ATS Corp (ATS) 2001 Q4 法說會逐字稿

Good morning,

Ladies and gentlemen, thank you for standing by.

Welcome to the ATS Automation Tooling Systems

fourth quarter conference call. At this time all participants

are listen only mode.Following the presentation will

conduct a question and answer session.

If anyone has any difficulties hearing the conference

press star zero for operator assistance. I would like to remind you that

our presentation today may contain

forward looking statements.

These forward-looking statements may reflect the current

views of the company's

management and are subject various

risks and uncertainties.

Certain of these risks are described in the ATS

annual report.

ATS disclaims any intention or

obligation to update or revise these

forward-looking statements.

This call is being recorded for replay purposes.

I would like to turn the call

over to Mr. Klaus Woerner,President and Chief Executive Officer of ATS, please

go ahead, Mr. Woerner.

Thank you, operator and

good morning, Ladies and

gentlemen.

In a few moments, Ron Jutras, we will

review financial performance,

but before that I would like

to provide with you a report

card on ATS software rating performance and

expectations.

First the report card.

Last year ATS sought to see

four operating objectives.

Target new market segments,

secure new position component

work, advance technology in a

customer-focused way and

acquire complementary technologies in

business.

ATS move made good strides in all

four areas for fiscal 2002 despite the steep

and prolonged economic

downturn that kept us from

achieving our primary financial

objectives.

ATS went assignments from one hundred twenty-five

new customers in both

traditional and new markets segments.

We also kept existing clients

satisfied and a full 77% of revenue

came from repeat customers. To complement our growing present and

customer base and traditional

markets we identified and

start direct long-term marketing efforts

towards promising new areas.

These include Contra built of

Automation Subsystems and

equipment, not just for semi

conductor but for other customers, including those in the

health care sector.

Automation for biotechnology and

in vitro-diagnostics sectors as well

as specialty [INAUDIBLE]packaging and

plant-wide automation for all

markets.

New position component work is also [INAUDIBLE}

including an assignment to produce seed adjustment

subsystems for multi-national

automotive company.

That assignment was awarded in

the first quarter of fiscal '02

and we will comment on schedule in May

2003 with an initial revenue

of approximately $12 to $15

million in fiscal 2004 and the

following the year, ATS annual

revenue under the program are

forecast to grow $40 to $50

million in canadian dollars that is.

The program is expected to continue for five

years, atleast extending into ATS's

fiscal 2008 year and maybe

beyond.

Also adding to [INAUDIBLE]components future potential,

our thermal products [INAUDIBLE]

was launched late in the

fourth quarter, eight years [INAUDIBLE] the [INAUDIBLE] agreement with

Tyco Electronics, on the terms of this agreement,

ATS is designing and

manufacturing thermal products for

Tyco, which is in-turn packaging out technology with theirs

and selling it to their customers.

We believe this agreement will

be pivotal for initiative

because it gives ATS to Tyco, sizable

direct sales force and makes

our solution part a valuable

bundle that includes Tyco's

connectors and inter connection systems.

With Tyco support, from recent announcements

from companies like Intel they

introduced the 2.5 gigahertz

processor on their [PENTITUIM] four machines.

Planning to move up to three

gigahertz next year, we

expect sales to ramp up.

ATS products are fully

qualified for these speed ranges and

increased thermal management

requirements.

As announced in the press release, we have now begun to

win production orders.

The business awarded to date

based on customer forecast is

expected to generate $12 to 13

million in the revenue this year, increasing

further in fiscal 2004.

We have many additional

prospects in the pipeline and

we expect it to be the start

of a growing area of our

precision components business.

This new work is a culmination

of direct selling efforts by ATS and as well as

joint efforts by Tyco and ATS.

Our VP of Precision Components, Bruce Healy,

has joined us here today to answer any

questions you may have in the

call.

Our sole initiative [EBITDA] [PHOTO-OP] performed

well in fiscal 2002, achieving greatly improved

revenue and operating profits

[PHOTO-OP] is only one of

perhaps two other companies in

the sector that is profitable.

This speaks well of the

operational and management

changes made in the past year

and the benefits ATS has brought

to [PHOTO-OP] production efficiencies through

automation.

They're quite bullish on this entire

area for the long-term, two, [PHOTO-OP] has

recently experienced

pricing pressure that is might

have an impact on short-term results, however we believe

this is temporary and further more

we know [PHOTO-OP] is well positioned

for this because we

continue to improve production

efficiencies to offset pricing

changes.

We also committed last year to

advancing our [INAUDIBLE] technologies and

ATS did that too.

In fact, from an operating

perspective, the launch of our

new flexes line or flexible system line of

standard automation equipment

in quarter four and the

success of super track automated material

handling systems are among the years

highlights.

