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Edited Transcript of MRE.TO earnings conference call or presentation 1-May-17 12:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 Martinrea International Inc Earnings Call

Vaughan May 3, 2017 (Thomson StreetEvents) -- Edited Transcript of Martinrea International Inc earnings conference call or presentation Monday, May 1, 2017 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Fred Di Tosto

Martinrea International Inc. - CFO

* Pat D'Eramo

Martinrea International Inc. - CEO, President and Director

* Robert P. Wildeboer

Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group

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Conference Call Participants

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* Ben Jekic

GMP Securities L.P., Research Division - Director and Special Situations Analyst, Equity Research

* Brian Morrison

TD Securities Equity Research - Research Analyst

* David Tyerman

Cormark Securities Inc., Research Division - Analyst, Institutional Equity Research

* Mark Neville

Scotiabank Global Banking and Markets, Research Division - Analyst

* Michael W. Glen

Macquarie Research - Analyst

* Peter Sklar

BMO Capital Markets Equity Research - Analyst

* Steven Arthur

RBC Capital Markets, LLC, Research Division - Analyst

* Todd Adair Coupland

CIBC World Markets Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the Martinrea International First Quarter Results Conference Call for 2017. (Operator Instructions) Please be advised that this call is being recorded.

I would now like to turn the conference over to Mr. Rob Wildeboer, Executive Chairman with Martinrea International. Please proceed, sir.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [2]

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Good morning, everyone. Thank you for joining us today. We always look forward to talking with our shareholders. We hope to inform you well and answer your questions.

With me this morning are Pat D'Eramo, Martinrea's CEO and President; and our CFO, Fred Di Tosto. Today, we will be discussing Martinrea's results for the first quarter ended March 31, 2017. I'll make some very brief opening remarks. Pat will make some operational and strategic comments. Fred will review the financial results, and I'll finish with some closing comments. Then we'll open the call for questions, and we will endeavor to answer them.

Our press release with key financial information discussed on a fairly detailed basis has been released. Our MD&A and financials have been filed on SEDAR and should be available, along with our AIF, filed about 8 weeks ago. These reports provide a detailed overview of our company, our operations and strategy and our industry and the risks we face.

Given the detail in our press release and filed

documents, our formal remarks on the call today will be generally overview in nature. We are very open to discussing in our remarks and, we hope, in the Q&A some highlights of the quarter or year, the state of the industry today, how we are addressing the challenges and progress in our operations. As always, we want you to see how we see the world.

As for our usual disclaimer, I should note that some of the information that we are sharing with you today may include forward-looking statements, even if qualitative. We remind you that these statements are based on assumptions that are subject to significant risks and uncertainties. This is particularly the case given the present automotive and economic environment.

Although Martinrea believes that the expectations reflected in these forward-looking statements are reasonable, we can obviously give no assurance that the expectations of any forward-looking statements will prove to be correct. Our public record, which includes the AIF and MD&A of operating results that I just mentioned, is available on SEDAR, and you may look at the full disclosure record of the company there. I also refer you to the disclaimers in our press release, our MD&A and our AIF.

A couple of comments at the outset. First, we normally do not release on a Monday morning, but we have busy executives and director schedules, particularly this week, and so we are getting an early start to the week. As you can tell by our press release and as Pat and Fred will outline to you, there are a lot of great things happening here.

So without further ado, here's Pat.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [3]

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Thank you, Rob. A great quarter. I continue to be really happy with the team's progress. This is our 10th quarter in a row that we have shown continued year-over-year improvement. It's coincidently another record quarter. In fact, this is our highest EPS quarter in our history.

We achieved a 5.6%, actually closer to 5.7%, operating income margin that shows great progress and continues to point directionally at our 50% improvement target of 6% by the end of 2017. Similarly, we achieved a 1.79:1 net debt to adjusted EBITDA ratio, progressing toward our goal of 1.5x by the end of the year.

Status-wise, our team continues down the path of the 4-pillar strategy effectively. First, recall that we are focusing on true cost reduction, not cost cutting, and there is a difference. True cost reduction becomes a standard that can be maintained and improved upon over time. Cost cutting is generally temporary or designed to bridge a downturn or an unplanned event. This is one of the reasons why I believe we can sustain our margin progression in a flat market.

Second, cost reduction continues to take hold in our manufacturing facilities as well as our engineering offices. Our cost-reduction efforts are focused on waste reduction and systemic improvements. It's not limited to our plant locations, but is alive and beginning to prosper in our offices and engineering locations as well.

Related to program management, I'm very pleased with the launch improvement and, more specifically, the continued success of our multi-plant GM Equinox/Terrain launch in our Alfield, Ingersoll, Ramos, San Luis Potosi and Estampado facilities. This is our largest single launch on one of GM's most successful platforms. Our execution to date is basically benchmark. We have multiple launches in process, and so far in 2017, no significant issues.

In the revenue arena, we had some good news, with some exciting wins such as the Ford V6 engine block program, estimated at $50 million in annualized revenue per year when fully launched. This is our first engine block with Ford in North America. We already produced blocks for Ford in Europe. This is an important milestone for our continued growth of our aluminum operations in North America, and we see more opportunities coming.

Additionally, we won $30 million in incremental steel and metal forming business on the GM pickup platform in North America and $10 million in takeover aluminum work. We are happy with the growing backlog across our product groups. These wins are all meeting our hurdle rates and will help the product mix, which will support our continued margin growth in the future.

While the marketplace has plateaued in some ways, I remind you that our margin improvement plan is not dependent on macro sales improving. We continue to be confident and remain on target to achieve our margin and leverage targets by the end of the year.

Now I'd like to take a moment and tell you that we are in the process of launching a new executive position that we are calling a PLE, product line executive. This position, along with whatever support is needed, will be challenged with bringing new or innovative products to market. These products would be unique in that they may not fit directly into one of our current business units or it may be a process or product hybrid between 2 or more of our business units. In either case, the team and its leader would be directly tied to the product, working through manufacturing and the functional groups to lead the product design, process design and commercial introduction of the new product to market. The first product line executive selection process has been kicked off and focused on our first go at a new unique Martinrea product.

