Martinrea International Inc. Releases 2011 Annual Results: Record Fourth Quarter Revenues and Profits

Marketwired

TORONTO, ONTARIO--(Marketwire -03/20/12)- Martinrea International Inc. (TSX: MRE.TO - News), a leader in the production of quality metal parts, assemblies and modules and fluid management systems focused primarily on the automotive sector, announced today the release of its financial results for the year and fourth quarter ended December 31, 2011.

Martinrea currently employs over 10,000 skilled and motivated people in 37 plants in Canada, the United States, Mexico, Brazil and Europe. All amounts in this press release are in Canadian dollars, unless otherwise stated; and all tabular amounts are in thousands of Canadian dollars, except earnings per share and number of shares.

Additional information about the Company, including the Company's Management Discussion and Analysis of Operating Results and Financial Position for the year and quarter ended December 31, 2011 ("MD&A") dated as of March 20, 2012, the Company's audited consolidated financial statements for the year ended December 31, 2011 (the "audited consolidated financial statements") and the Company's Annual Information Form for the financial year ended December 31, 2011, can be found at www.sedar.com.

Non-GAAP Measures

The Company now reports its financial results in accordance with International Financial Reporting Standards ("IFRS"). However, the Company has included certain non-GAAP financial measures and ratios in this Press Release that the Company believes will provide useful information in measuring the financial performance and financial condition of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to the other financial measures determined in accordance with IFRS. Non-GAAP measures referred to in the analysis include "adjusted net earnings", and "adjusted earnings per share on a basic and diluted basis" and are defined in the Tables A, B and C under "Adjustments to Net Income" of this Press Release.

Results of Operations

The comparative amounts in the analysis below have been adjusted to reflect the impact from the Company's transition to IFRS effective January 1, 2010.

 

REVENUE

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                               Three          Three
                              months         months
                               ended          ended
                            December       December
                            31, 2011       31, 2010      Change    % Change
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North America            $   542,262    $   493,663      48,599         9.8%
Europe                       150,838            757     150,081           -
Rest of World                 21,727              -      21,727           -
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Revenue                  $   714,827    $   494,420     220,407        44.6%
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Fourth Quarter 2011 to Fourth Quarter 2010 comparison

The Company's revenues for the fourth quarter of 2011 increased by $220.4 million or 44.6% to $714.8 million as compared to $494.4 million for the fourth quarter of 2010. The increase was partially due to $196.4 million in incremental revenue resulting from the inclusion of Martinrea Honsel in the consolidated financial results of the Company effective July 29, 2011, which led sales in both the Company's Europe and Rest of World operating segments to increase significantly year-over-year. Included in the $48.6 million increase in revenue generated in North America was $25.5 million related to the operations of the Company's plant in Querataro, Mexico which formed part of the Honsel acquisition. The remainder of the increase in revenue in North America was due to improved production volumes in North American light vehicle platforms and the launch of new programs during 2011, offset by a significant decrease in tooling revenue relating to upcoming new programs which is typically dependent on the timing of tooling construction and final inspection and acceptance by the customer.

Overall tooling revenue decreased by $42.8 million from $72.7 million for the fourth quarter of 2010 to $29.9 million for the fourth quarter of 2011, $6.8 million of which was generated by the acquired assets of Honsel.

The overall increase in revenue in the fourth quarter of 2011 as compared to the fourth quarter of 2010 would have been higher by $3.9 million had it not been negatively impacted by a reduction in the translation of U.S. dollar denominated revenue.

 

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                                Three         Three
                               months        months
                                ended         ended
                             December     September
                             31, 2011      30, 2011      Change    % Change
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North America             $   542,262   $   440,773     101,489        23.0%
Europe                        150,838       113,873      36,965        32.5%
Rest of World                  21,727        17,690       4,037        22.8%
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Revenue                   $   714,827   $   572,336     142,491        24.9%
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Fourth Quarter 2011 to Third Quarter 2011 comparison

The Company's revenues for the fourth quarter of 2011 increased by $142.5 million or 24.9% to $714.8 million as compared to $572.3 million for the third quarter of 2011. The increase was partially due to $49.8 million in incremental revenue generated by Martinrea Honsel during the fourth quarter of 2011, which included three full months of revenue as compared to only two months during the third quarter of 2011. The increase in revenue from Martinrea Honsel led sales in the Company's Europe and Rest of World operating segments to increase significantly quarter-over-quarter. Included in the $101.5 million increase in revenue generated in North America was a $10.0 million quarter-over-quarter increase in revenue at the Company's plant in Querataro, Mexico which formed part of the Honsel acquisition. The remainder of the increase in revenue in North America was due to improved production volumes in North American light vehicle platforms and the translation of U.S. dollar denominated revenue, which had a positive impact on revenue for the fourth quarter of 2011 of $15.9 million as compared to the third quarter of 2011.

Overall tooling revenue decreased by $6.4 million from $36.3 million for the third quarter of 2011 to $29.9 million for the fourth quarter of 2011, $6.8 million of which was generated by the acquired assets of Honsel.

 

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                            Year ended    Year ended
                              December      December
                              31, 2011      31, 2010      Change   % Change
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North America              $ 1,887,191   $ 1,686,679     200,512       11.9%
Europe                         266,323         2,700     263,623          -
Rest of World                   39,417             -      39,417          -
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Revenue                    $ 2,192,931   $ 1,689,379     503,552       29.8%
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2011 to 2010 comparison

The Company's revenues for the year ended December 31, 2011 increased by $503.6 million or 29.8% to $2,193.0 million as compared to $1,689.4 million for the year ended December 31, 2010. The increase was partially due to $343.0 million in incremental revenue resulting from the inclusion of Martinrea Honsel in the consolidated financial results of the Company effective July 29, 2011, which led sales in both the Company's Europe and Rest of World operating segments to increase significantly year-over-year. Included in the $200.5 million increase in revenue generated in North America was $41.5 million related to the operations of the Company's plant in Querataro, Mexico which formed part of the Honsel acquisition. The remainder of the increase in revenue in North America was due to improved production volumes in North American light vehicle platforms and the launch of new programs during 2010 and 2011, offset by the translation of U.S. dollar denominated revenue, which negatively impacted revenue for 2011 by $62.8 million, and a decrease in tooling revenue relating to upcoming new programs which is typically dependent on the timing of tooling construction and final inspection and acceptance by the customer.

Overall tooling revenue decreased by $2.2 million from $119.5 million for the year ended December 31, 2010 to $117.3 million for the year ended December 31, 2011, $13.5 million of which was generated by the acquired assets of Honsel.

