SOURCE: ATS Corporation

November 07, 2007 16:48 ET

ATS Corporation Announces Financial Results for the Third Quarter and Nine Months Ended September 30, 2007

MCLEAN, VA--(Marketwire - November 7, 2007) - ATS Corporation ("ATSC" or "the Company") (OTCBB: ATCT), a leading information technology company that delivers innovative technology solutions to federal, state, and local government organizations, today announced operating results for the third quarter and nine months ended September 30, 2007.

Third Quarter Results

ATSC reported revenue of $25.6 million for the third quarter of 2007. EBITDA (1) was $2.0 million for the quarter, resulting in an EBITDA margin of 8.0%. Operating income for the quarter was $711,000 and the net income for the quarter was $353,000. Prior to the acquisition of Advanced Technology Systems, Inc. ("ATS") on January 16, 2007, ATSC was a blank check company without operating units or results.

As previously disclosed in its 2007 first and second quarter earnings calls, ATSC continued to incur one-time transition-related costs from the January transaction that are not expected to be reflected in the ongoing performance of the Company. For the quarter ending September 30, 2007, those expenses included $38,000 in severance costs related to streamlining the Company's support operations and $144,000 related to start-up Sarbanes Oxley compliance initiatives. The exclusion of those expenses produces an adjusted EBITDA (2) of $2.2 million, resulting in an adjusted EBITDA margin of 8.7% for the quarter.

Backlog as of September 30, 2007 was approximately $148.8 million, of which $40.6 million was funded. Days sales outstanding were 79 at the end of the third quarter of fiscal year 2007.

As of September 30, 2007, ATSC's balance sheet included $13.5 million on its revolving credit facility related to the acquisition of Potomac Management Group which closed in September and $93.4 million in stockholders' equity.

Nine-Month Results

ATSC reported revenue of $75.4 million for the first nine months of 2007. EBITDA (1) and adjusted EBITDA (2) was $5.0 million and $5.6 million, respectively, for the nine-month period resulting in EBITDA margin of 6.7% and adjusted EBITDA margin of 7.5%. Operating income and net loss for the nine-month period were $1.1 million and $6.3 million, respectively. The loss included a charge of $6.9 million on derivative liabilities attributed to the Company's warrants. Effective March 14, 2007, the Company's warrant agreement was clarified to state that ATSC was not required to net cash settle the instruments if unable to deliver registered shares of common stock to the warrant holders. As a result, ATSC was no longer required to mark the warrants to market and the warrants were reclassified from liabilities to stockholders' equity. Prior to March 14, 2007, ATSC marked the warrants to market as liabilities and recognized gains or losses on the increase or decrease in the fair value of the warrants. The nine months' results reflect the change in fair value through the date such liability was reclassified to equity.

Third Quarter Highlights

Third quarter bookings totaled $46.0 million, including the following awards:

--  $16.5 million, 5-year contract with the Pension Benefit Guaranty
    Corporation ("PBGC") to provide software maintenance, operational and
    production support services for the Participant Applications Maintenance
    Team ("PAMT").
--  $14 million, 5-year contract with the Law Library of Congress to host,
    maintain and enhance the Global Legal Information Network ("GLIN") and
    supporting distance learning program.
--  $10 million, 5-year contract with the PBGC to provide development and
    maintenance support to My Pension Benefit Administration ("My PBA").
    

Major ATSC highlights and accomplishments during the quarter included:

--  Winning all recompeted contracts, securing in excess of $30 million in
    revenue over multiple years.
--  Closing of Potomac Management Group acquisition on September 1, 2007,
    adding approximately $13 million in annual revenue with EBITDA margins in
    the mid-teens.
--  Announcing the acquisition of Number Six Software, Inc. ("Number
    Six"), expected to close in the next few days, adding approximately $33
    million in annual revenue with 10 to 11% margins.
--  Increasing EBITDA (1) margins from 5% to 8% from the three months
    ending June 30, 2007 to the three months ending September 30, 2007.
--  Executing a strategic partnership with Thomson Financial and ATSC's
    commercial business unit, Appix, to target the broker dealer market by
    integrating the Appix mortgage backed securities processing system into
    Thomson Transaction Services main product, TTSHost.
--  Redeemed 2,835,222 warrants for $1,079,623 under the warrant
    repurchase program initiated in January 2007.
    

