ATS reports first quarter fiscal 2010 results



    TSX: ATA

    CAMBRIDGE, ON, Aug. 12, 2009 /CNW/ - ATS Automation Tooling Systems Inc.
("ATS") today reported its financial results for the three months ended June
28, 2009.

    
    First Quarter Summary

    -   Consolidated revenue was $152.7 million compared to $212.1 million a
        year ago;
    -   Consolidated earnings from operations decreased to $0.5 million from
        $16.3 million a year ago;
    -   Earnings were $0.00 per share (basic and diluted) compared to $0.17
        per share (basic and diluted) a year ago;
    -   A strong balance sheet was maintained with cash net of debt of
        $86.6 million at June 28, 2009 compared to $106.5 million at
        March 31, 2009 and $27.1 million at June 30, 2008.
    

    The Automation Systems Group's ("ASG") customers and the markets into
which ASG sells continue to be negatively impacted by the current global
economic recession. ASG customers have reduced their capital spending and/or
are delaying programs to varying degrees depending on the market segment and
some may experience financial difficulties. At Photowatt, tighter global
credit markets have reduced available funding for solar installation projects.
The resulting reduction in demand for solar modules, in addition to increased
global module capacity in the solar industry, have caused average selling
prices to decrease and could result in sustained over-supply in fiscal 2010.
    "The global economic environment has continued to present our businesses
with significant challenges," said Anthony Caputo, Chief Executive Officer.
"At Photowatt, low demand has extended into the first quarter, while ASG is
increasingly seeing the impact of the economic slow-down in its Order
Bookings. To deal with this, we are continuing with our restructuring and
consolidation initiatives, while seeking to offset negative market conditions
through our downstream initiatives in Photowatt and our efforts to improve
ASG's approach to market."


    
    Financial Results
                                                       3 months     3 months
                                                         ended        ended
    In millions of dollars,                             June 28,     June 30,
     except per share data                                2009         2008
    -------------------------------------------------------------------------
    Revenues from         Automation Systems Group    $   115.2    $   142.7
     continuing          ----------------------------------------------------
     operations           Photowatt Technologies           40.1         69.3
                         ----------------------------------------------------
                          Inter-segment                    (2.6)         0.1
                         ----------------------------------------------------
                          Consolidated                $   152.7    $   212.1
    -------------------------------------------------------------------------
    EBITDA                Automation Systems Group    $    16.7    $    12.3
                         ----------------------------------------------------
                          Photowatt Technologies
                            -  Photowatt France            (3.4)         9.3
                            -  Other Solar                    -         (0.3)
                            -  Gain on sale of building       -          3.2
                            -  Gain on silicon sale           -          2.0
                         ----------------------------------------------------
                          Corporate and Inter-segment
                           elimination                     (6.6)        (4.4)
                         ----------------------------------------------------
                          Consolidated                $     6.7    $    22.1
    -------------------------------------------------------------------------
    Net income from
     continuing
     operations           Consolidated                $     0.3    $    15.0
    -------------------------------------------------------------------------
    Earnings per share    From continuing operations
                           (basic & diluted)          $    0.00    $    0.19
                          After discontinued
                           operations
                           (basic & diluted)          $    0.00    $    0.17
    -------------------------------------------------------------------------

    Automation Systems Group Results

    -   Revenue decreased 19% to $115.2 million from $142.7 million a year
        ago;
    -   EBITDA increased 36% to $16.7 million compared to $12.3 million a
        year ago;
    -   Earnings from operations were $14.8 million, up 44% from
        $10.3 million a year ago;
    -   Period end Order Backlog decreased 11% to $230 million from
        $258 million a year ago;
    -   Order Bookings declined 43% to $96 million compared to $169 million a
        year ago, and included two significant healthcare orders totalling
        approximately $34 million;
    -   Order Bookings were $28 million during the first six weeks of the
        second quarter.
    

    Despite the decline in revenues, operating margin (excluding severance
and restructuring charges of $2.1 million incurred in the quarter) was
maintained at 15% compared to 7% and 15% in the first and fourth quarters of
fiscal 2009, respectively. Revenue increased year over year by 29% in energy,
offset by declines of 13% in healthcare, 58% in computer-electronics, 41% in
automotive, and 15% in "other" markets (primarily consumer products).

    
    Photowatt Technologies Results

    -   Revenue decreased by 42% to $40.1 million from 69.3 million a year
        ago;
    -   Photowatt France's ("PWF") EBITDA was negative $3.4 million compared
        to EBITDA of $9.3 million a year ago;
    -   Photowatt Technologies incurred an operating loss of $7.5 million
        compared to operating earnings of $10.5 million a year ago, which
        included gains on the sale of the Spheral Solar building and silicon
        of $3.2 million and $2.0 million respectively;
    -   Total megawatts (MWs) sold at Photowatt France decreased 40% to
        8.3 MWs from 13.8 MWs in the first quarter of fiscal 2009 - with UMG-
        Si products accounting for 27% of revenue compared to 54% in the
        first quarter a year ago.
    

    The year-over-year decline in operating results reflected lower MWs sold
due to the impact on demand of tighter credit markets, which restricted
funding available for solar projects and lower average selling prices. PWF
increased revenue from the sale of Systems to approximately $24.8 million from
$13.3 million in the first quarter of fiscal 2009, which partially offset
lower module demand and average selling prices. PWF's operating loss included
a $4.7 million warranty charge related to a specific customer contract which
contained an incremental performance clause beyond PWF's standard warranty
terms.

    Quarterly Conference Call

    ATS's quarterly conference call begins at 10 am eastern today and can be
accessed over the Internet at www.atsautomation.com or on the phone at 416 644
3416.

    Annual and Special Meeting of Shareholders

    ATS will hold its Annual and Special Meeting of Shareholders on August
13, 2009 at 10:00 a.m. (eastern) at the Holiday Inn Hotel and Conference
Centre, 30 Fairway Road South, Kitchener, Ontario, Canada.

    About ATS

    ATS Automation Tooling Systems Inc. provides innovative, custom designed,
built and installed manufacturing solutions to many of the world's most
successful companies. Founded in 1978, ATS uses its industry-leading knowledge
and global capabilities to serve the sophisticated automation systems' needs
of multinational customers in industries such as healthcare,
computer/electronics, energy, automotive and consumer products. It also
leverages its many years of experience and skills to fulfill the specialized
automation product manufacturing requirements of customers. Through Photowatt
Technologies, ATS participates in the growing solar energy industry as an
integrated manufacturer of ingots, wafers, cells and modules.
Photowatt-branded products and systems serve businesses, institutions and
homeowners in established and emerging markets. ATS employs approximately
2,400 people at 14 manufacturing facilities in Canada, the United States,
Europe, Southeast Asia and China. The Company's shares are traded on the
Toronto Stock Exchange under the symbol ATA. Visit the Company's website at
www.atsautomation.com.

    Management's Discussion and Analysis

    This Management's Discussion and Analysis ("MD&A") for the three months
ended June 28, 2009 (first quarter of fiscal 2010) is as of August 11, 2009
and provides information on the operating activities, performance and
financial position of ATS Automation Tooling Systems Inc. ("ATS" or the
"Company") and should be read in conjunction with the unaudited interim
consolidated financial statements of the Company for the first quarter of
fiscal 2010. The Company assumes that the reader of this MD&A has access to,
and has read the audited consolidated financial statements and MD&A of the
Company for the year ended March 31, 2009 (fiscal 2009) and, accordingly, the
purpose of this document is to provide a first quarter update to the
information contained in the fiscal 2009 MD&A. These documents and other
information relating to the Company, including the Company's fiscal 2009
audited consolidated financial statements, MD&A and annual information form
may be found on SEDAR at www.sedar.com.

    Notice to Reader

    The Company has two reportable segments: Automation Systems Group ("ASG")
and Photowatt Technologies which includes Photowatt France ("PWF") (the
ongoing Photowatt Technologies operations), and Other Solar which is comprised
of now closed solar divisions, principally Photowatt U.S.A., a small module
assembly facility and sales operation closed during fiscal 2008 and Spheral
Solar, a halted development project that has been wound down. References to
Photowatt's cell "efficiency" means the percentage of incident energy that is
converted into electrical energy in a solar cell. Solar cells and modules are
sold based on wattage output. "Silicon" refers to a variety of silicon
feedstock, including polysilicon, upgraded metallurgical silicon ("UMG-Si")
and polysilicon powders and fines. As described in note 5 to the interim
consolidated financial statements, during fiscal 2009, the Company completed
the sale of its Precision Components Group ("PCG"). The sale included the
segment's key operating assets and liabilities including its China-based
subsidiary. The results of PCG are reported in discontinued operations.

    Non-GAAP Measures

    Throughout this document the term "operating earnings" is used to denote
earnings (loss) from operations. EBITDA is also used and is defined as
earnings (loss) from operations excluding depreciation and amortization (which
includes amortization of intangible assets). The term "margin" refers to an
amount as a percentage of revenue. The terms "earnings (loss) from
operations", "operating earnings", "margin", "operating loss", "operating
results", "operating margin", "EBITDA", "Order Bookings" and "Order Backlog"
do not have any standardized meaning prescribed within Canadian generally
accepted accounting principles ("GAAP") and therefore may not be comparable to
similar measures presented by other companies. Operating earnings and EBITDA
are some of the measures the Company uses to evaluate the performance of its
segments. Management believes that ATS shareholders and potential investors in
ATS use non-GAAP financial measures such as operating earnings and EBITDA in
making investment decisions about the Company and measuring its operational
results. A reconciliation of operating earnings and EBITDA to total Company
net income for the first quarters of fiscal 2010 and 2009 is contained in this
MD&A (See "Reconciliation of EBITDA to GAAP Measures"). EBITDA should not be
construed as a substitute for net income determined in accordance with GAAP.
Order Bookings represent new orders for the supply of automation systems and
products that management believes are firm. Order Backlog is the estimated
unearned portion of ASG revenue on customer contracts that are in process and
have not been completed at the specified date. A reconciliation of Order
Bookings and Order Backlog to total Company revenue for the first quarters of
fiscal 2010 and 2009 is contained in the MD&A (See "ASG Order Backlog
Continuity").


