ATS Corp (ATS) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen, welcome to the ATS Automation fourth quarter conference call. I would like to remind you that this conference call is being recorded on May 24, 2012 at 10.00 AM Eastern time. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (Operator Instructions) I would now like to turn the call over to Stewart McCuaig, Vice President and General Counsel of ATS. Please go ahead.

Thanks, operator, and good morning, everyone. Your main hosts today are Anthony Caputo, Chief Executive Officer of ATS; and Maria Perrella, Chief Financial Officer. Before we begin, I'm required to provide the following statement respecting forward-looking information which is made on behalf of ATS and all of its representatives on this call. The oral statements made on this call will contain forward-looking information. The actual results could differ materially from a conclusion, forecast, or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information are contained in ATS's filings with Canadian provincial securities regulators. Now it is my pleasure to turn the call over to Anthony.

Good morning, ladies and gentlemen. I'm assuming you've seen our press release, Maria will review financial highlights in a few minutes. In the fourth quarter, we achieved a major milestone in the strategic development of ATS, we divested Photowatt France. We also achieved strong financial results in all key areas and, again, ended the quarter with record backlog. Today I'll update you on our Q4 performance, conditions in the market, and our outlook. On Solar, I'll update you on the separation process in France and Ontario. I will then make some summary comments.

In our core business, we booked CAD187 million of new orders. This increase was driven by larger programs, primarily in transportation and life sciences. Our revised approach to market, growth in the base business, and the addition of ATW all contributed to achieving a record backlog of CAD382 million. Our operations continued to perform well, revenues increased to CAD173 million, as some programs with longer delivery cycles moved beyond design and into assembly. EBIT was 9% for the quarter and 10% for the year. Last year EBIT was 7%. Despite the situation in Europe, we saw our approach to market gain traction. On a year-over-year basis, our bookings increased 30% and revenue 23%. About half of our growth was organic. Overall, I'm pleased with our progress for the year.

Turning to our markets, customer demand remained strong. Our funnel and proposal activity are significant and continue to grow. Transportation is very strong and we continue to see a number of opportunities in both traditional and new technologies related to automotive and heavy equipment. Life sciences is also strong. In energy, solar is weak, but as I noted last quarter, we are pursuing opportunities in nuclear and oil and gas. We are engaged with a number of customers on potential enterprise type solutions. This approach is a key differentiator for ASG, but keep in mind the large programs cause variability in quarterly booking numbers. Over time, I believe our revised approach to market will continue to serve us well. Our orders for the first seven weeks of the quarter were CAD53 million. As I said last quarter, given the reduced relevance of this metric we will stop reporting post-quarter bookings numbers going forward.

In terms of our outlook, we have moved beyond [fix] and are substantially through the separation of Solar and we are now focused on profitable growth. Organically, we have made good progress. We will continue to strengthen our sales organization, improve front end of the business processes, attract and reward the best talent, engage in a key account basis and increase program type bookings. On acquisitions, we have allocated considerable corporate resource for this activity. We have a strong balance sheet to work with and we have engaged in discussions with lenders who are supportive of our growth plans. We are targeting companies based on their ability to bring market or technology leadership, scale, or opportunity, whether in market segments we operate in or in new market segments that have characteristics which are attractive to ATS. We have several targets at various stages of discussion and we are generating more. As I indicated before, we will not substitute acquisitions for organic growth which remains the key strategic priority for ASG.

Turning to Solar, our financials include the results from our Ontario Solar business and costs associated with our obligations with respect to Photowatt France's bankruptcy process. On the Ontario Solar business, revenues during the quarter were CAD10 million, up from CAD2 million in Q3, and Ontario's loss was reduced to CAD2 million. The business continued to be negatively impacted by delays in the permitting process. Based on the recently released FIT review by the Ontario government and their commitment to improve the regulatory approval process, we expect volumes to increase in fiscal 2013. With respect to the sale of our Ontario Solar business, we received a number of offers and are continuing discussions with interested parties. Our expectation is to have a deal in place in the short term.

