10.02.06

10.2.2006: Meldung: ATS Automation Tooling Systems Q3 results, solar funding strategy and activities

ATS Automation Tooling Systems Inc. today reported its financial results for the three months ended December 31, 2005.

- Solar Group operating earnings, excluding Spheral Solar Power
("SSP"), were $5.1 million, a $1.7 million or 50% increase from the
third quarter a year ago. Including SSP, Solar Group had an
operating loss of $2.9 million. Prior to this quarter, SSP"s results
were capitalized on the Company"s balance sheet and not included in
operating results. The inclusion of SSP reduced Solar Group and
consolidated operating income by $8.0 million in the quarter.

- Excluding planned restructuring costs of $1.9 million, Automation
Systems Group (ASG) operating earnings were $1.1 million compared to
$9.8 million in the third quarter of the prior year. Restructuring
expenses were related to previously announced staff reductions and
the closure of ATS Niagara. Including restructuring costs, ASG"s loss
from operations was $0.8 million.

- Net loss for the third quarter was $5.8 million (10 cents per share
basic and diluted), which includes SSP operating losses and ASG
restructuring expenses totaling aggregating $9.9 million pre-tax
(11 cents per share basic and diluted). Net earnings a year ago were
$5.6 million (9 cents per share basic and diluted).

- Revenue from continuing operations in the third quarter was
$178.7 million, versus $200.5 million in the third quarter a year
ago.

- New ASG order bookings in the third quarter were $147 million
compared to $124 million in the third quarter a year ago.

- Period end ASG order backlog was $239 million, up 13% from
$211 million at September 30, 2005.

- Cash flow from operating activities was $35 million compared to
$24 million in the third quarter of last year.

Management Commentary


"We face a number of significant challenges in our ASG business including the continued strengthening of the Canadian dollar, uncertain and difficult automotive market conditions and the resulting margin compression these factors bring," said Mr. Jutras. "We are actively addressing these issues. However, as expected, the benefits of our efforts were not reflected in our third quarter results. We have reduced our workforce and closed one of our ASG facilities to lower our cost base and improve our utilization. We have further diversified our revenue base into stronger markets like healthcare and we are focused on enhancing customer service and further improving our operational effectiveness. We are also investing for our future through strategic initiatives which, near term, are targeted to maximize the return for the investment made, while also supporting our longer term strategic vision and corporate goals. In short, we are moving forward deliberately and strategically to be able to reward our shareholders for their patience and to better serve our customers."

Solar Group Commentary

"Recent developments in solar markets and capital markets, especially in the US, are very positive and, even though SSP technology is not yet fully proven, we are moving forward aggressively on numerous fronts to achieve our previously stated goals of making Solar Group self funding and unlocking the value for our shareholders," said Mr. Jutras. "The activities underway since January with our financial advisor are just one important element of our work. While an IPO is clearly a strong option, it is important that our Board review all appropriate options and the issues, timelines and challenges each path presents to ATS. We are conducting this work in a timely and professional manner.

"I am well aware of the need for urgency because markets are dynamic, but I also believe we are making very good use of our time by tackling a number of fundamental issues that must be addressed to make the Solar Group ready for third-party investment. Among these is the separation of the Solar Group into a standalone entity of ATS. This is a complex and time consuming task that is already underway and is necessary regardless of which course of action the Board decides to pursue. We have added key internal resources to the Solar Group, including the addition of a CFO, Jim Kopperson, at the start of January. We have also assigned resources from our corporate offices and secured additional outside expertise in legal, finance, accounting, tax, and valuation. I strongly believe we are moving down the right path."

Quarterly Conference Call

ATS"s quarterly webcast begins at 10 am eastern today at www.atsautomation.com.

About ATS

ATS Automation Tooling Systems Inc. (www.atsautomation.com) is the industry"s leading designer and producer of turn-key automated manufacturing and test systems, which are used primarily by multinational corporations operating in a variety of industries including: healthcare, computer/electronics, automotive, and consumer products. ATS is also an emerging leader in the rapidly growing market for solar energy cells and modules. The Company also makes precision components and subassemblies using its own custom-built manufacturing systems, process knowledge and automation technology. ATS employs approximately 3,900 people at 26 manufacturing facilities in Canada, the United States, Europe and Asia-Pacific. The Company"s shares are traded on The Toronto Stock Exchange under the symbol ATA.

Management"s Discussion and Analysis

This MD&A for the three and nine months ended December 31, 2005 provides detailed information on the Company"s operating activities of the third quarter of fiscal 2006 and should be read in conjunction with the unaudited interim consolidated financial statements of the Company for the three and nine months ended December 31, 2005 and the Company"s fiscal 2005 Annual Report. The Company assumes that the reader of this MD&A has access to, and has read the audited consolidated financial statements of the Company for fiscal 2005 and related MD&A contained in the Company"s 2005 Annual Report and the unaudited interim consolidated financial statements of the Company for the first and second quarter of fiscal 2006 and related MD&A and, accordingly, the purpose of this document is to provide a third quarter update to the information contained in the MD&A section of the 2005 Annual Report. For a discussion of the three months ended June 30, 2005 and September 30, 2005, refer to ATS"s first and second quarter MD&A. These documents and other information relating to the Company, including the Company"s 2005 Annual Report and 2005 Annual Information Form, may be found on SEDAR at www.sedar.com.

Notice to Readers

The Company has three reportable segments: Automation Systems Group ("ASG"), Solar Group ("Solar"), and Precision Components Group ("PCG"). The terms operating income, operating earnings, earnings from operations, operating loss, operating results, operating margin, Order Backlog and Order Bookings used in this MD&A have no standardized meanings prescribed within Canadian Generally Accepted Accounting Principles ("GAAP") and therefore may not be comparable to similar measures presented by other companies.

Automation Systems Group

ASG revenue declined 16% in the third quarter compared to the third quarter of last year. An increase in automotive revenue of 7% was more than offset by declines in computer-electronics, healthcare, and "other" revenues. Although Order Bookings entering the third quarter were strong (particularly in healthcare and computer-electronics), a considerable number of these recently booked projects were in the design phase during the third quarter. Greater revenue is generally recognized during the production stage of a project.

