EX-99.1 2 d308176dex991.htm PRESS RELEASE Press release

Exhibit 99.1

Quality Distribution, Inc. Announces Fourth Quarter and Year End 2011 Results

— Company Reports Fourth Quarter 2011 GAAP Net Income of $0.22 per Diluted Share —

— Q4 2011 Adjusted Earnings of $0.15 per Diluted Share Up Over 100% versus Q4 2010 —

— Quality Achieves Record Full Year 2011 Adjusted EBITDA of $74.2 million —

— Energy Logistics Revenue of $9.8 Million in Fourth Quarter —

— Greensville Transport Company Acquired —

TAMPA, FL – February 28, 2012 – Quality Distribution, Inc. (NASDAQ: QLTY) (“Quality” or the “Company”), which operates within North America, the largest chemical bulk tank truck network, a frac shale energy logistics business, and is the largest provider of intermodal tank container and depot services, today reported net income of $5.5 million, or $0.22 per diluted share, for the fourth quarter ended December 31, 2011, compared to a net loss of $10.7 million, or $(0.51) per diluted share, in the fourth quarter ended December 31, 2010. Net income for the year ended December 31, 2011 was $23.4 million, or $0.96 per diluted share compared to a net loss of $7.4 million, or $(0.36) per diluted share, for 2010.

After applying a normalized tax rate of 39%, adjusted net income for the fourth quarter of 2011 was $3.8 million, or $0.15 per diluted share, compared to adjusted net income of $1.3 million, or $0.06 per diluted share, for the same quarter in 2010. Adjusted net income for the fourth quarter of 2010 was derived by excluding $9.1 million of charges associated with the Company’s debt refinancing, $3.2 million of pre-tax restructuring charges, and $0.7 million of costs associated with an unconsummated stock offering, and then applying a normalized tax rate of 39%. The Company presents adjusted net income to neutralize the effect of the Company’s net operating loss and other tax credit carryforwards on after-tax earnings, and to exclude certain items it does not consider to be part of regular operating activities. A reconciliation of net income (loss) to adjusted net income is included in the attached financial exhibits.

The significant improvement in adjusted net income for the fourth quarter of 2011 versus the prior-year period was driven by a solid increase in operating income resulting from increased energy market revenue and profitability, enhanced earnings at Boasso, reduced maintenance expense and lower insurance costs. Additionally, interest expense declined 28.1% versus the prior year period, due primarily to the retirement of high-cost 2013 PIK Notes.

“I am very pleased with the Company’s growth in earnings this quarter versus the fourth quarter of last year,” said Gary Enzor, Chief Executive Officer. “The typical sequential decline in fourth quarter revenues was more than offset by improvements in certain cost areas, and by new and profitable energy logistics business. During the fourth quarter, we continued our expansion beyond the Marcellus Shale and began hauling oil in the Eagle Ford Shale. We are focused on exploring additional opportunities in these and other shale regions, including potential acquisitions, as we believe this market will continue to be a significant driver of our future growth.”


Total revenue for the fourth quarter ended December 31, 2011 was $178.8 million, an increase of 7.8% versus the same quarter last year. Excluding fuel surcharges, revenue for the fourth quarter of 2011 increased 3.8% compared to the prior year quarter. This quarter-over-quarter increase in revenue of $5.5 million (excluding fuel surcharges) was driven primarily by $9.7 million of revenues from the Company’s new energy logistics business and a $2.2 million increase in intermodal revenues, partially offset by $6.4 million of lower revenues in the chemical logistics business. While the Company successfully completed the installation of electronic on-board recorders (“EOBRs”) within its U.S. chemical logistics network, this initiative continued to adversely impact driver turnover during the fourth quarter, which constrained volumes within the chemical logistics business.

Operating income for the fourth quarter of 2011 was $13.3 million, which includes an insurance premium refund of $1.1 million and increased environmental expense of $0.7 million. Operating income for the fourth quarter of 2010 was $7.0 million, and included a restructuring charge of $3.2 million. Excluding these items, fourth quarter operating income increased $2.7 million, or 26.5%, versus the prior year period.

