Martinrea International Inc. (TSX : MRE), a diversified and global
automotive supplier engaged in the design, development and
manufacturing of highly engineered, value-added Lightweight
Structures and Propulsion Systems, today announced the release of
its financial results for the third quarter ended September 30,
2019 and that it has declared a quarterly cash dividend of $0.045
per share.
HIGHLIGHTS
- Total sales of $974 million; production sales of $847 million,
both up year-over-year
- Record third quarter diluted net earnings per share of
$0.56
- Record third quarter adjusted diluted net earnings per share(1)
of $0.53
- Some unfavourable impact of UAW-GM work stoppage in
quarter
- Quarterly adjusted operating income(1) (7.1%) and adjusted
EBITDA(1) (12.6%) margins up year-over-year
- Record third quarter adjusted EBITDA(1)
- Quarterly free cash flow(1) of $39 million; year-to-date free
cash flow(1) of $75 million
- Balance sheet continuing to be strong; net debt:adjusted
EBITDA(1) down to 1.45x (excluding impact of IFRS 16)
- New business awards of approximately $55 million in annualized
sales at peak volumes
- Quarterly cash dividend of $0.045 per share declared
- Repurchased over a million common shares in the quarter under
normal course issuer bid
- Increased investment in NanoXplore Inc. to hold a 25%
stake
OVERVIEW
Pat D’Eramo, President and Chief Executive
Officer, stated: “Our third quarter results were great, despite
some impact from the GM strike. Overall, the strike affected sales
and earnings in this quarter but, positively, we experienced solid
financial and operating performance, as our adjusted net earnings
per share, adjusted EBITDA, and free cash flow are all up year over
year. We continue to launch quite a bit of new work, and launches
are proceeding well. In the past few weeks we have won
approximately $55 million in annualized sales at peak volumes,
including $40 million in lightweight structures work with Ford, FCA
and Volvo starting in 2021, and $15 million of propulsion systems
work for GM, Jaguar Land Rover, Ford and Rivian starting in 2021.
Our people are performing well, and we thank them for their
efforts.”
Mr. D’Eramo added: “We just completed our annual
budget process, and we anticipate that 2020 will show growth in
production sales, continued margin improvement, stronger operating
earnings, free cash flow, and a strong balance sheet. Overall, we
are seeing many new program delays and slower ramp ups than
originally planned. Most of the delays are 6-9 months, moving out
projected sales originally planned for 2020 to 2021. The delayed
programs include the Jeep Grand Cherokee, Nissan Rogue and
Pathfinder, and Ford’s new product in its Hermosillo assembly
plant. These programs represent annual business to us when fully
launched in excess of $400 million. It appears to us, and to
industry estimates, that overall volumes for 2020 will be flat or
down in China, in Europe and somewhat in North America. As a result
of the program delays and slower ramp ups, and the overall market
volume outlook, we are pushing out our $4 billion sales target to
2021; and while operating margins are anticipated to improve in
2020 from 2019 and exceed 8%, we are moving our 9% target to 2021
also to be prudent.”
Fred Di Tosto, Chief Financial Officer, stated:
“Sales for the third quarter, excluding tooling sales of
approximately $128 million, were $847 million, within the range of
our previously announced sales guidance. In the quarter, our
adjusted net earnings per share, on a diluted basis, was $0.53 per
share, also within the range of our quarterly guidance and a record
third quarter, despite the disruption of the GM strike for two
weeks in the quarter. Adjusted operating income margin for the
quarter was 7.1%, up year over year. I’m also happy to report that
we were free cash flow positive for the third quarter and
anticipate that positive trend to continue over the next few years.
For our fourth quarter, we will experience the impact on sales,
margins and earnings of some volume decreases, primarily because of
the GM strike, which eventually affected the entire month of
October. GM is our largest customer and we lost about $20 million
in production sales in September, and approximately $70 million in
October. We anticipate that a portion of the volumes will be made
up over the next several months, but are unsure of the time frames.
As a result, our earnings per share guidance for the quarter will
have a broader range. In the fourth quarter, we are also seeing
some other customers cut back production to adjust inventories and
deal with lower market volumes overall. Fourth quarter sales,
excluding tooling sales, should be in the range of $750 million to
$810 million, and adjusted net earnings per share in the range of
$0.35 to $0.45 per share.”
Rob Wildeboer, Executive Chairman, stated: “The
year 2019 will be a great year for Martinrea. Looking forward, we
anticipate a strong 2020, with increased production sales and
future growth beyond that. The industry has been seeing some
challenges, but we believe we are seeing some positive signs for
our industry. Trade issues, for North America and for China and
Brexit, are showing positive signs of getting resolved; labour
issues are also getting resolved; both have been challenges facing
the industry. The underlying economy in North America and elsewhere
is showing resiliency and some positive signs, such as low interest
rates. These are all reasons for optimism. With our strong
financial performance and cash flow, we will continue to invest in
the business, maintain a strong balance sheet, make solid strategic
investments and acquisitions where appropriate, and invest in
ourselves by repurchasing shares where it makes sense. In the third
quarter, we did renew our normal course issuer bid and bought over
a million shares. We also increased our investment in NanoXplore,
which we are excited about. We believe our company is performing
very well on an absolute and relative basis, and the challenges and
opportunities in the industry provide opportunities for us.”
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 third quarter
ended September 30, 2019 (“MD&A”), the Company’s interim
condensed consolidated financial statements for the third quarter
ended September 30, 2019 (the “interim consolidated financial
statements”) and the Company’s Annual Information Form for the year
ended December 31, 2018, 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 tables set out certain key
financial metrics underlying the Company’s performance for the
three and nine months ended September 30, 2019 and 2018. Refer to
the Company’s financial statements for the three and nine months
ended September 30, 2019 for a detailed account of the Company’s
performance for the periods presented in the tables below.