Turning to France, we are pleased with the outcome of the recovery proceedings and EDF's assumption of the Photowatt business and employees effective March 1, 2012. We expect finalization on an agreement between the trustee and the purchaser to occur by the end of June. As I indicated last quarter, we did incur anticipated costs related to the bankruptcy process. We do not expect any more costs going forward in this regard. Our goal was to separate the Solar business from ATS quickly and on a cash neutral basis. Based on the positive outcome of the bankruptcy process, and our expectations related to Ontario, I believe we will more than achieve our objective.

In summary, our fourth quarter and year-over-year performance was strong. For the year, bookings grew 30%, revenues grew by 23%, and our EBIT margin improved 10%. This was achieved through continued strength in our base business and the integration improvement of the acquired businesses. Most importantly, we made a very significant strategic advancement last quarter. Photowatt France has been separated, significant progress was made in separating Ontario Solar, and we are now focused on our core business. Our core business is robust and growing. It has a demonstrated ability to engage customers on an enterprise basis, select and integrate acquisitions, and remain resilient in the face of macroeconomic downturns. Our plan is to grow, expand, and scale our business. By grow, I mean grow by applying our approach to market with a view to moving from machines to programs to enterprise solutions. By expand, I mean expand our offering by adding services, pre- and post-automation, selected products and entering new markets. By scale, I mean scale our business model by leveraging our demonstrated ability and taking advantage of a fragmented industry.

Obviously, we are cognizant of the evolving situation in Europe and the potential negative impact this could have in our business. To date, we have not been impacted. Notwithstanding what the future may bring, I am confident of two things, number one, that we have appropriate flexibility and business process to mitigate potential impacts, and number two, that we have a plan and balance sheet to take advantage of potential opportunities that may arise. At this point, I'd like to turn the call over to Maria.

Thank you, Anthony. Overall, fiscal year '12 was a successful year as good progress was made on our value creation strategy. ASG margins improved with acquisitions integrated, bookings and revenue grew, we moved significantly down the road of Solar separation and we are focused on the growth of our continuing core ASG operations. This morning my comments will focus primarily on our ASG business and our balance sheet. I will also address Solar and its impact on our results in Q4.

Starting with ASG results, we continue to be pleased with ASG's performance. Normalized operating performance improved in each quarter of fiscal year '12. In Q4, revenues came in a little stronger than we had planned, at CAD173 million, a significant increase over Q3 revenues of CAD149 million. As we have said before, fluctuations from quarter-to-quarter are to be expected due to the nature of our backlog. On a year-over-year basis, revenues grew CAD25 million or 17% over Q4 last year, primarily from the impact of several quarters of strong bookings. For the full year, revenues grew by CAD110 million, or 23%, to CAD595 million. Approximately half of this growth was organic and half came from acquisitions. Normalized gross margins for Q4 of 25% were consistent with Q3. Gross margins in Q4 last year were 24% and included one quarter of ATW. Continued strength in our base business, year-over-year improvements in Sortimat, and the successful integration of ATW drove the increase.

SG&A costs were CAD25.7 million, or about 15% of revenues. This is approximately CAD2 million higher than in the prior three quarters of fiscal year '12 when SG&A was in the CAD23 million range. The increase is due to a few items which include restructuring, consulting, and bonus accruals. In comparison to Q4 last year, SG&A increased by approximately CAD6 million. The increase is due to the addition of ATW and higher employee performance incentives versus last year. As well, last year's SG&A included the benefit of a CAD2.8 million recovery of a previously written-off receivable. Normalized for this item, Q4 fiscal year '11 SG&A was CAD22.6 million. Our fiscal 2012 stock compensation expenses increased to CAD4.9 million from CAD3 million last year, due primarily to our improved share price which drove vesting of performance-based options and higher deferred share unit revaluations.

