Martinrea International Inc. (TSX:MRE) a leader in the production
and development of quality metal parts, assemblies and modules,
fluid management systems and complex aluminum products focused
primarily on the automotive sector announced today the release of
its financial results for the third quarter ended September 30,
2012. Martinrea also announced today that it is commencing a normal
course issuer bid for up to 4,149,772 common shares of the Company,
representing approximately up to 5% of Martinrea's issued and
outstanding common shares. Martinrea currently employs over 11,000
skilled and motivated people in 37 plants in Canada, the United
States, Mexico, Brazil 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 September 30, 2012
dated as of November 13, 2012, the Company's unaudited interim
consolidated financial statements for the quarter ended September
30, 2012 (the "unaudited consolidated interim financial
statements") and the Company's Annual Information Form for the year
ended December 31, 2011, can be found at www.sedar.com.
Non-IFRS Measures
The Company reports its financial results in accordance with
International Financial Reporting Standards ("IFRS"). However, the
Company has included certain non-IFRS 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-IFRS 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.
REVENUE
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Three months ended Three months ended
September 30, 2012 September 30, 2011 Change % Change
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North America $ 560,060 $ 440,773 119,287 27.1%
Europe 121,568 113,873 7,695 6.8%
Rest of World 15,570 17,690 (2,120) (12.0%)
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Revenue $ 697,198 $ 572,336 124,862 21.8%
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Third Quarter 2012 to Third Quarter 2011 comparison
The Company's revenues for the third quarter of 2012 increased
by $124.9 million or 21.8% to $697.2 million as compared to $572.3
million for the third quarter of 2011. The total overall increase
in revenue was driven mainly by a $119.3 million increase in
revenue in the Company's North American operating segment. Included
in the $119.3 million increase in revenue generated in North
America was an increase of $8.6 million related to the operations
of the Company's plant in Queretaro, Mexico, which formed part of
the Honsel acquisition and for which the current quarter includes
three full months of revenue as compared to only two months in the
comparative third quarter of 2011 (Martinrea Honsel was acquired
part way through the third quarter of 2011 on July 29, 2011). The
remainder of the increase in North America can be attributed to the
launch of new programs during or subsequent to the third quarter of
2011, improved production volumes in North American OEM light
vehicle platforms, a $5.9 million increase in tooling revenue which
is typically dependent on the timing of tooling construction and
final inspection and acceptance by the customer, and the impact of
foreign exchange rates on the translation of U.S. dollar
denominated revenue, which had a positive impact on revenue for the
third quarter of 2012 of $13.6 million in comparison to the third
quarter of 2011.
Revenues for the third quarter of 2012 in the Company's Europe
operating segment, comprised predominantly of the European
operations of Martinrea Honsel, increased by $7.7 million or 6.8%
to $121.6 million from $113.9 million during the third quarter of
2011. Due to the timing of the Honsel acquisition which closed on
July 29, 2011, the third quarter of 2012 includes three full months
of revenue from Martinrea Honsel as compared to only two months
during the comparative third quarter of 2011. As such, despite the
increase in year-over-year revenue in Europe, average monthly
revenue during the quarter in fact decreased driven mainly by a
year-over-year decrease in OEM light vehicle and engine production
in Western Europe and the impact of foreign exchange rates on the
translation of Euro denominated revenue, which had a negative
impact on revenue for the third quarter of 2012 of $13.2 million as
compared to the third quarter of 2011.
Revenues for the third quarter of 2012 in the Company's Rest of
World operating segment, comprised predominantly of the Brazilian
operations of Martinrea Honsel, decreased by $2.1 million or 12% to
$15.6 million as compared to $17.7 million for the third quarter of
2011. As noted above, the third quarter of 2012 includes three full
months of revenue from Martinrea Honsel as compared to only two
months during the third quarter of 2011. The decrease in overall
revenue and average monthly revenue during the current quarter in
the Rest of World operating segment can be attributed to a decrease
in OEM light and medium-heavy vehicle and engine production volumes
in Brazil and the impact of foreign exchange rates on the
translation of Brazilian Real denominated revenue, which had a
negative impact on revenue for the third quarter of 2012 of $3.7
million as compared to the third quarter of 2011.
Overall tooling revenue increased by $8.0 million from $35.4
million for the third quarter of 2011 to $43.4 million for the
third quarter of 2012, $9.2 million of which was generated by
Martinrea Honsel.
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Three months ended Three months ended
September 30, 2012 June 30, 2012 Change % Change
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North America $ 560,060 $ 603,190 (43,130) (7.2%)
Europe 121,568 145,195 (23,627) (16.3%)
Rest of World 15,570 14,168 1,402 9.9%
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Revenue $ 697,198 $ 762,553 (65,355) (8.6%)
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Third Quarter 2012 to Second Quarter 2012 comparison
The Company's revenues for the third quarter of 2012 decreased
by $65.4 million or 8.6% to $697.2 million as compared to $762.6
million for the second quarter of 2012. Revenues in the North
American operating segment decreased by $43.1 million or 7.2%
quarter-over-quarter. The decrease in North American revenues was
generally due to the seasonal softness in production volumes in
North American OEM light vehicle platforms and a $17.2 million
decrease in tooling revenue, which is typically dependent on the
timing of tooling construction and final inspection and acceptance
by the customer. North American OEM light vehicle production
volumes are typically lower during the third quarter of any given
year due to the customer summer shutdowns common to the automotive
industry. Excluding tooling revenue, revenue in the North American
operating segment decreased by approximately 4.6%. However, overall
North American OEM light vehicle production for the third quarter
of 2012 decreased sequentially by approximately 10%. The
quarter-over-quarter decrease in revenue in the Company's North
American operating segment deviated favourably from the overall
decline in North American OEM light vehicle production, due
generally to the launch of incremental new programs, including the
new Ford Escape, and the impact of foreign exchange rates on the
translation of U.S. dollar denominated revenue, which had a
positive impact on revenue for the third quarter of 2012 of $3.3
million in comparison to the second quarter of 2012.
