ATS AUTOMATION | ANNUAL REPORT 2018
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ATA
TORONTO STOCK EXCHANGE
$1.9B
MARKET CAPITALIZATION
$1.1B
REVENUE
3,800+
EMPLOYEES WORLDWIDE
20
FACILITIES
50+
OFFICES
22
COUNTRIES
Contents
Letter to Shareholders 2 What We Do 6 Where We Do It 7 Building Value Through People 8
Building Value Through Process 11 Building Value Through Performance 14 Management’s
Discussion and Analysis 18 Management’s Responsibility for Financial Reporting 39
Auditors’ Report 40 Consolidated Financial Statements 41 Notes to Consolidated Financial
Statements 46 Board of Directors 84 Shareholder Information 86
Independent
Rolling Meadows
Wixom
Cambridge
Woodbridge
Parsippany
Lewis Center
Manufacturing Facility
Office
(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 Bookings1
Order Backlog1
Fiscal 2018
Fiscal 2017
Fiscal 2016
$
$
$
$
$
$
$
$
$
1,114.9
85.5
117.3
122.1
47.2
0.50
0.74
1,182
746
$
$
$
$
$
$
$
$
$
1,010.9
71.9
97.1
106.5
35.0
0.38
0.57
1,134
681
$
$
$
$
$
$
$
$
$
1,039.6
76.8
114.4
116.1
39.6
0.43
0.72
1,070
652
1 Non-IFRS measure. See Management’s Discussion and Analysis: Notice to Reader.
ATS is listed on the Toronto Stock Exchange under the symbol “ATA”.
Every day, we advance the future through innovative automation systems and
services. With locations and industry-leading experts around the world, we offer
complete solutions – no matter a project’s complexity or location.
Neuwied
Ludwigshafen
Stutensee
Winnenden
Lutherstadt Wittenberg
Zwickau
Munich
Ingolstadt
St. Georgen
Dortmund
Tianjin
Samutprakarn
ATS AUTOMATION | ANNUAL REPORT 2018 1
LETTER TO SHAREHOLDERS FROM ANDREW HIDER, CHIEF EXECUTIVE OFFICER
Dear Fellow Shareholders,
I joined ATS in March 2017 with a commitment to you and our board to delve
deeply into our business, to assess our strengths and where we can improve,
to set strategic priorities, and to implement new processes that will enable us
to deliver value for both you and our customers. We have made progress in each
of these areas and have delivered topline growth and margin expansion.
Importantly, we have taken foundational steps that help position us for the next
level of performance.
This past year, we completed a thorough strategic review of our operations,
technologies, customers and markets. We deployed the ATS Business Model across
the organization, we added a number of significant customer relationships and
we continued growing repeat business with new and long-term customers.
I’m excited by what we accomplished and am confident that we are on the right track.
Having undertaken an extensive analysis of our capabilities and technologies –
and how they align with customer needs in each of our key markets and
submarkets – we believe we are well positioned to drive above-market growth
well into the future.
2
ATS AUTOMATION | ANNUAL REPORT 2018
We are well positioned to drive above-market growth well into the future. 4 ATS AUTOMATION | ANNUAL REPORT 2018 2018 Financial PerformanceWith a strengthening macroeconomic environment, generally, and solid market fundamentals where we operate, specifically, we delivered sequential improvement in our key financial value drivers: bookings, revenues and adjusted earnings. We achieved record annual order bookings of $1.2 billion, up 4% over last year, and we ended the year with a record order backlog of $746 million, a 10% improvement compared to 2017. Our revenues were $1.1 billion, our EBIT margin expanded by 90 basis points and we saw improved gross margins, reflecting solid program execution and greater operational utilization. We also continued operating with working capital as a percentage of revenues below our target of 15%.Furthermore, we initiated a restructuring plan, which will enable us to improve our cost structure and management, enhance our global capacity utilization and align resources to areas of the business where we expect to drive growth. The past year represents the start of our journey, and I am cognizant of the challenges ahead of us. We know we need to do more in talent development and capacity utilization across all of our operations. And, of course, innovation is imperative in our industry. This is where the ATS Business Model represents a truly exciting opportunity.ATS Business ModelEvery successful team has a playbook designed around its shared strategy, collective strengths and commitment to performance. For us, that playbook is the ATS Business Model – or ABM. It is a set of tools that enable us to pursue and evolve our strategy, to drive continuous improvement, to outpace the competition in the markets we serve and to support long-term, sustainable value for you, our shareholders.Common sense, rigorously applied – that’s the foundation of the ABM. We pursue it across the organization, with a focus first on people, then process, then performance.Every successful team has a playbook designed around its shared strategy, collective strengths and commitment to performance. For us, that playbook is the ABM. LETTER TO SHAREHOLDERS FROM ANDREW HIDER, CHIEF EXECUTIVE OFFICER
We have operations around the world and industry-leading
technologies. None of that is possible, of course, without
the intelligence and commitment of our people. Having a
highly skilled, technical workforce in place – and ensuring
everyone can contribute at his or her highest level, and
grow in his or her position over the long term – enables us
to win as a team. Through the ABM, we are developing
leaders, while engaging and empowering our global
workforce.
With strong leaders and engaged people, we can drive
robust, disciplined process in all aspects of our business
and seek continuous improvement in everything we do.
Whether it’s a Kaizen event to advance process, a 5S
workspace improvement or a goal deployment to segment
strategies into specific focus areas, the ABM provides
valuable tools for the whole organization. By continuously
improving process, determining what we can repeat and
sharing those improvements throughout the company,
we strengthen the organization and create value for our
customers and shareholders.
In 2018, for example, one of our service groups took
a close look at its way of doing things by tracking and
analyzing leading and lagging indicators. Through a
combination of process-oriented problem solving and
sustainable daily management adjustments, it improved
on-time deliveries by over 50%. Such Kaizen events or
improvements – where we maximize efficiencies and
throughputs – can be shared across ATS and help us
pursue growth and margin expansion regardless of market.
Ultimately, performance powers value creation. It also
provides clarity within the organization, for individual
employees and for us as a team. Consistently measuring
our performance is how we ensure we are maximizing
the value of our people and our process. It’s how we
keep score.
The adoption has been encouraging, and we see many
opportunities ahead for continued improvement. We are
fully implementing the ABM in a number of ways. One way
is through global One-Point Lessons, which cover a specific
training topic once a week. We have also kicked off
three-day ABM Boot Camps, where leaders come together,
learn how to implement and improve, and leave able to
champion the playbook’s adoption among their division
team members.
Looking Ahead
We are in the early days of the ABM. Its ongoing
development will complement our existing strengths and
help us realize new ones. As we deploy new tools, we will
focus on those that can effect the biggest impacts across
the organization. Internal process changes will maximize
our ability to align our value proposition with customer
demand in attractive markets, along with our ability to
foster product innovation. We are breaking into
opportunities with existing and new life sciences
customers, for example, and we are helping transportation
companies grapple with the shift from internal combustion
engines to EV technologies. We are poised to help
customers in both areas roll out flexible solutions in a
deliberate, economical and safety-conscious fashion.
The global marketplace is experiencing rising labour costs,
a constant drive toward improved quality and continual
time-to-market imperatives. These factors all play well with
the value that ATS delivers. Through the ABM, internal
process-oriented changes and a rich history of innovative
automation solutions, we are in an enviable position to
serve our customers with efficient, reliable solutions –
before, during and after automation.
As we enter the new fiscal year, we are celebrating some
important ATS milestones: 2018 is our 40th anniversary
as a corporation and our 25th anniversary as a public
company listed on the Toronto Stock Exchange. And our
subsidiary IWK is celebrating its 125th year of offering
customers innovative solutions – certainly an amazing
milestone. I am proud and humbled to have the privilege
of leading this great company and our team of over
3,800 people. It’s a team that’s engaged, committed and
fully aligned to drive value for you and our customers.
With deep roots like ours, a forward-looking mentality and
the right playbook in place, we are ready to keep delivering
value for years to come.
Sincerely,
Andrew Hider
Chief Executive Officer
ATS Automation
June 21, 2018
ATS AUTOMATION | ANNUAL REPORT 2018 5
WHAT WE DO
We have been helping customers around the world transform, streamline and
optimize their manufacturing operations since 1978. Backed by an unmatched
track record of reliable expertise, our end-to-end, single-source solutions can
span the full life cycle of a project.
Pre-automation
Automation and integration
Post-automation
Perfecting automation requires the right
combination of vision and due diligence.
Drawing upon a broad technical base and
seasoned experience with multiple markets,
our experts develop optimized manufacturing
strategies that consider everything from
process design and time to market, to unit
cost and maximum return on investment.
Through close collaboration with customers
and disciplined data-driven analysis,
we conceptualize, simulate and perfect
comprehensive solutions – before
they’re installed.
Over the years, we have helped customers
across a range of industries realize
thousands of innovative automation projects.
With a depth of experience and know-how,
we work with them to develop original, fully
integrated solutions when off-the-shelf
systems just won’t do. We also offer a range
of standard automation products that drive
breakthrough performance – innovative
conveyance systems, high-speed tube–filling
and cartoning machines, and more.
No matter the approach, we work with
customers to make the complex possible.
Our proactive team helps ensure automated
manufacturing stays up and running – with
such single-source solutions as remote
diagnostics, critical analysis, preventive
maintenance, multi-language documentation
and hassle-free spare parts. We work closely
with customers to ensure their personnel
have the proper skills to run systems safely,
efficiently and sustainably, and we give them
real-time insight into their operations
through our ATS Toolkit™. And when the time
comes to upgrade, retrofit or move a system,
we’re there for that too.
6
ATS AUTOMATION | ANNUAL REPORT 2018
WHERE WE DO IT
Around the world, our innovative systems and comprehensive services help bring
a range of products to market. A history of successful partnerships, in four key
industrial markets, gives us a competitive edge – and the ability to develop
advanced solutions for just about anyone.
Life sciences
Energy
Transportation
We work with leading medical
device, pharmaceutical and
biotechnology companies to
design and build high-quality
automated solutions. When it
comes to medical devices, we
know failure is not an option.
So whether it’s manufacturing
a product for the first time or
increasing the efficiency of
an existing automation system,
we offer the experience
and reliability life sciences
companies – and end
users – demand.
Through innovation and support,
we power end-to-end solutions
that help energy companies
keep the lights on. Our experts
work with solar panel and
battery manufacturers to
maximize costs per watt; with
nuclear customers on remotely
operated automation; and with
oil, gas, water and wastewater
customers looking to optimize
production processes and meet
regulatory requirements.
Automotive, powertrain and
aerospace customers look to
us for reliable, cost-effective
solutions for a world on
the move. We’ve developed,
optimized and supported
thousands of assembly systems
that help put cars and trucks on
the road and planes in the sky.
And as the market continues
its shift toward the electrification
of vehicles (EVs), our team
of experts is helping to scale
emerging technologies for
advanced batteries and
driverless cars.
Consumer products
and electronics
Our technologies and services
empower consumer goods and
electronics companies to stay
competitive. With a full range
of proven platforms – and
an eye toward shifting
market trends – we work
with customers to deliver
high-performance assemblies,
innovative packaging and
timely solutions needed to
manufacture cost-effective,
first-class products.
