CAMBRIDGE, ON, Nov. 7, 2018 /CNW/ - ATS Automation Tooling
Systems Inc. (TSX: ATA) ("ATS" or the "Company") today
reported financial results for the three and six months ended
September 30, 2018.
Second quarter summary
- Fiscal 2019 second quarter revenues were $283.6 million, 3% higher than a year ago,
primarily reflecting foreign exchange rate changes. Fiscal 2019
year-to-date revenues were $583.6
million, 8% higher than a year ago.
- Fiscal 2019 second quarter earnings from operations were
$19.0 million (7% operating margin),
compared to $23.9 million (9%
operating margin) a year ago. Fiscal 2019 year-to-date earnings
from operations were $46.0 million
(8% operating margin), compared to $45.2
million (8% operating margin) a year ago.
- Adjusted earnings from operations1 were $25.4 million (9% margin) for the second quarter
of fiscal 2019, compared to $28.8
million (10% margin) a year ago, primarily reflecting
increased stock compensation expenses, partially offset by higher
revenues and gross margin. Fiscal 2019 year-to-date adjusted
earnings from operations1 were $57.9 million (10% margin), compared to
$55.1 million (10% margin) a year
ago, primarily reflecting higher revenues and gross margin,
partially offset by higher stock compensation expenses and
increased selling, general and administrative expenses.
- EBITDA1 was $29.0
million (10% EBITDA margin) for the second quarter of fiscal
2019, compared to $32.8 million (12%
EBITDA margin) a year ago. Fiscal 2019 year-to-date
EBITDA1 was $65.8 million
(11% EBITDA margin), compared to $63.0
million (12% EBITDA margin) a year ago.
- Fiscal 2019 second quarter earnings per share were 11 cents basic and diluted compared to
15 cents basic and diluted a year
ago. Fiscal 2019 year-to-date earnings per share were
29 cents basic and diluted compared
to 27 cents basic and diluted a year
ago. Adjusted basic earnings per share1 were
17 cents for the second quarter of
fiscal 2019 compared to 18 cents a
year ago. Fiscal 2019 year-to-date adjusted basic earnings per
share1 were 39 cents
compared to 34 cents a year ago.
- Fiscal 2019 second quarter Order Bookings were $355 million, a 38% increase from a year ago.
Fiscal 2019 year-to-date Order Bookings were $713 million, a 36% increase from a year ago.
- Period end Order Backlog was a record $830 million, 28% higher than at October 1, 2017.
- The Company's balance sheet and financial capacity to support
growth remained strong, with unutilized credit facilities of
$618.5 million.
- Subsequent to the second quarter, on October 31, 2018, the Company completed its
acquisition of Konstruktion, Maschinen- & Werkzeugbau GmbH
& Co. KG, and KNW GmbH (collectively, "KMW"). See "Business
Acquisition: KMW".
Financial results
|
3 months
ended
September 30,
2018
|
3 months
ended
October 1,
2017
|
6 months
ended
September 30,
2018
|
6 months
ended
October 1,
2017
|
Revenues
|
$
|
283.6
|
$
|
274.9
|
$
|
583.6
|
$
|
538.9
|
Earnings from
operations
|
$
|
19.0
|
$
|
23.9
|
$
|
46.0
|
$
|
45.2
|
Adjusted earnings
from operations1
|
$
|
25.4
|
$
|
28.8
|
$
|
57.9
|
$
|
55.1
|
EBITDA1
|
$
|
29.0
|
$
|
32.8
|
$
|
65.8
|
$
|
63.0
|
Net
income
|
$
|
10.8
|
$
|
13.8
|
$
|
27.5
|
$
|
25.3
|
Adjusted basic
earnings per share1
|
$
|
0.17
|
$
|
0.18
|
$
|
0.39
|
$
|
0.34
|
Basic and diluted
earnings per share
|
$
|
0.11
|
$
|
0.15
|
$
|
0.29
|
$
|
0.27
|
1 Non-IFRS
measure: see "Notice to Reader: Non-IFRS Measures and Additional
IFRS Measures".
|
"Our second quarter performance featured year-over-year growth
in Order Bookings and we finished the quarter with record Order
Backlog," said Andrew Hider, Chief
Executive Officer. "Operationally, we have continued to
advance and have success with the ATS business model (ABM).
Strategically, the acquisition of KMW will enhance our offering in
the EV market. Our balance sheet remains strong and we are well
positioned to continue executing our value creation strategy:
Build, Grow and Expand."
Second Quarter Summary
Fiscal 2019 second quarter
revenues were 3% higher than in the corresponding period a year
ago. Higher revenues primarily reflected foreign exchange rate
changes which positively impacted revenues earned by foreign-based
subsidiaries compared to the corresponding period a year ago,
primarily reflecting the weakening of the Canadian dollar relative
to the U.S. dollar and Euro. Increased revenues from construction
contracts also contributed to the year-over-year increase in second
quarter revenues.
By market, fiscal 2019 second quarter revenues from consumer
products & electronics increased 60% compared to a year ago,
due to higher Order Backlog entering the second quarter of fiscal
2019 primarily related to a warehousing automation program
initially won in fiscal 2018. Revenues generated in the energy and
transportation markets decreased by 11% and 9% respectively,
primarily due to the timing of customer program schedules and
related third-party equipment deliveries. Revenues generated in the
life sciences market were stable.
Fiscal 2019 second quarter earnings from operations were
$19.0 million (7% operating margin)
compared to $23.9 million (9%
operating margin) in the second quarter of fiscal 2018. Second
quarter fiscal 2019 earnings from operations included $0.9 million of incremental costs related to the
Company's acquisition activity and $5.5
million related to amortization of identifiable intangible
assets recorded on the completed acquisitions of PA, IWK and
sortimat. Included in second quarter fiscal 2018 earnings from
operations was $4.9 million related
to amortization of identifiable intangible assets recorded on the
completed acquisitions of PA, IWK and sortimat. Excluding these
items, second quarter fiscal 2019 adjusted earnings from operations
were $25.4 million (9% margin),
compared to adjusted earnings from operations of $28.8 million (10% margin) a year ago. Lower
adjusted earnings from operations primarily reflected increased
stock compensation expenses (see "Stock-based compensation"),
partially offset by higher revenues and gross margin.
Depreciation and amortization expense was $10.0 million in the second quarter of fiscal
2019, compared to $8.9 million a year
ago. The increase primarily reflected depreciation of internal
development projects, computer hardware and amortization of
acquisition-related intangible assets.
EBITDA was $29.0 million (10%
EBITDA margin) in the second quarter of fiscal 2019 compared to
$32.8 million (12% EBITDA margin) in
the second quarter of fiscal 2018. Lower EBITDA in the second
quarter of fiscal 2019 primarily reflected higher stock
compensation expenses compared to a year ago, partially offset by
higher revenues and gross margin.
Order Bookings
Second quarter fiscal 2019 Order
Bookings were $355 million, a 38%
increase over the second quarter of fiscal 2018. Increased Order
Bookings primarily reflected improved transportation Order Bookings
which included an $80 million
enterprise program from a global automotive manufacturer for a
fully automated battery system, of which $72
million was recorded in the second quarter and $8 million in the first quarter of fiscal 2019.
This Order Booking includes the design, installation and
post-delivery support, including training, for a turnkey battery
assembly system. The system will perform a critical role in
supporting the customer's competitive entry into the electric
vehicle (EV) market. Increased Order Bookings also reflected higher
Order Bookings in life sciences primarily related to medical device
programs and higher Order Bookings in consumer products &
electronics markets which were primarily related to warehousing
automation.
