ATS Corporation Announces Financial Results for the Third Quarter Ended September 30, 2011

Nov 14, 2011, 18:00 ET from ATS Corporation

MCLEAN, Va., Nov. 14, 2011 /PRNewswire/ --

  • Revenue of $21.6 million
  • EBITDA (1) of $2.6 million and Adjusted EBITDA (2) of $3.0 million
  • Operating income of $1.9 million and net income of $1.1 million
  • Fully diluted EPS of $0.05
  • Third quarter new bookings of $42.3 million
  • Backlog of $291.8 million
  • Total debt of $4.0 million as of September 30, 2011
  • DSO of 61 days as of September 30, 2011

ATS Corporation ("ATSC" or the "Company") (NYSE AMEX: ATSC), a leading information technology company that delivers innovative technology solutions to government and commercial organizations, today announced operating results for the third quarter ended September 30, 2011.

Third Quarter Results

ATSC reported revenue of $21.6 million for the third quarter of 2011. Revenue for the third quarter decreased by 26.2% over third quarter 2010 revenue of $29.2 million.   Revenue from Fannie Mae, a government sponsored enterprise, decreased by $2.6 million to $1.7 million, or 59.9%.  Revenue from civilian and defense contracts decreased by $4.1 million to $18.0 million, or 18.5%.  Revenue from commercial contracts decreased by $978,000 to $1.9 million or 34.5%.

Operating income for the quarter was $1.9 million and net income for the quarter was $1.1 million, or $0.05 per diluted share, compared to operating income of $2.7 million and net income (including $959,000 of other income) of $2.7 million, or $0.12 per diluted share, for the third quarter of 2010.  EBITDA (1) was $2.6 million and adjusted EBITDA (2) was $3.0 million for the 2011 third quarter, resulting in an adjusted EBITDA margin of 13.8%, compared to EBITDA (1) of $4.3 million and adjusted EBITDA (2) of $3.1 million or an adjusted EBITDA margin of 10.5% for the third quarter of 2010.  

Backlog as of September 30, 2011 was approximately $291.8 million, of which $36.4 million was funded, up 23.6% from $236.1 million as of December 31, 2010.  Days sales outstanding ("DSO") were 61 at the end of the third quarter of fiscal year 2011.

As of September 30, 2011, ATSC's balance sheet included debt of $4.0 million on its revolving credit facility and $62.0 million in stockholders' equity.

Nine-Month Results

ATSC reported revenue of $69.5 million for the first nine months of 2011. Revenue for the first nine months decreased by 21.9% over the first nine months of 2010 revenue of $89.0 million.  Operating income for the first nine months of 2011 was $4.9 million and net income for the period was $2.9 million, or $0.12 per diluted share, compared to an operating income of $7.0 million and net income of $4.9 million, or $0.22 per diluted share for the first nine months of 2010.     EBITDA (1) was $6.8 million and adjusted EBITDA (2) was $8.3 million for the first nine months of 2011, resulting in an adjusted EBITDA (2) margin of 12.0%, compared to an EBITDA (1) of $10.3 million and adjusted EBITDA (2) of $8.6 million, or an adjusted EBITDA (2) margin of 9.7%, for the first nine months of 2010.

Third Quarter Highlights and Management Comments

Third quarter new bookings totaled $42.3 million, representing a book to bill ratio of 2.0x.  New bookings in the quarter include a $33.7 million, five-year contract with the U.S. Department of Housing and Urban Development ("HUD"), representing the continuation of the Company's application systems support for three distinct HUD Single Family Premium Collections and Refund systems. Through effective application of system enhancements, ATSC has supported HUD in meeting exponential volume increases – in one case, a five-fold hike – in Single Family Premium Collection Systems brought on by recent dramatic spikes in mortgage applications that intensify demand for Federal Housing Authority ("FHA") issued mortgage insurance. In addition, ATSC's system support facilitates HUD's collection of over $7.3 billion in premiums and distribution of over $56 million in FHA-mortgage insurance refunds annually.

The balance of the new bookings was from add-ons or additional funding from HUD, the Defense Logistics Agency, the Nuclear Regulatory Commission, the Federal Housing Finance Agency, the Defense Technology Security Administration, the U.S. Coast Guard and Fannie Mae.  

ATSC Co-Chief Executive Officer, John Hassoun commented, "While our backlog continued to increase, we experienced revenue challenges this quarter.  Of the $7.7 million decline from the third quarter of 2010, approximately 34% was related to a downturn in our Fannie Mae business which began in the first quarter of 2011.  Additionally, we reported a decrease of $4.1 million in our government business areas in the third quarter. This decline was primarily driven by the prolonged impact we have faced this year from continued challenges with the Federal budget environment, including significant delays in awarding new contracts such as the Department of Health and Human Services CIOSP3 and Department of Commerce's NOAA Link, while also managing the simultaneous transition of a number of recompeted contracts to new awards where in some cases funding has been delayed for new development work and in other cases our initial scope of work was at a lower level than on the predecessor contract.  The $1 million decrease in our commercial business was driven by the completion of a development contract which transitioned to a maintenance effort in 2011.  Despite these challenges, we were pleased to win the $33.7 million HUD recompete, that represents the last of a series of major recompetes secured over the last 18 months and provides us with the ability to build on a solid, multi-year foundation of business and focus all our business development efforts on new pursuits."

