CAMBRIDGE, ON, Feb. 6, 2019 /CNW/ - ATS Automation Tooling
Systems Inc. (TSX: ATA) ("ATS" or the "Company") today reported financial results for the three and nine months ended
December 30, 2018.
Third quarter summary
- Fiscal 2019 third quarter revenues were $321.4 million, 16% higher than a year ago. Fiscal
2019 year-to-date revenues were $905.0 million, 11% higher than a year ago.
- Fiscal 2019 third quarter earnings from operations were $38.5 million (12% operating margin),
compared to $14.8 million (5% operating margin) a year ago. Fiscal 2019 year-to-date
earnings from operations were $84.5 million (9% operating margin), compared to $59.9 million (7% operating margin) a year ago.
- Adjusted earnings from operations1 were $46.7 million (15% margin) for the third
quarter of fiscal 2019, compared to $29.3 million (11% margin) a year ago, primarily reflecting
higher revenues, improved gross margin, and a recovery of stock-based compensation expenses. Fiscal 2019 year-to-date adjusted
earnings from operations1 were $104.6 million (12% margin), compared to $84.4 million (10% margin) a year ago, primarily reflecting higher revenues and gross margin.
- EBITDA1 was $48.7 million (15% EBITDA margin) for the third quarter of fiscal
2019, compared to $24.3 million (9% EBITDA margin) a year ago. Fiscal 2019 year-to-date
EBITDA1 was $114.6 million (13% EBITDA margin), compared to $87.2 million (11% EBITDA margin) a year ago.
- Fiscal 2019 third quarter earnings per share were 27 cents basic and diluted compared to
7 cents basic and diluted a year ago. Fiscal 2019 year-to-date earnings per share were
56 cents basic and diluted compared to 34 cents basic and diluted a
year ago. Adjusted basic earnings per share1 were 33 cents for the third quarter
of fiscal 2019 compared to 18 cents a year ago. Fiscal 2019 year-to-date adjusted basic
earnings per share1 were 72 cents compared to 53 cents a
year ago.
- Fiscal 2019 third quarter Order Bookings were a record $397 million, a 28% increase from a
year ago. Fiscal 2019 year-to-date Order Bookings were $1.1 billion, a 33% increase from a
year ago.
- Period end Order Backlog was a record $926 million, 34% higher than at December 31, 2017.
- The Company's balance sheet and financial capacity to support growth remained strong, with unutilized credit facilities of
$636.8 million.
- On October 31, 2018, the Company completed its acquisition of Construction, Machine- &
Werkzeugbau GmbH & Co. KG, and KMW GmbH (collectively, "KMW"). See "Business Acquisition: KMW".
- On December 6, 2018, the Company announced that it had acquired substantially all of the
intellectual property assets of Transformix Engineering Inc. for $10 million. See "Transformix
I.P.".
- On December 19, 2018, the Company entered into a definitive agreement to acquire Comecer
S.p.A. ("Comecer"). See "Business Acquisition: Comecer".
Financial results
|
3 months ended
December 30, 2018
|
|
3 months ended
December 31, 2017
|
9 months ended
December 30, 2018
|
9 months ended
December 31, 2017
|
Revenues
|
$
|
321.4
|
|
$
|
277.6
|
$
|
905.0
|
$
|
816.5
|
Earnings from operations
|
$
|
38.5
|
|
$
|
14.8
|
$
|
84.5
|
$
|
59.9
|
Adjusted earnings from operations1
|
$
|
46.7
|
|
$
|
29.3
|
$
|
104.6
|
$
|
84.4
|
EBITDA1
|
$
|
48.7
|
|
$
|
24.3
|
$
|
114.6
|
$
|
87.2
|
Net income
|
$
|
25.1
|
|
$
|
6.9
|
$
|
52.6
|
$
|
32.3
|
Adjusted basic earnings per share1
|
$
|
0.33
|
|
$
|
0.18
|
$
|
0.72
|
$
|
0.53
|
Basic and diluted earnings per share
|
$
|
0.27
|
|
$
|
0.07
|
$
|
0.56
|
$
|
0.34
|
|
1 Non-IFRS measure: see "Notice to Reader: Non-IFRS Measures and
Additional IFRS Measures".
|
"Third quarter performance featured year-over-year growth in revenues and margins and we finished the quarter with record
Order Bookings and record Order Backlog," said Andrew Hider, Chief Executive Officer.
"Operationally, we have continued to advance the ATS Business Model. Strategically, we have advanced our innovation agenda
organically by adding to our industry leading linear motion product portfolio, and through the acquisition of Transformix's
intellectual property. We have added to our capabilities to serve the EV market through the acquisition of KMW and reached an
agreement to acquire Comecer, which will provide us with a platform in high-growth segments of the pharmaceutical and nuclear
medicine markets. Our balance sheet is strong and we are well positioned to continue executing our value creation strategy:
Build, Grow and Expand."
Third Quarter Summary
Fiscal 2019 third quarter revenues were 16% higher than in the corresponding period a year ago, primarily reflecting
Order Backlog, which was 28% higher entering the third quarter of fiscal 2019 compared to a year ago. Organic growth in revenues
was approximately 14% with increased revenues generated primarily from automation construction contracts and services. As well,
certain programs that were delayed in the Company's fiscal 2019 second quarter, contributed in the third quarter. The balance of
the increase in revenues was due to the acquisition of KMW (acquired October 31, 2018 – see
Business Acquisition: KMW) and foreign exchange rate changes from the translation of revenues earned by foreign-based
subsidiaries.
By market, fiscal 2019 third quarter revenues from consumer products & electronics increased 28% compared to a year ago,
due to higher Order Backlog entering the third quarter of fiscal 2019 primarily related to a warehousing automation program
awarded in fiscal 2018. Revenues generated in the life sciences market increased by 18% due to higher Order Backlog entering the
third quarter of fiscal 2019. Revenues in the transportation market increased 16% primarily related to an EV enterprise program
awarded in the first quarter of fiscal 2019 and revenues from KMW. Revenues generated in the energy market decreased 5% primarily
due to the timing of program execution.
Fiscal 2019 third quarter earnings from operations were $38.5 million (12% operating margin)
compared to $14.8 million (5% operating margin) in the third quarter of fiscal 2018. Third quarter
fiscal 2019 earnings from operations included $2.7 million of incremental costs related to the
Company's acquisition activity and $5.5 million related to amortization of identifiable intangible
assets recorded on business acquisitions. Included in third quarter fiscal 2018 earnings from operations were $9.0 million of restructuring costs and $5.5 million related to amortization of
identifiable intangible assets recorded on business acquisitions.
Excluding these items in both comparable quarters, third quarter fiscal 2019 adjusted earnings from operations were
$46.7 million (15% margin), compared to adjusted earnings from operations of $29.3 million (11% margin) a year ago. Higher adjusted earnings from operations reflected higher revenues,
improved gross margin and a recovery of stock-based compensation expenses due to the revaluation of restricted share units and
deferred share units. The total stock-based compensation recovery was $6.3 million, compared to the
corresponding period a year ago, when stock-based compensation was an expense of $2.1 million (see
"Stock-based compensation").
Depreciation and amortization expense was $10.2 million in the third quarter of fiscal 2019,
compared to $9.5 million a year ago. The increase primarily reflected depreciation of internal
development projects and computer hardware.
EBITDA was $48.7 million (15% EBITDA margin) in the third quarter of fiscal 2019 compared to
$24.3 million (9% EBITDA margin) in the third quarter of fiscal 2018. Higher EBITDA in the third
quarter of fiscal 2019 primarily reflected higher revenues, improved gross margin and lower stock compensation expenses compared
to a year ago.
