Martinrea International Inc. Reports Record Third Quarter Results and Declares Dividend

Wednesday, 11. November 2020 23:01

TORONTO, Nov. 11, 2020 (GLOBE NEWSWIRE) -- Martinrea International Inc. (TSX : MRE), a diversified and global automotive supplier engaged in the design, development and manufacturing of highly engineered, value-added Lightweight Structures and Propulsion Systems, today announced the release of its financial results for the third quarter ended September 30, 2020 and that it has declared a quarterly cash dividend of $0.05 per share.

HIGHLIGHTS

  • Total sales of $971 million; production sales of $933 million
  • Record third quarter fully diluted net earnings per share of $0.57
  • Quarterly adjusted operating income(1) margin of 7.8%, above year-ago levels
  • Balance sheet ended the quarter strong, with a reduction in net debt during the quarter of over $100 million
  • Production volumes recovering more quickly than expected following the industry-wide COVID-19 shutdowns earlier this year
  • Strong fourth quarter anticipated
  • Dividend of $0.05 per share declared

OVERVIEW

Pat D’Eramo, President and Chief Executive Officer, stated: “Our third quarter performance was a record for the Company, and much improved over the previous quarter, as industry production volumes recovered more quickly than previously expected following the COVID-19 shutdowns. Demand in our key North American market remains strong and vehicle inventories remain low, particularly on truck, SUV and CUV platforms, where we are more heavily weighted. Looking at other markets, demand in China remains strong, while Europe is recovering, albeit at a more gradual pace. Operationally, we continue to perform well, as evidenced by our strong operating income margin during the quarter, which came in at 7.8%, or over 9% excluding our recently-acquired Martinrea Metalsa Group. Our focus on lean and operational excellence paid off during the quarter and we thank the team for their efforts and dedication during these challenging times. We are looking forward to a strong fourth quarter, based on anticipated volumes as we see them today, as OEMs continue to replenish currently low vehicle inventory levels. We expect fourth quarter production sales in the range of $900 million to $1.0 billion, and adjusted net earnings per share (1) in the range of $0.46 to $0.54, including the recently-acquired assets from Metalsa, which has been a drag on earnings as we drive efficiencies, in particular in our new German facility. The integration of the newly-acquired business is going well and we expect its performance to improve as we execute on the roadmap in front of us. We are also happy to announce new business wins totalling $70 million in annualized sales, including $45 million in Propulsion Systems for FCA and General Motors, $10 million in lightweight structures for electric vehicle platforms with General Motors, and $15 million for a battery box for Volvo’s heavy-duty truck in our Industrial group. We are seeing the highest level of quoting activity in our Industrial Group since my time at Martinrea, and we see opportunities to grow this business. We also expect to see our first product with graphene in production in 2021, a graphene-enhanced brake line for one of our OEM customers. Our customer has tested and approved the product and is working with us to convert current production from standard brake lines to the more durable graphene-enhanced brake lines. We are big proponents of graphene and its potential applications, and we intend to capitalize on this potential through our investment in NanoXplore.”

Fred Di Tosto, Chief Financial Officer, stated: “We experienced a sharp rebound in our financial results during the third quarter, as the Company and our industry recovered following the COVID-19 shutdowns.   Volumes were strong during the quarter and operating margins were above year-ago levels, driven by strength in our North American operations, reflective of volume and a positive sales mix, operating cost reductions, lower tooling sales and some benefit from government wage subsidies. Third quarter production sales, excluding the newly-acquired Martinrea Metalsa operations, were approximately flat year-over-year, with adjusted operating income(1) coming in at $75.6 million, up 9.4% year-over-year. We generated strong free cash flow (1) during the quarter, which resulted in a reduction in net debt of over $100.0 million. Our net debt to adjusted EBITDA(1) ratio ended the quarter at 2.21x, and approximately 1.70x for bank covenant purposes, given the agreement we reached with our banking syndicate to eliminate Q2 adjusted EBITDA(1) from the covenant calculation. We believe we entered the COVID-19 driven downturn with a strong balance sheet which has ultimately allowed us to navigate our way through the COVID crisis with confidence. Our net debt at the end of the third quarter was essentially back to pre-COVID levels and we funded an acquisition during that time. A very good result from all accounts and reflective of the strength of the business. Overall, we are very pleased with our third quarter results. To be able to post year-over-year growth in adjusted operating income (1), adjusted net earnings per share (1), and free cash flow (1) in the middle of a pandemic is an achievement of which we are all proud.”

Rob Wildeboer, Executive Chairman, stated: “From a macro perspective, our industry is recovering from the longest shutdown in its history at a pace few of us would have expected only a few short months ago. North American auto sales have now recovered close to pre-COVID volumes and are now at a sustainable level based on previous cycles. Strong demand, coupled with low inventories, sets the stage for a continued recovery in production in the months and years ahead. We believe some interesting trends are emerging that could support vehicle demand well into the future, including the perception of the vehicle as a safe, self-contained method of transportation, and an increase in demand for living space outside of large metropolitan areas. Overall, we think our future is bright, and not just from an industry recovery perspective. More importantly, we are an innovative company that invests in and develops leading-edge technology, as evidenced by our relationship with NanoXplore and development of new products, including graphene-enhanced brake lines. Our focus on innovation and our operational strength has enabled us to emerge from the COVID-19 crisis as a stronger and more competitive company. It’s in times like these that our focus on culture and our vision of making people’s lives better by being the best we can be in the products we make and the services we provide comes through for us. We want to thank our dedicated employees for their great service, as well as our shareholders, lenders, suppliers, customers and governments for their hard work and support.”

RESULTS OF OPERATIONS

All amounts in this press release are in Canadian dollars, unless otherwise stated; and all tabular amounts are in thousands of Canadian dollars, except earnings per share and number of shares. 

Additional information about the Company, including the Company’s Management Discussion and Analysis of Operating Results and Financial Position for the third quarter ended September 30, 2020 (“MD&A”), the Company’s interim condensed consolidated financial statements for the third quarter ended September 30, 2020 (the “interim financial statements”) and the Company’s Annual Information Form for the year ended December 31, 2019, can be found at www.sedar.com.

