Martinrea International Inc.
TSX : MRE

Martinrea International Inc.

August 06, 2009 17:01 ET

Martinrea International Inc. Releases Second Quarter Results 2009

TORONTO, ONTARIO--(Marketwire - Aug. 6, 2009) - 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 its second quarter ended June 30, 2009. Martinrea currently employs approximately 4,300 skilled and motivated people in 32 plants in Canada, the United States, Mexico, and Europe. 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.



REVENUE

--------------------------------------------------
Three months ended
-------------------
June 30, June 30, %
2009 2008 Change Change
--------------------------------------------------

Revenue 243,317 410,861 (167,544) (40.8%)
--------------------------------------------------


Second Quarter 2009 to Second Quarter 2008 comparison

Revenue for the second quarter of 2009 decreased from the prior year by 40.8% primarily due to significant production reductions by customers in North American light vehicle platforms as a result of the North American economic recession and customer pricing pressures. This decrease was partially offset by a decline in the value of the Canadian dollar versus the U.S. dollar in the second quarter of 2009 as compared to the second quarter of 2008 which increased the translation of U.S. dollar denominated revenues by $27.8 million. Tooling sales relating to new program launches decreased by $9.4 million in the quarter ended June 30, 2009 compared to the quarter ended June 30, 2008.

Second Quarter 2009 to First Quarter 2009 comparison

Revenue for the second quarter of 2009 of $243.3 million increased by 18.6% or $38.2 million compared to revenue in the first quarter of 2009 of $205.1 million. This increase was primarily due to the improved production volumes in the second quarter of 2009 as compared to the first quarter of 2009. This improvement was partially offset by a strengthening of the Canadian dollar versus the U.S. dollar decreasing the translation of U.S. dollar denominated revenues by approximately $2.6 million. During the second quarter of 2009, tooling sales relating to new program launches decreased by $3.3 million compared to the first quarter of 2009.



GROSS MARGIN

-----------------------------------------------------------
Three months ended
-------------------
June 30, June 30,
2009 2008 Change % Change
-----------------------------------------------------------

Gross Margin 16,027 43,077 (27,050) (62.8%)

% of revenues 6.6% 10.5% (3.9%)
-----------------------------------------------------------


Due to the adoption of the new CICA Handbook Section 3031, Inventories during 2008, the amortization of property, plant and equipment ("PP&E") that is directly related to production has been reclassified to cost of sales. The comparative amounts for 2008 have been reclassified to conform to the current year's presentation.

Second Quarter 2009 to Second Quarter 2008 comparison

Gross margin percentage of 6.6% for the second quarter of 2009 decreased by 3.9% compared to the gross margin percentage in the second quarter of 2008 of 10.5%. Excluding the impact of one-time costs in the second quarter of 2009 for the closure of the Kitchener facility of $1.6 million and the post employment benefit curtailment gain of $3.7 million as discussed in "Adjustments to Net Income", the gross margin for the second quarter of 2009 decreased by 4.8% to 5.7% as compared to the second quarter of 2008 of 10.5%. The gross margin percentage reduction is primarily due to under absorption of manufacturing overhead including the amortization of production PP&E as a result of low production volumes, change in product mix resulting from significant reductions in the light truck and sport utility platforms and pricing pressures from customers that continue to be a normal part of the North American automotive parts industry. The Company will continue its efficiency programs, the utilization of available capacity and the rationalization of operating facilities as necessary.

Second Quarter 2009 to First Quarter 2009 comparison

Gross margin percentage of 6.6% for the second quarter of 2009 increased by 4.8% compared to the gross margin percentage in the first quarter of 2009 of 1.8%. Excluding one-time costs of $1.6 million in the second quarter of 2009 as compared to $2.0 million in the first quarter of 2009 for Kitchener period costs to facilitate closure and the post employment benefit curtailment gain of $3.7 million in the second quarter of 2009 as discussed below in "Adjustments to Net Income", the gross margin in the second quarter of 2009 improved by 2.9% to 5.7% as compared to 2.8% in the first quarter of 2009. The gross margin percentage improvement is primarily due to better absorption of manufacturing overheads including the amortization of PP&E as a result of higher production volumes in the second quarter of 2009 as compared to the first quarter of 2009.



