AURORA, ON, Nov. 8, 2012 /PRNewswire/ - Magna
International Inc. (TSX: MG) (NYSE: MGA) today reported
financial results for the third quarter ended September 30, 2012.
| |
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED
SEPTEMBER 30, |
|
NINE MONTHS ENDED
SEPTEMBER 30, |
| |
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| |
|
|
|
|
|
|
|
|
| Sales |
|
$ |
7,411 |
|
$ |
6,970 |
|
$ |
22,804 |
|
$ |
21,497 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Adjusted EBIT(1) |
|
$ |
352 |
|
$ |
286 |
|
$ |
1,271 |
|
$ |
1,046 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Income from operations before
income taxes |
|
$ |
500 |
|
$ |
164 |
|
$ |
1,409 |
|
$ |
926 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Magna
International Inc. |
|
$ |
390 |
|
$ |
102 |
|
$ |
1,082 |
|
|
$706 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per share |
|
$ |
1.66 |
|
$ |
0.42 |
|
$ |
4.60 |
|
$ |
2.89 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
All results are
reported in millions of U.S. dollars, except per share figures,
which are in U.S. dollars.
(1) Adjusted EBIT is the measure of segment profit or loss as
reported in the Company's attached unaudited interim consolidated
financial statements.
Adjusted EBIT represents income from
operations before income taxes; interest expense (income), net; and
other (income) expense, net
|
THREE MONTHS ENDED SEPTEMBER 30,
2012
We posted sales of $7.4 billion
for the third quarter ended September 30,
2012, an increase of 6% from the third quarter of 2011. We
achieved this sales increase in a period when vehicle production
increased 15% in North America and
declined 7% in Western Europe,
both relative to the third quarter of 2011. In the third quarter of
2012, our North American and Rest of World production sales, as
well as tooling, engineering and other sales increased, while
European production sales and complete vehicle assembly sales
decreased, in each case relative to the comparable quarter in
2011.
Complete vehicle assembly sales decreased 6% to $620 million for the third quarter of 2012
compared to $663 million for the
third quarter of 2011, while complete vehicle assembly volumes
decreased 9% to approximately 29,000 units.
During the third quarter of 2012, adjusted EBIT increased 23% to
$352 million compared to $286 million for the third quarter of 2011.
During the third quarter of 2012, income from operations before
income taxes was $500 million, net
income attributable to Magna International Inc. was $390 million and diluted earnings per share were
$1.66, increases of $336 million, $288
million and $1.24,
respectively, each compared to the third quarter of 2011.
During the third quarter of 2012, we recorded other income related
to a re-measurement gain on the acquisition of the controlling 27%
interest in Magna E-Car Systems Partnership ("E-Car"). This
positively impacted income from operations before income taxes by
$153 million, net income attributable
to Magna International Inc. by $125
million and diluted earnings per share by $0.53 for the third quarter of 2012. During
the third quarter of 2011, we recorded other expense relating to
the disposal of an interior systems operation and the cost of
entering into an agreement pertaining to the settlement of certain
claims. These items negatively impacted income from
operations before income taxes and net income attributable to Magna
International Inc. by $124 million
and diluted earnings per share by $0.52 for the third quarter of 2011.
During the third quarter ended September
30, 2012, we generated cash from operations of $503 million before changes in non‑cash operating
assets and liabilities, and invested $63
million in non‑cash operating assets and liabilities. Total
investment activities for the third quarter of 2012 were
$363 million, including $279 million in fixed asset additions,
$28 million in investments and other
assets and $56 million to purchase
subsidiaries.
NINE MONTHS ENDED SEPTEMBER 30,
2012
We posted sales of $22.8 billion
for the nine months ended September 30,
2012, an increase of 6% from the nine months ended
September 30, 2011. This higher sales
level reflected increases in our North American, European, and Rest
of World production sales as well as higher tooling and engineering
and other sales, partially offset by lower complete vehicle
assembly sales.
During the nine months ended September
30, 2012, vehicle production increased 20% to 11.6 million
units in North America and
decreased 7% to 9.6 million units in Western Europe, each compared to the first
nine months of 2011.
Complete vehicle assembly sales decreased 10% to $1.9 billion for the nine months ended
September 30, 2012 compared to
$2.1 billion for the nine months
ended September 30, 2011, while
complete vehicle assembly volumes decreased 8% to approximately
92,000 units.
During the nine months ended September
30, 2012, adjusted EBIT increased 22% to $1.3 billion compared to $1.0 billion for the nine months ended
September 30, 2011.