Management's Outlook

Management will update guidance for the remainder of 2007 and provide guidance for 2008 after the Number Six acquisition closes, which we expect to occur in the next few days.

ATSC President and Chief Executive Officer Dr. Edward H. Bersoff stated, "We are pleased to report a strong quarter of progress in which we won all recompeted contracts, significantly increased our margins, and expanded our market presence with the closing of the acquisition of Potomac Management Group."

Bersoff continued, "While margin improvement continues to exceed projections, our revenue growth has been slower than estimated due to delays in several contract awards. Despite these issues, we are encouraged by our 100% recompete record and considerable increase in our pipeline and bid activity this past quarter."

Bersoff concluded, "We will continue to prioritize on growth opportunities both from our new business development efforts and acquisitions. Our recently announced acquisition of Number Six will add significant scale to our business with no overlapping customers and expand our software development capabilities. We believe the combination of our acquisition strategy and the increasing pipeline from our new business development team is establishing a strong platform for expansion in 2008 and beyond. We continue to think the fundamentals of our business remain strong and the Company is well-positioned to achieve its long-term growth strategy."

Conference Call

ATSC will conduct a third quarter conference call on Thursday, November 8, at 8:30 a.m EST. The number for the live teleconference is 888-321-3075, conference ID # 9420628.

A recorded replay of the teleconference will be available Thursday, November 8, 2007, at 10:00 a.m. EST and will be available through Thursday, November 22, 2007. The teleconference replay and can be accessed by dialing 877-519-4471, conference ID # 9420628. A recorded replay of the teleconference will also be available on the Company website (www.atsva.com) for one year from the conference call date.

About ATS Corporation

ATS Corporation operates through its subsidiaries, ATS, Reliable Integration Services, Potomac Management Group ("PMG"), and Appix, Inc. ("Appix").

ATS Corporation is a leading provider of systems integration and application development, IT infrastructure management and strategic consulting services to U.S. federal and state and local government agencies, financial institutions and government-sponsored enterprises. Since its founding in 1978, ATS has been recognized for its custom software development and software integration capabilities and its deep domain expertise in federal government financial, human resource and data management systems. ATS has built and implemented over 100 mission-critical systems for clients.

Any statements in this press release about future expectations, plans, and prospects for ATSC, including statements about the estimated value of the contract and work to be performed, and other statements containing the words "estimates," "believes," "anticipates," "plans," "expects," "will," and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: our dependence on our contracts with federal government agencies for the majority of our revenue, our dependence on our GSA schedule contracts and our position as a prime contractor on government-wide acquisition contracts to grow our business, and other factors discussed in our latest annual report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2007. In addition, the forward-looking statements included in this press release represent our views as of November 7, 2007. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to November 7, 2007.

Additional information about ATSC may be found at www.atsva.com.

(1) EBITDA after extraordinary items is a non-GAAP measure that is defined
    as GAAP net income plus other expense, interest expense, income taxes,
    and depreciation and amortization adjusted for extraordinary expenses
    not expected to be reflected in the going performance of ATS related to
    the loss on warrant liabilities and vested, canceled options of the
    former Chief Financial Officer.  The extraordinary expenses were only
    incurred in the first quarter of 2007.  We have provided EBITDA because
    we believe it is a commonly used measure of financial performance in
    comparable companies and is provided to help investors evaluate
    companies on a consistent basis, as well as to enhance an understanding
    of our operating results.  EBITDA is not a recognized term under U.S.
    GAAP and does not purport to be an alternative to net income as measure
    of operating performance or the cash flows from operating activities as
    a measure of liquidity. Please refer to the table at the end of this
    release that reconciles GAAP net income to EBITDA.

