Martinrea International Inc.
TSX : MRE

Martinrea International Inc.

August 10, 2011 17:01 ET

Martinrea International Inc. Releases Second Quarter Results Increased Revenues and Profitability

TORONTO, ONTARIO--(Marketwire - Aug. 10, 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 second quarter ended June 30, 2011. Martinrea currently employs over 10,000 skilled and motivated people in 37 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. Additional information about the Company, including the Company's Management Discussion and Analysis of Operating Results and Financial Position for the quarter ended June 30, 2011 ("MD&A") dated as of August 10, 2011, the Company's unaudited interim consolidated financial statements for the quarter ended June 30, 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.

Non-GAAP Measures

The Company now reports its financial results in accordance with International Financial Reporting Standards ("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 Tables A and B under "Adjustments to Net Income" of this Press Release.

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
Three months ended June 30, 2011 Three months ended June 30, 2010 Change % Change
Revenue $ 474,587 $ 418,392 56,195 13.4 %

Second Quarter 2011 to Second Quarter 2010 comparison

The Company's revenues for the second quarter of 2011 increased by $56.2 million or 13.4% to $474.6 million as compared to $418.4 million for the second quarter of 2010. The increase was primarily due to improved production volumes in North American light vehicle platforms, the launch of new programs during the first half of 2011 and an increase in tooling revenue relating to upcoming new programs which is typically dependent on the timing of tooling construction and final inspection and acceptance by the customer. Tooling revenue increased by $23.8 million to $39.3 million for the second quarter of 2011 as compared to $15.5 million for the second quarter of 2010. Revenue for the second 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 $19.8 million.

Three months ended June 30, 2011 Three months ended March 31, 2011 Change % Change
Revenue $ 474,587 $ 431,181 43,406 10.1 %

Second Quarter 2011 to First Quarter 2011 comparison

Revenues for the second quarter of 2011 increased by $43.4 million or 10.1% to $474.6 million as compared to $431.2 million for the first quarter of 2011. The increase was primarily due to seasonally higher production volumes in North American light vehicle platforms during the second quarter and an increase in tooling revenue relating to upcoming new programs. Tooling revenue increased by $27.5 million to $39.3 million for the second quarter of 2011 as compared to $11.8 million for the first quarter of 2011. Revenue for the second 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 $10.4 million.

GROSS MARGIN
Three months ended June 30, 2011 Three months ended June 30, 2010 Change % Change
Gross margin $ 49,992 $ 42,949 7,043 16.4 %
% of revenue 10.5 % 10.3 %

Second Quarter 2011 to Second Quarter 2010 comparison

The gross margin percentage for the second quarter of 2011 of 10.5% increased by 0.2% as compared to the gross margin percentage for the second quarter of 2010 of 10.3%. Excluding the one time items recorded as cost of sales in the second quarter of 2010 as explained in Table A under "Adjustments to Net Income", the gross margin percentage for the second quarter of 2011 increased to 10.5% from 10.2% for the second quarter of 2010. The gross margin percentage for the second quarter of 2011 was positively impacted by increased gross margin earned as a result of higher vehicle production volumes. The positive impact of higher vehicle production volumes was partially offset by a significant increase in tooling revenue, which typically earns low or no margins for the Company. Tooling revenue increased by $23.8 million to $39.3 million for the second quarter of 2011 as compared to $15.5 million for the second quarter of 2010.

Three months ended June 30, 2011 Three months ended March 31, 2011 Change % Change
Gross margin $ 49,992 $ 42,438 7,554 17.8 %
% of revenue 10.5 % 9.8 %

Second Quarter 2011 to First Quarter 2011 comparison

The gross margin percentage for the second quarter of 2011 of 10.5% increased by 0.7 % as compared to the gross margin percentage for the first quarter of 2011 of 9.8%. The gross margin percentage for the second quarter of 2011 was positively impacted by increased gross margin earned as a result of seasonally higher vehicle production volumes and a decrease in costs incurred in preparation of upcoming program launches. The positive impact of higher vehicle production volumes was partially offset by a significant increase in tooling revenue, which typically earns low or no margins for the Company. Tooling revenue increased by $27.5 million to $39.3 million for the second quarter of 2011 as compared to $11.8 million for the first quarter of 2011.