Revenues for the third quarter of 2012 in the Company's Europe
operating segment decreased by $23.6 million or 16.3% to $121.6
million from $145.2 million for the second quarter of 2012. The
decrease in revenues in Europe was driven by a quarter-over-quarter
decrease in OEM light vehicle and engine production in Western
Europe, some of which relates to the customer summer shutdowns
common to the automotive industry, and the impact of foreign
exchange rates on the translation of Euro denominated revenue,
which had a negative impact on revenue for the third quarter of
2012 of $4.7 million compared to the second quarter of 2012.
Overall, OEM light vehicle and engine production in Western Europe
decreased quarter-over-quarter by approximately 14% and 11%,
respectively.
Revenues for the third quarter of 2012 in the Company's Rest of
World operating segment increased by $1.4 million or 9.9% to $15.6
million from $14.2 million for the second quarter of 2012. The
increase can be attributed to an increase in OEM light and
medium-heavy vehicle production in Brazil. The increase in revenue
in the Rest of World operating segment would have been higher had
it not been for the translation of Brazilian Real denominated
revenue which had a negative impact on the quarter of $1.1 million
as compared to the second quarter of 2012.
Tooling revenue decreased by $18.9 million from $62.3 million
for the second quarter of 2012 to $43.4 million for the third
quarter of 2012, $9.2 million of which was generated by the
acquired assets of Honsel.
GROSS MARGIN
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Three months ended Three months ended
September 30, 2012 September 30, 2011 Change % Change
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Gross margin $ 58,883 $ 62,339 (3,456) (5.5%)
% of revenue 8.4% 10.9%
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Third Quarter 2012 to Third Quarter 2011 comparison
The gross margin percentage, before adjustments, for the third
quarter of 2012 of 8.4% decreased as a percentage of revenue by
2.5% from 10.9% realized during the third quarter of 2011.
Excluding the impact of a major equipment failure at one of the
Company's facilities in the U.S. as described in Table A under
"Adjustments to Net Income", and tooling revenue, which increased
year-over-year and typically earns low or no margins for the
Company, Martinrea's gross margin percentage for the third quarter
of 2012 would have been 9.6%, a decrease from 11.6% realized in the
third quarter of 2011. The gross margin percentage for the third
quarter of 2012 was positively impacted by productivity and
efficiency improvements at certain North American operating
facilities and improved production volumes in North American OEM
light vehicle platforms. The positive impact was more than offset
by a decrease in production volumes in Europe and Brazil as
previously noted and increased levels of launch costs and other
launch-related operational expenses. The launch activity costs
incurred during the quarter relate to several new programs
currently ramping up during the second half of 2012, which will
generate approximately $450 million in annualized business when
fully launched. The most significant of the new programs is the new
Ford Escape which is launching in four Martinrea facilities in the
U.S., including the Company's facilities in Shelbyville, Kentucky
and Hopkinsville, Kentucky. In addition to the content on the new
Ford Escape, current or upcoming launches during the second half of
the year include content on the following OEM platforms: Ford CD4,
GM Global Gamma, GM Alpha, GM Epsilon, Nissan L12F and Honda
C-5.
The Company's Shelbyville facility, approximating one million
square feet, represents approximately 20% of the Company's square
footage and is in the midst of the largest single launch in the
Company's history. A total of approximately $275 million in
anticipated annualized business related to Ford's C520 program is
in the process of ramping up at this facility, which has increased
from the award of the program, as anticipated sales and production
volumes have increased. The new work has greatly expanded
throughput and capacity utilization at Shelbyville, and is expected
to turn a very large plant with negative gross margin and earnings
into a positive gross margin and earnings contributor in 2013, as
launch costs subside, and as the plant reduces cycle times,
improves output per hour and efficiency, and in general
rationalizes its operations. While the ramp up has been
unprecedented and in a compressed time frame as the customer sells
vehicles and builds inventory in connection with the launch of the
Ford Escape, the Shelbyville plant has satisfied customer daily
production requirements since the first week of September 2012.
Operations have stabilized and the Shelbyville plant is now focused
on cost reduction. Further, operational improvements to certain
production lines are planned over the Christmas break when there is
downtime in production, with the objective of increasing throughput
and lowering cost. In the meantime, the plant is running at full
capacity and is incurring launch costs relating to extra people,
overtime, and other costs and inefficiencies, all of which are
expected to decline over time.
The Ford C520 business in Shelbyville consists of approximately
$150 million in value added internally produced components (some of
which are or will be manufactured by other Martinrea facilities)
and $125 million in components purchased from other suppliers that
will be integrated with internally produced components to produce
finished welded assemblies. The gross margins on components
purchased from other suppliers are typically lower than for value
added work, although return on capital is higher. With the launch
of the Ford C520 program in Shelbyville, approximately 25% of
Martinrea's business excluding Martinrea Honsel involves integrator
or assembly work.
The Company's Hopkinsville, Kentucky facility is involved in
several launches simultaneously, together with existing programs,
which has resulted and is resulting in significant costs, as the
plant deals with the increases in production volume. As discussed
in Table A under "Adjustments to Net Income", the Company
experienced a major equipment failure at this facility in June and
July which involved substantial one-time costs. Although the press
is now operational again, some of the facility's weld assembly
lines are struggling to keep up with the aggressive volume
requirements of the Company's customers. The customer volume
requirements and the need to upgrade and improve equipment
performance simultaneously is resulting in substantial cost for
overtime, extra personnel, and customer charge backs including
expedited freight to meet customer deadlines. While operations are
improving, not as quickly as desired but steadily, significant
costs have been and are being incurred at this facility, all of
which are expected to decline over time as operational improvements
are made.
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Three months ended Three months ended
September 30, 2012 June 30, 2012 Change % Change
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Gross margin $ 58,883 $ 76,067 (17,184) (22.6%)
% of revenue 8.4% 10.0%
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Third Quarter 2012 to Second Quarter 2012 comparison
Gross margin percentage, before adjustments, for the third
quarter of 2012 of 8.4% decreased as a percentage of revenue by
1.6% from 10.0% realized during the second quarter of 2012.
