22. GUARANTOR SUBSIDIARIES

At and during the year ended December 31, 2011, there were outstanding our 2018 Notes, which were issued by our subsidiaries, QD LLC and QD Capital. The payment obligations of QD LLC and QD Capital under the 2018 Notes are fully and unconditionally guaranteed by QDI and by all of its domestic subsidiaries other than immaterial subsidiaries as further described below.

The 2018 Notes are our subsidiaries', QD LLC and QD Capital, senior obligations and are secured by a subordinated, second-priority lien on assets that secure our New ABL Facility through a collateral agreement that is separate from the indenture under which these notes were issued. Pursuant to an intercreditor agreement, the liens on the collateral securing the 2018 Notes rank junior in right of payment to the New ABL Facility and obligations under certain hedging agreements and cash management obligations and certain other first-lien obligations. Decisions regarding the maintenance and release of the collateral secured by the collateral agreement are made by the lenders under our New ABL Facility and neither the indenture trustee nor the holders of the 2018 Notes have control of decisions regarding the release of the collateral. The 2018 Notes are also fully and unconditionally guaranteed, subject to certain customary release provisions on a second-priority senior secured basis, jointly and severally, by QDI, our other subsidiary guarantors, and certain of our future U.S. restricted subsidiaries.

The subsidiary guarantors of all of the 2018 Notes are all of our direct and indirect domestic subsidiaries other than immaterial subsidiaries. No non-domestic subsidiaries are guarantor subsidiaries. QD Capital has no material assets or operations. QD LLC, all of its subsidiary guarantors and QD Capital are 100% owned by QDI.

QD LLC conducts substantially all of its business through and derives virtually all of its income from its subsidiaries. Therefore, its ability to make required principal and interest payments with respect to its indebtedness depends on the earnings of subsidiaries and its ability to receive funds from its subsidiaries through dividend and other payments. The subsidiary guarantors are 100% owned subsidiaries of QD LLC.

QDI has no significant restrictions on its ability to receive funds from its subsidiaries. The New ABL Facility and the indenture governing our 2018 Notes contains certain limitations on QD LLC's ability to make distributions to QDI. We do not consider these restrictions to be significant, because QDI is a holding company with no significant operations or assets, other than ownership of 100% of QD LLC's membership units. QD LLC's direct and indirect wholly owned subsidiaries are generally permitted to make distributions to QD LLC, which is the principal obligor under the New ABL Facility and the 2018 Notes.

We have not presented separate financial statements and other disclosures concerning QD LLC, QD Capital or the subsidiary guarantors because management has determined such information is not material to the holders of the above-mentioned notes.

The following condensed consolidating financial information for QDI, QD LLC, QD Capital, which has no assets or operations, non-guarantor subsidiaries and combined guarantor subsidiaries presents:

•

Condensed consolidating balance sheets at December 31, 2011 and 2010 and condensed consolidating statements of operations and of cash flows for each of the three years ended December 31, 2011, 2010 and 2009.

•

Elimination entries necessary to consolidate the parent company and all its subsidiaries.

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2011

(in thousands)


	QDI			QD LLC & QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues:
Transportation	$	—		$	—		$	517,780		$	—		$	—		$	517,780
Other service revenue		—			—			110,064			524			—			110,588
Fuel surcharge		—			—			117,583			—			—			117,583

Total operating revenues		—			—			745,427			524			—			745,951

Operating expenses:
Purchased transportation		—			—			522,866			—			—			522,866
Compensation		—			—			61,098			—			—			61,098
Fuel, supplies and maintenance		—			—			51,102			—			—			51,102
Depreciation and amortization		—			—			14,413			—			—			14,413
Selling and administrative		—			120			21,445			82			—			21,647
Insurance costs		—			—			14,025			17			—			14,042
Taxes and licenses		—			—			2,211			—			—			2,211
Communication and utilities		—			—			2,732			—			—			2,732
Gain on disposal of property and equipment		—			—			(1,318	)		—			—			(1,318	)
Restructuring credit		—			—			(521	)		—						(521	)

