Martinrea International Inc.: Releases September 30, 2005 Third Quarter Results Solid Earnings in a Tough Automotive Environment
TORONTO--Nov. 1, 20050, 2005--Martinrea International Inc. (TSX:MRE), a leader in the production of quality metal parts, assemblies and modules and fluid management systems focused primarily on the automotive sector, announced today the release of its financial results for the fiscal quarter ended September 30, 2005.Revenues for the quarter ended September 30, 2005 totaled $161.4 million as compared to $125.3 million for the quarter ended September 30, 2004, a 29% increase year over year. Revenues for the quarter ended September 30, 2005 have increased from the prior year comparables primarily due to the launch of new programs in the third quarter of 2005 such as the new metallic gas tank for the Ford Fusion that launched in August 2005, the fuel and brake bundle for the GM Impala that launched in July 2005, the hydroformed engine cradle and metallic assemblies for the new Cadillac DTS that launched in August 2005, and the inclusion of the revenues of the Company's recently acquired metal forming facility in Corydon, Indiana. In addition, the Company launched the hydroformed engine cradle and metallic assemblies for the Buick Lucerne in October 2005. The increase in revenues from new programs was offset by the appreciation of the Canadian dollar versus the U.S. dollar resulting in a reduction in revenue of approximately $3.6 million, and lower volumes on some existing customer platforms. Incremental production sales were also offset by customer pricing pressures that continue to be a normal part of the North American automotive parts industry. Production revenues are expected to continue to rise as new programs mature and launches are completed.
Gross margin percentage for the quarter ended September 30, 2005 was 16.7% as compared to 15.9% in the third quarter of 2004. Gross margin percentage for the quarter ended September 30, 2005 has increased in comparison to the prior year third quarter despite the pressure on gross margins from contractual price reductions with customers and steel surcharges on part of the Company's steel purchases not on customer steel re-sale programs. The Company has been able to increase gross margin due to ongoing cost reduction plans and the successful launching of new programs during the last twelve months that have helped to fill available capacity.
Net earnings for the quarter ended September 30, 2005 were approximately $4.56 million as compared to $0.97 million for the quarter ended September 30, 2004. The earnings per share for the quarter were $0.08 on a basic and diluted basis, as compared to $0.02 on a basic and diluted basis for the prior year comparable. The increase in net earnings from the prior year comparable is primarily attributable to increased revenues and improved gross margin. The increase in net earnings was offset by the appreciation of the Canadian dollar versus the U.S. dollar resulting in a reduction in net earnings of approximately $0.6 million.
Net earnings and diluted earnings per share for the third quarter of 2005 decreased compared to net earnings of $6.1 million and diluted earnings per share of $0.11 for the second quarter of 2005. This decrease is due primarily to the reduction of revenue from the traditional July shut down period and the payment of $0.4M of interest on an after tax basis in regards to the payment of an outstanding earn-out amount relating to the purchase in 2001 of the Alfield facility by a predecessor of the Company.
Amortization expense was $7.2 million for the quarter ended September 30, 2005 as compared to $6.3 million for the quarter ended June 30, 2004. The amortization expense in the Company's second quarter of 2005 was $6.9 million. The increase in amortization from the prior year and prior quarter comparables is attributable to amortization of capital assets that are now production ready.
Selling, general and administrative expenses for the quarter ended September 30, 2005 were $10.9 million, or 6.8% of revenues, compared to $9.9 million, or 7.9% of revenues, for the quarter ended September 30, 2004. As the Company's revenues grow these expenses as a percentage of revenues will decrease. The corporate infrastructure that the Company has established can accommodate significant future revenue growth.
Selling, general and administrative expenses for the third quarter of 2005 decreased compared to $11.9 million for the second quarter of 2005 due to the one-time charges for the restructuring of one of the Company's Canadian plants that were incurred in the second quarter of 2005.
Capital expenditures for the quarter ended September 30, 2005 totaled $3.7 million. Capital expenditures for the nine months ended September 30, 2005 totaled $20.0 million. The capital expenditures in the third quarter of 2005 relate primarily to new program assembly equipment being put in place for programs launching. For the full year 2005, the Company plans to spend approximately $30 to $32 million, primarily on new program capital.
