Martinrea International Inc.
TSX : MRE

Martinrea International Inc.

May 04, 2011 17:05 ET

Martinrea International Inc.: Releases First Quarter Results Solid Revenues and Profitability

TORONTO, ONTARIO--(Marketwire - May 4, 2011) - Martinrea International Inc. (TSX:MRE), a leader in the production of quality metal parts, assemblies and modules and fluid management systems focused primarily on the automotive sector, announced today the release of its financial results for the first quarter ended March 31, 2011. Martinrea currently employs over 7,000 skilled and motivated people in 31 plants in Canada, the United States, Mexico and Slovakia. All amounts in this press release are in Canadian dollars, unless otherwise stated; and all tabular amounts are in thousands of Canadian dollars, except earnings per share and number of shares. Additional information about the Company, including the Company's Management Discussion and Analysis of Operating Results and Financial Position for the quarter ended March 31, 2011 ("MD&A") dated as of May 4, 2011, the Company's unaudited interim consolidated financial statements for the quarter ended March 31, 2011 (the "unaudited consolidated interim financial statements") and the Company's Annual Information Form for the financial year ended December 31, 2010, can be found at www.sedar.com.

Changes in Accounting Standards

On January 1, 2011, the Company adopted International Financial Reporting Standards ("IFRS") for financial reporting purposes, with a transition date of January 1, 2010. The interim consolidated financial statements for the three months ended March 31, 2011, including required comparative information, have been prepared in accordance with International Financial Reporting Standards 1, First-time adoption of International Financial Reporting Standards ("IFRS 1"), and with International Accounting Standard ("IAS") 34, Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB"). Previously, the Company prepared its interim and annual consolidated financial statements in accordance with Canadian generally accepted accounting principles ("Canadian GAAP").

The adoption of IFRS has had no impact on the Company's operations, strategic decisions and cash flow. Further information on the IFRS impacts is provided in the Accounting Policy Changes and Critical Accounting Estimates Sections of the Company's MD&A and note 26 to the Company's unaudited interim consolidated financial statements, including reconciliations between Canadian GAAP and IFRS net earnings.

Non-GAAP Measures

The Company now reports its financial results in accordance with IFRS. However, the Company has included certain non-GAAP financial measures and ratios in this press release that the Company believes will provide useful information in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to the other financial measures determined in accordance with IFRS. Non-GAAP measures referred to in the analysis include "adjusted net earnings", and "adjusted earnings per share on a basic and diluted basis" and are defined in the Tables A and B under "Adjustments to Net Income" below.

Results of Operations

The comparative amounts in the analysis below have been adjusted to reflect the impact from the Company's transition to IFRS effective January 1, 2010.

REVENUE                                                                     
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                 Three months ended   Three months ended                    
                     March 31, 2011       March 31, 2010    Change  % Change
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Revenue         $           431,181  $           381,480    49,701     13.0%
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First Quarter 2011 to First Quarter 2010 comparison

The Company's revenue for the first quarter of 2011 increased by $49.7 million or 13.0% to $431.2 million as compared to $381.5 million for the first quarter of 2010. The increase was primarily due to improved production volumes in North American light vehicle platforms and the launch of new programs during the first quarter of 2011. This increase in revenue would have been higher had it not been offset by a reduction in the translation of U.S. dollar denominated revenue of approximately $16.3 million. Tooling revenue relating primarily to new program launches increased by $1.2 million to $11.8 million as compared to $10.6 million for the first quarter of 2010.

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                 Three months ended   Three months ended                    
                     March 31, 2011    December 31, 2010    Change  % Change
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Revenue         $           431,181  $           494,420  (63,239)   (12.8%)
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First Quarter 2011 to Fourth Quarter 2010 comparison

The Company's revenue for the first quarter of 2011 decreased by $63.2 million or 12.8% to $431.2 million as compared $494.4 million for the fourth quarter of 2010. The decrease can be attributed to a significant decrease in tooling revenue relating to upcoming new programs which is dependent on the timing of tooling construction and final inspection and acceptance by the customer. Tooling revenue decreased by $60.9 million to $11.8 million for the first quarter of 2011 as compared to $72.7 million for the fourth quarter of 2010. Revenue for the first quarter of 2011 would have been higher had it not been negatively impacted by a reduction in the translation of U.S. dollar denominated revenue of approximately $7.5 million.

GROSS MARGIN                                                                
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                 Three months ended   Three months ended                    
                     March 31, 2011       March 31, 2010    Change  % Change
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Gross margin    $            42,438  $            37,964     4,474     11.8%
% of revenue                   9.8%                10.0%                    
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First Quarter 2011 to First Quarter 2010 comparison

The gross margin percentage for the first quarter of 2011 of 9.8% decreased by 0.2% as compared to the gross margin percentage for the first quarter of 2010 of 10.0%. Excluding the one time items recorded as cost of sales in the first quarter of 2010 as explained in Table A under "Adjustments to Net Income", the gross margin percentage for the first quarter of 2011 decreased to 9.8% from 10.2% for the first quarter of 2010. The decrease can be attributed to higher costs incurred in preparation of upcoming program launches and change in overall sales mix.

