KITCHENER, - Humpty Dumpty Snack Foods Inc. announced March 21, that it has entered into an agreement with Old Dutch Foods Ltd. ("Old Dutch") and HD Snax Ltd. ("HD Snax"), a wholly-owned subsidiary of Old Dutch, pursuant to which HD Snax has agreed to make an all-cash offer to acquire 100 per cent of the Company's common shares at $2.85 per share in a transaction valued at approximately $26.7 million (or $27.4 on a fully diluted basis). The cash consideration per share represents a premium of approximately 5% over the Company's closing share price on March 20, 2006 of $2.71.

The Company's Board of Directors has consulted with its legal advisors and has received an opinion from its financial advisors, Blair Franklin Capital Partners Inc. ("Blair Franklin"), that the consideration of $2.85 per share is fair, from a financial point of view, to shareholders of the Company (other than certain institutional and management shareholders holding just over 80% of the shares of the Company who have entered into lock-up agreements with Old Dutch and HD Snax, in respect of which Blair Franklin has expressed no opinion). The Board of Directors is therefore recommending to shareholders that they accept the offer.

"This offer is the culmination of a value maximization process aimed at unlocking shareholder value first announced by the Company in August 2005," said Bonita Then, Chair of the Company's Board of Directors. "The Board of Directors carefully considered and pursued a number of strategic initiatives in addition to the offer, including the realignment of its manufacturing capacities, the sale of non-core assets and sale and leaseback transactions. We believe that the offer has combined with these other strategic initiatives to deliver attractive value to shareholders."

Steve Aanenson, President and CEO of Old Dutch and HD Snax, said: "This initiative reflects our belief that Old Dutch and Humpty Dumpty will be ideal partners. The combination of these two companies and their brand equities provides a strategic fit in both geographic market coverage and product portfolio. The combination holds significant growth potential for both companies and for our customers throughout our total market. We plan to optimize synergies in all areas to capitalize on brand strengths across Canada and the U.S."

"This is an exciting opportunity for both companies," added Darek Nowakowski, the Company's CEO. "Humpty Dumpty's market is in eastern Canada and New England, while Old Dutch has a strong market position in western Canada and the mid-western U.S. Combining the two companies will enhance their competitive position and provide a truly national presence in the Canadian snack food market."

The HD Snax offer is subject to a number of customary conditions, including receipt of any required consents and a requirement that no less than 80% of the Company's shares be tendered to the offer. In this regard, shareholders holding just over 80% of the Company's shares have agreed to support the offer and tender their shares to the offer pursuant to lock-up agreements entered into with Old Dutch and HD Snax. Under the terms of the lock-up agreements, these shareholders are not permitted to tender their shares to any alternative offer unless that offer has a per share value of $2.95 or more.

The support agreement entered into between the Company, Old Dutch and HD Snax, pursuant to which the Company has agreed to support the offer, provides that if the offer is not completed in certain circumstances, including if a superior proposal is recommended to shareholders by the Company's Board of Directors, a fee of $950,000 will be payable by the Company to HD Snax.

Old Dutch, HD Snax and the Company anticipate the offering circular and directors' circular recommending the offer will be mailed to the Company's shareholders in early April, with the offer being open to shareholders for a period of 35 days following the date of mailing, unless the offer is extended or withdrawn. Shareholders are urged to read these documents carefully when they become available because they will contain important information about the offer.

The unpredictable state of manufacturing - Monthly Survey of Manufacturing - January 2006

Manufacturing shipments continued on an erratic course in January as the ever-volatile motor vehicles and parts industries pulled down total shipments, despite strength in several resource-based industries.

Shipments declined 0.7% to $51.8 billion in January, following a 1.8% advance in December. A substantial drop in motor vehicles and parts manufacturing largely contributed to January's weakness. Excluding the motor vehicles and parts industries, shipments actually edged up by 0.3%.

The unpredictable state of manufacturing

Over the past 18 months, the manufacturing sector has experienced considerable volatility as some key industries struggled, while strong global demand fuelled expansion in other industries. This has also generated some significant disparity across the country in terms of shipment activity.

Shipments fall despite strength in most industries

January's decline was not widespread as only 7 of the 21 manufacturing industries reported lower shipments, although these industries accounted for just over one-half of the value of total shipments.

Although seven provinces posted decreases in January, Ontario (-$554 million or -2.1%) was the hardest hit of the lot. Sustained strength among Quebec's manufacturers (+$146 million or +1.2%) and a big bounce-back in Manitoba (+$103 million or +9.8%) following a weak December, partly offset the decline overall.

Continued volatility in the transportation equipment sector

In January, temporary plant closures and production slowdowns at some factories contributed to declines in the manufacturing of motor vehicles and parts. Shipments of motor vehicles tumbled by 4.6% to $5.4 billion, the third decrease in a row.

Meanwhile, manufacturers of motor vehicle parts lost most of the substantial gains of December (+8.6%) as shipments fell 7.6% to $2.6 billion.

The automotive sector has been quite unpredictable over the past year. Canada is home to the assembly of several popular models in North America. Nevertheless, soaring gas prices, fickle consumers and lagging sales, despite tempting retail incentives, were among several factors contributing to some major announcements of restructuring in the motor vehicle manufacturing industry planned over the next few years.

Other industries reporting lower January shipments included railroad rolling stock (-30.9%) and paper (-4.2%) manufacturing.

