2014

ATS Reports Third Quarter Fiscal 2013 Results

CAMBRIDGE, ON, Feb. 6, 2013 /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, 2012 for its continuing operations (Automation Systems Group or "ASG") and discontinued operations ("Solar").

Third Quarter Summary

  • Revenues from continuing operations were $144.2 million, 3% lower than the corresponding period a year ago and 2% higher than the second quarter of fiscal 2013;
  • Earnings from continuing operations were $13.6 million (9% operating margin) compared to adjusted earnings from operations of $13.7 million (9% operating margin) in the corresponding period a year ago (which exclude non-recurring gains of $6.7 million from the sale of a facility and the benefit of U.S. research and development tax credits) and earnings from operations of $13.8 million (10% operating margin) in the second quarter of fiscal 2013;
  • EBITDA was $16.6 million (12% EBITDA margin) compared to adjusted EBITDA of $16.8 million (11% EBITDA margin) in the corresponding period a year ago and EBITDA of $16.7 million (12% EBITDA margin) in the second quarter of fiscal 2013;
  • Order Bookings were $173 million, a 3% decrease from the third quarter of fiscal 2012 and a 54% increase from the $112 million of Order Bookings in the second quarter of fiscal 2013;
  • Included in Order Bookings is a $40 million program for the first phase of a potential multi-year enterprise-type solution for ATS with a new North American based customer in the life sciences market;
  • Period end Order Backlog was $388 million, an increase of 3% from $376 million a year ago and an increase of 7% from $361 million in the second quarter of fiscal 2013;
  • The Company's balance sheet was strong with cash net of debt of $108.3 million.  During the quarter, the Company established a new $250 million credit facility, which provides improved terms and flexibility over the previous facility; and
  • During the quarter, the Company signed a definitive agreement to sell four ground-mount solar projects, representing approximately 34 megawatts ("MWs").  Net proceeds to the Company are expected to be approximately $20 million.

Financial Results

In millions of Canadian dollars,
except per share data
  3 months
ended
December 30,
2012
  3 months
ended
January 1,
2012
  9 months
ended
December 30,
2012
  9 months
ended
January 1,
2012
Revenues Continuing Operations $ 144.2 $ 149.1 $ 437.9 $ 421.9
Discontinued Operations $ 0.9 $ 9.7 $ 2.1 $ 106.4
Earnings from Operations1 Continuing Operations $ 13.6 $ 20.4 $ 42.6 $ 44.2
EBITDA1 Continuing Operations $ 16.6 $ 23.5 $ 51.5 $ 53.3
Net income (loss) Continuing Operations $ 10.7 $ 17.6 $ 32.2 $ 33.1
Discontinued Operations $ (21.7) $ (8.0) $ (25.4) $ (95.6)
Earnings per share From continuing operations
(basic & diluted)
$ 0.12 $ 0.20 $ 0.37 $ 0.38
From discontinued operations
(basic)
$ (0.24) $ (0.09) $ (0.29) $ (1.10)
From discontinued operations
(diluted)
$ (0.24) $ (0.09) $ (0.29) $ (1.09)

1 Non-IFRS measures

"Third quarter operating results were strong," said Anthony Caputo, Chief Executive Officer.  "We are focused on advancing our value creation plan to grow, expand and scale. Our growth is well supported through our actions to move towards enterprise-type solutions, which is gaining traction.  We are well positioned to support our growth strategy with our new $250 million credit facility."

Third Quarter Summary Continuing Operations

By industrial market, consumer products & electronics revenues declined 36% year over year due to lower Order Bookings and lower Order Backlog entering the third quarter compared to a year ago, primarily on lower activity in the consumer products markets. Energy market revenues decreased 48% on lower Order Backlog entering the third quarter compared to a year ago, reflecting reduced activity primarily in the solar market. Revenues from life sciences increased 6% year over year due to higher Order Backlog entering the third quarter compared to a year ago on continued strength in the industry. Transportation revenues increased by 9% on higher Order Backlog entering the third quarter compared to a year ago reflecting continued strength in the automotive industry in both new and existing technologies.

Foreign exchange rate changes negatively impacted the translation of revenues earned by foreign-based ASG subsidiaries by approximately $4.9 million compared to the third quarter of fiscal 2012, primarily reflecting the strengthening of the Canadian dollar relative to the Euro. Normalized for this impact, third quarter revenues were flat compared to the corresponding period a year ago.

Fiscal 2013 third quarter earnings from operations were $13.6 million (9% operating margin) compared to earnings from operations of $20.4 million (14% operating margin) in the third quarter of fiscal 2012. Included in fiscal 2012 third quarter earnings from operations was a gain of $3.0 million relating to the sale of a redundant ASG facility in France, and the benefit of $3.7 million of previously unrecognized U.S. research and development tax credits which were recorded due to improved profitability in the Company's U.S. businesses. Excluding these two items, earnings from operations were $13.7 million (9% operating margin).

ASG Order Bookings

Third quarter fiscal 2013 Order Bookings were $173 million, a 3% decrease from the third quarter of fiscal 2012 Order Bookings of $179 million. Included in this fiscal year's third quarter Order Bookings, is a program valued at approximately $40 million for a new, North-American based life sciences customer.  This is the first phase of a potential multi-year enterprise-type solution for ATS with this customer.  The manufacturing system was co-developed by ATS and the customer, through a year-long structured development process, using a number of proprietary ATS technologies. Future phases of the program are dependent on a successful launch of the customer's product and market penetration.

Quarter over quarter foreign exchange rate changes negatively impacted the translation of Euro-denominated Order Bookings, reflecting the strengthening of the Canadian dollar relative to the Euro.

Third Quarter Summary of Discontinued Operations: Solar

Fiscal 2013 third quarter revenues of $0.9 million were 91% lower than in the third quarter of fiscal 2012 reflecting the de-consolidation of Photowatt International S.A.S. ("PWF").

Fiscal 2013 third quarter loss from discontinued operations, net of tax was $21.7 million.  Included in the fiscal 2013 loss from discontinued operations, net of tax was $4.9 million of non-cash charges related to the write-down of inventory to its net realizable value, following declines in market average selling prices due to uncertainty in Ontario as a result of regulatory delays and $14.9 million of non-cash property, plant and equipment impairment charges to write down assets to their expected recoverable amounts, following management's decision to pursue separate sales of the manufacturing operations and the remaining three ground-mount solar projects.

During the three months ended December 30, 2012, Ontario Solar's 50% owned joint venture, Ontario Solar PV Fields ("OSPV") signed a definitive agreement to sell four ground-mount solar projects, representing approximately 34 MWs. The transaction is subject to a number of approvals and conditions, including the purchaser securing financing for the projects.  The Company expects the transaction to close in early calendar 2013. OSPV will retain 25% ownership of the projects until the projects reach commercial operation, which is expected to happen in the second half of calendar 2013. Net proceeds to the Company are expected to be approximately $20 million, which is expected to be paid out through calendar 2013, based on the projects achieving certain development milestones.

The Company intends to complete the separation of Solar via the divestment of the remaining projects owned by OSPV and the Ontario Solar manufacturing operations. The Company is continuing to work with interested parties to conclude agreements. Overall, management expects that the estimated proceeds to be realized on the pending and potential sales of the ground-mount solar projects will more than offset the impairment charges recorded in the Ontario Solar manufacturing operations.

Quarterly Conference Call

ATS's quarterly conference call begins at 10 am eastern on Wednesday February 6 and can be accessed live at www.atsautomation.com or on the phone by dialing 416 644 3416 five minutes prior.

