ATS Reports Dramatic Growth in Fourth Quarter | Automation.com

ATS Reports Dramatic Growth in Fourth Quarter

May 272005
CAMBRIDGE, ON, May 26 /CNW/ - ATS Automation Tooling Systems Inc. today
reported net earnings from continuing operations of $14.6 million (24 cents
per share basic and diluted) for the three months ended March 31, 2005 -
compared to a net loss from continuing operations of $0.8 million (loss of
1 cent per share basic and diluted) a year ago.

Automation Systems Group (ASG) and Solar Group both reported a
significant acceleration in operating earnings in the fourth quarter, with ASG
operating margins increasing to 8.4% from 5.5% in the fourth quarter a year
ago and Solar operating margins increasing to a record high of 14.6% from 8.0%
in the comparable quarter a year ago.

Fourth Quarter Financial Highlights
  • Consolidated revenue increased 14% to $208.7 million from
    $182.9 million in the fourth quarter a year ago. ASG revenue grew 9%
    to $146.1 million reflecting strong growth in the healthcare market.
    Solar Group revenue increased 57% to $41.0 million. These increases
    more than offset a 16% decrease in Precision Components Group (PCG)
    revenue, which totaled $25.5 million.
  • ASG operating earnings were up 67% to $12.3 million from $7.4 million
    in the fourth quarter of fiscal 2004 on much stronger operating
    margins.
  • ASG operating earnings of $12.3 million include unusual costs of
    $3.5 million related to an allowance for two customer credit-related
    matters. Excluding these unusual costs, ASG operating margins would
    have been 10.8%.
  • Solar Group operating earnings were a record $6.0 million, compared to
    $2.1 million a year ago on the strength of continued demand for solar
    products and better than anticipated production improvements in the
    quarter.
  • PCG continuing operations were breakeven in the fourth quarter
    compared to a loss of $0.9 million in the same period a year ago. The
    results for the fourth quarter of fiscal 2005 included a charge of
    $0.5 million as a result of a program that will be terminated due to
    management's rationalization initiatives in fiscal 2005.
  • During fiscal 2005 and in early fiscal 2006, the Company has
    rationalized PCG to improve its focus and prospects. Part of this
    initiative includes the planned divesture of its precision metals
    division. Accordingly, the precision metals results have been treated
    as a discontinued operation.
  • The total loss in the quarter from discontinued operations was
    $14.1 million (23 cents per share), including a $12.8 million after
    tax, non-cash charge to write-down the value of the precision metals
    assets to their estimated net realizable value. The actual value
    realized on disposition of these assets will be determined upon
    negotiation and completion of the planned sale and may vary from this
    estimate.
  • A non-cash goodwill impairment charge of $22.2 million ($20.7 million
    after-tax, or 34 cents per share) was taken in the fourth quarter to
    write-down the value of PCG's goodwill, reflecting broad based
    challenges in the automotive industry and the decline in the value of
    the Canadian dollar over the past two years.
  • The Company recorded a gain of $27 million (44 cents per share) from
    key-man life insurance proceeds. Subsequent to quarter end,
    $25 million of these proceeds were used to exercise and complete an
    option to repurchase and cancel 1,974,723 ATS common shares at a price
    of $12.66 per share.
  • Net earnings were $0.5 million (1 cent per share basic and diluted)
    compared to a net loss of $3.1 million (loss of 5 cents per share
    basic and diluted) a year ago.
  • New automation systems Order Bookings were $87 million, compared to
    $184 million a year ago.
  • Automation systems Order Backlog was $169 million compared to
    $227 million at March 31, 2004 and $232 million at December 31, 2004.

    Fiscal 2005 Annual Financial Highlights
    ATS also made substantial improvements during the twelve months ended
    March 31, 2005.

