ATS Reports Fourth Quarter and Annual Fiscal 2014 Results
>Editor's note: This release has been truncated.
ATS Automation Tooling Systems Inc. (TSX: ATA) ("ATS" or the "Company") today reported financial results for the three and 12 months ended March 31, 2014.
Fourth Quarter Summary
- Revenues from continuing operations were $200.7 million, 13% higher than the third quarter of fiscal 2014 and 31% higher than the corresponding period a year ago. Excluding IWK revenues of $29.6 million, revenues from continuing operations were $171.1 million, a 12% increase over the corresponding period a year ago;
- EBITDA1 was $23.5 million, compared to $22.6 million in the third quarter of fiscal 2014 and $17.3 million in the fourth quarter of fiscal 2013. Normalized for $1.0 million of restructuring costs, fourth quarter fiscal 2014 EBITDA was $24.5 million;
- Earnings from continuing operations were $17.2 million (9% operating margin), compared to $16.7 million (9% operating margin) in the third quarter of fiscal 2014 and $14.0 million (9% operating margin) in the fourth quarter a year ago;
- Earnings per share from continuing operations were 13 cents basic and diluted compared to 10 cents basic and 9 cents diluted in the fourth quarter a year ago;
- Order Bookings were $197 million, a 16% increase over the corresponding period a year ago. Excluding IWK Order Bookings of $26 million, Order Bookings were $171 million, compared to $170 million in the fourth quarter a year ago;
- Period end Order Backlog was a record $474 million, up 19% from $398 million in the fourth quarter a year ago. Higher Order Backlog reflected the addition of IWK's Order Backlog and higher Order Bookings in the energy and consumer products & electronics markets;
- The Company's balance sheet and financial capacity to support growth remained strong, with cash net of debt in continuing operations of $70.4 million at March 31, 2014, unutilized credit facilities of $179.3 million and $11.1 million of credit available under letter of credit facilities.
1 Non-IFRS measure: see "Notice to Reader: Non-IFRS Measures and Additional IFRS Measures"
"Our fourth quarter operating performance was strong," said Anthony Caputo, Chief Executive Officer. "Our business is growing, both organically and through acquisition, our operating margins remained strong and we ended the fiscal year with record Order Backlog. Strategically, the integration of IWK is progressing well and we remain focused on executing our value creation plan to grow, expand and scale our business."
Fourth Quarter Summary Continuing Operations
Fourth quarter revenues of $200.7 million were 31% higher than a year ago primarily reflecting $29.6 million of revenues earned by IWK. Excluding IWK, fourth quarter revenues were $171.1 million, a 12% increase over the corresponding period a year ago. Foreign exchange rate changes positively impacted the translation of revenues earned by foreign-based ATS subsidiaries compared to the corresponding period a year ago, primarily reflecting the weakening of the Canadian dollar relative to the Euro and U.S. dollar. By industrial market, fourth quarter revenues from consumer products & electronics increased by 216%, primarily on revenues from IWK and higher revenues earned in the consumer products market. Revenues generated in the energy market increased 94% compared to the corresponding period a year ago, primarily on higher Order Backlog entering the fourth quarter due largely to increased activity in nuclear energy. Revenues generated in the life sciences market increased 32% compared to the corresponding period a year ago, primarily on revenues from IWK. Transportation revenues decreased 5% compared to a year ago primarily due to lower Order Backlog in the fourth quarter compared to a year ago.
Earnings from operations were $17.2 million (9% operating margin) compared to $14.0 million (9% operating margin) in the fourth quarter of fiscal 2013. Fourth quarter fiscal 2014 earnings from operations included restructuring charges of $1.0 million to improve the Company's cost structure including closing its Singapore manufacturing facility. Adjusted for restructuring charges, fourth quarter fiscal 2014 earnings from operations were $18.2 million. Higher earnings from operations primarily reflected higher revenues, better program execution, and the inclusion of IWK, partially offset by an accrual for a legal settlement, higher stock-based compensation costs and increased depreciation and amortization expenses compared to the corresponding period a year ago. Depreciation and amortization expense was $6.3 million in the fourth quarter of fiscal 2014, compared to $3.3 million a year ago, primarily due to a $2.8 million increase in amortization as a result of the addition of identifiable intangible assets recorded on the acquisition of IWK in the third quarter of fiscal 2014.
EBITDA was $23.5 million (12% EBITDA margin) compared to $17.3 million (11% EBITDA margin) in the fourth quarter of fiscal 2013. Adjusted for restructuring charges, fourth quarter fiscal 2014 EBITDA was $24.5 million (12% EBITDA margin).
Fourth quarter fiscal 2014 Order Bookings were $197 million, a 16% increase from the fourth quarter of fiscal 2013, which primarily reflected $26 million of Order Bookings generated by IWK. Excluding the impact of IWK, Order Bookings were $171 million, a 1% increase from the corresponding period a year ago. Foreign exchange rate changes also positively impacted the translation of Order Bookings from foreign-based ATS subsidiaries compared to the corresponding period a year ago.
Fourth Quarter Summary of Discontinued Operations: Solar
Ontario Solar recorded a loss of $0.4 million in the fourth quarter of fiscal 2014. The fourth quarter loss a year ago was $0.6 million. During the first quarter of fiscal 2014, Ontario Solar manufacturing assets were sold and the manufacturing business wound up. In addition, four of seven ground-mount solar projects owned by Ontario Solar's 50% owned subsidiary Ontario Solar PV Fields ("OSPV") were sold.
