RE: rebroadcast WEDNESDAYNews Release
Mr. Fred Jaekel reports
MARTINREA INTERNATIONAL INC. RELEASES THIRD QUARTER RESULTS: INVESTMENT LEADING TO CONTINUING PROFITABILITY AND FUTURE REVENUE GROWTH; COMPANY ALSO ANNOUNCES FIRST DCX FUEL SYSTEM CONTRACT
Martinrea International has released its financial results for its third quarter ended Sept. 30, 2003. The comparative quarterly financial results for the quarter ended Sept. 30, 2002, include the operating results from Rea International Inc., acquired by Martinrea on April 29, 2002, but do not include the operating results from Pilot Industries Inc., which was acquired on Dec. 31, 2002.
Revenues for the quarter ended Sept. 30, 2003, were $141.4-million, and net earnings for the quarter were $4.2-million. Earnings per share for the quarter were approximately eight cents on a basic and seven cents on a fully diluted basis. Earnings for the quarter are consistent with profitability in the first and second quarters despite the effect of customer plant closures in July typical of the automotive industry. For the quarter ended Sept. 30, 2002, revenues were $73.4-million and the company had a net profit of $1.6-million, reflecting a profit per share of approximately four cents on both a basic and fully diluted basis. The net earnings for the nine-month period ended Sept. 30, 2003, of $13.1-million and earnings per share of 24 cents on a basic and 23 cents on a fully diluted basis continue to be a clear indicator of the company's ability to be profitable in a difficult economic climate. The company's financial performance for the nine months ended Sept. 30, 2003, is a significant improvement from the one-cent loss per share in the comparable prior year period, due in part to the inclusion of the operations of Rea International and Pilot Industries and increased revenues from the continued launch of new programs in the current year.
Gross margin percentage for the quarter ended Sept. 30, 2003, was 15.9 per cent as compared with 14.8 per cent for the quarter ended Sept. 30, 2002. The gross margin percentage for the third quarter of 2003 is consistent with the gross margin of 15.9 per cent in the company's second quarter of fiscal 2003 and an increase from the prior year comparable period. For the nine-month period ending Sept. 30, 2003, the gross margin percentage is 15.9 per cent and this was an improvement over the prior year. The gradual increase in gross margin percentage over time reflects improvements made in capacity utilization and production efficiencies. The company expects this positive trend to continue as products are launched and cost reductions are realized. The company remains committed to its cost reduction efforts and continues to rationalize its operations.
During the current year, the company has made significant capital investments totalling $40.6-million and it is currently financing approximately $19-million of customer-owned tooling and $14-million of tooling receivables that will be repaid by customers as programs are launched. In order to finance these cash outlays the company has used $16.4-million of its $40-million operating line. The company expects a reduction of the operating line debt over the next six months as tooling revenues are collected and growing profits from operating divisions are realized. Fred Jaekel, Martinrea's president and chief executive officer, stated: "Our company continues to grow its profile and reputation with our customers. Our customers increasingly view us as a supplier of choice. This is evident in key new business awards, such as the just-announced contract from General Motors to produce fuel and brake bundles for GM's next generation of full-size pickup trucks and sport utility vehicles. We have won a key program on the largest single vehicle platform in the world which, when launched, will provide revenues in excess of $125-million annually, over $100-million of which is new business. We also were just awarded our first fuel systems contract from DCX, an important breakthrough for our sales team. We already have fuel filler, fuel tank and metals business with DCX, but it is wonderful to expand our product coverage as well as customer penetration. These contracts take months of effort to achieve success, and reputations with the customer take years to achieve. We also won other new and carryover business in the past several months, but one important source of work for us recently has been takeover work from existing suppliers. The difficult competitive and economic environment has provided challenges for the supply base and opportunities for us. We continue to actively pursue opportunities for takeover business."
Mr. Jaekel added: "We launched two key programs that have generated incremental sales in the third quarter. The launch of the GMT 800 fuel bundles has gone very well. We have encountered challenges in launching our metal business in Hydroform Solutions as we train and mould a new work force, but we are progressing well. These launches will bring us incremental annual revenues of over $50-million. We will also be launching two significant additional metallic programs valued at $35-million annually for DCX's LX platform in Brampton. Production of these programs will begin in early 2004, and we are ramping up now. Once the programs are launched, the increase in capacity utilization will improve profitability."
Nick Orlando, Martinrea's executive vice-president and chief financial officer, added: "The third quarter although profitable was very challenging. As anticipated revenues were lower than the previous quarter despite incremental revenue from our GM pickup truck fuel bundles and the launch of the Ford Freestar. The reduction of revenue was primarily attributable to customer production levels declining by approximately 10 per cent over the same quarter in the previous year, as the OEMs reduced very high inventory levels and we experienced the traditional July shutdown."