Order Backlog
At September 30,
2018, Order Backlog was $830
million, 28% higher than at October
1, 2017. Higher Order Backlog was primarily driven by
increased Order Bookings in all markets in the first six months of
fiscal 2019. Certain Order Bookings, including two large enterprise
programs that the Company won and announced in the first and second
quarters of fiscal 2019, have longer performance periods, that will
lengthen the overall average program performance period and revenue
recognition period of the Company's Order Backlog.
Business Acquisition: KMW
Subsequent to the second
quarter, on October 31, 2018, the
Company completed its acquisition of Konstruktion, Maschinen- &
Werkzeugbau GmbH & Co. KG, and KMW GmbH (collectively, "KMW").
KMW is a German-based supplier of custom micro-assembly systems and
test equipment solutions. KMW is expected to provide ATS with an
internal source for complementary conveyorized micro-assembly and
test capabilities, further enabling the Company to provide full
automation solutions and meet customer demands for a complete
turnkey offering. The addition of KMW's micro-assembly technology
and expertise is expected to strengthen ATS' current offerings in
the EV market. The acquisition is aligned with ATS' strategy of
expanding its reach in current and new markets.
In its fiscal year ended March 31,
2018, KMW had revenues of approximately 14.0 million Euro and an EBITDA margin of over
20%. The total purchase price was 19.5
million Euro. Cash consideration paid in the third quarter
was 16.4 million Euro with the
balance to be paid subject to finalization of certain working
capital and other items. The cash consideration of the purchase
price along with transaction costs were funded with existing cash
on hand. This acquisition was accounted for as a business
combination with the Company as the acquirer of KMW. The
purchase method of accounting will be used and the earnings will be
consolidated from the acquisition date, October 31, 2018.
Quarterly Conference Call
ATS' quarterly conference
call begins at 10:00 a.m. eastern on
Wednesday November 7, 2018, and can
be accessed live at www.atsautomation.com or on the phone by
dialing (416) 764-8688 five minutes prior to the scheduled start
time. 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) 764-8677
and entering passcode 477805 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 3,900 people at 21
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 Quarter
Ended September 30, 2018
This Management's Discussion and Analysis ("MD&A") for
the three and six months ended September 30,
2018 (second quarter of fiscal 2019) is as of November 6, 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 unaudited interim condensed
consolidated financial statements of the Company for the second
quarter of fiscal 2019, which have been prepared in accordance with
International Financial Reporting Standards ("IFRS") and are
reported in Canadian dollars. The Company assumes that the
reader of this MD&A has access to, and has read, the audited
consolidated financial statements prepared in accordance with IFRS
and the MD&A of the Company for the year ended March 31, 2018 (fiscal 2018), and, accordingly,
the purpose of this document is to provide a fiscal 2019 second
quarter update to the information contained in the fiscal 2018
MD&A. Additional information is contained in the Company's
filings with Canadian securities regulators, including its Annual
Information Form, found on SEDAR at www.sedar.com and on the
Company's website at www.atsautomation.com.
Notice to reader: Non-IFRS measures and additional IFRS
measures
Throughout this document, management uses certain
non-IFRS measures to evaluate the performance of the Company. 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, contract assets, inventories, deposits,
prepaids and other assets, less accounts payable, accrued
liabilities, provisions and contract liabilities. 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 that 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 six-month periods ending September 30, 2018 and October 1, 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 six-month periods ending September 30, 2018 and October 1, 2017 is also contained in the MD&A
(see "Order Backlog Continuity").
COMPANY PROFILE
ATS is an industry-leading automation
solutions provider to many of the world's most successful
companies. ATS uses its extensive knowledge base and global
capabilities in custom automation, repeat automation, automation
products and value-added services, including pre-automation and
after-sales services, to address the sophisticated manufacturing
automation systems and service needs of multinational customers in
markets such as life sciences, chemicals, consumer products,
electronics, food, beverage, transportation, energy, and oil and
gas. Founded in 1978, ATS employs approximately 3,900 people
at 21 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.
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 strategic and disciplined acquisitions
that strengthen ATS' business.
ATS Business Model
The ABM is a business management
system that ATS 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 results in order to
yield world-class performance for our customers and
shareholders.
The ABM is 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.
OVERVIEW – OPERATING RESULTS
Consolidated
Revenues
(In millions of dollars)
|
Three
Months
|
Three
Months
|
Six
Months
|
Six Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
September
30,
|
October 1,
|
September
30,
|
October 1,
|
Revenues by
market
|
2018
|
2017
|
2018
|
2017
|
Consumer products
& electronics
|
$
|
51.6
|
$
|
32.2
|
$
|
117.9
|
$
|
68.8
|
Energy
|
30.8
|
34.6
|
67.7
|
56.4
|
Life
sciences
|
134.3
|
134.5
|
258.8
|
253.6
|
Transportation
|
66.9
|
73.6
|
139.2
|
160.1
|
Total
revenues
|
$
|
283.6
|
$
|
274.9
|
$
|
583.6
|
$
|
538.9
|
Second Quarter
Fiscal 2019 second quarter revenues
were 3% higher than in the corresponding period a year ago. Higher
revenues primarily reflected foreign exchange rate changes which
positively impacted revenues earned by foreign-based subsidiaries
compared to the corresponding period a year ago, primarily
reflecting the weakening of the Canadian dollar relative to the
U.S. dollar and Euro. Increased revenues from construction
contracts also contributed to the year-over-year increase in second
quarter revenues.
By market, fiscal 2019 second quarter revenues from consumer
products & electronics increased 60% compared to a year ago,
due to higher Order Backlog entering the second quarter of fiscal
2019 primarily related to a warehousing automation program
initially won in fiscal 2018. Revenues generated in the energy and
transportation markets decreased by 11% and 9% respectively,
primarily due to the timing of customer program schedules and
related third-party equipment deliveries. Revenues generated in the
life sciences market were stable.
Year-to-date
Revenues for the six months ended
September 30, 2018 were 8% higher
than in the corresponding period a year ago, primarily reflecting
higher Order Backlog entering fiscal 2019 compared to a year ago.
Increased revenues from construction contracts more than
offset lower services revenue.
By market, fiscal 2019 year-to-date revenues from consumer
products & electronics, energy and the life sciences markets
increased 71%, 20%, and 2%, respectively, primarily reflecting
higher Order Backlog entering fiscal 2019, and higher Order
Bookings in fiscal 2019 compared to a year ago. Transportation
revenues decreased 13% compared to a year ago, primarily due to
customer program schedules and related third-party equipment
deliveries.