|
|
Three months endedSeptember 30, 2019 |
|
Three months endedSeptember 30, 2018 |
$ Change |
% Change |
Sales |
$ |
974,384 |
|
$ |
851,136 |
|
123,248 |
14.5 |
% |
Gross Margin |
|
143,901 |
|
|
127,130 |
|
16,771 |
13.2 |
% |
Operating Income |
|
73,243 |
|
|
58,449 |
|
14,794 |
25.3 |
% |
Net Income for the
period |
|
46,678 |
|
|
36,381 |
|
10,297 |
28.3 |
% |
Net Earnings per Share
- Basic |
$ |
0.57 |
|
$ |
0.42 |
|
0.15 |
35.7 |
% |
Net Earnings per Share
- Diluted |
$ |
0.56 |
|
$ |
0.42 |
|
0.14 |
33.3 |
% |
Non-IFRS Measures(1) |
|
|
|
|
|
|
Adjusted Operating Income |
$ |
69,044 |
|
$ |
58,449 |
|
10,595 |
18.1 |
% |
% of Sales |
|
7.1% |
|
|
6.9% |
|
|
|
Adjusted EBITDA |
|
122,401 |
|
|
103,744 |
|
18,657 |
18.0 |
% |
% of Sales |
|
12.6% |
|
|
12.2% |
|
|
|
Adjusted Net
Income |
|
43,507 |
|
|
37,169 |
|
6,338 |
17.1 |
% |
Adjusted Net Earnings
per Share - Basic and Diluted |
$ |
0.53 |
|
$ |
0.43 |
|
0.10 |
23.3 |
% |
|
|
Nine months endedSeptember 30, 2019 |
|
Nine months endedSeptember 30, 2018 |
$ Change |
% Change |
Sales |
$ |
2,946,078 |
|
$ |
2,736,746 |
|
209,332 |
|
7.6 |
% |
Gross Margin |
|
456,180 |
|
|
421,594 |
|
34,586 |
|
8.2 |
% |
Operating Income |
|
214,008 |
|
|
218,565 |
|
(4,557 |
) |
(2.1 |
%) |
Net Income for the
period |
|
130,068 |
|
|
148,067 |
|
(17,999 |
) |
(12.2 |
%) |
Net Earnings per Share
- Basic |
$ |
1.57 |
|
$ |
1.71 |
|
(0.14 |
) |
(8.2 |
%) |
Net Earnings per Share
- Diluted |
$ |
1.56 |
|
$ |
1.70 |
|
(0.14 |
) |
(8.2 |
%) |
Non-IFRS Measures(1) |
|
|
|
|
|
|
Adjusted Operating Income |
$ |
236,476 |
|
$ |
218,565 |
|
17,911 |
|
8.2 |
% |
% of Sales |
|
8.0% |
|
|
8.0% |
|
|
|
Adjusted EBITDA |
|
394,021 |
|
|
349,438 |
|
44,583 |
|
12.8 |
% |
% of Sales |
|
13.4% |
|
|
12.8% |
|
|
|
Adjusted Net
Income |
|
153,853 |
|
|
149,326 |
|
4,527 |
|
3.0 |
% |
Adjusted Net Earnings
per Share - Basic |
$ |
1.86 |
|
$ |
1.72 |
|
0.14 |
|
8.1 |
% |
Adjusted Net Earnings
per Share - Diluted |
$ |
1.85 |
|
$ |
1.71 |
|
0.14 |
|
8.2 |
% |
Impact of the Adoption of IFRS 16,
Leases
Effective January 1, 2019, the Company adopted
the new accounting standard, IFRS 16, Leases (“IFRS 16”). In
adopting the new standard, the Company used the modified
retrospective approach which involves recognizing transitional
adjustments in opening retained earnings, if any, on the date of
initial application without restating comparative prior periods. As
such, 2018 prior year comparatives have not been restated.
The adoption of the new standard resulted in the
recognition of lease liabilities of $228.6 million and right-of-use
assets of $223.8 million, net of accrued liabilities related to the
leases of $4.8 million, recognized as at January 1, 2019 in the
interim condensed consolidated balance sheet. From an earnings
perspective, while timing differences may exist, the new standard
results in a decrease in operating rent expense essentially
replaced by increases in finance and depreciation expenses as
recognized in the interim condensed consolidated statement of
operations. As such, the adoption of IFRS 16 did not have a
significant impact on the Company’s operating results and the
financial metrics for the three and nine months ended September 30,
2019 outlined above other than “Adjusted EBITDA”. The adoption of
IFRS 16 contributed approximately 8% of the year-to-date
year-over-year growth in Adjusted EBITDA due to the recognition of
depreciation expense on right-of-use assets, in lieu of operating
rent expense, as required by the new standard. The adoption of the
new standard is further explained in “Recently adopted and
applicable accounting standards and policies” in the MD&A and
note 1(d)(i) of the financial statements for the three and nine
months ended September 30, 2019.
The following tables provide a reconciliation of
IFRS “Net Income” to Non-IFRS “Adjusted Net Income”, “Adjusted
Operating Income” and “Adjusted EBITDA”.
|
|
Three months endedSeptember 30, 2019 |
|
Three months endedSeptember 30, 2018 |
Net
Income |
$ |
46,678 |
|
$ |
36,381 |
Unusual and Other
Items (after-tax)* |
|
(3,171 |
) |
|
788 |
Adjusted Net
Income |
$ |
43,507 |
|
$ |
37,169 |
|
|
|
|
|
|
|
Nine months endedSeptember 30, 2019 |
|
Nine months endedSeptember 30, 2018 |
Net Income |
$ |
130,068 |
|
$ |
148,067 |
Unusual and Other
Items (after-tax)* |
|
23,785 |
|
|
1,259 |
Adjusted Net
Income |
$ |
153,853 |
|
$ |
149,326 |
*Unusual and other
items are explained in the "Adjustments to Net Income" section of
this Press Release |
|
|
Three months endedSeptember 30, 2019 |
|
Three months endedSeptember 30, 2018 |
Net
Income |
$ |
46,678 |
|
$ |
36,381 |
Income tax expense |
|
16,129 |
|
|
12,236 |
Other finance expense - excluding Unusual and Other Items* |
|
844 |
|
|
1,994 |
Share of loss of an associate |
|
818 |
|
|
- |
Finance expense |
|
9,345 |
|
|
6,937 |
Unusual and Other
Items (before-tax)* |
|
(4,770 |
) |
|
901 |
Adjusted Operating
Income |
$ |
69,044 |
|
$ |
58,449 |
Depreciation of property, plant and equipment and right-of-use
assets |
|
50,200 |
|
|
41,787 |
Amortization of intangible assets |
|
4,104 |
|
|
3,349 |
Loss (gain) on
disposal of property, plant and equipment |
|
(947 |
) |
|
159 |
Adjusted EBITDA |
$ |
122,401 |
|
$ |
103,744 |
|
|
Nine months endedSeptember 30, 2019 |
|
Nine months endedSeptember 30, 2018 |
Net
Income |
$ |
130,068 |
|
$ |
148,067 |
Income tax expense |
|
52,156 |
|
|
48,254 |
Other finance expense - excluding Unusual and Other Items* |
|
1,130 |
|
|
460 |
Share of loss of an associate |
|
1,330 |
|
|
- |
Finance expense |
|
29,085 |
|
|
20,345 |
Unusual and Other
Items (before-tax)* |
|
22,707 |
|
|
1,439 |
Adjusted Operating
Income |
$ |
236,476 |
|
$ |
218,565 |
Depreciation of property, plant and equipment and right-of-use
assets |
|
146,931 |
|
|
120,345 |
Amortization of intangible assets |
|
11,820 |
|
|
10,159 |
Loss (gain) on
disposal of property, plant and equipment |
|
(1,206 |
) |
|
369 |
Adjusted EBITDA |
$ |
394,021 |
|
$ |
349,438 |
*Unusual and other
items are explained in the "Adjustments to Net Income" section of
this Press Release |
SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended September 30, 2019 to three months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
|
|
Three months endedSeptember 30, 2019 |
|
Three months endedSeptember 30, 2018 |
$ Change |
% Change |
North America |
$ |
780,989 |
|
$ |
648,649 |
|
132,340 |
|
20.4 |
% |
Europe |
|
157,736 |
|
|
171,902 |
|
(14,166 |
) |
(8.2 |
%) |
Rest of the World |
|
37,727 |
|
|
33,542 |
|
4,185 |
|
12.5 |
% |
Eliminations |
|
(2,068 |
) |
|
(2,957 |
) |
889 |
|
(30.1 |
%) |
Total
Sales |
$ |
974,384 |
|
$ |
851,136 |
|
123,248 |
|
14.5 |
% |
The Company’s consolidated sales for the third
quarter of 2019 increased by $123.3 million or 14.5% to $974.4
million as compared to $851.1 million for the third quarter of
2018. The total increase in sales was driven by year-over-year
increases in the North America and Rest of the World operating
segments, partially offset by a decrease in Europe.
