ATS Andlauer Income Fund Announces Strong Revenue Growth and Margin Improvement During the Second Quarter 2008: Financial News

ATS Andlauer Income Fund Announces Strong Revenue Growth and Margin Improvement During the Second Quarter 2008
Monday August 11, 2008 6:02 pm ET

TORONTO, ONTARIO--(MARKET WIRE)--Aug 11, 2008 -- ATS Andlauer Income Fund (the "Fund") (Toronto:ATS-UN.TO - News) today reported second quarter results for 2008 announcing to unitholders that a renewed focus on operations and ample capacity have translated into exceptional revenue growth and margin improvement during the quarter.

"To say that I am pleased with the performance of ATS during the second quarter is an understatement," said Michael Andlauer, President and Chief Executive Officer. "Amidst the challenges of escalating fuel prices, a softening economy and weaker market conditions, ATSers have risen to the challenge."

"Last year presented many distractions for ATS with a move to a new state of the art facility in Toronto, and several major customer initiatives occurring simultaneously; however this year it is all about getting down to business- re-focusing on key operational processes, actively pursuing new business opportunities to fulfill capacity and tightening the management of our costs."

 

SELECTED FINANCIAL AND OPERATING INFORMATION

                                Three months ended         Six months ended
                                           June 30,                 June 30,
------------------- ------------------------------- ------------------------
                          2008                2007        2008         2007
------------------- ------------------------------- ------------------------
                    (unaudited)         (unaudited) (unaudited)  (unaudited)
                     ($ thousands, except per Unit ($ thousands, except per
                                           amounts)            Unit amounts)

Earnings Statement
 Highlights
Revenue                 51,116              44,037      99,829       88,451
Gross margin(1)         18,889              15,327      35,896       31,831
Gross margin
 percentage(1)           36.95%              34.80%      35.96%       35.99%
------------------- ------------------------------- ------------------------
Income (loss)
 before
 non-controlling
 interest                3,558              (1,788)      5,604        1,354
EBITDA(1)                5,497               3,627       9,515        8,433
------------------- ------------------------------- ------------------------
Income (loss) per
 Unit
 Basic                   0.310              (0.154)      0.488        0.117
 Diluted                 0.310              (0.154)      0.487        0.116
------------------- ------------------------------- ------------------------
------------------- ------------------------------- ------------------------

Balance Sheet
 Highlights
Total assets           122,706             122,143     122,706      122,143
Total liabilities       45,651              41,612      45,651       41,612
------------------- ------------------------------- ------------------------
------------------- ------------------------------- ------------------------

Distribution
 Highlights
Distributions
 declared
 per Unit               0.2922              0.2922      0.5844       0.5844
Payout ratio(1)             64%                 94%         78%          87%
------------------- ------------------------------- ------------------------
------------------- ------------------------------- ------------------------
(1) See Non-GAAP Measures

RESULTS OF OPERATIONS

For the three months ended June 30, 2008 compared to the three months ended June 30, 2007

Revenue for the three months ended June 30, 2008 was $51.1 million compared to $44.0 million for the same period in 2007, an increase of $7.1 million or 16.14% . Excluding fuel surcharge, revenue for the period increased by $4.1 million or 10.33% compared to the same period in 2007. Ground revenue increased by $4.0 million from $34.7 million in 2007 to $38.7 million in 2008 and air revenues increased by $0.1 million from $5.0 million in 2007 to $5.1 million in 2008. Total fuel surcharge revenue increased by $3.0 million from $4.3 million in 2007 to $7.3 million in 2008.

Excluding fuel surcharge, all verticals experienced growth in revenue. The Pharmaceutical and Healthcare vertical posted significant revenue growth of $2.6 million in the period and the Entertainment and Consumer Products $0.9 million and $0.6 million, respectively.

Cost of sales increased from $28.7 million for the three months ended June 30, 2007 to $32.2 million for the three months ended June 30, 2008; cost of sales as a percentage of revenue decreased from 65.20% for the three months ended June 30, 2007 to 63.05% for the three months ended June 30, 2008.

