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Martinrea International Inc. Reports Record First Quarter Results, New Product Awards and Announces Increased Dividend

TORONTO, May 03, 2018 (GLOBE NEWSWIRE) -- Martinrea International Inc. (TSX:MRE), a leader in the development and production of quality metal parts, assemblies and modules and fluid management systems and complex aluminum products focused primarily on the automotive sector, announced today the release of its financial results for the first quarter ended March 31, 2018 and a quarterly dividend increase.

HIGHLIGHTS

  • Fourteenth consecutive quarter with record year-over-year adjusted earnings; best quarterly earnings to date
  • Total sales of $964 million; production sales of $893 million
  • Record quarterly net income of $56 million, or $0.65 per share
  • Record quarterly adjusted net income of $56.6 million, or $0.65 per share
  • Record quarterly adjusted EBITDA of $120 million
  • Quarterly adjusted operating income (8.1%) and adjusted EBITDA (12.4%) margins increase substantially year-over-year
  • Balance sheet continues to strengthen; quarter end net debt:adjusted EBITDA ratio very strong at 1.4:1
  • Incremental new business awards of approximately $300 million in annualized sales, from existing and new customers
  • Increased quarterly cash dividend of $0.045 declared

OVERVIEW

Pat D’Eramo, President and Chief Executive Officer, stated: “We are extremely pleased with our first quarter results and performance.  We have started 2018 on a high note from a financial perspective and all our metrics continue to improve, with record earnings and significantly higher year-over-year operating margins.  We are working hard to accelerate our Martinrea 2.0 strategy, and our teams are responding well.  Productivity improvements are helping to drive margin improvement, despite flat sales.  Safety and quality metrics are a primary focus and continue to improve.  I am very pleased to note that our sales efforts have been paying off, and we are announcing a significant amount of new business totalling approximately $300 million in annualized sales, as follows: an aluminum hybrid rear sub-frame for Daimler to be produced in Meschede starting in 2020 ($90 million annual sales at peak volume); aluminum/steel hybrid front and rear sub-frames for a Ford crossover starting in 2020 ($40 million annual sales at peak volume); steel front and rear sub-frames, and suspension and engine dress module assemblies for another Ford crossover to be produced in Hermosillo starting in 2020 ($65 million annual sales at peak volume); aluminum powertrain components for Volkswagen to be produced in Spain starting in 2019 ($25 million annual sales at peak volume); and, for a new customer in China, an aluminum hybrid rear sub-frame for Geely’s electric vehicle platform to be produced in China starting in 2021 ($80 million annual sales at peak volume).  As you can see from these announcements, our product offerings reflect our lightweighting solutions over a broad range of vehicles using a variety of materials, over three continents.  We have a broad range of customers supporting us, and we thank them for their confidence in us.”

Fred Di Tosto, Chief Financial Officer, stated: “Sales for the first quarter, excluding tooling sales of $71 million, were $893 million, above our previously announced sales guidance, as certain programs had higher volumes than anticipated.  In the quarter, our adjusted net earnings per share, on a basic and diluted basis, was $0.65 per share, a record quarter and in excess of the high end of our quarterly guidance, including $0.02 resulting from a net foreign exchange gain.  Quarterly adjusted operating income and adjusted EBITDA margins increased significantly year-over-year and quarter-over-quarter.  Operating income margin for the quarter hit 8.1%.  Our balance sheet continues to strengthen as well ending the quarter at a net debt to adjusted EBITDA ratio of 1.4:1.  We intend to maintain a strong balance sheet over time, and will pay down debt as appropriate, although we do not have specific targets.  As is evident from the product wins just announced, we have a strong pipeline of programs on which to invest, and the product wins also solidify our ability to grow organically going forward.”

