MRE Martinrea International Inc

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 second quarter ended June 30, 2020 and that it has declared a quarterly cash dividend of $0.05 per share.

HIGHLIGHTS

• Quarterly sales, net income down due to COVID-19 related shutdowns
• Near breakeven adjusted EBITDA(1) in second quarter
• Balance sheet ended the quarter strong, with strong liquidity position
• Restart going very well; strong third quarter anticipated
• Dividend of $0.05 per share declared

OVERVIEW

Pat D’Eramo, President and Chief Executive Officer, stated: “Our second quarter was difficult with lower sales and net income reflecting the effects of the COVID-19 related shutdowns during the quarter.  In June we saw a return of volumes, a steady ramp-up over the course of the month, and while there were some issues in opening up operations for the industry, overall the restart has gone quite well.  The steps we have taken to improve our operations during the shutdown period strengthen our go forward position.  We continually focus on increasing productivity and efficiency, and we are a stronger and more competitive supplier as a result.  We are looking forward to a strong third quarter, based on anticipated volumes as we see them today, as OEMs replenish currently low vehicle inventory levels.  We expect production sales in the range of $850 million to $950 million, and adjusted net earnings per share in the range of $0.40 to $0.50, including the newly acquired Metalsa operations.  The operations we purchased from Metalsa, which we are integrating into our business, lost money in the second quarter and there will be some drag on earnings the rest of the year as we drive efficiencies, in particular in our new facility in Germany.  Our third quarter will not reach the record earnings levels of 2019, but we expect it will be one of the best third quarters in the history of the company, and that’s great news. We are also happy to announce new business wins totalling $65 million in annualized sales, including $40 million in aluminum transmission housings for the ZF Group starting in 2023, and $25 million in various lightweight structures for Ford and Toyota, starting in 2022 and 2023.”

Fred Di Tosto, Chief Financial Officer, stated: “Our second quarter results were obviously hit hard by the COVID-19 related shutdowns during the quarter.  Second quarter production sales, excluding the acquired operations from Metalsa, were down 60% year-over-year, with adjusted EBITDA(1) for the quarter coming in at ($8) million, a near breakeven level.  This was a respectable result considering the rapid dissipation of customer volumes and reflective of the aggressive cost cutting measures we took at the onset of the pandemic. Ultimately, our response to the COVID crisis has been measured, prudent and decisive.  A top priority was preserving the balance sheet and, in that regard, we ended the quarter in good shape, with ample liquidity. Our net debt to EBITDA(1) ratio ended the quarter at 2.64x, and under 2.0x for bank covenant purposes, given the agreement we reached with our banking syndicate to eliminate Q2 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 crisis with confidence. Overall, considering the magnitude of the volume declines and the consequent challenges we faced, we are pleased with our second quarter results and our response to the COVID-19 shutdowns during the quarter.  Although the pandemic is not over, we believe we have seen the bottom from a volume perspective, as we now look to the broader industry and economic recovery.  As the dust settles from the events of the past few months, it has been refreshing to get back to business, opening up all our facilities, and doing what we do best, producing great parts for our customers.”

Rob Wildeboer, Executive Chairman, stated: “From a macro perspective, our industry has endured the longest shutdown in its history, and everyone has been affected.  Our team has responded well, not only in improving our company for the long term, but in our dedication to developing and implementing leading safety protocols, and in contributing to the fight against COVID-19 by building ventilator stands and PPE such as masks for our people and people in our communities.  Just as with the great financial crisis of 2008-9, we will be a stronger and more competitive company going forward coming out of the crisis.  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.  We believe that our industry hit its low point in the second quarter, and looking forward, we see a steady, gradual recovery.  We expect that the second half of 2020 will be much better than the first half, and, while the rate of growth is still somewhat unclear, we expect growth in 2021 from this year’s levels and further growth in 2022 and beyond.” 

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 second quarter ended June 30, 2020 (“MD&A”), the Company’s interim condensed consolidated financial statements for the second quarter ended June 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 which 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 six months ended June 30, 2020 and 2019.  Refer to the Company’s interim financial statements for the three and six months ended June 30, 2020 for a detailed account of the Company’s performance for the periods presented in the tables below.