Flexes is a new [INAUDIBLE]standard automation

ideally suited to a number of industries.

For micromedical devices , and semi-conductor to

automotive electrics and computer

peripherals.

We believe the launch of

standard product modules will have a

positive impact on revenue and margin going forward

that's because flexes will be

popular particular with customers who have a global

production mandate and want to

duplicate automation line in

each plant.

Flexes offers these customers maximum

flexibility, reliability,

scaleability ranging for

a single flat form that

supports multiple operations including position placement,

dye-bonding, high speed alignment,

prior preparation handling,metrology

test and measurement.

The fact that we have now now

sold three flexes systems since the

launch in late March.

As for the Super Track, we have now

received seven orders, incorporating Super Track from a

diverse range of customers.

We have also recently

developed a derivative of Super Track, we call

Lean Track and [INAUDIBLE] Incorporates all

the advantages of a Super

Track in speed and cleanliness,

but is much, much lower cost.

Lean track costs approximately

30% to 40% less than conventional

conveyors, yet it's controlled extacly

like a conventional power free conveyor

system.

As previously advertised, ATS also

introduced complimentary high

speed technology in the third

quarter and is now sold over

a hundred and thirty of these systems.

This is an important

initiative because it allows us to captures

work that was traditionally outsouced to third parties that

hence earned better margin as

a result and very importantly,

better serve customers in the

area that matter the most.

Total cost of ownership and

speed of delivery.

In the current market, these [INAUDIBLE] new products

clearly differentiate ATS

from the competition and are

already contributing to a new

order [INAUDIBLE].

Finally, against our

acquisition objectives,

If you will recall very early in the fiscal year, we acquired OMEX, it is a profitable

QS nine thousand qualified metel forming and stamping company,

located in Stratford Interior.

Total price was approximately

$12 million.

OMEX has performed well since then,

contributing $10 million incremental revenue and

positive earnings , while helping

us pick up new work and

automotive and electrical from smaller

injection molding companies and stamping

companies that have been

struggling with the market

downturn.

In the long-term, OMEX will

enable us to grow the amount of higher

value added [INAUDIBLE] business in our precision

components group.

The bottom line from an

operating perspective is this:

ATS was far from idle during

fiscal 2002.

We made the most of a bad

economy, achieved the number strategic

objectives and have emerged more

solutions to offer customers ,more

opportunities for the

long-term.

Unlike many of our competitors, we

moved forward rather than

backwards and didn't stand

still.

In [INAUDIBLE] I am convinced our [INAUDIBLE]

retain our technical capabilities and skilled workforce

was the right one because it allowed ATS

to better equip itself

for future opportunities.Yes it made our financial performance

was not as robust as it

might have been even though in

context ATS performance soared above the pack and

we did remained profitable.

By preserving our capabilities ATS industry

leadership position has became

far more pronounced and this

proves to be valuable going

forward as customers

accelerate their purchases.

By preserving our capabilities, we

are also fully positioned to capitalize on a market recovery

without the need of costly, time consuming and the disrupted recruitment

and training.

That's an operation report

card.

Now let me tell you about

our near term expectations.

We believe the first quarter of

this new 2003 year will be

better than fourth quarter, fiscal 2002, both from a revenue and profitability

stand point.While we believe the economic

recovery will continue to be

gradual, it should be enough

to allow ATS to perform significantly better

in fiscal '03 than fiscal '02. As part of our expectations

we should see recovery in both

core position components and

automation system revenue and we believe we should

get good contributions with both thermal products and [INAUDIBLE].

This is a logical place now to for a round brighter financial performance

review touching on

automation bookings and

backlog, which underscore our going confidence in the

future.

When he is finished, I will

talk about the agenda for

2003.

Thank you, Klaus and good

morning.

ATS remained profitable in the fourth

quarter of fiscal 2002, In despite of the very

weak economic condition that

have been in place for

about six quarters.

This was achieved even while we

maintained our knowledge-based

workforce and further enhanced our technology

platforms through this more challenging period.

In addition ATS significantly to

financial strength in the

period as a result of good

cash generation and reflecting the

reduced requirements of the

business.

Now with demand beginning to improve, we

are well positioned to take

full advantage of the opportunities

that are emerging. In a few

moments, I will provide

commentary on backlog and bookings to illustrate why

we believe the improvement has

started.

First let's focus on the

quarter.

Automation system revenue was

43% lower than the fourth quarter

of last year.

Revenue last year represented

a record high for ATS by a

substantial margin.

While the fourth quarter this year, showed the obvious

effects of the economic downturn

compared to the third quarter

this year, Automation system revenue was 2% higher.