About ATS

ATS Automation provides innovative, custom designed, built and installed manufacturing solutions to many of the world's most successful companies. Founded in 1978, ATS uses its industry-leading knowledge and global capabilities to serve the sophisticated automation systems' needs of multinational customers in industries such as consumer products & electronics, energy, life sciences and transportation. It also leverages its many years of experience and skills to fulfill the specialized automation product manufacturing requirements of customers. Through its Ontario solar business, ATS participates in the solar energy industry. ATS employs approximately 2,400 people at 20 manufacturing facilities in Canada, the United States, 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, 2012

This Management's Discussion and Analysis ("MD&A") for the three and nine months ended December 30, 2012 (third quarter of fiscal 2013) is as of February 5, 2013 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 consolidated financial statements of the Company for the third quarter of fiscal 2013 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 MD&A of the Company for the year ended March 31, 2012 (fiscal 2012) and, accordingly, the purpose of this document is to provide a third quarter update to the information contained in the fiscal 2012 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

Throughout this document the term "operating earnings" is used to denote earnings (loss) from operations. EBITDA is also used and is defined as earnings (loss) from operations excluding depreciation and amortization (which includes amortization of intangible assets). The term "margin" refers to an amount as a percentage of revenue. The terms "earnings (loss) from operations", "operating earnings", "margin", "operating loss", "operating results", "operating margin", "EBITDA", "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. Operating earnings and EBITDA are some of the measures the Company uses to evaluate the performance of its segments. Management believes that ATS shareholders and potential investors in ATS use non-IFRS financial measures such as operating earnings and EBITDA in making investment decisions and measuring operational results. A reconciliation of operating earnings and EBITDA to net income from continuing operations for the three and nine month periods ending December 30, 2012 and January 1, 2012 is contained in this MD&A (see "Reconciliation of EBITDA to IFRS Measures"). EBITDA should not be construed as a substitute for net income determined in accordance with IFRS.

Order Bookings represent new orders for the supply of automation systems that management believes are firm. Order Backlog is the estimated unearned portion of revenue on customer contracts that are in process and have not been completed at the specified date.  A reconciliation of Order Bookings and Order Backlog to total Company revenues for the three and nine month periods ending December 30, 2012 and January 1, 2012 is contained in the MD&A (see "ASG Order Backlog Continuity").

COMPANY PROFILE

The Company operates in two segments: Automation Systems Group ("ASG"), the Company's continuing operations, and Solar, which is classified as discontinued operations. Through ASG, ATS provides innovative, custom designed, built and installed manufacturing solutions to many of the world's most successful companies. Founded in 1978, ATS uses its industry-leading knowledge and global capabilities to serve the sophisticated automation systems' needs of multinational customers in industries such as consumer products & electronics, energy, life sciences, and transportation. ATS also leverages its many years of experience and skills to fulfill the specialized automation product manufacturing requirements of customers. Through its Ontario solar business, ATS participates in the solar energy industry. ATS employs approximately 2,400 people at 20 manufacturing facilities in Canada, the United States, Europe, Southeast Asia and China.

Value Creation Strategy

The Company has made significant progress in each phase of its Value Creation Strategy, including the separation of solar assets (see "Discontinued Operations: Solar" and "Solar Separation and Outlook").

Accordingly, in June 2012, the ATS Board of Directors endorsed the Company's vision and mission statements, and approved the next phase of the Company's strategy: Grow, Expand and Scale. This strategy is designed to leverage the strong foundation of ATS's core automation business, continue the growth and development of ATS and create value for all stakeholders.

Vision

Deliver enabling manufacturing solutions to the world's market leaders.

Mission

We will achieve our mission by providing:

  • Outstanding value to our customers;
  • Superior financial returns to our shareholders; and
  • A premier work environment.

Grow

To further the Company's organic growth, ASG will continue to target providing comprehensive, value-based programs and enterprise solutions for customers built on differentiating technological solutions, value of customer outcomes achieved and global capability.

Expand

The Company seeks to expand its offering of products and services to the market.  The Company intends to build on its automation systems business to offer: engineering, including design, modelling and simulation, and program management; products, including contract manufacturing, automation and other manufacturing products; and services, including pre automation, post automation, training, life cycle material management, and other services.  Although engineering, products and services are part of ATS's portfolio today, the Company has significant room to grow these offerings in the future.

Scale

The Company is also committed to growth through acquisition, and has an organizational structure, business processes and the experience to successfully integrate acquired companies. Acquisition opportunities are targeted and evaluated on their ability to bring ATS market or technology leadership, scale and/or an opportunity brought on by a weak economic environment. For each of ASG's markets, the Company has analyzed the capability value chain and made a grow, team or acquire decision. Financially, targets are reviewed on a number of criteria including their potential to add accretive earnings to current operations.

OVERVIEW - OPERATING RESULTS FROM CONTINUING OPERATIONS

Results from continuing operations comprise those of ASG and corporate costs not directly attributable to Solar. The results of the Solar segment are reported as discontinued operations.

Effective from the first quarter of fiscal 2013, the Company changed the presentation of its revenues by industrial market to align with the organization of its sales and marketing group.  Computer-electronics was combined with consumer products (formerly known as "Other"). Comparative revenue figures in this MD&A were restated to reflect this change in presentation.

Consolidated Revenues from Continuing Operations
(In millions of dollars)

    Three Months
Ended
    Three Months
Ended
    Nine Months
Ended
    Nine Months
Ended
    December 30,
2012
    January 1,
2012
    December 30,
2012
    January 1,
2012
Revenues by market                      
  Consumer products & electronics $ 10.6   $ 16.5   $ 43.2   $ 47.9
  Energy   8.3     16.1     27.5     59.5
  Life sciences   52.0     49.1     162.7     141.9
  Transportation   73.3     67.4     204.5     172.6
Total revenues from continuing operations $ 144.2   $ 149.1   $ 437.9   $ 421.9

Third Quarter

Third quarter revenues were 3% lower than in the corresponding period a year ago. By industrial market, consumer products & electronics revenues declined 36% year over year due to lower Order Bookings and lower Order Backlog entering the third quarter compared to a year ago, primarily on lower activity in consumer products markets. Energy market revenues decreased 48% on lower Order Backlog entering the third quarter compared to a year ago, reflecting reduced activity primarily in the solar market. Revenues from life sciences increased 6% year over year due to higher Order Backlog entering the third quarter compared to a year ago on continued strength in the industry. Transportation revenues increased by 9% on higher Order Backlog entering the third quarter compared to a year ago reflecting continued strength in demand for both new and existing technologies in the automotive and heavy equipment industries.

Year over year foreign exchange rate changes negatively impacted the translation of revenues earned by foreign-based ASG subsidiaries by approximately $4.9 million compared to the third quarter of fiscal 2012, primarily reflecting the strengthening of the Canadian dollar relative to the Euro. Normalized for this impact, third quarter revenues were flat compared to the corresponding period a year ago.

Year-to-date

Revenues for the nine months ended December 30, 2012 were 4% higher than the corresponding period a year ago mainly due to increased Order Backlog entering the fiscal year compared to a year ago.

By industrial market, year-to-date revenues from life sciences and transportation markets increased 15% and 18% respectively compared to the same period a year ago, primarily on increased Order Backlog entering the fiscal year compared to a year ago. Revenues in energy decreased 54% compared to the same period a year ago, primarily due to decreased Order Backlog entering the fiscal year compared to a year ago on weakness in the solar market. Revenues in consumer products & electronics decreased 10% compared to the same period a year ago, primarily due to lower Order Bookings during the fiscal year compared to a year ago.

Foreign exchange rate changes negatively impacted the translation of revenues earned by foreign-based ASG subsidiaries by approximately $8.3 million compared to the first nine months of fiscal 2012, primarily reflecting the strengthening of the Canadian dollar relative to the Euro.

