Exhibit 99.1
QUALITY DISTRIBUTION, INC. REPORTS FOURTH QUARTER AND
FISCAL YEAR 2014 RESULTS
Quality Reports Q4 Diluted EPS of $0.09 and Adjusted Diluted EPS of $0.18
Fiscal Year 2014 Revenue Increased 6.7% to $991.8 million
Quality Generates Fiscal Year 2014 Free Cash Flow of $54.7 million
TAMPA, FL – February 25, 2015 – Quality Distribution, Inc. (NASDAQ: QLTY) (“Quality” or the “Company”), a North American logistics and transportation provider with market leading businesses, today announced its results for the fourth quarter and fiscal year ended December 31, 2014. Unless stated otherwise, all fourth quarter 2014 comparisons are relative to the fourth quarter of 2013 and all fiscal year 2014 comparisons are relative to the fiscal year ended December 31, 2013.
Fourth Quarter 2014 Highlights
| | • | | Revenue of $243.2 million was higher by 7.9% compared to $225.4 million. |
| | • | | Net income increased to $2.6 million, or $0.09 per diluted share, compared to a net loss of $22.8 million, or ($0.85) per diluted share. Adjusted net income increased 37.9% to $5.0 million, or $0.18 per diluted share, compared to $3.6 million, or $0.13 per diluted share. A reconciliation of net income (loss) to adjusted net income is included in the attached financial exhibits. |
Fiscal Year 2014 Highlights
| | • | | Revenue of $991.8 million was higher by 6.7% compared to $929.8 million. |
| | • | | Net income increased to $20.6 million, or $0.74 per diluted share, compared to a net loss of $42.0 million, or ($1.58) per diluted share. Adjusted net income increased 14.8% to $21.2 million, or $0.75 per diluted share, compared to $18.4 million, or $0.68 per diluted share. A reconciliation of net income (loss) to adjusted net income is included in the attached financial exhibits. |
| | • | | Free cash flow (defined below) was $54.7 million. |
| | • | | Quality reduced its leverage by 40 basis points, ending the year with a ratio of Net Debt to Adjusted EBITDA of 4.0x. |
“Our Chemical and Intermodal businesses delivered continued growth during the fourth quarter, which led to solid profitability at the high end of our earnings expectation range,” stated Gary Enzor, Chairman and Chief Executive Officer. “Chemical’s expansion efforts delivered strong results as well as increased international demand at Intermodal drove enhanced top and bottom line profitability. Our Energy Logistics revenue was down slightly versus last year, but adjusted operating income was up, primarily reflecting efforts to transition company-operated terminals to independent affiliates alongside our focus on reducing costs through asset optimization. Overall, we delivered a solid fourth quarter and look forward to continuing this positive momentum in 2015.”
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Fourth Quarter 2014 Consolidated Results
Revenue was higher by 7.9% at $243.2 million. Excluding fuel surcharges, revenue increased to $212.1 million, up 8.2% compared to $196.0 million. This revenue improvement was due to continued growth in Chemical Logistics, which was driven by increased volumes and positive contribution from new terminals established in 2014, along with strong growth in the Intermodal business.
Operating income was $10.8 million compared to an operating loss of $28.1 million. After adjusting for the non-operating items presented in the attached financial exhibits, operating income was $14.6 million, up 12.6% compared to $13.0 million, driven primarily by improvements in each operating segment and lower insurance costs.
Adjusted EBITDA was higher by 8.0% at $20.8 million compared to $19.3 million. A reconciliation of net income (loss) to adjusted EBITDA is included in the attached financial exhibits.
Fiscal Year 2014 Consolidated Results
Revenue was higher by 6.7% at $991.8 million. Excluding fuel surcharges, revenue increased to $854.1 million, up 6.1%, compared to $804.9 million, driven primarily by the Chemical Logistics and Intermodal operating segments.
Operating income was $51.2 million compared to an operating loss of $42.8 million. After adjusting for the non-operating items presented in the attached financial exhibits, operating income was $61.5 million, up 6.5% compared to $57.8 million, driven primarily by increases in each operating segment.
Adjusted EBITDA was flat at $86.9 million compared to $86.6 million. A reconciliation of net income (loss) to adjusted EBITDA is included in the attached financial exhibits.
Fourth Quarter 2014 Reporting Segment Results
Chemical Logistics
Revenue was $163.7 million, up 9.0% compared to $150.1 million. Excluding fuel surcharges, revenue increased $13.0 million or 10.4%, due primarily to the opening of several new terminal locations in 2014, which increased volume. Active recruiting and retention actions continue to improve driver counts, helping Chemical Logistics to meet strong customer demand.