Operating (loss) income		—			(120	)		57,374			425			—			57,679

Interest (income) expense, non-related party, net		(15	)		28,012			923			(8	)		—			28,912
Interest (income) expense, related party, net		—			(28,012	)		28,427			(415	)		—			—
Write off of debt issuance costs		—			3,181			—			—			—			3,181
Other expense		—			2			201			11			—			214

Income (loss) before income taxes		15			(3,303	)		27,823			837			—			25,372
Provision for (benefit from) income taxes		126			—			1,860			(45	)		—			1,941
Equity in earnings of subsidiaries		23,542			26,845			—			—			(50,387	)		—

Net income	$	23,431		$	23,542		$	25,963		$	882		$	(50,387	)	$	23,431

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2010

(in thousands)


	QDI			QD LLC & QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Operating revenues:
Transportation	$	—		$	—		$	498,446		$	—		$	—	$	498,446
Service revenue		—			—			106,893			581			—		107,474
Fuel surcharge		—			—			80,678			—			—		80,678

Total operating revenues		—			—			686,017			581			—		686,598
Operating expenses:
Purchased transportation		—			—			471,792			—			—		471,792
Compensation		—			—			57,563			—			—		57,563
Fuel, supplies and maintenance		—			—			54,366			1			—		54,367
Depreciation and amortization		—			—			16,004			—			—		16,004
Selling and administrative		33			195			19,015			96			—		19,339
Insurance costs		—			—			15,525			21			—		15,546
Taxes and licenses		—			—			2,218			—			—		2,218
Communication and utilities		—			—			4,119			—			—		4,119
Loss (gain) on disposal of property and equipment		—			—			1,141			(5	)		—		1,136
Restructuring costs		—			—			7,779			—			—		7,779

Operating (loss) income		(33	)		(195	)		36,495			468			—		36,735
Interest expense (income), non-related party, net		37			34,221			1,339			(49	)		—		35,548
Interest (income) expense, related party, net		—			(34,226	)		34,652			(426	)		—		—
Write-off of debt issuance costs		—			7,391			—			—			—		7,391
Other expense (income)		735			174			96			(214	)		—		791

(Loss) income before income taxes		(805	)		(7,755	)		408			1,157			—		(6,995	)
Provision for (benefit from) income taxes		3			—			822			(414	)		—		411
Equity in (loss) earnings of subsidiaries		(6,598	)		1,157			—			—			5,441		—

Net (loss) income	$	(7,406	)	$	(6,598	)	$	(414	)	$	1,571		$	5,441	$	(7,406	)

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2009

(in thousands)


	QDI			QD LLC & QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations		Consolidated
Operating revenues:
Transportation	$	—		$	—		$	454,658		$	—		$	—	$	454,658
Service revenue		—			—			104,716			238			—		104,954
Fuel surcharge		—			—			53,997			—			—		53,997

Total operating revenues		—			—			613,371			238			—		613,609
Operating expenses:
Purchased transportation		—			—			369,460			—			—		369,460
Compensation		—			—			76,955			—			—		76,955
Fuel, supplies and maintenance		—			—			66,527			—			—		66,527
Depreciation and amortization		—			—			20,218			—			—		20,218
Selling and administrative		—			268			24,259			45					24,572
Insurance costs		—			—			14,096			23			—		14,119
Taxes and licenses		—			—			3,578			—			—		3,578
Communication and utilities		—			—			7,910			—			—		7,910
Gain on sale of tank wash assets		—			—			(7,130	)		—			—		(7,130	)
Loss on disposal of property and equipment		—			—			450			—			—		450
Impairment charge		—			—			148,630			—			—		148,630
Restructuring costs		—			—			3,496			—			—		3,496

Operating (loss) income		—			(268	)		(115,078	)		170			—		(115,176	)
Interest (income) expense, non-related party, net		(5	)		25,689			2,412			(49	)		—		28,047
Interest (income) expense, related party, net		—			(25,689	)		26,116			(427	)		—		—
Gain on extinguishment of debt		—			(1,870	)		—			—			—		(1,870	)
Other expense (income)		—			2,343			(206	)		(205	)		—		1,932

Income (loss) before income taxes		5			(741	)		(143,400	)		851			—		(143,285	)
Provision for income taxes		119			—			37,038			92			—		37,249
Equity in loss of subsidiaries		(180,420	)		(179,679	)		—			—			360,099		—