		Three months ended June 30, 2020			Three months ended June 30, 2019		$ Change		% Change
Sales	$	460,564		$	948,533		(487,969	)	(51.4	%)
Gross Margin		(12,459	)		154,778		(167,237	)	(108.0	%)
Operating Income (Loss)		(163,365	)		57,302		(220,667	)	(385.1	%)
Net Income (Loss) for the period		(146,886	)		28,122		(175,008	)	(622.3	%)
Net Earnings (Loss) per Share - Basic and Diluted	$	(1.84	)	$	0.34		(2.18	)	(641.2	%)
Non-IFRS Measures*
Adjusted Operating Income (Loss)	$	(68,470	)	$	83,969		(152,439	)	(181.5	%)
% of Sales		(14.9	%)		8.9	%
Adjusted EBITDA		(8,177	)		137,709		(145,886	)	(105.9	%)
% of Sales		(1.8	%)		14.5	%
Adjusted Net Income (Loss)		(73,115	)		54,570		(127,685	)	(234.0	%)
Adjusted Net Earnings (Loss) per Share - Basic and Diluted	$	(0.91	)	$	0.66		(1.57	)	(237.9	%)

		Six months ended June 30, 2020			Six months ended June 30, 2019		$ Change		% Change
Sales	$	1,333,270		$	1,971,694		(638,424	)	(32.4	%)
Gross Margin		107,778			312,279		(204,501	)	(65.5	%)
Operating Income (Loss)		(114,160	)		140,765		(254,925	)	(181.1	%)
Net Income (Loss) for the period		(117,923	)		83,390		(201,313	)	(241.4	%)
Net Earnings (Loss) per Share - Basic and Diluted	$	(1.47	)	$	1.00		(2.47	)	(247.0	%)
Non-IFRS Measures*
Adjusted Operating Income (Loss)	$	(17,718	)	$	167,432		(185,150	)	(110.6	%)
% of Sales		(1.3	%)		8.5	%
Adjusted EBITDA		99,547			271,620		(172,073	)	(63.4	%)
% of Sales		7.5	%		13.8	%
Adjusted Net Income (Loss)		(42,992	)		110,346		(153,338	)	(139.0	%)
Adjusted Net Earnings (Loss) per Share - Basic and Diluted	$	(0.54	)	$	1.33		(1.87	)	(140.6	%)

*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 (Loss)”, “Adjusted Net Earnings (Loss) per Share (on a basic and diluted basis)”, “Adjusted Operating Income (Loss)”, "Adjusted EBITDA”, “Free Cash Flow” and “Net Debt”. 

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

		Three months ended June 30, 2020			Three months ended June 30, 2019
Net Income (Loss)	$	(146,886	)	$	28,122
Unusual and Other Items (after-tax)*		73,771			26,448
Adjusted Net Income (Loss)	$	(73,115	)	$	54,570
		Six months ended June 30, 2020			Six months ended June 30, 2019
Net Income (Loss)	$	(117,923	)	$	83,390
Unusual and Other Items (after-tax)*		74,931			26,956
Adjusted Net Income (Loss)	$	(42,992	)	$	110,346
*Unusual and other items are explained in the "Adjustments to Net Income (Loss)" section of this Press Release

		Three months ended June 30, 2020			Three months ended June 30, 2019
Net Income (Loss)	$	(146,886	)	$	28,122
Income tax expense (benefit)		(29,932	)		17,642
Other finance expense - excluding Unusual and Other Items*		4,286			853
Share of loss in associate		881			512
Finance expense		8,286			9,944
Unusual and Other Items (before-tax)*		94,895			26,896
Adjusted Operating Income (Loss)	$	(68,470	)	$	83,969
Depreciation of property, plant and equipment and right-of-use assets		56,953			49,837
Amortization of intangible assets		3,340			4,051
Gain on disposal of property, plant and equipment		-			(148	)
Adjusted EBITDA	$	(8,177	)	$	137,709

 

		Six months ended June 30, 2020			Six months ended June 30, 2019
Net Income (Loss)	$	(117,923	)	$	83,390
Income tax expense (benefit)		(18,722	)		36,027
Other finance expense - excluding Unusual and Other Items*		3,156			286
Share of loss in associate		1,581			512
Finance expense		17,748			19,740
Unusual and Other Items (before-tax)*		96,442			27,477
Adjusted Operating Income (Loss)	$	(17,718	)	$	167,432
Depreciation of property, plant and equipment and right-of-use assets		110,807			96,731
Amortization of intangible assets		6,458			7,716
Gain on disposal of property, plant and equipment		-			(259	)
Adjusted EBITDA	$	99,547		$	271,620
*Unusual and other items are explained in the "Adjustments to Net Income (Loss)" section of this Press Release

SALES
Three months ended June 30, 2020 to three months ended June 30, 2019 comparison
		Three months ended June 30, 2020			Three months ended June 30, 2019		$ Change		% Change
North America	$	318,134		$	754,041		(435,907	)	(57.8	%)
Europe		99,988			165,611		(65,623	)	(39.6	%)
Rest of the World		45,807			30,467		15,340		50.3	%
Eliminations		(3,365	)		(1,586	)	(1,779	)	112.2	%
Total Sales	$	460,564		$	948,533		(487,969	)	(51.4	%)

The Company’s consolidated sales for the second quarter of 2020 decreased by $488.0 million or 51.4% to $460.6 million as compared to $948.5 million for the second quarter of 2019. The total decrease in sales was driven by year-over-year decreases in the North America and Europe operating segments, partially offset by an increase in the Rest of the World.