Operating income was $19.4 million, up 15.0% compared to $16.9 million. After adjusting for the non-operating items presented in the attached financial exhibits, operating income increased by $1.1 million, driven primarily by incremental revenues from top-line growth. Comparable margins declined slightly as profitability from revenue growth was primarily offset by ongoing growth incentives for independent affiliates and lower margins from start-up terminals.
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Intermodal
Revenue was $37.9 million, up 15.4% compared to $32.9 million. Excluding fuel surcharges, revenue increased $4.7 million, up 16.2%. Strong domestic and international customer activity drove higher overall shipments, and stronger import volumes resulted in an increase in depot services revenue.
Operating income was $4.4 million, up 16.6% compared to $3.8 million, driven by incremental profits on higher trucking revenue and strong margins from increases in depot services revenue.
Energy Logistics
Revenue was $41.4 million, down slightly compared to $42.2 million. Excluding fuel surcharges, revenue was lower by 3.6%, primarily due to reduced volumes in the Woodford shale region, partially offset by higher volumes in the Marcellus, Utica and Bakken shale regions.
Operating loss was $2.2 million compared to $39.2 million. Adjusting for non-operating items presented in the attached financial exhibits, operating income increased to $1.7 million compared to $0.5 million, due primarily to cost control and asset optimization efforts that improved operating performance.
Shared Services
Shared services costs totaled $10.9 million compared to $9.7 million. This increase related primarily to higher driver recruitment and retention expenses, as well as increased performance-based incentive compensation costs.
Summary
Mr. Enzor continued, “The new Chemical terminals opened in 2014 contributed to our overall revenue growth in addition to our increased driver recruiting and retention actions that resulted in higher driver counts, which bodes well for 2015. Our Intermodal business continued to deliver solid top and bottom line improvement that we expect to continue this year. At Energy, we remain focused on our transition efforts to shift our mix of business toward steadier post-production activity versus drilling related work. In addition, the recent affiliation of our Jourdanton, TX terminal should help stabilize this business going forward.”
Balance Sheet and Cash Flow
On November 3, 2014, the Company amended its asset-based loan facility and term loan facility (collectively, the “ABL Facility”). The amendments resulted in lower credit spreads on borrowed funds, enhanced flexibility and extended maturities.
On January 15, 2015, Quality redeemed $10.0 million of 9.875% Second-Priority Senior Secured Notes due 2018 (“Senior Notes”). This optional redemption required a premium payment of $0.5 million and will result in a non-cash charge of $0.2 million to write off debt issuance costs in the first quarter of 2015.
The Company generated operating cash flow of $33.5 million in 2014, which was primarily used to repay debt.
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Capital expenditures for 2014 were $40.1 million and proceeds from equipment sales were $34.1 million, resulting in net capital expenditures for 2014 of $6.0 million, compared to net capital expenditures for 2013 of $1.5 million. Net capital expenditures were higher in 2014 to support growth in the Chemical Logistics business.
Borrowing availability under the Company’s ABL Facility was $62.0 million at December 31, 2014, representing a decrease from December 31, 2013 due primarily to borrowings used for the partial redemption of the Senior Notes in the third quarter of 2014, and the full retirement of subordinated promissory notes that occurred in the second quarter of 2014.
“Since 2013, we have redeemed $55.0 million of our higher cost Senior Notes which represents a nearly 25% reduction from the original amount of this note issuance, and also extinguished $21.3 million of our subordinated promissory notes. We have been successful in maintaining strong liquidity under our ABL Facility, while significantly reducing our higher cost debt using our ample free cash flow,” stated Joe Troy, Chief Financial Officer. “These redemptions, along with the 2014 amendment of our ABL Facility, have strengthened our balance sheet and reduced our leverage. We ended the year at a 4.0x ratio of Net Debt to Adjusted EBITDA. In 2015, we remain committed to deploying our free cash flow primarily to further reduce leverage as we make strides toward our targeted long-term goal of a 2.5x ratio of Net Debt to Adjusted EBITDA.”
Mr. Troy continued, “We continue to monitor the bank and bond markets for a potential refinancing of our Senior Notes, and will be prepared to opportunistically access these markets if conditions warrant. In the absence of improved market conditions, we are prepared to use a portion of our free cash flow throughout the year to redeem additional Senior Notes.”
2015 Outlook
For the first quarter of 2015, Quality expects adjusted net income per diluted share to be in the range of $0.11 to $0.16.
For fiscal year 2015, Quality expects:
| | • | | Adjusted net income per diluted share to be in the range of $0.77 to $0.87; |
| | • | | Free cash flow (defined as Adjusted EBITDA, less net capital expenditures, less cash interest, less cash taxes) to be in the range of $50 to $55 million; and |
| | • | | Net capital expenditures to be in the range of $10 to $15 million. |
These estimates assume a 39% tax rate, and exclude any impacts from non-operating items and costs related to any potential debt refinancing activity. These estimates also reflect anticipated interest savings from potential bond redemptions throughout the year assuming a Senior Note refinancing does not occur.
