Martinrea International Inc. Releases 2014 Audited Annual Results and Announces Dividend
(firmenpresse) - TORONTO, ONTARIO -- (Marketwired) -- 03/19/15 -- Martinrea International Inc. (TSX: MRE), a leader in the production and development of quality metal parts, assemblies and modules and fluid management systems and complex aluminum products focused primarily on the automotive sector, announced today the release of its financial results for the year and fourth quarter ended December 31, 2014, and a quarterly dividend.
HIGHLIGHTS
OVERVIEW
Pat D''Eramo, Martinrea''s President and Chief Executive Officer, stated: "We are pleased to report that 2014 was a record year for us, in terms of revenues, adjusted profits and parts produced, and 2015 is off to a very good start, as indicated in our first quarter outlook and our announced business awards. We are also seeing good quoting opportunities, particularly with Martinrea Honsel, and anticipate some new business in the near future. We have been focusing on our strategy going forward, based on four key pillars: having a high performance culture, operational excellence, superior financial management and customer satisfaction. We are making progress on executing better as a team every day, and I am really enjoying working with a great group of people at Martinrea."
Fred Di Tosto, Martinrea''s Chief Financial Officer, stated: "Revenues for the fourth quarter, excluding tooling revenues, were $862 million, above the range of previously announced sales guidance due to higher than expected production volumes across several vehicle platforms and a record fourth quarter. In the fourth quarter, our adjusted net earnings per share, on a basic and diluted basis, was $0.27, after adjusting for unusual items representing the cost of the CEO change and restructuring costs for the right-sizing of two Canadian operating facilities, within our quarterly guidance and a record fourth quarter. Fourth quarter adjusted operating income and adjusted EBITDA margins improved year-over-year despite pre-operating costs at new plants currently preparing for upcoming launches. The expansions add to our global footprint and represent an investment in our future. We continue to expect operating income margins to improve by 50% to over 6% by 2017, with steady improvement over the next three years."
Rob Wildeboer, Martinrea''s Executive Chairman, stated: "We are and remain very bullish about our future, and intend to execute on our vision, which is to be the best, preferred and most valued automotive supplier in the world in the products and services we provide our customers. Although our first quarter is not yet complete, we reaffirm our previously announced guidance that we expect to generate revenues for the quarter, excluding tooling revenues, in the range of $860 to $900 million, and generate earnings per share in the range of 31 to 35 cents per share. As we complete our 2014 financial year, we want to thank all our stakeholders for their support in the past year and look forward to serving you well in 2015 and beyond."
OVERALL RESULTS
Results of operations include certain unusual items which have been separately disclosed, where appropriate, in order to provide a clear assessment of the underlying Company results. This has required the use of non-IFRS measures in the Company''s disclosures that management believes provides the most appropriate basis on which to evaluate the Company''s results.
The following table sets out certain highlights of the Company''s performance for the years and fourth quarters ended December 31, 2014 and 2013.
(i)Non-IFRS Measures
The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"). However, the Company considers certain non-IFRS financial measures as useful information in measuring the financial performance and financial condition of the Company. These measures, which the Company believes are widely used by investors, securities analysts and other interested parties in evaluating the Company''s performance, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Non-IFRS measures include "Adjusted Net Income", "Adjusted Net Income per Share (on a basic and diluted basis)", "Adjusted Operating Income" and "Adjusted EBITDA". Unusual and other items are explained in the "Adjustments to Net Income" section of this Press Release. A reconciliation of IFRS "Net Income Attributable to Equity Holders of the Company" to Non-IFRS "Adjusted Operating Income" and "Adjusted EBITDA" can be found in the Company''s Management Discussion and Analysis of Operating Results and Financial Position for the Company''s year ended December 31, 2014 (the "MD&A").
SALES
Three months ended December 31, 2014 to three months ended December 31, 2013 comparison
The Company''s consolidated sales for the fourth quarter of 2014 increased by $85.2 million or 9.9% to $943.8 million as compared to $858.6 million for the fourth quarter of 2013. The total overall increase in sales was driven by increases in the Company''s North America and Rest of the World operating segments, partially offset by a year-over-year decrease in sales in Europe.