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                 Three months ended   Three months ended                    
                     March 31, 2011    December 31, 2010    Change  % Change
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Gross margin    $            42,438  $            50,944   (8,506)   (16.7%)
% of revenue                   9.8%                10.3%                    
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First Quarter 2011 to Fourth Quarter 2010 comparison

The gross margin percentage for the first quarter of 2011 of 9.8% decreased by 0.5 % as compared to the gross margin percentage for the fourth quarter of 2010 of 10.3%. Excluding the one time items recorded as cost of sales in the fourth quarter of 2010 as explained in Table B under "Adjustment to Net Income", the gross margin percentage for the fourth quarter of 2010 was 9.8% which is consistent with the gross margin percentage realized in the first quarter of 2011. The gross margin percentage for the first quarter of 2011 was positively impacted by the decline in tooling revenue, which typically earns low or no margins for the Company, as compared to the fourth quarter of 2010. This positive impact was offset by higher costs incurred in preparation of upcoming program launches.

ADJUSTMENTS TO NET INCOME

(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)

As a result of the economic recession in North America that caused a significant reduction in production by customers in 2009 and 2010 and a number of industry related developments and risks described under "Risks and Uncertainties" in the MD&A, and the rationalization of the Company's manufacturing facilities, the Company recorded a number of unusual items and other items throughout 2010. The Company believes that it is useful to set out in detail these unusual and other items as they are non-recurring in nature and thus the Company's past financial results may not be indicative of future results.

TABLE A                                                                     
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                     For the                                                
                       three                                                
                      months                                                
                       ended          For the three months ended            
                   March 31,                                                
                        2011                      March 31, 2010            
                 -----------   ----------------------------------           
                         (a)      Canadian        IFRS       (b)    (a)-(b) 
                        IFRS          GAAP  Adjustment      IFRS     Change 
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NET EARNINGS (A) $    14,015   $     9,714 $     1,340 $  11,054 $    2,961 
Add back -                                                                  
 Unusual Items:                                                             
Employee Related                                                            
 Severance Costs                                                            
 (2)                       -           245           -       245       (245)
Other                                                                       
 Restructuring                                                              
 Costs (3)                 -           125           -       125       (125)
Other                                                                       
 Restructuring                                                              
 Costs - Period                                                             
 costs and                                                                  
 pension expense                                                            
 recorded as cost                                                           
 of sales for                                                               
 facilities                                                                 
 closed during                                                              
 restructuring                                                              
 (3)                       -           890           -       890       (890)
Other                                                                       
 Restructuring                                                              
 Costs - Period                                                             
 costs recorded                                                             
 as SG&A expense                                                            
 for facilities                                                             
 closed during                                                              
 restructuring                                                              
 (3)                       -            38           -        38        (38)
Add back - Other                                                            
 Items:                                                                     
Development Costs                                                           
 (4)                       -         1,283           -     1,283     (1,283)
Valuation                                                                   
 Allowance on                                                               
 Deferred Tax                                                               
 Assets (5)                -          (179)        179         -          - 
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TOTAL UNUSUAL AND                                                           
 OTHER ITEMS                                                                
 BEFORE TAX                -         2,402         179     2,581     (2,581)
Tax impact                 -          (740)       (179)     (919)       919 
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TOTAL UNUSUAL AND                                                           
 OTHER ITEMS                                                                
 AFTER TAX (B)             -         1,662           -     1,662     (1,662)
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ADJUSTED NET                                                                
 EARNINGS (A + B)$    14,015   $    11,376 $     1,340 $  12,716 $    1,299 
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Number of Shares                                                            
 Outstanding -                                                              
 Basic ('000)         83,290                              83,326            
Adjusted Basic                                                              
 Earnings Per                                                               
 Share                  0.17                                0.15            
Number of Shares                                                            
 Outstanding -                                                              
 Diluted ('000)       84,915                              84,382            
Adjusted Diluted                                                            
 Earnings Per                                                               
 Share                  0.17                                0.15            
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TABLE B                                                                     
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                        For the                                             
                          three                                             
                         months                                             
                          ended        For the three months ended           
                      March 31,                                             
                           2011                 December 31, 2010           
                    ----------- ----------------------------------          
                            (a)    Canadian        IFRS       (b)     (a-b) 
                           IFRS        GAAP  Adjustment      IFRS    Change 
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NET EARNINGS (A)    $    14,015 $     5,122 $    10,453 $  15,575 $  (1,560)
Add back - Unusual                                                          
 Items:                                                                     
Impairment of                                                               
 Property, Plant &                                                          
 Equipment and                                                              
 Intangible Assets                                                          
 (1)                          -       3,802      (5,319)   (1,517)    1,517 
Employee Related                                                            
 Severance Costs (2)          -       1,938           -     1,938    (1,938)
Other Restructuring                                                         
 Costs (3)                    -       4,609           -     4,609    (4,609)
Other Restructuring                                                         
 Costs - Period                                                             
 costs and pension                                                          
 expense recorded as                                                        
 cost of sales for                                                          
 facilities closed                                                          
 during                                                                     
 restructuring (3)            -         569           -       569      (569)
Other Restructuring                                                         
 Costs - Period                                                             
 costs recorded as                                                          
 SG&A expenses for                                                          
 facilities closed                                                          
 during                                                                     
 restructuring (3)            -         294           -       294      (294)
Add back - Other                                                            
 Items:                                                                     
Pension plan                                                                
 settlement and                                                             
 Other Post                                                                 
 Employment Benefit                                                         
 Curtailment                                                                
 recorded as cost of                                                        
 sales (6)                    -       1,258      (4,464)   (3,206)    3,206 
Valuation Allowance                                                         
 on Deferred Tax                                                            
 Assets (5)                   -          95         (95)        -         - 
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TOTAL UNUSUAL AND                                                           
 OTHER ITEMS BEFORE                                                         
 TAX                          -      12,565      (9,878)    2,687    (2,687)
Tax impact                    -      (3,732)         95    (3,637)    3,637 
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TOTAL UNUSUAL AND                                                           
 OTHER ITEMS AFTER                                                          
 TAX (B)                      -       8,833      (9,783)     (950)      950 
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ADJUSTED NET                                                                
 EARNINGS (A + B)   $    14,015 $    13,955 $       670 $  14,625 $    (610)
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Number of Shares                                                            
 Outstanding - Basic                                                        
 ('000)                  83,290                            83,325           
Adjusted Basic                                                              
 Earnings Per Share        0.17                              0.18           
Number of Shares                                                            
 Outstanding -                                                              
 Diluted ('000)          84,915                            84,478           
Adjusted Diluted                                                            
 Earnings Per Share        0.17                              0.17           
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(1) Property, Plant and Equipment ("PP&E") and Intangible Asset Impairment Reversal