Adjusted EBITDA for the fourth quarter of 2011 was $17.9 million, up 22.0% versus the comparable prior year quarter, driven primarily from the new energy logistics business, improved intermodal results, and lower insurance and other costs. A reconciliation of net income (loss) to adjusted EBITDA is included in the attached financial exhibits.

Gary Enzor commented further, “Our multifaceted growth strategy is delivering positive results. In the fourth quarter of 2011, we completed the acquisition of Greensville, which provides a strong new market for our intermodal business, and we added a new energy business affiliate to service the Eagle Ford shale. With the U.S. EOBR implementation now complete, we are looking forward to getting our chemical logistics business back on track, and we are well-positioned to capitalize on organic and external growth opportunities in 2012.”

Full Year 2011 Results

Total revenue for the year ended December 31, 2011 was $746.0 million, an increase of 8.6% versus the same period last year. Excluding fuel surcharges, revenue increased 3.7% for the full year compared to the prior year primarily driven by new energy logistics revenues of $30.4 million.

Operating income for the year ended December 31, 2011 was $57.7 million, which includes the insurance premium refund and increased environmental expense noted above, and a restructuring credit of $0.5 million. Operating income for the year ended December 31, 2010 was $36.7 million, which includes a restructuring charge of $7.8 million.

Adjusted net income for the year ended December 31, 2011 was $17.1 million, or $0.70 per diluted share, up more than 100% versus the prior year period, and adjusted EBITDA for the year ended December 31, 2011 was a record $74.2 million, up 18.3% versus the comparable prior year period. These improvements were driven primarily from the new energy logistics business, improved intermodal results, and lower insurance and other costs. A reconciliation of net income (loss) to adjusted net income and adjusted EBITDA is included in the attached financial exhibits.


New Segment Reporting

In connection with the Company’s entry into the gas and oil frac shale energy market in 2011, a new segment for financial reporting purposes was identified during the fourth quarter of 2011, to better distinguish logistics services to the energy markets from logistics services to the chemical markets based upon how these businesses are managed.

The Company has three reportable business segments for financial reporting purposes that are distinguished primarily on the basis of services offered:

 

   

Chemical Logistics, which consists of the transportation of bulk chemicals primarily through a network of 29 independent affiliates, and equipment rental income;

 

   

Energy Logistics, which consists primarily of the transportation of fresh water, disposal water and oil for the energy logistics markets, primarily through 2 independent affiliates; and

 

   

Intermodal, which consists solely of Boasso and Greensville’s International Organization for Standardization or intermodal ISO tank container transportation and depot services supporting the international movement of bulk liquids.

Significant Transactions and Other

On November 1, 2011, Boasso, a wholly-owned subsidiary of Quality, completed its previously announced acquisition of Greensville Transport Company (“Greensville”). The purchase price was $8.6 million, paid in cash, with an additional $0.5 million to be paid in cash, contingent upon Greensville meeting certain future operating performance criteria.

Availability under the Company’s asset-based lending facility, which was entered into on August 19, 2011, was $82.3 million at December 31, 2011, an increase of $2.7 million versus December 31, 2010. As previously reported, the facility provided enhanced borrowing base formulas, and was utilized in the fourth quarter for the Greensville acquisition and normal debt service requirements.

Operating cash flow for the year ended December 31, 2011 was $35.4 million, an increase of $14.3 million, or 67.8%, versus the same period last year. Net capital expenditures for the year ended December 31, 2011 were $21.9 million, of which $12.6 million were for energy equipment.

“We continue to generate strong free cash flow, and our capital structure improvements have provided us the platform to pursue acquisitions and invest in our energy business,” said Joe Troy, Chief Financial Officer. “We are currently investing in multiple shales within our energy business, which have attractive return profiles and allow us to diversify our customer base. We remain focused on various internal and external opportunities to deploy capital that will enhance shareholder value.”

