ATS Andlauer Income Fund
TSX : ATS.UN

ATS Andlauer Income Fund

February 25, 2008 09:23 ET

CORRECTION FROM SOURCE: ATS Andlauer Income Fund Announces Results for Fourth Quarter and Year End December 31, 2007 and Increase to Special Cash Distribution

TORONTO, ONTARIO--(Marketwire - Feb. 25, 2008) - A correction from source is issued with respect to the release disseminated on February 22, 2008 at 12:12 ET. The percentage of distributions declared by ATS Andlauer Income Fund in 2007 that will be treated as taxable income for Canadian income tax purposes has been changed from 1.5% to 98.5%. The corrected release follows:



- Revenue grows 16.2% for the quarter - Revenue up 10.4% year to date
- EBITDA increases by 14.8% for the quarter - EBITDA marginal decline of
- Special distribution increases less than 1% year to date
to $0.25 per Unit - Payout ratio 80% year to date


ATS Andlauer Income Fund (the "Fund") (TSX:ATS.UN) announced today results for the fourth quarter and the year ended December 31, 2007, and an increase to the one-time special cash distribution it declared on December 11, 2007.

"Overall we are pleased with the solid performance we delivered in 2007 and extremely pleased with the exceptional performance of our operations in the fourth quarter, "said Michael Andlauer, President and Chief Executive Officer. "Our financial position is stronger than ever, and with our move to our new facility in Toronto complete we can focus on the execution of our operational strategy as we work to accelerate our temperature control services under the new banner ATS Healthcare Services."



SELECTED FINANCIAL AND OPERATING INFORMATION

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Three months ended Twelve months ended
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December 31, December 31,
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2007 2006 2007 2006
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(unaudited) (unaudited) (audited) (audited)
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($ thousands, except per ($ thousands, except per
Unit amounts) Unit amounts)
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Earnings Statement
Highlights
Revenue 59,041 50,789 193,875 175,678
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Gross margin(1) 22,752 19,462 70,296 66,214
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Gross margin
percentage(1) 38.54% 38.32 % 36.26% 37.69%
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Income before
non-controlling
interest 7,368 6,196 11,035 15,002
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EBITDA(1) 9,105 7,932 21,557 21,750
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Income per Unit
Basic 0.640 0.534 0.953 1.293
Diluted 0.638 0.533 0.951 1.290
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Balance Sheet Highlights
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Total assets 132,798 129,650 132,798 129,650
Total liabilities 53,184 44,553 53,184 44,553
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Distribution Highlights
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Distributions
declared per Unit 0.542 0.572 1.419 1.377
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Cash distribution
payout ratio (1) 71% 87% 80% 77%
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(1) Non-GAAP Measures



RESULTS OF OPERATIONS

For the three months ended December 31, 2007 compared to the three months ended December 31, 2006

Revenue for the three months ended December 31, 2007 was $59.0 million compared to $50.8 million for the same period in 2006, an increase of $8.2 million or 16.2%. The increase was the result of growth in all the verticals (Entertainment, Consumer Products and Pharmaceutical and Healthcare) in the quarter ended December 31, 2007 compared to the same period in 2006. Net of attrition, revenue from the Pharmaceutical and Healthcare vertical posted significant growth of $4.6 million in the quarter, while Consumer Products grew by $2.1 million, and the Entertainment vertical by $1.5 million.

Ground and air revenues, excluding fuel surcharge, increased by $4.5 million and $2.1 million, respectively, in the three month period ended December 31, 2007 compared to the same period in 2006. Total fuel surcharge revenue increased by $1.6 million from $4.4 million in 2006 to $6.0 million in 2007.

Cost of sales increased from $31.3 million for the three months ended December 31, 2006 to $36.3 million for the three months ended December 31, 2007; cost of sales as a percentage of revenue decreased marginally from 61.7% for the three months ended December 31, 2006 to 61.5% for the three months ended December 31, 2007.