ADJUSTMENTS TO NET INCOME
(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)

Results of operations during the second quarter ended June 30, 2011 and the 2010 comparative period include certain unusual items. 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
For the three months ended
June 30, 2011
For the three months ended
June 30, 2010
(a) Canadian IFRS (b) (a)-(b)
IFRS GAAP Adjustment IFRS Change
NET EARNINGS (A) $ 15,546 $ 12,412 $ 6,723 $ 19,135 $ (3,589 )
Add back - Unusual Items:
Net impairment of property, plant & equipment (1) - 6,308 (5,871 ) 437 (437 )
Employee related severance costs (2) - 3,892 - 3,892 (3,892 )
Other restructuring costs (3) - 1,517 - 1,517 (1,517 )
Other restructuring costs – period costs and pension expense recorded as cost of sales for facilities closed during restructuring (3) - 74 - 74 (74 )
Other restructuring costs – period costs recorded as SG&A expense for facilities closed during restructuring (3) - 30 - 30 (30 )
Add back - Other Items:
Transaction costs associated with the acquisition of Honsel AG (4) 1,436 - - - 1,436
Other post employment benefits curtailment recorded as cost of sales (5) - (630 ) (1,229 ) (1,859 ) 1,859
Gain on sale of Kitchener land and building (6) - (10,675 ) - (10,675 ) 10,675
Write-down of excess service inventory at the Company's Windsor, Ontario Facility recorded as cost of sales (7) - 1,290 - 1,290 (1,290 )
Valuation allowance on deferred tax assets (8) - (366 ) 366 - -
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX 1,436 1,440 (6,734 ) (5,294 ) 6,730
Tax impact (359 ) (1,867 ) 937 (930 ) 571
TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B) 1,077 (427 ) (5,797 ) (6,224 ) 7,301
ADJUSTED NET EARNINGS (A + B) $ 16,623 $ 11,985 $ 926 $ 12,911 $ 3,712
Number of Shares Outstanding – Basic ('000) 83,276 83,326
Adjusted Basic Earnings Per Share 0.20 0.15
Number of Shares Outstanding – Diluted ('000) 83,977 84,427
Adjusted Diluted Earnings Per Share 0.20 0.15
TABLE B
For the three months ended
June 30, 2011
For the three months ended
March 31, 2011

Change
NET EARNINGS (A) $ 15,546 $ 14,015 $ 1,531
Add back - Other Items:
Transactions costs associated with the acquisition of Honsel AG (4) 1,436 - 1,436
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX 1,436 - 1,436
Tax impact (359 ) - (359 )
TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B) 1,077 - 1,077
ADJUSTED NET EARNINGS (A + B) $ 16,623 $ 14,015 $ 2,608
Number of Shares Outstanding – Basic ('000) 83,276 83,290
Adjusted Basic Earnings Per Share 0.20 0.17
Number of Shares Outstanding – Diluted ('000) 83,977 84,915
Adjusted Diluted Earnings Per Share 0.20 0.17

(1) Property, plant and equipment ("PP&E") impairment

During the second quarter of 2010, the Company determined that the carrying value of certain dedicated manufacturing and stamping equipment exceeded its recoverable amount. Consequently, the carrying value of the PP&E was written-down by $6.3 million, being the excess of the carrying amount of the PP&E over its estimated recoverable amount. The impairment charge was non-cash in nature.

In connection with the comparative requirements of IFRS adoption, impairment tests were conducted for property, plant and equipment and intangible assets. In addition, as required by IFRS, the Company evaluated all previously recorded impairment charges for potential reversal. Based on this analysis, certain previously recorded impairment charges in the amount of $5.9 million were reversed resulting in a net impairment charge of $0.4 million during the second quarter of 2010. The reversal of previously recorded impairment charges under the requirements of IFRS was primarily due to the benefits from the restructuring activities conducted during 2010 which included the relocation of plant and equipment and the corresponding customer business to a cost competitive facility.