Automation Systems Group Revenue by Industry
($ millions)

Three months ended Nine months ended
12/31/2005 12/31/2004 12/31/2005 12/31/2004
-------------------------------------------------------------------------
Automotive $ 44.7 $ 41.7 $ 142.6 $ 120.3
Computer-electronics 27.5 44.4 76.5 122.0
Healthcare 40.9 44.4 108.7 117.5
Other 7.7 14.1 29.6 41.5
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Total 120.8 144.6 357.4 401.3
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On a regional basis, compared to the third quarter last year, the decline
in revenue occurred primarily at ASG"s Eastern North American facilities,
which began fiscal 2006 with lower backlog levels and continued to be affected
by weakness in the US dollar. For the three and nine months ended December 31,
2005, the estimated negative foreign exchange impact on ASG revenue was
$6.5 million and $22.4 million, respectively.
Revenue from Contract Equipment Manufacturing (CEM) increased 34% in the
third quarter to $11.9 million from $8.9 million a year ago. CEM is a growth
initiative that combines the competitive advantages of the Company"s ASG and
PCG operations. Over the first nine months, CEM revenues were $31.3 million,
33% higher than a year ago.
The acquisition of a small UK-based custom automation company in the
second quarter of fiscal 2006 (see note 3 to the Consolidated Interim
Financial Statements) contributed approximately $0.9 million in revenue in the
third quarter.
During the third quarter, ASG incurred $1.9 million of restructuring
costs including severance and plant closure costs, to improve capacity
utilization and financial performance. The Company has reduced employment in
its ASG North American and European operations by 6% since the end of the
first quarter. During the third quarter, the Company also consolidated ATS
Niagara, a small automation facility in Burlington Ontario, into its Cambridge
Ontario facility. The aggregate estimated reduction in the fixed cost base
from the ASG workforce reductions and consolidation of the ATS Niagara
facility are approximately $9 million. The decision to reduce ASG"s workforce
was done in a careful and deliberate manner to allow ASG to maintain its
industry-leading technical expertise and knowledge to serve its customers.
ASG third quarter operating loss was $0.8 million. Excluding the
$1.9 million impact of restructuring costs, operating earnings were
$1.1 million (0.9% margin) compared to operating earnings of $9.8 million
(6.8% margin) in the third quarter of fiscal 2005. Compared to the third
quarter last year, higher earnings were experienced in ASG"s Western North
American, Asian, and Contract Equipment Manufacturing operations. Lower
operating earnings at ASG"s Eastern North American operations, particularly in
the Cambridge division, were due to a number of factors including lower
revenue levels and costs associated with underutilized capacity; uncertain and
difficult automotive market conditions and resulting margin pressures; the
strong Canadian dollar; and a reduction in the estimated margin on several
technically challenging first-time projects. Although these technically-
challenging projects impact short term operating margins, they provide ASG
with important knowledge that can be employed to benefit future assignments
and they serve to further strengthen the relationships with these strategic
customers. The effect of the strong Canadian dollar had an estimated negative
effect on ASG operating loss and operating earnings for the three and nine
months ended December 31, 2005 of $1.0 million and $4.3 million, respectively
versus the comparable period a year earlier.
ATS traditionally derives a substantial portion of its consolidated
revenue from the North American automotive sector, which is experiencing
significant change due to competitive pressure. Management continues to
actively manage and monitor its current and future exposure to North American
automotive customers and has put in place additional controls intended to help
reduce the potential for losses. However, margin pressures are likely to
continue to be a factor on North American automotive projects, at least in the
short term. The Company is seeking to offset these challenges by growing its
healthcare and computer-electronics revenue and winning automotive business
from financially strong customers.
ASG operating earnings for the first nine months of fiscal 2006 were
$3.1 million compared to $26.5 million in the same period of fiscal 2005. The
operating earnings for the nine months ended December 31, 2005 include the
factors described above and also the $4.7 million provision taken in the
second quarter in respect of the Delphi Chapter 11 filing.

Delphi Chapter 11 Filing

On October 8th, 2005, Delphi Corporation and certain of its subsidiaries
("Delphi") announced a Chapter 11 business reorganization filing under the US
Bankruptcy Code. At the time of its filing, Delphi was one of ASG"s largest
automotive customers.
On October 8th, 2005, ASG had accounts receivable outstanding of
approximately US$4 million with the Delphi divisions that are subject to the
filing. Given the uncertainty surrounding the eventual amount realizable
related to the pre-bankruptcy accounts receivable, ATS recorded a provision in
the amount of US$4 million during the second quarter of fiscal 2006.
ASG also had approximately US$2 million of contracts in progress and
US$8 million of backlog on unshipped orders with Delphi at the time of the
Chapter 11 filing. ASG continues to fulfill the terms of these contracts as
they have not been cancelled and the Company continues to receive payments on
these projects and believes it will be paid in full for this work. As such,
management has not provided a reserve for these ongoing projects. Management
continues to engage in active discussions and negotiations with Delphi in
order to further secure payment and to assess ongoing credit risks. Excluding
the pre-bankruptcy accounts receivable, as at December 31, 2005, ASG had
approximately US$3 million of backlog and approximately US$7 million of
accounts receivable and contracts in progress with Delphi.

Automation Systems Backlog

At December 31, 2005, ASG Order Backlog was $239 million, $28 million, or
13% higher than at September 30, 2005, and $70 million, or 41% higher than at
March 31, 2005. Year-over-year backlog increased 3% from $232 million in the
third quarter last year and the change in weighting by industry reflects the
Company"s progress in diversifying and growing in healthcare and computer-
electronics markets to offset automotive market weakness.
New ASG Order Bookings increased 19% to $147 million from $124 million in
the third quarter a year ago. For the first nine months of fiscal 2006, Order
Bookings were 7% higher at $424 million compared to $395 million a year
earlier. Order Bookings to date in the fourth quarter are $50 million.

Automation Systems Backlog by Industry
($ millions)

12/31/2005 12/31/2004 Percentage
Change
-------------------------------------------------------------------------
Healthcare $ 100 $ 83 20%
Automotive 71 84 -15%
Computer-electronics 59 48 23%
Other 9 17 -47%
-------------------------------------------------------------------------
Total $ 239 $ 232 3%
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Automation Systems Outlook

Improved backlog levels entering the fourth quarter are expected to
generate higher revenue in ASG during the fourth quarter compared to recent
quarters. The increase in backlog during fiscal 2006 primarily reflects
increased healthcare booking activity in the second and third quarters which
has provided for a more attractive diversification in backlog across industry
groups. During fiscal 2006, ASG"s healthcare backlog has increased $45 million
or 82% to a record $100 million, and computer-electronics backlog has
increased $32 million.
Management believes, strong bookings during the second and third quarters
have improved factory loading across most ASG divisions compared to earlier in
fiscal 2006, with Order Backlog levels more than doubling in the Company"s
Cambridge, Ontario facility compared to the first quarter. ASG outlook is
tempered by the ongoing foreign exchange pressures on its Cambridge operations
and by the current challenges facing the North American automotive market. The
Company"s focus on diversifying its revenue base into stronger markets like
healthcare, and on improving operational effectiveness through strategic
initiatives, including recently completed capacity rationalization and ongoing
cost reduction strategies, are expected to contribute to improving results
going forward.

