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ATS Automation Annual Report 2019
ATSBuild. Grow. Expand.
ATA
Toronto Stock Exchange
$2.0B*
market capitalization
$1.3B
revenue
4, 400+
employees worldwide
23
facilities
50+*
offices
22
countries
To deliver maximum value for
our shareholders, we build on
a foundation of experience and
innovation, we grow organically
by providing outstanding solutions
and service to our customers, and
we expand to enter new markets
and realize new opportunities. >
Contents
Message from the CEO 2 The ABM in Action 6 Build 8 Grow 12 Expand 16
Management’s Discussion and Analysis 20 Management’s Responsibility for
Financial Reporting 43
Statements 46 Notes to Consolidated Financial Statements 51
Board of Directors 92 Shareholder Information 94
Independent Auditors’ Report 44 Consolidated Financial
*As at June 24, 2019
ATS at-a-glance
Ours is a singularly driven company in a complicated world. We help customers in diverse industrial markets transform,
streamline and optimize their manufacturing operations. Our advantages lie in industry-leading automation technology,
the expertise and commitment of our people, and a performance-oriented culture built on continuous improvement
and attention to detail. Explaining ATS to clients, investors and other stakeholders around the world, we stress three
facets of our identity. The Company today is the sum of these parts:
A factory-automation systems and solutions integrator.
ATS is an end-to-end technology and automation solutions provider. Our single-source solutions can span the full project
life cycle, from pre-automation, through automation and integration, to post-automation. From the outset, we put
the right talent in front of the customer. This ensures we develop optimized manufacturing strategies and that we
conceptualize, simulate and perfect comprehensive solutions before they’re installed. At implementation, we offer
original, fully integrated custom solutions as well as standard automation products that drive breakthrough performance –
conveyance systems, assembly platforms, advanced vision systems, aseptic processing and containment technologies,
and more. Our post-automation expertise includes remote diagnostics, critical analysis, preventive maintenance and
performance insights through IlluminateTM Manufacturing Intelligence, our new scalable Industrial Internet of Things
software platform.
A diversified, growth-oriented multinational organization with a global footprint.
ATS has operations in more than 20 countries, keeping us close to customers in four key industrial markets: life
sciences, energy, transportation, and consumer products and electronics. In life sciences, we support the manufacturing
and automation efforts of leading medical device, pharmaceutical and biotechnology companies. This essential sector
now makes up more than 50% of ATS’ total revenue stream. In energy, we have customers in nuclear, as well as in
oil and gas, batteries and solar. In transportation, we’re focused on automotive, powertrain and aerospace customers,
with particular emphasis on emerging electric and autonomous vehicle technology. Precision manufacturing and
materials handling technology is also in demand from our customers in consumer products, electronics, and food and
beverage markets.
A decentralized corporation with common purpose, approach and values aligned through the ATS Business Model.
ATS is a diverse, multifaceted organization that stresses the value of innovation. But there is a connective thread and
clarity of purpose at our core — the ATS Business Model (ABM). Introduced to ATS two years ago, the ABM is a powerful
business management system that enables us to achieve our business through a process of disciplined, continuous
improvement. The ABM provides our people with key problem-solving tools and a template for eliminating waste
and driving process improvement in all areas of responsibility, regardless of function. It empowers personnel, improves
customer satisfaction and enhances our returns.
(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 2019
Fiscal 2018
Fiscal 2017
$
$
$
$
$
$
$
$
$
1,253.6
114.8
142.8
157.2
70.8
0.76
0.98
1,408
904
$
$
$
$
$
$
$
$
$
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 Non-IFRS measure. See Management’s Discussion and Analysis: Notice to Reader.
ATS is listed on the Toronto Stock Exchange under the symbol “ATA”.
ATS AUTOMATION | ANNUAL REPORT 2019
1
1
A year ago, I wrote that I was
excited by the early progress
we had made in setting strategic
priorities and initiating new
processes to strengthen our
organization and deliver increased
value for both you and our
customers. This year, I’m pleased
to report that 2019 brought an
acceleration of that momentum
and validation of our efforts with
significantly stronger topline and
bottom line performance in all key
areas of the business.
2
ATS AUTOMATION | ANNUAL REPORT 2019
Message from the CEO
Andrew Hider
Equally encouraging is the way the Company
is aligning around a continuous improvement
mindset. I’ve had the opportunity to engage
with ATS personnel in many different locations,
and I’m repeatedly seeing evidence of their
deepening commitment to the ATS Business
Model (ABM).
As positive as that sounds, we are just getting
started. In the past year, we took innovative
steps to strengthen our technical capabilities,
broaden our product and service offerings, and
develop new sources of recurring revenue. We
also acquired two companies, our first such
deals in four years. And, after deploying the
first sets of ABM problem-solving tools, we
are now expanding our training network and
developing new tools to extend its reach and
impact. Heading into 2020, we’re confident
that our 2019 growth story is a precursor of
even greater value creation to come.
2019 Financial Performance
Last year’s macroeconomic environment was
generally healthy, although trade disputes
created some uncertainty and heightened
nervousness in equity markets. From a
results standpoint, our story was one of
strong, double-digit 11% organic growth, with
record revenues of almost $1.3 billion. Order
Bookings grew 19% to a record $1.4 billion and
Order Backlog at year-end was $904 million,
up 21% over 2018 – setting us up well for
fiscal 2020. The Company’s margin expansion
program contributed to an improvement in
gross margins and a 90-basis-point gain
in operating margins. Working capital as a
percentage of revenues remained below 10%.
Our two acquisitions had a modest impact on
results in fiscal 2019, due primarily to timing,
as they closed in the second half of the year.
Both are significant for their strategic value.
Comecer, which has its main production
facility in Castel-Bolognese, Italy, is a leader in
aseptic containment and processing systems
for the nuclear medicine and pharmaceutical
industries. It strengthens our customer
offering in both pharma and biopharma
and adds an innovative new platform in
radiopharmaceuticals. KMW, a supplier of
custom micro-assembly systems and test
equipment solutions based in Koblenz,
Germany, strengthens our offerings in the
electric vehicle market.
The Comecer acquisition will further contribute
to growth in our life sciences vertical, which
surpassed 50% of the Company’s consolidated
revenues in our fourth quarter. This reflects
our strategy to build shareholder value by
expanding in strong, higher-margin sectors
and product areas with above-market growth
potential that, while not immune to cyclical
swings, should remain relatively attractive even
when the economy is at a low point in its cycle.
ATS AUTOMATION | ANNUAL REPORT 2019
3
ATS Business Model
The foundation of a great business is having
great people. It follows, then, that working to
develop, engage, empower and energize our
people is both a core ATS value and the first of
our three pillars, followed by process, and then
performance, at the foundation of the ABM.
The deepening commitment among our people
to the ABM that I observed across the
Company in 2019 isn’t merely anecdotal.
It is reflected in engagement scores tracked
in our employee surveys. And what it tells
us is that the ABM – our playbook to achieve
our business goals and objectives through
disciplined, continuous improvement – is
becoming ingrained in our Company’s culture.
At the end of year two, it is much less of a
management initiative and more a part of
our DNA.
This success is a credit, in part, to our small
ABM team, who developed the training
methodology and initial problem-solving tools,
and the growing number of local leaders who
learned those tools and began taking co-workers
through various projects. Most importantly, the
success of the ABM is due to our workforce, who
have participated in more than 40 Kaizen events
and over 100 problem-solving exercises to drive
continuous improvement.
For the ABM to deliver results as intended,
it has to be led locally, with the quest for
continuous improvement ultimately becoming
part of every individual’s mindset. As the next
section (“The ABM in Action”) shows, that’s
not as big a stretch as it might seem. As soon
as workers see process-oriented problem-
solving exercises yielding efficiency gains of
50% or more, they’re on board and empowered.
The principle of “measure, test, refine and
“
From a results
standpoint, our story
was one of strong,
double-digit 11%
organic growth, with
record revenues of
almost $1.3 billion.
Order Bookings grew
19% to a record
$1.4 billion and Order
Backlog at year-end
was $904 million,
up 21% over 2018 –
setting us up well for
fiscal 2020.
”
4
ATS AUTOMATION | ANNUAL REPORT 2019
efficiency in real time, allows quick diagnosis
of breakdowns and supports predictive
maintenance.
Illuminate represents one of several tracks
we’re following to grow our services business
and to derive incremental revenues over the
long term that provide some balance to the
more cyclical nature of our project-oriented
business.
All of these efforts tie back to driving value for
our shareholders and our customers. I’m proud
to lead a team that is so strongly focused and
committed to that objective and I want to thank
them for our success in 2019. We’re excited
about where ATS is headed and I look forward
to celebrating our achievements with you in
2020 and the years beyond.
Sincerely,
Andrew Hider
Chief Executive Officer
ATS Automation
repeat” becomes a simple tool like a hammer,
and they start finding nails all over the place.
The ABM journey in 2020 will see us introduce
additional measurement and process-
improvement tools and apply them even more
widely. We will also expand strategic planning
at the business unit level to ensure ABM-led
activities are closely linked to company goals.
We also expect to see more measurable
evidence of the accumulating ABM-derived
process improvements leading to higher
profitability and generating greater shareholder
value. From this standpoint, the ABM is an
integral part of our overall capital allocation
strategy – both in terms of direct returns on
the internal investment and the added flexibility
more rigorous control over our operations
provides for external investment and
potential acquisitions.
Looking Ahead
The widespread performance improvements
and strong results we had in 2019 provide
plenty of momentum heading into 2020.
I’m looking forward, in particular, to bringing
our new acquisitions further into the fold and
leveraging their potential across our offerings
in important growth vertical markets.
From a product and technology development
standpoint, the ATS innovation story will also
be front and centre in 2020.
A key aspect here is the roll-out of IlluminateTM
Manufacturing Intelligence, a powerful smart
factory IIoT platform taking the place of
the ATS ToolkitTM. Introduced in late 2019,
it is a user-friendly upgrade that offers our
factory automation customers more tools
to operate their facilities more effectively.
The built-in intelligence provides extensive
analytics to track equipment performance and
ATS AUTOMATION | ANNUAL REPORT 2019
5
Thomas Oeser, a 30-year company
veteran and assembly leader
at ATS’ Cambridge, Ontario,
life sciences operation, thought
he’d seen it all. So, when CEO
Andrew Hider arrived at ATS in
early 2017 and unveiled the ATS
Business Model – a framework to
achieve business goals through a
process of disciplined continuous
improvement – Oeser thought it
was just another new management
initiative unlikely to lead anywhere.
This April, Hider met Oeser when he led him
on a walkabout in the Cambridge facility as
part of the CEO’s monthly business review.
When Hider asked Oeser what the ABM meant
to him, he became emotional. Earlier, Oeser
and his coworkers had partnered with the
ATS ABM team on a Kaizen process-
improvement exercise to improve efficiency
in bench assembly processes. The result
was a 50% reduction in build time and over
100% improvement in throughput.
Oeser told Hider the worker-led process was so
transformational that he wanted management
to accelerate its deployment. Though he’s
retiring soon, Oeser says he is excited to be
part of a process that ensures ATS is building
a sustained competitive advantage.
If fiscal 2018 was the year the ABM was
introduced at ATS, it started becoming who we
are in 2019. In all, we ran more than 40 Kaizen
events (usually over three to five days) like the
one for the Cambridge receiving area, and over
6
ATS AUTOMATION | ANNUAL REPORT 2019
The ABM in action
100 problem-solving exercises. This included
a “President’s Kaizen week” that tackled
different problem areas at four locations
simultaneously – two in Canada, one in the
U.S. and one in Germany – in which Hider
and seven other ATS executives each joined
a problem-solving team at a different site,
affirming their commitment to the ABM.
To date, almost every division has held at least
one Kaizen and they’ve been conducted across
many corporate functions, including sales,
purchasing, legal and finance as well as
factory operations. Most of the Company’s
4,400 employees not only know how the ABM
works, but they’re also starting to experience
real operational benefits.
We’ve only just scratched the surface, however.
Continuous improvement is a journey, not a
destination. We launched the ABM in a staged
roll-out, targeting the operations that are most
critical to our core value drivers. In time, as the
ABM becomes more ingrained in ATS culture,
local leaders will carry the process forward,
drilling deeper into their work areas to find
additional opportunities for improvement.
To ensure everyone understands how the ABM is
applied, we’ve introduced ABM boot camps. We
held several of these three-day sessions in 2019
and plan more for 2020. Information is also
shared through an ABM blog and every other
week we present 20-to-30-minute “One-point”
lessons open to everyone in the Company. ABM
team leaders are also working with different
business units to help them develop strategic
plans so that process improvements feed directly
back into better execution of Company strategy.
The motto for our ABM process is “Common
sense, rigorously applied.” Continuous
improvement, done correctly, makes things
better for three groups: employees, customers
and shareholders. Initially, some investors
wondered how the ABM approach fits with
highly engineered systems and products in a
project-oriented enterprise. What we’ve shown
is that as long as work follows a process,
we can measure it, and if something can be
measured, it can be improved upon.
In this sense, the ABM is directly linked to
improving shareholder value. Cutting waste
and boosting productivity can improve margins
and increase profitability. We’ve seen that in
our 2019 results and we expect further gains
in 2020 as we learn to codify and disseminate
local process improvements more widely.
We’re also introducing a five-week ABM
implementation process for newly acquired
businesses, starting with Comecer.
Our Kaizen methodology
Phase 1 > Team members in
the target area review the
process slated for improvement,
outlining all delays, bottlenecks
and challenges.
Phase 2 > The group develops
a prioritized list of approaches
to address the problems.
Phase 3 > Approaches
are tested; the results are
measured and reviewed.
Phase 4 > Findings are ranked;
a new process is selected.
Phase 5 > The team reports
out, outlining the new process,
training required and new
metrics to track.
ATS AUTOMATION | ANNUAL REPORT 2019
7
8
ATS AUTOMATION | ANNUAL REPORT 2019
We build
industry-leading
Developing a company that creates long-term, sustainable value
for shareholders is only possible if you have a strong foundation
to build upon. ATS has that covered. Established in 1978, the
Company’s track record in creating benchmark automation
solutions and highly complex projects is unparalleled. We’ve
completed more than 24,000 projects worldwide. Our clients
include many of the world’s most successful companies. And
our global presence gives us the scale and the ability to service
customers wherever they operate. >
ATS AUTOMATION | ANNUAL REPORT 2019
9
From a value-creation perspective, these
foundational milestones are a jumping-off
point for a set of strategic initiatives to drive
performance to higher levels. Some of these
initiatives have already started to yield results,
contributing to the performance improvements
we saw in fiscal 2019. The rest are taking
shape. All are designed to help us to deliver
above-market performance over the long term.
Ensuring we have the right people in the right
roles making the right decisions at the right
times has been a focus in the senior ranks,
too. We needed to build out the leadership
team, for now and for the future. To that end,
we made a number of key appointments over
the past year. Our strong performance in 2019
was a reflection, in part, of these leaders
executing well in these roles.
Central to everything is the ATS Business
Model (ABM), our playbook for the development
and application of processes and mindsets
to drive continuous improvement. The ABM
plays a role in all three stages of our value-
creation strategy. Here, in the Build stage, it
is essential for enhancing our core strengths.
This starts with improving the quality and
depth of our people through employee training,
engagement, empowerment and leadership
skills development.
24,000+
projects completed
We’ve also made it a priority to add to the
depth and capabilities of our regional service
teams in different global markets. The
objective is to make more dedicated resources
available to customers where those customers
need them most.
The ABM is linked to a second core area where
we’re making changes to build long-term value:
strategic planning. The rigour that accompanies
the ABM both in terms of process improvement
and measurement has enabled us to adopt
a more structured approach to strategic
planning. That, in turn, is helping us identify
and effectively allocate capital and other
resources to areas with unrealized potential for
greater growth.
Extending ABM implementation deeper and
more widely across the organization also
means we can take strategic planning deeper,
and closer to the customer as well.
Last but not least in the Build component of
our value-creation strategy are the metrics
by which we measure the effectiveness of
10
ATS AUTOMATION | ANNUAL REPORT 2019
Build
monthly by management, and any that are
lagging get closer scrutiny through the filter
of the ABM process. These practices ensure
both a consistent approach to assessment
across the organization and one that is directly
linked to our overarching goal of creating long-
term shareholder value.
every initiative. These are our eight value
drivers. Every action or initiative is expected
to contribute, directly or indirectly, to a positive
gain against these metrics. Four are financial:
Order Bookings, revenues, EBIT margin and
working capital; two are customer-facing:
on-time delivery and quality; and two link
back to our workforce: internal fill rate and
employee turnover.