The product under development is a new hybrid aluminum sub-frame that we are adding to our product portfolio. The product and Martinrea's ability to produce it has gained the attention of a number of customers. Interest has outpaced our current organizational structure, so I'm very excited about the addition of this new organization. I believe it could be a great model to introduce new products to market, with strong support from all parts of our organization, but not deter from the necessary daily focus to assure we continue to strengthen our base business.

Lastly, just a quick update on our flexible manufacturing progress. Our first flexible lines in Alfield, metal stamping and fabrication; and Ingersoll, a moving assembly line, have launched successfully. The next 3 facilities, which are in Mexico, will launch later this year, a moving assembly line in Ramos as well as a separate metal fab and stamping plant in Ramos and a metal fabricating plant in San Luis Potosi. We are very pleased with the results, not just operationally, but our quality levels as well for a very important customer. Again, thank you, Martinrea team, for all your hard work.

With that, I'll hand it over to Fred Di Tosto.

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Fred Di Tosto, Martinrea International Inc. - CFO [4]

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Thanks, Pat, and good morning. The first quarter was another solid quarter, our best quarter ever from an adjusted EPS and EBITDA perspective. As Pat noted, that now makes it 10 consecutive quarters of year-over-year improved record financial performance. It is clear that we are getting stronger and making progress towards our goals as an organization.

First quarter sales excluding $64 million in tooling sales were $936 million, within our previously provided sales guidance range. Production sales for the quarter were impacted by lower volumes of certain car platforms, including the Chevy Malibu, Ford Fusion and cancellation of the Chrysler 200; and other platforms late in their life cycle, such as the old GM Equinox/Terrain platform. As Pat noted, we launched some new work during the quarter, including a significant amount of steel metal forming work on the next-generation GM Equinox/Terrain, which is set to ramp up over the course of the year but won't hit peak volume until much later this year. Overall sales for the first quarter was slightly lower year-over-year by $39 million or approximately 3.7%, generally consistent with the flat volume market dynamic. I'll refer you to our Q1 MD&A for a full account of the year-over-year variances.

Adjusted net earnings per share in Q1 on a basic and diluted basis was $0.45 per share, at the high end of our previously provided earnings guidance range, a record quarter and up nicely year-over-year and quarter-over-quarter. We did have one adjustment to earnings for the quarter, representing a $5.7 million pretax gain on the sale of a building. In connection with the relocation of an existing operation to another more suitable facility, a building owned by the company was sold, generating the gain. Without this adjustment, net earnings per share for the quarter was $0.50.

Margins were also up, whether it be gross margin, adjusted operating income margin or adjusted EBITDA margin. Adjusted operating income margin for the quarter increased year-over-year and quarter-over-quarter to 5.6% from 4.9% in Q1 '16 and 4.6% in Q4 '16. Operational excellence activity, the cornerstone of our Martinrea 2.0 journey, and general sales mix, including programs that ended production during or subsequent to this time last year and higher year-over-year production volumes in existing and new programs, contributed to the year-over-year and quarter-over-quarter margin increase. Based on the positive margin trend over the past 10 quarters, it is clear that we are getting stronger in a lot of places.

I'd like to reiterate our interim target of at least 6% operating income margin by the end of '17. Everything is on track. We expect to achieve this milestone and won't stop there as we expect to be at or better than the peer average by the end of the decade. As our Q2 '17 guidance suggests, operating income margins for Q2 are expected to be at or better than 6.5%, depending on the level of tooling sales, timing of which is not always predictable. So the year continues to trend very nicely and in line with our expectations.

From a balance sheet perspective, net debt for the first quarter decreased by approximately $27 million quarter-over-quarter, with the drop essentially representing the free cash flow generated in the quarter. We did not experience typical seasonal Q1 increase in working capital this year due in large part to the timing of cash inflows and outflows related predominantly to tooling-related balance sheet accounts, more specifically the net balance sheet position of tooling receivables, tooling inventory and tooling payables. We expect net debt to be lower than the current level by the end of the year as we inch our way towards our leverage ratio target.

As a result of our increasing margins and debt reduction, our trailing net debt to adjusted EBITDA now sits at 1.78x, a quarter-over-quarter decrease from 1.89x at the end of '16, 2.18x at this time last year and over 2.5x at the end of Q3 '14, representing the peak after we had acquired the minority interest in Martinrea Honsel with debt. So leverage ratio has dropped drastically and this as we continue to invest in the future of the business. We are on our way toward target, which remains to be at 1.5x net debt to adjusted EBITDA by the end of this year.

As you can tell by our numbers, things are coming together quite nicely. Martinrea 2.0 is really taken hold of the organization, and we believe things will only get better from here.

Thank you, and I now turn you back over to Rob.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [5]

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Thanks, Fred. Just a few general comments.

First, at the macro level, we live in a very exciting industry at a very exciting time. The industry remains healthy in North America, Europe and Asia and is growing over time. In North America, we have seen a leveling of overall sales. We will likely see some monthly fluctuations, but North American sales remain at or fairly close to record highs.

If we continue to see strength in the North American economy, even at a modest level, volumes should remain solid. Some have said we are in the late innings of the game, but we think, and we're not alone in this industry, that, that was the right analogy to use. This is an extra-inning game.

The new technologies we see in the industry should not affect overall volumes and may be positive. Electrification trends to more hybrids and even some more pure electric vehicles over time won't affect overall volumes and certainly support the overall trend to light-weighting, a core strength of ours. They support moves to more lightweight steels and aluminum, and even a battery-operated vehicle needs lots of lightweight parts, like battery trays and so forth. If vehicles will be powered by fuel cells, most of our fluids products will be in high demand.

In sum, we don't fear electrification as we see as many or more opportunities as we see challenges. I note that we already have about $50 million of annual content on electric or hybrid vehicle platforms, such as Tesla, the Volt, the Bolt and a number of hybrid platforms. If sales of these vehicles go up, so will our revenues on those platforms.

