Martinrea International Inc. (MRE) Earnings Call Transcript & Summary

Good morning. I hope you enjoyed the music, and welcome to the Annual and Special General Meeting of Shareholders of Martinrea International Inc. My name is Rob Wildeboer. I'm the Executive Chair of the company, and the Board of Directors of the company has delegated to me the authority to lead the meeting of shareholders today. Before we begin, I would like to take this opportunity to introduce certain members of the company's senior executive management team and Board of Directors who are joining us today remotely. Presenting with me today are Pat D'Eramo, President and CEO and director nominee; as well as our CFO, Fred Di Tosto. Also present with us today is Kerri Pope, General Counsel and Corporate Secretary. A number of our executives and employees are participating virtually again this year, and those not participating are busy with our customers or at our plants helping to build our business, busy making parts, which is a nice thing to be able to say, believe me. Together, we comprise Martinrea's senior executive team. A critical element of our philosophy as a company is the talent of people. The best in the business are at the core of our company. We've built this company with great people. And we think we have a company full of them, not just at the executive level. We also have our independent directors joining today virtually, Terry Lyons, Sandra Pupatello, Molly Shoichet, Dave Schoch, Ed Waitzer and your Lead Director, Fred Olson. Our auditors are KPMG, and I would like to introduce Dave Power and Katherine Pressnail of KPMG, who are attending the virtual meeting also. As this meeting is held virtually via live webcast, we think it is necessary to set out a few rules for the orderly conduct of the meeting. I ask you to turn to Page 2 of the presentation. You will be responsible for changing the pages of the presentation. We will tell you which page we are on. [Operator Instructions] Please note that there will be a slight delay in the publication of the communications received. After the formal portion of the meeting, guests can also ask questions. When asking a question, please indicate your name, which entity you represent, if any, and confirm that you are a registered shareholder or a duly appointed proxy holder or if you're from the media or an analyst. When reading out a question, I will not read the name of the registered shareholder or proxy holder or guests submitting the question. In order to deal with all questions in a timely fashion, questions of a similar nature will be answered once, and duplicative questions will not receive a response. Questions on the formal meeting items will be addressed as each item is tabled. Any questions received of a more general nature will be addressed at the end of the meeting. If we are unable to address your general question during the meeting, a representative of Martinrea will reach out to you following the meeting with a response. For the purpose of the meeting today, voting on all matters will be conducted by electronic ballot. To allow sufficient time for voting, the polls will be open at the beginning of the meeting, and you will receive a message on the virtual interface requesting you to start registering your votes. I remind you that only registered shareholders and duly appointed proxy holders who have properly logged in with their control numbers or user name will be able to see on the screen all motions being brought forth at this meeting and will be asked to vote on each business item. We remind you that if you are a registered shareholder and you've already voted by proxy, you need not vote again unless you wish to change your vote and have revoked your proxy in compliance with the procedures as described in the circular. If you plan to vote at the meeting, you may choose to vote on each resolution immediately or wait to cast your vote until after an item is discussed or following the conclusion of discussions on all voting matters. To vote, simply click on your choice for, against or withhold as applicable. A confirmation message will appear to show your vote has been received. To change your vote before the polls close, simply change your selection. The votes you have submitted on each polling item at the time the poll closes will be recorded. Totals in favor, against or withheld, as the case may be, for each resolution item will be tallied by the scrutineers once the voting is completed. The chair will report on the outcome of all motions at the end of the meeting. Actual vote totals will be published in due course. With that introduction, I would now like to call this meeting to order. In order that the meeting covers all the business for which it was convened within a reasonable time frame, we have prearranged with certain persons attending this morning to make and second motions. This procedure is not an attempt to discourage participation, and there will be ample opportunity during the course of the meeting to ask questions. After the formal business is attended to, we have updated you as to the business and affairs of the company, we will have an open Q&A period. I do note that in our discussions today, we will probably use forward-looking statements based on our best guesses, our assumptions and our interpretations whether we do this in our presentations or in our answers to any questions. These forward-looking statements are subject to important risks and uncertainties that could cause actual results to differ materially from the conclusions, forecasts and projections discussed in this meeting as certain material factors and assumptions may have been applied in drawing conclusions. We're not going to be able to set forth all assumptions, risk factors and so on every time we say something. We do have a public record on SEDAR, which is comprised of our documents filed with securities regulators, that set out the nature of our business along with risks, uncertainties and so forth that could cause results to differ materially from any forward-looking information. Our remarks today are qualified by our public record in those filings, and our formal disclaimer is on Page 3 of the presentation for your reading pleasure. So the agenda is on Page 2. I now ask that the annual general and special meeting of the shareholders of the company come to order and declare the polls open on all resolutions. I appoint Kerri Pope, General Counsel and Corporate Secretary of the company, as secretary of the meeting. For the purpose of this meeting, I appoint Computershare Investor Services Inc., through its representatives, as scrutineers to compute the votes of any polls taken at this meeting and to report thereon to me. The purposes of today's meeting are set under the management information circular of the company dated May 7, 2021. The notice calling this meeting, the management information circular and the form of proxy were mailed to shareholders on or around May 12. Copies of the management information circular and other meeting materials are available under the company's profile on the SEDAR website. It's now time to ask the secretary to table proof of service of the notice of meeting. I confirm the secretary has received from the company's transfer agent and/or has been filed with me an official notice Computershare Investor Services Inc. and proof of service as to the mailing of the notice to shareholders. I direct that a copy of such proof of service be annexed to the minutes of this meeting as a schedule. As all shareholders should have previously received a copy of this notice, with your consent, I would ask for a motion to dispense with the reading of the notice.

I so move.

I second the motion.

Carried. I've been advised that there are voting shares representing more than 73%, actually 73.85%, of all outstanding voting shares of the company present, and therefore, a quorum of shareholders of the company is present and the meeting is properly called and duly constituted for the transaction of business. I have received the scrutineer's report, and I direct that their formal report be annexed to the minutes of this meeting as a schedule. I therefore declare this annual general and special meeting of shareholders to be regularly called and properly constituted for the transaction of business. For your information, sufficient proxies have been received to pass all resolutions with overwhelming majorities. In advance, I would like to thank shareholders for their support. The next item of business is the presentation of the consolidated financial statements of the company. These include the consolidated balance sheets as of December 31, 2020, and December 31, 2019, the consolidated statements of earnings and retained earnings, and the consolidated statement of changes in financial position for the 2 fiscal years that ended together with the auditor's report. The financial statements have been mailed to those shareholders who had requested to receive a copy and are posted on SEDAR. I would ask someone to move that the reading of the financial statements and auditor's report be dispensed with.

I so move.

I second the motion.