Consolidated Operating Results
(In millions of dollars)

    Three Months
Ended
    Three Months
Ended
    Nine Months
Ended
    Nine Months
Ended
    December 30,
2012
    January 1,
2012
    December 30,
2012
    January 1,
2012
                       
Earnings from operations $ 13.6   $ 20.4   $ 42.6   $ 44.2
Depreciation and amortization   3.0     3.1     8.9     9.1
EBITDA $ 16.6   $ 23.5   $ 51.5   $ 53.3

Third Quarter

Fiscal 2013 third quarter earnings from operations were $13.6 million (9% operating margin) compared to earnings from operations of $20.4 million (14% operating margin) in the third quarter of fiscal 2012. Included in fiscal 2012 third quarter earnings from operations was a gain of $3.0 million relating to the sale of a redundant ASG facility in France, and the benefit of $3.7 million of previously unrecognized U.S. research and development tax credits which were recorded due to improved profitability in the Company's U.S. businesses. Excluding these two items, earnings from operations a year ago were $13.7 million (9% operating margin). The decrease in earnings from operations primarily reflected lower revenues earned during the third quarter of fiscal 2013.

In the third quarters of fiscal 2013 and fiscal 2012, depreciation and amortization expense was generally consistent at $3.0 million and $3.1 million respectively.

Year-to-date

For the nine months ended December 30, 2012, earnings from operations were $42.6 million (10% operating margin) compared to earnings from operations of $44.2 million (10% operating margin) in the corresponding period a year ago. Excluding the $3.0 million gain relating to the sale of the redundant ASG facility in France, and the benefit of $3.7 million of previously unrecognized U.S. research and development tax credits, earnings from operations were $37.5 million (9% operating margin). Higher earnings from operations in fiscal 2013 primarily reflected increased revenues and improvements in supply chain management.

Depreciation and amortization expense was $8.9 million in the first nine months of fiscal 2013, generally consistent with the $9.1 million expensed in the same period a year ago.

ASG Order Bookings

Third quarter fiscal 2013 Order Bookings were $173 million, a 3% decrease from the third quarter of fiscal 2012 Order Bookings of $179 million. Included in this fiscal year's third quarter Order Bookings, is a program valued at approximately $40 million for a new, North-American based life sciences customer.  This is the first phase of a potential multi-year enterprise-type solution for ATS with this customer.  The manufacturing system was co-developed by ATS and the customer, through a year-long structured development process, using a number of proprietary ATS technologies. Future phases of the program are dependent on a successful launch of the customer's product and market penetration.

Quarter over quarter foreign exchange rate changes compared to a year ago negatively impacted the translation of Euro-denominated Order Bookings, reflecting the strengthening of the Canadian dollar relative to the Euro.

ASG Order Backlog Continuity
(In millions of dollars)

    Three Months
Ended
    Three Months
Ended
    Nine Months
Ended
    Nine Months
Ended
    December 30,
2012
    January 1,
2012
    December 30,
2012
    January 1,
2012
                       
Opening Order Backlog $ 361   $ 363   $ 382   $ 296
Revenues   (144)     (149)     (438)     (422)
Order Bookings   173     179     453     501
Order Backlog adjustments1   (2)     (17)     (9)     1
Total $ 388   $ 376   $ 388   $ 376

1 Order Backlog adjustments include foreign exchange adjustments and cancellations.

ASG Order Backlog by Industry
(In millions of dollars)

    December 30,
2012
    January 1,
2012
Consumer products & electronics $ 29   $ 38
Energy   15     34
Life sciences   170     117
Transportation   174     187
Total $ 388   $ 376

At December 30, 2012, ASG Order Backlog was $388 million, 3% higher than at January 1, 2012, reflecting the Company's revised approach to market which has varied the timing of various larger opportunities through the backlog-to-revenue cycle. The Company expects its current Order Backlog to be completed over an average period of seven to nine months.

ASG Outlook

The general economic environment remains uncertain, particularly with respect to the European economy due to the Eurozone sovereign debt crisis.  This has the potential to result in tighter credit markets which could negatively impact demand, particularly for the Company's European operations, and may cause volatility in Order Bookings.  Similarly, should economic growth in China continue to contract or the recovery in the U.S. economy stall, the Company's markets may be negatively impacted.  Overall, a prolonged or more significant downturn in the economy could negatively impact Order Bookings.  Impacts on demand for the Company's products and services may lag behind global macroeconomic trends due to the strategic nature of the Company's programs to its customers and long lead times on projects.

Many customers remain cautious in their approach to capital investment; however, activity in the life sciences and transportation markets remains strong. The Company has opportunities in energy markets such as nuclear and oil and gas; however, these may not offset weakness in the solar energy market caused by reductions in solar feed-in-tariffs. These conditions negatively impacted both demand for solar products and the need for additional solar manufacturing capacity. Activity in the consumer products & electronics market also remains soft.

In the second quarter of fiscal 2013, the Company recorded a $12 million Order Booking, based on the receipt of a down payment on an approximately 65 million Euro contract awarded to ATS for the turnkey supply of equipment and automation to produce medical devices in a new production facility in Nigeria.  ATS is the prime contractor on the project which involves five ATS divisions and six major subcontractors in Germany, Switzerland and Austria.  The balance of the agreement is conditional on ATS satisfying itself with respect to certain technical and product information and with respect to certain commercial matters, including finalization of project financing and export credit guarantees relating to the customers' project, which are expected to be provided by German and Austrian banks and export credit agencies.  Initial work on the program began in the third quarter of fiscal 2013.  Financial close on the program is expected in the first quarter of fiscal 2014. The majority of program activity is expected to occur subsequent to financial close, with most of the project delivered in fiscal 2014.  The program is being undertaken with the sponsorship and collaboration of the Rivers State Government, Nigeria.  The Company expects to record the balance of the Order Booking and Order Backlog when financial close is reached.

The Company's sales organization will continue to work to engage with customers on enterprise-type solutions. This approach to market may cause variability in Order Bookings from quarter to quarter and, as is already the case, lengthen the performance period and revenue recognition for certain customer programs.  Order Backlog remains strong, which will likely partially mitigate the impact of volatile Order Bookings on revenues in the short term.

Management expects that the implementation of its strategic initiatives to improve business processes, leadership and supply chain management will continue to have a positive impact on ATS operations. Management's disciplined focus on program management, cost reductions, standardization and quality put ATS in a strong competitive position to capitalize on opportunities going forward and sustain performance in difficult market conditions.

The Company is seeking to expand its position in the global automation market organically and through acquisition. The Company's strong financial position provides a solid foundation to pursue organic growth and the flexibility to pursue its acquisition growth strategy.

CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS
(In millions of dollars, except per share data)

          Three Months
Ended
    Three Months
Ended
    Nine Months
Ended
    Nine Months
Ended
    December 30,
2012
    January 1,
2012
    December 30,
2012
    January 1,
2012
Revenues $ 144.2   $ 149.1   $ 437.9   $ 421.9
Cost of revenues   109.0     107.6     324.8     309.0
Selling, general and administrative   20.7     22.9     68.0     68.8
Stock-based compensation   0.9     1.2     2.5     2.9
Gain on sale of land and building       (3.0)         (3.0)
Earnings from operations $ 13.6   $ 20.4   $ 42.6   $ 44.2
Net finance costs $ 0.6   $ 0.4   $ 1.3   $ 1.2
Provision for income taxes   2.3     2.4     9.1     9.9
Net income from continuing operations $ 10.7   $ 17.6   $ 32.2     33.1
Loss from discontinued operations, net of tax $ (21.7)   $ (8.0)   $ (25.4)   $ (95.6)
Net income (loss) $ (11.0)   $ 9.6   $ 6.8   $ (62.5)
Earnings per share                      
Basic - from continuing operations $ 0.12   $ 0.20   $ 0.37   $ 0.38
Basic - from discontinued operations $ (0.24)   $ (0.09)   $ (0.29)   $ (1.10)
  $ (0.12)   $ 0.11   $ 0.08   $ (0.72)
                       
Earnings (loss) per share                      
Diluted - from continuing operations $ 0.12   $ 0.20   $ 0.37   $ 0.38
Diluted - from discontinued operations $ (0.24)   $ (0.09)   $ (0.29)   $ (1.09)
  $ (0.12)   $ 0.11   $ 0.08   $ (0.71)
                       

Revenues.  At $144.2 million, consolidated revenues from continuing operations for the third quarter of fiscal 2013 were 3% lower than for the corresponding period a year ago. Year-to-date revenues were $437.9 million or 4% higher than for the same period a year ago.  See "Overview - Operating Results from Continuing Operations".