Sales for the fourth quarter of 2014 in the Company''s North America operating segment increased by $86.2 million or 12.9% to $756.7 million from $670.5 million for the fourth quarter of 2013. The increase was due to an overall increase in North American OEM light vehicle production, including year-over-year increased production volumes on the Ford Escape/Lincoln MKC and GM Equinox/Terrain, two of the Company''s largest platforms; the launch of new programs during or subsequent to the fourth quarter of 2013, including GM''s full size pick-up trucks and SUVs, BMW X5, Ford Transit and the new Chrysler 200; a $21.3 million increase in tooling sales, which are typically dependent on the timing of tooling construction and final acceptance by the customer; and the impact of foreign exchange on the translation of U.S. denominated production sales, which had a positive impact on overall sales for the fourth quarter of 2014 of $40.1 million as compared to the fourth quarter of 2013.
Sales for the fourth quarter of 2014 in the Company''s Europe operating segment decreased by $1.9 million or 1.1% to $171.5 million from $173.4 million for the fourth quarter of 2013. The decrease can be attributed to a $13.1 million decrease in tooling sales, which are typically dependent on the timing of tooling construction and final acceptance by the customer, partially offset by a year-over-year increase in overall production volumes due generally to Company specific platform mix and a benefit from the impact of foreign exchange on the translation of Euro denominated production sales, which had a positive impact on overall sales for the fourth quarter of 2014 of $1.6 million as compared to the fourth quarter of 2013.
Sales for the fourth quarter of 2014 in the Company''s Rest of the World operating segment increased by $0.9 million or 6.1% to $15.6 million from $14.7 million in the fourth quarter of 2013. The increase can be attributed to a $1.1 million increase in tooling sales and an increase in production sales in the Company''s new fluids systems plant in China, which began operations in 2013 and continues to ramp up its backlog of business, partially offset by a year-over-year decrease in overall OEM light and medium-heavy vehicle production in Brazil.
Overall tooling sales increased by $9.3 million from $72.4 million for the fourth quarter of 2013 to $81.7 million for the fourth quarter of 2014.
Year ended December 31, 2014 to year ended December 31, 2013 comparison
The Company''s consolidated sales for the year ended December 31, 2014 increased by $376.8 million or 11.7% to $3,598.6 million as compared to $3,221.9 million for the year ended December 31, 2013. The total overall increase in sales was driven by increases in the Company''s North America and Europe operating segments, partially offset by a year-over-year decrease in sales in the Rest of the World.
Sales for the year ended December 31, 2014 in the Company''s North America operating segment increased by $327.7 million or 13.0% to $2,851.4 million from $2,523.7 million for the year ended December 31, 2013. The increase was due to an overall increase in North American OEM light vehicle production, including year-over-year increased production volumes on the Ford Escape/Lincoln MKC and GM Equinox/Terrain, two of the Company''s largest platforms; the launch of new programs during 2013, including GM''s full size pick-up trucks and SUVs, BMW X5, Ford Transit and the new Chrysler 200; a year-over-year increase in tooling sales of $55.6 million; and the impact of foreign exchange on the translation of U.S. denominated production sales, which had a positive impact on overall sales for the year ended December 31, 2014 of $147.5 million as compared to the comparative period of 2013.
Sales for the year ended December 31, 2014 in the Company''s Europe operating segment increased by $56.4 million or 8.9% to $687.6 million from $631.2 million for the year ended December 31, 2013. The increase was due to the ramp up of new incremental aluminum business with Jaguar Land Rover including the sub-frame and shock towers for the new Range Rover Sport; a $49.5 million benefit from the impact of foreign exchange on the translation of Euro denominated production sales; and year-over-year increased production sales in the Company''s plant in Slovakia, which continues to ramp up and launch its backlog of business; partially offset by a $10.8 million decrease in tooling sales, which is typically dependent on the timing of tooling construction and final acceptance by the customer.
Sales for the year ended December 31, 2014 in the Company''s Rest of the World operating segment decreased by $7.3 million or 10.9% to $59.7 million from $67.0 million for the year ended December 31, 2013. The decrease can be attributed to a year-over-year decrease in overall OEM light and medium-heavy vehicle production in Brazil and a $2.5 million decrease in tooling sales, which are typically dependent on the timing of tooling construction and final acceptance by the customer; partially offset by an increase in production sales in the Company''s new fluids systems plant in China, which began operations in 2013 and continues to ramp up its backlog of business, and the translation of foreign denominated production sales which had a positive impact on overall sales for the year ended December 31, 2014 of $0.6 million.
Overall tooling sales increased $42.3 million from $202.7 million for the year ended December 31, 2013 to $245.0 million for the year ended December 31, 2014.