  • Consolidated revenue from continuing operations increased 25% to a
    record $770.9 million from $616.9 million in fiscal 2004. In fiscal
    2005, ASG revenue increased 17% to a record $547.4 million from
    $466.7 million, while Solar Group's revenue was a record
    $143.8 million, or 62% higher than in fiscal 2004. PCG revenue
    declined 3% to $98.1 million from $101.3 million in fiscal 2004.
  • ASG operating earnings increased 73% to $38.8 million (operating
    margin of 7.1%) compared to $22.5 million (4.8% operating margin) in
    the same period of fiscal 2004. Solar Group operating earnings
    increased more than three fold to $13.1 million from $4.2 million
    while operating margin increased to 9.1% from 4.8%.
  • PCG's operating loss from continuing operations was $0.4 million
    compared to an operating loss of $1.7 million in fiscal 2004.
  • Net earnings from continuing operations were $30.5 million (50 cents
    per share basic and diluted) compared to $1.7 million (3 cents per
    share basic and diluted) a year ago.
  • Net earnings were $9.3 million (15 cents per share basic and
    diluted) compared to a net loss of $2.3 million (loss of 4 cents per
    share basic and diluted) in the prior year.

    "ATS achieved dramatically improved operating results in Automation
    Systems Group in the fourth quarter by capitalizing on revenue growth and more
    effectively managing and utilizing our resources to deliver higher operating
    margins," said Ron Jutras, ATS President and Chief Executive Officer. "In
    fact, Group operating margins advanced to 8.4% in the quarter - and would have
    been 10.8% had it not been for an allowance taken for two customers
    experiencing financial difficulty. We're also very pleased with the progress
    we've made in healthcare and pharmaceuticals where revenue more than doubled
    in both the fourth quarter and for the full fiscal year compared to a year
    ago. We continue to strategically target growth in the most attractive
    segments of our markets and on balance, ASG's revenue and margins in the
    fourth quarter and for all of fiscal 2005 reflected this focus."

    In commenting on Solar Group results, Mr. Jutras said: "Our second
    largest operating group continued to set new performance records in the fourth
    quarter - surpassing the previous record highs for revenue, margins and
    operating earnings. In fact, operating margins were 14.6%, clearly
    demonstrating the value being created within our solar operations as a result
    of the significant strides made through the continuous optimization of
    Photowatt's highly automated factory in France, strong market demand, and to a
    lesser degree higher selling prices. Strong market demand for solar further
    reinforces the potential of our new Spheral Solar Power technology. In April
    we achieved a critical milestone by producing our first factory functional
    cells and shipping initial SuperFlex modules. As a result we have now started
    the first phases of our factory optimization plan."

    With respect to the continuing Precision Components Group, Mr. Jutras
    said: "As expected, PCG continued to progress towards returning to
    profitability and achieved breakeven results in spite of the charge we
    recorded to recognize the upcoming termination of an underperforming customer
    program. This turnaround was delivered despite the 16% decrease in PCG
    revenue. We believe the stronger focus of PCG over the past year as shown by
    asset and program rationalizations - notably the sale of its thermal products
    business last fall, the previously announced closure of a manufacturing plant
    in Texas, and the recently announced decision to divest the precision metals
    division - are necessary steps on our path back to sustainable profitability.
    The transfer of customer programs from Texas is on schedule to be completed
    next month. Negotiations to sell the metals division are ongoing. All of these
    steps are important in creating a healthy platform for PCG going forward."

    Looking Forward
    "We made significant progress in our operating margin performance in the
    fourth quarter showing that the initiatives we have taken are beginning to pay
    off," said Mr. Jutras. "Our near-term concern is the delays in customer order
    placement experienced in the past couple of months within the ASG business.
    These delays are frustrating because quotation activity is extremely robust.
    But in context, the flow of sales orders is seldom ideal in the automation
    industry and we have seen delays like this in the past. This is why the
    diversification we've achieved in recent years is so vital. We engage in
    active, ongoing discussions with our customers and from our vantage point, we
    are confident these delays are temporary. As a result, it's critically
    important that we retain our valued productive resources while we work
    aggressively to convert prospects into firm orders. It's obvious that the
    sales cycle for our automation systems has lengthened over the past few months
    for a variety of customer specific reasons. What's important to us is that our
    order prospects have not disappeared - we think they have gotten stronger. We
    believe our competitive advantages are greater than ever and ATS is better
    positioned to secure new business globally than ever before."