    
    AUTOMATION SYSTEMS GROUP SEGMENT

    ASG Revenue (in millions of dollars)

                                                         Three        Three
                                                        Months       Months
                                                         Ended        Ended
                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------
    Revenue by industry
    Healthcare                                        $    36.0    $    41.4
    Computer-electronics                                   14.3         34.2
    Energy                                                 41.3         32.0
    Automotive                                             14.1         23.9
    Other                                                   9.5         11.2
    -------------------------------------------------------------------------
    Total ASG revenue                                 $   115.2    $   142.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    ASG first quarter revenue was 19% lower than a year ago as a result of
lower year-over-year Order Bookings generated in both the first quarter of
fiscal 2010 and the fourth quarter of fiscal 2009.
    By industrial market, healthcare revenue decreased 13% year over year,
despite higher Order Bookings and Order Backlog in the past two quarters as
certain programs in Order Backlog will be converted to revenue over a longer
period of time. This is the result of the Company's approach to market which
involves selling more comprehensive automation solutions than in the past,
which has extended the period over which Order Backlog will be converted into
revenue. Healthcare continues to be a strong market for ASG, particularly
within North America where significant Order Bookings were won in the first
quarter of fiscal 2010. The 58% decrease in computer-electronics revenues
reflected the lower Order Backlog entering the first quarter compared to a
year ago. Revenue generated in the energy market increased by 29% based on
growth in solar industry Order Bookings during fiscal 2009 compared to fiscal
2008 and increased revenue from the nuclear industry. The 41% decline in
automotive revenue compared to a year ago reflected the ongoing challenges in
the global automotive industry. "Other" revenues decreased 15% year over year
primarily due to lower revenues in the consumer products industry.
    Automation Products Group ("APG"), a division of ASG, contributed revenue
of $31.6 million in the first quarter of fiscal 2010, compared to $25.9
million in the first quarter last year, a 22% increase.


    
    ASG Operating Results (in millions of dollars)

                                                         Three        Three
                                                        Months       Months
                                                         Ended        Ended
                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------
    Earnings from operations                          $    14.8    $    10.3
    Depreciation and amortization                           1.9          2.0
    -------------------------------------------------------------------------
    EBITDA                                            $    16.7    $    12.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Fiscal 2010 first quarter earnings from operations were $14.8 million
(operating margin of 13%) compared to earnings from operations of $10.3
million (operating margin of 7%) in the first quarter of fiscal 2009. Included
in first quarter fiscal 2010 earnings from operations was $2.1 million of
severance and restructuring charges related to division closures initiated in
the first quarter of fiscal 2010 in China and Europe and other workforce
reductions made primarily in ASG's North American operations. In the first
quarter a year ago, the Company incurred $0.1 million of charges related to
closing divisions in Michigan and Thailand.
    Excluding severance and restructuring charges, fiscal 2010 first quarter
operating earnings were $16.9 million (operating margin of 15%) compared to
$10.4 million in fiscal 2009 (operating margin of 7%). The improvement was
driven by cost reductions implemented during fiscal 2009, supply chain cost
reductions and improved program management. On a regional basis, improvements
in Canadian and European operating results, excluding severance and
restructuring charges were partially offset by reduced earnings in the
Company's U.S. operations compared to the same period a year ago.
    ASG depreciation and amortization expense was $1.9 million in the first
quarter of fiscal 2009 compared to $2.0 million in the same period a year ago.

    ASG Order Bookings

    ASG Order Bookings were $96 million, 43% lower than in the first quarter
of fiscal 2009, reflecting fewer opportunities as customers reduced capital
spending and/or delayed programs due to the global economic recession. Fiscal
2010 first quarter Order Bookings include two significant healthcare orders
worth approximately $24 million and $10 million. Order Bookings in the first
six weeks of the second quarter of fiscal 2010 were $28 million.


    
    ASG Order Backlog Continuity (in millions of dollars)

                                                         Three        Three
                                                        Months       Months
                                                         Ended        Ended
                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------
    Opening Order Backlog                             $     255    $     232
    Revenue                                                (115)        (143)
    Order Bookings                                           96          169
    Order Backlog adjustments(1)                             (6)           -
    -------------------------------------------------------------------------
    Total                                             $     230    $     258
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Order Backlog adjustments include foreign exchange and cancellations.


    Order Backlog by Industry (in millions of dollars)

                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------
    Healthcare                                        $     120    $      49
    Computer-electronics                                     15           38
    Energy                                                   62          106
    Automotive                                               18           39
    Other                                                    15           26
    -------------------------------------------------------------------------
    Total                                             $     230    $     258
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At June 28, 2009, ASG Order Backlog was $230 million, 11% lower than at
June 30, 2008 primarily reflecting lower Order Bookings throughout the first
quarter compared to the prior year.
    Increased healthcare Order Backlog reflected higher Order Backlog in
North America compared to the prior year. Declines in energy and
computer-electronics Backlog resulted primarily from lower Order Backlog in
North America. Lower automotive Order Backlog reflected lower Order Backlog in
all regions compared to the prior year. A decrease in "other" Order Backlog
reflected lower Order Backlog primarily in the consumer products industry
across all regions.

    ASG Outlook

    The global economic recession is having a negative impact on ASG's
customers and the markets into which ASG sells. As a result, management
expects continued reductions and/or delays in capital spending to varying
degrees, depending on the market segment. Certain industries, such as
automotive have been more severely impacted by the economic environment,
increasing the risk of bankruptcies. Other industries such as solar are being
impacted by the tighter credit conditions and market challenges, all of which
may have a negative impact on ASG's future profitability.
    To deal with the immediate market uncertainty, management has increased
its focus on all customer opportunities and proposals. Management is also
carefully evaluating the cash and credit terms of customer proposals and where
appropriate, is not pursuing unacceptable or high risk credit terms. ASG has
experienced some success with its new approach to market, however, these
opportunities are sporadic in nature and are not expected to repeat every
quarter.
    Operationally, ASG plans to continue the consolidation and restructuring
of underperforming, non-strategic manufacturing operations. These closures
will occur over the next several quarters as current customer commitments are
completed or moved to other divisions. Completion of these initiatives is
expected to cost between $2 million to $4 million, however, management is
actively monitoring the changing market conditions and will continue to modify
plans accordingly.
    Management expects that the implementation of its strategic initiatives
to improve leadership, business processes and supply chain management across
ASG will have a positive impact on ASG operations. In the short-term however,
management is uncertain as to what extent the improvement initiatives will
offset current market conditions.
    Management believes that the Company's strengthened balance sheet,
improved approach to market and operational improvements will allow ASG to
emerge from the current global economic recession in a strong competitive
position.

    
    PHOTOWATT TECHNOLOGIES SEGMENT


    Photowatt Technologies Revenue (in millions of dollars)

                                                         Three        Three
                                                        Months       Months
                                                         Ended        Ended
                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------
    Total Photowatt France revenue                    $    40.1    $    69.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenue by product
    Polysilicon products                              $    29.2    $    31.6
    UMG-Si products                                        10.9         37.7
    -------------------------------------------------------------------------
    Total Revenue                                     $    40.1    $    69.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Photowatt Technologies fiscal 2010 first quarter revenue of $40.1 million
was 42% lower than in the first quarter of fiscal 2009. Lower year-over-year
revenues primarily reflected a 40% decrease in total megawatts ("MWs") sold at
PWF to 8.3 MWs from 13.8 MWs in the same period a year ago. Lower MWs sold
resulted from lower demand due to tighter credit markets, which restricted
funding available for solar projects and a general reluctance on the part of
customers to commit to new orders until the solar market and average selling
prices stabilize. Decreases in average selling prices per watt also had a
negative impact on total revenues, partially offset by an increase in system
sales. PWF increased revenue from the sale of systems to approximately $24.8
million from $13.3 million in the first quarter of fiscal 2009.
    Total UMG-Si products represented $10.9 million of fiscal 2010 first
quarter revenue compared to $37.7 million a year ago. Average cell efficiency
in the first quarter of fiscal 2010 was approximately 14.2% for UMG-Si cells,
compared to approximately 13.8% during the first quarter of fiscal 2009 as a
result of process improvements made during fiscal 2009. Revenue from
polysilicon products was $29.2 million in the first quarter, compared to $31.6
million in the first quarter of fiscal 2009. Average polysilicon cell
efficiency in the first quarter of fiscal 2010 was approximately 15.0%,
compared to approximately 15.6% during the first quarter of fiscal 2009 due to
the use of lower quality materials during the ramp-up of polysilicon-based
production at PWF.