Resource-based industries offset some of the decline

Despite January's decrease overall, the majority of industries posted higher shipments.

Robust global demand and soaring industrial prices fuelled a 4.8% jump in shipments of primary metals to $4.2 billion in January. Primary metal prices surged 3.0% in January, led by strong demand for aluminium, nickel and zinc products.

Above-average temperatures this winter have contributed to plenty of construction activity in North America, and consequently a rise in the price of lumber products (+1.6%). As a result, shipments of wood products rose 1.8% to $3.0 billion in January, the highest level since May 2005.

Factory job losses versus productivity

According to the latest Labour Force Survey for February, there have been just over 106,000 (-4.7%) factory jobs lost compared to the same period one year ago. Yet, several manufacturing industries have been gradually improving their rates of capacity utilization.

Manufacturers used 84.7% of their production capacity in the fourth quarter of 2005, up from 84.1% in the previous quarter. According to the latest release of industrial capacity utilization rates, foreign demand for durable goods, such as automotive products, machinery, and plastics and rubber products, were among the industries contributing to the rise in the capacity rate.

Despite the month-to-month volatility in shipments and thousands of job losses, many manufacturers continue to hold their own, a possible sign of improved productivity and efficiency gains through restructuring, at least in some industries. The trend for shipments, although levelling off in recent months, has remained positive through much of the last year.

At 1997 prices, total shipments fell back 1.0% to $47.7 billion in January, following December's volume-based surge in constant dollar shipments (+1.5%).

Finished product inventories on the rise

Manufacturers' inventories continued to accumulate in January, rising 0.3% to $66.3 billion at month's end. Inventories have been on a gradual rise for about two years.

A 0.9% decline in goods-in-process inventories partly offset increases in finished products (+1.1%), and raw material (+0.5%) inventories.

The inventory-to-shipment ratio edges higher

January's drop in shipments contributed to an up-tick in the inventory-to-shipment ratio. The ratio edged up to 1.28 from 1.27 in December, although it remained shy of the year high of 1.31 set in July 2005. The volatility of shipments in recent months has also contributed to some flux in the ratio.

The inventory-to-shipment ratio is a key measure of the time, in months, that would be required in order to exhaust inventories if shipments were to remain at their current level.

Backlog of unfilled orders on the climb

Unfilled orders rose 1.0% to $43.2 billion in January, the fourth successive increase. As a result, the backlog of unfilled orders stood at the highest level since November 2002 ($43.3 billion), and has risen 11.5% compared to one year ago.

Unfilled orders have been on a positive trend since December 2004, with industries such as machinery and aerospace contributing to the rise.

Although the build-up of unfilled orders may be regarded as a sign of future production, assuming contracts are not cancelled, the recent backlog could also be an indication of the lack of production capacity. For example, by the fourth quarter of 2005, machinery manufacturers increased their capacity utilization to 89.2%, the highest rate posted since the fourth quarter of 1997.

The scope of January's boost in orders was wide ranging with increases reported by several big-ticket industries including fabricated metal products (+3.1%), heavy duty trucks (+8.7%) and computers (+1.7%).

New orders steady

Following a surge in December, manufacturers' level of new orders remained stable at $52.2 billion in January. Extensive decreases in the transportation equipment sector offset advances in new orders for fabricated metals products, primary metals and machinery.

The 2005 annual review of manufacturing shipments will be released in the spring.

Available on CANSIM: tables 304-0014, 304-0015 and 377-0008.

Definitions, data sources and methods: survey number 2101.

All data are benchmarked to the 2001 Annual Survey of Manufactures.

Data from the February Monthly Survey of Manufacturing will be released on April 13.

For general information or to order data, contact the dissemination officer (1-866-873-8789; 613-951-9497; fax: 613-951-9499; manufact@statcan.ca).

To enquire about the concepts, methods or data quality of the release, contact Russell Kowaluk (613-951-0600; kowarus@statcan.ca), Manufacturing, Construction and Energy Division.

Inglis, a recent immigrant to Canada, has been directing the Canadian expansion.  He says his organization typically works with large system integrators to provide innovation in the use of computers for industrial environments.  “We put computers where computers never used to go,” says Inglis. “On the factory floor, in automated machines, in emergency vehicles, almost anywhere there is a tough physical environment, we provide custom computer solutions to fit. Solutions that are tried, tested and trusted”.

“There were sound reasons for choosing Canada’s Technology Triangle,” recalls Inglis.  “It’s the heart of the manufacturing base in Canada; it has extremely good physical links to other parts of North America; there is a wealth of intellectual capital; and, the area is known for innovation.”   Inglis says that the support for a growing company in Waterloo Region makes it easier for a company like his to “hit the ground running”.  As well, he credits the work of the British Consulate General in Toronto for providing market research that recognizes the advantages of Canada and more specifically, Waterloo Region area.

Captec stands for ComputerAPplicationTEChnology.  The parent company started in the defense sector and has grown to provide a wide range of products that are currently used in high technology systems for the London Metropolitan Police, London Underground and the Royal Navy.  Inglis points to the organization’s successful track record for designing and producing innovative products such as those used in automatic license plate recognition technology, and in Manufacturing Execution Systems (MES). Originally established in 1985 as Integrated Measurement Systems Ltd, the company became Captec Ltd in 1998.  