On an operating basis, we track five key
performance indicators that align with those
value drivers. Those are monitored, reviewed
Our Value Drivers
Despite providing the framework for how we drive continuous improvement, the ABM focuses not
on prescriptive actions, but on process. Yet when it comes to how we measure the effectiveness of
specific initiatives and business success, we are very prescriptive, applying the same eight value
drivers to measure everything we do around the world. Our thinking is clear: every action we take
should yield measurable results that benefit the intended stakeholders – be they shareholders,
customers or our people.
Shareholder
Customer
People
Q Order Bookings
Q On-Time Delivery
Q Internal Fill Rate
Q Revenues
Q EBIT Margin
Q Working Capital
Q Quality
Q Employee Turnover
ATS AUTOMATION | ANNUAL REPORT 2019 11
A cornerstone of any long-term value creation strategy is healthy
organic growth. Deploying capital to drive organic growth and
profit margin expansion are key elements of ATS’ capital allocation
strategy, as this provides the potential to deliver higher shareholder
returns over the long term. >
Working to grow
organically to
12
ATS AUTOMATION | ANNUAL REPORT 2019
returns
ATS AUTOMATION | ANNUAL REPORT 2019 13
At ATS, we are focused on boosting organic
growth through the development and
implementation of growth tools under the
ABM, providing innovation and value to our
customers and growing our recurring revenue.
In 2019, we recorded our second straight
year of double-digit percentage increases
in organic growth. This was driven primarily
by the addition of new customers and the
expansion of long-term customer relationships
across our different markets. Such progress
tells us that our strategy is on the right track.
Reinforcing this belief is a significant increase
in customer satisfaction scores, a metric we
track internally.
Our business growth, particularly in our
life sciences market, is now coming from
a balance of franchise accounts – typically
repeat customers – and new customers.
The big orders provide an assurance of
volume, as they tend to run for multiple years
and allow us to plan, hire and build against
that certainty. At the same time, smaller
programs with new customers are easier
to repeat and over time they can become
footholds for new enterprise programs.
We’re also focusing our efforts and investment
in growing our business in life sciences, select
areas of the electric vehicle market and other
areas where we see strong fundamentals,
above-average market growth and opportunities
for us to add value for our customers. Those
conditions, in turn, result in the kind of higher-
margin returns that deliver the most value for
our shareholders.
Philosophically, this represents what we consider
a more disciplined approach to growth, one
that plays to our strengths. We have a track
record of delivering highly complex projects,
for example. Complexity often drives margins
whereas more commoditized solutions do not.
Growth also comes from optimizing our
capabilities, and this is where the ABM comes
in. As more of the Company has embraced
the ABM journey, we are seeing leaders at
all levels using it to deliver sustainable profit
improvement. Continuous improvement
initiatives increase performance, maximizing
bottom line growth. Ultimately, as these gains
accrue throughout the organization, it sends
a strong message to shareholders about our
commitment to long-term value when they
see earnings growth exceeding topline
revenue growth.
As our work with the ABM matures, we’re
also starting to focus more on identifying
and exploiting opportunities where we can
take process improvements achieved in
one department and apply them elsewhere,
creating a multiplier of sorts. ATS is a
decentralized organization with lots of different
processes, so not everything is transferable
14
ATS AUTOMATION | ANNUAL REPORT 2019
Grow
everywhere. But the more we can build scale
into our solutions, the greater the impact on
results.
As noted, the ability to generate more recurring
revenue is also a key part of our strategy
to boost organic growth. Earning repeat
business, by meeting or exceeding customer
expectations, certainly contributes to that.
But we’ll also be looking at other opportunities
along the lines of the approach we’ve just
taken with our new IIoT software platform for
factory automation, IlluminateTM Manufacturing
Intelligence. Illuminate brings additional
value to the life cycle of our customer’s
manufacturing operations, which allows us to
enhance and grow our customer relationships.
Among our growth initiatives, ATS has introduced
a margin expansion program. It consists of several
related strategies designed to expand our adjusted
earnings from operations margin over the long term.
The five measures are:
1 > Growing higher-margin after-sales service business
2 > Improving global supply chain management
3 > Increasing the use of standardized platforms and technologies
4 > Growing revenues while leveraging the current cost structure
5 > Promoting ongoing development and adoption of the ABM
5
ATS AUTOMATION | ANNUAL REPORT 2019 15
Continuing to
expand our
value
proposition
16
ATS AUTOMATION | ANNUAL REPORT 2019
value
Organic growth may be the staple of long-term value creation, but
the history of ATS, our current positioning and the dynamic state
of the markets where we operate are aligned in such a way that
business expansion holds the promise of significant, potentially
transformative, opportunity . >
ATS AUTOMATION | ANNUAL REPORT 2019 17
Acquisitions are just one potential avenue of
expansion, but that strategy took centre stage
in 2019 when we acquired two companies
and the intellectual property assets of a third.
Specifically, ATS bought assembly system
technology owned by Transformix Engineering;
acquired KMW, a supplier of custom micro-
assembly systems and test equipment, to
strengthen its position in the electric vehicle
market; and, in our most significant deal,
acquired Comecer, an Italian designer and
manufacturer of advanced aseptic containment
and processing systems for the nuclear
medicine and pharmaceutical industries.
These acquisitions were the first for ATS in
four years. They also help to strengthen our
position within two primary growth markets, life
sciences and electric vehicles. Going forward,
we will keep looking for other purchase
opportunities where there is a strategic fit, and
opportunities to take such businesses and
improve on them. We have also developed an
implementation process to introduce the ABM
quickly at new acquisitions and speed up the
payback. This enhances the value proposition
from the standpoint of capital allocation and
return to shareholders.
Our Comecer acquisition is a
textbook example of a strategic
purchase filling out a key platform
in a core business area. Previously
in the life sciences vertical, our
main strength was in medical
device manufacturing, while our
true pharma work was relatively
infrequent. Now, by adding
Comecer’s advanced pharmaceutical
aseptic containment and processing
systems, including its isolator
technology, we have state-of-the-
art expertise in pharmaceutical
automation. The high-end
engineering that goes into this
equipment is hard to replicate.
Acquiring it makes us a strong,
credible player in the space.
18
ATS AUTOMATION | ANNUAL REPORT 2019
Expand
Beyond M&A to support our current business
lines, we have identified three other areas for
expansion: after-sales services, innovation and
product development, and new markets and
business platforms.
Growth in after-sales services is probably
the most direct extension of our current
offerings. We’ve always provided after-sales
support, spare parts, retooling and retrofits
as part of our post-automation portfolio. But
we recognize that our massive installed base
of customer solutions and ability to support
customers globally represents an after-sales
service opportunity where we can bring more
value to our customers. We’re now commonly
bundling after-sales service into our new capex
equipment solutions for customers.
Services also merit greater attention due to
the increasing intelligence and digitization
embedded in our products, most recently
with the introduction of our IlluminateTM
Manufacturing Intelligence IIoT automation
software. The ability to manage that data,
leverage its insights, and resolve and
anticipate issues proactively means we can
add new value for our customers. Instant
connectivity also gives us the power and
flexibility to provide that service locally or
from our main operations. Deeper services
contacts also enhance the stickiness of
customer relationships.
Expansion linked to innovation and product
development also stems from a recognition
that we’ve developed thousands of custom
solutions and products for customers over
the years into products for wider consumption.
These include things like our linear motion
transport systems; assembly platforms;
advanced vision systems; material handling
technologies; test systems; and factory
management and intelligence software.
To address this gap, we are bringing more of
a commercial mindset to the drawing board
and are dedicating extra resources toward
standardizing the technology we’ve developed.
New markets and business platforms – which
we’d likely enter via acquisition – are the
least organic of the expansion opportunities
identified, but even they are targeted based on
their potential to build on our core strengths
in scalable components, machinery and
automation. Among the sectors identified
as having “new frontier” potential are areas
such as food and beverage machinery, safety
instrumentation and controls components,
pharma machinery and material handling
machinery.
ATS AUTOMATION | ANNUAL REPORT 2019 19
Management’s discussion
and analysis
For the Year Ended March 31, 2019
This Management’s Discussion and Analysis (“MD&A”) for the year ended March 31, 2019 (fiscal 2019) is as of May 15,
2019 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 2019, 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, contract assets, inventories,
deposits, prepaids and other assets, less accounts payable, accrued liabilities, provisions and contract liabilities. 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 that the Company expects to generate based on contracts that management believes to be
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ATS AUTOMATION | ANNUAL REPORT 2019
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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.
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, 2019 and March 31, 2018, 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 ended March 31, 2019 and March 31, 2018 is
also contained in the MD&A (see “Order Backlog Continuity”).
Company profile
ATS is an industry-leading automation solutions provider to many of the world’s most successful companies. ATS uses
its extensive knowledge base and global capabilities in custom automation, repeat automation, automation products
and value-added services, including pre-automation and after-sales services, to address the sophisticated manufacturing
automation systems and service needs of multinational customers in markets such as life sciences, pharmaceuticals,
chemicals, electric vehicles, transportation, consumer products, electronics, food, beverage, energy, and oil and gas.
Founded in 1978, ATS employs approximately 4,400 people at 23 manufacturing facilities and has over 50 offices in
North America, Europe, Southeast Asia and China.
Strategy
To drive the creation of long-term sustainable shareholder value, the Company has developed 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 pursuit and measurement of value drivers
and key performance indicators, a rigorous 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.
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 strategic and
disciplined acquisitions that strengthen ATS’ business.
The Company pursues these initiatives with a focus on strategic capital allocation in order to drive the creation of long-term
sustainable shareholder value.
ATS Business Model
The ABM is a business management system that ATS has developed with the goal of enabling the Company to pursue its
strategies, outpace its chosen markets, and drive year-over-year continuous improvement. The ABM brings 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 results in order to yield world-class performance for our customers and
shareholders.
ATS AUTOMATION | ANNUAL REPORT 2019 21
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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 ABM has been rolled out across ATS divisions globally, supported
with extensive training in the use of key problem-solving tools, and applied through various projects to drive continuous
improvement. Management is now deploying additional tools as part of the ongoing advancement of 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 automation 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, pharmaceuticals, nuclear medicine,
chemicals, electric vehicles, transportation, consumer products, electronics, food, beverage, energy, 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 specialized equipment for specific
applications or industrial markets, as well as 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, process optimization, preventative
maintenance, emergency and on-call support, spare parts, retooling, retrofits and equipment relocation. Service
agreements are often attached at the time of new equipment sale or are available on an after-market basis on installed
equipment. The Company employs a service strategy to increase the revenue derived from these activities. To enhance its
service offering, the Company recently unveiled IlluminateTM Manufacturing Intelligence, a system that captures, analyzes
and uses real-time machine performance data to quickly and accurately troubleshoot, deliver process and product
solutions, prevent equipment downtime, drive greater operational efficiency and unlock performance for sustainable
production improvements.
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ATS AUTOMATION | ANNUAL REPORT 2019
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Contract values for individual automation systems vary and are often in excess of $1 million, with some contracts for
enterprise-type programs well in excess of $10 million. Due to the custom nature of customer projects, contract durations
vary, with typical durations ranging from six to 12 months, and some larger contracts extending up to 18 to 24 months.
Contract values for pre-automation services and post-automation services range in value and can exceed $1 million with
varying durations, which can sometimes extend over a number of years.
Competitive strengths
Management believes ATS has the following competitive strengths:
Global presence, size and critical mass: ATS’ global presence and scale provide 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, Italy, Netherlands, 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 24,000
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 1,700 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 motion transport systems; robust cam-driven assembly platforms; advanced
vision systems used to ensure product or process quality; progressive material handling technologies; test systems;
factory management and intelligence software; other software solutions; aseptic processing and containment
technologies; 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; “Process Automation
Solutions” (“PA”), which provides innovative automation solutions for process and production sectors; “KMW,” which
specializes in custom micro-assembly systems and test equipment solutions; and “Comecer,” which provides high-tech
automation systems for the nuclear medicine and pharmaceutical industries. 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 customer
relationships are long-standing, often spanning a decade or more, and many customers are repeat buyers who return to ATS
and its subsidiaries time after time to meet their automation manufacturing, assembly, processing, and services’ needs.
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 2019 23
MANAgEMENT’s discUssiON ANd ANALysis
Overview – operating results
Consolidated revenues
(In millions of dollars)
Revenues by market
Life sciences
Transportation
Consumer products &
electronics
Energy
Total revenues
Revenues by
customer location
North America
Europe
Asia/Other
Total revenues
Fourth quarter
$
Q4 2019
193.1
82.3
39.2
34.0
Q4 2018
Fiscal 2019
Fiscal 2018
$
132.2
$
69.8
55.6
40.8
$
608.5
302.3
203.3
139.5
518.0
299.4
160.6
136.9
$
348.6
$
298.4
$
1,253.6
$
1,114.9
Q4 2019
Q4 2018
Fiscal 2019
Fiscal 2018
$
$
137.6
186.4
24.6
348.6
$
$
138.0
111.8
48.6
298.4
$
$
510.5
600.4
142.7
528.5
410.5
175.9
$
1,253.6
$
1,114.9
Fiscal 2019 fourth quarter revenues were 17% higher than in the corresponding period a year ago and included
$10.5 million of revenues earned by KMW and Comecer since acquisition. Excluding KMW and Comecer, fourth quarter
revenues were $338.1 million, a 13% increase compared to the corresponding period a year ago, primarily reflecting Order
Backlog, which was 34% higher entering the fourth quarter of fiscal 2019 compared to a year ago. Revenues generated
from construction contracts and from services both increased 17% compared to the corresponding period a year ago.
By market, revenues generated in the life sciences market increased by 46% due to higher Order Backlog entering the
fourth quarter of fiscal 2019 on improved Order Bookings in the year from both new and existing customers and, to a
lesser extent, revenues earned by Comecer since acquisition on February 28, 2019. Revenues in the transportation market
increased 18% primarily related to an electric vehicle (EV) enterprise program awarded in the first quarter of fiscal 2019
and revenues from KMW. Fiscal 2019 fourth quarter revenues from consumer products & electronics decreased 29%
compared to a year ago, due to lower Order Backlog entering the fourth quarter of fiscal 2019. Revenues generated in the
energy market decreased 17% primarily due to the timing of program execution.
Full year
Fiscal 2019 revenues were $1,253.6 million, 12% higher than in the prior fiscal year and included $12.8 million of
revenues earned by KMW and Comecer since acquisition. Excluding KMW and Comecer, fiscal 2019 revenues were
$1,240.8 million, an 11% increase compared to the corresponding period a year ago, primarily reflecting Order Backlog,
which was 10% higher entering fiscal 2019 compared to a year ago, and Order Bookings, which increased 19% in fiscal
2019 compared to a year ago.
By market, fiscal 2019 year-to-date revenues from consumer products & electronics, life sciences, energy, and the
transportation markets increased 27%, 17%, 2% and 1%, respectively, primarily reflecting higher Order Backlog entering
fiscal 2019, and higher life sciences and transportation market Order Bookings in fiscal 2019 compared to a year ago.
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ATS AUTOMATION | ANNUAL REPORT 2019
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Consolidated operating results
(In millions of dollars)
Earnings from operations
$
30.3
$
25.5
$
114.8
$
85.5
Q4 2019
Q4 2018
Fiscal 2019
Fiscal 2018
Amortization of acquisition-
related intangible assets
Restructuring charges
Acquisition-related
transaction costs
Adjusted earnings
from operations1
6.8
–
1.1
5.1
2.2
–
23.3
–
4.7
20.6
11.2
–
$
38.2
$
32.8
$
142.8
$
117.3
1 See “Notice to Reader: Non-IFRS Measures and Additional IFRS Measures.”
Earnings from operations
$
30.3
$
25.5
$
114.8
$
85.5
Q4 2019
Q4 2018
Fiscal 2019
Fiscal 2018
Depreciation and
amortization
EBITDA2
$
12.3
42.6
$
9.3
34.8
$
42.4
157.2
$
36.6
122.1
2 See “Notice to Reader: Non-IFRS Measures and Additional IFRS Measures.”
Fourth quarter
Fiscal 2019 fourth quarter earnings from operations were $30.3 million (9% operating margin) compared to $25.5 million
(9% operating margin) in the fourth quarter of fiscal 2018. Fourth quarter fiscal 2019 earnings from operations included
$1.1 million of incremental costs related to the Company’s acquisition activity and $6.8 million related to amortization of
identifiable intangible assets recorded on business acquisitions. Included in fourth quarter fiscal 2018 earnings from
operations were $2.2 million of restructuring costs and $5.1 million related to amortization of identifiable intangible
assets recorded on business acquisitions.
Excluding these items in both comparable quarters, fourth quarter fiscal 2019 adjusted earnings from operations were
$38.2 million (11% margin), compared to adjusted earnings from operations of $32.8 million (11% margin) a year ago.
Fourth quarter fiscal 2019 adjusted earnings from operations reflected higher revenues and improved gross margin, offset
by higher selling, general and administrative expenses, and increased stock compensation expenses (see “Stock-based
compensation”).