    
    Photowatt Technologies Operating Results (in millions of dollars)

                                                         Three        Three
                                                        Months       Months
                                                         Ended        Ended
                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------

    Earnings (loss) from operations:
    Photowatt France                                  $    (7.5)   $     5.6
    Other Solar                                               -          4.9
    -------------------------------------------------------------------------
    Photowatt Technologies earnings (loss) from
     operations:                                      $    (7.5)   $    10.5
    -------------------------------------------------------------------------

    Photowatt France EBITDA
    Photowatt France earnings (loss) from operations  $    (7.5)   $     5.6
    Depreciation and amortization                           4.1          3.7
    -------------------------------------------------------------------------
    Photowatt France EBITDA                           $    (3.4)   $     9.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Photowatt Technologies fiscal 2010 first quarter loss from operations was
$7.5 million compared to earnings from operations of $10.5 million a year ago.
    Fiscal 2010 first quarter loss from operations for PWF was $7.5 million
(operating margin of negative 19%), compared to earnings from operations of
$5.6 million (operating margin of 8%) in the first quarter of fiscal 2009. The
year-over-year decline in operating results reflected lower MWs sold and lower
average selling prices, partially offset by improved UMG-Si cell efficiency
and manufacturing yields. Included in the first quarter operating loss is a
$4.7 million warranty charge related to a specific customer contract which
contained an incremental performance clause beyond PWF's standard warranty
terms. To address lower sales volumes, management halted production for a
three-week period in the first quarter of fiscal 2010.
    PWF's operating loss included approximately $0.1 million of costs related
to its investment in PV Alliance ("PVA"), a joint venture involving PWF, EDF
ENR ("EDF"), a partially owned subsidiary of Electricité de France, and CEA
Valorisation ("CEA"). PVA includes Lab-Fab, a research initiative to improve
cell efficiency.
    PWF amortization expense was $4.1 million compared to $3.7 million in the
first quarter of fiscal 2009 reflecting additional depreciation and
amortization from PWF's expansion and improvement initiatives.
    Fiscal 2009 first quarter "Other Solar" earnings from operations included
a gain of $2.0 million on the sale of silicon (not usable by PWF or Spheral
Solar) that had a nominal carrying value, and a gain of $3.2 million on the
sale of the redundant Spheral Solar building in Cambridge, Ontario. The
remaining $0.3 million of expenses primarily related to the wind-down and
closure of the Spheral Solar facility and other clean-up and equipment
decommissioning costs.

    PWF Outlook

    The long-term outlook for the solar energy industry is positive. However,
in the short and medium-term, solar power is, and for the foreseeable future
will be affected by and largely dependent on, the existence of government
incentives. Certain jurisdictions into which PWF sells, such as Spain and
Germany, have subsidy programs that are designed to decline over time.
Reductions in feed-in tariffs and caps in certain jurisdictions were
implemented in the fourth quarter of fiscal 2009 and have had a negative
impact on market demand and average selling prices per watt. Management
believes PWF's average selling prices per watt may continue to be negatively
impacted by these trends in fiscal 2010.
    Tightening in the global credit markets has reduced available funding for
solar installation projects. The resulting reduction in demand for solar
modules, in addition to increased global module capacity in the solar
industry, could result in sustained over-supply in fiscal 2010. This is
expected to continue to negatively impact PWF. To offset this, management is
investigating downstream alternatives to create an additional market for PWF's
products and lock in average selling prices for a larger portion of fiscal
2010 sales. To this end, PWF is seeking strategic supply agreements with
customers for sales contracts that would consume a significant portion of
PWF's current capacity for the next several years. In addition, management is
engaging with financial institutions, investors and governments to enable and
develop solar projects in which PWF would participate.
    To keep PWF cost competitive, management is considering a plan to reduce
the cost structure which may cost up to $10 million. Management is actively
monitoring the changing market conditions and will continue to modify plans
accordingly.
    Management expects improvements in cell efficiency, manufacturing yields
and throughput will reduce PWF's direct manufacturing cost per watt.
Management does not know to what extent planned reductions in cost per watt
will offset the impact of declines in average selling prices on operating
earnings. Second quarter fiscal 2010 operating performance is expected to be
negatively impacted by the usual three week PWF factory shutdown.
    PWF will continue to combine process, automation and production knowledge
with the goal of achieving desirable results that can be replicated and/or
sold in France.


    
    Consolidated Results from Operations (in millions of dollars)

                                                         Three        Three
                                                        Months       Months
                                                         Ended        Ended
                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------
    Revenue                                           $   152.7    $   212.1
    Cost of revenue                                       132.6        178.9
    Selling, general and administrative                    18.8         21.4
    Stock-based compensation                                0.8          0.7
    Gains on sale of assets                                   -         (5.2)
    -------------------------------------------------------------------------
    Earnings from operations                          $     0.5    $    16.3
    -------------------------------------------------------------------------
    Interest expense (income)                         $     0.5    $    (0.5)
    Provision for (recovery of) income taxes               (0.3)         1.8
    Loss from discontinued operations                         -          2.1
    -------------------------------------------------------------------------
    Net income                                        $     0.3    $    12.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Revenue. At $152.7 million, consolidated revenue from continuing
operations was 28% lower than a year ago. The decrease in revenues resulted
from a 19% decrease in ASG revenues and a 42% decrease in Photowatt
Technologies revenues.
    Cost of revenue. Cost of revenue decreased on a consolidated basis by
$46.3 million or 26% to $132.6 million. Gross margin decreased from 16% in the
first quarter of fiscal 2009 to 13% in fiscal 2010. The decrease in gross
margins reflected lower gross margins at PWF due to lower MWs sold and lower
average selling prices in the first quarter of fiscal 2010 compared to a year
ago. Lower gross margins in PWF were partially offset by improved first
quarter gross margins in ASG as a result of cost reductions implemented during
fiscal 2009, supply chain cost reductions and improved program management.
    Selling, general and administrative ("SG&A") expenses. For the first
quarter of fiscal 2010, SG&A expenses decreased 12% or $2.6 million to $18.8
million compared to the respective prior-year period. SG&A expenses for the
first quarter of fiscal 2010 included $2.3 million of Company-wide severance
and restructuring costs compared to $0.1 million in the first quarter of
fiscal 2009. Lower SG&A costs reflected cost reductions implemented during
fiscal 2009, in addition to lower professional fees and lower profit sharing
and selling expenses.
    Gains on sale of assets. During the first quarter of fiscal 2009, the
Company completed delivery to a third party of silicon that was not usable by
PWF or Spheral Solar. The silicon had a nominal carrying value and the Company
recognized a gain of $2.0 million on the sale.
    During the first quarter of fiscal 2009, the Company completed the sale
of the redundant Spheral Solar building in Cambridge, Ontario for net proceeds
of $16.0 million. A net gain of $3.2 million was recognized on the sale.
    There were no such gains recorded in the first quarter of fiscal 2010.
    Stock-based compensation cost. For the first quarter, stock-based
compensation expense increased to $0.8 million from $0.7 million a year
earlier primarily reflecting the issuance of employee stock options offset by
cancellations.
    The expense associated with the Company's performance-based stock options
is recognized in income over the estimated assumed vesting period at the time
the stock options are granted. Upon the Company's stock price trading at or
above a stock price performance threshold for a specified minimum number of
trading days, the options vest. When the performance-based options vest, the
Company is required to recognize all previously unrecognized expenses
associated with the vested stock options in the period in which they vest.
    As at June 28, 2009, the following performance-based stock options were
un-vested:


    
                                             Weighted
                                              average    Current   Remaining
    Stock price    Number of  Grant date    remaining       year  expense to
     performance     options   value per      vesting    expense   recognize
     threshold   outstanding      option       period     ('000s)  (in 000's)
    -------------------------------------------------------------------------
    $5.49             41,666   $    1.66    3.4 years   $      5   $      63
    $7.49             41,667        1.66    4.7 years          3          64
    $8.41            266,667        2.11    1.8 years         45         302
    $8.50            889,333        1.41    3.4 years         63         836
    $9.08            218,666        2.77    1.3 years         59         272
    $9.49             41,667        1.66    5.4 years          3          65
    $10.41           266,667        2.11    3.2 years         31         381
    $10.50           889,333        1.41    4.3 years         54         898
    $11.08           218,667        2.77    2.5 years         36         380
    $12.41           266,666        2.11    4.2 years         26         413
    $13.08           281,667        2.77    3.5 years         32         422
    $15.09             5,290        3.68    0.0 years          1           -
    $16.60             5,290        3.68    0.8 years          1           4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Earnings from operations. First quarter fiscal 2010 consolidated earnings
from operations were $0.5 million, compared to earnings from operations of
$16.3 million a year ago. Fiscal 2010 first quarter performance reflected:
operating earnings of $14.8 million at ASG (operating earnings of $10.3
million a year ago); Photowatt Technologies operating loss of $7.5 million
(operating earnings of $10.5 million a year ago); and inter-segment
eliminations and corporate expenses of $6.8 million ($4.5 million of costs a
year ago).
    Interest expense and interest income. Net interest expense increased to
$0.5 million in the first quarter of fiscal 2010 compared to interest income
of $0.5 million a year ago. The increase in net interest expense is primarily
due to new credit facilities in PWF partially offset by higher cash balances
maintained through the first quarter of fiscal 2010 compared to the same
period a year ago.
    Provision for income taxes. The Company's effective income tax rate
differs from the combined Canadian basic federal and provincial income tax
rate of 33.0% (in the first quarter of fiscal 2009 the combined rate was
33.5%) primarily as a result of the utilization of unrecognized loss
carryforwards in Canada and losses incurred in parts of Europe, the benefit of
which was not recognized for financial statement reporting purposes.
    Net income from continuing operations. For the first quarter of fiscal
2010, net income from continuing operations was $0.3 million (0 cents earnings
per share basic and diluted) compared to net earnings from continuing
operations of $15.0 million (19 cents earnings per share basic and diluted) a
year ago.
    Loss from discontinued operations, net of tax. During fiscal 2009, the
Company sold the key operating assets and liabilities including equipment,
current assets, trade accounts payable and certain other assets and
liabilities of its Precision Components Group ("PCG") for cash proceeds of
$4.3 million and promissory notes with a face value of $2.7 million. This
transaction was completed in the fourth quarter of fiscal 2009. Accordingly,
the results of PCG operations have been segregated and presented separately as
discontinued operations.
    The loss from discontinued operations in the first quarter of fiscal 2009
was $2.1 million. There were no discontinued operations in the first quarter
of fiscal 2010. See note 5 to the interim consolidated financial statements
for further details on discontinued operations.
    Net income. For first quarter of fiscal 2010, net income was $0.3 million
(0 cents earnings per share basic and diluted) compared to net income of $12.9
million (17 cents earnings per share basic and diluted) for the same period
last year.


