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News

ATS Reports First Quarter: Significant Increases in ASG Orders and MgSi Solar Production, Announces Photowatt Spin-Out

ATS Automation

 

Note: Truncated Release

CAMBRIDGE, ON, Aug. 9 /CNW/ - ATS Automation Tooling Systems Inc. today reported its financial results for the three months ended June 30, 2007 - including significant increases in new automation order bookings, order backlog, and production of refined metallurgical silicon (‘‘MgSi’‘) solar products at Photowatt France - and announced its strategy to spin out Photowatt to ATS shareholders.

Highlights

     -   New Automation Order Bookings increase to $146 million from
         $98 million in the first quarter of fiscal 2007.
     -   Order Backlog expands to $217 million compared to $176 million a year
         ago.
     -   Operating results improve at ASG Cambridge and Ohio.
     -   MgSi revenue at Photowatt France increases to $16.7 million compared
         to nil a year ago.
     -   Board of Directors approves strategy to distribute shares in
         Photowatt to ATS shareholders (the ‘‘Spin Out’‘).
     -   A $110 million rights offering to raise funds for Photowatt launched
         and is expected to be completed as scheduled on August 16, 2007.

‘‘ATS made excellent strategic progress in the first quarter,’‘ said Ron Jutras, President and Chief Executive Officer. ‘‘Automation Systems Group (ASG) began its performance recovery with improved results experienced in our Cambridge and Ohio operations. Of vital importance, ASG generated a second consecutive quarter of much improved order bookings and with it a 23% increase in year-over-year order backlog levels. As a result, ASG order backlog to start the second quarter is at its highest level in five quarters and is much more balanced across our global operations compared to a year ago. This growth in Order Backlog is key to improving the utilization of our global resources and performance this year.’‘

Solar Share Distribution
The Company's Board of Directors has approved a strategy to distribute shares of Photowatt to ATS shareholders. This proposed Spin Out, consistent with ATS's commitment to creating value for shareholders through its solar business, will result in Photowatt becoming a standalone public company, and supports the strategy announced in June 2007 to turn ATS into a pure automation systems solutions business. Distributing the shares of Photowatt to ATS shareholders is expected to allow the full value of each business to be recognized in the share price of each enterprise in the stock market.

Furthermore, the Spin Out will not dilute ATS shareholders' ownership interest in Photowatt and will allow ATS shareholders to continue to participate in the expected future growth of Photowatt France.

The Spin Out of Photowatt is targeted for completion in the spring of 2008. This schedule reflects the guidance provided by the Company's experienced advisers after consideration of the need to complete necessary regulatory filings, secure advance tax rulings, recruit a separate board of directors and receive approvals from ATS shareholders and securities regulators.

During the preparatory period for the Spin Out, ATS intends to continue to strengthen Photowatt to make it a more attractive and valuable enterprise. Key activities to be undertaken include the deployment of the new capital raised through the rights offering as outlined in the rights offering prospectus, improving the efficiency of MgSi solar cells, and recruiting a CEO
for Photowatt.

Automation Systems Group (ASG) Results

     -   Order Bookings in the first quarter of fiscal 2008 increased 49% to
         $146 million compared to $98 million in the first quarter of fiscal
         2007.
     -   ASG Order Backlog increased 23% to $217 million from $176 million in
         the first quarter of fiscal 2007 and has increased $32 million, or
         17%, since year end.
     -   Excluding severance costs of $2.1 million in the current quarter, ASG
         EBITDA was $4.8 million, compared to adjusted EBITDA of $3.6 million
         in the fourth quarter of fiscal 2007.

Core Business Outlook
Management expects to see continued performance improvements in
Automation Systems Group operations in fiscal 2008. Although the strength of
the Canadian dollar and restructuring in the North American automotive
industry remain distinct challenges, management expects the substantial
increase in order backlog since year end, combined with the recent reduction
of excess capacity in North American ASG operations, will lead to higher
factory utilization and improved results for the balance of fiscal 2008.

To further strengthen performance in ASG, management intends to continue
to aggressively push forward with its four focused initiatives: improve core
operations through better resource utilization and further cost improvements;
develop new customer relationships as well as industry and regional automation
markets; further advance the recognized ATS global brand; and, enhance
employee talent development.

Photowatt Results

     -   Photowatt France revenue in the first quarter included $16.7 million
         from sales of MgSi modules, (nil first quarter last year) as
         Photowatt successfully ramped production of this product and
         attracted European buyers.
     -   Photowatt France revenue increased 22% from the fourth quarter of
         fiscal 2007 and was up 5% compared to the first quarter a year ago
         despite a 13% year-over-year decline in average per watt selling
         prices.
     -   10.7 megawatts of solar products were sold in the first quarter
         compared to 8.7 megawatts in the first quarter of fiscal 2007 and
         8.0 megawatts in the fourth quarter of fiscal 2007.
     -   Photowatt France generated EBITDA of $2.7 million in the first
         quarter compared to $5.9 million in the fourth quarter, primarily
         reflecting declines in industry prices per watt, shortages and rising
         prices of polysilicon and the Company's planned ramp up of MgSi
         module production.
     -   Photowatt Technologies combined operating loss was $2.4 million
         compared to an operating loss of $31.1 million in the fourth quarter
         of fiscal 2007, reflecting substantially lower Spheral Solar and
         solar corporate costs and a sequential reduction in Photowatt USA's
         operating loss as activity at this underperforming facility began to
         wind down in advance of its closure.