Consolidated Operating Results
(In millions of
dollars)
|
Three
Months
|
Three
Months
|
Six
Months
|
Six Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
September
30,
|
October 1,
|
September
30,
|
October 1,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Earnings from
operations
|
$
|
19.0
|
$
|
23.9
|
$
|
46.0
|
$
|
45.2
|
Amortization of
acquisition-related intangible assets
|
|
5.5
|
|
4.9
|
|
11.0
|
|
9.9
|
Acquisition-related
transaction costs
|
|
0.9
|
|
––
|
|
0.9
|
|
––
|
Adjusted earnings
from operations1
|
$
|
25.4
|
$
|
28.8
|
$
|
57.9
|
$
|
55.1
|
1 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures."
|
|
|
Three
Months
|
Three
Months
|
Six
Months
|
Six
Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
September
30,
|
October
1,
|
September
30,
|
October
1,
|
|
2018
|
2017
|
2018
|
2017
|
Earnings from
operations
|
$
|
19.0
|
$
|
23.9
|
$
|
46.0
|
$
|
45.2
|
Depreciation and
amortization
|
10.0
|
8.9
|
19.8
|
17.8
|
EBITDA2
|
$
|
29.0
|
$
|
32.8
|
$
|
65.8
|
$
|
63.0
|
2 See
"Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures."
|
Second Quarter
Fiscal 2019 second quarter earnings
from operations were $19.0 million
(7% operating margin) compared to $23.9
million (9% operating margin) in the second quarter of
fiscal 2018. Second quarter fiscal 2019 earnings from operations
included $0.9 million of incremental
costs related to the Company's acquisition activity and
$5.5 million related to amortization
of identifiable intangible assets recorded on the completed
acquisitions of PA, IWK and sortimat. Included in second quarter
fiscal 2018 earnings from operations was $4.9 million related to amortization of
identifiable intangible assets recorded on the completed
acquisitions of PA, IWK and sortimat. Excluding these items, second
quarter fiscal 2019 adjusted earnings from operations were
$25.4 million (9% margin), compared
to adjusted earnings from operations of $28.8 million (10% margin) a year ago. Lower
adjusted earnings from operations primarily reflected increased
stock compensation expenses (see "Stock-based compensation"),
partially offset by higher revenues and gross margin.
Depreciation and amortization expense was $10.0 million in the second quarter of fiscal
2019, compared to $8.9 million a year
ago. The increase primarily reflected depreciation of internal
development projects, computer hardware and amortization of
acquisition-related intangible assets.
EBITDA was $29.0 million (10%
EBITDA margin) in the second quarter of fiscal 2019 compared to
$32.8 million (12% EBITDA margin) in
the second quarter of fiscal 2018. Lower EBITDA in the second
quarter of fiscal 2019 primarily reflected higher stock
compensation expenses compared to a year ago, partially offset by
higher revenues and gross margin.
Year-to-date
For the six months ended September 30, 2018, earnings from operations were
$46.0 million (8% operating margin)
compared to $45.2 million (8%
operating margin) in the corresponding period a year
ago. Excluding $0.9 million of
incremental costs related to the Company's acquisition activity and
$11.0 million related to amortization
of identifiable intangible assets recorded on the completed
acquisitions of PA, IWK and sortimat, adjusted earnings from
operations were $57.9 million (10%
operating margin) in the first six months of fiscal 2019, compared
to adjusted earnings from operations of $55.1 million (10% operating margin) in the
corresponding period a year ago. Higher adjusted earnings from
operations primarily reflected higher revenues and gross margin in
the first six months of fiscal 2019, partially offset by higher
stock compensation expenses (see "Stock-based compensation"), and
increased selling, general and administrative expenses (see
"Selling, general and administrative expenses") compared to a year
ago.
Depreciation and amortization expense was $19.8 million in the first six months of fiscal
2019 compared to $17.8 million a year
ago. The increase primarily reflected depreciation of internal
development projects, computer hardware and amortization of
acquisition-related intangible assets.
Year-to-date fiscal 2019 EBITDA was $65.8
million (11% EBITDA margin) compared to $63.0 million (12% EBITDA margin) in the first
six months of fiscal 2018.
Order Bookings by Quarter
Second quarter fiscal 2019
Order Bookings were $355 million, a
38% increase over the second quarter of fiscal 2018. Increased
Order Bookings primarily reflected improved transportation Order
Bookings which included an $80
million enterprise program from a global automotive
manufacturer for a fully automated battery system, of which
$72 million was recorded in the
second quarter and $8 million in the
first quarter of fiscal 2019. This Order Booking includes the
design, installation and post-delivery support, including training,
for a turnkey battery assembly system. The system will perform a
critical role in supporting the customer's competitive entry into
the electric vehicle (EV) market. Increased Order Bookings also
reflected higher Order Bookings in life sciences primarily related
to medical device programs and higher Order Bookings in consumer
products & electronics markets which were primarily related to
warehousing automation.
Order Backlog Continuity
(In millions of dollars)
|
Three
Months
|
Three
Months
|
Six
Months
|
Six Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
September
30,
|
October
1,
|
September
30,
|
October 1,
|
|
2018
|
2017
|
2018
|
2017
|
Opening Order
Backlog
|
$
|
789
|
$
|
683
|
$
|
746
|
$
|
681
|
Revenues
|
(284)
|
(275)
|
(584)
|
(539)
|
Order
Bookings
|
355
|
257
|
713
|
523
|
Order Backlog
adjustments1
|
(30)
|
(17)
|
(45)
|
(17)
|
Total
|
$
|
830
|
$
|
648
|
$
|
830
|
$
|
648
|
1 Order
Backlog adjustments include foreign exchange adjustments and
cancellations.
|
Order Backlog by Market
(In millions of dollars)
|
|
|
As
at
|
September 30, 2018
|
October 1,
2017
|
Consumer products
& electronics
|
$
|
90
|
$
|
64
|
Energy
|
105
|
104
|
Life
sciences
|
397
|
307
|
Transportation
|
238
|
173
|
Total
|
$
|
830
|
$
|
648
|
At September 30, 2018, Order
Backlog was $830 million, 28% higher
than at October 1, 2017. Higher
Order Backlog was primarily driven by increased Order Bookings in
all markets in the first six months of fiscal 2019.
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. On September 30, 2018, the
U.S., Canada and Mexico governments reached a new trade
agreement to replace the North American Free Trade Agreement,
which, if adopted by the legislature of each country, would be
called the United
States-Mexico-Canada Agreement ("USMCA"). In June 2018, the U.S. government rescinded its
exclusion of Canada (and other
jurisdictions including the European Union) from steel and aluminum
tariffs. As a countermeasure, the Canadian government imposed
tariffs on certain imports from the U.S. effective July 1, 2018. Management believes that these
tariffs may impact pricing of certain components purchased by ATS
as these tariffs work through the supply chain. However, given
the uncertainty regarding the scope and duration of these trade
actions by the U.S. and other governments, and whether trade
tensions will escalate further, their impact on the Company's
operations cannot currently be quantified. Currently, management
does not expect these tariffs to have a material impact on the
Company's business, due to the Company's ability to use its global
footprint to obtain alternative sources of supply. Ongoing trade
agreement negotiations between various jurisdictions in which the
Company does business may impact its future sales and operations.
Currently, management has seen no indication of a material change
in customer demand or production plans. Management will continue to
monitor these developments and assess their impact, and identify
mitigation opportunities.
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 niche
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. Enterprise orders are
expected to provide ATS with more strategic customer relationships,
better program control and predictability and less short-term
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. Certain Order Bookings, including
two large enterprise programs that the Company won and announced in
the first and second quarters of fiscal 2019, have longer
performance periods, that will lengthen the overall average program
performance period and revenue recognition period of the Company's
Order Backlog.
The Company is also developing its service offering to provide
customers with critical support on both new and existing equipment
to maximize the value of manufacturing solutions through the full
life-cycles of the assets. The services strategy is expected to add
incremental revenues over time as the attach rate of services'
contracts on new equipment increases and as the penetration of the
installed based improves. The Company is working to grow
service revenues as a percentage of overall revenues over time,
which is expected to provide some balance to the capital
expenditure cycle of the Company's customers but may not fully
offset capital spending volatility.
The Company expects its Order Backlog of $830 million at the end of the second quarter of
fiscal 2019 to partially mitigate the impact of volatile Order
Bookings on revenues in the short term. In the third quarter of
fiscal 2019, management expects Order Backlog conversion to be in
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 third quarter.
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 is pursuing several initiatives with the goal of
expanding its adjusted earnings from operations margin over the
long-term including: growing the Company's higher margin
after-sales service business; improving global supply chain
management; increasing the use of standardized platforms and
technologies; growing revenues while leveraging the Company's
current cost structure; and the on-going development and adoption
of the ABM.