Order Bookings
Third quarter fiscal 2019 Order Bookings were $397 million, a 28% increase over the third
quarter of fiscal 2018. Increased Order Bookings primarily reflected higher life sciences and transportation Order
Bookings. Life sciences Order Bookings included a $60 million enterprise program from a
global life sciences customer for a fully automated manufacturing and packaging system. Higher Order Bookings in the
transportation market related to electric vehicle programs, including two Order Bookings each with values in the range of
$25 million. The inclusion of KMW had a positive impact on fiscal 2019 Order Bookings of just under
1%. Included in third quarter fiscal 2018 Order Bookings were enterprise programs for a warehousing automation application in
consumer products & electronics, and a life sciences program, both with values in the range of $25
million.
Order Backlog
At December 30, 2018, Order Backlog was $926 million, 34%
higher than at December 31, 2017. Higher Order Backlog was primarily driven by increased
Order Bookings in the life sciences and transportation markets in the first nine months of fiscal 2019.
ACQUISITIONS
Business Acquisition: KMW
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 provides 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 strengthens 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 18.3
million Euro. Cash consideration paid in the third quarter was 16.4 million Euro with the
balance to be paid within 18 months from the acquisition date, 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.
The acquisition has been accounted for as a business combination with the Company as the acquirer of KMW. The purchase
method of accounting has been used and the earnings of KMW were consolidated beginning from the acquisition date.
Business Acquisition: Comecer
On December 19, 2018, the Company entered into a definitive agreement to acquire Comecer
S.p.A. ("Comecer"), a leader in the design, engineering, manufacture, and servicing of advanced aseptic containment and
processing systems for the nuclear medicine and pharmaceutical industries. Comecer is primarily focused in radiopharmaceutical
equipment, where it supplies specialized radiation shielding systems used by customers in the production, handling, and
dispensing of radiopharmaceutical drugs. Applications for this type of equipment include the diagnosis and therapeutic treatment
of several conditions including various forms of cancer and cardiovascular disorders. Additionally, Comecer provides equipment to
support the aseptic processing, filling and handling of specialized pharmaceuticals as well as isolator and incubator equipment
used in advanced therapy medicinal production (ATMP), a regenerative cell therapy that uses patient cells to grow new tissues.
The addition of Comecer will strengthen ATS' customer offering in both pharma and biopharma, while adding an innovative new
platform in radiopharmaceuticals.
For the 2018 calendar year, Comecer is expected to generate revenues of approximately 67 million
Euro, with a low double-digit EBITDA margin. The total cash purchase price for the acquisition will be 113 million Euro, subject to working capital and other adjustments. The Company will fund the acquisition
primarily from cash on hand and its credit facilities. This acquisition will be accounted for as a business combination with
the Company as the acquirer of Comecer. The purchase method of accounting will be used and the earnings will be consolidated from
the acquisition date. The transaction is expected to close in the first calendar quarter of 2019, subject to customary closing
conditions. Integration of Comecer will target revenue synergies through cross-selling, geographic expansion and commercial
process best practices. Integration will also include the deployment of the ABM, which is expected to enable improvements
in project management, operations, supply chain management and product life cycle management. The acquisition is aligned with
ATS' strategy of expanding in attractive markets and is expected to increase the overall percentage of ATS' revenues being
generated in life sciences to over 50% of consolidated revenues.
Transformix I.P.
On December 6, 2018, the Company announced that it had acquired substantially all of the
intellectual property assets of Transformix Engineering Inc. ("Transformix") for $10
million. Transformix's CNCAssembly system, based on its patented Rapid Speed Matching technology, provides a method
of linking and synchronizing the movements of devices and tooling to enable faster and more efficient assembly systems. This
enhanced capability is expected to provide higher speed, lower cost, energy efficient and more flexible assembly solutions for
ATS' customers, while utilizing a smaller footprint. CNCAssembly is suitable for any application where high precision motion
control is required and can serve a broad range of end markets. The addition of this important technology will complement ATS'
growing portfolio of linear mover technology products, which includes the best-in-class SuperTrakTM linear motion
system and the recently launched SuperTrak MicroTM. Amortization of the intangible asset will begin when the asset is
available for use which is estimated to be in the second half of fiscal 2020. Over the next five years, potential future payments
of up to $20.0 million are payable based on sales which incorporate the acquired intellectual
property. The commission expenses will be recognized as they are incurred.
Increase in Number of Common Shares that may be Purchased under NCIB
On December 3, 2018, ATS announced that the Toronto Stock Exchange ("TSX") had accepted a
notice filed by it of its intention to make a normal course issuer bid ("NCIB"). Under the NCIB, ATS has the ability to purchase
for cancellation up to a maximum of 3,000,000 common shares, representing approximately 3.2% of the 94,139,097 common shares that
were issued and outstanding as of November 16, 2018. ATS will be seeking approval of the TSX to
increase the maximum number of shares that may be purchased under the NCIB to 6,366,405 common shares, representing 10% of the
"public float" (as defined by the TSX and calculated as of November 16, 2018). The increase in the
number of common shares that may be purchased under the NCIB is subject to TSX approval.
Purchases under the NCIB will continue to be made through the facilities of the TSX and/or alternative Canadian trading
systems in accordance with applicable regulatory requirements, during the twelve month period commencing on December 5, 2018 and ending on or before December 4, 2019. The average daily
trading volume of the common shares on the TSX for the six calendar months ending October 31, 2018
was 240,474 common shares. On any trading day ATS will not purchase more than 25% of such average daily trading volume,
representing 60,118 common shares, except where such purchases are made in accordance with available block purchase exemptions.
The common shares purchased under the NCIB will be cancelled. Since the commencement of the NCIB to February 5 2019, ATS has purchased 2,509,120 common shares for cancellation at a volume weighted average
trading price of $15.63 million.
Board of Directors
Daryl C.F. Wilson has announced his decision to step down form the board of directors
effective February 5, 2019, for personal reasons.
"On behalf of the board of directors, I extend our deepest gratitude to Daryl for his skillful and dedicated service over the
past 10 years," said David McAusland, Chairman. "We wish Daryl all the best in his future
endeavours."
Quarterly Conference Call
ATS' quarterly conference call begins at 10:00 a.m. eastern on Wednesday February 6, 2019, and can be accessed live at www.atsautomation.com or on the phone by dialing (647) 427-7450 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) 849-0833 and entering passcode 3581279 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 4,000 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 December 30, 2018
This Management's Discussion and Analysis ("MD&A") for the three and nine months ended December 30, 2018 (third
quarter of fiscal 2019) is as of February 5, 2019 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 third 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 third
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 nine-month periods ending December 30, 2018 and December 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 nine-month periods ending December 30, 2018 and December 31, 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, pharmaceuticals, chemicals, electric
vehicles, transportation, consumer products, electronics, food, beverage, energy, and oil and gas. Founded in 1978, ATS employs
approximately 4,000 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 automation 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
|
Nine Months
|
Nine Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
December 30,
|
December 31,
|
December 30,
|
December 31,
|
Revenues by
market
|
2018
|
2017
|
2018
|
2017
|
Consumer products &
electronics
|
$
|
46.2
|
$
|
36.1
|
$
|
164.1
|
$
|
104.9
|
Energy
|
37.8
|
39.8
|
105.5
|
96.2
|
Life
sciences
|
156.6
|
132.2
|
415.4
|
385.8
|
Transportation
|
80.8
|
69.5
|
220.0
|
229.6
|
Total
revenues
|
$
|
321.4
|
$
|
277.6
|
$
|
905.0
|
$
|
816.5
|
Third Quarter
Fiscal 2019 third quarter revenues were 16% higher than in the corresponding period a year ago, primarily reflecting
Order Backlog, which was 28% higher entering the third quarter of fiscal 2019 compared to a year ago. Organic growth in revenues
was approximately 14% with increased revenues generated primarily from automation construction contracts and services. As well,
certain programs that were delayed in the Company's fiscal 2019 second quarter, contributed in the third quarter. The balance of
the increase in revenues was due to the acquisition of KMW (acquired October 31, 2018 – see
Business Acquisition: KMW) and foreign exchange rate changes from the translation of revenues earned by foreign-based
subsidiaries.