SELLING, GENERAL & ADMINISTRATIVE ("SG&A")

-------------------------------------------------------
Three months ended
-------------------
June 30, June 30, %
2009 2008 Change Change
-------------------------------------------------------

SG&A 17,553 22,104 (4,551) (20.6%)
% of revenues 7.2% 5.4% 1.8%
-------------------------------------------------------


Second Quarter 2009 to Second Quarter 2008 comparison

SG&A expenses for the second quarter of 2009 decreased by $4.6 million compared to the second quarter of 2008 as a direct result of management's ability to proactively and effectively react to the reduced customer volumes by implementing strict cost control measures primarily from the reduction of personnel and the consolidation of certain facilities.

On a percentage of revenue basis, the percentage increased by 1.8% primarily due to the 40.8% reduction in revenues during the second quarter of 2009 as compared to the second quarter of 2008.

Second Quarter 2009 to First Quarter 2009 comparison

SG&A expenses for the second quarter of 2009 of $17.6 million were marginally higher as compared to the SG&A expenses of the first quarter of 2009 of $16.9 million as a result of higher level of activity to achieve the incremental revenue of $38.2 million in the same period.

On a percentage of revenue basis, SG&A expenses decreased by 1.1% in the second quarter of 2009 as compared to the first quarter of 2009 despite the 18.6% increase in revenue in the second quarter of 2009 as compared to the first quarter of 2009. This was achieved through management's continued efforts in maintaining the significantly reduced cost structure that was implemented in 2008 and continued throughout the six month period ended June 30, 2009.

ADJUSTMENTS TO NET INCOME

As a result of the economic recession in North America that has caused significant production reduction by customers and a number of industry-related developments and risks described in the Company's public filings, and the rationalization of the Company's manufacturing facilities, the Company recorded a number of unusual items and other items primarily during the fourth quarter of 2008 and the first six months of 2009. The Company believes that it is useful to set out in detail these unusual and other items as they are non-recurring and thus the Company's financial results for the quarter ended June 30, 2009 may not be indicative of future results.



TABLE A
-------

----------------------------------------------------------------------------
Three months ended
-------------------
June 30, June 30,
2009 2008 Change
----------------------------------------------------------------------------

NET EARNINGS (LOSS) (PER CANADIAN GAAP) (A) (8,505) 11,338 (19,843)

Add back - Unusual Items

Employee Related Severance Costs (1) 6,447 - 6,447

Other Restructuring Costs (2) 721 - 721
Restructuring Costs - Kitchener period costs
recorded as cost of sales (2) 1,557 - 1,557

Restructuring Costs - Kitchener period costs
recorded as SG&A expenses (2) 99 - 99

Add back - Other Items

Post employment benefit curtailment gain (4) (3,700) - (3,700)
---------------------------

TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX 5,124 - 5,124
---------------------------

Tax impact of above items (1,767) - (1,767)
---------------------------

TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B) 3,357 - 3,357


ADJUSTED NET EARNINGS (LOSS) (NON CANADIAN
GAAP) (A+B) (5,148) 11,338 (16,486)


Number of Shares Outstanding - Basic ('000) 72,465 71,826

Adjusted Basic Earnings (Loss) Per Share (0.07) 0.16

Number of Shares Outstanding - Diluted ('000) 73,074 72,538

Adjusted Diluted Earnings (Loss) Per Share (0.07) 0.16
----------------------------------------------------------------------------



TABLE B
-------

----------------------------------------------------------------------------
Three months ended
-------------------
June 30, March 31,
2009 2009 Change
----------------------------------------------------------------------------

NET EARNINGS (LOSS) (PER CANADIAN GAAP) (A) (8,505) (11,774) 3,269

Add back - Unusual Items

Employee Related Severance Costs (1) 6,447 1,195 5,252

Other Restructuring Costs (2) 721 3,202 (2,481)

Restructuring Costs - Kitchener period costs
recorded as cost of sales (2) 1,557 2,015 (458)

Restructuring Costs - Kitchener period costs
recorded as SG&A expenses (2) 99 1,030 (931)

Add back - Other Items

Gain on sale of land (3) - (3,963) 3,963

Post employment benefit curtailment gain (4) (3,700) - (3,700)
---------------------------

TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX 5,124 3,479 1,645
---------------------------