OVERALL RESULTS

Results of operations may include certain unusual and other items that have been separately disclosed, where appropriate, in order to provide a clear assessment of the underlying Company results. In addition to IFRS measures, management uses non-IFRS measures in the Company’s disclosures that it believes provide the most appropriate basis on which to evaluate the Company’s results.

The following tables set out certain highlights of the Company’s performance for the three and nine months ended September 30, 2020 and 2019. Refer to the Company’s interim financial statements for the three and nine months ended September 30, 2020 for a detailed account of the Company’s performance for the periods presented in the tables below.

  Three months ended September 30, 2020 Three months ended September 30, 2019$ Change% Change
Sales$971,060 $974,384 (3,324)(0.3%)
Gross Margin 151,478  143,901 7,577 5.3%
Operating Income 75,562  73,243 2,319 3.2%
Net Income for the period 45,636  46,678 (1,042)(2.2%)
Net Earnings per Share - Basic$0.57 $0.57 - - 
Net Earnings per Share - Diluted$0.57 $0.56 0.01 1.8%
Non-IFRS Measures*      
Adjusted Operating Income$75,562 $69,044 6,518 9.4%
% of Sales 7.8% 7.1%  
Adjusted EBITDA 134,232  122,401 11,831 9.7%
% of Sales 13.8% 12.6%  
Adjusted Net Income 45,636  43,507 2,129 4.9%
Adjusted Net Earnings per Share - Basic and Diluted$0.57 $0.53 0.04 7.5%


  Nine months ended September 30, 2020 Nine months ended September 30, 2019$ Change% Change
Sales$2,304,330 $2,946,078 (641,748)(21.8%)
Gross Margin 259,256  456,180 (196,924)(43.2%)
Operating Income (Loss) (38,598) 214,008 (252,606)(118.0%)
Net Income (Loss) for the period (72,287) 130,068 (202,355)(155.6%)
Net Earnings (Loss) per Share - Basic$(0.90)$1.57 (2.47)(157.3%)
Net Earnings (Loss) per Share - Diluted$(0.90)$1.56 (2.46)(157.7%)
Non-IFRS Measures*      
Adjusted Operating Income$57,844 $236,476 (178,632)(75.5%)
% of Sales 2.5% 8.0%  
Adjusted EBITDA 233,779  394,021 (160,242)(40.7%)
% of Sales 10.1% 13.4%  
Adjusted Net Income 2,644  153,853 (151,209)(98.3%)
Adjusted Net Earnings per Share - Basic$0.03 $1.86 (1.83)(98.4%)
Adjusted Net Earnings per Share - Diluted$0.03 $1.85 (1.82)(98.4%)

*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 additional information in measuring the financial performance and condition of the Company. These measures, which the Company believes are widely used by investors, securities analysts and other interested parties in evaluating the Company’s performance, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Non-IFRS measures include “Adjusted Net Income”, “Adjusted Net Earnings per Share (on a basic and diluted basis)”, “Adjusted Operating Income”, "Adjusted EBITDA”, “Free Cash Flow” and “Net Debt”. Please refer to the Company’s previously filed annual and interim MD&A of operating results and financial position for the fiscal year 2019 for a full reconciliation of IFRS to non-IFRS measures.

The following tables provide a reconciliation of IFRS “Net Income (Loss)” to Non-IFRS “Adjusted Net Income”, “Adjusted Operating Income” and “Adjusted EBITDA”.

  Three months ended September 30, 2020 Three months ended September 30, 2019
Net Income$45,636 $46,678 
Unusual and Other Items (after-tax)* -  (3,171)
Adjusted Net Income$45,636 $43,507 
     
  Nine months ended September 30, 2020 Nine months ended September 30, 2019
Net Income (Loss)$(72,287)$130,068 
Unusual and Other Items (after-tax)* 74,931  23,785 
Adjusted Net Income$2,644 $153,853 
*Unusual and other items are explained in the "Adjustments to Net Income" section of this Press Release


  Three months ended September 30, 2020  Three months ended September 30, 2019
Net Income$45,636 $46,678 
Income tax expense 18,636  16,129 
Other finance expense - excluding Unusual and Other Items* 1,852  844 
Share of loss of an associate 300  818 
Finance expense 9,138  9,345 
Unusual and Other Items (before-tax)* -  (4,770)
Adjusted Operating Income$75,562 $69,044 
Depreciation of property, plant and equipment and right-of-use assets 55,237  50,200 
Amortization of intangible assets 3,196  4,104 
Loss (gain) on disposal of property, plant and equipment 237  (947)
Adjusted EBITDA$134,232 $122,401 


  Nine months ended September 30, 2020 Nine months ended September 30, 2019
Net Income (Loss)$(72,287)$130,068 
Income tax expense (benefit) (86) 52,156 
Other finance expense - excluding Unusual and Other Items* 5,008  1,130 
Share of loss of an associate 1,881  1,330 
Finance expense 26,886  29,085 
Unusual and Other Items (before-tax)* 96,442  22,707 
Adjusted Operating Income$57,844 $236,476 
Depreciation of property, plant and equipment and right-of-use assets 166,044  146,931 
Amortization of intangible assets 9,654  11,820 
Loss (gain) on disposal of property, plant and equipment 237  (1,206)
Adjusted EBITDA$233,779 $394,021 
*Unusual and other items are explained in the "Adjustments to Net Income" section of this Press Release


SALES      
       
Three months ended September 30, 2020 to three months ended September 30, 2019 comparison
       
  Three months ended September 30, 2020 Three months ended September 30, 2019$ Change% Change
North America$739,489 $780,989 (41,500)(5.3%)
Europe 189,366  157,736 31,630 20.1%
Rest of the World 46,999  37,727 9,272 24.6%
Eliminations (4,794) (2,068)(2,726)131.8%
Total Sales$971,060 $974,384 (3,324)(0.3%)

The Company’s consolidated sales for the third quarter of 2020 decreased by $3.3 million or 0.3% to $971.1 million as compared to $974.4 million for the third quarter of 2019. The total decrease in sales was driven by a year-over-year decrease in North America, partially offset by increases in the Europe and Rest of the World operating segments.