Sales for the third quarter of 2019 in the
Company’s North America operating segment increased by $132.4
million or 20.4% to $781.0 million from $648.6 million for the
third quarter of 2018. The increase was due to an increase in
tooling sales of $86.8 million, which are typically dependant on
the timing of tooling construction and final acceptance by the
customer; the launch of new programs during or subsequent to the
third quarter of 2018, including the next generation GM
Silverado/Sierra, RAM pick-up trucks and the new Chevrolet Blazer;
and the impact of foreign exchange on the translation of U.S.
denominated production sales, which had a positive impact on
overall sales for the third quarter of 2019 of approximately $5.9
million as compared to the third quarter of 2018. These positive
factors were partially offset by lower year-over-year OEM
production volumes on certain light-vehicle platforms, in
particular the Ford Escape, and programs that ended production
during or subsequent to the third quarter of 2018. The United Auto
Workers (UAW) strike, which began on September 16, 2019 at General
Motors in the United States, negatively impacted production sales
for third quarter by approximately $20.0 million across several
platforms.
Sales for the third quarter of 2019 in the
Company’s Europe operating segment decreased by $14.2 million or
8.2% to $157.7 million from $171.9 million for the third quarter of
2018. The decrease can be attributed to lower year-over-year
production volumes on certain light-vehicle platforms, in
particular with Daimler and Jaguar Land Rover, and including
programs that ended production during or subsequent to the third
quarter of 2018; a $9.5 million decrease in tooling sales; and a
$4.3 million negative foreign exchange impact from the translation
of Euro denominated production sales as compared to the third
quarter of 2018. These negative factors were partially offset by
the launch of new programs during or subsequent to the third
quarter of 2018, including new aluminum engine blocks for Ford,
Jaguar Land Rover and Volvo, and an aluminum transmission for
Volkswagen.
Sales for the third quarter of 2019 in the
Company’s Rest of the World operating segment increased by $4.2
million or 12.5% to $37.7 million from $33.5 million in the third
quarter of 2018. The increase was due to higher year-over-year
production volumes on the Cadillac CT6 vehicle platform in China;
the ramp up of new aluminum structural components work for Jaguar
Land Rover in China, which began to ramp up in 2018 but at
significantly lower than expected volumes; and a $2.5 million
increase in tooling sales. These positive factors were partially
offset by lower year-over-year production volumes on the Ford
Mondeo vehicle platform in China; lower year-over-year production
sales in the Company’s operating facility in Brazil; and a $0.6
million negative foreign exchange impact from the translation of
foreign denominated production sales as compared to the third
quarter of 2018.
Overall tooling sales increased by $79.8 million
to $127.8 million for the third quarter of 2019 from $48.0 million
for the third quarter of 2018.
Nine
months ended September 30, 2019 to nine months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
|
|
Nine months endedSeptember 30, 2019 |
|
Nine months endedSeptember 30, 2018 |
$ Change |
% Change |
North America |
$ |
2,346,167 |
|
$ |
2,091,651 |
|
254,516 |
|
12.2 |
% |
Europe |
|
513,742 |
|
|
546,328 |
|
(32,586 |
) |
(6.0 |
%) |
Rest of the World |
|
91,526 |
|
|
107,751 |
|
(16,225 |
) |
(15.1 |
%) |
Eliminations |
|
(5,357 |
) |
|
(8,984 |
) |
3,627 |
|
(40.4 |
%) |
Total
Sales |
$ |
2,946,078 |
|
$ |
2,736,746 |
|
209,332 |
|
7.6 |
% |
The Company’s consolidated sales for the nine
months ended September 30, 2019 increased by $209.4 million or 7.6%
to $2,946.1 million as compared to $2,736.7 million for the nine
months ended September 30, 2018. The total increase in sales was
driven by an increase in the North America operating segment,
partially offset by year-over-year decreases in sales in Europe and
Rest of the World.
Sales for the nine months ended September 30,
2019 in the Company’s North America operating segment increased by
$254.5 million or 12.2% to $2,346.2 million from $2,091.7 million
for the nine months ended September 30, 2018. The increase was due
to the launch of new programs during or subsequent to the nine
months ended September 30, 2018, including the next generation GM
Silverado/Sierra, RAM pick-up trucks, and the new Chevrolet Blazer;
an increase in tooling sales of $99.6 million, which are typically
dependent on the timing of tooling construction and final
acceptance by the customer; and the impact of foreign exchange on
the translation of U.S. denominated production sales, which had a
positive impact on overall sales for the nine months ended
September 30, 2019 of approximately $64.6 million as compared to
the corresponding period of 2018. These positive factors were
partially offset by lower year-over-year OEM production volumes on
certain light-vehicle platforms, including the Ford Escape and Jeep
Wrangler, and programs that ended production during or subsequent
to the nine months ended September 30, 2018. The UAW strike, which
began on September 16, 2019 at General Motors in the United States,
negatively impacted production sales for the nine months ended
September 30, 2019 by approximately $20.0 million across several
platforms.
Sales for the nine months ended September 30,
2019 in the Company’s Europe operating segment decreased by $32.6
million or 6.0% to $513.7 million from $546.3 million for the nine
months ended September 30, 2018. The decrease can be attributed to
lower year-over-year production volumes on certain light vehicle
platforms, in particular with Jaguar Land Rover, and including
programs that ended production during or subsequent to the nine
months September 30, 2018; the impact of foreign exchange on the
translation of Euro denominated production sales, which had a
negative impact on overall sales for the nine months ended
September 30, 2019 of $11.2 million as compared to the
corresponding period of 2018; and a $6.2 million decrease in
tooling sales. These negative factors were partially offset by the
launch of new programs during or subsequent to the nine months
ended September 30, 2018, including new aluminum engine blocks for
Ford, Jaguar Land Rover and Volvo, and an aluminum transmission for
Volkswagen.
Sales for the nine months ended September 30,
2019 in the Company’s Rest of the World operating segment decreased
by $16.3 million or 15.1% to $91.5 million from $107.8 million for
the nine months ended September 30, 2018. The decrease was due to
lower year-over-year production volumes on the Ford Mondeo vehicle
platform in China; lower year-over-year production sales in the
Company’s operating facility in Brazil; a $3.3 million decrease in
tooling sales; and a $2.9 million negative foreign exchange impact
from the translation of foreign denominated production sales as
compared to the corresponding period of 2018. These negative
factors were partially offset by higher year-over-year production
volumes on the Cadillac CT6 vehicle platform in China, and the ramp
up of new aluminum structural components work for Jaguar Land Rover
in China, which began to ramp up in 2018, but at significantly
lower than expected volumes.
Overall tooling sales increased by $90.2 million
to $274.2 million for the nine months ended September 30, 2019 from
$184.0 million for the nine months ended September 30, 2018.
GROSS
MARGIN |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended September 30, 2019 to three months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
|
|
Three months endedSeptember 30, 2019 |
|
Three months endedSeptember 30, 2018 |
$ Change |
% Change |
Gross margin |
$ |
143,901 |
$ |
127,130 |
|
16,771 |
13.2% |
% of
Sales |
|
14.8% |
|
14.9% |
|
|
|
The gross margin percentage for the third
quarter of 2019 of 14.8% decreased slightly as a percentage of
sales by 0.1% as compared to the gross margin percentage for the
third quarter of 2018 of 14.9%. The slight decrease was generally
due to an increase in tooling sales which typically earn low
margins for the Company; the impact of the UAW strike at General
Motors, which began on September 16, 2019 and resulted in lost
production sales during the last two weeks of September, on the
Company’s margin profile for the quarter; and 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. These negative factors were essentially offset by
productivity and efficiency improvements at certain operating
facilities, and an improvement in general sales mix including new
and replacement programs that launched, and old programs that ended
production, during or subsequent to the third quarter of 2018.
