TSX: ATA
CAMBRIDGE, ON, Aug. 13 /CNW/ - ATS Automation Tooling Systems Inc. today
reported its financial results for the three months ended June 30, 2008 -
including substantial improvement in all key performance measures.
Highlights
- Consolidated revenue increased 36% to $212.1 million from
$155.4 million a year ago;
- Consolidated earnings from operations increased to $16.3 million
compared to a loss of $6.8 million a year ago;
- Earnings were $0.17 per share (basic and diluted) compared to a loss
of $0.15 per share a year ago.
"Our focus in fiscal 2009 is to stabilize the Company and improve
operating performance," said Anthony Caputo, ATS Chief Executive Officer. "We
have made good progress in both the Automation Systems Group and Photowatt
France, but much work remains to be done."
Financial Results
3 months 3 months
ended ended
In millions of dollars, June 30, June 30,
except per share data 2008 2007
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Revenues from Automation Systems Group $ 142.7 $ 107.8
continuing ----------------------------------------------------
operations Photowatt Technologies 69.3 47.7
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Inter-segment - (0.1)
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Consolidated $ 212.1 $ 155.4
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EBITDA Automation Systems Group $ 12.3 $ 2.7
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Photowatt Technologies
- Photowatt France 9.3 2.7
- Other Solar (0.3) (1.8)
- Gain on sale of building 3.2 -
- Gain on silicon sale 2.0 -
----------------------------------------------------
Corporate and Inter-segment
elimination (4.4) (4.9)
----------------------------------------------------
Consolidated $ 22.1 $ (1.3)
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Net income (loss)
from continuing Consolidated $ 15.0 $ (7.1)
operations
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Earnings (loss) From continuing operations
per share (basic & diluted) $ 0.19 $ (0.12)
----------------------------------------------------
After discontinued
operations
(basic & diluted) $ 0.17 $ (0.15)
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Automation Systems Group Results
- Revenue increased 32% to $142.7 million from $107.8 million a year
ago due to stronger Order Backlog entering the first quarter of
fiscal 2009 compared to the prior year;
- EBITDA was $12.3 million compared to $2.7 million a year ago;
- Earnings from operations were $10.3 million, up from $0.6 million a
year ago;
- Period end Order Backlog increased 19% to $258 million from
$217 million a year ago;
- Order Bookings grew 16% to $169 million compared to $146 million a
year ago, and included two bookings with new customers in the solar
industry totalling $41 million;
- Order Bookings were $62 million during the first six weeks of the
second quarter.
The improvement in operating results in all geographic regions reflected
higher revenue and better program execution. Revenue increased 42% in
healthcare, 41% in computer-electronics, 80% in energy and 19% in other
markets to more than offset a 12% decline in automotive revenue compared to
the first quarter of 2008.
Photowatt Technologies Results
- Revenue increased 45% to $69.3 million from $47.7 million a year ago;
- Photowatt France EBITDA was $9.3 million compared to $2.7 million a
year ago;
- Photowatt Technologies operating earnings were $10.5 million compared
to a loss of $2.4 million a year ago;
- Total megawatts (MWs) sold at Photowatt France increased 29% to
13.8 MWs from 10.7 MWs in the first quarter of fiscal 2008 - with
UMGSi products accounting for 54% of revenue;
- Average cell efficiency for UMGSi cells improved to approximately
13.8% from 12.9% a year ago, while average cell efficiency for
polysilicon products was 15.6% compared to 14.8% a year ago.
Photowatt Technologies operating earnings in the first quarter included a
gain of $2.0 million on the finalization of the sale of silicon not usable by
ATS and a gain of $3.2 million on the sale of the redundant Spheral Solar
building. Photowatt France's earnings included $0.2 million of costs related
to the ongoing investment in the PV Alliance, a joint venture involving
Photowatt France, EDF EnR Reparties, (a partially owned subsidiary of
Electricite de France), and CEA Valorisation, which is intended to increase
solar cell efficiency.
In the first quarter of fiscal 2009, Photowatt France supplemented its
internal ingot and wafer production with increased externally purchased
polysilicon wafers and cells to balance production. This added incremental
earnings to operations, but at lower operating margins than for products
manufactured using internally produced wafers and cells. Management intends to
make improvements to increase margins on products produced with externally
sourced materials. Average selling prices per watt were consistent year over
year.
Quarterly Conference Call
ATS's quarterly conference call begins at 10 am eastern today and can be
accessed over the Internet at www.atsautomation.com or on the phone at 416 644
3416.
