CAMBRIDGE, ON, Aug. 12, 2015 /CNW/ - ATS Automation Tooling
Systems Inc. (TSX: ATA) ("ATS" or the "Company") today
reported financial results for the three months ended June 28, 2015.
First Quarter Summary
- Revenues from continuing operations were $254.3 million, 33% higher than a year ago.
Excluding PA, first quarter revenues were $186.3 million, 2% lower than a year ago;
- Adjusted earnings from continuing operations1 were
$27.4 million (11% margin), compared
to $21.1 million (11% margin) a year
ago. Earnings from continuing operations were $17.5 million (7% operating margin), compared to
$14.4 million (8% operating margin) a
year ago;
- EBITDA1 was $28.7
million (11% margin) compared to $20.9 million (11% margin) a year ago. Excluding
$2.2 million of restructuring and
severance costs in this year's first quarter and $3.0 million of acquisition-related costs in last
year's first quarter, EBITDA was $30.9
million (12% margin), up from $23.9
million (13% margin) a year ago;
- Adjusted basic earnings per share from continuing
operations1 increased to 18
cents from 15 cents in the
first quarter a year ago;
- Order Bookings1 were $222
million, 39% higher than a year ago. Excluding PA, Order
Bookings were $154 million, 4% or
$6 million lower than a year
ago;
- Period end Order Backlog1 was $590 million, up 39% from $425 million at June 29,
2014. Higher Order Backlog primarily reflected the addition
of PA as well as higher Order Bookings in life sciences and
transportation;
- On June 17, 2015, the Company
completed a private placement of U.S. $250
million aggregate principal amount of senior notes, due in
2023. ATS used the majority of net proceeds to repay amounts
outstanding under its senior secured credit facility, with the
balance to be used for general corporate purposes.
- The Company's balance sheet and financial capacity to support
growth remained strong, with unutilized credit facilities of
$660 million and $3.1 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
June 28,
2015
|
3 months
ended
June 29,
2014
|
Revenues
|
Continuing
Operations
|
$
254.3
|
$
190.9
|
Earnings from
operations
|
Continuing
Operations
|
$
17.5
|
$
14.4
|
Adjusted earnings
from operations1
|
Continuing
Operations
|
$
27.4
|
$
21.1
|
EBITDA1
|
Continuing
Operations
|
$
28.7
|
$
20.9
|
Net
income
|
Continuing
Operations
|
$
9.8
|
$
9.0
|
Discontinued
Operations
|
$
––
|
$
6.9
|
Adjusted earnings
per share1
|
From continuing
operations
(basic)
|
$
0.18
|
$
0.15
|
Earnings per
share
|
From continuing
operations
(basic)
|
$
0.11
|
$
0.10
|
From discontinued
operations
(basic)
|
$
––
|
$
0.08
|
From continuing
operations
(diluted)
|
$
0.11
|
$
0.10
|
From discontinued
operations
(diluted)
|
$
––
|
$
0.07
|
1 Non-IFRS
measure: see "Notice to Reader: Non-IFRS Measures and Additional
IFRS Measures".
|
"First quarter performance, including PA's contribution, was
solid and market activity is strong," said Anthony Caputo, Chief Executive Officer. "We
have a significant Order Backlog both in terms of size and quality,
and our funnel is robust. Strategically, our focus is on growing
our business organically and through acquisition. The completion of
our private placement of U.S. $250
million senior notes, combined with our strong balance sheet
and significant available funding puts us in a strong position to
continue to pursue our value creation strategy."
First Quarter Summary Continuing Operations
Fiscal
2016 first quarter revenues were 33% higher than in the
corresponding period a year ago primarily reflecting $68.0 million of revenues earned by PA. Excluding
PA, first quarter revenues were $186.3
million, a 2% decrease from the corresponding period a year
ago. Foreign exchange rate changes did not materially impact the
translation of revenues earned by foreign-based subsidiaries
compared to the corresponding period a year ago.
By market, fiscal first quarter revenues from consumer products
and electronics decreased by 3% compared to the corresponding
period a year ago, primarily on lower Order Backlog at the
beginning of the first fiscal quarter. Revenues generated in energy
markets increased 57% primarily due to increased activity in the
nuclear energy market. Revenues generated from the life sciences
market increased 35% compared to the corresponding period a year
ago, primarily on revenues from PA. Transportation revenues
increased 49% compared to a year ago, primarily on revenues from PA
and higher Order Bookings during the first quarter compared to a
year ago.
Fiscal 2016 first quarter earnings from operations were
$17.5 million (7% operating margin)
compared to $14.4 million (8%
operating margin) in the first quarter a year ago. First
quarter fiscal 2016 earnings from operations included $2.2 million of restructuring and severance costs
and amortization expenses of $7.7
million related to amortization of identifiable intangible
assets recorded on the acquisitions of PA, IWK, ATW, and sortimat.
Excluding these costs, first quarter fiscal 2016 adjusted earnings
from operations were $27.4 million
(11% operating margin), compared to adjusted earnings from
operations of $21.1 million (11%
margin) a year ago. Higher adjusted earnings from operations
primarily reflected the inclusion of PA, lower employee incentive
costs and discretionary spending reductions, which were partially
offset by higher cost of revenues due to some lower margin programs
which have been bid and are being executed by the Company and
certain programs where costs exceeded budgets.
EBITDA was $28.7 million (11%
EBITDA margin) in the first quarter of fiscal 2016 compared to
$20.9 million (11% EBITDA margin) in
the first quarter of fiscal 2015. Excluding restructuring and
severance costs, first quarter fiscal 2016 EBITDA was $30.9 million (12% EBITDA margin). Comparably,
excluding acquisition related costs, first quarter fiscal 2015
EBITDA was $23.9 million (13% EBITDA
margin).
Order Bookings
First quarter fiscal 2016 Order
Bookings were $222 million, a 39%
increase from the first quarter of fiscal 2015. Excluding the
impact of PA, Order Bookings were $154
million, a 4% decrease from the corresponding period a year
ago primarily reflecting the timing of customer decisions on
various larger opportunities. By customer market, strength in
transportation, consumer products and electronics, and energy
markets was offset by lower Order Bookings in life
sciences.
