 |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark One)
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended JUNE 30, 2002
or
 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission File Number: 333-98077
Quality Distribution, LLC
| Delaware | 04-3668323 | |
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| (State or other jurisdiction of incorporation or organization) |
I.R.S. Employer Identification No.) |
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| 3802 Corporex Park Drive, Tampa, FL | 33619 | |
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| (Address of Principal Executive Offices) | (Zip Code) |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. 
Yes No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at JUNE 30, 2002 | ||||
| (Membership Interest, No par value) | 100 | ||||
QUALITY DISTRIBUTION, LLC AND SUBSIDIARIES
(SUCCESSOR TO QUALITY DISTRIBUTION, INC.)
INDEX
| Page No. | ||||
| Part I | Financial Information | |||
| Item 1 Financial Statements | ||||
| Condensed consolidated balance sheets - June 30, 2002 (unaudited) and December 31, 2001 | 3-4 | |||
| Condensed consolidated statements of operations - Three months and six months ended June 30, 2002 and 2001 (unaudited) | 5 | |||
| Condensed consolidated statements of cash flows - Six months ended June 30, 2002 and 2001 (unaudited) | 6 | |||
| Condensed Consolidated Statement of Membership Interest for the period ended June 30, 2002 | 7 | |||
| Notes to condensed consolidated financial statements (unaudited) | 8-27 | |||
| Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28-32 | |||
| Item 3 Quantitative and Qualitative Disclosures About Market Risk | 33 | |||
| Part II | Other Information | |||
| Item 1 Legal proceedings | 34 | |||
| Item 4 Submission of matters to a vote of security holders | 34 | |||
| Item 6 Exhibits and Reports on Form 8-K | 34 | |||
| Signatures | 35 | |||
2
FORM 10-Q
PART I — FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
QUALITY DISTRIBUTION, LLC AND SUBSIDIARIES,
(SUCCESSOR TO QUALITY DISTRIBUTION, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| June 30, | ||||||||||
| 2002 | December 31, | |||||||||
| (Unaudited) | 2001 | |||||||||
ASSETS |
||||||||||
Current assets: |
||||||||||
Cash |
$ | 3,261 | $ | 2,212 | ||||||
Accounts receivable |
98,416 | 98,173 | ||||||||
Allowance for doubtful accounts |
(11,130 | ) | (9,272 | ) | ||||||
Receivable — petroleum division sale |
3,501 | — | ||||||||
Inventories |
1,034 | 1,143 | ||||||||
Prepaid expenses |
5,017 | 5,767 | ||||||||
Prepaid tires |
8,482 | 8,968 | ||||||||
Income tax receivable |
— | 306 | ||||||||
Other |
2,599 | 2,666 | ||||||||
Total current assets |
111,180 | 109,963 | ||||||||
Property, plant and equipment |
339,452 | 348,688 | ||||||||
Less — accumulated depreciation and
amortization |
(179,272 | ) | (171,329 | ) | ||||||
| 160,180 | 177,359 | |||||||||
Goodwill, net |
130,111 | 150,510 | ||||||||
Intangibles |
2,570 | 2,265 | ||||||||
Other assets |
8,826 | 8,881 | ||||||||
| $ | 412,867 | $ | 448,978 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
FORM 10-Q
PART I — FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
QUALITY DISTRIBUTION, LLC AND SUBSIDIARIES,
(SUCCESSOR TO QUALITY DISTRIBUTION, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(continued)