Sales for the third quarter of 2020 in the Company’s North America operating segment decreased by $41.5 million or 5.3% to $739.5 million from $781.0 million for the third quarter of 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $29.7 million of year-over-year sales (including $0.4 million in tooling sales) to the North America operating segment. Excluding the acquired operations, third quarter sales in North America decreased year-over-year by $71.2 million or 9.1%. This decrease was due to a decrease in tooling sales of $100.3 million, which are typically dependent on the timing of tooling construction and final acceptance by the customer; partially offset by higher production volumes on General Motors pick-up truck and large SUV platform, which was negatively impacted by the United Auto Workers strike at General Motors during the third quarter of 2019, the continued production of ventilator stands for General Motors, and the impact of foreign exchange on the translation of U.S.-denominated production sales, which had a positive impact on overall sales for the third quarter of 2020 of approximately $11.8 million as compared to the third quarter of 2019. Overall third quarter OEM light vehicle production in North America was essentially flat year-over-year, despite the COVID-19 global pandemic.

Sales for the third quarter of 2020 in the Company’s Europe operating segment increased by $31.6 million or 20.1% to $189.4 million from $157.7 million for the third quarter of 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $53.5 million of year-over-year sales (including $5.8 million in tooling sales) to the Europe operating segment. Excluding the acquired operations, third quarter sales in Europe decreased year-over-year by $21.9 million or 13.9%. This decrease was due to overall lower industry volumes, primarily as a result of the COVID-19 pandemic; partially offset by an $8.4 million increase in tooling sales, and a $4.9 million positive foreign exchange impact from the translation of Euro-denominated production sales as compared to the third quarter of 2019.

Sales for the third quarter of 2020 in the Company’s Rest of the World operating segment increased by $9.3 million or 24.6% to $47.0 million from $37.7 million for the third quarter of 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $21.7 million of year-over-year sales to the Rest of the World operating segment. Excluding the acquired operations, third quarter sales in the Rest of the World decreased year-over-year by $12.4 million or 32.9%. This decrease was largely driven by lower year-over-year production volumes on the Cadillac CT6 vehicle platform in China, a $4.3 million decrease in tooling sales, and a $1.8 million negative foreign exchange impact from the translation of foreign-denominated production sales as compared to the third quarter of 2019.

Overall tooling sales, inclusive of the operations acquired from Metalsa, decreased by $90.0 million to $37.8 million for the third quarter of 2020 from $127.8 million for the third quarter of 2019.

Nine months ended September 30, 2020 to nine months ended September 30, 2019 comparison
       
  Nine months ended September 30, 2020 Nine months ended September 30, 2019$ Change% Change
North America$1,745,151 $2,346,167 (601,016)(25.6%)
Europe 449,251  513,742 (64,491)(12.6%)
Rest of the World 120,665  91,526 29,139 31.8%
Eliminations (10,737) (5,357)(5,380)100.4%
Total Sales$2,304,330 $2,946,078 (641,748)(21.8%)

The Company’s consolidated sales for the nine months ended September 30, 2020 decreased by $641.7 million or 21.8% to $2,304.3 million as compared to $2,946.1 million for the nine months ended September 30, 2019. The total decrease in sales was driven by decreases in the North America and Europe operating segments, partially offset by an increase in sales in the Rest of the World.

Sales for the nine months ended September 30, 2020 in the Company’s North America operating segment decreased by $601.1 million or 25.6% to $1,745.2 million from $2,346.2 million for the nine months ended September 30, 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $47.7 million of year-over-year sales (including $1.7 million in tooling sales) to the North America operating segment. Excluding the acquired operations, sales for the nine months ended September 30, 2020 in North America decreased year-over-year by $648.8 million or 27.7%. This decrease was due to overall lower industry volumes, primarily as a result of the impact of the COVID-19 pandemic, and a decrease in tooling sales of $152.6 million, which are typically dependent on the timing of tooling construction and final acceptance by the customer. These negative factors were partially offset by the impact of foreign exchange on the translation of U.S.-denominated production sales, which had a positive impact on overall sales for the nine months ended September 30, 2020 of approximately $23.0 million as compared to the corresponding period of 2019, and the launch of new programs during or subsequent to the nine months ended September 30, 2019, including the General Motors heavy duty truck, and the production of ventilator stands for General Motors.

Sales for the nine months ended September 30, 2020 in the Company’s Europe operating segment decreased by $64.5 million or 12.6% to $449.3 million from $513.7 million for the nine months ended September 30, 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $98.8 million of year-over-year sales (including $9.7 million in tooling sales) to the Europe operating segment. Excluding the acquired operations, sales for the nine months ended September 30, 2020 in Europe decreased year-over-year by $163.3 million or 31.8%. This decrease can be attributed to overall lower industry volumes, primarily as a result of the impact of the COVID-19 pandemic; lower pre-COVID year-over-year production related to certain light vehicle platforms, in particular with Daimler and Jaguar Land Rover; and a $2.8 million decrease in tooling sales. These negative factors were partially offset by the launch of new programs during or subsequent to the nine months ended September 30, 2019, namely an aluminum transmission for Volkswagen; and a $1.3 million positive foreign exchange impact from the translation of Euro-denominated production sales as compared to the corresponding period of 2019.

Sales for the nine months ended September 30, 2020 in the Company’s Rest of the World operating segment increased by $29.1 million or 31.8% to $120.7 million from $91.5 million for the nine months ended September 30, 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $48.8 million of year-over-year sales to the Rest of the World operating segment. Excluding the acquired operations, sales for the nine months ended September 30, 2020 in the Rest of the World decreased year-over-year by $19.7 million or 21.5%. This decrease was largely driven by COVID-19 related disruption, lower year-over-year production volumes on the Cadillac CT6 vehicle platform in China, a $3.9 million negative foreign exchange impact from the translation of foreign-denominated production sales as compared to the corresponding period of 2019, and a $0.4 million decrease in tooling sales.

Overall tooling sales, inclusive of the operations acquired from Metalsa, decreased by $144.4 million to $129.8 million for the nine months ended September 30, 2020 from $274.2 million for the nine months ended September 30, 2019.