Linehaul costs as a percentage of revenue declined by approximately 1.0% which was offset by an increase in pickup and delivery costs. The increase in pick up and delivery costs was a result of a change in the mix of freight which was greatly influenced by a new healthcare initiative in Ontario and continued higher delivery costs in Alberta. Overall, handling costs remained fairly consistent as a percentage of revenue from 2006 to 2007 with efficiencies gained from the new conveyor at the Disco Road Facility in Ontario offset by increased labour costs in Alberta.

Gross margin improved marginally from 38.3% for the three months ended December 31, 2006 to 38.5% for the same period in 2007. Pricing pressure in historically strong verticals continues to impact overall growth in margins despite healthy advances in revenue.

Income before non-controlling interest for the three month period ended December 31, 2007, was $7.4 million compared to an income of $6.2 million for the same period in 2006.

The Fund will not be liable for current taxes until January 1, 2011, however is required by GAAP to recognize in its current quarterly financial statements, the effect of future income taxes arising from temporary tax differences expected to reverse after January 1, 2011, at expected tax rates applicable to the Fund.

EBITDA was $9.1 million for the three months ended December 31, 2007, up from $7.9 million in the same period in 2006, representing an increase of 14.8% . As a percentage of revenue, EBITDA was 15.4% for the three months ended December 31, 2007, compared to 15.6% in the same period in 2006. Depreciation and amortization and interest expense increased in the period due to acquisitions of equipment under capital lease. EBITDA is a non-GAAP measure and may not be comparable to similar measures presented by other issuers. See "Non-GAAP Measures".

RESULTS OF OPERATIONS

For the twelve months ended December 31, 2007 compared to the results for the twelve months ended December 31, 2006

Revenue for the year ended December 31, 2007 was $193.9 million, an increase of $18.2 million or 10.4% over $175.7 million for the year ended December 31, 2006. The increase was largely due to organic growth in all three major customer categories- Pharmaceutical and Healthcare, Consumer Products, and Entertainment verticals. Pharmaceutical and Healthcare contributed approximately $11.1 million of the growth for the year ended December 31, 2007 compared to the same period in 2006 with Consumer Products and Entertainment posting growth of $4.8 million and $2.3 million, respectively, during the year ended December 31, 2007 compared to 2006.

An unforeseen design flaw in the conveyor system and operational processes at the new Disco Road facility in Toronto reported during quarter three, resulted in Management's belief that revenue was lower by an estimated $1.0 million to $1.5 million for the year ended December 31, 2007 resulting in unrecoverable under billing of certain shipments due to freight not being properly re-weighed and cubed. Management believes that the additional controls which were developed and implemented upon discovery of the problem are sufficient to prevent such incidents from materially impacting financial results in the future.

Cost of sales increased from $109.5 million for the year ended December 31, 2006 to $123.6 million for the year ended December 31, 2007; the cost of sales as a percentage of revenue increased from 62.3% for the year ended December 31, 2006 to 63.7% for the year ended December 31, 2007. The increase was due mainly to higher pickup and delivery costs and handling costs in Alberta and additional costs associated with start up and recruitment for new dedicated delivery Healthcare initiatives in Ontario.

Gross margin declined from 37.7% for the year ended December 31, 2006 to 36.3% for 2007. This decline was mainly due to continued cost pressures in Alberta, pricing pressure and the under billing of certain shipments that occurred during the third quarter of 2007.

Income before non-controlling interest for the year ended December 31, 2007 was $11.0 million after accounting for the provision for future income taxes of $ 3.2 million compared to $15.0 million for 2006 when there was a nil tax provision. Income before non-controlling interest was significantly reduced due to the requirement under GAAP to recognize the cumulative effect of future income taxes arising from temporary tax differences expected to reverse after January 1, 2011, at expected tax rates applicable to the Fund.

EBITDA was $21.6 million for the year ended December 31, 2007, down from $21.8 million for 2006, representing a decline of 0.9% . EBITDA included several transactions that Management believes are not expected to re-occur in future operating results including one-time moving costs associated with the Disco Road Facility in Toronto, a credit relating to a refund of property tax refund from the government of Quebec and the under billing of certain shipments due to the unforeseen design flaw in its Disco Road Facility conveyor system and operational processes during the third quarter. As well, increased costs in Alberta and pricing pressures continue to contribute to the decline in EBITDA. As a percentage of revenue, EBITDA was 11.1% for the year ended December 31, 2007, compared to an EBITDA of 12.4% in 2006.