GROSS MARGIN
Three months ended December 31, 2014 to three months ended December 31, 2013 comparison
The gross margin percentage for the fourth quarter of 2014 of 9.2% increased as a percentage of sales by 0.6% as compared to the gross margin percentage for the fourth quarter of 2013 of 8.6%. Excluding the impact of the unusual and other items recorded as cost of sales for the fourth quarter of 2013 as explained in Table A under "Adjustments to Net Income", the Company''s gross margin percentage for the fourth quarter of 2014 increased as a percentage of sales by 0.2% to 9.2% from 9.0% in the fourth quarter of 2013. The increase in gross margin as a percentage of sales was generally due to:
These factors were partially offset by:
Year ended December 31, 2014 to year ended December 31, 2013 comparison
The gross margin percentage for the year ended December 31, 2014 of 9.7% decreased as a percentage of sales by 0.4% as compared to the gross margin percentage for the year ended December 31, 2013 of 10.1%. Excluding the unusual and other items recorded as cost of sales during the year ended December 31, 2013 as explained in Table B under "Adjustments to Net Income", the gross margin percentage for the year ended December 31, 2014 decreased as a percentage of revenue by 0.5% to 9.7% from 10.2% for the year ended December 31, 2013. The decrease in gross margin as a percentage of sales was generally due to:
These factors were partially offset by:
The performance of the Company''s operating facility in Hopkinsville, Kentucky continued to be impacted in 2014 by operational expenses stemming from issues experienced by the facility at the end of 2013. The issues were rooted in serious equipment failures on two of the plant''s large tonnage presses which resulted in incremental premium costs as the facility was dealing with new programs, customer-requested engineering changes, which have impacted productivity, and the overall ramp-up in production volumes being experienced in the automotive industry. Since the equipment failures at the end of 2013, the presses have been operational but were not performing at optimal levels during 2014. Upgrades to the presses were successfully completed during the 2014 summer and December holiday shutdowns in order to reduce the risk of any further failures and improve the performance of the presses. Progress was made throughout the year and continues to be made at improving efficiencies. Costs have subsided, costs are expected to subside further, and margins are expected to improve at this facility as well as others, as operational improvements continue to be made.
ADJUSTMENTS TO NET INCOME
(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)
Adjusted net income exclude certain unusual and other items, as set out in the following tables and described in the notes thereto. Management uses adjusted net income as a measurement of operating performance of the Company and believes that, in conjunction with IFRS measures, it provides useful information about the financial performance and condition of the Company.
(1) Change in Chief Executive Officer
On November 1, 2014, Nick Orlando stepped down as Martinrea''s President and Chief Executive Officer and Pat D''Eramo was appointed as the Company''s President and Chief Executive Officer following a comprehensive search process conducted by the Company''s Board of Directors, which appointed a search committee of its members to oversee the process and to work with an outside executive search firm to make assessments and recommendations. The costs added back for adjusted net income purposes include $8.4 million in termination benefits for Nick Orlando as set out in his employment contract payable over a two year period, $0.9 million in fees paid to an outside executive search firm, a $0.9 million signing bonus paid to Pat D''Eramo upon his arrival to the Company and $0.5 million in stock based compensation expense related to certain stock options granted to Pat D''Eramo upon his arrival which had no vesting requirements.
(2) Restructuring Costs
During the fourth quarter of 2014, the Company right sized the workforce at two operating facilities in Canada resulting in $3.5 million in employee related severance costs.
(3) External Legal and Forensic Accounting Costs Related to Litigation
The costs added back for adjusted net income purposes reflects the legal and forensic accounting costs not covered by insurance (recorded as SG&A expense) incurred by the Company in relation to specific litigation matters out of the ordinary course of business as outlined in the Company''s Annual Information Form for the year ended December 31, 2014.
(4) 2013 Impact of Operational Issues at the Company''s Operating Facility in Hopkinsville, Kentucky
During the fourth quarter of 2013, the Company experienced some operational issues at its facility in Hopkinsville, Kentucky, as the facility was dealing with new program launches, customer-requested engineering changes which impacted productivity and the overall ramp-up in production volumes being experienced in the automotive industry. The issues were rooted in serious equipment failures on two of the plant''s large tonnage presses which resulted in incremental premium costs in the form of expedited freight, outsourcing costs, overtime, increased manpower, higher scrap levels, sorting and rework costs, launch related inefficiencies and other costs, all of which negatively impacted the performance of the plant. Since the equipment failures at the end of 2013, the presses have been operational but were not performing at optimal levels during 2014. Upgrades to the presses were completed during the 2014 summer and December holiday shutdowns in order to eliminate the risk of any further failures and improve the performance of the presses.