Captec plans a phased-in production approach for its manufacturing operations in the Region.  In April 2006, they will begin to manufacture products and will bring on further production capacity to support growth over the next year.  The current facility is located at 220 Woodside Business Centre, 675 Queen Street in Kitchener.  Worldwide, Captec employs just over 50 people based at the Hampshire, UK headquarters (Captec Ltd), and regional offices in Germany (Captec GmbH) & Canada (Captec North America Inc.)

Jamie Martin, Chair, Canada’s Technology Triangle Inc, says their decision reaffirms the Region’s recognition in the overseas market as the launching point for North American operations.  “The CTT is also known as a place where innovation happens and Captec is in the business of innovating industrial computing systems,” adds Martin.  “We welcome them to our community.”

The regional economy of CTT is diverse and includes advanced manufacturing, automotive, business and financial services, high technology and emerging Life Science including biotechnology and nanotechnology.  A recent BMO Financial Group study points to four major factors that contribute to above average growth for Canada’s Technology Triangle – “its relatively youthful demographics, its strong educational institutions, its industrial mix and a generally positive outlook for the North American economy.” The study notes the “stellar performance in 2005 with economic growth estimated at 5.1%” and predicts performance that “should outpace the Ontario and Canadian economies over the 2007-10 period.”

What’s the next big thing for Captec?  Inglis is proud to point to a pilot license plate recognition project for the Los Angeles Police Department.  What’s the next big wave for the security industry?  “Face recognition technology could be the next big thing,” remarks Inglis. “In manufacturing, we see the growth of computer control over PLC, and the continuing penetration of manufacturing execution systems into the factory floor environment”.

The FTSE Group, owned by The Financial Times and the London Stock Exchange, is the award-winning global index company that creates and manages international indexes and associated data services. In 2005 it launched the FTSE4Good index series, which provides responsible investors and asset managers with a socially responsible investment (SRI) benchmark.

In order to qualify for the FTSE4Good Index, eligible companies must meet criteria requirements in five areas: working toward environmental sustainability; developing positive relationships with stakeholders; upholding and supporting universal human rights; ensuring good supply chain labor standards; and countering bribery.

"This is a tremendous honor for Smithfield Foods, and is a reflection of the hard work and dedication of our employees," said Dennis H. Treacy, vice president, environmental and corporate affairs for Smithfield Foods. "FTSE's ranking of Smithfield Foods as a socially responsible company is a fitting testament to the integrity and ethics of our management team and each and every one of our employees."

"The FTSE4Good index is a driving force in encouraging companies globally to be more aware of criteria used for SRI," said Mark Makepeace, chief executive, FTSE Group. "We are committed to working with investors, companies and other interested parties to develop and encourage corporate responsible behavior that enhances shareholder value."

In 2005 Smithfield Foods became the first company in its industry to achieve the prestigious ISO 14001 certification of its Environmental Management System (EMS) for all U.S. hog production facilities and all pork and beef processing facilities, except for recent acquisitions. ISO certification means that Smithfield is meeting a stringent set of internationally respected environmental management standards.

The Machinery and Equipment Price Index (MEPI) was 125.6 (1986=100) in the fourth quarter of 2005, down 0.6% from the third quarter. The domestic component increased 0.1%, while the imported component decreased 1.3% during this period. Compared with the fourth quarter of 2004, the index edged down 0.2%, due mainly to a decrease in the import series (-1.1%).

Most industrial sector indexes decreased, while the remaining had slight increases of less than 1%, compared to the previous quarter. The total index drop was mostly influenced by manufacturing (-0.6%), transport, communication, storage and utilities (-0.5%) and community, business and personal services (-1.1%). Paper and allied products (-1.3%) and transportation equipment (-1.2%) exerted the strongest influence on the manufacturing decrease. Air transportation (-1.4%), electric power (-0.4%) and telephones (-0.7%) were the most significant factors in the downward movement of transport, communication, storage and utilities costs.

At the commodity level, compared to the last quarter, the major contributors to the decline were specialized industrial equipment (-0.6%), automobiles (-1.3%) and tractors (-2.2%). The specialized industrial equipment was influenced, in most part, by the decrease in the imported component (-0.8%).

On a quarterly basis, the Canadian dollar continued to strengthen (+2.38%) against its American counterpart, helping to lower the prices of imported goods. Annually, the Canadian dollar rose 4.83% over the fourth quarter 2004.

YEAR ENDED DECEMBER 31, 2005

Magna posted record sales of $22.8 billion for the year ended December 31, 2005, an increase of 10% over the year ended December 31, 2004. The higher sales level for the year ended December 31, 2005 reflects increases of 17% in North American average dollar content per vehicle and 11% in European average dollar content per vehicle, each over the year ended December 31, 2004. During the year ended December 31, 2005, North American vehicle production was essentially level and European vehicle production declined 4%, each in comparison to the year ended December 31, 2004. Complete vehicle assembly volumes increased 1% for the year ended December 31, 2005, compared to the year ended December 31, 2004. However, as a result of lower assembly volumes for all vehicles accounted for on a full cost basis, complete vehicle assembly sales declined 8% or $340 million to $4.1 billion for the year ended December 31, 2005 compared to $4.5 billion for the year ended December 31, 2004.

Our operating income was $942 million for the year ended December 31, 2005 compared to $1.1 billion for the year ended December 31, 2004, and we earned net income for the year ended December 31, 2005 of $639 million, compared to $676 million for the year ended December 31, 2004.