The Company's financial condition remains strong given the continuing profitability of its operations and its prospects for growth and new program launches. The Company had a strong balance sheet as at September 30, 2005, with shareholders equity of $460.0 million, as compared to $449.1 million as at December 31, 2004. The Company's working capital of $32.6 million together with internally generated cash flow and existing financing facilities should be sufficient to cover anticipated cash needs.
Fred Jaekel, Martinrea's President and Chief Executive Officer, stated: "I am extremely pleased with the progress our Company has made in this quarter and the year to date. In 2005 the Company will record its highest ever level of sales and profitability. We have seen year over year improvement in revenues, profits and profitability, despite a very tough automotive environment. I am pleased to announce that the Company has been awarded approximately $35 million of incremental business in the third quarter of 2005. The incremental new business awards that launch in 2007 consist of metallic assemblies totaling $30 million and fluid management products totaling $5 million. As at September 30, 2005, Martinrea's ratio of current assets to current liabilities was 1.2:1, which is consistent with the prior year end and the second quarter of 2005. Among the metallic assemblies we are very pleased that we have won our first program for the replacement to the Cadillac CTS amounting to $14 million and an additional $9 million on the GMT900. Further inroads are also being made with Daimler Chrysler. The Company has been awarded metal contracts for the JS27 and KA totaling $7.8 million."
Mr. Jaekel added, "Our operations continue to improve and perform well overall. In the third quarter and since our last release, our launches have been going well, and I am very proud of the efforts of our people overall and with our launches. Our performance in these areas means we are becoming a supplier of choice for our customers and we are seeing increasing opportunities constantly. Taking advantage of the right opportunities will help us to grow prudently and profitably. To give you a sense of upcoming launches, the Company will launch at different times in 2006 new programs that will approximate $183 million on an annualized basis once full production is achieved. The Company will have incremental business of approximately $147 million annualized on the GMT900 that launches in December 2005 for the GMT900 SUV followed by the GMT900 pick-up truck in October 2006. This work is in addition to existing GMT800 work manufactured by the Company, which is carrying forward to the GMT900. The Company will also be launching approximately $29 million annualized for Daimler Chrysler on such vehicles as the RT Minivan, Dodge Nitro, Jeep Wrangler, Pacifica, and the D-Segment. Additional incremental business of approximately $7 million has also been won for the Ford F250 and F350."
Nick Orlando, Martinrea's Executive Vice-President and Chief Financial Officer, stated: "The Company's financial performance continues to improve. The Company's investments in equipment, facilities and personnel have allowed the Company to take advantage of the restructuring occurring in the automotive parts industry. New business awards continue to fill available capacity and as a result the Company's profitability has improved. The Company is constantly looking for ways to enhance its competitiveness. The Company's cost structure is always under review."
Nick Orlando added: "The Company has decided to close two facilities in the fourth quarter of 2005. One metal forming facility will be combined with another of the Company's metal forming facilities. This merging of facilities will result in operational savings and the transfer of many experienced personnel that will further enhance capability in other Martinrea facilities. Moving costs and equipment write-downs will be approximately $0.5 million after tax that will be expensed in the fourth quarter of 2005. The Company will also close the facility in the Netherlands as of December 31, 2005. As is the case in most Western European countries high labour costs have made this plant uncompetitive as automotive parts production moves to Eastern Europe. The closure of this plant will contribute to earnings in 2006. The facility will lose approximately $2.8 million on an after tax basis in 2005 from operations. In addition the Company will incur an after tax cash cost of $0.9 million for employee severance and a $1.1 million after-tax write down of equipment in the fourth quarter of 2005. The one time costs of closing these facilities of $2.5 million after tax will result in an approximate $0.05 reduction of earnings per share on a basic and fully diluted basis in the fourth quarter of 2005. In the fourth quarter of 2005, the Company estimates that revenues will range from $155 million to $170 million. Earnings per share for the fourth quarter of 2005 will range from $0.06 to $0.08 earnings per share on a basic and fully diluted basis, after the one time write-downs. In absence of the plant moving and closing costs the earnings per share from continuing operations would range from $0.11 to $0.13 per share. This will be a significant improvement over the prior year."
