ATS reports first quarter: Significant increases in ASG orders and MgSi solar production, announces Photowatt spin-out



    TSX: ATA

    CAMBRIDGE, ON, Aug. 9 /CNW/ - ATS Automation Tooling Systems Inc. today
reported its financial results for the three months ended June 30, 2007 -
including significant increases in new automation order bookings, order
backlog, and production of refined metallurgical silicon ("MgSi") solar
products at Photowatt France - and announced its strategy to spin out
Photowatt to ATS shareholders.

    
    Highlights

    -   New Automation Order Bookings increase to $146 million from
        $98 million in the first quarter of fiscal 2007.
    -   Order Backlog expands to $217 million compared to $176 million a year
        ago.
    -   Operating results improve at ASG Cambridge and Ohio.
    -   MgSi revenue at Photowatt France increases to $16.7 million compared
        to nil a year ago.
    -   Board of Directors approves strategy to distribute shares in
        Photowatt to ATS shareholders (the "Spin Out").
    -   A $110 million rights offering to raise funds for Photowatt launched
        and is expected to be completed as scheduled on August 16, 2007.
    

    "ATS made excellent strategic progress in the first quarter," said Ron
Jutras, President and Chief Executive Officer. "Automation Systems Group (ASG)
began its performance recovery with improved results experienced in our
Cambridge and Ohio operations. Of vital importance, ASG generated a second
consecutive quarter of much improved order bookings and with it a 23% increase
in year-over-year order backlog levels. As a result, ASG order backlog to
start the second quarter is at its highest level in five quarters and is much
more balanced across our global operations compared to a year ago. This growth
in Order Backlog is key to improving the utilization of our global resources
and performance this year."

    Solar Share Distribution

    The Company's Board of Directors has approved a strategy to distribute
shares of Photowatt to ATS shareholders. This proposed Spin Out, consistent
with ATS's commitment to creating value for shareholders through its solar
business, will result in Photowatt becoming a standalone public company, and
supports the strategy announced in June 2007 to turn ATS into a pure
automation systems solutions business. Distributing the shares of Photowatt to
ATS shareholders is expected to allow the full value of each business to be
recognized in the share price of each enterprise in the stock market.
Furthermore, the Spin Out will not dilute ATS shareholders' ownership interest
in Photowatt and will allow ATS shareholders to continue to participate in the
expected future growth of Photowatt France.
    The Spin Out of Photowatt is targeted for completion in the spring of
2008. This schedule reflects the guidance provided by the Company's
experienced advisers after consideration of the need to complete necessary
regulatory filings, secure advance tax rulings, recruit a separate board of
directors and receive approvals from ATS shareholders and securities
regulators.
    During the preparatory period for the Spin Out, ATS intends to continue
to strengthen Photowatt to make it a more attractive and valuable enterprise.
Key activities to be undertaken include the deployment of the new capital
raised through the rights offering as outlined in the rights offering
prospectus, improving the efficiency of MgSi solar cells, and recruiting a CEO
for Photowatt.

    
    First Quarter Financial Summary
                                                       3 months     3 months
                                                          ended        ended
    in millions of dollars,                             June 30,     June 30,
     except per share data                                 2007         2006
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Revenue from          ASG                         $   107.8    $   121.8
     continuing          ----------------------------------------------------
     operations           Photowatt                        47.7         44.4
                         ----------------------------------------------------
                          PCG                              19.4         25.3
                         ----------------------------------------------------
                          Inter-segment elimination        (0.1)        (0.3)
                         ----------------------------------------------------
                          Consolidated                $   174.8    $   191.2
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    EBITDA                ASG                         $     2.7    $     5.6
                         ----------------------------------------------------
                          Photowatt Technologies:
                            - Photowatt France        $     2.7    $    12.5
                            - Photowatt USA                (0.3)        (0.2)
                            - Spheral Solar,
                               corporate and inter-
                               solar eliminations          (1.5)        (5.2)
                          Total                             0.9          7.1
                         ----------------------------------------------------
                          PCG                         $     0.6    $     2.7
                         ----------------------------------------------------
                          Inter-segment elimination   $    (5.0)   $    (2.4)
                         ----------------------------------------------------
                          Consolidated                $    (0.8)   $    13.0
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net Income (loss)     Consolidated                $    (8.9)   $     0.3
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Net loss per share    From continuing operations  $   (0.15)   $    0.04
                         ----------------------------------------------------
                          After discontinued
                           operations                 $   (0.15)   $    0.01
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    ASG Orders            ASG Order Bookings          $     146    $      98
                         ----------------------------------------------------
                          ASG Order Backlog           $     217    $     176
    -------------------------------------------------------------------------

    Automation Systems Group (ASG) Results

    -   Order Bookings in the first quarter of fiscal 2008 increased 49% to
        $146 million compared to $98 million in the first quarter of fiscal
        2007.
    -   ASG Order Backlog increased 23% to $217 million from $176 million in
        the first quarter of fiscal 2007 and has increased $32 million, or
        17%, since year end.
    -   Excluding severance costs of $2.1 million in the current quarter, ASG
        EBITDA was $4.8 million, compared to adjusted EBITDA of $3.6 million
        in the fourth quarter of fiscal 2007.
    

    Core Business Outlook

    Management expects to see continued performance improvements in
Automation Systems Group operations in fiscal 2008. Although the strength of
the Canadian dollar and restructuring in the North American automotive
industry remain distinct challenges, management expects the substantial
increase in order backlog since year end, combined with the recent reduction
of excess capacity in North American ASG operations, will lead to higher
factory utilization and improved results for the balance of fiscal 2008.
    To further strengthen performance in ASG, management intends to continue
to aggressively push forward with its four focused initiatives: improve core
operations through better resource utilization and further cost improvements;
develop new customer relationships as well as industry and regional automation
markets; further advance the recognized ATS global brand; and, enhance
employee talent development.

    
    Photowatt Results

    -   Photowatt France revenue in the first quarter included $16.7 million
        from sales of MgSi modules, (nil first quarter last year) as
        Photowatt successfully ramped production of this product and
        attracted European buyers.
    -   Photowatt France revenue increased 22% from the fourth quarter of
        fiscal 2007 and was up 5% compared to the first quarter a year ago
        despite a 13% year-over-year decline in average per watt selling
        prices.
    -   10.7 megawatts of solar products were sold in the first quarter
        compared to 8.7 megawatts in the first quarter of fiscal 2007 and
        8.0 megawatts in the fourth quarter of fiscal 2007.
    -   Photowatt France generated EBITDA of $2.7 million in the first
        quarter compared to $5.9 million in the fourth quarter, primarily
        reflecting declines in industry prices per watt, shortages and rising
        prices of polysilicon and the Company's planned ramp up of MgSi
        module production.
    -   Photowatt Technologies combined operating loss was $2.4 million
        compared to an operating loss of $31.1 million in the fourth quarter
        of fiscal 2007, reflecting substantially lower Spheral Solar and
        solar corporate costs and a sequential reduction in Photowatt USA's
        operating loss as activity at this underperforming facility began to
        wind down in advance of its closure.
    

    Photowatt France Commentary

    As part of its strategy to manage the impact of supply shortages and
higher prices for polysilicon, Photowatt successfully transitioned a
significant amount of its production to MgSi in the first quarter. As a
result, sales of silicon modules made from 100% MgSi represented approximately
40% of Photowatt France first quarter of fiscal 2008 revenue compared to 11%
in the fourth quarter of fiscal 2007 and nil in the first quarter of fiscal
2007.
    Now that Photowatt has successfully ramped production of its MgSi
products to substantial levels, the next phase in its planned strategy is to
optimize production processes for MgSi, including improving power conversion
efficiency, reducing silicon usage per watt, increasing labour efficiencies
and reducing scrap rates.
    Photowatt is also seeking additional long-term polysilicon supply
contracts to offset the limited supply and low quality of polysilicon
feedstock currently available in the short-term market.

    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
3427.

    Notice to Reader

    The terms EBITDA and adjusted EBITDA used in this press release are
non-GAAP measures. See Management's Discussion and Analysis attached.

    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, automotive and consumer products. It also leverages its
many years of repetitive manufacturing experience and skills to fulfill the
specialized repetitive equipment manufacturing requirements of customers.
Through its solar business, ATS participates in the growing solar energy
industry and through its precision components business it produces, in high
volume, precision components and subassemblies. ATS employs approximately
3,500 people at 24 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 30, 2007 (first quarter of fiscal 2008) provides detailed
information on the Company's operating activities for the first quarter of
fiscal 2008 and should be read in conjunction with the unaudited interim
consolidated financial statements of the Company for the three months ended
June 30, 2007 (first quarter fiscal 2008). 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 fiscal 2007 and, accordingly, the
purpose of this document is to provide a first quarter update to the
information contained in the fiscal 2007 MD&A. These documents and other
information relating to the Company, including the Company's fiscal 2007
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 three reportable segments: Automation Systems Group
("ASG"), Photowatt Technologies ("Photowatt"), and Precision Components Group
("PCG"). Photowatt Technologies is comprised of Photowatt France, Photowatt
USA and Spheral Solar. Photowatt France consists of an integrated solar ingot,
wafer, cell and module production facility in France. Photowatt USA is a small
module assembly and sales operation in the United States, which is in the
process of being closed. Spheral Solar is a now halted development project
based on spheral technology. Any reference to solar production capacity
assumes the use of polysilicon at currently experienced levels of efficiency.
Actual solar capacity may vary materially for a number of reasons including
the use of refined metallurgical silicon ("MgSi"), changes in cell
efficiencies and/or changes in production processes. 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, MgSi and polysilicon powders and fines.