Nine
months ended September 30, 2019 to nine months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
|
|
Nine months endedSeptember 30, 2019 |
|
Nine months endedSeptember 30, 2018 |
$ Change |
% Change |
Gross margin |
$ |
456,180 |
$ |
421,594 |
34,586 |
8.2% |
% of
Sales |
|
15.5% |
|
15.4% |
|
|
The gross margin percentage for the nine months
ended September 30, 2019 of 15.5% increased slightly as a
percentage of sales by 0.1% as compared to the gross margin
percentage for the nine months ended September 30, 2018 of 15.4%.
The slight increase 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 nine months ended September 30, 2018. These
positive factors were essentially offset by an increase in tooling
sales which typically earn low margins for the Company; the impact
of the UAW strike at General Motors, which began on September 16,
2019 and resulted in lost production sales during the last two
weeks of September, on the Company’s margin profile for the nine
months ended September 30, 2019; and 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.
ADJUSTMENTS TO NET INCOME
Adjusted Net Income excludes certain unusual and
other items, as set out in the following tables 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 September 30, 2019 to three months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
Three months ended |
|
Three months ended |
|
|
September 30, 2019 |
|
September 30, 2018 |
(a)-(b) |
|
(a) |
|
(b) |
Change |
|
|
|
|
|
NET INCOME (A) |
$46,678 |
|
|
$36,381 |
|
$10,297 |
|
|
|
|
|
|
Add Back - Unusual and Other Items: |
|
|
|
|
|
|
|
|
|
Loss (gain) on derivative instruments (1) |
|
(571 |
) |
|
|
901 |
|
|
(1,472 |
) |
Net gain
in the Company’s operating facility in Brazil (2) |
|
(4,199 |
) |
|
|
- |
|
|
(4,199 |
) |
|
|
|
|
|
|
|
|
|
|
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX |
($4,770 |
) |
|
$901 |
|
($5,671 |
) |
|
|
|
|
|
Tax
impact of above items |
|
1,599 |
|
|
|
(113 |
) |
|
1,712 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B) |
($3,171 |
) |
|
$788 |
|
($3,959 |
) |
|
|
|
|
|
|
|
|
|
|
ADJUSTED NET INCOME (A + B) |
$43,507 |
|
|
$37,169 |
|
$6,338 |
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares Outstanding - Basic (‘000) |
|
82,593 |
|
|
|
86,685 |
|
|
Adjusted
Basic Net Earnings Per Share |
$0.53 |
|
|
$0.43 |
|
|
Number of
Shares Outstanding - Diluted (‘000) |
|
82,713 |
|
|
|
87,096 |
|
|
Adjusted
Diluted Net Earnings Per Share |
$0.53 |
|
|
$0.43 |
|
|
|
|
|
|
|
TABLE
B |
|
|
|
|
|
Nine
months ended September 30, 2019 to nine months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
|
|
Nine months endedSeptember 30, 2019 |
|
Nine months endedSeptember 30, 2018 |
|
|
|
(a)-(b) |
|
(a) |
|
(b) |
Change |
|
|
|
|
|
NET INCOME (A) |
$130,068 |
|
|
$148,067 |
|
($17,999 |
) |
|
|
|
|
|
Add Back - Unusual and Other Items: |
|
|
|
|
|
|
|
|
|
Loss on derivative instruments (1) |
|
239 |
|
|
|
1,439 |
|
|
(1,200 |
) |
Net gain
in the Company’s operating facility in Brazil (2) |
|
(4,199 |
) |
|
|
- |
|
|
(4,199 |
) |
Impairment of assets (3) |
|
18,502 |
|
|
|
- |
|
|
18,502 |
|
Restructuring costs (4) |
|
8,165 |
|
|
|
- |
|
|
8,165 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX |
$22,707 |
|
|
$1,439 |
|
$21,268 |
|
|
|
|
|
|
Tax
impact of above items |
|
1,078 |
|
|
|
(180 |
) |
|
1,258 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B) |
$23,785 |
|
|
$1,259 |
|
$22,526 |
|
|
|
|
|
|
ADJUSTED NET INCOME (A + B) |
$153,853 |
|
|
$149,326 |
|
$4,527 |
|
|
|
|
|
|
Number of
Shares Outstanding - Basic (‘000) |
|
82,897 |
|
|
|
86,790 |
|
|
Adjusted
Basic Net Earnings Per Share |
$1.86 |
|
|
$1.72 |
|
|
Number of
Shares Outstanding - Diluted (‘000) |
|
83,054 |
|
|
|
87,360 |
|
|
Adjusted
Diluted Net Earnings Per Share |
$1.85 |
|
|
$1.71 |
|
|
|
|
|
|
|
(1) Unrealized loss (gain) on
derivative instruments
As further described in note 7 of the financial
statements and later on in the MD&A under “Investments”,
Martinrea holds warrants in NanoXplore Inc., a publicly listed
graphene company on the TSX Venture Exchange under the ticker
symbol GRA. The warrants represent derivative instruments and are
fair valued at the end of each reporting period using the
Black-Scholes-Merton valuation model, with the change in fair value
recorded through profit or loss. As it relates to the warrants as
at September 30, 2019, a gain of $0.6 million was recognized for
the three months ended September 30, 2019 (2018 - unrealized loss
of $0.9 million), and a loss of $0.2 million was recognized for the
nine months ended September 30, 2019 (2018 - unrealized loss of
$1.4 million), recorded in other finance income (expense) and added
back to Adjusted Net Income.
(2) Net gain
in the Company’s operating facility in Brazil Included in
income for the three months ended September 30, 2019 is a
non-recurring benefit recognized in the Company’s operating
facility in Brazil, included in the Rest of the World operating
segment. The benefit represents a $6.5 million recovery of
previously paid local social security taxes, partially offset by a
$2.3 million true-up of the facility’s claims and litigation
provision related to certain employee-related matters. The benefit
was recorded against selling, general and administrative
expense.
(3) Impairment of
assets
During the second quarter of 2019, the Company
recorded impairment charges on property, plant, equipment,
right-of-use assets, intangible assets and inventories totaling
$18.5 million related to an operating facility in China included in
the Rest of the World operating segment. The impairment charges
resulted from lower OEM production volumes on certain light vehicle
platforms being serviced by the facility, representing a
significant portion of the business, causing the Company to
complete an analysis of strategic alternatives. The impairment
charges were recorded where the carrying amount of the assets
exceeded their estimated recoverable amounts, including
consideration for where specific assets can be transferred to other
facilities.
(4) Restructuring
costs
Additions to the restructuring accrual in 2019
totaled $8.2 million and represent employee-related severance
resulting from the right-sizing of operating facilities in Brazil
($6.2 million), Canada ($1.7 million) and China ($0.3 million)
during the second quarter.