Solar Group

Solar Group revenue in the third quarter, which continues to be derived
solely from Photowatt, was $35.2 million, or $2.2 million lower than in the
same period last year, primarily due to a 12% decline in the average Euro
exchange rate to the Canadian dollar. Excluding the translation effect of
foreign exchange, Solar revenue would have been an estimated 9% higher than
the third quarter a year ago. Although management believes Photowatt has
secured silicon supply for the majority of its production needs through to the
end of calendar 2006, Photowatt revenue growth was constrained in the third
quarter due to the industry wide shortages of certain types of silicon.
Over the first nine months of fiscal 2006, Photowatt"s revenue was a
record $105.3 million, or 2% higher than in fiscal 2005, in spite of the
decline in the average Euro exchange rate. Excluding the translation effect of
foreign exchange, revenue over the first nine months would have been an
estimated 13% higher than a year ago. Revenue growth reflects strong market
demand for solar products, primarily as a result of attractive government
incentive programs in Europe, increasing consumer interest in clean,
sustainable energy sources and increased selling prices for its products.
Solar Group third quarter operating results include Photowatt and, for
the first time, Spheral Solar Power ("SSP"). Prior to October 1, 2005,
operating costs incurred by SSP were capitalized on the Company"s balance
sheet as deferred development costs and excluded from operating results.
Excluding the SSP operating loss of $8.0 million, Solar operating earnings for
the third quarter were $5.1 million (14% operating margin), a $1.7 million
increase from operating earnings of $3.4 million (9% margin) for the third
quarter last year. The increasingly strong operating performance of Photowatt
reflects the benefits of significant improvements in production yields,
throughput gains, cost reduction initiatives and capital investments that have
been made.
Solar Group operating loss, inclusive of SSP, for the three months ended
December 31, 2005 was $2.9 million, and operating earnings for the nine months
ended December 31, 2005 were $6.8 million, compared to operating earnings of
$3.4 million and $7.2 million, respectively, for the comparable periods a year
ago. Exclusive of SSP, Solar operating earnings were a record $14.8 million
(14% operating margin) in the first nine months of fiscal 2006 compared to
$7.2 million (7% margin) a year ago.

Solar Outlook

Management believes recent developments in both the solar market and
capital markets are very positive. Solar product demand is expected to remain
strong based upon ongoing European subsidy programs, newly introduced US
subsidy programs and growing demand for clean, renewable energy products that
can augment or replace increasingly scarce fossil fuels. With these positive
conditions, the Company is moving forward to achieve management"s previously
stated goals of making Solar Group self-financing and unlocking value for ATS
shareholders. As announced on January 3, 2006, the Company has selected BMO
Nesbitt Burns as financial advisor to assist in assessing and pursuing
financing opportunities and strategic alternatives for Solar Group. The
separation of Solar Group into a standalone entity is a complex and time
consuming task that is necessary to achieve the Company"s goals. The Company
has reallocated resources from its corporate offices and secured additional
third-party expertise in legal, finance, accounting, tax and valuation. As
part of these activities, Solar Group hired an experienced Chief Financial
Officer at the beginning of the fourth quarter.
In the meantime, Solar Group continues to position itself for growth. In
fiscal 2006, Photowatt is investing approximately $9 million to increase
estimated annual cell capacity to approximately 40 MW from 32 MW of estimated
capacity at the beginning of fiscal 2006. New wire saw process equipment is
now on site and is expected to be operational by the end of the fourth
quarter.
As a start up, SSP revenue volumes will remain low for the balance of
fiscal 2006. SSP is continuing to improve its manufacturing processes and
SSP"s manufacturing yields are beginning to increase. As expected, the running
of the factory equipment has identified targeted areas requiring further
process development. Specifically, one process in SSP"s 26 manufacturing steps
has been identified as a critical limiting factor in current cell yield.
Management has received assistance from a specialist in metallurgical
engineering, and potential solutions have been identified and are being
actively pursued. However, while progress continues to be made, there remain
significant challenges and risks associated in achieving yields, efficiencies
and throughput necessary for the successful commercialization of SSP.
SSP continues to develop its products and customer relationships. In
February 2006, a delivery of SSP"s innovative SuperFlex(TM) was made to a
major marine distributor. Product testing on the Elk residential roofing
shingles is progressing well. Additional SSP roofing membrane engineering
samples were also delivered to a customer in Europe. Strong demand for solar
energy continues to create substantial interest in SSP"s products among
wholesalers, distributors and retailers. Management believes the flexible
nature and durability of the SSP products gives SSP significant competitive
advantages and growth opportunities.
As discussed in the fiscal 2005 MD&A, the SSP initiative involves
significant start up risks and these should be considered in evaluating SSP"s
potential.

Silicon Supply

Silicon shortages remain an industry-wide concern and silicon prices have
continued to increase with year-over-year silicon pricing more than doubling.
Shortages of silicon may continue to impact Photowatt"s ability to increase
its production. Management believes that it has secured sources of silicon at
Photowatt for a significant amount of its capacity through to the end of
calendar 2006, but is continuing to devote resources to secure additional
supply to enable its operations to grow without interruption. Management
believes that sufficient silicon feedstock has been secured for SSP through
the end of the 2006 calendar year as well.
To date, Photowatt has mitigated a significant amount of the impact on
its operating income of supply shortages and increases in the market prices
for silicon by achieving higher internal operating efficiencies. However,
Photowatt"s silicon costs are expected to continue to increase during the
remainder of fiscal 2006 and into fiscal 2007 as its inventory of lower-priced
silicon is consumed and new silicon purchases are made at higher prices.
Photowatt continues to secure price increases with some of its customers to
help offset the increased cost of silicon. However, there remains a risk that
selling price increases and improvements in production efficiencies may not be
able to fully offset higher silicon costs. Management is currently exploring
longer term alternatives to secure additional silicon supply and continues to
reinvest the strong cash flow generation of Photowatt to fund Photowatt"s
near-term capacity expansion and silicon supply initiatives.

Precision Components Group

Third quarter PCG revenue was $24.5 million, 8% higher than the
$22.7 million in the comparable prior year period. Revenue growth was a result
of a number of factors including higher volumes on existing programs, new
programs that began to be ramped up in the quarter, and the assimilation of a
customer program that was transferred from discontinued Precision Metals
operation (see "Discontinued Operations" below) to continuing PCG operations
during the quarter. These factors more than offset the negative impact of
lower US-Canadian dollar exchange rates, the previously announced
discontinuation of an unprofitable customer program and volatility in North
American automotive markets for PCG.