In connection with the comparative requirements of IFRS adoption, impairment tests were conducted for property, plant and equipment and intangible assets at December 31, 2010. In addition, as required by IFRS, the Company evaluated all previously recorded impairment charges for potential reversal. Based on this analysis, incremental impairment charges were recorded but offset by the reversal of certain previously recorded impairment charges resulting in a net impairment reversal of $1.5 million during the fourth quarter of 2010. The reversal of previously recorded impairment charges under the requirements of IFRS was primarily due to the significant improvements in North American vehicle production from 2009 and the benefits from the restructuring activities conducted during 2009 and 2010 which included the relocation of plant and equipment and the corresponding customer business to cost competitive facilities.

(2) Employee Related Severance Costs

During the fourth quarter of 2010, the Company incurred employee related severance costs of $1.9 million relating primarily to the closure of a Company facility in Mississauga, Ontario on December 13, 2010 and the right-sizing of operating facilities in southwestern Ontario. The restructuring activities undertaken during the fourth quarter of 2010 formed part of the Company's overall cost cutting program aimed at realigning and increasing the efficiency of the Company's operations. Similar severance costs of $0.2 million were incurred in the first quarter of 2010. At this time, the Company does not expect to incur any additional employee related severance at these facilities.

(3) Restructuring Costs

In response to the significant decline in vehicle production volumes beginning in 2008, the Company undertook certain initiatives to prepare for a profitable and sustainable future. In so doing, certain restructuring activities were executed throughout 2009 and 2010. These initiatives included strict cost reduction measures across the entire organization, consolidation and closure of certain facilities and the rationalization of excess capacity at certain facilities achieved by moving equipment and programs between facilities.

Other restructuring costs during 2010 relate primarily to the cessation of manufacturing operations at the Company's Windsor, Ontario and Mississauga, Ontario facilities on June 30, 2010 and December 13, 2010, respectively, the right-sizing of operating facilities in southwestern Ontario and period costs associated with the closure of the Kitchener Frame facility prior to its disposal in the second quarter of 2010. Other restructuring costs include directly attributable facility and right-sizing costs and costs relating to the dismantling and transportation of PP&E between Company's facilities. At this time, the Company does not expect to incur any further significant restructuring costs with the exception of the funding of the Windsor pension and OPEB plans which the Company will continue to fund over next three years and the windup of the Martinrea Fabco Hot Stampings pension plan which is expected to be completed in 2011.

(4) Development Costs

Development costs in the nature of employee training and other operational inefficiencies during the product launch period are expensed in accordance with IFRS and the Company's accounting policies. The Company expensed approximately $1.3 million in the first quarter of 2010 in relation to development costs for takeover business from SKD.

(5) Valuation Allowance on Deferred Tax Assets

The concept of a separately disclosed valuation allowance on deferred tax assets no longer exists under IFRS since deferred tax assets are recorded on a net basis to reflect the amount that is probable of realization.. As such, the change in valuation allowance as previously reported under Canadian GAAP has been reclassified for comparative purposes to be included in the tax impact of the one time items noted in the tables above.