Photowatt France Commentary
As part of its strategy to manage the impact of supply shortages and higher prices for polysilicon, Photowatt successfully transitioned a significant amount of its production to MgSi in the first quarter. As a result, sales of silicon modules made from 100% MgSi represented approximately 40% of Photowatt France first quarter of fiscal 2008 revenue compared to 11% in the fourth quarter of fiscal 2007 and nil in the first quarter of fiscal 2007.

Now that Photowatt has successfully ramped production of its MgSi products to substantial levels, the next phase in its planned strategy is to optimize production processes for MgSi, including improving power conversion efficiency, reducing silicon usage per watt, increasing labour efficiencies and reducing scrap rates.

Photowatt is also seeking additional long-term polysilicon supply contracts to offset the limited supply and low quality of polysilicon feedstock currently available in the short-term market.

Quarterly Conference Call
ATS's quarterly conference call begins at 10 am eastern today and can be accessed over the Internet at www.atsautomation.com or on the phone at 416 644 3427.

Notice to Reader
The terms EBITDA and adjusted EBITDA used in this press release are non-GAAP measures. See Management's Discussion and Analysis attached.

About ATS
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 healthcare, computer/electronics, automotive and consumer products. It also leverages its many years of repetitive manufacturing experience and skills to fulfill the specialized repetitive equipment manufacturing requirements of customers.

Through its solar business, ATS participates in the growing solar energy industry and through its precision components business it produces, in high volume, precision components and subassemblies. ATS employs approximately 3,500 people at 24 manufacturing facilities in Canada, the United States, 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
This Management's Discussion and Analysis (‘‘MD&A’‘) for the three months ended June 30, 2007 (first quarter of fiscal 2008) provides detailed information on the Company's operating activities for the first quarter of fiscal 2008 and should be read in conjunction with the unaudited interim consolidated financial statements of the Company for the three months ended June 30, 2007 (first quarter fiscal 2008). The Company assumes that the reader of this MD&A has access to, and has read the audited consolidated financial statements and MD&A of the Company for fiscal 2007 and, accordingly, the purpose of this document is to provide a first quarter update to the information contained in the fiscal 2007 MD&A. These documents and other information relating to the Company, including the Company's fiscal 2007 audited consolidated financial statements, MD&A and Annual Information Form may be found on SEDAR at www.sedar.com.

Notice to Reader
The Company has three reportable segments: Automation Systems Group (‘‘ASG’‘), Photowatt Technologies (‘‘Photowatt’‘), and Precision Components Group (‘‘PCG’‘). Photowatt Technologies is comprised of Photowatt France, Photowatt USA and Spheral Solar. Photowatt France consists of an integrated solar ingot, wafer, cell and module production facility in France. Photowatt USA is a small module assembly and sales operation in the United States, which is in the process of being closed. Spheral Solar is a now halted development project based on spheral technology. Any reference to solar production capacity assumes the use of polysilicon at currently experienced levels of efficiency. Actual solar capacity may vary materially for a number of reasons including the use of refined metallurgical silicon (‘‘MgSi’‘), changes in cell efficiencies and/or changes in production processes. References to Photowatt's cell ‘‘efficiency’‘ means the percentage of incident energy that is converted into electrical energy in a solar cell. Solar cells and modules are sold based on wattage output. ‘‘Silicon’‘ refers to a variety of silicon feedstock, including polysilicon, MgSi and polysilicon powders and fines.

Non-GAAP Measures
Throughout this document the term ‘‘operating earnings’‘ is used to denote earnings (loss) from operations. EBITDA is also used and is defined as earnings (loss) from operations excluding depreciation, amortization (which includes amortization of intangible assets, and impairment of goodwill) and segment and business unit allocation of corporate costs. The term ‘‘adjusted EBITDA’‘ that is used by the Company from time to time and is defined as EBITDA excluding certain adjustments as described in the MD&A. The term ‘‘margin’‘ refers to an amount as a percentage of revenue. The terms ‘‘earnings from operations’‘, ‘‘operating earnings’‘, ‘‘margin’‘, ‘‘operating loss’‘, ‘‘operating results’‘, ‘‘operating margin’‘, ‘‘EBITDA’‘, ‘‘adjusted EBITDA’‘, ‘‘adjusted EBITDA margin’‘, ‘‘Order Bookings’‘ and ‘‘Order Backlog’‘ do not have any standardized meaning prescribed within Canadian generally accepted accounting principles (‘‘GAAP’‘) and therefore may not be comparable to similar measures presented by other companies. A reconciliation to total Company revenue and earnings from operations for the first quarter of fiscal 2008 and 2007 is contained in the unaudited interim Consolidated Financial Statements for the three months ended June 30, 2007. Operating earnings, EBITDA and adjusted EBITDA are some of the measures the Company uses to evaluate the performance of its segments. ATS presents EBITDA and adjusted EBITDA to show its baseline performance before certain non-cash and restructuring-related expenses and other items that are considered by management to be outside of ATS's expected normal ongoing operational results. Management believes that ATS shareholders and potential investors in ATS use non-GAAP financial measures such as operating earnings, EBITDA and adjusted EBITDA in making investment decisions about the Company and measuring its operational results. EBITDA and adjusted EBITDA should not be construed as substitutes for net income determined in accordance with GAAP.

For further information: Carl Galloway, Vice President and Treasurer, 
Gerry Beard, Vice President and Chief Financial Officer, (519) 653-6500.

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