The lower year over year

revenues for the fourth quarter

combined with the cost

associated retaining our

workforce and capacity were

the primary reasons for the

change in Automation systems

operating earnings.

In addition we determined that

it was prudent to write down the value of certain

slow-moving inventories.

Primary result of product

designs,-- changes in product design and to a lesser

economic environment.

These charges total $3.2 million and were well

spread out among four different lines of the Automation systems business.

We also incurred $.4 million in

Q4 primarily related to

management changes we felt

were necessary in a some of the operating

divisions.

AS a result, we reported a operating loss of $.7

million in Automation systems for the fourth quarter of

this year compared to a record

high operating profit of $23.6 million

in Q4 of last year.

We have been a public company

since 1993 and this is the

first time ,we have had a quarterly

operating loss in Automation

systems during this entire period.

While this loss is relatively

small, it's not something we

are comfortable with.

However with order activity

and shop utilization improving,

we also believe Q4 reflects an historic low

point for Automation systems

performance.

Precision components revenue

was 13% higher than Q4 of

last year, reflecting growth

from the solar operations and

the contributions of OMEX acquired in

June of 2001.

Lower precision components revenue from

computer electronics,

customers was more than offset by higher revenues from automotive, which

as you may recall substantial inventory

connection in Q4 of last year.

Our thermal solution business revenue was $1.2

million in the fourth quarter and reflects some initial

shipments of our new generation

products.

This is small relative to [INAUDIBLE] revenues

today, however, as Klaus noted, we

are progressing with securing initial orders and

this area of the company is

expected to grow quickly in the future.

Compared to the third quarter,

precision component revenues

were 12% higher, reflecting a

9% increase in solar and 14%

increase in the balance of the components

business.

The solar market remains

strong in the fourth quarter, while volumes stabilize

and then improved in the automotive

sector.

Compared to Q4 of last year,

precision components operating earnings benefited

from the increased revenues.

The contributions of OMEX and from

improved utilization.

When compared to Q3, when precision components reported an

operating loss of $.5 million, the Q4

results showed substantial

improvement, with a 7.5% operating margin.

The improvement was the result

of a stronger performance from

the North American operations.

[PHOTo-OP} were similar in Q4 to

Q3 of this year, however this

was only because we

established provisions for

bonuses and profit sharing payments at [PHOTO-OP] in

Q4 to award that team to the

strong improvement and operating results and the

achievement of performance

targets for fiscal 2002.

[PHOTO-OP] performed well throughout all

the fiscal 2002 and we expect

more in the future.

I would now like to review a period at the backlog

levels and order booking

activity for Automation

systems.

We ended the 2002 fiscal year with

an Automation systems order

backlog of one hundred and sixty-eight million

compared to two hundred and twelve million at the

start of the year.

The diversification of the backlog was

provided in the press release.

The biggest change year over

year, is the computer

electronics segment which was 64%

lower.

Close to half of this

reduction was the result of

lower contributions from fiber

optics and semi conductors customers,

among the hardest-hit

industries in this downturn.

Health care declined 20% or $9.5 million, but

we continue to expand

penetration of this newer

market over the past year.

We served thirty-one different

customers in the industry sector of

fiscal 2002 compared to fourteen

last year and

we continue to have a number

of good opportunities in the

quotation area.

The bright spot was the

automotive backlog that

increased 25.5% or 47% year over year.

This change was largely the

result of two large automotive

orders booked in Q3, which totalled

approximately $28 million.

The other sector also increased compared to Q4 of

last year up $3.5 million.

Over the course of the fourth

quarter, even while the total

backlog did not increase significantly,

industry diversification

improved, providing another indicator that

market conditions are

improving.

For example, computer

electronics backlog increased

by 13% over Q3 to represent

21% of total Q4 backlog.

In health care contribution, increased

12% to 23% of Q4 backlog.

Automotive still showed the benefits of the two large orders

booked in Q3 as automotive

orders -- backlog represented 47% of Q4

backlog versus 54% in Q3.

New automation order bookings

totalled $94 million in the

fourth quarter.

This is 19% lower than the one hundred- sixteen million recorded in Q4

of last year.

It is also 15% lower than the new order

bookings of $111 million achieved in

the third quarter.

There are some interesting factors

related to booking activity

that should be considered, however,

as I noted earlier, order

bookings in the third quarter

were significantly increased as a result of

two large automotive customer

orders that represented 25% of

the total bookings in the

period.

In the fourth quarter, also two

larger orders, one from a

health care customer and from

computer electronics customer.

Combined they were just under fifteen million or

only 16% of the two of the total new bookings

in the period.

Another positive of these

recent large orders is they

are both repeat systems orders.

With good potential for

additional follow on business in the

future.

There were two orders in the

$2.5 to $3.5 million range and

the balance was comprised of a

broad number of individual

orders with individual values

of $2 million or less.