Unless there are any questions, I'll move to the next item of business. The next item of business is the election of directors. The directors to be elected by the shareholders of the company shall hold office until the close of business of the first annual meeting of shareholders of the company following election or until their successors are elected or appointed. As set forth in the information circular, each of the following persons has been nominated by the company for the position of director of the company to hold office for the ensuing year or until the successors are elected or appointed and each has agreed to serve as a director, if elected, Pat D'Eramo, Terry Lyons, Fred Olson, Sandra Pupatello, Dave Schoch, Molly Shoichet, Ed Waitzer and Rob Wildeboer. Pursuant to Bylaw #4 of the company, the advance notice bylaw, in order to nominate a person for election as a director of the company, a notice in the form required by the bylaw must be delivered to the company no later than the close of business on the 30th day before the date of the meeting, or where notice and access is used for delivery of proxy-related materials, notice must be given not less than 40 days prior to the date of the meeting or as otherwise set out in the bylaw. The company did not receive advance notice from any shareholder with respect to nominations. There being no further nominations, the nominations are now declared closed. As the number of persons nominated is equal to the number of Board seats to be filled, I declare those persons who have been nominated to be duly elected by acclamation as directors of the company. On behalf of the company, I would like to thank the directors for agreeing to stand for reelection and for their efforts and contribution to the success of the company. In particular, your availability and willingness to spend long hours are appreciated. The past year was a very, very busy year for our Board given the challenges raised by the pandemic, and we thank you. Last year, you also elected Roman Doroniuk as a director. Sadly for all of us, Roman passed away in November after a long battle with cancer. Not only did he excel as a director and chair of the Human Resources and Compensation Committee, representing shareholders for 7 years, working diligently until his passing, but Roman was a fabulous person. He had a terrific sense of humor, a no-nonsense style, a brilliant intellect, and a deep empathy for the people who work at Martinrea. Roman was an immigrant to Canada. He started working on the shop floor. He never forgot his roots and is missed by all of us. Unless there are any questions, I'll move to the next item of business. The next item of business is the appointment of auditors. Will someone please move that KPMG LLP be reappointed as auditors of the company until the next annual meeting of shareholders and authorize the Board of Directors of the company to fix their remuneration?

I so move.

I second the motion.

Unless there are any questions, I will move to the next item of business. We'll now turn to the items of special business, which are the approvals and adoptions of the general bylaw and advance notice bylaw of the company. In May 2021, the Board of Directors passed resolutions approving the adoption of Bylaw #3 and Bylaw #4 of the company. The Board had determined to update and modernize its general bylaw, which is Bylaw #3, which was first adopted in 1997 and had not been amended since that time. The Board had also determined that since it was updating and modernizing Bylaw #3 that it should update and modernize the advance notice bylaw, Bylaw #4, of the company. The advance notice bylaw was adopted in 2014 and at that time was in compliance with the guidelines published by ISS and Glass Lewis, proxy advisers. Since 2014, the proxy advisers have revised their guidelines as to what they believe is acceptable in an advance notice bylaw. Summaries of the changes to the bylaws of the company are included in the management information circular. Since publication of the advance notice bylaw, which is Bylaw #4, the management information circular, an additional update to Section 1.38 of Bylaw #4 was made to bring Bylaw #4 in compliance with the latest ISS policy guidelines. The update pertains to the notice required in any nominating shareholder's notice. The updated Bylaw #4 was filed on SEDAR and our company website, and a press release was issued on May 21, 2021, announcing the update. The resolution approving the general bylaw, Bylaw #3, is set out on Page 18 of the management information circular, and a copy of the full general bylaw is attached to Schedule A to the management information circular. Are there any questions regarding the resolution? Being no questions, I ask someone to present a motion to approve the resolution confirming and adopting the general bylaw, Bylaw #3, of the company enclosed with the notice of meeting and management information circular.

I so move.

I second the motion.

Unless there are any questions, I will move to the next item of special business. The resolution approving the advance notice bylaw is set out on Page 19 of the management information circular, and a copy of the advance notice bylaw, Bylaw #4, is attached to Schedule B to the management information circular, with the additional updated version being filed on SEDAR, on our company website and summarized in a press release of May 21, 2021. Are there any questions regarding this resolution? Being no questions, I ask someone to present a motion to approve the resolution confirming and adopting the advance notice bylaw, Bylaw #4, of the company enclosed with the notice of meeting and management information circular.

I so move.

I second the motion.

That concludes the special business for this meeting. Unless there are any questions, I'll move to the next item of business. The next item of business is an advisory, nonbinding vote on Martinrea's approach to executive compensation. This is often referred to as say on pay. Although the vote is nonbinding, the Board of Directors will consider the results when assessing future compensation decisions. A detailed description of the company's approach to executive compensation is included in our proxy materials. I ask someone to present a motion to approve the resolution confirming and adopting the advisory, nonbinding vote on management's approach to executive compensation. The text of the resolution approving the advisory, nonbinding vote on management's approach to executive compensation was set out on Page 32 of the information circular.

I so move.

I second the motion.

Unless there are any questions, I'll move to voting. As we mentioned, voting today will be conducted by electronic ballot. For those of you who have not yet cast your votes, please do so now. We will provide registered shareholders or duly appointed proxy holders approximately 1 more minute to complete these electronic ballots. Once the electronic balloting closes, the voting page will disappear and your votes will automatically be submitted. As noted, I have been advised by the scrutineer that proxies deposited for the meeting are sufficient to pass all resolutions by an overwhelming majority. Thank you. I would also ask that the scrutineer compile the report regarding the results of voting on all business matters and direct that the results will be included in the minutes of this meeting and published on SEDAR and by press release shortly. Let's wait a couple more seconds to get to 1 minute. [Voting]

Okay. The formal items of business as set out in the notice of meeting have now been dealt with. I would ask for a motion to terminate this annual meeting of the shareholders of Martinrea International Inc.

I so move.

I second the motion.