NET
INCOME |
|
Three
months ended September 30, 2019 to three months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
|
|
|
|
Three months endedSeptember 30, 2019 |
|
Three months endedSeptember 30, 2018 |
$ Change |
% Change |
Net Income |
$ |
46,678 |
$ |
36,381 |
10,297 |
28.3 |
% |
Adjusted Net
Income |
$ |
43,507 |
$ |
37,169 |
6,338 |
17.1 |
% |
Net Earnings per
Share |
|
|
|
|
|
|
|
Basic |
$ |
0.57 |
$ |
0.42 |
|
|
|
Diluted |
$ |
0.56 |
$ |
0.42 |
|
|
Adjusted Net
Earnings per Share |
|
|
|
|
|
|
|
Basic
and Diluted |
$ |
0.53 |
$ |
0.43 |
|
|
Net income, before adjustments, for the third
quarter of 2019 increased by $10.3 million to $46.7 million from
$36.4 million for the third quarter of 2018 due in part to the
unusual and other items recognized during the three months ended
September 30, 2019 and 2018 as explained in Table A under
“Adjustments to Net Income”. Excluding these unusual and other
items, net income for the third quarter of 2019 increased to $43.5
million or $0.53 per share, on a basic and diluted basis, from
$37.2 million or $0.43 per share, on a basic and diluted basis, for
the third quarter of 2018. The lower outstanding Martinrea share
count as a result of the recent share repurchases the Company
completed under a normal course issuer bid, as further explained in
note 13 of the financial statements and later on in the MD&A
under “Disclosure of Outstanding Share Data”, contributed to the
year-over-year increase in Adjusted Net Earnings per Share.
Adjusted Net Income for the third quarter of
2019, as compared to the third quarter of 2018, was positively
impacted by the following:
- higher gross profit on increased year-over-year sales as
previously explained;
- a $0.9 million gain on the disposal of property, plant and
equipment for the third quarter of 2019 compared to a loss of $0.2
million for the third quarter of 2018;
- a net foreign exchange loss of $1.1 million for the third
quarter of 2019 compared to a loss of $2.1 million for the third
quarter of 2018; and
- lower operating rent expense due to the adoption of IFRS 16,
generally replaced by increases in finance and depreciation
expenses.
These positive factors were partially offset by
the following:
- a year-over-year increase in depreciation expense due primarily
to the adoption of IFRS 16;
- a year-over-year increase in research and development costs due
to increased new product and process research and development
activity and an increase in program-related development cost
amortization;
- a year-over-year increase in SG&A expense, excluding
adjustments, as previously discussed;
- a year-over-year increase in finance expense on the Company’s
revolving bank debt and equipment loans as a result of interest on
lease liabilities as a result of the adoption of IFRS 16; and
- the Company’s share of loss of an associate in the amount of
$0.8 million.
Nine
months ended September 30, 2019 to nine months ended September 30,
2018 comparison |
|
|
|
|
|
|
|
|
|
Nine months endedSeptember 30, 2019 |
|
Nine months endedSeptember 30, 2018 |
$ Change |
% Change |
Net Income |
$ |
130,068 |
$ |
148,067 |
(17,999 |
) |
(12.2 |
%) |
Adjusted Net
Income |
$ |
153,853 |
$ |
149,326 |
4,527 |
|
3.0 |
% |
Net Earnings per
Share |
|
|
|
|
|
|
Basic |
$ |
1.57 |
$ |
1.71 |
|
|
Diluted |
$ |
1.56 |
$ |
1.70 |
|
|
Adjusted Net
Earnings per Share |
|
|
|
|
|
|
Basic |
$ |
1.86 |
$ |
1.72 |
|
|
Diluted |
$ |
1.85 |
$ |
1.71 |
|
|
Net Income, before adjustments, for the nine
months ended September 30, 2019 decreased by $18.0 million to
$130.1 million from $148.1 million for the nine months ended
September 30, 2018 due largely to the unusual and other items
incurred as explained in Table B under “Adjustments to Net Income”.
Excluding these unusual and other items, net income for the nine
months ended September 30, 2019 increased to $153.9 million or
$1.86 per share, on a basic basis, and $1.85 per share on a diluted
basis, from $149.3 million or $1.72 per share, on a basic basis,
and $1.71 per share on a diluted basis, for the nine months ended
September 30, 2018. The lower outstanding Martinrea share count as
a result of recent share repurchases the Company completed under a
normal course issuer bid, as further explained in note 13 of the
financial statements and later on in the MD&A under “Disclosure
of Outstanding Share Data”, contributed to the year-over-year
increase in Adjusted Net Earnings per Share.
Adjusted Net Income for the nine months ended
September 30, 2019, as compared to the nine months ended September
30, 2018, was positively impacted by the following:
- higher gross profit on increased year-over-year sales as
previously explained;
- a $1.2 million gain on the disposal of property, plant and
equipment for the nine months ended September 30, 2019 compared to
a loss of $0.4 million for the comparative period of 2018; and
- lower operating rent expense due to the adoption of IFRS 16,
generally replaced by increases in finance and depreciation
expenses.
These positive factors were partially offset by
the following:
- a year-over-year increase in depreciation expense due primarily
to the adoption of IFRS 16;
- a year-over-year increase in research and development costs due
to increased new product and process research and development
activity and an increase in program-related development cost
amortization;
- a year-over-year increase in SG&A expense, excluding
adjustments, as previously discussed;
- a year-over-year increase in finance expense on the Company’s
revolving bank debt and equipment loans as a result of increased
debt levels and borrowing rates, and interest on lease liabilities
as a result of the adoption of IFRS 16;
- a net foreign exchange loss of $1.5 million for the nine months
ended September 30, 2019 compared to a loss of $0.7 million for the
nine months ended September 30, 2018; and
- the Company’s share of loss of an associate in the amount of
$1.3 million.
DIVIDEND
A cash dividend of $0.045 per share has been
declared by the Board of Directors payable to shareholders of
record on December 31, 2019, on or about January 15, 2020.
ABOUT MARTINREA
Martinrea is a diversified and global automotive
supplier engaged in the design, development and manufacturing of
highly engineered, value-added Lightweight Structures and
Propulsion Systems. Martinrea currently employs approximately
15,000 skilled and motivated people in 52 locations (including
sales and engineering centers) in Canada, the United States,
Mexico, Brazil, Germany, Spain, Slovakia, China and Japan.
Martinrea’s vision is 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; providing meaningful opportunity, job
satisfaction, and job security for our people; providing superior
long-term investment returns to our stakeholders; and being
positive contributors to our communities.
CONFERENCE CALL DETAILS
A conference call to discuss the financial
results will be held on Tuesday, November 12, 2019 at 5:30 p.m.
(Toronto time) which can be accessed by dialing 416-340-2218
(international: 001-416-340-2218) 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 Ganesh Iyer at 416-749-0314.
There will also be a rebroadcast of the call
available by dialing 905-694-9451 (international: 001-905-694-9451)
or toll free 800-408-3053 (conference id – 2162630#). The
rebroadcast will be available until December 12, 2019.