Tax Impact of above items (1,767) (2,243) 476
---------------------------


TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B) 3,357 1,236 2,121


ADJUSTED NET (LOSS) (NON CANADIAN GAAP) (A+B) (5,148) (10,538) 5,390


Number of Shares Outstanding - Basic ('000) 72,465 71,826

Adjusted Basic Earnings (Loss) Per Share (0.07) (0.15)

Number of Shares Outstanding - Diluted ('000) 73,074 72,426

Adjusted Diluted Earnings (Loss) Per Share (0.07) (0.15)
----------------------------------------------------------------------------


(1) Employee Related Severance Costs

In second quarter of 2009, the Company negotiated a buy-down and a buyout agreement with employees of its Shelbyville division and incurred a settlement amount of $8.4 million to restructure the future salary and benefits of the employees. The agreement reduced the future salary and benefits of the employees and also provided a buy-out opportunity to the employees. This expense was partially offset by a reversal of a severance accrual associated with the Kitchener facility resulting in a net expense of employee-related severance costs at $6.4 million as described above in Tables A and B.

(2) Other Restructuring Costs

In response to the significant decline in volumes in 2008, lower future forecasted volumes and to realign its operations, the Company undertook certain initiatives to prepare for a profitable and sustainable future. In so doing, certain restructuring costs of $2.4 million were expensed during the second quarter of 2009 in addition to the $6.2 million expensed during the first quarter of 2009. These initiatives include strict cost reduction measures across the entire organization, consolidation of certain facilities, closing of the facility in Kitchener, the rationalization of excess capacity at certain facilities by moving equipment and programs between facilities and other cash preservation measures.

It is anticipated that the Company will incur total restructuring costs of $70.0 to $72.0 million (combining this Item 2 with "Employee Related Severance Costs" in Item 1 above) of which $50.2 million was expensed during 2008 and $16.3 million expensed during the first six months of 2009 as outlined in note 7 of the interim consolidated financial statements for the second quarter of 2009. It is anticipated that the remaining amounts of $3.5 to $5.5 million will be expensed during the remaining quarters of 2009 as some costs did not meet the recognition criteria stipulated by Canadian GAAP for expense recognition in 2008 or the first two quarters of 2009.

As at June 30, 2009, $20.0 million of the total restructuring and employee related severance costs recorded in the fourth quarter of 2008 and the first and second quarters of 2009, were included in accounts payable and accrued liabilities, the majority of which will be paid during the third quarter of 2009.

(3) Gain on sale of land

In the first quarter of 2009, the Company sold a piece of land and recorded a gain of approximately $4.0 million.

(4) Post employment benefit curtailment gain

The Company recognized a curtailment gain of $3.7 million as a result of the restructuring of benefits of the employees of its Shelbyville division and continuing restructuring at its Windsor division leading to curtailment of future benefits under the OPEB plan.



NET EARNINGS / (LOSS)

-----------------------------------------------------------------
Three months ended
-------------------
June 30, June 30,
2009 2008 Change
-----------------------------------------------------------------

Net earnings / (loss) (8,505) 11,338 (19,843)
Earnings (loss) per common share
Basic (0.12) 0.16 (0.28)
Diluted (0.12) 0.16 (0.28)
-----------------------------------------------------------------


Second Quarter 2009 to Second Quarter 2008 comparison

The net loss for the second quarter of 2009 of $8.5 million as compared to net earnings of $11.3 million in the second quarter of 2008 was primarily attributable to a $167.5 million revenue reduction in the second quarter of 2009 as compared to the second quarter of 2008 discussed above, the deterioration of gross margin percentage discussed above for the second quarter of 2009 as compared to the second quarter of 2008 and one-time charges discussed in Table A above.

The adjusted net loss for the second quarter of 2009 as calculated in Table A was $5.1 million or $0.07 adjusted loss per share on a basic and diluted basis as compared to adjusted net earnings for the second quarter of 2008 of $11.3 million or adjusted earnings per share of $0.16 on a basic and diluted basis. The reduction of adjusted net earnings and adjusted earnings per share in 2009 as compared to 2008 was primarily on account of the $167.5 million revenue reduction in the second quarter of 2009 as compared to the second quarter of 2008 and the deterioration of gross margin percentage discussed above for the second quarter of 2009 as compared to the second quarter of 2008.