 

GROSS MARGIN

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                              Three          Three
                             months         months
                              ended          ended
                           December       December
                           31, 2011       31, 2010       Change    % Change
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Gross margin            $    78,703    $    50,944       27,759        54.5%
% of revenue                   11.0%          10.3%
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Fourth Quarter 2011 to Fourth Quarter 2010 comparison

The gross margin percentage for the fourth quarter of 2011 of 11.0% increased by 0.7% as compared to the gross margin percentage for the fourth quarter of 2010 of 10.3%. Excluding the unusual and other items recorded as cost of sales in the fourth quarter of 2010 as explained in Table A under "Adjustments to Net Income", the gross margin percentage for the fourth quarter of 2011 increased to 11.0% from 9.8% for the fourth quarter of 2010. The Company's gross margin for the fourth quarter of 2011 was positively impacted by the addition of the acquired operations of Honsel. Excluding the operations of Martinrea Honsel, Martinrea's gross margin percentage for the fourth quarter of 2011 would have been 9.9%, a slight increase over the fourth quarter of 2010, excluding unusual and other items. Martinrea's gross margin for the fourth quarter of 2011, excluding the operations of Martinrea Honsel, would have been higher if not for $0.9 million of pre-operating costs at the Company's new facility in Silao, Mexico and an increase in launch activity during the quarter predominantly at the Company's Shelbyville, Kentucky facility which negatively impacted the quarter by approximately $1.4 million.

The Company's Shelbyville facility, approximating one million square feet, represents about 20% of the Company's square footage in North America and presently has a revenue run rate of about $50 million per year. A total of approximately $200 million in anticipated annualized business related to Ford's C520 program is expected to launch at this facility in the Spring of 2012. The new work, when launched, will greatly expand throughput and capacity utilization at Shelbyville, and is expected to turn a very large plant with negative gross margin and earnings and current ramp up costs into a positive gross margin and earnings contributor starting in the Spring of 2012. This Ford C520 business consists of approximately $100 million in value added internally produced components and $100 million in components purchased from other suppliers that will be integrated with internally produced components to produce finished welded assemblies. The gross margins on components purchased from other suppliers are typically lower than for value added work, although return on capital is higher. After the launch of the Ford C520 program in Shelbyville, approximately 25% of Martinrea's business excluding Martinrea Honsel will involve integrator or assembly work.

 

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                                Three         Three
                               months        months
                                ended         ended
                             December     September
                             31, 2011      30, 2011       Change   % Change
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Gross margin               $   78,703    $   62,339       16,364       26.3%
% of revenue                     11.0%         10.9%
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Fourth Quarter 2011 to Third Quarter 2011 comparison

Gross margin percentage for the fourth quarter of 2011 of 11.0% increased by 0.1% as compared to the gross margin percentage for the third quarter of 2011 of 10.9%. Consistent with the third quarter of 2011, Martinrea Honsel had a positive impact on the gross margin for the fourth quarter. Excluding the operations of Martinrea Honsel, Martinrea's gross margin percentage for the fourth quarter of 2011 would have been 9.9%, an increase over the gross margin for the third quarter of 2011, excluding Martinrea Honsel, of 9.5%. The gross margin percentage for both the third and fourth quarters of 2011 was negatively impacted by pre-operating costs at the Company's new facility in Silao, Mexico which increased by $0.2 million quarter-over-quarter, and launch activity at the Company's Shelbyville, Kentucky facility, where the Company is currently ramping up for a significant program launch in the spring of 2012 for Ford's C520 program, which decreased by $0.4 million quarter-over-quarter.

 

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                                   Year         Year
                                  ended        ended
                               December     December
                               31, 2011     31, 2010       Change  % Change
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Gross margin                  $ 233,474    $ 169,976       63,498      37.4%
% of revenue                       10.6%        10.1%
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2011 to 2010 comparison

The gross margin percentage for the year ended December 31, 2011 of 10.6% increased by 0.5% as compared to the gross margin percentage for the year ended December 31, 2010 of 10.1%. Excluding the unusual and other items recorded as cost of sales during the year ended December 31, 2010 as explained in Table C under "Adjustments to Net Income", the gross margin percentage for the year ended December 31, 2011 increased to 10.6% from 10.0% for the year ended December 31, 2010. The Company's gross margin for the year ended December 31, 2011 was positively impacted by the addition of the acquired operations of Honsel. Excluding the operations of Martinrea Honsel, Martinrea's gross margin percentage for the year ended December 31, 2011 would have been 9.9%, relatively consistent with the gross margin percentage for the year ended December 31, 2010 of 10.0%, after unusual items. Martinrea's gross margin, excluding the operations of Martinrea Honsel, would have been higher if not for $1.8 million of pre-operating costs at the Company's new facility in Silao, Mexico and an increase in launch activity during the year predominantly at the Company's Shelbyville, Kentucky and Mexico City, Mexico facilities which negatively impacted 2011 by approximately $5.0 million.

 

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

Adjusted net earnings excludes certain unusual and other items, as set out in the following tables and described in the notes thereto. Management uses adjusted earnings as a measurement of operating performance of the Company and believes that, in conjunction with GAAP measures, it provides useful information about the financial performance and condition of the Company.

 

TABLE A

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                             For the
                               three
                              months
                               ended   For the three months ended
                            December
                            31, 2011        December 31, 2010
                            --------  ------------------------------
                                 (a)  Canadian        IFRS     (b)  (a)-(b)
                                IFRS      GAAP  Adjustment    IFRS   Change
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NET EARNINGS (A)              18,509     5,122      10,452  15,574    2,935

Add back - Unusual Items:
Impairment (reversal) of
 property, plant and
 equipment and intangible
 assets (1)                      435     3,802      (5,319) (1,517)   1,952

Employee Related Severance
 Costs (2)                     2,948     1,938           -   1,938    1,010

Other Restructuring Costs
 (3)                             901     4,609           -   4,609   (3,708)

Other Restructuring Costs -
 Period costs and pension
 expense recorded as cost of
 sales for facilities closed
 during restructuring (3)          -       569           -     569     (569)

Other Restructuring Costs -
 Period costs recorded as
 SG&A expense for facilities
 closed during restructuring
 (3)                               -       294           -     294     (294)

Add back - Other Items:
Transaction and integration
 costs associated with the
 Honsel acquisition recorded
 as SG&A (4)                   1,561         -           -       -    1,561

Pension plan settlement and
 Other Post Employment
 Benefits curtailment
 recorded as cost of sales
 (8)                               -     1,258      (4,410) (3,152)   3,152