Order Backlog
At June 28, 2015, Order Backlog was
$590 million, 39% higher than at
June 29, 2014. Higher Order
Backlog primarily reflected higher Order Bookings in the life
sciences and transportation markets and the addition of PA. The
Company expects its Order Backlog of $590
million at the end of the first quarter of fiscal 2016 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.
Quarterly Conference Call
ATS's quarterly conference
call begins at 10 am eastern on
August 12, 2015 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 August 19, 2015) by
dialing 416-849-0833 and entering passcode 96644346 followed by the
number sign.
Annual Shareholders' Meeting
The Company will host its
annual meeting of shareholders at 10
a.m. eastern on Thursday, August 13,
2015 at the TMX Broadcast Centre, The Exchange Tower, 130
King St. West, Toronto, Ontario.
About ATS
ATS is an industry-leading automation
solutions provider to many of the world's most successful
companies. ATS uses its extensive knowledge base and global
capabilities in custom automation, repeat automation, automation
products and value-added services including pre-automation and
after-sales services to address the sophisticated manufacturing
automation systems and service needs of multinational customers in
markets such as life sciences, chemicals, consumer products,
electronics, food, beverage, transportation, energy, and oil and
gas. Founded in 1978, ATS employs approximately 3,500 people at 25
manufacturing facilities and 51 offices in North America, Europe, Southeast
Asia and China. 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 June 28, 2015
This Management's Discussion and Analysis ("MD&A") for
the three months ended June 28, 2015
(first quarter of fiscal 2016) is as of August 11, 2015 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 first
quarter of fiscal 2016 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 the MD&A of the Company for the year ended March 31, 2015 (fiscal 2015) and, accordingly,
the purpose of this document is to provide a first quarter update
to the information contained in the fiscal 2015 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 and integration 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 additional
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 month period ending
June 28, 2015 and June 29, 2014; and (ii) adjusted earnings from
operations and adjusted basic earnings per share from continuing
operations to net income from continuing operations and basic
earnings per share from continuing operations respectively for the
three month period ending June 28,
2015 and June 29, 2014 is
contained in this MD&A (see "Reconciliation of Non-IFRS
Measures to IFRS Measures"). A reconciliation of Order Bookings and
Order Backlog to total Company revenues for the three month period
ending June 28, 2015 and June 29, 2014 is also contained in the MD&A
(see "Order Backlog Continuity").
COMPANY PROFILE
ATS is an industry-leading automation
solutions provider to many of the world's most successful
companies. ATS uses its extensive knowledge base and global
capabilities in custom automation, repeat automation, automation
products and value-added services including pre-automation and
after-sales services to address the sophisticated manufacturing
automation systems and service needs of multinational customers in
markets such as life sciences, chemicals, consumer products,
electronics, food, beverage, transportation, energy, and oil and
gas. Founded in 1978, ATS employs approximately 3,500 people at 25
manufacturing facilities and 51 offices in North America, Europe, Southeast
Asia and China.
Value Creation Strategy
To drive value creation, the
Company is focused on its growth 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 after sales services.
Scale
The Company is committed to growth
through acquisition and management believes that the Company has
the organizational structure, business processes and 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. To date,
ATS has successfully acquired four complementary and accretive
businesses: sortimat Group ("sortimat") on June 1, 2010; Assembly & Test Worldwide
("ATW") on January 5, 2011; IWK
Verpackungstechnik and Oystar IWK USA, Inc. ("IWK") on September 30, 2013 and M+W Process Automation
GmbH and ProFocus LLC (collectively "Process Automation Solutions"
or "PA") on September 1, 2014.
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
|
|
Three
|
|
|
|
Months
|
|
Months
|
|
|
|
Ended
|
|
Ended
|
Revenues by
market
|
|
June 28, 2015
|
|
June 29, 2014
|
|
Consumer products &
electronics
|
$
|
37.3
|
$
|
38.5
|
|
Energy
|
|
18.5
|
|
11.8
|
|
Life sciences
|
|
106.7
|
|
78.8
|
|
Transportation
|
|
91.8
|
|
61.8
|
Total revenues
from continuing operations
|
$
|
254.3
|
$
|
190.9
|
Fiscal 2016 first quarter revenues were 33% higher than in the
corresponding period a year ago primarily reflecting $68.0 million of revenues earned by PA. Excluding
PA, first quarter revenues were $186.3
million, a 2% decrease from the corresponding period a year
ago. Foreign exchange rate changes did not materially impact the
translation of revenues earned by foreign-based subsidiaries
compared to the corresponding period a year ago.
By market, fiscal first quarter revenues from consumer products
and electronics decreased by 3% compared to the corresponding
period a year ago, primarily on lower Order Backlog at the
beginning of the first fiscal quarter. Revenues generated in energy
markets increased 57% primarily due to increased activity in the
nuclear energy market. Revenues generated from the life sciences
market increased 35% compared to the corresponding period a year
ago, primarily on revenues from PA. Transportation revenues
increased 49% compared to a year ago, primarily on revenues from PA
and higher Order Bookings during the first quarter compared to a
year ago.
Consolidated
Operating Results (In millions of dollars)
|
|
|
Three
|
|
Three
|
|
|
Months
|
|
Months
|
|
|
Ended
|
|
Ended
|
|
|
June 28, 2015
|
|
June 29,
2014
|
Earnings from
operations
|
$
|
17.5
|
$
|
14.4
|
Amortization of
acquisition-related intangible assets
|
|
7.7
|
|
3.7
|
Acquisition-related
transaction costs
|
|
––
|
|
3.0
|
Restructuring
charges
|
|
2.2
|
|
––
|
Adjusted earnings
from
operations1
|
$
|
27.4
|
$
|
21.1
|
1 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures".
|
|
|
|
|
|
|
Three
|
|
Three
|
|
|
Months
|
|
Months
|
|
|
Ended
|
|
Ended
|
|
|
June 28,
2015
|
|
June 29,
2014
|
Earnings from
operations
|
$
|
17.5
|
$
|
14.4
|
Depreciation and
amortization
|
|
11.2
|
|
6.5
|
EBITDA1
|
$
|
28.7
|
$
|
20.9
|
1 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures".
|
|
|
|
|
Fiscal 2016 first quarter earnings from operations were
$17.5 million (7% operating margin)
compared to $14.4 million (8%
operating margin) in the first quarter a year ago. First
quarter fiscal 2016 earnings from operations included $2.2 million of restructuring and severance costs
and amortization expenses of $7.7
million related to amortization of identifiable intangible
assets recorded on the acquisitions of PA, IWK, ATW, and sortimat.