During the nine months ended September
30, 2012, income from operations before income taxes was
$1.4 billion, net income attributable
to Magna International Inc. was $1.1
billion and diluted earnings per share were $4.60, increases of $483
million, $376 million and
$1.71, respectively, each compared to
the first nine months of 2011. During the nine months ended
September 30, 2012, we recorded other
income related to a re-measurement gain on the acquisition of the
controlling 27% interest in E-Car. This positively impacted
income from operations before income taxes by $153 million, net income attributable to Magna
International Inc. by $125 million
and diluted EPS by $0.53 for the nine
months ended September 30,
2012. During the nine months ended September 30, 2011, we recorded other expense
relating to the disposal of an interior systems operation, the cost
of entering into an agreement pertaining to the settlement of
certain claims, the write down of real estate, and a gain on
disposal of an equity accounted investment. These items
negatively impacted income from operations before income taxes and
net income attributable to Magna International Inc. by $123 million and diluted earnings per share by
$0.50 for the nine months ended
September 30, 2011.
During the nine months ended September
30, 2012, we generated cash from operations before changes
in non‑cash operating assets and liabilities of $1.6 billion, and invested $487 million in non‑cash operating assets and
liabilities. Total investment activities for the first nine months
of 2012 were $972 million, including
$796 million in fixed asset
additions, a $97 million increase in
investments and other assets and $79
million to purchase subsidiaries.
A more detailed discussion of our consolidated financial results
for the third quarter and nine months ended September 30, 2012 is contained in the
Management's Discussion and Analysis of Results of Operations and
Financial Position and the unaudited interim consolidated financial
statements and notes thereto, which are attached to this Press
Release.
DIVIDENDS
Today, our Board of Directors declared a quarterly dividend of
$0.275 with respect to our
outstanding Common Shares for the quarter ended September 30, 2012. This dividend is payable on
December 14, 2012 to shareholders of
record on November 30, 2012.
NORMAL COURSE ISSUER BID
Subject to approval by the Toronto Stock Exchange and the New
York Stock Exchange, our Board of Directors approved a normal
course issuer bid to purchase up to 12.0 million of our Common
Shares. This new normal course issuer bid is expected to commence
on or about November 13, 2012 and
will terminate one year later.
OTHER MATTERS
We also announced that Frank
Stronach, Magna's Founder and Honorary Chairman has decided
to step down as a member of Magna's Board of Directors, effective
immediately.
Magna's Chairman, Bill Young,
stated: "On behalf of the Board, I would like to thank Frank
for his enormous contribution to Magna's success over the past six
decades."
Frank Stronach commented: "It has
been two years since control of Magna has changed hands and, in
that time, I have become involved in numerous activities outside of
the automotive industry. One of these activities involves
politics in Austria and I do not
want my political views to be confused with my role on Magna's
Board. As a result, I feel the time is right to step down as
a member of Magna's Board. Magna is in excellent hands, with
a seasoned management team and very capable Board members. Of
course, as Honorary Chairman, I will always be available to provide
any guidance that management or the Board requires."
Don Walker, Magna's Chief
Executive Officer added: "Personally and on behalf of all our
employees, I would like to thank Frank for all he has done for this
company. Also, I would like to assure all our stakeholders that we
remain fully committed to the Corporate Constitution, Employee
Charter and Operational Principles. These and other elements of the
Fair Enterprise culture that Frank founded have been the
cornerstone of Magna's success over the years and we expect they
will be key to our future success."
UPDATED 2012 OUTLOOK
| |
|
|
|
|
| Light Vehicle Production (Units) |
|
|
|
|
| |
North America |
15.3 million |
| |
Western Europe |
12.6 million |
| |
|
|
|
|
| Production Sales |
|
|
|
|
| |
North America |
$15.1 billion - $15.4 billion |
| |
Europe |
$8.6 billion - $8.8 billion |
| |
Rest of World |
$1.8 billion - $1.9
billion |
| |
Total Production Sales |
|
$25.5 billion - $26.1 billion |
|
|
| |
|
|
|
|
| Complete Vehicle Assembly Sales |
|
$2.4 billion - $2.6 billion |
|
|
| |
|
|
|
|
| Total Sales |
|
$30.3 billion - $31.2 billion |
|
|
| |
|
|
|
|
| Operating Margin*✝ |
|
Low to mid 5% range |
|
|
| |
|
|
|
|
| Tax Rate* |
|
Approximately 25% |
|
|
| |
|
|
|
|
| Capital Spending |
|
Approximately $1.4 billion |
|
|
| |
|
|
|
|
| * Excluding other income, net (unusual
items) |
| ✝ Excluding $52 million
amortization of intangibles related to acquisition of
E-Car |
In this 2012 outlook, in addition to 2012 light vehicle
production, we have assumed no material acquisitions or
divestitures. In addition, we have assumed that foreign exchange
rates for the most common currencies in which we conduct business
relative to our U.S. dollar reporting currency will approximate
current rates.