Mr. Orlando added: "Our gross margin is consistent with the previous quarter. Productivity gains in our facilities are being offset by significant customer pricing pressure and continued costs related to the rampup of our manufacturing operations in Hydroform Solutions. We must continue to vigorously pursue cost reductions and capacity utilization in our operations to continue improving gross margin."
Rob Wildeboer, Martinrea's chairman, stated: "We are moving forward and executing our business plan. We continue to rationalize our operations, and the integration of our acquisitions is virtually complete. Each of our divisions is being crafted into a centre of excellence, which benefits the customer and allows for plant specialization and efficiency. Every quarter we improve our operations, division by division, and we continually strengthen our company. We are much stronger than we were a year ago. We have great people, who are our greatest strength, committed to offering the customer great products at competitive prices. That is being manifested in new contract awards and more opportunities for growth. From a shareholder perspective, we believe that shareholder value will be enhanced over time as we grow revenues, profits and profitability."
Mr. Wildeboer added: "The company continued to increase its business in the third quarter and subsequently with new incremental business awards. Total annualized awards for work coming into production in 2004 is $60-million, in 2005 $100-million and a further $100-million coming into production in 2006 and 2007. In 2003 to date, the company has been awarded over $250-million in annual incremental business, launching in 2005, 2006 and 2007, an outstanding result. The awards of business also evidence that significant inroads are being made into new customer areas, such as the DCX fuel systems group."
A conference call to discuss those results will be held on Wednesday, Nov. 12, 2003, at 8 a.m. (Toronto time) which can be accessed by dialling (416) 405-9328 or toll-free (800) 387-6216. Please call 10 minutes prior to the start of the conference call. There will also be a rebroadcast of the call available by dialling (416) 695-5800 or toll-free number (800) 408-3053 (conference ID -- 1489616#). The rebroadcast will be available until Friday, Nov. 21, 2003.
WARNING: The company relies upon litigation protection for "forward-looking" statements.
CONSOLIDATED STATEMENT OF
OPERATIONS
Three months ended Sept. 30
(In thousands of dollars)
2003 2002
Sales $141,423 $73,423
Cost of sales 118,932 62,584
------- -------
Gross profit 22,491 10,839
Expenses
Selling,
administrative
and general 9,122 5,582
Foreign exchange (255) (397)
Amortization 5,810 2,452
Interest on long-
term debt 1,275 453
Interest expense
(income), net 29 30
------- -------
15,981 8,120
Earnings (loss)
before income
taxes (recovery)
and non-
controlling
interest 6,510 2,719
Income taxes
(recovery)
Current 1,976 (977)
Future 368 1,893
------- -------
2,344 916
Earnings (loss)
before non-
controlling
interest 4,166 1,803
Non-controlling
interest (5) 181
------- -------
Net earnings
(loss) $4,171 $1,622
======= =======
Earnings (loss)
per common share
Basic $0.08 $0.04
Diluted $0.07 $0.03
CONSOLIDATED STATEMENT OF
OPERATIONS
Nine months ended Sept. 30
(In thousands of dollars)
2003 2002
Sales $435,431 $141,112
Cost of sales 366,730 121,220
------- -------
Gross profit 68,701 19,892
Expenses
Selling,
administrative
and general 30,329 13,789
Foreign exchange (1,706) (179)
Amortization 15,559 5,973
Interest on long-
term debt 4,721 917
Interest expense
(income), net 147 (380)
------- -------
49,050 20,120
Earnings (loss)
before income
taxes (recovery)
and non-
controlling
interest 19,651 (228)
Income taxes
(recovery)
Current 6,862 (2,344)
Future (307) 2,287
------- -------
6,555 (57)
Earnings (loss)
before non-
controlling
interest 13,096 (171)
Non-controlling
interest (46) 216
------- -------
Net earnings
(loss) $13,142 $(387)
======= =======
Earnings (loss)
per common share
Basic $0.24 $(0.01)
Diluted $0.23 $(0.01)
CONSOLIDATED STATEMENT OF
RETAINED EARNINGS
Three months ended Sept. 30
(In thousands of dollars)
2003 2002
Retained earnings,
beginning of
period $14,227 $3,237
Adjustment to
reflect change
in accounting for
stock-based
compensation plan - -
------ ------
Retained earnings
as restated,
beginning of
period 14,227 3,237
Net earnings
(loss) 4,171 1,622
------ ------
Retained earnings,
end of period $18,398 $4,859