Excluding these costs, first quarter fiscal 2016 adjusted earnings
from operations were $27.4 million
(11% margin), compared to adjusted earnings from operations of
$21.1 million (11% margin) a year
ago. Higher adjusted earnings from operations primarily reflected
the inclusion of PA, lower employee incentive costs and
discretionary spending reductions, which were partially offset by
higher cost of revenues due to some lower margin programs which
have been bid and are being executed by the Company and certain
programs where costs exceeded budgets.
Depreciation and amortization expense was $11.2 million in the first quarter of fiscal
2016, compared to $6.5 million a year
ago, primarily due to increased amortization expenses as a result
of the addition of identifiable intangible assets recorded on the
acquisition of PA in the second quarter of fiscal 2015.
EBITDA was $28.7 million (11%
EBITDA margin) in the first quarter of fiscal 2016 compared to
$20.9 million (11% EBITDA margin) in
the first quarter of fiscal 2015. Excluding restructuring and
severance costs, first quarter fiscal 2016 EBITDA was $30.9 million (12% EBITDA margin). Comparably,
excluding acquisition-related costs, first quarter fiscal 2015
EBITDA was $23.9 million (13% EBITDA
margin).
Order Bookings
First quarter fiscal 2016 Order
Bookings were $222 million, a 39%
increase from the first quarter of fiscal 2015. Excluding the
impact of PA, Order Bookings were $154
million, a 4% decrease from the corresponding period a year
ago primarily reflecting the timing of customer decisions on
various larger opportunities. By customer market, strength in
transportation, consumer products and electronics, and energy
markets was offset by lower Order Bookings in life sciences.
Order Backlog
Continuity (In millions of dollars)
|
|
|
Three Months Ended June
28, 2015
|
|
Three Months Ended June 29,
2014
|
|
|
|
|
|
|
|
|
|
Opening Order
Backlog
|
$
|
632
|
$
|
474
|
Revenues
|
|
(254)
|
|
(191)
|
Order
Bookings
|
|
222
|
|
160
|
Order Backlog
adjustments1
|
|
(10)
|
|
(18)
|
Total
|
$
|
590
|
$
|
425
|
1 Order
Backlog adjustments include foreign exchange adjustments and
cancellations.
|
Order Backlog by
Market (In millions of dollars)
|
|
|
|
|
|
As
at
|
|
June 28, 2015
|
|
June 29,
2014
|
Consumer products
& electronics
|
$
|
74
|
$
|
75
|
Energy
|
|
45
|
|
48
|
Life
sciences
|
|
248
|
|
160
|
Transportation
|
|
223
|
|
142
|
Total
|
$
|
590
|
$
|
425
|
At June 28, 2015, Order Backlog
was $590 million, 39% higher than at
June 29, 2014. Higher Order
Backlog primarily reflected higher Order Bookings in the life
sciences and transportation markets and the addition of PA.
Outlook
The global economic environment has continued
to show signs of volatility, and uncertainty remains. In
North America, U.S. economic
growth has slowed, and Canada's
economy remains weak. 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 long lead
times on projects.
Many customers remain cautious in their approach to capital
investment; however, activity in life sciences and transportation
markets has remained strong. The Company has seen strength in
energy markets such as nuclear; however, the solar energy market
remains weak due to reductions in solar feed-in-tariffs. Activity
in the consumer products and electronics market has improved.
Overall, the funnel of opportunities continues to be strong across
all of the Company's end customer markets.
The Company's sales organization continues to work to engage
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
$590 million at the end of the first
quarter of fiscal 2016 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.
Management's disciplined focus on program management, cost
reductions, standardization and quality is expected to put ATS in a
strong competitive position to capitalize on opportunities and
sustain performance in challenging market conditions. With the
addition of PA, the Company has undertaken a comprehensive review
of its facilities and global capacity. As a result of this review,
in the first quarter of fiscal 2016, the Company completed the
divestiture of its Swiss-based automation operations through a sale
to a third party. In addition, actions to re-balance global
capacity and improve the Company's cost structure were implemented
in the first quarter of fiscal 2016. Additional measures to
re-balance global capacity and improve the Company's cost structure
are expected to be implemented in the second and third quarters of
fiscal 2016. As a result, management expects to incur incremental
charges of approximately $2.0 million
over the next two quarters. These charges are expected to have an
approximate payback period of less than one year. The planned sale
of certain assets associated with these restructuring activities is
expected to offset the restructuring costs. Management expects that
the application of its ongoing efforts to improve ATS' 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
|
Three
|
|
Months
|
Months
|
|
Ended
|
Ended
|
(In millions of
dollars, except per share
data)
|
June 28,
2015
|
June 29,
2014
|
Revenues
|
$
|
254.3
|
$
|
190.9
|
Cost of
revenues
|
|
193.3
|
|
137.1
|
Selling, general and
administrative
|
|
41.0
|
|
36.9
|
Stock-based
compensation
|
|
2.5
|
|
2.5
|
Earnings from
operations
|
$
|
17.5
|
$
|
14.4
|
Net finance
costs
|
$
|
4.4
|
$
|
0.9
|
Provision for income
taxes
|
|
3.3
|
|
4.5
|
Net income from
continuing
operations
|
$
|
9.8
|
$
|
9.0
|
Income from
discontinued
operations
|
$
|
––
|
$
|
6.9
|
Net
income
|
$
|
9.8
|
$
|
15.9
|
Earnings per
share
|
|
|
|
|
Basic from continuing
operations
|
$
|
0.11
|
$
|
0.10
|
Basic from
discontinued operations
|
$
|
––
|
$
|
0.08
|
|
$
|
0.11
|
$
|
0.18
|
Diluted from
continuing operations
|
$
|
0.11
|
$
|
0.10
|
Diluted from
discontinued operations
|
$
|
––
|
$
|
0.07
|
|
$
|
0.11
|
$
|
0.17
|
Revenues. At $254.3
million, consolidated revenues from continuing operations
for the first quarter of fiscal 2016 were $63.4 million or 33% higher than in the
corresponding period a year ago, primarily on incremental PA
revenue. See "Overview – Operating Results from Continuing
Operations."
