ATS reports third quarter results
TSE Symbol: ATA
CAMBRIDGE, ON, Feb. 11 /CNW/ - ATS Automation Tooling Systems Inc. today
reported it remained profitable in the third quarter, despite the dramatic
impact of the global economic downturn on its markets and customers. While
revenue and earnings remained well below last year, cash flow improved
significantly and new order booking activity improved 75% over the second
quarter.
"In the third quarter, ATS continued to face the aftermath of the severe
downturn in economic activity that hurt business confidence and slowed the
pace of customer investments in new products," said Klaus Woerner, ATS
President and Chief Executive Officer. "However, by capitalizing on our
industry leadership, using our human resources productively and maintaining
our strategic focus on continuous cost reduction, ATS not only remained
profitable, it advanced its core capabilities and strengthened its strategic
customer relationships. This is evident from the level of new order bookings
and quotation activity in the quarter, which we also interpret as signs that
the worst is probably behind us and customer demand is recovering."
Quarter Highlights
For the third quarter of fiscal 2002, ended December 31, 2001, ATS
generated:
- Net earnings of $1.1 million or 2 cents per share basic and diluted,
compared to $12.1 million or 20 cents per share basic and diluted in
the same period a year earlier.
- Consolidated revenue of $123.9 million, 28% lower than revenue of
$172.7 million in the same period of fiscal 2001.
- New automation systems order bookings of $110 million, down 32% from
$163 million in the third quarter a year ago, but 75% higher than the
$63 million in new bookings in the second quarter of fiscal 2002.
- Cash flow from operating activities of $41.8 million and a $32.1
million increase in cash and short-term investments.
- Quarter end automation systems backlog of $168 million, versus a
record high $256 million a year earlier.
<<
Revenue by Industry
($ millions)
13 weeks ended 39 weeks ended
12/31/2001 12/31/2000 12/31/2001 12/31/2000
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Automation Systems:
Computer/Electronics $ 20.1 $ 63.9 $ 115.8 $ 162.7
Automotive 45.3 45.7 118.0 135.9
Healthcare 13.8 18.2 54.8 49.4
Other 6.2 6.9 18.4 24.9
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Subtotal 85.4 134.7 307.0 372.9
Precision Components:
Automotive 23.6 24.3 74.5 70.6
Solar 14.1 10.2 35.6 29.3
Computer-electronics 1.1 3.7 2.7 14.9
Other 2.7 0.1 5.4 0.5
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Subtotal 41.5 38.3 118.2 115.3
Intersegment Elimination (3.0) (.3) (6.1) (1.3)
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Total Consolidated
Revenue $ 123.9 $ 172.7 $ 419.1 $ 486.9
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Revenue
In the third quarter of fiscal 2002:
- ATS Automation Systems Group revenue was $85.4 million, off 37% from
$134.7 million a year ago, as a result of the broad decline in
economic activity during the period. The decline was most pronounced
in the computer-electronics sector, where revenues were 68% lower than
in the third quarter last year. Healthcare revenue contribution was
24% lower, reflecting the economic downturn which ATS believes has
only temporarily slowed the Company's expansion in this market.
Automation Systems continued to derive strength from its broadly
diversified business model, as revenue from automotive and other
sectors held relatively steady.
- Revenue from ATS Precision Components Group increased 8% to $41.5
million from $38.3 million, as 38% growth in Photowatt's solar revenue
more than offset the impact of delayed new automotive program launches
and lower shipments. Photowatt solar revenue represented 34% of total
Precision Components Group revenue.
Consolidated Revenue by Region
($ millions)
13 weeks ended 39 weeks ended
12/31/2001 12/31/2000 12/31/2001 12/31/2000
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U.S. & Mexico $ 72.8 $ 121.4 $ 263.0 $ 342.0
Europe 29.6 23.3 84.6 64.8
Asia-Pacific and other 8.5 14.2 35.3 44.5
Canada 13.0 13.8 36.2 35.6
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Total $ 123.9 $ 172.7 $ 419.1 $ 486.9
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Operating Results
Automation Systems Group operating earnings were $4.0 million compared to
$18.4 million in the third quarter a year ago. This reflected lower revenues
and margins. Group operating margins were 4.6% compared to 13.6% a year ago.
Operating margin reduction was caused by significant inefficiencies and under-
utilization caused by the drop in revenue, order push outs and cancellations
related to the economic downturn that began over a year earlier - and the
Company's decision to retain its skilled workforce. ATS deliberately avoided
reducing its skilled workforce during this downturn because it would weaken
the Company's ability to effectively respond to an economic recovery, reduce
its technical capabilities and result in long-term costs in the form of
recruiting and training. By controlling spending, the Group remained
profitable, despite investing in more aggressive sales and marketing and
accelerating development of next generation automation tools.
