DELIVERING VALUE
THROUGH TEAM EXECUTION
ATS AUTOMATION ANNUAL REPORT 2017
ORDER BOOKINGS GREW 6%
IN FY2017.
Performance Highlights
(in millions of dollars, except per share data)
Revenues
Earnings from operations
Adjusted earnings from operations1
EBITDA1
Net income from continuing operations
Earnings per share – basic from
continuing operations
Adjusted earnings per share1
Order Bookings
Order Backlog
1 Non-IFRS measure
ATS is listed on the Toronto Stock Exchange under the symbol “ATA”.
Fiscal 2017
1,010.9
71.9
97.1
106.5
35.0
0.38
0.57
1,134
681
$
$
$
$
$
$
$
$
$
Fiscal 2016
Fiscal 2015
$
$
$
$
$
$
$
$
$
1,039.6
76.8
114.4
116.1
39.6
0.43
0.72
1,070
652
$
$
$
$
$
$
$
$
$
936.1
67.0
109.8
107.5
38.9
0.43
0.77
981
632
STRONG BALANCE SHEET
TO SUPPORT GROWTH WITH
$287 MILLION IN CASH
$40 MILLION AGREEMENT TO
DESIGN, DELIVER AND INSTALL
NEW AUTOMATED MEDICAL
DEVICE TECHNOLOGY
Table of Contents
ATS Worldwide 2 ATS Capabilities 4 Pre-Automation 5 Automation/Integration 6 Post-Automation 8
Markets Served 10 Building Excellence in the Life Sciences Industry 12 Advancing the Future of Energy 12
Driving Transportation Automation 13 Meeting Demand for Consumer Products and Electronics 13
Letter to Shareholders 14 Management’s Discussion and Analysis 16 Management’s Responsibility for
Financial Reporting 42 Independent Auditors’ Report 43 Consolidated Financial Statements 44
Notes to Consolidated Financial Statements 49 Shareholder Information 91 Board of Directors 92
ATS AUTOMATION ANNUAL REPORT 2017 1
ATS WORLDWIDE
ATS’s competitive advantage begins with our people. For more than 35 years,
our team of experienced professionals, leaders and highly skilled experts has
delivered value by collaborating with customers to create and build some of the
world’s most technologically advanced and innovative automation solutions.
North America
Rolling Meadows
Rock Hill
Wixom
Cambridge
Woodbridge
Parsippany
Lewis Center
Manufacturing Facility
Office
Our multi-region global footprint allows us to be closer to the customer,
building and delivering total turnkey solutions anywhere around the globe.
It also positions us well to serve those customers looking to replicate,
expand, relocate and/or repatriate automated manufacturing processes.
Global Footprint
Experience
Our 23 manufacturing facilities and over 50 sales and
service offices in North America, Europe, Southeast
Asia and China deliver automation solutions anywhere
in the world.
We have more than 35 years of experience
providing technology and innovative end-to-end
automation solutions that solve customers’
most complex challenges.
2
ATS AUTOMATION ANNUAL REPORT 2017
Neuwied
Ludwigshaffen
Stutensee
Winnenden
Lutherstadt
Lichtentanne-Stenn
Europe
Munich
Inglostadt
St. Georgen
Manufacturing Facility
Office
Asia
Tianjin
Samutprakarn
Penang
Singapore
Innovation
Quality and Compliance
ATS has a rich history of being a world leader in
designing and building custom-engineered
technologies and innovative automation solutions
across diverse sectors.
Scale
Our experienced team of 3,500 employees –
including almost 1,400 engineers and nearly
200 program managers – and a vast network of
highly skilled partners and suppliers are our biggest
competitive advantage.
ATS has been registered to the ISO 9000 generation
of standards for more than 15 years. We maintain a
global registration to 9001 and have expanded to
ISO 13485, ISO 14001 and VDA registration for several
key divisions. In addition, ATS has incorporated
a quality management system compliant to
CSA Z299.1-85, B51 and N285 within its Cambridge
Division. We also apply good manufacturing practices
(GMP) to our life sciences projects.
ATS AUTOMATION ANNUAL REPORT 2017 3
ATS CAPABILITIES
Automation helps advance the future by fuelling the development of new
products and services, improving product safety and reliability, reducing costs,
increasing productivity and growing opportunities for highly skilled jobs.
At ATS, we apply our extensive experience and global capabilities in delivering
innovative and high-quality technology and automation solutions to help
multinational customers transform their manufacturing operations.
ATS offers complete end-to-end solutions, allowing customers to single-source
their most complex projects. We complement our automation/integration
capabilities with value-added pre-automation consulting and post-automation
support services.
ATS HAS UNMATCHED EXPERTISE
IN ADDRESSING COMPLEX
TECHNOLOGY CHALLENGES FROM
DESIGN TO IMPLEMENTATION.
4
ATS AUTOMATION ANNUAL REPORT 2017
Pre-Automation
Our pre-automation experts help customers clearly
define their manufacturing strategy. Whether
installing standard machines or building a customized
solution to address a unique problem that cannot be
solved with an off-the-shelf product, we work to truly
understand the customer requirements and provide a
comprehensive, data-driven analysis that helps guide
the project forward.
Discovery and Analysis
We begin by working with the customer to review all
factors and considerations, identify and assess options,
and develop an optimal manufacturing strategy.
Concept Development and Simulation
The next step is to create concepts of how the project
will be integrated into the customer’s manufacturing
process. We then conduct simulations and testing to
mitigate risks and develop confidence in the solution
before the equipment is built.
INNOVATION IS PART OF OUR
EVERDAY LIFE AND DEFINES
OUR FUTURE.
ATS AUTOMATION ANNUAL REPORT 2017 5
ATS CAPABILITIES
ATS DELIVERS COMPLETE
MANUFACTURING SOLUTIONS FOR
CUSTOMERS ON AN ENTERPRISE
AND/OR PROJECT BASIS.
Automation/Integration
Our extensive automation/integration
offerings include:
Design Build
Our team has the experience and knowledge to create
innovative new manufacturing solutions where existing
commercial options are unavailable or insufficient.
Engineer and Integrate
ATS combines technologies and products into
complete automated manufacturing solutions.
Process and Facilities Control Systems
and Software Integration
We build systems that provide crucial information
about performance, and we can link equipment to
customers’ systems for fully automated reporting and
lot/batch handling. The ATS Overall Equipment
Effectiveness (OEE) Toolkit is a powerful web-based
tool that gives customers a real-time view of their
overall equipment effectiveness, allowing them to
drive improved performance.
6
ATS AUTOMATION ANNUAL REPORT 2017
ATS CAPABILITIES
Product and Technology Portfolio
Supply Chain Management
ATS’s standard automation products offer
breakthrough performance and are core to our
customers’ central processes. These include Flexsys
Lasers, SuperTrak modular conveyance systems,
LogiTrak electrified monorail, sortimat Cleanliner
handling technology, sortimat Birkman feeders,
ATS SmartVision software, ATS Cortex hardware and
high-speed tube filling and cartoning machines.
Build to Print
For customers without in-house equipment
fabrication capabilities, we build advanced equipment
manufacturing systems based on their specifications.
We prequalify and continuously monitor our global
network of best-in-class suppliers and leverage our
global purchasing power to obtain the best possible
pricing and lead times for each project.
Commissioning and Validation
ATS expertly installs equipment and ensures all
critical control technologies, software and system
performance attributes are tested, documented,
optimized and achieved. This includes validation for
regulatory compliance.
ATS AUTOMATION ANNUAL REPORT 2017 7
ATS CAPABILITIES
Post-Automation
Our post-automation services are a true differentiator
in the industry and one of our greatest growth
opportunities, especially as the smart factory concept
becomes a reality.
Our post-automation support services help deepen,
grow and sustain our customer relationships by
maximizing the performance, efficiency and uptime of
their automation projects. Expanding our offerings
and global service network are key focus areas for us.
Current post-automation offerings include:
Technical, Customer and
Time-Critical Support
Our global footprint and experienced team of
technicians provide customers with total support
solutions whenever and wherever needed. This
includes providing remote diagnostics, critical analysis
and response in downtime situations.
Connected Factory Technologies
Remote support and diagnostic tools monitor
performance and help production lines quickly get
back up and running. Our proprietary ATS OEE Toolkit
uses web-based technology that allows customers to
measure their system’s overall equipment
effectiveness from any connected device and take
action in real time to drive improved performance.
Knowledge Transfer and Training
We ensure our customers’ in-house personnel have
the proper skills to operate and maintain their
systems safely, efficiently and effectively. Our
professional instructors provide training on site or at
our world-class training facility in Canada.
OUR DIAGNOSTIC TECHNOLOGIES
AND INTEGRATION CAPABILITIES
SUPPORT THE SMART FACTORY
OF THE FUTURE.
8
ATS AUTOMATION ANNUAL REPORT 2017
ATS CAPABILITIES
Preventative Maintenance
Upgrades, Retrofits and Moves
ATS offers preventative maintenance services that
identify and address issues before they cause
downtime. On-site support and independent audits of
personnel skills, specific stations or entire systems are
among the options available.
We provide engineering, design, manufacturing
and installation services for customers requiring
modifications to existing systems. We also have
extensive experience working with our customers
to relocate capital equipment.
Spare Parts
Documentation
As a world leader in automation, we can save
customers time, hassle and expense by serving as a
single source for all spare parts and can leverage
our global footprint to offer value to our customers.
Our support options include a dedicated contact,
a basic recommended spare parts list and field
replaceable units.
Every ATS technology and solution can be supported
with a comprehensive suite of documentation that
details the required knowledge necessary to
maintain optimal system performance. Services also
include archiving, language translation and writing
functional specifications.
AFTER-SALES SERVICES
BOOKINGS GREW EVERY
QUARTER IN FY2017.
ATS AUTOMATION ANNUAL REPORT 2017 9
A LOYAL CUSTOMER BASE WITH
APPROXIMATELY 90% OF
BOOKINGS IN FY2017 PLACED
BY REPEAT CUSTOMERS
MARKETS SERVED
ATS’s broad experience serving as a strategic technology partner to leading
multinational customers across multiple industries is a unique competitive
advantage. As a diversified automation and technology company, we are able
to apply the knowledge gained from all sectors to every ATS program.
When a customer has a problem that no current solution can solve, we work
with the customer to understand the issue, identify success criteria and follow a
structured engineering approach to design, build and implement an
innovative solution.
10 ATS AUTOMATION ANNUAL REPORT 2017
STRENGTH IN LIFE SCIENCES
MARKET DRIVEN BY SOLID
INDUSTRY FUNDAMENTALS AND
ATS TECHNOLOGY INNOVATIONS
Our four key market segments include life sciences, energy, transportation,
and consumer products and electronics.
ATS is a single-source provider of innovative
automation solutions that help customers achieve
their goals, such as lower production costs, faster
speed to market, safer operations and improved
quality control. We offer a wide range of automation
and integration services and also provide duplicate or
“repeat” automation systems that leverage the
engineering design completed in the original
customer program.
While we are well positioned to continue to address
key market opportunities through technology and
innovative automation solutions, we recognize that we
must truly understand our customers’ needs today
and in the future and continually improve the
customer experience to create value for both our
customers and shareholders.
ATS AUTOMATION ANNUAL REPORT 2017 11
MARKETS SERVED
Building Excellence in the
Life Sciences Industry
Advancing the Future
of Energy
Life sciences companies face increasing competition,
pricing pressures and regulations from governing
agencies. ATS works with global leaders in
biotechnology, pharmaceuticals and medical devices
to design and build automation solutions and services
that increase the efficiency and productivity of their
manufacturing processes.
ATS has been a trusted automation solutions
provider to the nuclear industry for more than
15 years. We also have deep experience working
with chemical, oil and gas, water, wastewater and
solar customers who need specialized end-to-end
support to meet their production goals and
regulatory requirements.
The life sciences market is a great opportunity for
our business because it showcases the experience our
team has in using technology to solve problems.
For example, during the past year, we worked with
a customer on a new lifesaving medical device. The
customer knew what the device needed to do, but
required guidance on how to build and produce it in a
high-quality and efficient manner. We collaborated
with them to develop a solution that automated the
device’s production in a manner that followed
qualification and validation protocols, met strict
regulatory requirements, improved reliability and
increased production to meet the growing demand
at a competitive total value.
In 2016, we expanded our relationship with
Bruce Power – the world’s largest operating nuclear
facility – signing a master tooling agreement to build
automated solutions for the nuclear power plant’s
Life-Extension Program, with initial orders valued at
approximately $40 million. Supporting this agreement
is the knowledge ATS gained from working with
Bruce Power in the past and on the development
and integration of the Bruce Reactor Inspection and
Maintenance System, a remotely operated automated
machine that safely inspects tubing within a reactor
and replaces parts, if required.
OUR INNOVATIVE SOLUTIONS
ARE ENABLING THE
SCALABLE BUILDOUT OF
A BLOCKBUSTER DRUG.
12 ATS AUTOMATION ANNUAL REPORT 2017
MARKETS SERVED
Driving Transportation
Automation
ATS has engineered more than 6,500 assembly
systems responsible for building the components that
are critical to making vehicles run. We also provide
heavy equipment manufacturers with accurate and
cost-effective manufacturing, assembly and test
systems, and integrated process controls.
While our FY2017 revenues in the transportation
segment were down from the previous fiscal year, we
see significant opportunity in this segment as demand
shifts from conventional to electric and hybrid
vehicles. Our E-Motor and Lithium Ion Battery
solutions support the global push for improved fuel
economy. During the past year, we launched five
major automation projects involving the electrification
of cars. Our focus in this segment is to pursue
opportunities where we can leverage our experience,
expertise and innovative solutions to drive true
technological advancement.
Meeting Demand for
Consumer Products and
Electronics
ATS continuously strives to be at the forefront of
trends in automation technology to help leaders in
consumer goods and electronics achieve success in
their highly competitive markets. Our manufacturing
platforms include high-volume assembly, which
improves reliability and time to market, as well as
packaging, dispensing and web handling.
One example of how we have helped a consumer
goods customer occurred when a customer selected
ATS to develop a fully automated line for their
product’s motor. The project required automating
four different assembly stages involving glue
dispensing and curing. Implementation of the solution
resulted in improving the customer’s time to market
by 20% and increasing production capacity to help the
customer gain market share.
TECHNOLOGICAL ADVANCES IN
E-VEHICLES SUPPORTED BY
OUR AUTOMATION SOLUTIONS
ATS AUTOMATION ANNUAL REPORT 2017 13
Our goal is to drive long-term shareholder
value through the generation of
profitable growth, both organically
and through acquisition.
FELLOW SHAREHOLDERS,
When joining ATS in March this year, I committed to
our Board that I would delve deeply into our business
to understand and assess our areas of strength and
where we can improve. This included developing a
clear understanding from our customers of the value
we bring to their businesses and where we can
expand the products and services we provide.
During this period, I have visited most of our facilities,
met with our business leaders from around the world
and spoken with many of our 3,500 employees
through town halls and several employee
roundtables. I have also spent time with several
customers, shareholders and stakeholders.
ATS is made up of an impressive group of employees
who are highly engaged, highly motivated and highly
skilled. Our people are passionate and proud of the
work they do as builders of innovation and technology.
We have a strong operating base with the ability to
deliver innovative and high-quality technology and
automation solutions to our customers globally. Our
customers are leaders in their markets, and they
depend on ATS as a strategic technology partner that
enables them to execute on their strategies. They are
pleased with the quality of the work we do, the
innovative manufacturing solutions we produce and
our extended service programs.
Our ability to innovate, our global footprint and our
core technologies provide us with advantages in a
market that is populated by competitors who are
more closely aligned with a specific industry or region.
These are advantages that I expect will serve us well
as we move to the next level of performance to drive
long-term shareholder value creation.
Review of 2017 Performance
While ATS’s automation business has been
consistently profitable, there is room for
improvement. This past year, our revenues
decreased 3% and our adjusted earnings from
operations margin was lower by 1.4 percentage
points. The management team and Board are not
satisfied with these recent results and I will not be
satisfied with the status quo. In particular, we need to
do a better job of presenting our global value to all
customers, and we need to improve the utilization of
our global capacity, which includes further developing
our talent around the world and improving our
organizational structure. Taking the right steps in
each case will further strengthen our foundation.
Despite slight year-over-year declines in revenues
and profitability, a number of our key indicators have
never been stronger. We have a record Order Backlog
of $681 million entering fiscal 2018. Order Bookings
for fiscal 2017 were $1.1 billion, up 6% over last year.
We had several significant and strategic wins within
our Order Bookings during the year. One of these key
wins is a program announced in September for an
industry-leading, North American–based medical
device company valued at approximately $40 million,
which involves the design, delivery and installation of a
new manufacturing system that is based on ATS’s
proprietary technology. This unique technology
14 ATS AUTOMATION ANNUAL REPORT 2017
facilitates reliable, high-volume manufacturing
requirements in a compact footprint. We received a
follow-on Order Booking from this customer in March.
As well, we announced a multi-year master tooling
agreement with Bruce Power for the supply of
automated tooling systems and related services for
Bruce Power’s Life-Extension Program. This is a
long-term agreement with initial orders valued at
approximately $40 million, and the potential for
future orders.
Our balance sheet is strong with $287 million of cash
and $639 million of available credit at the end of
fiscal 2017. We have sufficient flexibility to grow ATS
both organically and through acquisition. Our
approach to deploying capital will be both disciplined
and strategic.
Going Forward
Our goal is to drive long-term shareholder value
through the generation of profitable growth, both
organically and through acquisition. I am working
with our management team and the Board to review
and build upon the Company’s strategies to drive
ATS to the next level of performance. We will
communicate our plans once we’ve completed the
necessary work, reviewed and have approval from
our Board.
What I can share with you is the framework through
which we will drive ATS: People, Process, Plan,
Performance and Customer:
• People: Making sure we have the right people in
the right roles and developing our pipeline of
talent throughout the organization.
• Process: Aligning around a common set of policy-
driven business processes that we will use to drive
continuous improvement in our operations.
• Plan: Delivering and driving profitable growth
through a rigorous strategic planning process, led
by our people, that targets incremental and
continuous improvement.
• Performance: Constantly and consistently
measuring our performance and course correcting
to ensure we meet the high expectations we set
for ourselves and the high expectations that our
customers, shareholders and other stakeholders
have of us.
• Customer: The underlying principle for each of
the P’s. Customer includes both the companies
that buy from us and the shareholders who own
our business. Listening to, anticipating and
meeting each customer’s needs will be at the core
of everything we do. And for our shareholders,
we will operate the Company to deliver long-term
shareholder value.
Each of these areas is critical and provides the basis
for how we will operate and guide ATS in fiscal 2018
and in the years ahead. We will develop and drive
improvement in all of these areas within ATS and I
am confident that they will support the performance
of our business as we grow organically and
complement that growth with strategic acquisitions.
Our pursuit of acquisitions will be well disciplined and
our evaluation of candidates will be based on
well-defined criteria that I have found to be effective
in my time as a leader. Today, we have a good
pipeline of prospects and will need to be prepared to
act when the opportunities arise.
Summary
While the future of the global economy is difficult to
predict, it has never been a better time for innovation,
technology and automation. ATS is perfectly positioned
to continue to deliver innovative and high-quality
technology and automation solutions to our
customers globally.
In closing, I’m very excited about the opportunity
ahead for ATS. This is a world-class company with a
strong history of innovation and quality. Our
employees are our number one asset, and they are
highly engaged and proud of the work they do at ATS.
Prospects in our markets are strong. Our operating
foundation is solid. Our skilled and independent
Board of Directors is committed, along with our
management team, to build on these competitive
strengths in the months and years ahead.
Sincerely,
Andrew Hider
Chief Executive Officer
ATS Automation
May 18, 2017
ATS AUTOMATION ANNUAL REPORT 2017 15
MANAGEMENT’S DISCUSSION
AND ANALYSIS
For the Year Ended March 31, 2017
This Management’s Discussion and Analysis (“MD&A”) for the year ended March 31, 2017 (fiscal 2017) is as of May 17,
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 audited consolidated
financial statements of the Company for fiscal 2017, 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”, “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 (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. 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.
16 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Earnings from operations and EBITDA are used by the Company to evaluate the performance of its operations.
Management believes 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. Management believes that adjusted
earnings from operations and adjusted basic earnings per share (including adjusted net income) are important
measures to increase comparability of performance between periods. The adjustment items used by
management to arrive at these metrics are not considered to be indicative of the business’s ongoing operating
performance. Management uses the measure non-cash working capital as a percentage of revenues to evaluate
the Company’s management of its investment in non-cash working capital. Management calculates non-cash
working capital as a percentage of revenues using period-end non-cash working capital divided by trailing two
fiscal quarter revenues annualized. 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
additional IFRS measures and non-IFRS financial measures in making investment decisions and measuring
operational results. EBITDA should not be construed as a substitute for net income determined in accordance
with IFRS. Adjusted earnings from operations is not necessarily indicative of earnings from operations or cash
flows from operations as determined under IFRS and may not be comparable to similar measures presented by
other companies.
A reconciliation of (i) earnings from operations and EBITDA to net income from continuing operations, and
(ii) adjusted earnings from operations to earnings from operations, adjusted net income to net income and
adjusted basic earnings per share to basic earnings per share, in each case for the three- and twelve-month
periods ending March 31, 2017 and March 31, 2016 is contained in this MD&A (see “Reconciliation of Non-IFRS
Measures to IFRS Measures”). A reconciliation of Order Bookings and Order Backlog to total Company revenues
for the three- and twelve-month periods ending March 31, 2017 and March 31, 2016 is also contained in the
MD&A (see “Order Backlog Continuity”).
Company Profile
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.
ATS AUTOMATION ANNUAL REPORT 2017 17
MANAGEMENT’S DISCUSSION AND ANALYSIS
CEO Appointment
Effective March 6, 2017, the Board of Directors appointed Andrew Hider as Chief Executive Officer of ATS
following an extensive planning and search process. 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.
During his career as a leader, Mr. Hider has brought focus to five key areas:
• People: ensuring that the Company attracts and retains the best people in the right roles and developing
the pipeline of talent in the organization
• Process: aligning businesses around a common set of policy-driven processes to deliver continuous
improvement
• Plan: driving profitable growth through a rigorous strategic planning process that targets incremental and
continuous improvement
• Performance: constantly and consistently managing performance and implementing countermeasures to
meet expectations
• Customer: understanding, anticipating and meeting the needs of the Company’s key stakeholders,
including customers and shareholders
Effective May 17, 2017 Mr. Hider was appointed to the Company’s Board of Directors.
Strategy
Mr. Hider is working with management and the Board to review and build upon ATS’ growth strategy, with a
view to driving long-term shareholder value through the generation of profitable growth, both organically and
through acquisition.
18 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Business Overview
ATS is an industry-leading automation solutions provider to many of the world’s most successful multinational
companies. ATS has expertise in custom automation, repeat automation, automation products and value-
added services including pre-automation and after-sales services.
ATS serves customers in the following markets: life sciences, transportation, energy, consumer products,
electronics, chemicals, food, beverage, and oil and gas. With broad and in-depth knowledge across multiple
industries and technical fields, ATS delivers single-source solutions to customers that lower their production
costs, accelerate delivery of their products, and improve quality control. ATS engages with customers on both
greenfield programs, such as equipping new factories, and brownfield programs, such as capacity expansions,
line moves, equipment upgrades, software upgrades, efficiency improvements and factory optimization.