(6) Pension settlement and other post employment benefit curtailment

During the fourth quarter of 2010, the Company settled the pension plan at its facility in Shelbyville, Kentucky. In doing so, the Company made payments towards lump sum payouts for those members who elected to receive payment of the plan in 2010 and annuities for those members who elected to postpone payment of the plan. The net gain on settlement (including the impact of an OPEB curtailment which resulted from the pension settlement) was approximately $3.2 million under IFRS as compared to a loss of $1.3 million as previously reported under Canadian GAAP. The difference between IFRS and Canadian GAAP can be mainly attributed to a policy election made by the Company under the provisions of IFRS 1 which resulted in all cumulative actuarial gains and losses for all employee benefit plans that existed at the IFRS transition date of January 1, 2010 to be recognized in opening accumulated deficit.

NET EARNINGS                                                                
(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)                             
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                                       Three       Three                    
                                      months      months                    
                                       ended       ended                    
                                   March 31,   March 31,                    
                                        2011        2010    Change % Change 
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Net Earnings                     $    14,015 $    11,054     2,961     26.8%
Adjusted net earnings            $    14,015 $    12,716     1,299     10.2%
Earnings per common share                                                   
 Basic                           $      0.17 $      0.13                    
 Diluted                         $      0.17 $      0.13                    
Adjusted earnings per common                                                
 share                                                                      
 Basic                           $      0.17 $      0.15                    
 Diluted                         $      0.17 $      0.15                    
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First Quarter 2011 to First Quarter 2010 comparison

The net earnings for the first quarter of 2011 of $14.0 million increased by $3.0 million from $11.0 million for the first quarter of 2010 primarily on account of increased customer production volumes and a decrease in the net impact of one time items as described in table A under "Adjustments to Net Income". Excluding one time items incurred during the first quarter of 2010, the adjusted net earnings for first quarter of 2011 improved to $14.0 million or $0.17 per share, on a basic and diluted basis, in comparison to adjusted net earnings of $12.7 million or $0.15 per share, on a basic and diluted basis, for the first quarter of 2010.

The increase in adjusted net earnings in the first quarter of 2011 as compared to the first quarter of 2010 was primarily due to a 13.1% increase in revenue (excluding tooling revenue) in the first quarter of 2011 as compared to the first quarter of 2010 partially offset by an increase in new program launch activity.

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                                    Three       Three                       
                                   months      months                       
                                    ended       ended                       
                                March 31,    December                       
                                     2011    31, 2010    Change   % Change  
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Net Earnings                  $    14,015 $    15,575    (1,560)     (10.0%)
Adjusted net earnings         $    14,015 $    14,625      (610)      (4.2%)
Earnings per common share                                                   
 Basic                        $      0.17 $      0.19                       
 Diluted                      $      0.17 $      0.18                       
Adjusted net earnings per                                                   
 common share                                                               
 Basic                        $      0.17 $      0.18                       
 Diluted                      $      0.17 $      0.17                       
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First Quarter 2011 to Fourth Quarter 2010 comparison

The net earnings for the first quarter of 2011 of $14.0 million decreased by $1.6 million from net earnings of $15.6 million for the fourth quarter of 2010 largely due to the impact of one-time items as discussed in Table B under "Adjustments to Net Income". Excluding one time items, the adjusted net earnings for the first quarter of 2011 remained relatively consistent at $14 million or $0.17 per share, on a basic and diluted basis, for the first quarter of 2011 as compared to adjusted net earnings of $14.6 million or $0.18 per share, on a basic basis, and $0.17 on a diluted basis, for the fourth quarter of 2010.

Adjusted net earnings for the first quarter of 2011 was negatively impacted by a slight decrease in revenue (excluding tooling revenue) of $2.3 million in the first quarter of 2011 as compared to the fourth quarter of 2010 and higher costs incurred in preparation for upcoming new program launches which was partially offset by a decrease in SG&A expenses.

CAPITAL EXPENDITURES                                                        
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                           Three months     Three months                    
                        ended March 31,  ended March 31,                    
                                   2011             2010    Change  % Change
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Capital Expenditures   $         25,075 $         13,075    12,000     91.8%
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First Quarter 2011 to First Quarter 2010 comparison

Capital expenditures increased by $12.0 million to $25.1 million in the fourth quarter of 2011 from $13.1 million in the first quarter of 2010. Capital expenditures incurred in the first quarter of 2011 are primarily related to the purchase of new program equipment in response to newly awarded business scheduled to launch over the next two years and capital for a new plant the Company will be opening in Silao, Mexico during 2011.

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                           Three months     Three months                    
                        ended March 31,   ended December                    
                                   2011         31, 2010  Change  % Change  
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Capital Expenditures $           25,075 $         35,005  (9,930)    (28.4%)
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First Quarter 2011 to Fourth Quarter 2010 comparison

Capital expenditures decreased by $9.9 million from $35.0 million in the fourth quarter of 2010 to $25.1 million in the first quarter of 2011 mainly on account of general timing of capital expenditures and progress payments to capital suppliers. Capital expenditures incurred in the first quarter of 2011 are primarily related to the purchase of new program equipment in response to newly awarded business scheduled to launch over the next two years and capital for a new plant the Company will be opening in Silao, Mexico during 2011.

