CAMBRIDGE, ON, May 17, 2018 /CNW/ - ATS Automation Tooling
Systems Inc. (TSX: ATA) ("ATS" or the "Company") today
reported financial results for the three and 12 months ended
March 31, 2018.
Fourth quarter and annual summary
- Fourth quarter revenues were $298.4
million, 12% higher than a year ago. Annual revenues were
$1,114.9 million, 10% higher than the
prior year.
- Fourth quarter earnings from operations were $25.5 million (9% operating margin), compared to
$16.8 million (6% operating margin) a
year ago. Annual earnings from operations were $85.5 million (8% margin) compared to
$71.9 million (7% margin) for the
prior year.
- Fourth quarter adjusted earnings from operations1
were $32.8 million (11% margin),
compared to $24.5 million (9% margin)
in the fourth quarter a year ago. Annual adjusted earnings from
operations were $117.3 million (11%
margin) compared to adjusted earnings from operations of
$97.1 million (10% margin) for the
prior year.
- Fourth quarter EBITDA1 was $34.8 million (12% margin), compared to
$25.6 million (10% margin) in the
fourth quarter of fiscal 2017. Annual EBITDA was $122.1 million (11% margin), compared to
$106.5 million (11% margin) in fiscal
2017.
- Fourth quarter earnings per share were 16 cents basic and diluted compared to
8 cents basic and diluted a year ago.
Fourth quarter adjusted basic earnings per share1 were
22 cents compared to 15 cents in the fourth quarter a year ago. Annual
earnings per share were 50 cents
basic and diluted compared to 38
cents basic and diluted for the year. Annual adjusted basic
earnings per share1 were 74
cents compared to 57 cents in
the prior year.
- Fourth quarter Order Bookings were $348
million, an 8% increase from the fourth quarter of fiscal
2017. Annual Order Bookings were $1,182
million, a 4% increase from $1,134
million in the prior year.
- Period end Order Backlog was a record $746 million, 10% higher than at March 31, 2017.
- The Company's balance sheet and financial capacity to support
growth remained strong, with unutilized credit facilities of
$656.3 million.
1
|
Non-IFRS measure: see
"Notice to reader: Non-IFRS measures and additional IFRS
measures".
|
"Our financial value drivers including Order Bookings, revenues,
operating margins and Order Backlog improved in both fiscal 2018
and in the fourth quarter," said Andrew
Hider, Chief Executive Officer. "During the year, ATS added
new customer relationships, supported our traditionally high level
of business from repeat customers and deployed the ATS Business
Model – the ABM. Our record Order Backlog, the on-going
development of the ABM, and our strong balance sheet provide a
solid platform as we work to drive continued growth and improvement
in our business, with the goal of delivering long term shareholder
value."
Financial results
|
3 months
ended
March
31,
2018
|
3 months
ended
March 31,
2017
|
12 months
ended
March
31,
2018
|
12 months
ended
March 31,
2017
|
Revenues
|
$
|
298.4
|
$
|
265.7
|
$
|
1,114.9
|
$
|
1,010.9
|
Earnings from
operations
|
$
|
25.5
|
$
|
16.8
|
$
|
85.5
|
$
|
71.9
|
Adjusted earnings
from operations1
|
$
|
32.8
|
$
|
24.5
|
$
|
117.3
|
$
|
97.1
|
EBITDA1
|
$
|
34.8
|
$
|
25.6
|
$
|
122.1
|
$
|
106.5
|
Net
income
|
$
|
15.0
|
$
|
7.8
|
$
|
47.2
|
$
|
35.0
|
Adjusted basic
earnings per share1
|
$
|
0.22
|
$
|
0.15
|
$
|
0.74
|
$
|
0.57
|
Basic and diluted
earnings per share
|
$
|
0.16
|
$
|
0.08
|
$
|
0.50
|
$
|
0.38
|
1 Non-IFRS
measure: see "Notice to reader: Non-IFRS measures and additional
IFRS measures".
|
Fourth quarter summary
Fiscal 2018 fourth quarter
revenues were 12% higher than in the corresponding period a year
ago. Higher revenues primarily reflected higher Order Backlog
entering the fourth quarter of fiscal 2018 compared to a year ago
and higher Order Bookings in the fourth quarter. Foreign exchange
rate changes positively impacted the translation of revenues earned
by foreign-based subsidiaries by approximately 3% compared to the
corresponding period a year ago, primarily reflecting the weakening
of the Canadian dollar relative to the Euro.
By market, fiscal 2018 fourth quarter revenues from the consumer
products & electronics and energy markets increased 33% and
167% respectively, due to higher Order Backlog entering the fourth
quarter of fiscal 2018. Revenues in the life sciences market
increased 4%, primarily due to the timing of Order Bookings.
Transportation revenues decreased 14% compared to a year ago,
primarily due to lower activity compared to the previous year.
Fiscal 2018 fourth quarter earnings from operations were
$25.5 million (9% operating margin)
compared to $16.8 million (6%
operating margin) in the fourth quarter of fiscal 2017. Fourth
quarter fiscal 2018 earnings from operations included $2.2 million of restructuring costs primarily
related to the previously announced closure of a U.S. facility and
$5.1 million related to amortization
of identifiable intangible assets recorded on the acquisitions of
PA, IWK and sortimat. Included in fourth quarter fiscal 2017
earnings from operations was a share purchase allowance of
$2.9 million, which was paid to the
Company's Chief Executive Officer as an inducement to join the
Company, and $4.8 million related to
amortization of identifiable intangible assets recorded on the
acquisitions of PA, IWK and sortimat. Excluding these items, fourth
quarter fiscal 2018 adjusted earnings from operations were
$32.8 million (11% margin), compared
to adjusted earnings from operations of $24.5 million (9% margin) a year ago. Higher
adjusted earnings from operations primarily reflected higher
revenues and improved gross margin, partially offset by higher
selling, general and administrative expenses and increased stock
compensation expenses.
Depreciation and amortization expense was $9.3 million in the fourth quarter of fiscal
2018, compared to $8.8 million a year
ago. The increase primarily reflected depreciation of internal
development projects.
EBITDA was $34.8 million (12%
EBITDA margin) in the fourth quarter of fiscal 2018 compared to
$25.6 million (10% EBITDA margin) in
the fourth quarter of fiscal 2017. Higher revenues in the fourth
quarter of fiscal 2018 were partially offset by higher selling,
general and administrative expenses compared to a year ago.
Excluding restructuring costs, fourth quarter fiscal 2018 EBITDA
was $37.0 million (12% EBITDA
margin). Comparably, excluding the share purchase allowance, fourth
quarter fiscal 2017 EBITDA was $28.5
million (11% EBITDA margin).
Order Bookings
Fourth quarter fiscal 2018 Order
Bookings were $348 million, an 8%
increase from the fourth quarter of fiscal 2017. By customer
market, higher Order Bookings in the consumer products &
electronics and life sciences markets were partially offset by
lower Order Bookings in the energy and transportation markets.
Foreign exchange rate changes positively impacted the translation
of Order Bookings from foreign-based ATS subsidiaries by
approximately 4% compared to the corresponding period a year
ago.
Order Backlog
At March 31,
2018, Order Backlog was a record $746
million, 10% higher than at March 31,
2017. Higher Order Backlog was driven primarily by higher
Order Bookings in the consumer products & electronics market.
Foreign exchange rate changes also positively impacted the
translation of Order Backlog from foreign-based ATS subsidiaries by
approximately 5% compared to fiscal 2017.
Quarterly conference call
ATS' quarterly conference
call begins at 10:00 a.m. eastern on
Thursday May 17, 2018, 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 7397424 followed by
the number sign.
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 3,800 people at 20
manufacturing facilities and over 50 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 Year
Ended March 31, 2018
This Management's Discussion and Analysis ("MD&A") for
the year ended March 31, 2018 (fiscal
2018) is as of May 16,
2018 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 audited consolidated financial statements of
the Company for fiscal 2018, which have been prepared in accordance
with International Financial Reporting Standards ("IFRS") and are
reported in Canadian dollars. 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. The
terms "operating margin", "EBITDA", "EBITDA margin", "adjusted net
income", "adjusted earnings from operations", "adjusted basic
earnings per share", "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 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 is defined as adjusted net income on a basic per
share basis, where adjusted net income 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 (including adjusted net income) 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' 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 provide 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.
A reconciliation of (i) earnings from operations and EBITDA to
net income, and (ii) adjusted earnings from operations to earnings
from operations, adjusted net income to net income and adjusted
basic earnings per share to basic earnings per share, in each case
for the three- and 12-month periods ended March 31, 2018 and March
31, 2017, 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-
and 12-month periods ending March 31,
2018 and March 31, 2017 is
also contained in this 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 3,800 people at 20
manufacturing facilities and over 50 offices in North America, Europe, Southeast
Asia and China.
STRATEGY
Framework
To drive the creation of
long-term sustainable shareholder value, the Company has developed
a framework for a three-part value creation strategy: Build, Grow
and Expand.