ATS AUTOMATION | ANNUAL REPORT 2018 7
8 ATS AUTOMATION | ANNUAL REPORT 2018BUILDING VALUE THROUGH PEOPLEThrough the application of robust, disciplined processes, the ATS Business Model drives continuous improvement and, ultimately, world-class performance for our customers and shareholders. Winning as a team, however, starts with 3,800 engaged and empowered employees who thrive on solving some of automation’s most complex challenges.With tailored automation solutions, we help customers manufacture their products as efficiently and sustainably as possible. Similarly, we believe in running ATS in ways that benefit our many stakeholders for the long term. We take a broad approach to corporate responsibility. For example, we have been involved with the Carbon Disclosure Project since 2011, and Forbes has recognized us as one of Canada’s Best Employers. We also conduct ourselves with the highest levels of integrity, and encourage our people to report possible ethics violations or violations of law, regulations, policies or procedures without fear of retribution or retaliation. Whether designing an environmentally friendly packaging solution for a customer or interacting with our employees, the lasting success of our business and our world is always top of mind.A sustainable modelWorking across 20 manufacturing facilities and over 50 locations globally, our people give us a competitive edge through an unrivalled combination of talent and experience. Our engineers and program managers work with customers to innovate reliable end-to-end solutions. We are committed to making sure the right people are in the right roles, and are given opportunities to contribute their talents, time and perspectives to drive manufacturing forward.As part of our ABM deployment, we use a number of tools – daily whiteboard reviews, visual management tools and other techniques – to add capacity and better allocate talent. We also offer training opportunities to employees at all levels, through weekly one-point sessions, online learning modules, local and regional ABM Champion networks and our ABM Boot Camps. Every day, we are developing our people so that together we can take on the challenges of tomorrow. The pursuit of continuous improvement is common across the organization. The ABM provides our people with the tools to eliminate waste and drive improvement in their areas of responsibility, regardless of function. The model allows for misses: the quest for perfection should never stifle organic growth or innovation. The ATS Business Model lets us embrace a culture of trial and error, where all ATS employees are encouraged to propose, measure and assess ideas – even those that may not bear fruit.Ultimately, the decisions that matter most are the ones we make when nobody is looking. At ATS, our people embrace discipline, originality and integrity. They are stepping up and securing the future of automation for our customers and shareholders. Founded in 1893, our IWK business
has partnered with pharmaceuticals
and cosmetics companies for 125 years.
ATS AUTOMATION | ANNUAL REPORT 2018 9
10 ATS AUTOMATION | ANNUAL REPORT 2018
ATS AUTOMATION | ANNUAL REPORT 2018 11For Insulet Corporation to scale its wearable Omnipod® Insulin Management System, it needed a partner with proven know-how in automation, validation and the Industrial Internet of Things – someone who could deliver a reliable, high-quality assembly solution for a North American environment. With thousands of life sciences systems under our belt, we helped Insulet strategically onshore manufacturing. Omnipod® lets patients manage insulin delivery simply, discreetly and without daily injections. It shows how fitting complex ideas into small spaces can have measurably positive impacts on an end user’s quality of life. And that’s the power of automation.Complex ideas in small spacesThrough systems, products and services, we help companies bring the high tech to life.In our line of work, as in any other, there’s waste in just about everything. Through the ABM, we look for opportunities to identify, measure and solve pain points in a disciplined, analytical fashion. By minimizing or eliminating unnecessary waste – shaping or transforming our products and services in ways we can maintain and duplicate – we can realize impactful improvements for our business that translate to higher value for our customers and shareholders.BUILDING VALUE THROUGH PROCESSWith unmatched experience across multiple markets, our talented and engaged people give us a competitive advantage. But as much as bench strength matters, so does the way we go about our business. That’s the power of the ATS Business Model. Reducing bottlenecks
A common language
There is no end to continuous improvement. As
teams throughout ATS identify, measure and solve pain
points, they use ABM tools to eliminate waste and
standardize the resulting process.
The exact solution that one division develops may not
translate to other areas of our business, but the overall
learning has value across the company. One division’s
rapid improvement can make another division’s
improvement even faster. We have established a common
language through which we can share problem-solving
improvements, best practices and overall impact across
divisions and sites.
Through a company-wide problem-solving culture and
an established Kaizen funnel, we identify problems,
investigate their root causes, implement short- and
long-term countermeasures and verify the impact of
our solutions. Working as teams, we are reducing costs
through increased productivity, improving lead times and
supporting business growth. We are also eliminating
bottlenecks that slow down overall process or divert
our people from their primary function.
Consider business development in our applications
engineering group. Traditionally, preparing a quotation
required the attention of numerous people and could
take weeks – consuming the valuable time of engineers
and affecting a customer’s overall time to market. ABM
tools helped the group identify and eliminate pain points
in the quoting process. With increased efficiencies in
place, the time needed to prepare a quote has dropped
significantly: our engineers have more time to innovate
solutions, while we have greater capacity to go after
new work.
By identifying and eliminating waste throughout the
company, we have more resources to engage our
customers, establish new customer relationships
and unlock organic growth.
Whether it’s a paradigm-shifting
conveyance system or a cutting-edge “cobot,”
our solutions make the manufacturing systems
of tomorrow possible.
12 ATS AUTOMATION | ANNUAL REPORT 2018
BUILDING VALUE THROUGH PROCESS
ATS AUTOMATION | ANNUAL REPORT 2018 13
14 ATS AUTOMATION | ANNUAL REPORT 2018With the right people in place and with a shared commitment to continuous improvement, we are building upon our track record of success and delivering optimized performance for customers and increased value for shareholders.Engaged people and efficient processes allow us to take a proactive approach to shifting market dynamics and to develop comprehensive solutions for 21st-century manufacturing, or Industry 4.0. That helps us drive the digitization of manufacturing, by developing solutions customers don’t even realize they need yet.Because of unprecedented technological and economic disruption, global manufacturers require solutions that will work today – and tomorrow. We can help customers relocate existing systems when manufacturing environments change, for example. We can also develop flexible ones that can anticipate, and accommodate, new technologies.The shift to EVsThe transportation industry is one area undergoing tremendous change, as it moves from internal combustion engines to fully or partly electric vehicles (EVs), and pioneers driverless technologies. We are at the forefront of helping global auto companies commercialize the battery technologies and sensors that will power vehicles of the future and, in many cases, allow them to operate autonomously.To bring new EV models to consumers, auto companies throughout North America, Europe and China are looking for new or updated assembly lines that represent significant infrastructure investments. We are working with many of them on automation solutions that draw upon our EV experience, and our history of over 22,000 automation projects. The result? Systems that will work today and remain as flexible as possible tomorrow.With batch sizes getting smaller and smaller, customers no longer desire flexibility – they demand it. SuperTrak™ Micro answers the demand through almost unlimited geometries and the ability to separate and merge part flows at full production speeds. Because the new platform does not rely on a closed loop carousel, it unlocks the full creativity of our system designers, which translates to unmatched productivity per square foot for customers. The latest addition to our SuperTrak™ family also represents a compelling solution for smaller firms and new market segments, such as the food and beverage industry.Engineered flexibilityBUILDING VALUE THROUGH PERFORMANCE We are at the forefront of helping auto
companies scale the technologies needed to
shift from internal combustion to fully
or partly electric vehicles.
ATS AUTOMATION | ANNUAL REPORT 2018 15
16 ATS AUTOMATION | ANNUAL REPORT 2018
ATS AUTOMATION | ANNUAL REPORT 2018 17Proactive performanceAcross industries, today’s manufacturing customers are looking for partners. With remote support and preventive maintenance programs, we are helping more and more of them get the most out of their systems through long-term, proactive solutions. With asset optimization, for example, customers can benefit from improved reliability and performance across every aspect of their operating environments. We also offer complete data management services and specialized support to identify and solve system problems, and we have the machine components to keep those systems going.With the right people and the right mindset, we are driving performance for customers – whether they need an assembly unit for EV batteries, a cottoning machine for a new pharmaceutical product or support on an industry-standard system. And we will be there every step of the way to keep those manufacturing environments optimized well into the future.Representing decades of machine-data experience, and now available to customers across all industries, our ATS Toolkit™ is an industry-leading software solution for improved manufacturing performance. Taking full advantage of the Industrial Internet of Things (IIoT), its rich functionality tracks performance and analyzes individual elements, captures real-time video when a problem occurs and shares operator knowledge across shifts and sites. It can even compare full plants on different continents. The ATS Toolkit™ is remotely accessible by any connected device, which means customers can take advantage of post-automation optimization and support 24-7. Like all of our solutions, it shows what a diverse, multinational team of skilled employees can do for our customers.A toolkit for automationMultiple markets, over 50 global locations, over 22,000 automation projects, 3,800 employees… We are one trusted partner. MANAGEMENT’S DISCUSSION
AND ANALYSIS
For the Year Ended March 31, 2018
This Management’s Discussion and Analysis (“MD&A”) for the year ended March 31, 2018 (fiscal 2018) is as of May 16,
2018 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 2018, 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. The
terms “operating margin”, “EBITDA”, “EBITDA margin”, “adjusted net income”, “adjusted earnings from operations”, “adjusted
basic earnings per share”, “non-cash working capital”, “Order Bookings” and “Order Backlog” do not have any standardized
meaning prescribed within IFRS and therefore may not be comparable to similar measures presented by other companies.
Such measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance
with IFRS. In addition, management uses “earnings from operations”, which is an additional IFRS measure, to evaluate the
performance of the Company. Earnings from operations is presented on the Company’s consolidated statements of income as
net income excluding income tax expense and net finance costs. Operating margin is an expression of the Company’s earnings
from operations as a percentage of revenues. EBITDA is defined as earnings from operations excluding depreciation and
amortization (which includes amortization of intangible assets). EBITDA margin is an expression of the Company’s EBITDA as a
percentage of revenues. Adjusted earnings from operations is defined as earnings from operations before items excluded from
management’s internal analysis of operating results, such as amortization expense of acquisition-related intangible assets,
acquisition-related transaction and integration costs, restructuring charges, and certain other adjustments which would be
non-recurring in nature (“adjustment items”). Adjusted basic earnings per share is defined as adjusted net income on a basic
per share basis, where adjusted net income is defined as adjusted earnings from operations less net finance costs and
income tax expense, plus tax effects of adjustment items. Non-cash working capital is defined as the sum of accounts
receivable, costs and earnings in excess of billing on contracts in progress, inventories, deposits, prepaids and other assets,
less accounts payable, accrued liabilities, provisions and billings in excess of costs and earnings on contracts in progress.
Order Bookings represent new orders for the supply of automation systems, services and products that management believes
are firm. Order Backlog is the estimated unearned portion of revenues on customer contracts that are in process and have not
been completed at the specified date.
Earnings from operations and EBITDA are used by the Company to evaluate the performance of its operations. Management
believes that 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’
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 provide 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.
18 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
A reconciliation of (i) earnings from operations and EBITDA to net income, 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 12-month periods ended March 31, 2018 and March 31, 2017, 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 12-month periods ending March 31, 2018 and March 31, 2017 is also
contained in this 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
3,800 people at 20 manufacturing facilities and over 50 offices in North America, Europe, Southeast Asia and China.
Strategy
Framework
To drive the creation of long-term sustainable shareholder value, the Company has developed a framework for a three-part
value creation strategy: Build, Grow and Expand.
Build: To build on the Company’s foundation and drive performance improvements, management is focused on strategic
initiatives including the advancement of the ATS Business Model (“ABM”), the implementation and measurement of value
drivers and key performance indicators, a revised strategic planning process, succession planning and talent management,
advancing employee engagement, and driving autonomy and accountability into its businesses.
Grow: To drive growth, management is focused on growing organically through the development and implementation of
growth tools under the ABM, providing innovation and value to the Company’s customers and markets, and growing the
Company’s recurring revenue model.
Expand: To expand the Company’s reach, management is focused on the development of new markets and business
platforms, expansion of its service offerings, investing in innovation and product development, and making strategic and
disciplined acquisitions that strengthen ATS’ business.