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 or belief in, expansion of and/or guidance or outlook
as to future revenue, sales (production or tooling), margin, gross
margin, earnings, operating earnings, (adjusted) earnings per
share, (adjusted) net earnings per share, operating income margins,
free cash flow, expected results and targets for the fourth
quarter, 2019 and future financial years, the strength of the
Company, the intention to pay down debt and maintain a strong
balance sheet, program wins, the ramping up and launching of new
programs, the delay of program launches to 2021, the financial
impact of launches, reduction in volumes for fourth quarter in
2019, the impact on sales, earnings and margin, GM to make up lost
volume, pursuit of its strategies, the payment of dividends, the
improvement in trade and labour issues and the performance of the
economy, industry volume expectations and market outlook, continued
investments in the business, including strategic, and repurchasing
shares under the normal course issuer bid 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 and commodities;
- 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;
- the risks associated with joint ventures;
- costs associated with rationalization of production
facilities;
- launch and operational costs;
- labour disputes;
- changes in governmental regulations or laws including any
changes to trade;
- litigation and regulatory compliance and investigations;
- 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 markets;
- 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;
- under-funding of pension plans;
- the cost of post-employment benefits;
- impairment charges;
- cybersecurity threats;
- the potential volatility of the Company’s share price; 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 TostoChief Financial OfficerMartinrea
International Inc.3210 Langstaff RoadVaughan, Ontario L4K
5B2
Tel: 416-749-0314Fax: 289-982-3001
1 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”, "Adjusted EBITDA” and “Free Cash Flow”.
|
Martinrea
International Inc. |
Interim Condensed
Consolidated Balance Sheets |
(in thousands of Canadian dollars) (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
September 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
101,409 |
$ |
70,162 |
Trade and other
receivables |
2 |
|
631,677 |
|
597,796 |
Inventories |
3 |
|
447,450 |
|
492,759 |
Prepaid expenses and
deposits |
|
|
27,479 |
|
23,275 |
Income taxes recoverable |
|
|
26,639 |
|
21,301 |
TOTAL CURRENT ASSETS |
|
|
1,234,654 |
|
1,205,293 |
Property, plant and
equipment |
4 |
|
1,506,360 |
|
1,481,452 |
Right-of-use assets |
5 |
|
197,541 |
|
- |
Deferred income tax
assets |
|
|
138,039 |
|
145,354 |
Intangible assets |
6 |
|
61,681 |
|
70,931 |
Investments |
7 |
|
37,820 |
|
10,781 |
TOTAL NON-CURRENT ASSETS |
|
|
1,941,441 |
|
1,708,518 |
TOTAL ASSETS |
|
$ |
3,176,095 |
$ |
2,913,811 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Trade and other payables |
9 |
$ |
800,896 |
$ |
862,699 |
Provisions |
10 |
|
10,508 |
|
5,393 |
Income taxes payable |
|
|
13,033 |
|
7,816 |
Current portion of long-term
debt |
11 |
|
14,914 |
|
16,804 |
Current
portion of lease liabilities |
12 |
|
28,342 |
|
- |
TOTAL CURRENT LIABILITIES |
|
|
867,693 |
|
892,712 |
Long-term debt |
11 |
|
778,332 |
|
723,913 |
Lease liabilities |
12 |
|
182,649 |
|
- |
Pension and other
post-retirement benefits |
|
|
69,992 |
|
61,267 |
Deferred income tax liabilities |
|
|
76,014 |
|
84,370 |
TOTAL NON-CURRENT LIABILITIES |
|
|
1,106,987 |
|
869,550 |
TOTAL LIABILITIES |
|
|
1,974,680 |
|
1,762,262 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Capital stock |
13 |
|
673,485 |
|
680,157 |
Contributed surplus |
|
|
42,322 |
|
42,016 |
Accumulated other
comprehensive income |
|
|
105,213 |
|
158,395 |
Retained earnings |
|
|
380,395 |
|
270,981 |
TOTAL EQUITY |
|
|
1,201,415 |
|
1,151,549 |
TOTAL LIABILITIES AND EQUITY |
|
$ |
3,176,095 |
$ |
2,913,811 |
|
|
|
|
|
|
Contingencies (note 19)
See accompanying notes to the interim condensed consolidated
financial statements.
On behalf of the Board:
“Robert Wildeboer”
Director
“Terry
Lyons”
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 |
|
|
Nine months ended |
|
|
Nine months ended |
|
|
Note |
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
SALES |
|
$ |
974,384 |
|
$ |
851,136 |
|
$ |
2,946,078 |
|
$ |
2,736,746 |
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (excluding
depreciation of property, plant and equipment |
|
|
|
|
|
|
|
|
|
and right-of-use assets) |
|
|
(783,885 |
) |
|
(684,888 |
) |
|
(2,353,926 |
) |
|
(2,202,537 |
) |
Depreciation of property,
plant and equipment and right-of-use assets |
|
|
|
|
|
|
|
|
|
(production) |
|
|
(46,598 |
) |
|
(39,118 |
) |
|
(135,972 |
) |
|
(112,615 |
) |
Total
cost of sales |
|
|
(830,483 |
) |
|
(724,006 |
) |
|
(2,489,898 |
) |
|
(2,315,152 |
) |
GROSS MARGIN |
|
|
143,901 |
|
|
127,130 |
|
|
456,180 |
|
|
421,594 |
|
|
|
|
|
|
|
|
|
|
|
Research and development
costs |
|
|
(10,086 |
) |
|
(6,228 |
) |
|
(28,159 |
) |
|
(19,375 |
) |
Selling, general and
administrative |
|
|
(57,381 |
) |
|
(59,088 |
) |
|
(176,024 |
) |
|
(173,950 |
) |
Depreciation of property,
plant and equipment and right-of-use assets |
|
|
|
|
|
|
|
|
|
(non-production) |
|
|
(3,602 |
) |
|
(2,669 |
) |
|
(10,959 |
) |
|
(7,730 |
) |
Amortization of customer
contracts and relationships |
|
|
(536 |
) |
|
(537 |
) |
|
(1,569 |
) |
|
(1,605 |
) |
Gain (loss) on disposal of
property, plant and equipment |
|
|
947 |
|
|
(159 |
) |
|
1,206 |
|
|
(369 |
) |
Impairment of assets |
8 |
|
- |
|
|
- |
|
|
(18,502 |
) |
|
- |
|
Restructuring costs |