Valuation Allowance on
 Deferred Tax Assets (5)           -        95         (95)      -        -
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TOTAL UNUSUAL AND OTHER
 ITEMS BEFORE TAX              5,845    12,565      (9,824)  2,741    3,104

Tax impact of above items     (1,543)   (3,732)         95  (3,637)   2,094

Non-controlling interest in
 above items                  (2,957)        -           -       -   (2,957)

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TOTAL UNUSUAL AND OTHER
 ITEMS AFTER TAX (B)           1,345     8,833      (9,729)   (896)   2,241

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ADJUSTED NET EARNINGS (A +
 B)                           19,854    13,955         723  14,678    5,176
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Number of Shares Outstanding
 - Basic ('000)               83,183                        83,325
Adjusted Basic Earnings Per
 Share                          0.24                          0.18
Number of Shares Outstanding
 - Diluted ('000)             83,222                        84,478
Adjusted Diluted Earnings
 Per Share                      0.24                          0.17

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TABLE B

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                                       For the
                                         three        For the
                                        months   three months
                                         ended          ended
                                      December      September
                                      31, 2011       30, 2011         (a-b)
                                   -----------   ---------------
                                           (a)            (b)        Change
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NET EARNINGS (A)                        18,509          6,454        12,055

Add back - Unusual Items:
Impairment (reversal) of property,
 plant and equipment and intangible
 assets (1)                                435              -           435

Employee Related Severance Costs
 (2)                                     2,948          9,974        (7,026)

Other Restructuring Costs (3)              901              -           901

Add back - Other Items:
Transaction and integration costs
 associated with the Honsel
 acquisition recorded as SG&A (4)        1,561          6,728        (5,167)
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TOTAL UNUSUAL AND OTHER ITEMS
 BEFORE TAX                              5,845         16,702       (10,857)

Tax impact of above items               (1,543)           (51)       (1,492)
Non-controlling interest in above
 items                                  (2,957)        (6,780)        3,823
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TOTAL UNUSUAL AND OTHER ITEMS AFTER
 TAX (B)                                 1,345          9,871        (8,526)

ADJUSTED NET EARNINGS (A + B)           19,854         16,325         3,529
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Number of Shares Outstanding -
 Basic ('000)                           83,183         83,179
Adjusted Basic Earnings Per Share         0.24           0.20
Number of Shares Outstanding -
 Diluted ('000)                         83,222         83,708
Adjusted Diluted Earnings Per Share       0.24           0.20
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TABLE C

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                          For the
                             year
                            ended       For the year ended
                         December
                         31, 2011        December 31, 2010
                         --------  ----------------------------
                              (a)  Canadian        IFRS     (b)   (a) - (b)
                             IFRS      GAAP  Adjustment    IFRS      Change
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NET EARNINGS (A)           54,530    32,993      19,767  52,760       1,770

Add back - Unusual Items:
Impairment (reversal) of
 property, plant and
 equipment and intangible
 assets (1)                   435    10,110     (11,190) (1,080)      1,515

Employee Related
 Severance Costs (2)       12,922     6,325           -   6,325       6,597

Other Restructuring Costs
 (3)                          901    11,474           -  11,474     (10,573)

Other Restructuring Costs
 - Period costs and
 pension expense recorded
 as cost of sales for
 facilities closed during
 restructuring (3)              -     1,840           -   1,840      (1,840)

Other Restructuring Costs
 - Period costs recorded
 as SG&A expense for
 facilities closed during
 restructuring (3)              -       504           -     504        (504)

Add back - Other Items:
Transaction and
 integration costs
 associated with the
 Honsel acquisition
 recorded as SG&A (4)       9,725         -           -       -       9,725

Pension settlement and
 Other post Employment
 Benefits curtailment
 recorded as cost of
 sales (8)                      -       628      (5,639) (5,011)      5,011

Development costs
 recorded as cost of
 sales (9)                      -     1,283           -   1,283      (1,283)

Gain on sale of Kitchener
 land and building and                                   (10,67
 other excess land (7)          -   (10,675)          -       5)     10,675

Write down of excess
 inventory at the
 Company's Windsor,
 Ontario Facility
 recorded as cost of
 sales(6)                       -     1,290           -   1,290      (1,290)

Valuation Allowance on
 Deferred Tax Assets (5)        -      (450)        450       -           -

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TOTAL UNUSUAL AND OTHER
 ITEMS BEFORE TAX          23,983    22,329     (16,379)  5,950      18,033

Tax impact of above items  (1,953)   (7,869)        853  (7,016)      5,063
Non-controlling interest
 in above items            (9,737)        -           -       -      (9,737)

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TOTAL UNUSUAL AND OTHER
 ITEMS AFTER TAX (B)       12,293    14,460     (15,526) (1,066)     13,359
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ADJUSTED NET EARNINGS ( A
 + B)                      66,823    47,453       4,241  51,694      15,129
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Number of Shares
 Outstanding - Basic
 ('000)                    83,183                        83,326
Adjusted Basic Earnings
 Per Share                   0.80                          0.62
Number of Shares
 Outstanding - Diluted
 ('000)                    84,108                        84,456
Adjusted Diluted Earnings
 Per Share                   0.79                          0.61


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(1) Impairment (reversal) of Property, Plant and Equipment ("PP&E") and Intangible Assets

Annual impairment tests were conducted on PP&E and intangible assets at December 31, 2011 and December 31, 2010. In addition, as required by IFRS, the Company evaluated all previously recorded impairment charges for potential reversal. Based on this analysis, incremental impairment charges were recorded which were offset by the reversal of certain previously recorded impairment charges resulting in a net impairment charge of $0.4 million during the year ended December 31, 2011 as compared to a net impairment reversal of $1.1 million for the year ended December 31, 2010. The reversal of previously recorded impairment charges under the requirements of IFRS in 2010 and 2011 was primarily due to the significant improvements in North American vehicle production from 2009 and the benefits from the restructuring activities conducted during 2009 and 2010 which included the relocation of plant and equipment and the corresponding customer business to cost competitive facilities.

(2) Employee Related Severance Costs

As part of the acquisition of Honsel, a certain level of restructuring was planned at the Company's German facility in Meschede. The restructuring efforts commenced immediately after the closing of the acquisition and, as a result, $11.4 million of employee related severance was recognized during the year ended December 31, 2011 of which $1.4 million was recognized during the fourth quarter of 2011. The majority of the restructuring costs expected to be incurred at this German facility will be in the nature of employee related severance as the Company rationalizes the overhead cost structure of the facility and improves the efficiency of the operations. The Company anticipates that additional employee related severance will be incurred at the facility over the course of the next twelve months.