Depreciation and amortization and interest expense increased in the period due to acquisitions of equipment under capital lease.



SUMMARY OF MOST RECENTLY COMPLETED CONSOLIDATED QUARTERLY RESULTS

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($ thousands, except per Dec 31, Sept 30, June 30, Mar 31,
Unit amounts) 2007 2007 2007 2007
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(Q4 07) (Q3 07) (Q2 07) (Q1 07)
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Revenue 59,041 46,383 44,037 44,414
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Gross margin 22,752 15,713 15,327 16,504
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EBITDA(1) 9,105 4,020 3,627 4,807
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Income (loss) before
non-controlling interest 7,368 2,313 (1,788) 3,143
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Income (loss) per Unit
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Basic 0.593 0.200 (0.154) 0.271
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Diluted 0.592 0.199 (0.154) 0.271
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Cash 2,391 1,477 833 753
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Total assets 132,798 120,796 122,143 124,293
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Total current liabilities 22,180 16,407 13,882 13,408
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Long-term debt 5,745 - 1,928 3,183
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Future income taxes 3,182 3,715 3,730 -
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Unitholders' equity 79,614 78,821 80,531 84,599
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Non-controlling interest 22,077 21,853 22,072 23,103
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($ thousands, except per Dec 31, Sept 30, June 30, Mar 31,
Unit amounts) 2006 2006 2006 2006
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(Q4 06) (Q3 06) (Q2 06) (Q1 06)
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Revenue 50,789 42,540 40,775 41,574
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Gross margin 19,462 15,828 15,289 15,635
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EBITDA(1) 7,964 5,622 4,096 4,068
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Income (loss) before
non-controlling interest 6,196 3,974 2,436 2,396
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Income (loss) per Unit
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Basic 0.534 0.342 0.210 0.206
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Diluted 0.533 0.342 0.210 0.206
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Cash 265 32 1,024 441
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Total assets 129,650 124,628 123,058 128,238
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Total current liabilities 18,048 12,229 12,165 11,893
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Long-term debt 3,349 3,749 3,000 7,364
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Future income taxes - - - -
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Unitholders' equity 85,097 85,401 84,780 85,705
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Non-controlling interest 23,156 23,249 23,113 23,276
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(1) See Non-GAAP Measures


Total cash distributions for the three and twelve month periods ended December 31, 2007 were $6.3 million or $0.542 per trust unit and $16.5 million or $1.419 per trust unit respectively. Cash distribution payout ratios for the same periods were 71% and 80% respectively. On an annualized basis, regular monthly distributions have increased from the prospectus estimate of $0.975 to $1.1688 per trust unit.

Cash distributions include a special one-time cash distribution which has been increased from $0.150 per trust unit to $0.250 per trust unit and will be paid on March 17, 2008 to unitholders of record at the close of business on December 31, 2007. The Fund is obligated under its declaration of trust to distribute all taxable income earned within a calendar year. The Fund may be required to withhold certain amounts otherwise distributable to non-resident unitholders, and, to the extent that the withholding cannot be applied to cash distributions, the Fund may be required to withhold and sell trust units to satisfy such obligations. The incremental one-time special cash distribution should not be viewed as indicative of future financial performance or distribution level. The distributions declared by the Fund in 2007 will be treated as 98.5% taxable income for Canadian income tax purposes.

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 September 30, 2007, 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 and gross margin percentage are a non-GAAP measures that represent the contribution of operating activities to earnings. They are considered key measures by management as they reflect 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 and therefore EBITDA may not be comparable to similar measures presented by other issuers.

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.
    Michael Andlauer
    President & Chief Executive Officer
    (416) 798-1379
    or
    ATS Andlauer Transportation Services GP Inc.
    Brian Mascarenhas
    Vice President & Chief Financial Officer
    (416) 798-1379
    Website: www.atsincomefund.ca