(2) Employee related severance costs

During the second quarter of 2010, the Company incurred severance costs of $3.9 million relating primarily to the closure of the Company's facility in Windsor, Ontario on June 30, 2010.

(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 the second quarter of 2010 relate primarily to the cessation of manufacturing operations at the Company's Windsor, Ontario facility on June 30, 2010 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 the next three years, the windup of the Martinrea Fabco Hot Stampings pension plan which is expected to be completed in 2011 and any restructuring required relating to the acquired assets of Honsel AG.

(4) Transaction costs associated with the acquisition of Honsel AG

On July 29, 2011, the Company closed the previously announced purchase of the assets of Honsel AG, a German-based leading supplier of aluminum components for the automotive and industrial sectors, to form the Martinrea Honsel Group. Martinrea joined with Anchorage Capital Group L.L.C ("Anchorage") in the transaction and, consequently, owns 55% of the Martinrea Honsel Group. The Company expensed $1.4 million in transaction costs related to the acquisition during the second quarter.

(5) Other post employment benefits curtailment

During the second quarter of 2010, the Company recognized a curtailment gain as a result of the restructuring of the post employment benefits of the employees at its Shelbyville, Kentucky facility and restructuring at its Windsor, Ontario facility leading to the curtailment of future benefits under the OPEB plan. The gain was approximately $1.9 million under IFRS as compared to $0.6 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.

(6) Gain on sale of Kitchener land and building

On June 25, 2010, the Company sold the land and building located in Kitchener, Ontario ("Kitchener Real Property") on an "as is" basis resulting in a gain on sale of $10.7 million in the second quarter of 2010. The fair value of the proceeds on disposition of the property amounted to $13.7 million of which $1.1 million was paid in cash and the remainder in the form of a promissory note with a face value of $13.9 million. The promissory note is secured by the Kitchener Real Property and is scheduled to be fully repaid by December 2013. Scheduled payments of $1.5 million were received during the second quarter of 2011.

(7) Write-down of excess service inventory at the Company's Windsor, Ontario facility

Certain excess service inventory costs of approximately $1.3 million associated with discontinued platforms were expensed during the second quarter of 2010 in connection with the closure of the Company's facility in Windsor, Ontario.

(8) 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 unusual and other items noted in the tables above.

NET EARNINGS
(ATTIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)
Three months ended June 30, 2011 Three months ended June 30, 2010 Change % Change
Net Earnings $ 15,546 $ 19,135 (3,589 ) -18.8 %
Adjusted net earnings $ 16,623 $ 12,911 (3,712 ) -28.8 %
Earnings per common share
Basic $ 0.19 $ 0.23
Diluted $ 0.19 $ 0.23
Adjusted earnings per common share
Basic $ 0.20 $ 0.15
Diluted $ 0.20 $ 0.15

Second Quarter 2011 to Second Quarter 2010 comparison

Net earnings for the second quarter of 2011 of $15.5 million decreased by $3.6 million from $19.1 million for the second quarter of 2010 largely due to the impact of one time items recognized during the second quarter of 2010 as discussed in Table A under "Adjustments to Net Income" offset by higher earnings resulting from increased customer production volumes and recent new program launches. Excluding one time items, the adjusted net earnings for the second quarter of 2011 improved to $16.6 million or $0.20 per share, on a basic and diluted basis, in comparison to adjusted net earnings of $12.9 million or $0.15 per share, on a basic and diluted basis, for the second quarter of 2010.

The increase in adjusted net earnings in the second quarter of 2011 as compared to the second quarter of 2010 was primarily due to an 8.0% increase in revenue (excluding tooling revenue) in the second quarter of 2011 as compared to the second quarter of 2010.

