ATS Reports Third Quarter Fiscal 2017 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 nine months ended January 1, 2017.
Third Quarter Summary
- Revenues were $237.4 million, 14% lower than a year ago, primarily reflecting the timing of project activities, the previously announced suspension and cancellation of a large enterprise program and revised estimates and adjustments related to certain programs that are in process or have been completed;
- Earnings from operations were $15.3 million (6% operating margin), compared to $26.8 million (10% operating margin) in the third quarter of fiscal 2016. Adjusted earnings from operations1 were $22.5 million (9% margin), compared to $32.1 million (12% margin) in the third quarter a year ago, primarily reflecting lower revenues and increased stock compensation expenses;
- EBITDA1 was $24.3 million (10% margin), compared to $36.0 million (13% margin) in the third quarter of fiscal 2016;
- Earnings per share were 7 cents basic compared to 16 cents basic a year ago. Adjusted basic earnings per share1 were 12 cents for the third quarter of fiscal 2017 compared to 21 cents a year ago;
- Order Bookings were $284 million, a 25% increase from the third quarter of fiscal 2016;
- Period end Order Backlog was $632 million, 16% higher than at December 27, 2015;
- The Company's balance sheet and financial capacity to support growth remained strong, with unutilized credit facilities of $658.2 million; and
- Subsequent to the third quarter, on February 8, 2017, the Company announced the appointment of Andrew Hider as Chief Executive Officer of ATS. See "CEO Appointment".
"Third quarter operating performance was solid, notwithstanding lower revenues," said Anthony Caputo, Chief Executive Officer "Order Backlog is significant, and includes a number of enterprise programs that are strategic to our customers. Our well-rooted strategy of pursuing these types of programs is yielding clear results. ATS' global customer base, talented employees and strong balance sheet with significant cash and funding available position the Company well for future value creation."
Third Quarter Summary
Fiscal 2017 third quarter revenues were 14% lower than in the corresponding period a year ago, primarily reflecting the timing of project activities. On average, projects currently in process are in an earlier stage of completion where relatively lower revenues are recognized. Additionally, fiscal 2017 third quarter revenues were negatively impacted by the suspension and subsequent cancellation of the large enterprise program won in the fourth quarter of fiscal 2016 and by revised estimates and adjustments related to certain programs that are in process or have been completed. Foreign exchange rate changes did not materially impact the translation of revenues earned by foreign-based subsidiaries compared to the corresponding period a year ago.
By market, fiscal 2017 third quarter revenues from consumer products & electronics decreased 31%, due to lower Order Backlog entering the third quarter of 2017 compared to a year ago. Revenues generated in the energy market increased 178% compared to the corresponding period a year ago, primarily due to higher Order Backlog entering the third quarter of 2017 compared to a year ago. Revenues generated in the life sciences market decreased 17% compared to the corresponding period a year ago, primarily reflecting the timing of project activities.
Transportation revenues decreased 34% compared to a year ago primarily due to lower activity compared to a year ago.
Fiscal 2017 third quarter earnings from operations were $15.3 million (6% operating margin) compared to $26.8 million (10% operating margin) in the third quarter of fiscal 2016. Third quarter fiscal 2017 earnings from operations included $2.3 million of restructuring costs related to the closure of a U.S. operation, which was substantially completed during the quarter. In addition, $1.0 million of incremental depreciation expense was incurred in relation to the closure.
Excluding the $2.3 million of restructuring costs and $4.9 million related to amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK, and sortimat, third quarter fiscal 2017 adjusted earnings from operations were $22.5 million (9% margin). Third quarter fiscal 2016 earnings from operations included a gain of $3.7 million from the sale of a redundant U.S. facility, $3.4 million of restructuring and severance costs and $5.6 million related to the amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat. Excluding these items, last year's third quarter adjusted earnings from operations were $32.1 million (12% margin). Lower adjusted earnings from operations in the third quarter of fiscal 2017 primarily reflected lower revenues and increased stock compensation expenses.
Depreciation and amortization expense was $9.0 million in the third quarter of fiscal 2017, compared to $9.2 million a year ago. Included in third quarter fiscal 2017 depreciation expense was the aforementioned $1.0 million of incremental depreciation related to the closure of a U.S. operation. Excluding the $1.0 million of incremental depreciation, depreciation and amortization expenses were $8.0 million in the third quarter of fiscal 2017, which primarily reflected lower amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat compared to the third quarter of fiscal 2016.
EBITDA was $24.3 million (10% EBITDA margin) in the third quarter of fiscal 2017 compared to $36.0 million (13% EBITDA margin) in the third quarter of fiscal 2016.
Third quarter fiscal 2017 Order Bookings were $284 million, a 25% increase over the third quarter of fiscal 2016. By customer market, higher Order Bookings in the consumer products & electronics, energy and life sciences markets more than offset lower Order Bookings in the transportation market.
