ATS reports improved second quarter performance, backlog
at $163 million
TSX: ATA
CAMBRIDGE, ON, Nov. 12 /CNW/ - ATS Automation Tooling Systems Inc. today
reported its financial results for the second quarter of fiscal 2003,
including an 11% increase in revenue, a four-fold increase in net earnings and
a 30% increase in new automation order bookings over the same period a year
earlier.
At $2.4 million (4 cents per share basic and diluted) net earnings for
the three months ended September 30, 2002 compared favourably with net
earnings of $0.5 million (1 cent per share basic and diluted) in the same
quarter of fiscal 2002.
"The summer quarter is traditionally a slow period for our industry
because of customer vacations and plant shutdowns and this year, our customers
were also confronted with an unusually high degree of global economic
turbulence," said Klaus Woerner, ATS President and Chief Executive Officer.
"Given these constraints, ATS performed very well. Drawing on the strong
automation backlog we had entering the quarter, we efficiently and profitably
fulfilled a large number of automation orders, while securing new long-term
work for both our automation systems and precision components groups. This
helped to keep period end backlog at reasonable levels going into the third
quarter. In addition, we made a very good showing at our industry's two
largest trade shows, finalized plans to expand and enhance our global
manufacturing footprint in Europe and China and launched our Spheral Solar
Power business. For a traditionally subdued period, this was a remarkably
productive quarter."
Second Quarter Fiscal 2003 Highlights
- Consolidated revenue was $147.6 million, up 11% from $132.5 million
in the second quarter a year ago.
- New automation systems bookings increased 30% to $81.6 million from
$63.0 million in the second quarter a year ago. There were no order
cancellations in this most recent quarter compared to $8.4 million a
year ago.
- Quarter end automation systems backlog was $163.0 million, up 3% from
the same period a year earlier, but, as expected because of
seasonality, off from $189.0 million at June 30, 2002.
Revenue Analysis
ATS continued to capitalize on its broad customer base and global market
reach to mitigate the impact of a downturn in capital spending. Segmented
revenue shows:
- Automation Systems Group revenue was $110.8 million, 14% higher than
$97.7 million in the second quarter a year ago, reflecting the strong
and more stable backlog entering the period and growth in two of the
Group's three primary strategic markets. Computer-electronics revenue
grew 21% over fiscal 2002's second quarter and automotive expanded
17%. Healthcare revenue was 11% lower but still contributed $16.3
million in revenue.
- Precision Components operations, excluding solar, achieved revenue of
$29.8 million in the second quarter of fiscal 2003, versus $26.6
million a year earlier. This 12% increase was the result of stronger
market conditions in the automotive sector, coupled with the Group's
proven ability to win new orders based on its broader capabilities.
- Photowatt International solar revenue was 4% higher at $11.1 million
versus $10.7 million, despite softer market conditions. Higher sales,
particularly in Germany - driven by government subsidy programs -
more than offset the impact on revenue of lower unit prices.
<<
Revenue by Industry
($ millions)
13 weeks ended 26 weeks ended
9/30/2002 9/30/2001 9/30/2002 9/30/2001
-------------------------------------------------------------------------
Automation Systems:
Computer-electronics $ 45.3 $ 37.5 $ 82.5 $ 95.5
Automotive 43.6 37.2 87.5 72.8
Healthcare 16.3 18.4 33.9 41.1
Other 5.6 4.6 13.9 12.2
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Subtotal 110.8 97.7 217.8 221.6
Precision Components:
Automotive 27.5 23.9 55.2 51.0
Computer-electronics 0.7 0.8 1.4 1.6
Solar 11.1 10.7 19.7 21.5
Other 1.6 1.9 3.5 2.6
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Subtotal 40.9 37.3 79.8 76.7
Intersegment Elimination 4.1 2.5 6.3 3.1
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Total Consolidated
Revenue $ 147.6 $ 132.5 $ 291.3 $ 295.2
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Consolidated Revenue by Region
($ millions)
13 weeks ended 26 weeks ended
9/30/2002 9/30/2001 9/30/2002 9/30/2001
-------------------------------------------------------------------------
U.S. & Mexico $ 86.0 $ 83.1 $ 172.3 $ 190.3
Europe 28.3 25.4 49.3 55.0
Canada 20.9 10.1 38.1 23.2
Asia-Pacific and other 12.4 13.9 31.6 26.7
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Total $ 147.6 $ 132.5 $ 291.3 $ 295.2
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Second Quarter Operating Results
Consolidated operating earnings were $3.6 million compared to $1.0
million in the second quarter of fiscal 2002, reflecting improved performance
by both the Automation Systems Group and Precision Components Group.