    
    Reconciliation of EBITDA to GAAP measures (in millions of dollars)

                                                         Three        Three
                                                        Months       Months
                                                         Ended        Ended
                                                        June 28,     June 30,
                                                          2009         2008
    -------------------------------------------------------------------------
    EBITDA
      Automation Systems                              $    16.7    $    12.3
      Photowatt Technologies                               (3.4)        14.2
      Corporate and inter-segment                          (6.6)        (4.4)
    -------------------------------------------------------------------------
      Total EBITDA                                    $     6.7    $    22.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Less: Depreciation and amortization expense
      Automation Systems                              $     1.9    $     2.0
      Photowatt Technologies                                4.1          3.7
      Corporate and inter-segment                           0.2          0.1
    -------------------------------------------------------------------------
      Total depreciation and amortization expense     $     6.2    $     5.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings (loss) from operations
      Automation Systems                              $    14.8    $    10.3
      Photowatt Technologies                               (7.5)        10.5
      Corporate and inter-segment                          (6.8)        (4.5)
    -------------------------------------------------------------------------
      Total earnings from operations                  $     0.5    $    16.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Less: Interest expense (income)                   $     0.5    $    (0.5)
          Provision for (recovery of) income taxes         (0.3)         1.8
          Loss from discontinued operations                   -          2.1
    -------------------------------------------------------------------------
    Net income                                        $     0.3    $    12.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Foreign Exchange

    A decrease in the value of the Canadian dollar relative to the U.S.
dollar and the Euro had a positive impact on the Company's revenue, earnings
from operations and net income in the first quarter of fiscal 2010 compared to
the first quarter of fiscal 2009. ATS follows a transaction hedging program to
help mitigate the impact of short-term foreign currency movements, primarily
in its Canadian operations which often transact business in U.S. dollars. This
hedging activity consists primarily of forward foreign exchange contracts for
the sale of U.S. dollars. Purchasing third-party goods and services in U.S.
dollars by Canadian operations also acts as a partial offset to U.S. dollar
exposure. Management estimates that its forward foreign exchange contract
hedging program is primarily effective for movements in currency rates within
a four-to-six-month period. See note 13 to the interim consolidated financial
statements for details on the derivative financial instruments outstanding at
June 28, 2009.


    
    Period Average Market Exchange Rates in CDN$

                                            Three months ended
                                          06/28/2009   06/30/2008   % change
    -------------------------------------------------------------------------
    US $                                    1.1660       1.0096        15.5%
    Euro                                    1.5881       1.5770         0.1%
    Singapore $                             0.7919       0.7388         7.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Liquidity, Cash Flow and Financial Resources

    At June 28, 2009, the Company had cash and short-term investments of
$145.1 million compared to $142.4 million at March 31, 2009. In the first
quarter of fiscal 2010, cash flows used in operating activities were $13.8
million, compared to cash flows used in operating activities of $4.7 million
in the first quarter of fiscal 2009. The Company's total debt to total equity
ratio at June 28, 2009 was 0.1:1. At June 28, 2009, the Company had $68.8
million of unutilized credit available under existing operating and long-term
credit facilities and a further $22.9 million available under letter of credit
facilities.
    In the first quarter of fiscal 2010, the Company's investment in non-cash
working capital increased by $20.3 million or 12%. Consolidated accounts
receivable decreased 7% or $8.3 million, due primarily to lower revenues in
the first quarter of fiscal 2010. Net contracts in progress increased by 6% or
$2.7 million compared to March 31, 2009. The Company actively manages its
accounts receivable and net construction-in-process balances through billing
terms on long-term contracts and by focusing on improving collection efforts.
Inventories decreased by 1% or $1.1 million. The Company is targeting to
increase the turnover of its inventory. In the short-term, these efforts will
be impacted by the Company's ability to increase sales volumes, particularly
in PWF. Deposits, prepaid assets and other decreased by 15% or $4.0 million
due to a reduction in the fair market value of forward foreign exchange
contracts and a reduction in restricted cash being used to secure letters of
credit. Accounts payable decreased 14% on lower purchases, consistent with
lower revenue levels in the first quarter of fiscal 2010.
    Property, plant and equipment purchases totalled $6.0 million in the
first quarter of fiscal 2010. Expenditures at PWF totalling $5.5 million were
primarily used for production equipment. Included in PWF capital expenditures
was $2.7 million related to PVA for production equipment and building
improvements. Total ASG and Corporate capital expenditures were $0.5 million.
    The Company's subsidiary, PWF has credit facilities of (euro)37.6
million, through short and long-term debt agreements and capital lease
agreements. The interest rates applicable to the credit facilities range from
Euribor plus 0.5% to Euribor plus 1.8% and 4.9% per annum. Certain of the
credit facilities are secured by certain assets of PWF and are subject to debt
leverage tests. PWF is in compliance with these covenants.
    In July 2009, PWF established a 6,480 Euro capital lease obligation,
repayable over five years. The finance lease bears interest of Euribor plus
1.9% and is secured by certain assets of PWF and a commitment to restrict
payments to the Company.
    The Company has an additional unsecured credit facility available of 2.0
million Swiss francs. The credit facility bears interest at 6.0% per annum. A
portion of the available credit facility is secured by a letter of credit.
    The Company's primary credit facility (the "Credit Agreement") provides
total credit facilities of up to $85 million, comprised of an operating credit
facility of $65 million and a letter of credit facility of up to $20 million
for certain purposes. The operating credit facility is subject to restrictions
regarding the extent to which the outstanding funds advanced under the
facility can be used to fund certain subsidiaries of the Company. The Credit
Agreement, which is secured by the assets, including real estate, of the
Company's North American legal entities and a pledge of shares and guarantees
from certain of the Company's legal entities, is repayable in full on October
31, 2009.
    The operating credit facility is available in Canadian dollars by way of
prime rate advances, letter of credit for certain purposes and/or bankers'
acceptances and in U.S. dollars by way of base rate advances and/or LIBOR
advances. The interest rates applicable to the operating credit facility are
determined based on certain financial ratios. For prime rate advances and base
rate advances, the interest rate is equal to the bank's prime rate or the
bank's U.S. dollar base rate in Canada, respectively, plus 1.25% to 2.25%. For
bankers' acceptances and LIBOR advances, the interest rate is equal to the
bankers' acceptance fee or the LIBOR, respectively, plus 2.25% to 3.25%.
    Under the Credit Agreement, the Company pays a standby fee on the
unadvanced portions of the amounts available for advance or draw-down under
the credit facilities at a rate of 0.5% per annum.
    The Credit Agreement is subject to a debt leverage test, a current ratio
test, and a cumulative EBITDA test. Under the terms of the Credit Agreement,
the Company is restricted from encumbering any assets with certain permitted
exceptions. The Credit Agreement also restricts the Company from repurchasing
its common shares, paying dividends and from acquiring and disposing of
certain assets. The Company is in compliance with these covenants and
restrictions.
    The Company expects that continued cash flows from operations, together
with cash and short-term investments on hand and credit available under
operating and long-term credit facilities, will be more than sufficient to
fund its requirements for investments in working capital, capital assets and
strategic investment plans including potential acquisitions. Management is
currently seeking to secure additional credit facilities to replace the Credit
Agreement expiring in October 2009.
    No stock options were exercised during the first quarter of fiscal 2010.
At August 7, 2009 the total number of shares outstanding was 87,277,155.

    Contractual Obligations

    Information on the Company's lease and contractual obligations is
detailed in the consolidated annual financial statements and MD&A for the year
ended March 31, 2009 found at www.sedar.com. The Company's off balance sheet
arrangements consist of operating lease financing related primarily to
facilities and equipment.


    
    Consolidated Quarterly Results

    ($ in thousands, except
     per share amounts)          Q1 2010     Q4 2009     Q3 2009     Q2 2009
    -------------------------------------------------------------------------
    Revenue                    $ 152,701   $ 201,774   $ 221,739   $ 219,071

    Earnings (loss) from
     operations                $     502   $  17,743   $  18,472   $  13,563

    Net income (loss) from
     continuing operations     $     325   $  14,041   $  15,814   $  12,688

    Net income (loss)          $     325   $  13,506   $  12,316   $   9,272

    Basic earnings (loss) per
     share from continuing
     operations                $    0.00   $    0.17   $    0.20   $    0.16

    Diluted earnings (loss)
     per share from continuing
     operations                $    0.00   $    0.16   $    0.20   $    0.16

    Basic earnings (loss) per
     share                     $    0.00   $    0.16   $    0.16   $    0.12

    Diluted earnings (loss)
     per share                 $    0.00   $    0.15   $    0.16   $    0.12

    ASG Order Bookings         $  96,000   $ 126,000   $ 157,000   $ 133,000

    ASG Order Backlog          $ 230,000   $ 255,000   $ 282,000   $ 247,000



    ($ in thousands, except
     per share amounts)          Q1 2009     Q4 2008     Q3 2008     Q2 2008
    -------------------------------------------------------------------------
    Revenue                    $ 212,071   $ 186,474   $ 174,457   $ 146,931

    Earnings (loss) from
     operations                $  16,278   $   8,183   $  24,426   $ (16,913)

    Net income (loss) from
     continuing operations     $  14,991   $  10,343   $  24,365   $ (15,492)

    Net income (loss)          $  12,930   $   7,939   $  (3,662)  $ (18,763)

    Basic earnings (loss) per
     share from continuing
     operations                $    0.19   $    0.13   $    0.32   $   (0.23)

    Diluted earnings (loss)
     per share from continuing
     operations                $    0.19   $    0.13   $    0.32   $   (0.23)

    Basic earnings (loss) per
     share                     $    0.17   $    0.10   $   (0.05)  $   (0.28)

    Diluted earnings (loss)
     per share                 $    0.17   $    0.10   $   (0.05)  $   (0.28)

    ASG Order Bookings         $ 169,000   $ 137,000   $ 115,000   $ 133,000

    ASG Order Backlog          $ 258,000   $ 232,000   $ 211,000   $ 220,000
    

    Interim financial results are not necessarily indicative of annual or
longer term results because many of the individual markets served by the
Company tend to be cyclical in nature. General economic trends, product life
cycles and product changes may impact ASG Order Bookings, PWF sales volumes,
and the Company's earnings in any of its markets. ATS typically experiences
some seasonality with its revenue and earnings due to summer plant shutdowns
by its customers and summer shutdown at PWF. Accordingly, revenue during the
second quarter is usually lower than in the first, third and fourth quarters.
In PWF, slower sales may occur in the winter months, when the weather may
impair the ability to install its products in certain geographical areas.