In addition, during the fourth quarter of 2011, the Company began the process of closing one of its small operating facilities in Mexico. The existing business and equipment of this facility will be moved to other Company facilities in Mexico including a new facility the Company opened in Silao, Mexico in 2011. Restructuring costs relating to this closure for 2011 totaled $2.4 million consisting primarily of employee related severance ($1.5 million) and the dismantling and transporting of PP&E between Company facilities ($0.9 million).

During the year ended December 31, 2010, the Company incurred employee related severance costs of $6.3 million relating primarily to the closure of the Company's facilities in Mississauga, Ontario and Windsor, Ontario. The restructuring activities undertaken during 2010 formed part of the Company's overall cost cutting program aimed at realigning and increasing the efficiency of the Company's operations.

(3) Other Restructuring Costs

During the fourth quarter of 2011, the Company began the process of closing one of its small operating facilities in Mexico. The existing business and equipment of this facility will be moved to other Company facilities in Mexico including a new facility the Company opened in Silao, Mexico in 2011. Restructuring costs relating to this closure for 2011 totalled $2.4 million consisting primarily of employee related severance ($1.5 million) and the dismantling and transporting of PP&E between Company facilities ($0.9 million).

Other restructuring costs of 2010 relate primarily to the cessation of manufacturing operations at the Company's Windsor, Ontario and Mississauga, Ontario facilities on June 30, 2010 and December 13, 2010, respectively, the right-sizing of operating facilities in southwestern Ontario and period costs associated with the closure of the Kitchener Frame facility prior to its disposal in the second quarter of 2010. Other restructuring costs include directly attributable facility and right-sizing costs and costs relating to the dismantling and transportation of PP&E between Company's facilities.

At this time, the Company does not expect to incur any further significant restructuring costs with the exception of the funding of the Windsor pension and OPEB plans which the Company will continue to fund over next two years, the windup of the Martinrea Fabco Hot Stampings pension plan, the completion of the closure of the small operating facility in Mexico and any restructuring required relating to the acquired assets of Honsel (as discussed above), which, at this point in time, the Company believes will be limited to employee related severance as the Company rationalizes the overhead cost structure and improves the efficiency of the operations in Meschede, Germany.

(4) Transaction and Integration Costs Associated with the Acquisition of Honsel

On July 29, 2011, the Company closed the purchase of the assets of Honsel to form the Martinrea Honsel Group. Martinrea joined with Anchorage in the transaction and, consequently, owns 55% of the Martinrea Honsel Group with Anchorage owning the remaining 45%. The Company expensed $9.7 million in transaction and integration costs related to the acquisition during the year ended December 31, 2011 of which $1.6 million was expensed during the fourth quarter of 2011 and $6.7 million during the third quarter of 2011.

(5) Valuation Allowance on Deferred Tax Assets

The concept of a separately disclosed valuation allowance on deferred tax assets no longer exists under IFRS since deferred tax assets are recorded on a net basis to reflect the amount that is probable of realization. As such, the change in valuation allowance as previously reported under Canadian GAAP has been reclassified for comparative purposes to be included in the tax impact of the unusual and other items noted in the tables above.

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

Certain excess service inventory costs of approximately $1.2 million associated with discontinued platforms were expensed during the second quarter of 2010 in connection with the closure of the Company's facility in Windsor, Ontario.

(7) Gain on sale of Kitchener facility

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

(8) Pension Settlement and Other Post Employment Benefits Curtailment

The Company recognized curtailment and settlement gains of $1.9 million and $3.2 million in second and fourth quarter of 2010 as a result of the post employment benefits of the employees at its Shelbyville, Kentucky facility.

(9) Development costs

Development costs in the nature of employee training and other operational inefficiencies during the product launch period are expensed in accordance with IFRS and the Company's accounting policies. The Company expensed approximately $1.3 million in the first quarter of 2010 in relation to development costs for takeover business from SKD.

 

NET EARNINGS
(ATTIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                   Three        Three
                                  months       months
                                   ended        ended
                                December     December
                                31, 2011     31, 2010     Change   % Change
----------------------------------------------------------------------------
Net earnings                 $    18,509  $    15,574      2,935       18.9%

Adjusted net earnings        $    19,854  $    14,678      5,176       35.3%
Earnings per common share
 Basic                       $      0.22  $      0.19
 Diluted                     $      0.22  $      0.18
Adjusted earnings per common
 share
 Basic                       $      0.24  $      0.18
 Diluted                     $      0.24  $      0.17

----------------------------------------------------------------------------
----------------------------------------------------------------------------

Fourth Quarter 2011 to Fourth Quarter 2010 comparison

Net earnings for the fourth quarter of 2011 of $18.5 million increased by $2.9 million from $15.6 million for the fourth quarter of 2010. Excluding unusual and other items incurred during these two quarters as explained in Table A under "Adjustments to Net Income", the net earnings for the fourth quarter of 2011 improved to $19.9 million or $0.24 per share, on a basic and diluted basis, in comparison to adjusted net earnings of $14.7 million or $0.17 per share, on a diluted basis, for the fourth quarter of 2010.

The adjusted net earnings for the fourth quarter of 2011 were positively impacted by the addition of Martinrea Honsel to the consolidated financial results of the Company and an increase in customer production volumes in North America. The positive impact was offset by an increase in launch activity costs during the quarter predominantly at the Company's Shelbyville, Kentucky facility, pre-operating costs at the Company's new facility in Silao, Mexico and an increase in selling, general and administration ("SG&A") expense as discussed in the Company's MD&A.

 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                    Three        Three
                                   months       months
                                    ended        ended
                                 December    September
                                 31, 2011     30, 2011     Change  % Change
----------------------------------------------------------------------------
Net Earnings                  $    18,509  $     6,454     12,055     186.8%

Adjusted net earnings         $    19,854  $    16,325      3,529      21.6%
Earnings per common share
 Basic                        $      0.22  $      0.08
 Diluted                      $      0.22  $      0.08
Adjusted earnings per common
 share
 Basic                        $      0.24  $      0.20
 Diluted                      $      0.24  $      0.20
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Fourth Quarter 2011 to Third Quarter 2011 comparison

Net earnings for the fourth quarter of 2011 of $18.5 million increased by $12.0 million from net earnings of $6.5 million for the third quarter of 2011. Excluding unusual and other items incurred during these two quarters as explained in Table B under "Adjustments to Net Income", the net earnings for the fourth quarter of 2011 improved to $19.9 million or $0.24 per share, on a basic and diluted basis, as compared to adjusted net earnings of $16.3 million or $0.20 per share, on a basic and diluted basis, for the third quarter of 2011. The adjusted net earnings for the fourth quarter of 2011 were positively impacted mainly by incremental earnings from Martinrea Honsel during the fourth quarter of 2011, which included three full months of activity compared to only two months in the third quarter of 2011, and an increase in customer production volumes in North America offset by an increase in SG&A expense.