Annual and Special Meeting of Shareholders
ATS will hold its Annual and Special Meeting of Shareholders on
September 11th, 2008 at 10:00 a.m. (Toronto time) at the Holiday Inn Hotel and
Conference Centre, 30 Fairway Road South, Kitchener, Ontario, Canada.
Materials will be mailed to shareholders prior to the meeting.
About ATS
ATS Automation Tooling Systems Inc. provides innovative, custom designed,
built and installed manufacturing solutions to many of the world's most
successful companies. Founded in 1978, ATS uses its industry-leading knowledge
and global capabilities to serve the sophisticated automation systems' needs
of multinational customers in industries such as healthcare,
computer/electronics, energy, automotive and consumer products. It also
leverages its many years of experience and skills to fulfill the specialized
repetitive equipment manufacturing requirements of customers. Through
Photowatt Technologies, ATS participates in the growing solar energy industry
as an integrated manufacturer of ingots, wafers, cells and modules.
Photowatt-branded products and systems serve businesses, institutions and
homeowners in established and emerging markets. ATS employs approximately
3,500 people at 21 manufacturing facilities in Canada, the United States,
Europe, Southeast Asia and China. The Company's shares are traded on the
Toronto Stock Exchange under the symbol ATA. Visit the Company's website at
www.atsautomation.com.
Management's Discussion and Analysis
This Management's Discussion and Analysis ("MD&A") for the three months
ended June 30, 2008 (first quarter of fiscal 2009) provides detailed
information on the operating activities, performance and financial position of
ATS Automation Tooling Systems Inc. ("ATS" or the "Company") and should be
read in conjunction with the unaudited interim consolidated financial
statements of the Company for the first quarter of fiscal 2009. The Company
assumes that the reader of this MD&A has access to, and has read the audited
consolidated financial statements and MD&A of the Company for fiscal 2008 and,
accordingly, the purpose of this document is to provide a first quarter update
to the information contained in the fiscal 2008 MD&A. These documents and
other information relating to the Company, including the Company's fiscal 2008
audited consolidated financial statements, MD&A and annual information form
may be found on SEDAR at www.sedar.com.
Notice to Reader
The Company has two reportable segments: Automation Systems Group ("ASG")
and Photowatt Technologies ("Photowatt") which includes Photowatt France (the
ongoing Photowatt Technologies operations), Photowatt USA, a small module
assembly facility and sales operation closed during fiscal 2008 and Spheral
Solar, a halted development project that has been wound down. Any reference to
solar production capacity assumes the use of polysilicon at 15% cell
efficiency. Actual solar capacity may vary materially for a number of reasons
including the use of Upgraded Metallurgical Silicon ("UMGSi"), changes in cell
efficiency and/or changes in production processes. References to Photowatt's
cell "efficiency" means the percentage of incident energy that is converted
into electrical energy in a solar cell. Solar cells and modules are sold based
on wattage output. "Silicon" refers to a variety of silicon feedstock,
including polysilicon, UMGSi and polysilicon powders and fines. As described
in Note 5 to the interim consolidated financial statements, the results of
Precision Components Group ("PCG"), which was classified as held for sale as
of March 31, 2008, are reported in discontinued operations.
Non-GAAP Measures
Throughout this document the term "operating earnings" is used to denote
earnings (loss) from operations. EBITDA is also used and is defined as
earnings (loss) from operations excluding depreciation and amortization (which
includes amortization of intangible assets and impairment of goodwill). The
term "margin" refers to an amount as a percentage of revenue. The terms
"earnings from operations", "operating earnings", "margin", "operating loss",
"operating results", "operating margin", "EBITDA", "Order Bookings" and "Order
Backlog" do not have any standardized meaning prescribed within Canadian
generally accepted accounting principles ("GAAP") and therefore may not be
comparable to similar measures presented by other companies. Operating
earnings and EBITDA are some of the measures the Company uses to evaluate the
performance of its segments. Management believes that ATS shareholders and
potential investors in ATS use non-GAAP financial measures such as operating
earnings and EBITDA in making investment decisions about the Company and
measuring its operational results. A reconciliation of EBITDA to total Company
revenue and earnings from operations for the first quarter of fiscal 2009 and
2008 is contained in the MD&A. EBITDA should not be construed as a substitute
for net income determined in accordance with GAAP. Order Bookings represent
new orders for the supply of automation systems and products that management
believes are firm. Order Backlog is the estimated unearned portion of ASG
revenue on customer contracts that are in process and have not been completed
at the specified date.