Three months ended June 30, 2011 Three months ended March 31, 2011 Change % Change
Net Earnings $ 15,546 $ 14,015 1,531 10.9 %
Adjusted net earnings $ 16,623 $ 14,015 2,608 18.6 %
Earnings per common share
Basic $ 0.19 $ 0.17
Diluted $ 0.19 $ 0.17
Adjusted earnings per common share
Basic $ 0.20 $ 0.17
Diluted $ 0.20 $ 0.17

Second Quarter 2011 to First Quarter 2011 comparison

Net earnings for the second quarter of 2011 of $15.6 million increased by $1.5 million from net earnings of $14.0 million for the first quarter of 2011 primarily on account of higher earnings on seasonally higher customer production volumes and a decrease in costs incurred in preparation of upcoming program launches partially offset by one-time items discussed in Table B under "Adjustments to Net Income". Excluding one-time items, the adjusted net earnings for the second quarter of 2011 was $16.6 million or $0.20 per share, on a basic and diluted basis, as compared to net earnings of $14.0 million or $0.17 per share, on a basic and diluted basis, for the first quarter of 2011.

Adjusted net earnings in the second quarter of 2011 was positively impacted by increased gross margin earned as a result of a seasonal increase in revenue (excluding tooling revenue) of 3.8% and a decrease in costs incurred in preparation of upcoming program launches.

CAPITAL EXPENDITURES
Three months ended June 30, 2011 Three months ended June 30, 2010 Change % Change
Capital Expenditures $ 29,006 $ 19,731 9,275 47.0 %

Second Quarter 2011 to Second Quarter 2010 comparison

Capital expenditures increased by $9.3 million to $29.0 million in the second quarter of 2011 from $19.7 million in the second quarter of 2010. Capital expenditures incurred in the second 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 is opening in Silao, Mexico during 2011.

Three months ended June 30, 2011 Three months ended March 31, 2011 Change % Change
Capital Expenditures $ 29,006 $ 25,075 3,931 15.7 %

Second Quarter 2011 to First Quarter 2011 comparison

Capital expenditures increased by $3.9 million from $25.1 million in the first quarter of 2011 to $29.0 million in the second quarter of 2011 mainly on account of general timing of capital expenditures and progress payments to capital suppliers. Capital expenditures incurred in first half 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 is opening in Silao, Mexico during 2011.

Nick Orlando, Martinrea's Chief Executive Officer, stated: "Our second quarter was very solid from a financial point of view. Revenues were up significantly from last year and from our first quarter. Our profits were up from first quarter, and our earnings were up from last year's second quarter when we exclude a significant one time gain from the sale of our Kitchener property last year. Our earnings per share this quarter were $0.20, after factoring out transaction costs we were required to accrue for the Honsel acquisition. Our gross margins improved also, on both a year over year basis and as compared to our first quarter. This reflects higher vehicle production volumes experienced in our second quarter of 2011, the fact that launches are proceeding well, and a continued focus on operational improvements that we are driving throughout the organization. We have many products to launch over the next twelve months including over $100 million of incremental welded assemblies for the Ford Escape, incremental fuel and brake work for the new Fusion and our first aluminum engine cradle for the new Land Rover. We were awarded the replacement work for the GM pick-up trucks and sport utility trucks for 2013 plus incremental business of $18 million on the new truck platform. In addition we were also awarded $9 million in fluid management product for the GM small sport utility vehicle and an additional $8 million in hot stamping product for the Ford Escape launching in 2012. We are very excited about our prospects to continue winning new work for our plants. Our teams, both at the plant level and at the corporate level, are working well together to serve our customers well and make us a supplier of choice to them."