GROSS MARGIN      
       
Three months ended September 30, 2020 to three months ended September 30, 2019 comparison
       
  Three months ended September 30, 2020 Three months ended September 30, 2019$ Change% Change
Gross margin$151,478 $143,901 7,5775.3%
% of Sales 15.6% 14.8%  

The gross margin percentage for the third quarter of 2020 of 15.6% increased as a percentage of sales by 0.8% as compared to the gross margin percentage for the third quarter of 2019 of 14.8%. The increase in gross margin as a percentage of sales was generally due to a decrease in tooling sales which typically earn low margins for the Company; a positive sales mix; productivity and efficiency improvements at certain operating facilities; and the receipt of certain COVID-related government wage subsidies. These positive factors were partially offset by a negative impact on overall margin percentage from the operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, and operational inefficiencies and other costs at certain facilities including upfront costs incurred in preparation of upcoming new programs.

Nine months ended September 30, 2020 to nine months ended September 30, 2019 comparison
       
  Nine months ended September 30, 2020 Nine months ended September 30, 2019$ Change% Change
Gross margin$259,256 $456,180 (196,924)(43.2%)
% of Sales 11.3% 15.5%  

The gross margin percentage for the nine months ended September 30, 2020 of 11.3% decreased as a percentage of sales by 4.2% as compared to the gross margin percentage for the nine months ended September 30, 2019 of 15.5%. The decrease in gross margin as a percentage of sales was generally due to overall lower sales volume and corresponding lower utilization of assets, driven primarily by the impact of the COVID-19 pandemic; a negative impact on overall margin percentage from the operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020; and operational inefficiencies and other costs at certain facilities including upfront costs incurred in preparation of upcoming new programs. These negative factors were partially offset by productivity and efficiency improvements at certain operating facilities; the receipt of certain COVID-related government wage subsidies; and a decrease in tooling sales, which typically earn low margins for the Company. The sharp sales decline in April and May, as a result of the COVID-19 related shutdowns, coupled with a volatile restart and ramp-up of production in May and June with limited predictability had a significant impact on gross margin during the second quarter of 2020, despite major reductions in costs.

ADJUSTMENTS TO NET INCOME (LOSS)

Adjusted Net Income (Loss) excludes certain unusual and other items, as set out in the following tables and described in the notes thereto. Management uses Adjusted Net Income (Loss) as a measurement of operating performance of the Company and believes that, in conjunction with IFRS measures, it provides useful information about the financial performance and condition of the Company.

TABLE A
     
Three months ended September 30, 2020 to three months ended September 30, 2019 comparison 
     
 Three months ended Three months ended 
 September 30, 2020 September 30, 2019(a)-(b)
 (a) (b)Change
     
NET INCOME (A)$45,636 $46,678 $(1,042)
     
Add Back - Unusual and Other Items:    
     
Gain on derivative instruments (4) -  (571) 571 
Net gain in the Company's operating facility in Brazil (5) -  (4,199) 4,199 
     
     
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX - $(4,770)$4,770 
     
Tax impact of above items -  1,599  (1,599)
     
     
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B) - $(3,171)$3,171 
     
     
ADJUSTED NET INCOME (A + B)$45,636 $43,507 $2,129 
     
     
Number of Shares Outstanding – Basic (‘000) 80,189  82,593  
Adjusted Basic Net Earnings Per Share$0.57 $0.53  
Number of Shares Outstanding – Diluted (‘000) 80,200  82,713  
Adjusted Diluted Net Earnings Per Share$0.57 $0.53  
     


TABLE B
     
Nine months ended September 30, 2020 to nine months ended September 30, 2019 comparison   
     
 Nine months ended
 Nine months ended
 
 September 30, 2020 September 30, 2019(a)-(b)
 (a) (b)Change
     
NET INCOME (LOSS) (A)$(72,287) $130,068 $(202,355)
     
Add Back - Unusual and Other Items:    
     
Transaction costs associated with the business acquired from Metalsa (recorded as SG&A) (1) 2,489   -  2,489 
Impairment of assets (2) 85,783   18,502  67,281 
Restructuring costs (3) 8,170   8,165  5 
Loss on derivative instruments (4) -   239  (239)
Net gain in the Company's operating facility in Brazil (5) -   (4,199) 4,199 
     
     
     
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX$96,442  $22,707 $73,735 
     
Tax impact of above items (21,511)  1,078  (22,589)
     
     
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B)$74,931  $23,785 $51,146 
     
ADJUSTED NET INCOME (A + B)$2,644  $153,853 $(151,209)
     
Number of Shares Outstanding – Basic (‘000) 80,090   82,897  
Adjusted Basic Net Earnings Per Share$0.03  $1.86  
Number of Shares Outstanding – Diluted (‘000) 80,090   83,054  
Adjusted Diluted Net Earnings Per Share$0.03  $1.85  
     

(1)   Transaction costs associated with the operations acquired from Metalsa (recorded as SG&A)

On March 2, 2020, the Company completed the acquisition of the structural components for passenger car operations of Metalsa S.A, de C.V. Included in SG&A expense are transaction costs related to the acquisition totaling $nil and $2.5 million for the three and nine months ended September 30, 2020, respectively.

(2)   Impairment of assets

The significant reduction in volumes and industry production projections as a result of the COVID-19 global pandemic has negatively impacted the recoverable amount of certain of the Company’s production-related assets and has also changed the expected usage of certain other assets. As a result, during the second quarter of 2020, the Company completed an analysis of its asset base and concluded there existed certain indicators of impairment for specific assets and cash-generating units (CGUs). Accordingly, the Company tested these assets and CGUs for recoverability using projected sales and cash flows modelled from industry production projections. Based on the results of this testing, during the second quarter of 2020, the Company recorded impairment charges on property, plant and equipment, right-of-use assets, intangible assets and inventories across its three operating segments totaling $85.8 million, including specific assets that are no longer expected to be redeployed or transferred to other facilities. The charges related to assets and CGUs across various jurisdictions in the Company’s segments, including the United States, Slovakia, China and Brazil. Of the total impairment charge, $72.2 million was recognized in North America, $1.3 million in Europe, and $12.3 million in the Rest of the World. For the specific assets that are no longer expected to be redeployed or transferred, the impairment charges are based on the estimated salvage value of the assets. For the CGUs, the impairment charges were recorded where the carrying amount of the CGUs exceeded their estimated recoverable amounts.