Sales for the second quarter of 2020 in the Company’s North America operating segment decreased by $435.9 million or 57.8% to $318.1 million from $754.0 million for the second quarter of 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $10.7 million of year-over-year sales (including $0.7 million in tooling sales) to the North America operating segment. Excluding the acquired operations, second quarter sales in North America decreased year-over-year by $446.6 million or 59.2%. 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 $12.1 million, which are typically dependant 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 second quarter of 2020 of approximately $9.3 million as compared to the second quarter of 2019, and the launch of new programs during the quarter, primarily the production of ventilator stands for General Motors.  

Sales for the second quarter of 2020 in the Company’s Europe operating segment decreased by $65.6 million or 39.6% to $100.0 million from $165.6 million for the second quarter of 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $30.0 million of year-over-year sales (including $2.8 million in tooling sales) to the Europe operating segment. Excluding the acquired operations, second quarter sales in Europe decreased year-over-year by $95.6 million or 57.7%. This decrease was due to overall lower industry volumes, primarily as a result of the impact of the COVID-19 pandemic, and a $1.9 million decrease in tooling sales; partially offset by the launch of new programs during or subsequent to the second quarter of 2019, including a new aluminum engine block for Volvo and an aluminum transmission for Volkswagen, and a $0.6 million positive foreign exchange impact from the translation of Euro-denominated production sales as compared to the second quarter of 2019.

Sales for the second quarter of 2020 in the Company’s Rest of the World operating segment increased by $15.3 million or 50.3% to $45.8 million from $30.5 million for the second quarter of 2019. The operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020, contributed $21.1 million of year-over-year sales to the Rest of the World operating segment. Excluding the acquired operations, second quarter sales in the Rest of the World decreased year-over-year by $5.8 million or 19.0%. This decrease was largely driven by COVID-19 related disruption and a $0.6 million negative foreign exchange impact from the translation of foreign-denominated production sales as compared to the second quarter of 2019. These negative factors were partially offset by higher year-over-year production volumes on the Cadillac CT6 vehicle platform in China, and a $1.9 million increase in tooling sales.

Overall tooling sales decreased by $8.6 million to $41.8 million for the second quarter of 2020 from $50.4 million for the second quarter of 2019.

Six months ended June 30, 2020 to six months ended June 30, 2019 comparison
		Six months ended June 30, 2020			Six months ended June 30, 2019		$ Change		% Change
North America	$	1,005,662		$	1,565,178		(559,516	)	(35.7	%)
Europe		259,885			356,006		(96,121	)	(27.0	%)
Rest of the World		73,666			53,799		19,867		36.9	%
Eliminations		(5,943	)		(3,289	)	(2,654	)	80.7	%
Total Sales	$	1,333,270		$	1,971,694		(638,424	)	(32.4	%)

The Company’s consolidated sales for the six months ended June 30, 2020 decreased by $638.4 million or 32.4% to $1,333.3 million as compared to $1,971.7 million for the six months ended June 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 six months ended June 30, 2020 in the Company’s North America operating segment decreased by $559.5 million or 35.7% to $1,005.7 million from $1,565.2 million for the six months ended June 30, 2019.  The operations acquired from Metalsa, the results for which were consolidated with those of the Company effective March 2, 2020, contributed $18.0 million of year-over-year sales (including $1.3 million in tooling sales) to the North America operating segment. Excluding the acquired operations, sales for the six months ended June 30, 2020 in North America decreased year-over-year by $577.5 million or 36.9%. 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 $52.2 million, which are typically dependant on the timing of tooling construction and final acceptance by the customer. These negative factors were partially offset by the launch of new programs during or subsequent to the six months ended June 30, 2019, including the GM heavy duty truck and the 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 six months ended June 30, 2020 of approximately $11.9 million as compared to the corresponding period of 2019.

Sales for the six months ended June 30, 2020 in the Company’s Europe operating segment decreased by $96.1 million or 27.0% to $259.9 million from $356.0 million for the six months ended June 30, 2019. The operations acquired from Metalsa, the results for which were consolidated with those of the Company effective March 2, 2020, contributed $45.3 million of year-over-year sales (including $3.9 million in tooling sales) to the Europe operating segment. Excluding the acquired operations, sales for the six months ended June 30, 2020 in Europe decreased year-over-year by $141.4 million or 39.7%. This decrease can be attributed to overall lower industry volumes, primarily as a result of the impact of the COVID-19 pandemic; lower year-over-year production related to certain light vehicle platforms, in particular with Daimler and Jaguar Land Rover; an $11.2 million decrease in tooling sales; and a $2.6 million negative foreign exchange impact from the translation of Euro-denominated production sales as compared to the corresponding period of 2019. These negative factors were partially offset by the launch of new programs during or subsequent to the six months ended June 30, 2019, including new aluminum engine blocks for Ford and Volvo, and an aluminum transmission for Volkswagen.

