CAMBRIDGE, ON, Aug. 17, 2016 /CNW/ - ATS Automation Tooling
Systems Inc. (TSX: ATA) ("ATS" or the "Company") today
reported financial results for the three months ended July 3, 2016.
First Quarter Summary
- Revenues were $265.4 million, 4%
higher than the first quarter a year ago, primarily reflecting
foreign exchange rate changes;
- Earnings from operations were $22.6
million (9% operating margin), compared to $17.5 million (7% operating margin) in the first
quarter of fiscal 2016. Adjusted earnings from continuing
operations1 were $27.9
million (11% margin), compared to $27.4 million (11% margin) a year ago;
- EBITDA1 was $31.5
million (12% margin), compared to $28.7 million (11% margin) in the first quarter a
year ago;
- Earnings per share were 13 cents
basic compared to 11 cents basic a
year ago. Adjusted basic earnings per share from continuing
operations1 were 17 cents
compared to 18 cents in the first
quarter a year ago;
- Order Bookings were $239 million,
an 8% increase from the first quarter of fiscal 2016;
- Period end Order Backlog was $610
million, 3% higher than the first quarter of fiscal 2016;
and
- The Company's balance sheet and financial capacity to support
growth remained strong, with unutilized credit facilities of
$651.2 million and $3.9 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
|
|
|
|
|
3 months
ended
July 3,
2016
|
|
3 months
ended
June 28, 2015
|
Revenues
|
$
|
265.4
|
|
$
|
254.3
|
Earnings from
operations
|
$
|
22.6
|
|
$
|
17.5
|
Adjusted earnings
from operations1
|
$
|
27.9
|
|
$
|
27.4
|
EBITDA1
|
$
|
31.5
|
|
$
|
28.7
|
Net
income
|
$
|
12.1
|
|
$
|
9.8
|
Adjusted basic
earnings per share1
|
$
|
0.17
|
|
$
|
0.18
|
Basic and diluted
earnings per share
|
$
|
0.13
|
|
$
|
0.11
|
1 Non-IFRS
measure: see "Notice to Reader: Non-IFRS Measures and Additional
IFRS Measures".
|
"First quarter operating performance was solid," said
Anthony Caputo, Chief Executive
Officer. "Order Backlog is significant, well diversified and of
strategic importance to our customers. We have a healthy balance
sheet, significant cash resources and funding available. As a
result, we are in a strong position to continue to pursue our
growth strategy, both organically and through acquisition."
First Quarter Summary
Fiscal 2017 first quarter
revenues were 4% higher than in the corresponding period a year
ago. Higher revenues primarily reflected foreign exchange rate
changes which 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 U.S dollar and Euro.
By market, fiscal 2017 first quarter revenues from consumer
products & electronics decreased 3% compared to the
corresponding period a year ago. Revenues generated in the energy
market increased 253% primarily due to higher Order Backlog
entering the first quarter of fiscal 2017 compared to a year ago.
Revenues in the life sciences market decreased 11% primarily
reflecting timing of project activities. Transportation revenues
decreased 24% primarily reflecting lower Order Backlog entering the
first quarter of fiscal 2017 compared to a year ago.
Fiscal 2017 first quarter earnings from operations were
$22.6 million (9% operating margin)
compared to $17.5 million (7%
operating margin) in the first quarter of fiscal 2016. Excluding
$5.3 million related to amortization
of identifiable intangible assets recorded on the acquisitions of
PA, IWK, and sortimat, first quarter fiscal 2017 adjusted earnings
from operations were $27.9 million
(11% margin). First quarter earnings from operations a year ago
included $2.2 million of
restructuring and severance costs and $7.7
million related to the amortization of identifiable
intangible assets recorded on the acquisitions of PA, IWK, ATW, and
sortimat. Excluding these items, adjusted earnings from operations
a year ago were $27.4 million (11%
margin).
Depreciation and amortization expense was $8.9 million in the first quarter of fiscal 2017,
compared to $11.2 million a year ago.
The decrease primarily reflected lower amortization of identifiable
intangible assets recorded on the acquisitions of PA, IWK, ATW and
sortimat compared to the first quarter of fiscal 2016.
EBITDA was $31.5 million (12%
EBITDA margin) in the first quarter of fiscal 2017 compared to
$28.7 million (11% EBITDA margin) in
the first quarter of fiscal 2016. Excluding restructuring and
severance costs, first quarter fiscal 2016 EBITDA was $30.9 million (12% EBITDA margin).
Order Bookings
First quarter fiscal 2017 Order
Bookings were $239 million, an 8%
increase from the first quarter of fiscal 2016. By customer market,
increased Order Bookings in the transportation market more than
offset lower Order Bookings in the consumer products and
electronics markets. Order Bookings in the life sciences
market were flat. Foreign exchange rate changes also positively
impacted the translation of Order Bookings from foreign-based ATS
subsidiaries compared to the first quarter of 2016.
Quarterly Conference Call
ATS' quarterly conference
call begins at 10:00 a.m. eastern on
Wednesday August 17, 2016, 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 by
dialing (416) 849-0833 and entering passcode 61394229 followed by
the number sign.
Annual Shareholders' Meeting
The Company will host its
annual meeting of shareholders at 10:00
a.m. eastern on Thursday, August 18,
2016 at the TMX Broadcast Centre, The Exchange Tower, 130
King Street 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 24
manufacturing facilities and over 50 offices in North America, Europe, Southeast
Asia and China.