Cost of revenues. At $193.3
million, first quarter fiscal 2016 cost of revenues
increased over the corresponding period a year ago by $56.2 million or 41% primarily on higher
revenues. At 24%, gross margin in the first quarter of fiscal 2016
decreased 4 percentage points from the corresponding period a year
ago. Lower gross margins primarily reflected some lower margin
programs which have been bid and are being executed by the Company,
certain programs where costs exceeded budgets, and the addition of
PA, which 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 first quarter of
fiscal 2016 were $41.0 million, which
included $2.2 million of
restructuring and severance costs. Excluding these costs, SG&A
expenses were $4.9 million or 14%
higher than the $33.9 million
incurred in the corresponding period last year, which was exclusive
of $3.0 million of acquisition
related costs. Higher SG&A costs primarily reflected higher
amortization expenses from acquired intangibles and the addition of
PA SG&A expenses. These increases in SG&A expenses were
partially offset by lower employee incentive costs and
discretionary spending reductions, which are not expected to
continue going forward.
Stock-based compensation cost. Stock-based
compensation expense was $2.5 million
in the first quarter of fiscal 2016, consistent with the first
quarter of fiscal 2015.
Earnings from operations. For the first quarter of fiscal
2016, consolidated earnings from operations were $17.5 million (operating margin of 7%) compared
to earnings from operations of $14.4
million a year ago (operating margin of 8%). See
"Overview – Operating Results from Continuing Operations".
Net finance costs. Net finance costs were
$4.4 million in the first quarter of
fiscal 2016, $3.5 million higher than
a year ago, reflecting increased usage of the Company's primary
credit facility and the Company's Senior Notes, which were issued
in June 2015 (see "Liquidity, Cash
Flow and Financial Resources"). The increased usage was used to
finance the acquisition of PA and to support letters of credit.
Income tax provision. The Company's fiscal 2016 first
quarter effective income tax rate of 25% 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 tax rates. The Company expects its
effective tax rate to approximate the combined Canadian statutory
tax rate.
Net income from continuing operations. Fiscal 2016, first
quarter net income from continuing operations was $9.8 million (11
cents per share basic and diluted, 18
cents adjusted basic) compared to $9.0 million (10
cents per share basic and diluted, 15
cents adjusted basic) for the first quarter of fiscal
2015.
Reconciliation of Non-IFRS Measures to IFRS
Measures
The following table reconciles EBITDA to the most
directly comparable IFRS measure (net income from continuing
operations):
|
|
Three
|
|
Three
|
|
|
Months
|
|
Months
|
|
|
Ended
|
|
Ended
|
(In millions of
dollars)
|
|
June 28, 2015
|
|
June 29,
2014
|
EBITDA
|
$
|
28.7
|
$
|
20.9
|
Less: depreciation
and amortization expense
|
|
11.2
|
|
6.5
|
Earnings from
operations
|
$
|
17.5
|
$
|
14.4
|
Less: net finance
costs
|
|
4.4
|
|
0.9
|
Provision for income
taxes
|
|
3.3
|
|
4.5
|
Net income from
continuing operations
|
$
|
9.8
|
$
|
9.0
|
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 June 28, 2015
|
Three Months Ended
June 29, 2014
|
|
IFRS
|
Adjustments
|
Adjusted
|
IFRS
|
Adjustments
|
Adjusted
|
|
|
|
|
|
(non-IFRS)
|
|
|
|
|
(non-IFRS)
|
Earnings from
operations
|
$
|
17.5
|
$
|
─
|
$
|
17.5
|
$
|
14.4
|
$
|
─
|
$
|
14.4
|
Amortization of
acquisition-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related intangible
assets
|
|
─
|
|
7.7
|
|
7.7
|
|
─
|
|
3.7
|
|
3.7
|
Acquisition-related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
transaction
costs
|
|
─
|
|
─
|
|
─
|
|
─
|
|
3.0
|
|
3.0
|
Restructuring
charges
|
|
─
|
|
2.2
|
|
2.2
|
|
─
|
|
─
|
|
─
|
|
$
|
17.5
|
$
|
9.9
|
$
|
27.4
|
$
|
14.4
|
$
|
6.7
|
$
|
21.1
|
Less: net finance
costs
|
$
|
4.4
|
$
|
─
|
$
|
4.4
|
$
|
0.9
|
$
|
─
|
$
|
0.9
|
Income from
continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes
|
$
|
13.1
|
$
|
9.9
|
$
|
23.0
|
$
|
13.5
|
$
|
6.7
|
$
|
20.2
|
Provision for income
taxes
|
$
|
3.3
|
$
|
─
|
$
|
3.3
|
$
|
4.5
|
$
|
─
|
$
|
4.5
|
Adjustment to
provision for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes1
|
|
─
|
|
3.0
|
|
3.0
|
|
─
|
|
1.6
|
|
1.6
|
|
$
|
3.3
|
$
|
3.0
|
$
|
6.3
|
$
|
4.5
|
$
|
1.6
|
$
|
6.1
|
Net income from
continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
$
|
9.8
|
$
|
6.9
|
$
|
16.7
|
$
|
9.0
|
$
|
5.1
|
$
|
14.1
|
Basic earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from continuing
operations
|
$
|
0.11
|
$
|
0.07
|
$
|
0.18
|
$
|
0.10
|
$
|
0.05
|
$
|
0.15
|
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.
|
LIQUIDITY, CASH
FLOW AND FINANCIAL RESOURCES (In millions of dollars,
except ratios)
|
|
|
June
28
|
|
March 31
|
As at
|
|
2015
|
|
2015
|
Cash and cash
equivalents
|
$
|
113.1
|
$
|
106.1
|
Debt-to-equity
ratio1
|
|
0.55:1
|
|
0.54:1
|
|
|
|
|
|
|
|
June
28
|
|
June
29
|
For the three months
ended
|
|
2015
|
|
2014
|
Cash flows used in
operating activities from continuing operations
|
$
|
(9.3)
|
$
|
(10.7)
|
1 Debt is
calculated as bank indebtedness plus long-term debt and current
portion of long-term debt. Equity excludes accumulated other
comprehensive income.
|
At June 28, 2015, the Company had
cash and cash equivalents of $113.1
million compared to $106.1
million at March 31, 2015. At
June 28, 2015, the Company's
debt-to-total-equity ratio was 0.55:1.