ABOUT MAGNA
We are a leading global automotive supplier with 305
manufacturing operations and 88 product development, engineering
and sales centres in 27 countries. Our 117,000 employees are
focused on delivering superior value to our customers through
innovative processes and World Class Manufacturing. Our product
capabilities include producing body, chassis, interiors, exteriors,
seating, powertrain, electronics, mirrors, closures and roof
systems and modules, as well as complete vehicle engineering and
contract manufacturing. Our common shares trade on the Toronto
Stock Exchange (MG) and the New York Stock Exchange (MGA). For
further information about Magna, visit our website at
www.magna.com.
| |
We will hold a conference call for interested analysts and
shareholders to discuss our third quarter results on Thursday,
November 8, 2012 at 8:00 a.m. EST. The conference call will be
chaired by Don Walker, Chief Executive Officer. The number to use
for this call is 1-877-360-1773. The number for overseas callers is
1-706-679-9940. Please call in at least 10 minutes prior to the
call. We will also webcast the conference call at
www.magna.com. The slide presentation accompanying the
conference call will be available on our website Thursday morning
prior to the call.
For further information, please contact Louis Tonelli,
Vice-President, Investor Relations at 905-726‑7035.
For teleconferencing questions, please contact Karin Kaminski at
905-726‑7103. |
| |
FORWARD‑LOOKING STATEMENTS
The previous discussion contains statements that constitute
"forward-looking statements" within the meaning of applicable
securities legislation, including, but not limited to, statements
relating to Magna's expected production sales, based on expected
light vehicle production in North
America and Western Europe;
Magna's expected production sales in the North America, Europe and Rest of World segments; total
sales; complete vehicle assembly sales; consolidated operating
margin; effective income tax rate; fixed asset expenditures; and
future purchases of our Common Shares under the Normal Course
Issuer Bid. The forward-looking information in this document is
presented for the purpose of providing information about
management's current expectations and plans and such information
may not be appropriate for other purposes. Forward-looking
statements may include financial and other projections, as well as
statements regarding our future plans, objectives or economic
performance, or the assumptions underlying any of the foregoing,
and other statements that are not recitations of historical fact.
We use words such as "may", "would", "could", "should", "will",
"likely", "expect", "anticipate", "believe", "intend", "plan",
"forecast", "outlook", "project", "estimate" and similar
expressions suggesting future outcomes or events to identify
forward-looking statements. Any such forward-looking statements are
based on information currently available to us, and are based on
assumptions and analyses made by us in light of our experience and
our perception of historical trends, current conditions and
expected future developments, as well as other factors we believe
are appropriate in the circumstances. However, whether actual
results and developments will conform with our expectations and
predictions is subject to a number of risks, assumptions and
uncertainties, many of which are beyond our control, and the
effects of which can be difficult to predict, including, without
limitation: the potential for a deterioration of economic
conditions or an extended period of economic uncertainty; declines
in consumer confidence and the impact on production volume levels;
risks arising from uncertain economic conditions in Europe, including the potential for a
deterioration of sales of our three largest German-based OEM
customers; restructuring actions by OEMs, including plant closures;
restructuring, downsizing and/or other significant non-recurring
costs; continued underperformance of one or more of our operating
divisions; our ability to successfully launch material new or
takeover business; liquidity risks; risks arising due to the
failure of a major financial institution; bankruptcy or insolvency
of a major customer or supplier; a prolonged disruption in the
supply of components to us from our suppliers; scheduled production
shutdowns of our customers' production facilities (typically in the
third and fourth quarters of each calendar year); shutdown of our
or our customers' or sub-suppliers' production facilities due to a
labour disruption; our ability to successfully compete with other
automotive suppliers; a reduction in outsourcing by our customers
or the loss of a material production or assembly program; the
termination or non-renewal by our customers of any material
production purchase order; a shift away from technologies in which
we are investing; impairment charges related to goodwill,
long-lived assets and deferred tax assets; shifts in market share
away from our top customers; shifts in market shares among vehicles
or vehicle segments, or shifts away from vehicles on which we have
significant content; risks of conducting business in foreign
markets, including China,
India, Brazil, Russia and other non-traditional markets for
us; exposure to, and ability to offset, volatile commodities
prices; fluctuations in relative currency values; our ability to
successfully identify, complete and integrate acquisitions or
achieve anticipated synergies; ongoing pricing pressures, including
our ability to offset price concessions demanded by our customers;
warranty and recall costs; our ability to understand and compete
successfully in non-automotive businesses in which we pursue
opportunities; risks related to natural disasters and potential
production disruptions; factors that could cause an increase in our
pension funding obligations; changes in our mix of earnings between
jurisdictions with lower tax rates and those with higher tax rates,
as well as our ability to fully benefit tax losses; other potential
tax exposures; legal claims and/or regulatory actions against us;
the unpredictability of, and fluctuation in, the trading price of
our Common Shares; work stoppages and labour relations disputes;
changes in credit ratings assigned to us; changes in laws and
governmental regulations; costs associated with compliance with
environmental laws and regulations; risks related to the electric
vehicle industry; and other factors set out in our Annual
Information Form filed with securities commissions in Canada and our annual report on Form 40-F
filed with the United States Securities and Exchange Commission,
and subsequent filings. In evaluating forward-looking statements,
we caution readers not to place undue reliance on any
forward-looking statements and readers should specifically consider
the various factors which could cause actual events or results to
differ materially from those indicated by such forward-looking
statements. Unless otherwise required by applicable securities
laws, we do not intend, nor do we undertake any obligation, to
update or revise any forward-looking statements to reflect
subsequent information, events, results or circumstances or
otherwise.