Precision Components Group Revenue by Industry
($ millions)

Three months ended Nine months ended
12/31/2005 12/31/2004 12/31/2005 12/31/2004
-------------------------------------------------------------------------
Automotive 22.0 20.3 61.8 64.1
Computer-electronics 0.9 0.9 2.6 3.9
Other 1.6 1.5 5.1 4.7
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Total 24.5 22.7 69.5 72.7
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The estimated negative foreign exchange impact on PCG revenue in the
quarter and for the first nine months of fiscal 2006 was $1.1 million and
$3.7 million, respectively. For the nine month period ended December 31, 2005,
PCG revenue was $69.5 million, 4% lower than the comparable prior year period
reflecting the strengthening Canadian dollar, the volatile North American
automotive market and discontinued programs.
During fiscal 2005, as a result of requesting price increases on an
unprofitable program, PCG received notice that in the first quarter of fiscal
2006 the customer would terminate the program. This discontinuation reduced
revenue by approximately $0.8 million and $2.9 million in the three and nine
months ended December 31, 2005, respectively, compared to the same periods of
last year.
PCG"s operating results in the third quarter have improved significantly
from the first and second quarters of fiscal 2006, despite the continued
strengthening of the Canadian dollar and ongoing difficulties in the
automotive sector. PCG"s operating loss for the third quarter was $0.5 million
compared to an operating loss of $0.1 million in the same period of fiscal
2005. Third quarter results also include $0.2 million of start-up costs
related to the new PCG Shanghai, China facility, as well as $0.3 million of
costs associated with the transfer of a customer program from Precision Metals
to ongoing PCG operations. The estimated negative impact of foreign currency
on PCG operating earnings in the third quarter was $0.6 million compared to
the same period of the prior year.
PCG"s operating loss for the first nine months of fiscal 2006 was
$2.8 million compared to an operating loss of $0.4 million in the same period
of fiscal 2005. In addition to the start up costs noted above and the impact
of foreign currency, these results include $1.0 million of incremental cash
expenditures incurred in first quarter fiscal 2006 to close PCG"s McAllen,
Texas facility and consolidate these assets into existing PCG operations. The
consolidation of McAllen"s production is complete, with all customer programs
transferred. The estimated negative impact of foreign currency on PCG
operating earnings for the nine months ended December 31, 2005 was
$1.4 million compared to the same period of the prior year.

Precision Components Outlook

Management believes PCG continues to progress in its pursuit of an
earnings recovery and should benefit from major restructuring initiatives
completed over the past nine months, including the recently completed sale of
the Precision Metals division in January 2006 and consolidation of the
McAllen, Texas facility. These initiatives were designed to reduce operating
costs and improve PCG asset utilization. Gains from these important strategic
steps and additional benefits from ongoing improvement initiatives, including
Six Sigma, are expected to accrue incrementally over the next several
quarters.
Management continues to expect that the North American automotive market
will remain challenging due to very competitive pricing, volatile program
volumes and the strong Canadian dollar. Despite these difficult conditions,
PCG continues to pursue and win attractive new business in an effort to more
effectively utilize existing capacity.

Consolidated Results From Operations

Consolidated revenue from continuing operations for the three months
ended December 31, 2005 was $178.7 million, $21.7 million or 11% lower than a
year earlier. This primarily reflected 16% and 6% declines in ASG and Solar
revenue, respectively, partially offset by an 8% increase in PCG revenue.
For the nine months ended December 31, 2005, revenue from continuing
operations was $523.7 million, $38.5 million or 7% lower than a year earlier.
This reflected 11% and 4% declines in ASG and PCG revenues respectively, which
more than offset a 2% increase in Solar revenue. Changes in effective foreign
exchange rates reduced consolidated revenue for the three and nine months
ended December 31, 2005 compared to the same periods of fiscal 2005 by an
estimated $12.5 million and $35.7 million respectively.

Consolidated Revenue by Region
($ millions)

Three months ended Nine months ended
12/31/2005 12/31/2004 12/31/2005 12/31/2004
-------------------------------------------------------------------------
U.S. & Mexico $ 89.6 $ 94.0 $ 274.9 $ 303.0
Europe 54.4 66.7 170.4 174.1
Canada 13.6 8.5 34.9 27.1
Asia-Pacific and other 21.1 31.3 43.5 58.0
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Total $ 178.7 $ 200.5 $ 523.7 $ 562.2
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Consolidated loss from operations for the three months ended December 31,
2005 was $6.6 million, compared to earnings from operations of $11.2 million a
year ago, reflecting Solar operating loss of $2.9 million (operating earnings
of $3.4 million a year ago), ASG operating loss of $0.8 million (operating
earnings $9.8 million a year ago), and PCG operating loss of $0.5 million
(operating loss $0.1 million a year ago). Consolidated loss from operations
for the first nine months of fiscal 2006 was $1.3 million compared to income
from operations of $25.2 million in the comparable prior year period. Changes
in effective foreign exchange rates reduced consolidated operating earnings
for the three and nine months ended December 31, 2005 compared to the same
periods of fiscal 2005 by an estimated $2.3 million and $7.1 million
respectively.
Amortization expense increased $2.0 million to $8.7 million during the
quarter compared to the respective prior year period, primarily due to
$1.7 million of depreciation in SSP related to property, plant and equipment.
Prior to the current quarter, the SSP division incurred no depreciation
expense because the division was in a pre-production phase.
Selling, general and administrative ("SG&A") expenses increased
$3.4 million to $21.3 million in the third quarter compared to the respective
prior year period. This increase is primarily attributed to the inclusion of
$0.9 million of SG&A expenses from the SSP division as well as $1.9 million of
ASG restructuring costs for severance and facility closures incurred during
the third quarter. Also included in the SG&A for the comparable quarter of the
prior year was an $0.8 million gain on the sale of a corporate aircraft. SG&A
expenses for the nine months ended December 31, 2005 increased $8.8 million to
$64.9 million compared to the prior year period, and include the above factors
and a $4.7 million provision taken in the second quarter for financial
exposure to Delphi Corporation.
Third quarter stock-based compensation cost was consistent with the third
quarter last year and increased $0.8 million for the first nine months of the
year compared to the same period of fiscal 2005. Stock-based compensation cost
reflects the issuance and cancellation of employee stock options, the
increased use of deferred stock units under the directors" compensation plan,
and the revaluation of the outstanding deferred stock units.
Interest expense for the three and nine months ended December 31, 2005
reflected higher interest rates and greater usage of the Company"s credit
facilities compared to a year ago.
Net loss for the third quarter of fiscal 2006 was $5.8 million (10 cents
per share basic and diluted) compared to net earnings of $5.6 million (9 cents
per share basic and diluted) a year ago. Net loss for the first nine months of
fiscal 2006 was $3.7 million (6 cents per share basic and diluted) compared to
net earnings of $8.8 million (15 cents per share basic and diluted) for the
same period last year.