By market, fiscal 2019 third quarter revenues from consumer products & electronics increased 28% compared to a year ago,
due to higher Order Backlog entering the third quarter of fiscal 2019 primarily related to a warehousing automation program
awarded in fiscal 2018. Revenues generated in the life sciences market increased by 18% due to higher Order Backlog entering the
third quarter of fiscal 2019. Revenues in the transportation market increased 16% primarily related to an EV enterprise program
awarded in the first quarter of fiscal 2019 and revenues from KMW. Revenues generated in the energy market decreased 5% primarily
due to the timing of program execution.
Year-to-date
Revenues for the nine months ended December 30, 2018 were 11% higher than in the
corresponding period a year ago, primarily reflecting Order Backlog, which was 10% higher entering fiscal 2019 compared to a year
ago, and Order Bookings, which have increased 33% in fiscal 2019 compared to a year ago. Organic growth in revenues was
approximately 9% with increased revenues generated primarily from automation construction contracts. The balance of the increase
in revenues was due primarily to foreign exchange rate changes from the translation of revenues earned by foreign-based
subsidiaries.
By market, fiscal 2019 year-to-date revenues from consumer products & electronics, energy and the life sciences markets
increased 56%, 10%, and 8%, respectively, primarily reflecting higher Order Backlog entering fiscal 2019, and higher Order
Bookings in fiscal 2019 compared to a year ago. Transportation revenues decreased 4% compared to a year ago primarily due to the
timing of customer program schedules and related third-party equipment deliveries.
Consolidated Operating Results
(In millions of dollars)
|
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
December 30,
|
December 31,
|
December 30,
|
December 31,
|
|
2018
|
2017
|
2018
|
2017
|
Earnings from
operations
|
$
|
38.5
|
$
|
14.8
|
$
|
84.5
|
$
|
59.9
|
Amortization of acquisition-related intangible
assets
|
5.5
|
5.5
|
16.5
|
15.5
|
Restructuring
charges
|
-
|
9.0
|
-
|
9.0
|
Acquisition-related transaction
costs
|
2.7
|
-
|
3.6
|
-
|
Adjusted earnings from
operations1
|
$
|
46.7
|
$
|
29.3
|
$
|
104.6
|
$
|
84.4
|
1 See "Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures."
|
|
|
|
|
|
|
|
|
|
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
December 30,
|
December 31,
|
December 30,
|
December 31,
|
|
2018
|
2017
|
2018
|
2017
|
Earnings from
operations
|
$
|
38.5
|
$
|
14.8
|
$
|
84.5
|
$
|
59.9
|
Depreciation and
amortization
|
10.2
|
9.5
|
30.1
|
27.3
|
EBITDA2
|
$
|
48.7
|
$
|
24.3
|
$
|
114.6
|
$
|
87.2
|
2 See "Notice to Reader: Non-IFRS Measures and Additional IFRS
Measures."
|
|
|
|
Third Quarter
Fiscal 2019 third quarter earnings from operations were $38.5 million (12% operating
margin) compared to $14.8 million (5% operating margin) in the third quarter of fiscal 2018. Third
quarter fiscal 2019 earnings from operations included $2.7 million of incremental costs related to
the Company's acquisition activity and $5.5 million related to amortization of identifiable
intangible assets recorded on business acquisitions. Included in third quarter fiscal 2018 earnings from operations were
$9.0 million of restructuring costs and $5.5 million related to
amortization of identifiable intangible assets recorded on business acquisitions.
Excluding these items in both comparable quarters, third quarter fiscal 2019 adjusted earnings from operations were
$46.7 million (15% margin), compared to adjusted earnings from operations of $29.3 million (11% margin) a year ago. Higher adjusted earnings from operations reflected higher revenues,
improved gross margin and a recovery of stock-based compensation expenses due to the revaluation of restricted share units and
deferred share units. The total stock-based compensation recovery was $6.3 million, compared to the
corresponding period a year ago, when stock-based compensation was an expense of $2.1 million (see
"Stock-based compensation").
Depreciation and amortization expense was $10.2 million in the third quarter of fiscal 2019,
compared to $9.5 million a year ago. The increase primarily reflected depreciation of internal
development projects and computer hardware.
EBITDA was $48.7 million (15% EBITDA margin) in the third quarter of fiscal 2019 compared to
$24.3 million (9% EBITDA margin) in the third quarter of fiscal 2018. Higher EBITDA in the third
quarter of fiscal 2019 primarily reflected higher revenues, improved gross margin and lower stock compensation expenses compared
to a year ago.
Year-to-date
For the nine months ended December 30, 2018, earnings from operations were $84.5 million (9% operating margin) compared to $59.9 million (7% operating
margin) in the corresponding period a year ago. Excluding $3.6 million of incremental costs
related to the Company's acquisition activity and $16.5 million related to amortization of
identifiable intangible assets recorded on business acquisitions, adjusted earnings from operations were $104.6 million (12% operating margin) in the first nine months of fiscal 2019, compared to adjusted earnings
from operations of $84.4 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 nine months of fiscal
2019 compared to a year ago.
Depreciation and amortization expense was $30.1 million in the first nine months of fiscal 2019
compared to $27.3 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 $114.6 million (13% EBITDA margin) compared to $87.2 million (11% EBITDA margin) in the first nine months of fiscal 2018.
Order Bookings by Quarter
Third quarter fiscal 2019 Order Bookings were $397 million, a 28% increase over the third
quarter of fiscal 2018. Increased Order Bookings primarily reflected higher life sciences and transportation Order
Bookings. Life sciences Order Bookings included a $60 million enterprise program from a
global life sciences customer for a fully automated manufacturing and packaging system. Higher Order Bookings in the
transportation market related to electric vehicle programs, including two Order Bookings each with values in the range of
$25 million. The inclusion of KMW had a positive impact on fiscal 2019 Order Bookings of just under
1%. Included in third quarter fiscal 2018 Order Bookings were enterprise programs for a warehousing automation application in
consumer products & electronics, and a life sciences program, both with values in the range of $25
million.
Order Backlog Continuity
(In millions of dollars)
|
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
December 30,
|
December 31,
|
December 30,
|
December 31,
|
|
2018
|
2017
|
2018
|
2017
|
Opening Order Backlog
|
$
|
830
|
$
|
648
|
$
|
746
|
$
|
681
|
Revenues
|
(321)
|
(278)
|
(905)
|
(817)
|
Order Bookings
|
397
|
311
|
1,109
|
834
|
Order Backlog adjustments1
|
20
|
8
|
(24)
|
(9)
|
Total
|
$
|
926
|
$
|
689
|
$
|
926
|
$
|
689
|
|
1 Order Backlog adjustments include incremental Order
Backlog of $2 million acquired with KMW, foreign exchange adjustments and cancellations.
|
Order Backlog by Market
(In millions of dollars)
|
December 30,
|
December 31,
|
As at
|
2018
|
2017
|
Consumer products & electronics
|
$
|
88
|
$
|
108
|
Energy
|
90
|
99
|
Life sciences
|
473
|
320
|
Transportation
|
275
|
162
|
Total
|
$
|
926
|
$
|
689
|
At December 30, 2018, Order Backlog was $926 million, 34% higher
than at December 31, 2017. Higher Order Backlog was primarily driven by increased Order
Bookings in the life sciences and transportation markets in the first nine 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 slowing growth and geopolitical risks
remain. Ongoing trade negotiations and disputes between various jurisdictions in which the Company does business may impact its
future sales and operations. Management will continue to closely monitor ongoing global trade discussions which could impact the
Company and identify mitigation opportunities.