Depreciation and amortization expense was $12.3 million in the fourth quarter of fiscal 2019, compared to $9.3 million a
year ago. The increase primarily reflected depreciation of internal development projects and incremental amortization of
acquisition-related intangible assets due to the acquisitions of KMW and Comecer.
EBITDA was $42.6 million (12% EBITDA margin) in the fourth quarter of fiscal 2019 compared to $34.8 million (12% EBITDA
margin) in the fourth quarter of fiscal 2018. EBITDA growth primarily reflected higher revenues and improved gross margin,
partially offset by higher selling, general and administrative expenses and stock compensation expenses compared to a
year ago. Excluding acquisition-related costs, fourth quarter fiscal 2019 EBITDA was $43.7 million (13% EBITDA margin).
Comparably, excluding restructuring costs, fourth quarter fiscal 2018 EBITDA was $37.0 million (12% EBITDA margin).
Full year
Earnings from operations were $114.8 million (9% operating margin) in fiscal 2019, compared to $85.5 million
(8% operating margin) in the corresponding period a year ago. Excluding $4.7 million of incremental costs related to the
Company’s acquisition activity and $23.3 million related to amortization of identifiable intangible assets recorded on
business acquisitions, adjusted earnings from operations were $142.8 million (11% operating margin) in fiscal 2019,
compared to adjusted earnings from operations of $117.3 million (11% operating margin) in the corresponding period a
ATS AUTOMATION | ANNUAL REPORT 2019 25
MANAgEMENT’s discUssiON ANd ANALysis
year ago. Higher adjusted earnings from operations primarily reflected higher revenues and gross margin in fiscal 2019,
partially offset by higher selling, general and administrative expenses, and stock compensation expenses compared to a
year ago.
Depreciation and amortization expense was $42.4 million in fiscal 2019 compared to $36.6 million a year ago. The increase
primarily reflected depreciation of internal development projects and amortization of acquisition-related intangible assets.
Fiscal 2019 EBITDA was $157.2 million (13% EBITDA margin) compared to $122.1 million (11% EBITDA margin) in fiscal
2018. Excluding acquisition-related costs, fiscal 2019 EBITDA was $161.9 million (13% EBITDA margin). Comparably,
excluding restructuring costs, fiscal 2018 EBITDA was $133.3 million (12% EBITDA margin).
Order Bookings by quarter
(In millions of dollars)
Q1
Q2
Q3
Q4
Total Order Bookings
Fourth quarter
$
Fiscal 2019
Fiscal 2018
$
358
355
397
298
266
257
311
348
$
1,408
$
1,182
Fourth quarter fiscal 2019 Order Bookings were $298 million, 14% lower than fourth quarter fiscal 2018 Order Bookings.
Excluding KMW and Comecer, fourth quarter Order Bookings were $269 million, which primarily reflected lower consumer
products & electronics and transportation Order Bookings compared to the prior year period when certain enterprise
programs were recorded in those markets.
Full year
Fiscal 2019 Order Bookings were $1,408 million, a 19% increase over prior year Order Bookings of $1,182 million.
Organic growth in Order Bookings was 16% compared to the prior year, and contributions from acquired businesses KMW
and Comecer accounted for 3% of the growth. By market, higher Order Bookings in the life sciences and transportation
markets more than offset lower Order Bookings in the consumer products & electronics market. Order Bookings in the
energy market were flat. Life sciences fiscal 2019 Order Bookings included a $60 million enterprise program from a
global life sciences customer for a fully automated manufacturing and packaging system. Higher Order Bookings in the
transportation market included an $80 million enterprise program from a global automotive manufacturer for an electric
vehicle program.
Order Backlog continuity
(In millions of dollars)
Opening Order Backlog
$
Revenues
Order Bookings
Order Backlog
adjustments1
Total
$
Q4 2019
Q4 2018
Fiscal 2019
Fiscal 2018
926
(349)
298
29
904
$
$
689
(298)
348
7
746
$
746
$
(1,254)
1,408
$
4
904
$
681
(1,115)
1,182
(2)
746
1
Order Backlog adjustments include incremental Order Backlog of $2 million and $60 million acquired with KMW and Comecer, respectively, foreign
exchange adjustments and cancellations.
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ATS AUTOMATION | ANNUAL REPORT 2019
Order Backlog by market
(In millions of dollars)
As at
Life sciences
Transportation
Consumer products & electronics
Energy
Total
MANAgEMENT’s discUssiON ANd ANALysis
Fiscal 2019
Fiscal 2018
$
$
501
244
86
73
904
$
$
358
188
118
82
746
At March 31, 2019, Order Backlog was $904 million, 21% higher than at March 31, 2018. Order Backlog growth was
primarily driven by higher Order Bookings in the life sciences and transportation markets in fiscal 2019 and Order Backlog
from acquired businesses. Foreign exchange rate changes negatively impacted the translation of Order Backlog from
foreign-based ATS subsidiaries by approximately 2% compared to fiscal 2018.
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 slowing
growth and geopolitical risks remain. Ongoing trade negotiations and disputes between various jurisdictions in which the
Company does business may impact its future sales and operations. Management will continue to closely monitor ongoing
global trade discussions which could impact the Company and identify mitigation opportunities.
Funnel activity (which includes customer requests for proposal and ATS identified customer opportunities) in life sciences
remains strong. Opportunities related to electric vehicles are significant; however, customers are cautious in their
approach to capital investment. Funnel activity in energy is variable and this market provides niche opportunities for ATS.
Funnel activity in the consumer products & electronics market remains low relative to other customer markets. Overall,
the Company’s funnel remains significant; however, conversion of opportunities into Order Bookings is variable.
The Company’s sales organization continues to work to engage customers on enterprise-type solutions. Enterprise orders
are expected to provide ATS with more strategic customer relationships, better program control and workload predictability
and less short-term 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 expects its Order Backlog of $904 million at the end of the fourth quarter of fiscal 2019 to partially mitigate
the impact of volatile Order Bookings on revenues in the short term. The composition of the Company’s Order Backlog has
changed in fiscal 2019, with the addition of several large, enterprise programs that the Company has won. These
enterprise programs have longer periods of performance and therefore longer revenue recognition cycles. In the first
quarter of fiscal 2020, management expects the conversion of Order Backlog to revenues to be in the 35% to 40% range.
The services strategy is expected to add incremental revenues over time as the attach rate of services’ contracts on
new equipment increases and as the penetration of the installed base improves. The Company is working to grow service
revenues as a percentage of overall revenues over time, which is expected to provide some balance to the capital
expenditure cycle of the Company’s customers but may not fully offset capital spending volatility.
The initial roll-out of the ABM has been 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.
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The Company is pursuing several initiatives with the goal of expanding its adjusted earnings from operations margin over
the long term, including: growing the Company’s higher margin after-sales service business; improving global supply chain
management; increasing the use of standardized platforms and technologies; growing revenues while leveraging the
Company’s current cost structure; and the ongoing development and adoption of the ABM.
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 below 10%, although from time
to time it could reach up to 15% or greater due to normal volatility associated with the Company’s project-based business.
In fiscal 2020, the Company expects to increase its investment in capital assets and intangible assets to approximately
$60 million due to planned expansions at several facilities in order to increase capacity. The actual investment will
depend upon timing of the expansions.
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.
Acquisitions
Business acquisition: Comecer
On February 28, 2019, the Company completed its acquisition of Comecer S.p.A. (“Comecer”), a leader in the design,
engineering, manufacture, and servicing of advanced aseptic containment and processing systems for the nuclear
medicine and pharmaceutical industries. Comecer is primarily focused in radiopharmaceutical equipment, where it
supplies specialized radiation shielding systems used by customers in the production, handling and dispensing of
radiopharmaceutical drugs. Applications for this type of equipment include the diagnosis and therapeutic treatment of
several conditions including various forms of cancer and cardiovascular disorders. Additionally, Comecer provides
equipment to support the aseptic processing, filling and handling of specialized pharmaceuticals as well as isolator and
incubator equipment used in advanced therapy medicinal production (ATMP), a regenerative cell therapy that uses patient
cells to grow new tissues. The addition of Comecer has strengthened ATS’ customer offering in both pharma and
biopharma, and added an innovative new platform in radiopharmaceuticals. Comecer’s main production facility is in
Castel-Bolognese, Italy.
For the 2018 calendar year, Comecer generated revenues of approximately 67 million Euro, with a low double-digit EBITDA
margin. The total cash purchase price for the acquisition was 113 million Euro, subject to working capital and net debt
adjustments. Cash consideration paid in the fourth quarter of fiscal 2019 was 95 million Euro. The acquisition has been
accounted for as a business combination with the Company as the acquirer of Comecer. The purchase method of
accounting has been used and the earnings of Comecer were consolidated beginning from the acquisition date. Integration
of Comecer will target revenue synergies through cross selling, geographic expansion and commercial process best
practices. Integration will also include the deployment of the ABM, which is intended to enable improvements in operations
including project management, supply chain management and product life cycle management. The acquisition is aligned
with ATS’ strategy of expanding in attractive markets and is expected to increase the Company’s overall revenues generated
in life sciences to over 50% of consolidated revenues.
Business acquisition: KMW
On October 31, 2018, the Company completed its acquisition of Konstruktion, Maschinen- & Werkzeugbau GmbH & Co.
KG, and KMW GmbH (collectively, “KMW”). KMW is a supplier of custom micro-assembly systems and test equipment
solutions. KMW provides ATS with an internal source for complementary conveyorized micro-assembly and test
capabilities, further enabling the Company to provide full automation solutions and meet customer demands for a
complete turnkey offering. The addition of KMW’s micro-assembly technology and expertise strengthens ATS’ current
offerings in the EV market. The acquisition is aligned with ATS’ strategy of expanding its reach in current and new
markets. KMW is headquartered in Koblenz, Germany.
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In its fiscal year ended March 31, 2018, KMW had revenues of approximately 14.0 million Euro and an EBITDA margin of
over 20%. The total purchase price was 18.3 million Euro. Cash consideration paid in the third quarter was 16.4 million
Euro with the balance to be paid within 18 months from the acquisition date. The cash consideration of the purchase
price along with transaction costs were funded with existing cash on hand. The acquisition has been accounted for as a
business combination with the Company as the acquirer of KMW. The purchase method of accounting has been used and
the earnings of KMW were consolidated beginning from the acquisition date.
Selected fourth quarter and annual information
Consolidated results
(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 earnings per share
Diluted earnings per share
From operations:
Total assets
Total cash and short-term investments
Total debt
Other non-current liabilities
Q4 2019
Q4 2018
Fiscal 2019
Fiscal 2018
Fiscal 2017
$
348.6
$
298.4
$ 1,253.6
$ 1,114.9
$ 1,010.9
256.0
219.9
56.1
6.2
30.3
5.8
6.3
18.2
0.20
0.20
$
$
$
$
$
49.7
3.3
25.5
5.6
4.9
15.0
0.16
0.16
$
$
$
$
$
924.9
204.1
9.8
114.8
20.9
23.1
70.8
0.76
0.75
$
$
$
$
$
826.8
194.3
8.3
85.5
23.8
14.5
47.2
0.50
0.50
$
$
$
$
$
760.3
171.9
6.8
71.9
25.6
11.3
35.0
0.38
0.38
$
$
$
$
$
$ 1,688.8
$ 1,542.2
$ 1,374.6
$
$
$
224.5
348.7
113.4
$
$
$
330.1
318.2
102.0
$
$
$
286.7
328.7
65.4
Revenues. At $348.6 million, consolidated revenues for the fourth quarter of fiscal 2019 were $50.2 million, 17% higher
than the corresponding period a year ago. At $1,253.6 million, annual consolidated revenues were $138.7 million, or 12%
higher than a year ago (see “Overview – Operating Results”).
Cost of revenues. At $256.0 million, fourth quarter fiscal 2019 cost of revenues increased compared to the corresponding
period a year ago by $36.1 million, or 16%, primarily due to higher revenues. Annual cost of revenues of $924.9 million
increased $98.1 million, or 12% primarily due to higher revenues. Fourth quarter fiscal 2019 gross margin was 27%
compared to 26% in the corresponding period a year ago, due primarily to improved program execution and operational
utilization. Fiscal 2019 gross margin was 26%, consistent with fiscal 2018.
Selling, general and administrative (“SG&A”) expenses. SG&A expenses for the fourth quarter of fiscal 2019 were
$56.1 million, which included $1.1 million of incremental costs related to the Company’s acquisition activity and
$6.8 million of amortization costs related to the amortization of identifiable intangible assets recorded on business
acquisitions. Excluding these costs, SG&A expenses were $48.2 million in the fourth quarter of fiscal 2019. Comparably,
SG&A expenses for the fourth quarter of fiscal 2018 were $42.4 million, which excluded $5.1 million of amortization
costs related to the amortization of identifiable intangible assets recorded on business acquisitions and $2.2 million of
restructuring costs. Higher SG&A expenses in the fourth quarter of fiscal 2019 primarily reflected the addition of KMW
and Comecer, and increased employee costs.
Fiscal 2019 SG&A expenses were $204.1 million compared to $194.3 million last year. Fiscal 2019 SG&A expenses
included $4.7 million of incremental costs related to the Company’s acquisition activity and $23.3 million of expenses
related to the amortization of identifiable intangible assets recorded on business acquisitions. Excluding these costs,
SG&A expenses were $176.1 million for fiscal 2019. Comparably, SG&A expenses for fiscal 2018 were $162.5 million,
ATS AUTOMATION | ANNUAL REPORT 2019 29
MANAgEMENT’s discUssiON ANd ANALysis
which excluded $11.2 million of restructuring costs, and $20.6 million of expenses related to the amortization of
identifiable intangible assets recorded on business acquisitions. Higher SG&A expenses in fiscal 2019 primarily reflected
increased: employee costs; spend on information technology systems and security; sales related expenses; and the
addition of KMW and Comecer.
Stock-based compensation. Stock-based compensation expense amounted to $6.2 million in the fourth quarter of fiscal
2019 compared to $3.3 million in the corresponding period a year ago. Fiscal 2019 stock-based compensation expense
was $9.8 million compared to $8.3 million a year ago. The increase in stock-based compensation costs is attributable to
higher expenses from the revaluation of deferred stock units and restricted share units based on the Company’s stock price.
Earnings from operations. For the three- and 12-month periods ended March 31, 2019, earnings from operations were
$30.3 million (9% operating margin) and $114.8 million (9% operating margin), respectively, compared to earnings from
operations of $25.5 million (9% operating margin) and $85.5 million (8% operating margin) in the corresponding periods a
year ago (see “Overview – Operating Results”).
Net finance costs. Net finance costs were $5.8 million in the fourth quarter of fiscal 2019 compared to $5.6 million a
year ago. Fiscal 2019 net finance costs were $20.9 million compared to $23.8 million a year ago. The decrease was
primarily due to higher interest income earned in fiscal 2019 compared to a year ago.
Income tax provision. For the three and 12 months ended March 31, 2019, the Company’s effective income tax rates of
26% and 25%, respectively, differed from the combined Canadian basic federal and provincial income tax rate of 27%
primarily due to income earned in certain jurisdictions with different statutory tax rates. The Company expects its effective
tax rate to remain in the range of 25% for fiscal 2020.
Net income. Fiscal 2019 fourth quarter net income was $18.2 million (20 cents per share basic and diluted), compared
to $15.0 million (16 cents per share basic and diluted) for the fourth quarter of fiscal 2018. Adjusted basic earnings per
share were 26 cents in the fourth quarter of fiscal 2019 compared to 22 cents for the fourth quarter of fiscal 2018
(see “Reconciliation of Non-IFRS Measures to IFRS Measures”).
Fiscal 2019 net income was $70.8 million (76 and 75 cents per share basic and diluted) compared to $47.2 million
(50 cents per share basic and diluted) a year ago. Adjusted basic earnings per share were 98 cents in fiscal 2019
compared to 74 cents a year ago (see “Reconciliation of Non-IFRS Measures to IFRS Measures”).