Management's Discussion and Analysis
For the Quarter
Ended July 3, 2016
This Management's Discussion and Analysis ("MD&A") for
the three months ended July 3, 2016
(first quarter of fiscal 2017) is as of August 16, 2016 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 2017 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, 2016 (fiscal 2016) and, accordingly,
the purpose of this document is to provide a fiscal 2017 first
quarter update to the information contained in the fiscal 2016
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 net income from continuing operations",
"adjusted earnings from operations", "adjusted basic earnings per
share from continuing operations", "non-cash working capital",
"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. Non-cash working
capital is defined as the sum of accounts receivable, costs and
earnings in excess of billing on contracts in progress,
inventories, deposits, prepaids and other assets, less accounts
payable, accrued liabilities, provisions and billings in excess of
costs and earnings on contracts in progress. 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
that 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 (including adjusted net income
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.
Management uses the measure non-cash working capital as a
percentage of revenues to evaluate the Company's management of its
investment in non-cash working capital. Management calculates
non-cash working capital as a percentage of revenues using period
end non-cash working capital divided by trailing two fiscal quarter
revenues annualized. 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 has 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, and (ii) adjusted earnings
from operations to earnings from operations, adjusted net income
from continuing operations to net income from continuing operations
and adjusted basic earnings per share from continuing operations to
basic earnings per share from continuing operations, in each case
for the three month period ending July 3,
2016 and June 28, 2015 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 periods
ending July 3, 2016 and June 28, 2015 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 24
manufacturing facilities and over 50 offices in North America, Europe, Southeast
Asia and China.
OVERVIEW –
OPERATING RESULTS
Consolidated Revenues (In millions of dollars)
|
|
|
Revenues by
market
|
Three
Months
Ended
July 3, 2016
|
Three
Months
Ended
June 28, 2015
|
|
Consumer products
& electronics
|
$
|
36.0
|
$
|
37.3
|
|
Energy
|
|
65.3
|
|
18.5
|
|
Life
sciences
|
|
94.7
|
|
106.7
|
|
Transportation
|
|
69.4
|
|
91.8
|
Total
revenues
|
$
|
265.4
|
$
|
254.3
|
Fiscal 2017 first quarter revenues were 4% higher than in the
corresponding period a year ago. Higher revenues primarily
reflected foreign exchange rate changes which 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 U.S
dollar and Euro.
By market, fiscal 2017 first quarter revenues from consumer
products & electronics decreased 3% compared to the
corresponding period a year ago. Revenues generated in the energy
market increased 253% primarily due to higher Order Backlog
entering the first quarter of fiscal 2017 compared to a year ago.
Revenues in the life sciences market decreased 11% primarily
reflecting timing of project activities. Transportation revenues
decreased 24% primarily reflecting lower Order Backlog entering the
first quarter of fiscal 2017 compared to a year ago.
Consolidated
Operating Results (In millions of dollars)
|
|
|
|
|
Three
|
|
Three
|
|
Months
|
|
Months
|
|
Ended
|
|
Ended
|
|
July 3,
2016
|
|
June 28,
2015
|
Earnings from
operations
|
$
|
22.6
|
|
$
|
17.5
|
Amortization of
acquisition-related intangible assets
|
|
5.3
|
|
|
7.7
|
Restructuring
charges
|
|
––
|
|
|
2.2
|
Adjusted earnings
from operations1
|
$
|
27.9
|
|
$
|
27.4
|
1 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures".
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
Three
|
|
|
Months
|
|
|
Months
|
|
|
Ended
|
|
|
Ended
|
|
|
July 3,
2016
|
|
|
June 28,
2015
|
Earnings from
operations
|
$
|
22.6
|
|
$
|
17.5
|
Depreciation and
amortization
|
|
8.9
|
|
|
11.2
|
EBITDA1
|
$
|
31.5
|
|
$
|
28.7
|
1 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures".
|
Fiscal 2017 first quarter earnings from operations were
$22.6 million (9% operating margin)
compared to $17.5 million (7%
operating margin) in the first quarter of fiscal 2016. Excluding
$5.3 million related to amortization
of identifiable intangible assets recorded on the acquisitions of
PA, IWK, and sortimat, first quarter fiscal 2017 adjusted earnings
from operations were $27.9 million
(11% margin). First quarter earnings from operations a year ago
included $2.2 million of
restructuring and severance costs and $7.7
million related to the amortization of identifiable
intangible assets recorded on the acquisitions of PA, IWK, ATW, and
sortimat. Excluding these items, adjusted earnings from operations
a year ago were $27.4 million (11%
margin).
Depreciation and amortization expense was $8.9 million in the first quarter of fiscal 2017,
compared to $11.2 million a year ago.
The decrease primarily reflected lower amortization of identifiable
intangible assets recorded on the acquisitions of PA, IWK, ATW and
sortimat compared to the first quarter of fiscal 2016.
EBITDA was $31.5 million (12%
EBITDA margin) in the first quarter of fiscal 2017 compared to
$28.7 million (11% EBITDA margin) in
the first quarter of fiscal 2016. Excluding restructuring and
severance costs, first quarter fiscal 2016 EBITDA was $30.9 million (12% EBITDA margin).
Order Bookings
First quarter fiscal 2017 Order
Bookings were $239 million, an 8%
increase from the first quarter of fiscal 2016. By customer market,
increased Order Bookings in the transportation market more than
offset lower Order Bookings in the consumer products and
electronics markets. Order Bookings in the life sciences market
were flat. Foreign exchange rate changes also positively impacted
the translation of Order Bookings from foreign-based ATS
subsidiaries compared to the first quarter of fiscal 2016.