In light of these operational issues and in conjunction with the Company''s 2013 annual business planning cycle, the Company recorded a year-end partial write-down of the assets for the Hopkinsville, Kentucky facility for the year ended December 31, 2013. No impairment charges were recorded in 2014. The 2013 year-end write-down includes an impairment of property plant and equipment and intangible assets of $27.7 million and a write-down of inventories to net realizable value (recorded in cost of sales) of $2.2 million. Under IFRS, the impairment of property plant and equipment and intangible assets could reverse in the future when the profitability of the Hopkinsville facility improves. The add-back of $10.5 million of premium external costs for purposes of adjusted net income for the fourth quarter of 2013 was limited to costs that had been eliminated by the end of the fourth quarter of 2013 or shortly thereafter and includes $8.6 million in customer charged premium expedited freight (recorded in SG&A expense) and $1.9 million of incremental inbound freight and premium charges from third party suppliers for temporarily outsourced stampings (recorded in cost of sales).
Other premium costs and inefficiencies (including the impact of outsourced stampings not included in the $1.9 million above) resulting from the operational issues were not added back for purposes of adjusted net income. Progress was made throughout 2014 and continues to be made at reducing these costs and improving efficiencies. Costs have subsided, costs are expected to subside further, and margins are expected to improve at this facility, as operational improvements continue to be made.
(5) 2013 Other Impairment of Property, Plant and Equipment
In conjunction with its 2013 annual business planning cycle, the Company recorded additional impairment charges on property plant and equipment of $1.4 million for the year ended December 31, 2013 related to specific manufacturing equipment in North America no longer in use.
(6) 2013 Write-down of Deferred Tax Asset
As at December 31, 2013, the Company recorded a $38.8 million partial write-down of deferred tax assets in the Company''s U.S. operations generated predominantly from tax losses. $33.7 million of the 2013 year-end partial write-down relates to 2013 tax losses not benefitted (but which were being benefitted throughout 2013) and the remainder represents the write-down of previously recognized deferred tax assets. For purposes of adjusted net income, the 2013 year-end partial write-down of the deferred tax assets has been netted against the tax impacts of the unusual and other items described above (determined before any consideration of the year-end write-down), which amounted to $15.5 million.
In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income; however, forming a conclusion on the realization of deferred tax assets is difficult when there is negative evidence, such as cumulative losses in recent years, in the jurisdictions to which the deferred tax assets relate. As at December 31, 2013, the Company concluded that given recent historical tax losses in the U.S., in particular more recently in Hopkinsville, Kentucky, and uncertainty as to the timing of when the Company would be able to generate the necessary level of earnings to recover these deferred tax assets, it was appropriate to record a partial write-down of the deferred tax assets in the U.S. in 2013. The partial write-down could reverse once the profitability of the U.S. operations improves.
NET INCOME
(ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY)
Three months ended December 31, 2014 to three months ended December 31, 2013 comparison
Net income, before adjustments, for the fourth quarter of 2014 increased by $63.3 million to $11.9 million from a net loss of $51.4 million for the fourth quarter of 2013. Excluding the unusual and other items incurred during these two quarters as explained in Table A under "Adjustments to Net Income", net income for the fourth quarter of 2014 increased to $22.8 million or $0.27 per share, on a basic and diluted basis, from $14.1 million or $0.17 per share, on a basic and diluted basis, for the fourth quarter of 2013.
Adjusted net income for the fourth quarter of 2014, as compared to the fourth quarter of 2013, was positively impacted by the following:
These factors were partially offset by the following:
Year ended December 31, 2014 to year ended December 31, 2013 comparison
Net income, before adjustments, for the year ended December 31, 2014 increased by $54.4 million to $71.3 million from $17.0 million for the year ended December 31, 2013. Excluding the unusual and other items incurred during these two years as explained in Table B under "Adjustments to Net Income", net income for the year ended December 31, 2014 increased to $83.4 million or $0.99 per share, on a basic basis, and $0.98 per share on diluted basis, from $82.4 million or $0.98 per share, on a basic basis, and $0.97 on a diluted basis, for the year ended December 31, 2013.