Cost of revenues.  At $109.0 million, third quarter fiscal 2013 cost of revenues increased over the corresponding period a year ago by $1.4 million or 1%. Year-to-date cost of revenues of $324.8 million increased by $15.8 million or 5%, primarily on higher revenues generated compared to the corresponding period.

At 24%, gross margin in the third quarter decreased from 28% in the corresponding period a year ago. Excluding the fiscal 2012 third quarter benefit of $3.7 million of previously unrecognized U.S. research and development tax credits which were recorded due to improved profitability in the Company's U.S. businesses, gross margin a year ago was 25%. Lower third quarter fiscal 2013 gross margins reflect higher than anticipated costs to complete certain customer programs.

Year-to-date gross margin of 26% decreased slightly from the 27% gross margin in the corresponding period a year ago. Excluding the benefit of $3.7 million of previously unrecognized U.S. research and development tax credits, gross margin was 26% in the corresponding period a year ago.

Selling, general and administrative ("SG&A") expenses. SG&A expenses for the third quarter of fiscal 2013 of $20.7 million were $2.2 million less than the $22.9 million in the corresponding period a year ago reflecting reduced spending on marketing, administration and employee costs. For the nine months ended December 30, 2012, SG&A expenses decreased 1% or $0.8 million to $68.0 million compared to the same period a year ago.

Stock-based compensation cost. Stock-based compensation expense of $0.9 million in the third quarter of fiscal 2013 decreased from $1.2 million in the corresponding period a year ago as a result of lower expenses from stock options, partially offset by share appreciation rights. For the nine month period ended December 30, 2012, stock-based compensation expense decreased to $2.5 million from $2.9 million a year earlier primarily reflecting lower expenses from stock option grants offset by the revaluation of deferred stock units.

Earnings from operations. For the three and nine month periods ended December 30, 2012, consolidated earnings from operations were $13.6 million and $42.6 million respectively (operating margins of 9% and 10% respectively), compared to earnings from operations of $20.4 and $44.2 million a year ago (operating margins of 14% and 10% respectively). See "Overview - Operating Results from Continuing Operations".

Net finance costs. Net finance costs of $0.6 million in the third quarter of fiscal 2013 were comparable to the $0.4 million a year ago. For the nine months ended December 30, 2012, finance costs were $1.3 million compared to $1.2 million in the corresponding period last year.

Provision for income taxes. For the three and nine months ended December 30, 2012, the Company's effective income tax rates of 18% and 22%, respectively, differed from the combined Canadian basic federal and provincial income tax rate of 27% (three and nine months ended January 1, 2012 - 12% and 23% respectively) primarily as a result of income earned in certain jurisdictions with lower tax rates and where utilization of unrecognized deferred tax assets resulted in lower tax expense for accounting purposes.

Net income from continuing operations. Fiscal 2013 third quarter net income from continuing operations was $10.7 million (12 cents per share basic and diluted) compared to net income from continuing operations of $17.6 million (20 cents per share basic and diluted) for the third quarter of fiscal 2012. Net income from continuing operations in the nine months ended December 30, 2012 was $32.2 million (37 cents per share basic and diluted) compared to net income from continuing operations of $33.1 million (38 cents per share basic and diluted) for the corresponding period a year ago.

Reconciliation of EBITDA to IFRS Measures
(In millions of dollars)

                                  Three Months
Ended
December 30,
2012
          Three Months
   Ended
      January 1,
2012
EBITDA              $ 16.6   $ 23.5
Less: depreciation and amortization expense                                         3.0     3.1
Earnings from operations                $ 13.6   $ 20.4
Less: net finance costs                                         0.6     0.4
Provision for income taxes                                         2.3     2.4
Net income from continuing operations                $ 10.7   $ 17.6

                                    Nine Months
Ended
    December 30,
2012
          Nine Months
   Ended
      January 1,
2012
EBITDA              $ 51.5   $ 53.3
Less: depreciation and amortization expense                                         8.9     9.1
Earnings from operations                $ 42.6   $ 44.2
Less: net finance costs                                         1.3     1.2
Provision for income taxes                                         9.1     9.9
Net income from continuing operations                $ 32.2   $ 33.1

DISCONTINUED OPERATIONS: SOLAR
(In millions of dollars)

    Three Months
Ended
December 30,
2012
    Three Months
Ended
January 1,
2012
    Nine Months
Ended
December 30,
2012
    Nine Months
    Ended
         January 1,
2012
Total revenues $ 0.9   $ 9.7   $ 2.1   $ 106.4
Loss from discontinued operations   (21.7)     (7.9)     (25.4)     (90.3)
Loss from discontinued operations, net of tax   (21.7)     (8.0)     (25.4)     (95.6)

Third Quarter

Revenues

Fiscal 2013 third quarter revenues of $0.9 million were 91% lower than in the third quarter of fiscal 2012 reflecting the de-consolidation of Photowatt International S.A.S. ("PWF").

Loss from Discontinued Operations, Net of Tax

Ontario Solar recorded a $21.7 million loss in the third quarter of fiscal 2013 on lower-than-planned revenues combined with higher fixed costs. Included in the loss from discontinued operations was $4.9 million of non-cash charges related to the write-down of inventory to its net realizable value, following declines in market average selling prices due to uncertainty in the Ontario market as a result of regulatory delays and $14.9 million of non-cash property, plant and equipment impairment charges to write down assets to their expected recoverable amounts, following management's decision to pursue separate sales of the manufacturing operations and the remaining three ground-mount solar projects. The third quarter loss in fiscal 2012 was $8.0 million, $5.1 million of which related to Ontario Solar and $2.8 million of which related to PWF.

Year-to-Date

Revenues

Revenues for the nine months ended December 30, 2012 of $2.1 million were 98% lower than in the same period of fiscal 2012 primarily reflecting the de-consolidation of PWF.

Loss from Discontinued Operations, Net of Tax

Fiscal 2013 year-to-date loss from discontinued operations, net of tax was $25.4 million compared to a loss of $95.6 million in the corresponding period a year ago.  Included in the fiscal 2013 loss from discontinued operations was $19.8 million of non-cash charges related to inventory write-downs and property, plant and equipment impairment charges. Included in the fiscal 2012 loss was an operating loss of $90.3 million, net finance charges of $0.7 million, and income tax expenses of $4.6 million, which included the write-off of deferred tax assets of $4.4 million.

Solar Separation and Outlook

During the year ended March 31, 2011, the Company's Board of Directors approved a plan designed to implement the separation of Solar from ATS.

Regarding Ontario Solar, during the third quarter of fiscal 2013, Ontario Solar's 50% owned joint venture, Ontario Solar PV Fields ("OSPV") signed a definitive agreement to sell four ground-mount solar projects, representing approximately 34 megawatts. The transaction is subject to a number of approvals and conditions, including the purchaser securing financing for the projects.  The Company expects the transaction to close in early calendar 2013. OSPV will retain 25% ownership of the projects until the projects reach commercial operation, which is expected to happen in the second half of calendar 2013. Net proceeds to the Company are expected to be approximately $20 million, which is expected to be paid out through calendar 2013, based on the projects achieving certain development milestones.

The Company intends to complete the separation of Solar via the divestment of the remaining projects owned by OSPV and the Ontario Solar manufacturing operations. The Company is continuing to work with interested parties to conclude agreements. Overall, management expects that the estimated proceeds to be realized on the pending and potential sales of the ground-mount solar projects will more than offset the impairment charges recorded in the Ontario Solar manufacturing business.