ATS and its subsidiaries engage at varying points in the customers’ automation cycle. During the pre-automation
phase, ATS offers comprehensive services, including discovery and analysis, concept development, simulation and
total cost of ownership modelling, all of which help to verify the feasibility of different types of automation, set
objectives for factors such as line speed and yield, assess production processes for manufacturability and
calculate the total cost of ownership.
For customers that have decided to proceed with an automation project, ATS offers a number of automation
and integration services, including engineering design, prototyping, process verification, specification writing,
software and manufacturing process controls development, equipment design and build, standard automation
products/platforms, third-party equipment qualification, procurement and integration, automation system
installation, product line commissioning, validation and documentation. Following the installation of custom
automation, ATS may supply duplicate or “repeat” automation systems to customers that leverage engineering
design completed in the original customer program. For customers seeking complex equipment production or
build-to-print manufacturing, ATS provides value engineering, supply chain management, integration and
manufacturing capabilities, and other automation products and solutions.
Post automation, ATS offers a number of services, including customer training, preventative maintenance,
process optimization, emergency and on-call support, spare parts, retooling, retrofits and equipment
relocation.
Contract values for individual automation systems vary and are often in excess of $1 million, with some
contracts for enterprise-type programs well in excess of $10 million. Due to the custom nature of customer
projects, contract durations vary, with typical durations ranging from six to 12 months, and some larger
contracts extending up to 18 to 24 months. Contract values for pre-automation services and post-automation
services range in value and can exceed $1 million with varying durations, which can sometimes extend over a
number of years.
Competitive Strengths
Management believes ATS has the following competitive strengths:
Global presence, size and critical mass: ATS’ global presence and scale provide an advantage in serving
multinational customers. The markets in which the Company operates are served primarily by competitors
with narrow geographic and/or industrial market reach. ATS has manufacturing operations in Canada, the
United States, Germany, China, Malaysia and Thailand. ATS can deliver localized service through a network of
over 50 offices located around the world. Management believes that ATS’ scale and global footprint provide it
with competitive advantages in winning large, multinational customer programs and in delivering a life-cycle-
oriented service platform to customers’ global operations.
ATS AUTOMATION ANNUAL REPORT 2017 19
MANAGEMENT’S DISCUSSION AND ANALYSIS
Technical skills, capabilities and experience: Automation manufacturing is a knowledge-based business. ATS
has designed, manufactured, assembled and serviced over 23,000 automation systems worldwide and has an
extensive knowledge base and accumulated design expertise. Management believes ATS’ broad experience in
many different industrial markets and with diverse technologies, its talented workforce, which includes over
1,300 engineers and over 200 program management personnel, and its ability to provide custom automation,
repeat automation, automation products and value-added services, position the Company well to serve
complex customer programs in a variety of markets.
Product and technology portfolio: Through its history of bringing thousands of unique automation projects to
market, ATS and its subsidiaries have developed an extensive product and technology portfolio. ATS has a
number of standard automation platforms, including SuperTrakTM, an in-line, high-speed flexible pallet
transport system; Discovery DialTM, a rotary dial indexer; JetwingTM and SpacelineTM, both synchronous indexing
chassis; and OmniTrakTM, which combines the synchronous drive of the SpacelineTM chassis with asynchronous
pallet movement provided by the programmable SuperTrakTM pallet transfer system, allowing for multiple
process times and selective synchronization of devices. Each of these automation platforms can be tailored to a
customer’s unique requirements.
Other standard automation products and technologies include advanced vision systems used to ensure
product or process quality, numerous material handling and feeder technologies, high-accuracy and high-
precision laser processing technologies, high-performance tube filling and cartoning technologies and advanced
HMI control systems. Management believes the Company’s extensive product and technology portfolio gives it
an advantage in developing unique and leading solutions for customers and maintaining competitiveness.
Recognized brands: Management believes ATS is well known within the global automation industry due to its
long history of innovation and broad scope of operations. In addition, ATS’ subsidiaries include several strong
brands: “sortimat”, which specializes in the life sciences market; “IWK”, which specializes in the packaging
market; and “Process Automation Solutions” or “PA”, which provides innovative automation solutions for
process and production sectors. Management believes that ATS’ brand names and global reputation improve
sales prospecting, allowing the Company to be considered for a wide variety of customer programs.
Trusted customer relationships: ATS serves some of the world’s largest multinational companies. Most of ATS’
customers are repeat customers and many have long-standing relationships with ATS, often spanning more
than a decade. Management estimates that approximately 90% of ATS’ Order Bookings in fiscal 2017 were
placed by repeat customers.
Total solutions capabilities: Management believes the Company gains competitive advantages because ATS
provides total turn-key solutions in automation. This allows customers to single-source their most complex
projects to ATS rather than rely on multiple engineering firms and equipment builders. In addition, ATS can
provide customers with other value-added services including pre-automation consulting, total cost of
ownership studies, life-cycle material management, post-automation service, training and support.
20 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview – Operating Results
Consolidated Revenues
(In millions of dollars)
Revenues by market
Q4 2017
Q4 2016
Fiscal 2017
Fiscal 2016
Consumer products &
electronics
Energy
Life sciences
Transportation
Total revenues
Revenues by
installation location
North America
Europe
Asia/Other
Total revenues
Fourth Quarter
$
$
$
$
41.9
15.3
127.5
81.0
265.7
Q4 2017
103.0
116.2
46.5
265.7
$
$
$
$
38.9
18.4
105.6
83.9
246.8
$
$
137.8
173.5
415.1
284.5
160.4
74.5
435.5
369.2
$
1,010.9
$
1,039.6
Q4 2016
Fiscal 2017
Fiscal 2016
93.3
100.6
52.9
246.8
$
$
365.6
406.5
238.8
456.9
394.1
188.6
$
1,010.9
$
1,039.6
Fiscal 2017 fourth quarter revenues were 8% higher than in the corresponding period a year ago. Higher
revenues primarily reflected higher Order Backlog entering the fourth quarter of fiscal 2017 compared to a year
ago. Foreign exchange rate changes negatively impacted the translation of revenues earned by foreign-based
subsidiaries compared to the corresponding period a year ago, reflecting the strengthening of the Canadian
dollar relative to the U.S. dollar and Euro.
By market, fiscal 2017 fourth quarter revenues from consumer products & electronics increased 8% due to
timing of Order Bookings. Revenues generated in the energy market decreased 17% primarily due to the
enterprise program won in the fourth quarter of fiscal 2016 that was cancelled in the third quarter of fiscal
2017. Revenues in the life sciences market increased 21% primarily reflecting higher Order Backlog entering the
fourth quarter of fiscal 2017. Transportation revenues decreased 3% compared to a year ago primarily due to
lower activity compared to the previous year.
Full Year
Fiscal 2017 revenues were 3% lower than in the corresponding period a year ago, primarily reflecting the timing
of project activities. Fiscal 2017 revenues were negatively impacted by the suspension and subsequent
cancellation of a part 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 in foreign currencies into
Canadian dollars.
By market, fiscal 2017 revenues from consumer products & electronics decreased 14%, primarily reflecting
lower activity in the consumer products market. Revenues generated in the energy market increased 133%,
compared to the corresponding period a year ago, primarily due to higher Order Backlog entering fiscal 2017
compared to a year ago. Revenues generated in the life sciences market decreased 5%, primarily reflecting the
timing of project activities and lower Order Backlog at the end of fiscal 2016, compared to the previous year.
Transportation revenues decreased 23% compared to a year ago primarily due to lower Order Backlog entering
fiscal 2017, compared to a year ago.
ATS AUTOMATION ANNUAL REPORT 2017 21
MANAGEMENT’S DISCUSSION AND ANALYSIS
Consolidated Operating Results
(In millions of dollars)
Earnings from
operations
Amortization of
acquisition-related
intangible assets
Share purchase
allowance
Restructuring charges
Executive transition
expenses
Gain on sale of assets
Adjusted earnings
from operations1
Q4 2017
Q4 2016
Fiscal 2017
Fiscal 2016
$
16.8
$
8.1
$
71.9
$
76.8
4.8
2.9
–
–
–
5.7
–
2.3
7.1
–
20.0
2.9
2.3
–
–
24.5
–
9.7
7.1
(3.7)
$
24.5
$
23.2
$
97.1
$
114.4
1 See “Notice to Reader: Non-IFRS Measures and Additional IFRS Measures.”
Earnings from
operations
Depreciation and
amortization
EBITDA2
Q4 2017
Q4 2016
Fiscal 2017
Fiscal 2016
$
$
16.8
8.8
25.6
$
$
8.1
9.6
17.7
$
$
71.9
34.6
106.5
$
$
76.8
39.3
116.1
2 See “Notice to Reader: Non-IFRS Measures and Additional IFRS Measures.”
Fourth Quarter
Fiscal 2017 fourth quarter earnings from operations were $16.8 million (6% operating margin) compared to
$8.1 million (3% operating margin) in the fourth quarter of fiscal 2016. Included in fourth quarter fiscal 2017
earnings from operations was a share purchase allowance of $2.9 million, which was paid to Mr. Hider as an
inducement to join the Company. The after-tax proceeds of the share purchase allowance were used to
purchase shares of ATS in the public market. Fourth quarter fiscal 2017 earnings from operations also included
$4.8 million related to amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK
and sortimat. Included in fourth quarter fiscal 2016 earnings from operations was $5.7 million related to
amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat, $2.3 million
of restructuring and severance costs and $7.1 million of executive transition expenses related to the transition
agreement entered into between the Company and the former Chief Executive Officer of ATS. Excluding these
items, fourth quarter fiscal 2017 adjusted earnings from operations were $24.5 million (9% margin), compared
to adjusted earnings from operations of $23.2 million (9% margin) a year ago. Higher adjusted earnings from
operations primarily reflected higher revenues, offset by increased stock compensation expenses (see
“Consolidated Results: Stock-based Compensation”).
Depreciation and amortization expense was $8.8 million in the fourth quarter of fiscal 2017, compared to
$9.6 million a year ago. The decrease primarily reflected lower amortization of identifiable intangible assets
recorded on the acquisitions of PA, IWK and sortimat compared to the fourth quarter of fiscal 2016.
22 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
EBITDA was $25.6 million (10% EBITDA margin) in the fourth quarter of fiscal 2017 compared to $17.7 million
(7% EBITDA margin) in the fourth quarter of fiscal 2016. Excluding the share purchase allowance, fourth
quarter fiscal 2017 EBITDA was $28.5 million (11% EBITDA margin). Comparably, excluding restructuring and
severance costs and executive transition expenses, fourth quarter fiscal 2016 EBITDA was $27.1 million
(11% EBITDA margin).
Full Year
Earnings from operations were $71.9 million (7% operating margin) in fiscal 2017, compared to $76.8 million
(7% operating margin) in the corresponding period a year ago. Earnings from operations included $2.9 million
for the share purchase allowance, $2.3 million of restructuring and severance costs and $20.0 million of
amortization costs related to the amortization of identifiable intangible assets recorded on the acquisitions of
PA, IWK and sortimat. Fiscal 2016 earnings from operations included $24.5 million of amortization costs related
to the amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat,
$9.7 million of restructuring and severance costs, $7.1 million of executive transition expenses and a gain of
$3.7 million on the sale of a redundant U.S. facility. Excluding these items, adjusted earnings from operations
were $97.1 million (10% margin) compared to adjusted earnings from operations of $114.4 million (11% margin)
in the corresponding period a year ago. Lower adjusted earnings from operations primarily reflected lower
revenues, higher selling, general and administrative expenses and increased stock compensation costs.
Depreciation and amortization expense was $34.6 million in fiscal 2017, compared to $39.3 million a year ago.
The decrease primarily reflected lower amortization of identifiable intangible assets recorded on the
acquisitions of PA, IWK, ATW and sortimat, compared to fiscal 2016.
EBITDA was $106.5 million (11% EBITDA margin) compared to $116.1 million (11% EBITDA margin) in fiscal 2016.
Excluding the share purchase allowance and restructuring costs, fiscal 2017 EBITDA was $111.7 million
(11% EBITDA margin). Comparably, excluding executive transition expenses, restructuring costs and the gain on
the sale of the U.S. facility, fiscal 2016 EBITDA was $129.2 million (12% EBITDA margin).
Order Bookings by Quarter
(In millions of dollars)
Q1
Q2
Q3
Q4
Total Order Bookings
Fourth Quarter
Fiscal 2017
Fiscal 2016
$
$
239
289
284
322
222
230
228
390
$
1,134
$
1,070
Fourth quarter fiscal 2017 Order Bookings were $322 million, a 17% decrease from the fourth quarter of fiscal
2016. By customer market, higher Order Bookings in the transportation and life sciences markets were offset
by lower Order Bookings in the energy and consumer products & electronics markets. Included in fourth
quarter fiscal 2016 Order Bookings was an enterprise program valued at approximately U.S. $100 million, part
of which was subsequently cancelled in the third quarter of fiscal 2017. Foreign exchange rate changes
negatively impacted the translation of Order Bookings from foreign-based ATS subsidiaries compared to the
corresponding period a year ago.
ATS AUTOMATION ANNUAL REPORT 2017 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
Full Year
Fiscal 2017 Order Bookings were $1,134 million, a 6% increase from prior year Order Bookings of $1,070 million.
By market, higher Order Bookings in the life sciences and transportation markets more than offset lower Order
Bookings in energy and consumer products & electronics. Foreign exchange rate changes did not materially
impact the translation of Order Bookings from foreign-based ATS subsidiaries compared to fiscal 2016.
Order Backlog Continuity
(In millions of dollars)
Opening Order Backlog
$
Revenues
Order Bookings
Order Backlog
adjustments1
Total
$
Q4 2017
Q4 2016
Fiscal 2017
Fiscal 2016
632
(266)
322
(7)
681
$
$
546
(247)
390
(37)
652
$
652
$
(1,011)
1,134
(94)
681
$
632
(1,040)
1,070
(10)
652
1 Order Backlog adjustments include foreign exchange adjustments and cancellations.
Order Backlog by Market
(In millions of dollars)
Consumer products & electronics
Energy
Life sciences
Transportation
Total
$
$
$
Fiscal 2017
Fiscal 2016
54
94
355
178
681
$
$
85
186
224
157
652
At March 31, 2017, Order Backlog was a record $681 million, 4% higher than at March 31, 2016. Higher Order
Backlog in the life sciences and transportation markets was partially offset by lower Order Backlog in the
consumer products & electronics and energy markets. Foreign exchange rate changes also negatively impacted
the translation of Order Backlog from foreign-based ATS subsidiaries compared to fiscal 2016.
24 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Outlook
The global economic environment has shown some recent signs of improvement; however, geopolitical risks
remain. Economic growth in the U.S., Canadian and European economies has been slow. Economic growth in
China and other parts of Asia has decelerated. A prolonged or more significant downturn in an economy where
the Company operates could negatively impact Order Bookings and may add to volatility in Order Bookings.
Funnel activity in life sciences has remained strong and funnel activity in the transportation market improved
with an increase in opportunities in new technologies. Activity in energy markets is sporadic, but the funnel
contains meaningful opportunities. Funnel activity in the consumer products & electronics market has
improved; however, it remains low relative to other customer markets. Overall, the Company’s funnel remains
significant; however, conversion of opportunities into Order Bookings is variable, as customers remain cautious
in their approach to capital investment.
The Company’s sales organization continues to work to engage customers on enterprise-type solutions. The
Company expects that this will provide ATS with more strategic relationships, increased predictability, better
program control and less sensitivity to macroeconomic forces. This approach to market and the timing of
customer decisions on larger opportunities may cause variability in Order Bookings from quarter to quarter
and, as is already the case, lengthen the performance period and revenue recognition for certain customer
programs. The Company expects its Order Backlog of $681 million at the end of fiscal 2017 to partially mitigate
the impact of volatile Order Bookings on revenues in the short term. In the first quarter of fiscal 2018,
management expects Order Backlog conversion to be in the 35% to 40% range. The expected conversion rate is
based on current programs in Order Backlog and management’s estimate of revenues from new Order
Bookings in the quarter.
The Company’s efforts to expand its after-sales service offering is expected to provide some balance to its
exposure to the capital expenditure cycle of its customers. However, the intended ramp-up of the Company’s
after-sales service revenues may not offset capital spending volatility in the short term.
Management’s disciplined focus on program management, cost reductions, standardization and quality is
expected to put ATS in a strong, competitive position to capitalize on opportunities. In fiscal 2017, the Company
initiated the closure of a U.S.-based operation to re-balance global capacity and improve the Company’s cost
structure. These actions resulted in charges of $2.3 million in fiscal 2017. Over the long term, management
expects that the application of its ongoing efforts to improve ATS’ cost structure, business processes, leadership
and supply chain management will have a positive impact on ATS operations.
The Company seeks to continue to expand its position in the global automation market organically and through
acquisition. The Company’s solid foundation and strong cash flow generation capability provide the flexibility to
pursue its growth strategy.
ATS AUTOMATION ANNUAL REPORT 2017 25
MANAGEMENT’S DISCUSSION AND ANALYSIS
Consolidated Results
Selected Fourth Quarter and Annual Information
(In millions of dollars, except per share data)
Q4 2017
Q4 2016
Fiscal 2017
Fiscal 2016
Fiscal 2015
Revenues
Cost of revenues
Selling, general and administrative
Stock-based compensation
Earnings from operations
Net finance costs
Provision for (recovery of)
income taxes
Net income from
continuing operations
Income from discontinued
operations, net of tax
Net income
Earnings per share
Basic from continuing operations
Basic from discontinued operations
Diluted from continuing operations
$
$
$
$
$
$
$
$
$
Diluted from discontinued operations $
$
0.08
From continuing operations:
Total assets
Total cash and short-term investments
Total bank debt
$
265.7
$
246.8
$ 1,010.9
$ 1,039.6
$
201.7
45.3
1.9
16.8
6.3
2.7
185.7
53.5
(0.5)
$
$
8.1
7.9
$
$
(1.2)
760.3
171.9
6.8
71.9
25.6
11.3
$
$
780.9
179.3
2.6
76.8
26.7
10.5
$
$
936.1
691.1
173.7
4.3
67.0
11.9
16.2
7.8
$
1.4
$
35.0
$
39.6
$
38.9
–
7.8
0.08
–
0.08
0.08
–
$
$
$
$
$
$
$
$
–
1.4
0.02
–
0.02
0.02
–
0.02
$
$
$
$
$
$
$
$
–
35.0
0.38
–
0.38
0.38
–
0.38
$
$
$
$
$
$
$
$
–
39.6
0.43
–
0.43
0.43
–
0.43
$
$
$
$
$
$
$
$
16.2
55.1
0.43
0.18
0.61
0.42
0.18
0.60
$ 1,374.6
$ 1,367.5
$ 1,220.7
$
$
286.7
328.7
$
$
170.0
323.7
$
$
106.1
291.3
Revenues. At $265.7 million, consolidated revenues for the fourth quarter of fiscal 2017 were $18.9 million,
or 8% higher than the corresponding period a year ago. At $1,010.9 million, fiscal 2017 revenues were
$28.7 million, or 3% lower than in the corresponding previous year (see “Overview – Operating Results”).
Cost of revenues. At $201.7 million, fourth quarter fiscal 2017 cost of revenues increased compared to the
corresponding period a year ago by $16.0 million, or 9%, primarily on higher revenues. Annual cost of revenues
of $760.3 million decreased by $20.6 million, or 3%, primarily on lower revenues generated compared to the
corresponding period last year.
At 24%, gross margin in the fourth quarter of fiscal 2017 decreased 1% from the corresponding period a year
ago. Lower fourth quarter gross margins primarily reflected some lower margin programs, which were bid and
are being executed by the Company, and certain programs where costs exceeded budgets. Fiscal 2017 gross
margin of 25% was consistent with the corresponding period a year ago.
26 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Selling, general and administrative (“SG&A”) expenses. SG&A expenses for the fourth quarter of fiscal 2017
were $45.3 million, which included $4.8 million of amortization costs related to the amortization of identifiable
intangible assets recorded on the acquisitions of PA, IWK and sortimat and $2.9 million for the share purchase
allowance. SG&A expenses for the fourth quarter of fiscal 2016 were $53.5 million, which included $5.7 million
of amortization costs related to the amortization of identifiable intangible assets recorded on the acquisitions
of PA, IWK and sortimat; $2.3 million of restructuring and severance costs; and $7.1 million of executive
transition expenses. Excluding these costs, SG&A expenses were $37.6 million in the fourth quarter of fiscal
2017, down from $38.4 million a year ago. Lower SG&A expenses in the fourth quarter of fiscal 2017 primarily
reflected foreign exchange rate changes, which reduced the translation of reported SG&A expenses of foreign-
based subsidiaries due to the strengthening of the Canadian dollar relative to the U.S. dollar and Euro.
Fiscal 2017 SG&A expenses were $171.9 million, which included $20.0 million of amortization costs related to the
amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat; $2.3 million of
restructuring and severance costs; and $2.9 million for the share purchase allowance. Excluding these items,
SG&A expenses were $146.7 million for fiscal 2017. Comparably, SG&A expenses for fiscal 2016 were
$141.7 million, which excludes $24.5 million of amortization costs related to the amortization of identifiable
intangible assets recorded on the acquisitions of PA, IWK and sortimat; $9.7 million of restructuring and severance
costs; a gain of $3.7 million on the sale of a U.S. facility; and $7.1 million of executive transition expenses. Higher
SG&A expenses in fiscal 2017 primarily reflected increased employee costs and foreign exchange rate changes,
which increased the translation of reported SG&A expenses of foreign-based subsidiaries, primarily due to the
weakening of the Canadian dollar relative to the U.S. dollar and Euro.
Stock-based compensation. Stock-based compensation expense amounted to $1.9 million in the fourth
quarter of fiscal 2017 compared to a recovery of $0.5 million in the corresponding period a year ago. Fiscal
2017 stock-based compensation expense increased to $6.8 million from $2.6 million a year ago. The increase in
stock-based compensation costs is attributable to higher expenses from stock options and the revaluation of
deferred stock units and restricted share units.
Earnings from operations. For the three- and twelve-month periods ended March 31, 2017, consolidated
earnings from operations were $16.8 million (6% operating margin) and $71.9 million (7% operating margin),
respectively, compared to earnings from operations of $8.1 million (3% operating margin) and $76.8 million
(7% operating margin), respectively, in the corresponding periods of fiscal 2016 (see “Overview –
Operating Results”).
Net finance costs. Net finance costs were $6.3 million in the fourth quarter of fiscal 2017, $1.6 million lower
than in the corresponding period a year ago. Fiscal 2017 finance costs were $25.6 million, compared to
$26.7 million in the corresponding period a year ago. The decrease was primarily due to the benefit of cross-
currency interest swaps, which were entered into in the fourth quarter of fiscal 2016 (see “Foreign Exchange”).
Income tax provision. For the three and twelve months ended March 31, 2017, the Company’s effective income
tax rates of 26% and 24%, respectively, differed from the combined Canadian basic federal and provincial
income tax rate of 27%, primarily due to income earned in certain jurisdictions with different statutory tax
rates. The Company expects its effective tax rate to remain in the range of 25%.
Net income. Fiscal 2017 fourth quarter net income was $7.8 million (8 cents per share basic and diluted)
compared to $1.4 million (2 cents per share basic and diluted) for the fourth quarter of fiscal 2016. Adjusted
basic earnings per share were 15 cents in the fourth quarter of fiscal 2017 compared to 14 cents for the fourth
quarter of fiscal 2016 (see “Reconciliation of Non-IFRS Measures to IFRS Measures”).