Funnel activity (which includes customer requests for proposal and ATS identified customer opportunities) in life sciences
remains strong. Opportunities in the electrification of vehicles have strengthened funnel activity in the transportation market.
Funnel activity in energy is variable 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 workload 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.
The Company expects its Order Backlog of $926 million at the end of the third quarter of fiscal
2019 to partially mitigate the impact of volatile Order Bookings on revenues in the short term. The composition of the Company's
Order Backlog has changed materially in fiscal 2019, with the addition of several large, enterprise programs that the Company has
won over the past 12 months. These enterprise programs have longer periods of performance and therefore longer revenue
recognition cycles. The Company's current Order Backlog of $926 million provides ATS with
significant visibility into revenues over the next several quarters. With these changes in the composition of the Company's Order
Backlog, in the fourth quarter of fiscal 2019, management expects Order Backlog conversion to be in the 30% to 35% range as a
result of the longer periods of performance of the larger enterprise programs embedded in the Company's current Order
Backlog.
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 base 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 is deploying the ABM across its divisions globally. The initial roll-out of the ABM has been 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 ongoing 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 balance sheet and strong cash flow generation capability provide the flexibility to pursue its growth strategy.
ACQUISITIONS
Business Acquisition: KMW
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 provides 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 strengthens 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 18.3
million Euro. Cash consideration paid in the third quarter was 16.4 million Euro with the
balance to be paid within 18 months from the acquisition date, 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.
The acquisition has been accounted for as a business combination with the Company as the acquirer of KMW. The purchase
method of accounting has been used and the earnings of KMW were consolidated beginning from the acquisition date.
Business Acquisition: Comecer
On December 19, 2018, the Company entered into a definitive agreement to acquire Comecer
S.p.A. ("Comecer"), a leader in the design, engineering, manufacture, and servicing of advanced aseptic containment and
processing systems for the nuclear medicine and pharmaceutical industries. Comecer is primarily focused in radiopharmaceutical
equipment, where it supplies specialized radiation shielding systems used by customers in the production, handling, and
dispensing of radiopharmaceutical drugs. Applications for this type of equipment include the diagnosis and therapeutic treatment
of several conditions including various forms of cancer and cardiovascular disorders. Additionally, Comecer provides equipment to
support the aseptic processing, filling and handling of specialized pharmaceuticals as well as isolator and incubator equipment
used in advanced therapy medicinal production (ATMP), a regenerative cell therapy that uses patient cells to grow new tissues.
The addition of Comecer will strengthen ATS' customer offering in both pharma and biopharma, while adding an innovative new
platform in radiopharmaceuticals.
For the 2018 calendar year, Comecer is expected to generate revenues of approximately 67 million
Euro, with a low double-digit EBITDA margin. The total cash purchase price for the acquisition will be 113 million Euro, subject to working capital and other adjustments. The Company will fund the acquisition
primarily from cash on hand and its credit facilities. This acquisition will be accounted for as a business combination with
the Company as the acquirer of Comecer. The purchase method of accounting will be used and the earnings will be consolidated from
the acquisition date. The transaction is expected to close in the first calendar quarter of 2019, subject to customary closing
conditions. Integration of Comecer will target revenue synergies through cross-selling, geographic expansion and commercial
process best practices. Integration will also include the deployment of the ABM, which is expected to enable improvements
in project management, operations, supply chain management and product life cycle management. The acquisition is aligned with
ATS' strategy of expanding in attractive markets and is expected to increase the overall percentage of ATS' revenues being
generated in life sciences to over 50% of consolidated revenues.
CONSOLIDATED RESULTS
(In millions of dollars, except per share data)
|
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
December
30,
|
December 31,
|
December 30,
|
December 31,
|
|
2018
|
2017
|
2018
|
2017
|
Revenues
|
$
|
321.4
|
$
|
277.6
|
$
|
905.0
|
$
|
816.5
|
Cost of
revenues
|
236.8
|
205.5
|
668.8
|
606.8
|
Selling, general and
administrative
|
52.4
|
55.2
|
148.0
|
144.7
|
Stock-based
compensation
|
(6.3)
|
2.1
|
3.7
|
5.1
|
Earnings from
operations
|
$
|
38.5
|
$
|
14.8
|
$
|
84.5
|
$
|
59.9
|
Net finance
costs
|
$
|
4.8
|
$
|
5.8
|
$
|
15.1
|
$
|
18.1
|
Provision for income
taxes
|
8.6
|
2.1
|
16.8
|
9.5
|
Net
income
|
$
|
25.1
|
$
|
6.9
|
$
|
52.6
|
$
|
32.3
|
Basic and diluted earnings per share
|
$
|
0.27
|
$
|
0.07
|
$
|
0.56
|
$
|
0.34
|
Revenues. At $321.4 million, consolidated revenues for the third quarter of fiscal
2019 were $43.8 million, or 16% higher than the corresponding period a year ago. At $905.0 million, year-to-date consolidated revenues were $88.5 million, or 11%
higher than in the corresponding period a year ago (see "Overview – Operating Results").
Cost of revenues. At $236.8 million, third quarter fiscal 2019 cost of revenues
increased compared to the corresponding period a year ago by $31.3 million, or 15%, primarily due
to higher revenues. Year-to-date cost of revenues of $668.8 million increased $62.0 million, or 10% primarily due to higher revenues. At 26%, gross margin was consistent in the third
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 third quarter of fiscal 2019
were $52.4 million, which included $2.7 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 business acquisitions. Excluding these costs, SG&A expenses
were $44.2 million in the third quarter of fiscal 2019. Comparably, SG&A expenses for the
third quarter of fiscal 2018 were $40.7 million, which excluded $9.0
million of restructuring costs, and $5.5 million of amortization costs related to the
amortization of identifiable intangible assets recorded on business acquisitions. Higher SG&A expenses in the third quarter
of fiscal 2019 primarily reflected increased sales-related expenses and employee costs.
For the first three quarters of fiscal 2019, SG&A expenses were $148.0 million compared to
$144.7 million in the comparable period last year. Fiscal 2019 SG&A expenses included
$3.6 million of incremental costs related to the Company's acquisition activity and $16.5 million of expenses related to the amortization of identifiable intangible assets recorded on business
acquisitions. Excluding these costs, SG&A expenses were $127.9 million in the first three
quarters of fiscal 2019. Comparably, SG&A expenses for the first three quarters of fiscal 2018 were $120.2 million, which excluded $9.0 million of restructuring costs, and
$15.5 million of expenses related to the amortization of identifiable intangible assets recorded on
business acquisitions. Higher SG&A expenses in fiscal 2019 primarily reflected increased sales-related expenses and employee
costs.
Stock-based compensation. Stock-based compensation recovery amounted to $6.3
million in the third quarter of fiscal 2019 compared to expense of $2.1 million in the
corresponding period a year ago. For the nine-month period ended December 30, 2018,
stock-based compensation expense decreased to $3.7 million, compared to $5.1
million a year earlier. The decrease in stock-based compensation costs is attributable to lower expenses from the
revaluation of deferred stock units and restricted share units based on the Company's stock price.
Earnings from operations. For the three- and nine-month periods ended December 30,
2018, earnings from operations were $38.5 million (12% operating margin) and $84.5 million (9% operating margin), respectively, compared to earnings from operations of $14.8 million (5% operating margin) and $59.9 million (7% operating margin) in
the corresponding periods a year ago (see "Overview – Operating Results").