Regarding PWF, on November 8, 2011, a hearing was held at which time the French bankruptcy court placed PWF into a "recovery" proceeding ("redressement judiciaire") under the supervision of a court-appointed trustee. The Company concluded that it ceased to have the ability to exert control over PWF, and accordingly, the Company's investment in PWF was deconsolidated from the Company's consolidated financial statements. Effective March 1, 2012, a third-party assumed control over the entire operations of the PWF assets and offers were made to transfer all employees to the new operator. This concluded ATS's operating support of PWF. However, until all matters are resolved under the bankruptcy process, additional provisions may be required.  The Company will record any such provision if and when it becomes known and the Company determines that the obligation will result in a probable outflow of economic resources and the Company is able to measure the obligation with sufficient reliability.

LIQUIDITY, CASH FLOW AND FINANCIAL RESOURCES
(In millions of dollars, except ratios)

As at   December 30,
2012
            March 31,
2012
Cash and cash equivalents $  109.6   $ 96.2
Debt-to-equity ratio   0.01:1     0.01:1
For the three months ended     
December 30,
2012
   
January 1,
2012
Cash flows provided by operating activities from continuing operations $  9.1   $ 8.0

At December 30, 2012, the Company had cash and cash equivalents of $109.6 million compared to $96.2 million at March 31, 2012. The Company's total debt-to-total-equity ratio, excluding accumulated other comprehensive income at December 30, 2012 was 0.01:1. At December 30, 2012, the Company had $190.2 million of unutilized credit available under the Credit Agreement and another $13.9 million available under letter of credit facilities.

In the three months ended December 30, 2012, cash flows provided by operating activities from continuing operations were $9.1 million ($8.0 million provided by in the corresponding period a year ago). In the nine months ended December 30, 2012, cash flows provided by operating activities from continuing operations were $34.9 million ($12.8 million used in the corresponding period a year ago).  The increase in cash flows provided by operating activities from continuing operations in fiscal 2013 compared to the same period a year ago related primarily to the timing of investments in non-cash working capital in a number of large customer programs.

In the third quarter of fiscal 2013, the Company's investment in non-cash working capital increased by $6.1 million compared to an increase of $6.3 million in the third quarter a year ago. On a year-to-date basis, investment in non-cash working capital increased by $11.1 million compared to an increase of $50.1 million a year ago. In fiscal 2013, accounts receivable increased 15% or $13.4 million from March 31, 2012, due to timing of billings on certain customer contracts. Net contracts in progress decreased by 16% or $11.2 million compared to March 31, 2012. The Company actively manages its accounts receivable and net contracts in progress balances through billing terms on long-term contracts and by focusing on collection efforts. Inventories decreased from March 31, 2012 by $0.1 million.  Deposits and prepaid assets increased by 33% or $4.1 million from March 31, 2012 due primarily to an increase in deposits on third-party materials and restricted cash used to secure letters of credit. Accounts payable and accrued liabilities decreased 5% from March 31, 2012 primarily due to timing of purchases.

Capital expenditures totalled $5.6 million for the first nine months of fiscal 2013, primarily related to facility improvements, computer hardware and equipment.

Intangible assets expenditures totalled $3.6 million for the first nine months of fiscal 2013, primarily related to computer software.

The Company expects to continue increasing its investment in working capital to support its base business. The Company expects that continued cash flows from operations, together with cash and cash equivalents on hand and credit available under operating and long-term credit facilities, will be sufficient to fund its requirements for investments in working capital and capital assets and to fund strategic investment plans including some potential acquisitions. Significant acquisitions could result in additional debt or equity financing requirements. The Company expects to use moderate leverage to support its growth strategy.

During the three months ended December 30, 2012 the Company established a new Senior Secured Credit Facility (the "Credit Agreement") which replaced the former primary credit facility. The Credit Agreement provides a three year committed revolving credit facility of $250.0 million. The Credit Agreement, which is secured by the assets, excluding real estate, of certain of the Company's North American legal entities and a pledge of shares and guarantees from certain of the Company's legal entities. At December 30, 2012, the Company had utilized $62.5 million under the Credit Agreement by way of letters of credit (March 31, 2012 - $47.0 million).

The Credit Agreement is available in Canadian dollars by way of prime rate advances, letters of credit for certain purposes and/or bankers' acceptances and in U.S. dollars by way of base rate advances and/or LIBOR advances. The interest rates applicable to the Credit Agreement are determined based on a debt to EBITDA ratio. For prime rate advances and base rate advances, the interest rate is equal to the bank's prime rate or the bank's U.S. dollar base rate in Canada, respectively, plus 0.50% to 1.50%. For bankers' acceptances and LIBOR advances, the interest rate is equal to the bankers' acceptance fee or the LIBOR, respectively, plus 1.50% to 2.50%. Under the Credit Agreement, the Company pays a fee for usage of financial letters of credit which ranges from 1.70% to 2.70% and a fee for usage of non-financial letters of credit which ranges from 1.15% to 1.80%. The Company also pays a standby fee on the unadvanced portions of the amounts available for advance or draw-down under the Credit Agreement at rates ranging from 0.30% to 0.50%.

The Credit Agreement is subject to a debt to EBITDA test and an interest coverage test.  Under the terms of the Credit Agreement, the Company is restricted from encumbering any assets with certain permitted exceptions.  The Credit Agreement also limits advances to certain subsidiaries and partially restricts the Company from repurchasing its common shares and paying dividends.

The Company has additional credit facilities of $12.1 million available (7.9 million Euro, 33.0 million Indian Rupees and 1.0 million Swiss francs).  The total amount outstanding on these facilities at period end was $2.3 million (March 31, 2012 - $3.0 million), of which $nil was classified as bank indebtedness (March 31, 2012 - $0.4 million) and $2.3 million was classified as long-term debt (March 31, 2012 - $2.5 million).  The interest rates applicable to these additional credit facilities range from 2.8% to 12.5% per annum.  A portion of the long-term debt is secured by certain assets of the Company. The 1.0 million Swiss Francs and the 33.0 million Indian Rupees credit facilities are secured by letters of credit under the Credit Agreement.

Contractual Obligations
(In millions of dollars)

The minimum operating lease payments related primarily to facilities and equipment and purchase obligations are as follows:

From continuing operations:          
    Operating
Leases
    Purchase
Obligations
Less than one year      $ 3.6    $              39.7
One - two years    2.6      0.2
Two - three years    2.3     
Three - four years    1.8     
Four - five years    1.4     
Due in over five years                  2.9     
  $ 14.6   $ 39.9
           
From discontinued operations:          
          Purchase
Obligations
Due within one year                      $ 0.3

The Company's off-balance sheet arrangements consist of purchase obligations and various operating lease financing arrangements related primarily to facilities and equipment, which have been entered into in the normal course of business. The Company's purchase obligations consist primarily of materials purchase commitments.

In accordance with industry practice, the Company is liable to customers for obligations relating to contract completion and timely delivery. In the normal conduct of its operations, the Company may provide bank guarantees as security for advances received from customers pending delivery and contract performance.  In addition, the Company provides bank guarantees for post-retirement obligations and may provide bank guarantees as security on equipment under lease and on order. At December 30, 2012, the total value of outstanding bank guarantees under credit facilities was approximately $82.2 million (March 31, 2012 - $54.2 million) from continuing operations and was $3.2 million (March 31, 2012 - $3.2 million) from discontinued operations.

The Company is exposed to credit risk on derivative financial instruments arising from the potential for counterparties to default on their contractual obligations to the Company. The Company minimizes this risk by limiting counterparties to major financial institutions and monitoring their creditworthiness. The Company's credit exposure to forward foreign exchange contracts is the current replacement value of contracts that are in a gain position.  For further information related to the Company's use of derivative financial instruments refer to note 10 of the interim consolidated financial statements.  The Company is also exposed to credit risk from its customers. Substantially all of the Company's trade accounts receivable are due from customers in a variety of industries and, as such, are subject to normal credit risks from their respective industries.  The Company regularly monitors customers for changes in credit risk.  The Company does not believe that any single industry or geographic region represents significant credit risk.  Credit risk concentration with respect to trade receivables is mitigated by the Company's client base being primarily large, multinational customers and through insurance purchased by the Company.

