ATS Reports Third Quarter Fiscal 2019 Results

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ATS Reports Third Quarter Fiscal 2019 Results

Canada NewsWire

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.

ATS Automation Tooling Systems (CNW Group/ATS Automation Tooling Systems Inc.)

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

Copyright CNW Group 2019

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