The point is while the gross

amount of new orders was $16

million lower than Q3, order

activity was much broader.

Secondly, order cancellation

and scope changes at $7.3

million were less than half

than what they were in Q3 and

$1.7 million less than last

year.

Also encouraging was in Q4 of

this year, most was for

changes in scope by new

projects and not cancelation.

Only $2.5 million of orders were actually

cancelled in the period.

We believe the reduced level in Q4 order

cancelation combined with greater diversification of new

order bookings are both positive

indicators of market activity

and renewal.

As we disclosed in the press

release, new order activity has

strengthens since the end of

the fourth quarter.

In the past six weeks, we have

won approximately $77 million in order comments

of our broad range of

customers.

In addition our quotation activity is very

brisk and we believe the amount of

hesitation in placing orders has dropped

significantly in the past

couple of months.

While,it's still early in the

recovery and business

confidence is still a bit shaky, we think

all these factors are positive

indicators that the worst of this economic downturn is

behind us.

Our financial strength is

another key competitive advantage that ATS

has coming out of the downturn

to add value.

Our cash position net of bank

indebtedness increased an additional twenty-eight

million over the course of the fourth

quarter.

This brings the

increase over the full 2002 fiscal to $41 million.

We ended fiscal 2002 with a

strong debt equity

ratio of 0.1.1 and net cash of $110

million.

Our strong cash position means we

are well positioned to finance

organic growth and addition to making

strategic acquisitions.

That's a brief financial

overview and I will turn you

back to Klaus.

Thank you, Ron. I opened with a report card

on operating performance.

Let me close it with our

agenda for the new fiscal

year.

Our course strategies have not

change and remain completely

customer-focused to an objective of enhancing

our volume of both new and traditional

markets, however while we

haven't changed our strategies,

we increased our emphasis several important

areas.

First we want to broaden our

automation capabilities and

customer base in Europe.

We are targeting to grow in

areas beyond automotive.

Second, we intend to continue forcefully

pursuing opportunities which

we believe are plentiful in the

[INAUDIBLE] subcontract bill of Automation subsystems and

equipment in many of our

markets, including semi

conductor and medical

companies.

Third, we are also focused on

generating opportunities and

partnerships to meet the needful plan ,[INAUDIBLE] automation in

the same markets as well as

electronics and automotive.

We did sizing capabilities and ATS

is a logical choice for the

major players in all these

sectors.

Fourth, we intend to advance our position

in both thermal products and solar

by exploiting opportunities

for advanced technology.

Fifth, we expect to add more

business partnerships as a way

to extend marketing reach.

ATS is a more sought after

partner because of our

industry leadership position

and higher profile.

Over all, we intend to take

maximum advantage of our

competitive strength return [INAUDIBLE]

to a height mode as soon

as possible.

That now concludes our remarks and I

would be pleased to answer

your questions. As a reminder

Bruce Healey, our Vice President of Precision Components is

here as well as Carl Gallery our Corporate

Treasurer.

Operator, would you please

open the call to questions.

Thank you.

Thank you, Ladies and gentleman, We will now

conduct a question and answer

session.

If you have a question, press

star followed by the one on your phone you will

hear a three prompt acknowledging

your request.

Your questions will be polled

in the order received they are received.

If you would like to decline from the polling process,

press star followed by the two.

Please ensure you lift the hand set, if you are using a speaker phone, before

pressing any keys

One moment for your first

question.

Your first question comes from Mason

Granger from Merrill Lynch.

Hi, it's JP Benson, actually

I have a few questions, first off one for

Bruce.

There was some guidance in the press release about what

you think fiscal year 03 revenues

could be from the thermal product could be,

It's something that's ramping

through the area.

Can you give us a sense of the

run rate you would be at by the end of fiscal

03?

The run rate at the end of

fiscal '03 would be in the $18

million range per ahem at that level.

Based on what we know now.

Based on the forecast we have today.

Okay. Is this with --

Can you help us a little

bit -- are these products going into

servers?

Which is the end market?

It seemed on the last call you

were targeting the server

market than the desk top pc

market.

They are primarily

server-based markets at this time.

Have you had any wins in

desk top pc's to speak of?

We have products that are

qualified for the upcoming speed ranges, within the desktop

but the technology is really

ahead of the curve of the

thermal requirements.

Okay.

Ron, you made a comment I

believe talking about solar

and pricing pressure there and

you believed it to be

temporary.

Why do you feel it's only

temporary?

I think the pricing --

first of all, I think the energy

needs globally will continue to increase

and Solar is a market which is continuing to grow and

expand.

You look at the paper today and you look at the

increased emphasis on

cleanliness , [INAUDIBLE] and all those

types of discussions, longer-term there is

a demand for clean energy.