Rob Wildeboer, Martinrea's Chairman, stated: "We are pleased with our performance in 2005 so far. I think we are showing prudent, profitable growth. However, as a company we remain very focused on the future and building for revenue and earnings growth over time. Improving financial performance, in a very tough environment, is a reflection, we believe, of our entrepreneurial and decentralized structure and the fact that we are meeting customer needs by providing great products at competitive prices. Our balance sheet continues to strengthen in this environment, which provides us a strong base to pursue the right kinds of opportunities for our company and our people. The best way to provide security and opportunity for our people is to be successful in the marketplace. Our improving financial position gives us the opportunity to consider new business opportunities that many of our heavily indebted competitors are not able to undertake. Where we can, we will continue to pay down debt and strengthen our financial position but we will take advantage of that financial position and those opportunities where we can."
"The present automotive environment is choppy" Mr. Wildeboer added, "and events such as the Delphi bankruptcy process have created uncertainty. While any direct exposure we have to Delphi is minimal and has been protected, we are mindful of the potentially negative implications of supplier and OEM distress. At the same time, we are seeing opportunities to buy assets, perform takeover work, or look at other situations where we can help our customers, and we are doing so. As an example of an opportunity, we recently bought two 2500 ton transfer presses at extremely competitive prices that will give the Company significant additional capacity that can be marketed to our customers. We will look carefully, and we will act where prudent and profitable."
The common shares of Martinrea trade on The Toronto Stock Exchange under the symbol "MRE".
This press release contains forward-looking statements based on assumptions, uncertainties and management's best estimates of future events. When used herein, words such as "intend" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on assumptions by and information available to the Company. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include such risks and factors as are detailed from time to time in the Company's periodic reports filed with the Ontario Securities Commission and other regulatory authorities. Actual results may differ materially from those currently anticipated. The Company has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
A conference call to discuss these results will be held on Friday November 11, 2005 at 8:00 a.m. (Toronto time), which can be accessed by dialing (416) 340-2216 or toll free (866) 898-9626. 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 (416) 695-5800 or toll free (800) 408-3053 (conference id - 3163982#). The rebroadcast will be available until Friday November 29, 2005.
MARTINREA INTERNATIONAL INC.
Interim Consolidated Balance Sheets
As at September 30, 2005 (unaudited) with comparative figures for
December 31, 2004
(in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
September 30, December 31,
2005 2004
---------------------------------------------------------------------
Assets
Current assets:
Accounts receivable $ 112,495 $ 84,695
Other receivables 2,311 5,709
Income taxes recoverable - 2,756
Inventories (note 4) 50,296 40,949
Prepaid expenses and deposits 8,166 7,804
--------------------------------------------------------------------
173,268 141,913
Future income tax assets 19,838 19,132
Investment (note 2) 835 -
Capital assets (note 5,7) 228,193 218,576
Goodwill 230,558 230,558
Intangible assets (note 6) 24,899 27,496
---------------------------------------------------------------------
$ 677,591 $ 637,675
---------------------------------------------------------------------
---------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ 21,939 $ 10,525
Accounts payable and accrued
liabilities 99,508 88,089
Income taxes payable 3,987 -
Current portion of long-term debt
(note 7) 15,283 15,362
--------------------------------------------------------------------
140,717 113,976
Long-term debt (note 7) 56,803 55,327
Future income tax liabilities 19,203 18,563
Non-controlling interest 889 698
Shareholders' equity:
Share capital (note 8) 444,047 444,047
Notes receivable for share capital (15,750) (15,750)
Contributed Surplus 20,111 19,668
Cumulative translation adjustment (16,282) (10,974)
Retained earnings 27,853 12,120
--------------------------------------------------------------------
459,979 449,111
---------------------------------------------------------------------
$ 677,591 $ 637,675
---------------------------------------------------------------------
---------------------------------------------------------------------
On behalf of the Board:
"Fred Jaekel" Director
----------------------------------------------------
"Robert Wildeboer" Director
----------------------------------------------------
MARTINREA INTERNATIONAL INC.