As there's no further business, I declare the formal part of the meeting to be concluded. We'll then have our presentations and Q&A period. Please turn to Page 4 of the presentation. Okay. Good morning again. It's time for the most stimulating, thought-provoking, wide-ranging AGM presentation in the country this year. We intend to inform you about our company, our future and our view of the world, and at bottom, how to create and operate a sustainable business over the long term is quite simply a great place to work for our people. After my comments, I'll turn it over to Pat to go over the highlights of 2020, and this year-to-date, some of our successes, challenges and opportunities and a view of the world and our place in it, including with some of our electrification and technology initiatives that we're very excited about. And Fred will give you a financial overview and our view of the future from a financial perspective. Both will show a really good view of the future that I believe will excite all our stakeholders and, of course, our investors. As a lead-in and in part by way of providing a foundation, I want to talk about 3 things: our culture as a base for long-term sustainability; the investor perspective, sustainable valuation creation and stock price; and thirdly, our approach to capital allocation that is how we invest. So turn to Page 5. I'm going to talk about culture as a base for long-term sustainability. We talk about culture a lot at Martinrea because it matters a lot to us. It matters to us, but more importantly, it matters to our people here at Martinrea whether in good times or in bad, and we've seen both. Our culture has a profound impact on our company and our people and on us. So we take it very seriously. Peter Drucker once said, "Culture eats strategy for breakfast," and we think he's right, especially in challenging times. Our vision is on the slide, "Making lives better by being the best supplier we can be in the products we make and the services we provide." Our people need a lot and that's a wide vision. There's a proverb that says where there is no vision, the people perish. And that's very true and very appropriate. Our mission is set out there: Making people's lives better by delivering outstanding quality products and services to our customers; providing meaningful opportunity, job satisfaction and job security to our people; providing superior long-term investment returns to our stakeholders, that means lenders and equity holders; and being positive contributors to our communities. In difficult times, we've doubled down on serving these groups, and our 10 guiding principles are foundational, as noted on the slide. These principles are a living document, and we updated them in the last year with input from our people. We moved our golden rule philosophy to first place, the first bullet. Indeed, if we had to pick one principle to work and live by at Martinrea, that would be it. More on that in a moment. We now stress the fact in principle 6. We are not only a team, but we are a diverse and inclusive team. We've always been that way, but we felt it important to stress that more directly. And we replaced our rule, "Our leadership team has to drive these messages consistently and simply," because we felt it's implied in any case -- that's the role of leadership, with a new rule, at the end, "Leave it better," reflecting our commitment to improve not just our environment but our world. So turn to the next slide, on Slide 6, where we articulate our company culture comprised of entrepreneurship, lean manufacturing principles, and the golden rule philosophy core to our 10 guiding principles, as demonstrated in this picture. On the entrepreneurial front, the company has been entrepreneurial in nature since inception, since I started as a chair in 1996, 25 years ago this year, as a company that has embraced characteristics of encouraging executives, general managers and all employees to act and think like an owner with a stake in the enterprise, supporting a can-do attitude, promoting an ability and willingness to urgently get things done, acting to avoid unnecessary bureaucracy, developing an ability to learn from mistakes openly and constructively, and the trust of working in a team. As a company, we embrace new initiatives every day, and we focus on new products, new technologies, new locations and new ways of doing things consistently. Our immediate and nimble response to the pandemic crisis, the speed at which we made products to help fight the health aspects of it, our restart and our ramp-up are all profoundly entrepreneurial. The company embraces lean thinking as part of its culture, too. Simply stated, the lean thinking way is a focus on eliminating waste in all aspects of the company's business and operations. The elimination of waste allows us to take out unnecessary cost, thereby making us competitive. It enables us to see problems that we can fix in our operations more easily. It allows us to simplify processes so that we can have safer, cleaner, more efficient and more sustainable workplaces. It is a culture of continuous improvement in whatever we do. We believe, as Pat will show, that this crisis is enabling us to be a leaner, more efficient company. At the core of our One Martinrea culture is a golden rule philosophy, our principle #1, based on treating others the way we want to be treated with dignity and respect, but more also maybe forgive people when they make a mistake. Why couldn't we use more of that attitude in the world today? It means following our 10 guiding principles in our business and operations and in how we deal with our customers, employees, suppliers, stakeholders, lenders and shareholders and our communities in better times and in tougher times. Being lean or being entrepreneurial is not enough. These cultural elements overlap are tied together with our golden rule approach. We make people's lives better in what we do, and we can only do that with a service-oriented approach to our work and our colleagues at work and all those who we deal with in our work. At Martinrea, we believe that our culture is and will be a sustainable competitive advantage for the company over the long term. And we believe it has driven the improving financial, safety and quality performance over the past several years. We don't profess to understand the stock market price every day or how investors make their decisions. And frankly, we're not sure we're alone in that. But we do believe one thing: Sustainable companies with great cultures will be around for a long time. We believe we have a company poised to excel over the next decade and beyond, and we and our people are committed to that. Our cultures come to the fore in the context of the COVID-19 challenge. We are working very hard to make people's lives better. We are focused on safety. We have safely brought back as many people to work as we can, when we can. We've worked with governments in the places in which we have plants on relief for employees we have had to lay off, and many of our people are benefiting from programs available to them. We have been leaders in PPE manufacturing, workplace protocols, screening and testing and vaccination. We've made millions of Level 3 medical masks. Just this week, we are donating 1 million masks to the province of Ontario for food banks and frontline workers. We walk the talk. We're also profitable in [indiscernible], which help our governments provide COVID relief. Throughout the pandemic, I and many in our industry have observed that our people are safer at work than any other place than home, and we have provided guidance on how to be able to safely live in a pandemic. It turns out that some studies are now showing that the workplace is even safer than people in homes during a lockdown, as a study from University of Chicago shows. This makes sense. Workplaces adopt mitigation protocols. People follow them. Our people demand safety at work, and we can enforce our protocols and discipline people who are not safe. People locked up at home typically do not follow safety protocols. And despite political messaging and threats of penalties and fines, which in practice are pretty toothless, the data shows that infection rates in workplace have typically dropped from well above household rates to well below. We have been a beacon of hope to our people and others throughout this pandemic. I believe firms are taking care of their people. We certainly have been focused on it. Our vision is making lives better. That is core to our company, and we've been doing that for our people and others over the past year. I am tremendously proud of our company and our people. I'll talk about sustainability and the stock price. I'm not going to get into sustainability in great detail. We do have a sustainability report, but let me outline for you what sustainability means to us here at Martinrea. And it's consistent with and follows from our culture. It's a natural partner in a sense. So turn to Page 7. You can see our vision and purpose and our approach to sustainability. We build a sustainable business through making people's lives better. We provide meaningful opportunity, job satisfaction and job security for our people. That's an element of our mission statement, which I said -- which I talked about before, but its core is sustainability also. The reality is that one of the best social policies a society can give its members is the dignity, respect, livelihood, opportunity and security of a good job. We can get into a great deal of detail on this topic but time does not permit, but a couple of