Subsequent to the end of fiscal 2014, OSPV completed the previously announced sale of its remaining three ground-mount solar projects. OSPV will retain 25% ownership of the projects until the projects reach commercial operation, which is expected to occur in early calendar 2015. Net proceeds to ATS are expected to be approximately $14.6 million, of which the Company received $12.0 million in the first quarter of fiscal 2015. Remaining proceeds are to be paid based on the projects achieving commercial operation.
Annual Results Materials
ATS' annual Consolidated Financial Statements, Management's Discussion and Analysis, and Annual Information Form for the year ended March 31, 2014, are available on the Company's website at www.atsautomation.com and on SEDAR at www.sedar.com.
Quarterly Conference Call
ATS' quarterly conference call begins at 10 am eastern on Thursday, May 22 and can be accessed live at www.atsautomation.com or on the phone by dialing 416 644 3416 five minutes prior. 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 (until midnight May 29, 2014) by dialing 416-640-1917 and entering passcode 4683190 followed by the number sign.
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 life sciences, transportation, energy, consumer products and electronics. ATS also leverages its many years of experience and skills to fulfill the specialized automation product manufacturing requirements of customers. ATS employs approximately 2,500 people at 23 manufacturing facilities in Canada, the United States, Europe, Southeast Asia and China. The Company's Solar segment is classified as discontinued operations. 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 Year Ended March 31, 2014
This Management's Discussion and Analysis ("MD&A") for the year ended March 31, 2014 (fiscal 2014) is as of May 21, 2014 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 audited consolidated financial statements of the Company for fiscal 2014 which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in Canadian dollars. 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. These terms do not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies. The terms "operating margin," "EBITDA", "EBITDA margin", "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. 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 from continuing operations 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. 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. Order Bookings provides 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 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 IFRS measures and non-IFRS financial measures in making investment decisions and measuring operational results. A reconciliation of earnings from operations and EBITDA to net income from continuing operations for the fiscal fourth quarters and years ending March 31, 2014 and March 31, 2013 is contained in this MD&A (see "Reconciliation of EBITDA to IFRS Measures"). EBITDA should not be construed as a substitute for net income determined in accordance with IFRS. A reconciliation of Order Bookings and Order Backlog to total Company revenues for the fiscal fourth quarters and years ending March 31, 2014 and March 31, 2013 is contained in the MD&A (see "Order Backlog Continuity").
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 life sciences, transportation, energy, consumer products and electronics. ATS also leverages its many years of experience and skills to fulfill the specialized automation product manufacturing requirements of customers. ATS employs approximately 2,500 people at 23 manufacturing facilities in Canada, the United States, Europe, Southeast Asia and China. The Company's Solar segment is classified as discontinued operations.
Note to Readers: Forward-Looking Statements:
This news release and management's discussion and analysis of financial conditions, and results of operations of ATS contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of ATS, or developments in ATS' business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things: the next phase of the Company's strategy: grow, expand, and scale; IWK acquisition - leveraging of IWK into other markets, potential for future acquisitions that would be a strategic fit with IWK; competitive strengths; a Nigerian contract and timing of Order Booking and Order Backlog in relation thereto; potential impact of general economic environment, including impact on credit markets, customer markets, and Order Bookings, and the timing of those impacts; demand for Company's products potentially lagging global macroeconomic trends; activity in the market segments that the Company serves; opportunities resulting from the IWK acquisition; the sales organization's approach to market and expected impact on Order Bookings; impact of Order Backlog on volatility and time to complete Order Backlog; the implementation of changes to cost structure and the expected impact; management's expectations in relation to the impact of strategic initiatives on ATS operations; the Company's strategy to expand organically and through acquisition; Company's expectation with respect to deferred tax assets and effective tax rate and cash taxes; separation of solar business; expected timing of receipt of proceeds in relation to the sale of seven joint venture ground mount solar projects; expected gain on solar divestitures; Company's expectation to continue to increase its investment in working capital; expectation in relation to meeting funding requirements for investments; expectation to use moderate leverage to support growth strategy; foreign exchange hedging; and accounting standards changes.
The risks and uncertainties that may affect forward-looking statements include, among others: impact of the global economy; general market performance including capital market conditions and availability and cost of credit; performance of the market sectors that ATS serves; foreign currency and exchange risk; the relative strength of the Canadian dollar; impact of factors such as increased pricing pressure and possible margin compression; the regulatory and tax environment; failure or delays associated with the new customer programs; that leveraging and strategic initiatives in relation to the IWK acquisition are delayed, not completed, or do not have intended positive impact; that acquisitions that are a strategic fit with IWK are not identified or concluded; failure of the Nigerian project to achieve financial close, generate further milestone payments, or satisfy other conditions or meet expected timelines; potential for greater negative impact associated with any non-performance related to large enterprise programs; variations in the amount of Order Backlog completed in any given quarter; that strategic initiatives are delayed, not completed, or do not have intended positive impact; that restructuring charges exceed those currently contemplated; 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; that the Company or its subsidiaries may have exposure to greater than anticipated income tax liabilities; that the solar joint venture ground mount projects are delayed in achieving commercial operation or cannot ultimately be developed, due to market, regulatory, transmission, local opposition, or other factors; labour disruptions; 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 liability claims; risks associated with greater than anticipated tax liabilities or expenses; and other risks detailed from time to time in ATS's filings with Canadian provincial securities regulators. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and other than as required by applicable securities laws, ATS does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.