Interim Consolidated Statements of Earnings and Retained Earnings
Three and nine months ended September 30, 2005 and 2004 (unaudited)
(in thousands of dollars - except per share amounts)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
---------------------------------------------------------------------
Sales $ 161,408 $ 125,286 $ 484,534 $ 432,831
Cost of sales 134,404 105,345 402,099 363,684
---------------------------------------------------------------------
Gross profit 27,004 19,941 82,435 69,147
Expenses:
Selling,
administrative
and general 10,879 9,867 33,143 30,872
Foreign exchange (68) 191 (354) (250)
Amortization
- capital assets 6,332 5,463 18,048 16,791
Amortization
- intangible
assets 866 866 2,597 2,597
Interest on
long term debt 945 1,282 3,125 3,527
Other interest
expense, net 768 101 1,332 758
(Gain) loss on
disposal of
capital assets (30) 96 (99) 134
--------------------------------------------------------------------
19,692 17,866 57,792 54,429
---------------------------------------------------------------------
Earnings before
income taxes and
non-controlling
interest 7,312 2,075 24,643 14,718
Income taxes
Current 2,383 (1,015) 8,785 4,212
Future 281 2,076 (66) 1,388
---------------------------------------------------------------------
2,664 1,061 8,719 5,600
Earnings before
non-controlling
interest 4,648 1,014 15,924 9,118
Non-controlling
interest 90 43 191 329
---------------------------------------------------------------------
Net earnings $ 4,558 $ 971 $ 15,733 $ 8,789
Retained earnings,
beginning of
period 23,295 8,975 12,120 20,663
Adjustment to
reflect change in
accounting for
stock based
compensation plan - - - (19,506)
---------------------------------------------------------------------
Retained earnings,
end of period $ 27,853 $ 9,946 $ 27,853 $ 9,946
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings per common
share (note 8)
Basic $ 0.08 $ 0.02 $ 0.28 $ 0.16
Diluted $ 0.08 $ 0.02 $ 0.27 $ 0.15
---------------------------------------------------------------------
---------------------------------------------------------------------
MARTINREA INTERNATIONAL INC.
Interim Consolidated Statements of Cash Flows
Three and nine months ended September 30, 2005 and 2004 (unaudited)
(in thousands of dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
---------------------------------------------------------------------
Cash provided by
(used in):
Operating activities:
Net earnings $ 4,558 $ 971 $ 15,733 $ 8,789
Items not
requiring cash:
Amortization
- capital assets 6,332 5,463 18,048 16,791
Amortization
- intangible
assets 866 866 2,597 2,597
Future income
taxes 281 2,076 (66) 1,388
Non-controlling
interest 90 43 191 329
(Gain) loss on
disposal of
capital assets (30) 96 (99) 134
Stock-based
compensation 222 (21) 443 60
-------------------------------------------------------------------
12,319 9,494 36,847 30,088
Changes in non-cash
working capital
items:
Accounts
receivable (19,125) 18,649 (27,800) 7,120
Other
receivables 2,793 67 3,398 4,791
Accounts payable
and accrued
liabilities (2,036) (21,166) 11,419 (20,940)
Income taxes
recoverable 908 (1,409) 6,743 4,078
Inventories (3,603) 4,459 (5,945) 4,103
Prepaid expenses
and deposits (133) 195 51 (955)
-------------------------------------------------------------------
(8,877) 10,289 24,713 28,285
---------------------------------------------------------------------
Financing activities:
Issue of share
capital (net of
cash expenses and
note receivable) - - - 33
Increase in
long-term debt - 4,652 14,576 13,464
Repayment of
long-term debt (4,600) (14,058) (12,634) (20,225)
Increase (decrease)
in bank
indebtedness 19,093 8,961 11,414 9,103
---------------------------------------------------------------------
14,493 (445) 13,356 2,375
---------------------------------------------------------------------
Investing activities:
Acquisition of
Corydon
Manufacturing LLC - - (15,209) -
Investment in
Hy-Drive
Technologies Ltd. - - (835) -
Purchase of
capital assets (3,687) (7,667) (19,998) (30,195)
Proceeds on
disposal of
capital assets 346 52 417 192
---------------------------------------------------------------------
(3,341) (7,615) (35,625) (30,003)
---------------------------------------------------------------------
Effect of exchange
rate changes on
cash and cash
equivalents (2,275) (2,229) (2,444) (657)
---------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents - - - -
Cash and cash
equivalents,
beginning of
period - - - -
---------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ - $ - $ - $ -
---------------------------------------------------------------------
---------------------------------------------------------------------
Supplemental cash
flow information:
Cash paid for
interest, net $ 1,640 $ 1,163 $ 4,322 $ 3,479
Cash paid
(received) for
income taxes $ 2,562 $ 577 $ 3,617 $ (723)
---------------------------------------------------------------------
---------------------------------------------------------------------
MARTINREA INTERNATIONAL INC.