Mr. Enzor continued, “Our first quarter earnings estimate reflects some caution around our Energy business due to oil price decreases, although we have not seen significant, non-weather related declines in volumes. We have experienced some adverse impact from severe winter weather conditions in each of our businesses. Overall, our asset-light business model continues to deliver strong free cash flow and we look forward to another year of positive results.”
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Fourth Quarter and Fiscal Year Results Conference Call
Quality will host a conference call for analysts and investors to discuss these results on Thursday, February 26, 2015 at 10:00 a.m. Eastern Standard Time, which can be accessed as follows:
Toll freedial-in: 888-778-9064
Toll dial-in: 913-312-1427
Passcode: 1985088
A live audio webcast of the conference call may be accessed in the Investor Relations section of Quality’s website. Copies of the earnings release and other financial information about Quality may also be accessed in the Investor Relations section of Quality’s website atwww.qualitydistribution.com. The Company regularly posts or otherwise makes available information within the Investor Relations section that may be important to investors.
A replay of the call will be available through March 28, 2015, which can be accessed as follows:
Dial-In: 888-203-1112
Passcode: 1985088
About Quality
Headquartered in Tampa, Florida, Quality operates the largest chemical bulk logistics 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 to the unconventional oil and gas industry through its wholly-owned subsidiaries, QC Energy Resources, Inc. and QC Environmental Services, Inc. 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 contains certain forward-looking information that is subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Forward-looking information is any statement other than a statement of historical fact and includes our 2015 expectations. Forward-looking statements are 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, risks and uncertainties regarding forward-looking statements include (1) the effect of local, national and international economic, credit, capital and labor 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, changes in fuel and insurance prices, interest rate fluctuations, and downturns in customers’ business cycles and shipping requirements; (2) our substantial leverage and our ability to make required payments and comply with restrictions contained in our debt arrangements or to otherwise generate sufficient cash flow from operations or borrowing under our ABL Facility to fund our liquidity needs; (3) competition and rate fluctuations, including fluctuations in prices and demand for transportation services as well as for commodities such as natural gas and oil; (4) our reliance on independent affiliates and independent owner-operators; (5) our liability related to third-party equipment leasing programs; (6) a shift away from or slowdown in production in the shale regions in which we have energy logistics operations; (7) our ability to attract and retain qualified drivers; (8) our liability as a self-insurer to the extent of our deductibles as well as changing conditions and pricing in the insurance marketplace; (9) increased unionization, which could increase our operating costs or constrain operating flexibility; (10) changes in, or our
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inability to comply with, governmental regulations and legislative changes affecting the transportation industry generally or in the particular segments in which we operate; (11) federal and state legislative and regulatory initiatives, which could result in increased costs and additional operating restrictions upon us or our oil and gas frac shale energy customers; (12) our ability to access and use disposal wells and other disposal sites and methods in our energy logistics business; (13) our ability to comply with current and future environmental laws and regulations and the increasing costs relating to environmental compliance; (14) potential disruptions at U.S. ports of entry; (15) diesel fuel prices and our ability to recover costs through fuel surcharges; (16) terrorist attacks and the cost of complying with existing and future anti-terrorism security measures; (17) our dependence on senior management; (18) the potential loss of our ability to use net operating losses to offset future income; (19) potential future impairment charges; (20) our ability to successfully identify acquisition opportunities, consummate such acquisitions and successfully integrate acquired businesses, converted independent affiliates and new independent affiliates and achieve the anticipated benefits and synergies of acquisitions and conversions, the effects of the acquisitions and conversions on the acquired businesses’ existing relationships with customers, governmental entities, independent affiliates, independent owner-operators and employees, and the impact that acquisitions and conversions could have on our future financial results and business performance and other future conditions in the market and industry from the acquired businesses; (21) our ability to execute plans to profitably operate in the transportation business and disposal well business within the energy logistics market; (22) our success in entering new markets; (23) adverse weather conditions; (24) disruptions of our information technology and communications systems; (25) our liability for our proportionate share of unfunded vested benefit liabilities, particularly in the event of our withdrawal from any of our multi-employer pension plans; (26) the assumptions underlying our expectations of financial results in 2015; and (27) changes in planned or actual capital expenditures due to operating needs, changes in regulation, covenants in our debt arrangements and other expenses, including interest expense. Readers are urged to carefully review and consider the various disclosures regarding these and other risks and uncertainties, 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, 2013 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, whether as a result of developments occurring after the date of this release or for any other reasons.