ATS Business Model
The ABM is a business management system that the Company has developed with the goal of enabling the Company to
pursue its strategies, outpace its chosen markets, and drive year-over-year continuous improvement. Introduced in
fiscal 2018, the ABM is bringing focus to:
• People: developing, engaging and empowering ATS’ people to build the best team;
• Process: alignment of ATS people to implement and continuously improve robust and disciplined business processes
throughout the organization; and
• Performance: consistently measuring performance in order to yield world-class performance for our customers
and shareholders.
ATS AUTOMATION | ANNUAL REPORT 2018 19
MANAGEMENT’S DISCUSSION AND ANALYSIS
The ABM is ATS’ playbook, serving as the framework utilized by the Company to achieve its business goals and objectives
through disciplined, continuous improvement. The initial roll-out of the ABM included Company-wide training and deployment of
tools to standardize problem solving, establishing focused key performance metrics and implementing continuous improvement
processes. As the initial tools are implemented, management will deploy additional tools as part of the ongoing advancement of
the ABM. Focus areas include:
• Strengthening the core: adopting a customer first mindset; implementing a robust performance management system;
adhering to eight value drivers; managing using Key Performance Indicators; and leveraging daily management to
measure at the point of impact;
• Delivering growth: alignment with customer success; focusing on organizational talent development, constantly
confirming that progress is being made toward stated goals; and developing annual operating and capital deployment
plans for each ATS division;
• Pursuing excellence: deploying specific goals that segment strategies into relevant focus areas; and improving
continuously using Kaizen events, problem solving and other continuous improvement initiatives, which increase
performance annually; and
• Pioneering innovation: driving market technology leadership; creating innovative platforms and analytics that benefit
customers by reducing complexity, shortening development cycles and improving production efficiencies; and expanding
the reach and scope of ATS’ capabilities for competitive advantage.
Business overview
ATS and its subsidiaries serve 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 engages at varying points in customers’ automation cycles. 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.
20 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
Competitive strengths
Management believes ATS has the following competitive strengths:
Global presence, size and critical mass: ATS’ global presence and scale provide advantages in serving multinational
customers, as many of the Company’s competitors are smaller and operate with a narrower geographic and/or industrial
market focus. ATS has manufacturing operations in Canada, the United States, Germany, China and Thailand. ATS can
deliver localized service through a network of over 50 locations 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.
Technical skills, capabilities and experience: 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 1,500 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
has developed an extensive product and technology portfolio. ATS has a number of standard automation platforms and
products, including: innovative linear mover transport systems; robust cam-driven assembly platforms; advanced vision
systems used to ensure product or process quality; progressive material handling technologies; test systems and software
solutions; and high-performance tube filling and cartoning systems. Management believes the Company’s extensive product
and technology portfolio provides advantages in developing unique and leading solutions for customers and in 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” (“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, returning to ATS time after time to meet their automation manufacturing, assembly or processing
needs. Many customers have long-standing relationships with ATS, often spanning a decade or more.
Total solutions capabilities: Management believes the Company gains competitive advantages because ATS provides total
turnkey 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.
ATS AUTOMATION | ANNUAL REPORT 2018 21
MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview – operating results
Consolidated revenues
(In millions of dollars)
Revenues by market
Consumer products &
electronics
Energy
Life sciences
Transportation
Total revenues
Revenues by
customer location
North America
Europe
Asia/Other
Total revenues
Fourth quarter
Q4 2018
Q4 2017
Fiscal 2018
Fiscal 2017
$
$
$
$
55.6
40.8
132.2
69.8
298.4
Q4 2018
138.0
111.8
48.6
298.4
$
$
$
$
41.9
15.3
127.5
81.0
265.7
$
$
160.6
136.9
518.0
299.4
137.8
173.5
415.1
284.5
$
1,114.9
$
1,010.9
Q4 2017
Fiscal 2018
Fiscal 2017
103.0
116.2
46.5
265.7
$
$
528.5
410.5
175.9
365.6
406.5
238.8
$
1,114.9
$
1,010.9
Fiscal 2018 fourth quarter revenues were 12% higher than in the corresponding period a year ago. Higher revenues
primarily reflected higher Order Backlog entering the fourth quarter of fiscal 2018 compared to a year ago and higher Order
Bookings in the fourth quarter. Foreign exchange rate changes positively impacted the translation of revenues earned by
foreign-based subsidiaries by approximately 3% compared to the corresponding period a year ago, primarily reflecting the
weakening of the Canadian dollar relative to the Euro.
By market, fiscal 2018 fourth quarter revenues from the consumer products & electronics and energy markets increased
33% and 167%, respectively, due to higher Order Backlog entering the fourth quarter of fiscal 2018. Revenues in the life
sciences market increased 4%, primarily due to the timing of Order Bookings. Transportation revenues decreased 14%
compared to a year ago, primarily due to lower activity compared to the previous year.
Full year
Fiscal 2018 revenues were 10% higher than in the corresponding period a year ago, primarily reflecting higher Order
Backlog entering fiscal 2018 compared to a year ago. By market, fiscal 2018 revenues from the consumer products &
electronics market increased 17%, primarily reflecting higher Order Bookings in the consumer products market. Revenues
generated in the energy market decreased 21% compared to the corresponding period a year ago, primarily due to lower
Order Backlog entering fiscal 2018 compared to a year ago. Revenues in the life sciences market increased 25%, primarily
reflecting higher Order Backlog entering fiscal 2018 compared to a year ago. Transportation revenues increased 5%
compared to a year ago, primarily due to higher Order Backlog entering fiscal 2018 compared to a year ago.
22 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
Consolidated operating results
(In millions of dollars)
Q4 2018
Q4 2017
Fiscal 2018
Fiscal 2017
Earnings from operations
$
25.5
$
16.8
$
85.5
$
Amortization of acquisition-
related intangible assets
Restructuring charges
Share purchase allowance
Adjusted earnings
from operations1
5.1
2.2
–
4.8
–
2.9
20.6
11.2
–
$
32.8
$
24.5
$
117.3
$
71.9
20.0
2.3
2.9
97.1
1 See “Notice to reader: Non-IFRS measures and additional IFRS measures”.
Q4 2018
Q4 2017
Fiscal 2018
Fiscal 2017
Earnings from operations
$
Depreciation and
amortization
EBITDA2
$
25.5
9.3
34.8
$
$
16.8
8.8
25.6
$
$
85.5
$
71.9
36.6
122.1
$
34.6
106.5
2 See “Notice to reader: Non-IFRS measures and additional IFRS measures”.
Fourth quarter
Fiscal 2018 fourth quarter earnings from operations were $25.5 million (9% operating margin) compared to $16.8 million
(6% operating margin) in the fourth quarter of fiscal 2017. Fourth quarter fiscal 2018 earnings from operations included
$2.2 million of restructuring costs primarily related to the previously announced closure of a U.S. facility and $5.1 million
related to amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat. Included in
fourth quarter fiscal 2017 earnings from operations was a share purchase allowance of $2.9 million, which was paid to the
Company’s Chief Executive Officer as an inducement to join the Company, and $4.8 million related to amortization of
identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat. Excluding these items, fourth quarter
fiscal 2018 adjusted earnings from operations were $32.8 million (11% margin), compared to adjusted earnings from
operations of $24.5 million (9% margin) a year ago. Higher adjusted earnings from operations primarily reflected higher
revenues and improved gross margin, partially offset by higher selling, general and administrative expenses and increased
stock compensation expenses (see “Consolidated results: Stock-based compensation”).
Depreciation and amortization expense was $9.3 million in the fourth quarter of fiscal 2018, compared to $8.8 million a
year ago. The increase primarily reflected depreciation of internal development projects.
EBITDA was $34.8 million (12% EBITDA margin) in the fourth quarter of fiscal 2018 compared to $25.6 million (10% EBITDA
margin) in the fourth quarter of fiscal 2017. Higher revenues in the fourth quarter of fiscal 2018 were partially offset by
higher selling, general and administrative expenses compared to a year ago. Excluding restructuring costs, fourth quarter
fiscal 2018 EBITDA was $37.0 million (12% EBITDA margin). Comparably, excluding the share purchase allowance, fourth
quarter fiscal 2017 EBITDA was $28.5 million (11% EBITDA margin).
ATS AUTOMATION | ANNUAL REPORT 2018 23
MANAGEMENT’S DISCUSSION AND ANALYSIS
Full year
Earnings from operations were $85.5 million (8% operating margin) in fiscal 2018, compared to $71.9 million (7%
operating margin) in the corresponding period a year ago. Excluding $11.2 million of restructuring costs and $20.6 million
related to amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat, adjusted
earnings from operations were $117.3 million (11% margin) in fiscal 2018, compared to adjusted earnings from operations
of $97.1 million (10% margin) in the corresponding period a year ago. Higher adjusted earnings from operations primarily
reflected higher revenues and improved gross margin in fiscal 2018, partially offset by higher selling, general and
administrative expenses and increased stock compensation expenses compared to a year ago.
Depreciation and amortization expense was $36.6 million in fiscal 2018, compared to $34.6 million a year ago. The
increase primarily reflected depreciation of internal development projects.
Fiscal 2018 EBITDA was $122.1 million (11% EBITDA margin) compared to $106.5 million (11% EBITDA margin) in fiscal
2017. Excluding restructuring costs, fiscal 2018 EBITDA was $133.3 million (12% EBITDA margin). Comparably, excluding
the share purchase allowance and restructuring costs, fiscal 2017 EBITDA was $111.7 million (11% EBITDA margin).
Order Bookings by quarter
(In millions of dollars)
Q1
Q2
Q3
Q4
Total Order Bookings
Fourth quarter
$
Fiscal 2018
Fiscal 2017
$
266
257
311
348
239
289
284
322
$
1,182
$
1,134
Fourth quarter fiscal 2018 Order Bookings were $348 million, an 8% increase from the fourth quarter of fiscal 2017. By
customer market, higher Order Bookings in the consumer products & electronics and life sciences markets were partially
offset by lower Order Bookings in the energy and transportation markets. Foreign exchange rate changes positively
impacted the translation of Order Bookings from foreign-based ATS subsidiaries by approximately 4% compared to the
corresponding period a year ago.
Full year
Fiscal 2018 Order Bookings were $1,182 million, a 4% increase from prior year Order Bookings of $1,134 million. By
market, higher Order Bookings in the energy and consumer products & electronics markets more than offset lower Order
Bookings in the life sciences and transportation markets.
24 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
Q4 2018
Q4 2017
Fiscal 2018
Fiscal 2017
689
(298)
348
7
746
$
$
632
(266)
322
(7)
681
$
681
$
(1,115)
1,182
(2)
746
$
652
(1,011)
1,134
(94)
681
Order Backlog continuity
(In millions of dollars)
Opening Order Backlog
$
Revenues
Order Bookings
Order Backlog
adjustments1
Total
$
1 Order Backlog adjustments include foreign exchange adjustments and cancellations.
Order Backlog by market
(In millions of dollars)
As at
Consumer products & electronics
Energy
Life sciences
Transportation
Total
$
$
$
Fiscal 2018
Fiscal 2017
118
82
358
188
746
$
$
54
94
355
178
681
At March 31, 2018, Order Backlog was a record $746 million, 10% higher than at March 31, 2017. Higher Order Backlog
was driven primarily by higher Order Bookings in the consumer products & electronics market. Foreign exchange rate
changes also positively impacted the translation of Order Backlog from foreign-based ATS subsidiaries by approximately 5%
compared to fiscal 2017.
Outlook
The Company’s Order Bookings are generally variable and sensitive to changes in the major economies the Company serves
including the U.S., Canada, Europe and Asia. The global economic environment has shown recent signs of improvement;
however, geopolitical risks remain.
