CAMBRIDGE, ON, Nov. 5, 2014 /CNW/ - ATS Automation Tooling
Systems Inc. (TSX: ATA) ("ATS" or the "Company") today
reported financial results for the three and six months ended
September 28, 2014.
Second Quarter Summary
- The Company completed its acquisition of M+W Process Automation
GmbH and ProFocus LLC (collectively Process Automation Solutions or
"PA") on August 29, 2014;
- Revenues from continuing operations were $207.0 million, 34% or $52.4 million higher than a year ago. Excluding
acquired businesses IWK and PA, second quarter revenues were
$150.8 million;
- EBITDA1 was $22.7
million (11% EBITDA margin), compared to $17.6 million (11% EBITDA margin) in the second
quarter of fiscal 2014. Excluding $7.1
million of acquisition related costs, second quarter 2015
EBITDA was $29.8 million (14% EBITDA
margin). Second quarter 2014 EBTIDA was $18.5 million (12% EBITDA margin) normalized for
$0.9 million of acquisition related
costs;
- Adjusted earnings from continuing operations1 were
$27.0 million (13% margin), compared
to $16.3 million (11% margin) in the
second quarter a year ago. Earnings from continuing operations were
$14.1 million (7% operating margin),
compared to $14.4 million (8%
operating margin) in the first quarter of fiscal 2015 and
$14.4 million (9% operating margin)
in the second quarter a year ago;
- Adjusted basic earnings per share from continuing
operations1 was 19 cents
compared to 14 cents in the second
quarter a year ago. Earnings per share from continuing operations
was 8 cents basic compared to
12 cents basic a year ago primarily
due to amortization and acquisition related costs;
- Order Bookings were $216 million,
a 96% increase over the corresponding period a year ago. Excluding
the impact of IWK and PA, Order Bookings were $172 million, 56% or $62 million higher than a year ago;
- Period end Order Backlog was $561
million, up 58% from $355
million in the second quarter a year ago. Higher Order
Backlog reflected higher second quarter Order Bookings, and the
addition of IWK and PA;
- The Company's balance sheet and financial capacity to support
growth remained strong, with unutilized credit facilities of
$337 million and $12.5 million of credit available under letter of
credit facilities.
___________________________
1 Non-IFRS measure: see "Notice to Reader: Non-IFRS
Measures and Additional IFRS Measures".
Financial Results
In millions of
Canadian dollars,
except per share
data
|
|
|
3 months ended
September 28,
2014
|
|
|
3 months
ended
September 29,
2013
|
|
|
6 months ended
September 28,
2014
|
|
|
6 months
ended
September 29,
2013
|
Revenues
|
Continuing
Operations
|
|
$
|
207.0
|
|
$
|
154.6
|
|
$
|
397.9
|
|
$
|
304.6
|
Discontinued
Operations
|
|
$
|
––
|
|
$
|
––
|
|
$
|
––
|
|
$
|
1.1
|
Earnings from
operations1
|
Continuing
Operations
|
|
$
|
14.1
|
|
$
|
14.4
|
|
$
|
28.5
|
|
$
|
27.1
|
Adjusted earnings
from operations1
|
Continuing
Operations
|
|
$
|
27.0
|
|
$
|
16.3
|
|
$
|
48.0
|
|
$
|
32.1
|
EBITDA1
|
Continuing
Operations
|
|
$
|
22.7
|
|
$
|
17.6
|
|
$
|
43.6
|
|
$
|
33.3
|
Net
income
|
Continuing
Operations
|
|
$
|
7.4
|
|
$
|
10.4
|
|
$
|
16.4
|
|
$
|
18.9
|
Discontinued
Operations
|
|
$
|
7.1
|
|
$
|
2.5
|
|
$
|
14.0
|
|
$
|
13.5
|
Earnings per
share
|
From
continuing
operations (basic)
|
|
$
|
0.08
|
|
$
|
0.12
|
|
$
|
0.18
|
|
$
|
0.22
|
From
discontinued
operations (basic)
|
|
$
|
0.08
|
|
$
|
0.03
|
|
$
|
0.15
|
|
$
|
0.15
|
From
continuing
operations (diluted)
|
|
$
|
0.08
|
|
$
|
0.11
|
|
$
|
0.18
|
|
$
|
0.21
|
From
discontinued
operations (diluted)
|
|
$
|
0.08
|
|
$
|
0.03
|
|
$
|
0.15
|
|
$
|
0.15
|
Adjusted earnings
per share1
|
From
continuing
operations (basic)
|
|
$
|
0.19
|
|
$
|
0.14
|
|
$
|
0.34
|
|
$
|
0.27
|
1 Non-IFRS
measure: see "Notice to Reader: Non-IFRS Measures and Additional
IFRS Measures".
|
"Second quarter performance reflected our strong operating
foundation and the addition of PA," said Anthony Caputo, Chief Executive Officer. "Order
Bookings grew organically and from acquisition and we ended the
quarter with record Order Backlog. We are now working to integrate
PA and drive revenue synergies in our now broader markets and from
the combination of expanded capabilities. Moving forward, we remain
focused on our value creation plan to grow, expand and scale our
business, both organically and through acquisition."
Second Quarter Summary Continuing Operations
Fiscal
2015 second quarter revenues were 34% higher than in the
corresponding period a year ago primarily reflecting $35.7 million of revenues earned by IWK (acquired
September 30, 2013) and $20.5 million of PA revenues in the month ended
September 28, 2014. Excluding IWK and
PA, second quarter revenues were $150.8
million, a 2% decrease compared to the corresponding period
a year ago primarily reflecting lower Order Bookings in the first
fiscal quarter of the year. Foreign exchange rate changes
positively impacted the translation of revenues earned by
foreign-based subsidiaries compared to the corresponding period a
year ago, primarily reflecting the weakening of the Canadian dollar
relative to the Euro and U.S. dollar.
Year over year, fiscal 2015 second quarter revenues from
consumer products & electronics increased by 383%, primarily on
revenue from acquisitions and organic growth in the consumer
products market. Revenues generated in the energy market increased
17%, primarily due to revenues from PA and increased activity in
the nuclear energy market. Revenues generated in the life sciences
market increased 14%, primarily on revenues from acquisitions.
Transportation revenues increased 12% primarily due to revenues
earned by PA.
Fiscal 2015 second quarter earnings from operations were
$14.1 million (7% operating margin)
compared to $14.4 million (9%
operating margin) in the second quarter of fiscal 2014. Second
quarter fiscal 2015 earnings from operations included $7.1 million of incremental acquisition costs and
$5.8 million of amortization costs on
identifiable intangible assets recorded on the acquisitions of PA,
IWK, Assembly & Test Worldwide and sortimat. Excluding these
costs, second quarter fiscal 2015 adjusted earnings from operations
were $27.0 million (13% margin),
compared to adjusted earnings from operations of $16.3 million (11% margin) in the second quarter
of fiscal 2014. Higher adjusted earnings from operations primarily
reflected the inclusion of PA and IWK, improved program execution
and lower stock-based compensation costs.
Depreciation and amortization expense was $8.6 million in the second quarter of fiscal
2015, compared to $3.2 million a year
ago, primarily due to a $4.8 million
increase in amortization as a result of the addition of
identifiable intangible assets recorded on the acquisitions of IWK
and PA.
Second quarter fiscal 2015 EBITDA was $22.7 million (11% EBITDA margin) compared to
$17.6 million (11% EBITDA margin) in
the second quarter of fiscal 2014. Excluding $7.1 million of acquisition related costs, second
quarter fiscal 2015 EBITDA was $29.8
million (14% EBITDA margin). Excluding $0.9 million of acquisition costs, second quarter
fiscal 2014 EBITDA was $18.5 million
(12% EBITDA margin).
Order Bookings
Second quarter fiscal 2015 Order
Bookings were $216 million, a 96%
increase from the second quarter of fiscal 2014. Excluding
the impact of IWK and PA, Order Bookings were $172 million, a 56% increase from the previous
year. Higher Order Bookings primarily reflected the timing of
customer decisions on various larger opportunities and improved
market activity, particularly in life sciences, transportation and
energy. The addition of IWK and PA further improved the
Company's Order Bookings in life sciences, consumer products and
electronics and transportation.
Business Acquisition – PA
On August 29, 2014 the Company announced the
completion of its acquisition of M+W Process Automation GmbH and
ProFocus LLC (collectively Process Automation Solutions or
"PA"). PA is a leading global provider of engineering-based
automation services and solutions focused on the control,
performance monitoring and measurement of critical production
processes. The acquisition is aligned with ATS' strategy of
scaling its position in the global automation market by adding to
its services and life-cycle management capabilities across several
core elements of the customer value chain. The addition of PA is
expected to enhance growth opportunities in both new markets and
with existing customers.
In calendar 2013, PA had revenues of approximately 166 million Euro and EBITDA of approximately
20 million Euro. Over the past three
years, PA's revenues have grown organically at an average annual
rate of approximately 19%. Sales by industry segment in 2013 were
41% automotive, 26% chemicals, 13% pharmaceuticals and
biotechnology, 3% oil & gas and 17% other industries including
food and beverage, water, wastewater, consumer care, paper, metal
and semiconductor. Revenues earned in Europe accounted for approximately 70% of
global sales, North America 27%
and Asia 3%. In calendar 2013,
PA's Order Bookings were 188 million
Euro
Cash consideration paid for PA pending post-closing adjustments
was $353 million (243 million Euro), net of $11.8 million of cash acquired. In addition, the
Company incurred $7.1 million of
acquisition-related transaction costs. The cash consideration of
the purchase price, along with transaction costs, was funded from
the Company's $750 million senior
secured credit facility. The acquisition has been accounted for as
a business combination with the Company as the acquirer of
PA. The purchase method of accounting has been used and the
earnings of PA were consolidated beginning from the acquisition
date. For additional information on the acquisition of PA, refer to
note 4 of the interim condensed consolidated financial
statements.
Second Quarter Summary of Discontinued Operations:
Solar
Ontario Solar recorded income of $7.1 million related to the revaluation of its
remaining 25% ownership in four ground-mount solar projects.
$5.0 million of net proceeds for the
remaining 25% ownership were received subsequent to the end of the
second quarter of fiscal 2015, and therefore the remaining 25%
investment was revalued in the second quarter of fiscal 2015 to its
expected fair value, resulting in a gain, which was recognized by
Ontario Solar's 50% owned joint operation Ontario Solar PV Fields
("OSPV"). Outstanding proceeds are expected to be received in
fiscal 2015.
Quarterly Conference Call
ATS's quarterly conference
call begins at 10 am eastern on
Wednesday November 5 and can be
accessed live at www.atsautomation.com or on the phone by dialing
647-427-7450 five minutes prior. A replay of the conference will be
available on the ATS website following the call. Alternatively, a
telephone recording of the call will be available for one week
(until midnight November 11, 2014) by
dialing 416-849-0833 and entering passcode 22010230 followed by the
number sign.