Driverless technologies will be introduced over time, but the move to fully self-driving vehicles will likely take a very long time for regulatory and other reasons. But vehicles are going to need structures, which we provide. We believe that if these technologies open the ability for people to travel by car when they otherwise cannot, such as for our parents or us when we get too old to drive, new markets will open up. We will produce more vehicles in all likelihood, not less.

The move to sharing vehicles, such as Uber, while perhaps causing some people to drive less, will increase wear and tear on vehicles being used for this form of ridesharing, lowering their shelf life before replacement. I personally believe that fewer people may take LRTs, streetcars and the like, and we may see added vehicle usage. Making car use easier and cheaper will tend to increase usage. In sum, there's a lot of opportunity out there.

We still see much discussion about NAFTA and so forth, but it seems to us that people are generally recognizing the value of the auto industry to North America and the U.S. regardless. And the fact that there are integrated industries competitive on a worldwide basis. I believe that it is not in our mutual best interest to take measures to screw up a great integrated industry and add cost, leading to lower jobs. And I think most people in Canada, Mexico and the U.S. are seeing that. The valuation cloud that hangs over Canadian auto parts companies should begin to dissipate over time as we deal with our trade issues.

We believe NAFTA can be improved. We believe people will support an integrated automotive supply chain. At the same time, I would note that Martinrea, with the shape of our North American footprint, is marvelously positioned to serve our customers' assembly plants, whether they be in the U.S., Canada or Mexico, from our plants in the U.S., Canada or Mexico.

Apart from the macro level, we are very excited by what we are doing here at our company. We are focusing strongly on our operations, on our product mix, on our customers with positive results. We have never been stronger than we are today, and it's not just because of the financial results. Our quality metrics, our safety metrics, all metrics are improving in the right direction. As we say, particularly at the time of NHL playoffs, we are putting pucks in the net.

We are, in my view, a really good company today, with great people and great culture. But we have not reached our peak, and in many ways, we're just getting started. We are gaining momentum when perhaps some others in the industry are not. Maybe their best days are behind them. Our best days are ahead, and we have the people and culture to bring it.

I was a Co-founder, I guess you could say, of Martinrea 1.0, which drove to build the footprint, a foundation to be a great supplier. We had many successes, and we had some failures. Well, now I believe I am Co-founder, you could say, of Martinrea 2.0, with Pat and key members of our team. Wait until you see what we will do with these assets.

I think some people in this industry, and that includes a lot of different stakeholders, look to the past and dwell on the past too much. Well, we are looking to the future because that is where the action is. And our culture and our people are going to drive it.

Wait until you see Martinrea 3.0. We are going to be the best-in-class supplier in the world in what we do, in quality and safety; in leading-edge process, which is a source of competitive advantage; in leading-edge product and process innovation in our areas of excellence; and in our ability to continue to improve metrics over time in a flat or plateau market if that is a reality. Our metrics will improve relative to our competitors, of that, we are convinced. And our prospects for the future in our various areas of business are great.

In terms of our metrics, we have indicated that our second quarter should have production revenues in a range of $920 million to $960 million and adjusted earnings per share of $0.49 to $0.53 per share. Those profit numbers indicate another record quarter and continued margin improvement. Over time, we have indicated that margin metrics will continue to improve. So by 2020, we should achieve or exceed industry averages, and we won't stop there. We just want to give you a time horizon of anticipated progress.

Please don't forget that we are a relatively young company, built through the startup of many plants and by the purchase of many assets, most of which were distressed at the time, which needed fixing. The improving metrics shows the ability to take stuff and make it better. To see our approach to manufacturing and the world-class status of our plants, we invite you to visit with us to see the Martinrea way. Those who take the time to see can see the strength of this company.

We want to thank our people for bringing to you a really positive story, and we want to thank our shareholders for your support. We will have our Annual Meeting in June, and we look forward to meeting you there. We are planning to arrange tours of our Alfield facility for those who are interested to see how we are continuously improving our manufacturing processes as a means to long-term, sustainable competitive advantage.

And that's it for the formal remarks. It's time for questions. I know that we tend to get a number of numerically focused questions, and that's okay. But please do not forget the qualitative comments. The strength of a company is not built on numbers alone or financial models alone, but the quality of its people to make the future better than today. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Steve Arthur with RBC Capital Markets.

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Steven Arthur, RBC Capital Markets, LLC, Research Division - Analyst [2]

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First off, just wanted to look a little bit further at some of the macro look. Rob, you had some good comments earlier. Obviously, we'll get U.S. sales figures later today for April. But when you look at your order book and when you speak with your customers, is your -- is it safe to say your basic planning assumption is kind of flat performance for the overall market in North America over this year and next? And then secondly, when you stress test things, if that's wrong, if we're down 5%, 10%, what kind of margin implications do you see, given the cost-reduction factors you're doing as well?

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [3]

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I'll say yes to part A and turn it to Fred for part B.

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Fred Di Tosto, Martinrea International Inc. - CFO [4]

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So just from a volume perspective, we continue to see, in the release, to be fairly strong, in line with a plateau environment. We do budget based on IHS. So when you look at IHS volumes, it's not projecting any growth in North America. So I think, from that perspective, that's our expectation and that's what we're modeling here. We're not seeing any drop-off. We are seeing lower volumes on car platforms, which is very consistent with the overall market dynamics and clearly indicative of consumer preference there. As it relates to any reduction in volume, the way I'll address that question is,is internally here, we've conducted a downturn planning in case there is a reduction of volume going forward. We've taken our senior management team, pulled that together. We've modeled quite a significant drop, just as an assumption, of 25%. And the goal in that exercise was maintain our margin percentage. What I will say is we weren't able to maintain the percentage, but we came in fairly close. So if it drops further now, which would be very drastic, I think the margin starts dropping, but I think any slight decrease in volumes overall and we're fairly confident we can maintain our percentage in our margin progression.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [5]

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We used 25% because it was extreme, with the expectation that if you get a normal variation, we would be able to manage the margin regardless, 5% or what have you, 10%.