(2) Adjusted EBITDA - Earnings before interest, taxes, depreciation and
    amortization adjusted for one time items not expected to be reflected
    in the ongoing performance of ATSC and related to severance expenses
    and start-up Sarbanes-Oxley compliance costs.  Adjusted EBITDA is not a
    recognized term under U.S. GAAP and does not purport to be an
    alternative to net income as measure of operating performance or the
    cash flows from operating activities as a measure of liquidity.  Please
    refer to the table at the end of this release that reconciles GAAP net
    income to Adjusted EBITDA.



Reconciliation of GAAP Net Income to
"EBITDA (1) and Adjusted EBITDA (2)"

                                                  3 months      9 months
                                                   ending        ending
                                                  9/30/2007     9/30/2007
                                                ------------- ------------

Net Income (Loss)                               $     353,000 $ (6,294,000)
 Adjustments to EBITDA:
   Depreciation                                 $     186,000 $    465,000
   Amortization Intangibles                     $   1,146,000 $  2,871,000
   Interest                                     $     125,000 $    (26,000)
   Taxes                                        $     233,000 $    507,000
                                                ------------- ------------
EBITDA                                          $   2,043,000 $ (2,477,000)

 EBITDA after Extraordinary Items
   Warrants                                                   $  6,930,000
   Stock Compensation Lloyd                                   $    590,000
                                                ------------- ------------
(1) EBITDA after Extraordinary Items            $   2,043,000 $  5,043,000


 "Adjusted EBITDA"
   Severance                                    $      38,000 $    360,000
   SOX                                          $     144,000 $    231,000
                                                ------------- ------------
 Total Adjustments to EBITDA                    $     182,000 $    591,000

(2) "Adjusted EBITDA"                           $   2,225,000 $  5,634,000
                                                ============= ============



ATS Corporation
Consolidated Balance Sheets (unaudited)

                                                September 30,  December 31,
                                                    2007          2006
                                                 (unaudited)
                                                ------------- -------------
Assets

Current Assets
  Cash                                          $     239,908 $     213,395
  Accounts receivable                              29,567,802             -
  Prepaid expenses and other current assets         1,019,782       136,006
  Income tax receivable                             2,721,771             -
  Deferred income taxes, current                    1,115,021             -
                                                ------------- -------------

Total Current Assets                               34,664,284       349,401

Short-term investments held in Trust account                -   121,024,475

Restricted Cash                                     1,262,530             -

Cash and cash equivalents held in trust fund                -         1,332

Property and equipment, net                         1,503,049             -

Goodwill                                           77,222,617             -

Intangible assets, net                             17,161,816             -

Deferred acquisition costs                                  -     1,361,215

Other assets                                          431,730             -

Deferred income tax benefit                                 -       502,744
                                                ------------- -------------

Total Assets                                    $ 132,246,026 $ 123,239,167
                                                ============= =============

Liabilities and Stockholders' Equity
   Line of credit                               $           - $           -
   Notes payable and capital leases - current
    portion                                           918,298             -
   Accounts payable and accrued expenses            8,575,221       942,146
   Accrued salaries and related taxes               4,892,712             -
   Accrued leave benefits                           2,680,450             -
   Income taxes payable                               230,865       310,606
   Warrant liabilities                                      -    13,860,000
   Other current liabilities                          509,873             -
   Deferred income taxes - current portion                  -        40,489
                                                ------------- -------------

Total Current Liabilities                          17,807,419    15,153,241

Notes Payable                                      14,996,253             -

Capital leases - net of current portion               107,689             -

Other long-term liabilities                           328,573             -

Deferred income taxes - net of current portion      5,605,770             -
                                                ------------- -------------

Total Liabilities                                  38,845,704    15,153,241

Common stock, subject to possible redemption
 4,197,900 shares                                           -    23,424,282

Interest income attributable to common stock
 subject to possible redemptions
 (net of taxes of $0 and $561,204, respectively)            -       702,752
                                                ------------- -------------