Notes to Interim Consolidated Financial Statements
Three and nine months ended September 30, 2005 and 2004 (unaudited) (in thousands of dollars - except per share amounts)
--------------------------------------------------------------------- ---------------------------------------------------------------------
1. Basis of Presentation
Not all disclosures required by generally accepted accounting principles for annual financial statements are presented and, accordingly, the interim financial statements should be read in conjunction with the most recent annual financial statements. The interim financial statements follow the same accounting policies and methods of their application as the December 31, 2004 annual financial statements.
2. Investment in Hy-Drive Technologies Ltd.
On February 1, 2005, the Company subscribed for common shares and warrants of Hy-Drive Technologies Inc. for $800, plus related costs of $35. The Company has accounted for its investment in Hy-Drive Technologies at cost.
3. Acquisition of Corydon Manufacturing LLC
On February 17, 2005, the Company purchased the assets of a metal forming plant in Corydon, Indiana for approximately US$12.5 million (Cdn$15.2 million) plus the assumption of operating leases with an outstanding obligation to maturity of approximately US$1.6 million. The purchase price was funded through a combination of asset-based financing and cash.
The fair market value of the assets and liabilities acquired is
detailed below:
---------------------------------------------------------------------
Inventory $ 3,402
Prepaid expenses 413
Capital assets 11,394
---------------------------------------------------------------------
$ 15,209
---------------------------------------------------------------------
---------------------------------------------------------------------
Total consideration was paid as follows:
Cash $ 8,283
Asset-based financing 6,926
---------------------------------------------------------------------
$ 15,209
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
4. Inventories
---------------------------------------------------------------------
---------------------------------------------------------------------
September 30, December 31,
2005 2004
---------------------------------------------------------------------
Raw materials $ 22,591 $ 18,160
Work in progress 9,228 8,590
Finished goods 7,710 8,539
Tooling work in progress 10,767 5,660
---------------------------------------------------------------------
$ 50,296 $ 40,949
---------------------------------------------------------------------
---------------------------------------------------------------------
5. Capital assets
---------------------------------------------------------------------
---------------------------------------------------------------------
At September 30, 2005: Accumulated Net book
Cost Amortization Value
---------------------------------------------------------------------
Land $ 8,879 $ - $ 8,879
Buildings and improvements 41,995 7,711 34,284
Leasehold improvements 12,975 5,306 7,669
Manufacturing equipment 237,407 109,153 128,254
Metal forming equipment 35,801 7,842 27,959
Tooling and fixtures 16,687 6,898 9,789
Motor and delivery vehicles 1,401 1,095 306
Office and computer equipment 16,713 12,809 3,904
Construction-in-progress 7,149 - 7,149
---------------------------------------------------------------------
$ 379,007 $ 150,814 $ 228,193
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
At December 31, 2004: Accumulated Net book
Cost Amortization Value
---------------------------------------------------------------------
Land $ 8,228 $ - $ 8,228
Buildings and improvements 40,673 7,598 33,075
Leasehold improvements 11,198 4,127 7,071
Manufacturing equipment 213,251 99,613 113,638
Metal forming equipment 35,795 6,200 29,595
Tooling and fixtures 14,812 5,162 9,650
Motor and delivery vehicles 1,389 1,177 212
Office and computer equipment 16,189 12,023 4,166
Construction-in-progress 12,941 - 12,941
---------------------------------------------------------------------
$ 354,476 $ 135,900 $ 218,576
---------------------------------------------------------------------
---------------------------------------------------------------------
6. Intangibles
--------------------------------------------------------------
--------------------------------------------------------------
September 30, December 31,
2005 2004
--------------------------------------------------------------
Cost $ 34,620 $ 34,620
Accumulated amortization 9,721 7,124
--------------------------------------------------------------
$ 24,899 $ 27,496
--------------------------------------------------------------
--------------------------------------------------------------
7. Long-term debt
---------------------------------------------------------------------
---------------------------------------------------------------------
September December
30, 31,
2005 2004
---------------------------------------------------------------------
Three year commercial term loan secured by
a registered general security agreement and
a first charge on the assets of all the
Company's material subsidiaries, with interest
payable at a fixed rate of 3.67% plus 1.5% to
2.5% on Canadian dollar amounts on $18,750
(2004 - $24,375) and at a floating rate of
bankers acceptance (BA) plus 1.5% to 2.5% on
Canadian dollar amounts on the remaining amount.