    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, amortization (which
includes amortization of intangible assets, and impairment of goodwill) and
segment and business unit allocation of corporate costs. The term "adjusted
EBITDA" that is used by the Company from time to time and is defined as EBITDA
excluding certain adjustments as described in the MD&A. The term "margin"
refers to an amount as a percentage of revenue. The terms "earnings from
operations", "operating earnings", "margin", "operating loss", "operating
results", "operating margin", "EBITDA", "adjusted EBITDA", "adjusted EBITDA
margin", "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. A reconciliation to total Company revenue and earnings from
operations for the first quarter of fiscal 2008 and 2007 is contained in the
unaudited interim Consolidated Financial Statements for the three months ended
June 30, 2007. Operating earnings, EBITDA and adjusted EBITDA are some of the
measures the Company uses to evaluate the performance of its segments. ATS
presents EBITDA and adjusted EBITDA to show its baseline performance before
certain non-cash and restructuring-related expenses and other items that are
considered by management to be outside of ATS's expected normal ongoing
operational results. Management believes that ATS shareholders and potential
investors in ATS use non-GAAP financial measures such as operating earnings,
EBITDA and adjusted EBITDA in making investment decisions about the Company
and measuring its operational results. EBITDA and adjusted EBITDA should not
be construed as substitutes for net income determined in accordance with GAAP.

    Automation Systems Group Segment

    
    ASG Revenue
    (in millions of dollars)
                                                          Three        Three
                                                         Months       Months
                                                          Ended        Ended
                                                        June 30,     June 30,
                                                           2007         2006
    -------------------------------------------------------------------------
    Revenue by industry
    Healthcare                                        $    29.1    $    47.5
    Computer-electronics                                   30.4         33.8
    Automotive                                             27.3         30.5
    Other                                                  21.0         10.0
    -------------------------------------------------------------------------
    Total ASG revenue                                 $   107.8    $   121.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    ASG first quarter revenue was 11% lower than a year ago, reflecting lower
Order Backlog entering the first quarter of fiscal 2008, compared to the Order
Backlog levels entering the same period of fiscal 2007. As expected, the
increases in Order Bookings experienced in the fourth quarter of fiscal 2007
did not have a significant impact on first quarter revenues as these projects
had not yet moved from design into manufacturing when materials are procured,
equipment is built and proportionately higher levels of revenues are
recognized.
    By industrial market, healthcare revenue reflected lower Order Backlog
levels entering the quarter compared to a year earlier. Generally, management
believes the sales cycle in healthcare is longer and less predictable than in
other markets and this has created variability in healthcare Order Bookings
and revenue on a quarterly basis. The 10% decline in automotive revenue
compared to a year ago reflects the ongoing impact of restructuring within the
North American automotive market, as well as management's decision to be more
selective in bidding on certain assignments in this industry. Reflecting
recent assignments awarded in emerging markets for ATS including the consumer
products and nuclear industries, "Other" revenue more than doubled year over
year.
    Repetitive Equipment Manufacturing ("REM") revenue was $10.9 million in
the first quarter of fiscal 2008, compared to $12.4 million in the first
quarter last year and $9.6 million in the fourth quarter of fiscal 2007.
    Foreign exchange negatively impacted ASG first quarter fiscal 2008
revenues by an estimated $1.1 million compared to the first quarter of fiscal
2007, primarily reflecting a stronger Canadian dollar relative to the US
dollar.

    ASG Operating Results

    Excluding severance costs in the first quarter of fiscal 2008
($2.1 million) and first quarter of fiscal 2007 ($0.4 million), ASG operating
income this year was $2.7 million compared to $3.2 million a year ago. Current
quarter operating results also reflect the 11% decrease in revenue from a year
ago and the impact of foreign exchange. Foreign exchange negatively impacted
ASG's operating earnings by an estimated $0.6 million compared to the first
quarter of fiscal 2007.
    During the first quarter of fiscal 2008, the Company continued to make
structural and operational improvements within its ASG operations and believes
these changes, including recent additions to senior leadership, will help to
deliver better results as revenue and factory utilization increase on the
strength of higher Order Backlog. Performance at ASG Cambridge and Ohio, two
of the largest facilities within ASG North America, is now beginning to
stabilize following significant restructuring in the final months of fiscal
2007. Combined, these facilities made positive contributions to operating
income in the first quarter compared to significant losses in the fourth
quarter of fiscal 2007. ASG's European operations also achieved improved
year-over-year results. Operating results at ASG's operations in Asia were
lower than a year ago, reflecting lower margins on some first-time
assignments.

    
    ASG Non-GAAP Reconciliation
    (in millions of dollars)

                                                          Three        Three
                                                         Months       Months
                                                          Ended        Ended
                                                        June 30,     June 30,
                                                           2007         2006
    -------------------------------------------------------------------------

    Operating income                                  $     0.6    $     2.8
    Depreciation and amortization                           2.1          2.8
    -------------------------------------------------------------------------
    EBITDA (Note 1)                                   $     2.7    $     5.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 1: Operating income and EBITDA includes $2.1 million and
            $0.4 million of severance costs in the first quarters of fiscal
            2008 and fiscal 2007, respectively.
    

    Automation Systems Group Order Bookings and Order Backlog

    ASG Order Bookings in the first quarter of fiscal 2008 were $146 million,
49% higher than in the first quarter of fiscal 2007 and 9% higher than the
fourth quarter of fiscal 2007. Order Bookings in the first six weeks of the
second quarter of fiscal 2008 were $59 million.
    At June 30, 2007, ASG Order Backlog was $217 million, 23% higher than at
June 30, 2006 and 17% higher than at March 31, 2007. Year-over-year, Order
Backlog increased 11% in healthcare, 71% in computer-electronics and 48% in
Other reflecting strong Order Bookings in the first quarter of fiscal 2008 in
all three segments. The increase in healthcare Order Backlog reflects the
Company's continuing strategy to penetrate this market. Included in healthcare
Order Backlog is the US $14 million Order Booking secured during the first
quarter that the Company previously announced. Automotive Order Backlog was at
a level consistent with last year reflecting continued weakness in order
activity in the North American automotive market and the Company's decision to
be selective in bidding on assignments in this market, partially offset by
increased activity in automotive markets in Europe.

    
    Automation Systems Order Backlog by Industry
    (in millions of dollars, except percentage change)

                                           June 30,     June 30,  Percentage
                                              2007         2006       Change
    -------------------------------------------------------------------------
    Healthcare                           $      80    $      72          11%
    Computer-electronics                        58           34          71%
    Automotive                                  45           47         (4)%
    Other                                       34           23          48%
    -------------------------------------------------------------------------
    Total                                $     217    $     176          23%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Automation Systems Group Outlook

    The outlook for fiscal 2008 expressed in the annual MD&A for fiscal 2007
is unchanged. While management continues to believe that the underlying global
trends that create demand for ASG's automated manufacturing solutions are
attractive, the strength of the Canadian dollar and ongoing restructuring
within the North American automotive market are expected to continue to
present challenges to performance. However, management expects the increases
in Order Bookings levels over the past two quarters and the resulting
improvement in Order Backlog to start the second quarter of fiscal 2008 will
allow revenue to trend upward as fiscal 2008 progresses. As well, management
expects the combination of higher expected revenue and ongoing operational
improvements, resulting in part from the recent reduction of excess capacity
in North America, should also contribute to higher factory utilization - a key
driver of earnings.
    To further strengthen performance in ASG, management intends to continue
to aggressively push forward with its four focused initiatives: improve core
operations through better resource utilization and further cost improvements;
develop new customer relationships as well as industry and regional automation
markets; further advance the recognized ATS global brand; and, enhance
employee talent development.