Second Quarter 2009 to First Quarter 2009 comparison

The net loss for the second quarter of 2009 of $8.5 million was less than the net loss of $11.8 million in the first quarter of 2009 primarily due to an increase in revenues of 18.6%, and improvements in gross margins of 4.8% as discussed above. The adjusted net loss for the second quarter of 2009 as calculated in Table B is $5.1 million or $0.07 adjusted loss per share on a basic and diluted basis as compared to adjusted net loss for the first quarter of 2009 of $10.5 million or adjusted loss per share of $0.15 on a basic and diluted basis. The decrease of the adjusted net loss and adjusted loss per share in the second quarter of 2009 as compared to the first quarter of 2009 is primarily attributable to the $38.2 million revenue growth in the second quarter of 2009 as compared to the first quarter of 2009 and improvements in the gross margin percentage discussed above in the second quarter of 2009 as compared to the first quarter of 2009.

Capital Expenditures

Second Quarter 2009 to Second Quarter 2008 comparison

Capital expenditures for the second quarter of 2009 totaled $19.8 million as compared to $11.8 million for the second quarter of 2008. The increase in capital expenditures in the second quarter of 2009 is primarily due to the purchase of certain equipment from SKD Automotive Group in Canada of approximately $4.1 million. In addition, transportation, installation and set-up costs of approximately $7.0 million were incurred to relocate this equipment to the Company's divisions located in Canada, the U.S. and Mexico where the work will be performed for customer programs associated with the equipment. The remainder of capital spending is dependent on when the capital project milestones are reached and the timing of product launches.

The Company continues to promote initiatives to re-use equipment and reduce capital expenditures where possible without delaying product launches.

Second Quarter 2009 to First Quarter 2009 comparison

Capital expenditures in the second quarter of 2009 of $19.8 million were higher than capital expenditures in the first quarter of 2009 of $4.9 million, primarily due to the SKD equipment acquisition of approximately $11.1 million discussed above, and the fact that capital spending is dependent on the milestones reached and timing of product launches.

Fred Jaekel, Martinrea's Chief Executive Officer, stated: "The second quarter of 2009 demonstrated continued weakness in revenues and volumes in the North American automotive industry, and included the bankruptcy filings of two of our largest customers, General Motors and Chrysler in the United States. We also saw long plant closures at a number of our customers. Industry volumes were again roughly half of what they were in the same period last year. Still, I believe we did quite well in the circumstances. While our revenues were down year over year, they did increase somewhat from our first quarter. We still showed a loss for the quarter, but less of a loss in operating terms than our first quarter. Even more significantly, our operational cash flow from operations excluding unusual and other items was positive $0.2 million, even in this environment. At Martinrea we continue to strive to be lean and as efficient as we can be, not only to weather these challenges but to strengthen our competitive position in our product areas."

Mr. Jaekel added: "While our customers have restructured, whether inside or outside bankruptcy, our receivables have been paid, on a timely basis. Our exposure to credit risk has been minimal. Meanwhile, given the very fast bankruptcy processes for each of Chrysler first and then GM, our customers have healthier balance sheets, have completed most of their restructuring, and now can focus on operations and products for their customers. We are there to assist them."

Nick Orlando, Martinrea's President and Chief Financial Officer, stated: "The results from operations and our positive cash flow from operations reflect the adjustments we made earlier in the year to the lower volumes and challenges of our industry. We have pared down non-essential spending, we have made reductions where needed, and we have been very prudent in our commitments. We continued to experience some one time restructuring costs in the quarter, as we have in our first quarter and at our 2008 year end, but I believe most of our restructuring costs and one time charges are behind us. Our restructuring costs were anticipated. At the same time, we won some new business in our second quarter. Some related to the takeover of SKD's Canadian business operations, which occurred in our second quarter. We bought the equipment required to produce the parts for our customers-Honda, Ford and Chrysler, and moved the SKD work to facilities where we had capacity, including to our newly acquired Jonesville facility in the U.S. The SKD related business acquired in 2009 approximated $170 million annualized that will begin increasing revenue in August 2009."