Sales for the six months ended June 30, 2020 in the Company’s Rest of the World operating segment increased by $19.9 million or 36.9% to $73.7 million from $53.8 million for the six months ended June 30, 2019. The operations acquired from Metalsa, the results for which were consolidated with those of the Company effective March 2, 2020, contributed $27.1 million of year-over-year sales to the Rest of the World operating segment. Excluding the acquired operations, sales for the six months ended June 30, 2020 in the Rest of the World decreased year-over-year by $7.2 million or 13.4%. This decrease was largely driven by COVID-19 related disruption, and a $2.2 million negative foreign exchange impact from the translation of foreign-denominated production sales as compared to the corresponding period of 2019. These negative factors were partially offset by higher year-over-year production volumes on the Cadillac CT6 vehicle platform in China, and a $3.8 million increase in tooling sales.

Overall tooling sales decreased by $54.4 million to $92.0 million for the six months ended June 30, 2020 from $146.4 million for the six months ended June 30, 2019.

GROSS MARGIN
Three months ended June 30, 2020 to three months ended June 30, 2019 comparison
		Three months ended June 30, 2020			Three months ended June 30, 2019		$ Change		% Change
Gross margin	$	(12,459	)	$	154,778		(167,237	)	(108.0	%)
% of Sales		(2.7	%)		16.3	%

The gross margin percentage for the second quarter of 2020 decreased to a negative level from a positive gross margin percentage of 16.3% for the second quarter of 2019. 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 essentially by the impact of the COVID-19 pandemic, and a negative impact on overall margin from the operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020. The sharp sales decline in April and May coupled with a volatile restart and ramp-up of production in May and June with limited predictability had a significant impact on gross margin for the second quarter of 2020, despite major reductions in costs.

Six months ended June 30, 2020 to six months ended June 30, 2019 comparison
		Six months ended June 30, 2020			Six months ended June 30, 2019		$ Change		% Change
Gross margin	$	107,778		$	312,279		(204,501	)	(65.5	%)
% of Sales		8.1	%		15.8	%

The gross margin percentage for the six months ended June 30, 2020 of 8.1% decreased as a percentage of sales by 7.7% as compared to the gross margin percentage for the six months ended June 30, 2019 of 15.8%. 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; operational inefficiencies and other costs at certain facilities including upfront costs incurred in preparation of upcoming new programs and related to new business in the process of being launched; and a negative impact on overall margin from the operations acquired from Metalsa, results for which were consolidated with those of the Company effective March 2, 2020. These negative factors were partially offset by productivity and efficiency improvements at certain operating facilities; and a decrease in tooling sales which typically earn low margins for the Company. The sharp sales decline in April and May coupled with a volatile restart and ramp-up of production in May and June with limited predictability had a significant impact on gross margin for the six months ended June 30, 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 June 30, 2020 to three months ended June 30, 2019 comparison
	Three months ended				Three months ended
	June 30, 2020				June 30, 2019			(a)-(b)
	(a)				(b)			Change
NET INCOME (LOSS) (A)	($	146,886	)		$	28,122		($	175,008	)
Add Back - Unusual and Other Items:
Transaction costs associated with the operations acquired from Metalsa (recorded as SG&A) (1)		942				-			942
Impairment of assets (2)		85,783				18,502			67,281
Restructuring costs (3)		8,170				8,165			5
Unrealized loss on derivative instruments (4)		-				229			(229	)
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX	$	94,895			$	26,896		$	67,999
Tax impact of above items		(21,124	)			(448	)		(20,676	)
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B)	$	73,771			$	26,448		$	47,323
ADJUSTED NET INCOME (LOSS) (A + B)	($	73,115	)		$	54,570		($	127,685	)
Number of Shares Outstanding - Basic (‘000)		79,961				82,747
Adjusted Basic Net Earnings (Loss) Per Share	($	0.91	)		$	0.66
Number of Shares Outstanding - Diluted (‘000)		79,961				82,922
Adjusted Diluted Net Earnings (Loss) Per Share	($	0.91	)		$	0.66