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Steven Arthur, RBC Capital Markets, LLC, Research Division - Analyst [6]

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Very helpful. Briefly, on the working capital change, Fred, I think you said that's related -- timing related, temporary, having a Q1 gain. Not any fundamental change in the way you're managing that?

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Fred Di Tosto, Martinrea International Inc. - CFO [7]

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I wouldn't say that. I think one of the things that Pat brought to the table, one of the initiatives in the Martinrea 2.0 when he joined was to really focus in on cash flow and optimize the working capital level. So I think we've done a lot of activity around the production side of our working capital, in particular, inventory. I think where you have some volatility is in the tooling side of the business. We've talked about in the past, for any point in time, we have a net larger -- I mean, a smaller net tooling position, being inventory, receivables and payables. I think what you saw in the first quarter is a move that actually worked in our favor. Some of that may balance out over time. Again, it's very difficult to predict. But I'll point you to my other comments on the net debt. So any change in working capital tends to affect our net debt levels just based on the fact that our credit facility is a revolving facility. So by the end of the year, I do expect our net debt to be lower than where it was at the end of Q1 and in line with our 1.5x target.

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Steven Arthur, RBC Capital Markets, LLC, Research Division - Analyst [8]

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Okay. And final one, just following up on that actually. Just longer term, you seem well on track with those 2017 objectives, the 1.5 turns of leverage, the 6% margins, which is quite an achievement from where you were a few years ago. I guess, big picture, looking ahead, say over the next 3 to 5 years, any color on where you target for those metrics? Or any longer-term business model goals or things you would set out for the business?

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [9]

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We said already a few times that by 2020, we expect to be in the median of the industry, which should be around 8%. Relative to the net debt target, we haven't spent a lot of time talking about it, but we think 1.5 is a pretty good place to be.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [10]

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Yes. We recognize -- we're getting some suggestions from different folks as to what people think we should be doing. And I think we're maintaining the short-term focus. But to a certain extent, the capital structure should have some debt in it. There are things that we can do with the cash when the time frame comes. And as you can anticipate, we'll have some of those discussions. I would say one thing though. I think that our net-debt-to-EBITDA ratio today is really solid compared to competitors. And let's go beyond the Canadian market. I know Gestamp is going public. They're a metal former that competes with us in our steel business. And they're going public, and they're advertising a strong balance sheet with a 2:1 net-debt-to-EBITDA ratio. I know one of our fluid systems competitors, TI, which is still private but looking to go public at some point or speculating, they're over 3x. I think Tower is somewhere between 1.5 and 2x. I think Nemak is somewhere between 1.5 and 2x. So I'm not sure where our competitors stand, but they've figured out a ratio that's fairly -- well, that's higher than our 1.5 to 1x target. But I think as it stands right now, happy to discuss, but we said we were going to put a target as kind of a report card for us. Let's get there, and then let's see what we can do.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [11]

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In the moment, we're very focused on getting to this target, and we expect to get there. And then at that point in time, we'll reassess the situation.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [12]

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Yes.

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Operator [13]

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The next question is from Mark Neville with Scotiabank.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [14]

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So for the Q3 -- and GM's talking, I think it's Q3 -- the back half, talking about 10 weeks, I think, of downtime just on some certain programs for some refresh products. Some of those programs are, I think, sizable for you. So I'm just curious if you can give us some maybe color on what kind of impact it might have or what you're thinking it might have in the second half.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [15]

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So at the current time, as I noted initially, releases look fairly strong for the next 3 months. We have good visibility for the next 3 months. The second half of the year tends to be weaker, generally speaking, in any given year. We're expecting that this year as well, maybe even more so just given some of these inventory adjustments that are out there. So I wouldn't be surprised if we do see some weaker volumes in the back half of the year and maybe some incremental shutdown weeks. But as we said, even at a slight drop, we expect to continue with that margin progression this year.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [16]

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Okay. And I know you haven't given [closer] go ahead.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [17]

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Sorry, as you know, and just for the people on the phone, Q3 tends to be the weakest quarter because of the July shutdowns in North America and the August shutdowns in Europe. And then Q4 tends to be better than Q3 but not as good as Q2 because of shutdowns that typically occur at Christmas. We think that 2017 is still going to be a record year. We think the second half of the year will probably be better or we think will be better than the second half of last year, [although] we are going to have a good year. The positive about the GM truck refresh, we have a lot of product on the trucks. But typically, what happens with refreshing is a lot of sales coming out of the gate. We like it when customers refresh products.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [18]

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Great. So I guess, sort of based on your thinking, '17 sales, you'll see a bit of dip from '16, maybe a bump up in '18, a little bit?

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [19]

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I think what we'll see probably more flattish this year and next.

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Mark Neville, Scotiabank Global Banking and Markets, Research Division - Analyst [20]

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Okay. And just to follow up on, I guess, Steve's question on the balance sheet. Maybe I'll ask it another way. At what point, again, I guess we're still a ways away from this, but, is leverage too low where you might start thinking about whether it's dividends or -- increasing dividend or something else?

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [21]

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Boy, wouldn't that be a nice problem to have.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [22]

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Yes. We're not going to buy racetracks or airplanes, but it's a nice issue to have. We are investing heavily in our plants, in our R&D, in those types of things. But as I said before, the optimal capital structure should have some debt. But we're not overly wed to any particular number. What we have done is we put out a number when Pat joined us at the end of 2014, and we said, this is what we think we can (inaudible) time frame. And so let's get there and do it, and then we can talk about the next 3-year time frame or go from there. But we want to stay focused.

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Operator [23]

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The next question is from Michael Glen with Macquarie.

