Quality Distribution loses $186.2 million on big non-cash charge

user-gravatar

Despite reporting a $186.2 million net loss for the second quarter, Tampa, Fla.-based bulk transportation carrier Quality Distribution said that it generated $8.8 million of net cash from operating activities and reduced total debt by $8.4 million.

The lion’s share of Quality’s loss resulted from a pre-tax non-cash charge of $148.6 million related to the impairment of goodwill and other intangible assets. The goodwill impairment charge was taken in connection with Quality’s annual impairment testing. The company said the size of the impairment is primarily driven by the fact that Quality’s tangible fixed assets have a market value significantly higher than their book value.

Included in the provision for income taxes is a deferred tax asset valuation allowance of $42.5 million which was primarily related to the goodwill impairment charge. Also figuring into the net loss for the second quarter was a pre-tax restructuring charge of $1.2 million.

Revenue excluding fuel surcharge was down 23 percent for the second quarter and down 22 percent for the first six months compared with the same 2008 periods.

“Cost reductions and our leaner business model have enabled us to generate positive net operating cash of $8.8 million for the quarter and $22.5 million for the six months in the most challenging months yet of this economic downturn,” said Gary Enzor, chief executive officer. “Sequentially, revenue was flat and is slightly increasing thus far in the third quarter.”

“The impairment charge and write down of the deferred tax asset are non-cash,” noted Steve Attwood, chief financial officer. “Quality’s financial performance during the quarter continued to reflect a positive trend. Also, the write down of the deferred tax asset has no impact on our ability to offset the asset against tax liabilities related to future earnings.”