Secondly some of the things

that are happening, we are pushing forward very strongly is

reducing the cost and

efficiency of solar cells so that -- for the dollar that

you spend, you get better

performance.

The industry cost curve is kind of

coming down?

We are very activate

and pushing on both

of those things.

While we are seeing pricing pressure, we think we

can offset those things through the

efficiencies we are gaining

and those that are planned as well for

the next year.

Just one final question.

I haven't had a chance to bang

all the numbers into my model,

it certainly looks like precision

component did better than in

the third quarter and

I believe you said that [PHOTO-OP]

was similar to third quarter because you did

some provisioning for bonuses and

so on.

Can you help a little bit with

where the big improvement most of come

in automotive and just a little color

on what went on there, the volumes

were better, but it seems like maybe a bigger pick

up than just the volume increase would have of

suggested.

You want to add something?

I wanted to add something to [INAUDIBLE] regards

to [PHOTO-OP] to specifically what we are

doing there.

We have two major initiative

moving away from the one hundred

millimeter square cells to one hundred twenty-five millimeter square cells

which [INAUDIBLE] increases the surface area A-cell by

50%.

Therefore it takes the same

money to process to sell

whether it's one hundred millimeters

or one hundred and twenty-five millimeters.

So therefore, there will be less interconnections and less

material handling and fewer

cells in a module.

Number one.

Number two, we also going away

from a particular coding to

enhance the efficiency of the

system , to a better coding, which will increase our

efficiency from 12% to about 15%

range after [INAUDIBLE].

Therefore again since you sell

module by the watt and not the

square footage, we

automatically gain an advantage

also.

These are the two main drivers that

we expect to be competitive

again.

Just on the pretty decent

improvement in operating

results at precision

components, Ron?

Maybe I can come back to

that question.

Clearly we had a much stronger

performance, as I indicated

the operating margins

increased to the 7.5% range in

the fourth quarter compared to

reporting a small loss in the

third quarter, and that was

primarily driven by the North

American operations which is

heavily, obviously almost exclusively at this point of time

driven off the automotive

sector.

we reported what was essentially flat

because of these additional provision.

I think there is two factor that is came

into play and Bruce might have some comments,

first of all we saw the volume issues

stabilized.

We had been dealing with

fluctuating volumes and [INAUDIBLE] cost.

As well,-- we had adjusted the size of the

operations as well as our capacity and made

better use of the capacities

we had in the fourth quarter and

that produced the benefits we

realized in the fourth quarter.

To add to that, in the last conference

call we talked about right

sizing.

As the volume has picked up in the

fourth quarter, the organizations

are really sized today to

handle the volume that is coming

through.

So it sounds like these --

you have seasonal fluctuations

quarterly in the automotive

business, but these kind of margins

are sustainable going forward?

Yes, they are.

Okay.

That's all, I'll let someone else go,

Thanks very much.

The next question

is from Glen Jamieson with Griffin McBurney, please proceed.

Good morning.

Klaus, when we are looking at

order booking activity it's been very

strong through the first half

of this quarter, is it

reasonable to assume you will

be able to achieve similar bookings through the

second half or is it too early in

the recovery to assume steady

order activity and we could have

lumpiness?

Well, certainly the signs are there that

order activity will remain at least remain at

this level or increase.

As I mentioned in my remarks,

we're pursuing quite a number

of different strategies now to

market ATS more and more into

areas, we have not done active

in before, but we find there

is a welcoming committee

awaiting us there and saying

ATS, we wish we had known you

earlier.

We do expect that during the

year, these new initiatives

will help broaden our customer

base again and also of course increase our business

activities.

Glen, I would say that some of

this is obviously pent up

demand coming through as well.

I think the other thing when

we look beyond the current

quarter, clearly there

is a call on what the [INAUDIBLE] economic

recovery is going to be and I think

we are not economists, but

looking at the indicators and

seeing good indication that is

things are improving, thats for the robustas, I guess

time will tell.

Okay, Fair enough.

Just one follow-up question here.

Over the last two quarters,you had a

couple of large orders booked

in each quarter.

In that $77 million we are

discussing, are there large

orders in there?

The largest we have, we did

a quick synopsis.

We did $3.6 million or $5.6 canadian.

It's pretty broad based and it's primarily

roughly split and equally 80%

of the total volume will probably be coming from the computer

electronics and automotive customers and balance from the other sector.

Okay, terrific.

If we turn to the thermals,

Bruce, that run rate that you

quoted for the end of fiscal

'03, I think you suggested $18 million in revenue, can you give me an idea

of what level of utilization

you would be at with your insisting equipment?

It is really small

utilization to what is put in

place.