Adjusted net income for the year ended December 31, 2014, as compared to the year ended December 31, 2013, was positively impacted by the following:
These factors were partially offset by the following:
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Three months ended December 31, 2014 to three months ended December 31, 2013 comparison
Additions to property, plant and equipment increased by $20.9 million to $67.4 million in the fourth quarter of 2014 from $46.5 million in the fourth quarter of 2013. Additions as a percentage of sales increased year-over-year to 7.1% for the fourth quarter of 2014 compared to 6.0% for the fourth quarter of 2013. While capital expenditures are made to refurbish or replace assets consumed in the normal course of business and for productivity improvements, a large portion of the investment in the fourth quarter of 2014 continued to be for manufacturing equipment and multiple expansions for programs that recently launched or will be launching over the next 24 months.
Year ended December 31, 2014 to year ended December 31, 2013 comparison
Additions to property, plant and equipment increased by $14.7 million to $203.8 million for the year ended December 31, 2014 from $189.1 million for the year ended December 31, 2013. Additions as a percentage of sales decreased year-over-year to 5.7% for the year ended December 31, 2014 compared to 5.9% for the comparative period of 2013. Despite the decrease as a percentage of sales, while capital expenditures are made to refurbish or replace assets consumed in the normal course of business and for productivity improvements, a large portion of the investment in 2014 continued to be for manufacturing equipment and multiple expansions for programs that recently launched or will be launching over the next 24 months.
DIVIDEND
A cash dividend of $0.03 per share has been declared by the Board of Directors payable to shareholders of record on April 17, 2015 on or about April 30, 2015.
CONFERENCE CALL DETAILS
A conference call to discuss these results will be held on Friday, March 20, 2015 at 8:00 a.m. (Toronto time) which can be accessed by dialing (416) 340-8410 or toll free (866) 225-2055. Please call 10 minutes prior to the start of the conference call.
If you have any teleconferencing questions, please call Andre La Rosa at (416) 749-0314.
There will also be a rebroadcast of the call available by dialing (905) 694-9451 or (800) 408-3053 (conference id 9430257#). The rebroadcast will be available until April 3, 2015.
ABOUT MARTINREA INTERNATIONAL INC.
Martinrea currently employs over 14,000 skilled and motivated people in 44 operating divisions in Canada, the United States, Mexico, Brazil, Germany, Slovakia, Spain and China. The Company is a Tier One supplier, serving vehicle manufacturers, automotive suppliers and other industrial sectors worldwide. For more information visit our website at . Additional information about the Company, including the Company''s MD&A dated as of March 19, 2015, the Company''s audited consolidated financial statements for the year ended December 31, 2014 and the Company''s Annual Information Form dated March 19, 2015 for the financial year ended December 31, 2014, can be found at .
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, but not limited to, statements related to the Company''s expectations as to (and improvements in) revenue, gross margin, operating income margins, earnings per share, statements as to the growth of the Company and pursuit of its strategies (including quoting opportunities), the launching and award of new programs including expectations as to the financial impact of launches, statements as to the progress of operational improvements and operational efficiencies (including the reduction of costs and inefficiencies due to operational improvements at, and stabilization of, the Company''s Hopkinsville plant and expectations as to the continued operation of the presses), the Company''s expectations as to new plant openings, the potential to reverse writedowns, 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 for the year ended December 31, 2014 and other public filings which can be found at :
These factors should be considered carefully, and readers should not place undue reliance on the Company''s forward-looking statements. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
The common shares of Martinrea trade on The Toronto Stock Exchange under the symbol "MRE".
Commitment and Contingencies (note 21)
See accompanying notes to the consolidated financial statements.
On behalf of the Board:
"Robert Wildeboer" Director
"Scott Balfour" Director
See accompanying notes to the consolidated financial statements.
See accompanying notes to the consolidated financial statements.
Martinrea International Inc.
Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars)
See accompanying notes to the consolidated financial statements.
(i) As at December 31, 2014, $13,372 (December 31, 2013, $13,216) of purchases of property, plant and equipment remain unpaid.
See accompanying notes to the consolidated financial statements.
Contacts:
Fred Di Tosto, Chief Financial Officer
Martinrea International Inc.
3210 Langstaff Road
Vaughan, Ontario L4K 5B2
(289) 982-3001 (FAX)
(416) 749-0314
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Datum: 19.03.2015 - 16:09 Uhr
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