Despite the increase in stock compensation expense, margins were maintained for the quarter and the year. Normalized for the CAD3.7 million in R&D tax assets and the CAD3 million gain on our former facility in France, operating margins of 9.3% in fiscal 2012 increased from fiscal year '11 operating margins of 7.3%. Increased margins were earned on higher revenues and improved Sortimat and ATW contributions. Q4 ASG order bookings were CAD187 million compared to our record CAD206 million of bookings generated in Q4 last year. Bookings have grown steadily over the last three quarters from CAD157 million to CAD165 million and to CAD179 million from Q1 to Q3, respectively, ending Q4 at CAD187 million. Overall, we have had a strong bookings year at CAD688 million, and ending backlog at CAD382 million, setting ASG up well for fiscal year '13 revenues. I will reiterate what Anthony said, that although relatively stable and growing over the year, we expect to see some fluctuations in bookings, given our approach to market and timing of various larger opportunities.

Turning to Solar, in Ontario, offers have been received for Photowatt Ontario and they are being evaluated. It is expected that a binding agreement will be reached in the near term. In the fourth quarter, Solar incurred a loss of CAD8 million, which is included in discontinued operations. Recall that we deconsolidated Photowatt France as of November 8, which is when it entered judicial bankruptcy. For the quarter, France incurred a CAD6.2 million loss. This loss includes the payment and accrual of costs related to the bankruptcy. ATS was not required to provide any funding to the operations in Q4, nor do we expect to provide funding going forward with the exception of the provisions made during Q4. Our Ontario Solar business incurred a loss from operations of CAD2 million in the fourth quarter, a reduction from the loss of CAD3.5 million incurred in the third quarter. Losses are due to low volumes as the current environment has delayed approval of projects and, therefore, the production and sale of modules. Ontario Solar has maintained a core team to ramp production up to required levels to be able to deliver on current obligations.

Moving to the balance sheet, I'll review cash generated from operations and working capital as a percentage of revenue. At the end of the fourth quarter, our total cash position in continuing operations was CAD96 million, or an increase of CAD27 million from Q3 cash of CAD69 million. Cash net of debt was CAD93 million. The CAD27 million dollar increase in cash was primarily generated out of ASG working capital as past investments and certain programs were realized. We are now seeing these programs at completion and cash milestone achievement. Approximately CAD40 million of investments were made throughout the year in certain strategic programs. Overall, this type of investment will continue and may slightly grow as there is an increase in revenue growth.

For fiscal year 2012, total use of cash of CAD27.6 million was made up of solar operation usage of CAD54 million, ASG cash generation of CAD17.8 million, and proceeds from sale of investments and building of CAD9.6 million. ASG working capital as a percentage of revenue increased compared to last year when working capital as a percentage of revenue was below 10%. In fiscal '12, working capital as a percentage of revenue was in the 10% to 13% range. As indicated in the past, the increase is due to the ramp in business, as well as decisions taken to use our balance sheet. We expect to operate within the 10% to 15% range for the time being. The core credit facility was extended from April to September 30, during which time we will be working on the next-generation credit facility which will provide considerable management flexibility.

Turning to net earnings, in Q4 we generated earnings per share of CAD0.13 from continuing operations compared to CAD0.20 last quarter, or CAD0.12 on a normalized basis, and CAD0.17 in Q4 last year. On an annual basis, earnings per share from continuing operations were CAD0.51 or an increase of CAD0.19 over last year. The effective tax rate for the quarter was 30%. This is higher than the Canadian effective tax rate of about 28% due primarily to higher earnings in the US where the tax rate is higher. For the year, the effective tax rate of 25% was lower than our statutory rate due primarily to the CAD6.7 million of gains we recorded in Q3 related to US R&D tax credits, and the gain on the sale of our facility in France which did not attract taxes.