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.
Business Acquisition: KMW
Subsequent to the second
quarter, on October 31, 2018, the
Company completed its acquisition of Konstruktion, Maschinen- &
Werkzeugbau GmbH & Co. KG, and KMW GmbH (collectively, "KMW").
KMW is a German-based supplier of custom micro-assembly systems and
test equipment solutions. KMW is expected to provide ATS with an
internal source for complementary conveyorized micro-assembly and
test capabilities, further enabling the Company to provide full
automation solutions and meet customer demands for a complete
turnkey offering. The addition of KMW's micro-assembly technology
and expertise is expected to strengthen ATS' current offerings in
the EV market. The acquisition is aligned with ATS' strategy of
expanding its reach in current and new markets.
In its fiscal year ended March 31,
2018, KMW had revenues of approximately 14.0 million Euro and an EBITDA margin of over
20%. The total purchase price was 19.5
million Euro. Cash consideration paid in the third quarter
was 16.4 million Euro with the
balance to be paid subject to finalization of certain working
capital and other items. The cash consideration of the purchase
price along with transaction costs were funded with existing cash
on hand. This acquisition was accounted for as a business
combination with the Company as the acquirer of KMW. The
purchase method of accounting will be used and the earnings will be
consolidated from the acquisition date, October 31, 2018.
CONSOLIDATED RESULTS
(In millions of dollars, except
per share data)
|
Three
Months
|
Three Months
|
Six Months
|
Six
Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
September
30,
|
October
1,
|
September
30,
|
October
1,
|
|
2018
|
2017
|
2018
|
2017
|
Revenues
|
$
|
283.6
|
$
|
274.9
|
$
|
583.6
|
$
|
538.9
|
Cost of
revenues
|
210.0
|
204.1
|
432.0
|
401.3
|
Selling, general and
administrative
|
48.1
|
45.2
|
95.6
|
89.5
|
Stock-based
compensation
|
6.6
|
1.7
|
10.0
|
2.9
|
Earnings from
operations
|
$
|
19.0
|
$
|
23.9
|
$
|
46.0
|
$
|
45.2
|
Net finance
costs
|
$
|
5.1
|
$
|
6.2
|
$
|
10.3
|
$
|
12.4
|
Provision for income
taxes
|
3.1
|
3.9
|
8.2
|
7.5
|
Net
income
|
$
|
10.8
|
$
|
13.8
|
$
|
27.5
|
$
|
25.3
|
Basic and diluted
earnings per share
|
$
|
0.11
|
$
|
0.15
|
$
|
0.29
|
$
|
0.27
|
Revenues. At $283.6
million, consolidated revenues for the second quarter of
fiscal 2019 were $8.7 million, or 3%
higher than the corresponding period a year ago. At $583.6 million, year-to-date consolidated
revenues were $44.7 million, or 8%
higher than in the corresponding period a year ago (see "Overview –
Operating Results").
Cost of revenues. At $210.0
million, second quarter fiscal 2019 cost of revenues
increased compared to the corresponding period a year ago by
$5.9 million, or 3%, primarily due to
higher revenues. Year-to-date cost of revenues of $432.0 million increased $30.7 million, or 8% primarily due to higher
revenues. At 26%, gross margin was consistent in the second quarter
of fiscal 2018 and 2019. Year-to-date gross margin was 26%,
consistent with fiscal 2018.
Selling, general and administrative ("SG&A")
expenses. SG&A expenses for the second quarter of
fiscal 2019 were $48.1 million, which
included $0.9 million of incremental
costs related to the Company's acquisition activity and
$5.5 million of amortization costs
related to the amortization of identifiable intangible assets
recorded on the acquisitions of PA, IWK and
sortimat. Excluding these costs, SG&A expenses were
$41.7 million in the second quarter
of fiscal 2019. Comparably, SG&A expenses for the second
quarter of fiscal 2018 were $40.3
million, which excluded $4.9
million of amortization costs related to the amortization of
identifiable intangible assets recorded on the acquisitions of PA,
IWK and sortimat. Higher SG&A expenses in the second quarter of
fiscal 2019 primarily reflected increased employee costs and
sales-related expenses.
For the six months ended September 30,
2018, SG&A expenses were $95.6
million, which included $0.9
million of incremental costs related to the Company's
acquisition activity and $11.0
million of expenses related to the amortization of
identifiable intangible assets recorded on the acquisitions of PA,
IWK and sortimat. Excluding these costs, SG&A expenses
were $83.7 million for the six months
ended September 30, 2018. Comparably,
SG&A expenses for the six months ended October 1, 2017 were $79.6
million, which excluded $9.9
million of expenses related to the amortization of
identifiable intangible assets recorded on the acquisitions of PA,
IWK and sortimat. Higher SG&A expenses in the first six months
of fiscal 2019 primarily reflected increased employee costs and
sales-related expenses.
Stock-based compensation. Stock-based compensation
expense amounted to $6.6 million in
the second quarter of fiscal 2019 compared to $1.7 million in the corresponding period a year
ago. For the six-month period ended September 30, 2018, stock-based compensation
expense increased to $10.0 million
from $2.9 million a year earlier. The
increase in stock-based compensation costs is attributable to
higher expenses from the revaluation of deferred stock units and
restricted share units.
Earnings from operations. For the three- and
six-month periods ended September 30,
2018, earnings from operations were $19.0 million (7% operating margin) and
$46.0 million (8% operating margin),
respectively, compared to earnings from operations of $23.9 million (9% operating margin) and
$45.2 million (8% operating margin)
in the corresponding periods a year ago (see "Overview – Operating
Results").
Net finance costs. Net finance costs were
$5.1 million in the second quarter of
fiscal 2019, $1.1 million lower than
in the corresponding period a year ago. For the six months
ended September 30, 2018, finance
costs were $10.3 million compared to
$12.4 million in the corresponding
period a year ago. The decrease was primarily due to higher
interest income earned in the first two quarters of fiscal 2019
compared to the corresponding period a year ago.
Income tax provision. For the three and six months ended
September 30, 2018, the Company's
effective income tax rates of 22% and 23%, respectively, differed
from the combined Canadian basic federal and provincial income tax
rate of 27% primarily due to 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 2019 second quarter net income was
$10.8 million (11 cents per share basic and diluted), compared
to $13.8 million (15 cents per share basic and diluted) for the
second quarter of fiscal 2018. Adjusted basic earnings per
share were 17 cents in the second
quarter of fiscal 2019 compared to 18
cents for the second quarter of fiscal 2018 (see
"Reconciliation of Non-IFRS Measures to IFRS Measures").