As a percentage of revenue, line-haul costs for the three months ended June 30, 2008 declined by 1.21%, pickup and delivery costs decreased by 0.71%, and handling costs decreased by 0.23% when compared to the same period in 2007. Initiatives focusing on improving operating efficiencies have resulted in the ability to i) improve payload performance, ii) improve cost control and management of pickup and delivery operations in both Toronto and Western Canada, and iii) increase handling efficiencies in Toronto which were offset by continued cost pressures in Western Canada.

Gross margin, as a result, increased from 34.8% for the three months ended June 30, 2007 to 36.95% for the same period in 2008. Pricing pressure and increased fuel costs continue to impact margins.

Income before non-controlling interest for the three month period ended June 30, 2008, was $3.6 million compared to a loss of $1.8 million for the same period in 2007. The increase is partly due to a provision for future income taxes amounting to $3.7 million made in June 2007 and the gains realized in gross margin during the current period.

EBITDA was $5.5 million for the three months ended June 30, 2008, up from $3.6 million in the same period in 2007, representing an increase of 52.78% due largely to the gains realized in margins as a result of operational efficiencies. As a percentage of revenue, EBITDA was 10.75% for the three months ended June 30, 2008, compared to 8.24% in the same period in 2007 which was burdened by one-time moving costs of $0.3 million not incurred in 2008. Depreciation, amortization and interest expense increased in the period due to acquisition of equipment under capital lease.

RESULTS OF OPERATIONS

For the six months ended June 30, 2008 compared to the results for the six months ended June 30, 2007

Revenue for the six months ended June 30, 2008 was $99.8 million, an increase of $11.3 million or 12.86% over $88.5 million for the same period in 2007. Ground revenue increased by $7.0 million from $70.1 million in 2007 to $77.1 million in 2008, while air revenues declined by $0.5 million from $10.3 million in 2007 to $9.8 million in 2008. Total fuel surcharge revenue increased by $4.8 million from $8.1 million in 2007 to $12.9 million in 2008.

Excluding fuel surcharge, the Pharmaceutical and Healthcare vertical posted significant revenue growth of $5.6 million in the six months ended June 30, 2008. Consumer Products grew by $1.0 million, and the Entertainment vertical remained flat year over year.

Cost of sales increased from $56.6 million for the six months ending June 30, 2007 to $63.9 million for the six months ending June 30, 2008; the cost of sales as a percentage of revenue remained relatively constant increasing from 64.01% for the six months ending June 30, 2007 to 64.04% for the six months ending June 30, 2008.

As a percentage of revenue, line-haul costs on a year to date basis have decreased by 1.16%, while pickup and delivery costs have increased by 1.04% and handling costs by 0.15% . Gross margin for the six months ending June 30, 2008 came in at 35.96% of revenue compared to 35.99% for the same period in 2007. Operating efficiencies realized in the three months ending June 30, 2008 helped post margin improvement on a year to date basis.

Income before non-controlling interest for the six month period ending June 30, 2008 was $5.6 million compared to $1.4 million for the same period in 2007. The increase is partly due to a provision for future income taxes amounting to $3.7 million made in 2007 and significant operational efficiencies realized during the period.

EBITDA was $9.5 million for the six months ended June 30, 2008, up from $8.4 million in the same period in 2007, representing growth of 12.82% . Included in the prior year EBITDA are approximately $0.3 million of one time moving costs that were incurred during the move to the new facility in Toronto in 2007. As a percentage of revenue, EBITDA was constant at 9.53% for the six months ended June 30, 2008, compared to the same period in 2007.

SUMMARY OF MOST RECENTLY COMPLETED CONSOLIDATED QUARTERLY RESULTS

 

($ thousands, except
 per Unit             Jun 30,   Mar 31,  Dec 31,   Sep 30,  Jun 30,  Mar 31,
 amounts)               2008      2008     2007      2007     2007     2007
                      (Q2 08)   (Q1 08)  (Q4 07)   (Q3 07)  (Q2 07)  (Q1 07)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Revenue               51,116    48,713   59,041    46,383   44,037   44,414
Gross margin          18,889    17,007   22,752    15,713   15,327   16,504
EBITDA(1)              5,497     4,018    9,105     4,020    3,627    4,807
Income (loss) before
 non-controlling
 interest              3,558     2,046    7,368     2,313   (1,788)   3,143
----------------------------------------------------------------------------