observations. There are many leadership and management gurus that have very good theories and observations on what good employee engagement looks like. Daniel Pink wrote a great book called Drive, where he argued employees are really looking for 3 things at work: namely mastery, autonomy and purpose. We encourage people to develop their skills, and we support that consistently. That's mastery. Our entrepreneurial approach encourages the development of autonomy. Our vision gives life to purpose, and we think we can get better. I believe it's a core responsibility of governments to let us and help us do this. And that's why we at Martinrea work so much with governments in Ontario, Canada and elsewhere. We have been doing this sustainably for 25 years, and we'll do so for many more years to come. We also deliver outstanding quality products and services that contribute to the safety, lightweighting and responsible propulsion of vehicles. We're at the leading edge of this. This path will show we are at the forefront of so many good things. One is the world's largest manufacturing industry. We're providing superior long-term investment returns. I'll come back to that in a minute. And we're being positive contributors to our communities. We have 57 plants. In many cases, we're the largest employer in a community. We provide jobs, opportunity, money from taxes, student programs, charitable contributions. All that supports communities. So when we look at ESG, it's consistent with our culture and what we do every day. It's not just a popular fab for us, a check in a box. I'm hopeful that people looking at ESG to more than be superficial in approach. Look to the substance of the culture. So let's look at sustainability in a sense of long-term value for investors, one of our key stakeholders that I believe benefit from our approach to culture and sustainability. So turn with me to Page 8. I have had the privilege of being chair of this enterprise for 25 years since it went public in 1996. I'm a co-founder. This is my 25th AGM. In 1996, we had 30 employees, a leased building, $2.5 million in sales, profit of approximately $0.5 million, and we very confidently used lasers to make metal parts for industry. We got into automotive parts later on in the decade and seriously so in 2001. We've grown a little bit by over 1,500x. That's something. Sustainability depends firstly on being around. Simon Sinek, one of those leadership gurus I just mentioned, has an interesting book called The Infinite Game. The name of the game is to stick around and be sustainable. If you cannot do that, investors lose their money, employees lose their jobs, lenders lose their shirts, communities suffer loss, customers lose trusted suppliers, and suppliers lose customers. In 1996, we went public with a small share offering of $2 IPO price. Our enterprise value was $10 million or so. Today, with our stock price, we've returned about a 600% return, recognizing we've been paying dividends over the years, too. By way of comparison, the TSX Composite, of which we're now part, returned under 300%. The TSX Consumer Discretionary Index, where our company is counted, has returned more than that but less than we have. Our enterprise value now approaches $2 billion. We have close to 16,000 employees. Our revenues are in the $4 billion range, and we are a leader in what we do wherever we do it. That's sustainability, and that's at the core of our business. I've had the privilege of building a number of things in my career, but this journey has given special pleasure. I've been joined on this journey by many great people who have been instrumental to our success and own this company and this culture, like I do, many hard-working people in our plants who actually make the product every day. People like Armando Pagliari, our EVP of HR, and our first real automotive employee who joined in 2001 right after 9/11 when things looked just a little bit strained, or so many of his HR team in the plants who help drive our culture daily. Or like Bruce Johnson and Megan Hunter, our EVPs of Martinrea Innovation Developments and of Supply Chain and Procurement, respectively, who joined after our TK Budd acquisition of 2006. Or like Hany Morsy, our Chief Internal Auditor, who for 1.5 decades has continuously audited our systems and helped improve them. Or like Kerri Pope, our General Counsel, joined in 2008 just before the economic crisis, something she claims to this day she did not cause but her presence helped to protect the company during the crisis. Or like Fred, our long-term CFO, joined in 2010. Or like Pat, our CEO, who has led us and leads us to consistent improvement and who has been here since 2014. All these people come and they grow and they care and they build and they stay. The average CEO tenure today in North America is under 5 years. Pat's well above that, and he will be here for many years to come. And we've added many great people at key positions in the plants and in our offices in the past few years. I can't name them all. And we continue to bring talented people into the company today. These people don't have to be here. There are other places to be. Most can earn a living elsewhere. They're here because this is a great place to work. And that, my friends, is what makes a firm, sustainable and a good long-term place for investors. We own this business, not just with equity but with our loyalty. I want to give another data point. The auto business is a tough business. We all know that. In the past 2 decades, we've certainly seen that. We saw 9/11, we saw the 2008 and '09 financial crisis, and we have seen the COVID pandemic and the industry shutdowns. We have survived, thrived and see a great future. How have others done from an equity perspective? Well, this is kind of an unfair question as most of our direct competitors have been bankrupt or insolvent somewhere during the past few decades, as this chart shows. Turn with me to Page 9. In the metallics space, Magna has done well. Most of our early people came from Magna. That was and remains a good and healthy competitor for us. We like to meet good competitors. They make us better and keep us sharp. But Dana, Oxford and Tower all went bankrupt at some point, tower twice. Budd would have been insolvent if we did not buy them and fixed them. We bought SKD from an insolvency. In the fluids space, our 2 leading competitors for 2 decades have been TI and Cooper Standard. Both went insolvent and were restructured. In the aluminum space, we bought a bankrupt Honsel. And of course, we even had 2 of our largest customers, GM and Chrysler, go through bankruptcy a dozen years ago. A bankruptcy event is not good for equity investors. They lose their investment. Our history has shown us to be resilient. We have preserved and enhanced our value over time. Notice not just automotive companies that don't survive. In the 1990s, the leading company by market capitalization in Canada was Northern Telecom, at one time representing about 1/3 of the value of the entire TSX. It doesn't exist today. Turn with me to the 5-year return chart on Page 10. Here's the chart of our 5-year returns, which has been pretty good. The chart is in your proxy materials. Recall in 2016, 5 years ago, there's a lot of concern about NAFTA and the U.S. approach to it. With the USMCA, we ended up with a decent result. Finally, our share price at the AGM last year was around $11, which perhaps ironically was up from a year before. Our share price is up nicely year-over-year to date. And of course, our price is significantly higher than the lows of the pandemic when it reached $5.70, overall good news. But our sustainability has been supported by our culture and our people, and that I think will be a driving force for future success. It's nice to see shareholder support for our Board and management and a resoundingly positive vote. They deserve your support. Finally, I'm going to touch on our approach to capital allocation because that goes hand in hand with our approach to culture, sustainability and long-term outlook and performance. So please turn with me to Page 11. Since Q2 of last year, our results have been really solid. We made progress in many areas. We made decent money, not as much we're going to make in the future, and we invested in our business. It made sense to grow our company and increase revenues, profit and cash flow over time. So with that in mind, I'm going to touch on capital allocation and capital spending. I should note that we have prepared an investor newsletter on our approach to capital allocation, which is posted on our website. Neil Forster, who has been both an auto analyst and an investor with Franklin Templeton and a shareholder, has set out our thinking very nicely for you there. Also, our Q1 presentation went into this subject in some detail. In any business, how the company allocates its capital is among the most important decisions management has to make. Capital allocation is equally as important as operational decision-making and execution, and we have to be effective at both to ensure our organization prospers or even survives over the long term. Profitable businesses with strong operating track records can be derailed by a poor capital allocation strategy. Therefore, it is critical that we get this part of the corporate strategy right. At Martinrea, we spend a lot of time thinking about capital allocation. Our overarching priority in this regard is quite simple: to generate long-term positive returns for our shareholders. Generating returns is part of our mission. In that sense, we're no different than many of