Quality will host a conference call for investors to discuss these results on Wednesday, February 29, 2012 at 10:00 a.m. Eastern Time. The toll free dial-in number is 877-719-9791; the toll number is 719-325-4779; the passcode is 2164362. A replay of the call will be available through March 29, 2012, by dialing 888-203-1112; passcode: 2164362. 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 also be accessed in the Investor Relations section of Quality’s website. The Company regularly posts or otherwise makes available information within the Investor Relations section that may be important to investors.


About Quality

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 also provides logistics and transportation services for fresh water, disposal water and oil hauling, serving the gas and oil frac shale energy markets through its wholly owned subsidiaries QC Energy Resources, Inc. and QC Energy Resources, LLC. Quality’s 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.

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, on our ability to obtain desired debt financing 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 and 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 generally or in the particular segments in which we operate; 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; our ability to execute plans to profitably operate in the energy logistics markets, our success in entering new markets; adverse weather conditions; 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, 2010 and its Quarterly Reports on Form 10-Q, as well as other reports filed with the Securities and Exchange Commission. Quality disclaims any obligation to update any forward-looking statement as a result of developments occurring after the date of this release.

 

Contact:   Joseph J. Troy
  Executive Vice President and Chief Financial Officer
  800-282-2031 ext. 7195


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,
 
     2011     2010     2011     2010  

OPERATING REVENUES:

      

Transportation

   $ 122,728      $ 117,380      $ 517,780      $ 498,446   

Service revenue

     28,070        27,917        110,588        107,474   

Fuel surcharge

     27,952        20,468        117,583        80,678   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     178,750        165,765        745,951        686,598   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES:

      

Purchased transportation

     122,429        114,025        522,866        471,792   

Compensation

     15,686        14,584        61,098        57,563   

Fuel, supplies and maintenance

     14,546        13,646        51,102        54,367   

Depreciation and amortization

     3,943        3,765        14,413        16,004   

Selling and administrative

     5,702        4,219        21,647        19,339   

Insurance costs

     2,501        3,859        14,042        15,546   

Taxes and licenses

     474        530        2,211        2,218   

Communications and utilities

     678        811        2,732        4,119   

(Gain) loss on disposal of property and equipment

     (470     145        (1,318     1,136   

Restructuring costs (credit)

     —          3,190        (521     7,779   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     165,489        158,774        688,272        649,863   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     13,261        6,991        57,679        36,735   

Interest expense

     7,279        10,129        29,497        36,170   

Interest income

     (151     (147     (585     (622

Write-off of debt issuance costs

     —          7,391        3,181        7,391   

Other (income) expense

     (36     567        214        791   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     6,169        (10,949     25,372        (6,995

Provision for (benefit from) income taxes

     693        (268     1,941        411   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 5,476      $ (10,681   $ 23,431      $ (7,406
  

 

 

   

 

 

   

 

 

   

 

 

 

PER SHARE DATA:

        

Net income (loss) per common share

      

Basic

   $ 0.23      $ (0.51   $ 1.01      $ (0.36
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.22      $ (0.51   $ 0.96      $ (0.36
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares

      

Basic

     23,519        20,918        23,088        20,382   

Diluted

     24,667        20,918        24,352        20,382   


QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In 000’s)

Unaudited

 

     December 31,
2011
    December 31,
2010
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 4,053      $ 1,753   

Accounts receivable, net

     90,567        80,895   

Prepaid expenses

     7,849        6,911   

Deferred tax asset

     4,048        3,848   

Other

     3,858        4,891   
  

 

 

   

 

 

 

Total current assets

     110,375        98,298   

Property and equipment, net

     125,892        113,419   

Goodwill

     31,344        27,023   

Intangibles, net

     18,471        16,924   

Other assets

     16,313        15,671   
  

 

 

   

 

 

 

Total assets

   $ 302,395      $ 271,335   
  

 

 

   

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS’ DEFICIT

    

Current liabilities:

    

Current maturities of indebtedness

   $ 4,139      $ 3,991   

Current maturities of capital lease obligations

     5,261        4,572   

Accounts payable

     7,571        7,200   

Independent affiliates and independent owner-operators payable

     9,795        11,059   

Accrued expenses

     25,327        24,363   

Environmental liabilities

     3,878        3,687   

Accrued loss and damage claims

     8,614        8,471   
  

 