Build: To build on the Company's foundation and drive
performance improvements, management is focused on strategic
initiatives including the advancement of the ATS Business Model
("ABM"), the implementation and measurement of value drivers and
key performance indicators, a revised strategic planning process,
succession planning and talent management, advancing employee
engagement, and driving autonomy and accountability into its
businesses.
Grow: To drive growth, management is focused on growing
organically through the development and implementation of growth
tools under the ABM, providing innovation and value to the
Company's customers and markets, and growing the Company's
recurring revenue model.
Expand: To expand the Company's reach, management is
focused on the development of new markets and business platforms,
expansion of its service offerings, investing in innovation and
product development, and making strategic and disciplined
acquisitions that strengthen ATS' business.
ATS Business Model
The ABM is a business management
system that the Company has developed with the goal of enabling the
Company to pursue its strategies, outpace its chosen markets, and
drive year-over-year continuous improvement. Introduced in fiscal
2018, the ABM is bringing focus to:
- People: developing, engaging and empowering ATS' people
to build the best team;
- Process: alignment of ATS people to implement and
continuously improve robust and disciplined business processes
throughout the organization; and
- Performance: consistently measuring performance in order
to yield world-class performance for our customers and
shareholders.
The ABM is the ATS' playbook, serving as the framework utilized
by the Company to achieve its business goals and objectives through
disciplined, continuous improvement. The initial roll-out of the
ABM included Company-wide training and deployment of tools to
standardize problem solving, establishing focused key performance
metrics and implementing continuous improvement processes. As the
initial tools are implemented, management will deploy additional
tools as part of the ongoing advancement of the ABM. Focus areas
include:
- Strengthening the core: adopting a customer first
mindset; implementing a robust performance management system;
adhering to eight value drivers; managing using Key Performance
Indicators; and leveraging daily management to measure at the point
of impact;
- Delivering growth: alignment with customer success;
focusing on organizational talent development, constantly
confirming that progress is being made toward stated goals; and
developing annual operating and capital deployment plans for each
ATS division;
- Pursuing excellence: deploying specific goals that
segment strategies into relevant focus areas; and improving
continuously using Kaizen events, problem solving and other
continuous improvement initiatives, which increase performance
annually; and
- Pioneering innovation: driving market technology
leadership; creating innovative platforms and analytics that
benefit customers by reducing complexity, shortening development
cycles and improving production efficiencies; and expanding the
reach and scope of ATS' capabilities for competitive
advantage.
BUSINESS OVERVIEW
ATS and its subsidiaries serve
customers in the following markets: life sciences, transportation,
energy, consumer products, electronics, chemicals, food, beverage,
and oil and gas. With broad and in-depth knowledge across multiple
industries and technical fields, ATS delivers single-source
solutions to customers that lower their production costs,
accelerate delivery of their products, and improve quality control.
ATS engages with customers on both greenfield programs, such as
equipping new factories, and brownfield programs, such as capacity
expansions, line moves, equipment upgrades, software upgrades,
efficiency improvements and factory optimization.
ATS engages at varying points in customers' automation cycles.
During the pre-automation phase, ATS offers comprehensive services,
including discovery and analysis, concept development, simulation
and total cost of ownership modelling, all of which help to verify
the feasibility of different types of automation, set objectives
for factors such as line speed and yield, assess production
processes for manufacturability and calculate the total cost of
ownership.
For customers that have decided to proceed with an automation
project, ATS offers a number of automation and integration
services, including engineering design, prototyping, process
verification, specification writing, software and manufacturing
process controls development, equipment design and build, standard
automation products/platforms, third-party equipment qualification,
procurement and integration, automation system installation,
product line commissioning, validation and documentation. Following
the installation of custom automation, ATS may supply duplicate or
repeat automation systems to customers that leverage engineering
design completed in the original customer program. For customers
seeking complex equipment production or build-to-print
manufacturing, ATS provides value engineering, supply chain
management, integration and manufacturing capabilities, and other
automation products and solutions.
Post automation, ATS offers a number of services, including
customer training, preventative maintenance, process optimization,
emergency and on-call support, spare parts, retooling, retrofits
and equipment relocation.
Contract values for individual automation systems vary and are
often in excess of $1 million, with
some contracts for enterprise-type programs well in excess of
$10 million. Due to the custom nature
of customer projects, contract durations vary, with typical
durations ranging from six to 12 months, and some larger contracts
extending up to 18 to 24 months. Contract values for pre-automation
services and post-automation services range in value and can exceed
$1 million with varying durations,
which can sometimes extend over a number of years.
Competitive strengths
Management believes ATS has the following competitive
strengths:
Global presence, size and critical mass: ATS'
global presence and scale provide advantages in serving
multinational customers, as many of the Company's competitors are
smaller and operate with a narrower geographic and/or industrial
market focus. ATS has manufacturing operations in Canada, the United
States, Germany,
China and Thailand. ATS can deliver localized service
through a network of over 50 locations around the world. Management
believes that ATS' scale and global footprint provide it with
competitive advantages in winning large, multinational customer
programs and in delivering a life-cycle-oriented service platform
to customers' global operations.
Technical skills, capabilities and experience: ATS
has designed, manufactured, assembled and serviced over 23,000
automation systems worldwide and has an extensive knowledge base
and accumulated design expertise. Management believes ATS' broad
experience in many different industrial markets and with diverse
technologies, its talented workforce, which includes over 1,500
engineers and over 200 program management personnel, and its
ability to provide custom automation, repeat automation, automation
products and value-added services, position the Company well to
serve complex customer programs in a variety of markets.
Product and technology portfolio: Through its
history of bringing thousands of unique automation projects to
market, ATS has developed an extensive product and technology
portfolio. ATS has a number of standard automation platforms and
products, including: innovative linear mover transport systems;
robust cam-driven assembly platforms; advanced vision systems used
to ensure product or process quality; progressive material handling
technologies; test systems and software solutions; and
high-performance tube filling and cartoning systems. Management
believes the Company's extensive product and technology portfolio
provides advantages in developing unique and leading solutions for
customers and in maintaining competitiveness.
Recognized brands: Management believes ATS is well
known within the global automation industry due to its long history
of innovation and broad scope of operations. In addition, ATS'
subsidiaries include several strong brands: "sortimat", which
specializes in the life sciences market; "IWK", which specializes
in the packaging market; and "Process Automation Solutions" ("PA"),
which provides innovative automation solutions for process and
production sectors. Management believes that ATS' brand names and
global reputation improve sales prospecting, allowing the Company
to be considered for a wide variety of customer programs.
Trusted customer relationships: ATS serves
some of the world's largest multinational companies. Most of ATS'
customers are repeat customers, returning to ATS time after time to
meet their automation manufacturing, assembly or processing needs.
Many customers have long-standing relationships with ATS, often
spanning a decade or more.
Total solutions capabilities: Management
believes the Company gains competitive advantages because ATS
provides total turnkey solutions in automation. This allows
customers to single-source their most complex projects to ATS
rather than rely on multiple engineering firms and equipment
builders. In addition, ATS can provide customers with other
value-added services including pre-automation consulting, total
cost of ownership studies, life-cycle material management,
post-automation service, training and support.
OVERVIEW – OPERATING RESULTS
Consolidated
revenues
(In millions of dollars)
Revenues by
market
|
Q4
2018
|
Q4 2017
|
Fiscal
2018
|
Fiscal
2017
|
Consumer products
& electronics
|
$
|
55.6
|
$
|
41.9
|
$
|
160.6
|
$
|
137.8
|
Energy
|
|
40.8
|
|
15.3
|
|
136.9
|
|
173.5
|
Life
sciences
|
|
132.2
|
|
127.5
|
|
518.0
|
|
415.1
|
Transportation
|
|
69.8
|
|
81.0
|
|
299.4
|
|
284.5
|
Total
revenues
|
$
|
298.4
|
$
|
265.7
|
$
|
1,114.9
|
$
|
1,010.9
|
|
|
|
|
|
|
|
|
|
Revenues by
customer location
|
Q4
2018
|
Q4 2017
|
Fiscal
2018
|
Fiscal
2017
|
North
America
|
$
|
138.0
|
$
|
103.0
|
$
|
528.5
|
$
|
365.6
|
Europe
|
|
111.8
|
|
116.2
|
|
410.5
|
|
406.5
|
Asia/Other
|
|
48.6
|
|
46.5
|
|
175.9
|
|
238.8
|
Total
revenues
|
$
|
298.4
|
$
|
265.7
|
$
|
1,114.9
|
$
|
1,010.9
|
Fourth quarter
Fiscal 2018 fourth quarter revenues
were 12% higher than in the corresponding period a year ago. Higher
revenues primarily reflected higher Order Backlog entering the
fourth quarter of fiscal 2018 compared to a year ago and higher
Order Bookings in the fourth quarter. Foreign exchange rate changes
positively impacted the translation of revenues earned by
foreign-based subsidiaries by approximately 3% compared to the
corresponding period a year ago, primarily reflecting the weakening
of the Canadian dollar relative to the Euro.