Order Backlog
Continuity (In millions of dollars)
|
|
|
Three
|
|
Three
|
|
|
Months
|
|
Months
|
|
|
Ended
|
|
Ended
|
|
|
July 3,
2016
|
|
June 28,
2015
|
Opening Order
Backlog
|
$
|
652
|
$
|
632
|
Revenues
|
|
(265)
|
|
(254)
|
Order
Bookings
|
|
239
|
|
222
|
Order Backlog
adjustments1
|
|
(16)
|
|
(10)
|
Total
|
$
|
610
|
$
|
590
|
1 Order
Backlog adjustments include foreign exchange adjustments and
cancellations.
|
|
|
|
|
|
|
|
|
Order Backlog by
Market (In millions of dollars)
|
|
|
|
As
at
|
July 3,
2016
|
June 28,
2015
|
Consumer products
& electronics
|
$
|
71
|
$
|
74
|
Energy
|
|
134
|
|
45
|
Life
sciences
|
|
224
|
|
248
|
Transportation
|
|
181
|
|
223
|
Total
|
$
|
610
|
$
|
590
|
At July 3, 2016, Order Backlog was
$610 million, 3% higher than at
June 28, 2015. Higher Order Backlog
in the energy market more than offset lower Order Backlog in the
consumer products and electronics, life sciences, and
transportation markets.
Outlook
The global economic environment has continued
to show signs of volatility and uncertainty remains. In the U.S.,
economic growth remains slow, and the Canadian and European
economies remain weak. Economic growth continues to decelerate in
China and other parts of
Asia. A prolonged or more
significant downturn in an economy where the Company operates could
negatively impact Order Bookings and may add to volatility in Order
Bookings.
Many customers remain cautious in their approach to capital
investment. Funnel activity in life sciences has remained strong
and funnel activity in the transportation market has seen some
reduction. Opportunities in energy markets are sporadic. Funnel
activity in the consumer products and electronics market has
improved; however, it remains low relative to other customer
markets. Overall, despite some reduction in transportation markets,
the Company's funnel remains significant and proposal activity is
robust; however, conversion of opportunities into Order Bookings is
variable.
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 and the timing of
customer decisions on larger opportunities 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
$610 million at the end of the first
quarter of fiscal 2017 to mitigate the impact of volatile Order
Bookings on revenues in the short term. In the second quarter of
fiscal 2017, management expects Order Backlog conversion to be in
higher end of the 35% to 40% range. The expected conversion rate is
based on programs in Order Backlog and management's estimate of
revenues from new Order Bookings in the quarter. Based on the
Company's current Order Backlog, management believes it has the
appropriate cost structure to deliver on its programs going
forward.
The Company's efforts to expand its after-sales service offering
is expected to provide some balance to its exposure to the capital
expenditure cycle of its customers. However, the intended ramp-up
of the Company's after-sales service revenues may not offset
capital spending volatility in the short-term.
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 (In millions of dollars, except per share
data)
|
|
|
|
Three
|
Three
|
|
Months
|
Months
|
|
Ended
|
Ended
|
|
July 3,
2016
|
June 28,
2015
|
Revenues
|
$
|
265.4
|
$
|
254.3
|
Cost of
revenues
|
|
200.6
|
|
193.3
|
Selling, general and
administrative
|
|
41.3
|
|
41.0
|
Stock-based
compensation
|
|
0.9
|
|
2.5
|
Earnings from
operations
|
$
|
22.6
|
$
|
17.5
|
Net finance
costs
|
$
|
6.6
|
$
|
4.4
|
Provision for income
taxes
|
|
3.9
|
|
3.3
|
Net
income
|
$
|
12.1
|
$
|
9.8
|
Basic and diluted
earnings per share
|
$
|
0.13
|
$
|
0.11
|
Revenues. At $265.4
million, consolidated revenues for the first quarter of
fiscal 2017 were $11.1 million or 4%
higher than the corresponding period a year ago. See "Overview –
Operating Results."
Cost of revenues. At $200.6
million, first quarter fiscal 2017 cost of revenues
increased compared to the corresponding period a year ago by
$7.3 million or 4% primarily on
higher revenues. Gross margin was 24% for the first quarter of
fiscal 2017 and the first quarter of fiscal 2016. Gross margins in
the first quarter of fiscal 2017 were tempered by lower utilization
in certain divisions due primarily to the timing of Order
Bookings. A number of programs with higher third-party
material content accounted for a larger percentage of revenues.
Gross margins in the first quarter a year ago were negatively
impacted by some lower margin programs which were bid and executed
by the Company and certain programs where costs exceeded
budgets.
Selling, general and administrative ("SG&A")
expenses. SG&A expenses for the first quarter of
fiscal 2017 were $41.3 million, which
included $5.3 million of expenses
related to the amortization of identifiable intangible assets
recorded on the acquisitions of PA, IWK, and sortimat. Excluding
these costs, SG&A expenses were $36.0
million in the first quarter of fiscal 2017. Comparably,
SG&A expenses for the first quarter of fiscal 2016 were
$31.1 million, which excluded
$7.7 million of expenses related to
the amortization of identifiable intangible assets recorded on the
acquisitions of PA, IWK, ATW and sortimat, and $2.2 million of restructuring and severance
costs. Higher SG&A expenses in the first quarter of fiscal 2017
primarily reflected higher professional fees and foreign exchange
rate changes which increased the translation of reported SG&A
expenses of foreign-based subsidiaries due to the weakening of the
Canadian dollar relative to the U.S. dollar and Euro.