In summary, ASG performed increasingly well throughout the year. We substantially achieved the separation of Solar and are now focused on the core business. Going forward, we are focused on growth and are well-positioned for fiscal year '13. Now, we would like to open the call to your questions. Operator, could you please provide instructions to our listeners? Thank you.

Certainly, thank you. Ladies and gentlemen, we will now conduct a question-and-answer session. (Operator Instructions) Your first question today comes from Daniel Kim with Paradigm Capital. Please go ahead.

Good morning, thank you. Just a quick question on the gross margins. Wondering if you can, Anthony, give us a better sense of any material difference in gross margins between the verticals, if there was a mix set play in terms of how gross margin shook out for the quarter because, given the fact that revenues were pretty strong in the quarter, I'm surprised that sequentially they dipped to 25% versus almost 28% last quarter? Thank you.

Do you want me to start and then? So, hi, in terms of --

I'm sorry, if I could just clarify something, Q4 gross margins were about 25% and Q3 were 25%, as well. Daniel is that what you said, 25% for Q3?

Sorry, the number I have for Q3 was 27.8%.

Okay, so that 27.8% includes US R&D tax credits of CAD3.7 million, and if you adjust for that then you would get a normalized gross margin of about 25%. So the margins quarter-over-quarter are approximately flat.

Oh, I see, okay. Okay, then that is fine. I'll move on to my next question, then. Anthony, you suggested that you are looking into some new verticals within the energy space in nuclear and oil and gas. Can you give us a better sense in terms of where you sit in that process, how you're building the sales channel, what kind of opportunities you're seeing?

So generally speaking, we are looking at verticals that have characteristics which we find attractive, and those characteristics are onerous regulatory environment, very negative consequences if we don't do what we are supposed to do. High barriers to entry, time critical, mission critical, all those kinds of things, and certainly, nuclear, oil and gas and there are other verticals that have those characteristics. In terms of what are we doing, in oil and gas, in nuclear, and what are we seeing, in terms of funnel. So we are, on the oil and gas side, looking at and doing work for companies on, I would say, the control and tool and automation side.

On the nuclear side, we already have considerable amount of experience given that we've already participated and built automation for retubing of nuclear reactors. And as you probably know, there is a significant amount of activity going on in that regard both in Canada and other jurisdictions. So basically, we are applying our funnel, front end sales resources to those markets and subjecting them to the same processes we use in other markets with a view to, A, building the funnel, and, B, bidding on and winning selected opportunities.

Great. Lastly, wondering, Anthony, if you can comment on your long-term outlook for the transport market? Obviously, quite strong currently in North America. Do you have a better sense of how this market might shake out, say, in one or two years time, please? Thank you.

I think it is a good market for us and right now we are seeing a great market, as opposed to a good market, in part because of the technology developments, innovations, new product launches which are happening. We have increased our exposure beyond cars, so to speak, into batteries and heavy equipment. And so, right now it's great and going forward we expect it's going to be great to good.

Your next question comes from Mark Neville with Scotiabank. Please go ahead.

Hi, good morning.

Good morning.

Hello.

Just on the revenues, I think last quarter you had said that you expect a modest improvement in Q4 and then sort of to approach your bookings moving forward, as you say, Q4 is very strong, I guess what I'm asking, is the Q4 number sort of a good quarterly figure? Could we see a rise from here just because your bookings continue to grow or would you expect maybe some short-term, maybe a little pull back before improving?

We would -- or what we've said in the past on our bookings also applies to revenue and that is, based on the nature of our backlog, we would expect lumpy revenues and we would caution against taking any of our quarters and multiplying by four.

Okay, but I guess to go towards -- when you had said previously that you expect revenues to sort of approach that bookings level, maybe when could we expect to see that then, to ask it a different way?

I think what we said was that we would expect the revenue pattern to mirror the booking pattern, and I think what we also said on this call was that the revenue for the quarter was a little bit higher than what we planned.