At June 28, 2015, the Company had
$660 million of unutilized
multipurpose credit, including letters of credit, available under
existing credit facilities and another $3.1
million available under letter of credit facilities.
In the first quarter of fiscal 2016, cash flows used in
operating activities from continuing operations were $9.3 million ($10.7
million used by operating activities from continuing
operations in the first quarter of fiscal 2015). The increase in
operating cash flows from continuing operations related primarily
to the timing of investments in non-cash working capital in large
customer programs.
In the first quarter of fiscal 2016, the Company's investment in
non-cash working capital increased by $26.8
million from March 31, 2015.
Accounts receivable increased 11% or $15.6
million, due to timing of billings on certain customer
contracts. Net contracts in progress decreased 1% or $1.7 million compared to March 31, 2015 due to timing of program
completion. 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 decreased 5% or $2.1
million primarily due to the timing of inventory purchases.
Deposits and prepaid assets increased 9% or $1.3 million compared to March 31, 2015 due to the timing of program
execution. Accounts payable and accrued liabilities decreased 4% or
$8.2 million.
Capital expenditures totalled $2.8
million in the first quarter of fiscal 2016, primarily
related to computer hardware.
Intangible assets expenditures were $1.1
million in the first quarter of fiscal 2015, primarily
related to computer software and development projects.
During the first quarter of fiscal 2016, the Company completed a
private placement of US $250 million
aggregate principal amount of senior notes (the "Senior Notes").
Transaction fees of $7.2 were
deferred and will be amortized over the term of the Senior
Notes. The Senior Notes are unsecured, were issued at par,
bear interest at a rate of 6.50% per annum, and mature on
June 15, 2023. ATS used the
majority of net proceeds from the Senior Notes to repay amounts
outstanding under its senior secured credit facility, with the
balance to be used for general corporate purposes. The
Company may redeem the Senior Notes, in whole at any time or in
part from time to time, at specified redemption prices and subject
to certain conditions required by the Senior Notes. If the
Company experiences a change of control, the Company may be
required to repurchase the Senior Notes, in whole or in part, at a
purchase price equal to 101% of the aggregate principal amount of
the Senior Notes, plus accrued and unpaid interest, if any, to, but
not including, the redemption date. The Senior Notes contain
customary covenants that restrict, subject to certain exceptions
and thresholds, some of the activities of the Company and its
subsidiaries, including the Company's ability to dispose of assets,
incur additional debt, pay dividends, create liens, make
investments, and engage in specified transactions with
affiliates. Subject to certain exceptions, the Senior Notes
will be guaranteed by each of the subsidiaries of the Company that
is a borrower or has guaranteed obligations under the Credit
Facility.
The Company's senior secured credit facility (the "Credit
Facility") provides a four-year committed revolving credit facility
of $750.0 million. The Credit
Facility is secured by (i) the Company's assets, including real
estate; (ii) assets, including certain real estate, of certain of
the Company's North American subsidiaries; and (iii) a pledge of
shares of certain of the Company's non-North American
subsidiaries. Certain of the Company's subsidiaries also
provide guarantees under the Credit Facility. At June 28, 2015, the Company had utilized
$89.6 million under the Credit
Facility, by way of letters of credit (March
31, 2015 - $290.0 million
classified as long-term debt and $85.0
million by way of letters of credit). The Credit
Facility matures on August 29,
2018.
The Credit Facility is available in Canadian dollars by way of
prime rate advances and/or bankers' acceptances, in U.S. dollars by
way of base rate advances and/or LIBOR advances, in Swiss francs,
Euros and British pounds sterling by way of LIBOR advances and by
way of letters of credit for certain purposes in Canadian dollars,
U.S. dollars and Euros. 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 a margin ranging from 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 a
margin that varies from 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. At
June 28, 2015, all of the covenants
were met.
The Company has additional credit facilities available of
$9.1 million (2.4 million Euro, 200.0
million Indian Rupees, 50.0 million
Thai Baht and 0.3 million Czech Koruna). The total amount
outstanding on these facilities was $8.6
million, of which $1.9 million
was classified as bank indebtedness (March
31, 2015 - $1.7 million) and
$6.7 million was classified as
long-term debt (March 31, 2015 -
$4.9 million). The interest rates
applicable to the credit facilities range from 1.66% to 10.25% per
annum. A portion of the long-term debt is secured by certain assets
of the Company. The 200.0 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
some potential acquisitions. Significant acquisitions could result
in additional debt or equity financing requirements. The Company
expects to use moderate leverage to support its growth
strategy.
Contractual Obligations
The minimum operating lease
payments, related primarily to facilities and equipment, and
purchase obligations are as follows:
|
|
Operating
|
|
Purchase
|
(In millions of
dollars)
|
|
leases
|
|
obligations
|
Less than one
year
|
$
|
9.8
|
$
|
86.2
|
One – two
years
|
|
8.2
|
|
0.9
|
Two – three
years
|
|
5.1
|
|
―
|
Three – four
years
|
|
4.4
|
|
―
|
Four – five
years
|
|
4.2
|
|
―
|
Due in over five
years
|
|
5.7
|
|
―
|
|
$
|
37.4
|
$
|
87.1
|
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 June 28, 2015, the total value of
outstanding bank guarantees was approximately $138.0 million (March 31,
2015 - $118.0 million).
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 10 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 market 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 quarter of fiscal 2016, 863,417 stock options
were exercised. At August 11,
2015 the total number of shares outstanding was
92,503,082 and there were 4,088,866 stock options
outstanding to acquire common shares of the Company.
RELATED-PARTY TRANSACTIONS
During fiscal 2015, the
Company 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 U.S. $0.5 million. 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 quarter of fiscal 2016.
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 and through its
investments in its foreign-based subsidiaries.
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 10 to the interim
condensed consolidated financial statements for details on the
derivative financial instruments outstanding at June 28, 2015.
In addition, from time to time, the Company may hedge the
foreign exchange risk arising from intercompany loans, net
investments in foreign-based subsidiaries and committed
acquisitions through the use of forward foreign exchange contracts
or other non-derivative financial instruments. The Company uses
hedging as a risk management tool, not to speculate.