Diluted earnings per share were $5.90 for the year ended December 31, 2005, compared to $6.95 for the year ended December 31, 2004.

For the year ended December 31, 2005, we generated cash from operations before changes in non-cash operating assets and liabilities of $1.5 billion, and generated $158 million in non-cash operating assets and liabilities. Total investment activities for the year ended December 31, 2005 were $1.2 billion, including $848 million in fixed asset additions, $187 million to purchase subsidiaries and a $127 million increase in other assets.

THREE MONTHS ENDED DECEMBER 31, 2005

We posted sales of $5.9 billion for the fourth quarter ended December 31, 2005, an increase of 4% over the fourth quarter of 2004. North American average dollar content per vehicle increased 8% and European average dollar content per vehicle was essentially unchanged, each compared to the fourth quarter of 2004. During the fourth quarter of 2005, North American vehicle production increased 3% and European vehicle production was essentially level, each compared with the fourth quarter of 2004. Complete vehicle assembly volumes increased 12% for the fourth quarter ended December 31, 2005, compared to the fourth quarter of 2004. However, as a result of lower assembly volumes in aggregate for vehicles accounted for on a full cost basis, complete vehicle assembly sales declined 12% or $145 million to $1.1 billion for the fourth quarter of 2005 compared to $1.2 billion for the fourth quarter of 2004.

Our operating income was $125 million for the fourth quarter of 2005 compared to $250 million for the fourth quarter of 2004, and we earned net income for the fourth quarter ended December 31, 2005 of $83 million, compared to $177 million for the fourth quarter ending December 31, 2004.

Diluted earnings per share were $0.75 for the fourth quarter ended December 31, 2005, compared to $1.81 for the fourth quarter ending December 31, 2004.

During the three months ended December 31, 2005, we generated cash from operations before changes in non-cash operating assets and liabilities of $408 million, and generated $750 million in non-cash operating assets and liabilities. Total investment activities for the third quarter of 2005 were $367 million, including $321 million in fixed asset additions, $19 million to purchase subsidiaries and a $27 million increase in other assets.

IMPAIRMENT CHARGES, RESTRUCTURING CHARGES AND OTHER CHARGES AND GAINS

During the years ended December 31, 2005 and 2004, we recorded a number of unusual items, including impairment charges associated with long-lived assets and goodwill, restructuring charges associated with our assessment of our global operating structure and capacity, and other special charges and gains.

For the years ended December 31, 2005 and 2004, the aggregate net charge before income taxes and minority interest for unusual items totalled $145 million and $45 million, respectively. On a per share basis, the aggregate net charge for unusual items totalled $1.05 and $0.28, respectively.

For the fourth quarter ended December 31, 2005 and 2004, the aggregate net charge before income taxes and minority interest for unusual items totalled $157 million and $19 million, respectively. On a per share basis, the aggregate net charge for unusual items totalled $1.07 and $0.06, respectively.

In addition, we expect to incur additional restructuring and rationalization charges during 2006 in the range of $30 to $40 million, related to activities that were initiated in 2005.

A more detailed discussion of our consolidated financial results for the fourth quarter and year ended December 31, 2005 is contained in the Management's Discussion and Analysis of Results of Operations and Financial Position and the unaudited interim consolidated financial statements and notes thereto, which are attached to this Press Release.

Siegfried Wolf, Magna's co-Chief Executive Officer commented: "2005 was a year of significant transition for Magna. Following the privatizations of our former public subsidiaries, we completed an assessment of our global operating footprint. While the results of this assessment ultimately had a negative impact on our short-term financial results, we believe management's decisions were necessary to better position us for the future."

Don Walker, Magna's co-Chief Executive Officer added: "Looking back at 2005, despite difficult industry conditions, including significantly higher commodity costs, lower production volumes on key Magna programs, and increased pressure for price concessions from our customers, we reported solid operating results. This is the result of the hard work and dedication of our employees around the world."

Statscan Quarterly financial statistics for enterprises Fourth quarter 2005 and annual 2005 (preliminary) reported that Manufacturing companies earned $42.0 billion in operating profits in 2005, down 6.9% from 2004. Of the 13 manufacturing industries, 10 lost ground, with petroleum and coal producers reporting the only substantial gain. The strong Canadian dollar trimmed revenues for exporters of goods priced in US dollars. High fuel costs and an unstable demand further undermined manufacturing profits. The December release of the Monthly Survey of Manufacturing revealed that the upward trend for shipments persevered in 2005, but that the rate of growth was much slower than in the previous year.

Wood and paper manufacturers earned $4.1 billion in operating profits in 2005, down from $6.5 billion in 2004. Softening newsprint demand, high energy costs and the strong Canadian dollar all contributed to weakness in the paper sector. Newsprint consumption has been declining steadily in recent years due to the increased popularity of electronic media. Wood producers benefited from strong domestic construction demand, however, as the value of issued building permits reached record high levels in 2005. Lumber exports picked up in the latter months of the year, partly due to US rebuilding efforts in the aftermath of the hurricanes on the Gulf Coast. However, the average wood product price reaped by manufacturers was significantly down in 2005, compared to the previous year.

Motor vehicle and parts manufacturers earned $1.8 billion in 2005, down 37.6% from 2004. Operating revenues dropped 6.5%, curtailed by lower exports of passenger automobiles, despite some strength in the fourth quarter. The industry was extremely volatile throughout the year, affected by rising fuel prices, intense foreign competition and inconsistent consumer demand.