Net finance costs. Net finance costs were $4.8 million in the third quarter of
fiscal 2019, $1.0 million lower than in the corresponding period a year ago. For the nine
months ended December 30, 2018, finance costs were $15.1 million
compared to $18.1 million in the corresponding period a year ago. The decrease was primarily
due to higher interest income earned in the first three quarters of fiscal 2019 compared to the corresponding period a year
ago.
Income tax provision. For the three and nine months ended December 30, 2018, the
Company's effective income tax rates of 26% and 24%, 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 third quarter net income was $25.1 million (27 cents per share basic and diluted), compared to $6.9 million (7 cents per share basic and diluted) for the third quarter of fiscal 2018. Adjusted basic earnings per
share were 33 cents in the third quarter of fiscal 2019 compared to 18
cents for the third quarter of fiscal 2018 (see "Reconciliation of Non-IFRS Measures to IFRS Measures").
Net income for the nine months ended December 30, 2018 was $52.6
million (56 cents per share basic and diluted) compared to $32.3
million (34 cents per share basic and diluted) for the corresponding period a year ago.
Adjusted basic earnings per share were 72 cents in the nine months ended December 30, 2018 compared to 53 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
|
Nine Months
|
Nine Months
|
|
Ended
|
Ended
|
Ended
|
Ended
|
|
December 30,
|
December 31,
|
December 30,
|
December 31,
|
|
2018
|
2017
|
2018
|
2018
|
EBITDA
|
$
|
48.7
|
$
|
24.3
|
$
|
114.6
|
$
|
87.2
|
Less: depreciation and amortization
expense
|
10.2
|
9.5
|
30.1
|
27.3
|
Earnings from operations
|
$
|
38.5
|
$
|
14.8
|
$
|
84.5
|
$
|
59.9
|
Less: net finance costs
|
4.8
|
5.8
|
15.1
|
18.1
|
Provision for income taxes
|
8.6
|
2.1
|
16.8
|
9.5
|
Net income
|
$
|
25.1
|
$
|
6.9
|
$
|
52.6
|
$
|
32.3
|
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 December 30, 2018
|
|
Three Months Ended December 31, 2017
|
|
IFRS
|
Adjustments
|
Adjusted
|
|
IFRS
|
Adjustments
|
Adjusted
|
|
|
|
(non-IFRS)
|
|
|
|
(non-IFRS)
|
Earnings from operations
|
$
|
38.5
|
$
|
––
|
$
|
38.5
|
|
$
|
14.8
|
$
|
––
|
$
|
14.8
|
Amortization of acquisition-
|
|
|
|
|
|
|
|
related intangible assets
|
––
|
5.5
|
5.5
|
|
––
|
5.5
|
5.5
|
Restructuring costs
|
––
|
––
|
––
|
|
––
|
9.0
|
9.0
|
Acquisition-related transaction costs
|
––
|
2.7
|
2.7
|
|
––
|
––
|
––
|
|
$
|
38.5
|
$
|
8.2
|
$
|
46.7
|
|
$
|
14.8
|
$
|
14.5
|
$
|
29.3
|
Less: net finance costs
|
$
|
4.8
|
$
|
–
|
$
|
4.8
|
|
$
|
5.8
|
$
|
––
|
$
|
5.8
|
Income before income taxes
|
$
|
33.7
|
$
|
8.2
|
$
|
41.9
|
|
$
|
9.0
|
$
|
14.5
|
$
|
23.5
|
Provision for income taxes
|
$
|
8.6
|
$
|
–
|
$
|
8.6
|
|
$
|
2.1
|
$
|
––
|
$
|
2.1
|
Adjustments to provision for
|
|
|
|
|
|
|
|
income taxes1
|
––
|
2.2
|
2.2
|
|
––
|
4.2
|
4.2
|
|
$
|
8.6
|
$
|
2.2
|
$
|
10.8
|
|
$
|
2.1
|
$
|
4.2
|
$
|
6.3
|
Net income
|
$
|
25.1
|
$
|
6.0
|
$
|
31.1
|
|
$
|
6.9
|
$
|
10.3
|
$
|
17.2
|
Basic earnings per share
|
$
|
0.27
|
$
|
0.06
|
$
|
0.33
|
|
$
|
0.07
|
$
|
0.11
|
$
|
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.
|
|
|
Nine Months Ended December 30,
2018
|
|
Nine Months Ended December 31, 2017
|
|
IFRS
|
Adjustments
|
Adjusted
|
|
IFRS
|
Adjustments
|
Adjusted
|
|
|
|
(non-IFRS)
|
|
|
|
(non-IFRS)
|
Earnings from operations
|
$
|
84.5
|
$
|
––
|
$
|
84.5
|
|
$
|
59.9
|
$
|
––
|
$
|
59.9
|
Amortization of acquisition-
|
|
|
|
|
|
|
|
related intangible assets
|
––
|
16.5
|
16.5
|
|
––
|
15.5
|
15.5
|
Restructuring costs
|
––
|
––
|
––
|
|
––
|
9.0
|
9.0
|
Acquisition-related transactions costs
|
––
|
3.6
|
3.6
|
|
––
|
––
|
––
|
|
$
|
84.5
|
$
|
20.1
|
$
|
104.6
|
|
$
|
59.9
|
$
|
24.5
|
$
|
84.4
|
Less: net finance costs
|
$
|
15.1
|
$
|
––
|
$
|
15.1
|
|
$
|
18.1
|
$
|
––
|
$
|
18.1
|
Income before income taxes
|
$
|
69.4
|
$
|
20.1
|
$
|
89.5
|
|
$
|
41.8
|
$
|
24.5
|
$
|
66.3
|
Provision for income taxes
|
$
|
16.8
|
$
|
––
|
$
|
16.8
|
|
$
|
9.5
|
$
|
––
|
$
|
9.5
|
Adjustments to provision for
|
|
|
|
|
|
|
|
income taxes1
|
––
|
5.4
|
5.4
|
|
––
|
7.2
|
7.2
|
|
$
|
16.8
|
$
|
5.4
|
$
|
22.2
|
|
$
|
9.5
|
$
|
7.2
|
$
|
16.7
|
Net income
|
$
|
52.6
|
$
|
14.7
|
$
|
67.3
|
|
$
|
32.3
|
$
|
17.3
|
$
|
49.6
|
Basic earnings per share
|
$
|
0.56
|
$
|
0.16
|
$
|
0.72
|
|
$
|
0.34
|
$
|
0.19
|
$
|
0.53
|
|
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
|
December 30, 2018
|
March 31, 2018
|
Cash and cash equivalents
|
$
|
374.1
|
$
|
330.1
|
Debt-to-equity ratio
|
0.47:1
|
0.47:1
|
|
|
|
|
December 30,
|
December 31,
|
For the three months ended
|
2018
|
2017
|
Cash flows provided by operating activities
|
$
|
62.2
|
$
|
5.5
|
At December 30, 2018, the Company had cash and cash equivalents of $374.1
million compared to $330.1 million at March 31, 2018. At
December 30, 2018, the Company's debt-to-total equity ratio was 0.47:1.
In the third quarter of fiscal 2019, cash flows provided by operating activities were $62.2
million ($5.5 million provided by operating activities in the third 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 and higher net income compared to a year ago. In the nine months ended December 30, 2018, cash flows provided by operating activities were $101.3
million ($39.8 million provided by operating activities in the corresponding period 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 and increased net income.
In the third quarter of fiscal 2019, the Company's investment in non-cash working capital decreased by $31.6 million from September 30, 2018. On a year-to-date basis, investment
in non-cash working capital decreased $15.7 million. Accounts receivable increased 13%, or
$26.7 million, driven by the timing of billings on certain customer contracts. Net contracts in
progress decreased 76%, or $52.1 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 7%, or $4.0
million, primarily due to a decrease in work-in-process on certain customer projects. Deposits and prepaid assets
decreased 4%, or $0.9 million, compared to March 31, 2018 due to the timing of program
execution. Accounts payable and accrued liabilities decreased 3%, or $7.0 million, compared to
March 31, 2018. Provisions decreased 37%, or $7.9 million, compared
to March 31, 2018.