Period average
exchange rates in CDN$
|
|
|
|
|
Three months
ended
|
|
|
June
28, 2015
|
June 29,
2014
|
%
change
|
U.S.
Dollar
|
1.2286
|
1.0901
|
12.7%
|
Euro
|
1.3600
|
1.4948
|
(9.0%)
|
CONSOLIDATED
QUARTERLY RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of
dollars,
except
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
per share
amounts)
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
2015
|
|
2014
|
|
2014
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from
continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
$
|
254.3
|
$
|
289.4
|
$
|
248.8
|
$
|
207.0
|
$
|
190.9
|
$
|
200.7
|
$
|
178.0
|
$
|
154.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
$
|
17.5
|
$
|
22.6
|
$
|
15.9
|
$
|
14.1
|
$
|
14.4
|
$
|
17.2
|
$
|
16.7
|
$
|
14.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
$
|
27.4
|
$
|
34.7
|
$
|
27.2
|
$
|
27.0
|
$
|
21.1
|
$
|
22.2
|
$
|
20.5
|
$
|
16.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
$
|
9.8
|
$
|
13.9
|
$
|
8.6
|
$
|
7.4
|
$
|
9.0
|
$
|
11.7
|
$
|
18.8
|
$
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
discontinued
operations
|
$
|
―
|
$
|
2.2
|
$
|
(0.0)
|
$
|
7.1
|
$
|
6.9
|
$
|
(0.4)
|
$
|
(0.3)
|
$
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
9.8
|
$
|
16.1
|
$
|
8.6
|
$
|
14.5
|
$
|
15.9
|
$
|
11.3
|
$
|
18.5
|
$
|
12.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing
operations
|
$
|
0.11
|
$
|
0.15
|
$
|
0.09
|
$
|
0.08
|
$
|
0.10
|
$
|
0.13
|
$
|
0.21
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basic
earnings per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share from
continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
$
|
0.18
|
$
|
0.24
|
$
|
0.18
|
$
|
0.19
|
$
|
0.15
|
$
|
0.17
|
$
|
0.14
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from discontinued
operations
|
$
|
―
|
$
|
0.03
|
$
|
(0.00)
|
$
|
0.08
|
$
|
0.08
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.11
|
$
|
0.18
|
$
|
0.09
|
$
|
0.16
|
$
|
0.18
|
$
|
0.12
|
$
|
0.21
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from continuing
operations
|
$
|
0.11
|
$
|
0.15
|
$
|
0.09
|
$
|
0.08
|
$
|
0.10
|
$
|
0.13
|
$
|
0.21
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
share from
discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
$
|
―
|
$
|
0.03
|
$
|
(0.00)
|
$
|
0.08
|
$
|
0.07
|
$
|
(0.01)
|
$
|
(0.00)
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
0.11
|
$
|
0.18
|
$
|
0.09
|
$
|
0.16
|
$
|
0.17
|
$
|
0.12
|
$
|
0.21
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order
Bookings
|
$
|
222.0
|
$
|
317.0
|
$
|
287.0
|
$
|
216.0
|
$
|
160.0
|
$
|
197.0
|
$
|
237.0
|
$
|
110.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order
Backlog
|
$
|
590.0
|
$
|
632.0
|
$
|
602.0
|
$
|
561.0
|
$
|
425.0
|
$
|
474.0
|
$
|
467.0
|
$
|
355.0
|
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, the timing of third-party content and by the
timing of acquisitions.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The
preparation of the Company's consolidated financial statements
requires management to make estimates, judgments 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, judgments 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 2015
MD&A.
ACCOUNTING STANDARDS CHANGE
IAS 19 – Employee
Benefits
Effective April 1,
2015, the Company adopted the amendments to IAS 19 –
Employee Benefits. The amendments require an
entity to consider contributions from employees or third parties
when accounting for defined benefit plans. When the contributions
are linked to service, they should be attributed to periods of
service as a negative benefit. These amendments clarify that, if
the amount of the contributions is independent of the number of
years of service, an entity is permitted to recognize such
contributions as a reduction in the service cost in the period in
which the service is rendered, instead of allocating the
contributions to the periods of service.
The application of the amendments to IAS 19 had no impact on the
interim condensed consolidated 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 (2013) 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 months ended June 28,
2015, there have been no changes in the design of the
Company's internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect,
the Company's internal controls over financial reporting.