 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                Year ended  Year ended
                                  December    December
                                  31, 2011    31, 2010     Change  % Change
----------------------------------------------------------------------------
Net Earnings                   $    54,530 $    52,760      1,770       3.4%
Adjusted net earnings          $    66,823 $    51,694     15,129      29.3%
Earnings per common share
  Basic                        $      0.66 $      0.63
  Diluted                      $      0.65 $      0.62
Adjusted earnings per common
 share
  Basic                        $      0.80 $      0.62
  Diluted                      $      0.79 $      0.61
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2011 to 2010 comparison

Net earnings for the year ended December 31, 2011 of $54.5 million increased by $1.8 million from $52.8 million for the year ended December 31, 2010. Excluding unusual and other items incurred during the two years as explained in Table C under "Adjustments to Net Income", the net earnings for the year ended December 31, 2011 significantly improved to $66.8 million or $0.79 per share, on a diluted basis, as compared to adjusted net earnings of $51.7 million or $0.61 per share, on a diluted basis, for the year ended December 31, 2010.

The adjusted net earnings for the year ended December 31, 2011 were positively impacted by the addition of Martinrea Honsel to the consolidated financial results of the Company and an increase in customer production volumes in North America. The positive impact was offset by an increase in launch activity costs during the quarter predominantly at the Company's Shelbyville, Kentucky and Mexico City, Mexico facilities, pre-operating costs at the Company's new facility in Silao, Mexico and an increase in SG&A expense.

 

CAPITAL EXPENDITURES

---------------------------------------------------------------------------
---------------------------------------------------------------------------
                                  Three        Three
                                 months       months
                                  ended        ended
                               December     December
                               31, 2011     31, 2010      Change  % Change
---------------------------------------------------------------------------
Capital Expenditures        $    47,498  $    35,005      12,493      35.7%
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Fourth Quarter 2011 to Fourth Quarter 2010 comparison

Capital expenditures increased by $12.5 million to $47.5 million in the fourth quarter of 2011 from $35.0 million in the fourth quarter of 2010. The increase can be partially attributed to incremental capital expenditures relating to Martinrea Honsel. Capital expenditures incurred in the fourth quarter of 2011 are primarily related to the purchase of new program equipment in response to newly awarded business scheduled to launch over the next two years and capital for a new plant the Company has opened in Silao, Mexico during 2011.

 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  Three        Three
                                 months       months
                                  ended        ended
                               December    September
                               31, 2011     30, 2011     Change   % Change
----------------------------------------------------------------------------
Capital Expenditures        $    47,498  $    47,889       (391)      (0.8%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Fourth Quarter 2011 to Third Quarter 2011 comparison

Capital expenditures for the fourth quarter of 2011 of $47.5 million is comparable to $47.9 million of capital expended during the third quarter of 2011. Capital expenditures incurred in both the quarters of 2011 are primarily related to the purchase of new program equipment in response to newly awarded business scheduled to launch over the next two years and capital for a new plant the Company has recently opened in Silao, Mexico. Capital expenditures for Martinrea Honsel remained relatively consistent quarter-over-quarter.

 

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                             Year ended   Year ended
                               December     December
                               31, 2011     31, 2010      Change   % Change
----------------------------------------------------------------------------
Capital Expenditures        $   149,468  $    90,932      58,536       64.4%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2011 to 2010 comparison

Capital expenditures increased by $58.5 million to $149.5 million for the year ended December 31, 2011 from $90.9 million during the year ended December 31, 2010. The increase in capital expenditures incurred in 2011 can be attributed to the purchase of new program equipment in response to newly awarded business scheduled to launch over the next two years, incremental capital expenditures relating to Martinrea Honsel and capital for a new plant opened in Silao, Mexico in 2011.

Nick Orlando, Martinrea's Chief Executive Officer, stated: "The year 2011 was a great year for us. Martinrea grew its business, organically and by an accretive acquisition of Honsel assets; we saw record revenues; we made more money, after unusual items, than in any other year previously; we have more plants and employ more good people than we ever have before; we expanded our product offerings to our customers; and we produced more great product for our customer base than we ever have before. The year 2011 again reflected our commitment to prudent, profitable growth, as we strive to meet our continuing objective: to develop a state of the art international fluid systems and metal forming business. We aim to be the best automotive parts supplier in the world in what we do - supporting our customers to become a leading supplier of choice. We attract talented people, develop them well and encourage them to perform great things. In our view, our people did many great things in 2011, and will do so again in 2012, which is already off to a very good start. Our fourth quarter was also a strong quarter for our company, the strongest quarter of the year and indeed the strongest fourth quarter performance in our history. We continued to work on operational improvements at Martinrea Honsel and that business contributed to our performance, and we continued to improve our operations at our Martinrea plants. Our preparation for launches at Shelbyville and elsewhere is going well, and we will be launching a significant volume of business in 2012. We are pleased to announce that we have won incremental business awards totaling $70 million annualized. This business consists of $12 million of new metal forming business for Chrysler on the next generation Liberty (launching in 2013), $10 million of fuel filler business on Ford's Transit vehicle (launching in 2013), $5.0 million of fuel filler business on GM's medium duty truck platform (launching in 2014), $8.0 million of suspension assembly business on GM's Impala platform (launching later this year), $10 million of aluminum transmission business for Volvo for our plant in Brazil (launching in 2013) and an aluminum engine cradle for GM's new full size vehicle platform which will generate $25 million of annualized sales starting in 2015."

Fred Di Tosto, Martinrea's Chief Financial Officer, stated: "Revenues for the fourth quarter, excluding $30 million in tooling revenues, were $685 million, which was within our quarterly sales guidance as previously provided. Our record fourth quarter revenues included approximately $196.4 million from the Martinrea Honsel assets, which also contributed to our adjusted earnings. In the fourth quarter of 2011 our adjusted earnings per share was $0.24, after factoring out employee related severance provisions and Honsel related transaction and integration costs, up from $0.20 in the third quarter of 2011 and $0.17 in the fourth quarter of 2010, after adjustments and on a diluted basis. We did experience some launch costs at the Shelbyville facility and pre-operating costs in Silao which negatively impacted earnings in the quarter but these should disappear over time. Our fourth quarter results from the Martinrea Honsel assets were accretive to earnings, after factoring out unusual and other items, and amounted to approximately $0.07 of earnings per share for the quarter. We are very pleased with the performance of Martinrea Honsel and will continue to work with our people to turn Martinrea Honsel into a global leader for aluminum automotive parts."