Net income for the six months ended September 30, 2018 was $27.5 million (29
cents per share basic and diluted) compared to $25.3 million (27
cents per share basic and diluted) for the corresponding
period a year ago. Adjusted basic earnings per share were
39 cents in the six months ended
September 30, 2018 compared to
34 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):
|
Three
Months
|
Three
Months
|
Six
Months
|
Six Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
September
30,
|
October 1,
|
September
30,
|
October 1,
|
|
2018
|
2017
|
2018
|
2018
|
EBITDA
|
$
|
29.0
|
$
|
32.8
|
$
|
65.8
|
$
|
63.0
|
Less: depreciation
and amortization expense
|
10.0
|
8.9
|
19.8
|
17.8
|
Earnings from
operations
|
$
|
19.0
|
$
|
23.9
|
$
|
46.0
|
$
|
45.2
|
Less: net finance
costs
|
5.1
|
6.2
|
10.3
|
12.4
|
Provision for income
taxes
|
3.1
|
3.9
|
8.2
|
7.5
|
Net
income
|
$
|
10.8
|
$
|
13.8
|
$
|
27.5
|
$
|
25.3
|
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
September 30, 2018
|
Three Months Ended
October 1, 2017
|
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
IFRS
|
Adjustments
|
Adjusted
(non-IFRS)
|
|
|
|
|
|
|
|
Earnings from
operations
|
$
|
19.0
|
$
|
––
|
$
|
19.0
|
$
|
23.9
|
$
|
––
|
$
|
23.9
|
Acquisition-related
transaction costs
|
––
|
0.9
|
0.9
|
––
|
––
|
––
|
Amortization of
acquisition-
|
|
|
|
|
|
|
related intangible
assets
|
––
|
5.5
|
5.5
|
––
|
4.9
|
4.9
|
|
$
|
19.0
|
$
|
6.4
|
$
|
25.4
|
$
|
23.9
|
$
|
4.9
|
$
|
28.8
|
Less: net finance
costs
|
$
|
5.1
|
$
|
––
|
$
|
5.1
|
$
|
6.2
|
$
|
––
|
$
|
6.2
|
Income before
income taxes
|
$
|
13.9
|
$
|
6.4
|
$
|
20.3
|
$
|
17.7
|
$
|
4.9
|
$
|
22.6
|
Provision for income
taxes
|
$
|
3.1
|
$
|
––
|
$
|
3.1
|
$
|
3.9
|
$
|
––
|
$
|
3.9
|
Adjustments to
provision for
|
|
|
|
|
|
|
income
taxes1
|
––
|
1.6
|
1.6
|
––
|
1.5
|
1.5
|
|
$
|
3.1
|
$
|
1.6
|
$
|
4.7
|
$
|
3.9
|
$
|
1.5
|
$
|
5.4
|
Net
income
|
$
|
10.8
|
$
|
4.8
|
$
|
15.6
|
$
|
13.8
|
$
|
3.4
|
$
|
17.2
|
Basic earnings per
share
|
$
|
0.11
|
$
|
0.06
|
$
|
0.17
|
$
|
0.15
|
$
|
0.03
|
$
|
0.18
|
1
Adjustments to provision for income taxes relate to the income tax
effects of adjustment items that are excluded for the purposes of
calculating non-IFRS based adjusted net income.
|
|
Six Months Ended
September 30, 2018
|
Six Months Ended
October 1, 2017
|
|
IFRS
|
Adjustments
|
Adjusted
|
IFRS
|
Adjustments
|
Adjusted
|
|
|
|
(non-IFRS)
|
|
|
(non-IFRS)
|
Earnings from
operations
|
$
|
46.0
|
$
|
––
|
$
|
46.0
|
$
|
45.2
|
$
|
––
|
$
|
45.2
|
Acquisition-related
transaction costs
|
––
|
0.9
|
0.9
|
––
|
––
|
––
|
Amortization of
acquisition-
|
|
|
|
|
|
|
related intangible
assets
|
––
|
11.0
|
11.0
|
––
|
9.9
|
9.9
|
|
$
|
46.0
|
$
|
11.9
|
$
|
57.9
|
$
|
45.2
|
$
|
9.9
|
$
|
55.1
|
Less: net finance
costs
|
$
|
10.3
|
$
|
––
|
$
|
10.3
|
$
|
12.4
|
$
|
––
|
$
|
12.4
|
Income before
income taxes
|
$
|
35.7
|
$
|
11.9
|
$
|
47.6
|
$
|
32.8
|
$
|
9.9
|
$
|
42.7
|
Provision for income
taxes
|
$
|
8.2
|
$
|
––
|
$
|
8.2
|
$
|
7.5
|
$
|
––
|
$
|
7.5
|
Adjustments to
provision for
|
|
|
|
|
|
|
income
taxes1
|
––
|
3.2
|
3.2
|
––
|
3.1
|
3.1
|
|
$
|
8.2
|
$
|
3.2
|
$
|
11.4
|
$
|
7.5
|
$
|
3.1
|
$
|
10.6
|
Net
income
|
$
|
27.5
|
$
|
8.7
|
$
|
36.2
|
$
|
25.3
|
$
|
6.8
|
$
|
32.1
|
Basic earnings per
share
|
$
|
0.29
|
$
|
0.10
|
$
|
0.39
|
$
|
0.27
|
$
|
0.07
|
$
|
0.34
|
1
Adjustments to provision for income taxes relate to the income tax
effects of adjustment items that are excluded for the purposes of
calculating non-IFRS based adjusted net income.
|
LIQUIDITY, CASH FLOW AND FINANCIAL RESOURCES
(In
millions of dollars, except
ratios)
As
at
|
September 30,
2018
|
March 31,
2018
|
Cash and cash
equivalents
|
$
|
354.2
|
$
|
330.1
|
Debt-to-equity
ratio
|
0.45:1
|
0.47:1
|
|
|
|
For the three months
ended
|
September 30,
2018
|
October 1,
2017
|
Cash flows provided
by operating activities
|
$
|
39.5
|
$
|
37.7
|
At September 30, 2018, the Company
had cash and cash equivalents of $354.2
million compared to $330.1
million at March 31,
2018. At September 30, 2018, the
Company's debt-to-total equity ratio was 0.45:1.
In the three months ended September 30,
2018, cash flows provided by operating activities were
$39.5 million ($37.7 million provided by operating activities in
the second quarter a year ago). The increase in operating cash
flows related primarily to the timing of investments in non-cash
working capital in certain customer programs. In the six
months ended September 30, 2018, cash
flows provided by operating activities were $39.1 million ($34.3
million provided by operating activities in the
corresponding period a year ago). The increase in operating
cash flows related primarily to increased net income.
In the second quarter of fiscal 2019, the Company's investment
in non-cash working capital decreased by $14.1 million from July
1, 2018. On a year-to-date basis, investment in
non-cash working capital increased $15.8
million. Accounts receivable decreased 2%, or
$4.8 million, driven by the timing of
billings on certain customer contracts. Net contracts in
progress decreased 32%, or $22.2
million, compared to March 31,
2018. The Company actively manages its accounts receivable
and net contracts in progress balances through billing terms on
long-term contracts, collection efforts and supplier payment terms.
Inventories decreased 9%, or $5.4
million, primarily due to a decrease in work-in-process on
certain customer projects. Deposits and prepaid assets increased
10%, or $2.2 million, compared to
March 31, 2018 due to the timing of
program execution. Accounts payable and accrued liabilities
decreased 14%, or $35.5 million,
compared to March 31, 2018.
Provisions decreased 36%, or $7.6
million, compared to March 31,
2018.
Capital expenditures totalled $9.4
million in the first six months of fiscal 2019, primarily
related to computer hardware, building additions and production
equipment.
Intangible assets expenditures were $3.0
million for the first six months of fiscal 2019, and
primarily related to various internal development projects and
computer software.
At September 30, 2018, the Company
had $618.5 million of unutilized
multipurpose credit, including letters of credit, available under
existing credit facilities and an additional $43.6 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 September 30,
2018, the Company had utilized $147.8
million under the Credit Facility by way of letters of
credit (March 31, 2018 - $108.5 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 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 September 30,
2018, all of the covenants were met.
The Company has additional credit facilities available of
$18.4 million (2.3 million Euros, $10.0
million U.S, 50.0 million Thai
Baht and 1.0 million Czech Koruna). The total amount
outstanding on these facilities at September
30, 2018 was $1.6 million, of
which $1.1 million was classified as
bank indebtedness (March 31, 2018 -
$2.7 million) and $0.5 million was classified as long-term debt
(March 31, 2018 - $0.7 million). The interest rates applicable to
the credit facilities range from 1.66% to 8.25% per annum. A
portion of the long-term debt is secured by certain assets of the
Company.