10 |
|
- |
|
|
- |
|
|
(8,165 |
) |
|
- |
|
OPERATING INCOME |
|
|
73,243 |
|
|
58,449 |
|
|
214,008 |
|
|
218,565 |
|
|
|
|
|
|
|
|
|
|
|
Share of loss of an
associate |
7 |
|
(818 |
) |
|
- |
|
|
(1,330 |
) |
|
- |
|
Finance expense (including
interest on lease liabilities) |
16 |
|
(9,345 |
) |
|
(6,937 |
) |
|
(29,085 |
) |
|
(20,345 |
) |
Other
finance income (expense) |
16 |
|
(273 |
) |
|
(2,895 |
) |
|
(1,369 |
) |
|
(1,899 |
) |
INCOME BEFORE INCOME
TAXES |
|
|
62,807 |
|
|
48,617 |
|
|
182,224 |
|
|
196,321 |
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense |
14 |
|
(16,129 |
) |
|
(12,236 |
) |
|
(52,156 |
) |
|
(48,254 |
) |
NET INCOME FOR THE PERIOD |
|
$ |
46,678 |
|
$ |
36,381 |
|
$ |
130,068 |
|
$ |
148,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
15 |
$ |
0.57 |
|
$ |
0.42 |
|
$ |
1.57 |
|
$ |
1.71 |
|
Diluted
earnings per share |
15 |
$ |
0.56 |
|
$ |
0.42 |
|
$ |
1.56 |
|
$ |
1.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
Nine months ended |
|
|
Nine months ended |
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
NET INCOME FOR THE PERIOD |
$ |
46,678 |
|
$ |
36,381 |
|
$ |
130,068 |
|
$ |
148,067 |
|
Other comprehensive
income (loss), net of tax: |
|
|
|
|
|
|
|
|
Items that may be reclassified to net income |
|
|
|
|
|
|
|
|
Foreign currency translation differences for foreign
operations |
|
(1,556 |
) |
|
(26,682 |
) |
|
(51,479 |
) |
|
13,143 |
|
Cash flow hedging derivative and non-derivative financial
instruments: |
|
|
|
|
|
|
|
|
Unrealized gain (loss) in fair value of financial instruments |
|
(1,184 |
) |
|
2,378 |
|
|
2,336 |
|
|
403 |
|
Reclassification of loss (gain) to net income |
|
240 |
|
|
(219 |
) |
|
1,033 |
|
|
(190 |
) |
Items that will not be reclassified to net
income |
|
|
|
|
|
|
|
|
Change in fair value of investments |
|
- |
|
|
(1,552 |
) |
|
(776 |
) |
|
(2,091 |
) |
Transfer of unrealized gain on investments to retained
earnings |
|
|
|
|
|
|
|
|
on change in accounting method (note 7) |
|
- |
|
|
- |
|
|
(4,314 |
) |
|
- |
|
Share of other comprehensive income (loss) of an associate |
|
(6 |
) |
|
- |
|
|
18 |
|
|
- |
|
Remeasurement of defined benefit plans |
|
(3,763 |
) |
|
(595 |
) |
|
(8,187 |
) |
|
1,650 |
|
Other comprehensive income (loss), net of tax |
|
(6,269 |
) |
|
(26,670 |
) |
|
(61,369 |
) |
|
12,915 |
|
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD |
$ |
40,409 |
|
$ |
9,711 |
|
$ |
68,699 |
|
$ |
160,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other |
|
|
|
|
|
|
|
|
|
|
|
|
Contributed |
|
|
comprehensive |
|
|
Retained |
|
|
|
|
|
|
Capital stock |
|
|
surplus |
|
|
income |
|
|
earnings |
|
|
Total equity |
|
BALANCE AT DECEMBER 31, 2017 |
$ |
713,425 |
|
$ |
41,981 |
|
$ |
94,268 |
|
$ |
108,825 |
|
$ |
958,499 |
|
Net income for the period |
|
- |
|
|
- |
|
|
- |
|
|
148,067 |
|
|
148,067 |
|
Compensation expense related
to stock options |
|
- |
|
|
283 |
|
|
- |
|
|
- |
|
|
283 |
|
Dividends ($0.12 per
share) |
|
- |
|
|
- |
|
|
- |
|
|
(10,396 |
) |
|
(10,396 |
) |
Exercise of employee stock
options |
|
2,422 |
|
|
(587 |
) |
|
- |
|
|
- |
|
|
1,835 |
|
Repurchase of common
shares |
|
(5,298 |
) |
|
- |
|
|
- |
|
|
(3,662 |
) |
|
(8,960 |
) |
Other comprehensive income
(loss) net of tax |
|
|
|
|
|
|
|
|
|
|
Remeasurement of defined benefit plans |
|
- |
|
|
- |
|
|
- |
|
|
1,650 |
|
|
1,650 |
|
Foreign currency translation differences |
|
- |
|
|
- |
|
|
13,143 |
|
|
- |
|
|
13,143 |
|
Change in fair value of investments |
|
- |
|
|
- |
|
|
(2,091 |
) |
|
- |
|
|
(2,091 |
) |
Cash flow hedging derivative and non-derivative |
|
|
|
|
|
|
|
|
|
|
financial instruments: |
|
|
|
|
|
|
|
|
|
|
Unrealized gain in fair value of financial instruments |
|
- |
|
|
- |
|
|
403 |
|
|
- |
|
|
403 |
|
Reclassification of gain to net income |
|
- |
|
|
- |
|
|
(190 |
) |
|
- |
|
|
(190 |
) |
BALANCE AT SEPTEMBER 30, 2018 |
|
710,549 |
|
|
41,677 |
|
|
105,533 |
|
|
244,484 |
|
|
1,102,243 |
|
Net income for the period |
|
- |
|
|
- |
|
|
- |
|
|
37,816 |
|
|
37,816 |
|
Compensation expense related
to stock options |
|
- |
|
|
368 |
|
|
- |
|
|
- |
|
|
368 |
|
Dividends ($0.045 per
share) |
|
- |
|
|
- |
|
|
- |
|
|
(3,817 |
) |
|
(3,817 |
) |
Exercise of employee stock
options |
|
101 |
|
|
(29 |
) |
|
- |
|
|
- |
|
|
72 |
|
Repurchase of common
shares |
|
(12,401 |
) |
|
- |
|
|
- |
|
|
(4,152 |
) |
|
(16,553 |
) |
Estimated repurchase of common
shares subsequent to |
|
|
|
|
|
|
|
|
|
|
year-end under an automatic
share repurchase program |
|
|
|
|
|
|
|
|
|
|
with a broker |
|
(18,092 |
) |
|
- |
|
|
- |
|
|
(5,779 |
) |
|
(23,871 |
) |
Other comprehensive income
(loss) net of tax |
|
|
|
|
|
|
|
|
|
|
Remeasurement of defined benefit plans |
|
- |
|
|
- |
|
|
- |
|
|
2,429 |
|
|
2,429 |
|
Foreign currency translation differences |
|
- |
|
|
- |
|
|
59,467 |
|
|
- |
|
|
59,467 |
|
Change in fair value of investments |
|
- |
|
|
- |
|
|
(776 |
) |
|
- |
|
|
(776 |
) |
Cash flow hedging derivative and non-derivative |
|
|
|
|
|
|
|
|
|
|
financial instruments: |
|
|
|
|
|
|
|
|
|
|
Unrealized loss in fair value of financial instruments |
|
- |
|
|
- |
|
|
(6,439 |
) |
|
- |
|
|
(6,439 |
) |
Reclassification of loss to net income |
|
- |
|
|
- |
|
|
610 |
|
|
- |
|
|
610 |
|
BALANCE AT DECEMBER 31, 2018 |
|
680,157 |
|
|
42,016 |
|
|
158,395 |
|
|
270,981 |
|
|
1,151,549 |
|
Net income for the period |
|
- |
|
|
- |
|
|
- |
|
|
130,068 |
|
|
130,068 |
|
Compensation expense related
to stock options |
|
- |
|
|
892 |
|
|
- |
|
|
- |
|
|
892 |
|
Dividends ($0.135 per
share) |
|
- |
|
|
- |
|
|
- |
|
|
(11,126 |
) |
|
(11,126 |
) |
Exercise of employee stock
options |
|
2,036 |
|
|
(586 |
) |
|