Funnel activity (which includes customer requests for proposal and ATS identified customer opportunities) in life sciences
remains strong and opportunities in the electrification of vehicles have strengthened funnel activity in the transportation
market. Funnel activity in energy is fluid, and this market provides select opportunities for ATS. 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 are cautious in their approach to capital investment.
The Company’s sales organization continues to work to engage customers on enterprise-type solutions, which it expects 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 is expected to
cause variability in Order Bookings from quarter to quarter and lengthen the performance period and revenue recognition
for certain customer programs. The Company’s efforts to expand its after-sales service offering is expected to provide some
balance to the capital expenditure cycle of its customers; however, this may not offset capital spending volatility. The
Company expects its Order Backlog of $746 million at the end of the fourth quarter of fiscal 2018 to partially mitigate the
impact of volatile Order Bookings on revenues in the short term. In the first quarter of fiscal 2019, management expects
Order Backlog conversion to be in the higher end of the 35% to 40% range. This expected conversion rate is based on
current programs in Order Backlog and management’s estimate of revenues from new Order Bookings in the quarter.
ATS AUTOMATION | ANNUAL REPORT 2018 25
MANAGEMENT’S DISCUSSION AND ANALYSIS
As previously announced, following a thorough review of the Company’s operations, including its global capabilities and
leadership, in the third quarter of fiscal 2018 management initiated a restructuring plan that addresses the rationalization
of divisions and business lines, and improvements to leadership and management. Specific actions under this plan include
the closure of a division in each of the U.S. and Southeast Asia and the rationalization of a business line at a division in
Europe. The restructuring is designed to improve the Company’s leadership and cost structure, and to enhance capacity
utilization by realigning resources to areas of the business that will enable it to deliver increased value to customers and
shareholders. The Company has incurred expenses of $11.2 million in fiscal 2018 related to these initiatives. Management
expects an 18- to 24-month payback, following completion of the restructuring, which is expected to be materially complete
in the first quarter of fiscal 2019.
The Company is deploying the ABM across its divisions globally. In fiscal 2018, the initial roll-out of the ABM was completed,
which included Company-wide training and deployment of tools to standardize problem solving and continuous
improvement processes. As the initial ABM tools are implemented, management will deploy additional tools as part of the
ongoing advancement of the ABM, with the goal of driving growth and continuous, sustained performance improvements
across the Company. Management expects that the ABM will provide the Company with a long-term competitive advantage
in delivering value to its customers and shareholders.
The Company seeks 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.
Consolidated results
Selected fourth quarter and annual information
(In millions of dollars, except per share data)
Revenues
Cost of revenues
Selling, general and administrative
Stock-based compensation
Earnings from operations
Net finance costs
Provision for income taxes
Net income
Basic and diluted earnings per share
From operations:
Total assets
Total cash and short-term investments
Total debt
Q4 2018
Q4 2017
Fiscal 2018
Fiscal 2017
Fiscal 2016
$
298.4
$
265.7
$ 1,114.9
$ 1,010.9
$ 1,039.6
219.9
201.7
49.7
3.3
25.5
5.6
4.9
15.0
0.16
$
$
$
$
45.3
1.9
16.8
6.3
2.7
7.8
0.08
$
$
$
$
826.8
194.3
8.3
85.5
23.8
14.5
47.2
0.50
$
$
$
$
760.3
171.9
6.8
71.9
25.6
11.3
35.0
0.38
$
$
$
$
780.9
179.3
2.6
76.8
26.7
10.5
39.6
0.43
$
$
$
$
$ 1,542.2
$ 1,374.6
$ 1,367.5
$
$
330.1
318.2
$
$
286.7
328.7
$
$
170.0
323.7
Revenues. At $298.4 million, consolidated revenues for the fourth quarter of fiscal 2018 were $32.7 million, or 12%, higher
than in the corresponding period a year ago. At $1,114.9 million, year-to-date revenues were $104.0 million, or 10%,
higher than in the corresponding period a year ago (see “Overview – operating results”).
Cost of revenues. At $219.9 million, fourth quarter fiscal 2018 cost of revenues increased compared to the corresponding
period a year ago by $18.2 million, or 9%. Annual cost of revenues of $826.8 million increased $66.5 million, or 9%,
primarily on higher revenues compared to the corresponding period last year. At 26%, gross margin in the fourth quarter of
fiscal 2018 increased 2% from the corresponding period a year ago, due primarily to improved program execution and
operational utilization. Fiscal 2018 gross margin of 26% increased 1% compared to fiscal 2017.
26 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
Selling, general and administrative (“SG&A”) expenses. SG&A expenses for the fourth quarter of fiscal 2018 were
$49.7 million, which included $5.1 million of amortization costs related to the amortization of identifiable intangible assets
recorded on the acquisitions of PA, IWK and sortimat and $2.2 million of restructuring costs. Excluding these costs, SG&A
expenses were $42.4 million in the fourth quarter of fiscal 2018. Comparably, SG&A expenses for the fourth quarter of
fiscal 2017 were $37.6 million, which excluded $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.
Higher SG&A expenses in the fourth quarter of fiscal 2018 primarily reflected increased employee costs and sales
related expenses.
Fiscal 2018 SG&A expenses were $194.3 million, which included $20.6 million of amortization costs related to the
amortization of identifiable intangible assets recorded on the acquisitions of PA, IWK and sortimat and $11.2 million of
restructuring and severance costs. Excluding these items, SG&A expenses were $162.5 million for fiscal 2018. Comparably,
SG&A expenses for fiscal 2017 were $146.7 million, which excluded $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. Higher SG&A expenses in fiscal
2018 primarily reflected increased employee costs and professional fees.
Stock-based compensation. Stock-based compensation expense amounted to $3.3 million in the fourth quarter of fiscal
2018 compared to $1.9 million in the corresponding period a year ago. Fiscal 2018 stock-based compensation expense
was $8.3 million compared to $6.8 million a year ago. The increase in stock-based compensation costs was due to higher
expenses from the revaluation of deferred stock units and restricted share units.
Earnings from operations. For the three- and 12-month periods ended March 31, 2018, consolidated earnings from
operations were $25.5 million (9% operating margin) and $85.5 million (8% operating margin), respectively, compared to
earnings from operations of $16.8 million (6% operating margin) and $71.9 million (7% operating margin) in the
corresponding periods a year ago (see “Overview – Operating Results”).
Net finance costs. Net finance costs were $5.6 million in the fourth quarter of fiscal 2018, $0.7 million lower than in the
corresponding period a year ago. Fiscal 2018 finance costs were $23.8 million compared to $25.6 million in the
corresponding period a year ago. The decrease was primarily due to higher interest income earned in fiscal 2018 compared
to the corresponding period a year ago.
Income tax provision. For the three and 12 months ended March 31, 2018, the Company’s effective income tax rates of
25% and 23%, respectively, differed from the combined Canadian basic federal and provincial income tax rate of 27%
primarily due to certain non-deductible income and 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 2018 fourth quarter net income was $15.0 million (16 cents per share basic and diluted) compared to
$7.8 million (8 cents per share basic and diluted) for the fourth quarter of fiscal 2017. Adjusted basic earnings per share
were 22 cents in the fourth quarter of fiscal 2018 compared to 15 cents for the fourth quarter of fiscal 2017 (see
“Reconciliation of non-IFRS measures to IFRS measures”).
Fiscal 2018 net income was $47.2 million (50 cents per share basic and diluted) compared to $35.0 million (38 cents
per share basic and diluted) for the corresponding period a year ago. Adjusted basic earnings per share were 74 cents in
fiscal 2018 compared to 57 cents in the corresponding period a year ago (see “Reconciliation of non-IFRS measures to
IFRS measures”).
ATS AUTOMATION | ANNUAL REPORT 2018 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):
Fiscal 2018
Fiscal 2017
Fiscal 2016
EBITDA
Less: depreciation and amortization expense
Earnings from operations
Less: net finance costs
Provision for income taxes
Net income
$
$
$
122.1
36.6
85.5
23.8
14.5
47.2
EBITDA
Less: depreciation and amortization expense
Earnings from operations
Less: net finance costs
Provision for income taxes
Net income
$
$
$
$
$
$
106.5
34.6
71.9
25.6
11.3
35.0
Q4 2018
34.8
9.3
25.5
5.6
4.9
15.0
$
$
$
$
$
$
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
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, 2018
Three Months Ended
March 31, 2017
IFRS
Adjustments
Adjusted
(non-IFRS)
IFRS
Adjustments
Adjusted
(non-IFRS)
Earnings from operations
$
25.5
$
–
$
25.5
$
16.8
$
–
$
16.8
Amortization of acquisition-
related intangible assets
Restructuring charges
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
$
$
$
$
$
$
$
–
–
–
25.5
5.6
19.9
4.9
–
4.9
15.0
0.16
$
$
$
$
$
$
$
5.1
2.2
–
7.3
–
7.3
–
2.0
2.0
5.3
0.06
$
$
$
$
$
$
$
5.1
2.2
–
32.8
5.6
27.2
4.9
2.0
6.9
20.3
0.22
$
$
$
$
$
$
$
–
–
–
16.8
6.3
10.5
2.7
–
2.7
7.8
0.08
$
$
$
$
$
$
$
4.8
–
2.9
7.7
–
7.7
–
2.2
2.2
5.5
0.07
$
$
$
$
$
$
$
4.8
–
2.9
24.5
6.3
18.2
2.7
2.2
4.9
13.3
0.15
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.
28 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
Twelve Months Ended
March 31, 2018
Twelve Months Ended
March 31, 2017
IFRS
Adjustments
Adjusted
(non-IFRS)
IFRS
Adjustments
Adjusted
(non-IFRS)
Earnings from operations
$
85.5
$
–
$
85.5
$
71.9
$
–
$
71.9
Amortization of acquisition-
related intangible assets
Restructuring charges
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
–
–
–
85.5
23.8
61.7
14.5
–
14.5
47.2
0.50
$
$
$
$
$
$
$
20.6
11.2
–
31.8
–
31.8
–
9.2
9.2
22.6
0.24
20.6
11.2
–
117.3
23.8
93.5
14.5
9.2
23.7
69.8
0.74
$
$
$
$
$
$
$
$
$
$
$
$
$
$
–
–
–
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
$
$
$
$
$
$
$
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.
Summary of investments, liquidity, cash flow
and financial resources
Investments
(In millions of dollars)
Investments – increase (decrease)
Non-cash operating working capital
Acquisition of property, plant and equipment
Acquisition of intangible assets
Proceeds from disposal of assets
Total net investments
Fiscal 2018
Fiscal 2017
$
$
27.0
19.9
6.1
(2.6)
50.4
$
(56.5)
9.9
8.0
(0.1)
(38.7)
$
In fiscal 2018, the Company’s investment in non-cash working capital increased $27.0 million, compared to a decrease of
$56.5 million a year ago. Accounts receivable increased 28%, or $46.9 million, driven by the timing of billings on certain
customer contracts. Net contracts in progress increased 43%, or $20.8 million, compared to March 31, 2017. 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 22%, or $10.5 million, primarily due to the
timing of inventory purchases. Deposits and prepaid assets increased 40%, or $6.4 million, compared to March 31, 2017
due to increased deposits on third-party materials for customer programs. Accounts payable and accrued liabilities
increased 34%, or $62.5 million, compared to March 31, 2017. Provisions increased 49%, or $6.9 million, compared to
March 31, 2017 due to restructuring activities undertaken in the year.
ATS AUTOMATION | ANNUAL REPORT 2018 29
MANAGEMENT’S DISCUSSION AND ANALYSIS
Capital expenditures totalled $19.9 million for fiscal 2018, primarily related to computer hardware and the improvement
and expansion of certain manufacturing facilities. Capital expenditures totalled $9.9 million in fiscal 2017, primarily related
to computer hardware.