Stock-based compensation. Stock-based compensation
expense amounted to $0.9 million in
the first quarter of fiscal 2017 compared to $2.5 million in the corresponding period a year
ago.
The decrease in stock-based compensation costs was attributable
to lower expenses from stock options and the revaluation of
deferred stock units, share appreciation rights, and restricted
share units.
Earnings from operations. For the first quarter of
fiscal 2017, consolidated earnings from operations were
$22.6 million (9% operating margin)
compared to earnings from operations of $17.5 million (7% operating margin) in the
corresponding period a year ago. See "Overview – Operating
Results."
Net finance costs. Net finance costs were
$6.6 million in the first quarter of
fiscal 2017, $2.2 million higher than
the corresponding period a year ago. The increase reflected
interest on the Company's Senior Notes, which were issued in
June 2015 (see "Liquidity, Cash Flow
and Financial Resources").
Income tax provision. For the three months ended
July 3, 2016, the Company's effective
tax rate of 24% 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 its effective tax rate to continue to be
in the range of 25%.
Net income. Fiscal 2017 first quarter net income was
$12.1 million (13 cents per share basic and diluted) compared to
$9.8 million (11 cents per share basic and diluted) for the
first quarter of fiscal 2016. Adjusted basic earnings per
share were 17 cents in the first
quarter of fiscal 2017 compared to 18
cents for the first quarter of fiscal 2016. See
"Reconciliation of Non-IFRS Measures to IFRS Measures."
Reconciliation of Non-IFRS Measures to IFRS
Measures
(In millions of dollars, except per share data)
The following table reconciles EBITDA to the most directly
comparable IFRS measure (net income):
|
|
Three
|
Three
|
|
|
Months
|
Months
|
|
|
Ended
|
Ended
|
|
|
July 3,
2016
|
June 28,
2015
|
EBITDA
|
$
|
31.5
|
$
|
28.7
|
Less: depreciation
and amortization expense
|
|
8.9
|
|
11.2
|
Earnings from
operations
|
$
|
22.6
|
$
|
17.5
|
Less: net finance
costs
|
|
6.6
|
|
4.4
|
Provision for income
taxes
|
|
3.9
|
|
3.3
|
Net
income
|
$
|
12.1
|
$
|
9.8
|
The following table reconciles adjusted earnings from operations
and adjusted basic earnings per share to the most directly
comparable IFRS measure (net income and basic earnings per share
respectively):
|
Three Months Ended
July 3, 2016
|
Three Months Ended
June 28, 2015
|
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
Earnings from
operations
|
$
|
22.6
|
$
|
─
|
$
|
22.6
|
$
|
17.5
|
$
|
─
|
$
|
17.5
|
Amortization of
acquisition-related intangible assets
|
|
─
|
|
5.3
|
|
5.3
|
|
─
|
|
7.7
|
|
7.7
|
Restructuring
charges
|
|
─
|
|
─
|
|
─
|
|
─
|
|
2.2
|
|
2.2
|
|
$
|
22.6
|
$
|
5.3
|
$
|
27.9
|
$
|
17.5
|
$
|
9.9
|
$
|
27.4
|
Less: net finance
costs
|
$
|
6.6
|
$
|
─
|
$
|
6.6
|
$
|
4.4
|
$
|
─
|
$
|
4.4
|
Income before
income taxes
|
$
|
16.0
|
$
|
5.3
|
$
|
21.3
|
$
|
13.1
|
$
|
9.9
|
$
|
23.0
|
Provision for income
taxes
|
$
|
3.9
|
$
|
─
|
$
|
3.9
|
$
|
3.3
|
$
|
─
|
$
|
3.3
|
Adjustment to
provision for income taxes1
|
|
─
|
|
1.6
|
|
1.6
|
|
─
|
|
3.0
|
|
3.0
|
|
$
|
3.9
|
$
|
1.6
|
$
|
5.5
|
$
|
3.3
|
$
|
3.0
|
$
|
6.3
|
Net
income
|
$
|
12.1
|
$
|
3.7
|
$
|
15.8
|
$
|
9.8
|
$
|
6.9
|
$
|
16.7
|
Basic earnings per
share
|
$
|
0.13
|
$
|
0.04
|
$
|
0.17
|
$
|
0.11
|
$
|
0.07
|
$
|
0.18
|
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.
|
LIQUIDITY, CASH
FLOW AND FINANCIAL RESOURCES (In millions of dollars,
except ratios)
|
|
|
|
|
|
|
|
|
|
|
|
July
3
|
|
March 31
|
As at
|
|
2016
|
|
2016
|
Cash and cash
equivalents
|
$
|
222.5
|
$
|
170.0
|
Debt-to-equity
ratio
|
|
0.54:1
|
|
0.56:1
|
|
|
|
|
|
|
|
|
|
|
|
|
July
3
|
|
June 28
|
For the three months
ended
|
|
2016
|
|
2015
|
Cash flows provided
by (used in) operating activities
|
$
|
57.5
|
$
|
(9.3)
|
At July 3, 2016, the Company had
cash and cash equivalents of $222.5
million compared to $170.0
million at March 31, 2016. At
July 3, 2016, the Company's
debt-to-total-equity ratio was 0.54:1.
At July 3, 2016, the Company had
$651.2 million of unutilized
multipurpose credit, including letters of credit, available under
existing credit facilities and another $3.9
million available under letter of credit facilities.
In the first quarter of fiscal 2017, cash flows provided by
operating activities were $57.5
million ($9.3 million used by
operating activities in the first quarter of fiscal 2016). The
increase in operating cash flows related primarily to the timing of
investments in non-cash working capital in large customer
programs.