During the second quarter of 2019, the Company recorded impairment charges on property, plant, equipment, right-of-use assets, intangible assets and inventories totaling $18.5 million related to an operating facility in China included in the Rest of the World operating segment. The impairment charges resulted from lower OEM production volumes on certain light vehicle platforms being serviced by the facility, representing a significant portion of the business, causing the Company to complete an analysis of strategic alternatives. The impairment charges were recorded where the carrying amount of the assets exceeded their estimated recoverable amounts, including consideration for where specific assets can be transferred to other facilities.

(3)   Restructuring costs

Additions to the restructuring provision, recognized during the second quarter of 2020, totaled $8.2 million and represent employee-related severance resulting from a reduction in the Company’s workforce globally in response to the COVID-19 global pandemic. Of the total addition to the restructuring provision, $6.6 million relates to North America, $1.0 million to Europe and $0.6 million to the Rest of the World.

Additions to the restructuring provision, recognized during the second quarter of 2019, totaled $8.2 million and represent employee-related severance resulting from the right-sizing of operating facilities in the North America ($1.7 million) and Rest of the World ($6.5 million) operating segments.

(4)   Loss (gain) on derivative instruments

Martinrea held warrants in NanoXplore Inc., a publicly listed graphene company on the TSX Venture Exchange under the ticker symbol GRA. The warrants represented derivative instruments and were fair valued at the end of each reporting period using the Black-Scholes-Merton valuation model, with the change in fair value recorded through profit or loss. Based on the fair value of the outstanding warrants as at September 30, 2019, a gain of $0.6 million was recognized for the three months ended September 30, 2019 and a loss of $0.2 million was recognized for the nine months ended September 30, 2019. All outstanding remaining warrants in NanoXplore expired in March 2020 unexercised.

(5)   Net gain in the Company’s operating facility in Brazil

Included in income for the three months ended September 30, 2019 is a non-recurring benefit recognized in the Company’s operating facility in Brazil, included in the Rest of World operating segment. The benefit represents a $6.5 million recovery of previously paid local social security taxes, partially offset by a $2.3 million true-up of the facility’s claims and litigation provision related to certain employee-related matters. The benefit was recorded against selling, general and administrative expense.

NET INCOME (LOSS)
 
        
Three months ended September 30, 2020 to three months ended September 30, 2019 comparison
        
  Three months ended September 30, 2020  Three months ended September 30, 2019$ Change% Change
Net Income$45,636 $46,678(1,042)(2.2%)
Adjusted Net Income$45,636 $43,5072,129 4.9%
Net Earnings per Share       
Basic$0.57 $0.57  
Diluted$0.57 $0.56  
Adjusted Net Earnings per Share       
Basic and Diluted$0.57 $0.53  

Net income, before adjustments, for the third quarter of 2020 decreased by $1.0 million to $45.6 million from $46.7 million for the third quarter of 2019. The slight decrease was due largely to the unusual and other items recognized during the third quarter of 2019 as explained in Table A under “Adjustments to Net Income (Loss)”. Excluding these unusual and other items, adjusted net income for the third quarter of 2020 increased by $2.1 million to $45.6 million or $0.57 per share, on a basic and diluted basis, from $43.5 million or $0.53 per share, on a basic and diluted basis, for the third quarter of 2019.

Adjusted Net Income for the third quarter of 2020, as compared to the third quarter of 2019, was positively impacted by the following:

  • higher gross profit on essentially flat year-over-year sales as previously explained; and
  • a year-over-year decrease in research and development costs due primarily to a decrease in new product and process research and development activity in light of the COVID-19 pandemic.

These factors were partially offset by the following:

  • negative third quarter results from the operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020;
  • a year-over-year increase in SG&A expense, excluding adjustments, as previously explained; and
  • a higher effective tax rate on adjusted income due generally to the mix of earnings stemming from the addition of the assets acquired from Metalsa (29.0% for the third quarter of 2020 compared to 25.0% for the third quarter of 2019).

Nine months ended September 30, 2020 to nine months ended September 30, 2019 comparison
       
  Nine months ended September 30, 2020 Nine months ended September 30, 2019$ Change% Change
Net Income (Loss)$(72,287)$130,068(202,355)(155.6%)
Adjusted Net Income$2,644 $153,853(151,209)(98.3%)
Net Earnings (Loss) per Share      
Basic$(0.90)$1.57  
Diluted$(0.90)$1.56  
Adjusted Net Earnings per Share      
Basic$0.03 $1.86  
Diluted$0.03 $1.85  

Net Income (Loss), before adjustments, for the nine months ended September 30, 2020 decreased by $202.4 million to a net loss of $72.3 million from net income of $130.1 million for the nine months ended September 30, 2019 due to the lower year-over-year sales volume, due primarily to the impact of the COVID-19 pandemic, and certain unusual and other items incurred during the nine months ended September 30, 2020 and 2019 as explained in Table B under “Adjustments to Net Income (Loss)”. Excluding these unusual and other items, adjusted net income for the nine months ended September 30, 2020 decreased to $2.6 million or $0.03 per share, on a basic and diluted basis, from $153.9 or $1.86, on a basic basis, and $1.85 on a diluted basis, for the nine months ended September 30, 2019.

Adjusted Net Income for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019, was negatively impacted by the following:

  • lower gross profit on lower year-over-year sales volume, as previously explained, due primarily to the impact of the COVID-19 pandemic;
  • negative year-to-date results from the operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020;
  • a net unrealized foreign exchange loss of $5.2 million for the nine months ended September 30, 2020 compared to a loss of $1.5 million for the nine months ended September 30, 2019; and
  • a higher effective tax rate on adjusted income due generally to the mix of earnings and tax impacts of the unusual and other items explained in Table B under “Adjustments to Net Income (Loss)” (89.0% for the nine months ended September 30, 2020 compared to 24.9% for the nine months ended September 30, 2019).

These factors were partially offset by the following:

  • a year-over-year decrease in SG&A expense, as previously discussed;
  • a year-over-year decrease in research and development costs due primarily to a decrease in new product and process research and development activity in light of the COVID-19 pandemic; and
  • a year-over-year decrease in finance expense on the Company’s long-term debt primarily as a result of lower borrowing rates.

DIVIDEND

A cash dividend of $0.05 per share has been declared by the Board of Directors payable to shareholders of record on December 31, 2020, on or about January 15, 2021.

