UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
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: 000-24180
Quality Distribution, Inc.
(Exact name of registrant as specified in its charter)
| Florida | 59-3239073 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 3802 Corporex Park Drive, Tampa, FL | 33619 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
813-630-5826
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
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 August 11, 2004 | |
| Common Stock (no par value per share) | 18,995,701 |
1
QUALITY DISTRIBUTION, INC.
CONTENTS
| Page No. | ||
| Part I - Financial Information |
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| Item 1. Financial Statements |
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| Condensed Consolidated Balance Sheets – June 30, 2004 (unaudited) and December 31, 2003 |
3 | |
| 4 | ||
| 5 | ||
| Notes to Condensed Consolidated Financial Statements (unaudited) (restated) |
6-21 | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22-31 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
31 | |
| 31-32 | ||
| Part II - Other Information |
||
| 33-34 | ||
| Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
34 | |
| 34 | ||
| 34 | ||
| 34 | ||
| 34 | ||
| 35 | ||
2
FORM 10-Q
PART I — FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In 000’s)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,355 | $ | 955 | ||||
| Accounts receivable, net of allowance of $7,771 and $6,893 |
86,575 | 74,944 | ||||||
| Current maturities of notes receivable from affiliates |
1,335 | 676 | ||||||
| Prepaid expenses |
3,921 | 3,566 | ||||||
| Prepaid tires |
7,960 | 7,978 | ||||||
| Other |
2,247 | 2,055 | ||||||
| Total current assets |
103,393 | 90,174 | ||||||
| Property and equipment, net of accumulated depreciation of $187,674 and $203,816 |
130,392 | 137,961 | ||||||
| Goodwill |
131,363 | 131,232 | ||||||
| Intangibles, net |
1,497 | 1,402 | ||||||
| Notes receivable from affiliates |
741 | 1,051 | ||||||
| Other assets |
9,268 | 9,871 | ||||||
| Total assets |
$ | 376,654 | $ | 371,691 | ||||
| LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ DEFICIT |
||||||||
| Current liabilities: |
||||||||
| Current maturities of indebtedness |
$ | 1,630 | $ | 1,759 | ||||
| Accounts payable |
20,664 | 18,988 | ||||||
| Affiliates and independent owner-operators payable |
10,790 | 7,319 | ||||||
| Accrued expenses |
60,693 | 54,242 | ||||||
| Income taxes payable |
339 | 518 | ||||||
| Total current liabilities |
94,116 | 82,826 | ||||||
| Long-term indebtedness, less current maturities |
273,550 | 272,750 | ||||||
| Environmental liabilities |
20,771 | 19,689 | ||||||
| Other non-current liabilities |
12,457 | 13,712 | ||||||
| Deferred tax liability |
1,462 | 1,552 | ||||||
| Total liabilities |
402,356 | 390,529 | ||||||
| Commitments and contingencies (Note 6) |
||||||||
| Minority interest in subsidiary |
1,833 | 1,833 | ||||||
| Stockholders’ deficit: |
||||||||
| Common stock, no par value; 29,000 authorized, 19,113 issued at June 30, 2004 and 19,080 issued at December 31, 2003 |
356,091 | 356,078 | ||||||
| Treasury stock, 113 and 111 shares at June 30, 2004 and December 31, 2003, respectively |
(1,310 | ) | (1,258 | ) | ||||
| Accumulated deficit |
(176,469 | ) | (169,569 | ) | ||||
| Stock recapitalization |
(189,589 | ) | (189,589 | ) | ||||
| Accumulated other comprehensive loss |
(14,670 | ) | (14,689 | ) | ||||
| Stock purchase warrants |
73 | 86 | ||||||
| Stock subscriptions receivable |
(1,661 | ) | (1,730 | ) | ||||
| Total stockholders’ deficit |
(27,535 | ) | (20,671 | ) | ||||
| Total liabilities, minority interest and stockholders’ deficit |