In the first quarter of fiscal 2017, the Company's investment in
non-cash working capital decreased by $36.6
million from March 31, 2016.
Accounts receivable decreased 22% or $42.4
million due to timing of billings on certain customer
contracts and improved collections. Net contracts in progress
decreased 2% or $1.8 million compared
to March 31, 2016 due to timing of
program activity. 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 $2.5 million primarily due to the timing of
inventory purchases. Deposits and prepaid assets increased 30% or
$6.7 million compared to March 31, 2016 due to the timing of program
execution. Accounts payable and accrued liabilities decreased 1% or
$1.5 million compared to March 31, 2016. Provisions decreased 3% or
$0.6 million compared to March 31, 2016.
Capital expenditures totalled $1.8
million in the first quarter of fiscal 2017, primarily
related to computer hardware.
Intangible assets expenditures were $1.4
million in the first quarter of fiscal 2017, primarily
related to computer software and various internal development
projects.
The Company's U.S. $250.0 million
aggregate principal amount of 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.
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. Transaction fees of $7.2
million were deferred and are being amortized over the term
of the Senior Notes.
The Company's senior secured credit facility (the "Credit
Facility") provides a 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 July 3, 2016 the Company had utilized
$102.8 million under the Credit
Facility by way of letters of credit (March
31, 2016 - $115.1
million). 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 as
defined in the Credit Facility. 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
July 3, 2016, all of the covenants
were met.
The Company has additional credit facilities available of
$12.4 million (3.6 million Euro, 275.0
million Indian Rupees, 50.0 million
Thai Baht and 0.9 million Czech Koruna). The total amount
outstanding on these facilities at July 3,
2016 was $8.4 million, of
which $1.5 million was classified as
bank indebtedness (March 31, 2016 -
$2.3 million) and $6.9 million was classified as long-term debt
(March 31, 2016 - $7.1 million). The interest rates applicable to
the credit facilities range from 1.66% to 10.00% per annum. A
portion of the long-term debt is secured by certain assets of the
Company. The 275.0 million Indian
Rupees and the 50.0 million Thai
Baht credit facilities are secured by letters of credit
under the Credit Facility.
Over the long term, the Company generally expects to continue
increasing its overall investment in non-cash working capital to
support the growth of its business, with fluctuations on a
quarter-over-quarter basis. The Company's goal is to maintain its
investment in non-cash working capital as a percentage of
annualized revenues at a level below 15%. 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 non-cash 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 continue to use leverage to support its growth
strategy.
Contractual Obligations
(In millions of dollars)
The Company's minimum operating lease payments (related
primarily to facilities and equipment) and purchase obligations are
as follows:
|
Operating
|
Purchase
|
|
leases
|
obligations
|
Less than one
year
|
$
|
9.3
|
$
|
82.7
|
One – two
years
|
|
7.8
|
|
3.3
|
Two – three
years
|
|
6.6
|
|
0.1
|
Three – four
years
|
|
5.9
|
|
0.1
|
Four – five
years
|
|
5.4
|
|
0.1
|
Due in over five
years
|
|
6.8
|
|
––
|
|
$
|
41.8
|
$
|
86.3
|
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 commitments for material
purchases.
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 letters of credit as security for advances
received from customers pending delivery and contract performance.
In addition, the Company provides letters of credit for
post-retirement obligations and may provide letters of credit as
security on equipment under lease and on order. At
July 3, 2016, the total value of
outstanding letters of credit was approximately $123.2 million (March 31,
2016 - $137.0 million).
In the normal course of operations, the Company is party to a
number of lawsuits, claims and contingencies. Although it is
possible that liabilities may be incurred in instances for which no
accruals have been made, the Company does not believe that the
ultimate outcome of these matters will have a material impact on
its consolidated financial position.
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 7 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 obtains
insurance in certain instances.
During the first quarter of fiscal 2017, 64,750 stock options
were exercised. At August 16,
2016 the total number of shares outstanding was
92,358,109 and there were 3,649,616 stock options
outstanding to acquire common shares of the Company.
Normal Course Issuer Bid
On November 4, 2015, the Company announced that the
Toronto Stock Exchange ("TSX") had accepted a notice filed by the
Company of its intention to make a normal course issuer bid
("NCIB"). Under the NCIB, ATS has the ability to purchase for
cancellation up to a maximum of 4,600,000 common shares,
representing approximately 5% of the 92,541,582 common shares that
were issued and outstanding as of October
31, 2015.
As at July 3, 2016, the Company
had purchased 481,473 common shares for $6.0
million under the NCIB. The weighted average price per share
repurchased was $12.45. No purchases
were made during the first quarter of fiscal 2017. ATS security
holders may obtain a copy of the notice, without charge, upon
request from the Secretary of the Company.
RELATED PARTY TRANSACTIONS
The Company has 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, a member of the
Company's Board of Directors who is associated with Mason Capital
has waived any fees to which he may have otherwise been entitled
for serving as a member of the Board of Directors or as a member of
any committee of the Board of Directors.
There were no significant related party transactions during the
first quarter of fiscal 2017.
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, through borrowings
made by the Company in currencies other than its functional
currency 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
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.
The Company uses cross-currency swaps as derivative financial
instruments to hedge a portion of its foreign exchange risk related
to its U.S.-dollar-denominated Senior Notes. On March 29, 2016 the Company entered into a
cross-currency interest rate swap instrument to swap U.S.