TABLE B
Six months ended June 30, 2020 to six months ended June 30, 2019 comparison
	Six months ended June 30, 2020				Six months ended June 30, 2019
								(a)-(b)
	(a)				(b)			Change
NET INCOME (LOSS) (A)	($	117,923	)		$	83,390		($	201,313	)
Add Back - Unusual and Other Items:
Transaction costs associated with the operations 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
Unrealized loss on derivative instruments (4)		-				810			(810	)
TOTAL UNUSUAL AND OTHER ITEMS BEFORE TAX	$	96,442			$	27,477		$	68,965
Tax impact of above items		(21,511	)			(521	)		(20,990	)
TOTAL UNUSUAL AND OTHER ITEMS - AFTER TAX (B)	$	74,931			$	26,956		$	47,975
ADJUSTED NET INCOME (LOSS) (A + B)	($	42,992	)		$	110,346		($	153,338	)
Number of Shares Outstanding - Basic (‘000)		80,041				83,052
Adjusted Basic Net Earnings (Loss) Per Share	($	0.54	)		$	1.33
Number of Shares Outstanding - Diluted (‘000)		80,041				83,246
Adjusted Diluted Net Earnings (Loss) Per Share	($	0.54	)		$	1.33

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 $0.9 million and $2.5 million for the three and six months ended June 30, 2020, respectively.

2)     Impairment of assets

The significant reduction in volumes and current 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, 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 current industry production projections. Based on the results of this testing, 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 for the three months ended June 30, 2020, 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 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 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) Unrealized loss 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 June 30, 2019, an unrealized loss of $0.2 million was recognized for the three months ended June 30, 2019 and an unrealized loss of $0.8 million was recognized for the six months ended June 30, 2019. All outstanding remaining warrants in NanoXplore expired in March 2020 unexercised.

NET INCOME (LOSS)
Three months ended June 30, 2020 to three months ended June 30, 2019 comparison
			Three months ended June 30, 2020			Three months ended June 30, 2019	$ Change		% Change
Net Income (Loss)		$	(146,886	)	$	28,122	(175,008	)	(622.3	%)
Adjusted Net Income (Loss)		$	(73,115	)	$	54,570	(127,685	)	(234.0	%)
Net Earnings (Loss) per Share
	Basic and Diluted	$	(1.84	)	$	0.34
Adjusted Net Earnings (Loss) per Share
	Basic and Diluted	$	(0.91	)	$	0.66

Net income (loss), before adjustments, for the second quarter of 2020 decreased by $175.0 million to a net loss of $146.9 million from net income of $28.1 million for the second quarter of 2019. Excluding unusual and other items as explained in Table A under “Adjustments to Net Income (Loss)”, adjusted net income (loss) for the second quarter of 2020 decreased to a net loss of $73.1 million or ($0.91) per share, on a basic and diluted basis, from net income of $54.6 million or $0.66 per share, on a basic and diluted basis, for the second quarter of 2019. 

Adjusted Net Income (Loss) for the second quarter of 2020, as compared to the second quarter of 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 second 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 depreciation expense as previously discussed;
• a net foreign exchange loss of $4.3 million for the second quarter of 2020 compared to a net foreign exchange loss of $0.9 million for the second quarter of 2019; and
• a lower effective tax rate on adjusted net income (loss) (10.8% for the second quarter of 2020 compared to 24.9% for the second quarter of 2019).

These negative 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.

Six months ended June 30, 2020 to six months ended June 30, 2019 comparison
			Six months ended June 30, 2020			Six months ended June 30, 2019	$ Change		% Change
Net Income (Loss)		$	(117,923	)	$	83,390	(201,313	)	(241.4	%)
Adjusted Net Income (Loss)		$	(42,992	)	$	110,346	(153,338	)	(139.0	%)
Net Earnings (Loss) per Share
	Basic and Diluted	$	(1.47	)	$	1.00
Adjusted Net Earnings (Loss) per Share
	Basic and Diluted	$	(0.54	)	$	1.33

Net Income (Loss), before adjustments, for the six months ended June 30, 2020 decreased by $201.3 million to a net loss of $117.9 million from net income of $83.4 million for the six months ended June 30, 2019. Excluding unusual and other items as explained in Table B under “Adjustments to Net Income (Loss)”, adjusted net income (loss) for the six months ended June 30, 2020 decreased to a net loss of $43.0 million or ($0.54) per share, on a basic and diluted basis, from net income of $110.3 million or $1.33 per share, on a basic and diluted basis, for the six months ended June 30, 2019.

Adjusted Net Income (Loss) for the six months ended June 30, 2020, as compared to the six months ended June 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 year-over-year increase in depreciation expense as previously discussed;
• an increase in the Company’s share of loss of an associate of $1.1 million;
• a net foreign exchange loss of $3.3 million for the six months ended June 30, 2020 compared to a loss of $0.4 million for the six months ended June 30, 2019; and
• a lower effective tax rate on adjusted net income (loss) (6.9% for the six months ended June 30, 2020 compared to 24.9% for the six months ended June 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 September 30, 2020, on or about October 15, 2020.

