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Posted November 10, 2011

Quarterly Report

Second Quarter Fiscal 2012 Results Report

CAMBRIDGE - ATS Automation Tooling Systems Inc. reported its financial results for the three and six months ended October 2, 2011 for its continuing operations (Automation Systems Group or "ASG") and discontinued operations ("Photowatt").

Second Quarter Summary of Continuing Operations

* Consolidated revenues from continuing operations were $145.9 million, 28% higher than the corresponding period a year ago, and 15% higher than the first quarter of fiscal 2012;

* Earnings from continuing operations for the second quarter of fiscal 2012 were $13.3 million (9% operating margin) compared to $6.6 million (6% operating margin) in the corresponding period a year ago and $10.5 million (8% operating margin) in the first quarter of this fiscal year, reflecting higher revenues and gross margins;

* Order Bookings increased 5% to $165.0 million from $157.0 million in the first quarter of fiscal 2012 and increased 57% year over year from $105.0 million in the second quarter of fiscal 2011, reflecting higher activity levels in transportation and life sciences;

* Period end Order Backlog was a record $363.0 million, an increase of 11% from $328.0 million in the first quarter of this fiscal year and up from $208.0 million a year ago; and

* The Company's balance sheet was strong with cash net of debt of $60.0 million and unutilized credit facilities of $58.2 million were available under existing operating and long-term credit facilities and another $26.6 million of credit was available under letter of credit facilities.

By industrial market, revenues from life sciences decreased 6% year over year despite higher Order Backlog entering the second quarter compared to a year ago, reflecting longer performance periods on certain programs. The 30% decrease in computer-electronics revenues reflected lower activity compared to a year ago. Revenues generated in the energy market decreased 38% on lower Order Backlog entering the second quarter compared to a year ago, reflecting lower activity primarily in the solar energy market.

The 418% increase in transportation revenues compared to a year ago primarily reflected higher Order Backlog entering the second quarter compared to a year ago and the inclusion of ATW. "Other" revenues decreased 27% year over year primarily due to decreased revenues in the consumer products market. Order Bookings were $47 million during the first 5 weeks of the third quarter of fiscal 2012.

Second Quarter Summary of Discontinued Operations
The Company's solar operations were classified as "Assets / Liabilities associated with discontinued operations" on the balance sheet and as "discontinued operations" on the income statement.

Discontinued Operations Summary

* Photowatt's fiscal 2012 second quarter revenues of $33.9 million were 46% lower than in the first quarter of fiscal 2012, primarily reflecting the decrease in average selling prices, and declined 25% from $45.1 million a year ago;

* Photowatt fiscal 2012 second quarter loss from operations was $71.3 million compared to a loss from operations of $2.6 million a year ago and included:

* $18.1 million of non-cash charges related to the write-down of inventory to its net realizable value, following declines in market average selling prices due to declining demand and excess module supply in the European solar industry;

* $24.1 million of charges related to the termination of certain silicon and wafer supply contracts, including non-cash asset impairment charges of $19.9 million;

* A further $8.8 million in non-cash charges related to silicon deposits that the Company does not expect to utilize;

* $3.1 million of write-downs to receivables that are not expected to be recovered; and
o Non-cash fixed asset and goodwill impairment charges of $4.3 million and $5.5 million respectively to write down assets to their expected recoverable amounts.

* Excluding the charges taken in the second fiscal quarter of 2012, the quarter-over-quarter decrease in operating results reflected lower average selling prices which were partially offset by lower direct manufacturing costs-per-watt. Second quarter fiscal 2012 operating results were also negatively impacted by higher spending on costs related to the separation of Photowatt.

* Included in fiscal 2012 income tax expenses was the write-off of deferred tax assets of $4.4 million as the Company no longer expects to realize the benefit of those deferred tax assets.

Photowatt Separation

During the year ended March 31, 2011, the Company's Board of Directors approved a plan designed to implement the separation of Photowatt from ATS via a dual-track process involving either a spinoff of the Company's combined solar businesses or a sale of Photowatt France ("PWF") and/or Photowatt Ontario ("PWO"). Subsequent to the end of the second quarter, discussions with parties in regards to a sale of PWF concluded without producing an acceptable transaction. As announced on November 4, 2011, the deterioration of economic conditions and the solar market in Europe (and in particular increased Asian competition and lower demand for solar products in France), have severely impacted PWF.

The Company re-examined the spinoff alternative and concluded it was not viable. Other options in relation to PWF have been exhausted and given the aforementioned conditions, PWF's filing for bankruptcy became necessary. On November 4, 2011, PWF filed an application with French bankruptcy courts for the opening of bankruptcy proceedings.

On November 8, 2011, a hearing was held at which time the bankruptcy court placed PWF into a "recovery" proceeding ("redressement judiciaire") under the supervision of a court appointed trustee. The objective of such a recovery process is to explore opportunities for PWF's operations in an effort to preserve jobs and maximize value. During the recovery process, ATS expects to provide funding for a period of three months.

ATS notes that the French bankruptcy process is different from the North American process and requires a more collaborative approach. There may be a number of matters that will require due consideration throughout the course of the process, and which could give rise to additional expenditures. The Company is engaged with experienced external advisors who have significant subject matter expertise to assist with this process.

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