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 2019
Fiscal 2018
Fiscal 2017
EBITDA
Less: depreciation and amortization expense
Earnings from operations
Less: net finance costs
Provision for income taxes
Net income
$
$
$
157.2
42.4
114.8
20.9
23.1
70.8
EBITDA
Less: depreciation and amortization expense
Earnings from operations
Less: net finance costs
Provision for income taxes
Net income
30
ATS AUTOMATION | ANNUAL REPORT 2019
$
$
$
$
$
$
122.1
36.6
85.5
23.8
14.5
47.2
Q4 2019
42.6
12.3
30.3
5.8
6.3
18.2
$
$
$
$
$
$
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
MANAgEMENT’s discUssiON ANd ANALysis
The following tables reconcile adjusted earnings from operations, adjusted net income and adjusted basic earnings per
share to the most directly comparable IFRS measure (net income and basic earnings per share):
Three Months Ended
March 31, 2019
Three Months Ended
March 31, 2018
IFRS
Adjustments
Adjusted
(non-IFRS)
IFRS
Adjustments
Adjusted
(non-IFRS)
Earnings from operations
$
30.3
$
–
$
30.3
$
25.5
$
–
$
25.5
Amortization of acquisition-
related intangible assets
Restructuring costs
Acquisition-related
transaction costs
Less: net finance costs
Income before income taxes
Provision for income taxes
Adjustment to provision for
income taxes1
Net income
Basic earnings per share
$
$
$
$
$
$
$
–
–
–
30.3
5.8
24.5
6.3
–
6.3
18.2
0.20
$
$
$
$
$
$
$
6.8
–
1.1
7.9
–
7.9
–
2.2
2.2
5.7
0.06
$
$
$
$
$
$
$
6.8
–
1.1
38.2
5.8
32.4
6.3
2.2
8.5
23.9
0.26
$
$
$
$
$
$
$
–
–
–
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
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.
Twelve Months Ended
March 31, 2019
Twelve Months Ended
March 31, 2018
IFRS
Adjustments
Adjusted
(non-IFRS)
IFRS
Adjustments
Adjusted
(non-IFRS)
Earnings from operations
$ 114.8
$
–
$ 114.8
$
85.5
$
–
$
85.5
Amortization of acquisition-
related intangible assets
Restructuring charges
Acquisition-related
transactions costs
Less: net finance costs
Income before income taxes
Provision for income taxes
Adjustment to provision for
income taxes1
Net income
Basic earnings per share
–
–
–
$ 114.8
$
$
$
$
$
$
20.9
93.9
23.1
–
23.1
70.8
0.76
$
$
$
$
$
$
$
23.3
–
23.3
–
4.7
4.7
28.0
$ 142.8
–
$
20.9
28.0
$ 121.9
–
$
23.1
7.5
7.5
20.5
0.22
$
$
$
7.5
30.6
91.3
0.98
$
$
$
$
$
$
$
–
–
–
85.5
23.8
61.7
14.5
–
14.5
47.2
0.50
20.6
11.2
–
20.6
11.2
–
$
$
$
$
$
$
$
31.8
$ 117.3
–
31.8
–
9.2
9.2
22.6
0.24
$
$
$
$
$
$
23.8
93.5
14.5
9.2
23.7
69.8
0.74
1
Adjustments to provision for income taxes relate to the income tax effects of adjustment items that are excluded for the purposes of calculating
non-IFRS based adjusted net income.
ATS AUTOMATION | ANNUAL REPORT 2019 31
MANAgEMENT’s discUssiON ANd ANALysis
Summary of investments, liquidity, cash flow and financial resources
Investments
(In millions of dollars)
Investments – increase (decrease)
Non-cash operating working capital
Acquisition of property, plant and equipment
Acquisition of intangible assets
Proceeds from disposal of assets
Total net investments
Fiscal 2019
Fiscal 2018
$
$
(2.5)
21.1
19.8
(5.2)
33.2
$
$
27.0
19.9
6.1
(2.6)
50.4
In fiscal 2019, the Company’s investment in non-cash working capital decreased $2.5 million, compared to an increase of
$27.0 million a year ago. Accounts receivable increased 4%, or $9.2 million, driven by the acquisition of Comecer. Net
contracts in progress decreased 24%, or $16.6 million, compared to March 31, 2018. 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 16%, or $9.5 million, primarily due to the acquisition of Comecer.
Deposits and prepaid assets increased 28%, or $6.2 million, compared to March 31, 2018 due to timing of program
execution. Accounts payable and accrued liabilities increased 6%, or $15.6 million, compared to March 31, 2018 due to
the acquisition of Comecer. Provisions decreased 34%, or $7.1 million, compared to March 31, 2018.
Capital expenditures totalled $21.1 million for fiscal 2019, primarily related to computer hardware, building additions, and
office equipment. Capital expenditures totalled $19.9 million in fiscal 2018, primarily related to computer hardware, and
the improvement and expansion of certain manufacturing facilities.
Intangible asset expenditures for fiscal 2019 and fiscal 2018 were $19.8 million and $6.1 million, respectively. Fiscal
2019 intangible asset expenditures primarily related to the acquisition of substantially all of the intellectual property
assets of Transformix Engineering Inc. (“Transformix”) for $10.0 million. Transformix’s CNCAssembly system, based on its
patented Rapid Speed Matching technology, provides a method of linking and synchronizing the movements of devices
and tooling to enable faster and more efficient assembly systems. This enhanced capability is expected to provide higher
speed, lower cost, energy efficient and more flexible assembly solutions for ATS’ customers, while utilizing a smaller
footprint. CNCAssembly is suitable for any application where high-precision motion control is required and can serve a
broad range of end markets. The addition of this important technology will complement ATS’ growing portfolio of linear
mover technology products, which includes the best-in-class SuperTrakTM linear motion system and the recently launched
SuperTrak MicroTM. Amortization of the intangible asset will begin when the asset is available for use which is estimated
to be in the second half of fiscal 2020. Over the next five years, potential future payments of up to $20.0 million are
payable based on sales which incorporate the acquired intellectual property. The commission expenses will be recognized
as they are incurred.
Proceeds from disposal of assets were $5.2 million in fiscal 2019, compared to $2.6 million in fiscal 2018. The increase
primarily reflected the sale of redundant assets in fiscal 2019.
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
2019 and determined there is no impairment of goodwill or intangible assets as of March 31, 2019 (fiscal 2018 – $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.
32
ATS AUTOMATION | ANNUAL REPORT 2019
MANAgEMENT’s discUssiON ANd ANALysis
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 2019
Fiscal 2018
$
$
224.5
0.48:1
127.6
$
$
330.1
0.47:1
59.7
At March 31, 2019, the Company had cash and cash equivalents of $224.5 million compared to $330.1 million at
March 31, 2018. At March 31, 2019, the Company’s debt-to-total equity ratio was 0.48:1.
In fiscal 2019, cash flows provided by operating activities were $127.6 million ($59.7 million provided by operating
activities in the corresponding period a year ago). The increase in operating cash flows related primarily to the timing of
investments in non-cash working capital in certain customer programs and higher net income compared to a year ago.
At March 31, 2019, the Company had $632.7 million of unutilized multipurpose credit, including letters of credit, available
under existing credit facilities and an additional $19.2 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 the Company’s assets, including certain real estate in North America and
a pledge of shares of certain subsidiaries. Certain of the Company’s subsidiaries also provide guarantees under the
Credit Facility. At March 31, 2019, the Company had utilized $134.3 million under the Credit Facility by way of letters of
credit (March 31, 2018 – $108.5 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%.
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, 2019, all of the covenants were met.
The Company has additional credit facilities available of $38.6 million (15.3 million Euros, $10.0 million U.S, 50.0 million
Thai Baht and 1.5 million Czech Koruna). The total amount outstanding on these facilities at March 31, 2019 was
$20.6 million, of which $2.0 million was classified as bank indebtedness (March 31, 2018 – $2.7 million) and
$18.6 million was classified as long-term debt (March 31, 2018 – $0.7 million). The interest rates applicable to the credit
facilities range from 0.60% to 8.25% per annum. A portion of the long-term debt is secured by certain assets of the
Company.
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
ATS AUTOMATION | ANNUAL REPORT 2019 33
MANAgEMENT’s discUssiON ANd ANALysis
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, 2019, 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.
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
12.3
10.2
8.2
5.0
3.2
3.9
Purchase
obligations
$
124.2
2.4
1.8
0.2
0.2
–
$
42.9
$
128.7
The Company’s off-balance sheet arrangements consist of purchase obligations and various operating lease financing
arrangements related primarily to facilities and equipment that were entered into in the normal course of business. The
Company’s purchase obligations consist primarily of commitments for material purchases.
In accordance with industry practice, the Company is liable to customers for obligations relating to contract completion
and timely delivery. In the normal conduct of its operations, the Company may provide letters of credit as security for
advances received from customers pending delivery and contract performance. In addition, the Company provides letters
of credit for post-retirement obligations and may provide letters of credit as security on equipment under lease and on
order. At March 31, 2019, the total value of outstanding letters of credit was approximately $203.3 million (March 31,
2018 – $137.1 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 insurance in certain instances.
Share data
During fiscal 2019, 416,842 stock options were exercised. At May 15, 2019, the total number of shares outstanding was
91,936,539, and there were 1,497,073 stock options outstanding to acquire common shares of the Company.
34
ATS AUTOMATION | ANNUAL REPORT 2019
MANAgEMENT’s discUssiON ANd ANALysis
Normal course issuer bid
On December 3, 2018, the Company announced that the Toronto Stock Exchange (“TSX”) had accepted a notice filed
by the Company of its intention to make a normal course issuer bid (“NCIB”). Under the NCIB, ATS has the ability to
purchase for cancellation up to a maximum of 3,000,000 common shares, representing approximately 3.2% of the
94,139,097 common shares that were issued and outstanding as of November 16, 2018. On February 6, 2019, ATS
announced the TSX’s approval of its amended notice to increase the maximum number of shares that may be purchased
under the NCIB to 6,366,405 common shares, representing 10% of the “public float” (as defined by the TSX and
calculated as of November 16, 2018), effective February 11, 2019.
Some purchases under the NCIB may be made pursuant to an automatic purchase plan between ATS and its broker. This
plan enables the purchase of up to 3,000,000 ATS common shares when ATS would not ordinarily be active in the market
due to internal trading blackout periods, insider trading rules, or otherwise.
From December 3, 2018 to March 31, 2019, the Company purchased 2,509,120 common shares for $39.3 million under
the NCIB. The weighted average price per share repurchased was $15.65. ATS security holders may obtain a copy of the
notice, without charge, upon request from the Secretary 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 2019.
Foreign exchange
The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its functional
currency of the Canadian dollar, through borrowings made by the Company in currencies other than its functional currency
and through its investments in its foreign-based subsidiaries.
The Company’s Canadian operations generate significant revenues in major foreign currencies, primarily U.S. dollars,
which exceed the natural hedge provided by purchases of goods and services in those currencies. In order to manage a
portion of this foreign currency exposure, the Company has entered into forward foreign exchange contracts. The timing
and amount of these forward foreign exchange contract requirements are estimated based on existing customer contracts
on hand or anticipated, current conditions in the Company’s markets and the Company’s past experience. Certain of the
Company’s foreign subsidiaries will also enter into forward foreign exchange contracts to hedge identified balance sheet,
revenue and purchase exposures. The Company’s forward foreign exchange contract hedging program is intended to
mitigate movements in currency rates primarily over a four- to six-month period.
The Company uses cross-currency swaps as derivative financial instruments to hedge a portion of its foreign exchange risk
related to its U.S.-dollar-denominated Senior Notes. On March 29, 2016, the Company entered into a cross-currency interest
rate swap instrument to swap U.S. $150.0 million into Canadian dollars. The Company will receive interest of 6.50% U.S.
per annum and pay interest of 6.501% Canadian. The terms of the hedging relationship will end on June 15, 2023.
The Company manages foreign exchange risk on its Euro-denominated net investments. The Company uses cross-currency
swaps as derivative financial instruments to hedge a portion of the foreign exchange risk related to its Euro-denominated
net investment. On March 29, 2016, the Company entered into a cross-currency interest rate swap instrument to swap
134.1 million Euros into Canadian dollars. The Company will receive interest of 6.501% Canadian per annum and pay
interest of 5.094% Euros. The terms of the hedging relationship will end on June 15, 2023.
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.
ATS AUTOMATION | ANNUAL REPORT 2019 35
MANAgEMENT’s discUssiON ANd ANALysis
Period average exchange rates in CAD
Year-end actual exchange rates
Period average exchange rates
March 31,
2019
March 31,
2018
% change
March 31,
2019
March 31,
2018
U.S. dollar
Euro
1.336
1.499
1.290
1.589
3.6%
(5.7%)
1.313
1.518
1.284
1.502
% change
2.2%
1.1%
Consolidated quarterly results
(In millions of dollars, except per share amounts)
Q4
2019
Q3
2019
Q2
2019
Q1
2019
Q4
2018
Q3
2018
Q2
2018
Q1
2018
Revenues
$ 348.6 $ 321.4 $ 283.6 $ 300.0 $ 298.4 $ 277.6 $ 274.9 $ 264.0
Earnings from operations
$ 30.3 $ 38.5 $ 19.0 $ 27.0 $ 25.5 $ 14.8 $ 23.9
$ 21.3
Adjusted earnings from operations1 $ 38.2 $ 46.7 $ 25.4 $ 32.6 $ 32.8 $ 29.3 $ 28.8 $ 26.3
Net income
$ 18.2 $ 25.1 $ 10.8 $ 16.7 $ 15.0 $ 6.9 $ 13.8 $ 11.5
Basic and diluted earnings
per share
$ 0.20
$ 0.27
$ 0.11
$ 0.18
$ 0.16
$ 0.07
$ 0.15
$ 0.12
Adjusted basic earnings per share1 $ 0.26 $ 0.33 $ 0.17 $ 0.22 $ 0.22 $ 0.18 $ 0.18 $ 0.16
Order Bookings2
Order Backlog2
$ 298.0 $ 397.0 $ 355.0 $358.0 $ 348.0 $ 311.0 $ 257.0 $ 266.0
$ 904.0 $ 926.0 $ 830.0 $ 789.0 $ 746.0 $ 689.0 $ 648.0 $ 683.0
1 See “Notice to Reader: Non-IFRS Measures and Additional IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS Measures.”
2 Non-IFRS measure. See “Notice to Reader: Non-IFRS Measures and Additional IFRS Measures.”
Interim financial results are not necessarily indicative of annual or longer-term results because many of the individual
markets served by the Company tend to be cyclical in nature. Operating performance quarter to quarter may also be
affected by the timing of revenue recognition on large programs in Order Backlog, which is impacted by such factors as
customer delivery schedules and the timing of third-party content, and by the timing of acquisitions. General economic
trends, product life cycles and product changes may impact revenues and operating performance. ATS typically
experiences some seasonality with its Order Bookings, revenues and earnings from operations due to summer plant
shutdowns by its customers.
Critical accounting estimates and assumptions
The preparation of the Company’s consolidated financial statements requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities at the end of the reporting period. Uncertainty about these estimates, judgments and
assumptions could result in outcomes that require a material adjustment to the carrying amount of the asset or liability
affected in future periods.
The Company based its assumptions on information available when the consolidated financial statements were prepared.
Existing circumstances and assumptions about future developments may change due to market changes or circumstances
arising beyond the control of the Company. Such changes are reflected in the estimates as they occur.
Notes 2 and 3 to the consolidated financial statements describe the basis of accounting and the Company’s significant
accounting policies.
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MANAgEMENT’s discUssiON ANd ANALysis
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 – 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 17 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 deferred income tax assets, which would increase or decrease income tax expense in
the period in which this is determined. The Company establishes provisions based on reasonable estimates for possible
consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such
provisions is based on various factors, such as experience of previous taxation audits and differing interpretations of tax
regulations by the taxable entity and the respective tax authority. These provisions for uncertain tax positions are made
using the best estimate of the amount expected to be paid based on a qualitative assessment of all the relevant factors.
The Company reviews the adequacy of these provisions at each quarter. However, it is possible that at some future date
an additional liability could result from audits by the taxation authorities. Where the final tax outcome of these matters is
different from the amount initially recorded, such differences will affect the tax provisions in the period in which such
determination is made.
Stock-based payment transactions
The Company measures the cost of transactions with employees by reference to the fair value of the equity instruments at
the date at which they are granted. Estimating fair value for stock-based payment transactions requires the determination
of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also
requires determination of the most appropriate inputs to the valuation model, including the future forfeiture rate, the
expected life of the share option, weighted average risk-free interest rate, volatility and dividend yield, and formation of
assumptions. The assumptions and models used for estimating fair value for stock-based payment transactions are
disclosed in note 18 to the consolidated financial statements.
ATS AUTOMATION | ANNUAL REPORT 2019 37
MANAgEMENT’s discUssiON ANd ANALysis
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is
the higher of its fair value less 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 10 to the consolidated financial
statements. The Company performed its annual impairment test of goodwill as at March 31, 2019 and determined there
was no impairment (March 31, 2018 – $nil).
Provisions
As described in note 3(n) 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 14 to the consolidated financial statements.
Changes in accounting policies
Accounting standard adopted in fiscal 2019
IFRS 15 – Revenue from Contracts with Customers
Effective April 1, 2018, the Company adopted 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 at an amount that reflects the consideration to which an entity
expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a
more structured approach to measuring and recognizing revenues.
The Company adopted the standard in accordance with the modified retrospective transitional approach. There were no
transitional adjustments or changes to the Company’s revenue recognition policies required on the adoption of this
standard. The transition to the new standard required additional disclosures in the consolidated financial statements.