Rob Wildeboer, Executive Chairman, stated: “We are firing on all cylinders and are becoming the company we aspire to be.  We are driving and accelerating our One Martinrea culture throughout the organization, as evidenced at our Martinrea Accelerate 2.0 leadership conference last week, where 130 members of our leadership team came together for a week to concentrate on developing our lean thinking and entrepreneurial cultures, all based on developing a Golden Rule culture of dignity and respect.  We are firmly convinced that culture matters, and it drives results, and results reinforce culture, all which result in a sustainable competitive advantage for our company over the long term.  I believe we are just getting started, and the future looks great.  We updated our vision to the following: making lives better by being the best supplier we can be in the products we make and the services we provide.  Our people believe in the why—why do we do what we do, and in the purpose of our work.  All our stakeholders are seeing the positive benefits.  The year 2018  should be a great year for us.  Building on the solid start to the year in our first quarter, our second quarter sales, excluding tooling sales, should range from $860 million to $900 million, and adjusted net earnings per share should range from $0.62 to $0.66 per share.  As previously disclosed, we see operating margins improving over time to 9% or more by 2020 and 2020 revenues to exceed $4 billion, based on our budgetary assumptions.  This is a wonderful industry to be in.”

RESULTS OF OPERATIONS

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 first quarter ended March 31, 2018 (“MD&A”), the Company’s interim condensed consolidated financial statements for the first quarter ended March 31, 2018 (the “interim consolidated financial statements”) and the Company’s Annual Information Form for the year ended December 31, 2017, can be found at www.sedar.com.  

Results of operations may include certain unusual and other items which have been separately disclosed, where appropriate, in order to provide a clear assessment of the underlying Company results.  In addition to IFRS measures, management uses non-IFRS measures in the Company’s disclosures that it believes provide the most appropriate basis on which to evaluate the Company’s results.

OVERALL RESULTS

The following table sets out certain highlights of the Company’s performance for the three months ended March 31, 2018 and 2017.  Refer to the Company’s interim consolidated financial statements for the three months ended March 31, 2018 for a detailed account of the Company’s performance for the periods presented in the table below.

             
    Three months ended
March 31, 2018
  Three months ended
March 31, 2017
$ Change   % Change  
Sales $ 963,900   $ 1,000,550   (36,650 ) (3.7 %)
Gross Margin   144,429     118,215   26,214   22.2 %
Operating Income   78,441     62,033   16,408   26.5 %
Net Income for the period   55,959     43,467   12,492   28.7 %
Net Income Attributable to Equity Holders of the Company $ 55,959   $ 43,602   12,357   28.3 %
Net Earnings per Share – Basic $ 0.65   $ 0.50   0.15   30.0 %
Net Earnings per Share – Diluted $ 0.64   $ 0.50   0.14   28.0 %
Non-IFRS Measures*            
Adjusted Operating Income $ 78,441   $ 56,335   22,106   39.2 %
% of Sales   8.1 %   5.6 %    
Adjusted EBITDA   119,962     94,547   25,415   26.9 %
% of Sales   12.4 %   9.4 %    
Adjusted Net Income Attributable to Equity Holders of the Company   56,630     38,731   17,899   46.2 %
Adjusted Net Earnings per Share – Basic and Diluted $ 0.65   $ 0.45   0.20   44.4 %
                     

*Non-IFRS Measures

The Company prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS”).  However, the Company considers certain non-IFRS financial measures as useful additional information in measuring the financial performance and condition of the Company.  These measures, which the Company believes are widely used by investors, securities analysts and other interested parties in evaluating the Company’s performance, 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 financial measures determined in accordance with IFRS.  Non-IFRS measures include “Adjusted Net Income”, “Adjusted Net Earnings per Share (on a basic and diluted basis)”, “Adjusted Operating Income” and "Adjusted EBITDA”. 

The following tables provide a reconciliation of IFRS “Net Income Attributable to Equity Holders of the Company” to Non-IFRS “Adjusted Net Income Attributable to Equity Holders of the Company”, “Adjusted Operating Income” and “Adjusted EBITDA”.