So,you could ramp with your

existing platform to some

order of magnitude above $18

million run rate?

Absolutely.

Is $50 million a reasonable range with what you have in place currently?

There is some Cap-X, actually required

We are not talking huge

numbers of Cap-X.

So, you can scale this business quickly

with incremental Cap-X?

Absolutely.

At that $18 million run

rate would this business be profitable

stand alone?

Yeah.

Where does it hit the break

even point.

I don't think we have that

name -- number.

Not at this point in time, we don't have that number.

Okay.

Would it be fair to assume by

the fourth quarter of fiscal 03

the unit would be profitable

to stand alone giving what you know today?

Could be.

Better be.

I also want to reiterate this is

sensibilia orders that have been

awarded to date.

Clearly there is a lot more

in the pipeline.

Right, just one follow-up and it

speaks to new orders.

What kind of lead times are

you seeing from the point

where you get a commitment

from a customer to actual

shipment activity.

In thermals?

Yeah.

From receipt of order, you

start with small volume ramps

to fill a worldwide pipeline.

As the processor speeds, the announce processor speeds along

before the vendor production.

There is a lag to when

you actually receive to when you get

into full volume.

Okay, terrific. Thank you.

It varies.

Depends upon when the

processor chip actually gets

installed.

Your next

question is from Cameron

Jeffries with Credit Suisse

First Boston.

Good morning, guys. Just a quick question on the

duration, just wondering if

you can give us a sense of what the

backlog duration is and whether there has

been significant changes since

the third quarter.

A difficult question to

answer given the fact that

you are talking probably about

three hundred different projects all with different

schedules.I would say that

in looking at, what we have [INAUDIBLE]

right now, two things that are

probably significant.

One, I think there has been an substantial increase in

the amount of repeat system activity that we have bag log.

Which is obviously positive because it allows us to roll through

in a quicker pace.

So I think we have seen that situation

improve.

We have also had a fair amount

of activity, particularly over the fourth

quarter in the design area

where I think Klaus mentioned

the last conference call, we had taken

overtime restrictions off the design area and

well that work is now flung onto the floor.

We also allow us to now get it

into the shop and the shop

utilization improves and we

are expecting that to also happen going forward.

There hasn't been really any big

order that has pushed it out or

anything like that to a meaningful

extent?

No.

Okay, For your operating margin for fiscal 03

can you give us a sense as to

how much improvement you

expect to see versus this year

and maybe how close you could come

to your -- what your former longer term target of

11%to12% was,

I don't imagine you will get

to that level, but could you give us a sense of how much

improvement you expect to see along those lines.

Again, our internal targets

which are based on the interline

assumption of continued economic

recovery have been showing a

steady progression of our consolidating

operating margin so by the end

of the fiscal year, the fourth quarter that we

would expect margins are

running at or better than what they were in

2001.

So, getting back into that range

we were talking about --.

In the fourth quarter though?

Yeah.

Great.

Thanks.

The next question

is from Peter Saccarl with Nesset Burns.

Please proceed.

Good morning.

Ron, the $3.2 million write

down and $400,000 of severance, I'm

trying to figure out the per

share impact.

Can you give me that or it

will me how much tax would be

taken against the charges?

The standard tax rate.

This is a quarter that was

year end so we went through

and did a number of analysis. I figured that

if we took all the factors out of the shoot

we probably would have reported an EPS

of about five cents per share.

Right and the other question I

had, when you are talking

about the $77 million of the

activity you secured since the quarter end, you describe it as new

order bookings and commitments,

what's the difference between

commitments and new order

bookings?

The only difference between the

two is one,have the purchase order in

hand and the other one, we have been told it's on

its way.

A letter of intent.

DOI

Do 100% typically result in

bookings within a short time frame?

Yes.

Okay, that's all I have, Thank you.

The next question

is from David Garaman with Scotia

Capital, please proceed.

Yes, I just wanted to come back to

one comment.

That was regarding the run

rate in the first six weeks of

the quarter.

I think he said that you felt that

things would remain at least

at this level or increase.

I am trying to interpret that.

Sounds like you could have a

very, very big number for the

year if you maintain that

rate.

Is that correct interpretation?,

Or should we be more cautious?

Are you suggesting that you

extrapolate it out?

If you extrapolated, you end up with a huge

number.

I'm not suggesting that

because that's sounds like too big of a

number, but I guess what I'm trying to

get a sense of is do you feel

you are getting back to the

situation you were in in 2001

or is it too soon to say on the order side?

Certainly from all we have

seen at this point in the way

of customer activities and

customer responses and

customer inquiries and so on.

We fully expect things to get

back to normal, yes.

In the second or third quarter

unless something totally

unforeseen happens again.

Normal to you would mean like what

within 01 or something like that?