| June 30, | ||||||||||||
| 2002 | December 31, | |||||||||||
| (Unaudited) | 2001 | |||||||||||
LIABILITIES AND MEMBERSHIP INTEREST |
||||||||||||
Current liabilities: |
||||||||||||
Current maturities of indebtedness |
$ | 2,677 | $ | 2,677 | ||||||||
Accounts payable and accrued expenses |
67,248 | 62,848 | ||||||||||
Affiliates and owner operators payable |
9,491 | 4,930 | ||||||||||
Income taxes payable |
547 | 1,092 | ||||||||||
Total current liabilities |
79,963 | 71,547 | ||||||||||
Long term bank debt, less current maturities |
289,343 | 301,179 | ||||||||||
Subordinated debt |
94,419 | 140,000 | ||||||||||
Environmental liabilities |
32,590 | 36,163 | ||||||||||
Other long term obligations |
11,880 | 13,744 | ||||||||||
Deferred
taxes |
1,396 | 1,270 | ||||||||||
Total liabilities |
509,591 | 563,903 | ||||||||||
Minority interest in subsidiary |
1,833 | 1,833 | ||||||||||
Mandatorily redeemable preferred stock |
— | 16,499 | ||||||||||
Mandatorily redeemable common stock (30 shares) |
— | 1,210 | ||||||||||
MEMBERSHIP INTEREST: |
||||||||||||
Membership interest, no par value,
1,000 authorized, 100 issued at June 30, 2002
Common stock, $.01 par value;
15,000 shares authorized and issued at
December 31, 2001 |
— | 20 | ||||||||||
Additional paid-in-capital |
176,816 | 105,544 | ||||||||||
Treasury stock |
— | (402 | ) | |||||||||
Accumulated (deficit) |
(77,515 | ) | (37,435 | ) | ||||||||
Stock recapitalization |
(189,589 | ) | (189,589 | ) | ||||||||
Accumulated other comprehensive (loss) |
(8,269 | ) | (10,829 | ) | ||||||||
Notes receivable |
— | (1,776 | ) | |||||||||
Total
membership interest |
(98,557 | ) | (134,467 | ) | ||||||||
| $ | 412,867 | $ | 448,978 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
FORM 10-Q
PART I FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
QUALITY DISTRIBUTION, LLC AND SUBSIDIARIES,
(SUCCESSOR TO QUALITY DISTRIBUTION, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)(in thousands)
| Six months ended | Three months ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
Operating revenues: |
||||||||||||||||||
Transportation |
$ | 223,518 | $ | 225,357 | $ | 117,790 | $ | 114,396 | ||||||||||
Other |
33,119 | 31,049 | 16,629 | 15,414 | ||||||||||||||
Total operating revenues |
256,637 | 256,406 | 134,419 | 129,810 | ||||||||||||||
Operating expenses: |
||||||||||||||||||
Purchased transportation |
150,120 | 150,933 | 79,243 | 77,141 | ||||||||||||||
Depreciation and amortization |
15,596 | 16,659 | 7,841 | 8,470 | ||||||||||||||
Other operating expenses |
74,328 | 72,085 | 38,064 | 36,311 | ||||||||||||||
Operating income |
16,593 | 16,729 | 9,271 | 7,888 | ||||||||||||||
Interest expense, net |
19,484 | 19,062 | 9,577 | 9,621 | ||||||||||||||
Interest expense, transaction fees |
10,077 | — | 10,077 | — | ||||||||||||||
Other
expense (income)
|
48 | (2 | ) | 12 | 11 | |||||||||||||
Loss before taxes |
(13,016 | ) | (2,331 | ) | (10,395 | ) | (1,744 | ) | ||||||||||
Provision for income taxes |
353 | 710 | 164 | 350 | ||||||||||||||
Net loss from continuing operations |
(13,369 | ) | (3,041 | ) | (10,559 | ) | (2,094 | ) | ||||||||||
Discontinued operations: |
||||||||||||||||||
Loss from operations of
discontinued division (net of tax of $0) |
(263 | ) | (419 | ) | (28 | ) | (336 | ) | ||||||||||