For further information about Magna, please see our website
at www.magna.com. Copies of financial data and other
publicly filed documents are available through the internet on the
Canadian Securities Administrators' System for Electronic Document
Analysis and Retrieval (SEDAR) which can be accessed at
www.sedar.com and on the United States Securities and Exchange
Commission's Electronic Data Gathering, Analysis and Retrieval
System (EDGAR) which can be accessed at www.sec.gov
MAGNA INTERNATIONAL INC.
Management's Discussion and Analysis of Results of Operations
and Financial Position
Unless otherwise noted, all amounts in this Management's
Discussion and Analysis of Results of Operations and Financial
Position ("MD&A") are in U.S. dollars and all tabular amounts
are in millions of U.S. dollars, except per share figures, which
are in U.S. dollars. When we use the terms "we", "us", "our" or
"Magna", we are referring to Magna International Inc. and its
subsidiaries and jointly controlled entities, unless the context
otherwise requires.
This MD&A should be read in conjunction with
the unaudited interim consolidated financial statements for the
three months and nine months ended September
30, 2012 included in this press release, and the
audited consolidated financial statements and MD&A for the year
ended December 31, 2011
included in our 2011 Annual Report to Shareholders.
This MD&A has been prepared as at
November 7, 2012.
OVERVIEW
We are a leading global automotive supplier with 305
manufacturing operations and 88 product development, engineering
and sales centres in 27 countries. Our 117,000 employees are
focused on delivering superior value to our customers through
innovative processes and World Class Manufacturing. Our product
capabilities include body, chassis, interiors, exteriors, seating,
powertrain, electronics, mirrors, closures and roof systems and
modules, as well as complete vehicle engineering and contract
manufacturing. Our common shares trade on the Toronto Stock
Exchange (MG) and the New York Stock Exchange (MGA). We follow a
corporate policy of functional and operational decentralization,
pursuant to which we conduct our operations through divisions, each
of which is an autonomous business unit operating within
pre-determined guidelines.
HIGHLIGHTS
North American light vehicle production
increased 15% in the third quarter of 2012 to 3.7 million units,
compared to 3.2 million units in the third quarter of 2011 while
Western European light vehicle production declined 7% to 2.8
million units over the same period.
Our total sales were $7.4
billion for the third quarter of 2012, an increase of 6%
over the third quarter of 2011. Higher
North American and Rest of World production sales, along
with higher tooling, engineering and other sales were the primary
reasons for the increase in total sales. Despite the 7% decline in
Western European production and the weakening of the euro and
British Pound, each relative to the U.S. dollar, European
production sales only declined 2% in the third quarter of 2012
compared to the third quarter of 2011. In addition, complete
vehicle assembly sales declined 6% in the third quarter of 2012,
primarily reflecting the weakening of the euro relative to the U.S.
dollar in the third quarter of 2012 compared to the third quarter
of 2011.
Our income from operations before income taxes
increased to $500 million, compared
to $164 million for the third quarter
of 2011. Our diluted earnings per Common Share increased to
$1.66, compared to $0.42 for the third quarter of 2011. Excluding
the impact of other (income) expense, net ("Other Income"), income
from operations before income taxes increased 20% or $59 million for the third quarter of 2012
relative to the third quarter of 2011. Our diluted earnings per
Common Share, excluding Other Income, after tax, increased 20% or
$0.19 for the third quarter of 2012
relative to the third quarter of 2011. During the third quarter of
2012, we recorded other income related to a re-measurement gain on
the previously announced acquisition of the 27% controlling
interest in Magna E-Car Systems partnership ("E-Car"). This
positively impacted income from operations before income taxes and
diluted earnings per Common Share by $153
million and $0.53,
respectively, for the third quarter of 2012. During the third
quarter of 2011, we recorded other expense relating to the disposal
of an interior systems operation and the cost of entering into an
agreement pertaining to the settlement of certain claims. These
items negatively impacted income from operations before income
taxes and diluted earnings per Common Share by $124 million and $0.52, respectively, for the third quarter of
2011.