Petroleum and coal manufacturers' operating profits surged to $11.7 billion in 2005, from $9.2 billion in 2004. Record high crude and refined oil prices drove earnings to unprecedented levels for many companies. Refining margins surged, particularly in the autumn after the hurricanes battered the US Gulf Coast and commodity prices escalated.

Primary metal producers saw profits drop 17.4% to $2.0 billion in 2005, the result of higher energy costs and softening steel prices.

CAMBRIDGE - Canadian General-Tower Limited (CGT), North America's leading supplier of automotive interior coverstock, announces it has signed a manufacturing agreement with Achilles Corporation (Tokyo, Japan) and its joint-venture company, Kunshan Achilles Artificial Leather Co., Ltd. Kunshan Achilles, a leading artificial leather manufacturer in China with proven competence in various applications including automotive, will provide a local source of supply for CGT to produce its automotive soft trim materials in China.

This is CGT's second manufacturing agreement signed this year to support current demand for its OEM automotive seating and other interior trim coverstocks in Asia, and provide the opportunity to enhance its business in the fastest growing automotive market in the world. Product trials are in progress at the Kunshan Achilles plant and production is targeted to begin in third quarter 2006.

Canadian General-Tower Limited, a provider of innovative polymer products, designs, and technical solutions is headquartered in Cambridge, Ontario, Canada. The company is North America's leading supplier of polymeric cover stocks for soft interior trim, with content on an estimated 80 percent of vehicles produced in the region. In addition to its automotive portfolio, the company manufactures flexible plastic film for use in pool liners, roofing and containment membranes, marine seating and stationary binders.

The 2006 Competitiveness Redbook, a joint effort of the NAM, Association of Washington Business and the Washington Research Council, is an extension of the NAM “Cost Study” reports, which documented how structural costs are eroding the ability of U.S. manufacturers to compete effectively. The recent NAM study showed that manufacturing profits in five key sectors were 67 percent lower than they would have been from 2000 to 2003 because of adverse structural costs.

“The NAM cost study broke new ground in documenting the structural costs that are eroding the ability of U.S. manufacturers to compete effectively. This Redbook data goes one step further by giving states a record of areas where they may need improvement in order to finance growth, innovation and jobs,” said NAM President John Engler. “As former Governor of Michigan, I know how important it is to maintain a healthy economic climate. The strength of the American economy in the years ahead is directly linked to the strength of our manufacturing base. It’s imperative to give our states and our nation the resources to compete.”

The Redbook provides business statistics and structural costs facing U.S. manufacturers at the state level, including:

■ cost of doing business;
■ state and local taxes;
■ non-agricultural employment growth;
■ wages and output of workers in manufacturing;
■ unemployment insurance taxes;
■ union membership;
■ educational statistics; and more.

Copies of the of the Redbook are available for purchase at www.nambooks.com. For further information on how structural costs are impacting manufacturers, please refer to the NAM “Cost Study” and “Profit Squeeze” reports available at www.nam.org/costs.

Management Commentary

"We face a number of significant challenges in our ASG business including the continued strengthening of the Canadian dollar, uncertain and difficult automotive market conditions and the resulting margin compression these factors bring," said Mr. Jutras. "We are actively addressing these issues. However, as expected, the benefits of our efforts were not reflected in our third quarter results. We have reduced our workforce and closed one of our ASG facilities to lower our cost base and improve our utilization. We have further diversified our revenue base into stronger markets like healthcare and we are focused on enhancing customer service and further improving our operational effectiveness. We are also investing for our future through strategic initiatives which, near term, are targeted to maximize the return for the investment made, while also supporting our longer term strategic vision and corporate goals. In short, we are moving forward deliberately and strategically to be able to reward our shareholders for their patience and to better serve our customers."

Solar Group Commentary

"Recent developments in solar markets and capital markets, especially in the US, are very positive and, even though SSP technology is not yet fully proven, we are moving forward aggressively on numerous fronts to achieve our previously stated goals of making Solar Group self funding and unlocking the value for our shareholders," said Mr. Jutras. "The activities underway since January with our financial advisor are just one important element of our work. While an IPO is clearly a strong option, it is important that our Board review all appropriate options and the issues, timelines and challenges each path presents to ATS. We are conducting this work in a timely and professional manner.

"I am well aware of the need for urgency because markets are dynamic, but I also believe we are making very good use of our time by tackling a number of fundamental issues that must be addressed to make the Solar Group ready for third-party investment. Among these is the separation of the Solar Group into a standalone entity of ATS. This is a complex and time consuming task that is already underway and is necessary regardless of which course of action the Board decides to pursue. We have added key internal resources to the Solar Group, including the addition of a CFO, Jim Kopperson, at the start of January. We have also assigned resources from our corporate offices and secured additional outside expertise in legal, finance, accounting, tax, and valuation. I strongly believe we are moving down the right path."

Quarterly Conference Call

ATS's quarterly webcast begins at 10 am eastern today at www.atsautomation.com.

About ATS

ATS Automation Tooling Systems Inc. (www.atsautomation.com) is the industry's leading designer and producer of turn-key automated manufacturing and test systems, which are used primarily by multinational corporations operating in a variety of industries including: healthcare, computer/electronics, automotive, and consumer products. ATS is also an emerging leader in the rapidly growing market for solar energy cells and modules. The Company also makes precision components and subassemblies using its own custom-built manufacturing systems, process knowledge and automation technology. ATS employs approximately 3,900 people at 26 manufacturing facilities in Canada, the United States, Europe and Asia-Pacific. The Company's shares are traded on The Toronto Stock Exchange under the symbol ATA.