AUTOMATION SYSTEMS GROUP SEGMENT
ASG Revenue
(in millions of dollars)
Three Three
Months Months
Ended Ended
June 30, June 30,
2008 2007
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Revenue by industry
Healthcare $ 41.4 $ 29.1
Computer-electronics 34.2 24.2
Energy 32.0 17.8
Automotive 23.9 27.3
Other 11.2 9.4
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Total ASG revenue $ 142.7 $ 107.8
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ASG first quarter revenue was 32% higher than a year ago, reflecting
higher Order Bookings generated in fiscal 2008 over fiscal 2007 and the
resulting higher Order Backlog entering the first quarter of fiscal 2009,
compared to the Order Backlog levels entering the same period of fiscal 2008.
By industrial market, healthcare revenue increased 42% year over year,
reflecting higher Order Backlog levels entering the quarter compared to a year
earlier. Healthcare continues to be a strong market for ASG, particularly
within North America. The 41% increase in computer-electronics revenues
reflects increased Order Backlog entering the first quarter compared to a year
ago, driven primarily by customer programs based in the United States. Revenue
generated in the energy market increased by 80% based on growth in solar
industry Order Bookings during the fourth quarter of fiscal 2008 and strong
revenue from the nuclear industry. The 12% decline in automotive revenue
compared to a year ago reflects the ongoing challenges in the North American
automotive parts market. "Other" revenues increased 19% year over year from
customers in the industrial products industry.
During the first quarter, the Company changed the name of its Repetitive
Equipment Manufacturing division to Automation Products Group or "APG".
Management believes the new name better reflects APG's business model to
deliver customer value through global supply chain management, continuous cost
reductions and product performance improvement. APG revenue was $25.9 million
in the first quarter of fiscal 2009, compared to $10.9 million in the first
quarter last year.
Foreign exchange negatively impacted ASG revenues by an estimated
$7.5 million compared to the first quarter of fiscal 2008, primarily
reflecting a stronger Canadian dollar relative to the US dollar.
ASG Operating Results (in millions of dollars)
Three Three
Months Months
Ended Ended
June 30, June 30,
2008 2007
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Earnings from operations $ 10.3 $ 0.6
Depreciation and amortization 2.0 2.1
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EBITDA $ 12.3 $ 2.7
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Fiscal 2009 first quarter earnings from operations were $10.3 million
(operating margin of 7%) compared to earnings from operations of $0.6 million
(operating margin of 1%) in the first quarter of fiscal 2008. Earnings from
operations improved in all geographic regions and reflected the 32% increase
in revenues, cost reductions implemented during the fourth quarter of fiscal
2008 and improved program management. During the first quarter, the Company
completed the previously-announced closures of its Michigan and Thailand
facilities. Incremental costs of $0.1 million associated with these closures
were incurred in the first quarter. Fiscal 2008 first quarter earnings from
operations included severance costs of $2.1 million.
Foreign exchange negatively impacted ASG first quarter earnings from
operations by an estimated $2.6 million compared to the first quarter of
fiscal 2008, primarily reflecting a stronger Canadian dollar relative to the
US dollar.
ASG Order Bookings
ASG Order Bookings were $169 million, 16% higher than in the first
quarter of fiscal 2008 and included Order Bookings of $24 million and
$17 million respectively with two new solar industry customers. Order Bookings
in the first six weeks of the second quarter of fiscal 2009 were $62 million.
ASG Order Backlog Continuity (in millions of dollars)
June 30, June 30,
2008 2007
-------------------------------------------------------------------------
Opening Order Backlog $ 232 $ 185
Revenue (143) (108)
Order Bookings 169 146
Order Backlog adjustments(1) - (6)
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Total $ 258 $ 217
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(1) Order Backlog adjustments include foreign exchange and cancellations.
Order Backlog by Industry (in millions of dollars)
June 30, June 30,
2008 2007
-------------------------------------------------------------------------
Healthcare $ 49 $ 80
Computer-electronics 38 43
Energy 106 27
Automotive 39 45
Other 26 22
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Total $ 258 $ 217
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At June 30, 2008, ASG Order Backlog was $258 million, 19% higher than at
June 30, 2007. Year over year, Order Backlog increased 293% in energy and 18%
in "other" markets. The increase in energy Order Backlog reflects the
Company's strategy to pursue opportunities in the nuclear and solar industries
and reflects the aforementioned solar industry Order Bookings. This growth was
partially offset by decreases of 39% in healthcare, 12% in
computer-electronics and 13% in automotive. Declines in healthcare and
computer-electronics Order Backlog reflect the lower Order Bookings in North
America and Asia during the quarter compared to the prior year. Included in
healthcare Order Backlog a year ago was a U.S. $14 million Order Booking
secured at the end of the first quarter and a U.S. $12 million Order Booking
which was subsequently cancelled during the second quarter of fiscal 2008.