About ATS
ATS Automation provides innovative, custom
designed, built and installed manufacturing solutions to many of
the world's most successful companies. Founded in 1978, ATS uses
its industry-leading knowledge and global capabilities to address
the sophisticated automation systems' and service needs of
multinational customers in industries such as life sciences,
transportation, energy, consumer products and electronics. It also
leverages its many years of experience and skills to fulfill the
specialized automation product manufacturing requirements of
customers. ATS employs approximately 3,500 people at 27
manufacturing facilities and 47 offices in North America, Europe, Southeast
Asia and China. The
Company's Solar segment is classified as discontinued operations.
The Company's shares are traded on the Toronto Stock Exchange under
the symbol ATA. Visit the Company's website at
www.atsautomation.com.
Management's Discussion and Analysis
For the Quarter
Ended September 28, 2014
This Management's Discussion and Analysis ("MD&A") for
the three and six months ended September 28,
2014 (second quarter of fiscal 2015) is as of November 4, 2014 and provides information on the
operating activities, performance and financial position of ATS
Automation Tooling Systems Inc. ("ATS" or the "Company") and should
be read in conjunction with the unaudited interim condensed
consolidated financial statements of the Company for the second
quarter of fiscal 2015 which have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and are
reported in Canadian dollars. The Company assumes that the reader
of this MD&A has access to, and has read the audited
consolidated financial statements prepared in accordance with IFRS
and MD&A of the Company for the year ended March 31, 2014 (fiscal 2014) and, accordingly,
the purpose of this document is to provide a fiscal 2015 second
quarter update to the information contained in the fiscal 2014
MD&A. Additional information is contained in the Company's
filings with Canadian securities regulators, including its Annual
Information Form, found on SEDAR at www.sedar.com and on the
Company's website at www.atsautomation.com.
Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures
Throughout this document management uses certain
non-IFRS measures to evaluate the performance of the Company. These
terms do not have any standardized meaning prescribed within IFRS
and therefore may not be comparable to similar measures presented
by other companies. The terms "operating margin," "EBITDA",
"EBITDA margin", "adjusted earnings from operations",
"adjusted basic earnings per share from continuing operations",
"Order Bookings" and "Order Backlog" do not have any standardized
meaning prescribed within IFRS and therefore may not be comparable
to similar measures presented by other companies. Such measures
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. In
addition, management uses "earnings from operations" which is an
additional IFRS measure to evaluate the performance of the Company.
Earnings from operations is presented on the Company's consolidated
statements of income as net income from continuing operations
excluding income tax expense and net finance costs. Operating
margin is an expression of the Company's earnings from operations
as a percentage of revenues. EBITDA is defined as earnings from
operations excluding depreciation and amortization (which includes
amortization of intangible assets). EBITDA margin is an
expression of the Company's EBITDA as a percentage of revenues.
Adjusted earnings from operations is defined as earnings from
operations before items excluded from management's internal
analysis of operating results, such as amortization expense of
acquisition-related intangible assets, acquisition-related
transaction costs, restructuring charges, and certain other
adjustments which would be non-recurring in nature ("adjustment
items"). Adjusted basic earnings per share from continuing
operations is defined as adjusted net income from continuing
operations on a basic per share basis, where adjusted net income
from continuing operations is defined as adjusted earnings from
operations less net finance costs and income tax expense, plus tax
effects of adjustment items. Order Bookings represent new
orders for the supply of automation systems, services and products
that management believes are firm. Order Backlog is the estimated
unearned portion of revenues on customer contracts that are in
process and have not been completed at the specified date.
Earnings from operations and EBITDA are used by the Company to
evaluate the performance of its operations. Management believes
earnings from operations is an important indicator in measuring the
performance of the Company's operations on a pre-tax basis and
without consideration as to how the Company finances its
operations. Management believes that EBITDA is an important
indicator of the Company's ability to generate operating cash flows
to fund continued investment in its operations. Management believes
that adjusted earnings from operations and adjusted basic earnings
per share from continuing operations are important measures to
increase comparability of performance between periods. The
adjustment items used by management to arrive at these metrics are
not considered to be indicative of the business's ongoing operating
performance. Order Bookings provides an indication of the Company's
ability to secure new orders for work during a specified period,
while Order Backlog provides a measure of the value of Order
Bookings that have not been completed at a specified point in
time. Both Order Bookings and Order Backlog are indicators of
future revenues the Company expects to generate based on contracts
that management believes to be firm. Management believes that ATS
shareholders and potential investors in ATS use these IFRS measures
and non-IFRS financial measures in making investment decisions and
measuring operational results. EBITDA should not be construed as a
substitute for net income determined in accordance with IFRS.
Adjusted earnings from operations is not necessarily indicative of
earnings from operations or cash flows from operations as
determined under IFRS and may not be comparable to similar measures
presented by other companies. A reconciliation of (i)
earnings from operations and EBITDA to net income from continuing
operations for the three and six month periods ending September 28, 2014 and September 29, 2013; and (ii) adjusted earnings
from operations and adjusted basic earnings per share from
continuing operations to net income from operations for the three
and six month periods ending September 28,
2014 and September 29, 2013 is
contained in this MD&A (see "Reconciliation of Non-IFRS to IFRS
Measures"). A reconciliation of Order Bookings and Order Backlog to
total Company revenues for the three and six month periods ending
September 28, 2014 and September 29, 2013 is contained in the MD&A
(see "Order Backlog Continuity").
Company Profile
ATS Automation provides innovative,
custom designed, built and installed manufacturing solutions to
many of the world's most successful companies. Founded in 1978, ATS
uses its industry-leading knowledge and global capabilities to
address the sophisticated automation systems' and service needs of
multinational customers in industries such as life sciences,
transportation, energy, consumer products and electronics. It also
leverages its many years of experience and skills to fulfill the
specialized automation product manufacturing requirements of
customers. ATS employs approximately 3,500 people at 27
manufacturing facilities and 47 offices in North America, Europe, Southeast
Asia and China. The
Company's Solar segment is classified as discontinued
operations.
Value Creation Strategy
To drive value creation, the
Company implemented a three-phase strategic plan: (1) fix the
business (improve the existing operations, gain operating control
of the business and earn credibility); (2) separate the businesses
(create a standalone automation business, monetize non-core assets
and strengthen the balance sheet); and (3) grow (both organically
and through acquisition). The Company has made significant
progress in each phase of its Value Creation Strategy, including
the separation of solar assets (see "Discontinued Operations:
Solar" and "Solar Separation and Outlook").
Accordingly, in June 2012, the ATS
Board of Directors approved the next phase of the Company's
strategy: Grow, Expand and Scale. The strategy is designed to
leverage the strong foundation of ATS' core automation business,
continue the growth and development of ATS and create value for all
stakeholders.
Grow
To further the Company's organic growth,
ATS will continue to target providing comprehensive, value-based
programs and enterprise solutions for customers built on
differentiating technological solutions, value of customer outcomes
achieved and global capability.
Expand
The Company seeks to expand its offering
of products and services to the market. The Company intends
to build on its automation systems business to offer: engineering,
including design, modelling and simulation, and program management;
products, including contract manufacturing, automation and other
manufacturing products; and services, including pre automation,
post automation, training, life cycle material management, and
other services. Although engineering, products and services
are part of ATS' portfolio today, the Company has significant room
to grow these offerings in the future.
Scale
The Company is also committed to growth
through acquisition and has the organizational structure, the
business processes and the experience to successfully integrate
acquired companies. Acquisition targets are evaluated on
their ability to bring ATS market or technology leadership, scale
and/or a market opportunity. For each of ATS' markets, the
Company has analyzed the capability value chain and made a grow,
team or acquire decision. Financially, targets are reviewed
on a number of criteria including their potential to add accretive
earnings to current operations.
Business Acquisition – PA
On August 29, 2014 the Company announced the
completion of its acquisition of M+W Process Automation GmbH and
ProFocus LLC (collectively Process Automation Solutions or
"PA"). PA is a leading global provider of engineering-based
automation services and solutions focused on the control,
performance monitoring and measurement of critical production
processes. The acquisition is aligned with ATS' stated
strategy of scaling its position in the global automation market by
adding to its services and life-cycle management capabilities
across several core elements of the customer value chain. The
addition of PA is expected to enhance growth opportunities in both
new markets and with existing customers.
In calendar 2013, PA had revenues of approximately 166 million Euro and EBITDA of approximately
20 million Euro. Over the past three
years, PA's revenues have grown organically at an average annual
rate of approximately 19%. Sales by industry segment in 2013
were 41% automotive, 26% chemicals, 13% pharmaceuticals and
biotechnology, 3% oil & gas and 17% other industries including
food and beverage, water, wastewater, consumer care, paper, metal
and semiconductor. Revenues earned in Europe accounted for approximately 70% of
global sales, North America 27%
and Asia 3%. In calendar
2013, PA's Order Bookings were 188 million
Euro.
Cash consideration paid for PA pending post-closing adjustments
was $353 million (243 million Euro), which was net of $11.8 million of cash acquired. In addition, the
Company incurred $7.1 million of
acquisition-related transaction costs. The cash consideration of
the purchase price, along with transaction costs, was funded from
the Company's $750 million senior
secured credit facility (see "Liquidity, Cash Flow and Financial
Resources"). The acquisition has been accounted for as a business
combination with the Company as the acquirer of PA. The purchase
method of accounting has been used and the earnings of PA were
consolidated beginning from the acquisition date. For additional
information on the acquisition of PA, refer to note 4 of the
interim condensed consolidated financial statements.
Overview – Operating Results from Continuing
Operations
Results from continuing operations comprise the
results of ATS' continuing operations and corporate costs not
directly attributable to Solar. The results of the Solar
segment are reported in discontinued operations.
Consolidated Revenues from Continuing Operations
(In
millions of dollars)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
Six
Months
Ended
|
|
Six Months
Ended
|
|
|
September
28,
2014
|
|
September
29,
2013
|
|
September 28,
2014
|
|
September
29,
2013
|
Revenues by
market
|
|
|
|
|
|
|
|
|
Consumer
products & electronics
|
$
|
42.0
|
$
|
8.7
|
$
|
80.5
|
$
|
22.0
|
Energy
|
|
14.5
|
|
12.4
|
|
26.3
|
|
18.7
|
Life
sciences
|
|
79.9
|
|
70.3
|
|
158.7
|
|
136.4
|
Transportation
|
|
70.6
|
|
63.2
|
|
132.4
|
|
127.5
|
Total revenues
from continuing operations
|
$
|
207.0
|
$
|
154.6
|
$
|
397.9
|
$
|
304.6
|
|
|
|
|
|
|
|
|
|
Second Quarter
Fiscal 2015 second quarter revenues
were 34% higher than in the corresponding period a year ago
primarily reflecting $35.7 million of
revenues earned by IWK (acquired September
30, 2013) and $20.5 million of
PA revenues in the month ended September 28,
2014. Excluding IWK and PA, second quarter revenues were
$150.8 million, a 2% decrease
compared to the corresponding period a year ago primarily
reflecting lower Order Bookings in the first fiscal quarter of the
year. Foreign exchange rate changes positively impacted the
translation of revenues earned by foreign-based subsidiaries
compared to the corresponding period a year ago, primarily
reflecting the weakening of the Canadian dollar relative to the
Euro and U.S. dollar.