At January 1, 2017, Order Backlog was $632 million, 16% higher than at December 27, 2015. Higher Order Backlog in the energy and life sciences markets more than offset lower Order Backlog in the consumer products & electronics and transportation markets.
On February 8, 2017, the Company announced that Andrew Hider had been appointed Chief Executive Officer of ATS. Mr. Hider is uniquely qualified to lead ATS and its global team of 3,500 employees. He is an experienced executive with a track record of success founded on his ability to drive business growth and operational performance in complex business environments and across multiple industries including transportation, advanced technology, instrumentation and industrial products.
Most recently, Mr. Hider served as President and CEO of the Taylor Made Group, LLC. Prior to that, Mr. Hider served for 10 years at Danaher Corporation (NYSE: DHR) including as President of Veeder Root. Mr. Hider began his career with General Electric (NYSE: GE), serving in a number of areas over a six-year period culminating in his appointment as General Manager of GE Tri-Remanufacturing. Mr. Hider holds a Bachelor of Science in Interdisciplinary Engineering and Management and a Masters of Business Administration, both from Clarkson University.
As planned and announced in March 2016, current CEO Anthony Caputo will be stepping down and resigning from the Board of Directors on February 15th, 2017. Mr. Hider will assume leadership of ATS on March 6, 2017.
Quarterly Conference Call
ATS' quarterly conference call begins at 10:00 a.m. eastern on Wednesday February 8, 2017, and can be accessed live at www.atsautomation.com or on the phone by dialing (647) 427-7450 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 by dialing (416) 849-0833 and entering passcode 63062588 followed by the number sign.
ATS is an industry-leading automation solutions provider to many of the world's most successful companies. ATS uses its extensive knowledge base and global capabilities in custom automation, repeat automation, automation products and value-added services including pre-automation and after-sales services to address the sophisticated manufacturing automation systems and service needs of multinational customers in markets such as life sciences, chemicals, consumer products, electronics, food, beverage, transportation, energy, and oil and gas. Founded in 1978, ATS employs approximately 3,500 people at 23 manufacturing facilities and over 50 offices in North America, Europe, Southeast Asia and China. The Company's shares are traded on the Toronto Stock Exchange under the symbol ATA. Visit the Company's website at www.atsautomation.com
Management's Discussion and Analysis For the Quarter Ended January 1, 2017
This Management's Discussion and Analysis ("MD&A") for the three and nine months ended January 1, 2017 (third quarter of fiscal 2017) is as of February 8, 2017, and provides information on the operating activities, performance and financial position of ATS Automation Tooling Systems Inc. ("ATS" or the "Company") and should be read in conjunction with the unaudited interim condensed consolidated financial statements of the Company for the third quarter of fiscal 2017 which have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in Canadian dollars. The Company assumes that the reader of this MD&A has access to, and has read the audited consolidated financial statements prepared in accordance with IFRS and the MD&A of the Company for the year ended March 31, 2016 (fiscal 2016), and accordingly, the purpose of this document is to provide a fiscal 2017 third quarter update to the information contained in the fiscal 2016 MD&A. Additional information is contained in the Company's filings with Canadian securities regulators, including its Annual Information Form, found on SEDAR at www.sedar.com and on the Company's website at www.atsautomation.com.
Notice to Reader: Non-IFRS Measures and Additional IFRS Measures
Throughout this document management uses certain non-IFRS measures to evaluate the performance of the Company. 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", "adjusted net income", "adjusted earnings from operations", "adjusted basic earnings per share", "non-cash working capital", "Order Bookings" and "Order Backlog" do not have any standardized meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies. Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. In addition, management uses "earnings from operations" which is an additional IFRS measure to evaluate the performance of the Company. Earnings from operations is presented on the Company's consolidated statements of income as net income excluding income tax expense and net finance costs. Operating margin is an expression of the Company's earnings from operations as a percentage of revenues. EBITDA is defined as earnings from operations excluding depreciation and amortization (which includes amortization of intangible assets). EBITDA margin is an expression of the Company's EBITDA as a percentage of revenues. Adjusted earnings from operations is defined as earnings from operations before items excluded from management's internal analysis of operating results, such as amortization expense of acquisition-related intangible assets, acquisition-related transaction and integration costs, restructuring charges, and certain other adjustments which would be non-recurring in nature ("adjustment items"). Adjusted basic earnings per share is defined as adjusted net income on a basic per share basis, where adjusted net income is defined as adjusted earnings from operations less net finance costs and income tax expense, plus tax effects of adjustment items. Non-cash working capital is defined as the sum of accounts receivable, costs and earnings in excess of billing on contracts in progress, inventories, deposits, prepaids and other assets, less accounts payable, accrued liabilities, provisions and billings in excess of costs and earnings on contracts in progress. 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.