- |
|
|
- |
|
|
1,450 |
|
Repurchase of common
shares |
|
(8,708 |
) |
|
- |
|
|
- |
|
|
(5,655 |
) |
|
(14,363 |
) |
Other comprehensive income
(loss) net of tax |
|
|
|
|
|
|
|
|
|
|
Remeasurement of defined benefit plans |
|
- |
|
|
- |
|
|
- |
|
|
(8,187 |
) |
|
(8,187 |
) |
Foreign currency translation differences |
|
- |
|
|
- |
|
|
(51,479 |
) |
|
- |
|
|
(51,479 |
) |
Change in fair value of investments |
|
- |
|
|
- |
|
|
(776 |
) |
|
- |
|
|
(776 |
) |
Transfer of unrealized gain on investments to retained |
|
|
|
|
|
|
|
|
|
|
earnings on change in accounting method (note 7) |
|
- |
|
|
- |
|
|
(4,314 |
) |
|
4,314 |
|
|
- |
|
Share of other comprehensive income of an associate |
|
- |
|
|
- |
|
|
18 |
|
|
- |
|
|
18 |
|
Cash flow hedging derivative and non-derivative |
|
|
|
|
|
|
|
|
|
|
financial instruments: |
|
|
|
|
|
|
|
|
|
|
Unrealized gain in fair value of financial instruments |
|
- |
|
|
- |
|
|
2,336 |
|
|
- |
|
|
2,336 |
|
Reclassification of loss to net income |
|
- |
|
|
- |
|
|
1,033 |
|
|
- |
|
|
1,033 |
|
BALANCE AT SEPTEMBER 30, 2019 |
$ |
673,485 |
|
$ |
42,322 |
|
$ |
105,213 |
|
$ |
380,395 |
|
$ |
1,201,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Three months ended |
|
|
Nine months ended |
|
|
Nine months ended |
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
CASH PROVIDED BY (USED
IN): |
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Net Income for the period |
$ |
46,678 |
|
$ |
36,381 |
|
$ |
130,068 |
|
$ |
148,067 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment and right-of-use
assets |
|
50,200 |
|
|
41,787 |
|
|
146,931 |
|
|
120,345 |
|
Amortization of customer contracts and relationships |
|
536 |
|
|
537 |
|
|
1,569 |
|
|
1,605 |
|
Amortization of development costs |
|
3,568 |
|
|
2,812 |
|
|
10,251 |
|
|
8,554 |
|
Impairment of assets (note 8) |
|
- |
|
|
- |
|
|
18,502 |
|
|
- |
|
Unrealized loss (gain) on foreign exchange forward contracts |
|
627 |
|
|
(235 |
) |
|
368 |
|
|
(700 |
) |
Loss (gain) on warrants (note 7) |
|
(571 |
) |
|
901 |
|
|
239 |
|
|
1,439 |
|
Finance expense (including interest on lease liabilities) |
|
9,345 |
|
|
6,937 |
|
|
29,085 |
|
|
20,345 |
|
Income tax expense |
|
16,129 |
|
|
12,236 |
|
|
52,156 |
|
|
48,254 |
|
Loss (gain) on disposal of property, plant and equipment |
|
(947 |
) |
|
159 |
|
|
(1,206 |
) |
|
369 |
|
Deferred and restricted share units expense (benefit) |
|
1,833 |
|
|
1,009 |
|
|
3,761 |
|
|
2,389 |
|
Stock options expense |
|
264 |
|
|
55 |
|
|
892 |
|
|
283 |
|
Share of loss of an associate |
|
818 |
|
|
- |
|
|
1,330 |
|
|
- |
|
Pension and other post-retirement benefits expense |
|
1,177 |
|
|
1,193 |
|
|
3,386 |
|
|
3,565 |
|
Contributions made to pension and other post-retirement
benefits |
|
(1,616 |
) |
|
(1,660 |
) |
|
(4,249 |
) |
|
(4,284 |
) |
|
|
128,041 |
|
|
102,112 |
|
|
393,083 |
|
|
350,231 |
|
Changes in non-cash working
capital items: |
|
|
|
|
|
|
|
|
Trade and other receivables |
|
1,795 |
|
|
(35,769 |
) |
|
(53,146 |
) |
|
(47,335 |
) |
Inventories |
|
28,596 |
|
|
(26,603 |
) |
|
27,309 |
|
|
(85,841 |
) |
Prepaid expenses and deposits |
|
(2,137 |
) |
|
(1,693 |
) |
|
(5,002 |
) |
|
(5,385 |
) |
Trade, other payables and provisions |
|
(38,097 |
) |
|
54,460 |
|
|
7,076 |
|
|
108,041 |
|
|
|
118,198 |
|
|
92,507 |
|
|
369,320 |
|
|
319,711 |
|
Interest paid (including interest on lease liabilities; |
|
|
|
|
|
|
|
|
excluding capitalized interest) |
|
(9,243 |
) |
|
(8,065 |
) |
|
(31,412 |
) |
|
(22,309 |
) |
Income taxes paid |
|
(11,885 |
) |
|
(16,675 |
) |
|
(52,172 |
) |
|
(79,253 |
) |
NET CASH PROVIDED BY OPERATING ACTIVITIES |
$ |
97,070 |
|
$ |
67,767 |
|
$ |
285,736 |
|
$ |
218,149 |
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Increase in long-term debt |
|
7,756 |
|
|
33,144 |
|
|
92,483 |
|
|
89,719 |
|
Repayment of long-term debt |
|
(3,811 |
) |
|
(5,340 |
) |
|
(27,193 |
) |
|
(52,343 |
) |
Principal payments of lease liabilities |
|
(6,873 |
) |
|
- |
|
|
(20,984 |
) |
|
- |
|
Dividends paid |
|
(3,724 |
) |
|
(3,909 |
) |
|
(11,265 |
) |
|
(9,114 |
) |
Exercise of employee stock options |
|
528 |
|
|
750 |
|
|
1,450 |
|
|
1,835 |
|
Repurchase of common shares |
|
(11,899 |
) |
|
(8,960 |
) |
|
(38,234 |
) |
|
(8,960 |
) |
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES |
$ |
(18,023 |
) |
$ |
15,685 |
|
$ |
(3,743 |
) |
$ |
21,137 |
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment* |
|
(57,431 |
) |
|
(69,506 |
) |
|
(217,877 |
) |
|
(220,808 |
) |
Capitalized development costs |
|
(2,624 |
) |
|
(3,610 |
) |
|
(8,056 |
) |
|
(10,094 |
) |
Investment in NanoXplore Inc. (note 7) |
|
(14,478 |
) |
|
- |
|
|
(29,477 |
) |
|
(680 |
) |
Proceeds on disposal of property, plant and equipment |
|
4,774 |
|
|
155 |
|
|
5,489 |
|
|
1,128 |
|
Upfront recovery of development costs incurred |
|
767 |
|
|
169 |
|
|
767 |
|
|
2,445 |
|
NET CASH USED IN INVESTING ACTIVITIES |
$ |
(68,992 |
) |
$ |
(72,792 |
) |
$ |
(249,154 |
) |
$ |
(228,009 |
) |
|
|
|
|
|
|
|
|
|
Effect
of foreign exchange rate changes on cash and cash equivalents |
|
1,214 |
|
|
(2,224 |
) |
|
(1,592 |
) |
|
1,224 |
|
|
|
|
|
|
|
|
|
|
INCREASE IN CASH AND
CASH EQUIVALENTS |
|
11,269 |
|
|
8,436 |
|
|
31,247 |
|
|
12,501 |
|
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD |
|
90,140 |
|
|
75,258 |
|
|
70,162 |
|
|
71,193 |
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
101,409 |
|
$ |
83,694 |
|
$ |
101,409 |
|
$ |
83,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*As at September 30, 2019, $37,093 (December 31, 2018 - $45,341)
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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