Fiscal 2017 net income was $35.0 million (38 cents per share basic and diluted) compared to $39.6 million
(43 cents per share basic and diluted) for the corresponding period a year ago. Adjusted basic earnings
per share were 57 cents in fiscal 2017, compared to 72 cents in the corresponding period a year ago
(see “Reconciliation of Non-IFRS Measures to IFRS Measures”).
ATS AUTOMATION ANNUAL REPORT 2017 27
MANAGEMENT’S DISCUSSION AND ANALYSIS
Reconciliation of Non-IFRS Measures to IFRS Measures
(In millions of dollars, except per share data)
The following table reconciles EBITDA to the most directly comparable IFRS measure (net income from
continuing operations):
Fiscal 2017
Fiscal 2016
Fiscal 2015
EBITDA
Less: depreciation and amortization expense
Earnings from operations
Less: net finance costs
Provision for income taxes
Net income from continuing operations
$
$
$
106.5
34.6
71.9
25.6
11.3
35.0
EBITDA
Less: depreciation and amortization expense
Earnings from operations
Less: net finance costs
Provision for (recovery of) income taxes
Net income from continuing operations
$
$
$
$
$
$
116.1
39.3
76.8
26.7
10.5
39.6
Q4 2017
25.6
8.8
16.8
6.3
2.7
7.8
$
$
$
$
$
$
107.5
40.5
67.0
11.9
16.2
38.9
Q4 2016
17.7
9.6
8.1
7.9
(1.2)
1.4
28 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following table reconciles adjusted earnings from operations and adjusted basic earnings per share to the
most directly comparable IFRS measure (net income and basic earnings per share, respectively):
Three Months Ended
March 31, 2017
Adjusted
Three Months Ended
March 31, 2016
Adjusted
IFRS
Adjustments
(non-IFRS)
IFRS
Adjustments
(non-IFRS)
Earnings from operations
$
16.8
$
–
$
16.8
$
8.1
$
–
$
8.1
Amortization of
acquisition-related
intangible assets
Restructuring charges
Executive transition
expenses
Share purchase allowance
Less: net finance costs
Income before income
taxes
Provision for (recovery of)
income taxes
Adjustment to provision
for income taxes1
Net income
Basic earnings per share
–
–
–
–
$
$
16.8
6.3
$
10.5
$
2.7
–
2.7
7.8
0.08
$
$
$
$
$
$
$
$
$
$
4.8
–
–
2.9
7.7
–
$
$
4.8
–
–
2.9
24.5
6.3
7.7
$
18.2
–
$
2.7
2.2
2.2
5.5
0.07
$
$
$
2.2
4.9
13.3
0.15
$
$
$
$
$
$
$
–
–
–
–
8.1
7.9
0.2
(1.2)
–
(1.2)
1.4
0.02
$
$
$
$
$
$
$
5.7
2.3
7.1
–
15.1
–
15.1
–
4.0
4.0
11.1
0.12
$
$
$
$
$
$
$
5.7
2.3
7.1
–
23.2
7.9
15.3
(1.2)
4.0
2.8
12.5
0.14
1 Adjustments to provision for income taxes relate to the income tax effects of adjustment items that are excluded for the purposes of calculating
non-IFRS based adjusted net income.
ATS AUTOMATION ANNUAL REPORT 2017 29
MANAGEMENT’S DISCUSSION AND ANALYSIS
Twelve Months Ended
March 31, 2017
Twelve Months Ended
March 31, 2016
IFRS
Adjustments
(non-IFRS)
IFRS
Adjustments
(non-IFRS)
Adjusted
Adjusted
Earnings from operations
$
71.9
$
–
$
71.9
$
76.8
$
–
$
76.8
Amortization of
acquisition-related
intangible assets
Restructuring charges
Gain on sale of assets
Executive transition
expenses
Share purchase allowance
Less: net finance costs
Income before income
taxes
Provision for income taxes
Adjustment to provision
for income taxes1
Net income
Basic earnings per share
$
$
$
$
$
$
$
–
–
–
–
–
71.9
25.6
46.3
11.3
–
11.3
35.0
0.38
$
$
$
$
$
$
$
20.0
2.3
–
–
2.9
25.2
–
25.2
–
7.8
7.8
17.4
0.19
$
$
$
$
$
$
$
20.0
2.3
–
–
2.9
97.1
25.6
71.5
11.3
7.8
19.1
52.4
0.57
$
$
$
$
$
$
$
–
–
–
–
–
76.8
26.7
50.1
10.5
–
10.5
39.6
0.43
24.5
9.7
(3.7)
7.1
–
24.5
9.7
(3.7)
7.1
–
$
$
$
$
$
$
$
37.6
$ 114.4
–
37.6
–
10.7
10.7
26.9
0.29
$
$
$
$
$
$
26.7
87.7
10.5
10.7
21.2
66.5
0.72
1 Adjustments to provision for income taxes relate to the income tax effects of adjustment items that are excluded for the purposes of calculating
non-IFRS based adjusted net income.
30 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Summary of Investments, Liquidity, Cash Flow and
Financial Resources
Investments
(In millions of dollars)
Investments – increase (decrease)
Non-cash operating working capital
Property, plant and equipment
Acquisition of intangible assets
Purchase of non-controlling interest
Proceeds from disposal of assets
Proceeds from sale of subsidiary
Total net investments
Fiscal 2017
Fiscal 2016
$
(56.5)
$
9.9
8.0
–
(0.1)
–
$
(38.7)
$
30.8
10.1
5.6
0.1
(22.3)
(2.3)
22.0
In fiscal 2017, the Company’s investment in non-cash working capital decreased $56.5 million, compared to an
increase of $30.8 million a year ago. Accounts receivable decreased 15%, or $29.8 million, driven by the timing
of billings on certain customer contracts. Net contracts in progress decreased 37%, or $28.3 million, compared
to March 31, 2016. The Company actively manages its accounts receivable and net contracts in progress
balances through billing terms on long-term contracts, collection efforts and supplier payment terms.
Inventories increased 4%, or $1.8 million, primarily due to the timing of inventory purchases. Deposits and
prepaid assets decreased 28%, or $6.2 million, compared to March 31, 2016 due to the timing of program
execution. Accounts payable and accrued liabilities increased 3%, or $5.0 million, compared to March 31, 2016.
Provisions decreased 30%, or $6.1 million, compared to March 31, 2016 due to the payment in fiscal 2017 of the
executive transition provision accrued in fiscal 2016.
Capital expenditures totalled $9.9 million for fiscal 2017, primarily related to computer hardware. Capital
expenditures totalled $10.1 million in fiscal 2016, primarily related to computer hardware.
Intangible assets expenditures for fiscal 2017 and fiscal 2016 were $8.0 million and $5.6 million, respectively,
and primarily related to computer software and various internal development projects.
Purchase of non-controlling interest was $0.1 million in fiscal 2016. There were no such transactions in fiscal 2017.
Proceeds from disposal of assets were $0.1 million in fiscal 2017, compared to $22.3 million in fiscal 2016. The
decrease primarily reflects the sale of a U.S. facility and the sale of certain other redundant assets in fiscal 2016.
Proceeds from sale of subsidiary were $2.3 million in fiscal 2016, related to the sale of a Swiss subsidiary, which
closed in fiscal 2016. There were no such transactions in fiscal 2017.
The Company performs impairment tests on its goodwill and intangible asset balances on an annual basis or as
warranted by events or circumstances. The Company conducted its annual impairment assessment in the
fourth quarter of fiscal 2017 and determined there is no impairment of goodwill or intangible assets as of
March 31, 2017 (fiscal 2016 – $nil).
All the Company’s investments involve risks and require that the Company make judgments and estimates
regarding the likelihood of recovery of the respective costs. In the event management determines that any of
the Company’s investments have become permanently impaired or recovery is no longer reasonably assured,
the value of the investment would be written down to its estimated net realizable value as a charge against
earnings. Due to the magnitude of certain investments, such write-downs could be material.
ATS AUTOMATION ANNUAL REPORT 2017 31
MANAGEMENT’S DISCUSSION AND ANALYSIS
Liquidity, Cash Flow and Financial Resources
(In millions of dollars, except ratios)
Cash and cash equivalents
Debt-to-equity ratio
Cash flows provided by operating activities
Fiscal 2017
Fiscal 2016
$
$
286.7
0.52:1
127.9
$
$
170.0
0.56:1
35.8
At March 31, 2017, the Company had cash and cash equivalents of $286.7 million compared to $170.0 million at
March 31, 2016. At March 31, 2017, the Company’s debt-to-total equity ratio was 0.52:1.
At March 31, 2017, the Company had $639.1 million of unutilized multipurpose credit, including letters of credit,
available under existing credit facilities and an additional $2.9 million available under letter of credit facilities.
In fiscal 2017, cash flows provided by operating activities were $127.9 million ($35.8 million provided by
operating activities in the corresponding period a year ago). The increase in operating cash flows related
primarily to the timing of investments in non-cash working capital in certain customer programs.
The Company’s U.S. $250.0 million aggregate principal amount of senior notes (the “Senior Notes”) are
unsecured, were issued at par, bear interest at a rate of 6.50% per annum and mature on June 15, 2023. The
Company may redeem the Senior Notes, in whole, at any time or in part, from time to time, at specified
redemption prices and subject to certain conditions required by the Senior Notes. If the Company experiences
a change of control, the Company may be required to repurchase the Senior Notes, in whole or in part, at a
purchase price equal to 101% of the aggregate principal amount of the Senior Notes, plus accrued and unpaid
interest, if any, to, but not including, the redemption date. The Senior Notes contain customary covenants that
restrict, subject to certain exceptions and thresholds, some of the activities of the Company and its subsidiaries,
including the Company’s ability to dispose of assets, incur additional debt, pay dividends, create liens, make
investments and engage in specified transactions with affiliates. Subject to certain exceptions, the Senior Notes
are guaranteed by each of the subsidiaries of the Company that is a borrower or has guaranteed obligations
under the Credit Facility. Transaction fees of $7.2 million were deferred and are being amortized over the term
of the Senior Notes.
The Company’s senior secured credit facility (the “Credit Facility”) provides a committed revolving credit facility
of $750.0 million. The Credit Facility is secured by: (i) the Company’s assets, including real estate; (ii) assets,
including certain real estate, of certain of the Company’s North American subsidiaries; and (iii) a pledge of
shares of certain of the Company’s non-North American subsidiaries. Certain of the Company’s subsidiaries also
provide guarantees under the Credit Facility. At March 31, 2017, the Company had utilized $115.0 million under
the Credit Facility by way of letters of credit (March 31, 2016 – $115.1 million). The Credit Facility matures on
August 29, 2018.
The Credit Facility is available in Canadian dollars by way of prime rate advances and/or bankers’ acceptances,
in U.S. dollars by way of base rate advances and/or LIBOR advances, in Swiss francs, Euros and British pounds
sterling by way of LIBOR advances and by way of letters of credit for certain purposes in Canadian dollars, U.S.
dollars and Euros. The interest rates applicable to the Credit Facility are determined based on a debt to EBITDA
ratio as defined in the Credit Facility. For prime rate advances and base rate advances, the interest rate is equal
to the bank’s prime rate or the bank’s U.S. dollar base rate in Canada, respectively, plus a margin ranging from
0.45% to 2.00%. For bankers’ acceptances and LIBOR advances, the interest rate is equal to the bankers’
acceptance fee or LIBOR, respectively, plus a margin that varies from 1.45% to 3.00%. The Company pays a fee
for usage of financial letters of credit, which ranges from 1.45% to 3.00% and a fee for usage of non-financial
letters of credit, which ranges from 0.97% to 2.00%. The Company pays a standby fee on the unadvanced
portions of the amounts available for advance or draw-down under the Credit Facility at rates ranging from
0.29% to 0.68%.
32 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Credit Facility is subject to a debt to EBITDA test and an interest coverage test. Under the terms of the
Credit Facility, the Company is restricted from encumbering any assets with certain permitted exceptions. The
Credit Facility also limits advances to subsidiaries and partially restricts the Company from repurchasing its
common shares and paying dividends. At March 31, 2017, all of the covenants were met.
The Company has additional credit facilities available of $8.1 million (3.3 million Euros, 75.0 million Indian
Rupees, 50.0 million Thai Baht and 1.1 million Czech Koruna). The total amount outstanding on these facilities
at March 31, 2017 was $4.0 million, of which $1.4 million was classified as bank indebtedness (March 31,
2016 – $2.3 million) and $2.6 million was classified as long-term debt (March 31, 2016 – $7.1 million). The
interest rates applicable to the credit facilities range from 1.66% to 9.18% per annum. A portion of the long-
term debt is secured by certain assets of the Company. The 75.0 million Indian Rupees and the 50.0 million
Thai Baht credit facilities are secured by letters of credit under the Credit Facility.
Over the long term, the Company generally expects to continue increasing its overall investment in non-cash
working capital to support the growth of its business, with fluctuations on a quarter-over-quarter basis. The
Company’s goal is to maintain its investment in non-cash working capital as a percentage of annualized
revenues at a level below 15%. The Company expects that continued cash flows from operations, together with
cash and cash equivalents on hand and credit available under operating and long-term credit facilities, will be
sufficient to fund its requirements for investments in non-cash working capital and capital assets and to fund
strategic investment plans including some potential acquisitions. Significant acquisitions could result in
additional debt or equity financing requirements. The Company expects to continue to use leverage to support
its growth strategy.
Contractual Obligations
(In millions of dollars)
The Company’s minimum operating lease payments (related primarily to facilities and equipment) and
purchase obligations are as follows:
Less than one year
One – two years
Two – three years
Three – four years
Four – five years
Due in over five years
Operating
leases
Purchase
obligations
$
10.5
$
7.7
6.9
6.1
4.9
1.3
83.5
7.4
0.1
–
–
–
$
37.4
$
91.0
The Company’s off-balance sheet arrangements consist of purchase obligations and various operating lease
financing arrangements related primarily to facilities and equipment that were entered into in the normal course
of business. The Company’s purchase obligations consist primarily of commitments for material purchases.
In accordance with industry practice, the Company is liable to customers for obligations relating to contract
completion and timely delivery. In the normal conduct of its operations, the Company may provide letters of
credit as security for advances received from customers pending delivery and contract performance. In
addition, the Company provides letters of credit for post-retirement obligations and may provide letters of
credit as security on equipment under lease and on order. At March 31, 2017, the total value of outstanding
letters of credit was approximately $136.0 million (March 31, 2016 – $137.0 million).
ATS AUTOMATION ANNUAL REPORT 2017 33
MANAGEMENT’S DISCUSSION AND ANALYSIS
In the normal course of operations, the Company is party to a number of lawsuits, claims and contingencies.
Although it is possible that liabilities may be incurred in instances for which no accruals have been made, the
Company does not believe that the ultimate outcome of these matters will have a material impact on its
consolidated financial position.
The Company is exposed to credit risk on derivative financial instruments arising from the potential for
counterparties to default on their contractual obligations to the Company. The Company minimizes this risk by
limiting counterparties to major financial institutions and monitoring their creditworthiness. The Company’s
credit exposure to forward foreign exchange contracts is the current replacement value of contracts that are in
a gain position. For further information related to the Company’s use of derivative financial instruments, refer
to note 11 of the consolidated financial statements. The Company is also exposed to credit risk from its
customers. Substantially all of the Company’s trade accounts receivable are due from customers in a variety of
industries and, as such, are subject to normal credit risks from their respective industries. The Company
regularly monitors customers for changes in credit risk. The Company does not believe that any single market
or geographic region represents significant credit risk. Credit risk concentration, with respect to trade
receivables, is mitigated as the Company primarily serves large, multinational customers and obtains insurance
in certain instances.
During fiscal 2017, 1,308,667 stock options were exercised. At May 17, 2017 the total number of shares
outstanding was 93,602,026 and there were 2,274,724 stock options outstanding to acquire common shares of
the Company.
Normal Course Issuer Bid
On November 4, 2015, the Company announced that the Toronto Stock Exchange (“TSX”) had accepted a notice
filed by the Company of its intention to make a normal course issuer bid (“NCIB”). Under the NCIB, ATS had the
ability to purchase, for cancellation, up to a maximum of 4,600,000 common shares, representing
approximately 5% of the 92,541,582 common shares that were issued and outstanding as of October 31, 2015.
During fiscal 2016, the Company purchased 481,473 common shares for $6.0 million under the NCIB. The
weighted average price per share repurchased was $12.45. No subsequent purchases were made in fiscal 2017.
The NCIB expired on November 5, 2016.
Related Party Transactions
The Company has an agreement with a shareholder, Mason Capital Management, LLC (“Mason Capital”), pursuant
to which Mason Capital has agreed to provide ATS with ongoing strategic and capital markets advisory services for
an annual fee of U.S. $0.5 million. As part of the agreement, a member of the Company’s Board of Directors who
is associated with Mason Capital has waived any fees to which he may have otherwise been entitled for serving as
a member of the Board of Directors or as a member of any committee of the Board of Directors.
There were no other significant related party transactions in fiscal 2017.
34 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Foreign Exchange
The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its
functional currency of the Canadian dollar, through borrowings made by the Company in currencies other than
its functional currency and through its investments in its foreign-based subsidiaries.
The Company’s Canadian operations generate significant revenues in major foreign currencies, primarily U.S.
dollars, which exceed the natural hedge provided by purchases of goods and services in those currencies. In
order to manage a portion of this foreign currency exposure, the Company has entered into forward foreign
exchange contracts. The timing and amount of these forward foreign exchange contract requirements are
estimated based on existing customer contracts on hand or anticipated, current conditions in the Company’s
markets and the Company’s past experience. Certain of the Company’s foreign subsidiaries will also enter into
forward foreign exchange contracts to hedge identified balance sheet, revenue and purchase exposures. The
Company’s forward foreign exchange contract hedging program is intended to mitigate movements in currency
rates primarily over a four- to six-month period.
The Company uses cross-currency swaps as derivative financial instruments to hedge a portion of its foreign
exchange risk related to its U.S.-dollar-denominated Senior Notes. On March 29, 2016, the Company entered
into a cross-currency interest rate swap instrument to swap U.S. $150.0 million into Canadian dollars. The
Company will receive interest of 6.50% U.S. per annum and pay interest of 6.501% Canadian. The terms of the
hedging relationship will end on June 15, 2023.
The Company manages foreign exchange risk on its Euro denominated net investments. The Company uses
cross-currency swaps as derivative financial instruments to hedge a portion of the foreign exchange risk related
to its Euro-denominated net investment. On March 29, 2016, the Company entered into a cross-currency
interest rate swap instrument to swap 134.1 million Euros into Canadian dollars. The Company will receive
interest of 6.501% Canadian per annum and pay interest of 5.094% Euros. The terms of the hedging
relationship will end on June 15, 2023. As a result of the cross-currency interest rate swap instruments, the
Company expects its interest expenses to be reduced by approximately U.S. $2 million per annum from the
coupon rate of the Senior Notes.
In addition, from time to time, the Company may hedge the foreign exchange risk arising from foreign currency
debt, intercompany loans, net investments in foreign-based subsidiaries and committed acquisitions through
the use of forward foreign exchange contracts or other non-derivative financial instruments. The Company uses
hedging as a risk management tool, not to speculate. See note 11 to the consolidated financial statements for
details on the derivative financial instruments outstanding at March 31, 2017.
Year-end actual exchange rates
Period average exchange rates
March 31,
March 31,
March 31,
March 31,
U.S. Dollar
Euro
2017
1.330
1.419
2016
1.299
1.478
% change
2.4%
(4.0%)
2017
1.313
1.440
2016
1.311
1.447
% change
0.2%
(0.5%)
ATS AUTOMATION ANNUAL REPORT 2017 35
MANAGEMENT’S DISCUSSION AND ANALYSIS
Consolidated Quarterly Results
(In millions of dollars, except per share amounts)
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Q4
2016
Q3
2016
Q2
2016
Q1
2016
Revenues
$ 265.7 $ 237.4 $ 242.5 $ 265.4 $ 246.8 $ 274.9 $ 263.7 $ 254.3
Earnings from operations
$ 16.8 $ 15.3 $ 17.3 $ 22.6 $
8.1 $ 26.8 $ 24.4 $ 17.5
Adjusted earnings from
operations
$ 24.5
$ 22.5
$ 22.3
$ 27.9
$ 23.2
$ 32.1
$ 31.7
$ 27.4
Net income
$
7.8 $
6.6 $
8.5 $ 12.1 $
1.4 $ 15.5 $ 12.8 $
9.8
Basic and diluted earnings
per share
Adjusted basic earnings
per share
Order Bookings
Order Backlog
$ 0.08
$ 0.07
$ 0.09
$ 0.13
$ 0.02
$ 0.16
$ 0.14
$ 0.11
$ 0.15
$ 0.12
$ 0.13
$ 0.17
$ 0.14
$ 0.21
$ 0.19
$ 0.18
$ 322.0 $ 284.0 $ 289.0 $ 239.0 $ 390.0 $ 228.0 $ 230.0 $ 222.0
$ 681.0 $ 632.0 $ 654.0 $ 610.0 $ 652.0 $ 546.0 $ 589.0 $ 590.0
Interim financial results are not necessarily indicative of annual or longer-term results because many of the
individual markets served by the Company tend to be cyclical in nature. Operating performance quarter to
quarter may also be affected by the timing of revenue recognition on large programs in Order Backlog, which is
impacted by such factors as customer delivery schedules and the timing of third-party content, and by the
timing of acquisitions. General economic trends, product life cycles and product changes may impact revenues
and operating performance. ATS typically experiences some seasonality with its Order Bookings, revenues and
earnings from operations due to summer plant shutdowns by its customers.
Critical Accounting Estimates and Assumptions
The preparation of the Company’s consolidated financial statements requires management to make estimates,
judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and
the disclosure of contingent assets and liabilities at the end of the reporting period. Uncertainty about these
estimates, judgments and assumptions could result in outcomes that require a material adjustment to the
carrying amount of the asset or liability affected in future periods.
The Company based its assumptions on information available when the consolidated financial statements were
prepared. Existing circumstances and assumptions about future developments may change due to market
changes or circumstances arising beyond the control of the Company. Such changes are reflected in the
estimates as they occur.
Notes 2 and 3 to the consolidated financial statements describe the basis of accounting and the Company’s
significant accounting policies.
Revenue recognition and contracts in progress
The nature of ATS contracts requires the use of estimates to quote new business, and most automation
systems are typically sold on a fixed-price basis. Revenues on construction contracts and other long-term
contracts are recognized on a percentage of completion basis as outlined in note 3(d) “Revenue Recognition –
Construction contracts” to the consolidated financial statements. In applying the accounting policy on
construction contracts, judgment is required in determining the estimated costs to complete a contract. These
cost estimates are reviewed at each reporting period and by their nature may give rise to income volatility. If
the actual costs incurred by the Company to complete a contract are significantly higher than estimated, the
Company’s earnings may be negatively affected. The use of estimates involves risks, since the work to be
performed requires varying degrees of technical uncertainty, including possible development work to meet the
36 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
customer’s specification, the extent of which is sometimes not determinable until after the project has been
awarded. In the event the Company is unable to meet the defined performance specification for a contracted
automation system, it may need to redesign and rebuild all or a portion of the system at its expense without an
increase in the selling price. Certain contracts may have provisions that reduce the selling price if the Company
fails to deliver or complete the contract by specified dates. These provisions may expose the Company to
liabilities or adversely affect the Company’s results of operations or financial position.