Intangible asset expenditures for fiscal 2018 and fiscal 2017 were $6.1 million and $8.0 million, respectively, and primarily
related to computer software and various internal development projects.
Proceeds from disposal of assets were $2.6 million in fiscal 2018, compared to $0.1 million in fiscal 2017. The increase
primarily reflects the sale of redundant assets in fiscal 2018.
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 2018
and determined there is no impairment of goodwill or intangible assets as of March 31, 2018 (fiscal 2017 – $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.
Liquidity, cash flow and financial resources
(In millions of dollars, except ratios)
As at
Cash and cash equivalents
Debt-to-equity ratio
Cash flows provided by operating activities
Fiscal 2018
Fiscal 2017
$
$
330.1
0.47:1
59.7
$
$
286.7
0.52:1
127.9
At March 31, 2018, the Company had cash and cash equivalents of $330.1 million compared to $286.7 million at
March 31, 2017. At March 31, 2018, the Company’s debt-to-total equity ratio was 0.47:1.
In fiscal 2018, cash flows provided by operating activities were $59.7 million ($127.9 million provided by operating activities
in the corresponding period a year ago). The decrease in operating cash flows related primarily to the timing of investments
in non-cash working capital in certain customer programs.
At March 31, 2018, the Company had $656.3 million of unutilized multipurpose credit, including letters of credit, available
under existing credit facilities and an additional $5.4 million available under letter of credit facilities.
On July 28, 2017, the Company amended its senior secured credit facility to extend the agreement by three years to mature
on August 29, 2021 (the “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, 2018, the Company had utilized $108.5 million under the Credit Facility by way of letters of credit (March 31,
2017 – $115.0 million).
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 net 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 that ranges from 1.45% to 3.00%, and a fee
for usage of non-financial letters of credit that 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%.
30 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Credit Facility is subject to financial covenants including a net 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, 2018, all of the covenants were met.
The Company has additional credit facilities available of $18.9 million (2.4 million Euros, $10.0 million U.S., 50.0 million
Thai Baht and 1.7 million Czech Koruna). The total amount outstanding on these facilities at March 31, 2018 was $3.4
million, of which $2.7 million was classified as bank indebtedness (March 31, 2017 – $1.4 million) and $0.7 million was
classified as long-term debt (March 31, 2017 – $2.6 million). The interest rates applicable to the credit facilities range from
1.66% to 6.25% per annum. A portion of the long-term debt is secured by certain assets of the Company. The 50.0 million
Thai Baht credit facility is secured by letters of credit under the Credit Facility.
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. At March 31, 2018, all of the covenants
were met. 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 seven-year term of the Senior Notes.
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.
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
$
10.1
$
113.2
9.2
7.8
4.2
2.3
0.9
1.7
0.5
–
–
–
$
34.5
$
115.4
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.
ATS AUTOMATION | ANNUAL REPORT 2018 31
MANAGEMENT’S DISCUSSION AND ANALYSIS
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,
2018, the total value of outstanding letters of credit was approximately $137.1 million (March 31, 2017 – $136.0 million).
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. 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 receivables insurance in certain instances.
Share data
During fiscal 2018, 399,666 stock options were exercised for common shares of the Company. At May 16, 2018,
94,001,692 common shares of the Company were outstanding and there were 1,818,958 stock options outstanding to
acquire common shares of the Company.
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 2018.
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.
32 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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.
Year-end actual exchange rates
Period average exchange rates
March 31,
March 31,
March 31,
March 31,
U.S. dollar
Euro
2018
1.290
1.589
2017
1.330
1.419
% change
(3.0%)
12.0%
2018
1.284
1.502
2017
1.313
1.440
% change
(2.2%)
4.3%
Consolidated quarterly results
(In millions of dollars, except per share amounts)
Q4
2018
Q3
2018
Q2
2018
Q1
2018
Q4
2017
Q3
2017
Q2
2017
Q1
2017
Revenues
$ 298.4 $ 277.6 $ 274.9 $ 264.0 $ 265.7 $ 237.4 $ 242.5 $ 265.4
Earnings from operations
$ 25.5 $ 14.8 $ 23.9 $ 21.3 $ 16.8 $ 15.3 $ 17.3 $ 22.6
Adjusted earnings from operations $ 32.8 $ 29.3 $ 28.8 $ 26.3 $ 24.5 $ 22.5 $ 22.3 $ 27.9
Net income
$ 15.0 $
6.9 $ 13.8 $ 11.5 $
7.8 $
6.6 $
8.5 $ 12.1
Basic and diluted earnings
per share
$ 0.16
$ 0.07
$ 0.15
$ 0.12
$ 0.08
$ 0.07
$ 0.09
$ 0.13
Adjusted basic earnings per share $ 0.22 $ 0.18 $ 0.18 $ 0.16 $ 0.15 $ 0.12 $ 0.13 $ 0.17
Order Bookings
Order Backlog
$ 348.0 $ 311.0 $ 257.0 $ 266.0 $ 322.0 $ 284.0 $ 289.0 $ 239.0
$ 746.0 $ 689.0 $ 648.0 $ 683.0 $ 681.0 $ 632.0 $ 654.0 $ 610.0
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. 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.
ATS AUTOMATION | ANNUAL REPORT 2018 33
MANAGEMENT’S DISCUSSION AND ANALYSIS
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(c) “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 involves varying degrees of technical uncertainty, including possible development work to meet the
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 or provide for refund of purchase 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.
34 ATS AUTOMATION | ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 to the consolidated financial statements.
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 costs 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 affect
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, 2018 and determined there was no impairment (March 31, 2017 – $nil).
Provisions
As described in note 3(o) 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 to 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. The Company has substantially completed its
assessment of IFRS 15. The Company does not expect the implementation of IFRS 15 to have a significant impact on its
consolidated statements of income, and will incorporate the new disclosure requirements of IFRS 15 in its consolidated
financial statements upon adoption on April 1, 2018.
ATS AUTOMATION | ANNUAL REPORT 2018 35
MANAGEMENT’S DISCUSSION AND ANALYSIS
IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16 – Leases (“IFRS 16”), 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 is currently assessing the
impact of adopting this new standard on its consolidated financial statements but expects that the adoption of IFRS 16 will
result in higher non-current assets and non-current liabilities on the consolidated statements of financial position.
Controls and procedures
The Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) of the Company 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, 2018 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, 2018, 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, 2018 and March 31, 2017, 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.
36 ATS AUTOMATION | ANNUAL REPORT 2018
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;
• Strategy execution risks;
• Acquisition risks;
• Expansion risks;
• Customer risks;
• Cumulative loss of several significant contracts;
• Lengthy sales cycle;
• Lack of long-term customer commitment;
• Industry consolidation;
• Foreign exchange risk;
• Liquidity, access to capital markets and leverage;
• Doing business in foreign countries;
• Restrictive covenants;
• Legislative compliance;
• Availability of performance and other guarantees
• Environmental compliance;
from financial institutions;
• Share price volatility;
• Competition;
• Corruption of Foreign Public Officials Act, United States
Foreign Corrupt Practices Act and anti-bribery laws risk;
• Intellectual property protection risks;
• First-time program and production risks;
• Infringement of third parties’ intellectual property
• Automation systems pricing;
• Revenue mix risk;
• Pricing, quality, delivery and volume risks;
• Product failure;
• New product market acceptance, obsolescence
rights risk;
• Internal controls;
• Impairment of intangible assets risk;
• Income and other taxes and uncertain tax liabilities;
• Variations in quarterly results;
and commercialization risk;
• Litigation;
• Security breaches or disruptions of information
• Natural disasters, pandemics, acts of war, terrorism,
technology systems;
• Insurance coverage;
international conflicts or other disruptions;
• Manufacturing facilities disruption; and
• Availability of raw materials and other
• Dependence on performance of subsidiaries.
manufacturing inputs;
• Availability of human resources and dependence on
key personnel;
ATS AUTOMATION | ANNUAL REPORT 2018 37
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: the strategic framework;
conversion of opportunities into 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; expectation that the Company’s efforts to expand its after-sales service offering will provide some balance to
the capital expenditure cycle of its customers; the Company’s Order Backlog partially mitigating the impact of volatile Order
Bookings; rate of Order Backlog conversion; the Company’s expectations surrounding the restructuring currently being
implemented, including with respect to impact, timing and payback; deployment of the ATS Business Model (“ABM”) and the
expected impact; 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; potential to use leverage to support the
Company’s growth strategy; and the Company’s belief with respect to the outcome of certain lawsuits, claims and
contingencies. 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; that some or all of the sales funnel is not converted to Order Bookings due to competitive factors or failure to
meet customer needs; timing of customer decisions related to large enterprise programs and potential for negative impact
associated with any cancellations or non-performance in relation thereto; that revenues from after-sales services are
insufficient to offset capital spending volatility; variations in the amount of Order Backlog completed in any given quarter;
that the current restructuring does not generate anticipated benefits, that it takes longer than anticipated, or that the
payback is other than expected; that the ABM is not deployed effectively, not adopted on the desired scale by the business,
or that its impact is other than as expected; 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 gives 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.
38 ATS AUTOMATION | ANNUAL REPORT 2018
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
ATS AUTOMATION | ANNUAL REPORT 2018 39
40 ATS AUTOMATION | ANNUAL REPORT 2018INDEPENDENT AUDITORS’ REPORTTo 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, 2018 and 2017, 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 statementsManagement 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’ responsibilityOur 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 audit 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.OpinionIn 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, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.Toronto, Canada Chartered Professional Accountants May 16, 2018 Licensed Public Accountants 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
Other long-term 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:
March 31, 2018
March 31, 2017
Note
14
5
5
6
7
8
9
10
16
16
$
$
14
$
12
5
14
13
14
16
11
$
14, 18
15
$
$
330,148
213,006
164,917
58,509
22,510
789,090
85,102
–
459,159
148,869
2,987
57,012
753,129
1,542,219
2,668
246,384
20,994
95,912
393
366,351
28,151
315,129
42,907
30,908
417,095
783,446
548,747
12,535
75,830
121,369
758,481
292
758,773
1,542,219
$
$
$
$
$
$
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
David McAusland
Director
Neil D. Arnold
Director
See accompanying notes to the consolidated financial statements.
ATS AUTOMATION | ANNUAL REPORT 2018 41
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
Note
2018
2017
$
$
$
$
654,193
79,979
380,758
1,114,930
826,771
194,421
8,276
85,462
23,766
61,696
14,487
47,209
47,165
44
47,209
17
20
16
$
$
$
$
$
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
Earnings per share attributable to shareholders
Basic and diluted
21
$
0.50
See accompanying notes to the consolidated financial statements.
42 ATS AUTOMATION | ANNUAL REPORT 2018
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:
Note
$
2018
47,209
$
2017
35,027
Currency translation adjustment (net of income taxes of $nil)
24,414
(10,978)
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 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.