Rob Wildeboer, Martinrea's Executive Chairman, stated: "In addition to focusing on our core business, over the past several months we have been involved in the purchase of the assets of Honsel AG, completed last week, as previously announced. The Company is finalizing the purchase of a joint venture interest in Brazil. The formation of the Martinrea Honsel Group now provides us with a significant presence in the aluminum automotive parts market, and broadens our metal forming product capabilities and offerings. Not only does Martinrea Honsel introduce us to a market leading position in engine blocks and specialized aluminum products, but aluminum suspension and body part products, areas where we are experts with our steel based product offerings. We now have a more significant geographic presence, which we intend to grow over time. Our customer base has been expanded, as key Martinrea Honsel customers include Daimler, Volkswagen, BMW and PSA, as well as our existing large customers Ford and Chrysler. We believe there is good opportunity over time to expand Martinrea Honsel in our traditional North American market also. The acquisition was done at a reasonable valuation, financed with our existing banking syndicate, and we believe will be accretive to earnings in the very short term, subject of course to market conditions. We at Martinrea have always followed the course of prudent, profitable growth, and the Honsel acquisition fits in with our philosophy. We maintain a strong balance sheet, which is prudent for these troubled times in the markets. Notwithstanding the concerns about slow growth in the overall economy and the fear of a recession, we believe North American production volumes still remain below historical volumes and scrap rates and that volumes will increase over time, which will support our ability to generate revenues, good cash flow and positive earnings."

Forward-Looking Information

Special Note Regarding Forward-Looking Statements

This Press Release 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, continued consolidation of automotive suppliers, the proposed wind-up date of the Martinrea Fabco Hot Stampings pension plan, 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, 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 including the effect of the acquisition of Honsel AG assets, the successful finalization of the joint venture interest in Brazil, the Company's statements of its intention for growth over time, including of the Martinrea Honsel business, the Company's statement on the significant presence in the aluminum automotive parts market gained by the Honsel acquisition, 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 including the assets of Honsel AG;
  • 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, except as required by law.