ATS’ contracts may be terminated by customers in the event of a default by the Company or, in some cases, for
the convenience of the customer. In the event of a termination for convenience, the Company typically
negotiates a payment provision reflective of the progress achieved on the contract and/or the costs incurred to
the termination date. If a contract is cancelled, Order Backlog is reduced and production utilization may be
negatively impacted.
A complete provision, which can be significant, is made for losses on such contracts when the losses first
become known. Revisions in estimates of costs and profits on contracts, which can also be significant, are
recorded in the accounting period in which the relevant facts impacting the estimates become known.
A portion of ATS’ revenue is recognized when earned, which is generally at the time of shipment and transfer of
title to the customer, provided collection is reasonably assured.
Income taxes
Deferred income tax assets, disclosed in note 16 to the consolidated financial statements, are recognized to the
extent that it is probable that taxable income will be available against which the losses can be utilized. Significant
management judgment is required to determine the amount of deferred income tax assets that can be recognized
based upon the likely timing and level of future taxable income together with future tax-planning strategies.
If the assessment of the Company’s ability to utilize the deferred income tax asset changes, the Company would
be required to recognize more or fewer of the deferred income tax assets, which would increase or decrease
income tax expense in the period in which this is determined. The Company establishes provisions based on
reasonable estimates for possible consequences of audits by the tax authorities of the respective countries in
which it operates. The amount of such provisions is based on various factors, such as experience of previous
taxation audits and differing interpretations of tax regulations by the taxable entity and the respective tax
authority. These provisions for uncertain tax positions are made using the best estimate of the amount
expected to be paid based on a qualitative assessment of all the relevant factors. The Company reviews the
adequacy of these provisions at each quarter. However, it is possible that at some future date an additional
liability could result from audits by the taxation authorities. Where the final tax outcome of these matters is
different from the amount initially recorded, such differences will affect the tax provisions in the period in
which such determination is made.
Stock-based payment transactions
The Company measures the cost of transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. Estimating fair value for stock-based payment transactions
requires the determination of the most appropriate valuation model, which is dependent on the terms and
conditions of the grant. This estimate also requires determination of the most appropriate inputs to the
valuation model, including the future forfeiture rate, the expected life of the share option, weighted average
risk-free interest rate, volatility and dividend yield, and formation of assumptions. The assumptions and models
used for estimating fair value for stock-based payment transactions are disclosed in note 17 of the consolidated
financial statements.
ATS AUTOMATION ANNUAL REPORT 2017 37
MANAGEMENT’S DISCUSSION AND ANALYSIS
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount,
which is the higher of its fair value less cost to sell and its value in use. The calculations involve significant
estimates and assumptions. Items estimated include cash flows, discount rates and assumptions on revenue
growth rates. These estimates could effect the Company’s future results if the current estimates of future
performance and fair values change. Goodwill is assessed for impairment on an annual basis as described in
note 9 to the consolidated financial statements. The Company performed its annual impairment test of
goodwill as at March 31, 2017 and determined there was no impairment (March 31, 2016 – $nil).
Provisions
As described in note 3(q) to the consolidated financial statements, the Company records a provision when an
obligation exists, an outflow of economic resources required to settle the obligation is probable and a reliable
estimate can be made of the amount of the obligation. The Company records a provision based on the best
estimate of the required economic outflow to settle the present obligation at the consolidated statement of
financial position date. While management believes these estimates are reasonable, differences in actual results
or changes in estimates could have a material impact on the obligations and expenses reported by the Company.
Employee benefits
The cost of defined benefit pension plans and the present value of the pension obligations are determined
using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from
actual developments in the future. These include the determination of the discount rate, future salary
increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying
assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, management considers the interest rates of corporate bonds in
their respective currency, with extrapolated maturities corresponding to the expected duration of the defined
benefit obligation. The mortality rate is based on publicly available mortality tables for the specific country. Future
salary increases and pension increases are based on expected future inflation rates for the respective country.
Further details about the assumptions used are provided in note 13 of the consolidated financial statements.
Accounting Standards Issued but not yet Effective
IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”), which establishes a
single comprehensive model for entities to use in accounting for revenues arising from contracts with
customers. Under IFRS 15, revenues are recognized to depict the transfer of promised goods or services to
customers at an amount that reflects the consideration to which an entity expects to be entitled in exchange for
those goods or services. The principles in IFRS 15 provide a more structured approach to measuring and
recognizing revenue. The new revenue standard will supersede all current revenue recognition requirements
under IFRS. The standard currently requires a full or modified retrospective application for annual periods
beginning on or after January 1, 2018, with early adoption permitted. The Company does not anticipate early
adoption and plans to adopt the standard for the annual period beginning on April 1, 2018. The Company has
not yet determined the impact on its consolidated financial statements.
38 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16 – Leases, which requires lessees to recognize assets and liabilities for
most leases. There are minimal changes to the existing accounting in IAS 17 – Leases from the perspective of
lessors. The new standard is effective for annual periods beginning on or after January 1, 2019, with early
adoption permitted provided IFRS 15 has been adopted or is adopted at the same date. The Company does not
anticipate early adoption and plans to adopt the standard for the annual period beginning on April 1, 2019. The
Company has not yet determined the impact on its consolidated financial statements.
Controls and Procedures
The Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) are responsible for establishing and
maintaining disclosure controls and procedures and internal controls over financial reporting for the Company.
The control framework used in the design of disclosure controls and procedures and internal control over
financial reporting is the “Internal Control – Integrated Framework (2013)” issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”).
Disclosure controls and procedures
An evaluation of the design and operating effectiveness of the Company’s disclosure controls and procedures
was conducted as of March 31, 2017 under the supervision of the CEO and CFO as required by CSA National
Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings. The evaluation included
documentation, review, enquiries and other procedures considered appropriate in the circumstances. Based on
that evaluation, the CEO and the CFO have concluded that the Company’s disclosure controls and procedures
are effective to provide reasonable assurance that information relating to the Company and its consolidated
subsidiaries that is required to be disclosed in reports filed under provincial and territorial securities legislation
is recorded, processed, summarized and reported to senior management, including the CEO and the CFO, so
that appropriate decisions can be made by them regarding required disclosure within the time periods
specified in the provincial and territorial securities legislation.
Internal control over financial reporting
CSA National Instrument 52-109 requires the CEO and CFO to certify that they are responsible for establishing
and maintaining internal control over financial reporting for the Company, and that those internal controls have
been designed and are effective in providing reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements in accordance with IFRS.
Management, including the CEO and CFO, does not expect that the Company’s disclosure controls or internal
controls over financial reporting will prevent or detect all errors and all fraud or will be effective under all potential
future conditions. A control system is subject to inherent limitations and, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
The CEO and CFO have, using the framework and criteria established in “Internal Control – Integrated
Framework (2013)” issued by COSO, evaluated the design and operating effectiveness of the Company’s internal
controls over financial reporting and concluded that, as of March 31, 2017, internal controls over financial
reporting were effective to provide reasonable assurance that information related to consolidated results and
decisions to be made based on those results were appropriate.
During the years ended March 31, 2017 and March 31, 2016, there have been no changes in the design of the
Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to
materially affect, the Company’s internal controls over financial reporting.
ATS AUTOMATION ANNUAL REPORT 2017 39
MANAGEMENT’S DISCUSSION AND ANALYSIS
Other Major Considerations and Risk Factors
Any investment in ATS will be subject to risks inherent to ATS’ business. The following risk factors are discussed
in the Company’s Annual Information Form, which may be found on SEDAR at www.sedar.com.
• Market volatility;
• Foreign exchange risk;
• Strategy execution risks;
• Doing business in foreign countries;
• Liquidity, access to capital markets and leverage;
• Availability of human resources and dependence
• Restrictive covenants;
• Availability of performance and other guarantees
on key personnel;
• Legislative compliance;
from financial institutions;
• Environmental compliance;
• Share price volatility;
• Competition;
•
Industry consolidation;
• First-time program and production risks;
• Automation systems pricing;
• Corruption of Foreign Public Officials Act, United
States Foreign Corrupt Practices Act and anti-
bribery laws risk;
•
•
Intellectual property protection risks;
Infringement of third parties’ intellectual property
rights risk;
• Revenue mix risk;
• Security breaches or disruptions of information
• Pricing, quality, delivery and volume risks;
• Product failure;
•
Insurance coverage;
• Acquisition risks;
• Expansion risks;
• Availability of raw materials and other
manufacturing inputs;
• Customer risks;
• Cumulative loss of several significant contracts;
technology systems;
Internal controls;
Impairment of intangible assets risk;
Income and other taxes and uncertain tax
liabilities;
•
•
•
• Variations in quarterly results;
• Litigation;
• Natural disasters, pandemics, acts of war,
terrorism, international conflicts or other
disruptions;
• Lengthy sales cycle;
• Manufacturing facilities disruption; and
• Lack of long-term customer commitment;
• Dependence on performance of subsidiaries.
• New product market acceptance, obsolescence,
and commercialization risk;
40 ATS AUTOMATION ANNUAL REPORT 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
Note to Readers: Forward-Looking Statements
This management’s discussion and analysis of financial conditions and results of operations of ATS contains
certain statements that may 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: potential impact of general
economic environment, including impact on Order Bookings and volatility of Order Bookings; the expected
benefits where the Company engages with customers on enterprise-type solutions and the potential impact on
Order Bookings, performance period, and timing of revenue recognition; the Company’s Order Backlog partially
mitigating the impact of volatile Order Bookings; the rate of completion of Order Backlog available to be
completed; the Company’s efforts to expand after-sales services and the expected impact; expected impact of
the Company’s focus and efforts in regards to certain management initiatives; the Company’s strategy to
expand organically and through acquisition; the Company’s expectation with respect to effective tax rate; the
Company’s goal with respect to non-cash working capital as a percentage of revenues; expectation in relation to
meeting funding requirements for investments; expectation to use leverage to support growth strategy; the
Company’s belief with respect to the outcome of certain lawsuits, claims and contingencies; and the Company’s
expectation with respect to a reduction of interest expense resulting from an interest rate swap. 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 markets 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; timing of customer decisions related to large enterprise programs and
potential for greater negative impact associated with any cancellations or non-performance in relation thereto;
variations in the amount of Order Backlog completed in any given quarter; that revenues from after-sales
services are insufficient to offset capital spending volatility; 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 and, as a result, anticipated benefits and synergies are not realized; that the effective tax rate is other
than expected, due to reasons including income spread among jurisdictions being other than anticipated;
non-cash working capital as a percentage of revenues operating at a level other than as expected due to
reasons, including, the timing and nature of Order Bookings, the timing of payment milestones and payment
terms in customer contracts, and delays in customer programs; risk that the ultimate outcome of lawsuits,
claims, and contingencies give rise to material liabilities for which no provisions have been recorded; 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’ 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.
ATS AUTOMATION ANNUAL REPORT 2017 41
MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL REPORTING
The preparation and presentation of the Company’s consolidated financial statements is the responsibility of
management. The consolidated financial statements have been prepared by management in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board. The
consolidated financial statements and other information in Management’s Discussion and Analysis and the
Annual Report include amounts that are based on estimates and judgments. Management has determined
such amounts on a reasonable basis in order to ensure that the consolidated financial statements are
presented fairly, in all material respects. Financial information presented elsewhere in Management’s
Discussion and Analysis and the Annual Report is consistent with that in the consolidated financial statements,
except as described further in the “Non-IFRS Measures” section of Management’s Discussion and Analysis.
Management maintains appropriate systems of internal accounting and administrative controls, which are
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with International Financial Reporting Standards as further described in the
“Controls and Procedures” section of Management’s Discussion and Analysis.
Management’s responsibilities for financial reporting are overseen by the Board of Directors (the “Board”),
which is ultimately responsible for reviewing and approving the consolidated financial statements. The Board
carries out this responsibility principally through its Audit and Finance Committee (the “Committee”).
The Committee is appointed by the Board and all of its members are independent directors. The Committee
meets periodically with management and the external auditors to discuss internal controls over the financial
reporting process, auditing matters and financial reporting issues, to satisfy itself that each party is properly
discharging its responsibilities and to review the consolidated financial statements and the external auditors’
report. The Committee has reported its findings to the Board, which has approved the consolidated financial
statements and Management’s Discussion and Analysis for issuance to shareholders. The Committee also
considers, for review by the Board and approval of shareholders, the engagement or reappointment of the
external auditors.
The consolidated financial statements have been audited on behalf of shareholders by Ernst & Young LLP, the
external auditors, in accordance with Canadian generally accepted auditing standards. The external auditors
have full and free access to management and the Committee.
Andrew Hider
Chief Executive Officer
Maria Perrella
Chief Financial Officer
42 ATS AUTOMATION ANNUAL REPORT 2017
INDEPENDENT
AUDITORS’ REPORT
To the Shareholders of ATS Automation Tooling Systems Inc.
We have audited the accompanying consolidated financial statements of ATS Automation Tooling Systems Inc.,
which comprise the consolidated statements of financial position as at March 31, 2017 and 2016, and the
consolidated statements of income, comprehensive income, changes in equity and cash flows for the years
then ended, and a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of ATS Automation Tooling Systems Inc. as at March 31, 2017 and 2016, and its financial performance
and its cash flows for the years then ended in accordance with International Financial Reporting Standards.
Toronto, Canada
May 17, 2017
ATS AUTOMATION ANNUAL REPORT 2017 43
CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(in thousands of Canadian dollars)
As at
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Costs and earnings in excess of billings on contracts in progress
Inventories
Deposits, prepaids and other assets
Non-current assets
Property, plant and equipment
Other assets
Goodwill
Intangible assets
Deferred income tax assets
Investment tax credit receivable
Total assets
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness
Accounts payable and accrued liabilities
Provisions
Billings in excess of costs and earnings on contracts in progress
Current portion of long-term debt
Non-current liabilities
Employee benefits
Long-term debt
Deferred income tax liabilities
Total liabilities
Commitments and contingencies
EQUITY
Share capital
Contributed surplus
Accumulated other comprehensive income
Retained earnings
Equity attributable to shareholders
Non-controlling interests
Total equity
Total liabilities and equity
On behalf of the Board:
Note
14
March 31, 2017
March 31, 2016
5
5
6
7
8
9
10
16
16
$
$
14
$
12
5
14
13
14
16
$
14, 18
15
$
$
286,697
166,069
144,708
47,981
16,119
661,574
69,233
13,291
423,250
156,069
2,138
49,015
712,996
1,374,570
1,411
183,839
14,124
96,490
1,321
297,185
26,668
325,947
38,761
391,376
688,561
543,317
12,871
54,974
74,599
685,761
248
686,009
1,374,570
$
$
$
$
$
$
170,034
195,911
202,694
46,200
22,324
637,163
71,060
4,211
431,747
177,065
2,534
43,683
730,300
1,367,463
2,319
178,826
20,267
126,127
5,259
332,798
28,252
316,120
39,740
384,112
716,910
528,184
13,201
68,319
40,634
650,338
215
650,553
1,367,463
David McAusland
Director
See accompanying notes to the consolidated financial statements.
Neil D. Arnold
Director
44 ATS AUTOMATION ANNUAL REPORT 2017
CONSOLIDATED STATEMENTS
OF INCOME
(in thousands of Canadian dollars, except per share amounts)
Years ended March 31
Revenues
Revenues from construction contracts
Sale of goods
Services rendered
Total revenues
Operating costs and expenses
Cost of revenues
Selling, general and administrative
Stock-based compensation
Earnings from operations
Net finance costs
Income before income taxes
Income tax expense
Net income
Attributable to
Shareholders
Non-controlling interests
Earnings per share attributable to shareholders
Basic and diluted
Note
2017
2016
$
$
$
$
$
589,033
78,776
343,095
1,010,904
760,248
171,907
6,814
71,935
25,552
46,383
11,356
35,027
34,994
33
35,027
0.38
17
20
16
21
$
$
$
$
$
617,487
80,153
342,000
1,039,640
780,948
179,297
2,638
76,757
26,652
50,105
10,507
39,598
39,553
45
39,598
0.43
See accompanying notes to the consolidated financial statements.
ATS AUTOMATION ANNUAL REPORT 2017 45
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(in thousands of Canadian dollars)
Years ended March 31
Net income
Other comprehensive income (loss):
Items to be reclassified subsequently to net income:
2017
35,027
$
2016
39,598
$
Currency translation adjustment (net of income taxes of $nil)
(10,978)
30,780
Net unrealized gain (loss) on derivative financial instruments
designated as cash flow hedges
Tax impact
Loss transferred to net income for derivatives designated as cash
flow hedges
Tax impact
Cash flow hedge reserve adjustment
Tax impact
Items that will not be reclassified subsequently to net income:
Actuarial gains (losses) on defined benefit pension plans
Tax impact
Other comprehensive income (loss)
Comprehensive income
Attributable to
Shareholders
Non-controlling interests
See accompanying notes to the consolidated financial statements.
(2,869)
751
(287)
46
(11)
3
(569)
157
(13,757)
21,270
21,237
33
21,270
$
$
$
1,309
(349)
4,136
(1,029)
51
(13)
1,099
(317)
35,667
75,265
75,220
45
75,265
$
$
$
46 ATS AUTOMATION ANNUAL REPORT 2017
CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY
(in thousands of Canadian dollars)
Share
Contributed
earnings
translation
hedge
comprehensive
controlling
capital
surplus
(deficit)
adjustments
reserve
income
interests
Total
equity
Retained
Currency
Cash flow
other
Non-
Year ended March 31, 2017
Total
accumulated
$ 528,184
$ 13,201
$ 40,634
$ 66,482
$
1,837
$ 68,319
$
215
$ 650,553
–
–
34,994
–
–
–
33
35,027
Balance, as at
March 31, 2016
Net income
Other
comprehensive loss
Total comprehensive
income (loss)
Non-controlling
interests
Stock-based
compensation
Exercise of stock
options
Balance, as at
–
–
–
–
–
–
–
2,361
15,133
(2,691)
(412)
(10,978)
(2,367)
(13,345)
–
(13,757)
34,582
(10,978)
(2,367)
(13,345)
33
21,270
(617)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(617)
2,361
12,442
March 31, 2017
$ 543,317 $ 12,871
$ 74,599
$ 55,504
$
(530)
$ 54,974
$
248
$ 686,009
Share
Contributed
Retained
earnings
Currency
Cash flow
other
Non-
translation
hedge
comprehensive
controlling
capital
surplus
(deficit)
adjustments
reserve
income
interests
Total
equity
Year ended March 31, 2016
Total
accumulated
Balance, as at
March 31, 2015
Net income
Other
$ 519,118
$ 14,420
$
–
–
comprehensive loss
Total comprehensive
income
Stock-based
compensation
Exercise of stock
options
Repurchase of
–
–
–
–
–
1,899
11,807
(3,118)
common shares
(2,741)
–
(3,291)
Balance, as at
3,590
39,553
$ 35,702
$
(2,268)
$ 33,434
$
170
–
–
–
$ 570,732
39,598
45
782
30,780
4,105
34,885
–
35,667
40,335
30,780
4,105
34,885
45
75,265
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,899
8,689
(6,032)
March 31, 2016
$ 528,184 $ 13,201
$ 40,634
$ 66,482
$
1,837
$ 68,319
$
215
$ 650,553
See accompanying notes to the consolidated financial statements.
ATS AUTOMATION ANNUAL REPORT 2017 47
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands of Canadian dollars)
Years ended March 31
Operating activities
Income from operations
Items not involving cash
Depreciation of property, plant and equipment
Amortization of intangible assets
Deferred income taxes
Other items not involving cash
Stock-based compensation
Loss (gain) on disposal of property, plant and equipment
Change in non-cash operating working capital
Cash flows provided by operating activities
Investing activities
Acquisition of property, plant and equipment
Acquisition of intangible assets
Purchase of non-controlling interest
Proceeds from disposal of property, plant and equipment
Proceeds from sale of subsidiary
Cash flows provided by (used in) investing activities
Financing activities
Bank indebtedness
Repayment of long-term debt
Proceeds from long-term debt
Proceeds from exercise of stock options
Repurchase of common shares
Cash flows provided by financing activities
Effect of exchange rate changes on cash and
cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental information
Cash income taxes paid
Cash interest paid
Note
2017
2016
$
35,027
$
39,598
10,492
24,070
1,900
(7,427)
6,814
483
71,359
56,541
127,900
(9,892)
(8,006)
–
84
–
(17,814)
(964)
(5,081)
701
12,442
–
7,098
(521)
116,663
170,034
286,697
10,785
23,222
9,681
29,681
(232)
(9,560)
2,638
(5,232)
66,574
(30,814)
35,760
(10,050)
(5,611)
(71)
22,323
2,274
8,865
661
(290,984)
303,670
8,689
(6,032)
16,004
2,879
63,508
106,526
170,034
10,078
16,619
$
$
$
$
$
$
$
$
16
17
7
10
15
$
$
$
$
$
$
$
$
See accompanying notes to the consolidated financial statements.
48 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
1. Corporate information
ATS Automation Tooling Systems Inc. and its subsidiaries (collectively “ATS” or “the Company”) design and build
custom-engineered turn-key automated manufacturing and test systems and provide pre-automation and
post-automation services to their customers.
The Company is listed on the Toronto Stock Exchange and is incorporated and domiciled in Ontario, Canada.
The address of its registered office is 730 Fountain Street North, Cambridge, Ontario, Canada.
The consolidated financial statements of the Company for the year ended March 31, 2017 were authorized for
issue by the Board of Directors on May 17, 2017.
2. Basis of preparation
These consolidated financial statements were prepared on a going concern basis under the historical cost
convention, as modified by the revaluation of available-for-sale financial assets and financial assets and
financial liabilities (including derivative instruments) at fair value through profit or loss or other comprehensive
income. All consolidated financial information is presented in Canadian dollars and has been rounded to the
nearest thousand, except where otherwise stated.
Statement of compliance
These consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries. Subsidiaries
are those entities where the Company directly or indirectly owns the majority of the voting power or can
otherwise control the activities. The financial statements of the subsidiaries are prepared for the same
reporting period as the parent company, using consistent accounting policies. Non-controlling interests in the
equity and results of the Company’s subsidiaries are presented separately in the consolidated statements of
income and within equity in the consolidated statements of financial position.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains
control, and continue to be consolidated until the date that such control ceases. The Company’s material
subsidiaries are: Automation Tooling Systems Enterprises Inc., and ATS Automation Tooling Systems GmbH.
The Company has a 100% voting and equity securities interest in each of these corporations. All material
intercompany balances, transactions, revenues and expenses and profits or losses, including dividends
resulting from intercompany transactions, have been eliminated on consolidation.
ATS AUTOMATION ANNUAL REPORT 2017 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
3. Summary of significant accounting policies
(a) Business combinations and goodwill:
Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured
as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount
of any non-controlling interest in the acquiree. For each business combination, the Company measures the
non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s
identifiable net assets. Acquisition costs are expensed as incurred.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition
date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or
liability will be recognized in accordance with IFRS 9 – Financial Instruments (“IFRS 9”) either in profit or loss or as a
change to other comprehensive income. If the contingent consideration is classified as equity, it will not be
remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent
consideration does not fall within the scope of IFRS 9, it is measured in accordance with the appropriate IFRS policy.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the
net identifiable assets of the acquiree at the date of acquisition.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose
of impairment testing, goodwill is allocated to cash-generating units (“CGUs”) or groups of CGUs based on the
level at which management monitors it. The allocation is made to those CGUs or groups of CGUs that are
expected to benefit from the business combination in which the goodwill arose.
Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is
measured based on the relative fair values of the operation disposed of and the portion of the CGU retained.
(b) Interest in joint arrangements:
The Company has interests in joint operations, whereby the joint operators have a contractual arrangement that
establishes joint control over the economic activities of the individual entity. The Company recognizes its share of
the joint operation’s assets, liabilities, revenues and expenses in the consolidated financial statements. The
financial statements of the joint operations are prepared for the same reporting period as the parent Company.
(c) Foreign currency:
Functional currency is the currency of the primary economic environment in which the subsidiary operates and
is normally the currency in which the subsidiary generates and uses cash. Each subsidiary in the Company
determines its own functional currency and items included in the consolidated financial statements of each
subsidiary are measured using that functional currency. The Company’s functional and presentation currency is
the Canadian dollar.
Transactions
Foreign currency transactions are initially recorded at the functional currency rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional
currency spot rate at the reporting date. All differences are recorded in the consolidated statements of income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value is determined.
50 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Translation
The assets and liabilities of foreign operations are translated into Canadian dollars at period-end exchange
rates and their revenue and expense items are translated at exchange rates prevailing at the dates of the
transactions. The resulting exchange differences are recognized in other comprehensive income. On disposal of
a foreign operation, the component of other comprehensive income relating to that particular foreign
operation is recognized in the consolidated statements of income.
(d) Revenue recognition:
Revenues are recognized to the extent that it is probable that the economic benefits will flow to the Company
and the revenues can be reliably measured. Revenues are measured at the fair value of the consideration
received, excluding discounts, rebates and sales taxes or duties.
The following specific recognition criteria must be met before revenues are recognized:
Sale of goods
Revenues from the sale of goods are recognized when the significant risks and rewards of ownership of the
goods have transferred to the buyer, usually on the delivery of goods or transfer of title to the customer.
Rendering of services
Revenues from services rendered are recognized when the stage of completion can be measured reliably.
Service revenues include maintenance contracts, extended warranty and other services provided. Stage of
completion of the contract is determined as follows:
• Revenues from time and material contracts are recognized at the contractual rates as labour hours are
delivered and direct expenses are incurred.
• Revenues from long-term service contracts are recognized on a percentage of completion basis over the
term of the contracts, unless there is a pattern of recognition that more accurately represents the stage of
completion.
Construction contracts
Revenues from construction contracts are recognized using the percentage of completion method. The degree
of completion is determined based on costs incurred, excluding costs that are not representative of progress to
completion, as a percentage of total costs anticipated for each contract. Incentive awards, claims or penalty
provisions are recognized when such amounts are likely to occur and can reasonably be estimated. When the
outcome of a construction contract cannot be estimated reliably, contract revenues are recognized only to the
extent of contract costs incurred that are likely to be recoverable. A complete provision is made for losses on
contracts in progress when such losses first become known. Revisions in cost and profit estimates, which can
be significant, are reflected in the accounting period in which the relevant facts become known.
(e) Investment tax credits and government grants:
Investment tax credits are accounted for as a reduction in the cost of the related asset or expense where there
is reasonable assurance that such credits will be realized. Government grants are recognized when there is
reasonable assurance that the grant will be received and all attached conditions will be met. When the grant
relates to an expense item, it is deducted from the cost that it is intended to compensate. When the grant
relates to an asset, it is deducted from the cost of the related asset. If a grant becomes repayable, the inception
to date impact of the assistance previously recognized in income is reversed immediately in the period in which
the assistance becomes repayable.
ATS AUTOMATION ANNUAL REPORT 2017 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(f) Taxes:
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively enacted, by the reporting date, in the countries where
the Company operates and generates taxable income. Current income tax related to items recognized directly
in equity is also recognized in equity and not in the consolidated statements of income. Management
periodically evaluates positions taken in the tax filings with respect to situations in which applicable tax
regulations are subject to interpretation, and establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences at the reporting date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period
when the asset will be realized or the liability will be settled, based on tax rates and tax laws that have been
enacted or substantively enacted at the reporting date.
Deferred income taxes are recognized for all taxable temporary differences, except:
• When the deferred income tax liability arises from the initial recognition of goodwill or an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
•
In respect of taxable temporary differences associated with investments in subsidiaries and interests in joint
operations, when the timing of the reversal of the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognized for all deductible temporary differences and carry forward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available,
against which the deductible temporary differences and the carry forward of unused tax credits and unused tax
losses can be utilized, except:
• When the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss.
•
In respect of deductible temporary differences associated with investments in subsidiaries and interests in
joint operations, deferred income tax assets are recognized only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profit will be available against which
the temporary differences can be utilized.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that all or part of the deferred income tax asset will be utilized.
Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable the benefit will be recovered.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to
offset current income tax assets against current income tax liabilities and the deferred income taxes relate to
the same taxable entity and the same taxation authority.
Deferred income tax related to items recognized outside profit or loss is also recognized outside profit or loss.
Deferred income tax items are recognized in correlation to the underlying transaction either in other
comprehensive income or directly in equity.
52 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Income tax benefits acquired as part of a business combination, but not satisfying the criteria for separate
recognition at that date, would be recognized subsequently if new information about facts and circumstances
existing at the acquisition date changed. The adjustment would either be treated as a reduction to goodwill (as
long as it does not exceed goodwill) if it is incurred during the measurement period or in profit or loss.
Revenues, expenses and assets are recognized net of the amount of sales tax, except where the sales tax
incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the
sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as
applicable. Receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of
accounts receivable or accounts payable in the consolidated statements of financial position.
(g) Non-current assets classified as assets held for sale:
Non-current assets classified as assets held for sale are measured at the lower of their carrying amount and fair
value less costs to sell. Non-current assets are classified as held for sale if their carrying amounts will be
derecognized principally through a sale transaction rather than recovered through continuing use. This
condition is regarded as being met only when the transaction is highly probable and the assets are available for
immediate sale in their present condition. Management must be committed to the sale, which should be
expected to qualify for recognition as a completed transaction within one year from the date of classification. In
the consolidated statements of income of the reporting period, and of the comparable period, revenues and
expenses from discontinued operations are reported separately from revenues and expenses from continuing
operations, down to the level of net income after income taxes.
Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or
amortized.
(h) Property, plant and equipment:
Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and
equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When
significant parts of property, plant and equipment are required to be replaced at intervals, ATS derecognizes
the replaced part and recognizes the new part with its own associated useful life and depreciation. Likewise,
when a major inspection is performed, its cost is recognized in the carrying amount of the property, plant and
equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are
recognized in the consolidated statements of income as incurred.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Buildings
Production equipment
Other equipment
25 to 40 years
3 to 10 years
3 to 10 years
Leasehold improvements are amortized over the shorter of the term of the related lease or their remaining
useful life on a straight-line basis.
An item of property, plant and equipment or any significant part initially recognized is derecognized upon disposal
or when no future economic benefits are expected from its use or eventual disposition. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the consolidated statements of income when the asset is derecognized.
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end
and adjusted prospectively, if appropriate.
ATS AUTOMATION ANNUAL REPORT 2017 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(i) Leases:
The determination of whether an arrangement is, or contains, a lease is based on the substance of the
arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a
specific asset or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in
an arrangement.
Finance leases, which transfer to ATS substantially all the risks and benefits incidental to ownership of the
leased item, are capitalized at the commencement of the lease at the lower of the fair value of the leased
property or the present value of the minimum lease payments. Lease payments are apportioned between
finance costs and the reduction of the lease liability to achieve a constant rate of interest on the remaining
balance of the liability. Finance costs are recognized in the consolidated statements of income.
Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that
ATS will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the
estimated useful life and the lease term.
Leases where ATS does not assume substantially all of the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognized as an expense in the consolidated
statements of income on a straight-line basis over the lease term.
(j) Borrowing costs:
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of
the respective asset. All other borrowing costs are expensed in the period they occur.
(k) Investment property:
Investment properties, which are properties held to earn rental income and/or for capital appreciation, are
measured at acquisition cost less straight-line depreciation and impairment losses. The depreciation policy for
investment property is consistent with the policy for owner-occupied property.
(l) Intangible assets:
Acquired intangible assets are primarily software, patents, customer relationships, brands, technologies and
licenses. Intangible assets acquired separately are initially recorded at fair market value and subsequently at
cost less accumulated amortization and impairment losses. The useful lives of intangible assets are assessed as
either finite or indefinite.
Intangible assets with finite lives are amortized over their useful economic lives, ranging from 1 to 20 years, on a
straight-line basis. Intangible assets with finite lives are assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortization period and the amortization method for an intangible
asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are
accounted for by changing the amortization period or method, as appropriate, and are treated as a change in
accounting estimate. The amortization expense on intangible assets with finite lives is recognized in the
consolidated statements of income in the expense category consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives, primarily brands, are not amortized. The Company assesses the
indefinite life at each reporting date to determine if there is an indication that an intangible asset may be
impaired. If any indication exists, or when annual impairment testing for the intangible asset is required, the
Company estimates the recoverable amount at the CGU level to determine whether the indefinite life continues
to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. An
asset is impaired when the recoverable amount is less than its carrying amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell or its value in use. Impairment losses relating to intangible assets
are evaluated for potential reversals when events or changes in circumstances warrant such consideration.
54 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognized in the consolidated statements
of income when the asset is derecognized.
Research and development expenditures
Research costs are expensed as incurred. Development expenditures on an individual project are recognized as
an intangible asset only when the following conditions are demonstrated:
• The technical feasibility of completing the intangible asset so that it will be available for use or sale.
• The Company’s intention to complete and its ability to use or sell the intangible asset.
• How the asset will generate future economic benefits.
• The availability of resources to complete the intangible asset.
• The ability to measure the expenditures reliably during development.
Following initial recognition of the development expenditure as an asset, the cost model is applied requiring
the asset to be carried at cost less any accumulated amortization and accumulated impairment losses.
Amortization of the asset begins when development is complete and the asset is available for use. It is
amortized over the period of expected future benefit. In the event that a product program for which costs have
been deferred is modified or cancelled, the Company will assess the recoverability of the deferred costs and if
considered unrecoverable, will expense the costs in the period the assessment is made.
(m) Financial instruments:
Recognition
Financial assets and financial liabilities are recognized on the consolidated statements of financial position
when the Company becomes a party to the contractual provisions of the instrument.
Classification
The Company classifies its financial assets and financial liabilities in the following measurement categories:
amortized cost, fair value through profit or loss (“FVTPL”), fair value through other comprehensive income
(“FVTOCI”), or derivatives designated as a hedging instrument in an effective hedge. The classification of
financial assets depends on the business model for managing the financial assets and the contractual terms of
the cash flows. Financial assets are measured at amortized cost where the business model is to hold the
financial asset to collect its contractual cash flows.
Financial liabilities are classified to be measured at amortized cost, derivatives designated as a hedging instrument
in an effective hedge, or they are designated to be measured subsequently at FVTPL. For assets and liabilities
measured at fair value, gains and losses are either recorded in profit or loss or other comprehensive income.
The Company reclassifies financial assets when and only when its business model for managing those assets
changes. Financial liabilities are not reclassified.
The Company classifies and measures financial assets (excluding derivatives) on initial recognition as
described below:
• Cash and cash equivalents and restricted cash are classified as and measured at amortized cost.
• Accounts receivable are classified as and measured at amortized cost using the effective interest rate
method, less any impairment allowance. Accounts receivable are held within a hold-to-collect business
model. The Company does not factor or sell any of its trade receivables.
Accounts payable, bank indebtedness, and long-term debt are classified as other financial liabilities and are
measured at amortized cost using the effective interest rate method.
ATS AUTOMATION ANNUAL REPORT 2017 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Measurement
All financial instruments are initially measured at fair value. Transaction costs that are directly attributable to
the acquisition or issuance of financial instruments classified as amortized costs are included with the carrying
value of such instruments. Transaction costs directly attributable to the acquisition of financial instruments
classified as FVTPL are recognized immediately in profit or loss.
Financial assets that are held within a business model whose objective is to collect the contractual cash flows,
and that have contractual cash flows that are solely payments of principal and interest on the principal
amounts outstanding, are generally measured at amortized cost at the end of the subsequent accounting
periods. All other financial assets including equity investments are measured at fair value at the end of
subsequent accounting periods, with changes recognized in profit or loss or other comprehensive income
(irrevocable election at the time of recognition). Designation at FVTOCI is not permitted if the equity investment
is held for trading. The cumulative fair value gain or loss will not be reclassified to profit or loss on the disposal
of the investments.
Derecognition
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or the
Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and
either the Company has transferred substantially all the risks and rewards of the asset, or ATS has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the
asset.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a
derecognition of the original liability and the recognition of a new liability, and the difference in the respective
carrying amounts is recognized in the consolidated statements of income.
Impairment
The Company recognizes expected credit losses for trade receivables based on the simplified approach under
IFRS 9. The simplified approach to the recognition of expected losses does not require the Company to track
the changes in credit risk; rather, the Company recognizes a loss allowance based on lifetime expected credit
losses at each reporting date from the date of the trade receivable.
Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter
bankruptcy or other financial reorganization and where observable data indicates that there is a measurable
decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate
with defaults. Trade receivables are reviewed qualitatively on a case-by-case basis to determine whether they
need to be written off.
Expected credit losses are measured as the difference in the present value of the contractual cash flows that
are due to the Company under the contract, and the cash flows that the Company expects to receive. The
Company assesses all information available, including past due status, credit ratings, the existence of third-
party insurance, and forward-looking macro-economic factors in the measurement of the expected credit
losses associated with its assets carried at amortized cost.
The Company measures expected credit loss by considering the risk of default over the contract period and
incorporates forward-looking information into its measurement.
56 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Fair value of financial instruments
The Company primarily applies the market approach for recurring fair value measurements. Three levels of
inputs may be used to measure fair value:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 – inputs other than quoted prices included in Level 1 that are observable or can be corroborated by
observable market data
Level 3 – unobservable inputs that are supported by no market activity
(n) Derivative financial instruments and hedge accounting:
The Company may use derivative financial instruments such as forward foreign exchange contracts and
cross-currency interest rate swaps to hedge its foreign currency risk. The Company designates certain
derivative financial instruments as either fair value hedges, cash flow hedges or hedges of net investments in
foreign operations.
Derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured at fair value. The accounting for subsequent changes in fair
value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the
item being hedged and the type of hedge relationship designated. At the inception of the hedge relationship,
the Company documents the economic relationship between the hedging instrument and the hedged item
including whether the hedging instrument is expected to offset changes in cash flows of hedged items. At the
inception of each hedging relationship, the Company documents its risk management objective, its strategy for
undertaking various hedge transactions and how the Company will assess the hedging instrument’s
effectiveness in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged
risk. The hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows
and are assessed on an ongoing basis to determine whether they have actually been highly effective
throughout the financial reporting periods for which they were designated.
Hedges which meet the criteria for hedge accounting are accounted for as follows:
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognized in other comprehensive income and accumulated under the heading of cash flow reserve,
while any ineffective portion is recognized immediately in the consolidated statements of income.
Amounts recognized in other comprehensive income and accumulated in equity are transferred to the
consolidated statements of income when the hedged item is recognized in profit or loss. These earnings are
included within the same line of the consolidated statements of income as the hedged item. Where the hedged
item is the cost of a non-financial asset or non-financial liability, the amounts recognized in other
comprehensive income are transferred at the initial carrying amount of the non-financial asset or liability.
If the forecasted transaction or firm commitment is no longer expected to occur, the cumulative gain or loss
previously recognized in equity is transferred to the consolidated statements of income. If the hedging
instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a
hedge is revoked, any cumulative gain or loss previously recognized in other comprehensive income remains in
other comprehensive income until the forecasted transaction or firm commitment affects profit or loss.
The Company uses forward foreign exchange contracts as hedges of its exposure to foreign currency risk on
anticipated revenues or costs, and cross-currency interest rate swap contracts as hedges of its exposure to
foreign-currency-denominated Senior Notes. The Company may use interest rate swap contracts to reduce its
exposure to floating interest rates.
ATS AUTOMATION ANNUAL REPORT 2017 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Hedges of net investments
Hedges of net investments in a foreign operation, including a hedge of a monetary item that is accounted for as
part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the
hedging instrument related to the effective portion of the hedge are recognized in other comprehensive income
while any gains or losses related to the ineffective portion are recognized in the consolidated statements of
income. On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in
equity is transferred to the consolidated statements of income. The Company uses cross-currency interest rate
swap contracts as a hedge of its exposure to foreign exchange risk on its investments in foreign subsidiaries.
(o) Inventories:
Inventories are stated at the lower of cost and net realizable value on a first-in, first-out basis. The cost of raw
materials includes purchase cost and costs incurred in bringing each product to its present location and
condition. The cost of work in progress and finished goods includes cost of raw materials, labour and related
manufacturing overhead, excluding borrowing costs, based on normal operating capacity. Cost of inventories
includes the transfer from equity of gains and losses on qualifying cash flow hedges in respect of the purchase
of raw materials. Net realizable value is the estimated selling price in the ordinary course of business, less
estimated costs of completion and the estimated costs necessary to make the sale.
(p) Impairment of non-financial assets:
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If
any indication exists, or when annual impairment testing for an asset is required, the Company estimates the
asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less
costs to sell and its value in use. It is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions
are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is
used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded
subsidiaries or other available fair value indicators.
Impairment losses, including impairment on inventories, are recognized in the consolidated statements of
income in those expense categories consistent with the function of the impaired asset.
(q) Provisions:
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event; it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company
expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the consolidated statements of income net of any
reimbursement. If the effect of the time value of money is material, provisions are discounted using a current
pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognized as a finance cost.
Warranty provisions
Provisions for warranty-related costs are recognized when the product is sold or the service provided. Initial
recognition is based on historical experience and specific known risks. The initial estimate of warranty-related
costs is reviewed at the end of each reporting period and adjusted to reflect the current best estimate.
58 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Restructuring provisions
Restructuring provisions are only recognized when general recognition criteria for provisions are fulfilled.
Additionally, the Company needs to have in place a detailed formal plan about the business or part of the
business concerned, the location and number of employees affected, a detailed estimate of the associated
costs and the appropriate timeline. The people affected have a valid expectation that the restructuring is being
carried out or the implementation has been initiated already.
Transition expenses
The Company recognizes transition expenses at the earlier of the following dates: (a) when the Company can no
longer withdraw the offer of those expenses; and (b) when the Company recognizes costs for a transition that is
within the scope of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets and involves the payment of
transition benefits.
In the case of a voluntary departure, the Company can no longer withdraw an offer of transition expenses when
either the employee accepts the offer, or when a restriction on the Company’s ability to withdraw the offer
exists. In the case of an involuntary departure, the Company can no longer withdraw an offer of transition
benefits when it has communicated to the affected employees a plan of termination.
(r) Employee benefits:
The Company operates pension plans in accordance with the applicable laws and regulations in the respective
countries in which the Company conducts business. The pension benefits are provided through defined benefit
and defined contribution plans. The cost of providing benefits under the defined benefit plans is determined
separately for each plan using the projected unit credit method, pro-rated on length of service and
management’s best estimate assumptions to value its pensions using a measurement date of March 31.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are
recognized in the period in which they occur in other comprehensive income. Net interest is calculated by
applying the discount rate to the net defined benefit liability or asset and is recognized in the selling, general
and administrative expenses in the consolidated statements of income.
The past service costs are recognized immediately in profit or loss as an expense.
The defined benefit asset or liability comprises the present value of the defined benefit obligation using the
current interest rate at the reporting date on high quality fixed income investments with maturities that match
the expected maturities of the obligation, less the fair value of plan assets out of which the obligations are to be
settled. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Fair value is based on market price information and in the case of quoted securities it is the published
bid price. The value of any defined benefit asset recognized is restricted to the sum of any past service costs
and actuarial gains and losses not yet recognized and the present value of any economic benefits available in
the form of refunds from the plan or reductions in the future contributions to the plan.
The accounting method for other long-term employee benefit plans is similar to the method used for defined
benefit plans, except that all actuarial gains and losses are recognized immediately in the consolidated
statements of income.
(s) Stock-based payments:
The Company operates both equity-settled and cash-settled stock-based compensation plans under which the
entity receives services from employees as consideration for equity instruments (options) of the Company or
cash payments.
ATS AUTOMATION ANNUAL REPORT 2017 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
For equity-settled plans, namely the Employee Share Purchase Plan and the Stock Option Plan, the fair value
determined at the grant date is expensed on a proportionate basis consistent with the vesting features of each
grant and incorporates an estimate of the number of equity instruments that will ultimately vest. The total
amount to be expensed is determined by reference to the fair value of the stock options granted, excluding the
impact of any non-market service and performance vesting conditions (for example, profitability, sales growth
targets and remaining an employee of the entity over a specified time period).
At the end of each reporting period, the Company revises its estimate of the number of equity instruments
expected to vest based on the non-market vesting conditions. The impact of the revision of the original
estimates, if any, is recognized in the consolidated statements of income with a corresponding adjustment to
equity. The proceeds received are credited to share capital and share premiums when the stock options are
exercised.
For cash-settled plans, namely the Deferred Stock Unit Plan, the Share Appreciation Rights and the Restricted
Share Units, the expense is determined based on the fair value of the liability incurred at each award date and
at each subsequent statement of financial position date until the award is settled. The fair value of the liability is
measured by applying quoted market prices. Changes in fair value are recognized in the consolidated
statements of income in stock-based compensation expense.
(t) Standards issued but not yet effective:
A number of new standards and amendments to standards have been issued but are not yet effective for the
financial year ended March 31, 2017 and, accordingly, have not been applied in preparing these consolidated
financial statements. This listing is of standards issued which the Company reasonably expects to be applicable
at a future date.
(i) IFRS 15 – Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”), which establishes a
single comprehensive model for entities to use in accounting for revenues arising from contracts with
customers. Under IFRS 15, revenues are recognized to depict the transfer of promised goods or services to
customers at an amount that reflects the consideration to which an entity expects to be entitled in exchange for
those goods or services. The principles in IFRS 15 provide a more structured approach to measuring and
recognizing revenues. The new revenue standard will supersede all current revenue recognition requirements
under IFRS.
The standard currently requires a full or modified retrospective application for annual periods beginning on or
after January 1, 2018, with early adoption permitted. The Company does not anticipate early adoption and plans
to adopt the standard for the annual period beginning on April 1, 2018. The Company has not yet determined
the impact on its consolidated financial statements.
(ii) IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16 – Leases, which requires lessees to recognize assets and liabilities
for most leases. There are minimal changes to the existing accounting in IAS 17 – Leases from the perspective of
lessors.
The new standard is effective for annual periods beginning on or after January 1, 2019, with early adoption
permitted provided IFRS 15 has been adopted or is adopted at the same date. The Company does not
anticipate early adoption and plans to adopt the standard for the annual period beginning on April 1, 2019.
The Company has not yet determined the impact on its consolidated financial statements.
60 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
4. Critical accounting estimates and assumptions
The preparation of the Company’s consolidated financial statements requires management to make estimates,
judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and
the disclosure of contingent assets and liabilities at the end of the reporting period. However, uncertainty about
these estimates, judgments and assumptions could result in outcomes that require a material adjustment to
the carrying amount of the asset or liability affected in future periods. The Company based its estimates,
judgments and assumptions on parameters available when the consolidated financial statements were
prepared. Existing circumstances and assumptions about future developments, however, may change due to
market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the
estimates when they occur.