Capital expenditures totalled $13.4 million in the first nine months of fiscal 2019, primarily
related to computer hardware, building additions, and office equipment.
Intangible assets expenditures were $14.6 million for the first nine months of fiscal 2019, and
primarily related to the acquisition of substantially all of the intellectual property assets of Transformix Engineering Inc.
("Transformix") for $10.0 million. Transformix's CNCAssembly system, based on its patented Rapid
Speed Matching technology, provides a method of linking and synchronizing the movements of devices and tooling to enable faster
and more efficient assembly systems. This enhanced capability is expected to provide higher speed, lower cost, energy efficient
and more flexible assembly solutions for ATS' customers, while utilizing a smaller footprint. CNCAssembly is suitable for any
application where high precision motion control is required and can serve a broad range of end markets. The addition of this
important technology will complement ATS' growing portfolio of linear mover technology products, which includes the best-in-class
SuperTrakTM linear motion system and the recently launched SuperTrak MicroTM. Amortization of the
intangible asset will begin when the asset is available for use which is estimated to be in the second half of fiscal 2020. Over
the next five years, potential future payments of up to $20.0 million are payable based on sales
which incorporate the acquired intellectual property. The commission expenses will be recognized as they are incurred.
At December 30, 2018, the Company had $636.8 million of unutilized
multipurpose credit, including letters of credit, available under existing credit facilities and an additional $19.5 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 the
Company's assets, including certain real estate in North America and a pledge of shares of
certain subsidiaries. Certain of the Company's subsidiaries also provide guarantees under the Credit Facility. At
December 30, 2018, the Company had utilized $129.7 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 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 December 30, 2018, all of the covenants were met.
The Company has additional credit facilities available of $19.4 million (2.3 million Euros, $10.0 million U.S, 50.0 million Thai
Baht and 1.3 million Czech Koruna). The total amount outstanding on these facilities at December
30, 2018 was $1.9 million, of which $1.4 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 December 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.
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
|
$
|
103.0
|
One – two years
|
10.6
|
1.6
|
Two – three years
|
8.4
|
0.7
|
Three – four years
|
4.5
|
0.6
|
Four – five years
|
2.2
|
0.2
|
Due in over five years
|
2.1
|
0.2
|
|
$
|
37.3
|
$
|
106.3
|
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 December 30, 2018, the total value of outstanding letters of credit was approximately $193.9 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 nine months of fiscal 2019, 137,405 stock options were exercised. At February 5,
2019 the total number of shares outstanding was 91,629,977 and there were 1,828,311 stock options outstanding to acquire
common shares of the Company.
NORMAL COURSE ISSUER BID
On December 3, 2018, the Company announced that the Toronto Stock Exchange ("TSX") had
accepted a notice filed by the Company of its intention to make a normal course issuer bid ("NCIB"). Under the NCIB, ATS has the
ability to purchase for cancellation up to a maximum of 3,000,000 common shares, representing approximately 3.2% of the
94,139,097 common shares that were issued and outstanding as of November 16, 2018. ATS will be
seeking approval of the TSX to increase the maximum number of shares that may be purchased under the NCIB to 6,366,405 common
shares, representing 10% of the "public float" (as defined by the TSX and calculated as of November 16,
2018). The increase in the number of common shares that may be purchased under the NCIB is subject to TSX approval.
Purchases under the NCIB will be made through the facilities of the TSX and/or alternative trading systems in accordance with
applicable regulatory requirements, during the twelve-month period which commenced on December 5,
2018 and ending on or before December 4, 2019. The average daily trading volume of the
common shares on the TSX for the six calendar months ending October 31, 2018 was 240,474 common
shares. On any trading day ATS will not purchase more than 25% of such average daily trading volume representing 60,118 common
shares, except where such purchases are made in accordance with available block purchase exemptions. The common shares purchased
under the NCIB will be cancelled.
Some purchases under the NCIB may be made pursuant to an automatic purchase plan between ATS and its broker. This plan would
enable the purchase of ATS common shares when ATS would not ordinarily be active in the market due to internal trading blackout
periods, insider trading rules, or otherwise.
ATS believes that there are times when the market price of ATS common shares may not reflect their underlying value and that
the purchase of shares by ATS will both provide liquidity to existing shareholders and benefit remaining shareholders. The NCIB
is viewed by ATS management as one component of an overall capital structure strategy and complementary to its organic and
acquisition growth plans.
As at December 30, 2018, the Company had purchased 979,152 common shares for $14.8 million under the NCIB. The weighted average price per share repurchased was $15.09. ATS security holders may obtain a copy of the notice, without charge, upon request from the Secretary
of the Company.
RELATED PARTY TRANSACTIONS
The Company has an agreement with a shareholder, Mason Capital Management, LLC ("Mason Capital"), pursuant to which
Mason Capital has agreed to provide ATS with ongoing strategic and capital markets advisory services for an annual fee of U.S.
$0.5 million. As part of the agreement, a member of the Company's Board of Directors who is
associated with Mason Capital has waived any fees to which he may have otherwise been entitled for serving as a member of the
Board of Directors or as a member of any committee of the Board of Directors.
There were no other significant related party transactions during the first nine 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
|
|
Nine Months Ended
|
|
December 30,
|
December 31,
|
|
|
December 30,
|
December 31,
|
|
|
2018
|
2017
|
% change
|
|
2018
|
2017
|
% change
|
U.S. dollar
|
1.322
|
1.272
|
3.9%
|
|
1.307
|
1.290
|
1.3%
|
Euro
|
1.508
|
1.498
|
0.7%
|
|
1.521
|
1.484
|
2.5%
|
CONSOLIDATED QUARTERLY RESULTS
(In millions of dollars, except per share amounts)
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
|
2019
|
2019
|
2019
|
2018
|
2018
|
2018
|
2018
|
2017
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
321.4
|
$
|
283.6
|
$
|
300.0
|
$
|
298.4
|
$
|
277.6
|
$
|
274.9
|
$
|
264.0
|
$
|
265.7
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
$
|
38.5
|
$
|
19.0
|
$
|
27.0
|
$
|
25.5
|
$
|
14.8
|
$
|
23.9
|
$
|
21.3
|
$
|
16.8
|
|
|
|
|
|
|
|
|
|
Adjusted earnings from
|
|
|
|
|
|
|
|
|
operations
|
$
|
46.7
|
$
|
25.4
|
$
|
32.6
|
$
|
32.8
|
$
|
29.3
|
$
|
28.8
|
$
|
26.3
|
$
|
24.5
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
25.1
|
$
|
10.8
|
$
|
16.7
|
$
|
15.0
|
$
|
6.9
|
$
|
13.8
|
$
|
11.5
|
$
|
7.8
|
Basic and diluted earnings
|
|
|
|
|
|
|
|
|
per share
|
$
|
0.27
|
$
|
0.11
|
$
|
0.18
|
$
|
0.16
|
$
|
0.07
|
$
|
0.15
|
$
|
0.12
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
Adjusted basic earnings per
|
|
|
|
|
|
|
|
|
share
|
$
|
0.33
|
$
|
0.17
|
$
|
0.22
|
$
|
0.22
|
$
|
0.18
|
$
|
0.18
|
$
|
0.16
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
Order Bookings
|
$
|
397.0
|
$
|
355.0
|
$
|
358.0
|
$
|
348.0
|
$
|
311.0
|
$
|
257.0
|
$
|
266.0
|
$
|
322.0
|
|
|
|
|
|
|
|
|
|
Order Backlog
|
$
|
926.0
|
$
|
830.0
|
$
|
789.0
|
$
|
746.0
|
$
|
689.0
|
$
|
648.0
|
$
|
683.0
|
$
|
681.0
|
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. In addition to the
critical accounting estimates described in the Company's fiscal 2018 MD&A, acquisitions that meet the definition of a
business combination require the Company to recognize the assets acquired and liabilities at their fair market value on the date
of the acquisition. The calculation of fair value of the assets and liabilities may require the use of estimates and
assumptions, based on discounted cash flows, market information and using independent valuations and management's best
estimates.