Impact of Foreign Exchange

The sustained strength of the Canadian dollar against the US dollar and
the Euro continued to have a significant and negative impact on the Company"s
revenue and earnings in the third quarter and on a year-to-date basis. In the
third quarter, the effective rate of exchange on the US dollar and Euro
currencies declined 5% and 12% respectively, while average market rates
declined 4% and 12% respectively compared to the same quarter of last year.
At December 31, 2005 the Company had, on hand, unrealized forward
exchange contracts for the future sale of US dollars totaling US$165.5 million
at an average exchange rate of Cdn $1.178. The unrecognized gain on these
forward contracts totaled approximately $2.2 million at December 31, 2005.

Period Average Market Exchange Rates in CDN$

Three months ended Nine months ended
12/31/2005 12/31/2004 % change 12/31/2005 12/31/2004 % change
-------------------------------------------------------------------------
US $ 1.1728 1.2173 -4% 1.2058 1.2939 -7%
Euro 1.3929 1.5856 -12% 1.4728 1.6074 -8%
Singapore $ 0.6948 0.7364 -6% 0.7203 0.7664 -6%
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Discontinued Operations

Subsequent to the third quarter and effective January 2, 2006, the
Company completed the sale of PCG"s precision metals division ("Precision
Metals") for estimated net proceeds of $4.2 million, including transaction
costs. The results and financial position of Precision Metals have been
segregated and presented separately as "discontinued operations" and "assets
held for sale" in the accompanying interim financial statements. The loss from
discontinued operations includes a loss of $0.1 million ($0.1 million after
income taxes) to reduce the Precision Metals assets to the estimated net
realizable value including transaction costs. The Company retained the land
and building related to the Precision Metals operations and entered into a
lease agreement with the purchaser for use of the land and building. The
Company expects to sell the land and building, and, as such the assets
continue to be classified as "held for sale". The net loss from discontinued
operations incurred during the third quarter was $0.5 million compared to a
loss of $1.7 million in the third quarter of fiscal 2005. See note 2 to the
Consolidated Interim Financial Statements for further details on the net loss
from discontinued operations.

Liquidity, Cash Flow and Financial Resources

Cash balances, net of bank indebtedness, at December 31, 2005 increased
$23 million during the quarter compared to the second quarter of fiscal 2006,
and decreased $33 million during the first nine months of fiscal 2006. The
increase in cash during the third quarter was largely as a result of the
reduced working capital in the ASG business, offset by investments in
property, plant and equipment. ASG"s reduction in working capital reflects
normal fluctuations due the project nature of the business.
The Company invested $11 million in property, plant and equipment, in the
third quarter of fiscal 2006. Investments in property, plant and equipment in
the Solar segment in the third quarter of fiscal 2006 were $2 million and
$6 million for SSP and Photowatt, respectively. Total assets recorded on the
consolidated balance sheet related to SSP, net of government funding, were
approximately $123 million at December 31, 2005, including acquisition costs
for the initial technology, the commercialization project and a $7 million
investment in inventory, mainly consisting of silicon.
The Company"s debt to equity ratio at December 31, 2005 was 0.2:1. At
December 31, 2005 the Company had $45 million of unutilized credit available
under existing operating and term credit facilities. The Company is in
compliance with its loan covenants.
During the third quarter, 23,000 stock options were exercised for total
proceeds of $164,000. At December 31, 2005 the total number of shares
outstanding was 59,092,602.

Share Repurchase

In April, 2005 the Company exercised its option to purchase for
cancellation 1,974,723 ATS common shares at a price of $12.66 per share as
further described in note 5 to the Consolidated Interim Financial Statements.
The total purchase price of $25 million was funded by life insurance proceeds
of $25 million received by the Company in fiscal 2005 under a life insurance
policy that had been maintained in respect of the Company"s founder, Mr. Klaus
Woerner, and which was established in conjunction with the execution of the
option agreement.


Consolidated Quarterly Results

($ in thousands, Q3 Q2 Q1 Q4
except per share amounts) 2006 2006 2006 2005
-------------------------------------------------------------------------

Revenue $ 178,720 $ 154,510 $ 190,500 $ 208,695

Net earnings (loss) from
continuing operations $ (5,310) $ (2,995) $ 5,751 $ 14,558

Net earnings (loss) $ (5,801) $ (3,329) $ 5,426 $ 459

Basic earnings (loss)
per share from continuing
operations $ (0.09) $ (0.05) $ 0.10 $ 0.24

Basic earnings (loss)
per share $ (0.10) $ (0.06) $ 0.09 $ 0.01

Diluted earnings (loss)
per share from continuing
operations $ (0.09) $ (0.05) $ 0.10 $ 0.24

Diluted earnings (loss)
per share $ (0.10) $ (0.06) $ 0.09 $ 0.01


($ in thousands, Q3 Q2 Q1 Q4
except per share amounts) 2005 2005 2005 2004
-------------------------------------------------------------------------

Revenue $ 200,460 $ 180,294 $ 181,486 $ 182,940

Net earnings (loss) from
continuing operations $ 7,283 $ 4,684 $ 3,945 $ (835)

Net earnings (loss) $ 5,627 $ 432 $ 2,780 $ (3,069)

Basic earnings (loss)
per share from continuing
operations $ 0.12 $ 0.08 $ 0.07 $ (0.01)

Basic earnings (loss)
per share $ 0.09 $ 0.01 $ 0.05 $ (0.05)

Diluted earnings (loss)
per share from continuing
operations $ 0.12 $ 0.08 $ 0.07 $ (0.01)

Diluted earnings (loss)
per share $ 0.09 $ 0.01 $ 0.05 $ (0.05)

Note: The above information has been restated for the Precision Metals
and thermals discontinued operations.


Lease and Contractual Obligations

Information on the Company"s lease and contractual obligations is
detailed in the annual financial statements and MD&A for the year ended
March 31, 2005. For the nine month period ended December 31, 2005, the Company
did not enter into any material leases or any material contractual obligations
which would be considered outside the normal course of operations.