Automotive Order Backlog reflects continued lower Order Bookings in the North
American automotive market during the quarter compared to the prior year.
Automation Systems Group Outlook
The outlook for ASG expressed in the fiscal 2008 annual MD&A remains
largely unchanged. Continued strong Order Bookings during the first quarter,
particularly in the energy sector, have lead to record levels of Order
Backlog. Initiatives taken during the fourth quarter to improve program
management and reduce costs have started to positively impact operating
performance, however, other initiatives to improve core operations and change
the ASG approach to market are not anticipated to significantly further
improve operating performance until the second half of fiscal 2009 and into
fiscal 2010. Management expects to complete a strategic review of ASG
divisions during the second quarter of fiscal 2009. This review is expected to
result in changes to the number, scope and "character" (core competencies and
markets served) of divisions globally. Management expects the improved core
operating profitability from the aforementioned actions will be partially
offset by implementation costs, as previously disclosed in the third quarter
of fiscal 2008 (see Consolidated Results from Operations). However, these
measures are expected to improve ASG operating performance compared to fiscal
2008.
Management continues to believe that the long-term fundamental market
demand for automation remains strong. However, the strength of the Canadian
dollar, ongoing restructuring within the North American manufacturing sector
and the broader deterioration in the North American economy is expected to
present the Company's Canadian and U.S. operations with challenges during
fiscal 2009.
PHOTOWATT TECHNOLOGIES SEGMENT
Photowatt Technologies Revenue (in millions of dollars)
Three Three
Months Months
Ended Ended
June 30, June 30,
2008 2007
-------------------------------------------------------------------------
Revenue by operating facility
Photowatt France $ 69.3 $ 46.2
Other Solar - 1.5
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Total revenue $ 69.3 $ 47.7
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Revenue by product
Polysilicon products $ 31.6 $ 30.5
UMGSi products 37.7 17.2
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Total Revenue $ 69.3 $ 47.7
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Photowatt Technologies fiscal 2009 first quarter revenue was
$69.3 million, 45% higher than in the first quarter of fiscal 2008. Higher
revenues primarily reflected an increase in total megawatts ("MWs") sold at
Photowatt France to 13.8 MWs from 10.7 MWs in the same period a year ago.
Growth in MWs sold resulted from increased cell efficiency and increased
ingot, wafer and cell production throughput compared to the same period a year
ago, particularly with UMGSi products. Revenue from the sale of module systems
("Systems") increased to $13.3 million from $3.9 million in the first quarter
of fiscal 2008. Systems include modules, combined with installation kits,
solar power system design and/or other value added services. Average selling
prices per watt in the first quarter of fiscal 2009 were consistent with the
prior year.
Foreign exchange positively impacted Photowatt France first quarter
revenues by an estimated $4.2 million on the translation of Photowatt France
revenues from Euros to Canadian dollars, reflecting the strengthening of the
Euro against the Canadian dollar.
Photowatt Technologies Operating Results (in millions of dollars)
Three Three
Months Months
Ended Ended
June 30, June 30,
2008 2007
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Earnings (loss) from operations:
Photowatt France $ 5.6 $ (0.4)
Other Solar 4.9 (2.0)
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Photowatt Technologies earnings (loss)
from operations: $ 10.5 $ (2.4)
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Photowatt France EBITDA
Photowatt France earnings (loss) from operations $ 5.6 $ (0.4)
Depreciation and amortization 3.7 3.1
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Photowatt France EBITDA $ 9.3 $ 2.7
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Fiscal 2009 first quarter earnings from operations for Photowatt France
were $5.6 million (operating margin of 8%), compared to a loss from operations
of $0.4 million (negative operating margin of 1%) in the first quarter of
fiscal 2008. Photowatt France's earnings from operations includes
approximately $0.2 million of costs related to the investment in the PV
Alliance ("PVA"), a joint venture involving Photowatt France, EDF ENR
Reparties ("EDF"), a partially owned subsidiary of Electricite de France, and
CEA Valorisation ("CEA"). PVA includes Lab-Fab, a research initiative to
improve cell efficiencies, and may eventually include manufacturing operations
in France - see "Photowatt France Outlook". Photowatt France amortization
expense was $3.7 million compared to $3.1 million in the first quarter of
fiscal 2008 reflecting additional depreciation and amortization from Photowatt
France's expansion and improvement initiatives.