Mr. Orlando added: "We also won several other business awards, totaling approximately $80 million on an annualized basis that launches 2010 - $5 million, 2011 - $6 million and 2012 - $69 million. The details are as follows. Our first fuel and brake line award in Europe on GM's new global small car will commence in 2011 and generate $6 million per year in additional revenue. This is an important step and we see further opportunity for additional fuel and brake contracts in Europe for the Company's greenfield operation in Slovakia. We are also pleased to announce our first metallic awards for Volkswagen's new facility in Chattanooga Tennessee which will generate $8 million annually and further diversify our customer base. On the 2012 Ford Fusion replacement vehicle we were successful in maintaining our current business and win incremental metallic assemblies that will generate $20 million in annual revenue. The Company is continuing to win metallic parts that it is currently not producing. In the quarter we have been awarded hot stamped door beams totaling $8 million annually for 2012 that are light weight high strength parts being introduced in many new vehicle designs. We are pursuing additional contracts in this area. We also continue winning front and rear cradles for GM's new next generation luxury vehicle in 2012 for North America valued at $16 million, the front cradle for the new 2012 mid-size vehicle valued at $17.2 million annually and a takeover cradle for the current Buick Lucerne that will begin production in 2010 that will generate $5 million annually. We are very pleased not only with the awards, but with the broadening of our customer base this year."

Rob Wildeboer, Martinrea's Executive Chairman, stated: "While we do not give guidance, we see a number of positive developments in our industry, at least from Martinrea's perspective. We believe sales levels and especially overall production volumes will be higher in the second half of 2009 than in the first six months, leading to increased revenues and operational cash flow, which we anticipate will be positive in the third quarter of 2009. Further, we do not believe industry volumes are sustainable at levels below the scrappage rate of 12.5 million to 13 million vehicles per year over the long term, whether or not there is a cash for clunkers program. People in North America will continue to need and drive vehicles, our customers will continue to sell them, and suppliers will continue to make parts for them. There will be a volume rebound over time, although it may take some time."

Mr. Wildeboer added: "We continue to have a strong balance sheet, strengthened at the end of our second quarter by an equity issue. A strong balance sheet gives us the opportunity to continue to look at opportunities to win new business, whether in the form of new business awards, takeover business or acquisitions. Our customers know we have the capacity not only to produce good parts but to invest capital where needed to provide for their needs. This is we believe a competitive advantage that many of our competitors do not have. We continue to be very positive about the future of our company and for our people."

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

This press release contains forward-looking statements within the meaning of applicable Canadian Securities laws including statements relating to: the Company's efficiency programs, capacity utilization, continuous improvement, and rationalization of operating facilities; automotive industry outlook and future vehicle production; plant closures, asset transfers and sales, the timing and quantum of severance and termination benefit obligations; future restructuring efforts, acquisition opportunities; new business awards; automotive industry consolidation; and the Company's pursuit of its business strategies. The words "expect", "anticipate", "estimate", "may", "will", "should", "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, those risks and uncertainties as set out under the heading "Risks and Uncertainties" in the Company's Management Discussion and Analysis dated August 6, 2009 and those risks and uncertainties as set forth in the Company's Annual Information Form and other public filings which can be found at www.sedar.com. Actual results may differ materially from those currently anticipated. Except as required by law, the Company has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements.

A conference call to discuss those results will be held on Friday, August 7, 2009 at 7:30 a.m. (Toronto time) which can be accessed by dialing (416) 340-2216 or toll free (866) 898-9626. 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 (416) 695-5800 or toll free number (800) 408-3053 (conference id - 3577712#). The rebroadcast will be available until August 21, 2009.



MARTINREA INTERNATIONAL INC.
Interim Consolidated Balance Sheets

As at June 30, 2009 (unaudited) with comparative figures for December 31,
2008
(in thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
June 30, December 31,
2009 2008
----------------------------------------------------------------------------

Assets

Current assets:
Cash and cash equivalents $ 26,530 $ 60,965
Accounts receivable 161,240 213,575
Other receivables 9,593 7,637
Income taxes recoverable 12,904 16,035
Inventories (note 3) 133,878 132,084
Prepaid expenses and deposits 5,909 5,131
----------------------------------------------------------------------------

350,054 435,427

Future income tax assets 63,197 55,651
Property, plant and equipment (note 4) 423,615 428,979
Intangible assets (note 5) 21,263 20,502
Other long term assets (note 6) 111,666 116,239
----------------------------------------------------------------------------

$ 969,795 $ 1,056,798
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities $ 172,553 $ 228,553
Current portion of long-term debt (note 8) 19,402 20,428
---------------------------------------------------------------------------
191,955 248,981

Long-term debt (note 8) 66,235 101,364
Pension and other post-retirement benefits 155,091 165,367
Future income tax liabilities 21,078 22,789
Non-controlling interest 1,045 1,218

Shareholders' equity:
Share capital (note 9) 683,057 629,052
Notes receivable for share capital (note 9) (2,700) (2,700)
Contributed surplus (note 10) 35,614 34,478
Accumulated other comprehensive loss (30,762) (13,212)
Retained deficit (150,818) (130,539)
---------------------------------------------------------------------------
534,391 517,079

Guarantees (note 14)

----------------------------------------------------------------------------
$ 969,795 $ 1,056,798
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to interim consolidated financial statements.