    Changes in Accounting Policies

    Effective April 1, 2009, the Company retroactively adopted the Canadian
Institute of Chartered Accountants ("CICA") Handbook Section 3064, "Goodwill
and intangible assets." The adopted standard establishes guidance for the
recognition, measurement, presentation and disclosure of goodwill and
intangible assets, including internally generated intangible assets. As
required by the standard, computer software assets have been retroactively
reclassified on the consolidated balance sheets from property, plant and
equipment to intangible assets. The net book value of computer software
reclassified as of March 31, 2009 was $3.0 million. As of June 28, 2009,
computer software of $2.7 million is included within intangible assets. There
is no impact on previously reported net income.

    Future Accounting Changes

    CICA Handbook Section 1582 "Business Combinations" which replaces
Handbook Section 1581 "Business Combinations" and is converged with IFRS 3
"Business Combinations" establishes standards for the measurement of a
business combination and the recognition and measurement of assets acquired
and liabilities assumed. This standard is effective for fiscal years beginning
on or after January 1, 2011. The Company may elect to early adopt this
standard and if so, will be required to early adopt Section 1601 "Consolidated
Financial Statements" and Section 1602 "Non-Controlling Interests". The
Company is evaluating the impact of adoption of this new section in connection
with its conversion to IFRS.
    CICA Handbook Section 1601 "Consolidated Financial Statements" and
Handbook Section 1602 "Non-Controlling Interests" replace Handbook Section
1600 "Consolidated Financial Statements". Handbook Section 1601 carries
forward the existing Canadian guidance on aspects of the preparation of
consolidated financial statements subsequent to acquisition other than
non-controlling interests. Handbook Section 1602 establishes standards for the
accounting of non-controlling interests of a subsidiary in the preparation of
consolidated financial statements subsequent to a business combination. The
standards are effective for fiscal years beginning on or after January 1,
2011. The Company may elect to early adopt the standards and if so, will be
required to early adopt Handbook Section 1582 "Business Combinations". The
Company is evaluating the impact of adoption of this new section in connection
with its conversion to IFRS.

    International Financial Reporting Standards

    The CICA's Accounting Standards Board has announced that Canadian
publicly-accountable enterprises will adopt International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board
effective January 1, 2011. Although IFRS uses a conceptual framework similar
to Canadian GAAP, differences in accounting policies and additional required
disclosures will need to be addressed.
    The Company commenced its IFRS conversion project in fiscal 2009. The
project consists of four phases: diagnostic; design and planning; solution
development; and implementation. The diagnostic phase was completed in fiscal
2009 with the assistance of external advisors. This work involved a high-level
review of the major differences between current Canadian GAAP and IFRS and a
preliminary assessment of the impact of those differences on the Company's
accounting and financial reporting, systems and other business processes. The
areas of highest potential impact include: property, plant and equipment;
provisions and contingencies; and IFRS 1: first time adoption, as well as more
extensive presentation and disclosure requirements under IFRS. Until
accounting policy choices are made during the solution development phase, the
Company will be unable to quantify the impact of IFRS on its Consolidated
Financial Statements.
    The Company has completed the design and planning phase of its IFRS
conversion plan. The Company has established a core implementation team and
steering committee comprised of members of senior management. In addition, the
IFRS conversion project strategy, governance structure and schedule has been
implemented. In early fiscal 2010, the Company commenced the solution
development phase, which will include detailed review of all relevant IFRS
standards, selection of new accounting policies where applicable, including
IFRS 1 transition date first time adoption exemptions, development of model
IFRS financial statements, identification of information gaps and necessary
changes in reporting, processes and systems, development of a process to
prepare IFRS comparative information and further training for employees.

    Controls and Procedures

    The Chief Executive Officer ("CEO") and the Chief Financial Officer
("CFO") are responsible for establishing and maintaining disclosure controls
and procedures and internal controls over financial reporting for the Company.
The control framework used in the design of disclosure controls and procedures
and internal control over financial reporting is the internal control
integrated framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
    Management, including the CEO and CFO, does not expect that the Company's
disclosure controls or internal controls over financial reporting will prevent
or detect all errors and all fraud or will be effective under all potential
future conditions. A control system is subject to inherent limitations and, no
matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met.
    During the three months ended June 28, 2009, there have been no changes
in the Company's internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over financial reporting.

    Note to Readers: Forward-Looking Statements

    This news release and management's discussion and analysis of financial
conditions, and results of operations of ATS contains certain statements that
constitute forward-looking information within the meaning of applicable
securities laws ("forward-looking statements"). Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of ATS, or
developments in ATS's business or in its industry, to differ materially from
the anticipated results, performance, achievements or developments expressed
or implied by such forward-looking statements. Forward-looking statements
include all disclosure regarding possible events, conditions or results of
operations that is based on assumptions about future economic conditions and
courses of action. Forward-looking statements may also include, without
limitation, any statement relating to future events, conditions or
circumstances. ATS cautions you not to place undue reliance upon any such
forward-looking statements, which speak only as of the date they are made.
Forward-looking statements relate to, among other things: the ASG healthcare
market; the global economic recession and management's expectation of
continued reductions and/or delays in capital spending, risk of customer
financial difficulties, and the resulting negative impact on ASG's future
profitability; evaluation of cash and credit terms in customer proposals;
sporadic nature of opportunities resulting from ASG's new approach to market;
ASG plans to continue consolidation and restructuring efforts and the
associated timeline and expected costs; management's plan to continue to
monitor market conditions and modify plans accordingly; management's
expectation that strategic initiatives will have a positive impact on ASG
operations and uncertainty as to what extent the improvement initiatives will
offset current market conditions; management's belief that the balance sheet,
approach to market and operational improvements will allow ASG to emerge from
the current global economic recession in a strong competitive position; short,
medium, and long term outlook for the solar energy industry; management's
belief that PWF's average selling prices per watt may continue to be
negatively impacted in fiscal 2010 by trends towards reductions in feed-in
tariffs and caps; potential for sustained oversupply of solar modules in the
market during fiscal 2010, the expected negative impact on PWF and
management's efforts towards offsetting this; management's consideration of a
plan to reduce PWF cost structure and the associated cost; management's
expectation of reduction in PWF's direct manufacturing cost per watt and
uncertainty as to what extent planned reductions in cost per watt will offset
the impact of declines in average selling prices on operating earnings; impact
of usual three week PWF factory shutdown; intention of PWF to continue to
combine process, automation and production knowledge with goal of achieving
desirable results; ATS's target to increase turnover of its inventory; ATS's
expectations with respect to cash flows; additional credit facilities;
seasonality of revenues; and the introduction, evaluation and adoption of new
accounting policies and standards. The risks and uncertainties that may affect
forward-looking statements include, among others: general market performance
including capital market conditions and availability and cost of credit;
economic market conditions; impact of factors such as health of automotive
customers, financial failure and/or bankruptcy of customers, increased pricing
pressure and possible margin compression; the success or failure of management
strategies to address the weak global economy and weakened financial condition
of actual and potential customers; foreign currency and exchange risk; the
relative strength of the Canadian dollar; performance of the market sectors
that ATS serves; that one or more customers experience bankruptcy despite
focus on credit terms; that consolidation and restructuring efforts take
longer than expected and/or incur greater costs than expected; that strategic
initiatives will not have the intended impact on ASG operations; ability of
Photowatt to identify downstream alternatives and lock in favourable average
selling prices with their customers; success or failure of management's
efforts to reduce cost per watt at PWF; potential inability to achieve
favourable results at PWF through combing process, automation and production
knowledge; risk that credit agreement to replace exiting credit facility is
not concluded and/or that future credit arrangements are less favourable than
those currently in place; extent of market demand for solar products; the
availability and possible reduction or elimination of government subsidies and
incentives for solar products in various jurisdictions; political, labour or
supplier disruptions in manufacturing and supply of silicon; the usefulness or
value of existing silicon supplies dissipates due to market conditions or for
other reasons; PWF is unable to secure further acceptable silicon feedstock at
favourable prices; reversal of current silicon supply arrangements and
negotiation of new supply arrangements; potential inability of PVA to achieve
improvements in cell efficiency, including problems with the technology or
commercialization thereof; slow-down or reversal of progress being made with
the efficiency and cost per watt of solar modules either through PVA research
and development efforts or PWF's independent efforts; ability to effectively
implement PVA projects and ability to properly manage the PVA relationship;
the development of superior or alternative technologies to those developed by
ATS; the success of competitors with greater capital and resources in
exploiting their technology; market risk for developing technologies; risks
relating to legal proceedings to which ATS is or may becomes a party; exposure
to product liability claims of Photowatt Technologies; risks associated with
greater than anticipated tax liabilities or expenses; and other risks detailed
from time to time in ATS's filings with Canadian provincial securities
regulators. Forward-looking statements are based on management's current
plans, estimates, projections, beliefs and opinions, and ATS does not
undertake any obligation to update forward-looking statements should
assumptions related to these plans, estimates, projections, beliefs and
opinions change.