By market, fiscal 2018 fourth quarter revenues from the consumer
products & electronics and energy markets increased 33% and
167%, respectively, due to higher Order Backlog entering the fourth
quarter of fiscal 2018. Revenues in the life sciences market
increased 4%, primarily due to the timing of Order Bookings.
Transportation revenues decreased 14% compared to a year ago,
primarily due to lower activity compared to the previous year.
Full year
Fiscal 2018 revenues were 10% higher than in
the corresponding period a year ago, primarily reflecting higher
Order Backlog entering fiscal 2018 compared to a year ago. By
market, fiscal 2018 revenues from the consumer products &
electronics market increased 17%, primarily reflecting higher Order
Bookings in the consumer products market. Revenues generated in the
energy market decreased 21% compared to the corresponding period a
year ago, primarily due to lower Order Backlog entering fiscal 2018
compared to a year ago. Revenues in the life sciences market
increased 25%, primarily reflecting higher Order Backlog entering
fiscal 2018 compared to a year ago. Transportation revenues
increased 5% compared to a year ago, primarily due to higher Order
Backlog entering fiscal 2018 compared to a year ago.
Consolidated operating results
(In millions of
dollars)
|
Q4
2018
|
Q4 2017
|
Fiscal
2018
|
Fiscal
2017
|
Earnings from
operations
|
$
|
25.5
|
$
|
16.8
|
$
|
85.5
|
$
|
71.9
|
Amortization of
acquisition-related intangible assets
|
|
5.1
|
|
4.8
|
|
20.6
|
|
20.0
|
Restructuring
charges
|
|
2.2
|
|
─
|
|
11.2
|
|
2.3
|
Share purchase
allowance
|
|
─
|
|
2.9
|
|
─
|
|
2.9
|
Adjusted earnings
from operations1
|
$
|
32.8
|
$
|
24.5
|
$
|
117.3
|
$
|
97.1
|
1 See
"Notice to reader: Non-IFRS measures and additional IFRS
measures."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4
2018
|
Q4 2017
|
Fiscal
2018
|
Fiscal
2017
|
Earnings from
operations
|
$
|
25.5
|
$
|
16.8
|
$
|
85.5
|
$
|
71.9
|
Depreciation and
amortization
|
|
9.3
|
|
8.8
|
|
36.6
|
|
34.6
|
EBITDA2
|
$
|
34.8
|
$
|
25.6
|
$
|
122.1
|
$
|
106.5
|
2 See
"Notice to reader: Non-IFRS measures and additional IFRS
measures."
|
|
|
|
|
|
|
|
|
Fourth quarter
Fiscal 2018 fourth quarter earnings
from operations were $25.5 million
(9% operating margin) compared to $16.8
million (6% operating margin) in the fourth quarter of
fiscal 2017. Fourth quarter fiscal 2018 earnings from operations
included $2.2 million of
restructuring costs primarily related to the previously announced
closure of a U.S. facility and $5.1
million related to amortization of identifiable intangible
assets recorded on the acquisitions of PA, IWK and sortimat.
Included in fourth quarter fiscal 2017 earnings from operations was
a share purchase allowance of $2.9
million, which was paid to the Company's Chief Executive
Officer as an inducement to join the Company, and $4.8 million related to amortization of
identifiable intangible assets recorded on the acquisitions of PA,
IWK and sortimat. Excluding these items, fourth quarter fiscal 2018
adjusted earnings from operations were $32.8
million (11% margin), compared to adjusted earnings from
operations of $24.5 million (9%
margin) a year ago. Higher adjusted earnings from operations
primarily reflected higher revenues and improved gross margin,
partially offset by higher selling, general and administrative
expenses and increased stock compensation expenses (see
"Consolidated results: Stock-based compensation").
Depreciation and amortization expense was $9.3 million in the fourth quarter of fiscal
2018, compared to $8.8 million a year
ago. The increase primarily reflected depreciation of internal
development projects.
EBITDA was $34.8 million (12%
EBITDA margin) in the fourth quarter of fiscal 2018 compared to
$25.6 million (10% EBITDA margin) in
the fourth quarter of fiscal 2017. Higher revenues in the fourth
quarter of fiscal 2018 were partially offset by higher selling,
general and administrative expenses compared to a year ago.
Excluding restructuring costs, fourth quarter fiscal 2018 EBITDA
was $37.0 million (12% EBITDA
margin). Comparably, excluding the share purchase allowance, fourth
quarter fiscal 2017 EBITDA was $28.5
million (11% EBITDA margin).
Full year
Earnings from operations were $85.5 million (8% operating margin) in fiscal
2018, compared to $71.9 million (7%
operating margin) in the corresponding period a year ago. Excluding
$11.2 million of restructuring costs
and $20.6 million related to
amortization of identifiable intangible assets recorded on the
acquisitions of PA, IWK and sortimat, adjusted earnings from
operations were $117.3 million (11%
margin) in fiscal 2018, compared to adjusted earnings from
operations of $97.1 million (10%
margin) in the corresponding period a year ago. Higher adjusted
earnings from operations primarily reflected higher revenues and
improved gross margin in fiscal 2018, partially offset by higher
selling, general and administrative expenses and increased stock
compensation expenses compared to a year ago.
Depreciation and amortization expense was $36.6 million in fiscal 2018, compared to
$34.6 million a year ago. The
increase primarily reflected depreciation of internal development
projects.
Fiscal 2018 EBITDA was $122.1
million (11% EBITDA margin) compared to $106.5 million (11% EBITDA margin) in fiscal
2017. Excluding restructuring costs, fiscal 2018 EBITDA was
$133.3 million (12% EBITDA margin).
Comparably, excluding the share purchase allowance and
restructuring costs, fiscal 2017 EBITDA was $111.7 million (11% EBITDA margin).
Order Bookings by quarter
(In millions of dollars)
|
Fiscal
2018
|
Fiscal
2017
|
Q1
|
$
|
266
|
$
|
239
|
Q2
|
|
257
|
|
289
|
Q3
|
|
311
|
|
284
|
Q4
|
|
348
|
|
322
|
Total Order
Bookings
|
$
|
1,182
|
$
|
1,134
|
Fourth quarter
Fourth quarter fiscal 2018 Order
Bookings were $348 million, an 8%
increase from the fourth quarter of fiscal 2017. By customer
market, higher Order Bookings in the consumer products &
electronics and life sciences markets were partially offset by
lower Order Bookings in the energy and transportation markets.
Foreign exchange rate changes positively impacted the translation
of Order Bookings from foreign-based ATS subsidiaries by
approximately 4% compared to the corresponding period a year
ago.
Full year
Fiscal 2018 Order Bookings were
$1,182 million, a 4% increase from
prior year Order Bookings of $1,134
million. By market, higher Order Bookings in the energy and
consumer products & electronics markets more than offset lower
Order Bookings in the life sciences and transportation markets.
Order Backlog continuity
(In millions of dollars)
|
Q4
2018
|
Q4 2017
|
Fiscal
2018
|
Fiscal
2017
|
Opening Order
Backlog
|
$
|
689
|
$
|
632
|
$
|
681
|
$
|
652
|
Revenues
|
|
(298)
|
|
(266)
|
|
(1,115)
|
|
(1,011)
|
Order
Bookings
|
|
348
|
|
322
|
|
1,182
|
|
1,134
|
Order Backlog
adjustments1
|
|
7
|
|
(7)
|
|
(2)
|
|
(94)
|
Total
|
$
|
746
|
$
|
681
|
$
|
746
|
$
|
681
|
1 Order
Backlog adjustments include foreign exchange adjustments and
cancellations.
|
Order Backlog by market
(In millions of dollars)
As
at
|
Fiscal
2018
|
Fiscal
2017
|
Consumer products
& electronics
|
$
|
118
|
$
|
54
|
Energy
|
|
82
|
|
94
|
Life
sciences
|
|
358
|
|
355
|
Transportation
|
|
188
|
|
178
|
Total
|
$
|
746
|
$
|
681
|
At March 31, 2018, Order Backlog
was a record $746 million, 10% higher
than at March 31, 2017. Higher Order
Backlog was driven primarily by higher Order Bookings in the
consumer products & electronics market. Foreign exchange rate
changes also positively impacted the translation of Order Backlog
from foreign-based ATS subsidiaries by approximately 5% compared to
fiscal 2017.
Outlook
The Company's Order Bookings are generally
variable and sensitive to changes in the major economies the
Company serves including the U.S., Canada, Europe and Asia. The global economic environment has
shown recent signs of improvement; however, geopolitical risks
remain.
Funnel activity (which includes customer requests for proposal
and ATS identified customer opportunities) in life sciences remains
strong and opportunities in the electrification of vehicles have
strengthened funnel activity in the transportation market. Funnel
activity in energy is fluid, and this market provides select
opportunities for ATS. Funnel activity in the consumer products
& electronics market has improved; however, it remains low
relative to other customer markets. Overall, the Company's funnel
remains significant; however, conversion of opportunities into
Order Bookings is variable as customers are cautious in their
approach to capital investment.