Income (loss) per
 Unit
 Basic                 0.310     0.178    0.593     0.200   (0.154)   0.271
 Diluted               0.310     0.177    0.592     0.199   (0.154)   0.271
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash                   2,326     1,684    2,391     1,477      833      753
Total assets         122,706   124,568  132,798   120,796  122,143  124,293
Total current
 liabilities          15,340    15,642   22,180    16,407   13,882   13,408
Long-term debt         5,326     5,537    5,745         -    1,928    3,183
Future income taxes    3,135     3,188    3,182     3,715    3,730        -
Unitholders' equity   77,055    78,390   79,614    78,821   80,531   84,599
Non-controlling
 interest             21,850    21,811   22,077    21,853   22,072   23,103

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See Non-GAAP Measures


($ thousands, except per Unit                               Dec 31,  Sep 30,
 amounts)                                                     2006     2006
                                                            (Q4 06)  (Q3 06)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Revenue                                                     50,789   42,540
Gross margin                                                19,462   15,828
EBITDA(1)                                                    7,964    5,622
Income (loss) before non-controlling
 interest                                                    6,196    3,974
----------------------------------------------------------------------------

Income (loss) per Unit
 Basic                                                       0.534    0.342
 Diluted                                                     0.533    0.342
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash                                                           265       32
Total assets                                               129,650  124,628
Total current liabilities                                   18,048   12,229
Long-term debt                                               3,349    3,749
Future income taxes                                              -        -
Unitholders' equity                                         85,097   85,401
Non-controlling interest                                    23,156   23,249

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) See Non-GAAP Measures

Total cash distributions for the three and six month periods ended June 30, 2008 were $3.4 million or $0.292 per trust unit and $6.7 million or $0.584 per trust unit respectively. Cash distribution payout ratios for the same periods were 64% and 78% respectively. On an annualized basis, distributions have increased from the prospectus estimate of $0.975 to $1.1688 per trust unit.

The Fund is an open-ended trust that holds, indirectly, securities of ATS Andlauer Transportation Services Limited Partnership ("ATS Andlauer LP"). ATS Andlauer LP is a leading single source transportation solutions provider in Canada, providing integrated trucking, courier, air freight and value added transportation and distribution services to consumer product companies. It operates facilities in 23 centres across Canada and serves approximately 1,400 diversified customers.

The Fund's units trade on the Toronto Stock Exchange under the symbol ATS.UN.

The Financial Statements and Management's Discussion and Analysis for the period ended June 30, 2008, along with additional information relating to the Fund, including all public filings, are available on www.sedar.com and on the Fund's website at www.atsincomefund.ca.

FORWARD LOOKING STATEMENTS

Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Fund. These statements are based on suppositions and uncertainties as well as on management's evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Fund's services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the Fund's operations or financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or at the Fund's website (www.atsincomefund.ca). Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release, and the Fund undertakes no obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities law.

NON-GAAP MEASURES

Gross margin is a non-GAAP measure that represents the contribution of operating activities to earnings. It is considered a key measure by management as it reflects the ability of the Fund to generate earnings necessary to fund overhead costs, capital investment and distributions.

EBITDA is a non-GAAP measure that management considers a key measure as an indicator of the ability of the Fund to meet its capital and financing commitments. EBITDA is not a recognized measure under GAAP and does not have a standardized meaning under GAAP. It was necessary to adjust EBITDA of the 2005 pre-acquisition results to facilitate the comparability with the current period. EBITDA and Adjusted EBITDA may not be comparable to similar measures presented by other issuers.

Distributable cash refers to cash available for distribution to unitholders in accordance with the distribution policies of the Fund described in the prospectus. Distributable cash of the Fund is a measure generally used by Canadian open-ended trusts as an indicator of financial performance and Management believes that prospective investors may consider the cash distributed by the Fund relative to the price of the Units when assessing an investment in Units. The Fund's method of determining distributable cash is derived from EBITDA, which in turn is derived from net income, a measure recognized under GAAP and is also reconciled to cash from operating activities.

Cash distribution payout ratio is a non-GAAP measure that compares distributions paid to available distributable cash which management considers an indicator of the Fund's conservatism and its ability to make distributions to unitholders at current rates in the future.