The Company applied certain practical expedients, as permitted by the standard in determining the impact on transition.
The standard requires contract assets and contract liabilities to be separately presented in the statement of financial
position. Contract assets represent the right to consideration in exchange for goods or services that have been transferred
to a customer. Contract liabilities represent the obligation to transfer goods and services to a customer for which the
Company has received consideration (or an amount of consideration is due) from the customer. Previously, the Company
recognized contract assets as “costs and earnings in excess of billings on contracts in progress” and contract liabilities as
“billings in excess of costs and earnings on contracts in progress.” Based on IFRS 15, contract assets and contract
liabilities have been disclosed as current assets and current liabilities, respectively, in the statement of financial position.
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MANAgEMENT’s discUssiON ANd ANALysis
Accounting standards issued but not yet effective
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 plans to adopt IFRS 16 using the
modified retrospective approach beginning on April 1, 2019. The Company intends to apply the practical expedient
exemptions available to exempt low value and short-term lease arrangements. Upon adoption of IFRS 16, the Company
expects to recognize right of use assets and a corresponding lease liability in the range of $68 to $73 million on the
consolidated statements of financial position, primarily relating to leased buildings and vehicles. Depreciation and finance
costs are expected to increase by approximately $13 million and $6 million, respectively, which will primarily be offset by
lower operating lease costs which have been recognized in cost of revenues and SG&A in the consolidated statements
of income.
ATS continues to assess the impact of the new leasing standard on the Company’s consolidated financial statements and
the conclusions and elections above are subject to change prior to the implementation of the new standard in April 2019.
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, 2019 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, 2019, 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.
ATS AUTOMATION | ANNUAL REPORT 2019 39
MANAgEMENT’s discUssiON ANd ANALysis
During the years ended March 31, 2019 and March 31, 2018, 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.
Limitation on scope
The Company acquired Comecer on February 28, 2019. Management has not fully completed its review of internal
controls over financial reporting for this newly acquired organization. Since the acquisition occurred within the 365 days of
the reporting period, management has limited the scope of design and subsequent evaluation of disclosure controls and
procedures and internal controls over financial reporting, as permitted under 5.3 of Form 52-109 F1 pursuant to National
Instrument 52-109, Certification of Disclosure in Issuer’s Annual and Interim Filings. For the period covered by this MD&A,
management has undertaken additional procedures to satisfy itself with respect to the accuracy and completeness of the
acquired operations’ financial information. The following summary of financial information pertains to the acquisition that
was included in ATS’ consolidated financial statements for the year ended March 31, 2019.
(millions of dollars)
Revenue1
Net income1
Current assets2
Non-current assets2
Current liabilities2
Non-current liabilities2
1 Results from March 1, 2019 to March 31, 2019.
2 Balance sheet as at March 31, 2019.
Comecer
8.7
0.1
59.8
174.2
64.1
82.9
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ATS AUTOMATION | ANNUAL REPORT 2019
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;
• Industry consolidation;
• Liquidity, access to capital markets and leverage;
• Restrictive covenants;
• Availability of performance and other guarantees from
financial institutions;
• Share price volatility;
• Competition;
• First-time program and production risks;
• Automation systems pricing;
• Revenue mix risk;
• Pricing, quality, delivery and volume risks;
• Product failure;
• New product market acceptance, obsolescence,
and commercialization;
• Security breaches or disruptions of information
technology systems;
• Insurance coverage;
• Availability of raw materials and other manufacturing
inputs;
• Customer risks;
• Insolvency or financial distress of third parties;
• Availability of human resources and dependence on
key personnel;
• Cumulative loss of several significant contracts;
• Lengthy sales cycle;
• Lack of long-term customer commitment;
• Foreign exchange risk;
• Doing business in foreign countries;
• Legislative compliance;
• Environmental compliance;
• Corruption of Foreign Public Officials Act, United States
Foreign Corrupt Practices Act and anti-bribery laws risk;
• Intellectual property protection risks;
• Infringement of third parties’ intellectual property
rights risk;
• Internal controls;
• Impairment of intangible assets risk;
• Income and other taxes and uncertain tax liabilities;
• Variations in quarterly results;
• Litigation;
• Natural disasters, pandemics, acts of war, terrorism,
international conflicts or other disruptions;
• Manufacturing facilities disruption;
• Restructuring and work stoppage risk; and
• Dependence on performance of subsidiaries.
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; trade
negotiations and disputes; conversion of opportunities into Order Bookings; the expected benefits where the Company
ATS AUTOMATION | ANNUAL REPORT 2019 41
MANAgEMENT’s discUssiON ANd ANALysis
engages with customers on enterprise-type solutions and the potential impact on Order Bookings, performance period,
and timing of revenue recognition; the Company’s Order Backlog partially mitigating the impact of volatile Order Bookings;
rate of Order Backlog conversion; expected benefits with respect to the Company’s efforts to expand its services
revenues; deployment of the ATS Business Model (“ABM”) and the expected impact; initiatives having the goal of expanding
adjusted earnings from operations margin over the long term; the Company’s strategy to expand organically and through
acquisition; the Company’s goal with respect to non-cash working capital as a percentage of revenues; the Company’s
expectations in regards to investment in capital assets; expectation in relation to meeting funding requirements for
investments; potential to use leverage to support growth strategy; the expected benefits resulting from the acquisition and
integration of Comecer; the Company’s expectation with respect to effective tax rate; expected benefits from the purchase
of Transformix intellectual property assets and when the assets will be available for use; 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
current or future trade negotiations or disputes have unexpected impact on the business, including increased cost of
supplies; 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; variations in the amount of Order
Backlog completed in any given quarter; that the Company is not successful in growing its service offering or that
expected benefits are not realized; 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; that efforts to expand adjusted earnings from operations margin
over the long term is unsuccessful, due to any number of reasons, including less than anticipated increase in after-sales
service revenues or reduced margins attached to those revenues, inability to achieve lower costs through supply chain
management, failure to develop, adopt internally, or have customers adopt, standardized platforms and technologies,
inability to maintain current cost structure if revenues were to grow, and failure of ABM to impact margins; 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; 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;
that the Company reverses one or more of its plans in regards to investment in capital assets or that the costs of capital
assets are greater than expected; that the expected benefits from the acquisition of Comecer are not realized for reasons
including failure to successfully integrate it and lack of customer receptivity to the expanded offering; that the effective tax
rate is other than expected, due to reasons including income spread among jurisdictions being other than anticipated;
that ATS does not realize the expected benefits of the Transformix asset purchase or that the products incorporating the
technology are delayed in development; risk that the ultimate outcome of lawsuits, claims and contingencies give rise to
material liabilities for which no provisions have been recorded; that one or more customers, or other entities with which
the Company has contracted, experience insolvency or bankruptcy with resulting delays, costs or losses to the Company;
political, labour or supplier disruptions; the development of superior or alternative technologies to those developed by
ATS; the success of competitors with greater capital and resources in exploiting their technology; market risk for
developing technologies; risks relating to legal proceedings to which ATS is or may become a party; exposure to product
and/or professional 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.
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ATS AUTOMATION | ANNUAL REPORT 2019
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 consolidated 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 2019 43
Independent auditor’s report
To the Shareholders of
ATS Automation Tooling Systems Inc.
Opinion
We have audited the consolidated financial statements of ATS Automation Tooling Systems Inc. and its subsidiaries,
(the “Company”), which comprise the consolidated statements of financial position as at March 31, 2019 and 2018, and
the consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of
changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Company as at March 31, 2019 and 2018, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant
to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information,
and in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to use after the date of the auditor’s report. If based on the work we
will perform on this other information, we conclude there is a material misstatement of other information, we are required
to report that fact to those charged with governance.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, 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.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
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ATS AUTOMATION | ANNUAL REPORT 2019
iNdEPENdENT AUdiTOR’s REPORT
basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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
Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of entities or business activities within
the Company to express an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Scott Kerr.
Toronto, Canada
May 15, 2019
Chartered Professional Accountants
Licensed Public Accountants
ATS AUTOMATION | ANNUAL REPORT 2019 45
Consolidated statements
of financial position
(in thousands of Canadian dollars)
As at
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable
Income tax receivable
Contract assets
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
Income tax payable
Provisions
Contract liabilities
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, 2019
March 31, 2018
Note
15
3, 21
6
7
9
8
10
11
17
17
$
$
15
$
13
3, 21
15
14
15
17
8
$
15, 19
16
$
$
224,540
217,245
4,938
213,553
67,998
28,719
756,993
97,669
2,446
551,643
213,945
3,194
62,953
931,850
1,688,843
1,950
254,227
7,721
13,943
161,139
18,550
457,530
28,187
328,247
78,585
6,663
441,682
899,212
516,613
11,709
69,549
191,449
789,320
311
789,631
1,688,843
$
$
$
$
$
$
330,148
209,551
3,455
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
240,093
6,291
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
David McAusland
Director
See accompanying notes to the consolidated financial statements.
Neil D. Arnold
Director
46
ATS AUTOMATION | ANNUAL REPORT 2019
Consolidated statements
of income
(in thousands of Canadian dollars, except per share amounts)
Years ended March 31
Revenues
Revenues from construction contracts
Sale of goods
Services rendered
Total revenues
Operating costs and expenses
Cost of revenues
Selling, general and administrative
Stock-based compensation
Earnings from operations
Net finance costs
Income before income taxes
Income tax expense
Net income
Attributable to
Shareholders
Non-controlling interests
Earnings per share attributable to shareholders
Basic
Diluted
See accompanying notes to the consolidated financial statements.
Note
2019
2018
$
763,228
90,005
400,383
1,253,616
$
654,193
79,979
380,758
1,114,930
20, 21
924,898
204,073
9,850
114,795
20,909
93,886
23,124
70,762
70,743
19
70,762
0.76
0.75
826,771
194,421
8,276
85,462
23,766
61,696
14,487
47,209
47,165
44
47,209
0.50
0.50
$
$
$
$
$
18
22
17
23
23
$
$
$
$
$
ATS AUTOMATION | ANNUAL REPORT 2019 47
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:
Currency translation adjustment (net of income taxes of $nil)
Net unrealized gain (loss) on derivative financial instruments
designated as cash flow hedges
Tax impact
Loss (gain) 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
Note
$
2019
70,762
2018
47,209
$
(12,145)
24,414
(109)
23
90
(12)
7,826
(1,954)
(675)
12
(6,944)
63,818
63,799
19
63,818
$
$
$
2,357
(655)
(1,673)
479
(5,420)
1,354
(534)
139
20,461
67,670
67,626
44
67,670
12
12
12
14
$
$
$
See accompanying notes to the consolidated financial statements.
48
ATS AUTOMATION | ANNUAL REPORT 2019
Consolidated statements
of changes in equity
(in thousands of Canadian dollars)
Year ended March 31, 2019
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, 2018
$ 548,747
$ 12,535
$ 121,369
$ 79,918
$
(4,088)
$ 75,830
$
292
$ 758,773
Net income
Other comprehensive
income (loss)
Total comprehensive
income (loss)
Stock-based
compensation
Exercise of stock
options
Repurchase of
common shares
(note 16)
Balance, as at
–
–
70,743
–
–
–
19
70,762
–
–
–
–
–
910
7,145
(1,736)
(39,279)
–
(663)
(12,145)
5,864
(6,281)
–
(6,944)
70,080
(12,145)
5,864
(6,281)
19
63,818
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
910
5,409
(39,279)
March 31, 2019
$ 516,613 $ 11,709
$ 191,449
$ 67,773
$
1,776
$ 69,549
$
311
$ 789,631
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
Year ended March 31, 2018
Total
accumulated
–
– 47,165
–
–
–
44 47,209
Net income
Other comprehensive
income (loss)
Total comprehensive
income (loss)
Stock-based
compensation
Exercise of stock
options
Balance, as at
–
–
–
–
(395)
24,414
(3,558)
20,856
–
20,461
–
46,770
24,414
(3,558)
20,856
44
67,670
953
5,430
(1,289)
–
–
–
–
–
–
–
–
–
–
953
4,141
March 31, 2018
$ 548,747 $ 12,535
$ 121,369
$ 79,918
$
(4,088)
$ 75,830
$
292
$ 758,773
See accompanying notes to the consolidated financial statements.
ATS AUTOMATION | ANNUAL REPORT 2019 49
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
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
Business acquisition, net of cash acquired
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
Repurchase of common shares
Cash flows provided by (used in) financing activities
Effect of exchange rate changes on cash and
cash equivalents
Increase (decrease) 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
2019
2018
$
70,762
$
47,209
9
11
17
18
9
11
5
16
$
$
$
$
$
$
$
$
12,137
30,254
13,718
(11,587)
9,850
125,134
2,464
127,598
(21,096)
(19,824)
(156,351)
5,209
(192,062)
(2,512)
(5,175)
335
5,409
(39,279)
(41,222)
78
(105,608)
330,148
224,540
10,468
26,243
10,352
26,315
866
(6,371)
8,276
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
$
$
$
$
$
$
$
$
50
ATS AUTOMATION | ANNUAL REPORT 2019
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, 2019 were authorized for issue by
the Board of Directors (the “Board”) on May 15, 2019.
2. Basis of preparation
These consolidated financial statements were prepared on a historical cost basis, except for derivative instruments that
have been measured at fair value. The consolidated financial statements are presented in Canadian dollars and all values
are 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.
ATS AUTOMATION | ANNUAL REPORT 2019 51
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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:
The Company generates revenue from construction contracts, the sale of goods, and by services rendered. Revenue is
measured based on the consideration specified in a contract and the Company recognizes revenue when it transfers
control of a product or provides a service to a customer. With respect to incremental costs such as sales commissions
incurred in obtaining a contract, the Company has elected to apply the practical expedient to expense these costs when
incurred as the term of the Company’s contracts are typically one year or less.
52
ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
Construction contracts
A construction contract generally includes the design, manufacture and installation of new equipment for a customer’s
new or existing system. The Company generally considers a construction contract to contain one performance obligation.
However, the Company may provide several distinct goods or services as part of a contract, in which case, the Company
separates the contract into more than one performance obligation. If a contract is separated into more than one
performance obligation, the total transaction price is allocated to each performance obligation in an amount based on the
estimated relative standalone selling prices of the promised goods or services underlying each performance obligation.
The Company typically satisfies construction contract performance obligations over time, therefore, the Company
recognizes revenue over time as the performance obligations are satisfied using the stage of completion method as
described below:
• The stage of completion of fixed-price contracts is measured based on costs incurred, excluding costs that are not
representative of progress to completion, as a percentage of total costs anticipated on each contract.
• The stage of completion of time and material contracts is measured using the right to invoice practical expedient –
revenue is recognized at the contractual rates as labour hours are delivered and direct expenses are incurred.
Payment terms on fixed-price contracts are normally based on set milestones outlined in the contract. Amounts received
in advance of the associated contract work being performed are recorded as contract liabilities. Revenue is recognized
without issuing an invoice and this entitlement to consideration is recognized as a reduction of the contract liability or
as a contract asset. Payment terms on time and material contracts are normally based on a monthly billing cycle. When
the contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred
are eligible to be recovered. Provisions for estimated losses on incomplete contracts are made in the period that losses
are determined.
Sale of goods
Revenue related to the sale of goods is recognized at a point in time when the Company satisfies a performance
obligation and control of the asset is transferred to the customer. In determining satisfaction of a performance obligation,
the Company considers the terms of the contract, including: shipping terms and transfer of title and risk.
Services rendered
Service contracts are either executed separately or bundled together with construction contracts. Where these contracts
are bundled together, they are regarded as separate performance obligations, as each of the promises are capable
of being distinct and are separately identifiable. Accordingly, a portion of the transaction price is allocated to each
performance obligation relative to standalone selling prices.
A service contract can include modifications to existing customer equipment, maintenance services, training, line
relocation, onsite support, field service, remote support, and consulting services. The Company generally considers
service contracts to contain one performance obligation which is satisfied over time. Therefore, revenue is recognized
over time, using the stage of completion method described below:
• The stage of completion of fixed-price contracts to provide specified services at specific times is measured based on
costs incurred, excluding costs that are not representative of progress to completion, as a percentage of total costs
anticipated on each contract.
• The stage of completion of fixed-price contracts to provide an indeterminable number of services over a specified
period of time is measured based on contract term elapsed as a percentage of the full contract term.
• The stage of completion of time and material contracts is measured using the right to invoice practical expedient –
revenue is recognized at the contractual rates as labour hours are delivered and direct expenses are incurred.
Payment terms on service contracts are similar to construction contracts. Provisions for estimated losses on incomplete
contracts are made in the period that losses are determined.
ATS AUTOMATION | ANNUAL REPORT 2019 53
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
Revenue-related assets and liabilities:
Trade receivables
A trade receivable represents the Company’s right to an amount of consideration that is unconditional (i.e., only the
passage of time is required before payment of the consideration is due).