Excluding the impact of a major equipment failure at one of the
Company's facilities in the U.S. as described in Table B under
"Adjustments to Net Income", and tooling revenue, which decreased
significantly quarter-over quarter and typically earns no or low
margins for the Company, gross margin percentage for the third
quarter of 2012 decreased by 1.9% to 9.6% from 11.5% for the second
quarter of 2012. The gross margin percentage for the third quarter
was negatively impacted by lower absorption of overheads from the
seasonal softness in production volumes in North American OEM light
vehicle platforms and a decrease in OEM light vehicle and engine
production volumes in Western Europe, some of which can be
attributed to the customer summer shutdowns common to the
automotive industry, and launch costs and other launch-related
operational expenses which increased quarter-over-quarter as
discussed above.
ADJUSTMENTS TO NET INCOME
(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)
Adjusted net earnings excludes certain unusual and other items,
as set out in the following tables and described in the notes
thereto. Management uses adjusted earnings as a measurement of
operating performance of the Company and believes that, in
conjunction with IFRS measures, it provides useful information
about the financial performance and condition of the Company.
TABLE A
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For the three For the three
months ended months ended
September 30, September 30,
2012 2011
-------------- --------------
(a) (b) (a)-(b)
Change
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NET EARNINGS (A) 7,980 6,454 1,526
Add back - Unusual Items:
Employee Related Severance Costs (1) 2,899 9,974 (7,075)
Other Restructuring Costs (1) 611 - 611
Add back - Other Items:
Impact of a major equipment failure at
an operating facility in the U.S.
(recorded as COS) (3) 3,950 - 3,950
Transaction costs associated with the
Honsel acquisition (recorded as SG&A)
(4) - 6,728 (6,728)
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TOTAL UNUSUAL AND OTHER ITEMS BEFORE
TAX 7,460 16,702 (9,242)
Tax impact of above items (820) (51) (769)
Non-controlling interest on above
items (837) (6,780) 5,943
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TOTAL UNUSUAL AND OTHER ITEMS AFTER
TAX (B) 5,803 9,871 (4,068)
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ADJUSTED NET EARNINGS (A + B) 13,783 16,325 (2,542)
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Number of Shares Outstanding - Basic
('000) 82,991 83,179
Adjusted Basic Earnings Per Share 0.17 0.20
Number of Shares Outstanding - Diluted
('000) 83,431 83,708
Adjusted Diluted Earnings Per Share 0.17 0.20
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TABLE B
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For the three For the three
months ended months ended
September 30,
2012 June 30, 2012 (a-b)
-------------- ---------------
(a) (b) Change
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NET EARNINGS (A) 7,980 14,372 (6,392)
Add back - Unusual Items:
Employee Related severance Costs (1) 2,899 1,054 1,845
Other Restructuring Costs (1) 611 1,413 (802)
Add back - Other Items:
Executive separation agreement
(recorded as SG&A) (2) - 5,177 (5,177)
Impact of a major equipment failure at
an operating facility in the U.S.
(recorded as COS) (3) 3,950 4,503 (553)
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TOTAL UNUSUAL AND OTHER ITEMS BEFORE
TAX 7,460 12,147 (4,687)
Tax impact of above items (820) (2,367) 1,547
Non-controlling interest in above
items (837) (102) (735)
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TOTAL UNUSUAL AND OTHER ITEMS AFTER
TAX (B) 5,803 9,678 (3,875)
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ADJUSTED NET EARNINGS (A + B) 13,783 24,050 (10,267)
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Number of Shares Outstanding - Basic
('000) 82,991 82,975
Adjusted Basic Earnings Per Share 0.17 0.29
Number of Shares Outstanding - Diluted
('000) 83,431 83,715
Adjusted Diluted Earnings Per Share 0.17 0.29
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(1) Employee related severance and other restructuring costs
As part of the acquisition of Honsel, a certain level of
restructuring was planned, in particular, at the Company's German
facility in Meschede. The restructuring efforts commenced
immediately after the closing of the acquisition on July 29, 2011
and, as a result, $11.4 million of employee related severance was
recognized during the year ended December 31, 2011, of which $10.0
million was incurred during the third quarter of 2011. An
additional $2.5 million of employee related severance has been
recognized during the nine months ended September 30, 2012, of
which $1.7 million was incurred during the third quarter of 2012
and $0.2 million during the second quarter of 2012. The majority of
the restructuring costs expected to be incurred will be in the
nature of employee related severance as the Company rationalizes
the overhead cost structure and improves the efficiency of the
operations. The Company anticipates that additional employee
related severance will be incurred during the remainder of
2012.
In addition, during the fourth quarter of 2011, the Company
began the process of closing one of its small operating facilities
in Mexico. The existing business and equipment of this facility is
being moved to other Company facilities in Mexico including a new
facility the Company opened in Silao, Mexico in 2011. Restructuring
costs relating to this closure during the fourth quarter of 2011
totaled $2.4 million consisting primarily of employee related
severance ($1.5 million) and the dismantling and transporting of
PP&E between Company facilities ($0.9 million). An additional
$3.5 million of primarily other restructuring costs has been
recognized during the nine months ended September 30, 2012, of
which $0.6 million was incurred during the third quarter of 2012
and $1.4 million during the second quarter of 2012, related to the
dismantling and transporting of PP&E between Company
facilities. The closure of this facility will be complete by the
end of 2012.
Costs associated with other restructuring activities totaled
$1.2 million for the third quarter of 2012 and $0.9 million for the
second quarter of 2012 for employee related severance relating to
the right sizing of certain other manufacturing facilities.
At this time, the Company does not expect to incur any further
significant restructuring costs with the exception of the
settlement of the Windsor pension and OPEB plans which the Company
will continue to fund over the next twelve months, the windup of
the Martinrea Fabco Hot Stampings pension plan, the completion of
the closure of the small operating facility in Mexico as noted
above and any restructuring required relating to the acquired
assets of Honsel (as discussed above).