| | |
| Contact: | | Michael C. Massi |
| | Vice President of Financial Planning & Analysis and Investor Relations |
| | 800-282-2031 ext. 7235 |
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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, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
OPERATING REVENUES: | | | | | | | | | | | | |
Transportation | | $ | 177,536 | | | $ | 164,554 | | | $ | 717,495 | | | $ | 675,094 | |
Service revenue | | | 34,544 | | | | 31,437 | | | | 136,652 | | | | 129,765 | |
Fuel surcharge | | | 31,102 | | | | 29,430 | | | | 137,611 | | | | 124,951 | |
| | | | | | | | | | | | | | | | |
Total operating revenues | | | 243,182 | | | | 225,421 | | | | 991,758 | | | | 929,810 | |
| | | | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | |
Purchased transportation | | | 161,821 | | | | 148,303 | | | | 667,799 | | | | 594,708 | |
Compensation | | | 24,354 | | | | 22,279 | | | | 92,435 | | | | 98,681 | |
Fuel, supplies and maintenance | | | 26,384 | | | | 25,927 | | | | 99,985 | | | | 105,917 | |
Depreciation and amortization | | | 5,432 | | | | 6,381 | | | | 21,617 | | | | 26,121 | |
Selling and administrative | | | 8,726 | | | | 7,569 | | | | 32,795 | | | | 31,534 | |
Insurance costs | | | 4,450 | | | | 5,692 | | | | 21,070 | | | | 19,169 | |
Taxes and licenses | | | 1,004 | | | | 853 | | | | 3,536 | | | | 3,758 | |
Communications and utilities | | | 988 | | | | 893 | | | | 3,872 | | | | 3,840 | |
(Gain) loss on disposal of property and equipment | | | (743 | ) | | | 62 | | | | (2,581 | ) | | | (2,450 | ) |
Impairment charges | | | — | | | | 35,604 | | | | — | | | | 91,296 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 232,416 | | | | 253,563 | | | | 940,528 | | | | 972,574 | |
| | | | | | | | | | | | | | | | |
Operating income (loss) | | | 10,766 | | | | (28,142 | ) | | | 51,230 | | | | (42,764 | ) |
Interest expense | | | 6,477 | | | | 7,371 | | | | 28,562 | | | | 31,147 | |
Interest income | | | (122 | ) | | | (196 | ) | | | (496 | ) | | | (855 | ) |
Gain on extinguishment of debt | | | — | | | | — | | | | (4,217 | ) | | | — | |
Write-off of debt issuance costs | | | 54 | | | | — | | | | 476 | | | | 521 | |
Other expense (income) | | | 178 | | | | 89 | | | | (144 | ) | | | (7,256 | ) |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 4,179 | | | | (35,406 | ) | | | 27,049 | | | | (66,321 | ) |
Provision for (benefit from) income taxes | | | 1,555 | | | | (12,608 | ) | | | 6,409 | | | | (24,283 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 2,624 | | | $ | (22,798 | ) | | $ | 20,640 | | | $ | (42,038 | ) |
| | | | | | | | | | | | | | | | |
PER SHARE DATA: | | | | | | | | | | | | |
Net income (loss) per common share | | | | | | | | | | | | |
Basic | | $ | 0.09 | | | $ | (0.85 | ) | | $ | 0.75 | | | $ | (1.58 | ) |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.09 | | | $ | (0.85 | ) | | $ | 0.74 | | | $ | (1.58 | ) |
| | | | | | | | | | | | | | | | |
Weighted average number of shares | | | | | | | | | | | | |
Basic | | | 27,847 | | | | 26,690 | | | | 27,539 | | | | 26,560 | |
Diluted | | | 28,198 | | | | 26,690 | | | | 28,077 | | | | 26,560 | |
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QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In 000’s)
Unaudited
| | | | | | | | |
| | | December 31,
2014 | | | December 31,
2013 | |
ASSETS | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 1,358 | | | $ | 1,957 | |
Accounts receivable, net | | | 136,790 | | | | 120,932 | |
Prepaid expenses | | | 14,118 | | | | 13,401 | |
Deferred tax asset, net | | | 29,333 | | | | 20,709 | |
Other current assets | | | 10,374 | | | | 9,919 | |
| | | | | | | | |
Total current assets | | | 191,973 | | | | 166,918 | |
Property and equipment, net | | | 156,249 | | | | 170,114 | |
Assets held-for-sale | | | 2,040 | | | | 1,129 | |
Goodwill | | | 34,896 | | | | 32,955 | |
Intangibles, net | | | 15,388 | | | | 16,149 | |
Non-current deferred tax asset, net | | | 18,942 | | | | 31,401 | |
Other assets | | | 8,295 | | | | 8,583 | |
| | | | | | | | |
Total assets | | $ | 427,783 | | | $ | 427,249 | |
| | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ DEFICIT | | | | | | | | |