$150.0 million into Canadian
dollars. The Company will receive interest of 6.50% U.S. per
annum and pay interest of 6.501% Canadian. The terms of the
hedging relationship will end on June 15,
2023.
The Company manages foreign exchange risk on its Euro
denominated net investments. The Company uses a
cross-currency swap as derivative financial instruments to hedge a
portion of the foreign exchange risk related to its
Euro-denominated net investment. On March 29, 2016, the Company entered into a
cross-currency swap instrument to swap 134.1
million Euro into Canadian dollars. The Company will
receive interest of 6.501% Canadian per annum and pay interest of
5.094% Euro. The terms of the hedging relationship will end
on June 15, 2023. As a result of the
cross currency interest rate swap instruments, the Company expects
its interest expenses to be reduced by approximately U.S.
$2 million per annum from the coupon
rate of the Senior Notes.
In addition, from time to time, the Company may hedge the
foreign exchange risk arising from foreign currency debt,
intercompany loans, net investments in foreign-based subsidiaries
and committed acquisitions through the use of forward foreign
exchange contracts or other non-derivative financial instruments.
The Company uses hedging as a risk management tool, not to
speculate. See note 7 to the interim condensed consolidated
financial statements for details on the derivative financial
instruments outstanding at July 3,
2016.
|
|
Period average
exchange rates in CDN$
|
|
|
Three months
ended
|
|
|
July 3,
2016
|
June 28,
2015
|
% change
|
U.S.
Dollar
|
1.2883
|
1.2286
|
4.9%
|
Euro
|
1.4554
|
1.3600
|
7.0%
|
CONSOLIDATED QUARTERLY RESULTS
(In millions of
dollars, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
Q1
|
|
Q4
|
|
Q3
|
|
Q2
|
|
|
2017
|
|
2016
|
|
2016
|
|
2016
|
|
2016
|
|
2015
|
|
2015
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from
continuing
operations
|
$
|
265.4
|
$
|
246.8
|
$
|
274.9
|
$
|
263.7
|
$
|
254.3
|
$
|
289.4
|
$
|
248.8
|
$
|
207.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
$
|
22.6
|
$
|
8.1
|
$
|
26.8
|
$
|
24.4
|
$
|
17.5
|
$
|
22.6
|
$
|
15.9
|
$
|
14.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
from
operations
|
$
|
27.9
|
$
|
23.2
|
$
|
32.1
|
$
|
31.7
|
$
|
27.4
|
$
|
34.7
|
$
|
27.2
|
$
|
27.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing
operations
|
$
|
12.1
|
$
|
1.4
|
$
|
15.5
|
$
|
12.8
|
$
|
9.8
|
$
|
13.9
|
$
|
8.6
|
$
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from
discontinued operations
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
2.2
|
$
|
(0.0)
|
$
|
7.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
12.1
|
$
|
1.4
|
$
|
15.5
|
$
|
12.8
|
$
|
9.8
|
$
|
16.1
|
$
|
8.6
|
$
|
14.5
|
Basic earnings per
share
from continuing operations
|
$
|
0.13
|
$
|
0.02
|
$
|
0.16
|
$
|
0.14
|
$
|
0.11
|
$
|
0.15
|
$
|
0.09
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basic
earnings per
share from continuing
operations
|
$
|
0.17
|
$
|
0.14
|
$
|
0.21
|
$
|
0.19
|
$
|
0.18
|
$
|
0.24
|
$
|
0.18
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
from discontinued operations
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
0.03
|
$
|
(0.00)
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.13
|
$
|
0.02
|
$
|
0.16
|
$
|
0.14
|
$
|
0.11
|
$
|
0.18
|
$
|
0.09
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
from continuing operations
|
$
|
0.13
|
$
|
0.02
|
$
|
0.16
|
$
|
0.14
|
$
|
0.11
|
$
|
0.15
|
$
|
0.09
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per
share from discontinued
operations
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
0.03
|
$
|
(0.00)
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
$
|
0.13
|
$
|
0.02
|
$
|
0.16
|
$
|
0.14
|
$
|
0.11
|
$
|
0.18
|
$
|
0.09
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order
Bookings
|
$
|
239.0
|
$
|
390.0
|
$
|
228.0
|
$
|
230.0
|
$
|
222.0
|
$
|
317.0
|
$
|
287.0
|
$
|
216.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order
Backlog
|
$
|
610.0
|
$
|
652.0
|
$
|
546.0
|
$
|
589.0
|
$
|
590.0
|
$
|
632.0
|
$
|
602.0
|
$
|
561.0
|
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.
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. 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.
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 described in the Company's fiscal 2016
MD&A.