By industrial market, fiscal 2015 second quarter revenues from
consumer products & electronics increased by 383%, primarily on
revenue from acquisitions and organic growth in the consumer
products market. Revenues generated in the energy market increased
17% compared to the corresponding period a year ago, primarily due
to revenues from PA and increased activity in the nuclear
energy market. Revenues generated in the life sciences market
increased 14% compared to the corresponding period a year ago,
primarily on revenues from acquisitions. Transportation revenues
increased 12% compared to a year ago primarily due to revenues
earned by PA.
Year-to-date
Revenues for the six months ended
September 28, 2014 were 31% higher
than in the corresponding period a year ago primarily reflecting
$70.3 million of revenues earned by
IWK and $20.5 million of revenues
earned by PA in the month ended September
28, 2014. Excluding IWK and PA, revenues were $307.1 million, a 1% increase over the
corresponding period a year ago. Foreign exchange rate changes
positively impacted the translation of revenues earned by
foreign-based subsidiaries compared to the corresponding period a
year ago, primarily reflecting the weakening of the Canadian dollar
relative to the Euro and U.S. dollar.
By industrial market, fiscal 2015 year-to-date revenues from
consumer products & electronics increased by 266%, primarily on
revenues from acquisitions and organic growth in the consumer
products market. Revenues generated in the energy market increased
41% compared to the corresponding period a year ago, primarily on
higher Order Backlog entering fiscal 2015 due largely to increased
activity in the nuclear energy market. Revenues generated in the
life sciences market increased 16% compared to the corresponding
period a year ago, primarily on revenues from acquisitions.
Transportation revenues increased 4% compared to a year ago
primarily due to revenues earned by PA.
Consolidated Operating Results
(In millions of dollars)
|
|
|
Three
Months
Ended
|
|
|
Three
Months
Ended
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
September 28,
2014
|
|
|
September
29,
2013
|
|
|
September 28,
2014
|
|
|
September
29,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
$
|
14.1
|
|
$
|
14.4
|
|
$
|
28.5
|
|
$
|
27.1
|
Amortization of
acquisition-related intangible assets
|
|
|
5.8
|
|
|
1.0
|
|
|
9.4
|
|
|
1.9
|
Acquisition-related
transaction costs
|
|
|
7.1
|
|
|
0.9
|
|
|
10.1
|
|
|
0.9
|
Restructuring
charges
|
|
|
––
|
|
|
––
|
|
|
––
|
|
|
2.2
|
Adjusted earnings
from operations1
|
|
$
|
27.0
|
|
$
|
16.3
|
|
$
|
48.0
|
|
$
|
32.1
|
1 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures."
|
|
|
|
Three
Months
Ended
|
|
|
Three
Months
Ended
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
September 28,
2014
|
|
|
September
29,
2013
|
|
|
September 28,
2014
|
|
|
September
29,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
$
|
14.1
|
|
$
|
14.4
|
|
$
|
28.5
|
|
$
|
27.1
|
Depreciation and
amortization
|
|
|
8.6
|
|
|
3.2
|
|
|
15.1
|
|
|
6.2
|
EBITDA1
|
|
$
|
22.7
|
|
$
|
17.6
|
|
$
|
43.6
|
|
$
|
33.3
|
1 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures."
|
|
Second Quarter
Fiscal 2015 second quarter earnings
from operations were $14.1 million
(7% operating margin) compared to $14.4
million (9% operating margin) in the second quarter of
fiscal 2014.
Second quarter fiscal 2015 earnings from operations included
$7.1 million of incremental costs
related to the Company's acquisition activity and amortization
expenses of $5.8 million related to
amortization of identifiable intangible assets recorded on the
acquisitions of PA, IWK, Assembly & Test Worldwide and
sortimat. Excluding these costs, second quarter fiscal 2015
adjusted earnings from operations were $27.0
million (13% margin), compared to adjusted earnings from
operations of $16.3 million (11%
margin) in the second quarter of fiscal 2014. Higher adjusted
earnings from operations primarily reflected the inclusion of PA
and IWK, improved program execution and lower stock-based
compensation costs.
Depreciation and amortization expense was $8.6 million in the second quarter of fiscal
2015, compared to $3.2 million a year
ago, primarily due to a $4.8 million
increase in amortization as a result of the addition of
identifiable intangible assets recorded on the acquisitions of IWK
and PA.
Second quarter fiscal 2015 EBITDA was $22.7 million (11% EBITDA margin) compared to
$17.6 million (11% EBITDA margin) in
the second quarter of fiscal 2014. Excluding $7.1 million of acquisition related costs, second
quarter fiscal 2015 EBITDA was $29.8
million (14% EBITDA margin). Excluding $0.9 million of acquisition costs, second quarter
fiscal 2014 EBITDA was $18.5 million
(12% EBITDA margin).
Year-to-date
For the six months ended September 28, 2014, earnings from operations were
$28.5 million (7% operating margin)
compared to $27.1 million (9%
operating margin) in the corresponding period a year ago. Earnings
from operations included $10.1
million of incremental costs related to the Company's
acquisition activity and amortization expenses of $9.4 million related to amortization of
identifiable intangible assets recorded on the acquisitions of PA,
IWK, Assembly & Test Worldwide and sortimat. Excluding these
costs, adjusted earnings from operations were $48.0 million (12% operating margin), compared to
adjusted earnings from operations of $32.1
million (11% operating margin) in the corresponding period a
year ago.
Higher adjusted earnings from operations primarily reflected
better program execution, higher revenues, lower stock-based
compensation expenses and the inclusion of IWK and PA.
Depreciation and amortization expense was $15.1 million in the first six months of fiscal
2015 compared to $6.2 million a year
ago, primarily due to a $7.5 million
increase in amortization as a result of the addition of
identifiable intangible assets recorded on the acquisitions
of IWK and PA.
Year to date fiscal 2015 EBITDA was $43.6
million (11% EBITDA margin) compared to $33.3 million (11% EBITDA margin) in the first
six months of fiscal 2014. Fiscal 2015 EBITDA, excluding
$10.1 million of acquisition related
costs, was $53.7 million (13%
margin), compared to $36.4 million
(12% margin) in the corresponding period a year ago.
Order Bookings
Second quarter fiscal 2015 Order
Bookings were $216 million, a 96%
increase from the second quarter of fiscal 2014. Excluding
the impact of IWK and PA, Order Bookings were $172 million, a 56% increase from the previous
year. Higher Order Bookings primarily reflected the timing of
customer decisions on various larger opportunities and improved
market activity, particularly in life sciences, transportation and
energy. The addition of IWK and PA further improved the
Company's Order Bookings in life sciences, consumer products and
electronics and transportation.
Order Backlog Continuity
(In millions of dollars)
|
|
|
Three
Months
Ended
|
|
|
Three
Months
Ended
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
September
28,
2014
|
|
|
September
29,
2013
|
|
|
September 28,
2014
|
|
|
September
29,
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening Order
Backlog
|
|
$
|
425
|
|
$
|
415
|
|
$
|
474
|
|
$
|
398
|
Revenues
|
|
|
(207)
|
|
|
(155)
|
|
|
(398)
|
|
|
(305)
|
Order
Bookings
|
|
|
216
|
|
|
110
|
|
|
376
|
|
|
275
|
Order Backlog
adjustments1
|
|
|
127
|
|
|
(15)
|
|
|
109
|
|
|
(13)
|
Total
|
|
$
|
561
|
|
$
|
355
|
|
$
|
561
|
|
$
|
355
|
1 Order
Backlog adjustments includes incremental Order Backlog of $131
million acquired with PA, foreign exchange adjustments and
cancellations.
|
|
Order Backlog by Industry
(In millions of dollars)
As
at
|
|
|
|
|
September 28,
2014
|
|
|
September 29,
2013
|
Consumer products
& electronics
|
|
|
|
$
|
68
|
|
$
|
29
|
Energy
|
|
|
|
|
51
|
|
|
45
|
Life
sciences
|
|
|
|
|
237
|
|
|
143
|
Transportation
|
|
|
|
|
205
|
|
|
138
|
Total
|
|
|
|
$
|
561
|
|
$
|
355
|
|
|
|
|
|
|
|
|
|
At September 28, 2014, Order
Backlog was $561 million, 58% higher
than at September 29, 2013.
Higher Order Backlog primarily reflected the addition of PA and IWK
as well as higher Order Bookings in life sciences, transportation
and energy, offset by a decrease in consumer products &
electronics.
Outlook
The global economic environment has continued
to show signs of volatility, and uncertainty remains. In
North America, the U.S. and
Canadian economies have shown signs of improvement, but growth
remains slow. Economic growth continues to decelerate in
China and other parts of
Asia. In Europe markets remain weak, which has the
potential to negatively impact demand, particularly for the
Company's European operations, and may add to volatility in Order
Bookings. Overall, a prolonged or more significant downturn in an
economy where the Company operates could negatively impact Order
Bookings. Impacts on demand for the Company's products and
services may lag behind global macroeconomic trends due to the
strategic nature of the Company's programs to its customers and the
long lead times on projects.
Many customers remain cautious in their approach to capital
investment; however, activity in the life sciences and
transportation markets remains strong. The Company has seen
strength in energy markets such as nuclear and oil and gas;
however, the solar energy market remains weak due to reductions in
solar feed-in-tariffs. Activity in consumer products &
electronics has improved and the addition of IWK provides the
Company with an opportunity to increase its exposure to new
customers in these markets and in life sciences.
The Company's sales organization continues to work to engage
with customers on enterprise-type solutions. The Company
expects that this will provide ATS with more strategic
relationships, increased predictability, better program control and
less sensitivity to macroeconomic forces. This approach to
market may cause variability in Order Bookings from quarter to
quarter and, as is already the case, lengthen the performance
period and revenue recognition for certain customer programs. The
Company expects its Order Backlog of $561
million at the end of the second quarter of fiscal 2015 to
mitigate the impact of volatile Order Bookings on revenues in the
short term. Management expects that approximately 40% to 45% of its
Order Backlog would typically be completed each quarter. As well,
the addition of PA is expected to improve the Company's Order
Bookings to revenue cycle due to the service, engineering and
consulting work that PA performs, which is invoiced on a time and
material basis and therefore normally recorded as an Order Booking
and revenue in the same period. Management estimates that on
average, approximately 20% to 25% of PA's revenues are earned
through time and material contracts.
The addition of PA provides growth opportunities in both new
markets and with existing customers. PA's significant
capability and market position benefit ATS and its strategy to grow
the business. The Company expects meaningful revenue
synergies through an expanded ATS offering, which will include PA's
process controls, software integration, manufacturing execution
systems ("MES"), remote monitoring, lifecycle management, modelling
and simulation capabilities. PA provides an imbedded
engineering, service and sales force, with early insight into
customer preferences, developments, problems and programs, allowing
PA to act as first responders for post-automation services and
equipment maintenance. PA expects to expand its main
automation contractor ("MAC") offering by utilizing ATS on a
subcontractor basis to address capability gaps across a number of
industries, thereby increasing opportunity. Further, both ATS
and PA are expected to have opportunities to engage customers on a
more comprehensive basis. Opportunities to improve
profitability will be pursued through adoption of ATS best
practices in approach to market, key account management,
front-end-of-the-business processes, performance management and
corporate strategy. Cost synergies are expected to be nominal.