Net (loss) income	$	(180,534	)	$	(180,420	)	$	(180,438	)	$	759		$	360,099	$	(180,534	)

Consolidating Balance Sheet, December 31, 2011

(in thousands)


	QDI			QD LLC and QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—		$	—		$	3,540		$	513		$	—		$	4,053
Accounts receivable, net		—			—			90,509			58			—			90,567
Prepaid expenses		—			31			7,818			—			—			7,849
Deferred tax asset, net		—			—			4,048			—			—			4,048
Other		307			—			3,551			—			—			3,858

Total current assets		307			31			109,466			571			—			110,375
Property and equipment, net		—			—			125,892			—			—			125,892
Goodwill		—			—			31,344			—			—			31,344
Intangibles, net		—			—			18,471			—			—			18,471
Investment in subsidiaries		(138,028	)		382,191			27,964			—			(272,127	)		—
Other assets		—			10,655			5,658			—			—			16,313

Total assets	$	(137,721	)	$	392,877		$	318,795		$	571		$	(272,127	)	$	302,395

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities:
Current maturities of indebtedness	$	—		$	—		$	4,139		$	—		$	—		$	4,139
Current maturities of capital lease obligations		—			—			5,261			—			—			5,261
Accounts payable		—			—			7,579			(8	)		—			7,571
Intercompany		(30,870	)		237,702			(171,982	)		(6,886	)		(27,964	)		—
Affiliates and independent owner-operators payable		—			—			9,795			—			—			9,795
Accrued expenses		341			4,184			20,751			51			—			25,327
Environmental liabilities		—			—			3,878			—			—			3,878
Accrued loss and damage claims		—			—			8,614			—			—			8,614

Total current liabilities		(30,529	)		241,886			(111,965	)		(6,843	)		(27,964	)		64 ,585
Long-term indebtedness, less current maturities		—			289,019			4,804			—			—			293,823
Capital lease obligations, less current maturities		—			—			3,840			—			—			3,840
Environmental liabilities		—			—			6,222			—			—			6,222
Accrued loss and damage claims		—			—			9,768			—			—			9,768
Other non-current liabilities		(1,007	)		—			31,306			43			—			30,342

Total liabilities		(31,536	)		530,905			(56,025	)		(6,800	)		(27,964	)		408,580
Shareholders' (deficit) equity:
Common Stock		393,859			354,963			399,757			4,833			(759,553	)		393,859
Treasury stock		(1,878	)		—			—			—			—			(1,878	)
Accumulated (deficit) retained earnings		(278,543	)		(273,840	)		4,938			3,627			265,275			(278,543	)
Stock recapitalization		(189,589	)		(189,589	)		—			(55	)		189,644			(189,589	)
Accumulated other comprehensive loss		(31,381	)		(30,909	)		(29,875	)		(1,034	)		61,818			(31,381	)
Stock purchase warrants		1,347			1,347			—			—			(1,347	)		1,347

Total shareholders' (deficit) equity		(106,185	)		(138,028	)		374,820			7,371			(244,163	)		(106,185	)

Total liabilities, redeemable noncontrolling interest and shareholders' (deficit) equity	$	(137,721	)	$	392,877		$	318,795		$	571		$	(272,127	)	$	302,395

Consolidating Balance Sheet, December 31, 2010

(in thousands)


	QDI			QD LLC and QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—		$	—		$	1,174		$	579		$	—		$	1,753
Accounts receivable, net		—			—			80,791			104			—			80,895
Prepaid expenses		—			231			6,664			16			—			6,911
Deferred tax asset, net		—			—			3,848			—			—			3,848
Other		(192	)		—			5,134			(51	)		—			4,891

Total current assets		(192	)		231			97,611			648			—			98,298
Property and equipment, net		—			—			113,419			—			—			113,419
Goodwill		—			—			27,023			—			—			27,023
Intangibles, net		—			—			16,924			—			—			16,924
Investment in subsidiaries		(156,047	)		451,537			18,967			—			(314,457	)		—
Other assets		—			9,110			6,561			—			—			15,671