           
    Three months ended
March 31, 2018
    Three months ended
March 31, 2017
Net Income Attributable to Equity Holders of  the Company $ 55,959   $ 43,602  
Unusual and Other Items (after-tax)*   671     (4,871 )
Adjusted Net Income Attributable to Equity Holders of the Company $ 56,630   $ 38,731  
*Unusual and other items are explained in the "Adjustments to Net Income" section of this press release
 


         
    Three months ended
March 31, 2018
  Three months ended
March 31, 2017
Net Income Attributable to Equity Holders of  the Company $ 55,959   $ 43,602  
Non-controlling interest   -     (135 )
Income tax expense   17,953     13,353  
Other finance income - excluding Unusual and Other Items*   (2,739 )   (631 )
Finance expense   6,501     5,844  
Unusual and Other Items (before-tax)*   767     (5,698 )
Adjusted Operating Income $ 78,441   $ 56,335  
Depreciation of property, plant and equipment   38,058     34,809  
Amortization of intangible assets   3,477     3,736  
Gain on disposal of property, plant and equipment   (14 )   (333 )
Adjusted EBITDA $ 119,962   $ 94,547  
*Unusual and other items are explained in the "Adjustments to Net Income" section of this press release
             


SALES            
             
Three months ended March 31, 2018 to three months ended March 31, 2017 comparison
             
    Three months ended
March 31, 2018
  Three months ended
March 31, 2017
$ Change   % Change  
North America $ 741,155   $ 802,984   (61,829 ) (7.7 %)
Europe   185,723     172,320   13,403   7.8 %
Rest of the World   40,381     27,077   13,304   49.1 %
Eliminations   (3,359 )   (1,831 ) (1,528 ) 83.5 %
Total Sales $ 963,900   $ 1,000,550   (36,650 ) (3.7 %)
                     

The Company’s consolidated sales for the first quarter of 2018 decreased by $36.7 million or 3.7% to $963.9 million as compared to $1,000.6 million for the first quarter of 2017. The total decrease in sales was driven by a decrease in the North America operating segment, partially offset by year-over-year increases in sales in Europe and the Rest of the World.

Sales for the first quarter of 2018 in the Company’s North America operating segment decreased by $61.8 million or 7.7% to $741.2 million from $803.0 million for the first quarter of 2017. The decrease was due to the impact of foreign exchange on the translation of U.S. denominated production sales, which had a negative impact on overall sales for the first quarter of 2018 of approximately $29.3 million as compared to the first quarter of 2017; and lower year-over-year OEM production volumes on certain light-vehicle platforms including the Chevrolet Malibu, Ford Fusion and GM pick-up truck line-up, and programs that ended production during or subsequent to the first quarter of 2017 such as the previous version of the GM Equinox/Terrain. These negative factors were partially offset by the launch of new programs during or subsequent to the first quarter of 2017 including the next generation GM Equinox/Terrain and an increase in tooling sales of $5.4 million, which are typically dependent on the timing of tooling construction and final acceptance by the customer.

Sales for the first quarter of 2018 in the Company’s Europe operating segment increased by $13.4 million or 7.8% to $185.7 million from $172.3 million for the first quarter of 2017. The increase can be attributed to a $14.6 million positive foreign exchange impact from the translation of Euro denominated production sales as compared to the first quarter of 2017, and higher overall production volumes in the Company’s Martinrea Honsel German operations including the ramp-up of new structural components work and the new V8 AMG engine block for Daimler; partially offset by a $5.1 million decrease in tooling sales. 

Sales for the first quarter of 2018 in the Company’s Rest of the World operating segment increased by $13.3 million or 49.1% to $40.4 million from $27.1 million for the first quarter of 2017. The increase was due to a $7.4 million increase in tooling sales, higher year-over-year production sales in the Company’s operating facility in Brazil and the launch of new structural components work for Jaguar Landrover in China, which began to ramp up in the first quarter of 2018; partially offset by a $0.4 million negative foreign exchange impact from the translation of foreign denominated production sales as compared to the first quarter of 2017.

Overall tooling sales increased by $7.0 million to $71.2 million for the first quarter of 2018 from $64.2 million for the first quarter of 2017.