(2) Executive separation agreement
On June 29, 2012, the Company announced that Nat Rea stepped
down as Vice Chairman and Director of Martinrea, effective
immediately, to pursue other opportunities. As part of the
separation agreement and based on the terms of his employment
contract, the Company paid Mr. Rea $5.2 million which was expensed
during the second quarter of 2012 and included in SG&A expense.
The Company does not expect to incur any further costs associated
with Mr. Rea's departure.
(3) Impact of a major equipment failure at an operating facility
in the U.S.
During the month of June, 2012, a press in one of the Company's
operating facilities in the U.S. experienced a significant failure
and was not operational for approximately 23 days. As a consequence
and due to the lack of press capacity at the facility,
approximately thirty dies were outsourced to external stamping
companies which resulted in the following incremental costs:
-- external stamping fees;
-- transportation costs to move the dies to the external stamping companies
and stamped parts back to the Martinrea operating facility for assembly;
-- additional manpower to ensure the quality of parts stamped by external
suppliers;
-- sorting and rework costs; and
-- dedicated external contractor support to get the press operational
again.
These incremental costs, which totaled $4.5 million for the
second quarter of 2012 and $3.95 million for the third quarter of
2012, are non-recurring in nature and had a significant impact on
the performance of the facility during the months of June and July,
2012 and part of August. The press is now operational again and, as
a result, no further costs related to this matter are being
incurred.
(4) Transaction costs associated with the acquisition of
Honsel
On July 29, 2011, the Company closed the purchase of the assets
of Honsel to form the Martinrea Honsel Group. Martinrea joined with
Anchorage in the transaction and, consequently, owns 55% of the
Martinrea Honsel Group with Anchorage owning the remaining 45%. The
Company expensed $6.7 million in transaction and integration costs
related to the acquisition during the third quarter of 2011. The
Company does not expect to incur any further significant
transaction and integration costs related to the acquired assets of
Martinrea Honsel.
NET EARNINGS
(ATTIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)
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Three months ended Three months ended %
September 30, 2012 September 30, 2011 Change Change
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Net Earnings $ 7,980 $ 6,454 1,526 23.6%
Adjusted net
earnings $ 13,783 $ 16,325 (2,542) (15.6%)
Earnings per
common share
Basic $ 0.10 $ 0.08
Diluted $ 0.10 $ 0.08
Adjusted
earnings per
common share
Basic $ 0.17 $ 0.20
Diluted $ 0.17 $ 0.20
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Third Quarter 2012 to Third Quarter 2011 comparison
Net earnings, before adjustments, for the third quarter of 2012
of $8.0 million increased by $1.5 million from $6.5 million for the
third quarter of 2011. Excluding unusual and other items incurred
during these two quarters as explained in Table A under
"Adjustments to Net Income", the net earnings for the third quarter
of 2012 decreased to $13.8 million or $0.17 per share, on a basic
and diluted basis, in comparison to adjusted net earnings of $16.3
million or $0.20 per share, on a basic and diluted basis, for the
third quarter of 2011.
The adjusted net earnings for the third quarter of 2012, as
compared to the third quarter of 2011, was positively impacted by
an increase in OEM light vehicle production volumes in North
America, the launch of new programs during or subsequent to the
third quarter of 2011 and productivity and efficiency improvements
at certain North American facilities. The positive impact was more
than offset by an increase in launch costs and other launch-related
operational expenses during the quarter, as previously discussed,
an increase in year-over-year interest expense on higher debt
levels and a decrease in the contribution of Martinrea Honsel to
the net earnings attributable to the equity holders of the Company
from $0.06 per share in the third quarter of 2011 to $0.02 per
share in the third quarter of 2012, due mainly to the
year-over-year decrease in OEM light and medium-heavy vehicle and
engine production volumes in Western Europe and Brazil.
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Three months ended Three months ended %
September 30, 2012 June 30, 2012 Change Change
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Net Earnings $ 7,980 $ 14,372 (6,392) (44.5%)
Adjusted net
earnings $ 13,783 $ 24,050 (10,267) (42.7%)
Earnings per
common share
Basic $ 0.10 $ 0.17
Diluted $ 0.10 $ 0.17
Adjusted
earnings per
common share
Basic $ 0.17 $ 0.29
Diluted $ 0.17 $ 0.29
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Third Quarter 2012 to Second Quarter 2012 comparison
Net earnings, before adjustments, for the third quarter of 2012
of $8.0 million decreased by $6.4 million from net earnings of
$14.4 million for the second quarter of 2012. Excluding unusual and
other items incurred during these two quarters, as explained in
Table B under "Adjustments to Net Income", net earnings for the
third quarter of 2012 decreased to $13.8 million or $0.17 per
share, on a basic and diluted basis, as compared to net earnings of
$24.1 million or $0.29 per share, on a basic and diluted basis, for
the second quarter of 2012. The decrease can be attributed to the
seasonal softness in OEM light vehicle production volumes in North
America, a quarter-over-quarter increase in launch costs and other
launch-related operational expenses as previously discussed and a
decrease in the contribution of Martinrea Honsel to the net
earnings attributable to the equity holders of the Company from
$0.05 per share in the second quarter of 2012 to $0.02 per share in
the third quarter of 2012 on lower OEM light and medium-heavy
vehicle and engine production volumes in Western Europe.
CAPITAL EXPENDITURES
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Three months ended Three months ended
September 30, 2012 September 30, 2011 Change % Change
----------------------------------------------------------------------------
Capital
Expenditures $ 54,504 $ 47,889 6,615 13.8%
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Third Quarter 2012 to Third Quarter 2011 comparison
Capital expenditures increased by $6.6 million to $54.5 million
in the third quarter of 2012 from $47.9 million in the third
quarter of 2011. This increase is primarily attributed to an
increase in the purchase of new program equipment related to newly
awarded business currently ramping up and scheduled to launch over
the next 12 to 24 months.