Management's disciplined focus on program management, cost
reductions, standardization and quality puts ATS in a strong
competitive position to capitalize on opportunities going forward
and sustain performance in challenging market conditions.
Management expects that the application of its ongoing efforts to
improve its cost structure, business processes, leadership and
supply chain management will continue to have a positive impact on
ATS operations.
The Company seeks to continue to expand its position in the
global automation market organically and through acquisition.
The Company's solid foundation and strong cash flow generation
capability provide the flexibility to pursue its growth
strategy.
Consolidated Results from Continuing Operations
|
|
|
Three
Months
Ended
|
|
|
Three
Months
Ended
|
|
|
Six
Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
September
28,
2014
|
|
|
September 29,
2013
|
|
|
September 28,
2014
|
|
|
September 29,
2013
|
Revenues
|
|
$
|
207.0
|
|
$
|
154.6
|
|
$
|
397.9
|
|
$
|
304.6
|
Cost of
revenues
|
|
|
150.8
|
|
|
114.7
|
|
|
287.8
|
|
|
225.3
|
Selling, general and
administrative
|
|
|
43.3
|
|
|
22.9
|
|
|
80.2
|
|
|
48.3
|
Stock-based
compensation
|
|
|
(1.2))
|
|
|
2.6
|
|
|
1.4
|
|
|
3.9
|
Earnings from
operations
|
|
$
|
14.1
|
|
$
|
14.4
|
|
$
|
28.5
|
|
$
|
27.1
|
Net finance
costs
|
|
$
|
2.3
|
|
$
|
0.5
|
|
$
|
3.2
|
|
$
|
1.1
|
Provision for income
taxes
|
|
|
4.4
|
|
|
3.5
|
|
|
8.9
|
|
|
7.1
|
Net income from
continuing operations
|
|
$
|
7.4
|
|
$
|
10.4
|
|
$
|
16.4
|
|
$
|
18.9
|
Income from
discontinued operations, net of tax
|
|
$
|
7.1
|
|
$
|
2.5
|
|
$
|
14.0
|
|
$
|
13.5
|
Net
income
|
|
$
|
14.5
|
|
$
|
12.9
|
|
$
|
30.4
|
|
$
|
32.4
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic from continuing
operations
|
|
$
|
0.08
|
|
$
|
0.12
|
|
$
|
0.18
|
|
$
|
0.22
|
Basic from
discontinued operations
|
|
|
0.08
|
|
|
0.03
|
|
|
0.15
|
|
|
0.15
|
|
|
$
|
0.16
|
|
$
|
0.15
|
|
$
|
0.33
|
|
$
|
0.37
|
Diluted from
continuing operations
|
|
$
|
0.08
|
|
$
|
0.11
|
|
$
|
0.18
|
|
$
|
0.21
|
Diluted from
discontinued operations
|
|
|
0.08
|
|
|
0.03
|
|
|
0.15
|
|
|
0.15
|
|
|
$
|
0.16
|
|
$
|
0.14
|
|
$
|
0.33
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues. At $207.0
million, consolidated revenues from continuing operations
for the second quarter of fiscal 2015 were $52.4 million or 34% higher than in the
corresponding period a year ago. At $397.9
million, year-to-date revenues were $93.3 million or 31% higher than in the
corresponding period a year ago, primarily on incremental IWK and
PA revenues. See "Overview – Operating Results from Continuing
Operations."
Cost of revenues. At $150.8
million, second quarter fiscal 2015 cost of revenues
increased over the corresponding period a year ago by $36.1 million or 31% primarily on higher
revenues. Year-to-date cost of revenues of $287.8 million increased by $62.5 million or 28%, primarily on higher
revenues generated compared to the corresponding period.
At 27%, gross margin in the second quarter of fiscal 2015
increased 1% from the corresponding period a year ago. Year-to-date
gross margin of 28% increased 2% from the corresponding period a
year ago. Increases in gross margin in the first half of fiscal
2015 reflected better program execution, improvements in the cost
structure of the Company's base business and the inclusion of IWK.
The addition of PA did not have a material impact on the Company's
gross margin in the second quarter of fiscal 2015. However, due to
its cost structure, PA has typically operated with a lower gross
margin than ATS. For PA, higher cost of sales is partially
offset by lower selling, general and administrative costs relative
to revenues as compared to ATS.
Selling, general and administrative ("SG&A")
expenses. SG&A expenses for the second quarter of
fiscal 2015 were $43.3 million.
This included $7.1 million of
incremental costs related to the Company's acquisition
activity. Normalized for these costs, SG&A expenses were
$36.2 million or 65% higher than the
normalized $22.0 million incurred in
the corresponding period last year, which excluded $0.9 million of acquisition related costs. On a
normalized basis, higher SG&A costs primarily reflected the
addition of PA and IWK SG&A expenses, including $4.8 million of incremental amortization expenses
related to the identifiable intangible assets recorded on
acquisitions, foreign exchange rate changes which negatively
impacted the translation of SG&A expenses, and higher
employee-related costs.
For the six months ended September 28,
2014, SG&A expenses were $80.2
million, which included $10.1
million of costs related to the Company's acquisition
strategy. Normalized for acquisition costs, year to date SG&A
spending was $70.1 million,
$24.9 million or 55% higher compared
to the same period a year ago. Higher SG&A costs primarily
reflected the addition of PA and IWK SG&A expenses, including
$7.5 million of incremental
amortization expenses related to the identifiable intangible assets
recorded on acquisitions.
Stock-based compensation. Stock-based compensation
recovery amounted to $1.2 million in
the second quarter of fiscal 2015 compared to $2.6 million of stock-based compensation expense
in the corresponding period a year ago. For the six month period
ended September 28, 2014, stock-based
compensation expense decreased to $1.4
million from $3.9 million a
year earlier. The decrease in stock-based compensation costs for
both periods is due to the revaluation of deferred stock units,
share appreciation rights and restricted share units.
Earnings from operations. For the three and six
month periods ended September 28,
2014, consolidated earnings from operations were
$14.1 million and $28.5 million respectively (operating margins of
7% in both periods), compared to earnings from operations of
$14.4 million and $27.1 million in the corresponding periods a year
ago (operating margins of 9% in both periods). See "Overview
– Operating Results from Continuing Operations."
Net finance costs. Net finance costs were
$2.3 million in the second quarter of
fiscal 2015, $1.8 million higher than
the corresponding period a year ago. For the six months ended
September 28, 2014, finance costs
were $3.2 million compared to
$1.1 million in the corresponding
period a year ago. The increase in net finance costs reflected
increased usage of the Company's credit facility to finance the
acquisition of PA and to support letters of credit.
Income tax provision. For the three and six months ended
September 28, 2014, the Company's
effective income tax rate of 37% and 35% respectively, differed
from the combined Canadian basic federal and provincial income tax
rate of 27% primarily as a result of income earned in certain
jurisdictions with different statutory rates. The Company expects
that with the recognition of deferred income tax assets in fiscal
2014 following the Company's assessment of its ability to utilize
tax losses in its German-based operations, its effective tax rate
will exceed the combined Canadian basic federal and provincial
income tax rate of 27% going forward. Cash taxes are expected to be
lower than the effective tax rate for accounting purposes due to
tax assets available primarily in Canada and Germany.
Net income from continuing operations. Fiscal 2015 second
quarter net income from continuing operations was $7.4 million (8
cents per share basic and diluted) compared to $10.4 million (12
cents per share basic, 11
cents per share diluted) for the second quarter of fiscal
2014. Adjusted basic earnings per share from continuing operations
was 19 cents in the second quarter of
fiscal 2015 compared to 14 cents for
the second quarter of fiscal 2014. See "Reconciliation of
Non-IFRS Measures to IFRS Measures."
Net income from continuing operations in the six months ended
September 28, 2014, was $16.4 million (18
cents per share basic and diluted) compared to $18.9 million (22
cents per share basic, 21
cents per share diluted) for the corresponding period a year
ago. Adjusted basic earnings per share from continuing operations
was 34 cents in the six months ended
September 28, 2014 compared to
27 cents in the corresponding period
a year ago. See "Reconciliation of Non-IFRS Measures to IFRS
Measures."