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Michael W. Glen, Macquarie Research - Analyst [24]

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Rob, you sort of challenged us on looking at some of the qualitative aspects of the work that you guys have done, so maybe you can just talk a bit about this. At instilling the Martinrea 2.0 initiative at the plant level, can you just talk about some of the changes that you've made there from an employee engagement perspective?

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [25]

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Yes. I'll make a couple of general comments. Then I think I'll turn it over to Pat to talk about it as well. And quite frankly, Fred can add comments if he wants as well. We think that the long-term strength of this company is based on, among other things, its culture, unlocking the value of our people and the talent and just the drive to work with us. That's been a big focus of us in part because we have so many plants that came from so many different places. We've bought distressed assets, where some of the people have been gun-shy, some of the people have come from family-oriented businesses where all family members and the dog work for the business. We've come from centralized structures. We've come from different cultures and so forth. And so we've spent a lot of time, Pat, I and Fred and the team, really focusing on our principles and how we work together, how we unlock value, also how we work with the customer, how we work with the suppliers, how we work with our stakeholders, including our lenders and our shareholders, and how we work in our communities. And we think that happy employees, motivated employees care more about their company, care more about performance. And ultimately, that's the strength and resiliency that a company develops over time, that we think you're seeing the benefits of. Pat?

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [26]

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I'd just add that we talk a lot about our targets of 1.5 and 6% and then where do we go beyond that, but the real work has been, how do we do it? What method do we use? And we talk about our 4-pillar strategy and Martinrea 2.0, and that, frankly, is the foundation for how we educated the organization on where and what we're going to focus on in order to achieve it. And I would say from my experience, the adaptation rate of people in this company is really strong. So the lean activities and the operational excellence activities, the development -- individual development programs that we've launched have been adopted and are running down the road at a much faster pace actually than I almost anticipated. So it's just continuing to do more of the same. I've made the comment before that if we were a plane taking off on a runway, I would argue we're still at the gate. We're just scratching the surface. So I anticipate a lot more progress in the coming years that will continue to improve the bottom line.

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Michael W. Glen, Macquarie Research - Analyst [27]

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And as you've gone through this transition, has there been people within the organization that have -- have most people seen -- been accepting of the new approach? Or has there been people who have just decided to leave the organization for whatever reason as they don't see these new initiatives as being productive?

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [28]

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I would say the majority definitely have been on board, but there's also been some turnover, some in the plants, some on my staff and different places in the organization. Certainly, when we laid out the strategy, it was made crystal clear that we've got to row in the same direction. And there will be people who would want to go a different way, and that's fine, but can't be part of the organization if you can't follow the path. And so there had been some turnover, but I'd say it's -- for the most part, we've kept the majority.

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Michael W. Glen, Macquarie Research - Analyst [29]

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Okay. And I'll follow up with a numerical one. Just as we look at the 6% target for 2017, can you give an idea -- like when I'm trying to model this out, to hit 6% for the full year '17, it looks like we really need to see a tick higher in the year-on-year margin acceleration. Is that -- and you're talking about that -- that seems to be what you're guiding towards in a market, and you're also talking about margin stepping lower in the back half due to seasonality. Am I thinking about that correctly?

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Fred Di Tosto, Martinrea International Inc. - CFO [30]

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Generally, yes. I think when you look at our margin progression from '15 to '16 -- or rather to date, it has been predominantly driven by operational activity, some of the stuff that Pat touched upon. And going forward, we continue to expect that to be a contributor. One of the other things that you're going to be seeing this year as well is our mix improving and expanding our margin profile. We have some new business coming online, replacing some old business that's rolling off. That's been priced better, if you will, under the new Martinrea 2.0 investment hurdle rate thinking. And the one big program, in particular, that's kicking in this year is the new Equinox work, and that will ramp up more so in the back half of the year as opposed to the front half. So I think you're thinking about it correctly. And as you can see from our Q1 margin performance, we did see quite an uptick year-over-year. Q2 guidance is suggesting the same, and you'll likely see the same in the back half of the year.

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Operator [31]

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The next question is from David Tyerman with Cormark Securities.

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David Tyerman, Cormark Securities Inc., Research Division - Analyst, Institutional Equity Research [32]

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First question is on China. So I noticed that the results were down there due to the Mondeo. Could you give us an idea of what you're seeing on that going forward?

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Fred Di Tosto, Martinrea International Inc. - CFO [33]

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Yes. So there's a couple of elements in the Rest of the World segment. So you touched upon China. So the China volumes, I did touch upon this on the last call. I was expecting them to be lower. The Ford Mondeo volumes were down, and we've seen that in the past, again, in other car platform. So it's one of the anchor programs of that facility. And then we also saw some weaker volume on the Cadillac CT6 in our other China facilities, so that hurt the Rest of the World performance. And the other element there as well, and it's reflective in our MD&A, our Brazil facility. Although volumes were actually a little bit higher year-over-year and quarter-over-quarter, we had some litigation costs that hit our results there. So you'll see that explained in the MD&A in more detail. But that's the bulk of the reason why that segment was actually down.

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David Tyerman, Cormark Securities Inc., Research Division - Analyst, Institutional Equity Research [34]

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So what's the outlook for the China in particular? Because I'm assuming that Brazil doesn't change that much. Well, you obviously won't keep having the litigation but...

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Fred Di Tosto, Martinrea International Inc. - CFO [35]

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Yes. As it relates to China, we're -- over the next couple of quarters, we're expecting volumes to be somewhat flat or flattish. We have a new program coming online in our new aluminum plant there later this year, Q3, Q4, so you'll see an uptick at that point in time and then '18 better than '17.

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David Tyerman, Cormark Securities Inc., Research Division - Analyst, Institutional Equity Research [36]

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Okay. And when you say flattish, are you talking to Q1?

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Fred Di Tosto, Martinrea International Inc. - CFO [37]

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Yes.

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David Tyerman, Cormark Securities Inc., Research Division - Analyst, Institutional Equity Research [38]

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Okay. And then can you just remind us on Europe, what the profile looks like in terms of ramps and so on? I think Honsel was supposed to -- or they mentioned that plant was supposed to be bottoming out and starting up?