             
GROSS MARGIN            
             
Three months ended March 31, 2018 to three months ended March 31, 2017 comparison
             
    Three months ended
March 31, 2018
    Three months ended
March 31, 2017
  $ Change % Change  
Gross margin $ 144,429   $ 118,215   26,214 22.2 %
% of Sales   15.0 %   11.8 %    

The gross margin percentage for the first quarter of 2018 of 15.0% increased as a percentage of sales by 3.2% as compared to the gross margin percentage for the first quarter of 2017 of 11.8%.  The increase in gross margin as a percentage of sales was generally due to:

  • productivity and efficiency improvements at certain operating facilities; and
  • general sales mix including new and replacement programs that launched, and old programs that ended production, during or subsequent to the first quarter of 2017.

These positive factors were partially offset by operational inefficiencies and other costs at certain other facilities, including upfront costs incurred in preparation of upcoming new programs and related to new business in the process of being launched; and an increase in tooling sales which typically earn low margins for the Company.

ADJUSTMENTS TO NET INCOME

(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)

Adjusted Net Income excludes certain unusual and other items, as set out in the following table and described in the notes thereto. Management uses Adjusted Net Income 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
         
Three months ended March 31, 2018 to three months ended March 31, 2017 comparison
         
  For the three months ended   For the three months ended  
  March 31, 2018   March 31, 2017 (a)-(b)
  (a)   (b) Change
         
NET INCOME (A) $ 55,959     $ 43,602   $ 12,357  
         
Add Back - Unusual and Other Items:        
         
Gain on sale of land and building (1)   -       (5,698 )   5,698  
Unrealized loss on derivative instruments (2)   767       -     767  
         
         
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX $ 767     $ (5,698 ) $ 6,465  
         
Tax impact of above items   (96 )     827     (923 )
         
         
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B) $ 671     $ (4,871 ) $ 5,542  
         
         
ADJUSTED NET INCOME (A + B) $ 56,630     $ 38,731   $ 17,899  
         
         
Number of Shares Outstanding – Basic (‘000)   86,746       86,492    
Adjusted Basic Net Earnings Per Share $ 0.65     $ 0.45    
Number of Shares Outstanding – Diluted (‘000)   87,352       86,635    
Adjusted Diluted Net Earnings Per Share $ 0.65     $ 0.45    
         

(1)   Gain on sale of land and building

During the first quarter of 2017, in connection with the relocation of an existing operation to another manufacturing facility, a building owned by the Company in Mississauga, Ontario was sold on an “as-is, where-is” basis.  The building was sold for proceeds of $9.9 million (net of closing costs of $0.4 million) resulting in a pre-tax gain of $5.7 million.

(2)   Unrealized loss on derivative instruments

In the third quarter of 2017, the Company acquired 5,500,000 common shares in NanoXplore Inc. (“NanoXplore”), a publicly listed company on the TSX Venture Exchange trading under the ticker symbol GRA, for a total of $2.5 million through a private placement offering (the investment is further described in note 6 of the interim consolidated financial statements and later on in the MD&A under the section “Investments”).  As part of the transaction to acquire the common shares, the Company also received warrants entitling the Company to acquire up to an additional 2,750,000 common shares in NanoXplore at a price of $0.70 per share for a period of up to two years after issuance. 

During the first quarter of 2018, the Company acquired an additional 411,800 common shares in NanoXplore for a total of $0.7 million through another private placement offering.  As part of the transaction to acquire the additional common shares, the Company also received warrants entitling the Company to acquire up to an additional 205,900 common shares in NanoXplore at a price of $2.30 per share for a period of up to two years after issuance. 

The warrants in NanoXplore represent derivative instruments and are fair valued at the end of each reporting period with the change in fair value recorded through profit or loss.  As at March 31, 2018, the warrants had a fair value of $3.3 million.  Based on the fair value of the warrants as at March 31, 2018, an unrealized loss of $0.8 million was recognized in the first quarter, recorded in other finance income.  This unrealized loss has been added back for Adjusted Net Income purposes.