The Company's sales organization continues to work to engage
customers on enterprise-type solutions, which it expects 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 is expected to cause
variability in Order Bookings from quarter to quarter and lengthen
the performance period and revenue recognition for certain customer
programs. The Company's efforts to expand its after-sales service
offering is expected to provide some balance to the capital
expenditure cycle of its customers; however, this may not offset
capital spending volatility. The Company expects its Order Backlog
of $746 million at the end of the
fourth quarter of fiscal 2018 to partially mitigate the impact of
volatile Order Bookings on revenues in the short term. In the first
quarter of fiscal 2019, management expects Order Backlog conversion
to be in the higher end of the 35% to 40% range. This expected
conversion rate is based on current programs in Order Backlog and
management's estimate of revenues from new Order Bookings in the
quarter.
As previously announced, following a thorough review of the
Company's operations, including its global capabilities and
leadership, in the third quarter of fiscal 2018 management
initiated a restructuring plan that addresses the rationalization
of divisions and business lines, and improvements to leadership and
management. Specific actions under this plan include the closure of
a division in each of the U.S. and Southeast Asia and the rationalization of a
business line at a division in Europe. The restructuring is designed to
improve the Company's leadership and cost structure, and to enhance
capacity utilization by realigning resources to areas of the
business that will enable it to deliver increased value to
customers and shareholders. The Company has incurred expenses of
$11.2 million in fiscal 2018 related
to these initiatives. Management expects an 18- to 24-month
payback, following completion of the restructuring, which is
expected to be materially complete in the first quarter of fiscal
2019.
The Company is deploying the ABM across its divisions globally.
In fiscal 2018, the initial roll-out of the ABM was completed,
which included Company-wide training and deployment of tools to
standardize problem solving and continuous improvement processes.
As the initial ABM tools are implemented, management will deploy
additional tools as part of the ongoing advancement of the ABM,
with the goal of driving growth and continuous, sustained
performance improvements across the Company. Management expects
that the ABM will provide the Company with a long-term competitive
advantage in delivering value to its customers and
shareholders.
The Company seeks 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
SELECTED FOURTH QUARTER AND
ANNUAL INFORMATION
(In millions of dollars, except per share
data)
|
|
Q4
2018
|
|
Q4 2017
|
|
Fiscal
2018
|
|
Fiscal
2017
|
|
Fiscal
2016
|
Revenues
|
$
|
298.4
|
$
|
265.7
|
$
|
1,114.9
|
$
|
1,010.9
|
$
|
1,039.6
|
Cost of
revenues
|
|
219.9
|
|
201.7
|
|
826.8
|
|
760.3
|
|
780.9
|
Selling, general and
administrative
|
|
49.7
|
|
45.3
|
|
194.3
|
|
171.9
|
|
179.3
|
Stock-based
compensation
|
|
3.3
|
|
1.9
|
|
8.3
|
|
6.8
|
|
2.6
|
Earnings from
operations
|
$
|
25.5
|
$
|
16.8
|
$
|
85.5
|
$
|
71.9
|
$
|
76.8
|
Net finance
costs
|
$
|
5.6
|
$
|
6.3
|
$
|
23.8
|
$
|
25.6
|
$
|
26.7
|
Provision for income
taxes
|
|
4.9
|
|
2.7
|
|
14.5
|
|
11.3
|
|
10.5
|
Net
income
|
$
|
15.0
|
$
|
7.8
|
$
|
47.2
|
$
|
35.0
|
$
|
39.6
|
Basic and diluted
earnings per share
|
$
|
0.16
|
$
|
0.08
|
$
|
0.50
|
$
|
0.38
|
$
|
0.43
|
From
operations:
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
$
|
1,542.2
|
$
|
1,374.6
|
$
|
1,367.5
|
Total cash and
short-term investments
|
|
|
|
|
$
|
330.1
|
$
|
286.7
|
$
|
170.0
|
Total debt
|
|
|
|
|
$
|
318.2
|
$
|
328.7
|
$
|
323.7
|
Revenues. At $298.4
million, consolidated revenues for the fourth quarter of
fiscal 2018 were $32.7 million, or
12%, higher than in the corresponding period a year ago. At
$1,114.9 million, year-to-date
revenues were $104.0 million, or 10%,
higher than in the corresponding period a year ago (see "Overview –
operating results").
Cost of revenues. At $219.9
million, fourth quarter fiscal 2018 cost of revenues
increased compared to the corresponding period a year ago by
$18.2 million, or 9%. Annual cost of
revenues of $826.8 million increased
$66.5 million, or 9%, primarily on
higher revenues compared to the corresponding period last year. At
26%, gross margin in the fourth quarter of fiscal 2018 increased 2%
from the corresponding period a year ago, due primarily to improved
program execution and operational utilization. Fiscal 2018 gross
margin of 26% increased 1% compared to fiscal 2017.
Selling, general and administrative ("SG&A")
expenses. SG&A expenses for the fourth quarter of fiscal
2018 were $49.7 million, which
included $5.1 million of amortization
costs related to the amortization of identifiable intangible assets
recorded on the acquisitions of PA, IWK and sortimat and
$2.2 million of restructuring costs.
Excluding these costs, SG&A expenses were $42.4 million in the fourth quarter of fiscal
2018. Comparably, SG&A expenses for the fourth quarter of
fiscal 2017 were $37.6 million, which
excluded $4.8 million of amortization
costs related to the amortization of identifiable intangible assets
recorded on the acquisitions of PA, IWK and sortimat and
$2.9 million for the share purchase
allowance. Higher SG&A expenses in the fourth quarter of fiscal
2018 primarily reflected increased employee costs and sales related
expenses.
Fiscal 2018 SG&A expenses were $194.3
million, which included $20.6
million of amortization costs related to the amortization of
identifiable intangible assets recorded on the acquisitions of PA,
IWK and sortimat and $11.2 million of
restructuring and severance costs. Excluding these items, SG&A
expenses were $162.5 million for
fiscal 2018. Comparably, SG&A expenses for fiscal 2017 were
$146.7 million, which excluded
$20.0 million of amortization costs
related to the amortization of identifiable intangible assets
recorded on the acquisitions of PA, IWK and sortimat; $2.3 million of restructuring and severance
costs; and $2.9 million for the share
purchase allowance. Higher SG&A expenses in fiscal 2018
primarily reflected increased employee costs and professional
fees.
Stock-based compensation. Stock-based compensation
expense amounted to $3.3 million in
the fourth quarter of fiscal 2018 compared to $1.9 million in the corresponding period a year
ago. Fiscal 2018 stock-based compensation expense was $8.3 million compared to $6.8 million a year ago. The increase in
stock-based compensation costs was due to higher expenses from the
revaluation of deferred stock units and restricted share units.
Earnings from operations. For the three- and 12-month
periods ended March 31, 2018,
consolidated earnings from operations were $25.5 million (9% operating margin) and
$85.5 million (8% operating margin),
respectively, compared to earnings from operations of $16.8 million (6% operating margin) and
$71.9 million (7% operating margin)
in the corresponding periods a year ago (see "Overview – Operating
Results").
Net finance costs. Net finance costs were $5.6 million in the fourth quarter of fiscal
2018, $0.7 million lower than in the
corresponding period a year ago. Fiscal 2018 finance costs were
$23.8 million compared to
$25.6 million in the corresponding
period a year ago. The decrease was primarily due to higher
interest income earned in fiscal 2018 compared to the corresponding
period a year ago.
Income tax provision. For the three and 12 months ended
March 31, 2018, the Company's
effective income tax rates of 25% and 23%, respectively, differed
from the combined Canadian basic federal and provincial income tax
rate of 27% primarily due to certain non-deductible income and
income earned in certain jurisdictions with different statutory tax
rates. The Company expects its effective tax rate to remain in the
range of 25%.
Net income. Fiscal 2018 fourth quarter net income was
$15.0 million (16 cents per share basic and diluted) compared to
$7.8 million (8 cents per share basic and diluted) for the
fourth quarter of fiscal 2017. Adjusted basic earnings per
share were 22 cents in the fourth
quarter of fiscal 2018 compared to 15
cents for the fourth quarter of fiscal 2017 (see
"Reconciliation of non-IFRS measures to IFRS measures").
Fiscal 2018 net income was $47.2
million (50 cents per share
basic and diluted) compared to $35.0
million (38 cents per share
basic and diluted) for the corresponding period a year ago.
Adjusted basic earnings per share were 74
cents in fiscal 2018 compared to 57
cents in the corresponding period a year ago (see
"Reconciliation of non-IFRS measures to IFRS measures").