ABOUT MARTINREA

Martinrea is a leader in the development and production of quality metal parts, assemblies and modules, fluid management systems, and complex aluminum products focused primarily on the automotive sector.  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. The Company’s mission is to make people’s lives better by: delivering outstanding quality products and services to our customers; providing meaningful opportunity, job satisfaction, and job security for our people; providing superior long-term investment returns to our stakeholders; and being positive contributors to our communities.  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 Tuesday, August 11, 2020 at 9:45 a.m. (Toronto time) which can be accessed by dialing 416-641-6104 (international: 001-416-641-6104) or toll free 800-952-5114 (participant code 4636275#).  Please call 10 minutes prior to the start of the conference call.   

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

There will also be a rebroadcast of the call available by dialing 905-694-9451 (international: 001-905-694-9451) or toll free 800-408-3053 (conference id – 8944834#).  The rebroadcast will be available until September 9, 2020.

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 third quarter 2020, growth for 2021 and 2022 and beyond; the effects and expected impact of or duration of the COVID-19 pandemic, or as a result of any current or future government actions, on the Company’s financial position, its business and operations, on its employees, on the automotive industry, or on the business of any OEM or suppliers, including impacts on volumes, and the auto industry, the type of factors affecting the economic impact;  the Company’s current and future strategy, priorities and response related to COVID-19, and the status of implementation; the recovery of the automotive industry; the potential effects or issues relating to a prolonged pandemic or lockdown(s), including the financial impact on the Company, its business or operations and global impact, the growth of the Company; the strength of the Company, including post-COVID-19; anticipated program wins, expected launch dates, the ramping up and launching of new programs and the expected financial impact of launches and other new programs; pursuit of its strategies (including investing in the business, strategic investments and acquisitions, continued focus on increasing productivity and efficiency);  the ability to grow business and serve customers; the benefit of the assets acquired from Metalsa and the expectations on financial results for the remainder of the year; 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 TostoChief Financial OfficerMartinrea International Inc.3210 Langstaff RoadVaughan, Ontario  L4K 5B2

Tel:         416-749-0314Fax:        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 second quarter ended June 30, 2020.

Martinrea International Inc.
Interim Condensed Consolidated Balance Sheets
(in thousands of Canadian dollars) (unaudited)
	Note		June 30, 2020		December 31, 2019
ASSETS
Cash and cash equivalents		$	125,834	$	118,973
Trade and other receivables	3		498,134		560,976
Inventories	4		494,232		383,682
Prepaid expenses and deposits			22,955		25,846
Income taxes recoverable			17,560		16,783
TOTAL CURRENT ASSETS			1,158,715		1,106,260
Property, plant and equipment	5		1,574,551		1,541,895
Right-of-use assets	6		198,360		188,378
Deferred tax assets			197,492		165,890
Intangible assets	7		55,024		54,787
Investments	8		40,570		37,085
TOTAL NON-CURRENT ASSETS			2,065,997		1,988,035
TOTAL ASSETS		$	3,224,712	$	3,094,295
LIABILITIES
Trade and other payables	10	$	766,470	$	728,787
Provisions	11		16,131		8,584
Income taxes payable			4,340		7,477
Current portion of long-term debt	12		16,380		15,651
Current portion of lease liabilities	13		32,914		28,247
TOTAL CURRENT LIABILITIES			836,235		788,746
Long-term debt	12		885,825		765,922
Lease liabilities	13		186,216		174,105
Pension and other post-retirement benefits			85,327		63,789
Deferred tax liabilities			78,953		83,310
TOTAL NON-CURRENT LIABILITIES			1,236,321		1,087,126
TOTAL LIABILITIES			2,072,556		1,875,872
EQUITY
Capital stock	14		660,151		661,422
Contributed surplus			43,310		42,449
Accumulated other comprehensive income			160,364		89,107
Retained earnings			288,331		425,445
TOTAL EQUITY			1,152,156		1,218,423
TOTAL LIABILITIES AND EQUITY		$	3,224,712	$	3,094,295

