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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Martinrea International Inc | TSX:MRE | Toronto | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.23 | 2.03% | 11.55 | 11.47 | 11.59 | 11.78 | 11.32 | 11.32 | 208,085 | 21:30:12 |
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 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended September 30, 2012 September 30, 2011 Change % Change ---------------------------------------------------------------------------- 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%) ---------------------------------------------------------------------------- Revenue $ 697,198 $ 572,336 124,862 21.8% ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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.
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended September 30, 2012 June 30, 2012 Change % Change ---------------------------------------------------------------------------- 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% ---------------------------------------------------------------------------- Revenue $ 697,198 $ 762,553 (65,355) (8.6%) ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended September 30, 2012 September 30, 2011 Change % Change ---------------------------------------------------------------------------- Gross margin $ 58,883 $ 62,339 (3,456) (5.5%) % of revenue 8.4% 10.9% ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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.
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended September 30, 2012 June 30, 2012 Change % Change ---------------------------------------------------------------------------- Gross margin $ 58,883 $ 76,067 (17,184) (22.6%) % of revenue 8.4% 10.0% ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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 ---------------------------------------------------------------------------- For the three For the three months ended months ended September 30, September 30, 2012 2011 -------------- -------------- (a) (b) (a)-(b) Change ---------------------------------------------------------------------------- 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) ---------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------- TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B) 5,803 9,871 (4,068) ---------------------------------------------------------------------------- ADJUSTED NET EARNINGS (A + B) 13,783 16,325 (2,542) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------- TABLE B ---------------------------------------------------------------------------- For the three For the three months ended months ended September 30, 2012 June 30, 2012 (a-b) -------------- --------------- (a) (b) Change ---------------------------------------------------------------------------- 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) ---------------------------------------------------------------------------- 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) ---------------------------------------------------------------------------- TOTAL UNUSUAL AND OTHER ITEMS AFTER TAX (B) 5,803 9,678 (3,875) ---------------------------------------------------------------------------- ADJUSTED NET EARNINGS (A + B) 13,783 24,050 (10,267) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------
(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) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended % September 30, 2012 September 30, 2011 Change Change ---------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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.
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended % September 30, 2012 June 30, 2012 Change Change ---------------------------------------------------------------------------- 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 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended September 30, 2012 September 30, 2011 Change % Change ---------------------------------------------------------------------------- Capital Expenditures $ 54,504 $ 47,889 6,615 13.8% ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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.
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Three months ended Three months ended September 30, 2012 June 30, 2012 Change % Change ---------------------------------------------------------------------------- Capital Expenditures $ 54,504 $ 53,065 1,439 2.7% ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
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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