Note to Readers

This press release and the third quarter MD&A and consolidated interim
financial statements accompanying it (collectively the "Press Release")
contain 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" 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, challenges
faced and being addressed by ATS including strengthening of the Canadian
dollar, automotive market conditions and the impact these factors have on
margins, ATS" focus on enhancing customer service and further improving
operational effectiveness, strategic initiatives that are being undertaken,
ability to maximize return on new investment made, moving forward to be able
to reward shareholders and better serve customers, taking steps to make Solar
Group self funding and unlock the value of Solar Group, the incurrence of
restructuring costs by ASG to improve capacity utilization and financial
performance, maintenance of technical expertise and knowledge, the use of
knowledge gained from certain ASG projects to benefit future assignments and
strengthen customer relationships, adoption of additional controls to help
reduce potential for ASG losses, focus on healthcare and computer electronics
business and obtaining automotive business from financially strong customers
to offset challenges in the automotive market, payment on contracts in
progress with Delphi, expected revenues for ASG, improvement in factory
loading across most ASG divisions, diversification of the revenue base and
improvement of operational effectiveness to improve ASG operating results,
demand for solar product, security of silicon supply through to the end of
2006, increase in cell capacity at Photowatt, timing of new wire saw process
equipment becoming operational, expected revenue volumes at SSP, prospects for
improvement of cell yield with one process in SSP"s manufacturing steps,
development of SSP products and customer relationships, competitive advantages
and growth opportunities for SSP products, impact of silicon supply on
Photowatt"s production level, adequacy of secured sources of silicon, cost of
silicon, ability of Photowatt to secure product price increases and attain
improvements in production efficiencies to offset higher silicon prices,
benefits to PCG from restructuring initiatives, PCG"s continued pursuit and
winning of attractive new business, and the sale of land and building related
to ATS" former Precision Metals operations. The risks and uncertainties that
may affect forward-looking statements include, among others, general market
performance, performance of the Canadian dollar, performance within the auto
sector, ability of the Company to implement programs that will improve
operational effectiveness, the success of strategic initiatives currently
under way, the ability of the Company to further penetrate the healthcare and
computer electronics markets, ability of the Company to exploit funding
alternatives, risks involved in successfully developing and commercializing
SSP technology on a cost-effective basis, ability to achieve lower silicon
usage relative to conventional solar technology, the cost and availability of
silicon and other raw materials and certain specialized manufacturing tools
and fixtures used in the production of Solar Group"s products, the successful
expansion of production capability and adoption of new production processes,
the extent of market demand for solar products such as those developed by the
Solar Group, the availability of government subsidies for solar products, the
development of superior or alternative technologies to those developed by ATS,
the success of competitors with greater capital and resources in exploiting
their technology and marketing their products, the risk of ASG not being able
to complete work on its backlog due to delays or other causes, risk of
investment in Photowatt not achieving the expected increase in cell capacity
due by the beginning of fiscal 2006 due to delays or other causes, risk that
an acceptable solution to the low cell yield being experienced by one process
in SSP"s manufacturing steps cannot be found, SSP"s ability to successfully
develop its products and customer relationships, ability of SSP to obtain
desired certifications for its products, ability of the Solar Group to
accurately predict its silicon demand, customer resistance to solar product
price increases, risk that the initiatives of PCG do not result in incremental
gains, ability of PCG to continue to win profitable new business, risks
related to the real estate market affecting the ability of ATS to sell the
land and building related to ATS" former Precision Metals operations, and
other risks detailed from time to time in ATS" filings with Canadian
provincial securities regulators, including ATS" Annual Report and Annual
Information Form for the fiscal year ended March 31, 2005. 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.

February 9, 2006


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

Three months ended Nine months ended
-------------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
-------------------------------------------------------------------------
(as restated) (as restated)
Revenue $ 178,720 $ 200,460 $ 523,730 $ 562,240

Operating costs
and expenses:
Cost of revenue 155,184 164,494 435,901 460,051
Amortization 8,665 6,669 22,913 20,357
Selling, general and
administrative 21,332 17,968 64,941 56,175
Stock-based
compensation (note 4) 171 154 1,308 487
-------------------------------------------------------------------------
185,352 189,285 525,063 537,070
-------------------------------------------------------------------------
Earnings (loss) from
operations (6,632) 11,175 (1,333) 25,170

Other (income) expenses:
Interest on
long-term debt 610 251 1,449 667
Other interest 128 48 464 444
Loss (gain) on
sale of assets 2 - (99) -
-------------------------------------------------------------------------
740 299 1,814 1,111
-------------------------------------------------------------------------
Earnings (loss) from
continuing operations
before income taxes
and non-controlling
interest (7,372) 10,876 (3,147) 24,059

Provision for
(recovery of)
income taxes (2,188) 3,505 (967) 7,968
Non-controlling interest
in earnings of
subsidiaries 126 88 374 179
-------------------------------------------------------------------------
Net earnings (loss) from
continuing operations (5,310) 7,283 (2,554) 15,912
Loss from discontinued
operations, net of tax
(note 2) (491) (1,656) (1,326) (7,073)
Extraordinary gain,
net of tax (note 3) - - 176 -
-------------------------------------------------------------------------

Net earnings (loss) $ (5,801) $ 5,627 $ (3,704) $ 8,839
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Earnings (loss)
per share (note 6)
Basic - from
continuing
operations $ (0.09) $ 0.12 $ (0.04) $ 0.26
Basic - from
discontinued
operations (0.01) (0.03) (0.02) (0.11)
-------------------------------------------------------------------------
$ (0.10) $ 0.09 $ (0.06) $ 0.15
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Diluted - from
continuing
operations $ (0.09) $ 0.12 $ (0.04) $ 0.26
Diluted - from
discontinued
operations (0.01) (0.03) (0.02) (0.11)
-------------------------------------------------------------------------
$ (0.10) $ 0.09 $ (0.06) $ 0.15
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements


Consolidated Statements of Retained Earnings
(in thousands of dollars - unaudited)

Three months ended Nine months ended
-------------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
-------------------------------------------------------------------------
Retained earnings,
beginning of period $ 196,453 $ 202,034 $ 208,120 $ 198,822
Net earnings (loss) (5,801) 5,627 (3,704) 8,839
Reduction from share
repurchase (note 5) - - (13,764) -
-------------------------------------------------------------------------

Retained earnings,
end of period $ 190,652 $ 207,661 $ 190,652 $ 207,661
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements



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

-------------------------------------------------------------------------
December 31 March 31
2005 2005
-------------------------------------------------------------------------
ASSETS (as restated)

Current assets:
Cash and short-term investments $ 52,092 $ 49,529
Accounts receivable 149,163 141,419
Income taxes recoverable 13,707 12,502
Costs and earnings in excess of billings
on contracts in progress 98,291 108,956
Inventories 70,684 67,481
Assets held for sale (note 2) 4,811 5,654
Other 4,486 3,749
-------------------------------------------------------------------------
393,234 389,290

Property, plant and equipment 248,847 246,016
Goodwill 33,464 34,750
Intangible assets 3,236 3,599
Future income tax assets 30,338 14,539
Deferred development costs 50,311 41,215
Assets held for sale (note 2) 2,085 5,916
Other assets 8,177 4,464
-------------------------------------------------------------------------
$ 769,692 $ 739,789
-------------------------------------------------------------------------
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS" EQUITY