 
NET INCOME
(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)
               
Three months ended March 31, 2018 to three months ended March 31, 2017 comparison
               
      Three months ended
March 31, 2018
  Three months ended
March 31, 2017
$ Change % Change  
Net Income $ 55,959 $ 43,602 12,357 28.3 %
Adjusted Net Income $ 56,630 $ 38,731 17,899 46.2 %
Net Earnings per Share            
  Basic $ 0.65 $ 0.50    
  Diluted $ 0.64 $ 0.50    
Adjusted Net Earnings per Share            
  Basic $ 0.65 $ 0.45    
  Diluted $ 0.65 $ 0.45    

Net Income, before adjustments, for the first quarter of 2018 increased by $12.4 million to $56.0 million from $43.6 million for the first quarter of 2017 largely as a result of the increase in the Company’s gross margin as previously discussed. Excluding the unusual and other items recognized during the first quarters of 2018 and 2017 as explained in Table A under “Adjustments to Net Income”, Net income for the first quarter of 2018 increased to $56.6 million or $0.65 per share, on a basic and diluted basis, from $38.7 million or $0.45 per share, on a basic and diluted basis, for the first quarter of 2017. 

Adjusted Net Income for the first quarter of 2018, as compared to the first quarter of 2017, was positively impacted by the following:

  • higher gross profit despite an overall decrease in year-over-year sales as previously explained;
  • productivity and efficiency improvements at certain operating facilities;
  • general sales mix including new and replacement programs that launched, and old programs that ended production, during or subsequent to the first quarter of 2017; and
  • a net foreign exchange gain of $2.7 million for the first quarter of 2018 compared to $0.6 million for the first quarter of 2017.

These factors were partially offset by the following:

  • operational inefficiencies and other costs at certain other facilities;
  • a year-over-year increase in SG&A expense as previously discussed;
  • a year-over-year increase in depreciation expense as previously discussed; and
  • a slight year-over-year increase in finance expense on the Company’s bank debt and equipment loans as a result of increased borrowing rates.

 
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
             
Three months ended March 31, 2018 to three months ended March 31, 2017 comparison
             
    Three months ended
March 31, 2018
  Three months ended
March 31, 2017
$ Change   % Change  
Additions to PP&E $ 50,337 $ 66,641 (16,304 ) (24.5 %)

Additions to PP&E decreased by $16.3 million to $50.3 million in the first quarter of 2018 from $66.6 million in the first quarter of 2017 due generally to timing of expenditures. Additions as a percentage of sales decreased year-over-year to 5.2% from 6.7% in the first quarter of 2017.  The Company continues to make investments in the business in particular at new greenfield operating facilities as these new plants execute on their backlogs of new business.

DIVIDEND

A cash dividend of $0.045 per share has been declared by the Board of Directors payable to shareholders of record on June 30, 2018, on or about July 15, 2018.

ABOUT MARTINREA

Martinrea currently employs approximately 15,000 skilled and motivated people in 44 operating divisions in Canada, the United States, Mexico, Brazil, Germany, Slovakia, Spain and China.

Martinrea’s vision: making lives better by being the best supplier we can be in the products we make and the services we provide.  The Company’s mission is to make people’s lives better by delivering: outstanding quality products and services to our customers; meaningful opportunity, job satisfaction and job security to our people through competitiveness and prudent growth; superior long term investment returns to our stakeholders; and positive contributions to our communities as good corporate citizens.

CONFERENCE CALL DETAILS

A conference call to discuss those results will be held on Friday, May 4, 2018 at 8:00am. (Toronto time) which can be accessed by dialing (416) 340-2219 or toll free (800) 377-0758.  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 - 1166690#).  The rebroadcast will be available until May 22, 2018.