ABOUT MARTINREA

Martinrea is a diversified and global automotive supplier engaged in the design, development and manufacturing of highly engineered, value-added Lightweight Structures and Propulsion Systems.

Martinrea operates in 57 locations in Canada, the United States, Mexico, Brazil, Germany, Slovakia, Spain, China, South Africa and Japan. Martinrea’s vision is making lives better by being the best supplier we can be in the products we make and the services we provide. For more information on Martinrea, please visit www.martinrea.com. Follow Martinrea on Twitter and Facebook.

CONFERENCE CALL DETAILS

A conference call to discuss the financial results will be held on Wednesday, November 11, 2020 at 5:30 p.m. (Toronto time) which can be accessed by dialing 416-641-6104 or toll free 800-952-5114 (participant code 4636275#). Please call 10 minutes prior to the start of the conference call.

A webcast of the Q3 slide presentation will be available in listen-only mode at the following link https://bell.media-server.com/mmc/p/c5aq96dh beginning at 5:30 p.m. (Toronto time). Please note that to participate in the question and answer session, the dial in numbers and participant code must be used.

There will also be a rebroadcast of the call available by dialing 905-694-9451 or toll free 800-408-3053 (conference id –4851137#). The rebroadcast will be available until December 5, 2020. The webcast presentation will be available for replay on the Martinrea website.

If you have any teleconferencing questions, please call Ganesh Iyer at 416-749-0314.

FORWARD-LOOKING INFORMATION

Special Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of applicable Canadian securities laws including statements related to the growth or expectations of, improvements in, expansion of and/or guidance or outlook as to future revenue, sales, margin, gross margin, earnings, and earnings per share, adjusted earnings per share, adjusted net earnings per share, operating income margins, operating margins, adjusted operating income margins, volumes, the strength of the fourth quarter 2020 and future growth; the recovery of the automotive industry and various markets, emerging trends that could support vehicle demand; the strength of the Company, including post-COVID-19; anticipated program wins, pursuit of its strategies (including investing in and growing the business, including the industrial business; expected production in 2021 of a product with graphene; the intention to capitalize on the NanoXplore investment); the integration and expected performance of the assets acquired from Metalsa; the payment of dividends as well as other forward-looking statements. The words “continue”, “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “views”, “intend”, “believe”, “plan”, “outlook” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances, such as expected sales and industry production estimates, current foreign exchange rates (FX), timing of product launches and operational improvements during the period and current Board approved budgets. Certain forward-looking financial assumptions are presented as non-IFRS information, and we do not provide reconciliation to IFRS for such assumptions. Many factors could cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, some of which are discussed in detail in the Company’s most recent Management Discussion and Analysis and Annual Information Form and other public filings which can found at www.sedar.com:

  • North American and global economic and political conditions and epidemics or pandemics;
  • the highly cyclical nature of the automotive industry and the industry’s dependence on consumer spending and general economic conditions;
  • the Company’s dependence on a limited number of significant customers;
  • financial viability of suppliers;
  • the Company’s reliance on critical suppliers and on suppliers for components and the risk that suppliers will not be able to supply components on a timely basis or in sufficient quantities;
  • competition;
  • the increasing pressure on the Company to absorb costs related to product design and development, engineering, program management, prototypes, validation and tooling;
  • increased pricing of raw materials and commodities;
  • outsourcing and insourcing trends;
  • the risk of increased costs associated with product warranty and recalls together with the associated liability;
  • product development and technological change;
  • the Company’s ability to enhance operations and manufacturing techniques;
  • dependence on key personnel;
  • limited financial resources/uncertainty of future financing/banking;
  • risks associated with the integration of acquisitions;
  • risks associated with private or public investment in technology companies;
  • the risks associated with joint ventures;
  • costs associated with rationalization of production facilities;
  • launch and operational costs;
  • labour relations matters;
  • trade restrictions;
  • changes in governmental regulations or laws including any changes to trade;
  • litigation and regulatory compliance and investigations;
  • quote and pricing assumptions;
  • currency risk;
  • fluctuations in operating results;
  • internal controls over financial reporting and disclosure controls and procedures;
  • environmental regulation and climate change;
  • the impact of climate, political, social and economic risks, natural disasters and pandemics in the countries in which we operate or sell to, or from which we source production;
  • a shift away from technologies in which the Company is investing;
  • competition with low cost countries;
  • the Company’s ability to shift its manufacturing footprint to take advantage of opportunities in emerging markets;
  • risks of conducting business in foreign countries, including China, Brazil and other markets;
  • potential tax exposures;
  • a change in the Company’s mix of earnings between jurisdictions with lower tax rates and those with higher tax rates, as well as the Company’s ability to fully benefit from tax losses;
  • under-funding of pension plans;
  • the cost of post-employment benefits;
  • impairment charges;
  • cybersecurity threats;
  • the potential volatility of the Company’s share price; and
  • dividends.

These factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking statements. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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

For further information, please contact:

Fred Di Tosto
Chief Financial Officer
Martinrea International Inc.
3210 Langstaff Road
Vaughan, Ontario L4K 5B2

Tel: 416-749-0314
Fax: 289-982-3001

___________________________________

1 The Company prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS”). However, the Company considers certain non-IFRS financial measures as useful additional information in measuring the financial performance and condition of the Company. These measures, which the Company believes are widely used by investors, securities analysts and other interested parties in evaluating the Company’s performance, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to financial measures determined in accordance with IFRS. Non-IFRS measures include “Adjusted Net Income”, “Adjusted Net Earnings per Share (on a basic and diluted basis)”, “Adjusted Operating Income”, "Adjusted EBITDA”, “Free Cash Flow” and “Net Debt”. A reconciliation of certain non-IFRS financial measures to measures determined in accordance with IFRS are contained in the Company’s Management Discussion and Analysis for the third quarter ended September 30, 2020.