our shareholders. I'm an investor myself. I've been doing it probably longer than most, purchasing shares in whole companies. In sum, we invest where the return potential makes the most sense. We are committed to the long-term sustainability of the company in line with our vision, mission and principles, as I've just shown. In management, we're all owners, increasing our holding of shares and equity-based investments over each of the prior 5 years, with minimum shareholding requirements and a robust equity share ownership program. In 2020 and 2021 to date, we have met the challenge of the pandemic head-on. And today, we are a strong company as we have ever been because we are owners and behave like owners. Taking a closer look, our capital allocation framework is shown on this chart. While maintaining a strong balance sheet, looking at the left, we seek to invest in growth and maintenance opportunities that have the potential to generate strong returns for our shareholders. This can take the form of organic capital investments and R&D initiatives as well as acquisitions that make strategic and financial sense. These priorities are driven by disciplined internal rate of return, or IRR, return on investment capital, or ROIC, framework. That is we choose the options that have the highest expected returns over the long term. So if you can turn to Page 12. In a nutshell, Martinrea's industry-leading returns on invested capital demonstrates that we are investing well. And those are numbers from the 2019 year, the pretax ROIC. In late 2014, Pat joined us as President and CEO, and we embarked on our lean transformation journey, a period we referred to here as Martinrea 2.0. Over the next 5 years, adjusted operating income margin nearly doubled to 7.5% in 2019. It would have been over 8% if we didn't have the 2019 GM strike that you may recall, putting us among the top in our peer group. We achieved this through a combination of plant-level operating improvements in our lean manufacturing practices and a more disciplined go-to-market approach, adhering to a strict IRR hurdle rate in quoting new business, which has generated ROICs that are among the best in our peer group, demonstrating our effectiveness when it comes to capital allocation, as this chart shows. So you can turn to the next chart on Page 13. Let's talk about free cash flow, playing a long game. Free cash flow is an important metric in assessing the merits of any investment. It's a key element for many investors, for many of you and ultimately a key driver of valuation. The value of investment is equal to the present value of future cash flows discounted at the appropriate cost of capital. Importantly, the cash-generating potential of the business must be looked at through a long-term lens. The company may have options to invest capital in high-return organic growth opportunities that will provide a steady stream of free cash flow in future years. However, those investments produce free cash flow initially. Working capital flows can also be unpredictable over short-term periods, viewing the true cash flow picture. On allocated capital, it's incumbent on us to play the long game and not be distracted by near-term ebbs and flows. Ultimately, companies that generate strong ROIC tend to generate strong free cash flow over time. We have a strong ROIC, as the last chart showed. Our Martinrea 2.0 journey has also included substantial capital investment, mostly related to investments in our steel metal forming operations to make our production lines more flexible as well as long-term capacity investments to support growth in our aluminum casting business. Notwithstanding, we hit an inflection point in 2019, where we generated over $100 million in free cash flow. Although the COVID-19 pandemic has impacted our continued progress in this area, we still managed to generate over $60 million in free cash flow in a COVID-disrupted 2020. This year, we're expecting CapEx to increase from 2020 levels, driven by new business wins, capital required for a number of customer-driven engineering changes, additional capacity to be put in place due to stronger-than-expected volumes, and some spending moving into 2021 from 2020. Fred will talk further on future free cash flow. So I'll leave that topic. Let's go back to Page 14, which is a repeat of our capital allocation framework. What about acquisitions? Our acquisition strategy is disciplined and has served us well over time. Historically, our acquisition strategy has revolved around acquiring businesses that broaden our product offering, technology footprint or our customer base. They helped us grow rapidly from a start-up company with $4 billion -- to a company with $4 billion in revenue. It's a true growth story. Primarily, these were distressed assets requiring investment and resources to turn around. We were able to acquire these companies cheaply and restructure the operations, thereby putting them on a more sustainable path. We've proven our effectiveness in turning around struggling businesses. We are prudent and disciplined buyers, and this is a big part of how we build our organization. Our acquisition strategy has evolved a bit over the years, though valuation remains a key component. Great companies can end up being bad acquisitions if you pay too much. So we are selective and prudent in our approach. Basically, we look for companies that can help us achieve some combination of advancing our lightweighting strategy or enhancing our product and technical capabilities or diversifying our customer base. And we look to acquire these companies that are reasonable to attractive valuations. While I won't get into it further here, our recent investment in Metalsa's assets and NanoXplore are proving to be great investments to maintain and grow our business. A strong balance sheet is paramount and it gives us the confidence and ability to withstand downturns if and when they arise, like during the Great Recession of 2008 and '09 and, more recently, the COVID-19 shutdowns of 2020 and related impacts, such as from the chip shortage today. Our customers also prefer to deal with suppliers who are financially sound that they know will be around to serve them in the long run. So a strong balance sheet is fundamental to maintaining and growing our business. We believe our targeted net debt to adjusted EBITDA ratio of approximately 1.5x is appropriate for our business as it represents a level that allows us to manage downside risk while maintaining the flexibility to invest for growth. The COVID-19 pandemic highlighted the importance of our strong balance sheet and strong lending relationships. It also showcased our ability to manage through a crisis in a period full of uncertainty. Our strong financial position leading into the COVID-19 downturn as well as actions we took in the form of cost reductions from temporary layoffs, salary reductions and CapEx reductions as well as liquidity actions to increase credit availability allowed us to navigate through the crisis in a position of strength. And finally, the final component of our capital allocation strategy is returning capital to shareholders in the form of share repurchases and dividend growth over time. While our dividend rate is higher than many in our industry, we pay approximately $16 million in dividends annually, representing a modest cash outlay given the scope of our business. While we seek to reward our investors with a steady stream of dividend income, our view is that share buybacks represent a more compelling opportunity as we believe our stock is undervalued. As such, return of capital is more likely to be focused on buybacks at this juncture as they offer better return potential. We've been active with our share repurchase program in the past. Between 2018 and 2020, we repurchased about 8% of the company's outstanding shares for about $83 million. When the pandemic hit in 2020, we suspended our formal normal-course issuer bid, a prudent move to preserve cash. However, we did maintain our dividend in full. It's now June 2021. We're still in the midst of the third wave of the pandemic. There are still many closures or lockdowns, getting better every day, including of borders, and the industry is facing many supply shortage particularly related to the semiconductor chips. We're seeing many customer shutdowns of plants and an uncertain outlook over the next several months, but things are certainly getting better, as I said. While we continue to invest in our business, maintain our dividend and keep our balance sheet strong, we're not recommencing our share repurchases just yet but do anticipate filing for a normal-course issuer bid later in 2021. Philosophically, we like buybacks as we think our shares are attractively valued and represent a good investment opportunity, but we're going to be prudent with our cash in the midst of pandemic uncertainty and chip and other supplier issues while still investing in the future of our company. In conclusion, we believe our capital allocation strategy provides the right mix between investing in the future of our company while putting in a strong financial position through prudent balance sheet management. It also seeks to reward our shareholders for their continued support in the form of returning capital to them through dividends and share buybacks. In summary, our capital allocation framework is core to our overall corporate strategy and should enable us to drive meaningful and substantial growth in revenues, earnings and free cash flow in the medium and long term. Thank you very much. Now I'll turn it over to Pat D'Eramo.