Current liabilities:
Bank indebtedness $ 35,308 $ -
Accounts payable and accrued liabilities 81,037 102,984
Billings in excess of costs and earnings on
contracts in progress 50,114 15,352
Future income taxes 30,907 27,838
-------------------------------------------------------------------------
197,366 146,174

Long-term debt (note 8) 54,682 41,070
Future income taxes 24,201 17,684
Non-controlling interest 1,017 677

Shareholders" equity:
Share capital (notes 5 and 6) 326,128 334,966
Retained earnings 190,652 208,120
Contributed surplus 1,716 783
Cumulative translation adjustment (26,070) (9,685)
-------------------------------------------------------------------------
492,426 534,184

-------------------------------------------------------------------------
$ 769,692 $ 739,789
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements



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

Three months ended Nine months ended
-------------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
-------------------------------------------------------------------------
Cash flows from
operating activities:
Net earnings (loss) $ (5,801) $ 5,627 $ (3,704) $ 8,839
Items not
involving cash 3,176 10,928 21,813 37,508
Stock-based
compensation 171 154 1,308 487
-------------------------------------------------------------------------
Cash flow from
operations (2,454) 16,709 19,417 46,834

Change in non-cash
operating working
capital 37,508 7,771 3,570 (14,551)
-------------------------------------------------------------------------
35,054 24,480 22,987 32,283

Cash flows from
investing activities:
Acquisition of
property, plant
and equipment (10,729) (6,154) (34,381) (30,260)
Cash received upon
acquisition of
subsidiary (note 3) - - 461 -
Investments and other (1,685) (2,359) (15,313) (8,890)
Proceeds from
disposal of assets 21 10,261 2,913 10,261
-------------------------------------------------------------------------
(12,393) 1,748 (46,320) (28,889)
Cash flows from
financing activities:
Bank indebtedness 5,804 (8,091) 35,308 7,085
Purchase of common
shares for
cancellation
(note 5) - - (25,000) -
Proceeds from
revolving term debt
(note 8) - - 15,000 -
Issuance of
common shares 164 73 2,398 415
Other - 10 - (88)
-------------------------------------------------------------------------
5,968 (8,008) 27,706 7,412

Effect of exchange
rate changes on
cash and short-term
investments (164) (1,235) (1,810) (1,736)
-------------------------------------------------------------------------
Increase in cash and
short-term investments 28,465 16,985 2,563 9,070

Cash and short-term
investments,
beginning of period 23,627 30,636 49,529 38,551
-------------------------------------------------------------------------

Cash and short-term
investments, end
of period $ 52,092 $ 47,621 $ 52,092 $ 47,621
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Supplementary
information:
Cash income taxes
paid $ 395 $ 388 $ 1,250 $ 1,940
Cash interest paid $ 768 $ 337 $ 1,955 $ 981
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements



ATS AUTOMATION TOOLING SYSTEMS INC.
Notes to Interim Consolidated Financial Statements
(tabular amounts in thousands, except per share amounts - unaudited)

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

These statements have not been reviewed or audited by the Company"s
auditor.

1. Significant accounting policies:

(i) The accompanying unaudited interim consolidated financial
statements are prepared in accordance with accounting principles
generally accepted in Canada ("GAAP") and the accounting policies are
consistent with those described in the annual consolidated financial
statements for the year ended March 31, 2005. The unaudited 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 fiscal 2005 audited
consolidated financial statements.

(ii) Contract revenue in the Automation Systems segment is recognized
using the percentage of completion method. The degree of completion
is determined based on costs incurred, excluding costs that are not
representative of progress to completion, as a percentage of total
costs anticipated for each contract. Incentive awards, claims or
penalty provisions are recognized when such amounts can reasonably be
determined. Complete provision is made for losses on contracts in
progress when such losses first become known. Revisions in cost and
profit estimates, which can be significant, are reflected in the
accounting period in which the relevant facts become known.

Revenue in the Solar and Precision Components segments is recognized
at time of shipment, providing collection is reasonably assured.

(iii) 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, fair value of reporting units,
fair value of assets held for sale, warranties, income taxes, future
tax assets, 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, and allowances for accounts receivable.

2. Discontinued operations and assets held for sale:

(i) During fiscal 2005, the Company committed to a plan to sell the
key operating assets, including certain working capital and property,
plant and equipment, of its precision metals division of the
Precision Components segment ("Precision Metals"). Accordingly, the
results of operations and financial position of Precision Metals have
been segregated and presented separately as discontinued operations
and as assets held for sale in the accompanying interim consolidated
financial statements. The results of the discontinued operations were
as follows:

Three months ended Nine months ended
---------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Revenue $ 7,177 $ 6,817 $ 23,953 $ 21,976

Loss from
operations $ (746) $ (1,756) $ (2,498) $ (4,470)
Income tax
recovery 255 571 850 1,453
---------------------------------------------------------------------
Loss from
discontinued
operations $ (491) $ (1,185) $ (1,648) $ (3,017)
---------------------------------------------------------------------

As at September 30, 2005, the Company reclassified approximately
$1.5 million of net assets (March 31, 2005 - $1.3 million) as a
result of the Company"s decision to integrate a product line that had
previously been classified as held for sale into its continuing
business.

Effective Janaury 2, 2006, the Company completed the sale of
Precision Metals for estimated net proceeds of $4,230,000, including
transaction costs. The loss from discontinued operations includes a
loss of $118,000 ($78,000 after income taxes) to reduce the Precision
Metals assets to the estimated net realizable value including
transaction costs. The Company retained the land and building related
to the Precision Metals operations and has entered into a lease
agreement with the purchaser for use of the land and building. The
Company expects to sell this land and building and, as such, the
assets continue to be classified as held for sale.