Contract assets
Contract assets represent the right to consideration in exchange for goods or services that have been transferred to
a customer. These assets are transferred to accounts receivable when the right to receive the consideration becomes
unconditional.
Contract liabilities
Contract liabilities represent the obligation to transfer goods and services to a customer for which the Company has
received consideration (or an amount of consideration is due) from the customer. Contract liabilities are recognized as
revenue when the Company performs under the contract.
Unearned revenue
Unearned revenue relates to deposits or prepayments from customers for service and sale of goods contracts where
revenue is earned at a point in time.
(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 are also recognized in equity and not in
the consolidated statements of income. Management periodically evaluates positions taken in the tax filings with respect
to situations in which applicable tax regulations are subject to interpretation, and establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax assets and
liabilities are measured at the tax rates that are expected to apply in the period when the asset will be realized or the liability
will be settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.
Deferred income taxes are recognized for all taxable temporary differences, except:
• When the deferred income tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit
nor taxable profit or loss.
• In respect of taxable temporary differences associated with investments in subsidiaries and interests in joint
operations, when the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
54
ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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 carryforward 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.
(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.
ATS AUTOMATION | ANNUAL REPORT 2019 55
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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) 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 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.
56
ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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.
(j) 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.
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Measurement
All financial instruments are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issuance of financial instruments classified as amortized costs are included with the carrying value of such
instruments. Transaction costs directly attributable to the acquisition of financial instruments classified as FVTPL are
recognized immediately in profit or loss.
Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that
have contractual cash flows that are solely payments of principal and interest on the principal amounts outstanding,
are generally measured at amortized cost at the end of the subsequent accounting periods. All other financial assets
including equity investments are measured at fair value at the end of subsequent accounting periods, with changes
recognized in profit or loss or other comprehensive income (irrevocable election at the time of recognition). Designation
at FVTOCI is not permitted if the equity investment is held for trading. The cumulative fair value gain or loss will not be
reclassified to profit or loss on the disposal of the investments.
Derecognition
A financial asset is derecognized when the rights to receive cash flows from the asset have expired or the Company has
transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in
full without material delay to a third party under a “pass-through” arrangement, and either the Company has transferred
substantially all the risks and rewards of the asset, or ATS has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired. When an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the
consolidated statements of income.
Impairment
The Company recognizes expected credit losses for trade receivables based on the simplified approach under IFRS 9. The
simplified approach to the recognition of expected losses does not require the Company to track the changes in credit
risk; rather, the Company recognizes a loss allowance based on lifetime expected credit losses at each reporting date
from the date of the trade receivable.
Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganization and where observable data indicates that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Trade receivables are
reviewed qualitatively on a case-by-case basis to determine whether they need to be written off.
Expected credit losses are measured as the difference in the present value of the contractual cash flows that are due to the
Company under the contract, and the cash flows that the Company expects to receive. The Company assesses all information
available, including past due status, credit ratings, the existence of third-party insurance, and forward-looking 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.
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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
(k) 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.
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.
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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.
(l) 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.
(m) Impairment of non-financial assets:
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and
its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. In determining fair value less
costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an
appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded subsidiaries or other available fair value indicators.
Impairment losses, including impairment on inventories, are recognized in the consolidated statements of income in those
expense categories consistent with the function of the impaired asset.
(n) 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.
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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.
(o) 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.
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.
(p) 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.
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(q) Standard adopted in fiscal 2019:
IFRS 15 – Revenue from Contracts with Customers
Effective April 1, 2018, the Company adopted 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 at an amount that reflects the consideration to which an entity
expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a
more structured approach to measuring and recognizing revenues.
The Company adopted the standard in accordance with the modified retrospective transitional approach. There were
no transitional adjustments or changes to the Company’s revenue recognition policies required on adoption of this
standard. The transition to the new standard required additional disclosures as outlined in note 21. The Company applied
certain practical expedients, as permitted by the standard in determining the impact on transition. The Company has not
assessed completed contracts before the date of transition. The Company’s accounting policy for revenue recognition is
described in note 3(c) “Revenue.”
The standard required contract assets and contract liabilities to be separately presented in the consolidated statement of
financial position. Contract assets represent the right to consideration in exchange for goods or services that have been
transferred to a customer. Contract liabilities represent the obligation to transfer goods and services to a customer for
which the Company has received consideration (or an amount of consideration is due) from the customer. Previously, the
Company recognized contract assets as “costs and earnings in excess of billings on contracts in progress” and contract
liabilities as “billings in excess of costs and earnings on contracts in progress.” Based on IFRS 15, contract assets
and contract liabilities have been disclosed as current assets and current liabilities, respectively, in the consolidated
statement of financial position.
(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, 2019 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.
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. The Company plans
to adopt the standard for the annual period beginning on April 1, 2019 using a modified retrospective approach. Upon
adoption of IFRS 16, the Company expects to recognize right of use assets and a corresponding lease liability in the
range of $68,000 to $73,000 on the consolidated statements of financial position, primarily related to leased buildings
and vehicles. The Company also expects to recognize higher depreciation expenses and finance costs under this new
standard offset by lower operating lease expenses. The quantitative impact of adopting IFRS 16 will be provided in the
Company’s Q1 2020 interim financial statements.
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.
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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.” 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:
Income tax assets and liabilities are measured at the amount that is expected to be realized or incurred upon ultimate
settlement with taxation authorities. Such assessments are based upon the applicable income tax legislation, regulations
and interpretations, all of which may be subject to change and interpretation. Deferred income tax assets, disclosed in
note 17, 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 18.
(d) 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 14.
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NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
(e) Fair value measurement:
Acquisitions that meet the definition of a business combination require the Company to recognize the assets acquired
and liabilities assumed at their fair value on the date of the acquisition. The calculation of fair value of the assets and
liabilities may require the use of estimates and assumptions, based on discounted cash flows, market information and
using independent valuations and management’s best estimates.
5. Acquisitions
(i) On October 31, 2018, the Company completed its acquisition of 100% of the shares of Konstruktion, Maschinen- &
Werkzeugbau GmbH & Co. KG, and KMW GmbH (collectively, “KMW”). KMW is a German-based supplier of custom
micro-assembly systems and test equipment solutions. The total purchase price was $27,326 (18,330 Euro). Cash
consideration paid in the third quarter of fiscal 2019 was $24,506 (16,438 Euro) with the balance to be paid within
18 months from the acquisition date. The balance to be paid is included in accounts payable and accrued liabilities on
the consolidated statements of financial position.
Cash used in investing activities was determined as follows:
Cash consideration
Less: cash acquired
$
$
24,506
(227)
24,279
The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon the estimated
fair values at the date of acquisition. The Company determined the fair values based on discounted cash flows, market
information, and using independent valuations and management’s best estimates. Final valuations of certain assets
including property, plant and equipment are not yet complete due to an outstanding third-party valuation report and the
inherent complexity associated with valuations. Therefore, the purchase price allocation is preliminary and is subject to
adjustment upon completion of the valuation process and analysis of resulting tax effects.
The preliminary allocation of the purchase price at fair value is as follows:
Purchase price allocation
Cash
Current assets
Property, plant and equipment
Intangible assets with a definite life
Customer relationships
Other
Current liabilities
Deferred income tax liability
Net identifiable assets
Residual purchase price allocated to goodwill
$
$
227
5,747
4,552
1,300
79
(2,153)
(386)
9,366
17,960
27,326
Current assets include accounts receivable of $3,180, representing gross contractual amounts receivable of $3,219 less
management’s best estimate of the contractual cash flows not expected to be collected of $39.
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The primary factors that contributed to a residual purchase price that resulted in the recognition of goodwill are: the
acquired workforce; access to growth opportunities in new markets and with existing customers; and the combined
strategic value to the Company’s growth plan. The amounts assigned to goodwill and intangible assets are not expected
to be deductible for tax purposes. This acquisition was accounted for as a business combination with the Company as
the acquirer of KMW. The purchase method of accounting was used and the earnings have been consolidated from the
acquisition date, October, 31, 2018.
(ii) On February 28, 2019, the Company completed its acquisition of 100% of the shares of Comecer S.p.A. (“Comecer”),
a leader in the design, engineering, manufacture and servicing of advanced aseptic containment and processing systems
for the nuclear medicine and pharmaceutical industries. The total purchase price was $170,456 (113,000 Euro) less
working capital and net debt adjustments resulted in cash consideration paid in the fourth quarter of fiscal 2019 was
$143,349 (95,030 Euro). Working capital and net debt are subject to finalization.
Cash used in investing activities was determined as follows:
Cash consideration
Less: cash acquired
$
$
143,349
(11,277)
132,072
The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon the estimated fair
values at the date of acquisition. The fair value of the assets acquired and the liabilities assumed have been determined
on a provisional basis based on information that is currently available to the Company. Final valuations of certain assets
including working capital, intangible assets, and property, plant and equipment are not yet complete due to the inherent
complexity associated with valuations. Specifically, a third-party valuation report has not been finalized. Therefore, the
purchase price allocation is preliminary and is subject to adjustment upon completion of the valuation process and
analysis of resulting tax effects.
The preliminary allocation of the purchase price at fair value is as follows:
Purchase price allocation
Cash
Current assets
Property, plant and equipment
Intangible assets with a definite life
Technology
Brands
Customer relationships
Other
Current liabilities
Deferred income tax liability
Other long-term liabilities
Net identifiable assets
Residual purchase price allocated to goodwill
$
11,277
48,405
3,479
37,410
32,583
6,184
4,378
(68,081)
(22,428)
(2,318)
50,889
92,460
$
143,349
Current assets include accounts receivable of $24,878, representing gross contractual amounts receivable of $27,078
less management’s best estimate of the contractual cash flows not expected to be collected of $2,200.
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The primary factors that contributed to a residual purchase price that resulted in the recognition of goodwill are: the
acquired workforce; access to growth opportunities in new markets and with existing customers; and the combined
strategic value to the Company’s growth plan. The amounts assigned to goodwill and intangible assets are not expected
to be deductible for tax purposes. This acquisition was accounted for as a business combination with the Company as the
acquirer of Comecer. The purchase method of accounting was used and the earnings have been consolidated from the
acquisition date, February 28, 2019. Comecer has contributed approximately $8,669 in revenue and $50 in net income
during the month ended March 31, 2019. If Comecer had been acquired at the beginning of ATS’ fiscal year (April 1,
2018), the Company estimates that revenues of the combined Comecer and ATS entity for the year ending March 31,
2019 would have been approximately $102,000 higher.
6. Inventories
As at
Raw materials
Work in progress
Finished goods
March 31, 2019
March 31, 2018
$
$
29,462
35,878
2,658
67,998
$
$
15,880
40,858
1,771
58,509
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, 2019 was $346 (March 31, 2018 – $428). The amount of inventories carried at net
realizable value as at March 31, 2019 was $1,166 (March 31, 2018 – $1,336).
7. Deposits, prepaids and other assets
As at
Prepaid assets
Restricted cash(i)
Supplier deposits
Forward foreign exchange contracts
Other assets
March 31, 2019
March 31, 2018
$
13,819
$
447
12,373
2,080
–
9,399
477
10,396
2,213
25
$
28,719
$
22,510
(i) Restricted cash primarily consists of cash collateralized to secure letters of credit.
8. Cross-currency interest rate swap
As at
Cross-currency interest rate swap instrument
March 31, 2019
March 31, 2018
$
(4,217)
$
(30,908)
Disclosed as:
Other assets
Other long-term liabilities
$
$
2,446
(6,663)
(4,217)
$
$
–
(30,908)
(30,908)
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 receives interest of 6.50% U.S. per annum and pays interest of 6.501% Canadian. On March 29, 2016,
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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 receives
interest of 6.501% Canadian per annum and pays interest of 5.094% Euros. The terms of the hedging relationships will
end on June 15, 2023.
9. Property, plant and equipment
Note
Land
Buildings and
leaseholds
Production
equipment
Other
equipment
Total
Cost:
Balance, at March 31, 2017
$
16,426 $
69,030 $
13,972 $
42,626 $ 142,054
Additions
Disposals
–
3,406
2,043
14,402
19,851
(257)
(3,663)
(1,351)
(2,691)
(7,962)
Exchange and other adjustments
5,242
3,066
953
2,563
11,824
Balance, at March 31, 2018
$
21,411 $
71,839 $
15,617 $
56,900 $ 165,767
Additions
–
5,610
2,673
12,813
21,096
Acquisition of subsidiaries
5
629
5,027
957
1,418
8,031
Disposals
(422)
(3,319)
(1,931)
(3,619)
(9,291)
Exchange and other adjustments
(557)
3,864
(20)
(7,031)
(3,744)
Balance, at March 31, 2019
$
21,061 $
83,021 $
17,296 $
60,481 $ 181,859
Buildings and
leaseholds
Production
equipment
Other
equipment
Land
Total
Depreciation:
Balance, at March 31, 2017
$
– $
(36,898) $
(10,651) $
(25,272) $
(72,821)
Depreciation expense
Disposals
Exchange and other adjustments
–
–
–
(2,834)
(928)
(6,590)
(10,352)
3,240
1,324
2,397
6,961
(1,999)
(724)
(1,730)
(4,453)
Balance, at March 31, 2018
$
– $
(38,491) $
(10,979) $
(31,195) $
(80,665)
Depreciation expense
Disposals
Exchange and other adjustments
Balance, at March 31, 2019
Net book value:
At March 31, 2019
At March 31, 2018
$
$
$
–
–
–
(3,365)
(1,241)
(7,531)
(12,137)
1,869
1,595
3,289
885
366
608
6,753
1,859
– $
(39,102) $
(10,259) $
(34,829) $
(84,190)
21,061 $
43,919 $
7,037 $
25,652 $
97,669
21,411 $
33,348 $
4,638 $
25,705 $
85,102
Included in other equipment as at March 31, 2019 is $2,055 (March 31, 2018 – $5,641) of assets that are under
construction and have not been depreciated.
ATS AUTOMATION | ANNUAL REPORT 2019 67
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
10. 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
Acquisition of subsidiaries
Foreign exchange
Balance, at March 31
March 31, 2019
March 31, 2018
$
551,643
$
459,159
2019
2018
$
459,159
$
423,250
110,420
(17,936)
–
35,909
$
551,643
$
459,159
The Company performed its annual impairment test of goodwill as at March 31, 2019. 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, 2019
were compared to the budgeted results for the year ending March 31, 2020, 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 8.40% to 9.35% 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.
11. Intangible assets
Development
projects
Note
Computer
software,
licenses
and other
Technology
Customer
relationships
Brands(i)
Total
Cost:
Balance, at March 31, 2017
$ 15,843
$ 33,177
$ 22,532
$ 176,958
$ 12,754
$ 261,264
Additions
Disposals
Exchange and other
adjustments
3,619
2,505
–
–
(316)
(3,272)
–
–
–
–
6,124
(3,588)
870
1,991
2,312
16,383
1,528
23,084
Balance, at March 31, 2018
$ 20,332
$ 37,357
$ 21,572
$ 193,341
$ 14,282
$ 286,884
Additions
Acquisition of subsidiaries
5
Disposals
Exchange and other
adjustments
4,215
–
–
5,470
4,457
(1,448)
10,139
37,410
–
–
–
7,484
32,583
19,824
81,934
–
–
(1,448)
(690)
(724)
(1,267)
(8,097)
(1,018)
(11,796)
Balance, at March 31, 2019
$ 23,857
$ 45,112
$ 67,854
$ 192,728
$ 45,847
$ 375,398
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ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
Computer
software,
licenses
and other
Development
projects
Technology
Customer
relationships
Brands
Total
Amortization:
Balance, at March 31, 2017
$
(6,240) $ (21,189) $ (13,097) $ (64,669) $
Amortization
Disposals
Exchange and other
adjustments
(1,925)
(3,824)
(3,039)
(17,527)
–
311
3,272
–
(324)
(1,296)
(1,402)
(7,066)
Balance, at March 31, 2018
$
(8,489) $ (25,998) $ (14,266) $ (89,262) $
–
–
–
–
–
$ (105,195)
(26,315)
3,583
(10,088)
$ (138,015)
Amortization
Disposals
Exchange and other
adjustments
(3,172)
(4,443)
(2,572)
(17,973)
(2,094)
(30,254)
–
1,346
–
–
146
652
652
3,994
–
26
1,346
5,470
Balance, at March 31, 2019
$ (11,515) $ (28,443) $ (16,186) $ (103,241) $
(2,068) $ (161,453)
Net book value:
At March 31, 2019
At March 31, 2018
$ 12,342
$ 16,669
$ 51,668
$ 89,487
$ 43,779
$ 213,945
$ 11,843
$ 11,359
$
7,306
$ 104,079
$ 14,282
$ 148,869
(i)
At April 1, 2018, the Company assessed a portion of its brand intangible assets to have a remaining useful life of three years. Previously, these assets
were estimated to have indefinite useful lives. The carrying amount of the intangible assets estimated to have an indefinite life as at March 31, 2019
was $40,751 (March 31, 2018 – $14,282).