ATSC Co-Chief Executive Officer and Chief Financial Officer Pamela Little further commented on the Company's financial performance, "We continue to manage our business to deliver above industry average profit margins and maintain strong DSO performance, and as a result, paid down our debt by another 49% since June 30, 2011."

At this time, no conference call is scheduled.

Updated Guidance

Based on its results from the third quarter of 2011 and its updated outlook for the remainder of 2011, ATSC has revised its prior revenue forecast for fiscal year 2011 from a range of $105 to $115 million to $96 to $98 million, and has revised its prior 2011 EBITDA guidance from a range of $14 to $16 million to $13 to 14 million.  

Ms. Little commented, "ATSC continues to be affected by challenges associated with the federal government services market as discussed earlier, including the delays in funding of development work on newly awarded follow-on contracts and delays in the award of already submitted proposals.  While these issues have shifted the expected revenues associated with such projects into fiscal year 2012, the Company continues to believe it is well-positioned to win new contracts already submitted and continues to submit proposals for additional new contracts."

About ATS Corporation

ATSC is a leading provider of software and systems development, systems integration, infrastructure management and outsourcing, information sharing, training and consulting to the Department of Defense, federal civilian agencies, public safety and national security customers, as well as commercial enterprises.  Headquartered in McLean, Virginia, the Company has more than 450 employees at 4 locations across the country. 

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

Forward-looking Statements

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 February 17, 2011. In addition, the forward-looking statements included in this press release represent our views as of November 14, 2011. 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 14, 2011.

(1) EBITDA is a non-GAAP measure that is defined as GAAP net income plus other expense, interest expense, income taxes, and depreciation and amortization.  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 a measure of operating performance or the cash flows from operating activities as a measure of liquidity.  Please refer to the table at the bottom of the statement of operations in this release that reconciles GAAP net income to EBITDA.

(2) Adjusted EBITDA is defined as EBITDA adjusted (i) in 2010 for one-time other income associated with the adjustment of seller notes and the release of escrow from a previous acquisition not expected to be reflected in the ongoing performance of ATSC and (ii) in 2011 for expenses related to severance, the Company's strategic evaluation, and a contract settlement reserve, none of which is expected to be reflected in the ongoing performance of ATSC.   Adjusted EBITDA is not a recognized term under U.S. GAAP and does not purport to be an alternative to net income as a measure of operating performance or the cash flows from operating activities as a measure of liquidity.  Please refer to the table in the financial statements that reconciles GAAP net income to adjusted EBITDA.

ATS Corporation

Consolidated Statements of Operations (unaudited)

Three Months

Ended September 30,

Nine Months

Ended September 30,

2011

(unaudited)

2010

(unaudited)

2011

(unaudited)

2010

(unaudited)

Revenue

$

21,577,564

$

29,246,619

$

69,511,146

$

89,004,930

Operating costs and expenses

 Direct costs

14,760,160

20,406,798

48,713,647

62,325,800

 Selling, general and administrative expenses

4,250,646

5,486,690

14,046,511

17,798,821

 Depreciation and amortization

629,759

626,511

1,898,221

1,903,680

Total operating costs and expenses

19,640,565

26,519,999

64,658,379

82,028,301

Operating income

1,936,999

2,726,620

4,852,767

6,976,629

Other (expense) income

 Interest, net

(74,475)

108,491

(192,520)

(1,069,551)

 Other  income

--

959,440

--

1,463,332

Income before income taxes

1,862,524

3,794,551

4,660,247

7,370,410

Income tax expense

747,156

1,131,537

1,808,031

2,463,802

Net income

$

1,115,368

$

2,663,014

$

2,852,216

$

4,906,608

Weighted average number of shares outstanding

-- basic

22,951,897

22,540,904

22,870,974

22,516,813

-- diluted

23,167,908

22,627,723

23,099,132

22,605,726

Net income per share

-- basic

$

0.05

$

0.12

$

0.12

$

0.22

-- diluted

$

0.05

$

0.12

$

0.12

$

0.22

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

Three Months

Ended September 30,

Nine Months

Ended September 30,

2011

(unaudited)

2010

(unaudited)

2011

(unaudited)

2010

(unaudited)

Net income

$

1,115,368

$

2,663,014

$

2,852,216

$

4,906,608

Adjustments:

 Depreciation and amortization

629,759

626,511

1,898,221

1,903,680

 Interest, net

(74,475)

108,491

(192,520)

(1,069,551)

 Taxes

747,156

1,131,537

1,808,031

2,463,802

EBITDA (1)

2,566,759

4,312,571

6,750,989

10,343,641

Net Settlements

--

(1,250,000)

