ATS Reports Second Quarter Fiscal 2018 Results

CAMBRIDGE, ON /CNW/ - ATS Automation Tooling Systems Inc. (TSX: ATA) ("ATS" or the "Company") today reported financial results for the three and six months ended October 1, 2017.

Second Quarter Summary

• Revenues were $274.9 million, 13% higher than a year ago.
• Earnings from operations were $23.9 million (9% operating margin), compared to $17.3 million (7% operating margin) in the second quarter of fiscal 2017. Adjusted earnings from operations1 were $28.8 million (10% margin), compared to $22.3 million (9% margin) in the second quarter a year ago, primarily reflecting higher revenues and improved gross margin.
• EBITDA¹ was $32.8 million (12% margin), compared to $25.3 million (10% margin) in the second quarter of fiscal 2017.
• Earnings per share were 15 cents basic and diluted compared to 9 cents basic and diluted a year ago. Adjusted basic earnings per share1 were 18 cents for the second quarter of fiscal 2018 compared to 13 cents a year ago.
• Order Bookings were $257 million, an 11% decrease from the second quarter of fiscal 2017.
• Period end Order Backlog was $648 million, 1% lower than at October 2, 2016.
• On July 28, 2017, the Company amended its $750 million senior secured credit facility to extend the agreement by three years to mature on August 29, 2021. The Company's balance sheet and financial capacity to support growth remained strong, with unutilized credit facilities of $647.9 million.
• Subsequent to the end of the second quarter of fiscal 2018, the Company announced an operational improvement program following a review of its global operations. See "Operational Improvements".

¹ Non-IFRS measure: see "Notice to Reader: Non-IFRS Measures and Additional IFRS Measures".

"Our second quarter performance reflected both year over year and sequential growth in revenues and margins," said Andrew Hider, Chief Executive Officer. "We have advanced the initial roll-out of our ATS Business Model and while we are in the early stages of deployment, we are making progress towards adoption across our global operations. Going forward, we have a strong balance sheet and a clear strategic framework with the goal of creating long-term sustainable shareholder value."

Second Quarter Summary
Fiscal 2018 second quarter revenues were 13% higher than in the corresponding period a year ago.  Higher revenues primarily reflected higher Order Backlog entering the second quarter of fiscal 2018 compared to a year ago.

By market, fiscal 2018 second quarter revenues from consumer products & electronics increased 15% compared to a year ago due to timing of Order Bookings.  Revenues generated in the energy market decreased 26% primarily due to lower Order Backlog entering the second quarter of fiscal 2018 compared to a year ago.  Revenues in the life sciences market increased 37%, primarily reflecting higher Order Backlog entering the second quarter of fiscal 2018 compared to a year ago.  Transportation revenues increased 6% compared to a year ago primarily due to timing of Order Bookings.

Fiscal 2018 second quarter earnings from operations were $23.9 million (9% operating margin) compared to $17.3 million (7% operating margin) in the second quarter of fiscal 2017.  Second quarter fiscal 2018 earnings from operations included $4.9 million related to amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat.  Included in second quarter fiscal 2017 earnings from operations was $5.0 million related to amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat.  Excluding these items, second quarter fiscal 2018 adjusted earnings from operations were $28.8 million (10% margin), compared to adjusted earnings from operations of $22.3 million (9% margin) a year ago.  Higher adjusted earnings from operations primarily reflected higher revenues and an improved gross margin in the second quarter of fiscal 2018, partially offset by higher selling, general and administrative expenses compared to a year ago.

Depreciation and amortization expense was $8.9 million in the second quarter of fiscal 2018 and $8.0 million in the second quarter of fiscal 2017.  The increase primarily reflected depreciation of internal development projects and computer hardware.

EBITDA was $32.8 million (12% EBITDA margin) in the second quarter of fiscal 2018 compared to $25.3 million (10% EBITDA margin) in the second quarter of fiscal 2017.  

Order Bookings
Second quarter fiscal 2018 Order Bookings were $257 million, an 11% decrease from the second quarter of fiscal 2017.  By customer market, lower Order Bookings in the life sciences market were partially offset by higher Order Bookings in consumer products & electronics, energy and transportation markets.   

Order Backlog
At October 1, 2017, Order Backlog was $648 million, 1% lower than at October 2, 2016.  Lower Order Backlog in the consumer products & electronics and transportation markets was partially offset by higher Order Backlog in the energy and life sciences markets.  Order Backlog a year ago included approximately $70 million related to a program that was put on hold by a customer subsequent to the end of the period and then cancelled due to rapid changes in their market.  Foreign exchange rate changes negatively impacted the translation of Order Backlog from foreign-based ATS subsidiaries compared to second quarter fiscal 2017.

Operational Improvements
Following a thorough review of the Company's operations, including its global capabilities and leadership, management has implemented a restructuring that will result in the closure of one division in southeast Asia, the rationalization of a business line at a division in Europe, as well as leadership and management changes. In total, management expects that approximately 3% of the Company's workforce will be affected.  The restructuring is designed to improve the Company's leadership, cost structure and enhance capacity utilization by realigning resources to areas of the business that will enable it to deliver increased value to customers and shareholders. The restructuring will be completed over the next three to four months and most of the associated cost of approximately $9 million to $10 million will be incurred in the Company's third fiscal quarter. Management expects an 18 to 24 month payback.

Board of Directors
Ivan Ross has announced his decision to step down from the board of directors effective November 8, 2017, in order to focus on his role at Ardea Partners, a financial advisory firm which Mr. Ross co-founded in 2016. With the recent appointment of Kirsten Lange to the board of directors, its membership is now comprised of seven directors.

"On behalf of the board of directors, I thank Ivan for his significant contributions to ATS," said David McAusland, Chairman. "Ivan has been a valuable and dedicated member of our board and we wish him every success in his future endeavours."

Quarterly Conference Call
ATS' quarterly conference call will begin at 10:00 a.m. eastern on Wednesday November 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 6088339 followed by the number sign.

About ATS
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.

Management's Discussion and Analysis
For the Quarter Ended October 1, 2017

This Management's Discussion and Analysis ("MD&A") for the three and six months ended October 1, 2017 (second quarter of fiscal 2018) is as of November 7, 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 second quarter of fiscal 2018, 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, 2017 (fiscal 2017), and, accordingly, the purpose of this document is to provide a fiscal 2018 second quarter update to the information contained in the fiscal 2017 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.

Company Contact
Maria Perrella, Chief Financial Officer
Tel: 519-653-6500