Total assets	$	(156,239	)	$	460,878		$	280,505		$	648		$	(314,457	)	$	271,335

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities:
Current maturities of indebtedness	$	—		$	—		$	3,991		$	—		$	—		$	3,991
Current maturities of capital lease obligations		—			—			4,572			—			—			4,572
Accounts payable		—			—			7,204			(4	)		—			7,200
Intercompany		(8,853	)		319,693			(285,803	)		(6,070	)		(18,967	)		—
Independent affiliates and independent owner-operators payable		—			—			11,059			—			—			11,059
Accrued expenses		—			4,077			20,253			33			—			24,363
Environmental liabilities		—			—			3,687			—			—			3,687
Accrued loss and damage claims		—			—			8,471			—			—			8,471

Total current liabilities		(8,853	)		323,770			(226,566	)		(6,041	)		(18,967	)		63,343
Long-term indebtedness, less current maturities		—			293,155			7,336			—			—			300,491
Capital lease obligations, less current maturities		—			—			8,278			—			—			8,278
Environmental liabilities		—			—			7,255			—			—			7,255
Accrued loss and damage claims		—			—			10,454			—			—			10,454
Other non-current liabilities		(1,007	)		—			26,841			226			—			26,060

Total liabilities		(9,860	)		616,925			(166,402	)		(5,815	)		(18,967	)		415,881
Redeemable noncontrolling interest in subsidiary		—			—			1,833			—			—			1,833
Shareholders' (deficit) equity:
Common Stock		371,288			354,963			490,761			4,833			(850,557	)		371,288
Treasury stock		(1,593	)		—			—			—			—			(1,593	)
Accumulated (deficit) retained earnings		(301,974	)		(297,382	)		(21,025	)		2,745			315,662			(301,974	)
Stock recapitalization		(189,589	)		(189,589	)		—			(55	)		189,644			(189,589	)
Accumulated other comprehensive loss		(26,194	)		(25,722	)		(24,662	)		(1,060	)		51,444			(26,194	)
Stock purchase warrants		1,683			1,683			—			—			(1,683	)		1,683

Total shareholders' (deficit) equity		(146,379	)		(156,047	)		445,074			6,463			(295,490	)		(146,379	)

Total liabilities, redeemable noncontrolling interest and shareholders' (deficit) equity	$	(156,239	)	$	460,878		$	280,505		$	648		$	(314,457	)	$	271,335

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2011

(in thousands)


	QDI			QD LLC and QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated

Cash flows from operating activities:
Net income	$	23,431		$	23,542		$	25,963		$	882		$	(50,387	)	$	23,431
Adjustments for non-cash charges		(20,668	)		(49,029	)		40,760			(415	)		50,387			21,035
Net changes in assets and liabilities		(158	)		(1,238	)		(8,666	)		995			—			(9,067	)
Intercompany activity		(2,605	)		26,725			(22,592	)		(1,528	)		—			—

Net cash provided by (used in) operating activities		—			—			35,465			(66	)		—			35,399

Cash flows from investing activities:
Capital expenditures		—			—			(38,340	)		—			—			(38,340	)
Acquistion of Greensville Transport Company		—			—			(8,594	)		—			—			(8,594	)
Proceeds from sales of property and equipment		—			—			16,476			—			—			16,476

Net cash used in investing activities		—			—			(30,458	)		—			—			(30,458	)

Cash flows from financing activities:
Principal payments on long-term debt and capital lease obligations		—			(33,378	)		(9,229	)		—			—			(42,607	)
Proceeds from revolver		—			175,457			—			—			—			175,457
Payments on revolver		—			(148,457	)		—			—			—			(148,457	)
Deferred financing costs		—			(4,965	)		—			—			—			(4,965	)
Redemption of noncontrolling interest		—			—			(1,833	)		—			—			(1,833	)
Proceeds from equity offering, net of transaction costs		17,580			—			—			—			—			17,580
Proceeds from exercise of stock options		1,768			—			—			—			—			1,768
Other		—			—			415			—			—			415
Intercompany activity		(19,348	)		11,343			8,005			—			—			—

Net cash used in financing activities		—			—			(2,642	)		—			—			(2,642	)