(ii) During the nine months ended December 31, 2004, the Company sold
the key intellectual property, inventory and operating assets of its
thermal management products business of the Precision Components
segment ("Thermals Business") for net proceeds of $8,600,000
resulting in a loss of $3,173,000 ($1,738,000 after income taxes).
Accordingly, the results of operations of the Thermals Business have
been segregated as discontinued operations in the interim
consolidated financial statements. The results of the discontinued
Thermal Business were as follows:

Three months ended Nine months ended
---------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Revenue $ - $ 476 $ - $ 5,029

Income (loss)
from operations $ - $ (721) $ 489 $ (6,154)
Income tax
(expense)
recovery - 602 (167) 2,450
---------------------------------------------------------------------
Income (loss) from
discontinued
operations $ - $ (119) $ 322 $ (3,704)
---------------------------------------------------------------------

(iii) During the three months ended June 30, 2003, the Company
committed to a plan to sell, and subsequently sold, the intellectual
property and key operating assets of its subsidiary, Eco-Snow Systems
Inc. ("Eco-Snow"). Accordingly, the results of operations of Eco-Snow
have been segregated and presented separately as discontinued
operations in the accompanying interim consolidated financial
statements. During the three months ended December 31, 2004, the
Company settled outstanding matters related to Eco-Snow resulting in
a loss from discontinued operations in the three and nine months
ended December 31, 2004. The results of the discontinued operations
were as follows:

Three months ended Nine months ended
---------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Revenue $ - $ - $ - $ -

Loss from
operations $ - $ (587) $ - $ (587)
Income tax
recovery - 235 - 235
---------------------------------------------------------------------
Loss from
discontinued
operations $ - $ (352) $ - $ (352)
---------------------------------------------------------------------

3. Acquisition:

During the three months ended September 30, 2005, ATS acquired the
net assets and business of an automation business in the United
Kingdom in order to increase installation support and sales and
service capabilities in this region. The results of this business
have been included in the interim consolidated financial statements
since acquisition.

The following table summarizes the estimated fair value of assets
acquired and liabilities assumed as at the date of acquisition:


Accounts receivable $ 845
Costs and earnings in excess of billings on contracts
in progress and inventories 840
Current liabilities (1,568)
---------------------------------------------------------------------
Net assets acquired excluding cash and long-term debt 117

Cash payment from vendor 220
Cash proceeds from long-term debt 439
Fair value of long-term debt assumed (402)
---------------------------------------------------------------------
257
---------------------------------------------------------------------
Net assets acquired 374
Less: acquisition costs (198)
---------------------------------------------------------------------
Extraordinary gain, net of tax 176
---------------------------------------------------------------------
---------------------------------------------------------------------

In accordance with GAAP, the excess of the fair value of assets
acquired less liabilities assumed was first allocated to all of the
acquired assets except current assets, with the remaining amount
presented as an extraordinary gain, net of income tax.

In conjunction with the purchase of assets, the vendor provided an
unsecured interest free loan of GBP 200,000 that is due on July 29,
2007. The fair value of the long-term debt was estimated using a
discount rate of 4.5%, based on other debt instruments with similar
characteristics.

4. Stock-based compensation:

In the calculation of the stock-based compensation expense in the
interim Consolidated Statements of Earnings, the fair values of the
Company"s non-performance based stock option grants were estimated
using the Black-Scholes option pricing model and the fair value of
the Company"s performance based stock option grants were estimated
using a binomial option pricing model with the following weighted
average assumptions and data:

Three months ended Nine months ended
---------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Weighted average
of risk-free
interest rate - - 3.4 % 3.6 %
Dividend yield - - 0.0 % 0.0 %
Weighted average
of expected life
(years) - - 5.2 yrs 5.5 yrs
Expected volatility - - 31.0 % 38.0 %
Number of stock
options granted
(thousands):
Non-performance
based - - 440 430
Performance based - - 173 -
Weighted average of
exercise price per
option (dollars) - - $ 14.40 $ 11.5
Weighted average
value per option
(dollars):
Non-performance based - - $ 5.04 $ 4.67
Performance based - - $ 4.42 $ -
---------------------------------------------------------------------
---------------------------------------------------------------------

During the three months ended June 30, 2005, the Company issued
certain performance based options. The performance based options vest
based on the ATS stock trading at or above specified thresholds 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, 2005, 25% of the performance
based options had vested.

5. Share repurchase option:

During the year ended March 31, 2005, the Company received proceeds
of $25,000,000 related to a "key-man" life insurance policy in
respect of the death of Mr. Klaus Woerner. The insurance policy was
entered into to provide funding for the repurchase of certain of
ATS"s shares.

Under an agreement entered into in 1998, the Company was granted the
option by 566226 Ontario Ltd., a corporation then controlled by Mr.
Woerner, to repurchase all or a portion of the shares held by 566226
Ontario Ltd. upon the death of Mr. Woerner, subject to certain
restrictions. This agreement was entered into to provide the Company
the ability to ensure an orderly disposition of shares controlled by
Mr. Woerner"s estate. On April 18, 2005, the Company exercised its
option to purchase for cancellation 1,974,723 shares at a price of
$12.66 per share. The purchase price of these shares was funded by
the $25,000,000 of life insurance proceeds.

As a result of the share repurchase, share capital has been reduced
by the value of $5.69 per share totaling $11.2 million. The excess
cost to repurchase the shares over the stated value was charged to
retained earnings.

6. Weighted average number of shares:

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

Three months ended Nine months ended
---------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
---------------------------------------------------------------------
Basic 59,077 60,748 59,143 60,719
Diluted 59,077 60,870 59,143 60,903
---------------------------------------------------------------------
---------------------------------------------------------------------

7. Segmented disclosure:

The Company evaluates performance based on three reportable segments:
Automation Systems, Solar and Precision Components. The Automation
Systems segment produces custom-engineered turn-key automated
manufacturing and test systems. The Solar segment is a high volume
manufacturer of photovoltaic products through its subsidiary
Photowatt International and also includes the Company"s investment in
the Spheral Solar(TM) Power initiative. 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 Nine months ended
---------------------------------------------------------------------
December 31 December 31 December 31 December 31
2005 2004 2005 2004
---------------------------------------------------------------------
(as restated) (as restated)
Revenue
Automation
Systems $ 120,790 $ 144,642 $ 357,409 $ 401,344
Solar 35,199 37,419 105,320 102,783
Precision
Components 24,543 22,702 69,458 72,665
Elimination of
inter-segment
revenue (1,812) (4,303) (8,457) (14,552)
---------------------------------------------------------------------
Consolidated $ 178,720 $ 200,460 $ 523,730 $ 562,240
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings (loss)
from operations
Automation
Systems $ (753) $ 9,843 $ 3,106 $ 26,500
Solar (2,872) 3,387 6,822 7,160
Precision
Components (497) (135) (2,835) (425)
Inter-segment
elimination
and corporate
expenses (2,510) (1,920) (8,426) (8,065)
---------------------------------------------------------------------
Consolidated $ (6,632) $ 11,175 $ (1,333) $ 25,170
---------------------------------------------------------------------
---------------------------------------------------------------------

8. Long-term debt:

During the nine months ended December 31, 2005, the Company drew upon
an additional $15,000,000 of the unsecured revolving bank credit
facility.

9. 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
bookings, Solar and Precision Components volumes, and the Company"s
earnings in any of its markets.



For further information

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


Source: ATS Automation Tooling Systems Inc.
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