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 July 3,
2016, 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: potential impact of
general economic environment, including impact on Order Bookings;
activity in the markets 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 expected
impact of the sales organization's approach to market on Order
Bookings, performance period, and timing of revenue recognition;
the Company's Order Backlog partially mitigating the impact of
volatility in Order Bookings; the rate of completion of Order
Backlog; appropriateness of the cost structure; the Company's
efforts to expand after-sales services and the expected impact; the
Company's strategy to expand organically and through acquisition;
the Company's expectation with respect to effective tax rate; the
Company's goal with respect to non-cash working capital as a
percentage of revenues; expectation in relation to meeting funding
requirements for investments; expectation to use leverage to
support growth strategy; the Company's belief with respect to the
outcome of certain lawsuits, claims and contingencies; and the
Company's expectation with respect to a reduction of interest
expense resulting from an interest rate swap. 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 markets 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; timing of customer decisions related to large
enterprise programs and potential for greater negative impact
associated with any non-performance in relation thereto; variations
in the amount of Order Backlog completed in any given quarter; that
the current cost structure is underutilized due to customer delays,
cancellations or other causes; that revenues from after-sales
services are insufficient to offset capital spending volatility;
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 effective tax rate is other
than expected, due to reasons including income spread among
jurisdictions being other than anticipated; non-cash working
capital as a percentage of revenues operating at a level other than
as expected due to reasons, including, the timing and nature of
Order Bookings, the timing of payment milestones and payment terms
in customer contracts, and delays in customer programs; risk that
the ultimate outcome of lawsuits, claims, and contingencies give
rise to material liabilities for which no accruals have been made;
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)
|
|
|
|
|
|
|
|
|
|
|
July
3
|
|
March 31
|
|
As at
|
Note
|
|
2016
|
|
2016
|
|
|
|
|
|
|
|
|
ASSETS
|
9
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
222,532
|
$
|
170,034
|
|
Accounts
receivable
|
|
|
153,472
|
|
195,911
|
|
Costs and earnings in
excess of billings on contracts in progress
|
4
|
|
216,858
|
|
202,694
|
|
Inventories
|
4
|
|
43,747
|
|
46,200
|
|
Deposits, prepaids
and other assets
|
5
|
|
29,024
|
|
22,324
|
|
|
|
|
665,633
|
|
637,163
|
|
Non-current
assets
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
69,610
|
|
71,060
|
|
Other
assets
|
6
|
|
10,276
|
|
4,211
|
|
Goodwill
|
|
|
423,963
|
|
431,747
|
|
Intangible
assets
|
|
|
167,470
|
|
177,065
|
|
Deferred income tax
assets
|
|
|
2,233
|
|
2,534
|
|
Investment tax credit
receivable
|
|
|
44,936
|
|
43,683
|
|
|
|
|
718,488
|
|
730,300
|
|
Total
assets
|
|
$
|
1,384,121
|
$
|
1,367,463
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Bank
indebtedness
|
9
|
$
|
1,546
|
$
|
2,319
|
|
Accounts payable and
accrued liabilities
|
|
|
177,281
|
|
178,826
|
|
Provisions
|
8
|
|
19,673
|
|
20,267
|
|
Billings in excess of
costs and earnings on contracts in progress
|
4
|
|
142,113
|
|
126,127
|
|
Current portion of
long-term debt
|
9
|
|
5,227
|
|
5,259
|
|
|
|
|
345,840
|
|
332,798
|
|
Non-current
liabilities
|
|
|
|
|
|
|
Employee
benefits
|
|
|
27,801
|
|
28,252
|
|
Long-term
debt
|
9
|
|
314,812
|
|
316,120
|
|
Deferred income tax
liabilities
|
|
|
39,380
|
|
39,740
|
|
|
|
|
381,993
|
|
384,112
|
|
Total
liabilities
|
|
$
|
727,833
|
$
|
716,910
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
9, 13
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
Share
capital
|
10
|
$
|
528,944
|
$
|
528,184
|
|
Contributed
surplus
|
|
|
13,568
|
|
13,201
|
|
Accumulated other
comprehensive income
|
|
|
60,826
|
|
68,319
|
|
Retained
earnings
|
|
|
52,728
|
|
40,634
|
|
Equity attributable
to shareholders
|
|
|
656,066
|
|
650,338
|
|
Non-controlling
interests
|
|
|
222
|
|
215
|
|
Total
equity
|
|
|
656,288
|
|
650,553
|
|
Total liabilities
and equity
|
|
$
|
1,384,121
|
$
|
1,367,463
|
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim Consolidated Statements of Income (in thousands of
Canadian dollars, except per share amounts - unaudited)
|
|
|
|
|
|
|
|
|
|
July
3
|
|
June 28
|
For the three months
ended
|
Note
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Revenues from
construction contracts
|
|
$
|
164,940
|
$
|
151,450
|
|
Sale of
goods
|
|
|
18,584
|
|
20,389
|
|
Services
rendered
|
|
|
81,828
|
|
82,425
|
|
|
|
|
|
|
Total
revenues
|
|
|
265,352
|
|
254,264
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
200,557
|
|
193,301
|
|
Selling, general and
administrative
|
|
|
41,328
|
|
40,951
|
|
Stock-based
compensation
|
12
|
|
869
|
|
2,544
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
22,598
|
|
17,468
|
|
|
|
|
|
|
Net finance
costs
|
15
|
|
6,640
|
|
4,346
|
|
|
|
|
|
|
Income before
income taxes
|
|
|
15,958
|
|
13,122
|
|
|
|
|