Current liabilities: | | | | | | | | |
Current maturities of indebtedness | | $ | 2,699 | | | $ | 8,692 | |
Current maturities of capital lease obligations | | | 334 | | | | 1,888 | |
Accounts payable | | | 12,955 | | | | 10,248 | |
Independent affiliates and independent owner-operators payable | | | 15,110 | | | | 14,398 | |
Accrued expenses | | | 32,617 | | | | 30,580 | |
Environmental liabilities | | | 4,389 | | | | 3,818 | |
Accrued loss and damage claims | | | 8,851 | | | | 8,532 | |
| | | | | | | | |
Total current liabilities | | | 76,955 | | | | 78,156 | |
Long-term indebtedness, less current maturities | | | 348,080 | | | | 369,730 | |
Capital lease obligations, less current maturities | | | 182 | | | | 2,995 | |
Environmental liabilities | | | 3,830 | | | | 4,479 | |
Accrued loss and damage claims | | | 10,493 | | | | 10,747 | |
Other non-current liabilities | | | 19,937 | | | | 17,393 | |
| | | | | | | | |
Total liabilities | | | 459,477 | | | | 483,500 | |
| | | | | | | | |
SHAREHOLDERS’ DEFICIT | | | | | | | | |
Common stock | | | 450,625 | | | | 441,877 | |
Treasury stock | | | (11,860 | ) | | | (10,557 | ) |
Accumulated deficit | | | (249,865 | ) | | | (270,505 | ) |
Stock recapitalization | | | (189,589 | ) | | | (189,589 | ) |
Accumulated other comprehensive loss | | | (31,005 | ) | | | (27,477 | ) |
| | | | | | | | |
Total shareholders’ deficit | | | (31,694 | ) | | | (56,251 | ) |
| | | | | | | | |
Total liabilities and shareholders’ deficit | | $ | 427,783 | | | $ | 427,249 | |
| | | | | | | | |
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QUALITY DISTRIBUTION, INC. AND SUBSIDIARIES
SEGMENT OPERATING RESULTS
(In 000’s)
Unaudited
The Company has three reportable business segments for financial reporting purposes that are distinguished primarily on the basis of services offered. The Company also separately reports Shared Services, which consists of corporate and shared services overhead costs, including information technology, driver recruiting, accounting, stock-based compensation, pension, environmental and other corporate headquarters costs. Segment results for prior-year periods were reclassified to conform to the current year presentation. The Company’s reportable business segments are:
| | • | | Chemical Logistics, which consists of the transportation of bulk chemicals primarily through our network that includes independent affiliates and company-operated terminals, and equipment rental income; |
| | • | | Energy Logistics, which consists primarily of the transportation of crude oil, fresh water and disposal water for the unconventional oil and gas market, through company-operated terminals and independent affiliates, and equipment rental income; and |
| | • | | Intermodal, which consists of Boasso’s intermodal ISO tank container transportation and depot services supporting the international movement of bulk liquids. |
| | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, 2014 | | | | | | | |
| | | Chemical | | | Energy | | | | | | Shared | | | | |
| | | Logistics | | | Logistics (a) | | | Intermodal | | | Services | | | Total | |
Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Transportation | | $ | 119,321 | | | $ | 38,486 | | | $ | 19,729 | | | $ | — | | | $ | 177,536 | |
Service revenue | | | 18,444 | | | | 2,228 | | | | 13,711 | | | | 161 | | | | 34,544 | |
Fuel surcharge | | | 25,937 | | | | 691 | | | | 4,474 | | | | — | | | | 31,102 | |
| | | | | | | | | | | | | | | | | | | | |
Total operating revenues | | $ | 163,702 | | | $ | 41,405 | | | $ | 37,914 | | | $ | 161 | | | $ | 243,182 | |
| | | | | | | | | | | | | | | | | | | | |
Segment revenue % of total revenue | | | 67.3 | % | | | 17.0 | % | | | 15.6 | % | | | 0.1 | % | | | 100.0 | % |
Segment operating income (loss)* | | $ | 20,295 | | | $ | 1,583 | | | $ | 5,281 | | | $ | (11,704 | ) | | $ | 15,455 | |
Depreciation and amortization | | | 2,384 | | | | 2,163 | | | | 851 | | | | 34 | | | | 5,432 | |
(Gain) loss on disposal of property and equipment | | | (1,518 | ) | | | 1,581 | | | | (16 | ) | | | (790 | ) | | | (743 | ) |
| | | | | | | | | | | | | | | | | | | | |
