ATS Andlauer Income Fund
TSX : ATS.UN

ATS Andlauer Income Fund

November 13, 2008 12:35 ET

ATS Andlauer Income Fund Announces Continued Revenue Growth and Margin Improvement During the Third Quarter 2008

- Revenue grows 7.4% (13.3% including fuel surcharge) - EBITDA up 20.0% - Payout ratio 75%

TORONTO, ONTARIO--(Marketwire - Nov. 13, 2008) - ATS Andlauer Income Fund (the "Fund") (TSX:ATS.UN) today reported third quarter results for 2008 announcing to unitholders another quarter of strong revenue growth and margin improvement as it enters into the busiest and most profitable quarter of its operating year.

An unrelenting focus on operations and customer service combined with aggressive sales efforts which resulted in the addition of several key accounts, have worked to mitigate the impact of continuing weaker industry economic conditions in the third quarter.

While it is difficult to predict with any certainty the outcome of the next several months, all economic forecasts indicate that activity in the fourth quarter will continue to be sluggish and that such conditions may continue well into next year. ATS will continue its strategy of focusing on operational excellence through cost controls and service, as well as adding to its sales efforts. Also impacting upcoming fourth quarter results will be one-time costs associated with the activities of the Special Committee relating to the current bid process underway, anticipated being in the range of $0.8 million to $1.1 million.



SELECTED FINANCIAL AND OPERATING INFORMATION

Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
(unaudited) (unaudited) (unaudited)(unaudited)
($ thousands, except per ($ thousands, except per
Unit amounts) Unit amounts)

Earnings Statement
Highlights
Revenue 52,884 46,383 152,713 134,835
Gross margin(1) 19,319 15,713 55,216 47,545
Gross margin percentage(1) 36.53% 33.88% 36.16% 35.26%
-------------------------- ------------------------ ------------------------
Income before
non-controlling interest 3,354 2,313 8,958 3,667
EBITDA(1) 5,421 4,020 14,936 12,452

Income per Unit
Basic 0.295 0.200 0.783 0.315
Diluted 0.295 0.199 0.783 0.315

-------------------------- ------------------------ ------------------------
-------------------------- ------------------------ ------------------------

Balance Sheet
Highlights
Total assets 125,857 120,796 125,857 120,796
Total liabilities 48,541 41,975 48,541 41,975

-------------------------- ------------------------ ------------------------
-------------------------- ------------------------ ------------------------

Distribution Highlights
Distributions declared
per Unit 0.2922 0.2922 0.8766 0.8766
Cash distribution payout
ratio 71% 86% 75% 86%
-------------------------- ------------------------ ------------------------
-------------------------- ------------------------ ------------------------

(1) See Non-GAAP Measures


RESULTS OF OPERATIONS

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

Revenue for the three months ended September 30, 2008 was $52.9 million compared to $46.4 million for the same period in 2007, an increase of $6.5 million or 14.01%. Excluding fuel surcharge, revenue for the period increased by $2.5 million or 5.87% compared to the same period in 2007. Management believes that an unforeseen design flaw in the conveyor system and operational processes at the new Disco Road facility in Toronto during the prior year resulted in revenue that was lower by an estimated $1.0 million to $1.5 million for the three month period ended September 30, 2007 due to freight not being properly re-weighed and cubed.

Ground revenue increased by $3.3 million from $36.4 million in 2007 to $39.7 million in 2008. Air revenues decreased by $0.6 million from $5.5 million in 2007 to $4.9 million in 2008. Total fuel surcharge revenue increased by $4.0 million from $4.3 million in 2007 to $8.3 million in 2008.

Excluding fuel surcharge, the Pharmaceutical and Healthcare, and the Entertainment businesses posted revenue growth of $2.1 million and $0.9 million, respectively, in the period, while Consumer Products declined by $0.5 million for the period.

Cost of sales increased from $30.7 million for the three months ended September 30, 2007 to $33.6 million for the three months ended September 30, 2008; cost of sales as a percentage of revenue decreased from 66.12% for the three months ended September 30, 2007 to 63.47% for the three months ended September 30, 2008.

As a percentage of revenue, linehaul costs for the three months ended September 30, 2008 declined by 1.48% as a result of the ongoing focus of improving linehaul efficiencies, pickup and delivery costs increased by 0.11%, and handling costs decreased by 1.28% when compared to the same period in 2007 partly due to the change in the mix of freight combined with the under billing of revenue in the range of $1.0 million to $1.5 million in 2007 which affected margins in the prior year.

Gross margin, as a result, increased from 33.88% for the three months ended September 30, 2007 to 36.53% for the same period in 2008.

Income before non-controlling interest for the three month period ended September 30, 2008, increased to $3.4 million from $2.3 million for the same period in 2007.

EBITDA was $5.4 million for the three months ended September 30, 2008, up from $4.0 million in the same period in 2007, representing an increase of 34.85% due to the absence of the issue relating to the under billing of revenue during the third quarter 2007 due to freight not being properly weighed and improved operational efficiencies. As a percentage of revenue, EBITDA was 10.25% for the three months ended September 30, 2008, compared to 8.67% in the same period in 2007. Depreciation, amortization and interest expense increased in the period due to acquisition of equipment under capital lease.