FORWARD-LOOKING INFORMATION

Special Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of applicable Canadian securities laws including statements related to the growth or expectations of, improvements in, expansion of and/or guidance or outlook as to future revenue, sales, gross margin, earnings, and earnings per share (including as adjusted), or operating income margins (including expected growth in operating income margin to 9% or growth in sales to over $4 billion by 2020), improvements in the Company’s metrics including quality and safety, the intention to maintain a strong balance sheet and pay down debt over time, the ramping up and launching of new programs and the financial impact of launches, the payment of dividends, as well as other forward-looking statements.  The words “continue”, “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “views”, “intend”, “believe”, “plan”, “outlook” and similar expressions are intended to identify forward-looking statements.  Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances, such as expected sales and industry production estimates, current foreign exchange rates (FX), timing of product launches and operational improvements during the period and current Board approved budgets.  Certain forward-looking financial assumptions are presented as non-IFRS information, and we do not provide reconciliation to IFRS for such assumptions.  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 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;
  • the Company’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 insourcing trends;
  • 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;
  • launch costs;
  • 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;
  • competition with low cost countries;
  • the Company’s ability to shift its manufacturing footprint to take advantage of opportunities in emerging markets;
  • risks of conducting business in foreign countries, including China, Brazil and other growing markets;
  • potential tax exposure;
  • a change in the Company’s mix of earnings between jurisdictions with lower tax rates and those with higher tax rates, as well as under-funding of pensions plans;
  • the cost of post-employment benefits;
  • impairment charges;
  • cybersecurity threats; and
  • dividends.

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”.

For further information, please contact:

Fred Di Tosto
Chief Financial Officer
Martinrea International Inc.
3210 Langstaff Road
Vaughan, Ontario  L4K 5B2

Tel:         (416) 749-0314
Fax:        (289) 982-3001

 
Martinrea International Inc.
Interim Condensed Consolidated Balance Sheets
(in thousands of Canadian dollars) (unaudited)          
           
           
  Note   March 31, 2018   December 31, 2017
ASSETS          
Cash and cash equivalents   $ 81,395 $ 71,193
Trade and other receivables 2   649,222   556,049
Inventories 3   424,964   376,972
Prepaid expenses and deposits     19,040   15,504
Income taxes recoverable     7,359   12,979
TOTAL CURRENT ASSETS     1,181,980   1,032,697
Property, plant and equipment 4   1,333,513   1,282,624
Deferred income tax assets     155,336   142,173
Intangible assets 5   70,139   68,414
Other assets 6   14,029   15,265
TOTAL NON-CURRENT ASSETS     1,573,017   1,508,476
TOTAL ASSETS   $ 2,754,997 $ 2,541,173
           
LIABILITIES          
Trade and other payables 7 $ 846,954 $ 741,549
Provisions 8   5,477   5,048
Income taxes payable     36,370   34,429
Current portion of long-term debt 9   20,640   24,795
TOTAL CURRENT LIABILITIES     909,441   805,821
Long-term debt 9   656,904   629,222
Pension and other post-retirement benefits     63,939   65,258
Deferred income tax liabilities     72,180   82,373
TOTAL NON-CURRENT LIABILITIES     793,023   776,853
TOTAL LIABILITIES     1,702,464   1,582,674
           
EQUITY          
Capital stock 10   713,425   713,425
Contributed surplus     42,155   41,981
Accumulated other comprehensive income     132,696   94,268
Retained earnings     164,257   108,825
TOTAL EQUITY     1,052,533   958,499
TOTAL LIABILITIES AND EQUITY   $ 2,754,997 $ 2,541,173
           

Contingencies (note 16)

See accompanying notes to the interim condensed consolidated financial statements.