Automation Systems Group operating earnings rose 39% to $6.0 million
(5.4% margin) versus $4.3 million (4.4% margin) in the second quarter a year
ago. This reflected higher revenues and more stable backlog entering the
quarter. Although significantly better than last year due to higher revenue
and better overhead absorption, the Group's operating results continued to be
affected by excess capacity, particularly in the Company's west coast
operations and the Company's strategic decision to retain its skilled
workforce to broaden ATS's competitive leadership and remain positioned for
future growth.
Precision Components operating earnings increased 118% to $0.2 million
(0.5% margin), from an operating loss of $1.1 million in the same period of
fiscal 2002. This year-over-year improvement reflected significantly better
performance in the Group's core precision components operations reflecting
higher revenues and enhanced efficiencies and utilization. These gains were
partially offset by an operating loss at Photowatt. This loss was due to the
customary month long summer plant shutdown, coupled with higher expenditures
to expand module manufacturing capacity in response to demand and to introduce
new processes designed to further reduce manufacturing costs.
Six Month Highlights
ATS generated consolidated net earnings of $6.6 million (11 cents basic
and diluted) for the six months ended September 30, 2002 on revenue of $291.3
million. This was lower than net earnings of $11.3 million (19 cents per share
basic and diluted) and revenue of $295.2 million in the same six month period
of fiscal 2002. The reduction reflected weak market conditions that have
persisted for more than a year.
Balance Sheet
ATS finished the quarter with a very strong balance sheet. Cash on hand,
net of bank indebtedness, totaled $93 million at September 30, 2002 compared
to $109 million at June 30, 2002 and $46 million a year ago. Period end debt
to equity ratio remained a healthy 0.1 to 1, unchanged from the ratio at March
31, 2002, and September 30, 2001.
Outlook
At September 30, 2002, automation systems order backlog was $163 million,
up 3% from $159 million at the end of the second quarter a year ago. As
expected, due to summer seasonality, this backlog was lower than the $189
million at June 30, 2002.
Automation Systems Backlog by Industry
($ millions)
9/30/2002 9/30/2001
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Computer/Electronics $ 41.6 $ 44.4
Automotive 85.2 63.8
Healthcare 27.1 42.0
Other 9.1 8.6
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Total $ 163.0 $ 158.8
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New automation systems order bookings in the second quarter were $81.6
million, 30% higher than bookings of $63.0 million a year ago. There were no
order cancellations. Order activity remained broadly based in the quarter.
"Automation systems order bookings were strong for a summer quarter that
experienced as much economic turbulence as this one did," said Mr. Woerner.
"We knew going into the quarter that we needed a large backlog to cushion us
against seasonality, and we certainly made good use of this buffer, but at the
same time added back new orders in a variety of sectors, most particularly
automotive. Automation backlog levels at September 30th were at reasonable
levels but it's what happens in the third and fourth quarters that count."
Looking forward, Mr. Woerner said there remain valid reasons for cautious
optimism.
"Clearly, the economy will have a major impact on customer capital
spending patterns and we can't predict when a true recovery will take place in
our market. That's the reason for caution as we move into the back half of the
year. The reasons for optimism are four fold. First, quotation activity
remains relatively strong and we're on the bid list for a number of attractive
opportunities. Second, our Precision Components Group has secured the $20
million worth of new orders we had targeted this summer. Those purchase orders
are now in and revenue from these assignments will begin to flow next fiscal
year and in some cases, in our fourth quarter. Third, we've now started
shipping thermal devices to the desktop market, which is allowing us to lock
up our previous objective of securing $12 million to $13 million in revenue
this fiscal year from this very promising initiative. We also have good follow
on prospects in the desktop area for our next fiscal year."
The fourth reason for optimism, said Mr. Woerner, is that "ATS is
extending its market leadership and is poised to further improve our market
share based on the fact that we are offering advanced, 21st century
technologies and capabilities that customers can't find with competitors. If
we needed proof of this leadership, we got it at the industry's two major
trade shows in September. We generated high quality leads in both Europe and
the U.S. and at both, sent a strong signal that our automation systems offer
more customer value, faster payback and are clearly more effective."
"This is not an easy environment to win business, but as our second
quarter performance proved, ATS is moving forward aggressively and
profitably," said Mr. Woerner. "We are aggressively managing costs across our
business, enlarging and enhancing our global footprint by opening new
facilities to secure assignments in China and Europe and positioning ATS for
long-term profitability and sustainable market share gains. Based on recent
quotation activity, we should also see tangible benefits from the recent
enlargement of our standard automation products platform as early as the
fourth quarter. All told, ATS is making the best of the economic cards we've
been dealt."