    ATS continues to introduce new services and new technologies to meet the
    needs of the Company's broadening customer base. In April, ASG successfully
    introduced three new platforms at Interphex, the pharmaceutical industry's
    largest trade show. ATS Compliant Solutions(TM), the Company's consulting
    service for healthcare and pharmaceuticals, achieved its first year financial
    goals for consulting revenue and earnings and helped ATS establish
    relationships with several significant new customers in the sector. The
    outlook for the Company's contract healthcare equipment manufacturing
    initiative is also very positive and in fiscal 2005, this activity produced
    revenue of $30.6 million, 87% more than the year before.

    With respect to Solar Group, Mr. Jutras said: "Demand for solar products
    is expected to remain robust well into fiscal 2006 and our manufacturing
    efficiency and throughput at Photowatt have shown additional major
    improvements this year. We continue to actively manage the tight supply and
    rising prices of silicon feedstock. While the effects of tight silicon supply
    are uncertain, we believe Photowatt has secured sources for a significant
    amount of its capacity for fiscal 2006. As a result we expect Photowatt's
    operating performance to remain strong. "

    "Significant solar market demand makes a great environment for us to
    launch our SSP technology," said Mr. Jutras, "and we reached an important
    technical milestone in April by shipping our first fully functional SuperFlex
    products produced on SSP factory systems. As expected production volumes are
    very modest but we have now reached the next stage of our plan that will put
    the SSP factory through a deliberate and focused program of optimization. This
    is the normal course of commissioning a manufacturing facility of this
    magnitude. Our first optimization cycle is well underway and in June we will
    go into an intensive improvement stage which is expected to last approximately
    one month. We will then restart production, assess performance and begin a new
    round of optimization, each time gaining throughput and capacity improvements.
    Each stage of this optimization process should be shorter in duration. We're
    excited about all of our prospects for SSP and especially delighted with the
    commitment being made to our integrated roofing system technology by Elk
    Corporation."

    The outlook for PCG is "cautious but improving," said Mr. Jutras.
    "Realistically, it is unlikely that the Group will achieve satisfactory levels
    of profitability until the second half of fiscal 2006 due to the costs of
    consolidating the McAllen business, the traditional summer shut-downs and the
    continued volatility in the automotive market. Our near-term goal is to
    complete the strategic initiatives taken over the past few months which we
    believe will further improve profitability at PCG."

    Management Appointments
    ATS also today announced the recruitment of Syl Ghirardi to the newly
    created position of President and Chief Executive Officer of the ATS Solar
    Group and the appointment of ATS veteran Joe Aikins to the position of Vice
    President of Systems Operations, ASG East.

    "Our entire team has a strong mandate to achieve the financial and
    operational goals that will enhance shareholder and customer value," said Mr.
    Jutras. "We intend to realize improvements in all Groups and build on the
    industry leadership established so effectively under our founder Klaus
    Woerner. I've spent a great deal of time over the past four months meeting
    with customers and I'm delighted with the universal support for the direction
    we are taking."

    Quarterly Conference Call
    ATS will hold its quarterly conference call at 10 am eastern time today.
    To listen to a live audio webcast of the call please visit
    www.atsautomation.com.

    Note to Readers
    The fourth quarter MD&A and consolidated financial statements
    accompanying this news release contain detailed information of quarterly
    performance, financial condition and the Company's outlook. Readers should
    review the Company's MD&A for the full fiscal year ended March 31, 2005 which
    will be contained in the Fiscal 2005 annual report when it becomes available.

    Certain forward-looking statements are made in this news release and
    accompanying MD&A, including statements regarding possible future results and
    business. Investors are cautioned that such forward-looking statements involve
    risks and uncertainties. The Company's results could differ materially from
    those currently anticipated due to a number of factors including, but not
    limited to, the risks and uncertainties contained in the Company's fiscal 2004
    Annual Report and other risks detailed from time to time in ATS's periodic
    reports filed with Canadian regulatory authorities. Readers should consult the
    Company's fiscal 2005 annual report, MD&A, and audited financial statements,
    and other regulatory documents, as they become available.

    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. ATS is also an
    emerging leader in the rapidly growing market for solar energy cells and
    modules. The Company also makes precision components and subassemblies using
    its own custom-built manufacturing systems, process knowledge and automation
    technology. ATS employs approximately 4,200 people at 26 manufacturing
    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.
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