On behalf of the Board:

“Robert Wildeboer”      Director

“Scott Balfour”            Director


 
Martinrea International Inc.
Interim Condensed Consolidated Statements of Operations
(in thousands of Canadian dollars, except per share amounts) (unaudited) 
           
           
      Three months ended     Three months ended  
  Note   March 31, 2018     March 31, 2017  
SALES    $ 963,900     $ 1,000,550  
           
Cost of sales (excluding depreciation of property, plant and equipment)     (783,859 )   (849,785 )
Depreciation of property, plant and equipment (production)     (35,612 )   (32,550 )
Total cost of sales     (819,471 )   (882,335 )
GROSS MARGIN     144,429     118,215  
           
Research and development costs     (6,684 )   (6,815 )
Selling, general and administrative     (56,342 )   (52,599 )
Depreciation of property, plant and equipment (non-production)     (2,446 )   (2,259 )
Amortization of customer contracts and relationships     (530 )   (540 )
Gain on sale of land and building 4   -     5,698  
Gain on disposal of property, plant and equipment     14     333  
OPERATING INCOME     78,441     62,033  
           
Finance expense     (6,501 )   (5,844 )
Other finance income 13   1,972     631  
INCOME BEFORE INCOME TAXES     73,912     56,820  
           
Income tax expense 11   (17,953 )   (13,353 )
NET INCOME FOR THE PERIOD   $ 55,959   $ 43,467  
           
Non-controlling interest     -     135  
NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY   $ 55,959   $ 43,602  
           
           
Basic earnings per share 12 $ 0.65   $ 0.50  
Diluted earnings per share 12 $ 0.64   $ 0.50  
               

See accompanying notes to the interim condensed consolidated financial statements.


 
Martinrea International Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
in thousands of Canadian dollars) (unaudited) 
 
 
      Three months ended     Three months ended  
      March 31, 2018     March 31, 2017  
               
NET INCOME FOR THE PERIOD $ 55,959     $ 43,467  
Other comprehensive income (loss), net of tax:            
  Items that may be reclassified to net income            
  Foreign currency translation differences for foreign operations   39,433     (4,690 )
  Change in fair value of investments   (1,005 )   -  
  Items that will not be reclassified to net income            
  Remeasurement of defined benefit plans   2,075     (535 )
Other comprehensive income (loss), net of tax   40,503     (5,225 )
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD $ 96,462   $ 38,242  
               
Attributable to:            
  Equity holders of the Company   96,462     38,377  
  Non-controlling interest   -     (135 )
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD $ 96,462   $ 38,242  
             

See accompanying notes to the interim condensed consolidated financial statements.

 

 
Martinrea International Inc.
Interim Condensed Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars) (unaudited)
 
 
    Equity attributable to equity holders of the Company      
                               
              Accumulated     Retained              
              other     earnings/         Non-      
      Capital   Contributed     comprehensive     (accumulated         controlling     Total  
      stock   surplus     income     deficit)     Total     interest     equity  
BALANCE AT DECEMBER 31, 2016   $ 710,510   $ 42,660     $ 117,048     $ (40,020 )   $ 830,198     $ (522 )   $ 829,676  
Net income for the period   -   -     -     43,602     43,602     (135 )   43,467  
Compensation expense related to stock options   -   36     -     -     36     -     36  
Dividends ($0.03 per share)   -   -     -     (2,598 )   (2,598 )   -     (2,598 )
Exercise of employee stock options   284   (82 )   -     -     202     -     202  
Other comprehensive income (loss),                            
net of tax                            
  Remeasurement of defined benefit plans   -   -     -     (535 )   (535 )   -     (535 )
  Foreign currency translation differences   -   -     (4,690 )   -     (4,690 )   -     (4,690 )
BALANCE AT MARCH 31, 2017   710,794   42,614     112,358     449     866,215     (657 )   865,558  
Net income for the period   -   -     -     115,941     115,941     (142 )   115,799  
Change in non-controlling interest   -   -     -     (1,849 )   (1,849 )   799     (1,050 )
Compensation expense related to stock options   -   87     -     -     87     -     87  
Dividends ($0.09 per share)   -   -     -     (7,790 )   (7,790 )   -     (7,790 )
Exercise of employee stock options   2,631   (720 )   -     -     1,911     -     1,911  
Other comprehensive income (loss),                            
net of tax                            
  Remeasurement of defined benefit plans   -   -     -     2,074     2,074     -     2,074  
  Foreign currency translation differences   -   -     (26,047 )   -     (26,047 )   -     (26,047 )
  Change in fair value of investments   -   -     7,957     -     7,957     -     7,957  
BALANCE AT DECEMBER 31, 2017   713,425   41,981     94,268     108,825     958,499     -     958,499  
Net income for the period   -   -     -     55,959     55,959     -     55,959  
Compensation expense related to stock options   -   174     -     -     174     -     174  
Dividends ($0.03 per share)   -   -     -     (2,602 )   (2,602 )   -     (2,602 )
Other comprehensive income (loss),                            
net of tax                            
  Remeasurement of defined benefit plans   -   -     -     2,075     2,075     -     2,075  
  Foreign currency translation differences   -   -     39,433     -     39,433     -     39,433  
  Change in fair value of investments   -   -     (1,005 )   -     (1,005 )   -     (1,005 )
BALANCE AT MARCH 31, 2018 $ 713,425 $ 42,155   $ 132,696   $ 164,257   $ 1,052,533   $ -   $ 1,052,533  
                                         