Thanks, Rob. Good morning, everybody. Let's briefly reflect on 2020. Our revenues approached pre-COVID levels in the second half with record adjusted earnings per share. Year ended with a similar level of net debt in 2019 despite funding of the acquisition and the global pandemic. Strong relationships with our lending syndicate allowed us to expand our credit facility and obtain covenant relief, ensuring adequate liquidity. And our stock price ended the year higher despite. Page 17. We completed the continuous improvement initiatives across the organization. And we pulled forward a lot of the work that we have had scheduled and used the shutdown to improve ourselves at an early stage of the year. Safety metrics improved. In fact, safety metrics have improved here steadily since 2014. We implemented technology improvements and process innovations to introduce new products such as our graphene-enhanced brake lines, multi-material systems and assemblies. We've been talking about multisystem assemblies for years now, and we're finally at the point where we're starting to launch these products. And I'll get into an example in a moment. We completed successful investments, including the Metalsa acquisition and the additional investment in NanoXplore. We collaborated with government and the industry to affect a safe return to work. Post shutdown last spring, the industry did an excellent job of sharing best practices across the supply base, between customers, across borders. These best practices significantly reduced the potential of in-house COVID transfer, which Rob referred to earlier. Page 18. Let's take a look at the current status. In North America, there's a very high demand. The last number of months, we've seen demand in 17 million to 18.5 million range. At the same time, the inventory is at the lowest level that I've seen in my career, especially in our sweet spot such as CUVs, SUVs and trucks. The chip shortage has certainly been a drag on sales and will continue to be this quarter and on into the third quarter to some extent, but this drag on sales and this chip shortage have also allowed different parts of the supply chain to start to recover that might otherwise be a problem. In Europe, sales growth has been driven by new business launches, positive sales mix. Of course, the industry there is also impacted by the global shortage of semiconductors, which we expect a similar time frame of recovery in the third and into the fourth quarter and into next year. Restructuring activities in our Metalsa operation in Germany, which we've discussed quite a bit, are back on schedule. And in Asia, China is operating at a high level, as high as they were pre-COVID, and of course, there is some impact in chips there as well with a similar time line. Let's go to Page 19. All right. I'm going to show you this picture of the map of the Metalsa acquisition. I'm going to officially announce my graduation from talking about Metalsa after today, but I thought it was worthwhile to touch on a few key points. The integration has now matured. And as I said, we're back on schedule in Germany. The signs are coming down on the Metalsa plants. Martinrea signs have gone up or are going up, but like many things in the world today, many of our signs are still on back order. The plants I want to emphasize right now is the one in Tuscaloosa, Alabama, which you'll note is the star on Page 19. That plant was acquired -- was basically half or more empty. And what's significant about that is just prior to the acquisition, we had won a very large package with Daimler on their electrical -- electric vehicle platform. Go to Page 20. I was at that plant 2 weeks ago, and it's now full. In fact, it's so full, we're actually expanding the plant as we speak. What's important about this platform is, one, it's diversifying our customer base. One of the things we've said about the acquisition is it brought about $400-plus million of additional business between BMW and Daimler primarily. This win was on top of that, and we had announced it a while ago. What's significant about this vehicle is it utilizes our advanced joining technologies that we've been talking about for some time. It's a multi-material platform. And more and more multi-material platforms will be coming into the market, especially on EVs. It uses high-strength steel, hot-formed steel, ultra high-strength steel, stamped and extruded cast aluminum components. The joining technology is equally impressive. This is the quintessential product when we refer to multi-material vehicle. Some of the -- to give you a taste of the joining technologies we use on this particular vehicle and if you look at the picture, that gray area, that rear floor pan assembly or rear assembly joining methods includes clinch nuts, rivets, MIG welding, MIG brazing, staking, aluminum spot welding, steel spot welding, bonding, projection welds and flow drill screwing. And that's just the ones I can remember. This is a premium global vehicle. It will be shipped from the Daimler plant in Tuscaloosa, Alabama all over the world. We believe these premium vehicles will be the strongest segment of the market for EVS. Let's go to Page 21. We talked a lot about launch over the last few quarters. And I want to take a moment and give you a little bit more light of what's going on. Certainly, in 2020, a lot of launches were delayed, and a lot of those launches were large launches delayed into 2021 from 2020. That's compounded with what was already scheduled for 2021. In some senses, we're doubling down at least temporarily from the amount of work we're doing to launch these very large launches. Some examples of those, the Jeep Grand Cherokee, which is now in production; the Grand Wagoneer, which is just beginning launch; Ford Mustang Mach-E, which is now coming close to meeting North America volume and will be going to China next; Nissan Pathfinder and Rogue; and Mercedes C-Class; Volvo XC40; and of course, not on this page but very significant is the Silverado/Sierra uplift in Oshawa, Canada, which will be launching late this year. In our Propulsion Systems group, Jeep Grand Cherokee again for the fluid systems, both fuel and brake; Grand Wagoneer, both fuel and brake; the D35 Ford engine, which is the primary -- in fact, the only 6-cylinder engine that goes into the F-150; and a Daimler Class 8 truck transmission, which has become so popular that Daimler has pulled that ahead 2 years. In other words, the 2020 launch requirements are approaching the 2022 projections. In Flexible Manufacturing, the Ford Maverick, which was announced earlier today; float arms and tanks for the John Deere; Cat fuel tanks; GM commercial van products; the Isuzu truck bracket assemblies; and new to our FMG group, JLG, which is a recent customer. Let's skip Page 22 and go right to Page 23. On Page 23, we're showing the Martinrea book of business evolving with the market. So our customers tend to call EVs and many things. EVs for one, electrified vehicles. Electrification is a general sense. But in any of these cases, they're really referring to both hybrids and BEVs, BEVs being the actual all-electric or battery electric vehicles. And if you look at the IHS data through 2028, the majority of vehicles are still hybrids and ICE vehicles with EVs growing. And if you look back at 2015 for Martinrea, about 1% of our volume was for BEVs and hybrids. 2020, it was 8%, and it's probably a little over that today. In 2023, it will be at 21%; and in 2025%, 25%, very much in line with the market. Let's go to Page 24. Now let's talk specifically about battery electric vehicles or what I refer to as all-electric vehicles and the platforms that we now are involved in and we've actually had quite a bit of activity. The Daimler EVA2, which I've just talked about, which launches next year in 2022; Ford Mach-E, which is already launched and is now reaching higher volumes, which is launched in late 2020; the Geely PMA 1, which is this year, in Q3; the GM Hummer, which will be next year; the Audi PPE, which will be in 2023; Tesla Model Y, which launches next year; and the Samsung aluminum battery tray, which is already in production. Let's go to Page 25, talk a little bit about the addressable content per vehicle. Our current addressable content per vehicle for an ICE engine is between $2,000 and $3,300. When you add the hybrid, it goes up a little bit because we can get newer volume. You can have the classic ICE volume of engine components, body-in-white components, suspensions, transmission housings, engine blocks as well as battery trays and potential electric motor housings and more advanced thermal management. The electric vehicle, though the number of products may drop slightly, the complexity of those products, as I described earlier with the EVA2, goes up. So the addressable content goes from $2,150 up to $3,800. So as we progress from ICE engines to hybrids, hybrids add more value and more content. And then on the EVs, EVs' content is more complex with higher-margin complexity, basically equals value. Let's go to Page 26. Take a little closer look at our transition from traditional ICE vehicles to hybrids to EVs. As you can see, 80% of our products basically are agnostic. Whether they be module assemblies, body-in-white products, brake lines or suspensions, they essentially stay the same with some uniqueness based on hybrid demands or EVs demands. But the capital impact is basically negligible. When you get down into products that transition, such as engine blocks and fuel lines, they transition from engines to motor housings, from fuel lines to battery trays, as I said earlier, which we already have production -- or in production. In this case, the products change, but the capital we invested mostly stays the same. So the return on invested capital, for the most part, will be unaffected. Let's go to Page 27. I'm going to shift gears here and talk a little bit about VoltaXplore, our joint venture with NanoXplore. Go to Page 28. So VoltaXplore is an EV battery joint venture. It's 50-50 joint venture between ourselves and NanoXplore to develop lithium-ion battery cells for electric vehicles. Now it's not just electric vehicles. It can also be for power grids and other applications. VoltaXplore will initially build a 1-megawatt-hour facility or demonstration facility in Montreal. We've already identified and leased the building. Both Martinrea and NanoXplore will invest $4 million upfront with another $6 million, if applicable. And upon success of this facility and building a business case, VoltaXplore intends to build and commission a 10-gigawatt manufacturing facility in Canada. What does that mean? Well, the demonstration facility is how we're going to prove out the technology. Our ability to build batteries in that demonstration facility would be something like the equivalent of 200 full battery sets for electric vehicles, as an example. The 10-gigawatt hour facility would be somewhere between 140,000 and 150,000 battery sets per vehicle, so a significant difference in the ability to produce. Let's go to Page 29 and talk a little bit about why we're doing this. So VoltaXplore has the advantages of using graphene. This was the real reason that we pursued this endeavor, that along with our manufacturing capability. So battery capacity is improved. Graphene enables the use of silicon in the anodes, which improves energy density and driving range. Charging speed. High conductivity of graphene improves charging speed. Battery life. Graphene-coated silicon spheres in anodes result in higher capacity retention. Why is that important? You don't hear a lot about battery life issues so far. But if you owned a Nissan Leaf, you would probably be exchanging your batteries by now because the Nissan Leaf has been out for some time. The older Teslas are now switching out batteries. And as we get more and more EVs, batteries being swapped out become more and more prevalent. So the longer life you have in the battery the more significant it is because you don't have to pay the money to switch out your battery. Battery cost. Back to the same subject. As you switch out your battery or when you buy your initial vehicle, cost of batteries are very high and are not equivalent to ICE vehicles at this time. So the ability to bring that cost down is important. And then improved safety. There's a high thermal conductivity of graphene, which help alleviate the potential for a fire. And you've heard the stories of fires in vehicles that are electric, such as the Tesla in Texas which was most recent. And even if you look back to the development of the Boeing 777 and lithium-ion batteries they use in that product, the initial planes were delayed due to battery fires. So it's a big problem, and graphene can help resolve those issues. So in summary, more range, faster charge, longer life, lower cost and less chance of fire. Last page, Page 30. Just to give you a little bit of the view of the time line for this product or this proposal. We've secured the demonstration facility. It's up and running. Equipment has been ordered and will be commissioned later this year and early into 2022. By mid-2022, we'll be able to make a determination whether we should go forward or not. Is a graphene-enhanced battery going to provide what's needed to make enough of an improvement to be attractive to the market? We certainly believe it will. And then based on that, our intent is to build a 10-gigawatt-hour facility launching in 2024. And with that, I'm going to pass the baton over to Fred Di Tosto. Fred?