Reconciliation of non-IFRS measures to IFRS
measures
(In millions of dollars, except per share data)
The following table reconciles EBITDA to the most directly
comparable IFRS measure (net income):
|
Fiscal
2018
|
Fiscal
2017
|
Fiscal
2016
|
EBITDA
|
$
|
122.1
|
$
|
106.5
|
$
|
116.1
|
Less: depreciation
and amortization expense
|
|
36.6
|
|
34.6
|
|
39.3
|
Earnings from
operations
|
$
|
85.5
|
$
|
71.9
|
$
|
76.8
|
Less: net finance
costs
|
|
23.8
|
|
25.6
|
|
26.7
|
Provision for income
taxes
|
|
14.5
|
|
11.3
|
|
10.5
|
Net
income
|
$
|
47.2
|
$
|
35.0
|
$
|
39.6
|
|
|
|
|
|
|
|
|
|
|
Q4
2018
|
Q4 2017
|
EBITDA
|
|
|
$
|
34.8
|
$
|
25.6
|
Less: depreciation
and amortization expense
|
|
|
|
9.3
|
|
8.8
|
Earnings from
operations
|
|
|
$
|
25.5
|
$
|
16.8
|
Less: net finance
costs
|
|
|
|
5.6
|
|
6.3
|
Provision for income
taxes
|
|
|
|
4.9
|
|
2.7
|
Net
income
|
|
|
$
|
15.0
|
$
|
7.8
|
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
March 31, 2018
|
Three Months Ended
March 31, 2017
|
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
Earnings from
operations
|
$
|
25.5
|
$
|
––
|
$
|
25.5
|
$
|
16.8
|
$
|
––
|
$
|
16.8
|
Amortization of
acquisition-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related intangible
assets
|
|
––
|
|
5.1
|
|
5.1
|
|
––
|
|
4.8
|
|
4.8
|
Restructuring
charges
|
|
––
|
|
2.2
|
|
2.2
|
|
––
|
|
––
|
|
––
|
Share purchase
allowance
|
|
––
|
|
––
|
|
––
|
|
––
|
|
2.9
|
|
2.9
|
|
$
|
25.5
|
$
|
7.3
|
$
|
32.8
|
$
|
16.8
|
$
|
7.7
|
$
|
24.5
|
Less: net finance
costs
|
$
|
5.6
|
$
|
––
|
$
|
5.6
|
$
|
6.3
|
$
|
––
|
$
|
6.3
|
Income before
income taxes
|
$
|
19.9
|
$
|
7.3
|
$
|
27.2
|
$
|
10.5
|
$
|
7.7
|
$
|
18.2
|
Provision for income
taxes
|
$
|
4.9
|
$
|
––
|
$
|
4.9
|
$
|
2.7
|
$
|
––
|
$
|
2.7
|
Adjustment to
provision for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes1
|
|
––
|
|
2.0
|
|
2.0
|
|
––
|
|
2.2
|
|
2.2
|
|
$
|
4.9
|
$
|
2.0
|
$
|
6.9
|
$
|
2.7
|
$
|
2.2
|
$
|
4.9
|
Net
income
|
$
|
15.0
|
$
|
5.3
|
$
|
20.3
|
$
|
7.8
|
$
|
5.5
|
$
|
13.3
|
Basic earnings per
share
|
$
|
0.16
|
$
|
0.06
|
$
|
0.22
|
$
|
0.08
|
$
|
0.07
|
$
|
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.
|
|
Twelve Months
Ended March 31, 2018
|
Twelve Months Ended
March 31, 2017
|
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
Earnings from
operations
|
$
|
85.5
|
$
|
––
|
$
|
85.5
|
$
|
71.9
|
$
|
––
|
$
|
71.9
|
Amortization of
acquisition-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
related intangible
assets
|
|
––
|
|
20.6
|
|
20.6
|
|
––
|
|
20.0
|
|
20.0
|
Restructuring
charges
|
|
––
|
|
11.2
|
|
11.2
|
|
––
|
|
2.3
|
|
2.3
|
Share purchase
allowance
|
|
––
|
|
––
|
|
––
|
|
––
|
|
2.9
|
|
2.9
|
|
$
|
85.5
|
$
|
31.8
|
$
|
117.3
|
$
|
71.9
|
$
|
25.2
|
$
|
97.1
|
Less: net finance
costs
|
$
|
23.8
|
$
|
––
|
$
|
23.8
|
$
|
25.6
|
$
|
––
|
$
|
25.6
|
Income before
income taxes
|
$
|
61.7
|
$
|
31.8
|
$
|
93.5
|
$
|
46.3
|
$
|
25.2
|
$
|
71.5
|
Provision for income
taxes
|
$
|
14.5
|
$
|
––
|
$
|
14.5
|
$
|
11.3
|
$
|
––
|
$
|
11.3
|
Adjustment to
provision for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income
taxes1
|
|
––
|
|
9.2
|
|
9.2
|
|
––
|
|
7.8
|
|
7.8
|
|
$
|
14.5
|
$
|
9.2
|
$
|
23.7
|
$
|
11.3
|
$
|
7.8
|
$
|
19.1
|
Net
income
|
$
|
47.2
|
$
|
22.6
|
$
|
69.8
|
$
|
35.0
|
$
|
17.4
|
$
|
52.4
|
Basic earnings per
share
|
$
|
0.50
|
$
|
0.24
|
$
|
0.74
|
$
|
0.38
|
$
|
0.19
|
$
|
0.57
|
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.
|
SUMMARY OF INVESTMENTS, LIQUIDITY, CASH FLOW AND FINANCIAL
RESOURCES
Investments
(In millions of dollars)
|
Fiscal
2018
|
Fiscal
2017
|
Investments –
increase (decrease)
|
|
|
|
|
Non-cash operating
working capital
|
$
|
27.0
|
$
|
(56.5)
|
Acquisition of
property, plant and equipment
|
|
19.9
|
|
9.9
|
Acquisition of
intangible assets
|
|
6.1
|
|
8.0
|
Proceeds from
disposal of assets
|
|
(2.6)
|
|
(0.1)
|
Total net
investments
|
$
|
50.4
|
$
|
(38.7)
|
In fiscal 2018, the Company's investment in non-cash working
capital increased $27.0 million,
compared to a decrease of $56.5
million a year ago. Accounts receivable increased 28%, or
$46.9 million, driven by the timing
of billings on certain customer contracts. Net contracts in
progress increased 43%, or $20.8
million, compared to March 31,
2017. The Company actively manages its accounts receivable
and net contracts in progress balances through billing terms on
long-term contracts, collection efforts and supplier payment terms.
Inventories increased 22%, or $10.5
million, primarily due to the timing of inventory purchases.
Deposits and prepaid assets increased 40%, or $6.4 million, compared to March 31, 2017 due to increased deposits on
third-party materials for customer programs. Accounts payable and
accrued liabilities increased 34%, or $62.5
million, compared to March 31,
2017. Provisions increased 49%, or $6.9 million, compared to March 31, 2017 due to restructuring activities
undertaken in the year.
Capital expenditures totalled $19.9
million for fiscal 2018, primarily related to computer
hardware and the improvement and expansion of certain manufacturing
facilities. Capital expenditures totalled $9.9 million in fiscal 2017, primarily related to
computer hardware.
Intangible asset expenditures for fiscal 2018 and fiscal 2017
were $6.1 million and $8.0 million, respectively, and primarily related
to computer software and various internal development projects.
Proceeds from disposal of assets were $2.6 million in fiscal 2018, compared to
$0.1 million in fiscal 2017. The
increase primarily reflects the sale of redundant assets in fiscal
2018.
The Company performs impairment tests on its goodwill and
intangible asset balances on an annual basis or as warranted by
events or circumstances. The Company conducted its annual
impairment assessment in the fourth quarter of fiscal 2018 and
determined there is no impairment of goodwill or intangible assets
as of March 31, 2018 (fiscal 2017 –
$nil).
All the Company's investments involve risks and require that the
Company make judgments and estimates regarding the likelihood of
recovery of the respective costs. In the event management
determines that any of the Company's investments have become
permanently impaired or recovery is no longer reasonably assured,
the value of the investment would be written down to its estimated
net realizable value as a charge against earnings. Due to the
magnitude of certain investments, such write-downs could be
material.
Liquidity, cash flow and financial resources
(In
millions of dollars, except ratios)
As at
|
Fiscal
2018
|
Fiscal
2017
|
Cash and cash
equivalents
|
$
|
330.1
|
$
|
286.7
|
Debt-to-equity
ratio
|
|
0.47:1
|
|
0.52:1
|
Cash flows provided
by operating activities
|
$
|
59.7
|
$
|
127.9
|
At March 31, 2018, the Company had
cash and cash equivalents of $330.1
million compared to $286.7
million at March 31, 2017. At
March 31, 2018, the Company's
debt-to-total equity ratio was 0.47:1.
In fiscal 2018, cash flows provided by operating activities were
$59.7 million ($127.9 million provided by operating activities
in the corresponding period a year ago). The decrease in operating
cash flows related primarily to the timing of investments in
non-cash working capital in certain customer programs.
At March 31, 2018, the Company had
$656.3 million of unutilized
multipurpose credit, including letters of credit, available under
existing credit facilities and an additional $5.4 million available under letter of credit
facilities.
On July 28, 2017, the Company
amended its senior secured credit facility to extend the agreement
by three years to mature on August 29,
2021 (the "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 March 31, 2018, the
Company had utilized $108.5 million
under the Credit Facility by way of letters of credit (March 31, 2017 – $115.0
million).
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 net 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 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 that
ranges from 1.45% to 3.00%, and a fee for usage of non-financial
letters of credit that 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 financial covenants including
a net 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 March 31, 2018,
all of the covenants were met.