As at September 30, 2005, the floating rate
was at 2.91% plus 2% (2004 - 4.62%). The rates
vary depending on the Company's funded debt to
earnings ratio before interest, taxes, and
amortization ratio. On August 14, 2004, the
Company amended its original agreement dated
June 27, 2003. Under the amended agreement,
the three year commercial term loan was reduced
by $10 million, with a corresponding increase
in the Company's line of credit. Commencing
September 30, 2004, equal quarterly payments
were reduced to $2,000 from $3,750, with full
repayment of all outstanding amounts on the
maturity date of September 30, 2006. The term
loan requires the maintenance of certain
financial ratios.
$ 36,000 $ 42,000
Fixed rate equipment loans with interest
thereon payable monthly with fixed rates of
4.5% per annum, payable in aggregate monthly
payments of $126 (principal and interest)
and maturing April 2005 to August 2007.
These loans are secured by the underlying
equipment. 92 1,085
US dollar equipment loans in the amount of
$191 US with interest thereon payable
monthly with fixed rates of 4.5% per annum,
payable in aggregate monthly payments of
$15 US (principal and interest), and maturing
in June 2006. These loans are secured by the
underlying equipment. 222 372
Note payable on the purchase
of SCS International Inc. with interest
thereon payable annually at 3% per annum
and semi-annual payments of $500 to July 2005.
- 1,000
US dollar equipment loans in the amount of
$4,858 US with semi annual principal and
interest payments, fixed rates of 5.8% to
6.2% per annum, payable in aggregate
semiannual principal payments of $654 US,
maturing from January 2005 to May 2009.
These loans are secured by the underlying
equipment. 5,984 7,442
US dollar equipment loans in the amount
of $5,302 US with monthly payments of $80 US
(principal and interest), maturing from
March 2010 to March 2012, and a one-time
lump-sum payment of $1,000 US owing at
March 2012. These loans are secured by
the underlying equipment. 6,164 -
US dollar equipment loans in the amount
of $2,650 US with monthly payments of
$60 US (principal and interest),
maturing in May 2010. These loans are
secured by the underlying equipment. 3,081 -
Four to seven year equipment loans with
interest thereon payable monthly at a
floating rate of BA plus 2.25%, with a
one-time option to fix the variable rate,
and maturing from March 2009 to April 2011.
Interest on advances made before commencement
of the loan is calculated at prime plus 1.75%.
The actual rate payable will be dependent
upon certain financial rates. These loans
are secured by the underlying equipment. 20,543 18,790
---------------------------------------------------------------------
72,086 70,689
Less current portion 15,283 15,362
---------------------------------------------------------------------
$ 56,803 $ 55,327
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Payments required during the next 12 months are as follows:
2005 $ 15,283
2006 35,477
2007 7,838
2008 6,679
2009 2,282
Thereafter 4,527
---------------------------------------------------------------------
$ 72,086
---------------------------------------------------------------------
---------------------------------------------------------------------
8. Share Capital
---------------------------------------------------------------------
---------------------------------------------------------------------
Number Amount
---------------------------------------------------------------------
Common Shares
Authorized - unlimited number of common shares
Issued and outstanding:
Balance, December 31, 2003 57,785,276 $ 437,850
Issued on Director's compensation 5,075 33
---------------------------------------------------------------------
Balance, December 31, 2004 and
September 30, 2005 57,790,351 $ 437,883
---------------------------------------------------------------------
Warrants
Issued and outstanding:
---------------------------------------------------------------------
Balance, December 31, 2004 and
September 30, 2005 3,533,333 $ 6,164
---------------------------------------------------------------------
Share Capital, December 31,
2004 and September 30, 2005 $ 444,047
---------------------------------------------------------------------
---------------------------------------------------------------------
Stock options
The Company has one stock option plan for key employees. Under the
plan, the Company may grant options to its key employees for up to
4,762,000 shares of common stock. The Company has, in the past, also
granted options to officers and employees of Rea and Pilot in
connection with the acquisitions thereof. Such options were granted
outside the stock option plan. Under the plan, the exercise price
of each option equals the market price of the Company's stock on the
date of grant and the options have a maximum term of 10 years.