Thanks, Pat. I'm starting off on Page 31. Good morning, everyone. I sincerely hope everyone is staying safe and healthy during these unprecedented, unique times. From my end, I would like to virtually welcome you to this year's annual general meeting. It's always a pleasure to spend some time together, although virtually in this case, and to discuss the state of the company with our many stakeholders. All of you have been very supportive of the company over the years. And as you know, your support is always appreciated. In my remarks, I will start with a quick overview of our fiscal 2020 financial results, acknowledging that 2020 was a very unusual year. But I think it's good to recap the year and provide some context on the impact COVID-19 had on our business and industry. A snapshot of our year-to-date, our Q1 2021 financial results will follow, and then I would like to spend some time talking about the longer-term financial outlook of the business, which we see is very bright once the lagging impacts of the pandemic and current industry-wide headwinds we face start to dissipate. Looking at Slide 32. Our financial results in 2020 were really a tale of two periods: the first half of the year, which included an approximate 2-month shutdown of our industry due to the COVID-19 pandemic, a period where we generated essentially no sales; and the second half of the year marked by a sharp recovery in sales and profits following the successful restart of production coming out of the COVID-related shutdown. As you can see from this slide, total sales in 2020 were $3.4 billion, down 13% from 2019, 21% down if you exclude the acquired operations from Metalsa, the acquisition we closed in early 2020. This was driven by a 32% year-over-year decline in the first half of the year, followed by a 53% sequential increase in the back half of the year. Similarly, adjusted operating income margins, which were negative during the first half of the year as a result of the pandemic-related shutdown, rebounded to 6.9% in the second half, not quite back to pre-COVID margins but approaching those levels and a strong result considering the overall volatile environment. The strong performance in the back half of the year reflected the sharp recovery in industry production volumes as well as actions we took to rightsize our cost structure during the Q2 COVID-related shutdowns. Of note, we generated $62 million in free cash flow in 2020, far exceeding our COVID-adjusted expectation. This, combined with actions we took to preserve our liquidity, allowed us to maintain our strong balance sheet, a strong result by all accounts, especially considering the COVID-related challenges that the company faced during the year. 2020, actually the last 15 months since the onset of the pandemic, has been a crazy time in our history. We've been through a lot as a company and an industry and have learned a lot along the way as well. And although the pandemic had a significant impact on our financial results in 2020, at the end of the day, I believe we are a much stronger company for it. We did what we had to do and got through it. And throughout all this, one thing has remained constant: Our team has performed admirably. And for that, we are very thankful. So to our people, again, thank you for all your efforts and dedication to the company. It is always very much appreciated. Moving on to 2021. Slide 33 summarizes our year-to-date or Q1 2021 results. As you can see here, after a challenging 2020, the first part of 2021 has been somewhat bumpy. COVID continues to challenge the industry and our company with an industry-wide semiconductor shortage being the most recent COVID-related headwind, impacting automobile production with some key customers and on some key platforms. This pandemic-related, industry-wide semiconductor issue only really began to surface at the beginning of 2021, surprisingly, to me anyways, coming off the 2020 back half that saw a rapid recovery of volumes and an overall pretty strong production volume environment. While the semiconductor shortage will continue to weigh on results in the near term, we are very confident in the longer-term outlook for our business given the strong customer demand for vehicles, lower vehicle inventories and our solid backlog of booked business. Given our confidence, we rolled out longer-term guidance in our last quarter call, which I will touch upon in a moment. Before I do that, I would like to take a closer look at our recent Q1 results. Q1 total sales were up approximately 14% year-over-year or approximately 5%, excluding $78 million of sales growth contribution from Martinrea Metalsa Group. Sales benefited from new business launches during the quarter as well as higher volumes of certain programs. As mentioned, demand for vehicles has been robust and vehicle inventories remain low in North America, particularly in our truck, SUV and CUV platforms, where we have the majority of our platform exposure. This obviously bodes well for future production. However, sales and volumes during the first quarter and, as a matter of fact, in Q2 to date were tempered by the global semiconductor shortage. Q1 adjusted operating income was $48.5 million, a pretty good result in the circumstances and roughly the same as last year. This represented a 4.9% margin, lower than the 5.8% margin we generated in the year ago quarter, which was largely pre-pandemic. As expected, we experienced a temporary lag in offsetting higher aluminum raw material costs through contractual price increases, which impacted Q1 operating margin by about 85 basis points. We expect this impact to mostly reverse in the second quarter as pricing on customer contracts adjust to reflect the higher aluminum costs. Should aluminum prices normalize to a lower level at some point in the future, we would actually benefit from a margin tailwind albeit a temporary one. Reversal is true if prices were to increase. Margins were also impacted in Q1 and will be in Q2 by a heavy launch cycle, which, of course, is very good news for future sales, margins and profits. Pat has already walked you through the various key launches we have in front of us in 2021. I will note that our large backlog includes a lot of exciting new product across all our commercial groups. Further, it's also important to understand that our sales mix hurts our margins somewhat in the context of the customer shutdowns because of the chip shortages. When Ford suspends production of the Escape, which it has for 10 weeks to date, this largely shuts down our Shelbyville, Kentucky plant, one of our largest operating facilities. When GM shuts down production of the Equinox, which has happened to a large extent, we have 5 plants supporting that program. When a plant is largely shut down, that hurts margins, which will rebound very positively and quickly when customer production resumes. In terms of earnings, adjusted net earnings per share was $0.41 in Q1, a slight increase from the $0.38 we delivered in the year ago quarter, which, as you know, was impacted by the early stages of the pandemic, so overall, a somewhat similar quarter year-over-year. As you can see, our business continues to face some short-term challenges from the industry-wide semiconductor shortage, a heavy launch schedule and lingering disruptions due to the COVID-19 pandemic. While the ultimate impact the semiconductor shortage will have on our operations is difficult, if not impossible, to predict and visibility is low, the issue will, at minimum, continue to impact production in the second quarter and potentially part of the third quarter with volumes expected to improve in the back half of the year, creating some obvious uncertainty as it relates to this year. The good news here is that demand