Nick Orlando, Martinrea's Chief Executive Officer, stated: "We had a solid first quarter from many perspectives. Revenues and profits were up year over year. Our company is solidly profitable. We are proceeding with program launches in many of our operations, and while these often involve some costs before the launches are complete, we are making good progress. As previously noted, we have significant launch activity this year, which will eventually improve our capacity utilization and throughput. We are also seeing significant quoting opportunities, and we did have some good product wins in the quarter, totaling approximately $30 million in annual sales when launched, including $18 million of new metal forming business for the Lincoln C489 program in Kentucky, $8 million as it relates to roof moldings for GM's new pickup and SUV program and $4 million of fuel assembly business for Ford's B299 program in Brazil. Our gross margin for the quarter was 9.8%, consistent with the gross margin percentage of our fourth quarter after excluding one time items affecting the fourth quarter number, and using the new IFRS accounting standards. We anticipate our gross margin percentage will improve going forward. We also believe that revenues and profits should be higher in our second quarter than our first, subject to production halts at our customers, whether caused by the recent supplier shortage issues created by the crisis in Japan, which has had relatively little effect to date, or otherwise."

Rob Wildeboer, Martinrea's Executive Chairman, stated: "Our net income, on a basic and diluted basis, for the first quarter was $0.17 cents per share. Our net income is not subject to any material restructuring adjustments, as our restructuring is substantially complete. We believe that our profits will improve as revenues grow and as we continue to drive efficiencies in our operations with a very capable team of people, who are doing a great job. Our balance sheet also remains very strong, and we have significant debt capacity. In the first quarter we expanded both our lending group and our credit facilities, and we would like to thank our lenders for their continuing support. They have been there for us throughout the recent automotive and economic crisis, and they continue to be supportive now. We are seeing opportunities for growth, in many areas. We are expanding some plants, we are building a plant in Silao Mexico and we recently announced we will be setting up our first fluid systems plant in China. There are also opportunities to grow our product line and geographic footprint in other areas. We believe our revenues and profits will continue to grow over time."

Forward-Looking Information

Special Note Regarding Forward-Looking Statements

This press release and documents incorporated by reference therein contains forward-looking statements within the meaning of applicable Canadian securities laws including related to the Company's expectations as to gross margin percentage, the launching of new metal forming and fluid systems programs, pricing pressures placed by OEMs on suppliers, continued consolidation of automotive suppliers, the increase in foreign owned OEM production in relation to vehicle importation, the increased reliance on outsourcing by foreign-owned OEMs, anticipated growth in the automotive industry in emerging markets, the increased reliance on forming technologies, future investments in leading edge technology, equipment and processes, the opportunity to increase sales, broad geographic penetration, increased relationships with intermediary suppliers, and the nature and duration of the economic recession to the continuation of monitoring, managing and rationalization of expenses, the Company's expectations regarding the amount of restructuring expenses to be expensed, the Company's expectation regarding the financing of future capital expenditures, the Company's views of the likelihood of tooling and component part supplier default, the Company's view on the financial viability of its customers, the impact of environmental regulation on the demand for automobiles, the Company's views on the long term outlook of the automotive industry and availability of credit for automotive purchases, and corresponding increased sales and production, the Company's expectations regarding future revenues and profitability, the Company's statements on labour relations, and the Company's ability to capitalize on opportunities in the automotive industry as well as other forward-looking statements. The words "continue", "expect", "anticipate", "estimate", "may", "will", "should", "views", "intend", "believe", "plan" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances. Many factors could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, some of which are discussed in detail in the Company's Annual Information Form and other public filings which can be found at www.sedar.com:

--  North American and global economic and political conditions; 
--  the highly cyclical nature of the automotive industry and the industry's
    dependence on consumer spending and general economic conditions; 
--  the Company's dependence on a limited number of significant customers,
    which have experienced and may continue to face severe financial
    challenges; 
--  financial viability of suppliers; 
--  Martinrea's reliance on suppliers for components and the risk that
    suppliers will not be able to supply components on a timely basis or in
    sufficient quantities; 
--  competition; 
--  the increasing pressure on the Company to absorb costs related to
    product design and development, engineering, program management,
    prototypes, validation and tooling; 
--  increased pricing of raw materials; 
--  outsourcing and in-sourcing trends; 
--  competition with low cost countries; 
--  the risk of increased costs associated with product warranty and recalls
    together with the associated liability; 
--  the Company's ability to enhance operations and manufacturing
    techniques; 
--  dependence on key personnel; 
--  limited financial resources; 
--  risks associated with the integration of acquisitions; 
--  costs associated with rationalization of production facilities; 
--  the potential volatility of the Company's share price; 
--  changes in governmental regulations or laws including any changes to the
    North American Free Trade Agreement; 
--  labour disputes; 
--  litigation; 
--  currency risk; 
--  fluctuations in operating results; 
--  internal controls over financial reporting and disclosure controls and
    procedures; 
--  environmental regulation; 
--  under-funding of pension plans; and 
--  the cost of post-employment benefits. 