On behalf of the Board:

"Fred Jaekel" Director
------------------------------------------
"Robert Wildeboer" Director
------------------------------------------



MARTINREA INTERNATIONAL INC.
Interim Consolidated Statements of Operations

Three and six months ended June 30, 2009 and 2008 (unaudited)
(in thousands of dollars, except per share amounts)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
----------------------------------------------------------------------------

Sales $ 243,317 $ 410,861 $ 448,389 $ 844,688

Cost of sales (excluding
amortization of property,
plant and equipment) 215,443 357,728 405,000 742,299
Amortization of property,
plant and equipment
(production) (note 4) 11,847 10,056 23,657 19,172
----------------------------------------------------------------------------
Total cost of sales 227,290 367,784 428,657 761,471
----------------------------------------------------------------------------

Gross profit 16,027 43,077 19,732 83,217

Expenses:
Selling, general and
administrative 17,553 22,104 34,495 45,279
Foreign exchange loss
(gain) 1,503 497 2,964 (347)
Amortization of property,
plant and equipment
(non-production) (note 4) 694 547 1,341 1,312
Amortization of
intangible assets (note 5) 1,137 1,160 2,248 2,195
Restructuring costs
(note 7) 7,168 - 11,565 -
Interest on long-term debt 1,120 1,762 2,400 3,856
Other interest expense
(income), net (230) (396) (109) (1,359)
Loss (gain) on disposal
of property, plant and
equipment (126) 13 (4,089) 10
---------------------------------------------------------------------------
28,819 25,687 50,815 50,946
---------------------------------------------------------------------------

Earnings before income
taxes and non-controlling
interest (12,792) 17,390 (31,083) 32,271

Income taxes (recovery):
Current 1,144 4,498 (444) 8,604
Future (5,391) 1,545 (10,188) 2,399
----------------------------------------------------------------------------
(4,247) 6,043 (10,632) 11,003

Earnings (loss) before
non-controlling interest (8,545) 11,347 (20,451) 21,268

Non-controlling interest (40) 9 (172) 24
----------------------------------------------------------------------------

Net earnings (loss) $ (8,505) $ 11,338 $ (20,279) $ 21,244
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings (loss) per common
share (note 11)

Basic $ (0.12) $ 0.16 $ (0.28) $ 0.30
Diluted $ (0.12) $ 0.16 $ (0.28) $ 0.29
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to interim consolidated financial statements.



MARTINREA INTERNATIONAL INC.
Interim Consolidated Statements of Comprehensive Income (Loss)

Three and six months ended June 30, 2009 and 2008 (unaudited)
(in thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
----------------------------------------------------------------------------

Net earnings (loss) $ (8,505) $ 11,338 $ (20,279) $ 21,244

Other comprehensive income,
net of tax:

Unrealized gain (loss) on
translation of financial
statements of
self-sustaining operations (26,081) (3,023) (17,550) 6,811
----------------------------------------------------------------------------

Other comprehensive income (26,081) (3,023) (17,550) 6,811
----------------------------------------------------------------------------

Comprehensive income (loss) $ (34,586) $ 8,315 $ (37,829) $ 28,055
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to interim consolidated financial statements.