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 September 30, 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.
Subsequent to the second quarter of fiscal 2019, on October 31, 2018, the Company completed its
acquisition of KMW. See "Business Acquisition: KMW".
Contractual Obligations
(In millions of dollars)
The Company's minimum operating lease payments (related
primarily to facilities and equipment) and purchase obligations are
as follows:
|
Operating
|
Purchase
|
|
leases
|
obligations
|
Less than one
year
|
$
|
9.5
|
$
|
115.2
|
One – two
years
|
9.1
|
2.4
|
Two – three
years
|
7.2
|
0.7
|
Three – four
years
|
4.2
|
0.2
|
Four – five
years
|
1.2
|
0.2
|
Due in over five
years
|
0.8
|
––
|
|
$
|
32.0
|
$
|
118.7
|
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 September 30, 2018, the total value of
outstanding letters of credit was approximately $170.5 million (March 31,
2018 - $137.1 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 insurance in certain instances.
During the first six months of fiscal 2019, 132,405 stock
options were exercised. At November 6,
2018 the total number of shares outstanding was 94,139,097
and there were 1,871,534 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
during the first six months of fiscal 2019.
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.
$150.0 million into Canadian dollars.
The Company will receive interest of 6.50% U.S. per annum and pay
interest of 6.501% Canadian. The terms of the hedging relationship
will end on June 15, 2023.
The Company manages foreign exchange risk on its Euro
denominated net investments. The Company uses cross-currency swaps
as derivative financial instruments to hedge a portion of the
foreign exchange risk related to its Euro-denominated net
investment. On March 29, 2016, the
Company entered into a cross-currency interest rate swap instrument
to swap 134.1 million Euros into
Canadian dollars. The Company will receive interest of 6.501%
Canadian per annum and pay interest of 5.094% Euros. The terms of
the hedging relationship will end on June
15, 2023.
In addition, from time to time, the Company may hedge the
foreign exchange risk arising from foreign currency debt,
intercompany loans, net investments in foreign-based subsidiaries
and committed acquisitions through the use of forward foreign
exchange contracts or other non-derivative financial instruments.
The Company uses hedging as a risk management tool, not to
speculate.
Period average exchange rates in CDN$
|
Three Months
Ended
|
|
Six Months
Ended
|
|
September
30, 2018
|
October 1,
2017
|
% change
|
September
30, 2018
|
October 1,
2017
|
% change
|
U.S.
dollar
|
1.306
|
1.252
|
4.3%
|
1.299
|
1.299
|
0.0%
|
Euro
|
1.519
|
1.473
|
3.1%
|
1.527
|
1.476
|
3.5%
|
CONSOLIDATED QUARTERLY RESULTS
(In millions of
dollars, except per share amounts)
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
|
2019
|
2019
|
2018
|
2018
|
2018
|
2018
|
2017
|
2017
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
283.6
|
$
300.0
|
$
298.4
|
$
277.6
|
$
274.9
|
$
264.0
|
$
265.7
|
$
237.4
|
|
|
|
|
|
|
|
|
|
Earnings from
operations
|
$
19.0
|
$
27.0
|
$
25.5
|
$
14.8
|
$
23.9
|
$
21.3
|
$
16.8
|
$
15.3
|
|
|
|
|
|
|
|
|
|
Adjusted earnings
from
|
|
|
|
|
|
|
|
|
operations
|
$
25.4
|
$
32.6
|
$
32.8
|
$
29.3
|
$
28.8
|
$
26.3
|
$
24.5
|
$
22.5
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
10.8
|
$
16.7
|
$
15.0
|
$
6.9
|
$
13.8
|
$
11.5
|
$
7.8
|
$
6.6
|
Basic and diluted
earnings
|
|
|
|
|
|
|
|
|
per share
|
$
0.11
|
$
0.18
|
$
0.16
|
$
0.07
|
$
0.15
|
$
0.12
|
$
0.08
|
$
0.07
|
|
|
|
|
|
|
|
|
|
Adjusted basic
earnings per
|
|
|
|
|
|
|
|
|
share
|
$
0.17
|
$
0.22
|
$
0.22
|
$
0.18
|
$
0.18
|
$
0.16
|
$
0.15
|
$
0.12
|
|
|
|
|
|
|
|
|
|
Order
Bookings
|
$
355.0
|
$
358.0
|
$
348.0
|
$
311.0
|
$
257.0
|
$
266.0
|
$
322.0
|
$
284.0
|
|
|
|
|
|
|
|
|
|
Order
Backlog
|
$
830.0
|
$
789.0
|
$
746.0
|
$
689.0
|
$
648.0
|
$
683.0
|
$
681.0
|
$
632.0
|
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, and by the timing
of acquisitions. General economic trends, product life cycles and
product changes may impact revenues and operating performance. ATS
typically experiences some seasonality with its Order Bookings,
revenues and earnings from operations due to summer plant shutdowns
by its customers.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The
preparation of the Company's interim condensed 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 interim condensed consolidated financial statements were
prepared. Existing circumstances and assumptions about future
developments may change due to market changes or circumstances
arising beyond the control of the Company. Such changes are
reflected in the estimates as they occur. There have been no
material changes to the critical accounting estimates described in
the Company's fiscal 2018 MD&A.
ACCOUNTING STANDARD ADOPTED IN FISCAL 2019
IFRS 15 – Revenue from Contracts with
Customers
Effective April 1,
2018, the Company adopted IFRS 15 - Revenue from
contracts with Customers ("IFRS 15"), in accordance with the
modified retrospective transitional approach. There were no
transitional adjustments or changes to the Company's revenue
recognition policies required on the adoption of this standard. As
required, in the interim consolidated statements of income, the
Company disaggregated revenue recognized from contracts with
customers into categories that depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by
economic factors. IFRS 15 establishes a single comprehensive
model for entities to use in accounting for revenue arising from
contracts with customers. Under IFRS 15, revenue is recognized at
an amount that reflects the consideration to which an entity
expects to be entitled in exchange for transferring goods or
services to a customer. The principles in IFRS 15 provide a more
structured approach to measuring and recognizing revenue. The
standard also specifies the accounting for the incremental costs of
obtaining a contract and the costs directly related to fulfilling a
contract.
The standard requires contract assets and contract liabilities
to be separately presented in the statement of financial position.
Contract assets represent the right to consideration in exchange
for goods or services that have been transferred to a customer.
Contract liabilities represent the obligation to transfer goods and
services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the
customer. Previously, the Company recognized contract assets as
"costs and earnings in excess of billings on contracts in progress"
and contract liabilities as "billings in excess of costs and
earnings on contracts in progress." Based on IFRS 15, contract
assets and contract liabilities have been disclosed as current
assets and current liabilities respectively in the statement of
financial position.
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
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") are responsible for
establishing and maintaining disclosure controls and procedures and
internal controls over financial reporting for the Company. The
control framework used in the design of disclosure controls and
procedures and internal control over financial reporting is the
"Internal Control - Integrated Framework (2013)" issued by the
Committee of Sponsoring Organizations of the Treadway Commission
("COSO").
Management, including the CEO and CFO, does not expect that the
Company's disclosure controls or internal controls over financial
reporting will prevent or detect all errors and all fraud or will
be effective under all potential future conditions. A control
system is subject to inherent limitations and, no matter how well
designed and operated, can provide only reasonable, not absolute,
assurance that the control system's objectives will be met.