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Three months ended Three months ended
September 30, 2012 June 30, 2012 Change % Change
----------------------------------------------------------------------------
Capital
Expenditures $ 54,504 $ 53,065 1,439 2.7%
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Third Quarter 2012 to Second Quarter 2012 comparison
Capital expenditures during the third quarter of 2012 remained
relatively consistent with the previous quarter increasing by $1.4
million to $54.5 million in the third quarter of 2012 from $53.1
million in the second quarter of 2012. Capital expenditures
incurred in both the second and third quarters of 2012 relate to
new program equipment for newly awarded business currently ramping
up and scheduled to launch over the next 12 to 24 months.
NORMAL COURSE ISSUER BID
Martinrea announced today that it is commencing a normal course
issuer bid for up to 4,149,772 common shares of the Company,
representing approximately up to 5% of Martinrea's issued and
outstanding common shares.
Martinrea believes that repurchasing its shares may be a good
use of funds, as it reduces dilution from stock issuances,
distributes cash to shareholders and reflects its view that current
share prices do not adequately reflect their value in relation to
its business prospects.
The Company's normal course issuer bid shall commence on or
about November 19, 2012 and terminate on November 18, 2013, unless
earlier terminated by the Company. Common shares purchased under
the normal course issuer bid will be cancelled. The price that
Martinrea will pay for any such common shares will be the market
price at the time of acquisition.
Management of Martinrea will determine the actual number of
common shares that may be purchased and the timing of any such
purchases, subject to compliance with TSX rules. Pursuant to TSX
rules, the maximum number of common shares that may be purchased on
a daily basis, subject to certain prescribed exceptions, shall be
107,863 common shares. This maximum represents 25% of the average
daily trading volume of the common shares on the TSX over the
period between May 1, 2012 and October 31, 2012, being 431,453
common shares.
Martinrea has 82,995,450 common shares issued outstanding as of
November 13, 2012. The bid has been approved by the TSX, and shall
be effected through the facilities of the TSX.
In the preceding twelve-month period, the Company repurchased
338,900 common shares for a total consideration of approximately
$2.39 million (or a volume weighted average price of $7.0547 per
share).
Paradigm Capital Inc. will conduct the bid on behalf of the
Company.
Nick Orlando, Martinrea's President and Chief Executive Officer,
stated: "Our third quarter results reflected record Q3 revenues,
solid earnings after adjustments, and extensive launch and
pre-launch activity as we continued to ramp up the largest backlog
in our history. The Company's operations are running well in many
plants and meeting or exceeding expectations. However, launch costs
and other operational costs in several plants negatively impacted
results in the quarter. At this stage, while only half way through
the fourth quarter, the Company anticipates that adjusted earnings
will continue to be affected by such costs. The Company anticipates
launch and operating costs for the fourth quarter to be similar to
those of the third quarter, however, such costs may exceed those in
the third quarter depending on when operations at facilities
launching new programs are normalized and launch and other costs
decline. As the Company is in the midst of its greatest launch load
in its history, many of the Company's plants are currently involved
in launch activity and are incurring launch costs. Most launch
activity is progressing well and is anticipated to be substantially
completed by year end. I can say that we are seeing continuing
improvement in the facilities where we are launching product."
Mr. Orlando continued: "Martinrea's Shelbyville, Kentucky plant
is in the midst of the largest single launch in the Company's
history. While the ramp up has been unprecedented and in a
compressed time frame as the customer sells vehicles and builds
inventory in connection with the launch of the Ford Escape, the
Shelbyville plant has satisfied customer daily production
requirements since the first week of September, 2012. Operations
have stabilized, we have inventory banks on hand and the
Shelbyville plant is now focused on cost reduction. Further,
operational improvements to certain productions lines are planned
over the Christmas break when there is downtime in production, with
the objective of increasing throughput and lowering costs. In the
meantime, the plant is running at full capacity and is incurring
launch costs relating to extra people, overtime, and other costs
and inefficiencies, all of which are expected to continue to
decline over time as the Company reduces cycle times, improves
output per hour, improves efficiencies and in general rationalizes
its operations. Our Hopkinsville, Kentucky facility is involved in
several launches simultaneously, together with existing programs,
which has resulted and is resulting in significant costs, as the
plant deals with the increases in volume. As we have noted, the
Company experienced a major equipment failure at this facility in
June and July which involved substantial one-time costs. Although
the press is now operational again, some of the facility's weld
assembly lines have struggled to keep up with the aggressive volume
requirements of the Company's customers. The customer volume
requirements and the need to upgrade and improve equipment
performance simultaneously is resulting in substantial costs for
overtime, extra personnel, and customer charge backs including
expedited freight to meet customer deadlines. In November 2012, the
Hopkinsville facility has reached a key milestone of satisfying
customer production requirements with minimal expedited freight.
Hopkinsville is now entering the cost control stage of its
launches. We continue to reduce non-value add costs and identify
opportunities to enhance productivity and profitability in the
coming months."
Mr. Orlando added: "Although we are very focused on launches
this year, we continue to look for and quote appropriate new
business, and have added the following new business since our last
announcement: $50 million in hot stamping and assembly work for the
new Chrysler 200 scheduled to launch in 2014 and $15 million in
other metal forming work on the new GM small pick-up truck
scheduled to launch in 2015."