Mr. Di Tosto added: "In addition, we saw gross margin for the quarter increase to 11% which was higher than both the third quarter of 2011 and comparative quarter of the previous year. In our first quarter of 2012, we anticipate revenues (excluding tooling revenues) will range from $690 million to $710 million, and we believe our earnings per share after adjustments, which includes the Martinrea Honsel results, will range from $0.28-$0.32 per share, a significant increase quarter-over-quarter based on an expected expansion of gross margin on slightly higher revenue and a decrease in SG&A expense. We expect gross margin to improve further as we launch a significant amount of business in Shelbyville starting in mid-April, and as we start to fill our Silao facility. The new work at Shelbyville will greatly expand the capacity utilization and throughput of the plant, which represents over 20% of our factory space in North America."

Rob Wildeboer, Martinrea's Executive Chairman, stated: "While 2011 was in our view a great building year for us in many ways, we are very positive about our prospects for 2012 and beyond, where we anticipate our earnings to increase consistent with previous guidance. We repeat our statements that we believe, based on where we sit today, that 2012 will be our best year to date by far from a financial point of view, subject to market conditions. Based on our assumptions of volumes, interest rates and our outlook, we are budgeting for consolidated revenues approaching $3 billion in 2012, and earnings, including our interest in Martinrea Honsel, should range somewhere between $1.05 and $1.25 per share, absent unusual items in each case. In 2013, we anticipate higher production sales; as well as improved gross margins and EBITDA margins across the board as the impact of higher throughput and efficiencies are felt, and we are anticipating in our budgets that our earnings per share for the year will grow to the $1.30 to $1.50 range, based on current assumptions. Underlying our optimism to some extent is the fact we have much product to launch, and the macroeconomic outlook involving automotive in North America in particular is positive. In sum, there remains pent up demand for light cars and trucks in North America. We believe the North American auto industry is in a growth phase, and certainly sales volumes in the U.S. this year to date have been much more robust than a year ago. There is still room to grow. Also much of the Martinrea Honsel business is in the form of product put in vehicles which have a healthy export market, like Jaguar. Europe is a little more troubling in terms of volumes, but our customers there, companies like Daimler, VW, BMW, Jaguar for example, are doing well. In terms of our financial position at Martinrea, we continue to have a strong balance sheet, with the capability, we believe, to take advantage of opportunities, whether in terms of expanding and taking on new work, or making complementary acquisitions".

Mr. Wildeboer added: "At year end we also reflect on the support we have received in the past year, and we thank all of our shareholders, lenders, customers and of course our employees for their continued and valued support."

Forward-Looking Information

Special Note Regarding Forward-Looking Statements

This Press Release contains forward-looking statements within the meaning of applicable Canadian securities laws including related to the Company's expectations as to the financial impact of the new launch at the Shelbyville plant, gross margin percentage and expectations on future sales, revenue, earnings per share and capital expenditures (including of Martinrea Honsel), the launching of new metal forming and fluid systems programs, anticipated growth in the automotive industry, the opportunity to increase sales, broad geographic penetration, and the nature and duration of the economic recession to the continuation of monitoring, managing and rationalization of expenses, the Company's expectations regarding the amount of restructuring expenses to be expensed, the Company's statements on operations and product launches, the Company's view on the financial viability of its customers, the Company's views on the long term outlook of the automotive industry and corresponding increased sales and production including of the amount of business of Martinrea Honsel in export markets, the Company's statements of its intention for growth over time (organically or through acquisition), including of the Martinrea Honsel business, the Company's statement on the success of the Martinrea Honsel Acquisition and optimism for the future, the Company's ability to capitalize on opportunities in the automotive industry and the Company's statements regarding the repayment of a promissory note, as well as other forward-looking statements. The words "continue", "expect", "anticipate", "estimate", "may", "will", "should", "views", "intend", "believe", "plan" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances. Many factors could cause the Company's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, some of which are discussed in detail in the Company's Annual Information Form and other public filings which can be found at www.sedar.com:

 

--  North American and global economic and political conditions;
--  the highly cyclical nature of the automotive industry and the industry's
    dependence on consumer spending and general economic conditions;
--  the Company's dependence on a limited number of significant customers;
--  financial viability of suppliers;
--  Martinrea's reliance on critical suppliers and on suppliers for
    components and the risk that suppliers will not be able to supply
    components on a timely basis or in sufficient quantities;
--  competition;
--  the increasing pressure on the Company to absorb costs related to
    product design and development, engineering, program management,
    prototypes, validation and tooling;
--  increased pricing of raw materials;
--  outsourcing and in-sourcing trends;
--  competition with low cost countries;
--  the risk of increased costs associated with product warranty and recalls
    together with the associated liability;
--  the Company's ability to enhance operations and manufacturing
    techniques;
--  dependence on key personnel;
--  limited financial resources;
--  risks associated with the integration of acquisitions;
--  costs associated with rationalization of production facilities;
--  the potential volatility of the Company's share price;
--  changes in governmental regulations or laws including any changes to the
    North American Free Trade Agreement;
--  labour disputes;
--  litigation;
--  currency risk;
--  fluctuations in operating results;
--  internal controls over financial reporting and disclosure controls and
    procedures;
--  environmental regulation;
--  a shift away from technologies in which the Company is investing;
--  potential tax exposures;
--  a change in the Company's mix of earnings between jurisdictions with
    lower tax rates and those with higher tax rates, as well as the
    Company's ability to fully benefit from tax losses;
--  the Company's ability to shift its manufacturing footprint to take
    advantage of opportunities in growing markets;
--  risks of conducting business in foreign countries, including China,
    Brazil and other growing markets;
--  under-funding of pension plans; and
--  the cost of post-employment benefits.

These factors should be considered carefully, and readers should not place undue reliance on the Company's forward-looking statements. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, except as required by law.

A conference call to discuss those results will be held on Wednesday, March 21, 2012 at 8:00 a.m. (Toronto time) which can be accessed by dialing 416-340-8410 or toll free 1-866-225-2055. Please call 10 minutes prior to the start of the conference call.

If you have any teleconferencing questions, please call Andre La Rosa at (416) 749-0314.

There will also be a rebroadcast of the call available by dialing 1-800-408-3053 (conference id 4555837#). The rebroadcast will be available until April 4, 2012.

The common shares of Martinrea trade on The Toronto Stock Exchange under the symbol "MRE".