Reconciliation of Non-IFRS Measures to IFRS
Measures
(In millions of dollars)
The following table reconciles EBITDA to the most directly
comparable IFRS measure (net income from continuing
operations):
|
|
|
Three
Months
Ended
September 28,
2014
|
|
|
Three Months
Ended
September 29,
2013
|
EBITDA
|
|
$
|
22.7
|
|
$
|
17.6
|
Less: depreciation
and amortization expense
|
|
|
8.6
|
|
|
3.2
|
Earnings from
operations
|
|
$
|
14.1
|
|
$
|
14.4
|
Less: net finance
costs
|
|
|
2.3
|
|
|
0.5
|
Provision for income
taxes
|
|
|
4.4
|
|
|
3.5
|
Net income from
continuing operations
|
|
$
|
7.4
|
|
$
|
10.4
|
|
|
|
|
|
|
|
|
|
|
Six
Months
Ended
September
28,
2014
|
|
|
Six Months
Ended
September
29,
2013
|
EBITDA
|
|
$
|
43.6
|
|
$
|
33.3
|
Less: depreciation
and amortization expense
|
|
|
15.1
|
|
|
6.2
|
Earnings from
operations
|
|
$
|
28.5
|
|
$
|
27.1
|
Less: net finance
costs
|
|
|
3.2
|
|
|
1.1
|
Provision for income
taxes
|
|
|
8.9
|
|
|
7.1
|
Net income from
continuing operations
|
|
$
|
16.4
|
|
$
|
18.9
|
The following table reconciles adjusted earnings from operations
and adjusted basic earnings per share from continuing operations to
the most directly comparable IFRS measure (net income from
continuing operations):
|
|
Three Months Ended September 28,
2014
|
|
|
Three Months Ended
September 29, 2013
|
|
|
IFRS
|
|
Adjustments
|
|
Adjusted
(non-IFRS)
|
|
|
IFRS
|
|
Adjustments
|
|
Adjusted
(non-IFRS)
|
Earnings from
operations
|
$
|
14.1
|
$
|
––
|
$
|
14.1
|
|
$
|
14.4
|
$
|
––
|
$
|
14.4
|
Amortization of
acquisition-related intangible assets
|
|
––
|
|
5.8
|
|
5.8
|
|
|
––
|
|
1.0
|
|
1.0
|
Acquisition-related
transaction costs
|
|
––
|
|
7.1
|
|
7.1
|
|
|
––
|
|
0.9
|
|
0.9
|
Restructuring
charges
|
|
––
|
|
––
|
|
––
|
|
|
––
|
|
––
|
|
––
|
|
$
|
14.1
|
$
|
12.9
|
$
|
27.0
|
|
$
|
14.4
|
$
|
1.9
|
$
|
16.3
|
Less: net finance
costs
|
$
|
2.3
|
$
|
––
|
$
|
2.3
|
|
$
|
0.5
|
$
|
––
|
$
|
0.5
|
Income from
continuing operations before income taxes
|
$
|
11.8
|
$
|
12.9
|
$
|
24.7
|
|
$
|
13.9
|
$
|
1.9
|
$
|
15.8
|
Provision for income
taxes
|
$
|
4.4
|
$
|
––
|
$
|
4.4
|
|
$
|
3.5
|
$
|
––
|
$
|
3.5
|
Adjustments to
provision for income taxes1
|
|
––
|
|
2.9
|
|
2.9
|
|
|
––
|
|
0.3
|
|
0.3
|
|
$
|
4.4
|
$
|
2.9
|
$
|
7.3
|
|
$
|
3.5
|
$
|
0.3
|
$
|
3.8
|
Net income from
continuing operations
|
$
|
7.4
|
|
$ 10.0
|
$
|
17.4
|
|
$
|
10.4
|
$
|
1.6
|
$
|
12.0
|
Basic earnings per
share from continuing operations
|
$
|
0.08
|
$
|
0.11
|
$
|
0.19
|
|
$
|
0.12
|
$
|
0.02
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
September 28, 2014
|
|
|
Six Months Ended
September 29, 2013
|
|
|
IFRS
|
|
Adjustments
|
|
Adjusted
(non-IFRS)
|
|
|
IFRS
|
|
Adjustments
|
|
Adjusted
(non-IFRS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
$
|
28.5
|
$
|
––
|
$
|
28.5
|
|
$
|
27.1
|
$
|
––
|
$
|
27.1
|
Amortization of
acquisition-related intangible assets
|
|
––
|
|
9.4
|
|
9.4
|
|
|
––
|
|
1.9
|
|
1.9
|
Acquisition-related
transaction costs
|
|
––
|
|
10.1
|
|
10.1
|
|
|
––
|
|
0.9
|
|
0.9
|
Restructuring
charges
|
|
––
|
|
––
|
|
––
|
|
|
––
|
|
2.2
|
|
2.2
|
|
$
|
28.5
|
$
|
19.5
|
$
|
48.0
|
|
$
|
27.1
|
$
|
5.0
|
$
|
32.1
|
Less: net finance
costs
|
$
|
3.2
|
$
|
––
|
$
|
3.2
|
|
$
|
1.1
|
$
|
––
|
$
|
1.1
|
Income from
continuing operations before income taxes
|
$
|
25.3
|
$
|
19.5
|
$
|
44.8
|
|
$
|
26.0
|
$
|
5.0
|
$
|
31.0
|
Provision for income
taxes
|
$
|
8.9
|
$
|
––
|
$
|
8.9
|
|
$
|
7.1
|
$
|
––
|
$
|
7.1
|
Adjustments to
provision for income taxes1
|
|
––
|
|
4.6
|
|
4.6
|
|
|
––
|
|
0.9
|
|
0.9
|
|
$
|
8.9
|
$
|
4.6
|
$
|
13.5
|
|
$
|
7.1
|
$
|
0.9
|
$
|
8.0
|
Net income from
continuing operations
|
$
|
16.4
|
$
|
14.9
|
$
|
31.3
|
|
$
|
18.9
|
$
|
4.1
|
$
|
23.0
|
Basic earnings per
share from continuing operations
|
$
|
0.18
|
$
|
0.16
|
$
|
0.34
|
|
$
|
0.22
|
$
|
0.05
|
$
|
0.27
|
1
Adjustments to provision for income taxes relate to the income tax
effects of adjustment items that are excluded for the purposes of
calculating non-IFRS based adjusted net income from continuing
operations
|
|
DISCONTINUED OPERATIONS: SOLAR
(In millions of dollars)
|
Three Months
Ended
September 28,
2014
|
Three Months
Ended
September
29,
2013
|
Six
Months
Ended
September
28,
2014
|
Six Months
Ended
September 29,
2013
|
Total
revenues
|
$
––
|
$
––
|
$
––
|
$
1.1
|
Gain
|
7.0
|
––
|
14.2
|
13.8
|
Income
from discontinued operations
|
7.1
|
2.5
|
14.0
|
13.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
Revenues
During the first quarter of fiscal 2014, the manufacturing
assets were sold and the business wound up. Accordingly, no
revenues have been generated since the first fiscal quarter of
2014.
Gain
The fiscal 2015 second quarter gain of $7.0 million related to the revaluation of
Ontario Solar's remaining 25% ownership in four ground-mount solar
projects. $5.0 million of net
proceeds for the remaining 25% ownership were received subsequent
to the end of the second quarter of fiscal 2015, and therefore the
remaining 25% investment was revalued in the second quarter of
fiscal 2015 to its expected fair value, resulting in a gain, which
was recognized by Ontario Solar's 50% owned joint operation Ontario
Solar PV Fields ("OSPV").
Income from Discontinued Operations
Ontario Solar recorded income of $7.1
million in the second quarter of fiscal 2015 compared to
income of $2.5 million in the second
quarter a year ago.
Year-to-date
Revenues
Revenues for the six months ended September 28, 2014 were $nil reflecting the
cessation of the business and were $1.1
million in the corresponding period of fiscal 2014.
Solar Separation and Outlook
During fiscal 2014, the Company sold four ground-mount solar
projects. OSPV retained 25% ownership of the projects until
they reached commercial operation, which occurred in October 2014. Net proceeds to the Company are
expected to be $21.4 million, of
which the Company received net proceeds of $5.0 million subsequent to the end of the second
quarter of fiscal 2015. The Company had previously received
net proceeds of $13.9 million during
fiscal 2014 and fiscal 2013. Outstanding proceeds are
expected to be received in fiscal 2015.
During the first quarter of fiscal 2015, OSPV sold its three
remaining ground-mount solar projects. OSPV has retained 25%
ownership of the projects until the projects reach commercial
operation, which is expected to occur in early calendar 2015.
Net proceeds to the Company are expected to be approximately
$14.6 million, of which the Company
has received net proceeds of $12.0
million in the first quarter of fiscal 2015. The remaining
proceeds are expected to be received when the projects achieve
commercial operation.
Management expects to record a gain on these divestitures as the
sales are completed and proceeds realized. Subsequent to the
settlement of outstanding liabilities, net proceeds from the
divestiture of Ontario Solar will be re-allocated to ATS' core
automation business to support growth.
LIQUIDITY, CASH FLOW AND FINANCIAL RESOURCES
(In millions of dollars, except ratios)
As
at
|
|
September
28,
2014
|
March 31,
2014
|
Cash and cash
equivalents
|
|
$
96.8
|
$ 76.5
|
Debt-to-equity
ratio
|
|
0.69:1
|
0.01:1
|
For the three months
ended
|
|
September
28,
2014
|
September
29,
2013
|
Cash flows provided
by operating activities from continuing operations
|
|
$
17.4
|
$
5.1
|
At September 28, 2014, the Company
had cash and cash equivalents of $96.8
million in continuing operations compared to $76.5 million at March 31,
2014. The Company's total debt-to-total equity ratio,
excluding accumulated other comprehensive income was 0.69:1 at
September 28, 2014.
At September 28, 2014, the Company
had $337 million of unutilized
multipurpose credit, including letters of credit, available under
existing credit facilities and an additional $12.5 million available under letter of credit
facilities.
In the three months ended September 28,
2014, cash flows provided by operating activities from
continuing operations were $17.4
million ($5.1 million provided
by in the corresponding period a year ago). The increase in
operating cash flows from continuing operations related primarily
to higher earnings and the timing of investments in non-cash
working capital in large customer programs. In the six months ended
September 28, 2014, cash flows
provided by operating activities from continuing operations were
$6.7 million ($21.3 million provided by in the corresponding
period a year ago).
In the second quarter of fiscal 2015, the Company's investment
in non-cash working capital decreased by $5.7 million from June 29,
2014. On a year-to-date basis, investment in non-cash
working capital increased by $21.0
million. Accounts receivable increased 24% or $28.2 million due to the acquisition of PA and
timing of billings on certain customer contracts. Net contracts in
progress increased 37% or $32.2
million compared to March 31,
2014. The Company actively manages its accounts receivable
and net contracts in progress balances through billing terms on
long-term contracts, collection efforts and supplier payment terms.
Inventories increased 81% or $19.5
million due to the acquisition of PA, and were primarily
comprised of un-invoiced customer work in process. Deposits and
prepaid assets increased 48% or $4.6
million compared to March 31,
2014 due to the acquisition of PA and timing of
program execution. Accounts payable and accrued liabilities
increased 34% or $47.5 million
compared to March 31, 2014 due to the
acquisition of PA.
Capital expenditures totalled $4.3
million in the first half of fiscal 2015, primarily related
to computer hardware.
Intangible assets expenditures totalled $2.8 million in the first half of fiscal 2015,
primarily related to computer software and development
projects.
As a result of the separation of Solar (see "Discontinued
Operations: Solar Separation and Outlook") the Company reverted
capacity in its Cambridge, Ontario
campus to its core ASG business in fiscal 2013 which resulted in
the sale of a vacant ASG facility in the first quarter of fiscal
2015. The net proceeds from disposal of the facility were
$8.5 million and the income statement
impact was minimal.
During the second quarter of fiscal 2015, the Company amended
its senior secured credit facility (the "Credit Facility"). The
Credit Facility provides a four-year committed revolving credit
facility of $750.0 million and
expires on August 29, 2018. The
Credit Facility is secured by the assets, excluding real estate, of
certain of the Company's North American legal entities and a pledge
of shares and guarantees from certain of the Company's legal
entities. At September 28,
2014, the Company had utilized $416.2
million under the Credit Facility, of which $353.4 million was classified as long-term debt
(March 31, 2014 - $nil) and
$62.8 million by way of letters of
credit (March 31, 2014 - $72.6 million).
The Credit Facility is available in Canadian dollars by way of
prime rate advances, letters of credit for certain purposes
and/or bankers' acceptances and in U.S. dollars by way of base rate
advances and/or LIBOR advances. The interest rates applicable to
the Credit Facility are determined based on a debt to EBITDA ratio.
For prime rate advances and base rate advances, the interest rate
is equal to the bank's prime rate or the bank's U.S. dollar base
rate in Canada, respectively, plus
0.45% to 2.00%. For bankers' acceptances and LIBOR advances, the
interest rate is equal to the bankers' acceptance fee or the LIBOR,
respectively, plus 1.45% to 3.00%. The Company pays a fee for
usage of financial letters of credit which ranges from 1.45% to
3.00% and a fee for usage of non-financial letters of credit which
ranges from 0.97% to 2.00%. The Company pays a standby fee on
the unadvanced portions of the amounts available for advance or
draw-down under the Credit Facility at rates ranging from 0.29% to
0.68%.
The Credit Facility is subject to a debt-to-EBITDA test and an
interest coverage test. Under the terms of the Credit
Facility, the Company is restricted from encumbering any assets
with certain permitted exceptions. The Credit Facility also limits
advances to subsidiaries and partially restricts the Company from
repurchasing its common shares and paying dividends.