Management's Discussion and Analysis

This MD&A for the three and nine months ended December 31, 2005 provides detailed information on the Company's operating activities of the third quarter of fiscal 2006 and should be read in conjunction with the unaudited interim consolidated financial statements of the Company for the three and nine months ended December 31, 2005 and the Company's fiscal 2005 Annual Report. The Company assumes that the reader of this MD&A has access to, and has read the audited consolidated financial statements of the Company for fiscal 2005 and related MD&A contained in the Company's 2005 Annual Report and the unaudited interim consolidated financial statements of the Company for the first and second quarter of fiscal 2006 and related MD&A and, accordingly, the purpose of this document is to provide a third quarter update to the information contained in the MD&A section of the 2005 Annual Report. For a discussion of the three months ended June 30, 2005 and September 30, 2005, refer to ATS's first and second quarter MD&A. These documents and other information relating to the Company, including the Company's 2005 Annual Report and 2005 Annual Information Form, may be found on SEDAR at www.sedar.com.

Notice to Readers

The Company has three reportable segments: Automation Systems Group ("ASG"), Solar Group ("Solar"), and Precision Components Group ("PCG"). The terms operating income, operating earnings, earnings from operations, operating loss, operating results, operating margin, Order Backlog and Order Bookings used in this MD&A have no standardized meanings prescribed within Canadian Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable to similar measures presented by other companies.

Automation Systems Group

ASG revenue declined 16% in the third quarter compared to the third quarter of last year. An increase in automotive revenue of 7% was more than offset by declines in computer-electronics, healthcare, and "other" revenues. Although Order Bookings entering the third quarter were strong (particularly in healthcare and computer-electronics), a considerable number of these recently booked projects were in the design phase during the third quarter. Greater revenue is generally recognized during the production stage of a project.

<<

Automation Systems Group Revenue by Industry

($ millions)

Three months ended Nine months ended

12/31/2005 12/31/2004 12/31/2005 12/31/2004

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Automotive $ 44.7 $ 41.7 $ 142.6 $ 120.3

Computer-electronics 27.5 44.4 76.5 122.0

Healthcare 40.9 44.4 108.7 117.5

Other 7.7 14.1 29.6 41.5

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Total 120.8 144.6 357.4 401.3

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On a regional basis, compared to the third quarter last year, the decline in revenue occurred primarily at ASG's Eastern North American facilities, which began fiscal 2006 with lower backlog levels and continued to be affected by weakness in the US dollar. For the three and nine months ended December 31, 2005, the estimated negative foreign exchange impact on ASG revenue was $6.5 million and $22.4 million, respectively.

Revenue from Contract Equipment Manufacturing (CEM) increased 34% in the third quarter to $11.9 million from $8.9 million a year ago. CEM is a growth initiative that combines the competitive advantages of the Company's ASG and PCG operations. Over the first nine months, CEM revenues were $31.3 million, 33% higher than a year ago.

The acquisition of a small UK-based custom automation company in the second quarter of fiscal 2006 (see note 3 to the Consolidated Interim Financial Statements) contributed approximately $0.9 million in revenue in the third quarter.

During the third quarter, ASG incurred $1.9 million of restructuring costs including severance and plant closure costs, to improve capacity utilization and financial performance. The Company has reduced employment in its ASG North American and European operations by 6% since the end of the first quarter. During the third quarter, the Company also consolidated ATS Niagara, a small automation facility in Burlington Ontario, into its Cambridge Ontario facility. The aggregate estimated reduction in the fixed cost base from the ASG workforce reductions and consolidation of the ATS Niagara facility are approximately $9 million. The decision to reduce ASG's workforce was done in a careful and deliberate manner to allow ASG to maintain its industry-leading technical expertise and knowledge to serve its customers.

ASG third quarter operating loss was $0.8 million. Excluding the $1.9 million impact of restructuring costs, operating earnings were $1.1 million (0.9% margin) compared to operating earnings of $9.8 million (6.8% margin) in the third quarter of fiscal 2005. Compared to the third quarter last year, higher earnings were experienced in ASG's Western North American, Asian, and Contract Equipment Manufacturing operations. Lower operating earnings at ASG's Eastern North American operations, particularly in the Cambridge division, were due to a number of factors including lower revenue levels and costs associated with underutilized capacity; uncertain and difficult automotive market conditions and resulting margin pressures; the strong Canadian dollar; and a reduction in the estimated margin on several technically challenging first-time projects. Although these technically- challenging projects impact short term operating margins, they provide ASG with important knowledge that can be employed to benefit future assignments and they serve to further strengthen the relationships with these strategic customers. The effect of the strong Canadian dollar had an estimated negative effect on ASG operating loss and operating earnings for the three and nine months ended December 31, 2005 of $1.0 million and $4.3 million, respectively versus the comparable period a year earlier.

ATS traditionally derives a substantial portion of its consolidated revenue from the North American automotive sector, which is experiencing significant change due to competitive pressure. Management continues to actively manage and monitor its current and future exposure to North American automotive customers and has put in place additional controls intended to help reduce the potential for losses. However, margin pressures are likely to continue to be a factor on North American automotive projects, at least in the short term. The Company is seeking to offset these challenges by growing its healthcare and computer-electronics revenue and winning automotive business from financially strong customers.