 

   

 

 

 

Total current liabilities

     64,585        63,343   

Long-term indebtedness, less current maturities

     293,823        300,491   

Capital lease obligations, less current maturities

     3,840        8,278   

Environmental liabilities

     6,222        7,255   

Accrued loss and damage claims

     9,768        10,454   

Other non-current liabilities

     30,342        26,060   
  

 

 

   

 

 

 

Total liabilities

     408,580        415,881   

Redeemable noncontrolling interest

     —          1,833   

SHAREHOLDERS’ DEFICIT

    

Common stock

     393,859        371,288   

Treasury stock

     (1,878     (1,593

Accumulated deficit

     (278,543     (301,974

Stock recapitalization

     (189,589     (189,589

Accumulated other comprehensive loss

     (31,381     (26,194

Stock purchase warrants

     1,347        1,683   
  

 

 

   

 

 

 

Total shareholders’ deficit

     (106,185     (146,379
  

 

 

   

 

 

 

Total liabilities, redeemable noncontrolling interest and shareholders’ deficit

   $ 302,395      $ 271,335   
  

 

 

   

 

 

 


QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES

SEGMENT OPERATING RESULTS

(In 000’s)

Unaudited

In connection with the Company’s entry into the gas and oil frac shale energy market in fiscal 2011, a new segment for financial reporting purposes was identified during the fourth quarter of 2011, to better distinguish logistics services to the energy markets from logistics services to the chemical markets based upon how these businesses are managed. The previous logistics segment was renamed Chemical Logistics.

The Company has three reportable business segments for financial reporting purposes that are distinguished primarily on the basis of services offered:

 

   

Chemical Logistics, which consists of the transportation of bulk chemicals primarily through a network of 29 independent affiliates, and equipment rental income;

 

   

Energy Logistics, which consists primarily of the transportation of fresh water, disposal water and oil for the energy logistics markets, primarily through 2 independent affiliates; and

 

   

Intermodal, which consists solely of Boasso and Greensville’s International Organization for Standardization or intermodal ISO tank container transportation and depot services supporting the international movement of bulk liquids.

 

     Year Ended December 31, 2011        
     Chemical     Energy              
     Logistics     Logistics     Intermodal     Total  

Operating Revenues:

        

Transportation

   $ 429,769      $ 29,432      $ 58,579      $ 517,780   

Service revenue

     67,414        1,006        42,168        110,588   

Fuel surcharge

     103,487        64        14,032        117,583   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

   $ 600,670      $ 30,502      $ 114,779      $ 745,951   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenue % of total revenue

     80.5     4.1     15.4     100.0

Segment operating income*

   $ 48,444      $ 3,081      $ 18,728      $ 70,253   

Depreciation & amortization

     10,418        785        3,210        14,413   

Other income

     (1,684     —          (155     (1,839
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 39,710      $ 2,296      $ 15,673      $ 57,679   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Year Ended December 31, 2010        
     Chemical     Energy               
     Logistics     Logistics      Intermodal     Total  

Operating Revenues:

         

Transportation

   $ 442,576        —         $ 55,870      $ 498,446   

Service revenue

     70,470        —           37,004        107,474   

Fuel surcharge

     72,053        —           8,625        80,678   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total operating revenues

   $ 585,099        —         $ 101,499      $ 686,598   
  

 

 

   

 

 

    

 

 

   

 

 

 

Segment revenue % of total revenue

     85.2     —           14.8     100.0

Segment operating income*

   $ 44,791        —         $ 16,863      $ 61,654   

Depreciation & amortization

     13,033        —           2,971        16,004   

Other expense

     8,901        —           14        8,915   
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating income

   $ 22,857        —         $ 13,878      $ 36,735   
  

 

 

   

 

 

    

 

 

   

 

 

 


Summarized segment operating results by quarter for 2011 are as follows (in thousands):

 

     Three Months Ended December 31, 2011  
     Chemical
Logistics
    Energy
Logistics
    Intermodal     Total  