The Company has additional credit facilities available of
$18.9 million (2.4 million Euros, $10.0
million U.S., 50.0 million Thai
Baht and 1.7 million Czech Koruna). The total amount
outstanding on these facilities at March 31,
2018 was $3.4 million, of
which $2.7 million was classified as
bank indebtedness (March 31, 2017 –
$1.4 million) and $0.7 million was classified as long-term debt
(March 31, 2017 – $2.6 million). The interest rates applicable to
the credit facilities range from 1.66% to 6.25% per annum. A
portion of the long-term debt is secured by certain assets of the
Company. The 50.0 million Thai Baht
credit facility is secured by letters of credit under the Credit
Facility.
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.
At March 31, 2018, all of the
covenants were met. Subject to certain exceptions, the Senior Notes
are 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 seven-year term of the
Senior Notes.
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.
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
leases
|
Purchase
obligations
|
Less than one
year
|
$
|
10.1
|
$
|
113.2
|
One – two
years
|
|
9.2
|
|
1.7
|
Two – three
years
|
|
7.8
|
|
0.5
|
Three – four
years
|
|
4.2
|
|
––
|
Four – five
years
|
|
2.3
|
|
––
|
Due in over five
years
|
|
0.9
|
|
––
|
|
$
|
34.5
|
$
|
115.4
|
The Company's off-balance sheet arrangements consist of purchase
obligations and various operating lease financing arrangements
related primarily to facilities and equipment that were 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 March 31, 2018, the total value of outstanding
letters of credit was approximately $137.1
million (March 31, 2017 -
$136.0 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. 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 receivables insurance in certain instances.
SHARE DATA
During fiscal 2018, 399,666 stock options
were exercised for common shares of the Company. At May 16, 2018, 94,001,692 common shares of the
Company were outstanding and there were 1,818,958 stock options
outstanding to acquire common shares 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 other significant related party transactions in
fiscal 2018.
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 cross-currency swaps 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 interest rate swap instrument to swap
134.1 million Euros into Canadian
dollars. The Company will receive interest of 6.501% Canadian per
annum and pay interest of 5.094% Euros. The terms of the hedging
relationship will end on June 15,
2023.
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.
|
Year-end actual
exchange rates
|
Period average
exchange rates
|
|
March 31,
2018
|
March 31,
2017
|
% change
|
March 31,
2018
|
March 31,
2017
|
% change
|
U.S.
dollar
|
1.290
|
1.330
|
(3.0%)
|
1.284
|
1.313
|
(2.2%)
|
Euro
|
1.589
|
1.419
|
12.0%
|
1.502
|
1.440
|
4.3%
|
CONSOLIDATED QUARTERLY RESULTS
(In millions of
dollars, except per share amounts)
|
Q4
2018
|
Q3
2018
|
Q2
2018
|
Q1
2018
|
Q4
2017
|
Q3
2017
|
Q2
2017
|
Q1
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
298.4
|
$
|
277.6
|
$
|
274.9
|
$
|
264.0
|
$
|
265.7
|
$
|
237.4
|
$
|
242.5
|
$
|
265.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
$
|
25.5
|
$
|
14.8
|
$
|
23.9
|
$
|
21.3
|
$
|
16.8
|
$
|
15.3
|
$
|
17.3
|
$
|
22.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
from operations
|
$
|
32.8
|
$
|
29.3
|
$
|
28.8
|
$
|
26.3
|
$
|
24.5
|
$
|
22.5
|
$
|
22.3
|
$
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
15.0
|
$
|
6.9
|
$
|
13.8
|
$
|
11.5
|
$
|
7.8
|
$
|
6.6
|
$
|
8.5
|
$
|
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share
|
$
|
0.16
|
$
|
0.07
|
$
|
0.15
|
$
|
0.12
|
$
|
0.08
|
$
|
0.07
|
$
|
0.09
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted basic
earnings per share
|
$
|
0.22
|
$
|
0.18
|
$
|
0.18
|
$
|
0.16
|
$
|
0.15
|
$
|
0.12
|
$
|
0.13
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order
Bookings
|
$
|
348.0
|
$
|
311.0
|
$
|
257.0
|
$
|
266.0
|
$
|
322.0
|
$
|
284.0
|
$
|
289.0
|
$
|
239.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order
Backlog
|
$
|
746.0
|
$
|
689.0
|
$
|
648.0
|
$
|
683.0
|
$
|
681.0
|
$
|
632.0
|
$
|
654.0
|
$
|
610.0
|
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 and the timing of third-party content. 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.
Notes 2 and 3 to the consolidated financial statements describe
the basis of accounting and the Company's significant accounting
policies.
Revenue recognition and contracts in
progress
The nature of ATS contracts requires the use of
estimates to quote new business, and most automation systems are
typically sold on a fixed-price basis. Revenues on construction
contracts and other long-term contracts are recognized on a
percentage of completion basis as outlined in note 3(c) "Revenue
recognition – Construction contracts" to the consolidated financial
statements. In applying the accounting policy on construction
contracts, judgment is required in determining the estimated costs
to complete a contract. These cost estimates are reviewed at each
reporting period and by their nature may give rise to income
volatility. If the actual costs incurred by the Company to complete
a contract are significantly higher than estimated, the Company's
earnings may be negatively affected. The use of estimates involves
risks, since the work to be performed involves varying degrees of
technical uncertainty, including possible development work to meet
the customer's specification, the extent of which is sometimes not
determinable until after the project has been awarded. In the event
the Company is unable to meet the defined performance specification
for a contracted automation system, it may need to redesign and
rebuild all or a portion of the system at its expense without an
increase in the selling price. Certain contracts may have
provisions that reduce the selling price or provide for refund of
purchase price if the Company fails to deliver or complete the
contract by specified dates. These provisions may expose the
Company to liabilities or adversely affect the Company's results of
operations or financial position.
ATS' contracts may be terminated by customers in the event of a
default by the Company or, in some cases, for the convenience of
the customer. In the event of a termination for convenience, the
Company typically negotiates a payment provision reflective of the
progress achieved on the contract and/or the costs incurred to the
termination date. If a contract is cancelled, Order Backlog is
reduced and production utilization may be negatively impacted.
A complete provision, which can be significant, is made for
losses on such contracts when the losses first become known.
Revisions in estimates of costs and profits on contracts, which can
also be significant, are recorded in the accounting period in which
the relevant facts impacting the estimates become known.
A portion of ATS' revenue is recognized when earned, which is
generally at the time of shipment and transfer of title to the
customer, provided collection is reasonably assured.
Income taxes
Deferred income tax assets, disclosed in
note 16 to the consolidated financial statements, are recognized to
the extent that it is probable that taxable income will be
available against which the losses can be utilized. Significant
management judgment is required to determine the amount of deferred
income tax assets that can be recognized based upon the likely
timing and level of future taxable income together with future
tax-planning strategies.
If the assessment of the Company's ability to utilize the
deferred income tax asset changes, the Company would be required to
recognize more or fewer of the deferred income tax assets, which
would increase or decrease income tax expense in the period in
which this is determined. The Company establishes provisions based
on reasonable estimates for possible consequences of audits by the
tax authorities of the respective countries in which it operates.
The amount of such provisions is based on various factors, such as
experience of previous taxation audits and differing
interpretations of tax regulations by the taxable entity and the
respective tax authority. These provisions for uncertain tax
positions are made using the best estimate of the amount expected
to be paid based on a qualitative assessment of all the relevant
factors. The Company reviews the adequacy of these provisions at
each quarter. However, it is possible that at some future date an
additional liability could result from audits by the taxation
authorities. Where the final tax outcome of these matters is
different from the amount initially recorded, such differences will
affect the tax provisions in the period in which such determination
is made.
Stock-based payment transactions
The Company measures
the cost of transactions with employees by reference to the fair
value of the equity instruments at the date at which they are
granted. Estimating fair value for stock-based payment transactions
requires the determination of the most appropriate valuation model,
which is dependent on the terms and conditions of the grant. This
estimate also requires determination of the most appropriate inputs
to the valuation model, including the future forfeiture rate, the
expected life of the share option, weighted average risk-free
interest rate, volatility and dividend yield, and formation of
assumptions. The assumptions and models used for estimating fair
value for stock-based payment transactions are disclosed in note 17
to the consolidated financial statements.
Impairment of non-financial assets
Impairment exists
when the carrying value of an asset or cash-generating unit exceeds
its recoverable amount, which is the higher of its fair value less
costs to sell and its value in use. The calculations involve
significant estimates and assumptions. Items estimated include cash
flows, discount rates and assumptions on revenue growth rates.
These estimates could affect the Company's future results if the
current estimates of future performance and fair values change.
Goodwill is assessed for impairment on an annual basis as described
in note 9 to the consolidated financial statements. The Company
performed its annual impairment test of goodwill as at March 31, 2018 and determined there was no
impairment (March 31, 2017 –
$nil).