    
    August 11, 2009



                     ATS AUTOMATION TOOLING SYSTEMS INC.
                         Consolidated Balance Sheets
                    (in thousands of dollars - unaudited)

                                                        June 28     March 31
                                                           2009         2009
    -------------------------------------------------------------------------
    ASSETS
    Current assets
    Cash and short-term investments                   $ 145,092    $ 142,361
    Accounts receivable                                 112,191      120,479
    Investment tax credits                               17,538       14,538
    Costs and earnings in excess of billings on
     contracts in progress                               84,025       86,079
    Inventories (note 4)                                136,464      137,600
    Future income taxes                                   7,604        3,669
    Deposits, prepaid assets and other (note 6)          22,502       26,507
    -------------------------------------------------------------------------
                                                        525,416      531,233

    Property, plant and equipment                       197,603      201,192
    Goodwill                                             38,199       39,990
    Intangible assets                                     5,863        6,419
    Future income taxes                                   3,125        2,812
    Portfolio investments                                 3,903        3,245
    Other assets (note 7)                                49,634       51,172
    -------------------------------------------------------------------------
                                                      $ 823,743    $ 836,063
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Bank indebtedness (note 11)                       $  23,198    $     142
    Accounts payable and accrued liabilities            148,125      172,935
    Billings in excess of costs and earnings on
     contracts in progress                               38,860       43,600
    Future income taxes                                  18,619       15,243
    Current portion of long-term debt (note 11)           4,308        4,133
    Current portion of obligations under capital
     leases (note 11)                                     3,379        3,409
    -------------------------------------------------------------------------
                                                        236,489      239,462

    Long-term debt (note 11)                             11,158       10,502
    Long-term portion of obligations under capital
     leases (note 11)                                    16,494       17,652

    Shareholders' equity
    Share capital                                       479,537      479,537
    Contributed surplus                                   9,296        8,722
    Accumulated other comprehensive income (note 14)      5,750       15,494
    Retained earnings                                    65,019       64,694
    -------------------------------------------------------------------------
                                                        559,602      568,447
    -------------------------------------------------------------------------
                                                      $ 823,743    $ 836,063
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Contingencies (note 17)
    See accompanying notes to interim consolidated financial statements



                     ATS AUTOMATION TOOLING SYSTEMS INC.
                    Consolidated Statements of Operations
       (in thousands of dollars, except per share amounts - unaudited)

                                                          Three months ended
    -------------------------------------------------------------------------
                                                        June 28     March 31
                                                           2009         2009
    -------------------------------------------------------------------------
    Revenue                                           $ 152,701    $ 212,071
    -------------------------------------------------------------------------

    Operating costs and expenses
      Cost of revenue                                   132,623      178,850
      Selling, general and administrative                18,766       21,393
      Stock-based compensation (note 8)                     810          744
    Gain on sale of silicon                                   -       (2,006)
    Gain on sale of building (note 5)                         -       (3,188)
    -------------------------------------------------------------------------
    Earnings from operations                                502       16,278
    -------------------------------------------------------------------------

    Other expenses (income)
      Interest on long-term debt                            301           12
      Other interest                                        239         (498)
    -------------------------------------------------------------------------
                                                            540         (486)
    -------------------------------------------------------------------------

    Income (loss) from continuing operations before
     income taxes                                           (38)      16,764
    Provision for (recovery of) income taxes (note 16)     (363)       1,773
    -------------------------------------------------------------------------

    Net income from continuing operations                   325       14,991
    Loss from discontinued operations, net of tax
     (note 5)                                                 -       (2,061)
    -------------------------------------------------------------------------
    Net income                                        $     325    $  12,930
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per share (note 9)
    Basic and diluted - from continuing operations    $    0.00    $    0.19
    Basic and diluted - from discontinued operations          -        (0.02)
    -------------------------------------------------------------------------
                                                      $    0.00    $    0.17
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



                     ATS AUTOMATION TOOLING SYSTEMS INC.
          Consolidated Statements of Shareholders' Equity and Other
                         Comprehensive Income (Loss)
                    (in thousands of dollars - unaudited)

    Three months ended                                         June 28, 2009
    -------------------------------------------------------------------------
                                            Accumulated
                                               Other
                                               Compre-
                                              hensive                Total
                                               Income                Share-
                          Share  Contributed   (Loss)    Retained   holders'
                         Capital   Surplus   (note 14)   Earnings    Equity
    -------------------------------------------------------------------------

    Balance, beginning
     of period         $ 479,537  $   8,722  $  15,494  $  64,694  $ 568,447

    Comprehensive
     income (loss)
      Net income               -          -          -        325        325
      Currency
       translation
       adjustment              -          -    (12,185)         -    (12,185)
      Net unrealized
       gain on
       available
       for-sale
       financial
       assets                  -          -        658          -        658
      Net unrealized
       gain on
       derivative
       financial
       instruments
       designated as cash
       flow hedges             -          -        377          -        377
      Gain transferred to
       net income for
       derivatives
       designated
       as cash flow
       hedges                  -          -      1,406          -      1,406
                                                                   ----------
    Total comprehensive
     loss                                                             (9,419)

    Stock-based
     compensation (note 8)     -        574          -          -        574
    -------------------------------------------------------------------------
    Balance, end of the
     period            $ 479,537  $   9,296  $   5,750  $  65,019  $ 559,602
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Three months ended                                         June 30, 2008
    -------------------------------------------------------------------------
                                            Accumulated
                                               Other
                                               Compre-
                                              hensive                Total
                                               Income                Share-
                          Share  Contributed   (Loss)    Retained   holders'
                         Capital   Surplus   (note 14)   Earnings    Equity
    -------------------------------------------------------------------------
    Balance, beginning
     of period         $ 432,825  $   6,370  $  (6,675) $  16,670  $ 449,190

    Comprehensive
     income (loss)
      Net income               -          -          -     12,930     12,930
      Currency
       translation
       adjustment              -          -     (2,186)         -     (2,186)
      Net unrealized
       loss on
       available
       for-sale
       financial assets        -          -     (1,682)         -     (1,682)
      Net unrealized
       gain on
       derivative
       financial
       instruments
       designated
       as cash flow
       hedges                  -          -        329          -        329
      Loss transferred
       to net income
       for derivatives
       designated as
       cash flow hedges        -          -         (6)         -         (6)
                                                                   ----------
    Total comprehensive
     income                                                            9,385

    Stock-based
     compensation (note 8)     -        692          -          -        692

    Costs related to
     shares issued for
     rights offering         (69)         -          -          -        (69)
    -------------------------------------------------------------------------

    Balance, end of the
     period            $ 432,756  $   7,062  $ (10,220) $  29,600  $ 459,198
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



                     ATS AUTOMATION TOOLING SYSTEMS INC.
                    Consolidated Statements of Cash Flows
                    (in thousands of dollars - unaudited)

                                                          Three months ended
    -------------------------------------------------------------------------
                                                        June 28      June 30
                                                           2009         2008
    -------------------------------------------------------------------------
    Operating activities:
    Net income                                        $     325    $  12,930
    Items not involving cash
      Depreciation and amortization                       6,203        5,821
      Future income taxes                                  (872)         510
      Other items not involving cash                         11          362
      Stock-based compensation (note 8)                     810          744
      Loss (gain) on disposal of property, plant
       and equipment                                         52       (3,154)
    -------------------------------------------------------------------------
    Cash flow from operations                             6,529       17,213
    Change in non-cash operating working capital        (20,290)     (21,922)
    -------------------------------------------------------------------------
    Cash flows used in operating activities             (13,761)      (4,709)
    -------------------------------------------------------------------------

    Investing activities:
    Acquisition of property, plant and equipment         (6,023)      (6,849)
    Acquisition of intangible assets                        (96)        (648)
    Investments, silicon deposits and other              (1,426)        (100)
    Proceeds from disposal of assets                        165       16,003
    Restricted cash (note 6)                              2,576       (8,146)
    -------------------------------------------------------------------------
    Cash flows provided by (used in) investing
     activities                                          (4,804)         260
    -------------------------------------------------------------------------

    Financing activities:
    Bank indebtedness (note 11)                          22,625      (19,189)
    Share issue costs                                         -          (69)
    Proceeds from long-term debt (note 11)                1,135       10,787
    Repayment of long-term debt (note 11)                  (131)           -
    Repayment of obligations under capital leases
     (note 11)                                             (811)           -
    -------------------------------------------------------------------------
    Cash flows provided by (used in) financing
     activities                                          22,818       (8,471)
    -------------------------------------------------------------------------
    Effect of foreign exchange rate changes on cash
     and short-term investments                          (1,522)        (220)
    -------------------------------------------------------------------------
    Increase (decrease) in cash and short-term
     investments                                          2,731      (13,140)
    Cash and short-term investments, beginning of
     period                                             142,361       55,816
    -------------------------------------------------------------------------
    Cash and short-term investments, end of period    $ 145,092    $  42,676
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental information

    Cash income taxes paid                            $     383    $      12
    Cash interest paid                                $      85    $     206
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



                     ATS AUTOMATION TOOLING SYSTEMS INC.
             Notes to Interim Consolidated Financial Statements

    1.  Significant accounting policies:

    (i) The accompanying interim consolidated financial statements of ATS
    Automation Tooling Systems Inc. and its subsidiaries (collectively "ATS"
    or the "Company") have been prepared in accordance with Canadian
    generally accepted accounting principles ("GAAP") and the accounting
    policies and method of their application are consistent with those
    described in the annual consolidated financial statements for the year
    ended March 31, 2009 except for the adoption of the new accounting
    standards described in note 2 herein. These interim consolidated
    financial statements do not include all disclosures required by GAAP for
    annual financial statements and should be read in conjunction with the
    Company's annual consolidated financial statements for the year ended
    March 31, 2009. Certain figures for the previous year have been
    reclassified to conform with the current year's interim consolidated
    financial statement presentation.