 


Martinrea International Inc.
Interim Condensed Consolidated Balance Sheets 
(in thousands of Canadian dollars) (unaudited)     
        
        
 Note September 30, 2020
 December 31, 2019
ASSETS       
Cash and cash equivalents $214,049 $118,973 
Trade and other receivables3 672,870  560,976 
Inventories4 509,517  383,682 
Prepaid expenses and deposits  21,844  25,846 
Income taxes recoverable  31,163  16,783 
TOTAL CURRENT ASSETS  1,449,443  1,106,260 
Property, plant and equipment5 1,591,823  1,541,895 
Right-of-use assets6 204,113  188,378 
Deferred tax assets  191,185  165,890 
Intangible assets7 55,006  54,787 
Investments8 40,188  37,085 
TOTAL NON-CURRENT ASSETS  2,082,315  1,988,035 
TOTAL ASSETS $3,531,758 $3,094,295 
        
LIABILITIES       
Trade and other payables10$1,052,494 $728,787 
Provisions11 5,100  8,584 
Income taxes payable  24,329  7,477 
Current portion of long-term debt12 18,107  15,651 
Current portion of lease liabilities13 34,123  28,247 
TOTAL CURRENT LIABILITIES  1,134,153  788,746 
Long-term debt12 870,258  765,922 
Lease liabilities13 190,282  174,105 
Pension and other post-retirement benefits  74,933  63,789 
Deferred tax liabilities  76,633  83,310 
TOTAL NON-CURRENT LIABILITIES  1,212,106  1,087,126 
TOTAL LIABILITIES  2,346,259  1,875,872 
        
EQUITY       
Capital stock14 662,427  661,422 
Contributed surplus  43,256  42,449 
Accumulated other comprehensive income  147,813  89,107 
Retained earnings  332,003  425,445 
TOTAL EQUITY  1,185,499  1,218,423 
TOTAL LIABILITIES AND EQUITY $3,531,758 $3,094,295 

Subsequent event (note 2)

Contingencies (note 20)

See accompanying notes to the interim condensed consolidated financial statements.

On behalf of the Board:

“Robert Wildeboer”Director
  
“Terry Lyons”Director




Martinrea International Inc. 
Interim Condensed Consolidated Statements of Operations 
(in thousands of Canadian dollars, except per share amounts) (unaudited)                           
          
          
   Three months ended  Three months ended  Nine months ended Nine months ended
 Note September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
          
SALES $971,060 $974,384 $2,304,330 $2,946,078 
          
Cost of sales (excluding depreciation of property, plant and equipment and right-of-use assets)  (768,280) (783,885) (1,890,680) (2,353,926)
Depreciation of property, plant and equipment and right-of-use assets (production)  (51,302) (46,598) (154,394) (135,972)
Total cost of sales  (819,582) (830,483) (2,045,074) (2,489,898)
GROSS MARGIN  151,478  143,901  259,256  456,180 
          
Research and development costs  (6,884) (10,086) (21,571) (28,159)
Selling, general and administrative  (64,537) (57,381) (169,479) (176,024)
Depreciation of property, plant and equipment and right-of-use assets (non-production)  (3,935) (3,602) (11,650) (10,959)
Amortization of customer contracts and relationships  (323) (536) (964) (1,569)
Gain (loss) on disposal of property, plant and equipment  (237) 947  (237) 1,206 
Impairment of assets9 -  -  (85,783) (18,502)
Restructuring costs11 -  -  (8,170) (8,165)
OPERATING INCOME (LOSS)  75,562  73,243  (38,598) 214,008 
          
Share of loss of an associate8 (300) (818) (1,881) (1,330)
Finance expense (including interest on lease liabilities)17 (9,138) (9,345) (26,886) (29,085)
Other finance income (expense)17 (1,852) (273) (5,008) (1,369)
INCOME (LOSS) BEFORE INCOME TAXES  64,272  62,807  (72,373) 182,224 
          
Income tax (expense) benefit15 (18,636) (16,129) 86  (52,156)
NET INCOME (LOSS) FOR THE PERIOD $45,636 $46,678 $(72,287)$130,068 
          
          
Basic earnings (loss) per share16$0.57 $0.57 $(0.90)$1.57 
Diluted earnings (loss) per share16$0.57 $0.56 $(0.90)$1.56 

See accompanying notes to the interim condensed consolidated financial statements.




Martinrea International Inc.
Interim Condensed Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars, except per share amounts) (unaudited)     
         
         
  Three months ended Three months ended Nine months ended Nine months ended
  September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
         
NET INCOME (LOSS) FOR THE PERIOD$45,636 $46,678 $(72,287)$130,068 
Other comprehensive income (loss), net of tax:        
Items that may be reclassified to net income        
Foreign currency translation differences for foreign operations (14,770) (1,556) 59,153  (51,479)
Cash flow hedging derivative and non-derivative financial instruments:        
Unrealized gain (loss) in fair value of financial instruments 1,977  (1,184) (1,267) 2,336 
Reclassification of loss to net income 324  240  831  1,033 
Items that will not be reclassified to net income        
Change in fair value of investments -  -  -  (776)
Transfer of unrealized gain on investments to retained earnings on change in accounting method -  -  -  (4,314)
Share of other comprehensive income (loss) of an associate (82) (6) (11) 18 
Remeasurement of defined benefit plans 2,051  (3,763) (8,245) (8,187)
Other comprehensive income (loss), net of tax  (10,500) (6,269) 50,461  (61,369)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD$35,136 $40,409 $(21,826)$68,699 

See accompanying notes to the interim condensed consolidated financial statements.




Martinrea International Inc.
Interim Condensed Consolidated Statements of Changes in Equity
(in thousands of Canadian dollars) (unaudited) 