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Fred Di Tosto, Martinrea International Inc. - CFO [39]

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Yes. So it did generally bottom out in Q4. And what you'll see over the next couple of quarters is a generally flattish type of revenue in Germany as it gets ready for -- to launch its backlog of business. So near the tail end of this year, you'll start seeing sales increase in Germany. In addition to that, Spain has been on a ramp-up since 2015, so you're going to continue to see those sales increase as well. Its next leg of ramp-up on that program is actually next year, so it will hit peak volume on that anchor program in 2018. So the combination of those 2, you'll start seeing Europe increase in the back half of this year and into next year, and then '19 will be better.

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David Tyerman, Cormark Securities Inc., Research Division - Analyst, Institutional Equity Research [40]

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Okay. That's really helpful. And then on the tax rate, any change in guidance on that?

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Fred Di Tosto, Martinrea International Inc. - CFO [41]

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No, nothing has changed in that front, something at around 25%. I think I had formed the guidance to be between 23% and 27%. I think we'll be somewhere between 24% and 25%. Again, the one thing I will say there is that there's some potential tax reform out there, which we'll have to assess. I think it's a ways out. There's a process that has to be followed before anything gets enacted. But absent any changes on that front, I expect the rate to be fairly consistent over the next little while.

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David Tyerman, Cormark Securities Inc., Research Division - Analyst, Institutional Equity Research [42]

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And the CapEx, still somewhere...

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Fred Di Tosto, Martinrea International Inc. - CFO [43]

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No change in the CapEx guidance. We see a leveling off, 20 -- $230 million to $240 million this year, similar levels next year. And beyond that, it's going to be dependent on much how much work we win.

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Operator [44]

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The next question is from Peter Sklar with BMO Capital Markets.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [45]

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Fred, back on China, the Mondeo, that's fluids business, isn't it?

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Fred Di Tosto, Martinrea International Inc. - CFO [46]

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Correct.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [47]

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And what's going on in the diecast plant? Is it -- like is it running some programs? Or is it just in the early stages? Or can you just describe a little bit what's going on?

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Fred Di Tosto, Martinrea International Inc. - CFO [48]

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Yes. It's very early stages. It's running one program right now. It's a sub-frame for the CT6. And as I noted on the last call, the volumes in that platform are actually much lower than what we anticipated and what the customer anticipated. So it's early stages. There's not a whole lot of activity going on because of that reason. But it'll start ramping up later this year when that second program rolls in. And that second program, just for your information, is Jaguar Land Rover. It's actually the same product we do in Spain will be manufactured in China as well.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [49]

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And is that a block -- an engine block?

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Fred Di Tosto, Martinrea International Inc. - CFO [50]

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No, knuckles and lower control arms.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [51]

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Right, okay. On the litigation in Brazil, were you able to tax-effect that? Or did your results take the full -- like full hit?

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Fred Di Tosto, Martinrea International Inc. - CFO [52]

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We don't -- we didn't tax-effect that because we're losing money in Brazil. So we're not setting up any tax benefit for that at the current time.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [53]

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Okay. And like will there be residual litigation costs? Or is that the big whack of it?

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Fred Di Tosto, Martinrea International Inc. - CFO [54]

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I'll be careful in my comments because some of these proceedings are continuing. What we find there, it's a very litigious environment. When you let people go and even when you don't let them go, they tend to sue you. I think that's fairly common. So we're dealing with that. There's some developments, some proceedings there that turned on us for this quarter, so we had to increase our provisioning. To say that there can't be more, I mean I can't say that, right now. We're kind of obviously staying close to it. But we felt the increase this quarter essentially is reflective of the current state of those proceedings.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [55]

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Yes. Let me make a broad comment about Brazil. Brazil operations, we bought with the purchase of Honsel in 2011. And I would say the first several months, maybe a year, volumes were quite high in Brazil. It was profitable at the get-go. And since that time, Brazil's economy and situation has been a string of unfortunate events in the economy. The economy has gone into a recession and a downturn. The political fiascoes have been front-page news now for several years. And we downsized the plant from over 600-or-so employees to just over 200 employees. And when you downsize like that, and people sue for severance and severance-related things or things where they basically say, "What can I take the company for while I have that situation?" So there's quite a number of cases. I hear from everyone, from accountants to people at other companies that have operations in Brazil that this seems to be the way things happen in Brazil. It's a bizarre place. And as it goes, these are some of the ongoing costs. What happened in Q1 is we had 3 cases go against us, and so we provided for it. But ultimately, Brazil is an interesting place, and we're hopeful. It's not a word we use a lot, but we're monitoring it very well. I think that the issue for Brazil and the issue for South America is how do you run industries like automotive industries on a long-term, sustainable basis. I am not happy when I see a government in Venezuela effectively take over a GM plant. I think that, quite frankly, a lot of countries in South America got to get their act together or they're going to be pariahs on the international field.

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Fred Di Tosto, Martinrea International Inc. - CFO [56]

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And just to clarify, we do and we have maintained a provision on these proceedings in the past. As Rob noted, the 3 cases did turn on us, but our provisioning has been based on historical closure patterns. These 3 were anomalies or they appear to be anomalies at the current time. So we upped our provisioning as a result of that, but we have maintained the provision all along.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [57]

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Okay. And just switching topics. Pat, I'm just wondering if you can talk about the North American stamping business. And in your discussion, address that the top line doesn't seem to be growing, why that's the case, but you're getting significant margin improvements. And is that coming from -- like are there some real underperformers that are turning? Or is that margin improvement more across the board? And also, if you could address Shelbyville and where you are on the Escape, I think that plant is -- has a big exposure to Escape, and where you'll be on the remodel. I think it's 2019.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [58]