During the first three quarters of fiscal 2013, 195,062 stock options were exercised. As of February 5, 2013 the total number of shares outstanding was 87,634,817 and there were 7,408,002 stock options outstanding to acquire common shares of the Company.

RELATED-PARTY TRANSACTIONS

There were no significant related-party transactions in the first nine months of fiscal 2013.

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. Strengthening in the value of the Canadian dollar relative to the Euro dollar has had a negative impact on translation of the Company's revenues to date in fiscal 2013 compared to fiscal 2012.

The Company's Canadian operations generate significant revenues in major foreign currencies, primarily U.S. dollars, which exceed the natural hedge provided by purchases of goods and services in those currencies.  In order to manage a portion of this net foreign currency exposure, the Company has entered into forward foreign exchange contracts. The timing and amount of these forward foreign exchange contract requirements are estimated based on existing customer contracts on hand or anticipated, current conditions in the Company's markets and the Company's past experience.  Certain of the Company's foreign subsidiaries will also enter into forward foreign exchange contracts to hedge identified balance sheet, revenue and purchase exposures. The Company's forward foreign exchange contract hedging program is intended to mitigate movements in currency rates primarily over a four-to-six month period. See note 10 to the interim consolidated financial statements for details on the derivative financial instruments outstanding at December 30, 2012.

In addition, from time to time, the Company enters forward foreign exchange contracts to manage the foreign exchange risk arising from certain inter-company loans and net investments in certain self-sustaining subsidiaries.

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,
2012
January 1,
2012
% change December 30,
2012
January 1,
2012
% change
U.S. Dollar 0.9916 1.0243   -3.2 % 0.9991 0.9916 0.8 %
Euro 1.2858 1.3767 -6.6 % 1.2751 1.3856 -0.8 %

CONSOLIDATED QUARTERLY RESULTS
Results have been reclassified to present Solar as discontinued operations.

                                               
(In millions of dollars, except per share amounts)   Q3
2013
    Q2
2013
    Q1
2013
    Q4
2012
    Q3
2012
    Q2
2012
    Q1
2012
    Q4
2011
Revenues from continuing operations $ 144.2   $ 141.4   $ 152.2   $ 173.5   $ 149.1   $ 145.9   $ 126.9   $ 148.4
Earnings from operations $ 13.6   $ 13.8   $ 15.2   $ 16.1   $ 20.4   $ 13.3   $ 10.5   $ 14.2
Income from continuing operations $ 10.7   $ 9.7   $ 11.8   $ 10.9   $ 17.6   $ 9.3   $ 6.2   $ 14.4
Loss from discontinued operations, net of tax $ (21.7)   $ (1.8)   $ (2.0)   $ (7.9)   $ (8.0)   $ (76.4)   $ (11.2)   $ (93.9)
Net income (loss) $ (11.0)   $ 7.9   $ 9.8   $ 3.0   $ 9.6   $ (67.1)   $ (5.0)   $ (79.5)
Basic and diluted earnings per share from continuing operations $ 0.12   $ 0.11   $ 0.13   $ 0.13   $ 0.20   $ 0.11   $ 0.07   $ 0.17
Basic and diluted loss per share from discontinued operations $ (0.24)   $ (0.02)   $ (0.02)   $ (0.09)   $ (0.09)   $ (0.87)   $ (0.13)   $ (1.08)
Basic and diluted earnings (loss) per share $ (0.12)   $ 0.09   $ 0.11   $ 0.04   $ 0.11   $ (0.76)   $ (0.06)   $ (0.91)
ASG Order Bookings $ 173.0   $ 112.0   $ 168.0   $ 187.0   $ 179.0   $ 165.0   $ 157.0   $ 206.0
ASG Order Backlog $ 388.0   $ 361.0   $ 397.0   $ 382.0   $ 376.0   $ 363.0   $ 328.0   $ 296.0

Interim financial results are not necessarily indicative of annual or longer-term results because many of the individual markets served by the Company tend to be cyclical in nature.  General economic trends, product life cycles and product changes may impact revenues and operating performance. ATS typically experiences some seasonality with its revenues and operating earnings due to summer plant shutdowns by its customers.

CRITICAL ACCOUNTING ESTIMATES, JUDGEMENTS & ASSUMPTIONS

The preparation of the Company's consolidated financial statements requires management to make estimates, judgements 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, judgements and assumptions could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

The Company based its assumptions on information available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the estimates as they occur. There have been no material changes to the critical accounting estimates as described in the Company's fiscal 2012 MD&A.

ACCOUNTING STANDARDS CHANGES

IFRS 7 - Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements

Effective April 1, 2012, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") amendment to IFRS 7 "Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements." The amendment requires additional disclosures for financial assets that have been transferred, but not derecognized. In addition, the amendment requires disclosures for continuing involvement in derecognized assets. The adoption of these amendments did not have a material impact on the financial position, cash flows or earnings of the Company.

Future Accounting Standards Changes

Standards issued but not yet effective or amended up to the date of issuance of the Company's interim consolidated financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective.

IFRS 9 - Financial Instruments: Classification and Measurement

IFRS 9 as issued reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for fiscal periods beginning on or after January 1, 2015.  In subsequent phases, the IASB will address hedge accounting and impairment of financial assets.  The adoption of the first phase of IFRS 9 will have an impact on the classification and measurement of financial assets, but will potentially have no impact on classification and measurement of financial liabilities. The Company will quantify the impact in conjunction with the other phases when issued.

IFRS 10 - Consolidated Financial Statements

This standard will replace portions of IAS 27, Consolidated and Separate Financial Statements and interpretation SIC-12, Consolidated - Special Purpose Entities. This standard incorporates a single model for consolidating all entities that are controlled and revises the definition of when an investor controls an investee to be when it is exposed, or has rights, to variable returns from its involvement with the investee and has the current ability to affect those returns through its power over the investee. Along with control, the new standard also focuses on the concept of power, both of which will include a use of judgment and a continuous reassessment as facts and circumstances change. IFRS 10 is effective for fiscal periods beginning on or after January 1, 2013, with early adoption permitted. The Company is assessing the impact of IFRS 10 on its financial position and results of operations.

IFRS 11 - Joint Arrangements

This standard will replace IAS 31, Interest in Joint Ventures. The new standard will apply to the accounting for interest in joint arrangements where there is joint control. Joint arrangements will be separated into joint ventures and joint operations. The structure of the joint arrangement will no longer be the most significant factor on classifying a joint arrangement as either a joint operation or a joint venture. IFRS 11 is effective for fiscal periods beginning on or after January 1, 2013, with early adoption permitted. The Company is assessing the impact of IFRS 11 on its financial position and results of operations.

IFRS 12 - Disclosure of Interest in Other Entities

The new standard includes disclosure requirements for subsidiaries, joint ventures and associates, as well as unconsolidated structured entities and replaces existing disclosure requirements. IFRS 12 is effective for fiscal periods beginning on or after January 1, 2013, with early adoption permitted. The Company is assessing the impact of IFRS 12 on its financial position and results of operations.

IFRS 13 - Fair Value Measurement

The new standard creates a single source of guidance for fair value measurement, where fair value is required or permitted under IFRS, by not changing how fair value is used but how it is measured. The focus will be on an exit price. IFRS 13 is effective for fiscal periods beginning on or after January 1, 2013, with early adoption permitted. The Company is assessing the impact of IFRS 13 on its financial position and results of operations.