A conference call to discuss these results will be held on Thursday, August 11, 2011 at 8:00 a.m. (Toronto time) which can be accessed by dialing 416.340.8410 or toll free 1.866.225.2055. 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 1.800.408.3053 (conference id –4555837#). The rebroadcast will be available until August 25, 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)
Note June 30, 2011 December 31, 2010
ASSETS
Cash and cash equivalents $ 5,366 $ 26,027
Trade and other receivables 2 325,759 250,404
Inventories 3 164,138 145,614
Prepaid expenses and deposits 6,219 4,401
Income taxes recoverable 7,275 5,255
Current portion of promissory note 7 4,645 5,994
TOTAL CURRENT ASSETS 513,402 437,695
Property, plant and equipment 4 426,349 402,771
Deferred income tax assets 65,411 68,088
Intangible assets 5 14,616 14,735
Promissory note 7 4,758 4,641
TOTAL NON-CURRENT ASSETS 511,134 490,235
TOTAL ASSETS $ 1,024,536 $ 927,930
LIABILITIES
Trade and other payables $ 293,364 $ 251,427
Provisions 8 3,234 4,339
Income taxes payable 2,585 5,627
Current portion of long-term debt 9 13,202 90,072
TOTAL CURRENT LIABILITIES 312,385 351,465
Long-term debt 9 127,619 13,062
Pension and other post-retirement benefits 39,298 44,108
Deferred income tax liabilities 38,293 30,187
TOTAL NON-CURRENT LIABILITIES 205,210 87,357
TOTAL LIABILITIES 517,595 438,822
EQUITY
Share capital 12 681,489 682,495
Note receivable for share capital 12 (2,700 ) (2,700 )
Contributed surplus 12 42,341 41,241
Accumulated other comprehensive loss (33,876 ) (22,132 )
Accumulated deficit (181,092 ) (210,718 )
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 506,162 488,186
Non-controlling interest 779 922
TOTAL EQUITY 506,941 489,108
TOTAL LIABILITIES AND EQUITY $ 1,024,536 $ 927,930
Subsequent event (note 24)
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
ended
Three months
ended
Six months
ended
Six months
ended
Note June 30,
2011
June 30,
2010
June 30,
2011
June 30,
2010
(Note 25 ) (Note 25 )
SALES $ 474,587 $ 418,392 $ 905,768 $ 799,872
Cost of sales (excluding depreciation of property, plant and equipment) (413,999 ) (365,439 ) (792,728 ) (698,790 )
Depreciation of property, plant and equipment (production) (10,596 ) (10,004 ) (20,610 ) (20,169 )
Total cost of sales (424,595 ) (375,443 ) (813,338 ) (718,959 )
GROSS MARGIN 49,992 42,949 92,430 80,913
Research and development costs 14 (2,033 ) (1,629 ) (4,291 ) (3,222 )
Selling, general and administrative (23,361 ) (18,296 ) (41,067 ) (36,170 )
Depreciation of property, plant and equipment (non-production) (794 ) (657 ) (1,515 ) (1,303 )
Amortization of customer contracts and relationships (1,069 ) (1,134 ) (2,160 ) (2,271 )
Net impairment charge on property, plant and equipment 6 - (437 ) - (437 )
Restructuring costs 17 - (5,409 ) - (5,779 )
Gain / (loss) on disposal of property, plant and equipment - 10,671 (4 ) 10,604
OPERATING INCOME 22,735 26,058 43,393 42,335
Finance costs (1,506 ) (1,561 ) (2,937 ) (2,953 )
Other finance income / (expense) 16 434 (143 ) 693 158
INCOME BEFORE INCOME TAXES 21,663 24,354 41,149 39,540
Income tax expense 11 (6,219 ) (5,377 ) (11,731 ) (9,531 )
NET INCOME FOR THE PERIOD 15,444 18,977 29,418 30,009
Non-controlling interest 102 158 143 180
NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY $ 15,546 $ 19,135 $ 29,561 $ 30,189
Basic earnings per share 13 $ 0.19 $ 0.23 $ 0.35 $ 0.36
Diluted earnings per share 13 $ 0.19 $ 0.23 $ 0.35 $ 0.36
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
ended
Three
months
ended
Six
months
ended
Six
months
ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
(Note 25 ) (Note 25 )
NET INCOME FOR THE PERIOD $ 15,444 $ 18,977 $ 29,418 $ 30,009
Other comprehensive income (loss), net of tax:
Foreign currency translation differences for foreign operations (2,377 ) 12,542 (11,574 ) 2,165
Defined benefit plan actuarial losses (1,809 ) (5,838 ) (170 ) (7,046 )
Other comprehensive income / (loss), net of tax (4,186 ) 6,704 (11,744 ) (4,881 )
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 11,258 25,681 17,674 25,128
Attributable to:
Equity holders of the Company 11,379 25,346 17,927 24,899
Non-controlling interest (121 ) 335 (253 ) 229
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD $ 11,258 $ 25,681 $ 17,674 $ 25,128
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 Non-
Share for share Contributed translation gains Accumulated controlling Total
Capital capital Surplus account and losses deficit Total interest equity
Balance at
January 1, 2010
$ 683,057 $ (2,700 ) $ 37,393 $ - $ - $ (263,415 ) $ 454,335 $ 1,259 $ 455,594