In our Europe
segment we reported Adjusted EBIT1 of $13 million for the third quarter of 2012,
compared to a loss of $35 million for
the third quarter of 2011. We remain cautious about the
macroeconomic environment in Europe. In addition, certain of our OEM
customers have announced plant closures in Europe, and similar announcements by other
customers and their European operations are possible. We expect to
take future restructuring actions in Europe, reflecting both our ongoing strategic
assessment of our business and in response to OEM facility actions,
and some of this restructuring is expected to impact us as early as
the fourth quarter of 2012. We anticipate our restructuring and
other operational improvement plans to yield improved operating
results in Europe over time.
We have significant ongoing activities in our
Rest of World segment, including a number of new facilities under
construction or launching in Asia
and South America, as well as the
integration of recent acquisitions in South America. While our ongoing investments
in these regions will generate future sales and earnings growth,
currently these activities are negatively impacting operating
results. In our Rest of World segment, we generated an Adjusted
EBIT of $5 million for the third
quarter of 2012, compared to $14
million in the third quarter of 2011. Operational
inefficiencies and other costs in certain operations in
South America as well as costs
related to new facilities were the primary reasons for the decline
in Adjusted EBIT in the third quarter of 2012.
During the third quarter of 2012, we announced
that we had strengthened our position in automotive pumps through
two acquisitions. We signed an agreement to acquire ixetic
Verwaltungs GmbH ("ixetic"), a manufacturer of automotive vacuum,
engine and transmission pumps with two manufacturing facilities in
Germany and one in each of
Bulgaria and China. In addition, we signed an agreement
with a joint venture partner to purchase the remaining 50% interest
in STT Technologies Inc. ("STT"), a leading supplier of
transmission and engine related oil pumps serving the North
American market. We believe the automotive pump market will
continue to grow, partly as a result of the global trend towards
improved fuel efficiency. The STT transaction closed in the fourth
quarter of 2012, and the ixetic transaction is also expected to
close in the fourth quarter of 2012. The combined cost of these
acquisitions is expected to be approximately $450 million.
Finally, with the completion of the transaction
in which we acquired the controlling 27% interest in E-Car, we
integrated the former E-Car operations into certain of our existing
operating units. E-Car's component business was integrated into our
Magna Powertrain operation, in order to take advantage of
opportunities for the electrification of vehicle powertrain
systems. E-Car's battery pack business and vehicle integration
operations have been integrated into our Magna Steyr operating unit.
____________________________________
1 Adjusted EBIT represents income from operations before
income taxes; interest expense (income), net; and other (income)
expense, net
FINANCIAL RESULTS SUMMARY
During the third quarter of 2012, we posted
sales of $7.4 billion, an increase of
6% from the third quarter of 2011. This higher sales level was a
result of increases in our North American and Rest of World
production sales and tooling, engineering and other sales partially
offset by decreases in our complete vehicle assembly sales and
European production sales. Comparing the third quarters of 2012 to
2011:
- North American vehicle production increased 15% and our
production sales increased 8% to $3.7
billion;
- Western European vehicle production decreased 7% and our
European production sales decreased 2% to 2.0 billion;
- Rest of World production sales increased 35% to $493 million from $365
million;
- Complete vehicle assembly sales declined 6% to $620 million, as complete vehicle assembly
volumes decreased 9%; and
- Tooling, engineering and other sales increased by 27% to
$656 million.
During the third quarter of 2012, we earned
income from operations before income taxes of $500 million compared to $164 million for the third quarter of 2011.
Excluding Other Income recorded in the third quarters of 2012 and
2011, as discussed in the "Other Income" section, the $59 million increase in income from operations
before income taxes was primarily as a result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the third quarter of 2011;
- lower costs incurred in preparation for upcoming launches;
- lower warranty costs of $13
million;
- a $6 million revaluation gain in
respect of asset-backed commercial paper ("ABCP");
- higher equity income; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- increased pre-operating costs incurred at new facilities;
- higher incentive compensation;
- intangible asset amortization of $13
million related to the acquisition and re-measurement of
E-Car;
- the net effect of the disposition during the third quarter of
2011 and subsequent acquisition in the second quarter of 2012 of an
interior systems operation;
- a larger amount of employee profit sharing;
- operational inefficiencies and other costs at certain
facilities;
- programs that ended production during or subsequent to the
third quarter of 2011; and
- net customer price concessions subsequent to the third quarter
of 2011.
During the third quarter of 2012, net income of
$386 million increased $286 million compared to the third quarter of
2011. Net income was impacted by Other Income, as discussed in the
"Other Income" section. Other Income positively impacted net income
in the third quarter of 2012 by $125
million and negatively impacted net income in the third
quarter of 2011 by $124 million.