Operating income (loss) | | $ | 19,429 | | | $ | (2,161 | ) | | $ | 4,446 | | | $ | (10,948 | ) | | $ | 10,766 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, 2013 | | | | | | | |
| | | Chemical | | | Energy | | | | | | Shared | | | | |
| | | Logistics (b) | | | Logistics (c) | | | Intermodal | | | Services | | | Total | |
Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Transportation | | $ | 107,186 | | | $ | 40,293 | | | $ | 17,075 | | | $ | — | | | $ | 164,554 | |
Service revenue | | | 17,609 | | | | 1,932 | | | | 11,707 | | | | 189 | | | | 31,437 | |
Fuel surcharge | | | 25,345 | | | | — | | | | 4,085 | | | | — | | | | 29,430 | |
| | | | | | | | | | | | | | | | | | | | |
Total operating revenues | | $ | 150,140 | | | $ | 42,225 | | | $ | 32,867 | | | $ | 189 | | | $ | 225,421 | |
| | | | | | | | | | | | | | | | | | | | |
Segment revenue % of total revenue | | | 66.6 | % | | | 18.7 | % | | | 14.6 | % | | | 0.1 | % | | | 100.0 | % |
Segment operating income (loss)* | | $ | 18,820 | | | $ | 643 | | | $ | 4,425 | | | $ | (9,983 | ) | | $ | 13,905 | |
Depreciation and amortization | | | 2,757 | | | | 2,677 | | | | 832 | | | | 115 | | | | 6,381 | |
Impairment charges | | | — | | | | 35,604 | | | | — | | | | — | | | | 35,604 | |
(Gain) loss on disposal of property and equipment | | | (837 | ) | | | 1,565 | | | | (220 | ) | | | (446 | ) | | | 62 | |
| | | | | | | | | | | | | | | | | | | | |
Operating income (loss) | | $ | 16,900 | | | $ | (39,203 | ) | | $ | 3,813 | | | $ | (9,652 | ) | | $ | (28,142 | ) |
| | | | | | | | | | | | | | | | | | | | |
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| (a) | Operating loss in the Energy Logistics segment during the three months ended December 31, 2014, includes $3.8 million of energy reorganization costs. |
| (b) | Operating income in the Chemical Logistics segment during the three months ended December 31, 2013 includes $1.4 million of excess claims settlement expenses. |
| (c) | Operating loss in the Energy Logistics segment during the three months ended December 31, 2013 includes $35.6 million of impairment charges and $4.1 million of energy reorganization costs. |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2014 | | | | | | | |
| | | Chemical | | | Energy | | | | | | Shared | | | | |
| | | Logistics (d) | | | Logistics (e) | | | Intermodal (f) | | | Services | | | Total | |
Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Transportation | | $ | 483,272 | | | $ | 154,282 | | | $ | 79,941 | | | $ | — | | | $ | 717,495 | |
Service revenue | | | 71,803 | | | | 8,867 | | | | 54,846 | | | | 1,136 | | | | 136,652 | |
Fuel surcharge | | | 113,348 | | | | 4,333 | | | | 19,930 | | | | — | | | | 137,611 | |
| | | | | | | | | | | | | | | | | | | | |
Total operating revenues | | $ | 668,423 | | | $ | 167,482 | | | $ | 154,717 | | | $ | 1,136 | | | $ | 991,758 | |
| | | | | | | | | | | | | | | | | | | | |
Segment revenue % of total revenue | | | 67.4 | % | | | 16.9 | % | | | 15.6 | % | | | 0.1 | % | | | 100.0 | % |
Segment operating income (loss)* | | $ | 79,905 | | | $ | 9,044 | | | $ | 25,785 | | | $ | (44,468 | ) | | $ | 70,266 | |
Depreciation and amortization | | | 9,654 | | | | 8,351 | | | | 3,349 | | | | 263 | | | | 21,617 | |
(Gain) loss on disposal of property and equipment | | | (4,791 | ) | | | 3,035 | | | | (35 | ) | | | (790 | ) | | | (2,581 | ) |
| | | | | | | | | | | | | | | | | | | | |
Operating income (loss) | | $ | 75,042 | | | $ | (2,342 | ) | | $ | 22,471 | | | $ | (43,941 | ) | | $ | 51,230 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2013 | | | | | | | |
| | | Chemical | | | Energy | | | | | | Shared | | | | |
| | | Logistics (g) | | | Logistics (h) | | | Intermodal | | | Services (i) | | | Total | |
Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Transportation | | $ | 442,164 | | | $ | 160,614 | | | $ | 72,316 | | | $ | — | | | $ | 675,094 | |
Service revenue | | | 68,029 | | | | 10,617 | | | | 50,489 | | | | 630. | | | | 129,765 | |
Fuel surcharge | | | 106,845 | | | | 273 | | | | 17,833 | | | | — | | | | 124,951 | |
| | | | | | | | | | | | | | | | | | | | |
Total operating revenues | | $ | 617,038 | | | $ | 171,504 | | | $ | 140,638 | | | $ | 630 | | | $ | 929,810 | |
| | | | | | | | | | | | | | | | | | | | |