11
11
11
13
$
$
$
2,357
(655)
(1,673)
479
(5,420)
1,354
(534)
139
20,461
67,670
67,626
44
67,670
$
$
$
(2,869)
751
(287)
46
(11)
3
(569)
157)
(13,757)
21,270
21,237
33
21,270
ATS AUTOMATION | ANNUAL REPORT 2018 43
CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
(in thousands of Canadian dollars)
Year ended March 31, 2018
Total
accumulated
Share
capital
Contributed
surplus
Retained
earnings
translation
adjustments
hedge
comprehensive
controlling
reserve
income
interests
Total
equity
Currency
Cash flow
other
Non-
Balance, as at
March 31, 2017
$ 543,317
$ 12,871
$ 74,599
$ 55,504
$
(530)
$ 54,974
$
248
$ 686,009
Net income
Other comprehensive
income (loss)
Total comprehensive
income (loss)
Stock-based
compensation
Exercise of stock
options
Balance, as at
–
–
47,165
–
–
–
44
47,209
–
–
–
–
–
953
5,430
(1,289)
(395)
24,414
(3,558)
20,856
–
20,461
46,770
24,414
(3,558)
20,856
44
67,670
–
–
–
–
–
–
–
–
–
–
953
4,141
March 31, 2018
$ 548,747 $ 12,535
$ 121,369
$ 79,918
$
(4,088)
$ 75,830
$
292
$ 758,773
Year ended March 31, 2017
Total
accumulated
Share
capital
Contributed
surplus
Retained
earnings
translation
adjustments
hedge
comprehensive
reserve
income
Currency
Cash flow
other
Non-
controlling
interests
Total
equity
Balance, as at
March 31, 2016
$ 528,184
$ 13,201
$ 40,634
$ 66,482
$
1,837
$ 68,319
$
215
$ 650,553
Net income
Other comprehensive
loss
Total comprehensive
income (loss)
Non-controlling
interests
Stock-based
compensation
Exercise of stock
options
Balance, as at
–
–
34,994
–
–
–
33
35,027
–
–
–
–
–
–
–
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
See accompanying notes to the consolidated financial statements.
44 ATS AUTOMATION | ANNUAL REPORT 2018
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands of Canadian dollars)
Years ended March 31
Operating activities
Net income
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
Proceeds from disposal of property, plant and equipment
Cash flows used in investing activities
Financing activities
Bank indebtedness
Repayment of long-term debt
Proceeds from long-term debt
Proceeds from exercise of stock options
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
See accompanying notes to the consolidated financial statements.
Note
2018
2017
$
47,209
$
35,027
7
10
16
17
7
10
$
$
$
$
$
$
$
$
10,352
26,315
866
(4,778)
8,276
(1,593)
86,647
(26,961)
59,686
(19,851)
(6,124)
2,594
(23,381)
1,191
(2,194)
195
4,141
3,333
3,813
43,451
286,697
330,148
10,231
21,751
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
$
$
$
$
$
$
$
$
ATS AUTOMATION | ANNUAL REPORT 2018 45
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 turnkey 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, 2018 were authorized for issue by the
Board of Directors (the “Board”) on May 16, 2018.
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 on 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.
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.
46 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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 that 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) 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.
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.
(c) 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.
ATS AUTOMATION | ANNUAL REPORT 2018 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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.
(d) 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.
(e) 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.
48 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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 carryforward 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.
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 and accrued liabilities on the consolidated statements of financial position.
ATS AUTOMATION | ANNUAL REPORT 2018 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(f) 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 on an annual basis or more frequently if
required and adjusted prospectively, if appropriate.
(g) 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.
(h) 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 in which they occur.
(i) 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.
50 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(j) 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.
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.
ATS AUTOMATION | ANNUAL REPORT 2018 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(k) 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 and accrued liabilities, bank indebtedness, and long-term debt are classified as other financial liabilities
and are measured at amortized cost using the effective interest rate method.
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.
52 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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 macroeconomic
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.
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
(l) 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 hedging 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 value 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.
ATS AUTOMATION | ANNUAL REPORT 2018 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Hedges that 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.
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.
(m) 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.
(n) 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.
54 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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.
(o) 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.
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.
(p) 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 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.
ATS AUTOMATION | ANNUAL REPORT 2018 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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.
(q) 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.
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
consolidated 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.
(r) 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, 2018 and, accordingly, have not been applied in preparing these consolidated financial statements. This
listing is of standards issued that 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. The Company has substantially completed its
assessment of IFRS 15. The Company does not expect the implementation of IFRS 15 to have a significant impact on its
consolidated statements of income, and will incorporate the new disclosure requirements of IFRS 15 in its consolidated
financial statements upon adoption on April 1, 2018.
(ii) IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16 – Leases (“IFRS 16”), 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 is currently assessing the
impact of adopting this new standard on its consolidated financial statements but expects that IFRS 16 will result in higher
non-current assets and non-current liabilities on the consolidated statements of financial position.
56 ATS AUTOMATION | ANNUAL REPORT 2018
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(c)
“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.
(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, 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.
ATS AUTOMATION | ANNUAL REPORT 2018 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
(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.
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
As at
Inventories are summarized as follows:
Raw materials
Work in progress
Finished goods
March 31, 2018
March 31, 2017
$
1,139,038
$
1,273,795
391,009
1,530,047
(1,461,042)
69,005
164,917
(95,912)
69,005
$
$
$
440,017
1,713,812
(1,665,594)
48,218
144,708
(96,490)
48,218
$
$
$
March 31, 2018
March 31, 2017
$
$
15,880
40,858
1,771
58,509
$
$
11,597
34,616
1,768
47,981
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, 2018 was $428 (March 31, 2017 – $545). The amount of inventories carried at net
realizable value as at March 31, 2018 was $1,336 (March 31, 2017 – $1,298).
58 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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.
7. Property, plant and equipment
March 31, 2018
March 31, 2017
$
$
9,399
477
10,396
2,213
25
8,864
426
5,768
1,051
10
$
22,510
$
16,119
Buildings and
leaseholds
Production
equipment
Other
equipment
Land
Total
Cost:
Balance, at March 31, 2016
$
16,619 $
67,620 $
14,175 $
39,456 $ 137,870
Additions
Disposals
Exchange and other adjustments
–
–
(193)
2,247
(334)
(503)
713
(696)
(220)
6,932
(3,003)
(759)
9,892
(4,033)
(1,675)
Balance, at March 31, 2017
$
16,426 $
69,030 $
13,972 $
42,626 $ 142,054
Additions
Disposals
Exchange and other adjustments
–
(257)
5,242
3,406
(3,663)
3,066
2,043
(1,351)
953
14,402
(2,691)
2,563
19,851
(7,962)
11,824
Balance, at March 31, 2018
$
21,411 $
71,839 $
15,617 $
56,900 $ 165,767
Buildings and
leaseholds
Production
equipment
Other
equipment
Land
Total
Depreciation:
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)
Depreciation expense
Disposals
Exchange and other adjustments
–
–
–
(2,834)
3,240
(1,999)
(928)
1,324
(724)
(6,590)
2,397
(1,730)
(10,352)
6,961
(4,453)
Balance, at March 31, 2018
$
– $
(38,491) $
(10,979) $
(31,195) $
(80,665)
Net book value:
At March 31, 2018
At March 31, 2017
$
21,411 $
33,348 $
4,638 $
25,705 $
85,102
$
16,426 $
32,132 $
3,321 $
17,354 $
69,233
Included in other equipment as at March 31, 2018 is $5,641 (March 31, 2017 – $197) of assets that are under
construction and have not been depreciated.
ATS AUTOMATION | ANNUAL REPORT 2018 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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.
Change in investment property
Balance, at April 1
Investment property reclassified to property, plant and equipment
Foreign exchange adjustment
Balance, at March 31
March 31, 2018
March 31, 2017
$
$
$
$
–
–
–
2018
4,043
(4,528)
485
–
$
$
$
$
4,043
9,248
13,291
2017
4,211
–
(168)
4,043
The investment property was a plot of vacant land that did not earn any rental income nor incur any direct operating
expenses, including repairs and maintenance. During the year ended March 31, 2018, the investment property was
reclassified to property, plant and equipment as the property is now being used for operations. The estimated fair value of
the Company’s investment property at March 31, 2017 approximated its carrying value, based on comparable market data
for similar properties.
9. Goodwill
The carrying amount of goodwill acquired through business combinations has been allocated to a group of CGUs that
combine to form a single operating segment, Automation Systems, as follows:
As at
Automation Systems
Balance, at April 1
Foreign exchange
Balance, at March 31
March 31, 2018
March 31, 2017
$
459,159
$
423,250
2018
423,250
35,909
459,159
$
$
2017
431,747
(8,497)
423,250
$
$
The Company performed its annual impairment test of goodwill as at March 31, 2018. 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, 2018
were compared to the budgeted results for the year ending March 31, 2019, as presented to and approved by the Board.
Non-recurring and unusual items have been adjusted in order to normalize past EBITDA. Management selected
capitalization rates in the range of 8.33% to 10.00% 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.
60 ATS AUTOMATION | ANNUAL REPORT 2018
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
$
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
3,619
2,505
–
–
(316)
(3,272)
–
–
–
–
6,124
(3,588)
870
1,991
2,312
16,383
1,528
23,084
$
20,332
$
37,357
$
21,572
$ 193,341
$
14,282
$ 286,884
Development
projects
Computer
software,
licenses
and other
Technology
Customer
relationships
Brands
Total
$
(5,700)
$
(18,036)
$
(10,935)
$
(50,028)
$
–
$
(84,699)
(611)
(3,492)
(2,535)
(17,432)
–
33
–
–
–
–
(24,070)
33
71
306
373
2,791
–
3,541
$
(6,240)
$
(21,189)
$
(13,097)
$
(64,669)
$
–
$ (105,195)
(1,925)
(3,824)
(3,039)
(17,527)
–
311
3,272
–
–
–
(26,315)
3,583
(324)
(1,296)
(1,402)
(7,066)
–
(10,088)
$
(8,489)
$
(25,998)
$
(14,266)
$
(89,262)
$
–
$ (138,015)
Cost:
Balance, at
March 31, 2016
Additions
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2017
Additions
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2018
Amortization:
Balance, at
March 31, 2016
Amortization
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2017
Amortization
Disposals
Exchange and other
adjustments
Balance, at
March 31, 2018
Net book value:
At March 31, 2018
At March 31, 2017
$
$
11,843 $
11,359 $
7,306 $ 104,079 $
14,282 $ 148,869
9,603 $
11,988 $
9,435 $ 112,289 $
12,754 $ 156,069
ATS AUTOMATION | ANNUAL REPORT 2018 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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, 2018. The
recoverable amount of the related CGU 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 that 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, 2019, as presented to and approved
by the Board, 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
–
–
–
–
–
$
330,148
$
195,329
(2,668)
(187,150)
(315,522)
–
–
–
–
–
March 31, 2018
Total
carrying
value
$
330,148
195,329
(2,668)
(187,150)
(315,522)
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)
(1,501)
–
–
–
–
–
–
(1,501)
(55)
(55)
(30,908)
(30,908)
(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 other long-term liabilities on the consolidated statements of financial position.
62 ATS AUTOMATION | ANNUAL REPORT 2018
As at
Fair value
through
profit or loss
Amortized
cost
Fair value
through other
comprehensive
income
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
March 31, 2017
Total
carrying
value
$
286,697
146,465
(1,411)
(140,707)
(327,268)
$
286,697
$
146,465
(1,411)
(140,707)
(327,268)
–
–
–
–
–
–
–
–
–
(966)
(740)
9,248
(740)
9,248
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)
–
–
(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 other long-term liabilities on the consolidated statements of financial position.
During the years ended March 31, 2018 and March 31, 2017, there were no changes in the classification of financial
assets as a result of a change in the purpose or use of those assets.
ATS AUTOMATION | ANNUAL REPORT 2018 63
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, 2018
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
Cross-currency interest rate swap
Disclosed at fair value:
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
$
(1,501)
$
–
$
(1,501)
$
–
$
(1,501)
(55)
(30,908)
(2,668)
(315,522)
Carrying
value
–
(55)
–
(30,908)
–
(55)
–
(30,908)
–
(2,668)
–
(315,522)
–
(2,668)
–
(315,222)
March 31, 2017
Level 1
Level 2
Level 3
Fair value
total
$
(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
4,043
(1,411)
(327,268)
–
–
–
4,043
4,043
(1,411)
–
(1,411)
–
(327,268)
–
(327,268)
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, 2018 and March 31, 2017, there were no transfers between Level 1 and Level 2 fair
value measurements. During the year ended March 31, 2018, the investment property previously included in Level 3 fair
value measurements was reclassified to property, plant and equipment, as described in note 8.