Excluding Other Income, after tax, net income for the third quarter
of 2012 increased $37 million.
During the third quarter of 2012, our diluted
earnings per share increased $1.24 to
$1.66 compared to $0.42 for the third quarter of 2011. Other
Income, after tax, positively impacted diluted earnings per share
in the third quarter of 2012 by $0.53
and negatively impacted diluted earnings per share in third quarter
of 2011 by $0.52, both as discussed
in the "Other Income" section. Excluding Other Income, after tax,
the $0.19 increase in diluted
earnings per share is a result of the increase in net income
attributable to Magna International Inc. and a decrease in the
weighted average number of diluted shares outstanding during the
third quarter of 2012. The decrease in the weighted average number
of diluted shares outstanding was primarily due to the repurchase
and cancellation of Common Shares, during or subsequent to the
third quarter of 2011, pursuant to our normal course issuer
bids.
INDUSTRY TRENDS AND RISKS
Our success is primarily dependent upon the
levels of North American and European car and light truck
production by our customers and the relative amount of content we
have on the various programs. OEM production volumes in different
regions may be impacted by factors which may vary from one region
to the next, including but not limited to general economic and
financial conditions, consumer confidence levels, interest rates,
credit availability, energy and fuel prices, international
conflicts, scheduled production shut-downs (typically in the third
and fourth quarters of each calendar year), labour relations
issues, regulatory requirements, trade agreements, infrastructure,
legislative changes, and environmental emissions and safety issues.
These factors and a number of other economic, industry and risk
factors which also affect our success, including such things as
relative currency values, commodities prices, price concessions and
other price reduction pressures from our customers, the financial
condition of our supply base and competition from other suppliers,
are discussed in our Annual Information Form and Annual Report on
Form 40-F, each in respect of the year ended December 31, 2011, and remain substantially
unchanged in respect of the third quarter ended September 30, 2012, except that:
- a majority of our European sales are to three German-based OEMs
- BMW, Volkswagen Group and Daimler. In recent quarters, these
three customers have outperformed the Western European automotive
market despite negative economic conditions in Europe, due in part to strong demand for their
vehicles in Asia and North America. A deterioration of the sales of
one or more of our three largest German-based customers could have
a material adverse effect on our sales and profitability.
- there continues to be considerable uncertainty about the
macroeconomic environment in Europe and the European automotive industry
continues to experience significant overcapacity, elevated levels
of vehicle inventory, reduced consumer demand for vehicles and
depressed production volumes and sales levels. In response to these
conditions, OEMs have announced plans to restructure their European
operations, including through plant closures, while other OEM
customers may take similar actions. In light of the prevailing
conditions in Europe, we may take
additional restructuring or downsizing actions. In such an event,
we may incur restructuring, downsizing and/or other significant
non-recurring costs in our European operations, which could have a
material adverse effect on our profitability.
RESULTS OF OPERATIONS
Average Foreign Exchange
| |
For the three
months |
|
For the nine
months |
| |
ended September 30, |
|
ended September 30, |
| |
2012 |
|
2011 |
|
Change |
|
2012 |
|
2011 |
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
| 1 Canadian dollar equals U.S. dollars |
1.005 |
|
1.021 |
|
- 2% |
|
0.998 |
|
1.023 |
|
- 2% |
| 1 euro equals U.S. dollars |
1.252 |
|
1.411 |
|
- 11% |
|
1.282 |
|
1.406 |
|
- 9% |
| 1 British pound equals U.S. dollars |
1.580 |
|
1.609 |
|
- 2% |
|
1.578 |
|
1.614 |
|
- 2% |
The preceding table reflects the average foreign
exchange rates between the most common currencies in which we
conduct business and our U.S. dollar reporting currency. The
significant changes in these foreign exchange rates for the three
months and nine months ended September 30,
2012 impacted the reported U.S. dollar amounts of our sales,
expenses and income.
The results of operations whose functional
currency is not the U.S. dollar are translated into U.S. dollars
using the average exchange rates in the table above for the
relevant period. Throughout this MD&A, reference is made to the
impact of translation of foreign operations on reported U.S. dollar
amounts where relevant.
Our results can also be affected by the impact of
movements in exchange rates on foreign currency transactions (such
as raw material purchases or sales denominated in foreign
currencies). However, as a result of hedging programs employed by
us, foreign currency transactions in the current period have not
been fully impacted by movements in exchange rates. We record
foreign currency transactions at the hedged rate where
applicable.