These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

A conference call to discuss these results will be held on Thursday, May 5, 2011 at 8:00 a.m. (Toronto time) which can be accessed by dialing 416-340-8410 or toll free 866-225-2055. Please call 10 minutes prior to the start of the conference call.

If you have any teleconferencing questions, please call Andre La Rosa at (416) 749-0314.

There will also be a rebroadcast of the call available by dialing 800-408-3053 (conference id - 4555837#). The rebroadcast will be available until May 19, 2011.

The common shares of Martinrea trade on The Toronto Stock Exchange under the symbol "MRE".

Martinrea International Inc.                                                
Consolidated Balance Sheets                                                 
(in thousands of Canadian dollars) (unaudited)                              
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                                  March 31,    December 31,      January 1, 
                        Note           2011            2010            2010 
----------------------------------------------------------------------------
ASSETS                                            (Note 26)       (Note 26) 
Cash and cash                                                               
 equivalents                  $           -   $      26,027   $      22,769 
Trade and other                                                             
 receivables               3        329,090         250,404         228,971 
Inventories                4        166,375         145,614         136,050 
Prepaid expenses and                                                        
 deposits                             5,368           4,401           4,389 
Income taxes                                                                
 recoverable                          5,889           5,255          15,517 
Current portion of                                                          
 promissory note           8          6,069           5,994               - 
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TOTAL CURRENT ASSETS                512,791         437,695         407,696 
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Property, plant and                                                         
 equipment                 5        410,096         402,771         370,953 
Deferred income tax                                                         
 assets                              63,986          68,088          64,228 
Intangible assets          6         14,944          14,735          17,579 
Promissory note            8          4,699           4,641               - 
Note receivable            7              -               -         130,805 
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TOTAL NON-CURRENT                                                           
 ASSETS                             493,725         490,235         583,565 
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TOTAL ASSETS                  $   1,006,516   $     927,930   $     991,261 
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LIABILITIES                                                                 
Bank Indebtedness             $      15,760   $           -   $           - 
Trade and other                                                             
 payables                  9        283,599         251,427         222,847 
Provisions                10          3,209           4,339           2,696 
Income taxes payable                  3,894           5,627           2,148 
Current portion of                                                          
 long-term debt           11         16,348          90,072          14,845 
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TOTAL CURRENT                                                               
 LIABILITIES                        322,810         351,465         242,536 
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Long-term debt            11        113,955          13,062          72,555 
Pension and other post-                                                     
 retirement benefits                 40,916          44,108         197,864 
Deferred income tax                                                         
 liabilities                         32,506          30,187          22,712 
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TOTAL NON-CURRENT                                                           
 LIABILITIES                        187,377          87,357         293,131 
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TOTAL LIABILITIES                   510,187         438,822         535,667 
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EQUITY                                                                      
Share capital             14        682,788         682,495         683,057 
Note receivable for                                                         
 share capital            14         (2,700)         (2,700)         (2,700)
Contributed surplus       14         41,771          41,241          37,393 
Accumulated other                                                           
 comprehensive loss                 (29,689)        (22,132)              - 
Accumulated deficit                (196,722)       (210,718)       (263,415)
----------------------------------------------------------------------------
TOTAL EQUITY                                                                
 ATTRIBUTABLE TO EQUITY                                                     
 HOLDERS OF THE COMPANY             495,448         488,186         454,335 
Non-controlling                                                             
 interest                               881             922           1,259 
----------------------------------------------------------------------------
TOTAL EQUITY                        496,329         489,108         455,594 
----------------------------------------------------------------------------
TOTAL LIABILITIES AND                                                       
 EQUITY                       $   1,006,516   $     927,930   $     991,261 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.

On behalf of the Board:

"Robert Wildeboer"       Director                                           
---------------------------------                                           
"Suleiman Rashid"        Director                                           
---------------------------------                                           
Martinrea International Inc.                                                
Consolidated Statements of Operations                                       
(in thousands of Canadian dollars, except per share amounts) (unaudited)    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                            Three months       Three months 
                                                   ended              ended 
                                   Note   March 31, 2011     March 31, 2010 
----------------------------------------------------------------------------
                                                                  (Note 26) 
----------------------------------------------------------------------------
SALES                                   $        431,181   $        381,480 
----------------------------------------------------------------------------
Cost of sales (excluding                                                    
 depreciation of property, plant                                            
 and equipment)                                 (378,729)          (333,351)
Depreciation of property, plant                                             
 and equipment (production)           5          (10,014)           (10,165)
----------------------------------------------------------------------------
Total cost of sales                             (388,743)          (343,516)
----------------------------------------------------------------------------
GROSS MARGIN                                      42,438             37,964 
----------------------------------------------------------------------------
Research and development costs       16           (2,258)            (1,593)
Selling, general and                                                        
 administrative                                  (17,706)           (17,874)
Depreciation of property, plant                                             
 and equipment (non-production)       5             (721)              (646)
Amortization of intangible assets     6           (1,091)            (1,137)
Restructuring costs                  19                -               (370)
Loss on disposal of property,                                               
 plant and equipment                                  (4)               (67)
----------------------------------------------------------------------------
OPERATING INCOME                                  20,658             16,277 
----------------------------------------------------------------------------
Finance costs                                     (1,431)            (1,392)
Other finance income and expense     18              259                301 
----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                        19,486             15,186 
Income tax expense                   13           (5,512)            (4,154)
----------------------------------------------------------------------------
NET INCOME FOR THE PERIOD                         13,974             11,032 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-controlling interest                              41                 22 
----------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO EQUITY                                           
 HOLDERS OF THE COMPANY                 $         14,015   $         11,054 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings per share             15 $           0.17   $           0.13 
Diluted earnings per share           15 $           0.17   $           0.13 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.