             
        Accumulated    
        other    
    Capital Contributed comprehensive Retained Total
    stock surplus income earnings equity
BALANCE AT DECEMBER 31, 2018$680,157 $42,016 $158,395 $270,981 $1,151,549 
Net income for the period -  -  -  130,068  130,068 
Compensation expense related to stock options -  892  -  -  892 
Dividends ($0.135 per share) -  -  -  (11,126) (11,126)
Exercise of employee stock options 2,036  (586) -  -  1,450 
Repurchase of common shares (8,708) -  -  (5,655) (14,363)
Other comprehensive income (loss) net of tax          
 Remeasurement of defined benefit plans -  -  -  (8,187) (8,187)
 Foreign currency translation differences -  -  (51,479) -  (51,479)
 Change in fair value of investments -  -  (776) -  (776)
 Transfer of unrealized gain on investments to retained earnings on change in accounting method -  -  (4,314) 4,314  - 
 Share of other comprehensive income of an associate -  -  18  -  18 
 Cash flow hedging derivative and non-derivative financial instruments:          
  Unrealized gain in fair value of financial instruments -  -  2,336  -  2,336 
  Reclassification of loss to net income -  -  1,033  -  1,033 
BALANCE AT SEPTEMBER 30, 2019 673,485  42,322  105,213  380,395  1,201,415 
Net income for the period -  -  -  51,153  51,153 
Compensation expense related to stock options -  303  -  -  303 
Dividends ($0.045 per share) -  -  -  (3,612) (3,612)
Exercise of employee stock options 645  (176) -  -  469 
Repurchase of common shares (12,708) -  -  (6,897) (19,605)
Other comprehensive income (loss) net of tax          
 Remeasurement of defined benefit plans -  -  -  4,406  4,406 
 Foreign currency translation differences -  -  (17,716) -  (17,716)
 Share of other comprehensive loss of an associate -  -  (44) -  (44)
 Cash flow hedging derivative and non-derivative financial instruments:          
  Unrealized gain in fair value of financial instruments -  -  1,399  -  1,399 
  Reclassification of loss to net income -  -  255  -  255 
BALANCE AT DECEMBER 31, 2019 661,422  42,449  89,107  425,445  1,218,423 
Net loss for the period -  -  -  (72,287) (72,287)
Compensation expense related to stock options -  1,812  -  -  1,812 
Dividends ($0.15 per share) -  -  -  (12,017) (12,017)
Exercise of employee stock options 3,479  (1,005) -  -  2,474 
Repurchase of common shares (2,474) -  -  (893) (3,367)
Other comprehensive income (loss) net of tax          
 Remeasurement of defined benefit plans -  -  -  (8,245) (8,245)
 Foreign currency translation differences -  -  59,153  -  59,153 
 Share of other comprehensive loss of an associate -  -  (11) -  (11)
 Cash flow hedging derivative and non-derivative financial instruments:          
  Unrealized loss in fair value of financial instruments -  -  (1,267) -  (1,267)
  Reclassification of loss to net income -  -  831  -  831 
BALANCE AT SEPTEMBER 30, 2020$662,427 $43,256 $147,813 $332,003 $1,185,499 

See accompanying notes to the interim condensed consolidated financial statements.




Martinrea International Inc.
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars) (unaudited) 

  Three months ended  Three months ended  Nine months ended Nine months ended
  September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
CASH PROVIDED BY (USED IN):        
OPERATING ACTIVITIES:        
Net Income (loss) for the period$45,636 $46,678 $(72,287)$130,068 
Adjustments for:        
Depreciation of property, plant and equipment and right-of-use assets 55,237  50,200  166,044  146,931 
Amortization of customer contracts and relationships 323  536  964  1,569 
Amortization of development costs 2,873  3,568  8,690  10,251 
Impairment of assets (note 9) -  -  85,783  18,502 
Unrealized loss on foreign exchange forward contracts 2,214  627  2,533  368 
Loss (gain) on warrants -  (571) -  239 
Finance expense (including interest on lease liabilities) 9,138  9,345  26,886  29,085 
Income tax expense (benefit) 18,636  16,129  (86) 52,156 
Loss (gain) on disposal of property, plant and equipment 237  (947) 237  (1,206)
Deferred and restricted share units expense (benefit) (236) 1,833  226  3,761 
Stock options expense 604  264  1,812  892 
Share of loss of an associate 300  818  1,881  1,330 
Pension and other post-retirement benefits expense 1,036  1,177  3,570  3,386 
Contributions made to pension and other post-retirement benefits (1,992) (1,616) (5,328) (4,249)
  134,006  128,041  220,925  393,083 
Changes in non-cash working capital items:        
Trade and other receivables (143,374) 1,795  (1,792) (53,146)
Inventories (62,073) 28,596  (84,780) 27,309 
Prepaid expenses and deposits 316  (2,137) 6,730  (5,002)
Trade, other payables and provisions 268,806  (38,097) 158,959  7,076 
  197,681  118,198  300,042  369,320 
         
Interest paid (8,895) (9,243) (27,375) (31,412)
Income taxes paid (10,262) (11,885) (24,473) (52,172)
NET CASH PROVIDED BY OPERATING ACTIVITIES$178,524 $97,070 $248,194 $285,736 
         
FINANCING ACTIVITIES:        
Increase in long-term debt (net of additions to deferred financing fees) 265  7,756  103,561  92,483 
Repayment of long-term debt (4,481) (3,811) (12,696) (27,193)
Principal payments of lease liabilities (8,606) (6,873) (23,885) (20,984)
Dividends paid (4,004) (3,724) (11,614) (11,265)
Exercise of employee stock options 1,618  528  2,474  1,450 
Repurchase of common shares -  (11,899) (3,367) (38,234)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES$(15,208)$(18,023)$54,473 $(3,743)
         
INVESTING ACTIVITIES:        
         
Purchase of property, plant and equipment (excluding capitalized interest)* (72,347) (57,431) (188,233) (217,877)
Business acquisition (excluding cash acquired) (note 2) -  -  (10,503) - 
Capitalized development costs (3,902) (2,624) (8,557) (8,056)
Investment in NanoXplore Inc. (note 8) -  (14,478) (5,000) (29,477)
Proceeds on disposal of property, plant and equipment 42  4,774  308  5,489 
Upfront recovery of development costs incurred -  767  -  767 
NET CASH USED IN INVESTING ACTIVITIES$(76,207)$(68,992)$(211,985)$(249,154)
         
Effect of foreign exchange rate changes on cash and cash equivalents 1,106  1,214  4,394  (1,592)
         
INCREASE IN CASH AND CASH EQUIVALENTS 88,215  11,269  95,076  31,247 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 125,834  90,140  118,973  70,162 
CASH AND CASH EQUIVALENTS, END OF PERIOD$214,049 $101,409 $214,049 $101,409 

*As at September 30, 2020, $40,731 (December 31, 2019 - $49,120) of purchases of property, plant and equipment remain unpaid and are recorded in trade and other payables and provisions.

See accompanying notes to the interim condensed consolidated financial statements.

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