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			Six months ended			Six months ended
	Note		June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
SALES		$	460,564		$	948,533		$	1,333,270		$	1,971,694
Cost of sales (excluding depreciation of property, plant and equipment
and right-of-use assets)			(419,914	)		(747,810	)		(1,122,400	)		(1,570,041	)
Depreciation of property, plant and equipment and right-of-use assets
(production)			(53,109	)		(45,945	)		(103,092	)		(89,374	)
Total cost of sales			(473,023	)		(793,755	)		(1,225,492	)		(1,659,415	)
GROSS MARGIN			(12,459	)		154,778			107,778			312,279
Research and development costs			(5,234	)		(8,784	)		(14,687	)		(18,073	)
Selling, general and administrative			(47,534	)		(57,785	)		(104,942	)		(118,643	)
Depreciation of property, plant and equipment and right-of-use assets
(non-production)			(3,844	)		(3,892	)		(7,715	)		(7,357	)
Amortization of customer contracts and relationships			(341	)		(496	)		(641	)		(1,033	)
Gain on disposal of property, plant and equipment			-			148			-			259
Impairment of assets	9		(85,783	)		(18,502	)		(85,783	)		(18,502	)
Restructuring costs	11		(8,170	)		(8,165	)		(8,170	)		(8,165	)
OPERATING INCOME (LOSS)			(163,365	)		57,302			(114,160	)		140,765
Share of loss of an associate	8		(881	)		(512	)		(1,581	)		(512	)
Finance expense (including interest on lease liabilities)	17		(8,286	)		(9,944	)		(17,748	)		(19,740	)
Other finance income (expense)	17		(4,286	)		(1,082	)		(3,156	)		(1,096	)
INCOME (LOSS) BEFORE INCOME TAXES			(176,818	)		45,764			(136,645	)		119,417
Income tax (expense) benefit	15		29,932			(17,642	)		18,722			(36,027	)
NET INCOME (LOSS) FOR THE PERIOD		$	(146,886	)	$	28,122		$	(117,923	)	$	83,390
Basic earnings (loss) per share	16	$	(1.84	)	$	0.34		$	(1.47	)	$	1.00
Diluted earnings (loss) per share	16	$	(1.84	)	$	0.34		$	(1.47	)	$	1.00

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			Six months ended			Six months ended
			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
NET INCOME (LOSS) FOR THE PERIOD		$	(146,886	)	$	28,122		$	(117,923	)	$	83,390
Other comprehensive income (loss), net of tax:
	Items that may be reclassified to net income
	Foreign currency translation differences for foreign operations		(33,963	)		(21,885	)		73,923			(49,923	)
	Cash flow hedging derivative and non-derivative financial instruments:
	Unrealized gain (loss) in fair value of financial instruments		2,515			1,482			(3,244	)		3,520
	Reclassification of loss to net income		312			422			507			793
	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 of an associate		45			24			71			24
	Remeasurement of defined benefit plans		(4,547	)		(5,509	)		(10,296	)		(4,424	)
Other comprehensive income (loss), net of tax			(35,638	)		(25,466	)		60,961			(55,100	)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD		$	(182,524	)	$	2,656		$	(56,962	)	$	28,290

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
							Contributed			comprehensive			Retained
				Capital stock			surplus			income			earnings			Total equity
BALANCE AT DECEMBER 31, 2018			$	680,157		$	42,016		$	158,395		$	270,981		$	1,151,549
Net income for the period				-			-			-			83,390			83,390
Compensation expense related to stock options				-			628			-			-			628
Dividends ($0.09 per share)				-			-			-			(7,447	)		(7,447	)
Exercise of employee stock options				1,294			(372	)		-			-			922
Repurchase of common shares				-			-			-			(2,464	)		(2,464	)
Other comprehensive income (loss) net of tax
	Remeasurement of defined benefit plans			-			-			-			(4,424	)		(4,424	)
	Foreign currency translation differences			-			-			(49,923	)		-			(49,923	)
	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			-			-			24			-			24
	Cash flow hedging derivative and non-derivative
	financial instruments:
		Unrealized gain in fair value of financial instruments		-			-			3,520			-			3,520
		Reclassification of loss to net income		-			-			793			-			793
BALANCE AT JUNE 30, 2019				681,451			42,272			107,719			344,350			1,175,792
Net income for the period				-			-			-			97,831			97,831
Compensation expense related to stock options				-			567			-			-			567
Dividends ($0.09 per share)				-			-			-			(7,291	)		(7,291	)
Exercise of employee stock options				1,387			(390	)		-			-			997
Repurchase of common shares				(21,416	)		-			-			(10,088	)		(31,504	)
Other comprehensive income (loss) net of tax
	Remeasurement of defined benefit plans			-			-			-			643			643
	Foreign currency translation differences			-			-			(19,272	)		-			(19,272	)
	Share of other comprehensive loss of an associate			-			-			(50	)		-			(50	)
	Cash flow hedging derivative and non-derivative
	financial instruments:
		Unrealized gain in fair value of financial instruments		-			-			215			-			215
		Reclassification of loss to net income		-			-			495			-			495
BALANCE AT DECEMBER 31, 2019				661,422			42,449			89,107			425,445			1,218,423
Net loss for the period				-			-			-			(117,923	)		(117,923	)
Compensation expense related to stock options				-			1,208			-			-			1,208
Dividends ($0.10 per share)				-			-			-			(8,002	)		(8,002	)
Exercise of employee stock options				1,203			(347	)		-			-			856
Repurchase of common shares				(2,474	)		-			-			(893	)		(3,367	)
Other comprehensive income (loss) net of tax
	Remeasurement of defined benefit plans			-			-			-			(10,296	)		(10,296	)
	Foreign currency translation differences			-			-			73,923			-			73,923
	Share of other comprehensive income of an associate			-			-			71			-			71
	Cash flow hedging derivative and non-derivative
	financial instruments:
		Unrealized loss in fair value of financial instruments		-			-			(3,244	)		-			(3,244	)
		Reclassification of loss to net income		-			-			507			-			507
BALANCE AT JUNE 30, 2020			$	660,151		$	43,310		$	160,364		$	288,331		$	1,152,156