Operating profitability increased during the first quarter of fiscal 2009
compared to a year ago on revenue growth and operational improvements to
increase cell efficiency and manufacturing yields. Average cell efficiency for
UMGSi products increased to 13.8% compared to 12.9% in the first quarter of
fiscal 2008. Average cell efficiency for polysilicon products also improved to
15.6% compared to 14.8% in the first quarter of fiscal 2008. Photowatt France
supplemented its internal ingot and wafer production with increased externally
purchased wafers and cells to balance production. This added incremental
earnings to operations, but at lower operating margins than for products
manufactured using internally produced wafers and cells. Management intends to
make improvements to increase margins on products produced with externally
sourced materials. In the first quarter of last year, Photowatt France used
recycled polysilicon in the manufacturing process, which contributed to lower
cell efficiency in that quarter.
Foreign exchange positively impacted Photowatt France first quarter
earnings from operations by an estimated $0.3 million compared to the first
quarter of fiscal 2008, primarily reflecting a stronger Euro relative to the
Canadian dollar.
"Other solar" includes Spheral Solar, Photowatt USA and inter-solar
eliminations. First quarter fiscal 2009 earnings from operations included a
gain of $2.0 million on the sale of silicon (not usable by Photowatt France or
Spheral Solar) that had a nominal carrying value. This completed the sales
transaction initiated in the fourth quarter of fiscal 2008. Also included in
the first quarter fiscal 2009 earnings from operations was a gain of
$3.2 million on the sale of the redundant Spheral Solar building in Cambridge,
Ontario. The remaining $0.3 million of expenses primarily related to the
wind-down and closure of the Spheral Solar facility and other clean-up and
equipment decommissioning costs. Included in first quarter fiscal 2008 loss
from operations was a $0.3 million loss from operations from the now closed
Photowatt USA division, a $1.3 million loss from operations from the now
halted Spheral Solar research initiative and $0.8 million of solar corporate
costs and inter-solar eliminations.
Photowatt France Outlook
The outlook for Photowatt France expressed in the fiscal 2008 annual MD&A
remains largely unchanged. With respect to fundamental demand, global
electricity usage is expected to increase, which management believes provides
a positive long-term outlook for solar energy businesses. Countries in which
Photowatt France sells products such as Germany, Spain, France and Italy have
significant government subsidy programs for solar power. Certain
jurisdictions, such as Spain and Germany, have subsidy programs that are
designed to decline over time. Management believes the solar industry will
continue to be impacted by these trends over the long-term.
In the short term, Photowatt France is expected to continue to face the
industry-wide issues associated with supply of polysilicon and lower average
selling prices per watt than in fiscal 2008, particularly in the latter half
of the fiscal year. UMGSi products were developed by Photowatt France as an
alternative to polysilicon with the objective of creating a competitive
advantage, and now account for the majority of products being manufactured by
Photowatt France. The operational focus is to increase the cell efficiency and
reduce the cost per watt of manufacturing UMGSi modules.
In the first quarter of fiscal 2009, management initiated the previously
announced euro 20 million investment to expand capacity in the existing
facility and reduce manufacturing costs. The Company has committed to
approximately euro 17 million of equipment, of which approximately
euro 3 million has been installed and the remaining euro 14 million is
expected to be received and installed during the second and third quarters of
fiscal 2009. In addition, Photowatt France intends to invest a further
euro 4 million in automation systems, which are being designed and built by
the Company's ASG segment, to improve the production process and increase
manufacturing yields. The benefits of these investments are expected to begin
positively impacting operating performance during the fourth quarter of fiscal
2009.
Photowatt France continues to advance the PVA with its partners.
Facilities are now being prepared and equipment has been ordered in
preparation for a 25 MW cell line to research cell efficiency improvements.
The cell line is expected to be completed during the second half of fiscal
2010. Initial research activities are expected to begin during the latter half
of fiscal 2009, and are anticipated to be largely funded by French subsidies.
Photowatt France's direct investment in the PVA is expected to be less than
euro 10 million, and have a payback period of approximately 2 years.
Subsequent to the end of the first quarter, the Company formalized a
purchase agreement for the supply of a further 1,900 tonnes of UMGSi over the
next three and a half years (see "Contractual Obligations"). Under the terms
of the purchase agreement, deliveries will begin immediately and extend
through December 2011. This purchase agreement formalizes an existing
successful relationship Photowatt France has had with this supplier for the
past year.
Management expects the recent improvements in cell efficiency and
throughput, along with action plans for the remainder of fiscal 2009, will
positively impact Photowatt France's operating earnings compared to fiscal
2008.