ASG operating earnings for the first nine months of fiscal 2006 were $3.1 million compared to $26.5 million in the same period of fiscal 2005. The operating earnings for the nine months ended December 31, 2005 include the factors described above and also the $4.7 million provision taken in the second quarter in respect of the Delphi Chapter 11 filing.

Delphi Chapter 11 Filing

On October 8th, 2005, Delphi Corporation and certain of its subsidiaries

("Delphi") announced a Chapter 11 business reorganization filing under the US Bankruptcy Code. At the time of its filing, Delphi was one of ASG's largest automotive customers.

On October 8th, 2005, ASG had accounts receivable outstanding of approximately US$4 million with the Delphi divisions that are subject to the filing. Given the uncertainty surrounding the eventual amount realizable related to the pre-bankruptcy accounts receivable, ATS recorded a provision in the amount of US$4 million during the second quarter of fiscal 2006.

ASG also had approximately US$2 million of contracts in progress and US$8 million of backlog on unshipped orders with Delphi at the time of the Chapter 11 filing. ASG continues to fulfill the terms of these contracts as they have not been cancelled and the Company continues to receive payments on these projects and believes it will be paid in full for this work. As such, management has not provided a reserve for these ongoing projects. Management continues to engage in active discussions and negotiations with Delphi in order to further secure payment and to assess ongoing credit risks. Excluding the pre-bankruptcy accounts receivable, as at December 31, 2005, ASG had approximately US$3 million of backlog and approximately US$7 million of accounts receivable and contracts in progress with Delphi.

Automation Systems Backlog

At December 31, 2005, ASG Order Backlog was $239 million, $28 million, or 13% higher than at September 30, 2005, and $70 million, or 41% higher than at March 31, 2005. Year-over-year backlog increased 3% from $232 million in the third quarter last year and the change in weighting by industry reflects the Company's progress in diversifying and growing in healthcare and computer- electronics markets to offset automotive market weakness.

New ASG Order Bookings increased 19% to $147 million from $124 million in the third quarter a year ago. For the first nine months of fiscal 2006, Order Bookings were 7% higher at $424 million compared to $395 million a year earlier. Order Bookings to date in the fourth quarter are $50 million.

Automation Systems Backlog by Industry

($ millions)

12/31/2005 12/31/2004 Percentage

Change

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Healthcare $ 100 $ 83 20%

Automotive 71 84 -15%

Computer-electronics 59 48 23%

Other 9 17 -47%

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Total $ 239 $ 232 3%

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Automation Systems Outlook

Improved backlog levels entering the fourth quarter are expected to generate higher revenue in ASG during the fourth quarter compared to recent quarters. The increase in backlog during fiscal 2006 primarily reflects increased healthcare booking activity in the second and third quarters which has provided for a more attractive diversification in backlog across industry groups. During fiscal 2006, ASG's healthcare backlog has increased $45 million or 82% to a record $100 million, and computer-electronics backlog has increased $32 million.

Management believes, strong bookings during the second and third quarters have improved factory loading across most ASG divisions compared to earlier in fiscal 2006, with Order Backlog levels more than doubling in the Company's Cambridge, Ontario facility compared to the first quarter. ASG outlook is tempered by the ongoing foreign exchange pressures on its Cambridge operations and by the current challenges facing the North American automotive market. The Company's focus on diversifying its revenue base into stronger markets like healthcare, and on improving operational effectiveness through strategic initiatives, including recently completed capacity rationalization and ongoing cost reduction strategies, are expected to contribute to improving results going forward.

Solar Group

Solar Group revenue in the third quarter, which continues to be derived solely from Photowatt, was $35.2 million, or $2.2 million lower than in the same period last year, primarily due to a 12% decline in the average Euro exchange rate to the Canadian dollar. Excluding the translation effect of foreign exchange, Solar revenue would have been an estimated 9% higher than the third quarter a year ago. Although management believes Photowatt has secured silicon supply for the majority of its production needs through to the end of calendar 2006, Photowatt revenue growth was constrained in the third quarter due to the industry wide shortages of certain types of silicon.

Over the first nine months of fiscal 2006, Photowatt's revenue was a record $105.3 million, or 2% higher than in fiscal 2005, in spite of the decline in the average Euro exchange rate. Excluding the translation effect of foreign exchange, revenue over the first nine months would have been an estimated 13% higher than a year ago. Revenue growth reflects strong market demand for solar products, primarily as a result of attractive government incentive programs in Europe, increasing consumer interest in clean, sustainable energy sources and increased selling prices for its products.

Solar Group third quarter operating results include Photowatt and, for the first time, Spheral Solar Power ("SSP"). Prior to October 1, 2005, operating costs incurred by SSP were capitalized on the Company's balance sheet as deferred development costs and excluded from operating results. Excluding the SSP operating loss of $8.0 million, Solar operating earnings for the third quarter were $5.1 million (14% operating margin), a $1.7 million increase from operating earnings of $3.4 million (9% margin) for the third quarter last year. The increasingly strong operating performance of Photowatt reflects the benefits of significant improvements in production yields, throughput gains, cost reduction initiatives and capital investments that have been made.

