Quality Distribution Inc. (QLTY)

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March 12, 2008 - 6:27 PM EDT

Quality Distribution, Inc. Announces Fourth Quarter and Year End Quarter Results
TAMPA, Fla., March 12 /PRNewswire-FirstCall/ -- Quality Distribution, Inc. (Nasdaq: QLTY) (the 'Company') today reported the results for its fourth quarter and fiscal year ended December 31, 2007. Total revenue for the quarter increased 9.0% over the fourth quarter of 2006 from $171.1 million to $186.6 million. Total revenue for the year increased by 2.9% from $730.2 million last year to $751.6 million in 2007. Revenue excluding fuel surcharge was $159.4 million for the fourth quarter 2007 and $656.9 million for the year 2007.

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The Company incurred a net loss for fourth quarter of 2007 of $11.2 million, or ($0.58) per fully diluted share, as compared to net income for the same period of last year of $6.1 million, or $0.31 per fully diluted share. Applying a normalized tax rate of 39% to both periods would have resulted in a fully diluted loss per share for the fourth quarter 2007 of ($0.49), as compared with fully diluted earnings per share of $0.03 for the fourth quarter of 2006. Net income for 2006 was significantly influenced by the fact that we recorded as part of our provision for income taxes, a non cash benefit of $45.8 million, resulting from the release of the Company's deferred tax valuation allowance.

As stated in our earnings pre-release on February 12, 2008, in addition to a weakening economic environment, the Company's fourth quarter of 2007 was negatively impacted by several factors: the recent refinancing of our senior credit facility resulted in a $1.2 million non-cash charge to write off the remaining deferred financing costs related to the Company's previous senior credit facility, a $1.6 million charge related to unconsummated acquisition and re-financing activities during the year, a $0.8 million charge for bridge commitment fees related to the Boasso acquisition, and $4.8 million of incremental charges related to the adverse development of several large casualty claims that were settled at the end of the fourth quarter. The total pre-tax impact of these charges on the fourth quarter was approximately $8.4 million. Conversely, in the fourth quarter of last year, several unusual events had a net positive impact of $4.7 million on pretax income, including: a gain on the sale of real estate of approximately $4.3 million, a credit to insurance expense of $0.7 million related to the recovery of monies from an early 1990s claim, and better than normalized insurance claims experience of $0.7 million, which were offset by a $1.0 million charge for the write off of costs related to a planned secondary offering. After the adjustments mentioned above, there was a net decrease in the pre-tax income of our core business of $3.6 million (or ($0.12) tax effected EPS) in the fourth quarter of this year as compared to the fourth quarter of last year. The primary factors attributable to the reduction in quarterly year over year profitability were increased depreciation and lease costs related to updating our fleet over the past two years, loss on sale and/or impairment of obsolete revenue equipment and reduced margins due to affiliate conversions which take twelve to eighteen months to stabilize.

As previously announced, on December 18, 2007, the Company acquired 100% of the outstanding capital stock of Boasso America Corporation ('Boasso') for an aggregate purchase price of $58.8 million less the outstanding debt of Boasso, and subject to a working capital adjustment. The fourth quarter and annual results include two weeks of results from the Boasso acquisition.

Commenting on the results and acquisitions, President and Chief Executive Officer Gary Enzor stated, 'As we stated in our earnings pre-release of February 12, 2008, we are very disappointed with our Q4 and full year 2007 results. We are committed to taking actions necessary to improve results.'

Mr Enzor added: 'We are very pleased with the Boasso acquisition: Boasso's revenue for January and February 2008 has increased 10% as compared with the same periods last year. We expect Boasso to continue performing at these levels and in addition we expect to realize operating leverage as Quality Distribution's approximately $8 million of ISO container revenue is absorbed into Boasso's more robust and more profitable operating model. Furthermore, Boasso is scheduled to open a major new ISO container operation in Newark, New Jersey this summer, a location we expect to contribute significant revenue and bottom line growth.'

Timothy Page, Chief Financial Officer stated, 'As for the rest of Quality Distribution, revenue (excluding fuel surcharge and Boasso) in our core trucking business is up 2% above last year through the end of February. Total revenue (excluding fuel surcharge and Boasso) is up 2.8%. While not meeting our expectations, we are pleased that given the weak economy and a significant housing sector related revenue decline with our largest customer, our transportation revenue is up versus last year.'

Mr. Page added, 'The proceeds from the refinancing of our credit facility were primarily used to fund the acquisition of Boasso. Besides extending the maturities of our existing Senior Credit Facility, this refinancing provides us with additional borrowing availability and along with the recent declines in LIBOR rates is expected to yield a reduction in our blended cost of capital.'

In the fourth quarter of 2007, the Company changed its accounting policy for tires. Prior to the change, the cost of original and replacement tires mounted on equipment were reported as prepaid tires and amortized based on estimated usage. Under the new policy, the Company capitalizes the cost of tires mounted on equipment as a part of the total equipment cost and depreciates the cost over the useful life of the related equipment. This change in policy is consistent with industry practice, and did not have a material impact on the Company's pre-tax results in 2006 and 2007. The Company has reported this change retrospectively applying the new policy to all prior period financial statements presented.

The Company will host a conference call for investors to discuss these results on March 13, 2008 at 11:00 a.m. Eastern Time. The toll free dial-in number is 888-240-9352; the toll number is 913-981-5525; the passcode is 4790489. https://cis.premconf.com/sc/scw.dll/usr?cid=vlllrwznnzzvlcmdcA replay of the call will be available until April 12, 2008 by dialing 888-203-1112; passcode; 4790489. Copies of this earnings release and other financial information about the Company may be accessed in the Investor Relation section of the Company's website at www.qualitydistribution.com.

Headquartered in Tampa, Florida, QDI, through its subsidiaries, Quality Carriers, Inc. and Boasso America Corporation, and through its affiliates and owner-operators, provides bulk transportation and related services. QDI also provides tank cleaning services to the bulk transportation industry through its QualaWash(R) facilities. QDI is an American Chemistry Council Responsible Care(R) Partner and is a core carrier for many of the Fortune 500 companies that are engaged in chemical production and processing.

This 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 the Company's substantial leverage; economic factors; downturns in customers' business cycles or in the national economy; the cyclical nature of the transportation industry; claims exposure and insurance costs; adverse weather conditions; dependence on affiliates and owner-operators; changes in government regulation including transportation, environmental and anti-terrorism laws; the Company's environmental remediation costs; fluctuations in fuel pricing or availability; increases in interest rates; potential disruption at U.S. ports of entry; changes in senior management; the Company's ability to achieve projected operating objectives and debt reduction in 2008; its ability to successfully integrate acquired businesses or integrate affiliate businesses converted to Company-controlled operations; and the Company's ability to attract and retain qualified drivers. Readers are urged to carefully review and consider the various disclosures, including but not limited to risk factors, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2006 and its quarterly reports on Form 10-Q, as well as 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 release.

Contact: Timothy B. Page
Senior Vice President and Chief Financial Officer
800-282-2031 ext. 7376