The Company has additional credit facilities of $8.4 million (1.8 million
Euro, 230.0 million Indian
Rupees, 0.5 million Swiss
Francs and 30.0 million Thai
Baht). The total amount outstanding on these facilities was
$5.2 million of which $0.8 million was classified as bank indebtedness
(March 31, 2014 - $0.9 million) and $4.4
million was classified as long-term debt (March 31, 2014 - $5.8
million). The interest rates applicable to the credit
facilities range from 1.85% to 10.50% per annum. A portion of the
long-term debt is secured by certain assets of the Company. The
0.5 million Swiss Francs and
230.0 million Indian Rupees credit
facilities are secured by letters of credit under the Credit
Facility.
The Company expects to continue increasing its investment in
working capital to support the growth of its business. The Company
expects that continued cash flows from operations, together with
cash and cash equivalents on hand and credit available under
operating and long-term credit facilities, will be sufficient to
fund its requirements for investments in working capital and
capital assets and to fund strategic investment plans including
certain potential acquisitions. Significant acquisitions could
result in additional debt or equity financing requirements. The
Company expects to continue to use leverage to support its growth
strategy.
In the second quarter of fiscal 2015, the Company completed its
acquisition of PA. Total cash consideration paid for PA pending
post-closing adjustments was $353
million (243 million Euro),
which was net of $11.8 million of
cash acquired. See "Value Creation Strategy: Business
Acquisition – PA."
Contractual Obligations
(In millions of dollars)
The minimum operating lease payments (related primarily to
facilities and equipment) and purchase obligations are as
follows:
From continuing operations:
|
|
|
|
|
Operating
leases
|
|
|
|
Purchase
obligations
|
|
|
|
|
|
|
|
|
|
|
Less than one
year
|
|
|
|
$
|
7.4
|
|
|
$
|
56.1
|
One – two
years
|
|
|
|
|
6.0
|
|
|
|
1.0
|
Two – three
years
|
|
|
|
|
4.0
|
|
|
|
––
|
Three – four
years
|
|
|
|
|
2.0
|
|
|
|
––
|
Four – five
years
|
|
|
|
|
1.3
|
|
|
|
––
|
Due in over five
years
|
|
|
|
|
3.4
|
|
|
|
––
|
|
|
|
|
$
|
24.1
|
|
|
$
|
57.1
|
|
|
|
|
|
|
|
|
|
|
The Company's off-balance sheet arrangements consist of purchase
obligations and various operating lease financing arrangements
related primarily to facilities and equipment, which have been
entered into in the normal course of business. The Company's
purchase obligations consist primarily of materials purchase
commitments.
In accordance with industry practice, the Company is liable to
customers for obligations relating to contract completion and
timely delivery. In the normal conduct of its operations, the
Company may provide bank guarantees as security for advances
received from customers pending delivery and contract performance.
In addition, the Company provides bank guarantees for
post-retirement obligations and may provide bank guarantees as
security on equipment under lease and on order. At
September 28, 2014, the total value
of outstanding bank guarantees was approximately $119.3 million with approximately $89.5 million under credit facilities from
continuing operations (March 31, 2014
- $95.3 million) and $nil
(March 31, 2014 - $2.1 million) from discontinued operations.
The Company is exposed to credit risk on derivative financial
instruments arising from the potential for counterparties to
default on their contractual obligations to the Company. The
Company minimizes this risk by limiting counterparties to major
financial institutions and monitoring their creditworthiness. The
Company's credit exposure to forward foreign exchange contracts is
the current replacement value of contracts that are in a gain
position. For further information related to the Company's
use of derivative financial instruments, refer to note 11 of the
interim condensed consolidated financial statements. The
Company is also exposed to credit risk from its customers.
Substantially all of the Company's trade accounts receivable are
due from customers in a variety of industries and, as such, are
subject to normal credit risks from their respective industries.
The Company regularly monitors customers for changes in credit
risk. The Company does not believe that any single industry
or geographic region represents significant credit risk. Credit
risk concentration with respect to trade receivables is mitigated
as the Company primarily serves large, multinational customers and
through insurance.
During the first six months of fiscal 2015, 192,201 stock
options were exercised. At November 4,
2014 the total number of shares outstanding was
90,985,748 and there were 4,223,250 stock options
outstanding to acquire common shares of the Company.
RELATED-PARTY TRANSACTIONS
The Company has entered into an agreement with a shareholder,
Mason Capital Management, LLC ("Mason Capital"), pursuant to which
Mason Capital has agreed to provide ATS with ongoing strategic and
capital markets advisory services for an annual fee of $0.5 million U.S. As part of the agreement,
members of the Company's board of directors who are associated with
Mason Capital have waived any fees to which they may have otherwise
been entitled for serving as members of the board of directors or
as members of any committee of the board of directors.
There were no other significant related-party transactions in
the first half of fiscal 2015.
FOREIGN EXCHANGE
The Company is exposed to foreign exchange risk as a result of
transactions in currencies other than its functional currency of
the Canadian dollar. Weakening in the value of the Canadian
dollar relative to the U.S. dollar and the Euro had a positive
impact on translation of the Company's revenues in the second
quarter of fiscal 2015 compared to the corresponding period of
fiscal 2014.
The Company's Canadian operations generate significant revenues
in major foreign currencies, primarily U.S. dollars, which exceed
the natural hedge provided by purchases of goods and services in
those currencies. In order to manage a portion of this net
foreign currency exposure, the Company has entered into forward
foreign exchange contracts. The timing and amount of these
forward foreign exchange contract requirements are estimated based
on existing customer contracts on hand or anticipated, current
conditions in the Company's markets and the Company's past
experience. Certain of the Company's foreign subsidiaries
will also enter into forward foreign exchange contracts to hedge
identified balance sheet, revenue and purchase exposures. The
Company's forward foreign exchange contract hedging program is
intended to mitigate movements in currency rates primarily over a
four to six month period. See note 11 to the interim
condensed consolidated financial statements for details on the
derivative financial instruments outstanding at September 28, 2014.
In addition, from time to time, the Company enters forward
foreign exchange contracts to manage the foreign exchange risk
arising from certain inter-company loans and investments in certain
subsidiaries and committed acquisitions.
The Company uses hedging as a risk management tool, not to
speculate.
Period average exchange rates in CDN$
|
Three months ended
|
Six months ended
|
|
September
28,
2014
|
September
29, 2013
|
% change
|
September 28, 2014
|
September
29, 2013
|
% change
|
U.S.
Dollar
|
1.0888
|
1.0384
|
4.9 %
|
1.0894
|
1.0311
|
5.7 %
|
Euro
|
1.4424
|
1.3769
|
4.8 %
|
1.4686
|
1.3571
|
8.2 %
|
CONSOLIDATED QUARTERLY RESULTS
|
|
|
|
|
|
|
|
|
(In millions of
dollars, except
per share
amounts)
|
Q2
2015
|
Q1
2015
|
Q4
2014
|
Q3
2014
|
Q2
2014
|
Q1
2014
|
Q4
2013
|
Q3
2013
|
Revenues from
continuing
operations
|
$ 207.0
|
$ 190.9
|
$ 200.7
|
$ 178.0
|
$ 154.6
|
$ 150.0
|
$ 153.2
|
$ 144.2
|
Earnings from
operations
|
$ 14.1
|
$ 14.4
|
$ 17.2
|
$ 16.7
|
$ 14.4
|
$ 12.7
|
$ 14.0
|
$ 13.6
|
Adjusted earnings
from operations1
|
$ 27.0
|
$ 21.1
|
$ 22.2
|
$ 20.6
|
$ 16.3
|
$ 15.9
|
$ 15.0
|
$ 14.6
|
Income from
continuing
operations
|
$ 7.4
|
$ 9.0
|
$ 11.7
|
$ 18.8
|
$ 10.4
|
$ 8.6
|
$ 8.9
|
$ 10.7
|
Income (loss)
from
discontinued
operations
|
$ 7.1
|
$ 6.9
|
$ (0.4)
|
$ (0.3)
|
$ 2.5
|
$ 11.0
|
$ (0.6)
|
$ (21.7)
|
Net income
(loss)
|
$ 14.5
|
$ 15.9
|
$ 11.3
|
$ 18.5
|
$ 12.9
|
$ 19.6
|
$ 8.3
|
$ (11.0)
|
Basic earnings per
share from
continuing
operations
|
$ 0.08
|
$ 0.10
|
$ 0.13
|
$ 0.21
|
$ 0.12
|
$ 0.10
|
$ 0.10
|
$ 0.12
|
Adjusted basic
earnings per share from continuing
operations1
|
$ 0.19
|
$ 0.15
|
$ 0.17
|
$ 0.14
|
$ 0.14
|
$ 0.13
|
$ 0.11
|
$ 0.13
|
Basic earnings (loss)
per share
from discontinued
operations
|
$ 0.08
|
$ 0.08
|
$ (0.01)
|
$ (0.00)
|
$ 0.03
|
$ 0.12
|
$ (0.01)
|
$ (0.24)
|
Basic earnings (loss)
per share
|
$ 0.16
|
$ 0.18
|
$ 0.12
|
$ 0.21
|
$ 0.15
|
$ 0.22
|
$ 0.09
|
$ (0.12)
|
Diluted earnings per
share
from continuing
operations
|
$ 0.08
|
$ 0.10
|
$ 0.13
|
$ 0.21
|
$ 0.11
|
$ 0.10
|
$ 0.09
|
$ 0.12
|
Diluted earnings
(loss) per
share from
discontinued
operations
|
$ 0.08
|
$ 0.07
|
$ (0.01)
|
$ (0.00)
|
$ 0.03
|
$ 0.12
|
$ (0.00)
|
$ (0.24)
|
Diluted earnings
(loss) per
share
|
$ 0.16
|
$ 0.17
|
$ 0.12
|
$ 0.21
|
$ 0.14
|
$ 0.22
|
$ 0.09
|
$ (0.12)
|
Order
Bookings
|
$ 216.0
|
$ 160.0
|
$ 197.0
|
$ 237.0
|
$ 110.0
|
$ 165.0
|
$ 170.0
|
$ 173.0
|
Order
Backlog
|
$ 561.0
|
$ 425.0
|
$ 474.0
|
$ 467.0
|
$ 355.0
|
$ 415.0
|
$ 398.0
|
$ 388.0
|
1 Adjusted
earnings from operations and adjusted basic earnings per share from
continuing operations are non-IFRS measures and do not have any
standardized meaning prescribed within IFRS and therefore may not
be comparable to similar measures presented by other companies.
Such measures are intended to provide additional information only
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS. See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures."
|
Interim financial results are not necessarily indicative of
annual or longer-term results because many of the individual
markets served by the Company tend to be cyclical in nature.
General economic trends, product life cycles and product changes
may impact revenues and operating performance. ATS typically
experiences some seasonality with its Order Bookings, revenues and
earnings from operations due to summer plant shutdowns by its
customers. Operating performance quarter to quarter may also
be affected by the timing of revenue recognition on large programs
in Order Backlog, which is impacted by such factors as customer
delivery schedules, and the timing of third-party content.
CRITICAL ACCOUNTING ESTIMATES, JUDGMENTS &
ASSUMPTIONS
The preparation of the Company's consolidated financial
statements requires management to make estimates, judgements and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities at the end of the reporting
period. Uncertainty about these estimates, judgements and
assumptions could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability
affected in future periods.