 

Martinrea International Inc.
Consolidated Balance Sheets
(in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 December 31,   December 31,     January 1,
                          Note           2011           2010           2010
----------------------------------------------------------------------------
ASSETS                                              (Note 28)      (Note 28)
Cash and cash
 equivalents                    $      26,505  $      26,027  $      22,769
Trade and other
 receivables                 4        386,776        250,404        228,971
Inventories                  5        248,588        145,614        136,050
Prepaid expenses and
 deposits                               8,224          4,401          4,389
Income taxes recoverable               11,056          5,255         15,517
Current portion of
 promissory note            10          2,263          5,994              -
----------------------------------------------------------------------------
TOTAL CURRENT ASSETS                  683,412        437,695        407,696
----------------------------------------------------------------------------
Property, plant and
 equipment                   6        616,592        402,771        370,953
Deferred income tax
 assets                     15         72,715         68,088         64,228
Intangible assets            7         42,397         14,735         17,579
Promissory note             10          2,378          4,641              -
Note receivable              8              -              -        130,805
----------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS              734,082        490,235        583,565
----------------------------------------------------------------------------
TOTAL ASSETS                    $   1,417,494  $     927,930  $     991,261
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES
Trade and other payables    11  $     427,072  $     251,427  $     222,847
Provisions                  12         12,956          4,339          2,696
Income taxes payable                    3,724          5,627          2,148
Current portion of long-
 term debt                  13         17,928         90,072         14,845
----------------------------------------------------------------------------
TOTAL CURRENT
 LIABILITIES                          461,680        351,465        242,536
----------------------------------------------------------------------------
Long-term debt              13        245,317         13,062         72,555
Pension and other post-
 retirement benefits        14         53,795         44,108        197,864
Deferred income tax
 liabilities                15         40,119         30,187         22,712
Provisions                  12          3,149              -              -
Other financial
 liability                   3         71,236              -              -
----------------------------------------------------------------------------
TOTAL NON-CURRENT
 LIABILITIES                          413,616         87,357        293,131
----------------------------------------------------------------------------
TOTAL LIABILITIES                     875,296        438,822        535,667
----------------------------------------------------------------------------

EQUITY
Share capital               16        674,568        682,495        683,057
Note receivable for
 share capital              16           (602)        (2,700)        (2,700)
Contributed surplus         16         44,165         41,241         37,393
Other equity                 3        (71,236)             -              -
Accumulated other
 comprehensive loss                    (8,330)       (18,822)             -
Accumulated deficit                  (169,006)      (214,028)      (263,415)
----------------------------------------------------------------------------
TOTAL EQUITY
 ATTRIBUTABLE TO EQUITY
 HOLDERS OF THE COMPANY               469,559        488,186        454,335
Non-controlling interest               72,639            922          1,259
----------------------------------------------------------------------------
TOTAL EQUITY                          542,198        489,108        455,594
----------------------------------------------------------------------------
TOTAL LIABILITIES AND
 EQUITY                         $   1,417,494  $     927,930  $     991,261
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

On behalf of the Board:

Robert Wildeboer, Director

Suleiman Rashid, Director

 

Martinrea International Inc.
Consolidated Statements of Operations
(in thousands of Canadian dollars, except per share amounts)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                  Year ended     Year ended
                                                December 31,   December 31,
                                         Note           2011           2010
----------------------------------------------------------------------------
                                                                   (Note 28)
----------------------------------------------------------------------------
SALES                                          $   2,192,931  $   1,689,379
----------------------------------------------------------------------------

Cost of sales (excluding depreciation
 of property, plant and equipment)                (1,907,295)    (1,478,039)
Depreciation of property, plant and
 equipment (production)                              (52,162)       (41,364)
----------------------------------------------------------------------------
Total cost of sales                               (1,959,457)    (1,519,403)
----------------------------------------------------------------------------
GROSS MARGIN                                         233,474        169,976
----------------------------------------------------------------------------

Research and development costs             18        (10,397)        (6,404)
Selling, general and administrative                 (115,718)       (77,166)
Depreciation of property, plant and
 equipment (non-production)                           (3,795)        (2,864)
Amortization of customer contracts and
 relationships                                        (5,231)        (4,562)
Net impairment (charge) reversal            9           (435)         1,080
Restructuring and integration costs        21        (13,823)       (17,799)
Gain (loss) on disposal of property,
 plant and equipment                                     (10)        10,529
----------------------------------------------------------------------------
OPERATING INCOME                                      84,065         72,790
----------------------------------------------------------------------------

Finance costs                                         (9,603)        (6,708)
Other finance income and expenses          20            684             62
----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES                            75,146         66,144

Income tax expense                         15        (18,896)       (13,721)
----------------------------------------------------------------------------
NET INCOME FOR THE PERIOD                             56,250         52,423
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Non-controlling interest                              (1,720)           337
----------------------------------------------------------------------------
NET INCOME ATTRIBUTABLE TO EQUITY
 HOLDERS OF THE COMPANY                        $      54,530  $      52,760
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Basic earnings per share                   17  $        0.66  $        0.63
Diluted earnings per share                 17  $        0.65  $        0.62
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

 

Martinrea International Inc.
Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                  Year ended     Year ended
                                                December 31,   December 31,
                                                        2011           2010
----------------------------------------------------------------------------
                                                                   (Note 28)
NET INCOME FOR THE PERIOD                      $      56,250  $      52,423
Other comprehensive income (loss), net of tax:
  Foreign currency translation differences for
   foreign operations                                  7,150        (18,822)
  Defined benefit plan actuarial losses              (10,604)        (3,310)
----------------------------------------------------------------------------
Other comprehensive loss, net of tax                  (3,454)       (22,132)
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD             52,796         30,291
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Attributable to:
  Equity holders of the Company                       54,418         30,160
  Non-controlling interest                            (1,622)           131
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD      $      52,796  $      30,291
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

 

Martinrea International Inc.
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                    Equity attributable to equity holders of the Company
               -------------------------------------------------------------

                                 Notes
                            receivable                           Cumulative
                    Share    for share  Contributed      Other  translation
                  Capital      capital      Surplus     Equity      account
----------------------------------------------------------------------------
Balance at
 January 1,
 2010           $ 683,057  $    (2,700) $    37,393  $       -  $         -
Net income for
 the period             -            -            -          -            -
Compensation
 expense
 related to
 stock options          -            -        3,877          -            -
Exercise of
 employee stock
 options              101            -          (29)         -            -
Repurchase of
 common shares       (663)           -            -          -            -
Other
 comprehensive
 income, net of
 tax
  Actuarial
   losses               -            -            -          -            -
  Foreign
   currency
   translation
   differences          -            -            -          -      (18,822)
----------------------------------------------------------------------------
Balance at
 December 31,
 2010             682,495       (2,700)      41,241          -      (18,822)
----------------------------------------------------------------------------