Options are granted throughout the year and vest between 0 and
4 years.
The following summary sets out the activity in outstanding common
share purchase options:
---------------------------------------------------------------------
---------------------------------------------------------------------
September 30, 2005 December 31, 2004
---------------------------------------------------------------------
Weighted Weighted
Options average Options average
Exercise exercise
price price
---------------------------------------------------------------------
Balance, beginning of period 4,104,000 $ 9.56 4,194,000 $ 9.54
Granted 453,000 5.09 30,000 6.34
Exercised - - - -
Cancelled (647,000) 9.96 (120,000) 8.00
---------------------------------------------------------------------
Balance, end of period 3,910,000 $ 8.97 4,104,000 $ 9.56
---------------------------------------------------------------------
---------------------------------------------------------------------
8. Earnings (loss) per common share
Basic and diluted earnings per common share have been calculated
using the weighted average and maximum dilutive number of shares,
using the treasury stock method.
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended: September 30, September 30,
2005 2004
---------------------------------------------------------------------
Weighed Per common Weighed Per common
Average share average share
number amount number amount
of of
common common
shares shares
---------------------------------------------------------------------
Basic 55,290,351 $ 0.08 55,285,276 $ 0.02
Effect of
dilutive
securities
-Shares
secured by
notes
receivable 2,500,000 - 2,500,000 -
-Stock options 97,457 - 18,588 -
---------------------------------------------------------------------
Diluted 57,887,808 $ 0.08 57,803,864 $ 0.02
---------------------------------------------------------------------
---------------------------------------------------------------------
The dilutive effect of stock options excludes the effect of 3,337,000
(2004 - 4,034,000) out of the money options whose strike price is
higher than the average market price for the period, as they are
anti-dilutive.
---------------------------------------------------------------------
---------------------------------------------------------------------
Nine months ended: September 30, September 30,
2005 2004
---------------------------------------------------------------------
Weighed Per common Weighed Per common
Average share average share
number amount number amount
of of
common common
shares shares
---------------------------------------------------------------------
Basic 55,290,351 $ 0.28 55,286,999 $ 0.16
Effect of
dilutive
securities
-Shares secured
by notes
receivable 2,500,000 (0.01) 2,500,000 (0.01)
-Stock options 46,023 - 27,580 -
---------------------------------------------------------------------
Diluted 57,836,374 $ 0.27 57,814,579 $ 0.15
---------------------------------------------------------------------
---------------------------------------------------------------------
The dilutive effect of stock options excludes the effect of 3,500,000(2004 - 3,944,000) out of the money options whose strike price is higher than the average market price for the period, as they are anti-dilutive.
--------------------------------------------------------------------- ---------------------------------------------------------------------
9. Guarantees
The Company is a guarantor under a tool financing program. The tool financing program involves a third party that provides tooling suppliers with financing subject to a Company guarantee. Payments from the third party to the tooling supplier are approved by the Company prior to the funds being advanced. The amounts loaned to tooling suppliers through this financing arrangement do not appear on the Company's balance sheet. At September 30, 2005, the amount of program financing was $3.6 million. The maximum amount of undiscounted future payments the Company could be required to make under the guarantee is $3.6 million. The Company would be required to perform under the guarantee in cases where a tooling supplier could not meet its obligation to the third party.
The term of the guarantee will vary from program to program, but typically ranges between 6-18 months.
Martinrea International Inc. (TSX:MRE)