The Company based its assumptions on information available when
the consolidated financial statements were prepared. Existing
circumstances and assumptions about future developments may change
due to market changes or circumstances arising beyond the control
of the Company. Such changes are reflected in the estimates as they
occur. There have been no material changes to the critical
accounting estimates as described in the Company's fiscal 2014
MD&A.
ACCOUNTING STANDARDS CHANGE
IFRIC 21 – Levies
Effective April 1, 2014, the
Company applied IFRIC 21 for the first time. IFRIC 21
provides guidance on when to recognize a liability to pay a levy
imposed by government that is accounted for in accordance with IAS
37 – Provisions, Contingent Liabilities and Contingent
Assets. The adoption of IFRIC 21 had no impact on the
financial statements of the Company.
CONTROLS AND PROCEDURES
The Chief Executive Officer ("CEO") and the Chief Financial
Officer ("CFO") are responsible for establishing and maintaining
disclosure controls and procedures and internal controls over
financial reporting for the Company. The control framework
used in the design of disclosure controls and procedures and
internal control over financial reporting is the internal control
integrated framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
Management, including the CEO and CFO, does not expect that the
Company's disclosure controls or internal controls over financial
reporting will prevent or detect all errors and all fraud or will
be effective under all potential future conditions. A control
system is subject to inherent limitations and, no matter how well
designed and operated, can provide only reasonable, not absolute,
assurance that the control system's objectives will be met.
During the three and six months ended September 28, 2014, there have been no changes in
the Company's internal controls over financial reporting, other
than the limitation of scope of design noted below, that have
materially affected, or are reasonably likely to materially affect,
the Company's internal controls over financial reporting.
In May 2013, COSO released an
updated version of the 1992 internal control integrated framework.
The original framework will be available through December 15, 2014, at which time the 1992
framework will be superseded. The Company is in the process of
reviewing the changes to the framework and developing a transition
plan to adopt the new framework for the fiscal year ending
March 31, 2015.
Limitation on Scope of Design
The Company acquired PA on August
29, 2014. Management has not fully completed its
review of internal controls over financial reporting for this newly
acquired organization. Since the acquisition occurred within
the 365 days of the reporting period, management has limited the
scope of design and subsequent evaluation of disclosure controls
and procedures and internal controls over financial reporting, as
permitted under Section 3.3 of National Instrument 52-109,
Certification of Disclosure in Issuers' Annual and Interim
Filings. For the period covered by this MD&A, management
has undertaken additional procedures to satisfy itself with respect
to the accuracy and completeness of the acquired operations'
financial information. The following summary financial information
pertains to the acquisition that was included in ATS's Interim
Consolidated Financial Statements for the period ended September 28, 2014.
(millions of
dollars)
|
PA
1
|
Revenue1
|
20.5
|
Net
loss1
|
0.0
|
Current assets
2
|
92.5
|
Non-current assets
2
|
359.0
|
Current liabilities
2
|
60.5
|
Non-current
liabilities 2
|
48.2
|
1 Results from
September 1, 2014 to September 28, 2014
|
2 Balance sheet as at
September 28, 2014
|
Note to Readers: Forward-Looking Statements:
This news release and management's discussion and analysis of
financial conditions, and results of operations of ATS contains
certain statements that constitute forward-looking information
within the meaning of applicable securities laws ("forward-looking
statements"). Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of ATS, or
developments in ATS' business or in its industry, to differ
materially from the anticipated results, performance, achievements
or developments expressed or implied by such forward-looking
statements. Forward-looking statements include all disclosure
regarding possible events, conditions or results of operations that
is based on assumptions about future economic conditions and
courses of action. Forward-looking statements may also
include, without limitation, any statement relating to future
events, conditions or circumstances. ATS cautions you not to place
undue reliance upon any such forward-looking statements, which
speak only as of the date they are made. Forward-looking
statements relate to, among other things: the next phase of the
Company's strategy: grow, expand, and scale; the enhancement of
growth opportunities in both new markets and with existing
customers resulting from the PA acquisition; potential impact of
general economic environment, including impact on demand and Order
Bookings, and the timing of those impacts; impacts on demand for
Company's products potentially lagging global macroeconomic trends;
activity in the market segments that the Company serves; IWK
presenting opportunity for exposure to new customers; the sales
organization's approach to market and expected impact on Order
Bookings, performance period, and timing of revenue recognition;
the Company's Order Backlog mitigating the impact of volatility in
Order Bookings; the rate of completion of Order Backlog; impact of
PA on Order Bookings to revenue cycle; PA acquisition – growth
opportunities presented by PA, ATS benefiting from PA's capability
and market position, revenue synergies through an expanded ATS
offering, PA's opportunity to expand its MAC offering, ATS
and PA engaging customers on a more comprehensive basis, PA
benefiting from the adoption of ATS' best practices, and
expectations in relation to cost synergies; management's
expectations in relation to the impact of strategic initiatives on
ATS operations; the Company's strategy to expand organically and
through acquisition; Company's expectation with respect to deferred
tax assets, effective tax rate and cash taxes; separation of solar
business; expected timing of receipt of proceeds in relation to the
sale of seven joint venture ground mount solar projects; expected
gain on solar divestitures; Company's expectation to continue to
increase its investment in working capital; expectation in relation
to meeting funding requirements for investments; expectation to use
increased leverage to support growth strategy; foreign exchange
hedging; and accounting standards changes. The risks and
uncertainties that may affect forward-looking statements include,
among others: impact of the global economy; general market
performance including capital market conditions and availability
and cost of credit; performance of the market sectors that ATS
serves; foreign currency and exchange risk; the relative strength
of the Canadian dollar; impact of factors such as increased pricing
pressure and possible margin compression; the regulatory and tax
environment; failure or delays associated with new customer
programs; potential for greater negative impact associated with any
non-performance related to large enterprise programs; that IWK's
customers are not receptive to ATS' offerings; that ATS is unable
to enhance growth opportunities or PA's portfolio, or expand
product or service offerings; that ATS is unable to leverage PA's
capability and market position; that revenue synergies are not
realized; variations in the amount of Order Backlog completed in
any given quarter; that customers are more difficult to engage than
expected; that strategic initiatives are delayed, not completed, or
do not have intended positive impact; inability to successfully
expand organically or through acquisition, due to an inability to
grow expertise, personnel, and/or facilities at required rates or
to identify, negotiate and conclude one or more acquisitions; or to
raise, through debt or equity, or otherwise have available,
required capital; that acquisitions made are not integrated as
quickly or effectively as planned or expected and, as a result,
anticipated benefits and synergies are not realized; that the
Company or its subsidiaries may have exposure to greater than
anticipated income tax liabilities; that the remaining solar joint
venture ground mount projects are delayed in achieving commercial
operation or cannot ultimately be developed, due to market,
regulatory, transmission, local opposition, or other factors; that
gains on solar projects are less than expected; labour disruptions;
that one or more customers, or other entities with which the
Company has contracted, experience insolvency or bankruptcy with
resulting delays, costs or losses to the Company; political, labour
or supplier disruptions; the development of superior or alternative
technologies to those developed by ATS; the success of competitors
with greater capital and resources in exploiting their technology;
market risk for developing technologies; risks relating to legal
proceedings to which ATS is or may become a party; exposure to
product liability claims; risks associated with greater than
anticipated tax liabilities or expenses; and other risks detailed
from time to time in ATS' filings with Canadian provincial
securities regulators. Forward-looking statements are based on
management's current plans, estimates, projections, beliefs and
opinions, and other than as required by applicable securities laws,
ATS does not undertake any obligation to update forward-looking
statements should assumptions related to these plans, estimates,
projections, beliefs and opinions change.
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Financial Position (in thousands of Canadian dollars –
unaudited)
|
|
|
|
September
28
|
|
March 31
|
As
at
|
Note
|
|
2014
|
|
2014
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
96,844
|
$
|
76,466
|
Accounts
receivable
|
|
|
145,973
|
|
117,821
|
Costs and earnings in
excess of billings on contracts in progress
|
6
|
|
192,090
|
|
146,231
|
Inventories
|
6
|
|
43,667
|
|
24,186
|
Deposits, prepaids
and other assets
|
7
|
|
14,285
|
|
9,630
|
|
|
|
492,859
|
|
374,334
|
Assets associated
with discontinued operations
|
5
|
|
7,711
|
|
13,265
|
|
|
|
500,570
|
|
387,599
|
Non-current
assets
|
|
|
|
|
|
Property, plant and
equipment
|
8
|
|
78,809
|
|
85,412
|
Investment
property
|
|
|
4,032
|
|
4,341
|
Goodwill
|
9
|
|
391,609
|
|
151,731
|
Intangible
assets
|
10
|
|
206,709
|
|
111,298
|
Deferred income tax
assets
|
|
|
8,005
|
|
7,838
|
Investment tax credit
receivable
|
|
|
32,222
|
|
30,165
|
|
|
|
721,386
|
|
390,785
|
Total
assets
|
|
$
|
1,221,956
|
$
|
778,384
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Bank
indebtedness
|
13
|
$
|
818
|
$
|
913
|
Accounts payable and
accrued liabilities
|
|
|
185,763
|
|
138,285
|
Provisions
|
12
|
|
9,347
|
|
10,412
|
Billings in excess of
costs and earnings on contracts in progress
|
6
|
|
73,004
|
|
59,363
|