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			Six months ended			Six months ended
				June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES:
Net Income for the period			$	(146,886	)	$	28,122		$	(117,923	)	$	83,390
Adjustments for:
	Depreciation of property, plant and equipment and right-of-use assets			56,953			49,837			110,807			96,731
	Amortization of customer contracts and relationships			341			496			641			1,033
	Amortization of development costs			2,999			3,555			5,817			6,683
	Impairment of assets (note 9)			85,783			18,502			85,783			18,502
	Unrealized loss (gain) on foreign exchange forward contracts			211			(842	)		319			(259	)
	Loss on warrants			-			229			-			810
	Finance expense (including interest on lease liabilities)			8,286			9,944			17,748			19,740
	Income tax (benefit) expense			(29,932	)		17,642			(18,722	)		36,027
	Gain on disposal of property, plant and equipment			-			(148	)		-			(259	)
	Deferred and restricted share units expense (benefit)			4,642			(204	)		462			1,928
	Stock options expense			604			314			1,208			628
	Share of loss of an associate			881			512			1,581			512
	Pension and other post-retirement benefits expense			1,284			1,186			2,534			2,209
	Contributions made to pension and other post-retirement benefits			(2,524	)		(1,375	)		(3,336	)		(2,633	)
				(17,358	)		127,770			86,919			265,042
Changes in non-cash working capital items:
	Trade and other receivables			143,119			58,046			141,582			(54,941	)
	Inventories			21,553			(17,354	)		(22,707	)		(1,287	)
	Prepaid expenses and deposits			8,305			87			6,414			(2,865	)
	Trade, other payables and provisions			(156,454	)		(16,602	)		(109,847	)		45,173
				(835	)		151,947			102,361			251,122
	Interest paid			(8,559	)		(11,585	)		(18,480	)		(22,169	)
	Income taxes paid			(2,468	)		(11,822	)		(14,211	)		(40,287	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES			$	(11,862	)	$	128,540		$	69,670		$	188,666
FINANCING ACTIVITIES:
	Increase in long-term debt (net of additions to deferred financing fees)			46,868			3,307			103,296			84,727
	Repayment of long-term debt			(4,125	)		(19,301	)		(8,215	)		(23,382	)
	Principal payments of lease liabilities			(7,914	)		(6,836	)		(15,279	)		(14,111	)
	Dividends paid			(3,998	)		(3,724	)		(7,610	)		(7,541	)
	Exercise of employee stock options			856			-			856			922
	Repurchase of common shares			-			-			(3,367	)		(26,335	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			$	31,687		$	(26,554	)	$	69,681		$	14,280
INVESTING ACTIVITIES:
	Purchase of property, plant and equipment (excluding
		capitalized interest)*		(41,832	)		(83,028	)		(115,886	)		(160,446	)
	Business acquisition (note 2)			-			-			(26,044	)		-
	Cash acquired in business acquisition (note 2)			-			-			15,541			-
	Capitalized development costs			(2,872	)		(3,116	)		(4,655	)		(5,432	)
	Investment in NanoXplore Inc. (note 8)			(5,000	)		-			(5,000	)		(14,999	)
	Proceeds on disposal of property, plant and equipment			-			232			266			715
NET CASH USED IN INVESTING ACTIVITIES			$	(49,704	)	$	(85,912	)	$	(135,778	)	$	(180,162	)
Effect of foreign exchange rate changes on cash and cash equivalents				(802	)		(2,381	)		3,288			(2,806	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				(30,681	)		13,693			6,861			19,978
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				156,515			76,447			118,973			70,162
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	125,834		$	90,140		$	125,834		$	90,140

*As at June 30, 2020, $40,420 (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.