Fred Di Tosto, Martinrea's Chief Financial Officer, stated:
"Revenues for the third quarter, excluding $43.4 million in tooling
revenues, were approximately $654 million which was just short of
the low end of our quarterly sales guidance as previously provided
due mainly to softness in revenues in Europe. In the third quarter
of 2012 our adjusted earnings per share on a basic and diluted
basis was $0.17, after factoring out restructuring costs and the
cost of a major equipment failure in Hopkinsville, Kentucky as
previously announced, within our quarterly earnings guidance as
previously reported. Our third quarter results from the Martinrea
Honsel assets were accretive to earnings, after factoring out
unusual and other items, and amounted to approximately $0.02 of
earnings per share for the quarter, lower than our previous two
quarters due mainly to softness in Brazil and Europe. Our third
quarter from Martinrea Classic amounted to approximately $0.15 of
earnings per share, after factoring out unusual and other items. As
noted, we did experience some launch activity costs and operational
costs which negatively impacted earnings in the quarter. These
costs are expected to subside at some point, but will impact the
fourth quarter of 2012, as we continue to work through the ramp up
of the largest backlog in our history. In addition, we saw gross
margin for the quarter, excluding tooling revenue and unusual and
other items, at 9.6%, a decrease over the previous quarter due
mainly to the lower absorption of overhead from the third quarter
softness in production volumes in both North America and Europe,
and launch activity we have described. Aside from the short term
volatility in our gross margin as a result of the extensive launch
activity, we expect gross margin to continue to improve over time
and approach historical levels as we launch a significant backlog
of business over the next 24 months and as, if and when production
volumes continue to improve in North America."
Rob Wildeboer, Martinrea's Executive Chairman, stated: "Overall,
we have had a good year so far, with record revenues and adjusted
earnings per share of $0.76 year to date. We anticipate that the
Martinrea Honsel numbers will continue in the fourth quarter to be
soft, as Europe and Brazil experience softness in production and
revenues. In our fourth quarter of 2012, we anticipate revenues
(excluding tooling revenues) will range from $650 to $680 million,
and we believe our earnings per share after adjustments will range
from $0.14 to $0.19 cents per share. The Company continues to
estimate that 2012 revenues and adjusted net income overall will be
higher than in any previous year in the Company's history. The
Company continues to anticipate that 2013 revenues and adjusted
earnings per share will be at record levels absent unanticipated
events."
Mr. Wildeboer continued: "Our top priority continues to be the
improvement of our operations at facilities launching new programs.
In terms of our launches and launch costs, these are substantial
investments to support business awards that will generate future
sales and earnings in most cases and for many years to come. Our
launch costs have been more substantial than we anticipated a year
ago, as our launch schedule has been compressed mainly into the
second half of the year and as ramp ups have been heavier than
anticipated, in part because of the fact that the North American
automotive market is so robust right now and we happen to be
involved in some very popular platforms. While 2012 is our year of
the launch, unfortunately it is also the year of launch costs for
us. This has lowered our earnings compared to budget. As for
operational improvements, we will make them as we always have, but
they are costly right now and they take time. We have a great team
here at Martinrea, we are proud of how they have performed for us
and for our customers and we have a very bright future
together."
A conference call to discuss the third quarter results will be
held on Wednesday, November 14, 2012 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 905-694-9451 or toll free 800-408-3053 (conference id -
4555837#). The rebroadcast will be available until Wednesday,
November 28, 2012.
Forward-Looking Information
Special Note Regarding Forward-Looking Statements
This Press Release and the 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 future profitability, revenues,
outlooks and earnings, statements as to the growth of the Company
and pursuit of its strategies, the launching of new programs at the
Shelbyville and Hopkinsville and other plants, including
expectations as to the financial impact of the launches, statements
on operational improvement and other launch costs, and the
continuation of monitoring, managing of launch costs and
operational expenses, the nature and duration of the economic
recession to the continuation of monitoring, managing and
rationalization of expenses (including of Martinrea Honsel), the
Company's expectations regarding the future amount and type of
restructuring expenses to be expensed (including Martinrea Honsel)
and the windup of the Hot Stampings pension plan, the Company's
characterization of the automotive market and its views on the long
term outlook of the automotive industry, including the European
automotive market, and corresponding increased sales and
production, 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 including anticipated
launch costs and timing of launches, 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;
-- financial viability of suppliers;
-- Martinrea's reliance on critical suppliers and 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;
-- a shift away from technologies in which the Company is investing;
-- potential tax exposures;
-- a change in the Company's mix of earnings between jurisdictions with
lower tax rates and those with higher tax rates, as well as the
Company's ability to fully benefit from tax losses;
-- the Company's ability to shift its manufacturing footprint to take
advantage of opportunities in growing markets;
-- risks of conducting business in foreign countries, including China,
Brazil and other growing markets;
-- 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.
The common shares of Martinrea trade on The Toronto Stock
Exchange under the symbol "MRE".
Martinrea International Inc.
Condensed Consolidated Balance Sheets
(in thousands of Canadian dollars) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September December
Note 30, 2012 31, 2011
----------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 31,264 $ 26,505
Trade and other receivables 3 481,539 386,776
Inventories 4 282,184 248,588
Prepaid expenses and deposits 8,631 8,224
Income taxes recoverable 10,395 11,056
Current portion of promissory note 2,349 2,263
----------------------------------------------------------------------------
TOTAL CURRENT ASSETS 816,362 683,412
----------------------------------------------------------------------------
Property, plant and equipment 5 685,031 616,592
Deferred income tax assets 85,392 72,715
Intangible assets 6 51,862 42,397
Promissory note 2,469 2,378
----------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 824,754 734,082
----------------------------------------------------------------------------
TOTAL ASSETS $1,641,116 $1,417,494
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES
Bank Indebtedness $ 16,632 $ -
Trade and other payables 7 512,176 427,072
Provisions 8 7,332 12,956
Income taxes payable 8,471 3,724
Current portion of long-term debt 9 20,521 17,928
----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 565,132 461,680
----------------------------------------------------------------------------
Long-term debt 9 325,850 245,317
Pension and other post-retirement benefits 57,329 53,795
Deferred income tax liabilities 53,489 40,119
Provisions 8 1,818 3,149
Other financial liability 2 79,660 71,236
----------------------------------------------------------------------------
TOTAL NON-CURRENT LIABILITIES 518,146 413,616
----------------------------------------------------------------------------
TOTAL LIABILITIES 1,083,278 875,296
----------------------------------------------------------------------------
EQUITY
Share capital 11 675,606 674,568
Notes receivable for share capital 11 - (602)
Contributed surplus 11 46,340 44,165
Other equity 2 (79,660) (71,236)
Accumulated other comprehensive loss (33,985) (8,330)
Accumulated deficit (129,682) (169,006)
----------------------------------------------------------------------------
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF
THE COMPANY 478,619 469,559
Non-controlling interest 79,219 72,639
----------------------------------------------------------------------------
TOTAL EQUITY 557,838 542,198
----------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $1,641,116 $1,417,494
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial
statements.