On December 6, 2018, the Company acquired substantially all of the intellectual property assets of Transformix
Engineering Inc. (“Transformix”). Transformix’s CNCAssembly system, based on its patented Rapid Speed Matching
technology, provides a method of linking and synchronizing the movements of devices and tooling to enable faster and
more efficient assembly systems. Total consideration included $10,000 paid upon closing from the Company’s cash
holdings. The acquired intellectual property asset is included in technology additions at March 31, 2019. Amortization of
the intangible asset will begin when the asset is available for use which is expected to be in the second half of fiscal
2020. Over the next five years, potential future payments of up to $20,000 are payable based on sales which incorporate
the acquired intellectual property assets. The commission expenses will be recognized as they are incurred.
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, 2019. 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, 2020, as presented to and approved
by the Board, were extrapolated for a five-year period. Management used a pre-tax discount of 15% 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.
ATS AUTOMATION | ANNUAL REPORT 2019 69
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
12. Financial instruments and risk management
(a) Summary of financial instruments:
(i) Categories of financial instruments:
The carrying values of the Company’s financial instruments are classified into the following categories:
As at
Fair value
through
profit or loss
Amortized
cost
Fair value
through other
comprehensive
income
Financial assets:
Cash and cash equivalents
$
Trade accounts receivable
Financial liabilities:
Bank indebtedness
Trade accounts payable and
accrued liabilities
Long-term debt
Derivative instruments:
Held for trading derivatives
that are not designated in
hedge accounting
relationships – loss(i)
Derivative instruments in
designated hedge accounting
relationships – loss(i)
Cross-currency interest rate
swap – loss(ii)
–
–
–
–
–
(75)
–
–
$
224,540
$
198,336
(1,950)
(213,645)
(346,797)
–
–
–
March 31, 2019
Total
carrying
value
$
224,540
198,336
(1,950)
(213,645)
(346,797)
(75)
(74)
–
–
–
–
–
–
(74)
(4,217)
(4,217)
(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.
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NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
As at
Fair value
through
profit or loss
Amortized
cost
Fair value
through other
comprehensive
income
Financial assets:
Cash and cash equivalents
$
Trade accounts receivable
Financial liabilities:
Bank indebtedness
Trade accounts payable and
accrued liabilities
Long-term debt
Derivative instruments:
Held for trading derivatives
that are not designated in
hedge accounting
relationships – loss(i)
Derivative instruments in
designated hedge accounting
relationships – loss(i)
Cross-currency interest rate
swap – loss(ii)
–
–
–
–
–
(1,501)
–
–
$
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)
(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.
During the years ended March 31, 2019 and March 31, 2018, there were no changes in the classification of financial
assets as a result of a change in the purpose or use of those assets.
(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, 2019
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
$
(75)
$
–
$
(75)
$
–
$
(75)
(74)
–
(74)
–
(74)
Cross-currency interest rate swap
(4,217)
–
(4,217)
–
(4,217)
Disclosed at fair value:
Bank indebtedness
Long-term debt
(1,950)
–
(1,950)
–
(1,950)
(346,797)
–
(346,797)
–
(346,797)
ATS AUTOMATION | ANNUAL REPORT 2019 71
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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
$
(1,501)
$
–
$
(1,501)
$
–
$
(1,501)
(55)
(30,908)
(2,668)
(315,522)
–
(55)
–
(55)
–
(30,908)
–
(30,908)
–
(2,668)
–
(315,522)
–
(2,668)
–
(315,222)
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, 2019 and March 31, 2018, there were no transfers between Level 1 and Level 2 fair
value measurements.
(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:
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ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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, 2019 of approximately +/- $58,927 and $6,777, respectively
(2018 +/- $26,914 and $7,191), and on income before income taxes for the year ended March 31, 2019 of approximately
+/- $187 and $342, respectively (2018 +/- $373 and $494).
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.
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, 2019, $1,950 or 1.0% (March 31, 2018 – $2,668 or 1.0%) 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 +/- $20 on income before income taxes for the year ended March 31, 2019
(March 31, 2018 +/- $27).
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
ATS AUTOMATION | ANNUAL REPORT 2019 73
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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, 2019
March 31, 2018
$
161,130
$
161,791
17,185
3,988
3,080
15,843
20,982
4,236
4,040
7,158
$
201,226
$
198,207
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
$
$
2019
2,878
1,199
(1,172)
(58)
43
2018
1,759
2,279
(921)
(321)
82
$
2,890
$
2,878
The Company minimizes credit risk associated with derivative financial instruments by only entering into derivative
transactions with highly rated multinational financial institutions, in order to reduce the risk of counterparty default. The
Company reviews counterparty credit ratings on a regular basis and sets credit limits when deemed necessary.
Liquidity risk
Liquidity risk is the risk that the Company may encounter difficulties in meeting obligations associated with financial
liabilities. The Company’s process for managing liquidity risk includes ensuring, to the extent possible, that it will have
sufficient liquidity to meet its liabilities when they become due. The Company requires authorizations for expenditures on
projects and prepares annual capital expenditure budgets to assist with the management of capital. The Company’s
accounts payable primarily have contractual maturities of less than 90 days, and the contractual cash flows equal their
carrying values.
Trade payables – aged by due date as at
March 31, 2019
March 31, 2018
0–30 days
31–60 days
61–90 days
Over 90 days
Total
$
62,190
15,987
6,487
2,148
$
60,848
11,274
3,203
1,656
$
86,812
$
76,981
As at March 31, 2019, the Company was holding cash and cash equivalents of $224,540 (March 31, 2018 – $330,148)
and had unutilized lines of credit of $632,618 (March 31, 2018 – $656,267). 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 15.
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ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
(c) Hedge accounting and risk management contracts:
Cash flow hedges – foreign currency risk of forecasted purchases and sales
The Company manages foreign exchange risk on its highly probable forecasted revenue and purchase transactions
denominated in various foreign currencies. The Company has identified foreign exchange fluctuation risk as the hedged
risk. To mitigate the risk, forward currency contracts are designated as the hedging instrument and are entered into to
hedge a portion of the purchases and sales. The forward currency contracts limit the risk of variability in cash flows
arising from foreign currency fluctuations. The Company has established a hedge ratio of 1:1 for all of its hedging
relationships. The Company has identified counterparty credit risk as the only potential source of hedge ineffectiveness.
Cash flow hedges – foreign currency risk on foreign-currency-denominated Senior Notes
The Company uses cross-currency interest rate swaps as derivative financial instruments to hedge a portion of its foreign
exchange risk related to its U.S.-dollar-denominated Senior Notes. On March 29, 2016, the Company entered into a
cross-currency interest rate swap instrument to swap U.S. $150,000 into Canadian dollars. The Company will receive
interest of 6.50% U.S. per annum and pay interest of 6.501% Canadian. The terms of the hedging relationship will end on
June 15, 2023. The Company has established a hedge ratio of 1:1 for all of its hedging relationships. The Company has
identified counterparty credit risk as the only potential source of hedge ineffectiveness.
During the years ended March 31, 2019 and March 31, 2018, there were no unrealized gains or losses recognized in
selling, general and administrative expenses for the ineffective portion of cash flow hedges.
Hedge of Euro-denominated net investment in foreign operations
The Company manages foreign exchange risk on its Euro-denominated net investments. The Company uses a cross-
currency interest rate swap as 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
Currency sold
Derivative hedging
instruments(i)
Pound sterling
U.S. dollars
U.S. dollars
Euros
Euros
Cross-currency interest rate
swap instruments(ii)
U.S. dollars
Canadian dollars
Carrying amount
Hedging instrument
Hedged item
Cash flow hedge reserves
March 31, 2019
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
Canadian dollars
Euros
Canadian dollars
U.S. dollars
21,536
81,356
1,122
15,310
9,230
–
–
–
1,350
–
314
908
51
–
152
314
908
51
1,350
152
314
908
51
1,350
152
Canadian dollars
200,400
2,446
–
Euros
200,965
–
6,663
7,826
18,865
7,826
18,865
314
908
51
1,350
152
2,446
6,663
–
–
–
–
–
–
–
ATS AUTOMATION | ANNUAL REPORT 2019 75
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
As at
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
Carrying amount
Hedging instrument
Hedged item
Cash flow hedge reserves
March 31, 2018
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
Euros
193,455
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
5,380
34,736
25,528
–
–
–
–
–
–
–
(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.
As at March 31, 2019, the Company is holding the following forward foreign exchange contracts to hedge the exposure on
its revenues and purchases:
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
1 to 2 years
March 31, 2019
Average
Average
Average
Average
Currency
Nominal
hedged
Nominal
hedged
Nominal
hedged
Nominal
hedged
Nominal
bought
amount
rate
amount
rate
amount
rate
amount
rate
amount
Pound sterling
Canadian dollars
3,862
1.715
3,575
1.720
6,609
1.726
3,810
1.733
3,679
Canadian dollars
15,818
1.316
13,433
1.317
14,696
1.316
15,364
1.312
22,044
Euros
703
Canadian dollars
3,125
1.186
1.733
142
3,147
1.214
1.607
184
3,972
1.178
1.615
92
5,066
1.188
1.651
–
–
Average
hedged
rate
1.741
1.309
–
–
U.S. dollars
2,958
1.147
4,037
1.154
1,430
1.164
425
1.174
380
1.177
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
1 to 2 years
Currency
Nominal
bought
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, 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
–
–
–
–
–
–
–
–
As at
Currency sold
Revenue hedges
U.S. dollars
U.S. dollars
Euros
Purchase hedges
Euros
As at
Currency sold
Revenue hedges
U.S. dollars
U.S. dollars
Euros
Purchase hedges
Canadian dollars
Euros
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NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
The following summarizes the Company’s amounts included in other comprehensive income that relate to hedge accounting:
As at
Cash flow hedges
Foreign exchange risk:
Revenue hedges
Purchase hedges
Euro net investment hedge
As at
Cash flow hedges
Foreign exchange risk:
Revenue hedges
Purchase hedges
Euro net investment hedge
Amount reclassified
March 31, 2019
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
(126)
145
7,826
–
–
–
(183)
(273)
Revenues
Cost of revenues
–
Net finance costs
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
Amount reclassified
881
(197)
(5,420)
–
–
–
(1,205)
Revenues
468
–
Cost of revenues
Net finance costs
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, 2019, the Company recorded risk management losses of $4,365 (losses of $4,132 for the
year ended March 31, 2018) on foreign currency risk management forward contracts in the consolidated statements of
income. Included in these amounts were unrealized losses of $3,714 (gains of $957 during the year ended March 31,
2018), representing the change in fair value. In addition, during the year ended March 31, 2019, the Company realized
losses in foreign exchange of $651 (losses of $5,089 during the year ended March 31, 2018), which were settled.
ATS AUTOMATION | ANNUAL REPORT 2019 77
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
13. Provisions
Balance, at March 31, 2017
$
8,175
$
978
$
4,971
$
14,124
Warranty
Restructuring
Other
Total
Provisions made
Provisions reversed
Provisions used
Exchange adjustments
5,543
(2,203)
(2,699)
349
11,212
–
(6,446)
189
8,923
–
(7,986)
(12)
25,678
(2,203)
(17,131)
526
Balance, at March 31, 2018
$
9,165
$
5,933
$
5,896
$
20,994
Provisions made
Acquisition of subsidiaries
Provisions reversed
Provisions used
Exchange adjustments
3,468
1,337
(2,808)
(2,717)
(159)
4
–
–
(5,108)
(44)
6,607
–
(600)
(7,056)
25
10,079
1,337
(3,408)
(14,881)
(178)
Balance, at March 31, 2019
$
8,286
$
785
$
4,872
$
13,943
Warranty provisions
Warranty provisions are related to sales of products and are based on experience reflecting statistical trends of
warranty costs.
Restructuring
Restructuring charges are recognized in the period incurred and when the criteria for provisions are fulfilled. Termination
benefits are recognized as a liability and an expense when the Company is demonstrably committed through a formal
restructuring plan.
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.
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14. 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, 2019. The next valuations are scheduled to be as at March 31, 2020.
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
Acquisition of subsidiary
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, 2019
March 31, 2018
$
$
$
$
$
31,732
1,033
663
216
675
(1,289)
(1,079)
31,951
3,581
159
144
(120)
3,764
28,187
$
29,572
–
744
222
464
(1,322)
2,052
31,732
2,904
162
304
211
3,581
28,151
$
$
$
$
Amounts recognized in the consolidated statements of comprehensive income (before tax) were as follows:
As at
Total actuarial losses recognized in OCI
March 31, 2019
March 31, 2018
$
(675)
$
(534)
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
Sensitivity analysis
March 31, 2019
March 31, 2018
2.2%
0.2%
2.3%
0.3%
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.
ATS AUTOMATION | ANNUAL REPORT 2019 79
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
As at March 31, 2019, 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
$
(3,799)
$
4,726
$
1,040
$
(1,034)
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, 2019
March 31, 2018
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, 2019
March 31, 2018
$
$
216
663
879
3,890
4,769
$
$
222
744
966
3,170
4,136
The Company expects to contribute $144 to its defined benefit plans during the year ending March 31, 2020.
The cumulative actuarial losses, net of income taxes, recognized in retained earnings as at March 31, 2019 were $6,346
(March 31, 2018 – $5,683).
15. Bank indebtedness and long-term debt
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 the Company’s assets, including certain real estate in North America and a
pledge of shares of certain of the Company’s subsidiaries. Certain of the Company’s subsidiaries also provide guarantees
under the Credit Facility. At March 31, 2019, the Company had utilized $134,336 under the Credit Facility, by way of
letters of credit (March 31, 2018 – $108,541).
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
80
ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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, 2019, all of the covenants were met.
The Company has additional credit facilities available of $38,561 (15,324 Euros, $10,034 U.S., 50,000 Thai Baht
and 1,489 Czech Koruna). The total amount outstanding on these facilities at March 31, 2019 was $20,589, of which
$1,950 was classified as bank indebtedness (March 31, 2018 – $2,668) and $18,639 was classified as long-term debt
(March 31, 2018 – $739). The interest rates applicable to the credit facilities range from 0.60% to 8.25% per annum.
A portion of the long-term debt is secured by certain assets of the Company.
The Company’s U.S. $250,000 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, 2019, 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 $7,200 were
deferred and are being amortized over the term of the Senior Notes. The Company uses a cross-currency interest rate
swap instrument to hedge a portion of its U.S.-dollar-denominated Senior Notes (see note 8).
(i) Bank indebtedness:
As at
Other facilities
(ii) Long-term debt:
As at
Senior Notes
Other facilities
Issuance costs
Less: current portion
March 31, 2019
March 31, 2018
$
1,950
$
2,668
March 31, 2019
March 31, 2018
$
334,000
$
322,425
18,639
(5,842)
346,797
18,550
739
(7,642)
315,522
393
$
328,247
$
315,129
ATS AUTOMATION | ANNUAL REPORT 2019 81
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
Scheduled principal repayments and interest payments on long-term debt as at March 31, 2019 are as follows:
Less than one year
One–two years
Two–three years
Three–four years
Four–five years
16. Share capital
Principal
18,550
$
$
70
19
–
334,000
$
352,639
$
Interest
21,899
21,710
21,710
21,710
10,855
97,884
Authorized share capital of the Company consists of an unlimited number of common shares, without par value, for
unlimited consideration.
On December 3, 2018, the Company announced its intention to make a normal course issuer bid (“NCIB”) to purchase
for cancellation up to 3,000,000 common shares before December 4, 2019. As at March 31, 2019 the Company had
purchased 2,509,120 common shares for $39,279 under the NCIB program. All purchases are made in accordance with
the bid at prevalent market prices plus brokerage fees, or such other prices that may be permitted by the Toronto Stock
Exchange, with consideration allocated to share capital up to the average carrying amount of the shares, and any excess
allocated to retained earnings. The weighted average price per share repurchased for the year ended March 31, 2019
was $15.65.