Total common stock subject to possible
 redemption                                                 -    24,127,034
                                                ------------- -------------

Commitments and Contingencies                               -             -

Stockholders' Equity
   Common stock - $.0001 par value;
    100,000,000 shares authorized;
    26,626,079 and 26,250,000 issued;
    18,283,324 and 26,250,000 outstanding,
    respectively (which includes 0 and
    4,197,900 shares subject to possible
    redemption, respectively)                           2,662         2,625
   Additional paid-in capital                     126,772,677    81,467,698
   Treasury stock, at cost 8,342,755 shares       (30,272,007)            -
   Retained earnings (deficit)                     (3,103,010)    2,488,569
                                                ------------- -------------

Total Stockholders' Equity                         93,400,322    83,958,892

Total Liabilities and Stockholders' Equity      $ 132,246,026 $ 123,239,167
                                                ============= =============



ATS Corporation
Consolidated Statements of Operations (unaudited)


                                 Successor                Successor
                          -----------------------  -----------------------
                           ATS Corp    ATS Corp     ATS Corp    ATS Corp
                           3 months    3 months     9 months    9 months
                            ending      ending       ending      ending
                           9/30/2007   9/30/2006    9/30/2007   9/30/2006

Revenue                   $25,646,747           -  $75,372,148           -

Operating Costs and
 Expenses
   Cost of Services        17,753,224           -   52,922,818           -
   Selling, general and
    administrative          5,850,756     102,400   18,006,631     996,021
   Depreciation and
    Amortization              186,052           -      465,608           -
   Amortization of
    Intangible Assets       1,146,205           -    2,870,689           -

                          ----------- -----------  ----------- -----------
Total operating costs and
 expenses                  24,936,237     102,400   74,265,746     996,021

Operating Income              710,510    (102,400)   1,106,402    (996,021)

Other Income (Expense)
   Interest Income
    (expense), net           (124,571)  1,448,763       26,417   4,032,676
   Gain (Loss) on warrant
    liabilities                     -   4,200,000   (6,930,000)  5,040,000
   Other income                    93           -        9,847           -

                          ----------- -----------  ----------- -----------
Income (Loss) Before
 Income Taxes                 586,032   5,546,363   (5,787,334)  8,076,655

Income Tax (Benefit)
 Expense
   Current                    232,827     840,378      506,999   1,721,171
   Deferred                         -    (232,431)           -    (348,483)

                          ----------- -----------  ----------- -----------
Income (Loss) from
 Continuing Operations        353,205   4,938,416   (6,294,333)  6,703,967
                          =========== ===========  =========== ===========

Loss from Discontinued
 Operations                         -           -            -           -

Net Income (Loss)         $   353,205 $ 4,938,416  $(6,294,333)$ 6,703,967
                          =========== ===========  =========== ===========

Calculation of Net Income
 for Diluted Earnings
   Net Income less gain on
    derivative liabilities          - $(4,200,000)           - $(5,040,000)
                          ----------- -----------  ----------- -----------
   Adjusted Net income for
    diluted earnings      $   353,205 $   738,416  $(6,294,333)$ 1,663,967
                          =========== ===========  =========== ===========
Weighted average number of
 shares outstanding
   -basic                  18,194,081  26,250,000   18,870,815  26,250,000
                          =========== ===========  =========== ===========
   -diluted                18,499,615  26,250,000   18,870,815  26,250,000
                          =========== ===========  =========== ===========

Weighted average number of
 shares outstanding
 exclusive of shares
 subject to possible
 redemption
   -basic                  18,194,081  26,250,000   18,870,815  26,250,000
                          =========== ===========  =========== ===========
   -diluted                18,499,615  26,250,000   18,870,815  26,250,000
                          =========== ===========  =========== ===========

Basic net income (loss)
 per share
 -Continuing operations   $      0.02 $      0.19  $     (0.33)$      0.26
 -Discontinued operations           -           -            -           -
                          =========== ===========  =========== ===========
Net income (loss)         $      0.02 $      0.19  $     (0.33)$      0.26