Precision Components operated at slightly below breakeven in the third
quarter. Operating loss of $0.5 million represented an improvement from a loss
in the second quarter of $1.1 million, but was significantly below operating
earnings of $1.7 million in the comparable period of fiscal 2001. Operating
earnings in the comparable period a year ago included a one-time benefit from
a successfully settled contract dispute at Photowatt. The Group's operating
margin in the third quarter of fiscal 2002 was -1.2% compared to 4.4% a year
earlier. Photowatt, the Company's solar cell and module unit, continued to
generate solid, positive performance as a result of continuing favourable
conditions in the renewable energy sector and better internal efficiencies.
Balance Sheet
At December 31, 2001, ATS had $83 million in cash and marketable
securities and a debt to equity ratio of 0.10 to 1. The Company's substantial
financial strength is another significant competitive advantage in the current
environment.
Outlook
ATS booked $110 million in new automation systems orders in the quarter,
up 75% over bookings in the second quarter of fiscal 2002, but off from the
$163 million in the comparable period a year earlier. The Company's Automation
Systems backlog was $168 million - 6% higher than at the start of the third
quarter, but lower than the record backlog of $256 million a year ago. Order
cancellations and scope reductions totaled $15.6 million in the third quarter
- of this, approximately $13 million was work that was put on hold in the
second quarter. There were no significant orders put on hold in the third
quarter.
Automation Systems Backlog by Industry
($ millions)
12/31/2001 12/31/2000
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Computer/Electronics $ 31.2 $ 119.8
Automotive 91.1 55.9
Healthcare 34.0 66.1
Other 11.9 14.6
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Total $ 168.2 $ 256.4
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"Based on improved order flow, we are expecting an improvement in fourth
quarter results," said Mr. Woerner. "It is difficult to tell whether the
economic recovery will be mild or more bullish, but ATS is doing its utmost to
give demand a hard shove. We have recently launched two exciting new standard
automation tools that have already resulted in several customer orders and are
planning to launch more next generation technologies over the course of this
calendar year. These are efficiency and productivity products that present
customers with many enabling features that improve production flexibility and
most important, reduce their costs. The mutual benefit for ATS and our
customers is that our standard products can be delivered and deployed very
rapidly without technical or deployment risk. To ATS, the development of these
products further distances our Company from the competition and makes us that
much more cost efficient in serving customers' needs."
In addition to new automation tools, ATS Precision Components has been
actively promoting its thermal products solutions to the computer-electronics
sector with the expectation of solid market penetration this year. ATS also
expects Photowatt to continue its growth trend to help offset lingering
weakness in core Precision Components markets.
"The initiatives we are taking, including aggressive marketing and the
formation of strategic alliances with leading companies in our markets, should
act together as a powerful catalyst for ATS's future growth," said Mr.
Woerner. "I believe ATS is better positioned than any company in our industry
for renewed market growth. By maintaining our workforce through the downturn,
ATS has avoided the cost and disruption of hiring and training new skilled
workers. This means our Company will be ready when demand escalates. There are
many hopeful signs of recovery and ATS has the financial and human resources
strength, diversified customer base and leading technology foundation to
exploit the long-term opportunities before us."
Quarterly Conference Call
ATS will hold its quarterly conference call at 5 pm eastern time today.
To listen to a live audio webcast of the call please visit
www.atsautomation.com.
Corporate Description
ATS Automation Tooling Systems Inc. (www.atsautomation.com) is the
industry's leading designer and producer of turn-key automated manufacturing
and test systems, which are used primarily by multinational corporations
operating in a variety of industries including: automotive,
computer/electronics, healthcare, and consumer products. The Company also
makes precision components and sub-assemblies using its own custom-built
manufacturing systems, process knowledge and automation technology. ATS
employs approximately 3,200 people at 26 facilities in Canada, the United
States, Europe and Asia-Pacific. The Company's shares are traded on The
Toronto Stock Exchange under the symbol ATA.
Certain forward looking statements are made in this news release,
including statements regarding possible future business. Investors are
cautioned that such forward-looking statements involve risks and
uncertainties, including, without limitation, continued acceptance of ATS's
products, technologies, customer requirements and other risks detailed from
time to time in ATS's periodic reports filed with Canadian regulatory
authorities.
ATS AUTOMATION TOOLING SYSTEMS INC.