--

(1,745,000)

Severance

--

--

1,072,414

--

Contract Settlement Reserve

339,119

--

339,119

--

Strategic Expenses

65,336

--

174,035

--

EBITDA (2)

$

2,971,214

$

3,062,571

$

8,336,557

$

8,598,641

ATS Corporation

Consolidated Balance Sheets

September 30, 2011 (unaudited)

December 31, 2010

(audited)

ASSETS

Current assets

 Cash and cash equivalents

$

66,236

$

65,993

 Restricted cash

1,327,891

1,327,245

 Accounts receivable, net

14,071,032

21,219,602

 Prepaid expenses and other current assets

473,203

696,174

 Income taxes receivable and prepaid, net

13,291

61,477

 Other current assets

25,091

25,491

 Deferred income taxes, current

863,412

698,521

Total current assets

16,840,156

24,094,503

Property and equipment, net

2,341,972

2,714,164

Goodwill

55,370,011

55,370,011

Intangible assets, net

2,616,225

4,110,470

Other assets

133,314

133,314

Deferred income taxes

1,475,950

1,407,545

Total assets

$

78,777,628

$

87,830,007

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 Capital leases – current portion

$

80,931

$

79,572

 Accounts payable

3,955,062

4,457,781

 Other accrued expenses and current liabilities

1,369,112

2,381,941

 Accrued salaries and related taxes

2,674,074

2,917,294

 Accrued vacation

1,702,852

1,968,226

 Deferred revenue

315,034

513,653

 Deferred rent – current portion

320,498

320,498

Total current liabilities

10,417,563

12,638,965

Long-term debt  – net of current portion

3,963,239

14,400,000

Capital leases – net of current portion

82,779

143,648

Deferred rent – net of current portion

2,295,119

2,465,962

Total liabilities

16,758,700

29,648,575

Commitments and contingencies

Stockholders' equity:

Preferred stock $0.0001 par value, 1,000,000 shares authorized, and no shares issued and outstanding

--

--

Common stock $0.0001 par value, 100,000,000 shares authorized, 31,849,790 and 31,561,486 shares issued, and 22,951,897 and 22,663,593 shares outstanding

3,185

3,156

Additional paid-in capital

133,789,090

132,803,839

Treasury stock, at cost, 8,897,893 shares held

(31,663,758)

(31,663,758)

Accumulated deficit

(40,109,589)

(42,961,805)

Total stockholders' equity

62,018,928

58,181,432

Total liabilities and stockholders' equity

$

78,777,628

$

87,830,007

ATS Corporation

Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended

September 30,

2011 (unaudited)

2010 (unaudited)

Cash flows from operating activities

 Net income

$

2,852,216

$

4,906,608

 Adjustments to reconcile net income to net cash from operating activities:

   Depreciation and amortization

1,898,221

1,903,680

   Non-cash interest expense SWAP agreement

--

(354,020)

   Stock-based compensation

652,823

560,863

   Directors' fees paid in equity

--

103,094

   Deferred income taxes

(206,060)

856,016

   Deferred rent

(170,843)

(139,806)

   Gain on disposal of equipment

--

(8,722)

   Provision for bad debt

(109,700)

951,245

 Changes in assets and liabilities:

   Accounts receivable

7,258,270

763,187

   Prepaid expenses

222,971

(2,505)

   Restricted cash

(646)

(2,282)

   Other assets

400

20,315

   Accounts payable

(470,937)

1,136,436

   Other accrued expenses and accrued liabilities

(1,012,829)

(3,177,887)

   Accrued salaries and related taxes

(243,220)

(946,026)

   Accrued vacation

(265,374)

136,893

   Income taxes payable and receivable, net

86,626

(62,838)

   Other current liabilities

(198,619)

(1,087,245)

Net cash provided by operating activities

10,293,299

5,557,006

Cash flows from investing activities

   Purchase of property and equipment

(31,783)

(9,074)

   Proceeds from disposals of equipment

--

10,000

Net cash (used in) provided by investing activities

(31,783)

926

Cash flows from financing activities

   Borrowings on line of credit

36,680,507

51,366,004

   Payments on line of credit

(47,117,268)

(54,594,279)

   Payments on notes payable

--

(2,007,900)

   Payments on capital leases

(91,293)

--

   Proceeds from exercise of stock options

128,750

5,587

   Proceeds from stock issued pursuant to Employee Stock Purchase Plan

138,031

151,438

   Payments to repurchase treasury stock

--

(454,640)

Net cash used in financing activities

(10,261,273)

(5,533,790)

Net increase in cash

243

24,142

Cash, beginning of period

65,993

178,225

Cash, end of period

$

66,236

$

202,367

Supplemental disclosures:

Cash paid or received during the period for:

   Income taxes paid

$

2,006,100

$

1,669,146

   Income tax refunds

59,895

2,258

   Interest paid

223,780

1,789,871

   Interest received

10,777

301,264

SOURCE ATS Corporation



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