Martinrea International Inc.                                                
Consolidated Statements of Comprehensive Income                             
(in thousands of Canadian dollars) (unaudited)                              
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                            Three months       Three months 
                                                   ended              ended 
                                          March 31, 2011     March 31, 2010 
----------------------------------------------------------------------------
                                                                  (Note 26) 
NET INCOME FOR THE PERIOD               $         13,974   $         11,032 
Other comprehensive income (loss), net                                      
 of tax:                                                                    
 Foreign currency translation                                               
  differences for foreign operations              (9,197)           (10,377)
 Defined benefit plan actuarial gains                                       
  (losses)                                         1,640             (1,208)
----------------------------------------------------------------------------
Other comprehensive loss, net of tax              (7,557)           (11,585)
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME (LOSS) FOR                                       
 THE PERIOD                                        6,417               (553)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:                                                            
 Equity holders of the Company                     6,549               (447)
 Non-controlling interest                           (132)              (106)
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME (LOSS) FOR                                       
 THE PERIOD                             $          6,417   $           (553)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.

Martinrea International Inc.                                                
Consolidated Statements of Changes in Equity                                
(in thousands of Canadian dollars) (unaudited)                              
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                  Equity attributable to equity holders of the Company      
            ----------------------------------------------------------------
                             Notes                                          
                        receivable                  Cumulative    Actuarial 
                Share    for share   Contributed   translation    gains and 
              Capital      capital       Surplus       account       losses 
----------------------------------------------------------------------------
Balance at                                                                  
 January 1,                                                                 
 2010        $683,057   $   (2,700)  $    37,393   $         -   $        - 
Net Income                                                                  
 for the                                                                    
 period             -            -             -             -            - 
Compensation                                                                
 expense                                                                    
 related to                                                                 
 stock                                                                      
 options            -            -           267             -            - 
Actuarial                                                                   
 losses             -            -             -             -       (1,208)
Foreign                                                                     
 currency                                                                   
 translation                                                                
 differences        -            -             -       (10,377)           - 
----------------------------------------------------------------------------
Balance at                                                                  
 March 31,                                                                  
 2010         683,057       (2,700)       37,660       (10,377)      (1,208)
----------------------------------------------------------------------------
Net Income                                                                  
 for the                                                                    
 period             -            -             -             -            - 
Compensation                                                                
 expense                                                                    
 related to                                                                 
 stock                                                                      
 options            -            -         3,610             -            - 
Exercise of                                                                 
 employee                                                                   
 stock                                                                      
 options          101            -           (29)            -            - 
Repurchase                                                                  
 of common                                                                  
 shares          (663)           -             -             -            - 
Actuarial                                                                   
 losses             -            -             -             -       (2,103)
Foreign                                                                     
 currency                                                                   
 translation                                                                
 differences        -            -             -        (8,444)           - 
----------------------------------------------------------------------------
Balance at                                                                  
 December                                                                   
 31, 2010     682,495       (2,700)       41,241       (18,821)      (3,311)
----------------------------------------------------------------------------
Net Income                                                                  
 for the                                                                    
 period             -            -             -             -            - 
Compensation                                                                
 expense                                                                    
 related to                                                                 
 stock                                                                      
 options            -            -           570             -            - 
Exercise of                                                                 
 employee                                                                   
 stock                                                                      
 options          499            -           (40)            -            - 
Repurchase                                                                  
 of common                                                                  
 shares          (206)           -             -             -            - 
Actuarial                                                                   
 gains              -            -             -             -        1,640 
Foreign                                                                     
 currency                                                                   
 translation                                                                
 differences        -            -             -        (9,197)           - 
----------------------------------------------------------------------------
Balance at                                                                  
 March 31,                                                                  
 2011        $682,788   $   (2,700)  $    41,771   $   (28,018)  $   (1,671)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
             Equity attributable to equity                                  
                 holders of the Company                                     
            ---------------------------------                               
                                                       Non-                 
                Accumulated                     controlling                 
                    deficit           Total        interest    Total equity 
----------------------------------------------------------------------------
Balance at                                                                  
 January 1,                                                                 
 2010        $     (263,415)  $     454,335   $       1,259   $     455,594 
Net Income                                                                  
 for the                                                                    
 period              11,054          11,054             (22)         11,032 
Compensation                                                                
 expense                                                                    
 related to                                                                 
 stock                                                                      
 options                  -             267               -             267 
Actuarial                                                                   
 losses                   -          (1,208)              -          (1,208)
Foreign                                                                     
 currency                                                                   
 translation                                                                
 differences              -         (10,377)                        (10,377)
----------------------------------------------------------------------------
Balance at                                                                  
 March 31,                                                                  
 2010              (252,361)        454,071           1,237         455,308 
----------------------------------------------------------------------------
Net Income                                                                  
 for the                                                                    
 period              41,706          41,706            (315)         41,391 
Compensation                                                                
 expense                                                                    
 related to                                                                 
 stock                                                                      
 options                  -           3,610               -           3,610 
Exercise of                                                                 
 employee                                                                   
 stock                                                                      
 options                  -              72               -              72 
Repurchase                                                                  
 of common                                                                  
 shares                 (63)           (726)              -            (726)
Actuarial                                                                   
 losses                   -          (2,103)              -          (2,103)
Foreign                                                                     
 currency                                                                   
 translation                                                                
 differences              -          (8,444)              -          (8,444)
----------------------------------------------------------------------------
Balance at                                                                  
 December                                                                   
 31, 2010          (210,718)        488,186             922         489,108 
----------------------------------------------------------------------------
Net Income                                                                  
 for the                                                                    
 period              14,015          14,015             (41)         13,974 
Compensation                                                                
 expense                                                                    
 related to                                                                 
 stock                                                                      
 options                  -             570               -             570 
Exercise of                                                                 
 employee                                                                   
 stock                                                                      
 options                  -             459               -             459 
Repurchase                                                                  
 of common                                                                  
 shares                 (19)           (225)              -            (225)
Actuarial                                                                   
 gains                    -           1,640               -           1,640 
Foreign                                                                     
 currency                                                                   
 translation                                                                
 differences              -          (9,197)              -          (9,197)
----------------------------------------------------------------------------
Balance at                                                                  
 March 31,                                                                  
 2011        $     (196,722)  $     495,448   $         881   $     496,329 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.