The following are the critical judgments, estimates and assumptions that have been made in applying the
Company’s accounting policies and that have the most significant effect on the amounts in the consolidated
financial statements:
(a) Revenue recognition and contracts in progress:
Revenues from construction contracts are recognized on a percentage of completion basis as outlined in
note 3(d) “Revenue Recognition – Construction Contracts.” In applying the accounting policy on construction
contracts, judgment is required in determining the expected profitability of the contract and the estimated
costs to complete a contract. These factors are reviewed at each reporting period and by their nature may give
rise to income volatility.
(b) Income taxes:
Deferred income tax assets, disclosed in note 16, are recognized to the extent that it is probable that taxable
income will be available against which the losses can be utilized. Significant management judgment is required
to determine the amount of deferred income tax assets that can be recognized based upon the likely timing
and level of future taxable income together with future tax planning strategies.
If the assessment of the Company’s ability to utilize the deferred income tax asset changes, the Company would
be required to recognize more or fewer deferred income tax assets, which would increase or decrease income
tax expense in the period in which this is determined. The Company establishes provisions based on
reasonable estimates for possible consequences of audits by the tax authorities of the respective countries in
which it operates. The amount of such provisions is based on various factors, such as experience of previous
taxation audits and differing interpretations of tax regulations by the taxable entity and the respective tax
authority. These provisions for uncertain tax positions are made using the best estimate of the amount
expected to be paid based on a qualitative assessment of all the relevant factors. The Company reviews the
adequacy of these provisions at each quarter. However, it is possible that at some future date an additional
liability could result from audits by the taxation authorities. Where the final tax outcome of these matters is
different from the amount initially recorded, such differences will affect the tax provisions in the period in
which such determination is made.
(c) Stock-based payment transactions:
The Company measures the cost of transactions with employees by reference to the fair value of the equity
instruments. Estimating fair value for stock-based payment transactions requires the determination of the most
appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also
requires determining the most appropriate inputs to the valuation model including the future forfeiture rate,
the expected life of the share option, weighted average risk-free interest rate, volatility and dividend yield and
making assumptions about them. The assumptions and models used for estimating fair value for stock-based
payment transactions are disclosed in note 17 to the consolidated financial statements.
ATS AUTOMATION ANNUAL REPORT 2017 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(d) Impairment of non-financial assets:
Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the
higher of its fair value less costs to sell and its value in use. As disclosed in notes 9 and 10 to the consolidated
financial statements, the calculations involve significant estimates and assumptions. Items estimated include
cash flows, discount rates and assumptions on revenue growth rates. These estimates could affect the
Company’s future results if the current estimates of future performance and fair values change.
(e) Employee benefits:
The cost of defined benefit pension plans, the cost of other long-term employee benefit plans and the present
value of the pension obligations are determined using actuarial valuations. An actuarial valuation involves making
various assumptions that may differ from actual developments in the future. These include the determination of
the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexity of
the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive
to changes in these assumptions. All assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, management considers the interest rates of corporate bonds in the
respective currency, with extrapolated maturities corresponding to the expected duration of the defined benefit
obligation. The mortality rate is based on publicly available mortality tables for the specific country. Future salary
increases and pension increases are based on expected future inflation rates for the respective country.
Further details about the assumptions used are provided in note 13.
(f) Fair value measurement:
Acquisitions that meet the definition of a business combination require the Company to recognize the assets
acquired and liabilities assumed at their fair value on the date of the acquisition. The calculation of fair value of
the assets and liabilities may require the use of estimates and assumptions, based on discounted cash flows,
market information and using independent valuations and management’s best estimates.
5. Construction contracts and inventories
As at
Contracts in progress:
Costs incurred
Estimated earnings
Progress billings
Disclosed as:
Costs and earnings in excess of billings on contracts in progress
Billings in excess of costs and earnings on contracts in progress
March 31, 2017
March 31, 2016
$
1,273,795
$
1,338,603
440,017
1,713,812
(1,665,594)
48,218
144,708
(96,490)
48,218
415,450
1,754,053
(1,677,486)
76,567
202,694
(126,127)
76,567
$
$
$
$
$
$
62 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
As at
Inventories are summarized as follows:
Raw materials
Work in progress
Finished goods
March 31, 2017
March 31, 2016
$
$
11,597
34,616
1,768
47,981
$
$
11,328
32,530
2,342
46,200
The amount charged to net income and included in cost of revenues for the write-down of inventories for
valuation issues during the year ended March 31, 2017 was $545 (March 31, 2016 – $233). The amount of
inventories carried at net realizable value as at March 31, 2017 was $1,298 (March 31, 2016 – $1,664).
6. Deposits, prepaids and other assets
As at
Prepaid assets
Restricted cash(i)
Supplier deposits
Forward foreign exchange contracts
Other assets
(i) Restricted cash primarily consists of cash collateralized to secure letters of credit.
March 31, 2017
March 31, 2016
$
$
8,864
426
5,768
1,051
10
7,557
443
8,842
5,453
29
$
16,119
$
22,324
ATS AUTOMATION ANNUAL REPORT 2017 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
7. Property, plant and equipment
Buildings and
leaseholds
Production
equipment
Other
equipment
Land
Total
Cost:
Balance, at March 31, 2015
$
20,673 $
85,458 $
14,964 $
35,720 $ 156,815
Additions
Disposals
Exchange and other
adjustments
–
1,453
897
(4,978)
(24,381)
(2,737)
7,700
(4,438)
10,050
(36,534)
924
5,090
1,051
474
7,539
Balance, at March 31, 2016
$
16,619 $
67,620 $
14,175 $
39,456 $ 137,870
Additions
Disposals
Exchange and other
adjustments
–
–
2,247
(334)
713
(696)
6,932
(3,003)
9,892
(4,033)
(193)
(503)
(220)
(759)
(1,675)
Balance, at March 31, 2017
$
16,426 $
69,030 $
13,972 $
42,626 $ 142,054
Buildings and
leaseholds
Production
equipment
Other
equipment
Land
Total
Depreciation:
Balance, at March 31, 2015
$
– $
(41,777) $
(11,390) $
(19,747) $
(72,914)
Depreciation expense
Disposals
Exchange and other adjustments
–
–
–
(3,222)
13,091
(2,480)
(885)
2,727
(838)
(5,574)
3,962
(677)
(9,681)
19,780
(3,995)
Balance, at March 31, 2016
$
– $
(34,388) $
(10,386) $
(22,036) $
(66,810)
Depreciation expense
Disposals
Exchange and other adjustments
–
–
–
(3,150)
(1,027)
139
501
573
189
(6,315)
2,754
325
(10,492)
3,466
1,015
Balance, at March 31, 2017
$
– $
(36,898) $
(10,651) $
(25,272) $
(72,821)
Net book value:
At March 31, 2017
At March 31, 2016
$
$
16,426 $
32,132 $
3,321 $
17,354 $
69,233
16,619 $
33,232 $
3,789 $
17,420 $
71,060
Included in other equipment as at March 31, 2017 is $197 (March 31, 2016 – $301) of assets which are under
construction and have not been depreciated.
64 ATS AUTOMATION ANNUAL REPORT 2017
8. Other assets
As at
Investment property
Cross-currency interest rate swap instrument(i)
(i) The details of this instrument are presented in note 11 to the consolidated financial statements.
Change in Investment Property
Balance, at April 1
Foreign exchange adjustment
Balance, at March 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
March 31, 2017
March 31, 2016
$
$
$
$
4,043
9,248
13,291
2017
4,211
(168)
4,043
$
$
$
$
4,211
–
4,211
2016
3,880
331
4,211
The estimated fair value of the Company’s investment property at March 31, 2017 and March 31, 2016
approximates its carrying value, based on comparable market data for similar properties. The investment
property is a plot of vacant land which does not earn any rental income nor incur any direct operating
expenses, including repairs and maintenance.
9. Goodwill
The carrying amount of goodwill acquired through business combinations has been allocated to a group of
CGUs which combine to form a single operating segment, Automation Systems Group, as follows:
As at
Automation Systems Group
Balance, at April 1
Acquisition – PA
Foreign exchange
Balance, at March 31
March 31, 2017
March 31, 2016
$
423,250
$
431,747
2017
2016
$
431,747
$
405,881
–
(8,497)
923
24,943
$
423,250
$
431,747
The Company performed its annual impairment test of goodwill as at March 31, 2017. The recoverable amount
of the group of CGUs is determined based on fair value less costs to sell using a capitalized EBITDA approach.
This approach requires management to estimate maintainable future EBITDA and capitalize this amount by
rates of return which incorporate the specific risks and opportunities facing the business. EBITDA includes
income before income taxes, net finance costs, depreciation and amortization.
In determining a maintainable future EBITDA, the historical operating results for the five years ended March 31,
2017 were compared to the budgeted results for the year ending March 31, 2018, as presented to and
approved by the Board of Directors. Non-recurring and unusual items have been adjusted in order to normalize
past EBITDA. Management selected capitalization rates in the range of 8.3% to 12.5% for the calculation of the
reasonable range of capitalized EBITDA. As a result of the analysis, management did not identify impairment for
this group of CGUs.
Management believes that any reasonable possible change in the key assumptions on which the recoverable
amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount
of the group of CGUs.
ATS AUTOMATION ANNUAL REPORT 2017 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
10. Intangible assets
Development
projects
Computer
software,
licenses
and other
Technology
Customer
relationships
Brands
Total
$
10,419
$
36,695
$
21,605
$ 166,088
$
12,238
$ 247,045
2,599
3,012
–
(873)
–
–
–
–
–
–
5,611
(873)
472
(10,502)
1,723
17,242
1,046
9,981
$
13,490
$
28,332
$
23,328
$ 183,330
$
13,284
$ 261,764
2,699
5,307
–
(33)
–
–
–
–
–
–
8,006
(33)
(346)
(429)
(796)
(6,372)
(530)
(8,473)
$
15,843
$
33,177
$
22,532
$ 176,958
$
12,754
$ 261,264
Development
projects
Computer
software,
licenses
and other
Technology
Customer
relationships
Brands
Total
$
(4,124)
$
(23,481)
$
(7,656)
$
(28,174)
$
(1,512)
(6,087)
(2,639)
(19,443)
–
782
–
–
(64)
10,750
(640)
(2,411)
$
(5,700)
$
(18,036)
$
(10,935)
$
(50,028)
$
(611)
(3,492)
(2,535)
(17,432)
–
71
33
–
–
306
373
2,791
$
(6,240)
$
(21,189)
$
(13,097)
$
(64,669)
$
–
–
–
–
–
–
–
–
–
$
(63,435)
(29,681)
782
7,635
$
(84,699)
(24,070)
33
3,541
$ (105,195)
Cost:
Balance, at
March 31, 2015
Additions
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2016
Additions
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2017
Amortization:
Balance, at
March 31, 2015
Amortization
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2016
Amortization
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2017
Net book value:
At March 31, 2017 $
9,603 $
11,988 $
9,435 $ 112,289 $
12,754 $ 156,069
At March 31, 2016
$
7,790 $
10,296 $
12,393 $ 133,302 $
13,284 $ 177,065
66 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
As at March 31, 2017, there are no intangible assets included in computer software, licenses and other intangibles
that are in development and have not been depreciated (none at March 31, 2016). Research and development
costs that are not eligible for capitalization have been expensed and are recognized in cost of revenues.
The Company performed its annual impairment test of indefinite-lived intangible assets as at March 31, 2017.
The recoverable amount of acquired brand intangible assets was estimated based on a value-in-use calculation
using the present value of the future cash flows expected to be derived by the related subsidiaries. This
approach requires management to estimate cash flows which include EBIT less income taxes, depreciation and
amortization and capital expenditures.
In determining future cash flows, the budgeted results for the year ending March 31, 2018, as presented to and
approved by the Board of Directors, were extrapolated for a five-year period. Management used pre-tax
discount rates in the range of 15% to 20% to determine the present value of the future cash flows. As a result of
the analysis, management did not identify an impairment of the intangible assets and any reasonable change in
assumptions would not result in impairment.
11. Financial instruments and risk management
(a) Summary of financial instruments
(i) Categories of financial instruments:
The carrying values of the Company’s financial instruments are classified into the following categories:
As at
Fair value
through
profit or loss
Amortized
cost
Fair value
through other
comprehensive
income
Financial assets:
Cash and cash equivalents
$
Trade accounts receivable
Financial liabilities:
Bank indebtedness
Trade accounts payable and
accrued liabilities
Long-term debt
Derivative instruments:
Held for trading derivatives
that are not designated in
hedge accounting
relationships – loss(i)
Derivative instruments in
designated hedge
accounting relationships –
loss(i)
Cross-currency interest rate
swap – gain(ii)
–
–
–
–
–
(966)
–
–
$
286,697
$
146,465
(1,411)
(140,707)
(327,268)
–
–
–
–
–
–
–
–
–
(740)
9,248
March 31, 2017
Total
carrying
value
$
286,697
146,465
(1,411)
(140,707)
(327,268)
(966)
(740)
9,248
ATS AUTOMATION ANNUAL REPORT 2017 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
As at
Fair value
through
profit or loss
Amortized
cost
Fair value
through other
comprehensive
income
Financial assets:
Cash and cash equivalents
$
Trade accounts receivable
Financial liabilities:
Bank indebtedness
Trade accounts payable and
accrued liabilities
Long-term debt
Derivative instruments:
Held for trading derivatives
that are not designated in
hedge accounting
relationships – gain(i)
Derivative instruments in
designated hedge
accounting relationships –
gain(i)
Cross-currency interest rate
swap – loss(ii)
–
–
–
–
–
1,961
–
–
$
170,034
$
182,998
(2,319)
(138,610)
(321,379)
–
–
–
March 31, 2016
Total
carrying
value
$
170,034
182,998
(2,319)
(138,610)
(321,379)
1,961
–
–
–
–
–
–
2,416
2,416
(1,197)
(1,197)
(i)
Derivative financial instruments in a gain position are included in deposits, prepaids and other assets and derivative financial instruments in a loss
position are included in accounts payable and accrued liabilities on the consolidated statements of financial position.
(ii) The cross-currency interest rate swap instrument in a gain position is included in other assets on the consolidated statements of financial position.
The cross-currency interest rate swap instrument in a loss position is included in accounts payable and accrued liabilities on the consolidated
statements of financial position.
During the years ended March 31, 2017 and March 31, 2016, there were no changes in the classification of
financial assets as a result of a change in the purpose or use of those assets.
68 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(ii) Fair value measurements:
The following table summarizes the Company’s financial instruments that are carried or disclosed at fair value
and indicates the fair value hierarchy that reflects the significance of the inputs used in making the
measurements:
As at
March 31, 2017
Carrying
value
Level 1
Level 2
Level 3
Fair value
total
Measured at fair value:
Held for trading derivatives that
are not designated in hedge
accounting relationships
Derivative instruments in designated
hedge accounting relationships
$
(966)
$
–
$
(966)
$
–
$
(966)
Cross-currency interest rate swap
9,248
–
9,248
(740)
–
(740)
–
(740)
–
9,248
Disclosed at fair value:
Investment property
Bank indebtedness
Long-term debt
As at
Measured at fair value:
Held for trading derivatives that
are not designated in hedge
accounting relationships
Derivative instruments in designated
hedge accounting relationships
Cross-currency interest rate swap
Disclosed at fair value:
Investment property
Bank indebtedness
Long-term debt
4,043
(1,411)
–
–
–
4,043
4,043
(1,411)
–
(1,411)
(327,268)
–
(327,268)
–
(327,268)
Carrying
value
Level 1
Level 2
Level 3
Fair value
total
March 31, 2016
$
1,961
$
–
$
1,961
$
–
$
1,961
2,416
(1,197)
–
2,416
–
2,416
–
(1,197)
–
(1,197)
4,211
(2,319)
(321,379)
–
–
–
4,211
4,211
(2,319)
–
(2,319)
–
(321,379)
–
(321,379)
The estimated fair values of cash and cash equivalents, accounts receivable, bank indebtedness, accounts
payable and accrued liabilities approximate their respective carrying values due to the short period to maturity.
The estimated fair value of long-term debt approximates the carrying value due to interest rates approximating
current market values.
Derivative financial instruments are carried at fair value. The fair value of the Company’s derivative instruments
is estimated using a discounted cash flow technique incorporating inputs that are observable in the market or
can be derived from observable market data. The derivative contract counterparties are highly rated
multinational financial institutions.
During the years ended March 31, 2017 and March 31, 2016, there were no transfers between Level 1 and
Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements.
ATS AUTOMATION ANNUAL REPORT 2017 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(b) Risks arising from financial instruments and risk management
The Company manages its market risk through the use of various financial derivative instruments. The Company
uses these instruments to mitigate exposure to fluctuations in foreign exchange rates. The Company’s strategy,
policies and controls are designed to ensure that the risks it assumes comply with the Company’s internal
objectives and its risk tolerance. The Company does not enter into derivative financial agreements for speculative
purposes. As such, any change in cash flows associated with derivative instruments is designed to be offset by
changes in cash flows of the relevant risk being hedged.
When appropriate the Company applies hedge accounting. Hedging does not guard against all risks and is not
always effective. The Company may recognize financial losses as a result of volatility in the market values of
these contracts. The fair values of these instruments represent the price that would be received to sell the asset
or paid to transfer the liability in an orderly transaction between market participants at the measurement date.
The fair value of these derivatives is determined using valuation techniques such as discounted cash flow
analysis. The valuation technique incorporates all factors that would be considered in setting a price, including
the Company’s own credit risk as well as the credit risk of the counterparty.
Foreign currency risk
The Company transacts business in multiple currencies, the most significant of which are the Canadian dollar,
the U.S. dollar and the Euro. As a result, the Company has foreign currency exposure with respect to items
denominated in foreign currencies which may have an impact on operating results and cash flows. The types of
foreign exchange risk can be categorized as follows:
Translation exposure
Each foreign operation’s assets and liabilities are translated from the subsidiary’s functional currency into
Canadian dollars using the exchange rates in effect at the consolidated statement of financial position dates.
Unrealized translation gains and losses are deferred and included in accumulated other comprehensive
income. The cumulative currency translation adjustments are recognized in income when there has been a
reduction in the net investment in the foreign operations.
Foreign currency risks arising from the translation of assets and liabilities of foreign operations into the Company’s
functional currency are hedged under certain circumstances. The Company has assessed the net foreign currency
exposure of operations relative to their own functional currency. A fluctuation of +/- 5% in the Euro and U.S. dollar,
provided as an indicative range in a volatile currency environment, would, everything else being equal, have an
effect on accumulated other comprehensive income for the year ended March 31, 2017 of approximately
+/- $26,190 and $9,562, respectively (2016 +/- $15,885 and $2,105) and on income before income taxes for the year
ended March 31, 2017 of approximately +/- $121 and $84, respectively (2016 +/- $30 and $1,525).
Foreign-currency-based earnings are translated into Canadian dollars each period at prevailing rates. As a result,
fluctuations in the value of the Canadian dollar relative to these other currencies will impact reported net income.
Transaction exposure
The Company generates significant revenues in foreign currencies, which exceed the natural hedge provided by
purchases of goods and services in those currencies. The Company’s risk management objective is to reduce
cash flow risk related to foreign-currency-denominated cash flows. In order to manage foreign currency
exposure in subsidiaries which have transaction exposure in currencies other than the subsidiary’s functional
currency, the Company enters into forward foreign exchange contracts. The timing and amount of these
forward foreign exchange contracts are estimated based on existing customer contracts on hand or anticipated,
current conditions in the Company’s markets and the Company’s past experience. As such, there is not a
material transaction exposure.
70 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
The Company’s U.S.-dollar-denominated Senior Notes are translated into Canadian dollars at the foreign
exchange rate in effect at the consolidated statement of financial position dates. As a result, the Company is
exposed to foreign currency translation gains and losses. The Company uses cross-currency interest rate swaps
as derivative financial instruments to hedge a portion of its foreign exchange risk related to the Senior Notes.
The balance of the Senior Notes is designated as a hedge of the U.S.-dollar-denominated net investment in
foreign operations.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
In relation to its debt financing, the Company is exposed to changes in interest rates, which may impact the
Company’s borrowing costs. Floating rate debt exposes the Company to fluctuations in short-term interest
rates. The Company manages interest rate risk on a portfolio basis and seeks financing terms in individual
arrangements that are most advantageous taking into account all relevant factors, including credit margin, term
and basis. The risk management objective is to minimize the potential for changes in interest rates to cause
adverse changes in cash flows to the Company. As at March 31, 2017, $820 or 0.2% (March 31, 2016 – $4,802 or
1%) of the Company’s total debt is subject to movements in floating interest rates. A +/- 1% change in interest
rates in effect for the fiscal year would, all things being equal, have an impact of +/- $8 on income before
income taxes for the year ended March 31, 2017 (March 31, 2016 +/- $48).
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument
fails to meet its contractual obligations. Financial instruments that potentially subject the Company to credit
risk consist mainly of cash and cash equivalents, accounts receivable and derivative financial instruments. The
carrying values of these assets represent management’s assessment of the associated maximum exposure to
such credit risk. Cash and cash equivalents are held by major financial institutions. Substantially all of the
Company’s trade accounts receivable are due from customers in a variety of industries and, as such, are subject
to normal credit risks from their respective industries. The Company regularly monitors customers for changes
in credit risk. The Company does not believe that any single industry or geographic region represents significant
credit risk. Credit risk concentration with respect to trade receivables is mitigated by the Company’s client base
being primarily large, multinational customers and a portion of these balances being insured by a third party.
Trade receivables – aged by due date as at
Current
1 – 30 days
31 – 60 days
61 – 90 days
Over 90 days
Total
March 31, 2017
March 31, 2016
$
121,029
$
134,778
11,868
4,721
4,768
5,838
33,322
6,178
3,267
7,986
$
148,224
$
185,531
The movement in the Company’s allowance for doubtful accounts for the years ended March 31 was as follows:
Balance, at April 1
Provisions and revisions
Foreign exchange
Balance, at March 31
2017
2,533
(757)
(17)
$
2016
2,289
315
(71)
1,759
$
2,533
$
$
ATS AUTOMATION ANNUAL REPORT 2017 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
The Company minimizes credit risk associated with derivative financial instruments by only entering into
derivative transactions with highly rated multinational financial institutions, in order to reduce the risk of
counterparty default. The Company reviews counterparty credit ratings on a regular basis and sets credit limits
when deemed necessary.
Liquidity risk
Liquidity risk is the risk that the Company may encounter difficulties in meeting obligations associated with
financial liabilities. The Company’s process for managing liquidity risk includes ensuring, to the extent possible,
that it will have sufficient liquidity to meet its liabilities when they become due. The Company requires
authorizations for expenditures on projects and prepares annual capital expenditure budgets to assist with the
management of capital. The Company’s accounts payable primarily have contractual maturities of less than 90
days, and the contractual cash flows equal their carrying value.