Net income (loss) not
 subject to possible
 redemption               $      0.02 $         -  $         - $         -
                          =========== ===========  =========== ===========

Weighted average number of
 shares outstanding                 -  26,250,000            -  26,250,000
Shares assumed from the
 conversion of warrants             -   3,111,111            -   3,818,182
                          ----------- -----------  ----------- -----------
Weighted average number of
 shares outstanding -
 diluted                            -  29,361,111            -  30,068,182
                          =========== ===========  =========== ===========

Diluted net income (loss)
 per share
 -Continuing operations   $      0.02 $      0.03  $     (0.33)$      0.06
 -Discontinued operations           -           -            -           -
                          =========== ===========  =========== ===========
Net income (loss)         $      0.02 $      0.03  $     (0.33)$      0.06

Net income (loss) not
 subject to possible
 redemption               $      0.02 $      0.19  $     (0.33)$      0.26


                                Predecessor
                          -----------------------
                             ATS I       ATS I
                           3 months    9 months
                            ending      ending
                           7/31/2006   7/31/2006

Revenue                   $30,048,881 $86,231,975

Operating Costs and
 Expenses
   Cost of Services        18,907,450  54,138,280
   Selling, general and
    administrative          9,430,722  27,807,147
   Depreciation and
    Amortization              202,314     622,314
   Amortization of
    Intangible Assets           5,035      34,202

                          ----------- -----------
Total operating costs and
 expenses                  28,545,521  82,601,943

Operating Income            1,503,360   3,630,032

Other Income (Expense)
   Interest Income
    (expense), net            (92,504)   (277,396)
   Gain (Loss) on warrant
    liabilities                     -
   Other income                31,223      47,118

                          ----------- -----------
Income (Loss) Before
 Income Taxes               1,442,079   3,399,754

Income Tax (Benefit)
 Expense
   Current                    750,691   1,564,180
   Deferred                         -           -

                          ----------- -----------
Income (Loss) from
 Continuing Operations        691,388   1,835,574
                          =========== ===========

Loss from Discontinued
 Operations                  (623,773) (1,194,681)

Net Income (Loss)         $    67,615 $   640,893
                          =========== ===========

Calculation of Net Income
 for Diluted Earnings
   Net Income less gain on
    derivative liabilities          -           -
                          ----------- -----------
   Adjusted Net income for
    diluted earnings      $    67,615 $   640,893
                          =========== ===========
Weighted average number of
 shares outstanding
   -basic                  19,022,500  19,022,500
                          =========== ===========
   -diluted                19,469,600  19,469,600
                          =========== ===========

Weighted average number of
 shares outstanding
 exclusive of shares
 subject to possible
 redemption

   -basic                  19,022,500  19,022,500
                          =========== ===========
   -diluted                19,469,600  19,469,600
                          =========== ===========

Basic net income (loss)
 per share
-Continuing operations    $      0.04 $      0.10
-Discontinued operations        (0.03)      (0.06)
                          =========== ===========
Net income (loss)         $      0.00 $      0.03

Net income (loss) not
 subject to possible
 redemption               $         - $         -
                          =========== ===========

Weighted average number of
 shares outstanding                 -           -
Shares assumed from the
 conversion of warrants             -           -
                          ----------- -----------
Weighted average number of
 shares outstanding -
 diluted                            -           -
                          =========== ===========

Diluted net income (loss)
 per share
-Continuing operations    $      0.04 $      0.10
-Discontinued operations        (0.03)      (0.06)
                          =========== ===========
Net income (loss)         $      0.00 $      0.03

Net income (loss) not
 subject to possible
 redemption               $      0.00 $      0.03



ATS Corporation
Consolidated Statement of Cash Flows (unaudited)

                                          (Successor)        (Predecessor)
                                  For the Nine  For the Nine  For the Nine
                                  Months Ended  Months Ended  Months Ended
                                  September 30, September 30,   July 31,
                                      2007          2006          2006
                                  ============  ============  ============