Operating Revenues:

        

Transportation

   $ 99,146      $ 9,099      $ 14,483      $ 122,728   

Service revenue

     16,847        623        10,600        28,070   

Fuel surcharge

     24,407        64        3,481        27,952   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     140,400        9,786        28,564        178,750   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenue % of total revenue

     78.5     5.5     16.0     100.0

Segment operating income*

     11,249        1,539        3,946        16,734   

Depreciation & amortization

     2,668        457        818        3,943   

Other income

     (338     —          (132     (470
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 8,919      $ 1,082      $ 3,260      $ 13,261   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended September 30, 2011  
     Chemical
Logistics
    Energy
Logistics
    Intermodal     Total  

Operating Revenues:

        

Transportation

   $ 107,693      $ 18,341      $ 14,940      $ 140,974   

Service revenue

     16,981        306        10,851        28,138   

Fuel surcharge

     26,428        —          3,758        30,186   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     151,102        18,647        29,549        199,298   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenue % of total revenue

     75.8     9.4     14.8     100.0

Segment operating income*

     12,080        1,224        5,384        18,688   

Depreciation & amortization

     2,518        287        795        3,600   

Other income

     (145     —          (53     (198
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 9,707      $ 937      $ 4,642      $ 15,286   
  

 

 

   

 

 

   

 

 

   

 

 

 


     Three Months Ended June 30, 2011  
     Chemical
Logistics
    Energy
Logistics
    Intermodal     Total  

Operating Revenues:

        

Transportation

   $ 112,318      $ 1,992      $ 15,087      $ 129,397   

Service revenue

     17,078        77        10,487        27,642   

Fuel surcharge

     29,014        —          3,940        32,954   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     158,410        2,069        29,514        189,993   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenue % of total revenue

     83.4     1.1     15.5     100.0

Segment operating income*

     14,333        318        4,735        19,386   

Depreciation & amortization

     2,537        41        800        3,378   

Other (income) expense

     (954     —          23        (931
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 12,750      $ 277      $ 3,912      $ 16,939   
  

 

 

   

 

 

   

 

 

   

 

 

 
     Three Months Ended March 31, 2011  
     Chemical
Logistics
    Energy
Logistics
    Intermodal     Total  

Operating Revenues:

        

Transportation

   $ 110,612      $ —        $ 14,069      $ 124,681   

Service revenue

     16,508        —          10,230        26,738   

Fuel surcharge

     23,638        —          2,853        26,491   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     150,758        —          27,152        177,910   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenue % of total revenue

     84.7     0.0     15.3     100.0

Segment operating income*

     10,782        —          4,663        15,445   

Depreciation & amortization

     2,695        —          797        3,492   

Other (income) expense

     (247     —          7        (240
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 8,334      $ —        $ 3,859      $ 12,193   
  

 

 

   

 

 

   

 

 

   

 

 

 


Summarized segment operating results for the three months ended December 31, 2010 are as follows (in thousands):

 

     Three Months Ended December 31, 2010  
     Chemical
Logistics
    Energy
Logistics
    Intermodal     Total  

Operating Revenues:

        

Transportation

   $ 104,253      $ —        $ 13,127      $ 117,380   

Service revenue

     18,137        —          9,780        27,917   

Fuel surcharge

     18,361        —          2,107        20,468   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     140,751        —          25,014        165,765   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment revenue % of total revenue

     84.9     0.0     15.1     100.0

Segment operating income*

     10,336        —          3,755        14,091   

Depreciation & amortization

     2,970        —          795        3,765   

Other expense (income)

     3,342        —          (7     3,335   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

   $ 4,024      $ —        $ 2,967      $ 6,991   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

* Segment operating income excludes Depreciation and amortization, (Gain) loss on disposal of property and equipment, and Restructuring costs (credit)


RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME, EBITDA AND ADJUSTED EBITDA AND RECONCILIATION OF NET INCOME PER SHARE TO ADJUSTED NET INCOME PER SHARE

For the Three Months and the Year Ended December 31, 2011 and 2010

(In 000’s)

Unaudited

Adjusted Net Income and Adjusted Net Income 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 and Adjusted Net Income 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, 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, the Company adjusts for significant items that are not part of regular operating activities. These adjustments include restructuring charges (credits) related to a plan of restructure which began in the second quarter of 2008 and concluded in the fourth quarter of 2010, write-off of debt issuance costs, write-off unconsummated stock offering costs, and excess interest from debt refinancing.