|
|
Income tax
expense
|
11
|
|
3,857
|
|
3,274
|
|
|
|
|
|
|
Net
income
|
|
$
|
12,101
|
$
|
9,848
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
Shareholders
|
|
$
|
12,094
|
$
|
9,839
|
Non-controlling
interests
|
|
|
7
|
|
9
|
|
|
$
|
12,101
|
$
|
9,848
|
|
|
|
|
|
|
Earnings per share
attributable to shareholders
|
16
|
|
|
|
|
Basic and
diluted
|
|
$
|
0.13
|
$
|
0.11
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim Consolidated Statements of Comprehensive Income (in
thousands of Canadian dollars - unaudited)
|
|
|
|
|
|
|
|
July
3
|
|
June 28
|
For the three months
ended
|
|
2016
|
|
2015
|
|
|
|
|
|
Net
income
|
$
|
12,101
|
$
|
9,848
|
|
|
|
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
Items to be
reclassified subsequently to net income:
|
|
|
|
|
|
|
|
|
|
|
Currency translation
adjustment (net of income taxes of $nil)
|
|
(6,555)
|
|
(4,676)
|
|
|
|
|
|
|
Net unrealized gain
(loss) on derivative financial instruments designated as cash flow
hedges
|
|
(613)
|
|
581
|
|
Tax impact
|
|
183
|
|
(162)
|
|
|
|
|
|
|
Loss (gain)
transferred to net income for derivatives designated as cash flow
hedges
|
|
(310)
|
|
1,141
|
|
Tax impact
|
|
78
|
|
(292)
|
|
|
|
|
|
|
Cash flow hedge
reserve adjustment
|
|
(368)
|
|
––
|
|
Tax impact
|
|
92
|
|
––
|
|
|
|
|
|
Other
comprehensive loss
|
|
(7,493)
|
|
(3,408)
|
|
|
|
|
|
Comprehensive
income
|
$
|
4,608
|
$
|
6,440
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
Shareholders
|
$
|
4,601
|
$
|
6,431
|
Non-controlling
interests
|
|
7
|
|
9
|
|
$
|
4,608
|
$
|
6,440
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim Consolidated Statements of Changes in Equity (in
thousands of Canadian dollars - unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
July 3, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
Contributed
surplus
|
|
Retained
earnings
|
|
Currency
translation
adjustments
|
|
Cash flow
hedge reserve
|
|
Total
accumulated
other
comprehensive
income
|
|
Non-
controlling
interests
|
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at
March 31, 2016
|
$
|
528,184
|
$
|
13,201
|
$
|
40,634
|
$
|
66,482
|
$
|
1,837
|
$
|
68,319
|
$
|
215
|
$
|
650,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
––
|
|
––
|
|
12,094
|
|
––
|
|
––
|
|
––
|
|
7
|
|
12,101
|
Other comprehensive
loss
|
|
––
|
|
––
|
|
––
|
|
(6,555)
|
|
(938)
|
|
(7,493)
|
|
––
|
|
(7,493)
|
Total comprehensive
income (loss)
|
|
––
|
|
––
|
|
12,094
|
|
(6,555)
|
|
(938)
|
|
(7,493)
|
|
7
|
|
4,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
––
|
|
601
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
601
|
Exercise of stock
options
|
|
760
|
|
(234)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at
July 3, 2016
|
$
|
528,944
|
$
|
13,568
|
$
|
52,728
|
$
|
59,927
|
$
|
899
|
$
|
60,826
|
$
|
222
|
$
|
656,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 28, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
Contributed
surplus
|
|
Retained
earnings
|
|
Currency
translation
adjustments
|
|
Cash flow
hedge reserve
|
|
Total
accumulated
other
comprehensive
income
|
|
Non-
controlling
interests
|
|
Total
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as 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, as at June
28, 2015
|
$
|
528,070
|
$
|
12,861
|
$
|
13,429
|
$
|
31,026
|
$
|
(1,000)
|
$
|
30,026
|
$
|
179
|
$
|
584,565
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim Consolidated Statements of Cash Flows (in thousands
of Canadian dollars - unaudited)
|
|
|
|
|
|
|
|
|
|
July
3
|
|
June
28
|
Three months
ended
|
Note
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Income
|
|
$
|
12,101
|
$
|
9,848
|
Items not involving
cash
|
|
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
|
2,299
|
|
2,305
|
|
Amortization of
intangible assets
|
|
|
6,612
|
|
8,843
|
|
Deferred income
taxes
|
11
|
|
1,457
|
|
(1,644)
|
|
Other items not
involving cash
|
|
|
(2,416)
|
|
(4,354)
|
|
Stock-based
compensation
|
12
|
|
869
|
|
2,544
|
|
Loss (gain) on
disposal of property, plant and equipment
|
|
|
4
|
|
(4)
|
|
|
|
20,926
|
|
17,538
|
Change in non-cash
operating working capital
|
|
|
36,598
|
|
(26,800)
|
Cash flows
provided by (used in) operating
activities
|
|
$
|
57,524
|
$
|
(9,262)
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
|
$
|
(1,846)
|
$
|
(2,768)
|
Acquisition of
intangible assets
|
|
|
(1,437)
|
|
(1,094)
|
Proceeds from
disposal of property, plant and
equipment
|
|
|
31
|
|
34
|
Proceeds from sale of
subsidiary
|
|
|
––
|
|
2,274
|
Cash flows used in
investing
activities
|
|
$
|
(3,252)
|
$
|
(1,554)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Bank
indebtedness
|
|
$
|
(755)
|
$
|
254
|
Repayment of
long-term debt
|
|
|
(144)
|
|
(290,055)
|
Proceeds from
long-term debt
|
|
|
66
|
|
302,517
|
Issuance of common
shares
|
|
|
526
|
|
6,739
|
Cash flows
provided by (used in) financing
activities
|
|
$
|
(307)
|
$
|
19,455
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
(1,467)
|
|
(2,073)
|
|
|
|
|
|
|
Increase in cash and
cash equivalents
|
|
|
52,498
|
|
6,566
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of year
|
|
|
170,034
|
|
106,526
|
|
|
|
|
|
|
Cash and cash
equivalents, end of year
|
|
$
|
222,532
|
$
|
113,092
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
Cash income taxes
paid
|
|
$
|
4,405
|
$
|
3,598
|
Cash interest
paid
|
|
$
|
11,236
|
$
|
3,428
|
SOURCE ATS Automation Tooling Systems Inc.