Current portion of
long-term debt
|
13
|
|
2,676
|
|
3,815
|
|
|
|
271,608
|
|
212,788
|
Liabilities
associated with discontinued
operations
|
5
|
|
––
|
|
6,774
|
|
|
|
271,608
|
|
219,562
|
Non-current
liabilities
|
|
|
|
|
|
Employee
benefits
|
|
|
24,141
|
|
23,213
|
Long-term
debt
|
13
|
|
349,247
|
|
1,324
|
Deferred income tax
liabilities
|
|
|
45,132
|
|
16,747
|
|
|
|
418,520
|
|
41,284
|
Total
liabilities
|
|
$
|
690,128
|
$
|
260,846
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share
capital
|
14
|
$
|
512,521
|
$
|
510,725
|
Contributed
surplus
|
|
|
15,345
|
|
15,025
|
Accumulated other
comprehensive income
|
|
|
17,448
|
|
35,970
|
Retained
deficit
|
|
|
(13,990)
|
|
(44,311)
|
Equity attributable
to shareholders
|
|
|
531,324
|
|
517,409
|
Non-controlling
interests
|
|
|
504
|
|
129
|
Total
equity
|
|
|
531,828
|
|
517,538
|
Total liabilities
and equity
|
|
$
|
1,221,956
|
$
|
778,384
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Income (in thousands of Canadian dollars, except per share
amounts – unaudited)
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
|
September
28
|
|
September
29
|
|
September
28
|
|
September 29
|
|
Note
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Revenues from
construction contracts
|
|
$
|
156,695
|
$
|
140,186
|
$
|
317,885
|
$
|
274,283
|
|
Sale of
goods
|
|
|
12,203
|
|
6,730
|
|
26,616
|
|
13,953
|
|
Services
rendered
|
|
|
38,132
|
|
7,653
|
|
53,408
|
|
16,360
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
|
207,030
|
|
154,569
|
|
397,909
|
|
304,596
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
150,750
|
|
114,661
|
|
287,822
|
|
225,306
|
|
Selling, general and
administrative
|
|
|
43,316
|
|
22,907
|
|
80,253
|
|
48,270
|
|
Stock-based
compensation
|
16
|
|
(1,157)
|
|
2,600
|
|
1,357
|
|
3,945
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
14,121
|
|
14,401
|
|
28,477
|
|
27,075
|
|
|
|
|
|
|
|
|
|
|
Net finance
costs
|
20
|
|
2,279
|
|
513
|
|
3,157
|
|
1,115
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income taxes
|
|
|
11,842
|
|
13,888
|
|
25,320
|
|
25,960
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
15
|
|
4,430
|
|
3,548
|
|
8,926
|
|
7,044
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
|
7,412
|
|
10,340
|
|
16,394
|
|
18,916
|
|
|
|
|
|
|
|
|
|
|
Income from
discontinued operations, net of tax
|
5
|
|
7,070
|
|
2,558
|
|
13,983
|
|
13,514
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
14,482
|
$
|
12,898
|
$
|
30,377
|
$
|
32,430
|
|
|
|
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
|
|
|
|
Shareholders
|
|
$
|
14,463
|
$
|
12,893
|
$
|
30,321
|
$
|
32,407
|
Non-controlling
interests
|
|
|
19
|
|
5
|
|
56
|
|
23
|
|
|
$
|
14,482
|
$
|
12,898
|
$
|
30,377
|
$
|
32,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to shareholders
|
21
|
|
|
|
|
|
|
|
|
Basic – from
continuing operations
|
|
$
|
0.08
|
$
|
0.12
|
$
|
0.18
|
$
|
0.22
|
Basic – from
discontinued operations
|
5
|
|
0.08
|
|
0.03
|
|
0.15
|
|
0.15
|
|
|
$
|
0.16
|
$
|
0.15
|
$
|
0.33
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to shareholders
|
21
|
|
|
|
|
|
|
|
|
Diluted – from
continuing operations
|
|
$
|
0.08
|
$
|
0.11
|
$
|
0.18
|
$
|
0.21
|
Diluted – from
discontinued operations
|
5
|
|
0.08
|
|
0.03
|
|
0.15
|
|
0.15
|
|
|
$
|
0.16
|
$
|
0.14
|
$
|
0.33
|
$
|
0.36
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Comprehensive Income (in thousands of Canadian dollars –
unaudited)
|
|
|
Three
months ended
|
|
Six months
ended
|
|
|
September
28
|
|
September 29
|
|
September
28
|
|
September
29
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
14,482
|
$
|
12,898
|
$
|
30,377
|
$
|
32,430
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items to be
reclassified subsequently to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
adjustment (net of income taxes of $nil)
|
|
(2,890)
|
|
(1,686)
|
|
(18,122)
|
|
9,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss
on available-for-sale financial assets
|
|
––
|
|
(30)
|
|
––
|
|
(555)
|
|
Tax impact
|
|
––
|
|
8
|
|
––
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain
(loss) on derivative financial instruments designated as cash flow
hedges
|
|
(1,706)
|
|
712
|
|
(1,054)
|
|
(1,039)
|
|
Tax impact
|
|
427
|
|
(179)
|
|
266
|
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss transferred to
net income for derivatives designated as cash flow
hedges
|
|
158
|
|
950
|
|
520
|
|
1,113
|
|
Tax impact
|
|
(40)
|
|
(251)
|
|
(132)
|
|
(302)
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
(4,051)
|
|
(476)
|
|
(18,522)
|
|
9,059
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
$
|
10,431
|
$
|
12,422
|
$
|
11,855
|
$
|
41,489
|
|
|
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
|
|
|
Shareholders
|
$
|
10,412
|
$
|
12,417
|
$
|
11,799
|
$
|
41,466
|
Non-controlling
interests
|
|
19
|
|
5
|
|
56
|
|
23
|
|
$
|
10,431
|
$
|
12,422
|
$
|
11,855
|
$
|
41,489
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Changes in Equity (in thousands of Canadian dollars –
unaudited)
|
Six months ended
September 28, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
Contributed
surplus
|
|
Retained earnings (deficit)
|
|
Currency
translation adjustments
|
|
Available-for-sale financial assets
|
|
Cash flow
hedges
|
|
Total accumulated other
comprehensive income
|
|
Non-controlling interests
|
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at March
31, 2014
|
$
|
510,725
|
$
|
15,025
|
$
|
(44,311)
|
$
|
36,616
|
$
|
––
|
$
|
(646)
|
$
|
35,970
|
$
|
129
|
$
|
517,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
––
|
|
––
|
|
30,321
|
|
––
|
|
––
|
|
––
|
|
––
|
|
56
|
|
30,377
|
Other comprehensive
loss
|
|
––
|
|
––
|
|
––
|
|
(18,122)
|
|
––
|
|
(400)
|
|
(18,522)
|
|
––
|
|
(18,522)
|
Total comprehensive
income (loss)
|
|
––
|
|
––
|
|
30,321
|
|
(18,122)
|
|
––
|
|
(400)
|
|
(18,522)
|
|
56
|
|
11,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
319
|
|
319
|
Stock-based
compensation
|
|
––
|
|
861
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
861
|
Exercise of stock
options
|
|
1,796
|
|
(541)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
1,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at
September 28, 2014
|
$
|
512,521
|
$
|
15,345
|
$
|
(13,990)
|
$
|
18,494
|
$
|
––
|
$
|
(1,046)
|
$
|
17,448
|
$
|
504
|
$
|
531,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
September 29, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
Contributed
surplus
|
|
Retained earnings (deficit)
|
|
Currency translation
adjustments
|
|
Available-for-sale
financial assets
|
|
Cash flow hedges
|
|
Total accumulated other comprehensive
income
|
|
Non-controlling interests
|
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at March 31,
2013
|
$
|
486,734
|
$
|
19,317
|
$
|
(107,407)
|
$
|
(23)
|
$
|
239
|
$
|
(339)
|
$
|
(123)
|
$
|
83
|
$
|
398,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
––
|
|
––
|
|
32,407
|
|
––
|
|
––
|
|
––
|
|
––
|
|
23
|
|
32,430
|
Other comprehensive
income (loss)
|
|
––
|
|
––
|
|
––
|
|
9,428
|
|
(413)
|
|
44
|
|
9,059
|
|
––
|
|
9,059
|
Total comprehensive
income (loss)
|
|
––
|
|
––
|
|
32,407
|
|
9,428
|
|
(413)
|
|
44
|
|
9,059
|
|
23
|
|
41,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
––
|
|
1,007
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
1,007
|
Exercise of stock
options
|
|
6,852
|
|
(2,001)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
4,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at September
29, 2013
|
$
|
493,586
|
$
|
18,323
|
$
|
(75,000)
|
$
|
9,405
|
$
|
(174)
|
$
|
(295)
|
$
|
8,936
|
$
|
106
|
$
|
445,951
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Cash Flow (in thousands of Canadian dollars –
unaudited)
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
|
September
28
|
|
September
29
|
|
September
28
|
|
September
29
|
|
Note
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
7,412
|
$
|
10,340
|
$
|
16,394
|
$
|
18,916
|
Items not involving
cash
|
|
|
|
|
|
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
|
1,890
|
|
1,754
|
|
3,824
|
|
3,432
|
|
Amortization of
intangible assets
|
|
|
6,747
|
|
1,418
|
|
11,293
|
|
2,798
|
|
Deferred income
taxes
|
|
|
(2,241)
|
|
1,736
|
|
(2,088)
|
|
4,301
|
|
Other items not
involving cash
|
|
|
(1,133)
|
|
61
|
|
(2,775)
|
|
(895)
|
|
Stock-based
compensation
|
16
|
|
(1,157)
|
|
2,600
|
|
1,357
|
|
3,945
|
|
Gain (loss) on
disposal of property, plant and equipment
|
|
|
100
|
|
––
|
|
(323)
|
|
––
|
|
|
$
|
11,618
|
$
|
17,909
|
$
|
27,682
|
$
|
32,497
|
Change in non-cash
operating working capital
|
|
|
5,748
|
|
(12,816)
|
|
(21,001)
|
|
(11,243)
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in
operating activities of discontinued
operations
|
5
|
|
(204)
|
|
(9,365)
|
|
(3,028)
|
|
(8,177)
|
|
|
|
|
|
|
|
|
|
|
Cash flows
provided by (used in) operating activities
|
|
$
|
17,162
|
$
|
(4,272)
|
$
|
3,653
|
$
|
13,077
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
|
$
|
(1,611)
|
$
|
(561)
|
$
|
(4,285)
|
$
|
(1,646)
|
Acquisition of
intangible assets
|
|
|
(936)
|
|
(1,537)
|
|
(2,775)
|
|
(2,412)
|
Business acquisition,
net of cash acquired
|
|
|
(352,864)
|
|
––
|
|
(352,864)
|
|
––
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
disposal of property, plant and equipment
|
|
|
231
|
|
2
|
|
8,760
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided
by investing activities of discontinued operations
|
5
|
|
––
|
|
––
|
|
13,643
|
|
19,679
|
|
|
|
|
|
|
|
|
|
|
Cash flows
provided by (used in) investing activities
|
|
$
|
(355,180)
|
$
|
(2,096)
|
$
|
(337,521)
|
$
|
15,639
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
7
|
$
|
––
|
$
|
817
|
$
|
(67)
|
$
|
(345)
|
Bank
indebtedness
|
|
|
6
|
|
1,986
|
|
(107)
|
|
2,162
|
Repayment of
long-term debt
|
|
|
(15,047)
|
|
(51)
|
|
(15,119)
|
|
(95)
|
Proceeds from
long-term debt
|
|
|
366,619
|
|
41,072
|
|
367,351
|
|
41,072
|
Issuance of common
shares
|
|
|
40
|
|
3,754
|
|
1,255
|
|
4,851
|
|
|
|
|
|
|
|
|
|
|
Cash flows
provided by financing activities
|
|
$
|
351,618
|
$
|
47,578
|
$
|
353,313
|
$
|
47,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
1,490
|
|
303
|
|
(1,215)
|
|
4,011
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and
cash equivalents
|
|
|
15,090
|
|
41,513
|
|
18,230
|
|
80,372
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
|
|
81,754
|
|
144,729
|
|
78,614
|
|
105,870
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
|
$
|
96,844
|
$
|
186,242
|
$
|
96,844
|
$
|
186,242
|
|
|
|
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents – continuing operations
|
|
$
|
96,844
|
$
|
183,702
|
$
|
96,844
|
$
|
183,702
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents – associated with discontinued
operations
|
|
|
––
|
|
2,540
|
|
––
|
|
2,540
|
|
|
$
|
96,844
|
$
|
186,242
|
$
|
96,844
|
$
|
186,242
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
|
|
|
|
Cash income taxes
paid by continuing operations
|
|
$
|
2,374
|
$
|
577
|
$
|
4,282
|
$
|
1,108
|
Cash interest paid by
continuing operations
|
|
$
|
2,093
|
$
|
244
|
$
|
2,743
|
$
|
443
|
SOURCE ATS Automation Tooling Systems Inc.