On behalf of the Board:
"Robert Wildeboer" Director
--------------------------------
"Suleiman Rashid" Director
--------------------------------
Martinrea International Inc.
Condensed Consolidated Statements of Operations
(in thousands of Canadian dollars, except per share amounts) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Three
months months Nine months Nine months
ended ended ended ended
September September September September
Note 30, 2012 30, 2011 30, 2012 30, 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SALES $ 697,198 $ 572,336 $ 2,195,405 $ 1,478,104
----------------------------------------------------------------------------
Cost of sales (excluding
depreciation of
property, plant and
equipment) (622,159) (495,514) (1,933,023) (1,288,240)
Depreciation of property,
plant and equipment
(production) (16,156) (14,483) (47,123) (35,093)
----------------------------------------------------------------------------
Total cost of sales (638,315) (509,997) (1,980,146) (1,323,333)
----------------------------------------------------------------------------
GROSS MARGIN 58,883 62,339 215,259 154,771
----------------------------------------------------------------------------
Research and development
costs (3,056) (2,732) (10,191) (7,022)
Selling, general and
administrative (33,940) (36,117) (108,131) (77,182)
Depreciation of property,
plant and equipment
(non-production) (1,511) (1,008) (3,929) (2,522)
Amortization of customer
contracts and
relationships (1,431) (2,018) (4,558) (4,178)
Restructuring and
integration costs 13 (3,510) (9,974) (8,141) (9,974)
Gain on disposal of
property, plant and
equipment 994 71 1,065 67
----------------------------------------------------------------------------
OPERATING INCOME 16,429 10,561 81,374 53,960
----------------------------------------------------------------------------
Finance costs (4,507) (2,961) (12,526) (5,899)
Other finance income and
expenses (44) 445 479 1,139
----------------------------------------------------------------------------
INCOME BEFORE INCOME
TAXES 11,878 8,045 69,327 49,200
Income tax expense 10 (2,861) (3,807) (17,009) (15,538)
----------------------------------------------------------------------------
NET INCOME FOR THE PERIOD 9,017 4,238 52,318 33,662
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Non-controlling interest (1,037) 2,216 (6,911) 2,359
----------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE
TO EQUITY HOLDERS OF THE
COMPANY $ 7,980 $ 6,454 $ 45,407 $ 36,021
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings per share 12 $ 0.10 $ 0.08 $ 0.55 $ 0.43
Diluted earnings per
share 12 $ 0.10 $ 0.08 $ 0.54 $ 0.43
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial
statements.
Martinrea International Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands of Canadian dollars) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2012 30, 2011 30, 2012 30, 2011
----------------------------------------------------------------------------
NET INCOME FOR THE PERIOD $ 9,017 $ 4,238 $ 52,318 $ 33,662
Other comprehensive income
(loss), net of tax:
Foreign currency translation
differences for foreign
operations (23,058) 38,994 (25,986) 27,420
Defined benefit plan actuarial
losses (1,077) (3,720) (6,083) (3,892)
----------------------------------------------------------------------------
Other comprehensive income
(loss), net of tax (24,135) 35,274 (32,069) 23,528
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME
(LOSS) FOR THE PERIOD (15,118) 39,512 20,249 57,190
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
Equity holders of the Company (14,951) 39,515 13,669 57,442
Non-controlling interest (167) (3) 6,580 (252)
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME
(LOSS) FOR THE PERIOD $(15,118) $ 39,512 $ 20,249 $ 57,190
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial
statements.
Martinrea International Inc.
Condensed Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equity attributable to equity holders of the Company
------------------------------------------------------
Notes
receivable Cumulative
Share for share Contributed Other translation
capital capital surplus equity account
----------------------------------------------------------------------------
Balance at December
31, 2010 $682,495 $(2,700) $41,241 $ - $(18,822)
----------------------------------------------------------------------------
Net income for the
period - - - - -
Compensation expense
related to stock
options - - 1,967 - -
Contribution from non-
controlling interest
- Honsel acquisition - - - - -
Acquired non-
controlling interest
- Honsel acquisition - - - - -
Repayment of notes
receivable - 1,925 - - -
Exercise of employee
stock options 499 - (40) - -
Repurchase of common
shares (5,632) - - - -
Other comprehensive
income,
net of tax
Actuarial losses - - - - -
Foreign currency
translation
differences - - - - 25,313
----------------------------------------------------------------------------
Balance at September
30, 2011 677,362 (775) 43,168 - 6,491
----------------------------------------------------------------------------
Net income for the
period - - - - -
Compensation expense
related to stock
options - - 997 - -
Fair value of put
option granted to
non-controlling
interest - - - (71,236) -
Repayment of notes
receivable - 173 -
Repurchase of common
shares (2,794) - - - -
Other comprehensive
income,
net of tax
Actuarial losses - - - - -
Foreign currency
translation
differences - - - - (14,821)
----------------------------------------------------------------------------
Balance at December
31, 2011 674,568 (602) 44,165 (71,236) (8,330)
----------------------------------------------------------------------------
Net income for the
period - - - - -
Compensation expense
related to stock
options - - 2,450 - -
Fair value adjustment
of put option granted
to non-controlling
interest - - - (8,424) -
Repayment of notes
receivable - 602 - - -
Exercise of employee
stock options 1,038 - (275) - -
Other comprehensive
income,
net of tax
Actuarial losses - - - - -
Foreign currency
translation
differences - - - - (25,655)
----------------------------------------------------------------------------
Balance at September