    (ii) The preparation of these interim consolidated financial statements
    in conformity with GAAP requires management to make estimates and
    assumptions that may affect the reported amounts of assets and
    liabilities and disclosure of contingent assets and liabilities at the
    date of the interim consolidated financial statements and the reported
    amount of revenue and expenses during the reporting period. Actual
    results could differ from these estimates. Significant estimates and
    assumptions are used when accounting for items such as impairment of
    long-lived assets, recoverability of deferred development costs, fair
    value of reporting units and goodwill, warranties, income taxes, future
    income tax assets, determination of estimated useful lives of intangible
    assets and property, plant and equipment, impairment of portfolio
    investments, contracts in progress, inventory provisions, revenue
    recognition, contingent liabilities, and allowances for uncollectible
    accounts receivable.

    2.  Changes in accounting policies:

    Effective April 1, 2009, the Company retroactively adopted the Canadian
    Institute of Chartered Accountants ("CICA") Handbook Section 3064
    "Goodwill and Intangible Assets" which replaced CICA Handbook Section
    3062 "Goodwill and Other Intangible Assets" and CICA Handbook Section
    3450 "Research and Development Costs". The adopted standard establishes
    guidance for the recognition, measurement, presentation and disclosure of
    goodwill and intangible assets including internally generated intangible
    assets.

    As required by the standard, the Company has retroactively reclassified
    computer software assets on the consolidated balance sheets from
    property, plant and equipment to intangible assets. The net book value of
    computer software reclassified as of March 31, 2009 was $2,968. As of
    June 28, 2009 computer software of $2,728 is included within intangible
    assets. There is no impact on previously reported net income or loss.

    3.  Future accounting changes:

    The CICA's Accounting Standards Board has announced that Canadian
    publicly accountable enterprises will adopt International Financial
    Reporting Standards ("IFRS") as issued by the International Accounting
    Standards Board effective January 1, 2011. Although IFRS uses a
    conceptual framework similar to Canadian GAAP, differences in accounting
    policies and additional required disclosures will need to be addressed.
    The Company is currently assessing the impact of this announcement on its
    consolidated financial statements.

    CICA Handbook Section 1582 "Business Combinations" which replaces
    Handbook Section 1581 "Business Combinations" and is converged with IFRS
    3 "Business Combinations" establishes standards for the measurement of a
    business combination and the recognition and measurement of assets
    acquired and liabilities assumed. This standard is effective for fiscal
    years beginning on or after January 1, 2011. The Company may elect to
    early adopt this standard and if so, will be required to early adopt
    Section 1601 "Consolidated Financial Statements" and Section 1602 "Non-
    Controlling Interests". The Company is evaluating the impact of adoption
    of this new section in connection with its conversion to IFRS.

    CICA Handbook Section 1601 "Consolidated Financial Statements" and
    Handbook Section 1602 "Non-Controlling Interests" replace Handbook
    Section 1600 "Consolidated Financial Statements". Handbook Section 1601
    carries forward the existing Canadian guidance on aspects of the
    preparation of consolidated financial statements subsequent to
    acquisition other than non-controlling interests. Handbook Section 1602
    establishes standards for the accounting of non-controlling interests of
    a subsidiary in the preparation of consolidated financial statements
    subsequent to a business combination. The standards are effective for
    fiscal years beginning on or after January 1, 2011. The Company may elect
    to early adopt the standards and if so, will be required to early adopt
    Handbook Section 1582 "Business Combinations". The Company is evaluating
    the impact of adoption of this new section in connection with its
    conversion to IFRS.

    4.  Inventories:
                                                        June 28     March 31
                                                           2009         2009
    -------------------------------------------------------------------------
    Inventories are summarized as follows:
      Raw materials                                   $  87,669    $  84,678
      Work in process                                    13,421       11,711
      Finished goods                                     35,374       41,211
    -------------------------------------------------------------------------
                                                      $ 136,464    $ 137,600
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The amount of inventory recognized as an expense and included in cost of
    revenue accounted for other than by the percentage-of-completion method
    during the three months ended June 28, 2009 was $48,030 (three months
    ended June 30, 2008: $56,111). The amount charged to net income and
    included in cost of revenue for the write-down of inventory for valuation
    issues during the three months ended June 28, 2009 was $991 (three months
    ended June 30, 2008: $581).

    5.  Discontinued operations:

    (i) During the year ended March 31, 2009, the Company sold the key
    operating assets and liabilities, including equipment, current assets,
    trade accounts payable and certain other assets and liabilities of its
    Precision Components Group ("PCG") for cash proceeds of $4,250 and
    promissory notes with a face value of $2,750. Accordingly, the results of
    operations and financial position of PCG have been segregated and
    presented separately as discontinued operations in the interim
    consolidated financial statements. The results of the discontinued
    operations are as follows:

                                                          Three months ended
    -------------------------------------------------------------------------
                                                        June 28      June 30
                                                           2009         2008
    -------------------------------------------------------------------------
    Revenue                                           $       -    $  12,183

    Loss from discontinued operations, net of tax     $       -    $  (2,061)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (ii) During the year ended March 31, 2009, the Company sold the land and
    building related to its Spheral Solar development project which was
    halted in early fiscal 2008. The land and building were sold for net
    proceeds of $16,000 and a gain of $3,188 before and after tax.

    (iii) During the year ended March 31, 2009, the Company reclassified
    long-lived assets that were previously held for sale, as held for use
    assets, as the Company no longer believes these assets will be sold
    within one year.

    6.  Deposits, prepaid assets and other:
                                                        June 28     March 31
                                                           2009         2009
    -------------------------------------------------------------------------
    Prepaid assets                                    $   3,013    $   2,755
    Restricted cash(i)                                    9,091       11,892
    Silicon and other deposits                            8,398        8,731
    Forward contracts and other                           2,000        3,129
    -------------------------------------------------------------------------
                                                      $  22,502    $  26,507
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (i) Restricted cash consists of cash collateralized to secure letters of
        credit.

    7.  Other assets:
                                                        June 28     March 31
                                                           2009         2009
    -------------------------------------------------------------------------
    Silicon deposits                                  $  49,634    $  51,021
    Other                                                     -          151
    -------------------------------------------------------------------------
                                                      $  49,634    $  51,172
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  Stock-based compensation:

    In the calculation of the stock-based compensation expense in the interim
    consolidated statements of operations, the fair values of the Company's
    stock option grants were estimated using the Black-Scholes option pricing
    model for time vesting stock options and binomial option pricing models
    for performance based stock options.

    During the three months ended June 28, 2009 the Company granted 350,000
    time vesting options (375,000 in the three months ended June 30, 2008).
    The options granted vest over 4 years from the date of issue. During the
    three month periods ended June 28, 2009 and June 30, 2008, no performance
    based options were granted. Performance based stock options vest based on
    the Company's stock trading at or above certain thresholds for a
    specified number of minimum trading days. These performance options
    expire on the seventh anniversary after the date that the options vest.
    During the three month periods ended June 28, 2009 and June 30, 2008, no
    performance based options vested.

    The fair value of time vesting options issued during the period were
    estimated at the date of grant using the Black-Scholes option pricing
    model with the following weighted average assumptions:

                                                          Three months ended
    -------------------------------------------------------------------------
                                                        June 28      June 30
                                                           2009         2008
    -------------------------------------------------------------------------
    Weighted average risk-free interest rate              2.11%        3.24%
    Dividend yield                                           0%           0%
    Weighted average expected life                   4.55 years    4.0 years
    Expected volatility                                     60%          45%
    Number of stock options granted:
      Time vested                                       350,000      375,000
    Weighted average exercise price per option        $    5.10    $    7.80
    Weighted average value per option:
      Time vested                                     $    2.56    $    3.03
    -------------------------------------------------------------------------

    9.  Earnings (loss) per share:

    Weighted average number of shares used in the computation of earnings
    (loss) per share is as follows:

                                                          Three months ended
    -------------------------------------------------------------------------
                                                        June 28      June 30
                                                           2009         2008
    -------------------------------------------------------------------------
    Basic                                            87,277,155   77,277,155
    Diluted                                          87,277,155   77,489,356
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months ended June 28, 2009, all stock options to purchase
    common shares are excluded from the weighted average common shares in the
    calculation of diluted earnings per share as they are anti-dilutive
    (6,002,405 stock options were excluded in the three months ended June 30,
    2008).

    10. Segmented disclosure:

    The Company evaluates performance based on two reportable segments:
    Automation Systems and Photowatt Technologies. The Automation Systems
    segment produces custom-engineered turn-key automated manufacturing
    systems and test systems. The Photowatt Technologies segment is a high
    volume manufacturer of photovoltaic products.

    The Company accounts for inter-segment revenue at current market rates,
    negotiated between the segments.

                                                          Three months ended
    -------------------------------------------------------------------------
                                                        June 28      June 30
                                                           2009         2008
    -------------------------------------------------------------------------
    Revenue
      Automation Systems                              $ 115,201    $ 142,735
      Photowatt Technologies                             40,082       69,337
      Inter-segment revenue                              (2,582)          (1)
    -------------------------------------------------------------------------
    Consolidated                                      $ 152,701    $ 212,071
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) from operations
      Automation Systems                              $  14,752    $  10,302
      Photowatt Technologies                             (7,533)      10,513
      Inter-segment operating earnings (loss)              (675)         293
      Stock-based compensation                             (810)        (744)
      Other expenses                                     (5,232)      (4,086)
    -------------------------------------------------------------------------
    Consolidated                                      $     502    $  16,278
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11. Bank indebtedness and long-term debt:

    The Company's primary credit facility (the "Credit Agreement") provides
    total credit facilities of up to $85,000, comprised of an operating
    credit facility of $65,000 and a letter of credit facility of up to
    $20,000 for certain purposes. The operating credit facility is subject to
    restrictions regarding the extent to which the outstanding funds advanced
    under the facility can be used to fund certain subsidiaries of the
    Company. The Credit Agreement, which is secured by the assets, including
    real estate, of the Company's North American legal entities and a pledge
    of shares and guarantees from certain of the Company's legal entities, is
    repayable in full on October 31, 2009.