Segment revenue % of total revenue | | | 66.4 | % | | | 18.4 | % | | | 15.1 | % | | | 0.1 | % | | | 100.0 | % |
Segment operating income (loss)* | | $ | 80,146 | | | $ | 10,634 | | | $ | 23,174 | | | $ | (41,751 | ) | | $ | 72,203 | |
Depreciation and amortization | | | 11,147 | | | | 11,173 | | | | 3,322 | | | | 479 | | | | 26,121 | |
Impairment charges | | | — | | | | 91,296 | | | | — | | | | — | | | | 91,296 | |
(Gain) loss on disposal of property and equipment | | | (4,234 | ) | | | 4,809 | | | | (161 | ) | | | (2,864 | ) | | | (2,450 | ) |
| | | | | | | | | | | | | | | | | | | | |
Operating income (loss) | | $ | 73,233 | | | $ | (96,644 | ) | | $ | 20,013 | | | $ | (39,366 | ) | | $ | (42,764 | ) |
| | | | | | | | | | | | | | | | | | | | |
| (d) | Operating income in the Chemical Logistics segment during the year ended December 31, 2014 includes $0.2 million of independent affiliate conversion costs and $0.2 million of severance costs. |
| (e) | Operating loss in the Energy Logistics segment during the year ended December 31, 2014 includes $9.8 million of energy reorganization costs. |
| (f) | Operating income in the Intermodal segment during the year ended December 31, 2014 includes $0.1 million of severance costs. |
| (g) | Operating income in the Chemical Logistics segment during the year ended December 31, 2013 includes $1.4 million of excess claims settlement expenses, $0.4 million of independent affiliate conversion costs and $0.3 million of severance costs. |
| (h) | Operating loss in the Energy Logistics segment during the year ended December 31, 2013 includes $91.3 million of impairment charges and $9.3 million of energy reorganization costs. |
| (i) | Operating loss in Shared Services during the year ended December 31, 2013 includes $2.6 million of gains on property dispositions and $0.4 million of severance costs. |
* Segment operating income (loss) reported in the business segment tables above excludes amounts such as depreciation and amortization, impairment charges and gains and losses on disposal of property and equipment.
10
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME AND ADJUSTED NET INCOME PER SHARE. RECONCILIATION OF NET INCOME (LOSS) TO EBITDA TO ADJUSTED EBITDA.
For the Three Months and the Years Ended December 31, 2014 and 2013
(In 000’s)
Unaudited
Adjusted Net Income, 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, 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 the three months ended December 31, 2014 and 2013 for Adjusted Net Income, management uses the Company’s actual effective tax rates of 38.2% and 36.6%, respectively, for calculating the provision for income taxes. For the years ended December 31, 2014 and 2013 for Adjusted Net Income, management uses the Company’s actual effective tax rate of 38.2% (adjusted for the release of a deferred tax valuation allowance), and 36.6%, respectively, for calculating the provision for income taxes. 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 energy reorganization costs, severance costs, independent affiliate conversion costs, excess claims settlement expenses, gain on extinguishment of debt, gain on property dispositions, impairment charges, note redemption costs, write-off of debt issuance costs, equity offering costs and earnout adjustments.
EBITDA is a component of the measure used by Quality’s management to facilitate internal comparisons to competitors’ results and the bulk transportation markets that our chemical and energy logistics and intermodal segments serve. 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 (loss) is adjusted for the provision for income taxes, depreciation and amortization and net interest expense. To calculate Adjusted EBITDA, we calculate EBITDA from Net Income (loss), which is then further adjusted for items that are not part of regular operating activities, including energy reorganization costs, severance costs, independent affiliate conversion costs, excess claims settlement expenses, gain on extinguishment of debt, gain on property dispositions, impairment charges, write-off of debt issuance costs, equity offering costs, earnout adjustments 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.