During the three and six months ended September 30, 2018, there have been no changes in
the design of the Company's internal controls over financial
reporting that have materially affected, or are reasonably likely
to materially affect, the Company's internal controls over
financial reporting.
Note to Readers: Forward-looking statements
This news
release and management's discussion and analysis of financial
conditions, and results of operations of ATS contains certain
statements that may constitute forward-looking information within
the meaning of applicable securities laws ("forward-looking
statements"). Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of ATS, or
developments in ATS' business or in its industry, to differ
materially from the anticipated results, performance, achievements
or developments expressed or implied by such forward-looking
statements. Forward-looking statements include all disclosure
regarding possible events, conditions or results of operations that
is based on assumptions about future economic conditions and
courses of action. Forward-looking statements may also
include, without limitation, any statement relating to future
events, conditions or circumstances. ATS cautions you not to place
undue reliance upon any such forward-looking statements, which
speak only as of the date they are made. Forward-looking
statements relate to, among other things: the strategic framework;
trade tariffs and trade agreements; 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; expected benefits with respect to the
Company's efforts to expand its service offering; the Company's
Order Backlog partially mitigating the impact of volatile Order
Bookings; rate of Order Backlog conversion; deployment of the ATS
Business Model ("ABM") and the expected impact; initiatives having
the goal of expanding adjusted earnings from operations margin over
long-term; the Company's strategy to expand organically and through
acquisition; the expected benefits resulting from the acquisition
of KMW; 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 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 current or future trade
tariffs or trade agreements have unexpected impact on the business,
including increased cost of supplies; 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 the Company is not
successful in growing its service offering or that expected
benefits are not realized; variations in the amount of Order
Backlog completed in any given quarter; 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; that
efforts to expand adjusted earnings from operations margin over
long-term is unsuccessful, due to any number of reasons, including
less than anticipated increase in after-sales service revenues or
reduced margins attached to those revenues, inability to achieve
lower costs through supply chain management, failure to develop,
adopt internally, or have customers adopt, standardized platforms
and technologies, inability to maintain current cost structure if
revenues were to grow, and failure of ABM to impact margins;
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 expected benefits from the
acquisition of KMW are not realized for reasons including failure
to successfully integrate it and lack of customer receptivity to
the expanded offering; that the effective tax rate is other than
expected, due to reasons including income spread among
jurisdictions being other than anticipated; non-cash working
capital as a percentage of revenues operating at a level other than
as expected due to reasons, including, the timing and nature of
Order Bookings, the timing of payment milestones and payment terms
in customer contracts, and delays in customer programs; risk that
the ultimate outcome of lawsuits, claims, and contingencies give
rise to material liabilities for which no 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.
Interim
Consolidated Statements of Financial Position
(in thousands of
Canadian dollars - unaudited)
|
|
|
September
30
|
March 31
|
As
at
|
Note
|
2018
|
2018
|
|
|
|
|
ASSETS
|
9
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
|
$
|
354,228
|
$
|
330,148
|
Accounts
receivable
|
|
208,228
|
213,006
|
Contract
assets
|
2, 4
|
168,979
|
164,917
|
Inventories
|
4
|
53,136
|
58,509
|
Deposits, prepaids
and other assets
|
5
|
24,747
|
22,510
|
|
|
809,318
|
789,090
|
Non-current
assets
|
|
|
|
Property, plant and
equipment
|
|
86,461
|
85,102
|
Goodwill
|
|
438,923
|
459,159
|
Intangible
assets
|
|
131,250
|
148,869
|
Deferred income tax
assets
|
|
2,521
|
2,987
|
Investment tax credit
receivable
|
|
57,378
|
57,012
|
|
|
716,533
|
753,129
|
Total
assets
|
|
$
|
1,525,851
|
$
|
1,542,219
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Bank
indebtedness
|
9
|
$
|
1,129
|
$
|
2,668
|
Accounts payable and
accrued liabilities
|
|
210,891
|
246,384
|
Provisions
|
8
|
13,380
|
20,994
|
Contract
liabilities
|
2, 4
|
122,137
|
95,912
|
Current portion of
long-term debt
|
9
|
359
|
393
|
|
|
347,896
|
366,351
|
Non-current
liabilities
|
|
|
|
Employee
benefits
|
|
26,813
|
28,151
|
Long-term
debt
|
9
|
316,407
|
315,129
|
Deferred income tax
liabilities
|
|
41,610
|
42,907
|
Other long-term
liabilities
|
6
|
17,133
|
30,908
|
|
|
401,963
|
417,095
|
Total
liabilities
|
|
$
|
749,859
|
$
|
783,446
|
|
|
|
|
Commitments and
contingencies
|
9, 13
|
|
|
|
|
|
|
EQUITY
|
|
|
|
Share
capital
|
10
|
$
|
550,996
|
$
|
548,747
|
Contributed
surplus
|
|
12,602
|
12,535
|
Accumulated other
comprehensive income
|
|
63,272
|
75,830
|
Retained
earnings
|
|
148,819
|
121,369
|
Equity attributable
to shareholders
|
|
775,689
|
758,481
|
Non-controlling
interests
|
|
303
|
292
|
Total
equity
|
|
775,992
|
758,773
|
Total liabilities
and equity
|
|
$
|
1,525,851
|
$
|
1,542,219
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim
Consolidated Statements of Income
(in thousands of
Canadian dollars, except per share amounts - unaudited)
|
|
|
Three months ended
|
Six months
ended
|
|
|
September
30
|
October 1
|
September
30
|
October
1
|
|
Note
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
Revenues from
construction contracts
|
|
$
172,269
|
$
161,468
|
$
358,561
|
$
305,291
|
Sale of
goods
|
|
20,142
|
20,065
|
41,766
|
38,932
|
Services
rendered
|
|
91,212
|
93,418
|
183,276
|
194,690
|
|
|
|
|
|
|
Total
revenues
|
|
283,623
|
274,951
|
583,603
|
538,913
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
Cost of
revenues
|
|
209,969
|
204,182
|
432,012
|
401,315
|
Selling, general and
administrative
|
|
48,079
|
45,204
|