64 ATS AUTOMATION | ANNUAL REPORT 2018
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 that 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 date. 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, 2018 of approximately +/- $26,914 and $7,191, respectively
(2017 +/- $26,190 and $9,562), and on income before income taxes for the year ended March 31, 2018 of approximately
+/- $373 and $494, respectively (2017 +/- $121 and $84).
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 that 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.
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.
ATS AUTOMATION | ANNUAL REPORT 2018 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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, 2018, $2,668
or 1.0% (March 31, 2017 – $820 or 0.2%) 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 +/- $27 on
income before income taxes for the year ended March 31, 2018 (March 31, 2017 +/- $8).
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, 2018
March 31, 2017
$
161,791
$
121,029
20,982
4,236
4,040
7,158
11,868
4,721
4,768
5,838
$
198,207
$
148,224
The movement in the Company’s allowance for doubtful accounts for the years ended March 31 was as follows:
Balance, at April 1
Provision for doubtful accounts
Amounts written off
Recoveries
Foreign exchange
Balance, at March 31
$
$
2018
1,759
2,279
(921)
(321)
82
2017
2,533
687
(1,168)
(276)
(17)
$
2,878
$
1,759
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.
66 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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 values.
Trade payables – aged by due date as at
March 31, 2018
March 31, 2017
0–30 days
31–60 days
61–90 days
Over 90 days
Total
$
60,848
11,274
3,203
1,656
$
47,768
8,663
1,959
1,163
$
76,981
$
59,553
As at March 31, 2018, the Company was holding cash and cash equivalents of $330,148 (March 31, 2017 – $286,697)
and had unutilized lines of credit of $656,267 (March 31, 2017 – $639,050). The Company expects that continued cash
flows from operations in fiscal 2019, 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.
(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.
During the years ended March 31, 2018 and March 31, 2017, there were no unrealized gains or losses recognized in
selling, general and administrative expenses for the ineffective portion of cash flow hedges.
ATS AUTOMATION | ANNUAL REPORT 2018 67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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 a derivative financial instrument 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, 2018
Currency sold
Derivative hedging instruments(i)
U.S. dollars
U.S. dollars
Euros
Euros
Canadian dollars
Cross-currency interest rate
swap instruments(ii)
U.S. dollars
Canadian dollars
As at
Carrying amount
Hedging instrument
Hedged item
Cash flow hedge reserves
Currency bought
Nominal amount
(in CAD)
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
Canadian dollars
Euros
69,025
4,535
Canadian dollars
65,339
U.S. dollars
Euros
7,308
711
Canadian dollars
193,455
Euros
213,006
373
240
–
–
–
–
–
–
–
661
2
6
373
240
661
2
6
373
240
661
2
6
373
240
661
2
6
5,380
25,528
5,420
34,736
5,420
34,736
5,380
25,528
–
–
–
–
–
–
–
Carrying amount
Hedging instrument
Hedged item
Cash flow hedge reserves
March 31, 2017
Currency sold
Currency bought
Nominal amount
(in CAD)
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)
U.S. dollars
Canadian dollars
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
–
Canadian dollars
199,500
Euros
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
–
–
–
–
–
–
–
–
(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 other long-term liabilities on the consolidated statements of
financial position.
68 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
As at March 31, 2018, the Company is holding the following forward foreign exchange contracts to hedge the exposure on
its revenues and purchases:
As at
Currency sold
Revenue hedges
U.S. dollars
U.S. dollars
Euros
Purchase hedges
Canadian dollars
Euros
As at
Currency sold
Revenue hedges
U.S. dollars
U.S. dollars
U.S. dollars
Euros
Purchase hedges
U.S. dollars
Euros
Euros
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
1 to 2 years
Average
Average
Average
Average
Currency
Nominal
hedged
Nominal
hedged
Nominal
hedged
Nominal
hedged
Nominal
bought
amount
rate
amount
rate
amount
rate
amount
rate
amount
Average
hedged
rate
March 31, 2018
Canadian dollars
22,035
1.276
15,264
1.292
15,347
1.298
13,155
1.305
3,224
1.328
Euros
Canadian dollars
2,299
2,327
1.183
1,595
1.182
641
1.158
–
–
–
–
1.667
16,180
1.579
13,296
1.599
11,883
1.607
21,653
1.619
Euros
601
U.S. dollars
3,336
1.575
1.237
110
1,827
1.607
1.246
–
–
2,145
1.255
–
–
–
–
–
–
–
–
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
1 to 2 years
Currency
bought
Nominal
amount
Average
hedged
rate
Nominal
amount
Average
hedged
rate
Nominal
amount
Average
hedged
rate
Nominal
amount
Average
hedged
rate
Nominal
amount
Average
hedged
rate
March 31, 2017
Canadian dollars
16,459
1.282
18,500
1.303
16,652
Euros
1,100
1.102
Turkish lira
U.S. dollars
193
958
34.980
1.078
Canadian dollars
Canadian dollars
U.S. dollars
7,898
5,803
1,703
33
1.309
1.408
1.060
1.841
157
128
57
812
–
1.128
35.000
1.064
1.308
–
374
–
177
–
–
1.326
1.096
–
1.070
–
–
3,857
1.312
–
–
–
–
–
–
–
–
–
–
1,703
1.065
1,703
1.071
1,703
1.078
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
British pounds
Canadian dollars
ATS AUTOMATION | ANNUAL REPORT 2018 69
881
(197)
(3,300)
144
3,130
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:
Amount reclassified
March 31, 2018
Change in the value
Hedge
from the cash flow
of the hedging
ineffectiveness
hedge reserve
Line item affected
instrument recognized
in OCI gain (loss)
recognized in
profit or loss
to profit or loss
in profit or loss because
gain (loss)
of the reclassification
Euro net investment hedge
(5,420)
As at
–
–
–
(1,205)
468
Revenues
Cost of revenues
–
Net finance costs
March 31, 2017
Change in the value
Hedge
from the cash flow
of the hedging
ineffectiveness
hedge reserve
Line item affected
instrument recognized
in OCI gain (loss)
recognized in
profit or loss
to profit or loss
in profit or loss because
gain (loss)
of the reclassification
Amount reclassified
As at
Cash flow hedges
Foreign exchange risk:
Revenue hedges
Purchase hedges
Cash flow hedges
Foreign exchange risk:
Revenue hedges
Purchase hedges
Senior Notes hedge
–
–
–
–
(413)
126
–
–
Revenues
Cost of revenues
Selling, general and
administrative
Net finance costs
Euro net investment hedge
10,445
Instruments not subject to hedge accounting
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, 2018, the Company recorded risk management losses of $4,132 (gains of $4,970 for the
year ended March 31, 2017) on foreign currency risk management forward contracts in the consolidated statements of
income. Included in these amounts were unrealized gains of $957 (gains of $1,044 during the year ended March 31,
2017), representing the change in fair value. In addition, during the year ended March 31, 2018, the Company realized
losses in foreign exchange of $5,089 (gains of $3,926 during the year ended March 31, 2017), which were settled.
70 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
12. Provisions
Balance, at
March 31, 2016
Provisions made
Provisions reversed
Provisions used
Exchange adjustments
Balance, at
March 31, 2017
Provisions made
Provisions reversed
Provisions used
Exchange adjustments
Balance, at
March 31, 2018
Warranty provisions
Warranty
Restructuring
Executive
transition
expenses
Other
Total
$
8,219
$
2,069
$
4,976
$
5,003
$
20,267
4,662
(1,969)
(2,620)
(117)
2,337
–
(3,424)
(4)
$
8,175
$
978
$
5,543
(2,203)
(2,699)
349
11,212
–
(6,446)
189
–
–
(4,976)
–
–
–
–
–
–
6,371
–
(6,412)
9
13,370
(1,969)
(17,432)
(112)
$
4,971
$
14,124
8,923
–
(7,986)
(12)
25,678
(2,203)
(17,131)
526
$
9,165
$
5,933
$
–
$
5,896
$
20,994
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.
Other provisions
Other provisions are related to medical insurance expenses that have been incurred during the year but are not yet paid
and other miscellaneous provisions.
ATS AUTOMATION | ANNUAL REPORT 2018 71
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, 2018. The next valuations are scheduled to be as at March 31, 2019.
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
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, 2018
March 31, 2017
$
29,572
$
30,739
744
222
464
(1,322)
2,052
31,732
2,904
162
304
211
3,581
28,151
$
$
$
$
742
1,171
(1,573)
(797)
(710)
29,572
2,487
177
305
(65)
2,904
26,668
$
$
$
$
Amounts recognized in the consolidated statements of comprehensive income (before tax) were as follows:
As at
Total actuarial losses recognized in OCI
March 31, 2018
March 31, 2017
$
(534)
$
(569)
The significant weighted average annual actuarial assumptions used in measuring the accrued benefit obligation were
as follows:
As at
Discount rate
Rate of compensation increase
March 31, 2018
March 31, 2017
2.3%
0.3%
2.5%
1.3%
72 ATS AUTOMATION | ANNUAL REPORT 2018
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 benefit obligation are the discount rate and life
expectancy. The sensitivity analyses have been performed based on reasonably possible changes in the respective
assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
As at March 31, 2018, the following quantitative analysis shows changes to the significant actuarial assumptions and the
corresponding impact on the accrued benefit obligations:
1%
increase
Discount rate
1%
decrease
Life expectancy
Increase
by 1 year
Decrease
by 1 year
Accrued benefit obligations
$
(3,943)
$
4,917
$
1,076
$
(1,061)
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as
it is unlikely that the changes in assumptions would occur in isolation from one another as some of the assumptions may
be correlated.
The weighted average allocations of plan assets were:
As at
Other
March 31, 2018
March 31, 2017
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
Defined contribution plans
Net employee benefits expense
March 31, 2018
March 31, 2017
$
$
222
744
966
3,170
4,136
$
$
1,171
742
1,913
3,282
5,195
The Company expects to contribute $304 to its defined benefit plans during the year ending March 31, 2019.
The cumulative actuarial losses, net of income taxes, recognized in retained earnings as at March 31, 2018 were $5,683
(March 31, 2017 – $5,288).
ATS AUTOMATION | ANNUAL REPORT 2018 73
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.
On July 28, 2017, the Company amended its senior secured credit facility to extend the agreement by three years to mature
on August 29, 2021 (the “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, 2018, the Company had utilized $108,541 under the Credit Facility, by way of letters of credit (March 31,
2017 – $115,034).
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 net 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 that ranges from 1.45% to 3.00%, and a fee
for usage of non-financial letters of credit that 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%.
The Credit Facility is subject to financial covenants including a net 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, 2018, all of the covenants were met.
The Company has additional credit facilities available of $18,884 (2,399 Euros, $10,000 U.S., 50,000 Thai Baht and
1,677 Czech Koruna). The total amount outstanding on these facilities at March 31, 2018 was $3,407, of which $2,668
was classified as bank indebtedness (March 31, 2017 – $1,411) and $739 was classified as long-term debt (March 31,
2017 – $2,619). The interest rates applicable to the credit facilities range from 1.66% to 6.25% per annum. A portion of the
long-term debt is secured by certain assets of the Company. The 50,000 Thai Baht credit facility is secured by letters of
credit under the Credit Facility.