$ | 376,654 | $ | 371,691 | ||||
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, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited — In 000’s, Except Per Share Amounts)
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (Restated) | ||||||||||||||||
| Operating revenues: |
||||||||||||||||
| Transportation |
$ | 132,771 | $ | 121,813 | $ | 260,628 | $ | 236,622 | ||||||||
| Other service revenues |
18,009 | 17,758 | 36,422 | 35,349 | ||||||||||||
| Fuel surcharge |
6,649 | 4,061 | 11,564 | 8,676 | ||||||||||||
| Total operating revenues |
157,429 | 143,632 | 308,614 | 280,647 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Purchased transportation |
106,269 | 90,134 | 207,043 | 174,066 | ||||||||||||
| Compensation |
15,651 | 14,934 | 30,200 | 31,386 | ||||||||||||
| Fuel, supplies and maintenance |
9,558 | 9,874 | 19,100 | 20,601 | ||||||||||||
| Depreciation and amortization |
5,874 | 7,630 | 11,894 | 15,124 | ||||||||||||
| Selling and administrative |
7,638 | 3,181 | 11,379 | 6,294 | ||||||||||||
| Insurance |
11,260 | 5,141 | 15,588 | 9,263 | ||||||||||||
| PPI professional fees |
811 | — | 4,053 | — | ||||||||||||
| Other operating expenses |
2,578 | 3,197 | 5,321 | 5,779 | ||||||||||||
| Operating income (loss) |
(2,210 | ) | 9,541 | 4,036 | 18,134 | |||||||||||
| Interest expense |
5,395 | 6,314 | 10,612 | 12,958 | ||||||||||||
| Foreign currency transaction loss |
— | 937 | — | 937 | ||||||||||||
| Other expense (income) |
126 | (21 | ) | 154 | (45 | ) | ||||||||||
| Income (loss) before taxes |
(7,731 | ) | 2,311 | (6,730 | ) | 4,284 | ||||||||||
| Provision for income taxes |
131 | 102 | 170 | 240 | ||||||||||||
| Net income (loss) |
(7,862 | ) | 2,209 | (6,900 | ) | 4,044 | ||||||||||
| Distributions to minority interest/preferred stock dividends and accretions |
— | (2,272 | ) | — | (4,463 | ) | ||||||||||
| Net loss attributable to common stockholders |
$ | (7,862 | ) | $ | (63 | ) | $ | (6,900 | ) | $ | (419 | ) | ||||
| Per share data: |
||||||||||||||||
| Net loss per common share – basic |
$ | (0.42 | ) | $ | (0.02 | ) | $ | (0.37 | ) | $ | (0.13 | ) | ||||
| Net loss per common share – diluted |
$ | (0.42 | ) | $ | (0.02 | ) | $ | (0.37 | ) | $ | (0.13 | ) | ||||
| Weighted average number of shares – basic |
18,915 | 3,337 | 18,900 | 3,337 | ||||||||||||
| Weighted average number of shares – diluted |
18,915 | 3,337 | 18,900 | 3,337 | ||||||||||||
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, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited — In 000’s)
| Six months ended June 30, |
||||||||
| 2004 |
2003 |
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| (Restated) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (6,900 | ) | $ | 4,044 | |||
| Adjustments for non-cash charges |
13,190 | 20,308 | ||||||
| Changes in assets and liabilities |
(2,230 | ) | (12,695 | ) | ||||
| Net cash provided by operating activities |
4,060 | 11,657 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(4,277 | ) | (3,836 | ) | ||||
| Acquisition of assets |
(781 | ) | — | |||||
| Proceeds from asset dispositions |
363 | 765 | ||||||
| Net cash used in investing activities |
(4,695 | ) | (3,071 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net draws (payments) on the revolver |
1,500 | (7,000 | ) | |||||
| Payments of debt obligations |
(830 | ) | (1,532 | ) | ||||
| Deferred financing fees |
(369 | ) | — | |||||
| Increase in bank overdraft |
619 | 1,814 | ||||||
| Other |
17 | 236 | ||||||
| Net cash provided by (used in) financing activities |
937 | (6,482 | ) | |||||
| Net increase in cash |
302 | 2,104 | ||||||
| Effect of exchange rate changes on cash |
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