Consolidated Statements of Earnings
(in thousands, except per share amounts - unaudited)
Thirty-nine weeks Thirteen weeks
ended ended
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December December December December
31 2001 31 2000 31 2001 31 2000
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Revenue $ 419,121 $ 486,923 $ 123,900 $ 172,711
Operating costs and expenses:
Cost of revenue 330,565 372,023 99,159 131,177
Depreciation and
amortization 19,834 16,319 6,779 5,869
Selling and administrative 49,652 46,567 16,307 16,833
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400,051 434,909 122,245 153,879
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Earnings from operations 19,070 52,014 1,655 18,832
Other expenses (income):
Interest on long-term debt 1,836 2,806 392 960
Interest Income (1,689) (2,157) (429) (1,143)
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147 649 (37) (183)
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Earnings before income taxes,
non-controlling interest
and goodwill amortization 18,923 51,365 1,692 19,015
Provision for income taxes 6,329 17,619 548 6,441
Non-controlling interest
in earnings of subsidiaries 193 145 62 66
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Earnings before goodwill
amortization 12,401 33,601 1,082 12,508
Goodwill amortization,
net of tax - 1,159 - 394
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Net earnings $ 12,401 $ 32,442 $ 1,082 $ 12,114
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Net earnings per share:
(note 2)
Basic $ 0.21 $ 0.56 $ 0.02 $ 0.20
Diluted $ 0.20 $ 0.54 $ 0.02 $ 0.20
Weighted average number of
shares:
Basic 60,245 58,382 60,307 59,943
Diluted 61,033 59,570 60,918 60,976
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See accompanying notes to the consolidated financial statements
Consolidated Statements of Retained Earnings
(in thousands of dollars - unaudited)
Thirty-nine weeks Thirteen weeks
ended ended
-------------------------------------------------------------------------
December December December December
31 2001 31 2000 31 2001 31 2000
-------------------------------------------------------------------------
Retained earnings,
beginning of period $ 190,316 $ 147,452 $ 201,635 $ 164,453
Net earnings 12,401 32,442 1,082 12,114
Cost of issuance of common
shares, net of future
income taxes - (3,327) - -
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Retained earnings, end
of period $ 202,717 $ 176,567 $ 202,717 $ 176,567
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See accompanying notes to the consolidated financial statements
ATS AUTOMATION TOOLING SYSTEMS INC.
Consolidated Statements of Cash Flows
(in thousands of dollars - unaudited)
Thirty-nine weeks Thirteen weeks
ended ended
-------------------------------------------------------------------------
December December December December
31 2001 31 2000 31 2001 31 2000
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Cash Flows from
Operating Activities:
Net Earnings $ 12,401 $ 32,442 $ 1,082 $ 12,114
Items not involving cash 24,633 22,061 8,560 4,798
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Cash flow from operations 37,034 54,503 9,642 16,912
Change in non-cash
operating working capital 11,141 (63,939) 32,152 (18,209)
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48,175 (9,436) 41,794 (1,297)
Cash Flows from
Investing Activities:
Acquisition of interest
in subsidiaries (note 3) (5,317) (12,321) - (12,321)
Acquisition of fixed assets (20,964) (50,274) (4,027) (18,826)
Investments and other (9,510) (6,966) (3,890) 987
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(35,791) (69,561) (7,917) (30,160)
Cash Flows from Financing
Activities:
Bank Indebtedness (5,572) (25,618) (3,525) (4,144)
Long-term debt - (405) - (11)
Issuance of common shares 689 117,772 15 636
Other 2,483 2,771 1,759 (512)
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(2,400) 94,520 (1,751) (4,031)
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Increase (decrease) in cash
and short-term investments 9,984 15,523 32,126 (35,488)
Cash and short-term
investments,
beginning of period 72,949 66,245 50,807 117,256
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Cash and short-term
investments, end of period $ 82,933 $ 81,768 $ 82,933 $ 81,768
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Supplementary information:
Cash income taxes paid $ 5,645 $ 23,201 $ 1,192 $ 12,896
Cash interest paid $ 2,131 $ 1,810 $ 515 $ 1,164
See accompanying notes to the consolidated financial statements
ATS AUTOMATION TOOLING SYSTEMS INC.
Consolidated Balance Sheets
(in thousands of dollars - unaudited)
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December March
31 2001 31 2001
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ASSETS
Current assets:
Cash and short-term investments $ 82,933 $ 72,949
Accounts receivable 115,765 152,266
Income taxes recoverable 7,074 1,051
Costs and earnings in excess of billings on
contracts in progress 118,821 150,363
Inventories 67,285 52,230
Other 3,131 2,329
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395,009 431,188
Fixed assets 210,798 205,733
Goodwill and other intangibles 67,399 57,306
Other assets 26,540 18,580
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$ 699,746 $ 712,807
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LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Bank indebtedness $ 1,036 $ 4,079
Accounts payable and accrued liabilities 53,972 79,222
Billings in excess of costs and earnings on
contracts in progress 7,016 20,992
Future income taxes 23,027 21,281
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85,051 125,574
Long-term debt 53,930 53,279
Future income taxes 7,526 4,568
Non-controlling interest 2,790 2,585
Shareholders' equity:
Share capital 329,566 323,324
Retained earnings 202,717 190,316
Cumulative translation adjustment 18,166 13,161
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550,449 526,801
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$ 699,746 $ 712,807
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See accompanying notes to the consolidated financial statements
ATS AUTOMATION TOOLING SYSTEMS INC.