    
    Photowatt Technologies Segment

    Photowatt Technologies Revenue
    (in millions of dollars)
                                                          Three        Three
                                                         Months       Months
                                                          Ended        Ended
                                                        June 30,     June 30,
                                                           2007         2006
    -------------------------------------------------------------------------
    Revenue by region
    Germany                                           $    22.5    $    15.8
    Spain                                                   9.7         14.7
    Rest of Europe                                         11.0         11.5
    North America                                           2.8          1.4
    Asia/Other                                              1.7          1.0
    -------------------------------------------------------------------------
    Total revenue                                     $    47.7    $    44.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revenue by operating facility
    Photowatt France                                  $    46.2    $    43.8
    Photowatt USA                                           2.6          1.7
    Inter-solar eliminations                               (1.1)        (1.1)
    -------------------------------------------------------------------------
    Total revenue                                     $    47.7    $    44.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Photowatt's total revenue (inclusive of Photowatt France and Photowatt
USA) was $47.7 million, 7% higher than in the first quarter of fiscal 2007
despite the negative impact of an industry slowdown in Europe, which
management believes is short term in nature. Higher revenues reflected an
increase in total megawatts ("MWs") sold at Photowatt France to 10.7 MWs from
8.7 MWs during the first quarter of fiscal 2007 (estimated benefit
$9.4 million) and the positive impact of foreign exchange (estimated
$1.6 million compared to a year ago). Growth in MWs sold resulted from
increased ingot, wafer and cell production capacity at Photowatt France
completed in March 2007.
    The increase in MWs sold at Photowatt France was offset by a 13% decrease
in average selling prices per watt during the first quarter of fiscal 2008
compared to the first quarter of fiscal 2007, which negatively impacted
revenue by approximately $6.8 million. Average selling prices per watt for
polysilicon modules decreased approximately 8% compared to a year ago.
Management believes this was largely caused by reduced government incentives
in Germany and an increase in supply of solar products on the market as solar
companies sought to reduce excess inventory. In addition, MgSi modules were
sold at average selling prices approximating 90% of the price per watt for
polysilicon modules. During the first quarter, revenue from the sale of MgSi
modules totalled approximately $16.7 million compared to $4.1 million in the
fourth quarter of fiscal 2007 and nil a year ago. Management believes that
market conditions in Europe are stabilizing.

    
    Photowatt Technologies Operating Results
    (in millions of dollars)
                                                          Three        Three
                                                         Months       Months
                                                          Ended        Ended
                                                        June 30,     June 30,
                                                           2007         2006
    -------------------------------------------------------------------------

    Operating income (loss):
    Photowatt France                                  $    (0.4)   $    10.2
    Photowatt USA                                          (0.3)        (0.2)
    Spheral Solar                                          (1.3)        (4.4)
    Solar corporate costs                                  (0.6)        (0.5)
    Inter-solar eliminations                                0.2         (0.5)
    -------------------------------------------------------------------------
    Photowatt Technologies operating loss             $    (2.4)   $     4.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Reflecting declines in industry prices per watt, polysilicon shortages
resulting in increases in polysilicon costs and the Company's planned ramp up
of MgSi module production Photowatt France incurred an operating loss of
$0.4 million in the first quarter of fiscal 2008 compared to an operating
profit of $10.2 million a year ago and $3.0 million during the fourth quarter
of fiscal 2007. The reasons for the variance in operating performance compared
to a year ago are as follows:

    
    -   the impact of the aforementioned reduced selling prices, which
        negatively impacted operating income by approximately $6.8 million
        compared to a year ago;
    -   increased costs of polysilicon feedstock and lower average cell
        efficiencies, which negatively impacted operating income by
        $4.1 million compared to a year ago. Increasing costs of polysilicon
        reflect continuing industry wide supply shortages. Lower average
        efficiency for cells manufactured in the quarter reflected planned
        increased production of MgSi solar modules and slightly lower
        efficiencies on products produced using polysilicon during the
        quarter compared to the same period a year ago. Lower polysilicon
        efficiencies were the result of the increased use of lower grades of
        polysilicon (reclaimed polysilicon). Increased use of reclaimed
        polysilicon reflects the continued shortage of polysilicon at
        reasonable prices in the spot market. In support of the Company's
        strategy to use its vertically integrated business model and
        technology capabilities to help overcome polysilicon shortages,
        Photowatt ramped up production of MgSi modules in the quarter.
        Average efficiency for cells manufactured using MgSi during the
        quarter was on target at approximately 13%.
    -   increased use of recycled polysilicon and MgSi also increased direct
        labor costs, other materials costs, and scrap rates, which negatively
        impacted operating income by $3.4 million compared to a year ago.
    -   increased use of purchased polysilicon wafers and cells to help
        offset shortages of polysilicon and to increase its manufacturing
        contributions from its cell and module capacity. While positive
        contributions are generated from the use of purchased wafers and
        cells, margins are lower than those generated by using wafers and
        cells produced by Photowatt.
    -   increased volume of MWs sold, which positively impacted operating
        earnings by $4.1 million compared to a year ago.

    Photowatt France Non-GAAP Reconciliation
    (in millions of dollars)
                                                          Three        Three
                                                         Months       Months
                                                          Ended        Ended
                                                        June 30,     June 30,
                                                           2007         2006
    -------------------------------------------------------------------------

    Operating income                                  $    (0.4)   $    10.2
    Depreciation and amortization                           3.1          2.3
    -------------------------------------------------------------------------
    EBITDA                                            $     2.7    $    12.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Amortization expense at Photowatt France was $3.1 million compared to
$2.3 million during the first quarter of fiscal 2007. Photowatt France's
EBITDA for the first quarter was $2.7 million (6% EBITDA margin) compared to
$12.5 million (29% EBITDA margin) a year ago and $5.9 million (16% EBITDA
margin) in the fourth quarter of fiscal 2007 reflecting the same factors noted
above.
    Photowatt USA's operating loss in the first quarter was $0.3 million
compared to an operating loss of $0.2 million a year ago. In fiscal 2007, the
Company announced the wind up of this non-strategic module production facility
in New Mexico, which is expected to close during fiscal 2008.
    Spheral Solar's operating loss in the first quarter was $1.3 million
compared to an operating loss of $4.4 million a year ago. The improvement
primarily reflected the reduction in Spheral Solar staff and expenses
associated with the Company's decision, taken in the latter half of the first
quarter of fiscal 2008, to halt further internal Spheral Solar development.
    Solar corporate costs were $0.6 million in the first quarter of fiscal
2008 compared to $0.5 million a year ago. Inter-solar eliminations were
$0.2 million, which represented the realization of deferred profits on
shipments of silicon from Spheral Solar to Photowatt France. No such shipments
were made in the first quarter of fiscal 2008 and none are expected going
forward.
    Reflecting the reasons noted above, the operating loss for Photowatt
Technologies was $2.4 million in the first quarter of fiscal 2008 compared to
operating income of $4.6 million a year earlier.

    Photowatt Outlook

    The outlook for Photowatt is largely unchanged from the outlook discussed
in the annual MD&A for fiscal 2007. Management continues to believe demand for
the solar industry will be positively impacted by a number of trends over the
long term.
    In the short term, Photowatt is expected to continue to face the
industry-wide challenges associated with shortages of polysilicon, increasing
polysilicon prices and lower average selling prices per watt than in fiscal
2007. Second quarter fiscal 2008 operating performance is also expected to be
impacted by the usual four week Photowatt France factory shutdown.
    As part of its strategy to manage the impact of higher polysilicon
prices, Photowatt France has utilized its vertically-integrated production
capability and technology expertise to produce solar products using lower cost
MgSi. This industry-leading capability is currently at an early stage of
development and as expected power conversion efficiencies are lower than those
generated using higher priced polysilicon feedstock. Given the shortage of
polysilicon at reasonable prices, management expects to use a significant part
of its manufacturing capacity in fiscal 2008 to produce MgSi based products.
Until the cell efficiency of these products is enhanced, production of these
products is expected to have a negative impact on profitability compared to
historical margins using polysilicon (secured at lower historical cost than
available in the market today). Photowatt is aggressively pursuing process
improvements designed to increase the profitability of producing MgSi solar
cells and modules. These process improvement efforts are focused on:
increasing cell power efficiencies; enhancing manufacturing yields and
reducing scrap rates; and, increasing throughput at all stages of production.
Planned capital investments in fiscal 2008 are also targeted to generate cost
savings in fiscal 2009.
    Management's strategic direction for, and associated initiatives related
to, Photowatt Technologies, also include securing additional sources of high
quality polysilicon and capacity expansion. These initiatives are designed to
enhance the long term performance of the business while also reducing the risk
associated with polysilicon supply. Management believes these initiatives,
combined with recent long-term silicon supply contracts (see "Contractual
Obligations") which significantly increase Photowatt France's access to
silicon material, have strengthened Photowatt Technologies prospects for the
future. Management intends to continue to fortify this business throughout
fiscal 2008 to prepare it for the solar Spin Out (see "Subsequent Events").
    Management also intends to advance its collaborative development
arrangements focused on increasing power efficiencies of solar cells with
Electricité de France ("EDF", a major French electrical utility) and the
Commissariat à l'Energie Atomique (the world renowned French research
institute). This includes formation of the "lab-fab" planned for the second
half of fiscal 2008. Assuming approvals of government support and success in
phase one, phase two of this collaboration is intended to result in the "PV
Alliance," a joint venture to manufacture solar cells and modules between EDF
and Photowatt Technologies.