for vehicles is high. So we are expecting and, as a matter of fact, preparing for a rapid recovery of production volumes once these supply pressures ease. Turning to our balance sheet on Slide 34. I'm happy to report that our balance sheet continues to be strong. We are well positioned in this area. Over the last number of years, under our Martinrea 2.0 strategy, we've done a tremendous job of strengthening the balance sheet. As such, our balance sheet was strong entering the COVID-19 pandemic, allowing us to navigate the pandemic headwinds we faced with confidence. Now net debt did increase slightly in Q1 compared to the end of last year. On the face of the financials, net debt to adjusted EBITDA was 2.24x at the end of the first quarter but approximately 1.6x for bank covenant purposes, reflecting our amended credit agreement, allowing us to exclude COVID-disrupted Q2 2020 EBITDA from the calculation. Overall, our balance sheet is strong, and our leverage ratio remains within our comfort range and well below our bank covenant maximum of 3x. It is clear we have a strong balance sheet for this industry and the ability to generate cash, and we are committed to maintaining a strong balance sheet. This is paramount in any capital allocation decisions we make, as Rob outlined for you. A strong balance sheet, in addition to providing us the flexibility to invest for growth, helps us with our customers. Further, subsequent to the first quarter, we amended our credit agreement with our lending syndicate, providing us with additional credit availability at pre-COVID pricing and extending our maturities out to 2025. We have an excellent relationship with our lenders, and we sincerely thank them for their ongoing support. I would now like to move on to the longer-term financial outlook of the business on Slide 35. We outlined our thoughts on the future on our last quarterly call, what I'd like to summarize here for you. Despite the near-term challenges from the ongoing semiconductor shortage and other headwinds we discussed, we are very optimistic on the long-term prospects and outlook for our business. As noted, demand for vehicles is robust, driven by a strong macroeconomic outlook, especially in North America, low interest rates and, for many, an increase in savings in wealth accumulated during the pandemic. Vehicle inventories remain low and are likely to remain low for some time given pent-up demand. We believe this sets the stage for a multiyear period of strong production growth once supply-side pressures ease. Our outlook for 2023 calls for total sales, including tooling sales, of $4.6 billion to $4.8 billion and adjusted operating income margin exceeding 8% back to pre-COVID expectations and free cash flow in excess of $200 million. Of note, approximately 90% of expected 2023 sales reflects business that is already booked. While these sales are dependent on market volumes, we believe our volume projections, which are based on IHS assumptions, are realistic if not somewhat conservative. Also worth mentioning is that our 2023 sales targets imply substantial market outgrowth over the next few years, driven by our backlog in new business and program launches. The investments we are making in our business today in the form of organic capital expenditures will allow us to grow at a faster pace than the industry we operate in. As Rob mentioned, we generate high returns on our invested capital and expect to continue doing so on a go-forward basis with our prudent and disciplined go-to-market approach. Free cash flow is an important element of our 2023 outlook. I turn you now to Slide 36 to provide you with a bit more background on the topic. As Rob noted, we have invested heavily in the business in recent years mainly in the form of flexible weld lines in our steel metal forming business and capacity investments to grow our aluminum footprint. The aluminum investments, in particular, are long-term assets, such as casting machines that will generate financial benefits for many years to come. Notwithstanding under Martinrea -- under our Martinrea 2.0 strategy, we always said that our free cash flow profile will turn positive in a significant way, and that is exactly what happened in 2019. 2019 was a big year for us, a turning points of sorts, a year in which we generated $115 million of free cash flow. And we followed that with $62 million of free cash flow in 2020 despite a pandemic year, exceeding our expectations, a strong result by any measure. In the moment, coming out of the COVID-disrupted 2020, we are not currently expecting a similar result in 2021 due largely to a normalization of working capital and higher CapEx, but that is temporary. We expect to get back to a strong positive free cash flow profile in 2022. Looking further out, we expect CapEx to normalize to a range approximating depreciation and amortization as a percentage of sales. This is a key assumption underpinning our expectation of over $200 million of free cash flow in 2023. Of note, certain metallics programs will require less capital moving forward as we enter the second generation of flexible weld lines. We also expect capacity investments in our aluminum business to normalize. In short, we expect the capital intensity of our business to decline in the coming years, which, when combined with the expected growth and margin profile of our business, should drive substantial free cash flow, as reflected in our guidance. When we rolled out our Martinrea 2.0 strategy back in 2015, we said that we would double margins over a 5- year period, and that is exactly what we did to a level among the best in our industry. Simply put, we did what we said we would do, and we are very confident we will do so again in delivering on our 2023 outlook. So it's all I want to cover from my end. Thank you for your time. Again, it's always a pleasure to talk about our company. There's no denying that we've made some tremendous progress across the organization over the past few years. We have some temporary challenges in front of us in the moment but are confident in the longer-term prospects for the business and industry. We are very excited about the future and our business. And with that, I turn you back over to Rob.

Thanks, Fred. Thanks, Pat. Any questions? Maybe not, but as you can tell from our presentations, as we say in every quarterly call, we want you to see how we see the world. And we've shared with you our perspectives on that. From a cultural point of view, from a sustainability point of view, from a capital allocation point of view, we describe our business, the fact that we're well positioned for some of the key trends in the world today in our business, lightweighting, electrification, different propulsion systems and so forth. We want you to see how we see the world because we believe you're our partners in our business. That's true whether you're a shareholder, an investor or a lender listening to the call or one of our employees that is listening to the call, and it's the same for our customers and suppliers. We're going to be posting this on our website so you can listen to it. I think a number of our people are going to be listening to it over the next month or so because it gives a pretty good foundation of how we see the world and where we're going to go. Do we have any questions?

We've no questions.

Okay. Well, I think we've answered everything by our detailed presentation. So I'd like to thank everyone for attending. And for those that listen to this later on as well, enjoy. And if anyone does have any questions, we are always available to talk to our investors and other interested parties. So have a great day, and thank you for attending.

Ladies and gentlemen, this concludes the meeting. You may now disconnect.