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 may 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; potential impact of
general economic environment, including impact on demand and Order
Bookings; impacts on demand for Company's products potentially
lagging global macroeconomic trends; activity in the market
segments that the Company serves; the engagement with customers on
enterprise solutions providing ATS with more strategic
relationships, increased predictability, better program control and
less sensitivity to macroeconomic forces; 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;
management's expectations in relation to the impact of management
focus and strategic initiatives on ATS operations; expected timing,
cost, and payback period of anticipated measures to re-balance
global capacity and improve cost structure; impact of planned sale
of certain assets; the Company's strategy to expand organically and
through acquisition; the Company's expectation with respect to
effective tax rate; Company's expectation to continue to increase
its investment in working capital; expectation in relation to
meeting funding requirements for investments; and expectation to
use increased leverage to support growth strategy. 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; variations in
the amount of Order Backlog completed in any given quarter; that
the effective tax rate is other than expected, due to reasons
including income spread among jurisdictions being other than
anticipated; that customers are more difficult to engage than
expected; that strategic initiatives are delayed, not completed, or
do not have intended positive impact; that measures to re-balance
global capacity and improve cost structure are delayed or that
charges are greater than expected and/or that the payback is not
realized as quickly as anticipated; that proceeds from planned sale
of assets is other than expected; 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 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)
|
|
|
|
|
June
28
|
|
March
31
|
As
at
|
Note
|
|
2015
|
|
2015
|
|
|
|
|
|
|
ASSETS
|
12
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
113,092
|
$
|
106,052
|
Accounts
receivable
|
|
|
160,933
|
|
145,342
|
Costs and earnings in
excess of billings
|
|
|
|
|
|
|
on contracts in
progress
|
6
|
|
207,023
|
|
192,813
|
Inventories
|
6
|
|
39,935
|
|
42,079
|
Deposits, prepaids
and other
assets
|
7
|
|
16,052
|
|
14,731
|
|
|
|
537,035
|
|
501,017
|
Assets held for
sale
|
5
|
|
––
|
|
4,221
|
|
|
|
537,035
|
|
505,238
|
Non-current
assets
|
|
|
|
|
|
Property, plant and
equipment
|
8
|
|
83,761
|
|
83,901
|
Investment
property
|
|
|
3,920
|
|
3,880
|
Goodwill
|
|
|
402,480
|
|
405,881
|
Intangible
assets
|
9
|
|
181,178
|
|
183,610
|
Deferred income tax
assets
|
|
|
3,356
|
|
5,057
|
Investment tax credit
receivable
|
|
|
35,043
|
|
33,107
|
|
|
|
709,738
|
|
715,436
|
Total
assets
|
|
$
|
1,246,773
|
$
|
1,220,674
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Bank
indebtedness
|
12
|
$
|
1,874
|
$
|
1,731
|
Accounts payable and
accrued liabilities
|
|
|
192,707
|
|
200,871
|
Provisions
|
11
|
|
12,122
|
|
10,419
|
Billings in excess of
costs and earnings
|
|
|
|
|
|
|
on contracts in
progress
|
6
|
|
91,897
|
|
76,031
|
Current portion of
long-term debt
|
12
|
|
4,420
|
|
3,372
|
|
|
|
303,020
|
|
292,424
|
Liabilities directly
associated with assets held for sale
|
5
|
|
––
|
|
5,717
|
|
|
|
303,020
|
|
298,141
|
Non-current
liabilities
|
|
|
|
|
|
Employee
benefits
|
|
|
25,381
|
|
24,777
|
Long-term
debt
|
12
|
|
298,246
|
|
286,154
|
Deferred income tax
liabilities
|
|
|
35,561
|
|
40,870
|
|
|
|
359,188
|
|
351,801
|
Total
liabilities
|
|
$
|
662,208
|
$
|
649,942
|
|
|
|
|
|
|
Commitments and
Contingencies
|
12, 16
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share
capital
|
13
|
$
|
528,070
|
$
|
519,118
|
Contributed
surplus
|
|
|
12,861
|
|
14,420
|
Accumulated other
comprehensive income
|
|
|
30,026
|
|
33,434
|
Retained
earnings
|
|
|
13,429
|
|
3,590
|
Equity attributable
to shareholders
|
|
|
584,386
|
|
570,562
|
Non-controlling
interests
|
|
|
179
|
|
170
|
Total
equity
|
|
|
584,565
|
|
570,732
|
Total liabilities
and
equity
|
|
$
|
1,246,773
|
$
|
1,220,674
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Income (in thousands of Canadian dollars, except per share
amounts - unaudited)
|
|
|
|
|
June
28
|
|
June
29
|
For the three months
ended
|
Note
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Revenues from
construction contracts
|
|
$
|
151,450
|
$
|
161,190
|
|
Sale of
goods
|
|
|
20,389
|
|
14,413
|
|
Services
rendered
|
|
|
82,425
|
|
15,276
|
|
|
|
|
|
|
Total
revenues
|
|
|
254,264
|
|
190,879
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
193,301
|
|
137,072
|
|
Selling, general and
administrative
|
|
|
40,951
|
|
36,937
|
|
Stock-based
compensation
|
15
|
|
2,544
|
|
2,514
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
17,468
|
|
14,356
|
|
|
|
|
|
|
Net finance costs
|
18
|
|
4,346
|
|
878
|
|
|
|
|
|
|
Income from
continuing operations before income
taxes
|
|
|
13,122
|
|
13,478
|
|
|
|
|
|
|
Income tax
expense
|
14
|
|
3,274
|
|
4,496
|
|
|
|
|
|
|
Income from
continuing
operations
|
|
|
9,848
|
|
8,982
|
|
|
|
|
|
|
Income from
discontinued operations, net of
tax
|
|
|
––
|
|
6,913
|
|
|
|
|
|
|
Net
income
|
|
$
|
9,848
|
$
|
15,895
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
Shareholders
|
|
$
|
9,839
|
$
|
15,858
|
Non-controlling
interests
|
|
|
9
|
|
37
|
|
|
$
|
9,848
|
$
|
15,895
|
|
|
|
|
|
|
Earnings per share
attributable to
shareholders
|
19
|
|
|
|
|
Basic – from
continuing
operations
|
|
$
|
0.11
|
$
|
0.10
|
Basic – from
discontinued
operations
|
|
|
––
|
|
0.08
|
|
|
$
|
0.11
|
$
|
0.18
|
|
|
|
|
|
|
Earnings per share
attributable to shareholders
|
19
|
|
|
|
|
Diluted – from
continuing operations
|
|
$
|
0.11
|
$
|
0.10
|
Diluted – from
discontinued
operations
|
|
|
––
|
|
0.07
|
|
|
$
|
0.11
|
$
|
0.17
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Comprehensive Income (in thousands of Canadian dollars -
unaudited)
|