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 nine months ended December 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 negotiations and disputes;
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; the
Company's Order Backlog partially mitigating the impact of volatile Order Bookings; rate of Order Backlog conversion; expected
benefits with respect to the Company's efforts to expand its services revenues; 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
Comecer, expected Comecer 2018 calendar year revenues and EBITDA, expected timing of closing, and integration of Comecer and
expected impact; the Company's expectation with respect to effective tax rate; expected benefits from purchase of Transformix
intellectual property assets and when the asset will be available for use; 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
negotiations or disputes 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; variations in the amount of Order Backlog completed in any given quarter; that the Company
is not successful in growing its service offering or that expected benefits are not realized; 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 Comecer are not realized for reasons including failure to successfully integrate it and lack of customer
receptivity to the expanded offering; that Comecer 2018 calendar year revenues and EBITDA are other than expected; that Closing
of the Comecer transaction is delayed or required government approvals are not forthcoming; that the effective tax rate is other
than expected, due to reasons including income spread among jurisdictions being other than anticipated; that ATS does not realize
the expected benefits of Transformix asset purchase or that the products incorporating the technology are delayed in development;
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 and/or professional 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)
|
|
|
|
|
|
|
|
|
|
December 30
|
|
March 31
|
As at
|
Note
|
|
2018
|
|
2018
|
|
|
|
|
|
|
ASSETS
|
11
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
374,090
|
$
|
330,148
|
Accounts receivable
|
|
|
239,693
|
|
213,006
|
Contract assets
|
2, 5
|
|
204,259
|
|
164,917
|
Inventories
|
5
|
|
54,483
|
|
58,509
|
Deposits, prepaids and other assets
|
6
|
|
21,639
|
|
22,510
|
|
|
|
894,164
|
|
789,090
|
Non-current assets
|
|
|
|
|
|
Property, plant and equipment
|
|
|
92,381
|
|
85,102
|
Other assets
|
7
|
|
8,442
|
|
––
|
Goodwill
|
4
|
|
476,466
|
|
459,159
|
Intangible assets
|
8
|
|
142,284
|
|
148,869
|
Deferred income tax assets
|
|
|
2,392
|
|
2,987
|
Investment tax credit receivable
|
|
|
58,600
|
|
57,012
|
|
|
|
780,565
|
|
753,129
|
Total assets
|
|
$
|
1,674,729
|
$
|
1,542,219
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Bank indebtedness
|
11
|
$
|
1,390
|
$
|
2,668
|
Accounts payable and accrued liabilities
|
|
|
239,399
|
|
246,384
|
Provisions
|
10
|
|
13,142
|
|
20,994
|
Contract liabilities
|
2, 5
|
|
187,355
|
|
95,912
|
Current portion of long-term debt
|
11
|
|
395
|
|
393
|
|
|
|
441,681
|
|
366,351
|
Non-current liabilities
|
|
|
|
|
|
Employee benefits
|
|
|
27,406
|
|
28,151
|
Long-term debt
|
11
|
|
335,202
|
|
315,129
|
Deferred income tax liabilities
|
|
|
49,184
|
|
42,907
|
Other long-term liabilities
|
7
|
|
20,011
|
|
30,908
|
|
|
|
431,803
|
|
417,095
|
Total liabilities
|
|
$
|
873,484
|
$
|
783,446
|
|
|
|
|
|
|
Commitments and contingencies
|
11, 15
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share capital
|
12
|
$
|
536,287
|
$
|
548,747
|
Contributed surplus
|
|
|
12,772
|
|
12,535
|
Accumulated other comprehensive income
|
|
|
77,963
|
|
75,830
|
Retained earnings
|
|
|
173,913
|
|
121,369
|
Equity attributable to shareholders
|
|
|
800,935
|
|
758,481
|
Non-controlling interests
|
|
|
310
|
|
292
|
Total equity
|
|
|
801,245
|
|
758,773
|
Total liabilities and equity
|
|
$
|
1,674,729
|
$
|
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
|
|
Nine months ended
|
|
|
|
December 30
|
|
December 31
|
|
December 30
|
|
December 31
|
|
Note
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues
|
|
|
|
|
|
|
|
|
|
Automation construction contracts
|
|
$
|
195,441
|
$
|
169,649
|
$
|
554,002
|
$
|
474,940
|
Sale of goods
|
|
|
21,038
|
|
17,971
|
|
62,804
|
|
56,903
|
Services rendered
|
|
|
104,918
|
|
89,973
|
|
288,194
|
|
284,663
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
321,397
|
|
277,593
|
|
905,000
|
|
816,506
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
236,836
|
|
205,493
|
|
668,848
|
|
606,808
|
Selling, general and administrative
|
|
|
52,408
|
|
55,182
|
|
147,978
|
|
144,711
|
Stock-based compensation
|
14
|
|
(6,310)
|
|
2,142
|
|
3,692
|
|
5,040
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
38,463
|
|
14,776
|
|
84,482
|
|
59,947
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
17
|
|
4,761
|
|
5,763
|
|
15,084
|
|
18,105
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
33,702
|
|
9,013
|
|
69,398
|
|
41,842
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
13
|
|
8,601
|
|
2,108
|
|
16,836
|
|
9,590
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
25,101
|
$
|
6,905
|
$
|
52,562
|
$
|
32,252
|
|
|
|
|
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
|
|
|
Shareholders
|
|
$
|
25,094
|
$
|
6,892
|
$
|
52,544
|
$
|
32,217
|
Non-controlling interests
|
|
|
7
|
|
13
|
|
18
|
|
35
|
|
|
$
|
25,101
|
$
|
6,905
|
$
|
52,562
|
$
|
32,252
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
attributable to shareholders
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
18
|
$
|
0.27
|
$
|
0.07
|
$
|
0.56
|
$
|
0.34
|
ATS AUTOMATION TOOLING SYSTEMS INC.
|
Interim Consolidated Statements of Comprehensive Income
|
(in thousands of Canadian dollars - unaudited)
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
December 30
|
|
December 31
|
|
December 30
|
|
December 31
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
25,101
|
$
|
6,905
|
$
|
52,562
|
$
|
32,252
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items to be reclassified subsequently to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
adjustment
|
|
|
|
|
|
|
|
|
(net of income taxes of
$nil)
|
|
9,476
|
|
5,446
|
|
(6,473)
|
|
12,613
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on derivative financial
|
|
|
|
|
|
|
|
|
instruments designated as cash flow
hedges
|
|
(5,257)
|
|
17
|
|
(1,594)
|
|
4,827
|
Tax impact
|
|
1,316
|
|
(10)
|
|
399
|
|
(1,269)
|
|
|
|
|
|
|
|
|
|
Gain transferred to net income for derivatives
|
|
|
|
|
|
|
|
|
designated as cash flow
hedges
|
|
(815)
|
|
(875)
|
|
(773)
|
|
(794)
|
Tax impact
|
|
213
|
|
240
|
|
208
|
|
236
|
|
|
|
|
|
|
|
|
|
Cash flow hedge reserve adjustment
|
|
13,012
|
|
116
|
|
13,822
|
|
(8,144)
|
Tax impact
|
|
(3,254)
|
|
(29)
|
|
(3,456)
|
|
2,036
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
14,691
|
|
4,905
|
|
2,133
|
|
9,505
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
$
|
39,792
|
$
|
11,810
|
$
|
54,695
|
$
|
41,757
|
|
|
|
|
|
|
|
|
|
Attributable to
|
|
|
|
|
|
|
|
|
Shareholders
|
$
|
39,785
|
$
|
11,797
|
$
|
54,677
|
$
|
41,722
|
Non-controlling interests
|
|
7
|
|
13
|
|
18
|
|
35
|
|
$
|
39,792
|
$
|
11,810
|
$
|
54,695
|
$
|
41,757
|
ATS AUTOMATION TOOLING SYSTEMS INC.