    PCG Segment

    First quarter PCG revenue of $19.4 million was $5.9 million lower than in
the same period of fiscal 2007 primarily due to lower volumes on existing
customer programs resulting from significant production cuts by the Big Three
North American automakers and the impact of the consolidation of the MPP
business unit into existing PCG operations.
    Foreign exchange negatively impacted first quarter fiscal 2008 PCG
revenues by an estimated $0.3 million compared to the first quarter of fiscal
2007.
    PCG operating loss of $1.1 million reflected the impact of lower
revenues, higher material costs and scrap rates related to PCG's Plastics
business unit and the transition of production from the now closed MPP
facility to the Plastics business unit.

    
    PCG Non-GAAP Reconciliation
    (in millions of dollars)
                                                          Three        Three
                                                         Months       Months
                                                          Ended        Ended
                                                        June 30,     June 30,
                                                           2007         2006
    -------------------------------------------------------------------------

    Operating income                                  $    (1.1)   $     0.9
    Depreciation and amortization                           1.7          1.8
    -------------------------------------------------------------------------
    EBITDA                                            $     0.6    $     2.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    PCG EBITDA was $0.6 million compared to EBITDA of $2.7 million a year
ago, primarily reflecting the impact of lower revenues as a significant
portion of the costs of the business are fixed in nature.
    Foreign exchange negatively impacted first quarter fiscal 2008 PCG
operating earnings by an estimated $0.1 million compared to the first quarter
of fiscal 2007.

    PCG Outlook

    During the first quarter of fiscal 2008, ATS retained financial advisors
to identify and evaluate strategic alternatives to exit the remaining PCG
operations. The outlook for PCG is unchanged from year end. Management
believes strength in the Canadian dollar and the difficult conditions in the
North American automotive parts market will continue to negatively impact PCG
revenue and earnings during the balance of fiscal 2008.

    Consolidated Results from Operations

    Revenue. At $174.8 million, consolidated revenue from continuing
operations for the three months ended June 30, 2007 was 9% lower than a year
ago. A 7% increase in Photowatt Technologies revenue was offset by the 11% and
23% reductions in ASG and PCG revenues respectively. The estimated effect on
revenue of changes in effective foreign exchange rates was an increase in
revenue of $0.2 million for the three months ended June 30, 2007 compared to
the same period of the prior year. Excluding the impact of foreign exchange,
consolidated revenue was an estimated 9% lower compared to the first quarter
of fiscal 2007.
    Consolidated earnings from operations. For the three months ended
June 30, 2007, consolidated loss from operations was $7.9 million, compared to
earnings from operations of $5.7 million a year ago. Fiscal 2008 first quarter
performance reflected: operating earnings of $0.6 million at ASG (operating
earnings $2.8 million a year ago); Photowatt Technologies operating loss of
$2.4 million (operating earnings $4.6 million a year ago); PCG operating loss
of $1.1 million ($0.9 million operating income a year ago); and inter-segment
eliminations and corporate expenses of $4.9 million ($2.5 million of costs a
year ago) reflecting incremental severance costs, professional fees, and
stock-based compensation. Consolidated operating results improved
significantly from the fourth quarter fiscal 2007 operating loss of
$43.4 million.
    Selling, general and administrative ("SG&A") expenses. For the first
quarter of fiscal 2008, SG&A expenses increased 9% or $2.0 million to
$23.5 million compared to the respective prior year period. Included in the
SG&A for the first quarter of fiscal 2008 was $2.9 million of consolidated
severance costs.
    Stock-based compensation cost. For the first quarter, stock-based
compensation expense increased to $0.6 million from $0.1 million a year
earlier reflecting the issuance of employee stock options and the increased
use of deferred stock units under the directors' compensation plan.
    Interest expense. For the three months ended June 30, 2007, interest
expense increased $0.6 million compared to a year ago to $1.2 million,
primarily reflecting higher usage of the Company's credit facilities.
    Loss from discontinued operations, net of tax. The loss from discontinued
operations in the first quarter a year ago includes a non-cash charge of
$2.0 million ($2.2 million before taxes) to write down the assets of the
Company's Berlin, Germany coil winding operation to their net realizable
value. This operation was sold during the three months ended June 30, 2006,
and accordingly, its results and financial position have been segregated and
presented separately as discontinued operations. See Note 4 to the
Consolidated Interim Financial Statements for further details on the net loss
from discontinued operations.
    Provision for income taxes. The Company's effective income tax rate
differs from the combined Canadian basic federal and provincial income tax
rate of 36.1% (2007 - 36.1%) primarily as a result of losses incurred in
Canada, the benefits of which have not been recognized for financial statement
reporting purposes.
    Net earnings (loss) from continuing operations. For the first quarter of
fiscal 2008, net loss from continuing operations was $8.9 million (15 cents
per share basic and diluted) compared to net earnings from continuing
operations of $2.5 million (4 cents per share basic and diluted) a year ago.
    Net earnings (loss). For first quarter of fiscal 2008, net loss was
$8.9 million (15 cents per share basic and diluted) compared to net earnings
of $0.3 million (1 cent per share basic and diluted) for the same period last
year.

    Foreign Exchange

    Year over year changes in foreign exchange increased first quarter fiscal
2008 consolidated revenue by an estimated $0.2 million compared to the first
quarter of fiscal 2007. This increase was primarily related to the effect of a
stronger Euro relative to the Canadian dollar on the translation of revenue
from foreign subsidiaries, which was partially offset by a weaker US dollar
relative to the Canadian dollar. Changes in foreign exchange rates resulted in
decreased first quarter fiscal 2008 consolidated operating earnings by an
estimated $0.7 million compared to the first quarter of fiscal 2007.

    
    Period Average Market Exchange Rates in CDN$

                                           Three months ended
                                         06/30/2007   06/30/2006    % change
    -------------------------------------------------------------------------
    US $                                    1.0955       1.1200       (2.2)%
    Euro                                    1.4767       1.4110         4.7%
    Singapore $                             0.7179       0.7053         1.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Liquidity, Cash Flow and Financial Resources

    Cash balances, net of bank indebtedness and long-term debt, at June 30,
2007 decreased $34.7 million compared to March 31, 2007. The change in the net
cash balance was largely as a result of increased working capital and
investments in property, plant and equipment, primarily in Photowatt.
    The Company invested $7.8 million in property, plant and equipment in the
first quarter of fiscal 2008, including $6.6 million in Photowatt.
    No stock options were exercised during the first quarter of fiscal 2008.
At August 8, 2007 the total number of shares outstanding was 59,262,005.
    The Company's debt to equity ratio at June 30, 2007 was 0.3:1. At
June 30, 2007 the Company had $68.7 million of unutilized credit available
under existing operating and long-term credit facilities. The Company is in
compliance with its loan covenants.
    During the first quarter, the Company repatriated US$25.5 million from
its US subsidiaries and used this to repay a portion of its US-denominated
LIBOR debt in Canada. The Company also borrowed $20 million of Bankers
Acceptances under its revolving credit facility.
    As planned, the Company has amended the agreement governing its primary
operating credit facility and its revolving bank credit facility (the
"Agreement"), as described in Note 10 of the annual consolidated financial
statements for the year ended March 31, 2007. The total credit available under
these facilities remains unchanged at $70.0 million and $60.0 million
respectively. The amendments include a 0.6% increase in the borrowing rates
and an agreement by the Company to grant a general security agreement to the
bank providing the credit facilities in Canada. Under the terms of the
Agreement, the Company is unable to encumber any assets with certain limited
exceptions which include, among others, operating leases aggregating not more
than $27.9 million, capital leases not aggregating more than $5.0 million,
liens for borrowings by subsidiaries of up to 15% of "tangible net worth" of
the Company, and purchase money security interests and certain other security
interests entered into in the ordinary course of business. The agreement also
restricts the disposition of assets by the Company, with certain permitted
exceptions and an agreement to reduce available credit by an amount equal to a
portion of the net proceeds received by the Company from certain material
asset sales, if any. Permitted dispositions include: the disposition of assets
no longer in use not exceeding $10.0 million; the disposition of the Company's
publicly traded portfolio investments; the disposition of equipment of the
Company's Spheral Solar Power division; and the disposition of other assets,
together not exceeding $70.0 million in aggregate. Permitted dispositions also
include the disposition of assets of subsidiaries not exceeding $15.0 million.