MARTINREA INTERNATIONAL INC.
Interim Consolidated Statements of Changes in Shareholders' Equity

As at June 30, 2009 (unaudited) with comparative figures for December 31,
2008
(in thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accum-
ulated
other
Notes compre-
receivable Contrib- hensive Retained
Share for share uted income Earnings
capital capital Surplus (loss) (deficit) Total
----------------------------------------------------------------------------

Balance,
January
1, 2008 $ 629,052 $ (2,700) $ 29,337 $ (65,277) $ 131,054 $ 721,466

Change in
accounting
policy
(note 1
and 3) - - - - (505) (505)
-----------------------------------------------------------------
As
restated,
January
1, 2008 629,052 (2,700) 29,337 (65,277) 130,549 720,961

Net loss
for the
year - - - - (261,088) (261,088)

Compensation
expense
related to
stock
options - - 5,141 - - 5,141

Other
compre-
hensive
income - - - 52,065 - 52,065
-----------------------------------------------------------------

Balance,
December
31, 2008 $ 629,052 $ (2,700) $ 34,478 $ (13,212) $ (130,539) $ 517,079

Net loss
for the
period - - - - (20,279) (20,279)

Share issue
in private
placement
(net of
share issue
costs of
$2,486 and
future tax
recovery
of $716) 54,005 - - - - 54,005

Compensation
expense
related to
stock
options - - 1,136 - - 1,136

Other
compre-
hensive
income - - - (17,550) - (17,550)
----------------------------------------------------------------------------
Balance,
June 30,
2009 $ 683,057 $ (2,700) $ 35,614 $ (30,762) $ (150,818) $ 534,391
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to interim consolidated financial statements.



MARTINREA INTERNATIONAL INC.
Interim Consolidated Statements of Cash Flows

Three and six months ended June 30, 2009 and 2008 (unaudited)
(in thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
----------------------------------------------------------------------------

Cash provided by (used in):

Operating activities:
Net earnings (loss) $ (8,505) $ 11,338 $ (20,279) $ 21,244
Items not involving cash:
Amortization of property,
plant and equipment
(note 4) 12,541 10,603 24,998 20,484
Amortization of intangible
assets (note 5) 1,137 1,160 2,248 2,195
Amortization of deferred
financing costs - 107 - 214
Future income taxes (5,391) 1,545 (10,188) 2,399
Non-controlling interest (40) 8 (172) 23
Loss (gain) on disposal
of property, plant and
equipment (126) 13 (4,089) 10
Stock-based compensation 567 1,109 1,136 1,981
Pension and other post
employment benefits (283) 1,737 2,508 3,867
Contribution made to pension
and other post employment
benefits (3,052) (5,375) (6,268) (9,232)
----------------------------------------------------------------------------
(3,152) 22,245 (10,106) 43,185

Changes in non-cash
working capital items:
Accounts receivable 15,117 27,143 46,526 17,992
Other receivables 2,745 9,685 (2,203) 15,719
Inventories 2,288 17,440 (141) 17,313
Prepaid expenses and
deposits 980 (188) (778) (340)
Accounts payable and
accrued liabilities (41,590) (49,071) (63,550) (59,768)
Income tax 7,207 8,802 4,428 (14,271)
----------------------------------------------------------------------------
(16,405) 36,056 (25,824) 19,830
----------------------------------------------------------------------------

Financing activities:
Issue of share capital
(net of share issuance costs) 54,005 - 54,005 -
Increase in long-term debt 11,000 - 17,703 1,263
Repayment of long-term debt (48,089) (4,691) (53,194) (8,624)
----------------------------------------------------------------------------
16,916 (4,691) 18,514 (7,361)
----------------------------------------------------------------------------

Investing activities:
Acquisition of SKD (note 2) - - (4,267) -
Purchase of property,
plant and equipment (19,795) (11,811) (24,692) (24,780)
Proceeds on disposal of
property, plant and
equipment 130 290 5,333 312
----------------------------------------------------------------------------
(19,665) (11,521) (23,626) (24,468)
----------------------------------------------------------------------------

Effect of exchange rate
changes on cash and cash
equivalents (2,752) (1,064) (3,499) (49)
----------------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents (21,906) 18,780 (34,435) (12,048)

Cash and cash equivalents,
beginning of period 48,436 17,180 60,965 48,008

----------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 26,530 $ 35,960 $ 26,530 $ 35,960
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental cash flow
information:
Cash paid for interest, net $ 1,343 $ 1,182 $ 2,114 $ 2,741
Cash paid (received) for
income taxes, net $ (2,925) $ 4,286 $ (2,659) $ 29,062

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

See accompanying notes to interim consolidated financial statements.

Contact Information

  • Martinrea International Inc.
    Nick Orlando
    President and Chief Financial Officer
    (416) 749-0314
    (905) 264-2937 (FAX)