|
|
June
28
|
|
June 29
|
For the three months
ended
|
|
2015
|
|
2014
|
|
|
|
|
|
Net
income
|
$
|
9,848
|
$
|
15,895
|
|
|
|
|
|
Other comprehensive
income
(loss):
|
|
|
|
|
|
|
|
|
|
Items to be
reclassified subsequently to net income:
|
|
|
|
|
|
|
|
|
|
|
Currency translation
adjustment (net of income taxes of $nil)
|
|
(4,676)
|
|
(15,232)
|
|
|
|
|
|
|
Net unrealized gain
on derivative financial instruments
|
|
|
|
|
|
|
designated as cash
flow hedges
|
|
581
|
|
652
|
|
Tax impact
|
|
(162)
|
|
(161)
|
|
|
|
|
|
|
Loss transferred to
net income for
|
|
|
|
|
|
|
derivatives
designated as cash flow hedges
|
|
1,141
|
|
362
|
|
Tax
impact
|
|
(292)
|
|
(92)
|
|
|
|
|
|
Other
comprehensive loss
|
|
(3,408)
|
|
(14,471)
|
|
|
|
|
|
Comprehensive
income
|
$
|
6,440
|
$
|
1,424
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
Shareholders
|
$
|
6,431
|
$
|
1,387
|
Non-controlling
interests
|
|
9
|
|
37
|
|
$
|
6,440
|
$
|
1,424
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Changes in Equity (in thousands of Canadian dollars -
unaudited)
|
Three months ended
June 28, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
|
other
|
|
Non-
|
|
|
|
|
Share
|
|
Contributed
|
|
Retained
|
|
translation
|
|
Cash
flow
|
|
comprehensive
|
|
controlling
|
|
Total
|
|
|
capital
|
|
surplus
|
|
earnings
|
|
adjustments
|
|
hedges
|
|
income
|
|
interests
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at March
31, 2015
|
$
|
519,118
|
$
|
14,420
|
$
|
3,590
|
$
|
35,702
|
$
|
(2,268)
|
$
|
33,434
|
$
|
170
|
$
|
570,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
––
|
|
––
|
|
9,839
|
|
––
|
|
––
|
|
––
|
|
9
|
|
9,848
|
Other comprehensive
income
(loss)
|
|
––
|
|
––
|
|
––
|
|
(4,676)
|
|
1,268
|
|
(3,408)
|
|
––
|
|
(3,408)
|
Total comprehensive
income
(loss)
|
|
––
|
|
––
|
|
9,839
|
|
(4,676)
|
|
1,268
|
|
(3,408)
|
|
9
|
|
6,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
––
|
|
654
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
654
|
Exercise of stock
options
|
|
8,952
|
|
(2,213)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
6,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at June
28,
2015
|
$
|
528,070
|
$
|
12,861
|
$
|
13,429
|
$
|
31,026
|
$
|
(1,000)
|
$
|
30,026
|
$
|
179
|
$
|
584,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 29, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
Currency
|
|
|
|
other
|
|
Non-
|
|
|
|
|
Share
|
|
Contributed
|
|
earnings
|
|
translation
|
|
Cash flow
|
|
comprehensive
|
|
controlling
|
|
Total
|
|
|
capital
|
|
surplus
|
|
(deficit)
|
|
adjustments
|
|
hedges
|
|
income
|
|
interests
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at March 31,
2014
|
$
|
510,725
|
$
|
15,025
|
$
|
(44,311)
|
$
|
36,616
|
$
|
(646)
|
$
|
35,970
|
$
|
129
|
$
|
517,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
––
|
|
––
|
|
15,858
|
|
––
|
|
––
|
|
––
|
|
37
|
|
15,895
|
Other comprehensive
income
(loss)
|
|
––
|
|
––
|
|
––
|
|
(15,232)
|
|
761
|
|
(14,471)
|
|
––
|
|
(14,471)
|
Total comprehensive
income
(loss)
|
|
––
|
|
––
|
|
15,858
|
|
(15,232)
|
|
761
|
|
(14,471)
|
|
37
|
|
1,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
––
|
|
535
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
535
|
Exercise of stock
options
|
|
1,738
|
|
(523)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
1,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, at June 29,
2014
|
$
|
512,463
|
$
|
15,037
|
$
|
(28,453)
|
$
|
21,384
|
$
|
115
|
$
|
21,499
|
$
|
166
|
$
|
520,712
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Interim Consolidated Statements of
Cash Flow (in thousands of Canadian dollars -
unaudited)
|
|
|
|
June
28
|
|
June 29
|
Three months
ended
|
Note
|
|
2015
|
|
2014
|
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
9,848
|
$
|
8,982
|
Items not involving
cash
|
|
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
|
2,305
|
|
1,934
|
|
Amortization of
intangible assets
|
|
|
8,843
|
|
4,546
|
|
Deferred income
taxes
|
14
|
|
(1,644)
|
|
153
|
|
Other items not
involving cash
|
|
|
(4,354)
|
|
(1,642)
|
|
Stock-based
compensation
|
15
|
|
2,544
|
|
2,514
|
|
Gain on disposal of
property, plant and equipment
|
|
|
(4)
|
|
(423)
|
|
|
$
|
17,538
|
$
|
16,064
|
Change in non-cash
operating working capital
|
|
|
(26,800)
|
|
(26,749)
|
Cash flows used in
operating activities of
|
|
|
|
|
|
|
discontinued
operations
|
|
|
––
|
|
(2,824)
|
Cash flows used in
operating activities
|
|
$
|
(9,262)
|
$
|
(13,509)
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
8
|
$
|
(2,768)
|
$
|
(2,674)
|
Acquisition of
intangible assets
|
9
|
|
(1,094)
|
|
(1,839)
|
Proceeds from
disposal of property, plant and equipment
|
|
|
34
|
|
8,529
|
Proceeds from sale of
subsidiary
|
5
|
|
2,274
|
|
––
|
Cash flows provided
by investing activities
|
|
|
|
|
|
|
of discontinued
operations
|
|
|
––
|
|
13,643
|
Cash flows
provided by (used in) investing
activities
|
|
$
|
(1,554)
|
$
|
17,659
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
Restricted
cash
|
7
|
$
|
––
|
$
|
(67)
|
Bank
indebtedness
|
|
|
254
|
|
(113)
|
Repayment of
long-term debt
|
|
|
(290,055)
|
|
(72)
|
Proceeds from
long-term debt
|
|
|
302,517
|
|
732
|
Issuance of common
shares
|
|
|
6,739
|
|
1,215
|
Cash flows
provided by financing activities
|
|
$
|
19,455
|
$
|
1,695
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(2,073)
|
|
(2,705)
|
|
|
|
|
|
|
Increase in cash and
cash equivalents
|
|
|
6,566
|
|
3,140
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of year
|
|
|
106,526
|
|
78,614
|
|
|
|
|
|
|
Cash and cash
equivalents, end of year
|
|
$
|
113,092
|
$
|
81,754
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
Cash and cash
equivalents – continuing operations
|
|
$
|
113,092
|
$
|
81,619
|
Cash and cash
equivalents – associated with discontinued
operations
|
|
|
––
|
|
135
|
|
|
$
|
113,092
|
$
|
81,754
|
Supplemental
information
|
|
|
|
|
|
Cash income taxes
paid by continuing
operations
|
|
$
|
3,598
|
$
|
1,908
|
Cash interest paid by
continuing operations
|
|
$
|
3,428
|
$
|
650
|
SOURCE ATS Automation Tooling Systems Inc.