Cash Flows from Operating Activities
 Net income (loss)                $ (6,294,333) $  6,703,967  $    640,893
 Adjustments to reconcile net
  income (loss) to net cash (used
  in) provided by operating
  activities:
   Depreciation and amortization       465,608            --       656,516
   Amortization of intangibles       2,870,689            --            --
   Deferred income taxes            (1,942,376)     (348,483)   (1,786,808)
   Deferred rent                            --            --      (231,492)
   Loss on disposal of equipment            --            --        58,283
   Stock-based compensation            778,443            --            --
   Board of Director's stock
    compensation                        42,638            --            --
  Interest on notes payable             14,141            --            --
   (Gain) Loss on derivative
    liabilities attributable to
    warrants                         6,930,000    (5,040,000)           --
   Changes in assets and
    liabilities, net of effects of
    acquisitions:
     Accounts receivable            (5,813,760)           --      (360,727)
     Interest receivable                    --      (128,876)           --
     Prepaid expenses                 (632,007)       67,930        49,645
     Prepaid supplies                       --            --       381,361
     Income taxes receivable          (277,399)     (195,214)     (363,610)
     Other assets                      (61,965)           --      (213,229)
     Accounts payable and accrued
      expenses                          46,826     1,234,167      (844,118)
     Accrued salaries and related
      taxes                         (4,027,516)           --      (770,593)
     Accrued vacation                  391,839            --        95,167
     Other current liabilities        (385,324)           --            --
     Other long-term liabilities      (362,767)           --            --
                                  ============  ============  ============

Net Cash (Used in) Provided by
 Operating Activities               (8,257,263)    2,293,491    (2,688,712)
                                  ============  ============  ============

Cash Flows from Investing Activities
 Purchase of property and
  equipment                           (359,976)           --      (298,988)
 Sale of U.S. government
  securities held in Trust fund    121,024,475            --            --
 Purchase of U.S. government
  securities held in Trust fund             --  (595,573,920)           --
 Maturities of U.S. government
  securities held in Trust fund             --   593,344,327            --
 Purchase of Advanced Technology
  Systems Incorporated, net of
  cash received                    (79,396,068)           --            --
 Purchase of Potomac Management
  Group, Inc., net of cash
  received                         (13,684,302)           --
 Purchase of Reliable Integration
  Services, Inc., net of cash
  received                            (997,849)           --            --
 Deferred acquisition costs                 --    (1,154,976)           --
 Release of cash held in Trust Fund      1,332       269,161            --
 Restricted cash                       (44,748)           --            --
                                  ============  ============  ============

Net Cash Provided by (Used in)
 Investing Activities               26,542,864    (3,115,408)     (298,988)
                                  ============  ============  ============

Cash Flows from Financing Activities
 Net borrowings on line-of-credit   13,496,253            --     1,687,035
 Payments on notes payable                  --            --       (41,469)
 Payments on capital leases            (52,989)           --       (19,959)
 Payments to repurchase stock
  purchase warrants                 (1,430,345)           --            --
 Payments to repurchase treasury
  stock                            (30,272,007)           --        (4,662)
                                  ============  ============  ============

Net Cash (Used in) Provided by
 Financing Activities              (18,259,088)           --     1,620,945
                                  ============  ============  ============

Net Increase (Decrease) in Cash         26,513      (821,917)   (1,366,755)

Cash, beginning of period              213,395     1,855,394     1,366,755
                                  ============  ============  ============

Cash, end of period               $    239,908  $  1,033,477  $         --
                                  ============  ============  ============

Contact Information

  • Company Contact:
    Joann O'Connell
    Vice President, Investor Relations
    ATS Corporation
    (703) 506-0088

    Pubic Relations Contact:
    David Knowles
    301-924-0330 x25

    Investor Relations Contact:
    Laura Kowalcyk
    Investor Relations
    CJP Communications for ATS Corporation
    (212) 279-3115 ext. 209
    Email Contact: lkowalcyk@cjpcom.com