Exactly.

Fair enough, What areas are thriving

this [INAUDIBLE]?

Like I said, if you look at

the numbers in that $77 million,

we are seeing pretty good based

activity.

If that's an indicator, I said about

80% of the total volume is

electronic and automotive.

You split it both equally between the two and it

would be balanced basically from health

care where the stuff in the other consumer products primarily

in that area.

It's broad based and the order

size indicate that the indivtial order is they

are broad based as well.

Electronics is more active

now than the past three

quarters.

What Ron said earlier off the

electronic and computer

peripheral business, we

dropped --.

Backlogs are down 64%.

64% exactally right, So with that we receive alot

we see a lot of activity in that sector

again.

Did you say 80% from auto

and computer?

Roughly 80% is

between automotive and

computer electronics.

Great.

A couple of house keeping

issues.

The inventory, did that run

through cost getting sold?

Yes.

And the reverence?

Yes.

On the non-cash working

capital, you made an

improvement.

Will we see farther

improvement in percentages?

It sounds like we have growth

ahead.

We probably have contact.

What we are seeing with the

increase in activity will be

likely a requirement to put

money into working capital.

That coupled with the fact

that we are having an increase

in shop utilization indicates

a working capital utilization.

I am not expecting dramatic

improve ATS because I think we

are moving back into growth

mode again.

Right.

Cap-X for 03?

Right now I will give you

some guidance from the

standpoint of what we set in

the operating budgets for the

year.

That's clearly dependent upon

the pace of new order

placement that comes in in the

components group.

We have right now in the

$29-30 million has

continue for

the new accident.

About ten million of that is

work we are planning to make

in the Solar business.

To farther improve

efficiencies.

Roughly about 7-8 million in

the components group and

another chunk in the systems

group largely continued to

attach to it as well.

Depending on how the

business goes, up to 29-30.

Clearly a call on the

economic and how we

participate.

From a planning standpoint,

targets are for that to take

place and we provide

conteufrplgenceys to provide

to that.

Last question, tax rates

going forward?

I think that during the

quarter, we are going to see

the rate come down a little

bit.

Partly because of the tax

planning inteurbatives we

under took in the current

year.

We are talking in the 30%

range.

Thank you very much.

Ladies and

gentlemen, if there additional

questions please press star one.

Your next skwe from --.

Good morning.

Ron, a couple of questions.

In opening remarks, you

expected 1 to be better than

Q4.

That's expecting the backlog

is flat and the backlog is

down sequentially from q3.

Despite that, you feel

comfortable to see an

improvement in Q1?

First of all, I am not

expecting that we will have

inventory adjustments in Q1.

Secondly, I think as I

indicated, we are having more

work fly on to the floor.

We are getting an increase in

shop utilization and that will

be beneficial.

We are expecting good

performance in the groups.

From our perspective when we

look at the business combined

with the fact that the order

bookings is increasing with

repeat system that is means we

can pull that as well, we

think it pwoeds well.

Okay.

Regarding the demand pick up

you are seeing, order booking

is up since year end.

Is it at a point that

visibility is increasing

throughout the quarter and

maybe you would be willing to

give a forecast in terms of

revenue for q1.

I would say we have not

provided a forecast and we

didn't contemplate doing that

today.

Okay.

Just to go back on the

long-term goal of revenue

growth between 15-25%, at what

point do you think you could

be back at that level?

That's very much a call on

the economic recovery, but the

budget targets are calling for

a substantial pick up in

business.

A recovery in our levels of

activity over the course of

the current fiscal year so

that from a revenue standpoint

we are coming off the base

when kh we think is a low

point and looking for the

growth to be at the top end of

the 15-25% range over all.

Obviously we are looking for

improved utilization to allow

earnings to grow.

Okay.

Just to go back, is it

possible to have a reading in

terms of revenue?

Was the revenue more back in

the quarter or more front and

loaded?

No, the

revenue was basically ran

through the first quarter in a normal sense

and we do get movement on a month

by month basis and I don't

think it's indicative.

Thank you.

Your next

question is a follow-up from

David Garaman from Scotia Capital.

Yes, actually two questions,One on the comment you just

made, Ron.

You said you expected based on what you

can see in the plan on the

economy and so on.

If it turns out the way you

think it will, the recovery

that revenues would be at the

top end of your forecast?

Revenue growth will be at the

top end of our growth range [INAUDIBLE].

Okay.

That would imply, unless I'm

wrong, a very, very large

increase in orders in the year

because you typical convert

roughly half your orders to

sales at any one point in time.

Your orders are receiving

faster to keep the bag log at

a reasonable level.

I'm not sure I follow the

math, you that you are running through, but I can tell you that

we are coming off of the year, where our revenues contracted.

and you see the backlog, Certainly stabilized and

improved throughout current

quarter.