Okay, so on the SG&A expense, you said it bumped up a bit this quarter, is this the run rate or sort of the number to use also moving forward?

This quarter was just a little unusually high due to certain bonus accruals that were made. So the run rate going forward, I would say, is more the average of -- or what happens throughout the year, the four quarters the average of those four quarters.

Okay. And maybe just one last question on the working capital, just so I understood it correctly, I think you said last year you invested about CAD40 million, when you said you expect it to grow, I guess you meant as the revenues grow, not another CAD40 million this year, as you said, your working capital as a percent of revenues is sort of in the range as you expect it?

Yes, that is correct. So the growth would be as a result of the growth in revenue and as a percentage of the revenue.

Okay, thanks a lot.

You're welcome.

Your next question comes from Cherilyn Radbourne with TD Securities. Please go ahead.

Thanks very much, and good morning.

Good morning.

You've already given us some additional color on transportation and energy. I just wondered if we could have a bit more perspective on what you are seeing in the other verticals, life sciences, electronics and the other? It looks like you had some nice bookings in life sciences during the quarter, in particular.

Yes, life sciences was good, is good, continues to be good, and if it wasn't for the great performance in transportation, then life sciences would look better but in and of itself, we are pleased with it. And, obviously, we are trying to grow it as aggressively as we can, but it is a good segment. We are increasing the number of customers, we are increasing our offering and expanding our offering to traditional customers, and our penetration in terms of available market is small, relatively speaking, so there is a lot of market to still grow into.

And in terms of electronics and other, any signs of life in those two?

In electronics, we have been and continue to be, I would say, very selective, and we have focused our approach to market to certain customers and to certain opportunities. Generally speaking, at a macro basis, electronics is weak compared to some of our other segments.

Okay.

And energy, I already spoke about Solar in terms of us offering automation to traditional solar customers being weaker, but we are trying to augment it, and we are being successful to some degree in augmenting it on the nuclear and oil and gas side.

And from a bit more of a big picture perspective, nearshoring or the repatriation of manufacturing back to North America is something I've been hearing more about and I just wonder if that is something you are seeing in your business and is that positive, negative or neutral in your view?

We are seeing it and it is positive. I don't know how many data points we need until we call it a trend, but certainly we are seeing a number of our customers make a jurisdiction decision between the US and other markets, for instance, China or South America, which we had not routinely seen in the past. So we see it as a positive. We are experiencing it as a positive. Is it a macro trend? I hope so. So, but, that is where we are at.

Okay, that is helpful and that is my two. Thank you.

Your next question comes from Mac Whale with Cormark Securities. Please go ahead.

Hi. Just wanted to follow up again on the SG&A questions that were asked. It sounded that the guidance you have given, it sounds as if really these accruals are for the full year, but I was wondering how does that incentive work? Is the bonus paid out in the quarter for the entire year or is it really related to the big jump in revenue that you saw in Q4?

The bonus is related to the whole year and we accrue throughout the year, and the idea is to accrue evenly throughout the year. And a smaller portion of the bonus is based on bookings and, as you can see from our bookings, we've had some bookings growth and we had to make some accrual adjustments for the sales bonuses.

So if you are now doing an accrual going forward, shouldn't we then expect actually this level of SG&A to continue?

If you -- Q4 was a bit of a catch-up. So if you take the sum of the quarters, or if you just take the whole year SG&A number, that should be the run rate going forward.

Okay, I understand. And then just on the -- you give a revenue segmentation with contracts and equipment and, I guess, services, can you give us the quarterly number and the year-over-year comparison? I couldn't find it in the release.

I'll just have to look for that information, Mac, I will get back to you.

Okay, sure, no problem. That's my two. Thanks.

Thank you.

Your next question comes from David Galison with CIBC World Markets. Please go ahead.