Provisions
As described in note 3(o) to the
consolidated financial statements, the Company records a provision
when an obligation exists, an outflow of economic resources
required to settle the obligation is probable and a reliable
estimate can be made of the amount of the obligation. The Company
records a provision based on the best estimate of the required
economic outflow to settle the present obligation at the
consolidated statement of financial position date. While management
believes these estimates are reasonable, differences in actual
results or changes in estimates could have a material impact on the
obligations and expenses reported by the Company.
Employee benefits
The cost of defined benefit pension
plans and the present value of the pension obligations are
determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual
developments in the future. These include the determination of the
discount rate, future salary increases, mortality rates and future
pension increases. Due to the complexity of the valuation, the
underlying assumptions and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these assumptions. All
assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, management
considers the interest rates of corporate bonds in their respective
currency, with extrapolated maturities corresponding to the
expected duration of the defined benefit obligation. The mortality
rate is based on publicly available mortality tables for the
specific country. Future salary increases and pension increases are
based on expected future inflation rates for the respective
country. Further details about the assumptions used are provided in
note 13 to the consolidated financial statements.
ACCOUNTING STANDARDS ISSUED BUT NOT YET
EFFECTIVE
IFRS 15 – Revenue from Contracts with
Customers
In May 2014, the
IASB issued IFRS 15 – Revenue from Contracts with Customers
("IFRS 15"), which establishes a single comprehensive model for
entities to use in accounting for revenues arising from contracts
with customers. Under IFRS 15, revenues are recognized to depict
the transfer of promised goods or services to customers at an
amount that reflects the consideration to which an entity expects
to be entitled in exchange for those goods or services. The
principles in IFRS 15 provide a more structured approach to
measuring and recognizing revenue. The new revenue standard will
supersede all current revenue recognition requirements under IFRS.
The standard currently requires a full or modified retrospective
application for annual periods beginning on or after January 1, 2018. The Company has substantially
completed its assessment of IFRS 15. The Company does not expect
the implementation of IFRS 15 to have a significant impact on its
consolidated statements of income, and will incorporate the new
disclosure requirements of IFRS 15 in its consolidated financial
statements upon adoption on April 1,
2018.
IFRS 16 – Leases
In January
2016, the IASB issued IFRS 16 – Leases ("IFRS 16"),
which requires lessees to recognize assets and liabilities for most
leases. There are minimal changes to the existing accounting in IAS
17 – Leases from the perspective of lessors. The new
standard is effective for annual periods beginning on or after
January 1, 2019, with early adoption
permitted provided IFRS 15 has been adopted or is adopted at the
same date. The Company does not anticipate early adoption and plans
to adopt the standard for the annual period beginning on
April 1, 2019. The Company is
currently assessing the impact of adopting this new standard on its
consolidated financial statements but expects that the adoption of
IFRS 16 will result in higher non-current assets and non-current
liabilities on the consolidated statements of financial
position.
CONTROLS AND PROCEDURES
The Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO") of the Company 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").
Disclosure controls and procedures
An evaluation of
the design and operating effectiveness of the Company's disclosure
controls and procedures was conducted as of March 31, 2018 under the supervision of the CEO
and CFO as required by CSA National Instrument 52-109 -
Certification of Disclosure in Issuers' Annual and Interim
Filings. The evaluation included documentation, review,
enquiries and other procedures considered appropriate in the
circumstances. Based on that evaluation, the CEO and the CFO have
concluded that the Company's disclosure controls and procedures are
effective to provide reasonable assurance that information relating
to the Company and its consolidated subsidiaries that is required
to be disclosed in reports filed under provincial and territorial
securities legislation is recorded, processed, summarized and
reported to senior management, including the CEO and the CFO, so
that appropriate decisions can be made by them regarding required
disclosure within the time periods specified in the provincial and
territorial securities legislation.
Internal control over financial reporting
CSA National
Instrument 52-109 requires the CEO and CFO to certify that they are
responsible for establishing and maintaining internal control over
financial reporting for the Company, and that those internal
controls have been designed and are effective in providing
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance
with IFRS.
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.
The CEO and CFO have, using the framework and criteria
established in "Internal Control – Integrated Framework (2013)"
issued by COSO, evaluated the design and operating effectiveness of
the Company's internal controls over financial reporting and
concluded that, as of March 31, 2018,
internal controls over financial reporting were effective to
provide reasonable assurance that information related to
consolidated results and decisions to be made based on those
results were appropriate.
During the years ended March 31,
2018 and March 31, 2017, 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.
OTHER MAJOR CONSIDERATIONS AND RISK FACTORS
Any
investment in ATS will be subject to risks inherent to ATS'
business. The following risk factors are discussed in the Company's
Annual Information Form, which may be found on SEDAR at
www.sedar.com.
- Market volatility;
- Strategy execution risks;
- Acquisition risks;
- Expansion risks;
- Industry consolidation;
- Liquidity, access to capital markets and leverage;
- Restrictive covenants;
- Availability of performance and other guarantees from financial
institutions;
- Share price volatility;
- Competition;
- First-time program and production risks;
- Automation systems pricing;
- Revenue mix risk;
- Pricing, quality, delivery and volume risks;
- Product failure;
- New product market acceptance, obsolescence, and
commercialization risk;
- Security breaches or disruptions of information technology
systems;
- Insurance coverage;
- Availability of raw materials and other manufacturing
inputs;
- Availability of human resources and dependence on key
personnel;
- Customer risks;
- Cumulative loss of several significant contracts;
- Lengthy sales cycle;
- Lack of long-term customer commitment;
- Foreign exchange risk;
- Doing business in foreign countries;
- Legislative compliance;
- Environmental compliance;
- Corruption of Foreign Public Officials Act, United States
Foreign Corrupt Practices Act and anti-bribery laws risk;
- Intellectual property protection risks;
- Infringement of third parties' intellectual property rights
risk;
- Internal controls;
- Impairment of intangible assets risk;
- Income and other taxes and uncertain tax liabilities;
- Variations in quarterly results;
- Litigation;
- Natural disasters, pandemics, acts of war, terrorism,
international conflicts or other disruptions;
- Manufacturing facilities disruption; and
- Dependence on performance of subsidiaries.
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 strategic framework;
conversion of opportunities into Order Bookings; the expected
benefits where the company engages with customers on
enterprise-type solutions and the potential impact on Order
Bookings, performance period, and timing of revenue recognition;
expectation that the Company's efforts to expand its after-sales
service offering will provide some balance to the capital
expenditure cycle of its customers; the Company's Order Backlog
partially mitigating the impact of volatile Order Bookings; rate of
Order Backlog conversion; the Company's expectations surrounding
the restructuring currently being implemented, including with
respect to impact, timing and payback; deployment of the ATS
Business Model ("ABM") 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; potential to use leverage to support
the Company's growth strategy; and the Company's belief with
respect to the outcome of certain lawsuits, claims and
contingencies. 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; that some or all of the sales
funnel is not converted to Order Bookings due to competitive
factors or failure to meet customer needs; timing of customer
decisions related to large enterprise programs and potential for
negative impact associated with any cancellations or
non-performance in relation thereto; that revenues from after-sales
services are insufficient to offset capital spending volatility;
variations in the amount of Order Backlog completed in any given