Finally, holding gains and losses on
transactions occurring in a currency other than an operation's
functional currency, which are recorded in selling, general and
administrative expenses, impact reported results.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2012
Sales
| |
|
For the three
months |
| |
|
ended
September 30, |
| |
|
2012 |
|
|
2011 |
|
|
Change |
| Vehicle Production Volumes
(millions of units) |
|
|
|
|
|
|
|
|
|
| |
North America |
|
3.690 |
|
|
3.222 |
|
|
+ |
15% |
| |
Western Europe |
|
2.813 |
|
|
3.027 |
|
|
- |
7% |
| Sales |
|
|
|
|
|
|
|
|
|
| |
External Production |
|
|
|
|
|
|
|
|
|
| |
|
North America |
$ |
3,636 |
|
$ |
3,382 |
|
|
+ |
8% |
| |
|
Europe |
|
2,006 |
|
|
2,044 |
|
|
- |
2% |
| |
|
Rest of World |
|
493 |
|
|
365 |
|
|
+ |
35% |
| |
Complete Vehicle
Assembly |
|
620 |
|
|
663 |
|
|
- |
6% |
| |
Tooling, Engineering and
Other |
|
656 |
|
|
516 |
|
|
+ |
27% |
| Total Sales |
$ |
7,411 |
|
$ |
6,970 |
|
|
+ |
6% |
External Production Sales - North America
External production sales in North America increased 8% or $254 million to $3.64
billion for the third quarter of 2012 compared to
$3.38 billion for the third quarter
of 2011. The increase in external production sales is primarily as
a result of:
- the launch of new programs during or subsequent to the third
quarter of 2011, including the:
-
- Volkswagen Passat;
- Mercedes-Benz M-Class and GL-Class;
- Chevrolet Malibu;
- Chevrolet Sonic; and
- Dodge Dart;
- higher production volumes on certain existing programs;
and
- acquisitions completed during or subsequent to the third
quarter of 2011, which positively impacted sales by $5 million.
These factors were partially offset by:
- a decrease in content on certain programs, including the:
-
- Ford Escape; and
- Ram Pickup;
- programs that ended production during or subsequent to the
third quarter of 2011, including the Ford Crown Victoria;
- a decrease in reported U.S. dollar sales due to the weakening
of the Canadian dollar against the U.S. dollar; and
- net customer price concessions subsequent to the third quarter
of 2011.
External Production Sales - Europe
External production sales in Europe decreased $38
million to $2.0 billion for
the third quarter of 2012. The decrease in external production
sales is primarily as a result of:
- a decrease in reported U.S. dollar sales primarily as a result
of the weakening of the euro against the U.S. dollar;
- lower production volumes on certain existing programs; and
- net customer price concessions subsequent to the third quarter
of 2011.
These factors were partially offset by:
- the launch of new programs during or subsequent to the third
quarter of 2011, including the:
-
- Mercedes-Benz B-Class;
- Volkswagen up!, SEAT Mii and Skoda Citigo;
- Audi Q3; and
- Range Rover Evoque; and
- acquisitions completed during or subsequent to the third
quarter of 2011, which positively impacted sales by $85 million, including:
-
- BDW technologies group ("BDW"); and
- the net effect of the disposition during the third quarter of
2011 and subsequent acquisition in the second quarter of 2012 of an
interior systems operation.
External Production Sales - Rest of
World
External production sales in Rest of World
increased 35% or $128 million to
$493 million for the third quarter of
2012 compared to $365 million for the
third quarter of 2011, primarily as a result of:
- acquisitions completed during or subsequent to the third
quarter of 2011, which positively impacted sales by $68 million, including ThyssenKrupp Automotive
Systems Industrial do Brasil Ltda. ("TKASB"); and
- the launch of new programs during or subsequent to the third
quarter of 2011, primarily in Brazil and China.
These factors were partially offset by a
$45 million decrease in reported U.S.
dollar sales as a result of the weakening of foreign currencies
against the U.S. dollar, including the Brazilian real.
Complete Vehicle Assembly Sales
| |
For the three
months |
| |
ended
September 30, |
| |
2012 |
|
2011 |
|
Change |
| |
|
|
|
|
|
|
|
|
| Complete Vehicle Assembly
Sales |
$ |
620 |
|
$ |
663 |
|
- |
6% |
| |
|
|
|
|
|
|
|
|
| Complete Vehicle Assembly Volumes
(Units) |
|
|
|
|
|
|
|
|
| |
MINI Countryman, Mercedes-Benz G-Class, Peugeot
RCZ |
|
|
|
|
|
|
|
|
| |
and Aston Martin Rapide |
|
29,153 |
|
|
31,939 |
|
- |
9% |
Complete vehicle assembly sales decreased 6% or
$43 million to $620 million for the third quarter of 2012
compared to $663 million for the
third quarter of 2011 while assembly volumes decreased 9% or 2,786
units.