See accompanying notes to the interim condensed consolidated financial statements.


Martinrea International Inc. 
Interim Condensed Consolidated Statements of Cash Flows 
(in thousands of Canadian dollars, except per share amounts) (unaudited) 
             
             
        Three months ended     Three months ended  
        March 31, 2018     March 31, 2017  
CASH PROVIDED BY (USED IN):        
OPERATING ACTIVITIES:        
Net Income for the period  $ 55,959     $ 43,467  
Adjustments for:        
  Depreciation of property, plant and equipment   38,058     34,809  
  Amortization of customer contracts and relationships   530     540  
  Amortization of development costs   2,947     3,196  
  Unrealized gains on foreign exchange forward contracts   (1,304 )   (1,696 )
  Unrealized loss on derivative instruments (note 6)   767     -  
  Finance expense   6,501     5,844  
  Income tax expense   17,953     13,353  
  Gain on sale of land and building (note 4)   -     (5,698 )
  Gain on disposal of property, plant and equipment   (14 )   (333 )
  Deferred and restricted share units expense   302     98  
  Stock options expense   174     36  
  Pension and other post-retirement benefits expense   1,177     1,138  
  Contributions made to pension and other post-retirement benefits   (643 )   (500 )
        122,407     94,254  
Changes in non-cash working capital items:        
  Trade and other receivables   (72,686 )   (57,646 )
  Inventories   (36,415 )   (18,549 )
  Prepaid expenses and deposits   (3,079 )   (2,044 )
  Trade, other payables and provisions   100,176     119,595  
    110,403     135,610  
  Interest paid (excluding capitalized interest)   (6,933 )   (5,120 )
  Income taxes paid   (31,678 )   (23,452 )
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 71,792   $ 107,038  
             
FINANCING ACTIVITIES:        
  Increase in long-term debt   19,689     -  
  Repayment of long-term debt   (5,279 )   (26,959 )
  Dividends paid   (2,602 )   (2,591 )
  Exercise of employee stock options   -     202  
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES $ 11,808   $ (29,348 )
             
INVESTING ACTIVITIES:        
  Purchase of property, plant and equipment*   (71,453 )   (87,339 )
  Capitalized development costs   (2,992 )   (3,523 )
  Investment in NanoXplore Inc. (note 6)   (680 )   -  
  Proceeds on disposal of land and building (note 4)   -     9,872  
  Proceeds on disposal of property, plant and equipment   770     458  
NET CASH USED IN INVESTING ACTIVITIES $ (74,355 ) $ (80,532 )
             
Effect of foreign exchange rate changes on cash and cash equivalents   957     (274 )
             
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   10,202     (3,116 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   71,193     59,165  
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 81,395   $ 56,049  
             

*As at March 31, 2018, $42,761 (December 31, 2017 - $63,877) of purchases of property, plant and equipment remain unpaid and are recorded in trade and other payables and provisions.

See accompanying notes to the interim condensed consolidated financial statements.

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