30, 2012 $675,606 $ - $46,340 $(79,660) (33,985)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Equity attributable to
equity holders of the
Company
------------------------
Non-
Accumulated controlling Total
deficit Total interest equity
------------------------------------------------------------------------
Balance at December
31, 2010 $(214,028) $488,186 $ 922 $489,108
------------------------------------------------------------------------
Net income for the
period 36,021 36,021 (2,359) 33,662
Compensation expense
related to stock
options - 1,967 - 1,967
Contribution from non-
controlling interest
- Honsel acquisition - - 67,924 67,924
Acquired non-
controlling interest
- Honsel acquisition - - 5,415 5,415
Repayment of notes
receivable - 1,925 - 1,925
Exercise of employee
stock options - 459 - 459
Repurchase of common
shares 730 (4,902) - (4,902)
Other comprehensive
income,
net of tax
Actuarial losses (3,892) (3,892) - (3,892)
Foreign currency
translation
differences - 25,313 2,107 27,420
------------------------------------------------------------------------
Balance at September
30, 2011 (181,169) 545,077 74,009 619,086
------------------------------------------------------------------------
Net income for the
period 18,509 18,509 4,079 22,588
Compensation expense
related to stock
options - 997 - 997
Fair value of put
option granted to
non-controlling
interest - (71,236) - (71,236)
Repayment of notes
receivable - 173 - 173
Repurchase of common
shares 366 (2,428) - (2,428)
Other comprehensive
income,
net of tax
Actuarial losses (6,712) (6,712) - (6,712)
Foreign currency
translation
differences - (14,821) (5,449) (20,270)
------------------------------------------------------------------------
Balance at December
31, 2011 (169,006) 469,559 72,639 542,198
------------------------------------------------------------------------
Net income for the
period 45,407 45,407 6,911 52,318
Compensation expense
related to stock
options - 2,450 - 2,450
Fair value adjustment
of put option granted
to non-controlling
interest - (8,424) - (8,424)
Repayment of notes
receivable - 602 - 602
Exercise of employee
stock options - 763 - 763
Other comprehensive
income,
net of tax
Actuarial losses (6,083) (6,083) - (6,083)
Foreign currency
translation
differences - (25,655) (331) (25,986)
------------------------------------------------------------------------
Balance at September
30, 2012 $(129,682) $478,619 $79,219 $557,838
------------------------------------------------------------------------
------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial
statements.
Martinrea International Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2012 30, 2011 30, 2012 30, 2011
----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net Income for the period $ 9,017 $ 4,238 $ 52,318 33,662
Adjustments for:
Depreciation of property,
plant and equipment 17,667 15,491 51,052 37,615
Amortization of customer
contracts and
relationships 1,431 2,018 4,558 4,178
Amortization of development
costs 494 179 1,328 199
Accretion of interest on
promissory note (60) (136) (177) (405)
Unrealized losses / (gains)
on foreign exchange
forward contracts (11) 1,963 78 1,471
Finance costs 4,507 2,961 12,526 5,899
Income tax expense 2,861 3,807 17,009 15,538
Gain on disposal of
property, plant and
equipment (994) (71) (1,065) (67)
Stock-based compensation 679 827 2,450 1,967
Pension and other post-
retirement benefits
expense 793 684 2,290 1,480
Contributions made to
pension and other post-
retirement benefits (3,200) (3,068) (6,814) (8,631)
----------------------------------------------------------------------------
33,184 28,893 135,553 92,906
Changes in non-cash working
capital items:
Trade and other receivables 26,480 (52,919) (106,442) (132,821)
Inventories (19,719) (22,276) (42,222) (43,702)
Prepaid expenses and
deposits 705 (6,888) (406) (8,706)
Trade, other payables and
provisions (1,295) 49,649 93,577 95,486
----------------------------------------------------------------------------
39,355 (3,541) 80,060 3,163
Interest paid (4,240) (2,221) (11,864) (5,077)
Income taxes received
(paid) - net (3,068) 2,625 (9,976) (3,659)
----------------------------------------------------------------------------
NET CASH PROVIDED / (USED) IN
OPERATING ACTIVITIES 32,047 (3,137) 58,220 (5,573)
----------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase in bank
indebtedness 5,272 13,359 16,632 13,359
Repurchase of common shares - (3,462) - (4,902)
Contribution from non-
controlling interest - 67,924 - 67,924
Receipt of payment on notes
receivable for share
capital - 1,925 602 1,925
Exercise of employee stock
options 171 - 763 459
Increase in long-term debt 30,845 113,309 105,471 157,466
Repayment of long-term debt (5,384) (13,372) (18,091) (19,867)
----------------------------------------------
NET CASH PROVIDED IN
FINANCING ACTIVITIES 30,904 179,683 105,377 216,364
----------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property, plant
and equipment (54,504) (47,889) (141,802) (101,970)
Acquisition of Honsel, net
of cash acquired (note 2) - (130,529) - (130,529)
Proceeds from sale of
Nuremberg facility -
assets held for sale (note
2) - 54,904 - 54,904
Promissory note (net of
principal repayments) - - - 1,500
Capitalized development
costs (2,318) (5,108) (16,804) (7,269)
Proceeds on disposal of
property, plant and
equipment 2,603 75 2,898 122
----------------------------------------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES (54,219) (128,547) (155,708) (183,242)
----------------------------------------------------------------------------
Effect of foreign exchange
rate changes on cash and
cash equivalents (4,211) 2,639 (3,130) 2,428
----------------------------------------------------------------------------
INCREASE IN CASH AND CASH
EQUIVALENTS 4,521 50,638 4,759 29,977
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 26,743 5,366 26,505 26,027
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 31,264 $ 56,004 $ 31,264 56,004
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the interim condensed consolidated financial
statements
Contacts: Martinrea International Inc. Fred Di Tosto Chief
Financial Officer (416) 749-0314 (289) 982-3001 (FAX)
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