    The operating credit facility is available in Canadian dollars by way of
    prime rate advances, letter of credit for certain purposes and/or
    bankers' acceptances and in U.S. dollars by way of base rate advances
    and/or LIBOR advances. The interest rates applicable to the operating
    credit facility are determined based on certain financial ratios. For
    prime rate advances and base rate advances, the interest rate is equal to
    the bank's prime rate or the bank's U.S. dollar base rate in Canada,
    respectively, plus 1.25% to 2.25%. For bankers' acceptances and LIBOR
    advances, the interest rate is equal to the bankers' acceptance fee or
    the LIBOR, respectively, plus 2.25% to 3.25%.

    Under the Credit Agreement, the Company pays a standby fee on the
    unadvanced portions of the amounts available for advance or draw-down
    under the credit facilities at a rate of 0.5% per annum.

    The Credit Agreement is subject to a debt leverage test, a current ratio
    test, and a cumulative EBITDA test. Under the terms of the Credit
    Agreement, the Company is restricted from encumbering any assets with
    certain permitted exceptions. The Credit Agreement also restricts the
    Company from repurchasing its common shares, paying dividends and from
    acquiring and disposing certain assets. The Company is in compliance with
    these covenants and restrictions.

    The Company's subsidiary, Photowatt International S.A.S. has credit
    facilities including capital lease obligations of 37,596 Euro. The
    interest rates applicable to the credit facilities range from Euribor
    plus 0.5% to Euribor plus 1.8% and 4.9% per annum. Certain of the credit
    facilities are secured by certain assets of Photowatt International
    S.A.S. and are subject to debt leverage tests. The Company is in
    compliance with these covenants.

    In July 2009, Photowatt International S.A.S. established a 6,480 Euro
    capital lease obligation, repayable over five years. The finance lease
    bears interest of Euribor plus 1.9% and is secured by certain assets of
    Photowatt International S.A.S. and a commitment to restrict payments to
    the Company.

    The Company has an additional unsecured credit facility available of
    2,000 Swiss francs. The credit facility bears interest of 6.0% per annum.
    A portion of the available credit facility is secured by a letter of
    credit.

    In May 2009, a credit facility in the amount of 500 Euro expired.

    The following amounts were outstanding:

                                                        June 28     March 31
                                                           2009         2009
    -------------------------------------------------------------------------
    Bank indebtedness:
    Primary credit facility                           $       -    $       -
    Other facilities                                     23,198          142
    -------------------------------------------------------------------------
                                                      $  23,198    $     142
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Long-term debt:
    Primary credit facility                           $       -    $       -
    Other facilities                                     15,466       14,635
    -------------------------------------------------------------------------
                                                      $  15,466    $  14,635
    Less: current portion                                 4,308        4,133
    -------------------------------------------------------------------------
                                                      $  11,158    $  10,502
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Obligations under capital lease:
    Future minimum lease payments                     $  22,347    $  23,802
    Less: amount representing interest (at rates
     ranging from 3% to 5%)                               2,474        2,741
    -------------------------------------------------------------------------
                                                      $  19,873    $  21,061
    Less: current portion                                 3,379        3,409
    -------------------------------------------------------------------------
                                                      $  16,494    $  17,652
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. Restructuring:

    In fiscal 2008, the Company commenced a restructuring program to improve
    operating performance. The restructuring program included workforce
    reductions, and the closure of underperforming, non-strategic divisions.
    In the three months ended June 30, 2008, severance and restructuring
    expenses associated with this restructuring program were $160.

    In fiscal 2009, the Company accelerated and expanded its previous
    restructuring program. In the three months ended June 28, 2009, severance
    and restructuring expenses associated with the closure of two divisions
    and other workforce reductions were $2,299, primarily in the Automation
    Systems group.

    The following is a summary of the changes in the provision for
    restructuring costs:

                                                        June 28      June 30
                                                           2009         2008
    -------------------------------------------------------------------------
    Balance, beginning of the three month period      $   4,535    $  12,585

    Accruals                                              2,299          160
    Cash payments                                        (2,964)      (4,476)
    Foreign exchange                                        (33)         (37)
    -------------------------------------------------------------------------
    Balance, end of period                            $   3,837    $   8,232
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    13. Financial instruments:

    Fair value hedges

    Derivatives that are not designated in hedging relationships are
    classified as held-for-trading and the changes in fair value are
    recognized in selling, general and administrative expenses in the interim
    consolidated statements of operations. During the three months ended
    June 28, 2009, the fair value of derivative financial assets classified
    as held-for-trading and included in deposits and prepaid assets decreased
    by $232 (increased by $122 during the three months ended June 30, 2008)
    and the fair value of derivative financial liabilities classified as
    held-for-trading and included in accounts payable and accrued liabilities
    increased by $1,391 (decreased by $108 during the three months ended
    June 30, 2008).

    Cash flow hedges

    During the three months ended June 28, 2009, an unrealized gain of
    $21 was recognized in selling, general and administrative expense for the
    ineffective portion of cash flow hedges (unrealized gain of $23 during
    the three months ended June 30, 2008). After-tax unrealized gains of
    $427 included in accumulated other comprehensive income at June 28, 2009
    are expected to be reclassified to earnings over the next 12 months when
    the revenue is recorded (unrealized gains of $227 at June 30, 2008).

    14. Accumulated other comprehensive income:

    The components of accumulated other comprehensive income are as follows:

                                                        June 28     March 31
                                                           2009         2009
    -------------------------------------------------------------------------
    Accumulated currency translation adjustment       $   6,013    $  18,198

    Accumulated unrealized loss on available-for-sale
       financial assets                                    (690)      (1,348)

    Accumulated unrealized net gain (loss) on
     derivative financial instruments designated as
     cash flow hedges                                       427       (1,356)
    -------------------------------------------------------------------------
    Accumulated other comprehensive income            $   5,750    $  15,494
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    15. Investment in Joint Venture:

    During the year ended March 31, 2008, Photowatt International S.A.S., EDF
    ENR Reparties and CEA Valorisation entered into an agreement to establish
    the PV Alliance, a joint venture. The joint venture became effective in
    October 2007 with contributions of cash by the venturers.

    This is a jointly-controlled enterprise and accordingly, the Company
    proportionately consolidates its 40% share of assets, liabilities,
    revenues and expenses in the interim consolidated financial statements.

    The following is a summary of the Company's proportionate share of the
    joint venture:

                                                        June 28      June 30
                                                           2009         2008
    -------------------------------------------------------------------------
    Balance Sheet
    Current assets                                    $   1,933    $     277
    Property and equipment                                2,985            1
    Intangible assets                                     1,564            -
    Current liabilities                                  (4,326)        (172)
    Long-term debt                                       (2,244)           -
    -------------------------------------------------------------------------
    Net assets                                        $     (88)   $     106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                        June 28      June 30
    Three months ended                                     2009         2008
    -------------------------------------------------------------------------
    Statement of Operations
    Net loss                                          $    (145)   $    (151)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the year ended March 31, 2009, the PV Alliance established
    shareholder loans proportionately worth 2,628 Euro, to be received in
    instalments until September 2009. During the three months ended June 28,
    2009, the PV Alliance received an additional shareholder loan
    proportionately worth 200 Euro. The loans are repayable over five years,
    guaranteed by the signing of a Pledge Agreement, and bear interest at the
    maximum fiscally deductible rate.

    An operating lease was established during the year ended March 31, 2009
    for a portion of the Photowatt International S.A.S. building used by PV
    Alliance and will result in annual lease payments proportionately worth
    83 Euro. The contract with the lessee expires in 2018 with an option to
    terminate the lease in 2016. The lease contains an option to extend the
    lease for an additional nine years.

    During the three months ended June 28, 2009, the PV Alliance received
    government assistance of 192 Euro.

    16. Income taxes:

    For the three months ended June 28, 2009, the Company's effective income
    tax rate differs from the combined Canadian basic federal and provincial
    income tax rate of 33.0% (June 30, 2008 - 33.5%) primarily as a result of
    the utilization of unrecognized loss carryforwards in Canada and losses
    incurred in Europe, the benefit of which was not recognized for financial
    statement reporting purposes. In the three months ended June 30, 2008,
    the Company's effective income tax rate differed from the combined
    Canadian basic federal and provincial income tax rate primarily as a
    result of the utilization of unrecognized loss carryforwards in Canada
    and parts of Europe.

    17. Contingencies:

    In the normal course of operations, the Company is party to a number of
    lawsuits, claims and contingencies. Accruals are made in instances where
    it is probable that liabilities have been incurred and where such
    liabilities can be reasonably estimated. Although it is possible that
    liabilities may be incurred in instances for which no accruals have been
    made, the Company does not believe that the ultimate outcome of these
    matters will have a material impact on its consolidated financial
    position.

    18. Cyclical nature of the business:

    Interim financial results are not necessarily indicative of annual or
    longer term results because many of the individual markets served by the
    Company tend to be cyclical in nature. General economic trends, product
    life cycles and product changes may impact Automation Systems order
    bookings, Photowatt Technologies volumes, and the Company's earnings in
    any of its markets. ATS typically experiences some seasonality with its
    revenue and earnings due to summer plant shutdowns by its customers and
    summer shutdown at Photowatt International S.A.S. Accordingly, revenue
    during the second quarter is usually lower than in the first, third and
    fourth quarters. In Photowatt Technologies, slower sales may occur in the
    winter months, when the weather may impair the ability to install its
    products in certain geographical areas.
    





For further information:

For further information: Maria Perrella, Chief Financial Officer, Carl
Galloway, Vice-President and Treasurer, (519) 653-6500


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