74 ATS AUTOMATION | ANNUAL REPORT 2018
(i) Bank indebtedness
As at
Other facilities
(ii) Long-term debt
As at
Senior Notes
Other facilities
Issuance costs
Less: current portion
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
March 31, 2018
March 31, 2017
$
2,668
$
1,411
March 31, 2018
March 31, 2017
$
322,425
$
332,500
739
(7,642)
315,522
393
2,619
(7,851)
327,268
1,321
$
315,129
$
325,947
Scheduled principal repayments and interest payments on long-term debt as at March 31, 2018 are as follows:
Less than one year
One – two years
Two – three years
Three – four years
Four – five years
Thereafter
$
$
Principal
393
325
21
–
–
322,425
Interest
20,971
20,963
20,958
20,958
20,958
10,479
$
323,164
$
115,287
15. Share capital
Authorized share capital of the Company consists of an unlimited number of common shares, without par value, for
unlimited consideration.
The changes in the common shares issued and outstanding during the period presented were as follows:
Balance, at March 31, 2016
Exercise of stock options
Balance, at March 31, 2017
Exercise of stock options
Balance, at March 31, 2018
Number of
common shares
92,293,359
1,308,667
93,602,026
399,666
94,001,692
Share
capital
528,184
15,133
543,317
5,430
548,747
$
$
$
ATS AUTOMATION | ANNUAL REPORT 2018 75
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 that 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, 2018
March 31, 2017
Income before income taxes and non-controlling interest
$
61,696
$
Combined Canadian basic federal and provincial income tax rate
26.50%
46,383
26.50%
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 23% (2017 – 24%)
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 on revaluation of cash flow hedges
Other items recognized through equity
Income tax charged directly to equity
$
16,349
$
12,291
1,288
(3,181)
939
(71)
(837)
14,487
13,621
866
14,487
1,178
(3,512)
(2,334)
$
$
$
$
$
1,036
(5,591)
3,866
89
(335)
11,356
9,456
1,900
11,356
800
1,739
2,539
$
$
$
$
$
(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 comprise the following:
As at
March 31, 2018
March 31, 2017
Accounting income not currently taxable
$
Intangible assets
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
(33,777)
(30,827)
(11,903)
14,809
2,003
16,010
3,765
$
(20,556)
(32,282)
(9,845)
4,611
(1,576)
13,821
9,204
Net deferred income tax liability
$
(39,920)
$
(36,623)
76 ATS AUTOMATION | ANNUAL REPORT 2018
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, 2018
March 31, 2017
$
$
2,987
(42,907)
(39,920)
$
$
2,138
(38,761)
(36,623)
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, 2018
March 31, 2017
$
$
510
57,876
58,386
$
$
451
60,972
61,423
Loss carryforwards: As at March 31, 2018, the Company has the following net operating loss carryforwards that are
scheduled to expire in the following years:
As at
Year of expiry
2020–2024
2025–2029
2030–2038
No expiry
As at
Year of expiry
2020–2024
2025–2029
2030–2037
No expiry
March 31, 2018
Non-Canadian
Canadian
$
$
6,216
4,862
11,271
11,567
33,916
$
–
3,712
43,453
–
$
47,165
March 31, 2017
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, 2017 –
U.S. $13,456) and Canadian capital loss carryforwards of $288,177 (March 31, 2017 – $289,345) that do not expire.
Investment tax credits: As at March 31, 2018, the Company has investment tax credits available to be applied against
future taxes payable in Canada of approximately $49,632 and in foreign jurisdictions of approximately $13,514. The
investment tax credits are scheduled to expire as follows:
Year of expiry
2026–2029
2030–2034
2035–2038
Gross ITC balance
$
$
20,027
20,463
22,656
63,146
ATS AUTOMATION | ANNUAL REPORT 2018 77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
The benefit of $57,012 (March 31, 2017 – $49,015) of these investment tax credits has been recognized in the
consolidated financial statements. Unrecognized investment tax credits are scheduled to expire between 2026 and 2038.
(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 $86,425 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 2018 or 2017 by the Company to
its shareholders.
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, 2018 and March 31, 2017, 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. 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. 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, 2018, the value of the outstanding liability related to the
DSUs was $9,542 (2017 – $6,303). 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 that 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
granting of stock options to insiders that may be under the 1995 Plan.
78 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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, 2018, there are a total of 2,740,774 common shares remaining for future stock option grants under both
plans (March 31, 2017 – 2,684,674).
Years ended March 31
2018
Weighted
average
exercise
price
Number of
stock
options
Number of
stock
options
Stock options outstanding, beginning of year
2,274,724
$
12.60
3,433,866
$
Granted
Exercised(i)
Forfeited
300,625
(399,666)
(356,725)
12.77
294,000
10.36
(1,308,667)
14.58
(144,475)
Stock options outstanding, end of year
1,818,958
$
12.73
2,274,724
$
2017
Weighted
average
exercise
price
11.68
10.46
9.51
14.34
12.60
Stock options exercisable, end of year,
time-vested options
Stock options exercisable, end of year,
performance-based options
738,250
$
12.97
959,163
$
12.41
333,333
$
11.60
391,499
$
11.44
(i) For the year ended March 31, 2018, the weighted average share price at the date of exercise was $15.36 (March 31, 2017 – $12.61).
As at March 31, 2018
Stock options outstanding
Stock options exercisable
Range of
exercise prices
$7.10–$10.00
$10.01–$12.50
$12.51–$14.50
$14.51–$15.83
$7.10–$15.83
Weighted
average
remaining
contractual
life
Number
outstanding
118,000
1.01 years
$
478,167
3.58 years
792,791
4.19 years
430,000
4.23 years
Weighted
average
exercise
price
8.60
10.54
13.17
15.83
Number
exercisable
118,000
$
302,667
438,416
212,500
1,818,958
3.83 years
$
12.81
1,071,583
$
Weighted
average
exercise
price
8.60
10.58
13.37
15.83
12.54
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 2018 79
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
2018
0.92%
0%
29%
2017
0.90%
0%
30%
4.75 years
4.75 years
300,625
12.77
3.37
$
$
294,000
10.46
2.88
$
$
During the year ended March 31, 2018, the Company did not grant any share appreciation rights (“SARs”) (none in the year
ended March 31, 2017). The Company has recorded a liability of $83 as at March 31, 2018 (March 31, 2017 – $44) based
on the fair value of the vested SARs. The market value of a common share of the Company as at March 31, 2018 was
$17.69 (March 31, 2017 – $13.57). During the year ended March 31, 2018, no SARs vested (39,375 in the year ended
March 31, 2017).
Restricted Share Unit Plan
During the year ended March 31, 2018, the Company granted 211,398 time-vesting restricted share units (“RSUs”)
(157,639 in the year ended March 31, 2017). 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, 2018, the Company granted 211,712
performance-based RSUs (128,785 in the year ended March 31, 2017). 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, 2018, the value of the outstanding liability related to the RSU plan was $5,699 (March 31, 2017 – $2,722).
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
Purchase
obligations
$
10,148
$
113,181
9,189
7,756
4,251
2,260
927
1,754
505
–
–
–
$
34,531
$
115,440
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.
80 ATS AUTOMATION | ANNUAL REPORT 2018
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
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, 2018, the total value of outstanding letters of credit was approximately $137,148 (March 31, 2017 – $136,021).
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.
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 revenues by customer location. 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
Other
Total Company
As at
Canada
United States
Germany
China
Malaysia
Other Europe
Other
Total Company
Property, plant
and equipment
$
30,148
15,701
33,748
1,215
1,669
1,657
964
March 31, 2018
Intangible assets
$
10,147
19,018
118,961
53
72
496
122
$
85,102
$
148,869
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
ATS AUTOMATION | ANNUAL REPORT 2018 81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of Canadian dollars, except per share amounts)
Revenues from external customers for the years ended
March 31, 2018
March 31, 2017
Canada
United States
Germany
China
Malaysia
Other Europe
Other
Total Company
$
60,988
$
34,261
436,197
194,726
72,568
30,204
215,798
104,449
315,769
196,777
70,202
120,915
209,734
63,246
$
1,114,930
$
1,010,904
For the year ended March 31, 2018, the Company did not have revenues from any single customer that amounted to 10%
or more of total consolidated revenues. For the year ended March 31, 2017, the Company had revenues from one customer
that were 13.9% of its total revenues.
20. Net finance costs
Years ended
Interest expense
Interest income
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, 2018
March 31, 2017
$
$
25,689
(1,923)
23,766
$
$
26,208
(656)
25,552
March 31, 2018
March 31, 2017
93,734,117
301,083
94,035,200
92,571,163
235,946
92,807,109
For the year ended March 31, 2018, stock options to purchase 725,000 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
(1,602,641 common shares were excluded for the year ended March 31, 2017).
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, 2018 and
March 31, 2017, 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.
82 ATS AUTOMATION | ANNUAL REPORT 2018
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, 2018
March 31, 2017
Equity excluding accumulated other comprehensive income
$
682,943
$
631,035
Long-term debt
Bank indebtedness
Cash and cash equivalents
Capital under management
Debt-to-equity ratio
315,522
2,668
(330,148)
327,268
1,411
(286,697)
$
670,985
$
673,017
0.47:1
0.52:1
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 or as a member of any committee of the Board.
The remuneration of the Board and key management personnel is determined by the Board 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)
Total remuneration
March 31, 2018
March 31, 2017
$
2,294
$
5,550
642
4,669
57
–
$
10,918
$
657
(707)
980
2,910
6,134
(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.
Stock-based compensation represents the remuneration of the Board and of key management personnel and is reported in
the consolidated statements of income as stock-based compensation expense.
ATS AUTOMATION | ANNUAL REPORT 2018 83
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 (UK).
Andrew P. 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, he 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 Masters of Business
Administration, both from Clarkson University.
Kirsten Lange(1)
Ms. Lange, a German citizen, has 27 years of business experience in top management and in consulting, across
many of the geographies ATS serves, including Germany and China. Most recently, she served as a member of the
Management Board of Voith Hydro, where she was responsible for growing the Automation and Service divisions,
as well as for developing new digital business models. Previous to that, Ms. Lange spent 22 years with the Boston
Consulting Group (BCG), based in Munich, Germany, where she worked as a Partner and Managing Director with
over 100 companies in sectors such as machine and plant construction, chemicals, automotive, energy, packaged
consumer goods and many more. During her time with BCG she spent two years in Shanghai, running the local office
and developing the Chinese market. Since 2015 she has been a member of the Board of Directors and Audit
Committee of Heidelberger Druckmaschinen AG. She is also currently on the Board of Directors of Fritsch Holdings AG.
Ms. Lange graduated from the University of Munich with a degree in Journalism and earned a Master of Business
Administration from INSEAD/France.
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
Masters in Business Administration in Finance from New York University’s Stern School of Business.
84 ATS AUTOMATION | ANNUAL REPORT 2018
David L. 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. He 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.
Gordon E. 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 principal at Tekmana, which engages 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
University of Rochester.
Daryl C.F. Wilson(2 & 3)
Mr. Wilson is the President, CEO and a director of Hydrogenics Corporation, a Canadian public company and hydrogen
technology provider. Prior to joining Hydrogenics he was Vice President 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. He holds an MBA 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.).
Notes:
(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 2018 85
SHAREHOLDER INFORMATION
Corporate headquarters
730 Fountain Street North
Cambridge, Ontario
Canada N3H 4R7
Tel: 1-519-653-6500
Investor relations contact
Sonya Mehan
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 16, 2018
10:00 a.m. Eastern Time
TMX Broadcast Centre
The Exchange Tower
130 King Street West
Toronto, Ontario
86 ATS AUTOMATION | ANNUAL REPORT 2018
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ATSAUTOMATION.COM
ATS Automation Tooling Systems Inc
730 Fountain Street North
Cambridge, ON N3H 4R7
With the goal of driving continuous and sustainable performance
improvements – by engaging and developing our people, and by applying
disciplined, robust processes – we are building long-term shareholder
value. This is our journey to build a great company, with great people,
and to do it the right way. – Andrew Hider, CEO
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