IAS 1 - Presentation of Financial Statements

The amendment requires financial statements to group together items within other comprehensive income that may be reclassified to the profit or loss section of the interim consolidated statements of income. The amendment reaffirms existing requirements that items in other comprehensive income and profit or loss should be presented as either a single statement or two consecutive statements. The amendment requires tax associated with items presented before tax to be shown separately for each of the two groups of other comprehensive income items (without changing the option to present items of other comprehensive income either before tax or net of tax). IAS 1 is effective for fiscal periods beginning on or after July 1, 2012, with early adoption permitted. The Company is assessing the impact of IAS 1 on its financial position and results of operations.

IAS 19 - Employee Benefits

The amendment eliminates the option to defer the recognition of gains and losses, known as the 'corridor method', requires re-measurements to be presented in other comprehensive income, and enhances the disclosure requirements for defined benefit plans. The standard also requires that the discount rate used to determine the defined benefit obligation should also be used to calculate the expected return on plan assets by introducing a net interest approach, which replaces the expected return on plan assets and interest costs on the defined benefit obligation, with a single net interest component determined by multiplying the net defined benefit liability or asset by the discount rate used to determine the defined benefit obligation. The amendment becomes effective for fiscal periods beginning on or after January 1, 2013. The Company is assessing the impact of IAS 19 on its financial position and results of operations.

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 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 systems objectives will be met.

During the three and nine months ended December 30, 2012, there have been no changes in 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 constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements").  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of ATS, or developments in ATS' business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.  Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action.  Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made.  Forward-looking statements relate to, among other things: the next phase of the Company's strategy: grow, expand, and scale; new customer program reflected in Order Bookings; potential impact of general economic environment, including impact on credit markets, customer markets, and Order Bookings, and the timing of those impacts; demand for Company's products potentially lagging global macroeconomic trends; activity in the market segments that the Company serves; a Nigerian contract and expectations in relation to project timing, financial close, and timing of delivery; the sales organization's approach to market and expected impact on Order Bookings; management's expectations in relation to the impact of strategic initiatives on ATS operations; the Company's strategy to expand organically and through acquisition; separation of solar business; the expected closing with respect to the definitive agreement in relation to four joint venture ground mount solar projects and expected net proceeds and timing thereof; the Company's intention to divest the remaining Ontario Solar assets; expected proceeds from pending and potential sale of ground-mount solar projects; PWF bankruptcy process; Company's expectation to continue to increase its investment in working capital; expectation in relation to meeting funding requirements for investments; foreign exchange hedging; and accounting standards changes. The risks and uncertainties that may affect forward-looking statements include, among others: impact of the global economy and the Eurozone sovereign debt crisis; general market performance including capital market conditions and availability and cost of credit; performance of the market sectors that ATS serves; foreign currency and exchange risk; the relative strength of the Canadian dollar; impact of factors such as increased pricing pressure and possible margin compression; the regulatory and tax environment; failure of delays associated with new customer program; failure of the Nigerian project to achieve financial close or satisfy other conditions or meet expected timelines; 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; that strategic initiatives within ASG are delayed, not completed, or do not have intended positive impact; potential for greater negative impact associated with any non-performance related to large enterprise programs; that the conditions in the agreement for the sale of four joint venture ground mount solar projects are not met or that there are delays in meeting conditions and/or achieving stated milestones; that the sale process for Ontario Solar's remaining assets fails to generate an acceptable transaction or that remaining joint venture ground mount projects cannot be developed, or a definitive agreement with respect to their sale cannot be concluded, due to market, regulatory, transmission, local opposition, or other factors; unexpected delays and issues, on the timing, form and structure of the solar separation; ability to obtain necessary government and other certifications and approvals for solar projects in a timely fashion; labour disruptions; that expenditures associated with the PWF bankruptcy exceed current expectations; that one or more customers, or other persons with which the Company has contracted, experience insolvency or bankruptcy with resulting delays, costs or losses to the Company; political, labour or supplier disruptions; the development of superior or alternative technologies to those developed by ATS; the success of competitors with greater capital and resources in exploiting their technology; market risk for developing technologies; risks relating to legal proceedings to which ATS is or may become a party; exposure to product liability claims; risks associated with greater than anticipated tax liabilities or expenses; and other risks detailed from time to time in ATS's 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.

AUTOMATION TOOLING SYSTEMS INC.
Interim Consolidated Statements of Financial Position
(in thousands of Canadian dollars - unaudited)
 
As at Note     December 30
2012
  March 31
2012
             
ASSETS            
Current assets            
Cash and cash equivalents        $  109,590  $  96,229
Accounts receivable            103,555    90,151
Costs and earnings in excess of billings on contracts in progress  5     107,443    112,486
Inventories  5     10,262    10,278
Deposits, prepaids and other assets  6      16,604    12,474
        347,454    321,618
Assets associated with discontinued operations  4     14,849    35,746
         362,303    357,364
             
Non-current assets            
Property, plant and equipment  7     79,188   78,880
Investment property  8     3,753   3,792
Goodwill           58,111   58,320
Intangible assets  9     28,036   28,641
Deferred income tax assets          14,952   15,544
Investment tax credit receivable          26,454   26,087
Portfolio investment          1,713  
        212,207   211,264
Total assets       $  574,510  $ 568,628
             
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness         $    $  434
Accounts payable and accrued liabilities          106,931   113,133
Provisions   11     9,445   9,696
Billings in excess of costs and earnings on contracts in progress  5       50,197   44,016
Current portion of long-term debt  12     260   263
        166,833   167,542
Liabilities associated with discontinued operations  4     7,512   9,969
        174,345   177,511
             
Non-current liabilities            
Employee benefits          7,697   6,340
Long-term debt  12      988   2,262
Deferred income tax liability          2,424   1,063
        11,109   9,665
Total liabilities        $ 185,454 $ 187,176
             
EQUITY            
Share capital  13   $  484,771 $  483,099
Contributed surplus         19,239   17,868
Accumulated other comprehensive loss          (2,033)   (383)
Retained deficit         (113,022)   (119,210)
Equity attributable to shareholders           388,955   381,374
Non-controlling interests          101   78
Total equity        389,056   381,452
Total liabilities and equity       $ 574,510 $ 568,628
             

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    January 1   December 30    January 1
  Note    2012    2012   2012   2012
                     
Revenues                  
  Revenues from construction contracts    $ 129,590 $ 134,657 $ 399,252 $ 383,763
  Sale of goods         6,752   6,014   18,436   17,371
  Services rendered        7,856   8,378   20,164   20,724
                     
Total revenues        144,198   149,049   437,852   421,858
                     
Operating costs and expenses                  
  Cost of revenues            109,003   107,556   324,761   308,952
  Selling, general and administrative        20,652   22,950   68,007   68,819
  Stock-based compensation   15   896   1,153   2,469   2,909
  Gain on sale of land and building           (2,989)     (2,989) 
                     
Earnings from operations        13,647   20,379   42,615   44,167
Net finance costs   19   529   440   1,261   1,185
                     
Income from continuing operations                  
   before income taxes        13,118   19,939   41,354    42,982
                     
Income tax expense   14   2,376   2,385   9,131   9,928
                     
Income from continuing operations        10,742   17,554   32,223   33,054
                     
Loss from discontinued operations,                  
  net of tax    4    (21,700)     (8,012)   (25,463)   (95,605)
                     
Net income (loss)      (10,958) $ 9,542  $ 6,760 $ (62,551)
                     
Attributable to                    
Shareholders     $ (10,965) $ 9,544  $ 6,737 $ (62,626)
Non-controlling interests        7   (2)   23   75
    $ (10,958) $ 9,542 $ 6,760  $  (62,551)
                     
Earnings (loss) per share                  
   attributable to shareholders  20                
Basic - from continuing operations          $ 0.12   0.20  $ 0.37 $ 0.38
Basic - from discontinued operations  4   (0.24)   (0.09)   (0.29)   (1.10)
    $ (0.12) $  0.11  $ 0.08 $ (0.72)
                     