11
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Year ended
December 31, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
Net Income (Loss) Reconciliation: | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 2,624 | | | $ | (22,798 | ) | | $ | 20,640 | | | $ | (42,038 | ) |
Net income (loss) per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.09 | | | $ | (0.85 | ) | | $ | 0.75 | | | $ | (1.58 | ) |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.09 | | | $ | (0.85 | ) | | $ | 0.74 | | | $ | (1.58 | ) |
| | | | | | | | | | | | | | | | |
Weighted average number of shares: | | | | | | | | | | | | | | | | |
Basic | | | 27,847 | | | | 26,960 | | | | 27,539 | | | | 26,560 | |
Diluted | | | 28,198 | | | | 26,960 | | | | 28,077 | | | | 26,560 | |
Reconciliation: Net income (loss) | | $ | 2,624 | | | $ | (22,798 | ) | | $ | 20,640 | | | $ | (42,038 | ) |
Adjustments to net income (loss): | | | | | | | | | | | | | | | | |
Provision for (benefit from) income taxes | | | 1,555 | | | | (12,608 | ) | | | 6,409 | | | | (24,283 | ) |
Energy reorganization costs | | | 3,838 | | | | 4,061 | | | | 9,781 | | | | 9,293 | |
Severance and lease termination costs | | | — | | | | 96 | | | | 267 | | | | 728 | |
Independent affiliate conversion costs | | | — | | | | — | | | | 222 | | | | 438 | |
Excess claims settlement expenses | | | — | | | | 1,350 | | | | — | | | | 1,350 | |
Gain on extinguishment of debt | | | — | | | | — | | | | (4,217 | ) | | | — | |
Gain on property dispositions | | | — | | | | — | | | | — | | | | (2,577 | ) |
Impairment charges | | | — | | | | 35,604 | | | | — | | | | 91,296 | |
Note redemption costs | | | — | | | | — | | | | 675 | | | | 675 | |
Write-off of debt issuance costs | | | 54 | | | | — | | | | 476 | | | | 521 | |
Equity offering costs | | | — | | | | — | | | | — | | | | 476 | |
Earnout adjustment | | | — | | | | — | | | | — | | | | (6,800 | ) |
| | | | | | | | | | | | | | | | |
Adjusted income before income taxes | | | 8,071 | | | | 5,705 | | | | 34,253 | | | | 29,079 | |
Provision for income taxes at 38.2% for the three months and the year ended December 31, 2014 and 36.6% for the three months and the year ended December 31, 2013 | | | 3,083 | | | | 2,089 | | | | 13,085 | | | | 10,646 | |
| | | | | | | | | | | | | | | | |
Adjusted net income | | $ | 4,988 | | | $ | 3,616 | | | $ | 21,168 | | | $ | 18,433 | |
| | | | | | | | | | | | | | | | |
Adjusted net income per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.18 | | | $ | 0.14 | | | $ | 0.77 | | | $ | 0.69 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.18 | | | $ | 0.13 | | | $ | 0.75 | | | $ | 0.68 | |
| | | | | | | | | | | | | | | | |
Weighted average number of shares: | | | | | | | | | | | | | | | | |
Basic | | | 27,847 | | | | 26,690 | | | | 27,539 | | | | 26,560 | |
Diluted | | | 28,198 | | | | 27,398 | | | | 28,077 | | | | 27,099 | |
12
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Year ended
December 31, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
EBITDA and Adjusted EBITDA: | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 2,624 | | | $ | (22,798 | ) | | $ | 20,640 | | | $ | (42,038 | ) |
Adjustments to net income (loss): | | | | | | | | | | | | | | | | |
Provision for (benefit from) income taxes | | | 1,555 | | | | (12,608 | ) | | | 6,409 | | | | (24,283 | ) |
Depreciation and amortization | | | 5,432 | | | | 6,381 | | | | 21,617 | | | | 26,121 | |
Interest expense, net | | | 6,355 | | | | 7,175 | | | | 28,066 | | | | 30,292 | |
| | | | | | | | | | | | | | | | |
EBITDA | | | 15,966 | | | | (21,850 | ) | | | 76,732 | | | | (9,908 | ) |
Energy reorganization costs | | | 3,765 | | | | 3,467 | | | | 9,630 | | | | 8,136 | |
Severance and lease termination costs | | | — | | | | 96 | | | | 267 | | | | 579 | |
Independent affiliate conversion costs | | | — | | | | — | | | | 222 | | | | 438 | |
Excess claims settlement expenses | | | — | | | | 1,350 | | | | — | | | | 1,350 | |
Gain on extinguishment of debt | | | — | | | | — | | | | (4,217 | ) | | | — | |
Gain on property dispositions | | | — | | | | — | | | | — | | | | (2,577 | ) |
Impairment charges | | | — | | | | 35,604 | | | | — | | | | 91,296 | |
Write-off of debt issuance costs | | | 54 | | | | — | | | | 476 | | | | 521 | |
Equity offering costs | | | — | | | | — | | | | — | | | | 476 | |
Earnout adjustment | | | — | | | | — | | | | — | | | | (6,800 | ) |
Non-cash stock-based compensation | | | 1,027 | | | | 596 | | | | 3,762 | | | | 3,085 | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 20,812 | | | $ | 19,263 | | | $ | 86,872 | | | $ | 86,596 | |
| | | | | | | | | | | | | | | | |
13