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Yes. So I'll try to do this in order. Overall, the improvement has been through operational excellence, lean. United States, in particular, has seen benefit as well as Canada and Mexico. But all the margin improvement, frankly, is coming from just improved operations and better performance. And of course, our stamping and welding group is our largest. As far as revenue, there hasn't been any real revenue change. There hasn't been any significant poor performing programs that have dropped off at this point. But in the future, in the next few years, we might start to see more and more of that, which will help. But it's basically taking the same stuff we were running 2 years ago and running it better. As far as revenue, there hasn't been a huge revenue change because during the time when we were struggling in the U.S., I think it was '14, there were some programs that were not replaced due to our performance. And so we're seeing the result of that currently. Some of the new products we had discussed, like the sub-frame, during the call are some of the products that will be replacing some of that, if you will, space. Of course, those are launching yet in the future. So I expect we'll continue to see good performance from the plants. I mean, they're all on the upswing. Nobody's achieved certainly what we're capable of yet. So I think you're going to continue to see margin improvement on the current sales. Relative to Shelbyville, that's -- you're right, that's -- a lot of their sales depends on the Escape. We're satisfied with -- in fact, happy with what we're getting on the next generation. And from our point of view, we're going to be better off as we go forward.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [59]

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And will you be able to fill the capacity? Like will there be a drop-off at Shelbyville in terms of revenue? Or do you have other programs coming in?

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [60]

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It's a little bit skewed because a lot of what happens in Shelbyville now is pass-through. We buy a lot of product, hold it in our inventory, assemble it on to products and pass it through to Ford. And in the new generation, we've reduced that pretty substantially. So a lot more of the work is value add going forward. And certainly, as the plant has improved and you think about where it is in the U.S., it's right in the center of a lot of activity. you've got a lot of assemblers around. Certainly, we're working very hard to put more work in that plant.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [61]

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We don't make money on pass-through. We're happy for others to do it.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [62]

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Okay. And then lastly, if you could just address Hopkinsville, I think that's been one of your problematic plants, and what's happened there and what the outlook is.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [63]

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Yes. I would put it very similar to Shelbyville. A lot of, frankly, outstanding improvement, the return from a quality point of view for the customers, where we've been kind of on the bench or on the penalty box, if you will. It's received its Q1 back. It's received its GM certification back. Its performance has been -- I can't compare it to how it was when we first purchased it, but I would say certainly, in the last 4 or 5 years, it's performing significantly better than it had in the past. The key now is to continue to find good work to put in it. It's a great facility in that, from a stamping point of view, it stamps well, but it's got an ED system in there that's for painting. So it's a good plant to have in our system.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [64]

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I think, as we're talking about plants, let's also talk about a couple of stars. We invited people to see the Alfield facility. I think you took some people through there, Peter, the first week after launch. Looked pretty good the first week after launch. Normally, you don't let investors or anyone take a look at a plant within 3 months of a launch because it tends to be a disaster. I think it showed pretty well. It shows better. Now it's a state-of-the-art stamping plant. We had some people through last week. So it's one of the best stamping plants they've ever seen, and those are people that know stamping plants. Similar, our facility in Hermosillo, ranks right at the top of the quality list and the performance list in one of our customers, where they say nobody achieves this ranking in the world, except this plant seems to have done it. So our guys are leading edge in terms of metal fabrication, in terms of steel. I think one of the things we talked about -- one of the earlier questions was how did we develop this across the chain. And we are seeing, in that whole group, a lot of sharing of best practices and so forth and building up our reputation with the customers, which is also seen by some of the largest wins in our history over the last couple of years in the metal stamping group.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [65]

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I think one other thing, Peter, if you remember, when you went through Alfield, we talked about the different generations of our flexible manufacturing. And in Alfield's case, we weren't able to go the whole distance because the timing wasn't in our favor, so we went part way, which is a big advantage from where we're at today. But the plants you mentioned, both Shelbyville and Hopkinsville, and our new business will have the full generation 2 flexible lines. So those are some of the first plants that will see those lines in for their new programs.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [66]

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So are you saying that they're going into Shelbyville and Hopkinsville?

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [67]

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Yes. The -- with some of the work they've won, their next-generation lines that we're putting in will be the gen 2 lines that you saw -- or that we've talked about when we were at Alfield.

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Peter Sklar, BMO Capital Markets Equity Research - Analyst [68]

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Right. And I do agree like Alfield looked very good. Just back on Shelby. You mentioned Hopkinsville has its Q1. Where is Shelbyville in terms of the Ford rating?

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [69]

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It's a good question.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [70]

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I'm going to say, forgive my ignorance right now, I can't recall from sitting here.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [71]

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But -- so we got all that replacement.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [72]

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Yes. We got...

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [73]

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Whether you have it or not, we are -- you got the work.

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Pat D'Eramo, Martinrea International Inc. - CEO, President and Director [74]

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Yes. I mean, we won all the sourcing within the last year.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [75]

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Yes.

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Operator [76]

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The next question is from Ben Jekic with GMP Securities.

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Ben Jekic, GMP Securities L.P., Research Division - Director and Special Situations Analyst, Equity Research [77]

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I would say most of my questions have been asked, so I'll let somebody else ask if they have any.

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Operator [78]

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The next question is from Todd Coupland with CIBC.

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Todd Adair Coupland, CIBC World Markets Inc., Research Division - Research Analyst [79]

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Rob, there's been some speculation in the market about what you might do around owned real estate at Martinrea. And I'm just wondering. I know you're not going to say specifically what you want to do, but philosophically, could you just talk about whether or not you see any monetization opportunities within the owned real estate and give us some philosophical comments on that?