Net Income for the period - - - - - 30,189 30,189 (180 ) 30,009
Compensation expense related to stock options - - 2,048 - - - 2,048 - 2,048
Actuarial losses - - - - (7,046 ) - (7,046 ) - (7,046 )
Foreign currency translation differences - - - 2,165 - - 2,165 1 2,166
Balance at
June 30, 2010
683,057 (2,700 ) 39,441 2,165 (7,046 ) (233,226 ) 481,691 1,080 482,771
Net Income for the period - - - - - 22,571 22,571 (158 ) 22,413
Compensation expense related to stock options - - 1,829 - - - 1,829 - 1,829
Exercise of employee stock options 101 - (29 ) - - - 72 - 72
Repurchase of common shares (663 ) - - - - (63 ) (726 ) - (726 )
Actuarial gains - - - - 3,735 - 3,735 - 3,735
Foreign currency translation differences - - - (20,986 ) - - (20,986 ) - (20,986 )
Balance at
December 31, 2010
682,495 (2,700 ) 41,241 (18,821 ) (3,311 ) (210,718 ) 488,186 922 489,108
Net Income for the period - - - - - 29,561 29,561 (143 ) 29,418
Compensation expense related to stock options - - 1,140 - - - 1,140 - 1,140
Exercise of employee stock options 499 - (40 ) - - - 459 - 459
Repurchase of common shares (1,505 ) - - - - 65 (1,440 ) - (1,440 )
Actuarial losses - - - - (170 ) - (170 ) - (170 )
Foreign currency translation differences - - - (11,574 ) - - (11,574 ) - (11,574 )
Balance at
June 30, 2011
$ 681,489 $ (2,700 ) $ 42,341 $ (30,395 ) $ (3,481 ) $ (181,092 ) $ 506,162 $ 779 $ 506,941
See accompanying notes to the interim consolidated financial statements.
Martinrea International Inc.
Notes to the Interim Consolidated Financial Statements
(in thousands of Canadian dollars, except per share amounts) (unaudited)
Martinrea International Inc.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)
Three
months
ended
Three
months
ended
Six
months
ended
Six
months
ended
June 30,
2011
June 30,
2010
June 30,
2011
June 30,
2010
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net Income for the period $ 15,444 $ 18,977 $ 29,418 $ 30,009
Adjustments for:
Depreciation of property, plant and equipment 11,390 10,661 22,125 21,472
Amortization of customer contracts and relationships 1,069 1,134 2,160 2,271
Amortization of development costs 20 - 20 -
Net impairment charge on property, plant and equipment - 437 - 437
Amortization of deferred financing costs 65 72 322 144
Accretion of interest on promissory note (135 ) - (268 ) -
Unrealized losses / (gains) on foreign exchange forward contracts (212 ) 609 (492 ) 133
Income tax expense 6,219 5,377 11,731 9,531
(Gain) / Loss on disposal of property, plant and equipment - (10,671 ) 4 (10,604 )
Stock-based compensation 570 1,781 1,140 2,048
Pension and other post-retirement benefits 142 (2,626 ) 796 (2,376 )
Contributions made to pension and other post-retirement benefits (4,145 ) (3,050 ) (5,564 ) (5,722 )
30,427 22,701 61,392 47,343
Changes in non-cash working capital items:
Trade and other receivables 3,484 (30,954 ) (79,902 ) (64,236 )
Inventories 2,134 (1,615 ) (21,426 ) (10,595 )
Prepaid expenses and deposits (851 ) 767 (1,818 ) (818 )
Trade, other payables and provisions 12,090 29,600 48,626 35,785
Income taxes payable / recoverable (97 ) (99 ) (173 ) 1,731
47,186 20,400 6,698 9,210
Interest paid (1,639 ) (1,321 ) (2,856 ) (3,214 )
Income taxes paid (4,120 ) (70 ) (6,284 ) 2,516
NET CASH PROVIDED / (USED) IN OPERATING ACTIVITIES 41,428 19,009 (2,441 ) 8,512
FINANCING ACTIVITIES:
Decrease in bank indebtedness (15,760 ) - - -
Repurchase of common shares (1,215 ) - (1,440 ) -
Exercise of employee stock options - - 459 -
Increase in long-term debt 13,788 - 44,157 16,000
Repayment of long-term debt (3,173 ) (3,810 ) (6,495 ) (7,662 )
NET CASH PROVIDED / (USED) IN FINANCING ACTIVITIES (6,360 ) (3,810 ) 36,681 8,338
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (29,006 ) (19,731 ) (54,081 ) (32,806 )
Promissory note (net of principal repayments) 1,500 (12,637 ) 1,500 (12,637 )
Development costs (741 ) - (2,161 ) -
Proceeds on disposal of property, plant and equipment - 13,737 47 13,807
NET CASH USED IN INVESTING ACTIVITIES (28,247 ) (18,631 ) (54,695 ) (31,636 )
Effect of foreign exchange rate changes on cash and cash equivalents (1,455 ) (1,659 ) (206 ) (2,374 )
INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 5,366 (5,091 ) (20,661 ) (17,160 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - 10,700 26,027 22,769
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,366 $ 5,609 $ 5,366 $ 5,609
See accompanying notes to the interim consolidated financial statements.

Contact Information

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