Quarterly Conference Call
ATS will hold its quarterly conference call at 5 p.m. 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. Through
Photowatt International S.A., and Spheral Solar Power Inc., ATS is an emerging
leader in the rapidly growing market for solar energy cells and modules. 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)
Twenty-six weeks ended Thirteen weeks ended
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September September September September
30 2002 30 2001 30 2002 30 2001
-------------------------------------------------------------------------
Revenue $ 291,264 $ 295,221 $ 147,603 $ 132,494
Operating costs and expenses:
Cost of revenue 235,014 231,406 120,876 109,002
Depreciation and
amortization 14,598 13,055 7,377 6,594
Selling and administrative 32,149 33,345 15,714 15,907
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281,761 277,806 143,967 131,503
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Earnings from operations 9,503 17,415 3,636 991
Other expenses (income):
Interest on long-term debt 629 1,444 317 684
Interest income (1,223) (1,260) (621) (519)
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(594) 184 (304) 165
-------------------------------------------------------------------------
Earnings before income taxes
and non-controlling interest 10,097 17,231 3,940 826
Provision for income taxes 3,274 5,781 1,273 271
Non-controlling interest in
earnings of subsidiaries 265 131 237 105
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Net earnings $ 6,558 $ 11,319 $ 2,430 $ 450
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Net earnings per share:
Basic $ 0.11 $ 0.19 $ 0.04 $ 0.01
Diluted $ 0.11 $ 0.19 $ 0.04 $ 0.01
Weighted average number
of shares:
Basic 60,431 60,214 60,483 60,300
Diluted 61,039 61,091 60,965 61,074
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See accompanying notes to consolidated financial statements
Consolidated Statements of Retained Earnings
(in thousands of dollars - unaudited)
Twenty-six weeks ended Thirteen weeks ended
-------------------------------------------------------------------------
September September September September
30 2002 30 2001 30 2002 30 2001
-------------------------------------------------------------------------
Retained earnings, beginning
of period as restated
(note 2) $ 198,732 $ 186,139 $ 202,860 $ 197,008
Net earnings 6,558 11,319 2,430 450
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Retained earnings, end
of period $ 205,290 $ 197,458 $ 205,290 $ 197,458
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See accompanying notes to interim consolidated financial statements
ATS AUTOMATION TOOLING SYSTEMS INC.
Consolidated Statements of Cash Flows
(in thousands of dollars - unaudited)
Twenty-six weeks ended Thirteen weeks ended
-------------------------------------------------------------------------
September September September September
30 2002 30 2001 30 2002 30 2001
-------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 6,558 $ 11,319 $ 2,430 $ 450
Items not involving cash 17,839 16,073 12,762 6,014
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Cash flow from operations 24,397 27,392 15,192 6,464
Change in non-cash
operating working capital (25,125) (21,011) (26,311) (26,312)
-------------------------------------------------------------------------
(728) 6,381 (11,119) (19,848)
Cash flows from investing
activities:
Acquisition of interest
in subsidiaries - (5,317) - -
Acquisition of fixed assets (9,360) (16,937) (6,696) (9,380)
Investments and other (4,997) (5,620) (1,023) (3,967)
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(14,357) (27,874) (7,719) (13,347)
Cash flows from financing
activities:
Bank indebtedness (61) (2,047) (414) 2,128
Issuance of common shares 823 674 17 116
Other (2,565) 724 2,879 5,752
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(1,803) (649) 2,482 7,996
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Increase (decrease) in cash
and short-term investments (16,888) (22,142) (16,356) (25,199)
Cash and short-term
investments,
beginning of period 113,281 72,949 112,749 76,006
-------------------------------------------------------------------------
Cash and short-term
investments,
end of period $ 96,393 $ 50,807 $ 96,393 $ 50,807
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Supplementary information:
Cash income taxes paid $ 5,415 $ 4,453 $ 3,055 $ 4,195
Cash interest paid $ 648 $ 1,616 $ 272 $ 1,185
See accompanying notes to interim consolidated financial statements
ATS AUTOMATION TOOLING SYSTEMS INC.
Consolidated Balance Sheets
(in thousands of dollars - unaudited)
-------------------------------------------------------------------------
September 30 March 31
2002 2002
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(as restated,
see note 2)
ASSETS
Current assets:
Cash and short-term investments $ 96,393 $ 113,281
Accounts receivable 94,336 113,704
Income taxes recoverable 11,646 11,140
Costs and earnings in excess of billings on
contracts in progress 135,328 104,320
Inventories 75,523 60,712
Other 5,295 3,114
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418,521 406,271
Fixed assets 213,238 212,009
Goodwill 57,680 57,974
Other intangibles 9,151 9,491
Other assets 31,403 27,447
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$ 729,993 $ 713,192
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank indebtedness $ 3,047 $ 3,108
Accounts payable and accrued liabilities 69,247 65,434
Billings in excess of costs and earnings
on contracts in progress 11,108 12,481
Future income taxes 27,742 27,455
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111,144 108,478
Long-term debt 53,313 53,860
Future income taxes 4,110 2,196
Non-controlling interest 3,213 2,957
Shareholders' equity:
Share capital 330,483 329,660
Retained earnings 205,290 198,732
Cumulative translation adjustment 22,440 17,309
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558,213 545,701
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$ 729,993 $ 713,192
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See accompanying notes to interim consolidated financial statements
ATS AUTOMATION TOOLING SYSTEMS INC.