    Rights Offering

    On July 6, 2007, the Company filed a final short form prospectus in
relation to its previously announced $110 million rights offering. The rights
offering provides existing common shareholders with rights to subscribe for
additional common shares in ATS. The offering is expected to raise net
proceeds of approximately $103 million. Each shareholder of record of the
Company on July 19, 2007 received one right for each common share held. For
every 3.35 rights held, the holder will be entitled to purchase one common
share at the subscription price of $6.23 until 5:00 pm (Toronto time) on
August 14, 2007. The subscription price of $6.23 per share represented a
discount of 32% to the closing price of $9.13 per share on July 5, 2007. The
rights commenced trading on the TSX on July 17, 2007. The net proceeds of the
rights offering will be used to further expand the manufacturing capacity of
Photowatt France, to procure silicon supplies, to advance research and
development and for general corporate purposes at Photowatt France, as further
described in the final short form prospectus that is available at
www.sedar.com.

    
    Consolidated Quarterly Results

    ($ in thousands,
     except per share         Q1         Q4         Q3         Q2         Q1
     amounts)               2008       2007       2007       2007       2007
    -------------------------------------------------------------------------
    Revenue            $ 174,801  $ 172,486  $ 171,795  $ 164,598  $ 191,196
    Net earnings (loss)
     from continuing
     operations        $  (8,937) $ (80,854) $  (2,389) $  (2,110) $   2,496
    Net earnings
     (loss)            $  (8,937) $ (80,854) $  (2,389) $  (2,110) $     338
    Basic earnings
     (loss) per share
     from continuing
     operations        $   (0.15) $   (1.36) $   (0.04) $   (0.04) $    0.04
    Basic earnings
     (loss) per share  $   (0.15) $   (1.36) $   (0.04) $   (0.04) $    0.01
    Diluted earnings
     (loss) per share
     from continuing
     operations        $   (0.15) $   (1.36) $   (0.04) $   (0.04) $    0.04
    Diluted earnings
     (loss) per share  $   (0.15) $   (1.36) $   (0.04) $   (0.04) $    0.01


    ($ in thousands,
     except per share         Q4         Q3         Q2         Q1
     amounts)               2006       2006       2006       2006
    --------------------------------------------------------------
    Revenue            $ 208,775  $ 176,254  $ 152,050  $ 188,716
    Net earnings (loss)
     from continuing
     operations        $ (65,073) $  (5,309) $  (3,019) $   5,868
    Net earnings
     (loss)            $ (65,589) $  (5,801) $  (3,329) $   5,426
    Basic earnings
     (loss) per share
     from continuing
     operations        $   (1.09) $   (0.09) $   (0.05) $    0.10
    Basic earnings
     (loss) per share  $   (1.11) $   (0.10) $   (0.06) $    0.09
    Diluted earnings
     (loss) per share
     from continuing
     operations        $   (1.09) $   (0.09) $   (0.05) $    0.10
    Diluted earnings
     (loss) per share  $   (1.11) $   (0.10) $   (0.06) $    0.09
    

    ATS revenue and operating results are generally lower in the second
quarter of each fiscal year (three months ended September 30th) due to summer
plant shutdowns.

    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, 2007 found at www.sedar.com. The Company's off balance sheet
arrangements consist of operating lease financing related primarily to
facilities and equipment.
    In April 2007, the Company entered into a commitment to purchase
1,700 tonnes of MgSi commencing in 2007 and ending December 31, 2011. Advance
payments are required, which will be applied against the price of the product
received. Commencing in 2008, the price per kilogram of metallurgical-grade
silicon may be adjusted at the beginning of the calendar year based upon an
agreed upon formula.
    In June 2007, the Company entered into an eight-year commitment,
commencing January 1, 2010, to purchase approximately 32 million polysilicon
wafers over the term of the agreement. Advance payments are required, which
will be applied against the price of the wafers received during the life of
the commitment. The price per wafer will be adjusted at the beginning of each
calendar year based upon an agreed upon formula.

    Changes in Accounting Policies

    Effective April 1, 2007, the Company adopted new Canadian Institute of
Chartered Accountants Handbook Sections which established the accounting and
reporting standards for financial instruments and hedging activities. These
sections require the initial recognition of financial instruments at fair
value on the balance sheet. As required by these standards, the comparative
interim consolidated financial statements have not been restated except for
the reclassification of the cumulative translation adjustment to accumulated
other comprehensive income. See Note 2 to the interim consolidated financial
statements for further details including the impact of adopting these
standards.
    The Canadian Institute of Chartered Accountants has also issued new
Handbook Sections that will become effective for the Company on April 1, 2008
- see Note 3 to the interim consolidated financial statements. The Company is
currently evaluating the impact of adopting these future accounting standards.

    Subsequent Events

    Subsequent to June 30, 2007, the Company filed its final short form
prospectus in connection with its rights offering (see "Rights Offering"
above).
    On August 8, 2007, the Board of Directors approved a strategy to
distribute shares in Photowatt to ATS shareholders ("the Spin Out"). This
proposed Spin Out is consistent with ATS's commitment to creating value for
shareholders through its solar business, will result in Photowatt becoming a
standalone public company, and supports the strategy announced in June 2007 to
turn ATS into a pure automation systems solutions business. Distributing the
shares of Photowatt to ATS shareholders is expected to allow the full value of
each business to be recognized in the share price of each enterprise in the
stock market. Furthermore, the Spin Out will not dilute ATS shareholders'
ownership interest in Photowatt and will allow ATS shareholders to continue to
participate in the expected future growth of Photowatt France.
    The Spin Out of Photowatt is targeted to be completed in the spring of
2008. This schedule reflects the guidance provided by the Company's advisers
after consideration of the need to complete necessary regulatory filings,
secure advance tax rulings, recruit a separate board of directors and receive
approvals from ATS shareholders and securities regulators.

    Controls and Procedures

    In its annual MD&A dated June 18, 2007 and for the fiscal year ended
March 31, 2007, the Company reported that it had identified certain weaknesses
in the design of internal controls over financial reporting. The Company, with
the assistance of external specialists, is developing remediation plans for
the identified controls deficiencies, and has commenced with certain elements
of the remediation plans. During the first quarter of fiscal 2008, the Company
again performed a number of additional financial review procedures in an
effort to mitigate the risk of undetected material errors in the Company's
Consolidated Financial Statements and disclosures. During the three months
ended June 30, 2007, 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.

    Forward Looking Statement

    This news release relates to ATS's first quarter financial results for
the three months ended June 30, 2007, and 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: ATS's ability to
generate long-term shareholder value; the outlook for ATS's businesses for
fiscal 2008; the proposed Spin Out of Photowatt France and realization of
value and participation in growth of Photowatt France by ATS shareholders; the
strengthening and future growth of Photowatt; the deployment of capital raised
by the rights offering; ASG's strategy in more selective bidding on certain
assignments; increased activity in automotive markets in Europe; continuance
of global trends that create demand for ASG's automated manufacturing
solutions; the emphasis on four focused initiatives to strengthen ASG's
performance; ASG's ability to improve its performance; ASG's ability to
further develop its business and to improve the utilization of its global
resources; increases in ASG revenues, higher factory utilization and improved
results; ASG's strategy to penetrate the healthcare market; the slow-down in
the solar energy industry in Europe; solar market conditions in Europe
stabilizing; the success of ATS's strategy to overcome polysilicon shortages
and higher polysilicon prices; use of a significant part of Photowatt France's
manufacturing capacity in fiscal 2008 to produce refined metallurgical silicon
products; Photowatt's strategy to optimize production processes including
improving power conversion efficiency, reducing silicon usage per watt, and
increasing labour efficiencies and reducing scrap rates; Photowatt's key
initiatives including capacity expansion dependant on cost, ability to obtain
supplies and adapting to changes in production processes; securing additional
sources of high quality polysilicon and expanding capacity; Photowatt France's
access to silicon material; Photowatt Technologies' prospects for the future;
advancing collaborative development arrangements with EDF and the CEA and a
joint venture with EDF to manufacture solar cells and modules; the continued
growth of the solar industry; the impact of significant production cuts by the
Big Three North American automakers on PCG; and the exit from PCG's remaining
operations. The risks and uncertainties that may affect forward-looking
statements include, among others: general market performance and restructuring
within the North American automotive market; the receipt of all necessary
approvals and advance tax ruling relating to the Spin Out; the state of the
capital markets; foreign currency and exchange risk; strength of the Canadian
dollar; performance of the market sectors that ATS serves; that some or all of
the trends towards automation that ATS believes are attractive dissipate or do
not result in increased demand for automation; risks associated with operating
and servicing customers in a foreign country; that multinational companies
withdraw from global manufacturing for business, political, economic or other
reasons; unforeseen problems with the implementation of the ASG strategic
initiatives or failure of those measures to bring about improved performance
at ASG; the success of ongoing operational improvements at ASG; problems
associated with the expansion of production capability and adoption of new
production processes at Photowatt; managing the impact of supply shortages and
higher prices for polysilicon; Photowatt's ability to improve efficiencies of
its solar modules produced using lower grade polysilicon or refined
metallurgical silicon; Photowatt's ability to secure additional long-term
polysilicon supply contracts; the reduction in government incentives in
Germany and its effect on Photowatt; inability to advance collaborative
development arrangements focused on increasing power efficiencies of solar
cells; political, labour or supplier disruptions in manufacturing and supply
of silicon; the usual four week Photowatt France factory shutdown in the
second fiscal quarter; the ability of ATS to exit the remaining PCG
operations; 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.