Martinrea International Inc.                                                
Consolidated Statements of Cash Flows                                       
(in thousands of Canadian dollars) (unaudited)                              
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                            Three months       Three months 
                                                   ended              ended 
                                          March 31, 2011     March 31, 2010 
----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN):                                                 
OPERATING ACTIVITIES:                                                       
Net Income for the period               $         13,974   $         11,032 
Adjustments for:                                                            
 Depreciation of property, plant and                                        
  equipment                                       10,735             10,811 
 Amortization of intangible assets                 1,091              1,137 
 Amortization of deferred financing                                         
  costs                                              257                 72 
 Accretion of interest on promissory                                        
  note                                              (133)                 - 
 Unrealized gains on foreign exchange                                       
  forward contracts                                 (280)              (476)
 Income tax expense                                5,512              4,154 
 Loss on disposal of property, plant                                        
  and equipment                                        4                 67 
 Stock-based compensation                            570                267 
 Pension and other post-retirement                                          
  benefits                                           654                250 
Contributions made to pension and other                                     
 post-retirement benefits                         (1,419)            (2,672)
----------------------------------------------------------------------------
                                                  30,965             24,642 
Changes in non-cash working capital                                         
 items:                                                                     
 Trade and other receivables                     (83,386)           (33,282)
 Inventories                                     (23,560)            (8,980)
 Prepaid expenses and deposits                      (967)            (1,585)
 Trade, other payables and provisions             36,536              6,185 
 Income taxes payable / recoverable                  (76)             1,830 
----------------------------------------------------------------------------
                                                 (40,488)           (11,190)
 Interest paid                                    (1,217)            (1,893)
 Income taxes paid                                (2,164)             2,586 
----------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES            (43,869)           (10,497)
----------------------------------------------------------------------------
FINANCING ACTIVITIES:                                                       
 Increase in bank indebtedness                    15,760                  - 
 Repurchase of common shares                        (225)                 - 
 Exercise of employee stock options                  459                  - 
 Increase in long-term debt                       30,369             16,000 
 Repayment of long-term debt                      (3,322)            (3,852)
----------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING                                              
 ACTIVITIES                                       43,041             12,148 
----------------------------------------------------------------------------
INVESTING ACTIVITIES:                                                       
 Purchase of property, plant and                                            
  equipment                                      (25,075)           (13,075)
 Development costs                                (1,420)                 - 
 Proceeds on disposal of property,                                          
  plant and equipment                                 47                 70 
----------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES            (26,448)           (13,005)
----------------------------------------------------------------------------
Effect of foreign exchange rate changes                                     
 on cash and cash equivalents                      1,249               (715)
----------------------------------------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS            (26,027)           (12,069)
CASH AND CASH EQUIVALENTS, BEGINNING OF                                     
 PERIOD                                           26,027             22,769 
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF                                           
 PERIOD                                 $              -   $         10,700 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the interim consolidated financial statements.

Contact Information

  • Martinrea International Inc.
    Nick Orlando
    Chief Executive Officer and President
    (416) 749-0314
    (289) 982-3001 (FAX)