Earnings (loss) per share                  
   attributable to shareholders  20                
Diluted - from continuing operations          $ 0.12 $ 0.20  $  0.37  $ 0.38
Diluted - from discontinued operations  4   (0.24)   (0.09)   (0.29)   (1.09)
    $ (0.12)  $  0.11 $ 0.08 $ (0.71)
                   
                     

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    January 1   December 30    January 1
      2012   2012   2012   2012
                 
 Net income (loss)   $ (10,958)  $ 9,542  $ 6,760  $ (62,551)
                 
 Other comprehensive income (loss):                
                   
  Currency translation adjustment                
    (net of income taxes of nil)    6,136   (6,792)   (1,602)   4,580
                   
  Net unrealized gain on available-for-sale                 
    financial assets   104    ―    104    ― 
  Tax impact    (25)    ―    (25)    ― 
                   
  Net unrealized gain (loss) on derivative                
    financial instruments designated as                
    cash flow hedges    (321)   546   (55)   (2,227)
  Tax impact   100   (101)   62   568
  Loss (gain) transferred to net income for                
    derivatives designated as cash flow hedges    (259)   1,542   (126)   35
  Tax impact   42   (381)   (8)   7
                   
  Actuarial losses on defined benefit pension plans   ―     ―    (736)    ― 
  Tax impact     ―     ―    187    ― 
                   
  Net gain on hedges of net investments in foreign                 
  operations (net of income taxes of nil)     ―    (140)    ―    81
                   
 Other comprehensive income (loss)   5,777   (5,326)   (2,199)   3,044
                 
 Comprehensive income (loss) $ (5,181)  $ 4,216 $ 4,561 (59,507)
                 
 Attributable to                 
 Shareholders  $ (5,188)  $ 4,218 $ 4,538 (59,582)
 Non-controlling interests    7   (2)   23   75
  $ (5,181)  $ 4,216 $ 4,561 (59,507)
                 

 

ATS AUTOMATION TOOLING SYSTEMS INC.
Interim Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars - unaudited)
                                     
Nine months ended December 30, 2012                                    
                            Total        
                    Available-       accumulated        
            Retained   Currency   for-sale       other   Non-    
    Share   Contributed    earnings   translation   financial   Cash flow   comprehensive   controlling   Total
    capital   surplus    (deficit)   adjustments   assets   hedges   income   interests   equity
                                     
Balance, at March 31, 2012  $ 483,099  $ 17,868  $ (119,210)  $ (559) $ $ 176 $ (383) $ 78 $ 381,452
                                     
Net income     ―    ―    6,737         ―    23   6,760
Other comprehensive income (loss)    ―    ―    (549)    (1,602)   79   (127)   (1,650)     (2,199)
Total comprehensive income (loss)    ―    ―    6,188    (1,602)   79   (127)   (1,650)   23   4,561
                                     
Stock-based compensation    ―    1,890    ―                1,890
Exercise of stock options    1,672    (519)    ―                1,153
                                     
Balance, at December 30, 2012  $ 484,771  $ 19,239  $ (113,022) $ (2,161) $ 79 $ 49  $ (2,033) $ 101 $ 389,056
                                     
Nine months ended January 1, 2012                                    
                            Total        
                                                      Available-       accumulated         
            Retained   Currency   for-sale       other   Non-    
    Share    Contributed    earnings   translation   financial    Cash flow   comprehensive   controlling   Total
    capital    surplus    (deficit)   adjustments   assets    hedges   income   interests   equity
                                     
Balance, at March 31, 2011  $ 481,908  $ 14,298  $ (59,659) (2,767) $ ―  $ 1,279 $ (1,488) $ (224)  $ 434,835
                                     
Net income (Ioss)    ―    ―    (62,626)     ―        75   (62,551)
Other comprehensive income (loss)    ―    ―    ―    4,661   ―    (1,617)   3,044     3,044
Total comprehensive income (loss)    ―    ―    (62,626)    4,661   ―    (1,617)   3,044   75   (59,507)
                                     
Non-controlling interest    ―        239      ―        220   459
Stock-based compensation    ―    2,739        ―          2,739
Exercise of stock options     99    (29)       ―   ―          70
                                     
Balance, at January 1, 2012  $ 482,007  $ 17,008  (122,046)  1,894 $ ―  (338) $ 1,556 $ 71 $ 378,596 
                                     

   

 

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 January 1   December 30   January 1
    Note     2012 2012   2012   2012
                       
 Operating activities:                     
 Income from continuing operations      $ 10,742  $ 17,554  $ 32,223  $ 33,054
 Items not involving cash                     
  Depreciation of property, plant and                    
    equipment        1,698   1,561   4,908   4,985
  Amortization of intangible assets        1,347   1,490   3,955   4,081
  Deferred income taxes        (883)    ―    2,228   1,929
  Other items not involving cash        1,379   (4,444)   166   (6,653)
  Stock-based compensation  15     896   1,153   2,469   2,909
  Loss (gain) on disposal of property, plant                    
    and equipment        27   (2,989)   27   (2,989)
       $ 15,206  $ 14,325  $ 45,976  $ 37,316
 Change in non-cash operating working capital        (6,065)   (6,336)   (11,055)   (50,127)
 Cash flows used in operating activities                    
  of discontinued operations  4     (1,911)   (11,700)   (6,685)   (38,169)
 Cash flows provided by (used in)                    
  operating activities       $ 7,230  $ (3,711)  $ 28,236  $ (50,980)
                     
 Investing activities:                     
 Acquisition of property, plant and equipment       $ (2,142)  $ (1,236)  $ (5,553)  $ (3,660)
 Acquisition of intangible assets        (1,511)   (676)   (3,634)   (1,526)
 Acquisition of portfolio investments        (1,609)    ―    (1,609)    ― 
 Proceeds from disposal of property, plant and                    
  equipment         ―   6,474   7   6,990
 Proceeds on sale of portfolio investments         ―    ―     ―   2,054
 Cash flows used in investing activities                    
  of discontinued operations  4     (25)   (701)   (104)   (5,805)
 Cash flows provided by (used in)                    
  investing activities       $ (5,287)  $ 3,861  $ (10,893)  $ (1,947)
                     
 Financing activities:                     
 Restricted cash  6     1,172   3,530   (2,094)   6,443
 Bank indebtedness        (56)   (189)   (403)   (3,774)
 Decrease in long-term debt       (1,121)   (259)   (1,245)   (391)
 Issuance of common shares       14    ―    1,153   70
 Cash flows used in financing activities of                    
  discontinued operations  4     (72)   (2,976)   (309)   (3,857)
 Cash flows provided by (used in)                     
   financing activities       $ (63)  $ 106  $ (2,898)  $ (1,509)
                     
 Effect of exchange rate changes on cash                    
  and cash equivalents        2,150   (1,439)   (1,159)   1,340
                         
 Increase (decrease) in cash and cash equivalents       4,030   (1,183)   13,286   (53,096)
                         
 Cash and cash equivalents,                    
  beginning of period        105,948   72,355   96,692   124,268
                     
 Cash and cash equivalents, end of period       $ 109,978  $ 71,172  $ 109,978  $ 71,172
                     
 Attributable to                     
 Cash and cash equivalents -                    
  continuing operations       $ 109,590  $ 69,185  $ 109,590  $ 69,185
 Cash and cash equivalents -                    
  associated with discontinued operations        388   1,987   388   1,987
       $ 109,978  $ 71,172  $ 109,978  $ 71,172
 Supplemental information                     
 Cash income taxes paid by continuing operations       $ 455  $ 173  $ 2,562  $ 1,922
 Cash interest paid by continuing operations       $ 256  $ 173  $ 705  $ 308
 Cash interest paid by discontinued operations       $  ―  $ 142  $  ―  $ 958
                     

 

 

 

 

 

 

SOURCE ATS Automation Tooling Systems Inc.




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