Good morning. Just wanted to talk a bit about the margins. You had previously said that target margins are 10% to 15%, just wondering, and we are pretty much there at the bottom end, what are we looking at to get -- to grow that and get to more towards the higher end? Is there more work to do at ATS, ATW or Sortimat or -- could you provide some more color on that?

Yes, I'll start. So there is more work to do at ATW and Sortimat. They are not quite at the margin levels we saw with the ASG base business in the past, although they've improved significantly and we are quite pleased with their performance in fiscal 2012. But there is more improvement to be had there.

And also in our base business, so now, we consider all of it our base business, but there is more improvement that can take place on supply chain and then also using our lower cost divisions throughout ASG. And then in addition to that, we've talked about our corporate costs being in the CAD20 million range and we've said that we don't expect those to increase, and we have the right cost structure in place to support an acquisition. So, if for example, we were to add an acquisition in the CAD250 million range, our corporate costs would remain flat and, by adding the CAD250 million of revenues, we would improve our margins by about 1%.

Okay. And then my second question was related to the acquisition pipeline. Are you -- is there a size that you are either targeting or maybe a size that you would not consider?

So our primary lens are the characteristics that I talked about, does it give us market or technology leadership, does it give us scale or is it opportunistic. And then, is it in a segment that we find attractive, does it give us core capability that is additive and that we can lever, pull our capabilities into or create synergies between our businesses. Then in terms of size, you know the size of the two companies that we bought so far, and what I said, I think a couple of calls ago, is that our plan is to make our acquisitions more meaningful in terms of size and strategic importance.

But that is not a synonym for doing something stupid. So we have the aspiration, the market is -- the industry is structured such that there are companies that are bigger than the companies that we bought. Our balance sheet is strong, we have the resources to -- and the dry powder to do considerable acquisitions ourselves even with our own balance sheet. But we wouldn't do something stupid and stupid could be either bet the Company or a crazy multiple or any other undue risk, but we are trying to get there faster with our acquisitions.

Okay, thank you very much.

Your next question comes from David Tyerman with Canaccord Genuity. Please go ahead.

Yes, good morning. I just wanted to follow up on the operating margin discussion. That was very helpful, Maria. I'm just wondering, in terms of what we should expect from what you've got right now. Obviously, the corporate cost PERT won't change unless you do make the acquisition, but the ATW, Sortimat and base business presumably improves. You've really been not getting a lot of improvement now for three quarters, should we start to see some pickup here and can you get into the 10% to 15% EBIT range just with the base business?

Our expectation is to get within the 10% to 15% range with the base business. As far as how long it would take to get there, when we could get there, quarter-over-quarter, we don't provide that sort of guidance.

Okay, but I mean -- it's been three quarters now and the margins are going sideways. Do they still -- do they keep going sideways for a prolonged period? Should we be expecting that or is there room for movement, sooner than later?

We are working to improve, so there is room for improvement, and we are working to improve sooner rather than later, but I can't say how soon that will take place.

Okay, and then just going on to the M&A side, I was wondering if you have any kind of financial metrics we should be thinking of when we are thinking of making acquisition? Do you have a return on invested capital target or that it's got to be accretive within a certain number of quarters, or I'm just wondering, I'm just trying to get an idea of what I should be thinking about from that standpoint?

We do have criteria that we apply which is financial, as well as those other parameters that I talked about. But for the purposes of your question, I think you can assume that most, if not all, of our acquisitions would be accretive and they would either be accretive to equal zero or very shortly thereafter.

And by accretive do you mean EPS accretive or return on invested capital exceeds weighted average cost of capital or what does accretive mean?

Earnings.

Earnings?

Yes.

EPS.

EPS.

Okay, thank you. I'll get back in queue.

(Operator Instructions) Your next question is a follow-up from Cherilyn Radbourne with TD Securities. Please go ahead.

Thank you. I just wanted to ask for a quick clarification with respect to the sale of the Ontario Solar assets, can you just clarify if you are progressing with the sale of the manufacturing piece or with your stake in OSPV or both?