EBITDA is a component of the measure used by Quality’s management to facilitate internal comparisons to competitors’ results and the bulk transportation, logistics and intermodal industries in general. We believe that financial information based on GAAP for businesses, such as Quality’s, should be supplemented by EBITDA so investors better understand the financial information in connection with their evaluation of the Company’s business. This measure addresses 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, logistics and intermodal industries 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 is adjusted for provision for (benefit from) income tax, depreciation and amortization and net interest expense. To calculate Adjusted EBITDA, we calculate EBITDA from Net Income, which is then further adjusted for significant items that are not part of regular operating activities, including the restructuring charges (credits) related to a plan of restructure which began in the second quarter of 2008 and concluded in 2010, write-off of debt issuance costs, write-off of unconsummated stock offering costs, and other non-cash items such as non-cash stock-based compensation. Adjusted Net Income and Adjusted Net Income 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.


 

     Three months ended
December 31,
    Year ended
December 31,
 
     2011      2010     2011     2010  

Net income (loss)

   $ 5,476       $ (10,681   $ 23,431      $ (7,406

Net income (loss) per common share:

         

Basic

   $ 0.23       $ (0.51   $ 1.01      $ (0.36
  

 

 

    

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.22       $ (0.51   $ 0.96      $ (0.36
  

 

 

    

 

 

   

 

 

   

 

 

 

Weighted average number of shares:

         

Basic

     23,519         20,918        23,088        20,382   

Diluted

     24,667         20,918        24,352        20,382   

Reconciliation:

         

Net income (loss)

   $ 5,476       $ (10,681   $ 23,431      $ (7,406

Adjustments to net income (loss):

         

Provision for (benefit from) income taxes

     693         (268     1,941        411   

Write-off of debt issuance costs

     —           7,391        3,181        7,391   

Restructuring costs (credit)

     —           3,190        (521     7,779   

Costs associated with unconsummated stock offering

     —           735        —          735   

Excess interest from debt refinancing

     —           1,728        —          1,728   
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted income before income taxes

     6,169         2,095        28,032        10,638   

Provision for income taxes at 39%

     2,406         817        10,932        4,149   
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 3,763       $ 1,278      $ 17,100      $ 6,489   
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted net income per common share:

         

Basic

   $ 0.16       $ 0.06      $ 0.74      $ 0.32   
  

 

 

    

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.15       $ 0.06      $ 0.70      $ 0.30   
  

 

 

    

 

 

   

 

 

   

 

 

 

Weighted average number of shares:

         

Basic

     23,519         20,918        23,088        20,382   

Diluted

     24,667         22,020        24,352        21,684   

 

EBITDA and Adjusted EBITDA:    Three months ended
December 31,
    Year ended
December 31,
 
     2011      2010     2011     2010  

Net income (loss)

   $ 5,476       $ (10,681   $ 23,431      $ (7,406

Adjustments to net income (loss):

         

Provision for (benefit from) income taxes

     693         (268     1,941        411   

Depreciation and amortization

     3,943         3,765        14,413        16,004   

Interest expense, net

     7,128         9,982        28,912        35,548   
  

 

 

    

 

 

   

 

 

   

 

 

 

EBITDA

     17,240         2,798        68,697        44,557   

Write-off of debt issuance costs

     —           7,391        3,181        7,391   

Restructuring costs (credit)

     —           3,190        (521     7,779   

Costs associated with unconsummated stock offering

     —           735        —          735   

Non-cash stock-based compensation

     669         568        2,874        2,273   
  

 

 

    

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 17,909       $ 14,682      $ 74,231      $ 62,735