Net income for
 the period             -            -            -          -            -
Compensation
 expense
 related to
 stock options          -            -        2,964          -            -
Contribution
 from non-
 controlling
 interest -
 Honsel
 acquisition            -            -            -          -            -
Acquired non-
 controlling
 interest -
 Honsel
 acquisition            -            -            -          -            -
Fair value of
 put option
 granted to
 non-
 controlling
 interest (note
 3)                     -            -            -    (71,236)           -
Repayment of
 notes
 receivable             -        2,098            -          -            -
Exercise of
 employee stock
 options              499            -          (40)         -            -
Repurchase of
 common shares     (8,426)           -            -          -            -
Other
 comprehensive
 income, net of
 tax
  Actuarial
   losses               -            -            -          -            -
  Foreign
   currency
   translation
   differences          -            -            -          -       10,492
----------------------------------------------------------------------------
Balance at
 December 31,
 2011           $ 674,568  $      (602) $    44,165  $ (71,236) $    (8,330)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

-------------------------------------------------------------------
-------------------------------------------------------------------
                 Equity attributable to
                 equity holders of the
                        Company
               --------------------------


                                                 Non-
                Accumulated               controlling        Total
                    deficit        Total     interest       equity
-------------------------------------------------------------------
Balance at
 January 1,
 2010           $  (263,415) $   454,335  $     1,259  $   455,594
Net income for
 the period          52,760       52,760         (337)      52,423
Compensation
 expense
 related to
 stock options            -        3,877            -        3,877
Exercise of
 employee stock
 options                  -           72            -           72
Repurchase of
 common shares          (63)        (726)           -         (726)
Other
 comprehensive
 income, net of
 tax
  Actuarial
   losses            (3,310)      (3,310)           -       (3,310)
  Foreign
   currency
   translation
   differences            -      (18,822)           -      (18,822)
-------------------------------------------------------------------
Balance at
 December 31,
 2010              (214,028)     488,186          922      489,108
-------------------------------------------------------------------

Net income for
 the period          54,530       54,530        1,720       56,250
Compensation
 expense
 related to
 stock options            -        2,964            -        2,964
Contribution
 from non-
 controlling
 interest -
 Honsel
 acquisition              -            -       67,924       67,924
Acquired non-
 controlling
 interest -
 Honsel
 acquisition              -            -        5,415        5,415
Fair value of
 put option
 granted to
 non-
 controlling
 interest (note
 3)                       -      (71,236)           -      (71,236)
Repayment of
 notes
 receivable               -        2,098            -        2,098
Exercise of
 employee stock
 options                  -          459            -          459
Repurchase of
 common shares        1,096       (7,330)           -       (7,330)
Other
 comprehensive
 income, net of
 tax
  Actuarial
   losses           (10,604)     (10,604)           -      (10,604)
  Foreign
   currency
   translation
   differences            -       10,492       (3,342)       7,150
-------------------------------------------------------------------
Balance at
 December 31,
 2011           $  (169,006) $   469,559  $    72,639  $   542,198
-------------------------------------------------------------------
-------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

 

Martinrea International Inc.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                  Year ended     Year ended
                                                December 31,   December 31,
                                                        2011           2010
----------------------------------------------------------------------------
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net Income for the period                      $      56,250  $      52,423
Adjustments for:
  Depreciation of property, plant and
   equipment                                          55,957         44,228
  Amortization of customer contracts and
   relationships                                       5,231          4,562
  Amortization of development costs                      747              -
  Net impairment charge (reversal)                       435         (1,080)
  Amortization of deferred financing costs               548            287
  Accretion of interest on promissory note              (506)          (321)
  Unrealized losses / (gains) on foreign
   exchange forward contracts                              2            (15)
  Finance costs                                        9,603          6,708
  Income tax expense                                  18,895         13,721
  (Gain) / Loss on disposal of property, plant
   and equipment                                          10        (10,529)
  Stock-based compensation                             2,964          3,877
  Pension and other post-retirement benefits
   expense                                             2,667         (5,196)
  Contributions made to pension and other
   post-retirement benefits                          (10,482)       (19,895)
----------------------------------------------------------------------------
                                                     142,321         88,770
Changes in non-cash working capital items:
  Trade and other receivables                       (104,204)       (28,907)
  Inventories                                        (53,423)       (13,848)
  Prepaid expenses and deposits                       (3,824)           (12)
  Trade, other payables and provisions                72,551         36,075
  Income taxes payable / recoverable                  (5,119)        (2,016)
----------------------------------------------------------------------------
                                                      48,302         80,062
  Interest paid                                       (8,379)        (5,299)
  Income taxes received (paid)                        (4,905)         5,365
----------------------------------------------------------------------------
NET CASH PROVIDED IN OPERATING ACTIVITIES             35,018         80,128
----------------------------------------------------------------------------

FINANCING ACTIVITIES:
  Repurchase of common shares                         (7,330)          (726)
  Contribution from non-controlling interest          67,924              -
  Receipt of payment on notes receivable for
   share capital                                       2,098              -
  Exercise of employee stock options                     459             72
  Increase in long-term debt                         165,264         51,447
  Repayment of long-term debt                        (29,346)       (35,545)
----------------------------------------------------------------------------
NET CASH PROVIDED IN FINANCING ACTIVITIES            199,069         15,248
----------------------------------------------------------------------------

INVESTING ACTIVITIES:
  Purchase of property, plant and equipment         (149,468)       (90,932)
  Acquisition of Honsel, net of cash acquired
   (note 3)                                         (130,529)             -
  Proceeds from sale of Nuremberg facility -
   assets held for sale (note 3)                      54,904              -
  Promissory note (net of principal
   repayments)                                         6,500        (10,314)
  Capitalized development costs                      (14,656)        (1,288)
  Proceeds on disposal of property, plant and
   equipment                                              79         13,857
----------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES               (233,170)       (88,677)
----------------------------------------------------------------------------

Effect of foreign exchange rate changes on
 cash and cash equivalents                              (439)        (3,441)
----------------------------------------------------------------------------

INCREASE IN CASH AND CASH EQUIVALENTS                    478          3,258
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD        26,027         22,769
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD       $      26,505  $      26,027
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.

Contact:

Martinrea International Inc.
Fred Di Tosto
Chief Financial Officer
(416) 749-0314
(289) 982-3001

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