    
                     ATS AUTOMATION TOOLING SYSTEMS INC.

                    Consolidated Statements of Operations
            (in thousands, except per share amounts - unaudited)

                                                          Three months ended
    -------------------------------------------------------------------------
                                                         June 30     June 30
                                                            2007        2006
    -------------------------------------------------------------------------

    Revenue                                            $ 174,801   $ 191,196

    Operating costs and expenses:
      Cost of revenue                                    151,436     156,560
      Amortization                                         7,182       7,243
      Selling, general and administrative                 23,543      21,553
      Stock-based compensation (note 5)                      588         101
    -------------------------------------------------------------------------
                                                         182,749     185,457
    -------------------------------------------------------------------------
    Earnings (loss) from operations                       (7,948)      5,739
    Other expenses (income):
      Interest on long-term debt                             800         728
      Other interest expense (income)                        424        (146)
    -------------------------------------------------------------------------
                                                           1,224         582
    -------------------------------------------------------------------------
    Earnings (loss) from continuing operations
     before income taxes and non-controlling interest     (9,172)      5,157

    Provision for (recovery of) income taxes (note 12)      (250)      2,538
    Non-controlling interest in earnings of
     subsidiaries                                             15         123
    -------------------------------------------------------------------------
    Net earnings (loss) from continuing operations        (8,937)      2,496

    Loss from discontinued operations, net of tax
     (note 4)                                                  -      (2,158)
    -------------------------------------------------------------------------

    Net earnings (loss)                                $  (8,937)  $     338
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per share (note 6)
      Basic and diluted - continuing operations        $   (0.15)  $    0.04
      Basic and diluted - discontinued operations      $       -   $   (0.03)
    -------------------------------------------------------------------------
      Basic and diluted - net earnings (loss)          $   (0.15)  $    0.01
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements


                         Consolidated Balance Sheets
                    (in thousands of dollars - unaudited)

    -------------------------------------------------------------------------
                                                         June 30    March 31
                                                            2007        2007
    -------------------------------------------------------------------------

    ASSETS

    Current assets:
      Cash and short-term investments                  $  21,124   $  25,568
      Accounts receivable                                143,220     131,410
      Investment tax credits                              13,712      13,712
      Costs and earnings in excess of billings on
       contracts in progress                              71,164      73,755
      Inventories                                         77,993      74,804
      Deposits and prepaid assets (note 2)                20,857      10,861
    -------------------------------------------------------------------------
                                                         348,070     330,110

    Property, plant and equipment                        212,524     221,718
    Goodwill                                              33,610      35,657
    Intangible assets                                        259         352
    Future income taxes                                       85         179
    Deferred development costs                             2,283       2,414
    Portfolio investments (note 2)                        24,530       4,728
    Other assets                                          16,311       5,907
    -------------------------------------------------------------------------

                                                       $ 637,672   $ 601,065
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities:
      Bank indebtedness (note 9)                       $  77,692   $  37,204
      Accounts payable and accrued liabilities           120,771     122,587
      Billings in excess of costs and earnings on
       contracts in progress                              34,938      23,186
      Future income taxes                                 17,699      14,395
      Current portion of long-term debt                      425         447
    -------------------------------------------------------------------------
                                                         251,525     197,819

    Long-term debt (note 9)                               28,843      39,025
    Future income taxes                                       47          75
    Other long-term liabilities                              877         877
    Non-controlling interest                               1,771       1,890

    Shareholders' equity:
      Share capital                                      327,560     327,560
      Contributed surplus                                  3,600       3,193
      Accumulated other comprehensive income
       (note 10)                                          (7,707)     (9,422)
      Retained earnings                                   31,156      40,048
    -------------------------------------------------------------------------

                                                         354,609     361,379
    -------------------------------------------------------------------------

                                                       $ 637,672   $ 601,065
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements


               Consolidated Statements of Shareholders' Equity
                    (in thousands of dollars - unaudited)

    Three months ended June 30, 2007
    -------------------------------------------------------------------------
                                                                  Accumulated
                                                                      Other
                                                                      Comp-
                                             Share    Contributed  rehensive
                                            Capital     Surplus      Income
    -------------------------------------------------------------------------

    Balance beginning of period,
     as previously reported                $ 327,560   $   3,193   $  (9,422)
      Transitional adjustment on
       adoption of new accounting
       standards (note 2)                          -           -      20,534
    -------------------------------------------------------------------------
    Balance beginning of period, as
     restated                                327,560       3,193      11,112
    Comprehensive loss:
      Net loss                                     -           -           -
      Currency translation
       adjustment (note 11)                        -           -     (17,191)
      Net unrealized loss on available-
       for-sale financial assets (net of
       income taxes of $nil)                       -           -      (3,855)
      Net unrealized gain on derivative
       financial instruments designated
       as cash flow hedges (net of income
       taxes of $840)                              -           -       1,835
      Amount transferred to net earnings (loss)
       for derivatives designated as cash flow
       hedges (net of income taxes of $nil)        -           -         392

    Total comprehensive loss
    Stock-based compensation                       -         407           -
    -------------------------------------------------------------------------
    Balance end of the period              $ 327,560   $   3,600   $  (7,707)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------
                                                          Share-
                                            Retained     holders'
                                            Earnings      Equity
    -------------------------------------------------------------
    Balance beginning of period,
     as previously reported                $  40,048   $ 361,379
      Transitional adjustment on
       adoption of new accounting
       standards (note 2)                         45      20,579
    -------------------------------------------------------------
    Balance beginning of period, as
     restated
    Comprehensive loss:
      Net loss
      Currency translation
       adjustment (note 11)                        -     (17,191)
      Net unrealized loss on available-
       for-sale financial assets (net of
       income taxes of $nil)                       -      (3,855)
      Net unrealized gain on derivative
       financial instruments designated
       as cash flow hedges (net of income
       taxes of $840)                              -       1,835
      Amount transferred to net earnings (loss)
       for derivatives designated as cash flow
       hedges (net of income taxes of $nil)        -         392
                                                       ----------
    Total comprehensive loss                             (27,756)
    Stock-based compensation                       -         407
    -------------------------------------------------------------
    Balance end of the period              $  31,156   $ 354,609
    -------------------------------------------------------------
    -------------------------------------------------------------


    Three months ended June 30, 2006
    -------------------------------------------------------------------------
                                                                  Accumulated
                                                                      Other
                                                                      Comp-
                                             Share    Contributed  rehensive
                                            Capital     Surplus      Income
    -------------------------------------------------------------------------

    Balance beginning of period            $ 326,840   $   2,035   $ (23,017)
      Net earnings                                 -           -           -
      Currency translation adjustment              -           -      (3,389)
      Issuance of common shares                  503           -           -
      Stock-based compensation                     -         310           -
    -------------------------------------------------------------------------
    Balance end of the period              $ 327,343   $   2,345   $ (26,406)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------
                                                          Share-
                                            Retained     holders'
                                            Earnings      Equity
    -------------------------------------------------------------
    Balance beginning of period            $ 125,063   $ 430,921
      Net earnings                               338         338
      Currency translation adjustment              -      (3,389)
      Issuance of common shares                    -         503
      Stock-based compensation                     -         310
    -------------------------------------------------------------
    Balance end of the period              $ 125,401   $ 428,683
    -------------------------------------------------------------
    -------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements


                    Consolidated Statements of Cash Flows
                    (in thousands of dollars - unaudited)

                                                          Three months ended
    -------------------------------------------------------------------------
                                                         June 30     June 30
                                                            2007        2006
    -------------------------------------------------------------------------
    Operating activities:
      Net earnings (loss)                              $  (8,937)  $     338
      Add (deduct) non-cash items:
        Amortization                                       7,182       7,243
        Future taxes                                       3,370      (5,544)
        Other items not involving cash                      (319)       (323)
        Stock-based compensation                             588         101
        Write down of assets to net realizable
         value (note 4)                                        -       1,978
    -------------------------------------------------------------------------
        Cash flow from operations                          1,884       3,793
        Change in non-cash operating working capital     (18,008)    (12,161)
    -------------------------------------------------------------------------
    Cash flows used in operating activities              (16,124)     (8,368)

    Investing activities:
      Acquisition of property, plant and equipment        (7,778)     (6,146)
      Investments and other                              (11,631)     (2,341)
      Proceeds from disposal of assets                        16         426
    -------------------------------------------------------------------------
    Cash flows used in investing activities              (19,393)     (8,061)

    Financing activities:
      Bank indebtedness                                   40,488       6,218
      Proceeds from long-term debt (note 9)               20,000      20,000
      Repayment of long-term debt (note 9)               (27,935)          -
      Issuance of common shares, net of cost of
       issuance                                                -         503
    -------------------------------------------------------------------------
    Cash flows provided by financing activities           32,553      26,721
    -------------------------------------------------------------------------
    Effect of exchange rate changes on cash and
     short-term investments                               (1,480)       (818)
    -------------------------------------------------------------------------
    Increase (decrease) in cash and short-term
     investments                                          (4,444)      9,474
    Cash and short-term investments, beginning
     of period                                            25,568      27,921
    -------------------------------------------------------------------------

    Cash and short-term investments, end of period     $  21,124   $  37,395
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
      Cash income taxes paid                           $   1,244   $     133
      Cash interest paid                               $   1,408   $   1,118
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to interim consolidated financial statements



                     ATS AUTOMATION TOOLING SYSTEMS INC.