Hi, both.

Okay, thank you. That is all.

Your next question is a follow-up from David Tyerman with Canaccord Genuity. Please go ahead.

Okay, just back to clarify that, so both near term or is OSPV going to be something that gets pieced out over time?

Both near term.

Both near term, okay, thank you. And then on the tax rate, I realize it's always a tough one, but, Maria, do you have any thoughts on what we should be thinking for fiscal 2013?

I would use between 28% and 30%, and if you look at our fiscal 2012 tax rate, for the year it is 25%, but we had two unusual items that were not taxable, the gain of the sale -- or gain on the sale of the France building and US investment tax credits. We don't see any of that type of activity going forward, which would put us in the 28% to 30% range.

Okay, perfect. And then, just on CapEx, any thoughts on that? Does it run near depreciation or some other number?

Yes, so CapEx is, I think I've said in the past, in the CAD6 million to CAD8 million range, and I would put it in the CAD8 million range going forward.

Okay, that is great, thank you very much.

Your next question is a follow-up from Mark Neville with Scotiabank. Please go ahead.

Hi. Again, just to go back to the margin question, the 10% to 15% range, again, we're close to the 10%, but if I understand correctly, I believe there was an earn out that is affecting your margins now. Could you talk to how big that is and to when that ends and what your margin profile would look like without that or maybe when it ends?

The earn out is substantially done and it will be done -- it is not material going forward. It will come to an end in December this year, and for the year it might be in the CAD400,000 or CAD500,000 range.

Okay, but, I guess, looking at maybe Q4 then, did it have a big impact on the margin?

In Q4, no.

No. Okay, thanks.

You're welcome.

Your next question is a follow-up from Mac Whale with Cormark Securities. Please go ahead.

Just a follow-up on the sale of Photowatt Ontario, what are the metrics there that you are looking at in terms of, from your side, I know it's a tough question to ask when you're negotiating, but I'm trying to understand whether it's motivated by just covering your expenses in Photowatt France or whether there is some return and some investment level that you want to get a return on? I'm wondering what that might be?

It is not a tough question to ask, but it is a tough question to answer. (laughter) So I'm just going to repeat what I said, which was our original plan was to separate the Solar business between France and Ontario on a cash neutral basis. And then we said, okay, given what we believe we are able to achieve in Ontario and what we have achieved in France, we believe that we can exceed the plan that we have set for ourselves and ultimately, when we get it done then we will all see the metrics of it.

And -- so maybe you can just talk about those discussions. It a long time to have indicative offers on the table. Are they still there? Given the turmoil in the market, in the solar market, are they really moving targets? What is delaying -- what is perceived to be a delay in getting something done? What is the big issue?

Let me just lay the foundation and then I'll answer your question. So the foundation is, we have a good production business that has competitive characteristics and we have a bunch of projects that have value in the market. Then in terms of our process, there has been two short-term issues which aren't material or fundamental which have delayed us a little bit. One is the synchronizing of the sale of the projects and the sale of the manufacturing assets.

And the other one is moving parts, or wait and see a little bit from the perspective of the buyer because of what was going to happen with the US tariff situation on Chinese sales. What was going to happen with the FIT review and what was going to happen as a result of the preliminary insolvency of Q-Cells. And all that is -- happened with no erosion in indicative offers and we are at PSA discussion stage.

Okay, that is helpful. Thanks.

Okay, and then, Mac, just to answer your previous question.

Right, yes.

Q4 fiscal 2011 revenues from the sale of goods were CAD11 million and services rendered were CAD12 million.

Okay.

So year-over-year --

Okay.

They decreased.

Okay.

Okay, and that decrease is just coming from our products group.

Okay. Okay, great, thanks.

(Operator Instructions) Mr. Caputo, there are no further questions at this time.

Thank you, everybody. Have a nice day.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect your lines.