Trade payables – aged by due date as at
0 – 30 days
31 – 60 days
61 – 90 days
Over 90 days
Total
March 31, 2017
March 31, 2016
$
47,768
$
40,300
8,663
1,959
1,163
7,751
2,696
4,221
$
59,553
$
54,968
As at March 31, 2017, the Company was holding cash and cash equivalents of $286,697 (March 31, 2016 –
$170,034) and had unutilized lines of credit of $639,050 (March 31, 2016 – $638,712). On June 17, 2015, the
Company completed a private placement of U.S. $250,000 aggregate principal amount of senior notes as
described in note 14 to the consolidated financial statements. The Company expects that continued cash flows
from operations in fiscal 2018, together with cash and cash equivalents on hand and available credit facilities,
will be more than sufficient to fund its requirements for investments in working capital, property, plant and
equipment and strategic investments including some potential acquisitions, and that the Company’s credit
ratings provide reasonable access to capital markets to facilitate future debt issuance.
The Company’s long-term debt obligations and scheduled interest payments are presented in note 14 to the
consolidated financial statements.
(c) Hedge accounting and risk management contracts
Cash flow hedges – foreign currency risk of forecasted purchases and sales
The Company manages foreign exchange risk on its highly probable forecasted revenue and purchase
transactions denominated in various foreign currencies. The Company has identified foreign exchange
fluctuation risk as the hedged risk. To mitigate the risk, forward currency contracts are designated as the
hedging instrument and are entered into to hedge a portion of the purchases and sales. The forward currency
contracts limit the risk of variability in cash flows arising from foreign currency fluctuations. The Company has
established a hedge ratio of 1:1 for all of its hedging relationships. The Company has identified counterparty
credit risk as the only potential source of hedge ineffectiveness.
Cash flow hedges – foreign currency risk on foreign-currency-denominated Senior Notes
The Company uses cross-currency interest rate swaps as derivative financial instruments to hedge a portion of
its foreign exchange risk related to its U.S.-dollar-denominated Senior Notes. On March 29, 2016, the Company
entered into a cross-currency interest rate swap instrument to swap U.S. $150,000 into Canadian dollars. The
Company will receive interest of 6.50% U.S. per annum and pay interest of 6.501% Canadian. The terms of
the hedging relationship will end on June 15, 2023. The Company has established a hedge ratio of 1:1 for all of
its hedging relationships. The Company has identified counterparty credit risk as the only potential source of
hedge ineffectiveness.
72 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
During the years ended March 31, 2017 and March 31, 2016 there were no unrealized gains or losses
recognized in selling, general and administrative expenses for the ineffective portion of cash flow hedges.
Hedge of Euro-denominated net investment in foreign operations
The Company manages foreign exchange risk on its Euro-denominated net investments. The Company uses a
cross-currency interest rate swap as derivative financial instruments to hedge a portion of the foreign exchange
risk related to its Euro-denominated net investment. On March 29, 2016, the Company entered into a cross-
currency interest rate swap instrument to swap 134,084 Euros into Canadian dollars. The Company will receive
interest of 6.501% Canadian per annum and pay interest of 5.094% Euro. The terms of the hedging relationship
will end on June 15, 2023. The Company has established a hedge ratio of 1:1 for all of its hedging relationships.
The Company has identified counterparty credit risk as the only potential source of hedge ineffectiveness.
The following table summarizes the Company’s outstanding cash flow hedge positions to buy and sell foreign
currencies under forward foreign exchange contracts and cross-currency interest rate swaps:
As at
March 31, 2017
Currency sold
Currency bought
Carrying amount
Hedging instrument
Hedged item
Cash flow hedge reserves
Nominal
amount (in
CAD dollars)
Assets
Liabilities
Changes in fair value
used for calculating
hedge ineffectiveness
Changes in fair
value used for
calculating hedge
ineffectiveness
For
continuing
hedges
For
discontinued
hedges
Derivative hedging
instruments(i)
U.S. dollars
U.S. dollars
U.S. dollars
Euros
Euros
British pounds
Cross-currency interest rate
swap instruments(ii)
Canadian dollars
46,757
Euros
Turkish lira
U.S. dollars
Canadian dollars
Canadian dollars
1,631
321
5,618
5,803
33
–
–
6
65
55
–
U.S. dollars
Canadian dollars
Canadian dollars
Euros
199,500
190,239
40
9,208
817
45
–
–
–
4
–
–
817
45
6
65
55
4
817
817
45
6
65
55
4
45
6
65
55
4
40
9,208
40
9,208
40
9,208
–
–
–
–
–
–
–
–
As at
March 31, 2016
Currency sold
Currency bought
Carrying amount
Hedging instrument
Hedged item
Cash flow hedge reserves
Nominal
amount (in
CAD dollars)
Assets
Liabilities
Changes in fair value
used for calculating
hedge ineffectiveness
Changes in fair
value used for
calculating hedge
ineffectiveness
For
continuing
hedges
For
discontinued
hedges
Derivative hedging
instruments(i)
U.S. dollars
U.S. dollars
Euros
Euros
Chinese renminbi
British pounds
Canadian dollars
Canadian dollars
Euros
U.S. dollars
Canadian dollars
Canadian dollars
Canadian dollars
Euros
47,110
3,441
591
697
241
552
813
Cross-currency interest rate
swap instruments(ii)
U.S. dollars
Canadian dollars
Canadian dollars
Euros
194,805
198,136
2,236
79
–
68
5
9
38
51
–
–
–
19
–
–
–
–
–
1,248
2,236
2,236
2,236
79
19
68
5
9
38
51
–
79
19
68
5
9
38
51
–
79
19
68
5
9
38
51
–
–
–
–
–
–
–
–
–
–
(i)
Derivative hedging instruments in a gain position are included in deposits, prepaids and other assets and derivative hedging instruments in a loss
position are included in accounts payable and accrued liabilities on the consolidated statements of financial position.
(ii) The cross-currency interest rate swap instrument in a gain position is included in other assets on the consolidated statements of financial position.
The cross-currency interest rate swap instrument in a loss position is included in accounts payable and accrued liabilities on the consolidated
statements of financial position.
ATS AUTOMATION ANNUAL REPORT 2017 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
As at March 31, 2017, the Company is holding the following forward foreign exchange contracts to hedge the
exposure on its revenues and purchases:
As at
March 31, 2017
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
Currency sold
bought
amount
hedged rate
amount
hedged rate
amount
hedged rate
amount
hedged rate
Currency
Nominal
Average
Nominal
Average
Nominal
Average
Nominal
Average
Canadian dollars
16,459
Euros
1,100
Turkish lira
U.S. dollars
1.282
1.102
34.980
1.078
1.309
1.408
1.060
1.841
18,500
157
128
57
812
–
1.303
1.128
35.000
1.064
1.308
–
16,652
374
–
177
–
–
1.326
1.096
–
1.070
–
–
3,857
1.312
–
–
–
–
–
–
–
–
–
–
1,703
1.065
1,703
1.071
1,703
1.078
–
–
–
–
–
–
193
958
7,898
5,803
1,703
33
U.S. dollars
Canadian dollars
Euros
Euros
Canadian dollars
U.S. dollars
British pounds
Canadian dollars
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
1 to 2 years
Average
Average
Average
Average
Average
Currency
Nominal
hedged
Nominal
hedged
Nominal
hedged
Nominal
hedged
Nominal
hedged
bought
amount
rate
amount
rate
amount
rate
amount
rate
amount
rate
March 31, 2016
Revenue hedges
U.S. dollars
U.S. dollars
U.S. dollars
Euros
Purchase hedges
As at
Currency sold
Revenue hedges
U.S. dollars
U.S. dollars
Euros
Euros
1.317
0.903
1.104
–
0.205
1.830
1.361
6,883
1,900
–
901
–
121
–
1.345
0.893
–
1.509
–
1.835
–
7,792
559
–
37
–
121
–
1.394
0.891
–
1.689
–
1.838
–
7,013
1.408
10,390
1.374
–
–
–
–
–
–
–
–
106
–
1.839
–
–
–
–
–
37
–
–
–
–
–
1.841
–
Canadian dollars
15,032
Euros
U.S. dollars
Canadian dollars
982
591
–
241
Chinese renminbi
Canadian dollars
Purchase hedges
British pounds
Canadian dollars
166
Euros
Canadian dollars
1,054
74 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
The following summarizes the Company’s amounts included in other comprehensive income that relate to
hedge accounting:
As at
March 31, 2017
Change in the value
of the hedging
Amount reclassified
Hedge
from the cash
Line item affected
instrument
ineffectiveness
flow hedge reserve
in profit or loss
recognized in OCI
recognized in
to profit or loss
because of the
Cash flow hedges
gain/(loss)
profit or loss
gain/(loss)
reclassification
Foreign exchange risk:
Revenue hedges
Purchase hedges
Senior Notes hedge
(3,300)
144
3,130
Euro net investment hedge
10,445
As at
–
–
–
–
(413)
126
–
–
Revenues
Cost of revenues
Selling, general and
administrative
Net finance costs
March 31, 2016
Change in the value of
from the cash
Line item affected
Cash flow hedges
in OCI gain/(loss)
instrument recognized
recognized in
profit or loss
profit or loss
gain/(loss)
the hedging
Hedge ineffectiveness
flow hedge reserve to
in profit or loss
because of the
reclassification
Amount reclassified
Foreign exchange risk:
Revenue hedges
Purchase hedges
Senior Notes hedge
5,588
(143)
(1,970)
Euro net investment hedge
(1,197)
Instruments not subject to hedge accounting
–
–
–
–
4,170
(33)
–
–
Revenues
Cost of revenues
Selling, general and
administrative
Net finance costs
As part of the Company’s risk management strategy, forward contract derivative financial instruments are used
to manage foreign currency exposure related to the translation of foreign currency net assets to the
subsidiary’s functional currency. As these instruments have not been designated as hedges, the change in fair
value is recorded in selling, general and administrative expenses in the consolidated statements of income.
For the year ended March 31, 2017, the Company recorded risk management gains of $4,970 (gains of $3,765
for the year ended March 31, 2016) on foreign currency risk management forward contracts in the consolidated
statements of income. Included in these amounts were unrealized gains of $1,044 (gains of $1,961 during the
year ended March 31, 2016) representing the change in fair value. In addition, during the year ended March 31,
2017, the Company realized gains in foreign exchange of $3,926 (gains of $1,804 during the year ended
March 31, 2016), which were settled.
ATS AUTOMATION ANNUAL REPORT 2017 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
12. Provisions
Warranty
Restructuring
Executive
transition
expenses
Other
Total
$
7,702
$
1,419
$
–
$
1,298
$
10,419
6,292
(2,108)
(3,962)
9,681
–
(9,251)
295
220
4,976
11,516
–
–
–
–
(7,822)
32,465
(2,108)
(21,035)
11
526
$
8,219
$
2,069
$
4,976
$
5,003
$
4,662
(1,969)
(2,620)
2,337
–
(3,424)
–
–
(4,976)
6,371
–
(6,412)
20,267
13,370
(1,969)
(17,432)
(117)
(4)
$
8,175
$
978
$
–
–
9
(112)
$
4,971
$
14,124
Balance, at
March 31, 2015
Provisions made
Provisions reversed
Provisions used
Exchange
adjustments
Balance, at
March 31, 2016
Provisions made
Provisions reversed
Provisions used
Exchange
adjustments
Balance, at
March 31, 2017
Warranty provisions
Warranty provisions are related to sales of products and are based on experience reflecting statistical trends of
warranty costs.
Restructuring
Restructuring charges are recognized in the period incurred and when the criteria for provisions are fulfilled.
Termination benefits are recognized as a liability and an expense when the Company is demonstrably
committed through a formal restructuring plan.
Executive transition expenses
Further details of the executive transition expenses are provided in note 23.
76 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
13. Employee benefits
The Company operates pension plans for certain of its employees through defined contribution plans, defined
benefit plans and other long-term employee benefit plans. The costs associated with defined contribution plans
are expensed as incurred. The most recent actuarial valuations of the defined benefit plans and other long-
term employee benefit plans were completed as at March 31, 2017. The next valuations are scheduled to be as
at March 31, 2018.
The changes in the fair value of assets, the employee benefit obligation and the funded status were as follows:
As at
Accrued benefit obligations:
Opening balance
Interest cost
Service cost
Assumption changes
Transfers and benefits paid
Executive transition expenses(i)
Foreign exchange
Accrued benefit obligations, ending balance
Plan assets:
Opening balance
Interest income included in net interest expense
Company contributions
Foreign exchange
Plan assets, ending balance
Employee benefits liability
March 31, 2017
March 31, 2016
$
30,739
$
26,868
742
1,171
(1,573)
(797)
–
(710)
29,572
2,487
177
305
(65)
2,904
26,668
$
$
$
$
601
1,571
(1,211)
(797)
2,089
1,618
30,739
2,091
70
206
120
2,487
28,252
$
$
$
$
(i) Further details of the executive transition expenses are provided in note 23.
Amounts recognized in the consolidated statements of comprehensive income (before tax) were:
As at
Total actuarial gains (losses) recognized in OCI
March 31, 2017
March 31, 2016
$
(569)
$
1,099
The significant weighted average annual actuarial assumptions used in measuring the accrued benefit
obligation were:
Discount rate
Rate of compensation increase
March 31, 2017
March 31, 2016
2.5%
1.3%
2.5%
2.5%
ATS AUTOMATION ANNUAL REPORT 2017 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Sensitivity analysis
Significant actuarial assumptions for the determination of the defined obligation are the discount rate and life
expectancy. The sensitivity analyses have been determined based on reasonably possible changes of the
respective assumptions occurring at the end of the reporting period, while holding all other assumptions
constant.
As at March 31, 2017, the following quantitative analysis shows changes to the significant actuarial assumptions
and the corresponding impact to the accrued benefit obligations:
Discount rate
Life expectancy
1%
increase
1%
decrease
Increase
by 1 year
Decrease
by 1 year
Accrued benefit obligations
$
(3,710)
$
4,641
$
962
$
(950)
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit
obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of
the assumptions may be correlated.
The weighted average allocations of plan assets were:
As at
Other
March 31, 2017
March 31, 2016
100.0%
100.0%
No plan assets were directly invested in the Company’s securities.
The net employee benefits expense included the following components:
Years ended
Defined benefit plans
Service cost
Interest cost
Executive transition expenses
Defined contribution plans
Net employee benefits expense
March 31, 2017
March 31, 2016
$
1,171
$
742
–
1,913
3,282
5,195
$
$
1,571
601
2,089
4,261
3,513
7,774
The Company expects to contribute $305 to its defined benefit plans during the year ended March 31, 2018.
The cumulative actuarial losses, net of income taxes, recognized in retained earnings as at March 31, 2017 was
$5,288 (March 31, 2016 – $4,876).
78 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
14. Bank indebtedness and long-term debt
On June 17, 2015, the Company completed a private placement of U.S. $250,000 aggregate principal amount of
senior notes (the “Senior Notes”). Transaction fees of $7,200 were deferred and are being amortized over the
term of the Senior Notes. The Senior Notes are unsecured, were issued at par, bear interest at a rate of 6.50%
per annum and mature on June 15, 2023. ATS used the majority of net proceeds from the Senior Notes to repay
amounts outstanding under its senior secured credit facility, with the balance to be used for general corporate
purposes. The Company may redeem the Senior Notes, in whole at any time or in part from time to time, at
specified redemption prices and subject to certain conditions required by the Senior Notes. If the Company
experiences a change of control, the Company may be required to repurchase the Senior Notes, in whole or in
part, at a purchase price equal to 101% of the aggregate principal amount of the Senior Notes, plus accrued and
unpaid interest, if any, to, but not including, the redemption date. The Senior Notes contain customary
covenants that restrict, subject to certain exceptions and thresholds, some of the activities of the Company and
its subsidiaries, including the Company’s ability to dispose of assets, incur additional debt, pay dividends, create
liens, make investments, and engage in specified transactions with affiliates. Subject to certain exceptions, the
Senior Notes are guaranteed by each of the subsidiaries of the Company that is a borrower or has guaranteed
obligations under the Credit Facility.
On March 29, 2016, the Company entered into a cross-currency interest rate swap instrument to swap
U.S. $150,000 into Canadian dollars to hedge a portion of its foreign exchange risk related to its
U.S.-dollar-denominated Senior Notes. The Company will receive interest of 6.50% U.S. per annum and pay
interest of 6.501% Canadian. On March 29, 2016, the Company entered into a cross-currency interest rate swap
instrument to swap 134,084 Euros into Canadian dollars to hedge a portion of the foreign exchange risk related
to its Euro-denominated net investment. The Company will receive interest of 6.501% Canadian per annum and
pay interest of 5.094% Euros. The terms of the hedging relationships will end on June 15, 2023. The details of
this instrument are presented in note 11 to the consolidated financial statements.
The Company’s senior secured credit facility (the “Credit Facility”) provides a committed revolving credit facility
of $750,000. The Credit Facility is secured by (i) the Company’s assets, including real estate; (ii) assets, including
certain real estate, of certain of the Company’s North American subsidiaries; and (iii) a pledge of shares of
certain of the Company’s non-North American subsidiaries. Certain of the Company’s subsidiaries also provide
guarantees under the Credit Facility. At March 31, 2017, the Company had utilized $115,034 under the Credit
Facility, by way of letters of credit (March 31, 2016 – $115,053). The Credit Facility matures on August 29, 2018.
The Credit Facility is available in Canadian dollars by way of prime rate advances and/or bankers’ acceptances,
in U.S. dollars by way of base rate advances and/or LIBOR advances, in Swiss francs, Euros and British pounds
sterling by way of LIBOR advances and by way of letters of credit for certain purposes in Canadian dollars, U.S.
dollars and Euros. The interest rates applicable to the Credit Facility are determined based on a debt to EBITDA
ratio as defined in the Credit Facility. For prime rate advances and base rate advances, the interest rate is equal
to the bank’s prime rate or the bank’s U.S. dollar base rate in Canada, respectively, plus a margin ranging from
0.45% to 2.00%. For bankers’ acceptances and LIBOR advances, the interest rate is equal to the bankers’
acceptance fee or the LIBOR, respectively, plus a margin that varies from 1.45% to 3.00%. The Company pays a
fee for usage of financial letters of credit which ranges from 1.45% to 3.00% and a fee for usage of non-financial
letters of credit which ranges from 0.97% to 2.00%. The Company pays a standby fee on the unadvanced
portions of the amounts available for advance or draw-down under the Credit Facility at rates ranging from
0.29% to 0.68%.
ATS AUTOMATION ANNUAL REPORT 2017 79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
The Credit Facility is subject to a debt to EBITDA test and an interest coverage test. Under the terms of the
Credit Facility, the Company is restricted from encumbering any assets with certain permitted exceptions. The
Credit Facility also limits advances to subsidiaries and partially restricts the Company from repurchasing its
common shares and paying dividends. At March 31, 2017, all of the covenants were met.
The Company has additional credit facilities available of $8,116 (3,326 Euros, 75,000 Indian Rupees, 50,000 Thai
Baht and 1,145 Czech Koruna). The total amount outstanding on these facilities was $4,030, of which $1,411
was classified as bank indebtedness (March 31, 2016 – $2,319) and $2,619 was classified as long-term debt
(March 31, 2016 – $7,077). The interest rates applicable to the credit facilities range from 1.66% to 9.18% per
annum. A portion of the long-term debt is secured by certain assets of the Company. The 75,000 Indian Rupees
and the 50,000 Thai Baht credit facilities are secured by letters of credit under the Credit Facility.
(i) Bank indebtedness
As at
Other facilities
(ii) Long-term debt
As at
Senior Notes
Other facilities
Issuance costs
Less: current portion
March 31, 2017
March 31, 2016
$
1,411
$
2,319
March 31, 2017
March 31, 2016
$
332,500
$
324,675
2,619
(7,851)
327,268
1,321
7,077
(10,373)
321,379
5,259
$
325,947
$
316,120
Scheduled principal repayments and interest payments on long-term debt as at March 31, 2017 are as follows:
Principal
Interest
$
1,321
$
432
434
239
107
332,586
335,119
$
21,684
21,684
21,662
21,640
21,626
27,020
$
135,316
Less than one year
One – two years
Two – three years
Three – four years
Four – five years
Thereafter
80 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
15. Share capital
Authorized share capital of the Company consists of an unlimited number of common shares, without par
value, for unlimited consideration.
On November 4, 2015, the Company announced its intention to implement a normal course issuer bid (“NCIB”)
to purchase, for cancellation, up to 4,600,000 common shares before November 5, 2016. During fiscal 2016, the
Company purchased 481,473 common shares for $6,032 under the NCIB program. All purchases are made in
accordance with the bid at prevalent market prices plus brokerage fees, or such other prices that may be
permitted by the Toronto Stock Exchange, with consideration allocated to share capital up to the average
carrying amount of the shares, and any excess allocated to retained earnings. The weighted average price per
share repurchased in the year ended March 31, 2016 was $12.45. No shares were repurchased in the year
ended March 31, 2017. The NCIB expired on November 5, 2016.
The changes in the common shares issued, repurchased and outstanding during the period presented were
as follows:
Balance, at March 31, 2015
Exercise of stock options
Repurchase of common shares
Balance, at March 31, 2016
Exercise of stock options
Balance, at March 31, 2017
Number of
common shares
Share
capital
91,629,665
$
519,118
1,145,167
(481,473)
92,293,359
1,308,667
93,602,026
11,807
(2,741)
528,184
15,133
543,317
$
$
ATS AUTOMATION ANNUAL REPORT 2017 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
16. Taxation
(i) Reconciliation of income taxes:
Income tax expense differs from the amounts which would be obtained by applying the combined Canadian
basic federal and provincial income tax rate to income before income taxes. These differences result from the
following items:
Years ended
March 31, 2017
March 31, 2016
Income before income taxes and non-controlling interest
Combined Canadian basic federal and provincial income tax rate
Income tax expense based on combined Canadian basic federal
and provincial income tax rate
Increase (decrease) in income taxes resulting from:
Adjustments in respect to current income tax of previous periods
Non-taxable income net of non-deductible expenses
Recognition/use of previously unrecognized assets
Income taxed at different rates and statutory rate changes
Manufacturing and processing allowance and all other items
At the effective income tax rate of 24% (2016 – 21%)
Income tax expense reported in the consolidated statements
of income:
Current tax expense
Deferred tax expense
Deferred tax related to items charged or credited directly to equity:
Net gain (loss) on revaluation of cash flow hedges
Other items recognized through equity
Income tax charged directly to equity
$
$
$
$
$
$
$
$
$
46,383
26.50%
12,291
1,036
(5,591)
3,866
89
(335)
50,105
26.50%
13,278
941
(1,166)
(1,502)
(677)
(367)
11,356
$
10,507
9,456
1,900
11,356
800
1,739
2,539
$
$
$
$
10,739
(232)
10,507
(1,391)
(3,389)
(4,780)
(ii) Components of deferred income tax assets and liabilities:
Deferred income taxes are provided for the differences between accounting and tax bases of assets and
liabilities. Deferred income tax assets and liabilities are comprised of the following:
As at
March 31, 2017
March 31, 2016
Accounting income not currently taxable
$
Intangibles
Investment tax credits taxable in future years when utilized
Loss available for offset against future taxable income
Property, plant and equipment
Scientific research and experimental development expenditures
available for offset against future taxable income
Other
$
(20,556)
(32,282)
(9,845)
4,611
(1,576)
13,821
9,204
(27,363)
(34,873)
(9,111)
7,007
(1,546)
22,328
6,352
Net deferred income tax liability
$
(36,623)
$
(37,206)
82 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Presented as:
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax liability
March 31, 2017
March 31, 2016
$
$
2,138
(38,761)
(36,623)
$
$
2,534
(39,740)
(37,206)
Unrecognized deferred income tax assets: Deferred income tax assets have not been recognized in respect of
the following items (gross amount):
As at
Deductible temporary differences
Loss available for offset against future taxable income
March 31, 2017
March 31, 2016
$
$
451
60,972
61,423
$
$
541
56,173
56,714
Loss carryforwards: As at March 31, 2017, the Company has the following net operating loss carryforwards
which are scheduled to expire in the following years:
Year of expiry
2020 – 2024
2025 – 2029
2030 – 2037
No expiry
Non-Canadian
Canadian
$
9,087
$
702
–
17,292
27,081
$
–
6,233
44,697
–
$
50,930
In addition, the Company has U.S. Federal and State capital loss carryforwards of U.S. $13,456 (March 31,
2016 – U.S. $13,456) and Canadian capital loss carryforwards of $289,345 (March 31, 2016 – $282,720) which do
not expire.
