07
Diluted $0.06 $0.01 $0.30 $0.07
Weighted average number of shares:        
Basic 20,918 19,679 20,382 19,449
Diluted 22,020 21,322 21,684 20,352
         
EBITDA and Adjusted EBITDA:  Three months ended

December 31, 
Year ended

December 31, 
  2010 2009 2010 2009
Net (loss) income $(10,681) $4,569 $(7,406) $(180,534)
         
Adjustments to net (loss) income:        
(Benefit from) provision for income taxes   (268) 298 411 * 37,249
Depreciation and amortization 3,765 4,524 16,004 20,218
Interest expense, net 9,982 8,278 35,548 28,047
EBITDA 2,798 17,669 44,557 (95,020)
         
Gain on sale of tank wash assets --  (7,130) --  (7,130)
Gain on extinguishment of debt --  (1,195) --  (1,870)
Write-off of debt issuance costs 7,391  20 7,391  20
Costs associated with unconsummated stock offering 735  --  735  -- 
Refinancing costs --  2,323 --  2,323
Restructuring costs 3,190  1,391 7,779  3,496
Impairment of goodwill and intangibles --  --  --  148,630
Non-cash stock-based compensation 568  681 2,273  1,101
         
Adjusted EBITDA $14,682 $13,759 $62,735 $51,550
         
* This amount represents a $37.3 million increase to deferred tax expense related to a net adjustment to the balance of the

valuation allowance which occurred as a result of change in realizability of the related net deferred tax asset in future years.
 
CONTACT: Joan Rodgers
         Director of Investor Relations
         800-282-2031 ext. 7235

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