Loss on disposal of discontinued
division (net of tax of $0) |
(1,431 | ) | — | (1,431 | ) | — | ||||||||||||
Net loss before Cumulative effect of
Change in accounting principle |
(15,063 | ) | (3,460 | ) | (12,018 | ) | (2,430 | ) | ||||||||||
Cumulative effect of a change
in accounting principle
(net of tax of $0) |
(23,985 | ) | — | — | — | |||||||||||||
Net loss |
(39,048 | ) | (3,460 | ) | (12,018 | ) | (2,430 | ) | ||||||||||
Preferred stock dividends and
accretions |
(1,032 | ) | (794 | ) | (430 | ) | (397 | ) | ||||||||||
Net income attributable to owner’s
interest |
$ | (40,080 | ) | $ | (4,254 | ) | $ | (12,448 | ) | $ | (2,827 | ) | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
FORM 10-Q
ITEM 1 — FINANCIAL STATEMENTS
QUALITY DISTRIBUTION, LLC AND SUBSIDIARIES,
(SUCCESSOR TO QUALITY DISTRIBUTION, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) — (In thousands)
| Six months ended | |||||||||
| June 30, | |||||||||
| 2002 | 2001 | ||||||||
Cash
flows provided by (used in) Operating activities: |
|||||||||
Net loss |
$ | (39,048 | ) | $ | (3,460 | ) | |||
Adjustments for non cash charges |
45,705 | 19,087 | |||||||
Changes in assets and liabilities |
3,274 | (10,770 | ) | ||||||
Net cash provided by operating
activities |
9,931 | 4,857 | |||||||
Investing activities: |
|||||||||
Capital expenditures |
(6,520 | ) | (13,846 | ) | |||||
Proceeds from asset dispositions |
3,682 | 1,734 | |||||||
Net cash (used in)
investing activities |
(2,838 | ) | (12,112 | ) | |||||
Financing activities: |
|||||||||
Proceeds from issuance of debt |
— | 11,000 | |||||||
Payment of debt obligations |
(1,839 | ) | (1,587 | ) | |||||
Preferred stock redemption |
— | (2,600 | ) | ||||||
Exchange offer fees |
(3,572 | ) | — | ||||||
Other |
(691 | ) | 499 | ||||||
Net cash provided by (used in)
financing activities |
(6,102 | ) | 7,312 | ||||||
Net increase in cash |
991 | 57 | |||||||
Effect of exchange rate changes on cash |
58 | (798 | ) | ||||||
Cash, beginning of period |
2,212 | 2,636 | |||||||
Cash, end of period |
$ | 3,261 | $ | 1,895 | |||||
Supplemental disclosures of cash flow
information: |
|||||||||
Cash payments for: |
|||||||||
Interest |
$ | 11,529 | $ | 16,891 | |||||
Income taxes |
$ | 153 | $ | 362 | |||||
Supplemental disclosures of
Non-cash activities: |
|||||||||
Preferred Stock Accretion |
$ | 1,032 | $ | 722 | |||||
Unrealized gain or (loss) on
derivative instruments |
$ | 2,340 | $ | (1,773 | ) | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Quality Distribution LLC and Subsidiaries, successor to Quality Distribution, Inc.
Condensed Consolidated Statement of Membership interest
For the Period Ended June 30, 2002
(In 000’s)
| Accumulated | |||||||||||||||||||||||||||||||||
| Other | Total | ||||||||||||||||||||||||||||||||
| Common | Treasury | Additional | Accumulated | Stock | Comprehensive | Notes | Membership | ||||||||||||||||||||||||||
| Stock | Stock | Paid-in-capital | Deficit | Recapitalization | Loss | Receivable | Interest | ||||||||||||||||||||||||||
Balance December 31, 2001 |
$ | 20 | $ | (402 | ) | $ | 105,544 | $ | (37,435 | ) | $ | (189,589 | ) | $ | (10,829 | ) | $ | (1,776 | ) | $ | (134,467 | ) | |||||||||||
Net Loss |
(39,048 | ) | (39,048 | ) | |||||||||||||||||||||||||||||
Interest rate swaps |
|||||||||||||||||||||||||||||||||