Investment tax credits: As at March 31, 2017, the Company has investment tax credits available to be applied
against future taxes payable in Canada of approximately $51,749 and in foreign jurisdictions of approximately
$17,061. The investment tax credits are scheduled to expire as follows:
Year of expiry
2025 – 2029
2030 – 2034
2035 – 2037
Gross ITC balance
$
$
23,608
22,629
22,573
68,810
The benefit of $49,015 (March 31, 2016 – $43,683) of these investment tax credits have been recognized in the
consolidated financial statements. Unrecognized investment tax credits are scheduled to expire between 2028
and 2037.
(iii) The Company has determined that as of the reporting date, undistributed profits of its subsidiaries will not
be distributed in the foreseeable future.
(iv) There are temporary differences of $79,183 associated with investments in subsidiaries for which no
deferred income tax liability has been recognized.
(v) There are no income tax consequences attached to the payment of dividends in either 2017 or 2016 by the
Company to its shareholders.
ATS AUTOMATION ANNUAL REPORT 2017 83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
17. Stock-based compensation
Employee Share Purchase Plan:
Under the terms of the Company’s Employee Share Purchase Plan, qualifying employees of the Company may
set aside funds through payroll deductions for an amount up to a maximum of 10% of their base salary or
$10,000 in any one calendar year. Subject to the member not making withdrawals from the plan, the Company
makes contributions to the plan equal to 20% of a member’s contribution to the plan during the year, up to a
maximum of 1% of the member’s salary or $2,000. Shares for the plan may be issued from treasury or
purchased in the market as determined by the Company’s Board of Directors. During the years ended
March 31, 2017 and March 31, 2016, no shares were issued from treasury related to the plan.
Deferred Stock Unit Plan:
The Company offers a Deferred Stock Unit Plan (“DSU Plan”) for members of the Board of Directors. Under the
DSU Plan, each non-employee director may elect to receive all or a portion of his or her annual compensation in
the form of notional common shares of the Company called deferred stock units (“DSUs”). The issue and
redemption prices of each DSU are based on a five-day volume weighted average trading price of the
Company’s common shares for the five trading days prior to issuance or redemption. Under the terms of the
DSU Plan, directors are not entitled to convert DSUs into cash until retirement from the Board of Directors. The
value of each DSU, when converted to cash, will be equal to the market value of a common share of the
Company at the time the conversion takes place. As at March 31, 2017, the value of the outstanding liability
related to the DSUs was $6,303 (2016 – $3,932). The DSU liability is revalued at each reporting date based on
the change in the Company’s stock price. The change in the value of the DSU liability is included in the
consolidated statements of income in the period of the change.
Stock Option Plan:
The Company uses a stock option plan to attract and retain key employees, officers and directors. Under the
Company’s 1995 Stock Option plan (the “1995 Plan”), the shareholders have approved a maximum of 5,991,839
common shares for issuance, with the maximum reserved for issuance to any one person at 5% of the common
shares outstanding at the time of the grant. Time vested stock options vest over four-year periods.
Performance-based stock options vest based on the Company’s stock trading at or above a threshold for a
specified number of minimum trading days in a fiscal quarter. For time vested stock options, the exercise price
is the price of the Company’s common shares on the Toronto Stock Exchange at closing for the day prior to the
date of the grant. For performance-based stock options, the exercise price is either the price of the Company’s
common shares on the Toronto Stock Exchange at closing for the day prior to the date of the grant or the
five-day volume weighted average price of the Company’s common shares on the Toronto Stock Exchange prior
to the date of the grant. Stock options granted under the 1995 Plan may be exercised during periods not
exceeding seven years from the date of grant, subject to earlier termination upon the option holder ceasing to
be a director, officer or employee of the Company. Stock options issued under the 1995 Plan are non-
transferable. Any stock option granted which is cancelled or terminated for any reason prior to exercise is
returned to the pool and becomes available for future stock option grants. In the event that the stock option
would otherwise expire during a restricted trading period, the expiry date of the stock option is extended to the
10th business day following the date of expiry of such period. In addition, the 1995 Plan restricts the grant of
stock options to insiders that may be under the 1995 Plan.
Under the Company’s 2006 Stock Option Plan (the “2006 Plan”), the shareholders have approved a maximum of
5,159,000 common shares for issuance. The terms of the 2006 Plan are identical to those of the 1995 Plan,
except that the maximum number of common shares to be issued pursuant to the issue of options under the
2006 Plan is 5,159,000 common shares.
As at March 31, 2017, there are a total of 2,274,724 common shares remaining for future stock option grants
under both plans (March 31, 2016 – 2,834,199).
84 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Years ended March 31
2017
Weighted
average
exercise
price
Number of
stock
options
Number of
stock
options
Stock options outstanding, beginning of year
3,433,866
$
11.68
4,221,283
$
Granted
Exercised(i)
Forfeited
294,000
10.46
793,500
(1,308,667)
9.51
(1,145,167)
(144,475)
14.34
(435,750)
Stock options outstanding, end of year
2,274,724
$
12.60
3,433,866
$
2016
Weighted
average
exercise
price
10.10
15.63
7.59
14.28
11.68
Stock options exercisable, end of year,
time vested options
Stock options exercisable, end of year,
performance-based options
959,163
$
12.41
776,925
$
9.88
391,499
$
11.44
1,305,791
$
10.25
(i) For the year ended March 31, 2017, the weighted average share price at the date of exercise was $12.61 (March 31, 2016 – $14.76).
As at March 31, 2017
Stock options outstanding
Stock options exercisable
Range of
Exercise prices
$6.34 – $10.00
$10.01 – $12.50
$12.51 – $14.50
$14.51 – $15.83
$6.34 – $15.83
Weighted
average
remaining
contractual
life
Number
outstanding
264,250
1.68 years
$
701,833
4.43 years
677,266
4.18 years
631,375
5.23 years
Weighted
average
exercise
price
8.10
10.57
13.66
15.83
Number
exercisable
264,250
$
354,333
493,516
238,563
2,274,724
4.26 years
$
12.66
1,350,662
$
Weighted
average
exercise
price
8.10
10.62
13.58
15.83
12.13
The expense associated with the Company’s performance-based stock options is recognized in income over the
estimated assumed vesting period at the time the stock options are granted. Upon the Company’s stock price
trading at or above a stock price performance threshold for a specified minimum number of trading days, the
options vest. When the performance-based stock options vest, the Company is required to recognize all
previously unrecognized expenses associated with the vested stock options in the period in which they vest.
The fair values of the Company’s stock options issued during the periods presented were estimated at the date
of grant using the Black-Scholes option pricing model with the following weighted average assumptions.
Expected stock price volatility was determined at the time of the grant by considering historical share price
volatility. Expected stock option grant life was determined at the time of the grant by considering the average of
the grant vesting period and the grant exercise period.
ATS AUTOMATION ANNUAL REPORT 2017 85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Years ended March 31
Weighted average risk-free interest rate
Dividend yield
Weighted average expected volatility
Weighted average expected life
Number of stock options granted:
Time vested
Weighted average exercise price per option
Weighted average value per option:
Time vested
Share Appreciation Rights
2017
0.90%
0%
30%
2016
0.90%
0%
29%
4.75 years
4.75 years
294,000
10.46
2.88
$
$
793,500
15.63
4.05
$
$
During the year ended March 31, 2017, the Company did not grant any share appreciation rights (“SARs”) (none
in the year ended March 31, 2016). The Company has recorded a liability of $44 as at March 31, 2017 (March 31,
2016 – $200) based on the fair value of the vested SARs. The market value of a common share of the Company
as at March 31, 2017 was $13.57 (March 31, 2016 – $10.59). During the year ended March 31, 2017, 39,375 SARs
vested (39,375 in the year ended March 31, 2016).
Restricted Share Unit Plan
During the year ended March 31, 2017, the Company granted 157,639 time vesting restricted share units
(“RSUs”) (89,250 in the year ended March 31, 2016). The RSUs give the employee the right to receive a cash
payment equal to the market value of a common share of the Company. During the year ended March 31, 2017,
the Company granted 128,785 performance-based RSUs (103,000 in the year ended March 31, 2016). The
performance-based RSUs vest upon successful achievement of certain operational and share price targets.
The performance-based RSUs give the employee the right to receive a cash payment based on the market value
of a common share of the Company. The weighted average remaining vesting period for the time vesting RSUs
and performance-based RSUs is 1.3 years. The RSU liability is recognized quarterly based on the expired portion
of the vesting period and the change in the Company’s stock price. At March 31, 2017, the value of the
outstanding liability related to the RSU plan was $2,722 (March 31, 2016 – $1,572).
86 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
18. Commitments and contingencies
The minimum operating lease payments, related primarily to facilities and equipment, and purchase obligations
are as follows:
Less than one year
One – two years
Two – three years
Three – four years
Four – five years
Due in over five years
Operating
leases
$
10,522
$
7,714
6,889
6,069
4,907
1,343
Purchase
obligations
83,505
7,369
144
40
–
–
$
37,444
$
91,058
The Company’s off-balance sheet arrangements consist of purchase obligations and various operating lease
financing arrangements related primarily to facilities and equipment which have been entered into in the
normal course of business.
The Company’s purchase obligations consist primarily of commitments for materials purchases.
In accordance with industry practice, the Company is liable to customers for obligations relating to contract
completion and timely delivery. In the normal conduct of its operations, the Company may provide letters of
credit as security for advances received from customers pending delivery and contract performance. In
addition, the Company provides letters of credit for post-retirement obligations and may provide letters of
credit as security on equipment under lease and on order. As at March 31, 2017, the total value of outstanding
letters of credit was approximately $136,021 (March 31, 2016 – $136,991).
In the normal course of operations, the Company is party to a number of lawsuits, claims and contingencies.
Although it is possible that liabilities may be incurred in instances for which no accruals have been made, the
Company does not believe that the ultimate outcome of these matters will have a material impact on its
consolidated financial position.
ATS AUTOMATION ANNUAL REPORT 2017 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
19. Segmented disclosure
The Company’s operations are reported as one operating segment, Automation Systems, which plans, allocates
resources, builds capabilities and implements best practices on a global basis.
Geographic segmentation of revenues is determined based on the customer’s installation site. Non-current
assets represent property, plant and equipment and intangible assets that are attributable to individual
geographic segments, based on location of the respective operations.
As at
Canada
United States
Germany
China
Malaysia
Other Europe
Asia-Pacific and other
Total Company
As at
Canada
United States
Germany
China
Malaysia
Other Europe
Asia-Pacific and other
Total Company
Property, plant
and equipment
$
22,866
16,287
25,671
944
1,773
1,160
532
March 31, 2017
Intangible assets
$
10,454
22,942
121,918
45
101
471
138
$
69,233
$
156,069
Property, plant
and equipment
$
23,087
17,434
26,192
1,082
1,784
712
769
March 31, 2016
$
Intangible
assets
9,000
25,703
141,730
54
72
312
194
$
71,060
$
177,065
Revenues from external customers for the years ended
March 31, 2017
March 31, 2016
Canada
United States and Mexico
Germany
China
Malaysia
Other Europe
Asia-Pacific and other
Total Company
$
34,261
331,335
196,777
70,202
120,915
209,734
47,680
$
76,498
380,455
204,292
105,895
37,619
189,800
45,081
$
1,010,904
$
1,039,640
For the year ended March 31, 2017, the Company had revenues from one customer that were 13.9% of its total
revenues (March 31, 2016 – none).
88 ATS AUTOMATION ANNUAL REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
20. Net finance costs
Years ended
Interest expense
Interest income
March 31, 2017
March 31, 2016
$
$
26,208
(656)
25,552
$
$
26,835
(183)
26,652
21. Earnings per share
Years ended
Weighted average number of common shares outstanding
Dilutive effect of stock option conversion
Diluted weighted average number of common shares outstanding
March 31, 2017
March 31, 2016
92,571,163
235,946
92,807,109
92,184,870
478,441
92,663,311
For the year ended March 31, 2017, stock options to purchase 1,602,641 common shares are excluded from the
weighted average number of common shares in the calculation of diluted earnings per share as they are
anti-dilutive (1,276,200 common shares were excluded for the year ended March 31, 2016).
22. Capital management
The Company’s capital management framework is designed to ensure the Company has adequate liquidity,
financial resources and borrowing capacity to allow financial flexibility and to provide an adequate return to
shareholders. The Company defines capital as the aggregate of equity (excluding accumulated other
comprehensive income), bank indebtedness, long-term debt and cash and cash equivalents.
The Company monitors capital using the ratio of total debt to equity. Total debt includes bank indebtedness,
and long-term debt as shown on the consolidated statements of financial position. Net debt consists of cash
and cash equivalents less total debt. Equity includes all components of equity, less accumulated other
comprehensive income. This is unchanged from the previous year. The Company also monitors an externally
imposed covenant of debt to EBITDA of not greater than 3 to 1. EBITDA includes income before income taxes,
less net finance costs, depreciation and amortization. For the years ended March 31, 2017 and March 31, 2016,
the Company operated with a ratio below the externally imposed covenant. The Company is prepared to
increase the total debt to equity ratio and net debt to EBITDA ratio if appropriate opportunities arise.
ATS AUTOMATION ANNUAL REPORT 2017 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
The capital management criteria can be illustrated as follows:
As at
March 31, 2017
March 31, 2016
Equity excluding accumulated other comprehensive income
$
Long-term debt
Bank indebtedness
Cash and cash equivalents
Capital under management
Debt to equity ratio
631,035
327,268
1,411
(286,697)
$
582,234
321,379
2,319
(170,034)
$
673,017
$
735,898
0.52:1
0.56:1
23. Related party disclosure
On April 1, 2014, the Company entered into an agreement with a shareholder, Mason Capital Management, LLC
(“Mason Capital”), pursuant to which Mason Capital agreed to provide ATS with ongoing strategic and capital
markets advisory services for an annual fee of U.S. $500. As part of the agreement, a member of the Company’s
Board of Directors who is associated with Mason Capital has waived any fees to which he may have otherwise
been entitled for serving as a member of the Board of Directors or as a member of any committee of the Board
of Directors.
The remuneration of the Board of Directors and key management personnel is determined by the Board of
Directors on recommendation from the Human Resources Committee of the Board:
As at
Short-term employee benefits
Fees
Stock-based compensation
Post-employment benefits
Other long-term benefits(i)
Executive transition expenses(ii)
Total remuneration
March 31, 2017
March 31, 2016
$
2,294
$
3,053
657
(707)
980
2,910
–
$
6,134
$
655
593
986
–
7,065
12,352
Stock-based compensation represents the remuneration of the Board of Directors and of key management
personnel and is reported in the consolidated statements of income as stock-based compensation expense.
(i)
In March 2017, Andrew Hider was appointed as Chief Executive Officer of ATS. In connection with Mr. Hider’s appointment, and as an inducement to
join ATS, the Company paid Mr. Hider a share purchase allowance (“SP Allowance”) in the amount of $2,910. The after-tax proceeds of the SP
Allowance were used to purchase shares of the Company in the public market (“Purchased ATS Shares”) and are subject to certain minimum
shareholding requirements. The Purchased ATS Shares are subject to forfeiture if Mr. Hider’s employment is terminated for cause or through
resignation within two years of his commencement date, or 50% forfeited if such termination takes place after two years and before three years
from his commencement date.
(ii) In March 2016, the Company announced that Anthony Caputo, the Chief Executive Officer of the Company, was leaving the Company in February
2017. In connection with this, Mr. Caputo and the Company entered into a transition agreement in accordance with which Mr. Caputo received a
lump sum payment of $4,976, which encompassed a bonus entitlement for fiscal 2017, and the Company incurred $2,089 of post-employment
benefit expenses related to an additional two years of credited service towards Mr. Caputo’s pension entitlement.
90 ATS AUTOMATION ANNUAL REPORT 2017
SHAREHOLDER INFORMATION
Senior management
Andrew Hider
Chief Executive Officer
Maria Perrella
Chief Financial Officer
Charles Gyles
Corporate Vice-President, Organizational Effectiveness
Stewart McCuaig
Corporate Vice-President, General Counsel
Corporate headquarters
730 Fountain Street North
Cambridge, Ontario
Canada N3H 4R7
Tel: 1-519-653-6500
Investor relations contact
Maria Perrella
Tel: 1-519-653-6500
Email: investor@atsautomation.com
Stock exchange listing
Toronto Stock Exchange: “ATA”
Registrar and transfer agent
Computershare Trust Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario
Canada M5J 2Y1
Website
www.atsautomation.com
Shareholders’ annual meeting
Thursday, August 17, 2017
10:00 a.m. Eastern Time
TMX Broadcast Centre
The Exchange Tower
130 King Street West
Toronto, Ontario
ATS AUTOMATION ANNUAL REPORT 2017 91
BOARD OF DIRECTORS
Neil D. Arnold(1)(3)
Mr. Arnold has over 35 years of experience in public company finance and general management. Most recently,
he served as Executive Chairman of the Board of Directors of WHX Corp., a public holding company for primary
industrial businesses. He also served as Group Finance Director of Lucas Varity, PLC, a public company
providing components and systems to the global aerospace and automotive industries with revenues in
excess of $7 billion. Prior to that, Mr. Arnold was Chief Financial Officer of Varity Corporation (previously
Massey-Ferguson Ltd.). He has served as a director of Lucas Varity, and WHX Corp. At present, Mr. Arnold is
a Trustee of Pembroke College Foundation of North America Inc. and a Trustee of The Summit Center
Foundation, Inc., both charitable organizations. Mr. Arnold earned a Bachelor of Arts in Engineering Science
from Pembroke College, Oxford University and is a Fellow of the Chartered Institute of Management
Accountants (U.K.).
Andrew Hider
Mr. Hider is the Chief Executive Officer of ATS Automation Tooling Systems Inc. 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, a diversified global leader in the supply of innovative products and systems for marine, transportation,
agriculture and construction markets, a position he held from May 2016 through to February 2017. Prior to that,
Mr. Hider served for 10 years at Danaher Corporation, a global science and technology company, initially joining
Danaher as General Manager and Director of Dover and most recently serving as President of Veeder Root.
Mr. Hider began his career with General Electric, serving in a number of areas over a six-year period, including
manufacturing, project management, procurement and finance, 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 Master of Business Administration, both from Clarkson University.
Michael E. Martino(2)(3)
Mr. Martino is a founder and principal of Mason Capital Management LLC. Mr. Martino began his investment
career at Oppenheimer & Company, where he was responsible for risk arbitrage research; he ended his tenure
at Oppenheimer as Executive Director, Risk Arbitrage. He began his business career at GE Capital Corporation,
where he held positions in information systems and business analysis. He was formerly a director of
Spar Aerospace Limited, a publicly traded aerospace company. Mr. Martino graduated from Fairfield University
with a degree in political science and earned a Master of Business Administration in Finance from New York
University’s Stern School of Business.
David McAusland(3)
Mr. McAusland, the Chairman of the Board of Directors, is a corporate advisor, lawyer, and experienced
corporate director and senior executive. Mr. McAusland is a partner in the law firm McCarthy Tétrault and was
previously Executive Vice-President, Corporate Development, and Chief Legal Officer of Alcan Inc., where he
provided leadership on its worldwide mergers, growth strategies, major transactions and capital investments.
Mr. McAusland currently acts as director of Cogeco Inc., Cogeco Cable Inc. and Cascades Inc. Mr. McAusland is
also involved with several not-for-profit organizations and private companies. Mr. McAusland received his B.C.L.
in 1976 and his LL.B. in 1977, both from McGill University.
92 ATS AUTOMATION ANNUAL REPORT 2017
BOARD OF DIRECTORS
Gordon Presher (1)(2)
Mr. Presher is a uniquely qualified entrepreneur and technologist, possessing expertise and experience in
both the automation technology and solar industries. He is currently engaged in technology and business
consulting services for small to mid-sized companies. He was the Co-founder, Chairman and Chief Executive
Officer of Solar Sentry Corp., a seed-stage developer of innovative monitoring equipment for the solar
energy industry that ceased operations in December of 2016. Prior to Solar Sentry, Mr. Presher was Chairman
and Chief Executive Officer of Ormec Systems Corp., a factory automation firm specializing in precise motion
control that has continued operations based in Rochester, New York. He began his career as an automation-
controls engineer at Eastman Kodak Company, progressing to project leader on two key corporate automation
projects. Mr. Presher holds a Bachelor of Science in Physics and Math from Houghton College, and a Bachelor
of Science in Electrical Engineering from the University of Rochester.
Ivan Ross(1)(2)
Mr. Ross has over 25 years of experience in the financial industry. Currently, he is working at Ardea Partners,
a financial advisory firm, which he co-founded in 2016. From 2011 through March of 2016, Mr. Ross was a
research analyst at Mason Capital Management LLC. From 1992 to 2011, he worked at Goldman Sachs
(promoted to partner in 2002) principally in the Investment Banking Division’s Corporate Finance and New
Products Department, which he ran for many years. Mr. Ross began his career in 1986 as a tax lawyer at
Skadden, Arps in New York, where he advised and structured complex merger and financing transactions. He
holds a Bachelor of Science in Economics from the Wharton School, University of Pennsylvania (1983), and a
JD from New York University School of Law (1986), where he was a member of the Order of the Coif and the
Annual Survey of American Law. Mr. Ross currently serves on the Board of Directors of Mimeo.com, a private
business to business print and document services business headquartered in New York. He also serves as a
member of the Boards of Overseers at each of the Jacobson Leadership Program in Law and Business at New
York University School of Law and the Katz Center for Advanced Judaic Studies at the University of Pennsylvania.
Daryl C.F. Wilson(2)(3)
Mr. Wilson is the President, CEO and director of Hydrogenics Corporation, a Canadian public company and
hydrogen technology provider. Prior to joining Hydrogenics, he was VP of Manufacturing and Operations with
Royal Group Technologies and Zenon Environmental Inc. Preceding that, he served on the senior management
team of Toyota Motor Manufacturing Canada. Mr. Wilson has been National Chair of the Environmental Quality
Committee of the CMA. Mr. Wilson holds a Master of Business Administration in Operations Management/
Management Science from McMaster University; a Bachelor of Science in Chemical Engineering from the
University of Toronto; and has obtained a Chartered Director designation (C.Dir.).
(1) Member of Audit and Finance Committee.
(2) Member of Human Resources Committee.
(3) Member of the Corporate Governance and Nominating Committee.
ATS AUTOMATION ANNUAL REPORT 2017 93
WWW.ATSAUTOMATION.COM
ATS Automation Tooling Systems Inc.
730 Fountain Street North
Cambridge, Ontario
Canada, N3H 4R7