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [80]

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I like being philosophical. But we do have -- and it's in our AIF. I think we list just about every plant, what it specializes in and so forth. And we also divide it owned versus leased. So I would say that on a square footage basis, about half and half roughly, might be 40-60 or something. Quite frankly, we haven't done particular math. And so that's point one. Point two, we have no aversion to or particular preference to leasing or owning real estate. Sometimes, when we buy companies, it comes with a real estate. Sometimes, a fair bit of the real estate is leased. And we don't have particular philosophical perspective as to what we necessarily prefer. But the -- having said that, there are circumstances where we move out of a facility or we look at it where we say we're willing to sell the facility. Certainly, we saw a little bit of that in the first quarter, where we sold our Lakeshore facility, which we bought for about a couple of million dollars in the late '90s. I remember that purchase a long time ago. And that was a facility that -- it was an industrial facility that did, among other things, the Orion bus. And so we did the frame of the Orion bus, rolled it across the parking lot to Orion bus, which was next to us. And we basically lost a lot of our industrial business in that facility when Orion bus was basically shut down. At that time, it was Daimler bus. It's not the best location to have an industrial fabrication plant in southeast Oakville. Not a lot of people live just down the street. So we made a determination to relocate it closer to major transportation routes, like the 401 and so forth, and as a result, sold the facility. Certainly like the price that we've got for it compared to cost. I think that there are facilities in certain jurisdictions that we could take a look at. We're not averse to selling a building if we get a price that's higher than it's worth and entering into a lease arrangement if we think it's a long-term situation. But we don't have a philosophy of packaging up our real estate and creating a REIT or selling everything through a REIT or anything like that. In terms of some of our larger stamping facilities, we typically like to own them and control them because they have deep bits and big machines and that type of stuff. And if you ever do want to move it, restoring a building to historical state is difficult when you've got big press holes and so forth. With respect to fluids work, it's very easy to lease. You don't have to put holes in the floor. You put your equipment on the concrete that's there. You don't need special reinforcement and so forth. And so I think you see most of our fluids facilities leased. And that's kind of where we sit. Fred, did I miss any?

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Fred Di Tosto, Martinrea International Inc. - CFO [81]

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No.

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Todd Adair Coupland, CIBC World Markets Inc., Research Division - Research Analyst [82]

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So Rob, just one quick follow-up on that. Do you -- I get the answer on unlikely to package up and turn owned into a REIT. Do you anticipate any other moves this year with what you're seeing at the current time?

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [83]

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I'll give you -- so with respect to Detroit hot stamping, we've closed that facility, and we have a closed facility in Windsor. So I anticipate that we're not -- Windsor is being used as a warehouse, and Detroit hot stampings is just -- is basically holding inventory that is made as part of the organized slowdown, shutdown. Those are assets that we don't need to hold, and so we'll look at that. At the same time, I don't think they're necessarily worth a whole lot. I will say that we live in a crazy real estate market in Toronto at all levels. We get approached from time to time to see if we want to enter into a sale-leaseback arrangement with our Toronto facilities that we own. There's really only 2 that we own in Toronto, one is Hydroform Solutions and one is Carlingview. So what we've said, to be honest, is if you make us an offer we can't refuse, we'll take a look at it and see what we do. Both those facilities are long-term facilities for us. Certainly, Hydroform Solutions, which I think you've been to, it's a full facility. It does a lot of work on the edge. It's right across the street from Bramalea Chrysler, and that's one that if someone made us an offer we couldn't refuse, we wouldn't refuse it.

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Operator [84]

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(Operator Instructions) The next question is from Brian Morrison with TD Securities.

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Brian Morrison, TD Securities Equity Research - Research Analyst [85]

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Just a couple follow-up questions. And I hate to drill down on this operating margin improvement, but if I just look at the operating margin improvement of, call it, 100 basis points or north of that in 2017, maybe just trying to understand it in a more simplified manner. When I look at those 3 key themes of cost reduction, be it productivity, efficiencies; product mix; the ramp of production driving scale, how would you allocate the 100 basis points to each of those buckets? And then my second question is for Fred, just in terms of a housekeeping question. Do you have any clarity on the timing of change in the accounting policy on the Equinox/Terrain as we move to VAA? Is that a Q3, Q4 event? Or would that be more 2018?

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Fred Di Tosto, Martinrea International Inc. - CFO [86]

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Okay. So as it relates to your first question, so the year-over-year improvement this year in operating margin is -- there's 2 aspects. There's the operational activity, and then there's the mix that's there in change. Just generally speaking, I think I can attribute 50% to each, so it's half and half. And I think that answers your question there. As it relates to the change in the contract on -- in our London facility as it relates to the module assembly on the old Equinox, so the new program is in the process of ramping up this year, and the old program will be ramping out at the same time. So that impact is going to start kicking in, in the back half of the year, with a full year effect in 2018. The one thing I want to reiterate on this is the one thing that people tend to miss on this is the profitability of that program is going to drop quite a bit, given the fact that we don't take any volume risk on the new program the way it's -- the way we're compensated for it. So it's not a straight mathematical exercise to say that a certain piece of the margin improvement is attributable to this. There is an element of that. We generally quantify it to be around 0.2%, and that's for a full year in 2018. So despite the fact that you're going to start seeing that ramp down in the back half of the year, the impact on our '17 margin is fairly negligible.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [87]

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And it's not an accounting change. I mean it's a different contract with different risk. It's simply a contract change. We think actually, with these non-VAA programs and pass-through, which also is a good chunk of our work in Shelbyville, like our margins are historically understated.

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Operator [88]

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There are no further questions registered at this time. I would now like to turn the meeting back to over to Mr. Wildeboer.

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Robert P. Wildeboer, Martinrea International Inc. - Executive Chairman and Chairman of Martinrea Honsel Group [89]

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Thank you very much. Thanks for the call. We get to see everyone who participates on the call, and there were a lot of you this morning, so we really appreciate you taking your time on a Monday morning.

As I said, we normally don't release on a Monday morning, but we did here. We've got a lot of good things going on in the company. If anyone has further questions, would like to discuss any issues, you can contact any of us at (416) 749-0314.

We remind you of the shareholders meeting. We love talking to people face to face. And what we will be doing at the shareholders meeting, which is in the usual place, which is near 407 and Weston Rd., is if there are people that are interested in going relatively a mile away to the Alfield facility and seeing some of the stuff that we're doing there, we will arrange that. And we look forward to seeing you. Everyone, have a great day.

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Operator [90]

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The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.