Notes to Interim Consolidated Financial Statements
(tabular amounts in thousands, except per share amounts - unaudited)
-------------------------------------------------------------------------
1. Significant accounting policies:
(a) The accompanying unaudited interim consolidated financial
statements are prepared in accordance with accounting principles
generally accepted in Canada and the accounting policies are
consistent with those described in the annual consolidated
financial statements for the year ended March 31, 2002, except
as described in note 2. The unaudited interim consolidated
financial statements presented in this interim report do not
conform in all respects to the requirements of generally
accepted accounting principles for annual financial statements
and should be read in conjunction with the audited consolidated
financial statements in the Company's fiscal 2002 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, 2002, the Company retroactively adopted the
new Recommendations of the Canadian Institute of Chartered
Accountants ("CICA") related to foreign currency translation.
The new Recommendations require gains and losses on the
translation of long-term monetary assets and liabilities to be
included in income. Previously, such gains and losses were
deferred and amortized over the life of the respective asset or
liability. Retroactive adoption of this policy had no material
impact on net earnings for the three months ended September 30,
2001, the six months ended September 30, 2001 or the year ended
March 31, 2002 and as such have remained as previously reported.
The retroactive changes to the consolidated balance sheet at
March 31, 2002 and March 31, 2001 are as follows:
Decrease in other assets $ 4,177
Decrease in retained earnings $ 4,177
(b) Effective April 1, 2002, the Company prospectively adopted the
new Recommendations of the CICA for Stock-based Compensation and
Other Stock-based Payments. The new Recommendations establish
standards for the recognition, measurement and disclosure of
stock-based compensation and other stock-based payments. The new
standards only apply to awards granted after the adoption date.
The Company has elected to continue accounting for stock options
as capital transactions, and to disclose pro forma net earnings
and earnings per share information using the fair value based
method. As a result, the adoption of the Recommendations had no
effect on the Company's reported earnings for the three months
or the six months ended September 30, 2002 - see note 3.
3. Stock-Based Compensation:
In accordance with the CICA recommendations, the following pro forma
disclosures present the compensation cost for the Company's stock
option plan had compensation cost been determined and recorded in the
statement of earnings and the earnings per share based on the fair
value at the grant date of the options awarded on or after April 1,
2002:
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Twenty-six weeks ended Thirteen weeks ended
September 30, 2002 September 30, 2002
--------------------------------------------------------------------
Net income
as reported $ 6,558 $ 2,430
pro forma $ 6,128 $ 2,215
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Earnings per share
Basic - as reported $ 0.11 $ 0.04
- pro forma $ 0.10 $ 0.04
Diluted - as reported $ 0.11 $ 0.04
- pro forma $ 0.10 $ 0.04
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--------------------------------------------------------------------
In the pro forma results above, the fair values of the Company's
stock option grants were estimated using the Black Scholes option
pricing model with the following assumptions: risk free interest rate
of 5.4%; dividend yield of 0%; expected lives of 6.0 years; and
volatility of 42%, and the estimated compensation cost of the options
granted was amortized over the five year vesting period of the
options. During the thirteen weeks ended September 30, 2002 no stock
options were issued. During the twenty-six weeks ended September 30,
2002 471,495 stock options were granted at an average price of
$18.61.
4. Segmented disclosure:
The Company evaluates performance based on two reportable segments:
Automation Systems and Precision Components. The Automation Systems
segment primarily produces custom-engineered turn-key automated
manufacturing and test systems. The Precision Components segment is
primarily 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.
Twenty-six weeks ended Thirteen weeks ended
-------------------------------------------------------------------------
September September September September
30 2002 30 2001 30 2002 30 2001
-------------------------------------------------------------------------
Revenue
Automation Systems $ 217,844 $ 221,601 $ 110,815 $ 97,667
Precision Components 79,772 76,769 40,861 37,299
Elimination of
inter-segment
revenue (6,352) (3,149) (4,073) (2,472)
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Consolidated $ 291,264 $ 295,221 $ 147,603 $ 132,494
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Earnings from operations
Automation Systems $ 11,325 $ 21,204 $ 5,994 $ 4,317
Precision Components 2,500 288 205 (1,075)
Inter-segment
elimination and
corporate expenses (4,322) (4,077) (2,563) (2,251)
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Consolidated $ 9,503 $ 17,415 $ 3,636 $ 991
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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 To request a free copy of this organization's annual report, please go to http://www.newswire.ca and click on reports@cnw.
© 2002 Canada Newswire Ltd.