95,570
|
89,529
|
Stock-based
compensation
|
12
|
6,567
|
1,669
|
10,002
|
2,898
|
|
|
|
|
|
|
Earnings from
operations
|
|
19,008
|
23,896
|
46,019
|
45,171
|
|
|
|
|
|
|
Net finance
costs
|
15
|
5,090
|
6,147
|
10,323
|
12,342
|
|
|
|
|
|
|
Income before
income taxes
|
|
13,918
|
17,749
|
35,696
|
32,829
|
|
|
|
|
|
|
Income tax
expense
|
11
|
3,132
|
3,912
|
8,235
|
7,482
|
|
|
|
|
|
|
Net
income
|
|
$
10,786
|
$
13,837
|
$
27,461
|
$
25,347
|
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
|
Shareholders
|
|
$
10,780
|
$
13,831
|
$
27,450
|
$
25,325
|
Non-controlling
interests
|
|
6
|
6
|
11
|
22
|
|
|
$
10,786
|
$
13,837
|
$
27,461
|
$
25,347
|
Earnings per
share
|
|
|
|
|
|
attributable to
shareholders
|
|
|
|
|
|
Basic and
diluted
|
16
|
$0.11
|
$0.15
|
$
0.29
|
$
0.27
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim
Consolidated Statements of Comprehensive Income
(in thousands of
Canadian dollars - unaudited)
|
|
Three months
ended
|
Six months
ended
|
|
September
30
|
October 1
|
September 30
|
October
1
|
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
Net
income
|
$
|
10,786
|
$
|
13,837
|
$
|
27,461
|
$
|
25,347
|
|
|
|
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
Items to be
reclassified subsequently to net income:
|
|
|
|
|
|
|
|
|
|
Currency translation
adjustment
|
|
|
|
|
(net of income taxes
of $nil)
|
(397)
|
(3,166)
|
(15,949)
|
7,167
|
|
|
|
|
|
Net unrealized gain on
derivative financial
|
|
|
|
|
instruments designated
as cash flow hedges
|
2,300
|
2,126
|
3,663
|
4,810
|
Tax
impact
|
(576)
|
(547)
|
(917)
|
(1,259)
|
|
|
|
|
|
Loss (gain)
transferred to net income for derivatives
|
|
|
|
|
designated as cash
flow hedges
|
37
|
(340)
|
42
|
81
|
Tax
impact
|
––
|
100
|
(5)
|
(4)
|
|
|
|
|
|
Cash flow hedge
reserve adjustment
|
(8,552)
|
(6,233)
|
810
|
(8,260)
|
Tax
impact
|
2,138
|
1,558
|
(202)
|
2,065
|
|
|
|
|
|
Other
comprehensive income (loss)
|
(5,050)
|
(6,502)
|
(12,558)
|
4,600
|
|
|
|
|
|
Comprehensive
income
|
$
|
5,736
|
$
|
7,335
|
$
|
14,903
|
$
|
29,947
|
|
|
|
|
|
Attributable
to
|
|
|
|
|
Shareholders
|
$
|
5,730
|
$
|
7,329
|
$
|
14,892
|
$
|
29,925
|
Non-controlling
interests
|
6
|
6
|
11
|
22
|
|
$
|
5,736
|
$
|
7,335
|
$
|
14,903
|
$
|
29,947
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim
Consolidated Statements of Changes in Equity
(in thousands of
Canadian dollars -unaudited)
|
Six months ended
September 30, 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, 2018
|
$
|
548,747
|
$
|
12,535
|
$
|
121,369
|
$
|
79,918
|
$
|
(4,088)
|
$
|
75,830
|
$
|
292
|
$
|
758,773
|
|
|
|
|
|
|
|
|
|
Net
income
|
––
|
––
|
27,450
|
––
|
––
|
––
|
11
|
27,461
|
Other comprehensive
income (loss)
|
––
|
––
|
––
|
(15,949)
|
3,391
|
(12,558)
|
––
|
(12,558)
|
Total comprehensive
income (loss)
|
––
|
––
|
27,450
|
(15,949)
|
3,391
|
(12,558)
|
11
|
14,903
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
––
|
544
|
––
|
––
|
––
|
––
|
––
|
544
|
Exercise of stock
options
|
2,249
|
(477)
|
––
|
––
|
––
|
––
|
––
|
1,772
|
|
|
|
|
|
|
|
|
|
Balance, as at
September 30, 2018
|
$
|
550,996
|
$
|
12,602
|
$
|
148,819
|
$
|
63,969
|
$
|
(697)
|
$
|
63,272
|
$
|
303
|
$
|
775,992
|
|
|
Six months ended
October 1, 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, 2017
|
$
|
543,317
|
12,871
|
$
|
74,599
|
$
|
55,504
|
$
|
(530)
|
$
|
54,974
|
$
|
248
|
$
|
686,009
|
|
|
|
|
|
|
|
|
|
Net
income
|
––
|
––
|
25,325
|
––
|
––
|
––
|
22
|
25,347
|
Other comprehensive
income (loss)
|
––
|
––
|
––
|
7,167
|
(2,567)
|
4,600
|
––
|
4,600
|
Total comprehensive
income (loss)
|
––
|
––
|
25,325
|
7,167
|
(2,567)
|
4,600
|
22
|
29,947
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
––
|
704
|
––
|
––
|
––
|
––
|
––
|
704
|
Exercise of stock
options
|
287
|
(79)
|
––
|
––
|
––
|
––
|
––
|
208
|
|
|
|
|
|
|
|
|
|
Balance, as at
October 1, 2017
|
$
|
543,604
|
$
|
13,496
|
$
|
99,924
|
$
|
62,671
|
$
|
(3,097)
|
$
|
59,574
|
$
|
270
|
$
|
716,868
|
ATS AUTOMATION
TOOLING SYSTEMS INC.
Interim
Consolidated Statements of Cash Flows
(in thousands of
Canadian dollars - unaudited)
|
|
|
Three months
ended
|
Six months
ended
|
|
|
September
30
|
October 1
|
September
30
|
October 1
|
|
Note
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net income
|
|
$
|
10,786
|
$
|
13,837
|
$
|
27,461
|
$
|
25,347
|
Items not involving
cash
|
|
|
|
|
|
Depreciation of
property, plant and equipment
|
|
2,981
|
2,563
|
5,768
|
5,049
|
Amortization of
intangible assets
|
|
6,997
|
6,375
|
14,056
|
12,765
|
Deferred income
taxes
|
11
|
(1,288)
|
(985)
|
100
|
(123)
|
Other items not
involving cash
|
|
(654)
|
710
|
(2,433)
|
749
|
Stock-based
compensation
|
12
|
6,567
|
1,669
|
10,002
|
2,898
|
Gain on disposal of
property, plant and
|
|
|
|
|
|
equipment
|
|
––
|
(290)
|
––
|
(266)
|
|
|
25,389
|
23,879
|
54,954
|
46,419
|
Change in non-cash
operating working capital
|
|
14,105
|
13,790
|
(15,841)
|
(12,109)
|
Cash flows
provided by operating activities
|
|
$
|
39,494
|
$
|
37,669
|
$
|
39,113
|
$
|
34,310
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Acquisition of
property, plant and equipment
|
|
$
|
(4,835)
|
$
|
(3,869)
|
$
|
(9,398)
|
$
|
(7,177)
|
Acquisition of
intangible assets
|
|
(1,385)
|
(2,073)
|
(2,961)
|
(2,928)
|
Proceeds from
disposal of property,
|
|
|
|
|
|
plant and
equipment
|
|
20
|
521
|
150
|
536
|
Cash flows used in
investing activities
|
|
$
|
(6,200)
|
$
|
(5,421)
|
$
|
(12,209)
|
$
|
(9,569)
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
Bank
indebtedness
|
|
$
|
(1,327)
|
$
|
170
|
$
|
(1,309)
|
$
|
(250)
|
Repayment of
long-term debt
|
|
(93)
|
(1,161)
|
(292)
|
(1,509)
|
Proceeds from
long-term debt
|
|
2
|
91
|
38
|
97
|
Proceeds from
exercise of options
|
|
717
|
––
|
1,772
|
208
|
Cash flows
provided by (used in)
|
|
|
|
|
|
financing
activities
|
|
$
|
(701)
|
$
|
(900)
|
$
209
|
$
|
(1,454)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
|
|
|
|
and cash
equivalents
|
|
(3,009)
|
(4,401)
|
(3,033)
|
(3,679)
|
|
|
|
|
|
|
Increase in cash and
cash equivalents
|
|
29,584
|
26,947
|
24,080
|
19,608
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period
|
|
324,644
|
279,358
|
330,148
|
286,697
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period
|
|
$
|
354,228
|
$
|
306,305
|
$
|
354,228
|
$306,305
|
|
|
|
|
|
|
Supplemental
information
|
|
|
|
|
|
Cash income taxes
paid
|
|
$
|
4,028
|
$
|
1,899
|
$
|
4,780
|
$
|
5,356
|
Cash interest
paid
|
|
$
|
1,791
|
$
|
788
|
$
|
12,937
|
$
|
10,695
|
SOURCE ATS Automation Tooling Systems Inc.