quarter; that the current restructuring does not generate
anticipated benefits, that it takes longer than anticipated, or
that the payback is other than expected; that the ABM is not
deployed effectively, not adopted on the desired scale by the
business, or that its impact is other than as 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
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 gives rise to material
liabilities for which no provisions have been recorded; 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. Consolidated Statements of Financial
Position (in thousands of Canadian dollars)
|
|
As at
|
Note
|
March 31
2018
|
March 31
2017
|
|
|
|
|
|
|
ASSETS
|
14
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
330,148
|
$
|
286,697
|
Accounts
receivable
|
|
|
213,006
|
|
166,069
|
Costs and earnings in
excess of billings
|
|
|
|
|
|
|
on contracts in
progress
|
5
|
|
164,917
|
|
144,708
|
Inventories
|
5
|
|
58,509
|
|
47,981
|
Deposits, prepaids
and other assets
|
6
|
|
22,510
|
|
16,119
|
|
|
|
789,090
|
|
661,574
|
Non-current
assets
|
|
|
|
|
|
Property, plant and
equipment
|
7
|
|
85,102
|
|
69,233
|
Other
assets
|
8
|
|
––
|
|
13,291
|
Goodwill
|
9
|
|
459,159
|
|
423,250
|
Intangible
assets
|
10
|
|
148,869
|
|
156,069
|
Deferred income tax
assets
|
16
|
|
2,987
|
|
2,138
|
Investment tax credit
receivable
|
16
|
|
57,012
|
|
49,015
|
|
|
|
753,129
|
|
712,996
|
Total
assets
|
|
$
|
1,542,219
|
$
|
1,374,570
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Bank
indebtedness
|
14
|
$
|
2,668
|
$
|
1,411
|
Accounts payable and
accrued liabilities
|
|
|
246,384
|
|
183,839
|
Provisions
|
12
|
|
20,994
|
|
14,124
|
Billings in excess of
costs and earnings
|
|
|
|
|
|
|
on contracts in
progress
|
5
|
|
95,912
|
|
96,490
|
Current portion of
long-term debt
|
14
|
|
393
|
|
1,321
|
|
|
|
366,351
|
|
297,185
|
Non-current
liabilities
|
|
|
|
|
|
Employee
benefits
|
13
|
|
28,151
|
|
26,668
|
Long-term
debt
|
14
|
|
315,129
|
|
325,947
|
Deferred income tax
liabilities
|
16
|
|
42,907
|
|
38,761
|
Other long-term
liabilities
|
11
|
|
30,908
|
|
––
|
|
|
|
417,095
|
|
391,376
|
Total
liabilities
|
|
$
|
783,446
|
$
|
688,561
|
|
|
|
|
|
|
Commitments and
contingencies
|
14, 18
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share
capital
|
15
|
$
|
548,747
|
$
|
543,317
|
Contributed
surplus
|
|
|
12,535
|
|
12,871
|
Accumulated other
comprehensive income
|
|
|
75,830
|
|
54,974
|
Retained
earnings
|
|
|
121,369
|
|
74,599
|
Equity attributable
to shareholders
|
|
|
758,481
|
|
685,761
|
Non-controlling
interests
|
|
|
292
|
|
248
|
Total
equity
|
|
|
758,773
|
|
686,009
|
Total liabilities
and equity
|
|
$
|
1,542,219
|
$
|
1,374,570
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Consolidated Statements of
Income (in thousands of Canadian dollars, except per share
amounts)
|
|
|
|
|
Years ended March
31
|
Note
|
2018
|
2017
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Revenues from
construction contracts
|
|
$
|
654,193
|
$
|
589,033
|
|
Sale of
goods
|
|
|
79,979
|
|
78,776
|
|
Services
rendered
|
|
|
380,758
|
|
343,095
|
|
|
|
|
|
|
Total
revenues
|
|
|
1,114,930
|
|
1,010,904
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
826,771
|
|
760,248
|
|
Selling, general and
administrative
|
|
|
194,421
|
|
171,907
|
|
Stock-based
compensation
|
17
|
|
8,276
|
|
6,814
|
|
|
|
|
|
|
Earnings from
operations
|
|
|
85,462
|
|
71,935
|
|
|
|
|
|
|
Net finance
costs
|
20
|
|
23,766
|
|
25,552
|
|
|
|
|
|
|
Income before
income taxes
|
|
|
61,696
|
|
46,383
|
|
|
|
|
|
|
Income tax
expense
|
16
|
|
14,487
|
|
11,356
|
|
|
|
|
|
|
Net
income
|
|
$
|
47,209
|
$
|
35,027
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
Shareholders
|
|
$
|
47,165
|
$
|
34,994
|
Non-controlling
interests
|
|
|
44
|
|
33
|
|
|
$
|
47,209
|
$
|
35,027
|
|
|
|
|
|
|
Earnings per share
attributable to shareholders
|
|
|
|
|
|
Basic and
diluted
|
21
|
$
|
0.50
|
$
|
0.38
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Consolidated Statements of
Comprehensive Income (in thousands of Canadian
dollars)
|
|
|
|
|
|
|
Years ended March
31
|
Note
|
|
2018
|
|
2017
|
|
|
|
|
|
|
Net income
|
|
$
|
47,209
|
$
|
35,027
|
|
|
|
|
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Items to be
reclassified subsequently to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
adjustment (net of income taxes of $nil)
|
|
|
24,414
|
|
(10,978)
|
|
|
|
|
|
|
|
Net unrealized gain
(loss) on derivative financial instruments designated as cash flow
hedges
|
11
|
|
2,357
|
|
(2,869)
|
|
Tax impact
|
|
|
(655)
|
|
751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss transferred to
net income for derivatives designated as cash flow
hedges
|
11
|
|
(1,673)
|
|
(287)
|
|
Tax impact
|
|
|
479
|
|
46
|
|
|
|
|
|
|
|
Cash flow hedge
reserve adjustment
|
11
|
|
(5,420)
|
|
(11)
|
|
Tax impact
|
|
|
1,354
|
|
3
|
|
|
|
|
|
|
Items that will not
be reclassified subsequently to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses on
defined benefit pension plans
|
13
|
|
(534)
|
|
(569)
|
|
Tax
impact
|
|
|
139
|
|
157
|
|
|
|
|
|
|
Other
comprehensive income (loss)
|
|
|
20,461
|
|
(13,757)
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
67,670
|
$
|
21,270
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
Shareholders
|
|
$
|
67,626
|
$
|
21,237
|
Non-controlling
interests
|
|
|
44
|
|
33
|
|
|
$
|
67,670
|
$
|
21,270
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Consolidated Statements of Changes
in Equity (in thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March
31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2017
|
$
|
543,317
|
$
|
12,871
|
$
|
74,599
|
$
|
55,504
|
$
|
(530)
|
$
|
54,974
|
$
|
248
|
$
|
686,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
––
|
|
––
|
|
47,165
|
|
––
|
|
––
|
|
––
|
|
44
|
|
47,209
|
Other comprehensive
income (loss)
|
|
––
|
|
––
|
|
(395)
|
|
24,414
|
|
(3,558)
|
|
20,856
|
|
––
|
|
20,461
|
Total comprehensive
income (loss)
|
|
––
|
|
––
|
|
46,770
|
|
24,414
|
|
(3,558)
|
|
20,856
|
|
44
|
|
67,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
––
|
|
953
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
953
|
Exercise of stock
options
|
|
5,430
|
|
(1,289)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
4,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at
March 31, 2018
|
$
|
548,747
|
$
|
12,535
|
$
|
121,369
|
$
|
79,918
|
$
|
(4,088)
|
$
|
75,830
|
$
|
292
|
$
|
758,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31,
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
––
|
|
––
|
|
34,994
|
|
––
|
|
––
|
|
––
|
|
33
|
|
35,027
|
Other comprehensive
loss
|
|
––
|
|
––
|
|
(412)
|
|
(10,978)
|
|
(2,367)
|
|
(13,345)
|
|
––
|
|
(13,757)
|
Total comprehensive
income (loss)
|
|
––
|
|
––
|
|
34,582
|
|
(10,978)
|
|
(2,367)
|
|
(13,345)
|
|
33
|
|
21,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
––
|
|
––
|
|
(617)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
(617)
|
Stock-based
compensation
|
|
––
|
|
2,361
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
2,361
|
Exercise of stock
options
|
|
15,133
|
|
(2,691)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
12,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at March
31, 2017
|
$
|
543,317
|
$
|
12,871
|
$
|
74,599
|
$
|
55,504
|
$
|
(530)
|
$
|
54,974
|
$
|
248
|
$
|
686,009
|
ATS AUTOMATION
TOOLING SYSTEMS INC. Consolidated Statements of Cash
Flows (in thousands of Canadian dollars)
|
|
|
|
|
Years ended March
31
|
Note
|
2018
|
2017
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net income
|
|
$
|
47,209
|
$
|
35,027
|
Items not involving
cash
|
|
|
|
|
|
|
Depreciation of
property, plant and equipment
|
7
|
|
10,352
|
|
10,492
|
|
Amortization of
intangible assets
|
10
|
|
26,315
|
|
24,070
|
|
Deferred income
taxes
|
16
|
|
866
|
|
1,900
|
|
Other items not
involving cash
|
|
|
(4,778)
|
|
(7,427)
|
|
Stock-based
compensation
|
17
|
|
8,276
|
|
6,814
|
|
Loss (gain) on
disposal of property, plant and equipment
|
|
|
(1,593)
|
|
483
|
|
|
|
86,647
|
|
71,359
|
Change in non-cash
operating working
capital
|
|
|
(26,961)
|
|
56,541
|
Cash flows
provided by operating activities
|
|
$
|
59,686
|
$
|
127,900
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
7
|
$
|
(19,851)
|
$
|
(9,892)
|
Acquisition of
intangible assets
|
10
|
|
(6,124)
|
|
(8,006)
|
Proceeds from
disposal of property, plant and equipment
|
|
|
2,594
|
|
84
|
Cash flows used in
investing activities
|
|
$
|
(23,381)
|
$
|
(17,814)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Bank
indebtedness
|
|
$
|
1,191
|
$
|
(964)
|
Repayment of
long-term debt
|
|
|
(2,194)
|
|
(5,081)
|
Proceeds from
long-term debt
|
|
|
195
|
|
701
|
Proceeds from
exercise of stock options
|
|
|
4,141
|
|
12,442
|
Cash flows
provided by financing activities
|
|
$
|
3,333
|
$
|
7,098
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
|
3,813
|
|
(521)
|
|
|
|
|
|
|
Increase in cash and
cash equivalents
|
|
|
43,451
|
|
116,663
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of year
|
|
|
286,697
|
|
170,034
|
|
|
|
|
|
|
Cash and cash
equivalents, end of year
|
|
$
|
330,148
|
$
|
286,697
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
Cash income taxes
paid
|
|
$
|
10,231
|
$
|
10,785
|
Cash interest
paid
|
|
$
|
21,751
|
$
|
23,222
|
SOURCE ATS Automation Tooling Systems Inc.