Effect of exchange rate changes on cash		—			—			1			—			—			1

Net increase (decrease) in cash and cash equivalents		—			—			2,366			(66	)		—			2,300
Cash and cash equivalents, beginning of year		—			—			1,174			579			—			1,753

Cash and cash equivalents, end of year	$	—		$	—		$	3,540		$	513		$	—		$	4,053

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2010

(in thousands)


	QDI			QD LLC and QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(7,406	)	$	(6,598	)	$	(414	)	$	1,571		$	5,441		$	(7,406	)
Adjustments for non-cash charges		9,566			(20,673	)		50,553			(426	)		(5,441	)		33,579
Net changes in assets and liabilities		140			(1,017	)		(5,340	)		1,115			—			(5,102	)
Intercompany activity		(2,300	)		28,288			(24,305	)		(1,683	)		—			—

Net cash provided by operating activities		—			—			20,494			577			—			21,071

Cash flows from investing activities:
Capital expenditures		—			—			(11,184	)		—			—			(11,184	)
Proceeds from sales of property and equipment		—			—			10,105			—			—			10,105

Net cash used in investing activities		—			—			(1,079	)		—			—			(1,079	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			223,479			—			—			—			223,479
Principal payments on long-term debt and capital lease obligations		—			(201,085	)		(9,692	)		—			—			(210,777	)
Proceeds from revolver		—			59,200			—			—			—			59,200
Payments on revolver		—			(88,700	)		—			—			—			(88,700	)
Deferred financing costs		—			(5,594	)		—			—			—			(5,594	)
Other		(692	)		(319	)		(476	)		—			—			(1,487	)
Intercompany activity		692			13,019			(11,611	)		(2,100	)		—			—

Net cash used in financing activities		—			—			(21,779	)		(2,100	)		—			(23,879	)

Effect of exchange rate changes on cash		—			—			7			—			—			7

Net decrease in cash and cash equivalents		—			—			(2,357	)		(1,523	)		—			(3,880	)
Cash and cash equivalents, beginning of year		—			—			3,531			2,102			—			5,633

Cash and cash equivalents, end of year	$	—		$	—		$	1,174		$	579		$	—		$	1,753

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2009

(in thousands)


	QDI			QD LLC and QD Capital			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(180,534	)	$	(180,420	)	$	(180,438	)	$	759		$	360,099		$	(180,534	)
Adjustments for non-cash charges		180,420			159,261			228,567			(427	)		(360,099	)		207,722
Net changes in assets and liabilities		(893	)		970			12,482			9			—			12,568
Intercompany activity		1,007			20,189			(20,895	)		(301	)		—			—

Net cash provided by operating activities		—			—			39,716			40			—			39,756

Cash flows from investing activities:
Capital expenditures		—			—			(8,221	)		—			—			(8,221	)
Acquisition purchase price adjustment		—			266			—			—			—			266
Proceeds from sale of tank wash assets		—			—			10,000			—			—			10,000
Proceeds from sales of property and equipment		—			—			7,532			—			—			7,532

Net cash provided by investing activities		—			266			9,311			—			—			9,577

Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			—			—			—			—			—
Principal payments on long-term debt and capital lease obligations		—			(4,618	)		(13,124	)		—			—			(17,742	)
Proceeds from revolver		—			28,600			—			—			—			28,600
Payments on revolver		—			(47,600	)		—			—			—			(47,600	)
Financing costs		—			(2,323	)		—			—			—			(2,323	)
Deferred financing costs		—			(2,554	)		—			—			—			(2,554	)
Other		—			(145	)		(8,751	)		—			—			(8,896	)
Intercompany activity		—			28,374			(28,374	)		—			—			—

Net cash used in financing activities		—			(266	)		(50,249	)		—			—			(50,515	)

Effect of exchange rate changes on cash		—			—			28			—			—			28

Net (decrease) increase in cash and cash equivalents		—			—			(1,194	)		40			—			(1,154	)
Cash and cash equivalents, beginning of year		—			—			4,725			2,062			—			6,787

Cash and cash equivalents, end of year	$	—		$	—		$	3,531		$	2,102		$	—		$	5,633