Automation company reports loss

ATS Automation Tooling Systems has reported a net loss of $1.6 million (0.03 per share) for the three months ended December 31, 2003 - despite being profitable on an operating basis.

ATS Automation Tooling Systems has reported a net loss of $1.6 million (0.03 per share) for the three months ended December 31, 2003 - despite being profitable on an operating basis and achieving 14% growth in consolidated third quarter revenue.

Third quarter consolidated earnings were reduced by approximately $6.0 million and revenue by $19.3 million compared to the third quarter of last year as a result of a 16% decline in the average value of the US dollar versus the Canadian dollar.

In spite of this large negative foreign exchange impact, all three of the Company's operating segments produced higher revenues and two of the three produced higher operating earnings.

Third quarter results this year also included an unusual charge of $2.1 million to adjust the Company's accumulated future income tax liability for recently increased Ontario corporate income tax rates.

Without this non- cash charge, earnings per share would have been 1 cent during the third quarter essentially the same as in last year's third quarter.

"Our financial results were disappointing in the third quarter," said Klaus Woerner, ATS President and Chief Executive Officer.

"Revenue growth was reasonably strong across the board in Automation Systems, Solar and Precision Components but our operating margins were not acceptable.

Currency movements are likely to present an ongoing challenge for ATS as a multinational business, however we believe our strategy is sound and we are very confident in our ability to compete successfully and profitably in our global markets.

" Third Quarter Fiscal 2004 Financial Highlights - Consolidated revenue was $174.4 million, up 14% from $153.1 million in the third quarter a year ago.

- Earnings from operations were $0.9 million compared to $1.1 million in the third quarter a year ago, reflecting a slight reduction in operating margin.

- Period end automation systems backlog was ahead 19% to $181 million, from $152 million a year ago, but lower than the $200 million at the end of the second quarter of fiscal 2004.

- New automation systems order bookings were $94 million compared to $93 million in the third quarter of fiscal 2003.

- Cash flow from operations was $8.4 million, compared to $10.6 million in the third quarter of last year.

Cash on hand was $47.6 million versus $58.3 million at the start of the quarter.

- Debt to equity ratio at December 31, 2003 remained a very healthy 0.1:1.

Automation Systems Group revenue in the third quarter was $118.5 million, up 12% from $105.8 million in the third quarter a year ago.

Strong revenue growth was achieved by the Group in its core markets.

Automotive revenue was up 14%, healthcare up 13%, and the contribution from computer-electronics was 5% higher than the same quarter a year ago.

Precision Components Group revenue was 31% higher at $41.4 million compared to $31.7 million a year ago.

At $29.7 million, revenue from automotive was 7% higher than a year ago as thermal products revenue increased 425% to $8.4 million compared to $1.6 million last year.

The Group also benefited from a $3.0 million revenue contribution in the quarter from Micro- Precision Plastics, which was acquired in February 2003.

Solar Group achieved revenue growth of 46% to $27.5 million compared to $18.8 million a year ago, as the Company's Photowatt International operations benefited from strong demand in Europe.

The Company also announced a four month delay in the start up of its first Spheral Solar Power manufacturing facility due to construction and development challenges, and a $10 million to $15 million increase in the total estimated start-up investment due to strategic decisions to internalize production of certain critical processes, reduce launch risks and make investments that are expected to facilitate future capacity expansion of the factory.

"Spheral Solar Power is an ambitious project with tremendous value creation potential," said Woerner.

"In spite of the delay and additional investments, we're making good progress on many fronts in the commercialization plan and continue to expect attractive returns from this major growth initiative." Looking Forward - ATS continues to take a cautiously optimistic stance regarding short-term order flow.

The Company continues to see solid opportunities for new customer assignments, both follow-on and new.

In addition, quotation activity remains robust.

New Automation Systems Order booking activity since the end of December totaled approximately $54 million.

New assignments in precision components are continuing to ramp up and production processes are stabilizing providing the basis for better efficiencies, economies of scale and margins.

"Looking forward, there are good reasons for optimism," said Woerner.

"On a fiscal year basis, order booking activity and backlog levels have improved, however we continue to see some delays in customers placing orders.

What we can say with certainty is that our goals are to continue to build profitable new business in our targeted sectors and to be very efficient in completing these assignments.

We believe ATS is better positioned to meet these goals in upcoming quarters than it has been over the last few, primarily because we are now beginning to see better capacity utilization, and the North American economy is instilling greater confidence in our customers.

Our job is making sure that revenue growth is once again complemented by earnings growth.

We are committed to this task." Note to Readers The MD and A and consolidated financial statements accompanying this news release contain detailed information of quarterly performance, financial condition and the Company's outlook.

Quarterly Conference Call ATS will hold its quarterly conference call at 10 am eastern time today.

To listen to a live audio webcast of the call please visit www.atsautomation.com

Corporate Description ATS Automation Tooling Systems (www.atsautomation.com test systems, which are used primarily by multinational corporations operating in a variety of industries including: automotive, computer- electronics, healthcare, and consumer products.

The Company also makes precision components and sub-assemblies using its own custom-built manufacturing systems, process knowledge and automation technology.

ATS is also an emerging leader in the rapidly growing market for solar energy cells and modules.

ATS employs approximately 3,800 people at 25 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 and A for the three months ended December 31, 2003 should be read in conjunction with the Company's fiscal 2003 annual report and the unaudited interim consolidated financial statements.

The Company's interim financial statements and MD and A for the first and second quarters of fiscal 2004 should also be read in comparing year-to-date results.

Early in the second quarter of fiscal 2004, the Company divested assets comprising a precision cleaning technology business, Eco-Snow Systems, for approximately $8.9 million.

This business has been treated as a discontinued operation, as specified by the CICA, and its results have been removed from operating earnings for the current quarter and first nine months of fiscal 2004 and the comparable periods of fiscal 2003.

The Company has three reportable segments: Automation Systems Group (ASG), Precision Components Group (PCG) and Solar.

Note to Readers The terms Operating Earnings, Operating Loss, Operating Results, Operating Margins, Order Backlog and Order Bookings used in this MD and A have no standardized meanings prescribed within GAAP and therefore may not be comparable to similar measures presented by other companies.

Certain forward looking statements are made in this news release and accompanying MD and A, including statements regarding possible future business.

Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, without limitation, continued acceptance of ATS's products, technologies, customer requirements and other risks detailed from time-to-time in ATS's periodic reports filed with Canadian regulatory authorities.

Impact of Foreign Exchange Changes in foreign exchange rates over the past year, primarily the weakening of the US dollar, had a significantly negative impact on the Company's revenue and Operating Earnings.

The estimated impact of foreign exchange movements on both revenue and operating earnings, net of the offsetting impact of forward exchange contracts, for each of the Company's reportable segments have been summarized in the table below for the third quarter and in a separate table for the 39 week period under the heading "Nine Month Performance".

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