Notes to Interim Consolidated Financial Statements
(tabular amounts in thousands of dollars - unaudited)
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1. Significant accounting policies:
(a) The accompanying unaudited interim consolidated financial
statements are prepared in accordance with accounting principles
generally accepted in Canada and are consistent with those described
in the annual consolidated financial statements for the year ended
March 31, 2001. The unaudited financial statements and notes presented
in this interim report should be read in conjunction with the audited
consolidated financial statements in the Company's fiscal 2001 Annual
Report.
(b) Contract revenue in the Automation Systems segment is recognized
using the percentage of completion method. The degree of completion is
determined based on costs incurred, excluding costs that are not
representative of progress to completion, as a percentage of total
costs anticipated for each contract. Incentive awards, claims or
penalty provisions are recognized when such amounts can reasonably be
determined. Complete provision is made for losses on contracts in
progress when such losses first become known. Revisions in cost and
profit estimates, which can be significant, are reflected in the
accounting period in which the relevant facts become known.
2. Accounting policy changes:
(a) Effective April 1, 2001, the Company adopted the new accounting
Recommendations of the Canadian Institute of Chartered Accountants
("CICA") for earnings per share. The new Recommendations substantially
harmonize Canadian standards with existing U.S. and International
standards. For fiscal 2001, the diluted earnings per share figures in
the Consolidated Statement of Earnings have been recalculated using
the new standard. For the nine months ended December 31, 2000 and for
the three months ended December 31, 2000, the diluted earnings per
share did not change when recalculated using the new standard.
(b) Effective April 1, 2001, the Company adopted the new accounting
Recommendations of the CICA for goodwill and other intangible assets.
The new Recommendations require the Company to discontinue the
amortization of goodwill and instead, apply an impairment test at
least on an annual basis. An impairment loss is to be provided when
the carrying amount of the goodwill of a reporting unit exceeds its
fair value. While Management believes that no goodwill impairment loss
is required to be provided for any reporting unit, the new standard
provides a transition period of one year from the effective date of
adoption of this recommendation, to make an assessment in this regard.
Had this new standard been retroactively applied and had the
previously expensed goodwill been reversed, the adjusted earnings per
share in the quarter ended December 31, 2000 would have been 21 cents
per share for both basic and diluted and for the nine months ended
December 31, 2000 the adjusted earnings per share would have been 58
cents per share basic and 56 cents per share diluted. These new CICA
Recommendations can only be applied prospectively.
3. Acquisitions:
During the first quarter ended June 30, 2001, the Company acquired
Omex Inc., a metal forming company located in Stratford, Ontario.
The acquisition has been accounted for using the purchase method as
follows:
Assets, at assigned value $ 5,155
Liabilities assumed (3,679)
Goodwill 9,394
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$ 10,870
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Consideration:
Cash 5,317
Common shares 5,553
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$ 10,870
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The consolidated interim statements of earnings include the results of
the acquired business from the date of acquisition.
4. Segmented disclosure:
The Company evaluates performance based on two reportable segments:
Automation Systems and Precision Components. The Automation Systems
segment produces custom-engineered turn-key automated manufacturing
and test systems. The Precision Components segment is a high volume
manufacturer of photovoltaic products, plastic and metal components
and sub-assemblies.
The Company accounts for inter-segment sales at current market rates,
negotiated between the segments.
Thirty-nine weeks ended Thirteen weeks ended
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December December December December
31 31 31 31
2001 2000 2001 2000
----------------------------------------------------------------------
Revenue
Automation Systems $ 306,954 $ 372,878 $ 85,353 $ 134,756
Precision Components 118,248 115,300 41,478 38,262
Elimination of
inter-segment
revenue (6,081) (1,255) (2,931) (307)
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Consolidated $ 419,121 $ 486,923 $ 123,900 $ 172,711
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Operating Income
Automation Systems $ 25,157 $ 51,663 $ 3,953 $ 18,392
Precision Components (230) 4,012 (518) 1,673
Inter-segment
elimination and
other corporate
expenses (5,857) (3,661) (1,780) (1,233)
----------------------------------------------------------------------
Consolidated $ 19,070 $ 52,014 $ 1,655 $ 18,832
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>>
5. Cyclical nature of the business:
Interim financial results are not necessarily indicative of annual or
longer term results, because many of the individual markets served by
the Company tend to be cyclical in nature. General economic trends,
product life cycles and product changes may impact Automation Systems
bookings, Precision Components volumes, and the Company's earnings in
any of its markets.
%SEDAR: 00002017E
For further information: Ron Jutras, Chief Financial Officer, (519) 653 6500
© 2002 Canada Newswire Ltd.