             Notes to Interim Consolidated Financial Statements
    (tabular amouynts in thousands, except per share amounts - unaudited)

    -------------------------------------------------------------------------

    1.  Significant accounting policies:

        (i)    The accompanying interim consolidated financial statements are
        prepared in accordance with accounting principles generally accepted
        in Canada ("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, 2007
        except for the adoption of the new accounting standards included in
        note 2 herein. The interim consolidated financial statements
        presented in this interim report do not conform in all respects to
        the requirements of generally accepted accounting principles for
        annual financial statements and should be read in conjunction with
        the Company's annual consolidated financial statements for the year
        ended March 31, 2007.

        (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 assets, recoverability of deferred
        development costs, fair value of reporting units, fair value of
        assets held for sale, warranties, income taxes, future tax assets,
        investment tax credits, determination of estimated useful lives of
        intangible assets and property, plant and equipment, impairment of
        long-term investments, contracts in progress, inventory provisions,
        revenue recognition, contingent liabilities, and allowances for
        accounts receivable.

    2.  Change in accounting policies:

        Effective April 1, 2007, the Company adopted the new Canadian
        Institute of Chartered Accountants ("CICA") Handbook Sections 1530
        "Comprehensive Income", 3251 "Equity", 3855 "Financial Instruments -
        Recognition and Measurement", 3861 "Financial Instruments -
        Disclosure and Presentation" and 3865 "Hedges". These CICA Handbook
        Sections establish the accounting and reporting standards for
        financial instruments and hedging activities, and require the initial
        recognition of financial instruments at fair value on the interim
        consolidated balance sheet. As required by the standards, the
        comparative interim consolidated financial statements have not been
        restated, except for the reclassification of the cumulative
        translation adjustment to accumulated other comprehensive income.

        Comprehensive income and equity CICA Handbook Section 1530

        requires the presentation of comprehensive income and its components
        in a financial statement. Comprehensive income is composed of the
        Company's net income and other comprehensive income which includes
        unrealized gains and losses on translating financial statements of
        self-sustaining foreign operations, changes in the fair value of the
        effective portion of cash flow hedging instruments and changes in
        unrealized gains (losses) on available-for-sale financial assets
        measured at fair value. The Company discloses comprehensive income
        within its interim consolidated statements of shareholders' equity.

        CICA Handbook Section 3251 provides standards for the presentation of
        equity and changes in equity during the reporting period.

        Financial instruments

        CICA Handbook Section 3855 establishes standards for recognizing and
        measuring financial instruments, including derivatives. Under the new
        standard, all financial instruments are initially recorded on the
        interim consolidated balance sheet at fair value except for certain
        related party transactions. They are subsequently valued either at
        fair value or amortized cost depending on the classification selected
        for the financial instrument. Financial assets are classified as
        either "held-for-trading", "held-to-maturity", "available-for-sale"
        or "loans and receivables" and financial liabilities are classified
        as either "held-for-trading" or "other liabilities". Financial assets
        and liabilities classified as held-for-trading are measured at fair
        value with changes in fair value recorded in the interim consolidated
        statements of operations except for financial assets and liabilities
        designated as cash flow hedges which are measured at fair value with
        changes in fair value recorded as a component of other comprehensive
        income. Financial assets classified as held-to-maturity or loans and
        receivables and financial liabilities classified as other liabilities
        are subsequently measured at amortized cost using the effective
        interest method. Available-for-sale financial assets that have a
        quoted price in an active market are measured at fair value with
        changes in fair value recorded in other comprehensive income. Such
        gains and losses are reclassified to earnings when the related
        financial asset is disposed of or when the decline in value is
        considered to be other-than-temporary. Equity instruments classified
        as "available-for-sale" that do not have a quoted price in an active
        market are subsequently measured at cost.

        The Company has classified its financial instruments as follows:

           -  Cash and short-term investments are classified as held-for-
              trading.

           -  Accounts receivable and notes receivable included in other
              assets are classified as loans and receivables.

           -  Long-term investments in equities included in portfolio
              investments are classified as available-for-sale.

           -  Bank indebtedness is classified as held-for-trading.

           -  Accounts payable and accrued liabilities and long-term debt are
              classified as other liabilities.

        The Company has elected to expense transaction costs related to
        financial instruments classified as other than held-for-trading.

        The Company has elected to use trade date accounting for regular-way
        purchases and sales of financial assets.

        Embedded derivatives

        In addition to recognizing all stand-alone derivative financial
        instruments at fair value, CICA Handbook Section 3855 requires
        embedded derivatives, which are components included in a non-
        derivative host contract that have features similar to derivatives,
        to be accounted for separately when their economic characteristics
        and risks are not closely related to the host instrument and the
        combined contract is not recorded at fair value. These embedded
        derivatives are measured at fair value with subsequent changes
        recorded in the interim consolidated statements of operations. The
        Company enters into certain non-financial instrument contracts which
        contain embedded foreign currency derivatives. Where the contract is
        not leveraged, does not contain an option feature and is denominated
        in a currency that is commonly used in the economic environment where
        the transaction takes place, the embedded derivative is not accounted
        for separately from the host contract. As allowed under CICA Handbook
        Section 3855, the Company elected April 1, 2003 as the transition
        date for embedded derivatives and only reviewed contracts entered
        into or modified after that date.

        Hedging

        CICA Handbook Section 3865 specifies the criteria that must be met in
        order for hedge accounting to be applied and the accounting for each
        of the permitted hedging strategies. If the derivative is designated
        as a fair value hedge, changes in fair value of the derivative and
        changes in the fair value of the hedged item attributable to the
        hedged risk are recognized in the interim consolidated statements of
        operations. If the derivative is designated as a cash flow hedge, the
        effective portions of the change in fair value of the derivative are
        initially recorded in other comprehensive income and are reclassified
        to the interim consolidated statements of operations when the hedged
        item is recognized. Hedge accounting is discontinued prospectively
        when it is determined that the derivative is not effective as a
        hedge, or the derivative is terminated or sold, or upon sale or early
        termination of the hedged item. The Company elected to apply hedge
        accounting for certain forward foreign exchange contracts used to
        manage foreign currency exposure on anticipated revenue and firm
        commitments and has designated these as cash flow hedges. The fair
        value of these derivatives is included in deposits and prepaid assets
        when in an asset position and in accounts payable and accrued
        liabilities when in a liability position.

        Gains or losses arising from hedging activities are reported in the
        same caption on the interim consolidated statements of operations as
        the hedged item.

        The types of hedging relationships that qualify for hedge accounting
        have not changed under CICA Handbook Section 3865. The nature of the
        items or transactions that the Company hedges and the Company's
        hedging programs in relation to these items or transactions are
        included in Note 4 to the Company's annual consolidated financial
        statements for the year ended March 31, 2007.

        Fair value

        The fair value of a financial instrument is the amount of
        consideration that would be agreed upon in an arms length transaction
        between knowledgeable, willing parties who are under no compulsion to
        act. The fair value of a financial instrument on initial recognition
        is the transaction price, which is the fair value of the
        consideration given or received. Subsequent to initial recognition,
        the fair values of financial instruments that are quoted in active
        markets are based on bid prices for financial assets held and offer
        prices for financial liabilities. When independent prices are not
        available, fair values are determined by using valuation techniques
        that refer to observable market data.

        Transition adjustment

        The impact of adopting the new standards as at April 1, 2007 was as
        follows:

           -  An increase in portfolio investments of $23,677,000, an
              increase of $21,109,000 in accumulated other comprehensive
              income (AOCI) and an increase of $2,568,000 in future income
              tax liability related to recording the fair value of portfolio
              assets designated as available-for-sale.

           -  An increase in deposits and prepaid assets of $251,000, an
              increase of $781,000 in accounts payable and accrued
              liabilities, a decrease of $575,000 in AOCI and an increase in
              retained earnings of $45,000 related to recording the fair
              value of cash flow hedges where hedge accounting is used.

           -  $9,422,000 of net foreign currency losses that were previously
              presented as a separate item in shareholders' equity have been
              reclassified to AOCI.