Solar Group operating loss, inclusive of SSP, for the three months ended December 31, 2005 was $2.9 million, and operating earnings for the nine months ended December 31, 2005 were $6.8 million, compared to operating earnings of $3.4 million and $7.2 million, respectively, for the comparable periods a year ago. Exclusive of SSP, Solar operating earnings were a record $14.8 million (14% operating margin) in the first nine months of fiscal 2006 compared to $7.2 million (7% margin) a year ago.

Solar Outlook

Management believes recent developments in both the solar market and capital markets are very positive. Solar product demand is expected to remain strong based upon ongoing European subsidy programs, newly introduced US subsidy programs and growing demand for clean, renewable energy products that can augment or replace increasingly scarce fossil fuels. With these positive conditions, the Company is moving forward to achieve management's previously stated goals of making Solar Group self-financing and unlocking value for ATS shareholders. As announced on January 3, 2006, the Company has selected BMO Nesbitt Burns as financial advisor to assist in assessing and pursuing financing opportunities and strategic alternatives for Solar Group. The separation of Solar Group into a standalone entity is a complex and time consuming task that is necessary to achieve the Company's goals. The Company has reallocated resources from its corporate offices and secured additional third-party expertise in legal, finance, accounting, tax and valuation. As part of these activities, Solar Group hired an experienced Chief Financial Officer at the beginning of the fourth quarter.

In the meantime, Solar Group continues to position itself for growth. In fiscal 2006, Photowatt is investing approximately $9 million to increase estimated annual cell capacity to approximately 40 MW from 32 MW of estimated capacity at the beginning of fiscal 2006. New wire saw process equipment is now on site and is expected to be operational by the end of the fourth quarter.

As a start up, SSP revenue volumes will remain low for the balance of fiscal 2006. SSP is continuing to improve its manufacturing processes and SSP's manufacturing yields are beginning to increase. As expected, the running of the factory equipment has identified targeted areas requiring further process development. Specifically, one process in SSP's 26 manufacturing steps has been identified as a critical limiting factor in current cell yield. Management has received assistance from a specialist in metallurgical engineering, and potential solutions have been identified and are being actively pursued. However, while progress continues to be made, there remain significant challenges and risks associated in achieving yields, efficiencies and throughput necessary for the successful commercialization of SSP.

SSP continues to develop its products and customer relationships. In February 2006, a delivery of SSP's innovative SuperFlex(TM) was made to a major marine distributor. Product testing on the Elk residential roofing shingles is progressing well. Additional SSP roofing membrane engineering samples were also delivered to a customer in Europe. Strong demand for solar energy continues to create substantial interest in SSP's products among wholesalers, distributors and retailers. Management believes the flexible nature and durability of the SSP products gives SSP significant competitive advantages and growth opportunities.

As discussed in the fiscal 2005 MD&A, the SSP initiative involves significant start up risks and these should be considered in evaluating SSP's potential.

Silicon Supply

Silicon shortages remain an industry-wide concern and silicon prices have continued to increase with year-over-year silicon pricing more than doubling. Shortages of silicon may continue to impact Photowatt's ability to increase its production. Management believes that it has secured sources of silicon at Photowatt for a significant amount of its capacity through to the end of calendar 2006, but is continuing to devote resources to secure additional supply to enable its operations to grow without interruption. Management believes that sufficient silicon feedstock has been secured for SSP through the end of the 2006 calendar year as well.

To date, Photowatt has mitigated a significant amount of the impact on its operating income of supply shortages and increases in the market prices for silicon by achieving higher internal operating efficiencies. However, Photowatt's silicon costs are expected to continue to increase during the remainder of fiscal 2006 and into fiscal 2007 as its inventory of lower-priced silicon is consumed and new silicon purchases are made at higher prices. Photowatt continues to secure price increases with some of its customers to help offset the increased cost of silicon. However, there remains a risk that selling price increases and improvements in production efficiencies may not be able to fully offset higher silicon costs. Management is currently exploring longer term alternatives to secure additional silicon supply and continues to reinvest the strong cash flow generation of Photowatt to fund Photowatt's

near-term capacity expansion and silicon supply initiatives.

Precision Components Group

Third quarter PCG revenue was $24.5 million, 8% higher than the $22.7 million in the comparable prior year period. Revenue growth was a result of a number of factors including higher volumes on existing programs, new programs that began to be ramped up in the quarter, and the assimilation of a customer program that was transferred from discontinued Precision Metals operation (see "Discontinued Operations" below) to continuing PCG operations during the quarter. These factors more than offset the negative impact of lower US-Canadian dollar exchange rates, the previously announced discontinuation of an unprofitable customer program and volatility in North American automotive markets for PCG.

The estimated negative foreign exchange impact on PCG revenue in the quarter and for the first nine months of fiscal 2006 was $1.1 million and $3.7 million, respectively. For the nine month period ended December 31, 2005, PCG revenue was $69.5 million, 4% lower than the comparable prior year period reflecting the strengthening Canadian dollar, the volatile North American automotive market and discontinued programs.

During fiscal 2005, as a result of requesting price increases on an unprofitable program, PCG received notice that in the first quarter of fiscal 2006 the customer would terminate the program. This discontinuation reduced revenue by approximately $0.8 million and $2.9 million in the three and nine months ended December 31, 2005, respectively, compared to the same periods of last year.

PCG's operating results in the third quarter have improved significantly from the first and second quarters of fiscal 2006, despite the continued strengthening of the Canadian dollar and ongoing difficulties in the automotive sector. PCG's operating loss for the third quarter was $0.5 million compared to an operati