RESULTS OF OPERATIONS

For the nine months ended September 30, 2008 compared to the results for the nine months ended September 30, 2007

Revenue for the nine months ended September 30, 2008 was $152.7 million, an increase of $17.9 million or 13.26% over $134.8 million for the same period in 2007. Excluding fuel surcharge, revenue for the period increased by $9.1 million or 7.39% compared to the same period in 2007. An unforeseen design flaw in the conveyor system and operational processes at the new Disco Road facility in Toronto during the prior year resulted in revenue that was lower by an estimated $1.0 million to $1.5 million for the nine month period ended September 30, 2007 resulting in unrecoverable under billing of certain shipments due to freight not being properly re-weighed and cubed.

Ground revenue, excluding fuel surcharge, increased by $10.7 million from $106.1 million in 2007 to $116.8 million in 2008, while air revenues declined by $1.1 million from $15.9 million in 2007 to $14.8 million in 2008. Total fuel surcharge revenue increased by $8.8 million from $12.4 million in 2007 to $21.2 million in 2008.

Excluding fuel surcharge, the Pharmaceutical and Healthcare business posted significant revenue growth of $7.7 million in the nine months ended September 30, 2008. The Entertainment and Consumer Products businesses grew by $0.9 and $0.5 million, respectively, year over year.

Cost of sales increased from $87.3 million for the nine months ending September 30, 2007 to $97.5 million for the nine months ending September 30, 2008; the cost of sales as a percentage of revenue decreased from 64.74% for the nine months ending September 30, 2007 to 63.84% compared to the same period in 2008.

As a percentage of revenue, linehaul costs on a year to date basis decreased by 1.27%, while pickup and delivery costs increased by 0.72% and handling costs decreased by 0.34%. Gross margin for the nine months ending September 30, 2008 came in at 36.16% of revenue compared to 35.26% for the same period in 2007. Operating efficiencies realized in three months ending September 30, 2008 helped post margin improvement on a year to date basis. Underbilling of revenue in the range of $1.0 million to $1.5 million affected margins in 2007.

Income before non-controlling interest for the nine month period ending September 30, 2008 increased to $9.0 million from $3.7 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.

EBITDA was $14.9 million for the nine months ended September 30, 2008, up from $12.5 million in the same period in 2007, representing growth of 19.95%. Affecting the prior year EBITDA are approximately $0.5 million of one time moving costs that were incurred during the move to the new facility in Toronto in 2007 and approximately $1.0 - $1.5 million relating to the under billing of revenue due to freight not being properly weighed. As a percentage of revenue, EBITDA increased from 9.24% for the nine months ended September 30, 2007 to 9.78% for the nine months ended September 30, 2008.



SUMMARY OF MOST RECENTLY COMPLETED CONSOLIDATED QUARTERLY RESULTS

($ thousands, except per Unit amounts)

Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2008 2008 2008 2007 2007 2007 2007 2006
(Q3 08) (Q2 08) (Q1 08) (Q4 07) (Q3 07) (Q2 07) (Q1 07) (Q4 06)
----------------------------------------------------------------------------

Revenue 52,884 51,116 48,713 59,041 46,383 44,037 44,414 50,789
Gross margin 19,319 18,889 17,007 22,752 15,713 15,327 16,504 19,462
EBITDA(1) 5,421 5,497 4,018 9,105 4,020 3,627 4,807 7,964
Income (loss)
before
non-contro-
lling
interest 3,354 3,558 2,046 7,368 2,313 (1,788) 3,143 6,196
----------------------------------------------------------------------------
Income (loss)
per Unit
Basic 0.295 0.310 0.178 0.593 0.200 (0.154) 0.271 0.534
Diluted 0.295 0.310 0.177 0.592 0.199 (0.154) 0.271 0.533
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Cash 2,931 2,326 1,684 2,391 1,477 833 753 265
Total
assets 125,857 122,706 124,568 132,798 120,796 122,143 124,293 129,650
Total
current
liabilities 18,472 15,340 15,642 22,180 16,407 13,882 13,408 18,048
Long-term
debt 5,112 5,326 5,537 5,745 - 1,928 3,183 3,349
Future
income
taxes 3,102 3,135 3,188 3,182 3,715 3,730 - -
Unitholders'
equity 77,316 77,055 78,390 79,614 78,821 80,531 84,599 85,097
Non-contro-
lling
interest 21,857 21,850 21,811 22,077 21,853 22,072 23,103 23,156

----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) See Non-GAAP Measures


Total cash distributions for the three and nine month periods ended September 30, 2008 were $3.4 million or $0.292 per trust unit and $10.1 million or $0.877 per trust unit respectively. Cash distribution payout ratios for the same periods were 71% and 75% 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.

Contact Information

  • ATS Andlauer Transportation Services GP Inc.
    Maggie Smith, CA
    Information & Governance Officer
    (416) 679-7900
    or
    ATS Andlauer Transportation Services GP Inc.
    Brian Mascarenhas
    Vice President & Chief Financial Officer
    (416) 798-1379 ext 200
    Website: www.atsincomefund.ca