    3.  Future Accounting Changes: The CICA has issued the following new
        Handbook Sections that will become effective on April 1, 2008 for the
        Company:

           -  CICA Handbook Section 3862, "Financial Instruments -
              Disclosures"

           -  CICA Handbook Section 3863, "Financial Instruments -
              Presentation"

           -  CICA Handbook Section 1535, "Capital Disclosures"

           -  CICA Handbook Section 3031, "Inventories"

        CICA Handook Section 3862 modifies the disclosure requirements for
        CICA Handbook Section 3861, "Financial Instruments - Disclosure and
        Presentation", including required disclosure for the assessment of
        the significance of financial instruments for an entity's financial
        position and performance and of the extent of risks arising from
        financial instruments to which the Company is exposed and how the
        Company manages those risks. CICA Handbook Section 3863 carries
        forward the presentation requirements of CICA Handbook Section 3861.
        The Company is currently evaluating the impact of the adoption of
        these standards on the interim consolidated financial statements.

        CICA Handbook Section 1535 establishes standards for disclosing
        information about an entity's capital and how it is managed. The
        entity's disclosure should include information about its objectives,
        policies and processes for managing capital and disclose whether or
        not it has complied with any capital requirements to which it is
        subject and the consequences of non-compliance. The Company is
        currently evaluating the impact of adoption of this new section on
        the interim consolidated financial statements.

        CICA Handbook Section 3031 provides more guidance on the measurement
        and disclosure requirements of inventory than the previous CICA
        Handbook Section 3030. The Company is currently evaluating the impact
        of adoption of this new section on the interim consolidated financial
        statements.

    4.  Discontinued operations and assets held for sale:

        During the year ended March 31, 2007, the Company sold the key
        operating assets and liabilities, including equipment, current
        assets, trade accounts payable and certain other assets and
        liabilities of its Berlin, Germany coil winding business for net
        proceeds of 600,000 Euro. Accordingly, the results of operations and
        financial position of the Berlin coil winding business have been
        segregated and presented separately as discontinued operations in the
        interim consolidated financial statements. The results of the
        discontinued operations were as follows:

                                                          Three months ended
        ---------------------------------------------------------------------
                                                         June 30     June 30
                                                            2007        2006
        ---------------------------------------------------------------------
        Revenue                                        $       -   $   1,737

        Loss from operating activities                         -        (180)
        Write-down to reduce assets sold to net
         realizable value, net of tax                          -      (1,978)
        ---------------------------------------------------------------------
        Loss from discontinued operations, net of tax  $       -   $  (2,158)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    5.  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 vested stock options and a binomial
        option pricing model for performance based stock options.

        No stock options were granted during the three months ended June 30,
        2007.

        During the three months ended June 30 2006, the Company issued
        certain performance based options. The performance based options vest
        based on the ATS stock trading at or above a threshold for a minimum
        of 20 trading days in a fiscal quarter. These performance options
        expire on the seventh anniversary of the date of the award. During
        the three months ended June 30, 2007 and 2006, no performance based
        options vested.

    6.  Weighted average number of shares:

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

                                                          Three months ended
        ---------------------------------------------------------------------
                                                         June 30     June 30
                                                            2007        2006
        ---------------------------------------------------------------------
        Basic                                             59,262      59,220
        Diluted                                           59,262      59,386
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        All stock options are excluded from the weighted average common
        shares in the calculation of diluted earnings per share for the three
        months ended June 30, 2007 as they are anti-dilutive.

    7.  Financial Instruments:

        Change in fair value of financial instruments

        Derivatives that are not designated in hedging relationships are
        classified as held-for-trading and the changes in fair value are
        recognized in the interim consolidated statements of operations.
        During the three months ended June 30, 2007, the fair value of
        financial assets classified as held-for-trading increased by
        $1,655,000 and the fair value of financial liabilities classified as
        held-for-trading decreased by $310,000.

        Cash flow hedges

        During the three months ended June 30, 2007, an unrealized loss of
        $46,000 was recognized in selling, general and administrative expense
        for the ineffective portion of cash flow hedges. After-tax unrealized
        gains of $1,652,000 included in AOCI at June 30, 2007 are expected to
        be reclassified to earnings over the next 12 months when the revenue
        is recorded.

    8.  Segmented disclosure:

        The Company evaluates performance based on three reportable segments:
        Automation Systems, Photowatt Technologies, and Precision Components.
        The Automation Systems segment produces custom-engineered turn-key
        automated manufacturing and test systems. The Photowatt Technologies
        segment is a high volume manufacturer of photovoltaic products and
        also includes the Company's investment in Spheral Solar(TM). The
        Precision Components segment is a high volume manufacturer of plastic
        and metal components and sub-assemblies.

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

                                                          Three months ended
        ---------------------------------------------------------------------
                                                         June 30     June 30
                                                            2007        2006
        ---------------------------------------------------------------------

        Revenue
          Automation Systems                           $ 107,784   $ 121,784
          Photowatt Technologies                          47,689      44,381
          Precision Components                            19,412      25,260
          Elimination of inter-segment revenue               (84)       (229)
        ---------------------------------------------------------------------
        Consolidated                                   $ 174,801   $ 191,196
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Earnings (loss) from operations
          Automation Systems                           $     575   $   2,786
          Photowatt Technologies                          (2,446)      4,587
          Precision Components                            (1,142)        870
          Inter-segment elimination and corporate
           expenses                                       (4,935)     (2,504)
        ---------------------------------------------------------------------
        Consolidated                                   $  (7,948)  $   5,739
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    9.  Bank indebtedness and long-term debt:

        The Company has amended the agreement governing its primary operating
        credit facility and its revolving credit facility (the "Agreement"),
        as described in Note 10 of the annual consolidated financial
        statements for the year ended March 31, 2007. The total credit
        available under these facilities remains unchanged at $70,000,000 and
        $60,000,000 respectively. The amendments include a 0.6% increase in
        the borrowing rates and an agreement by the Company to grant a
        general security agreement to the bank providing the credit
        facilities in Canada. Under the terms of the Agreement, the Company
        is unable to encumber any assets with certain limited exceptions
        which include, among others, operating leases aggregating not more
        than $27,900,000, capital leases not aggregating more than
        $5,000,000, liens for borrowings by subsidiaries of up to 15% of
        "tangible net worth" of the Company, and purchase money security
        interests and certain other security interests entered into in the
        ordinary course of business. The agreement also restricts the
        disposition of assets by the Company, with certain permitted
        exceptions and an agreement to reduce available credit by an amount
        equal to a portion of the net proceeds received by the Company from
        certain material asset sales, if any. Permitted dispositions include:
        the disposition of assets no longer in use not exceeding $10,000,000;
        the disposition of the Company's publicly-traded portfolio
        investments; the disposition of equipment of the Company's Spheral
        Solar Power division; and, the disposition of other assets, together
        not exceeding $70,000,000 in aggregate. Permitted dispositions also
        include the disposition of assets of subsidiaries not exceeding
        $15,000,000.

        During the three months ended June 30, 2007 the Company repatriated
        $25,500,000 (USD) from U.S. subsidiaries which was used to repay a
        portion of the U.S. dollar denominated LIBOR debt in Canada. The
        Company also borrowed $20,000,000 (CDN) of Bankers Acceptances under
        the revolving bank credit facility.

    10. Accumulated other comprehensive income:

        The components of accumulated other comprehensive income which is
        presented in the interim consolidated statements of shareholders'
        equity are as follows:

                                                          Three months ended
        ---------------------------------------------------------------------
                                                         June 30     June 30
                                                            2007        2006
        ---------------------------------------------------------------------

        Accumulated currency translation adjustment    $ (26,613)  $ (26,406)
        Accumulated unrealized gain on available-for-
         sale financial assets                            17,254           -
        Accumulated unrealized net gain on derivative
         financial instruments designated as cash flow
         hedges                                            1,652           -
        ---------------------------------------------------------------------
                                                       $  (7,707)  $ (26,406)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. Currency translation adjustment:

        The currency translation adjustment reflects unrealized translation
        adjustments arising on the translation of foreign currency
        denominated assets and liabilities of self-sustaining foreign
        operations. These translation adjustments are recorded in the interim
        consolidated statements of operations when there is a reduction in
        the Company's net investment in the respective foreign operations.

    12. Income taxes:

        The Company's effective income tax rate differs from the combined
        Canadian basic federal and provincial income tax rate of 36.1% (2007 -
        36.1%) primarily as a result of losses incurred in Canada, the
        benefit of which have not been recognized for financial statement
        reporting purposes.

    13. 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 and Precision Components
        volumes, and the Company's earnings in any of its markets.

    14. Comparative figures:

        Certain comparative figures have been reclassified to conform with
        the current period's presentation.

    15. Subsequent events:

        Subsequent to June 30, 2007, the Company filed its final short form
        prospectus in connection with its rights offering.

        In August 2007, the Board of Directors approved a strategy to
        distribute Photowatt International S.A.S. to the Company's
        shareholders.
    





For further information:

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


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