|
Interim Consolidated Statements of Changes in Equity
|
(in thousands of Canadian dollars - unaudited)
|
|
Nine months ended December 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
|
other
|
|
Non-
|
|
|
|
|
Share
|
|
Contributed
|
|
Retained
|
|
translation
|
|
Cash flow
|
|
comprehensive
|
|
controlling
|
|
Total
|
|
|
capital
|
|
surplus
|
|
earnings
|
|
adjustments
|
|
hedge reserve
|
|
income
|
|
interests
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at March 31,
2018
|
$
|
548,747
|
$
|
12,535
|
$
|
121,369
|
$
|
79,918
|
$
|
(4,088)
|
$
|
75,830
|
$
|
292
|
$
|
758,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
––
|
|
––
|
|
52,544
|
|
––
|
|
––
|
|
––
|
|
18
|
|
52,562
|
Other comprehensive income
(loss)
|
|
––
|
|
––
|
|
––
|
|
(6,473)
|
|
8,606
|
|
2,133
|
|
––
|
|
2,133
|
Total comprehensive income
(loss)
|
|
––
|
|
––
|
|
52,544
|
|
(6,473)
|
|
8,606
|
|
2,133
|
|
18
|
|
54,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
––
|
|
729
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
729
|
Exercise of stock options
|
|
2,315
|
|
(492)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
1,823
|
Repurchase of common shares (note
12)
|
|
(14,775)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
(14,775)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at December 30,
2018
|
$
|
536,287
|
$
|
12,772
|
$
|
173,913
|
$
|
73,445
|
$
|
4,518
|
$
|
77,963
|
$
|
310
|
$
|
801,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
|
|
|
|
other
|
|
Non-
|
|
|
|
|
Share
|
|
Contributed
|
|
Retained
|
|
translation
|
|
Cash flow
|
|
comprehensive
|
|
controlling
|
|
Total
|
|
|
capital
|
|
surplus
|
|
earnings
|
|
adjustments
|
|
hedge reserve
|
|
income
|
|
interests
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at March 31, 2017
|
$
|
543,317
|
$
|
12,871
|
$
|
74,599
|
$
|
55,504
|
$
|
(530)
|
$
|
54,974
|
$
|
248
|
$
|
686,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
––
|
|
––
|
|
32,217
|
|
––
|
|
––
|
|
––
|
|
35
|
|
32,252
|
Other comprehensive income (loss)
|
|
––
|
|
––
|
|
––
|
|
12,613
|
|
(3,108)
|
|
9,505
|
|
––
|
|
9,505
|
Total comprehensive income (loss)
|
|
––
|
|
––
|
|
32,217
|
|
12,613
|
|
(3,108)
|
|
9,505
|
|
35
|
|
41,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
––
|
|
767
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
767
|
Exercise of stock options
|
|
4,031
|
|
(947)
|
|
––
|
|
––
|
|
––
|
|
––
|
|
––
|
|
3,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as at December 31, 2017
|
$
|
547,348
|
$
|
12,691
|
$
|
106,816
|
$
|
68,117
|
$
|
(3,638)
|
$
|
64,479
|
$
|
283
|
$
|
731,617
|
ATS AUTOMATION TOOLING SYSTEMS INC.
|
Interim Consolidated Statements of Cash Flows
|
(in thousands of Canadian dollars - unaudited)
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
December 30
|
|
December 31
|
|
December 30
|
|
December 31
|
|
Note
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
25,101
|
$
|
6,905
|
$
|
52,562
|
$
|
32,252
|
Items not involving
cash
|
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and
equipment
|
|
|
2,988
|
|
2,542
|
|
8,756
|
|
7,591
|
Amortization of intangible
assets
|
8
|
|
7,246
|
|
6,969
|
|
21,302
|
|
19,734
|
Deferred income
taxes
|
13
|
|
4,564
|
|
(3,609)
|
|
4,664
|
|
(3,732)
|
Other items not involving
cash
|
|
|
(2,932)
|
|
(6,024)
|
|
(5,365)
|
|
(5,541)
|
Stock-based
compensation
|
14
|
|
(6,310)
|
|
2,142
|
|
3,692
|
|
5,040
|
|
|
|
30,657
|
|
8,925
|
|
85,611
|
|
55,344
|
Change in non-cash operating working capital
|
|
|
31,577
|
|
(3,460)
|
|
15,736
|
|
(15,569)
|
Cash flows provided by operating
activities
|
|
$
|
62,234
|
$
|
5,465
|
$
|
101,347
|
$
|
39,775
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and
equipment
|
|
$
|
(4,019)
|
$
|
(6,515)
|
$
|
(13,417)
|
$
|
(13,692)
|
Acquisition of intangible
assets
|
8
|
|
(11,672)
|
|
(1,519)
|
|
(14,633)
|
|
(4,447)
|
Business acquisition, net of cash acquired
|
4
|
|
(24,279)
|
|
––
|
|
(24,279)
|
|
––
|
Proceeds from disposal of property,
|
|
|
|
|
|
|
|
|
|
plant and equipment
|
|
|
5,046
|
|
10
|
|
5,196
|
|
546
|
Cash flows used in investing activities
|
|
$
|
(34,924)
|
$
|
(8,024)
|
$
|
(47,133)
|
$
|
(17,593)
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Bank
indebtedness
|
|
$
|
198
|
$
|
(806)
|
$
|
(1,111)
|
$
|
(1,056)
|
Repayment of long-term
debt
|
|
|
(28)
|
|
(91)
|
|
(320)
|
|
(1,600)
|
Proceeds from long-term
debt
|
|
|
38
|
|
25
|
|
76
|
|
122
|
Proceeds from exercise of
options
|
|
|
51
|
|
2,876
|
|
1,823
|
|
3,084
|
Repurchase of common shares
|
12
|
|
(14,775)
|
|
––
|
|
(14,775)
|
|
–
|
Cash flows provided by (used in)
|
|
|
|
|
|
|
|
|
|
financing
activities
|
|
$
|
(14,516)
|
$
|
2,004
|
$
|
(14,307)
|
$
|
550
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
|
|
|
|
|
|
|
and cash
equivalents
|
|
|
7,068
|
|
1,820
|
|
4,035
|
|
(1,859)
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash
equivalents
|
|
|
19,862
|
|
1,265
|
|
43,942
|
|
20,873
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
354,228
|
|
306,305
|
|
330,148
|
|
286,697
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
374,090
|
$
|
307,570
|
$
|
374,090
|
$
|
307,570
|
|
|
|
|
|
|
|
|
|
|
Supplemental information
|
|
|
|
|
|
|
|
|
|
Cash income taxes paid
|
|
$
|
1,575
|
$
|
3,242
|
$
|
6,355
|
$
|
8,598
|
Cash interest paid
|
|
$
|
11,090
|
$
|
9,791
|
$
|
24,027
|
$
|
20,486
|
SOURCE ATS Automation Tooling Systems Inc.
View original content to download multimedia: http://www.newswire.ca/en/releases/archive/February2019/06/c7423.html