With an increase in the amount

of repeat systems activity.

We are continuing to look at

strong order prospects and we think

we our improving economic situation from my perspective that

should allow us the growth at a faster

rate.

Also don't forget we are

coming off a smaller base.

That helps us to achieve a

higher percentage growth rate.

I'll follow-up with you on

that.

The other quick question was Klaus

mentioned about subcontract build

and I was wondering if he can

provide some explanation of what

he means by that.

Gladly, just to

to give you one example, we

recently picked up a customer or found a customer

who partially made their own

equipment and partially

subcontracted it out to the small companies in the

regional area and had a lot of

problems with trying to put

the systems together and a lot

of problems with documentation

of the systems and a series of

the systems in various parts

of North America and the

world.

They discovered us months ago

and now we are building all of

their subsystems and given up

to do this internally.

They have given up working

with four to five different small

subcontractors because of the [INAUDIBLE]

problems they had.

The company in the medical

equipment business.

This will based on the

forecast they have given us,

result in about a $20 million

annual business for us now

with hopefully a lot of

upside.

That's one typical example of

how we can increase our presence

in that sort of business.

There many companies out there

who are sure they have similar

needs.

Okay, So, this is all precision

component?

This is actually a systems

built.

Okay.

Somebody might have a contract

to provide a large system they

are not proving terrible effective at producing some

smaller parts of it and that's

where you folks come in.

It sounds like you have an

annual component, that is

correct?

Well yeah and of course alot of these could lead into a life time

relationship because if we prove to be a valuable supplier, no reason

what so ever, why we should let go as a

supplier unless they exit the

particular line of business.

It's Ron, I just want to make sure we

clarify on this thing, maybe alittle bit of confusion,

What we are talking about is

customers developed a platform

and they are looking for

somebody to build that

platform while they continue

to focus on designing new

platforms.

Clearly we bring in the

ability to optimize design and

scale the production and basically help

them to take the product

through to market.

So, would this be systems per

say,or is this kind of like --

maybe I can contrast it

between the system that you

typically produce with a lot different

components, something like eco-cell where it's a

single unit, is it more like the eco-cell?

Yes, very much a standard

platform that the company

developed and markets,

Correct.

Thank you very much.

Your next

question is from Ben Washatar with

National Bank Financial.

Please proceed.

Thank you, Yes,the question more on your

acquisition strategies going forward.

You have alot of cash, generating cash which

is just marvelous,

Can you go back to your views

on your strategy on the acquisitions particularly, as the case being after the

slow down , pricing of assets must have come down

significantly and what kind of

matrix are you looking at, financial in terms of market position?

Our position of strategy , is historical

has been to acquire small tuck

in types of acquisitions that

complement geographic

positioning or adding to the

technology base.

Right now the areas we are

looking at most would be the

[INAUDIBLE] as we are looking at.

Europe is an area that we

would like to broad note our

presence in farther and we are activity

looking at opportunities in

that particular market at the current

time.

As for the metrics, I think

that -- I don't know if the

pricing in the private

company space has come down tremendously,

clearly there has been more of a check and

balance come into it.

Private companies, which are

typically owned by owner

managers are not as elastic to

the swings that take place in

the public markets.

I think it will be very much dependent

upon the strategic value of

the acquisitions we look at can contribute to ATS,

that will determine the

pricing range.

Historically, acquisitions we have done

have typically been in the seven- eight times

ebitda and sometimes lower and

sometimes the numbers equated

to one times revenue.

I don't know if those are good

to judge on a go forwarded basis.

Should we expect in this

context acquisition

announcement this is year?

Is that part of the strategy?

That is certainly a

possibility because we are

actively looking at

opportunities today even

though it would be too early

to suggest we have something

that's a slam dunk.

Thank you very much.

Your next

question is a follow-up with

Cameron Jeffries with Credit Suisse First Boston.

Ron, you can remind us what the

third party percentage was in

the fourth quarter?

Yeah.

Third party content read 46%--,

forty-six cents on the dollar by the automation systems revenue.

Thanks.

Once again, Ladies and

gentlemen, if there additional

questions, please press star

followed by the one.

Mr. Woerner, there no farther

questions at this time.

Please continue.

Thank you, operator.

If there no farther questions,

I have one other announcement.

Our annual meeting will be

held on September 26th at 4 p.M.

Eastern time.

This is later than normal

because we decided to organize

a date that does not conflict

with peak summer vacations.

Hope to see you there.

The details will be in the

annual report and circular.

Thank you very much again for

listening and have a good day.

Ladies and

gentlemen, this concludes your

conference call and thank you

for participating.

Please disconnect your lines.