The changes in the common shares issued and outstanding during the period presented were as follows:
Balance, at March 31, 2017
Exercise of stock options
Balance, at March 31, 2018
Exercise of stock options
Repurchase of common shares
Balance, at March 31, 2019
Number of
common shares
93,602,026
399,666
94,001,692
416,842
(2,509,120)
$
$
Share
capital
543,317
5,430
548,747
7,145
(39,279)
91,909,414
$
516,613
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17. 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, 2019
March 31, 2018
Income before income taxes and non-controlling interest
$
93,886
$
Combined Canadian basic federal and provincial income tax rate
26.50%
61,696
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 25% (2018 – 23%)
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 (loss) gain on revaluation of cash flow hedges
Opening deferred tax of acquired company
Other items recognized through equity
Income tax charged directly to equity
$
24,880
$
16,349
1,010
(1,727)
976
(476)
(1,539)
23,124
9,406
13,718
23,124
(1,943)
(22,670)
1,760
$
$
$
$
$
$
$
$
$
(22,853)
$
1,288
(3,181)
939
(71)
(837)
14,487
13,621
866
14,487
1,178
–
(3,512)
(2,334)
(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, 2019
March 31, 2018
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
(42,404)
(49,680)
(12,918)
16,292
4,610
4,785
3,924
$
(33,777)
(30,827)
(11,903)
14,809
2,003
16,010
3,765
Net deferred income tax liability
$
(75,391)
$
(39,920)
ATS AUTOMATION | ANNUAL REPORT 2019 83
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
Presented as:
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax liability
March 31, 2019
March 31, 2018
$
$
3,194
(78,585)
(75,391)
$
$
2,987
(42,907)
(39,920)
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, 2019
March 31, 2018
$
$
196
52,028
52,224
$
$
510
57,876
58,386
Loss carryforwards: As at March 31, 2019, 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
2030–2039
No expiry
As at
Year of expiry
2020–2024
2025–2029
2030–2038
No expiry
March 31, 2019
Non-Canadian
Canadian
6,973
5,649
17,665
8,988
39,275
$
–
–
42,939
–
$
42,939
March 31, 2018
Non-Canadian
Canadian
6,216
4,862
11,271
11,567
33,916
$
–
3,712
43,453
–
$
47,165
$
$
$
$
In addition, the Company has no U.S. federal and state capital loss carryforwards (March 31, 2018 – U.S. $13,456).
The Company has Canadian capital loss carryforwards of $288,492 (March 31, 2018 – $288,177) that do not expire.
Investment tax credits: As at March 31, 2019, the Company has investment tax credits available to be applied against
future taxes payable in Canada of approximately $53,674 and in foreign jurisdictions of approximately $12,287. The
investment tax credits are scheduled to expire as follows:
Year of expiry
2026–2029
2030–2034
2035–2039
Gross ITC balance
$
$
22,201
20,818
22,942
65,961
The benefit of $62,953 (March 31, 2018 – $57,012) of these investment tax credits has been recognized in the
consolidated financial statements. Unrecognized investment tax credits are scheduled to expire between 2026 and 2039.
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(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 $96,896 associated with investments in subsidiaries for which no deferred income tax
liability has been recognized.
18. 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, 2019 and March 31, 2018, 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. During the year ended March 31, 2019, the
Company granted 50,069 units (March 31, 2018 – 81,436). During the year ended March 31, 2019, 239,597 units
(March 31, 2018 – nil), were redeemed upon directors retirement from the Board. As at March 31, 2019, the value of the
outstanding liability related to the DSUs was $6,767 (2018 – $9,542). The DSU liability is revalued at each reporting date
based on the change in the Company’s stock price. The DSU liability is included in accounts payable and accrued
liabilities on the consolidated statements of financial position. 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.
ATS AUTOMATION | ANNUAL REPORT 2019 85
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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, 2019, there are a total of 2,618,691 common shares remaining for future stock option grants under both
plans (March 31, 2018 – 2,740,774).
Years ended March 31
2019
Weighted
average
exercise
price
Number of
stock
options
2018
Weighted
average
exercise
price
Number of
stock
options
Stock options outstanding, beginning of year
1,818,958
$ 12.73
2,274,724
$
12.60
Granted
Exercised(i)
Forfeited
199,688
(416,842)
(77,606)
20.30
12.98
14.47
300,625
(399,666)
(356,725)
12.77
10.36
14.58
Stock options outstanding, end of year
1,524,198
$ 13.61
1,818,958
$
12.73
Stock options exercisable, end of year,
time-vested options
Stock options exercisable, end of year,
performance-based options
608,781
$ 13.29
738,250
$
12.97
333,333
$ 11.60
333,333
$
11.60
(i) For the year ended March 31, 2019, the weighted average share price at the date of exercise was $19.33 (March 31, 2018 – $15.36).
As at March 31, 2019
Stock options outstanding
Stock options exercisable
Range of
exercise prices
$8.85–$10.50
$10.51–$12.50
$12.51–$14.50
$14.51–$20.30
$8.85–$20.30
Weighted
average
remaining
contractual
life
Number
outstanding
219,000
3.34 years
$
242,167
1.17 years
583,042
3.49 years
479,989
4.37 years
1,524,198
3.38 years
$
Weighted
average
exercise
price
10.13
10.60
12.92
17.56
13.61
Number
exercisable
118,000
$
242,167
374,134
207,813
942,114
$
Weighted
average
exercise
price
9.85
10.60
13.20
15.83
12.69
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.
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ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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.
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
Restricted Share Unit Plan
2019
2.11%
0%
28%
2018
0.92%
0%
29%
4.75 years
4.75 years
199,688
20.30
5.61
$
$
300,625
12.77
3.37
$
$
During the year ended March 31, 2019, the Company granted 193,201 time-vesting restricted share units (“RSUs”)
(211,398 in the year ended March 31, 2018). 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, 2019, the Company granted
145,900 performance-based RSUs (211,712 in the year ended March 31, 2018). 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 1.1 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, 2019, the value of the outstanding liability related to the RSU plan was $8,559 (March 31, 2018 – $5,699).
19. 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
12,327
10,176
8,192
5,007
3,228
3,948
Purchase
obligations
$
124,183
2,436
1,779
173
174
–
$
42,878
$
128,745
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.
ATS AUTOMATION | ANNUAL REPORT 2019 87
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
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, 2019, the total value of outstanding letters of credit was approximately $203,254 (March 31,
2018 – $137,148).
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.
20. 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.
Property, plant
and equipment
March 31, 2019
Intangible assets
$
$
34,977
14,329
40,276
4,483
3,604
22,353
16,473
95,754
79,232
133
$
97,669
$
213,945
March 31, 2018
Property, plant
and equipment
Intangible assets
$
30,148
15,701
33,748
1,657
3,848
$
10,147
19,018
118,961
496
247
$
85,102
$
148,869
As at
Canada
United States
Germany
Other Europe
Other
Total Company
As at
Canada
United States
Germany
Other Europe
Other
Total Company
88
ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
Revenues from external customers for the years ended
March 31, 2019
March 31, 2018
Canada
United States
Germany
Other Europe
Other
Total Company
$
91,340
$
60,988
399,529
342,178
258,193
162,376
436,197
194,726
215,798
207,221
$
1,253,616
$
1,114,930
For the year ended March 31, 2019, 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, 2018, the Company did not have revenues from any
single customer that amounted to 10% or more of total consolidated revenues.
21. Revenue from contracts with customers
(a) Disaggregation of revenue from contracts with customers:
Revenues by market for the years ended
Consumer products & electronics
Energy
Life sciences
Transportation
Total Company
Timing of revenue recognition based on transfer of control for the
years ended
Goods and services transferred at a point in time
Goods and services transferred over time
Total Company
(b) Backlog:
March 31, 2019
March 31, 2018
$
203,313
$
160,565
139,507
608,490
302,306
136,950
518,043
299,372
$
1,253,616
$
1,114,930
March 31, 2019
March 31, 2018
$
90,005
$
79,979
1,163,611
1,034,951
$
1,253,616
$
1,114,930
The following table presents the aggregate amount of the revenues expected to be realized in the future from partially or
fully unsatisfied performance obligations as at March 31, 2019. The amounts disclosed below represent the value of firm
orders and do not include constrained variable consideration or letters of intent. Such orders may be subject to future
modifications that could impact the amount and/or timing of revenue recognition.
Revenues expected to be recognized in:
Less than one year
Thereafter
Total
March 31, 2019
March 31, 2018
$
$
734,000
169,800
903,800
$
$
630,000
116,000
746,000
ATS AUTOMATION | ANNUAL REPORT 2019 89
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
(c) Contract balances:
As at
Trade receivables
Contract assets
Contract liabilities
Unearned revenue(i)
Net contract balances
March 31, 2019
March 31, 2018
$
198,336
$
195,329
213,553
(161,139)
(30,475)
164,917
(95,912)
(38,542)
$
220,275
$
225,792
(i) The unearned revenue liability is included in accounts payable and accrued liabilities on the consolidated statement of financial position.
During the year ended March 31, 2019, the Company completed its acquisitions of KMW and Comecer which included
incremental contract balances as described in note 5.
As at
Contracts in progress:
Costs incurred
Estimated earnings
Progress billings
Net contract assets and liabilities
March 31, 2019
March 31, 2018
$
1,284,332
$
1,139,038
510,381
1,794,713
(1,742,299)
391,009
1,530,047
(1,461,042)
$
52,414
$
69,005
During the year ended March 31, 2019, the Company recognized as revenues $128,195 of the opening contract liabilities
and unearned revenues at April 1, 2018.
22. Net finance costs
Years ended
Interest expense
Interest income
23. Earnings per share
March 31, 2019
March 31, 2018
$
$
26,017
(5,108)
20,909
$
$
25,689
(1,923)
23,766
Years ended
March 31, 2019
March 31, 2018
Weighted average number of common shares outstanding
93,542,314
93,734,117
Dilutive effect of stock option conversion
508,531
301,083
Diluted weighted average number of common shares outstanding
94,050,845
94,035,200
For the year ended March 31, 2019, stock options to purchase 186,239 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
(725,000 common shares were excluded for the year ended March 31, 2018).
90
ATS AUTOMATION | ANNUAL REPORT 2019
NOTEs TO cONsOLidATEd fiNANciAL sTATEMENTs
24. 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, 2019 and March 31, 2018, 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.
The capital management criteria can be illustrated as follows:
As at
March 31, 2019
March 31, 2018
Equity excluding accumulated other comprehensive income
$
720,082
$
682,943
Long-term debt
Bank indebtedness
Cash and cash equivalents
Capital under management
Debt-to-equity ratio
346,797
1,950
(224,540)
315,522
2,668
(330,148)
$
844,289
$
670,985
0.48:1
0.47:1
25. 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
Total remuneration
March 31, 2019
March 31, 2018
$
$
6,321
656
5,379
50
5,550
642
4,669
57
$
12,406
$
10,918
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 2019 91
Board of directors
Neil D. Arnold(1 & 3)
Mr. Arnold has over 35 years of experience in public company finance and general management. Most recently, he
served as Executive Chairman of the Board of Directors of WHX Corp., a public holding company for primary industrial
businesses. He also served as Group Finance Director of Lucas Varity, PLC, a public company providing components and
systems to the global aerospace and automotive industries with revenues in excess of $7 billion. Prior to that, Mr. Arnold
was Chief Financial Officer of Varity Corporation (previously Massey-Ferguson Ltd.). He has served as a director of Lucas
Varity and WHX Corp. At present, Mr. Arnold is a Trustee of Pembroke College Foundation of North America Inc. and a
Trustee of The Summit Center Foundation, Inc., both charitable organizations. Mr. Arnold earned a Bachelor of Arts in
Engineering Science from Pembroke College, Oxford University and is a Fellow of the Chartered Institute of Management
Accountants (U.K.).
Joanne S. Ferstman(1 & 3)
Ms. Ferstman currently serves as a corporate director. She has over 20 years of progressive experience in the financial
industry. Over an 18-year period until her retirement in June 2012, she held several leadership positions with the
Dundee group of companies, which operated in wealth management, resources and real estate verticals. She was
responsible for financial and regulatory reporting and risk management, and was involved in mergers and acquisitions and
strategic development. She held the position of Chief Financial Officer for many years and latterly held the positions of
Vice Chair of DundeeWealth Inc. and President and Chief Executive Officer of Dundee Capital Markets Inc. Prior to joining
the Dundee group of companies, Ms. Ferstman spent five years at a major international accounting firm. She is a
Chartered Professional Accountant and has a Bachelor of Commerce and Graduate Diploma in Public Accountancy from
McGill University. She currently serves as the Chair of DREAM Unlimited Corp. (a real estate company). She also serves
as lead director of Osisko Gold Royalties Ltd. (a mining royalty company) and as a director of Cogeco Communications Inc.
(a communications company). Ms. Ferstman was formerly a director of Aimia Inc., Excellon Resources Inc. and Osisko
Mining Corporation, and a trustee of DREAM Office REIT and DREAM Industrial REIT.
Andrew P. Hider
Mr. Hider is the CEO of ATS. He is an experienced executive with a track record of success founded on his ability to
drive business growth and operational performance in complex business environments and across multiple industries
including transportation, advanced technology, instrumentation and industrial products. Most recently, Mr. Hider served
as President and CEO of the Taylor Made Group, LLC, a diversified global leader in the supply of innovative products and
systems for marine, transportation, agriculture and construction markets, a position he held from May 2016 through to
February 2017. Prior to that, Mr. Hider served for 10 years at Danaher Corporation, a global science and technology
company, initially joining Danaher as General Manager and Director of Dover and most recently serving as President of
Veeder Root. Mr. Hider began his career with General Electric, serving in a number of areas over a six-year period including
manufacturing, project management, procurement and finance, culminating in his appointment as General Manager of
GE Tri-Remanufacturing. Mr. Hider holds a Bachelor of Science in Interdisciplinary Engineering and Management and a
Master of Business Administration, both from Clarkson University.
92
ATS AUTOMATION | ANNUAL REPORT 2019
BOARd Of diREcTORs
Kirsten Lange(1 & 2)
Ms. Lange, a German citizen, has 28 years of business experience in top management and in consulting, across many of
the geographies ATS serves, including Germany and China. Most recently, she was the CEO of Fritsch Holding AG, a mid-sized
German machinery company. Before that, 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 is 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 Holding AG. Ms. Lange graduated from the University of Munich with a degree in Journalism and earned a Master of
Business Administration from INSEAD/France, where she also has been appointed as Adjunct Professor.
Michael E. Martino(2)
Mr. Martino is a founder and principal of Mason Capital Management LLC. Mr. Martino began his investment career at
Oppenheimer & Company where he was responsible for risk arbitrage research; he ended his tenure at Oppenheimer
as Executive Director, Risk Arbitrage. He began his business career at GE Capital Corporation where he held positions
in information systems and business analysis. He was formerly a director of Spar Aerospace Limited, a publicly traded
aerospace company. Mr. Martino graduated from Fairfield University with a degree in Political Science and earned a
Master of Business Administration in Finance from New York University’s Stern School of Business.
David 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
Communications Inc., and IPL Plastics Inc. Mr. McAusland is also involved with several not-for-profit organizations and private
companies. Mr. McAusland received his B.C.L. in 1976 and his LL.B. in 1977, both from McGill University.
Philip B. Whitehead(4)
Mr. Whitehead is an experienced business leader. He is currently Vice President and Corporate Officer of the Danaher
Corporation, a global science and technology company, and Chairman of Danaher’s European Board. Since joining Danaher in
1992, Mr. Whitehead has held a number of executive and operational roles beginning with Managing Director of Veeder Root
Europe. In his current position, he leads Danaher’s mergers and acquisition activity in Europe and supports the corporation’s
growth initiatives in selected high growth markets. Earlier in his career, Mr. Whitehead worked in senior sales and marketing
roles at Proctor and Gamble, Hovis Marketing and Unilever. He also operated his own management consultancy business.
Mr. Whitehead has a Diploma in Marketing, Accounting and Finance from Bournemouth College, U.K.
Notes:
(1) Member of the Audit and Finance Committee.
(2) Member of the Human Resources Committee.
(3) Member of the Corporate Governance and Nominating Committee.
(4) Special Advisor, Strategy and Corporate Development
ATS AUTOMATION | ANNUAL REPORT 2019 93
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 15, 2019
10:00 a.m. Eastern Time
TMX Broadcast Centre
The Exchange Tower
130 King Street West
Toronto, Ontario
94
ATS AUTOMATION | ANNUAL REPORT 2019
Rolling Meadows
Wixom
Cambridge
Woodbridge
Parsippany
Lewis Center
ATS global locations
Achieving scale. Delivering results
With the acquisitions of Comecer, located in Castel-Bolognese, Italy, and
KMW, based in Koblenz, Germany, ATS now has 23 facilities and more
than 50 offices operating in 22 countries. Our increased global footprint
puts us in even closer touch with our customers and their markets.
It also creates access to an expanded range of opportunities for driving
growth and innovation and delivering enhanced returns.
Manufacturing facility
Office
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Stutensee
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Lutherstadt Wittenberg
Zwickau
Munich
Ingolstadt
Castel-Bolognese
St. Georgen
Dortmund
Joure
Tianjin
Samutprakarn
“
The foundation of a
great business is having
great
people.
It follows, then, that working to
develop, engage, empower and
energize our people is both a
core ATS value and the first of
our three pillars, followed by
process, and then performance,
”
at the foundation of the ABM.
– Andrew Hider, CEO
ATSAutomation.com
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