The decrease in complete vehicle assembly sales
is primarily as a result of:
- a $70 million decrease in
reported U.S. dollar sales as a result of the weakening of the euro
against the U.S. dollar;
- a decrease in assembly volumes for the:
-
- Peugeot RCZ; and
- MINI Countryman; and
- the end of production of the Aston Martin Rapide at our
Magna Steyr facility during the
second quarter of 2012.
These factors were partially offset by an
increase in assembly volumes for the Mercedes-Benz G-Class.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
27% or $140 million to $656 million for the third quarter of 2012
compared to $516 million for the
third quarter of 2011.
In the third quarter of 2012, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Chevrolet Trax;
- Ford Fusion;
- Chevrolet Spin;
- Honda Accord;
- QOROS C/Sedan/Hatch;
- MINI Countryman;
- Dodge Dart;
- Mercedes-Benz M-Class; and
- Opel Cascada Convertible.
In the third quarter of 2011, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Mercedes-Benz M-Class;
- MINI Cooper and Countryman;
- Ford Fusion;
- Opel Cascada Convertible;
- Chery A6 Coupe;
- Jaguar XJ;
- Ford Ranger;
- Chevrolet Sonic;
- Peugeot RCZ; and
- BMW X3.
In addition, tooling, engineering and other
sales decreased as a result of the weakening of the euro against
the U.S. dollar.
Cost of Goods Sold and Gross
Margin
| |
For the three
months |
| |
ended
September 30, |
| |
2012 |
2011 |
| Sales |
$ |
7,411 |
$ |
6,970 |
| |
|
|
|
|
| Cost of goods sold |
|
|
|
|
| |
Material |
|
4,763 |
|
4,507 |
| |
Direct labour |
|
483 |
|
467 |
| |
Overhead |
|
1,294 |
|
1,227 |
| |
|
6,540 |
|
6,201 |
| Gross margin |
$ |
871 |
$ |
769 |
| |
|
|
|
|
| Gross margin as a percentage of
sales |
|
11.8% |
|
11.0% |
Cost of goods sold increased $0.3 billion to $6.5
billion for the third quarter of 2012 compared to
$6.2 billion for the third quarter of
2011 primarily as a result of:
- higher material, overhead and labour costs associated with the
increase in sales, including wage increases at certain
operations;
- $204 million related to
acquisitions completed during or subsequent to the third quarter of
2011, including TKASB, BDW and the net effect of the disposition
during the third quarter of 2011 and subsequent acquisition in the
second quarter of 2012 of an interior systems operation ; and
- a larger amount of employee profit sharing.
These factors were partially offset by:
- a decrease in reported U.S. dollar cost of goods sold primarily
due to the weakening of the euro, Brazilian real, Czech koruna and
Canadian dollar, each against the U.S. dollar; and
- lower warranty costs of $13
million.
Gross margin increased $0.1
billion to $0.9 billion for
the third quarter of 2012 compared to $0.8
billion for the third quarter of 2011 and gross margin as a
percentage of sales increased to 11.8% for the third quarter of
2012 compared to 11.0% for the third quarter of 2011. The increase
in gross margin as a percentage of sales was substantially due
to:
- lower costs incurred in preparation for upcoming launches;
- lower warranty costs; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- increased pre-operating costs incurred at new facilities;
- an increase in tooling sales that have low or no margins;
- the net effect of the disposition during the third quarter of
2011 and subsequent acquisition in the second quarter of 2012 of an
interior systems operation;
- a larger amount of employee profit sharing;
- operational inefficiencies and other costs at certain
facilities; and
- net customer price concessions subsequent to the third quarter
of 2011.
Depreciation and Amortization
Depreciation and amortization costs increased
$33 million to $203 million for the third quarter of 2012
compared to $170 million for the
third quarter of 2011. The higher depreciation and amortization was
primarily as a result of:
- $14 million related to
acquisitions completed during or subsequent to the third quarter of
2011, including BDW, TKASB and E-Car;
- intangible asset amortization of $13
million related to the acquisition and re-measurement of
E-Car;
- capital spending during or subsequent to the third quarter of
2011; and
- depreciation related to new facilities.
These factors were partially offset by a
decrease in reported U.S. dollar depreciation and amortization due
to the weakening of the euro, Brazilian real and Canadian dollar,
each against the U.S. dollar.
Selling, General and Administrative
("SG&A")
SG&A expense as a percentage of sales was
4.7% for the third quarter of 2012 compared to 4.9% for the third
quarter of 2011. SG&A expense increased $8 million to $349
million for the third quarter of 2012 compared to
$341 million for the third quarter of
2011 primarily as a result of:
- higher incentive compensation;
- $12 million related to
acquisitions completed during or subsequent to the third quarter of
2011, including TKASB, E-Car and the net effect of the disposition
during the third quarter of 2011 and subsequent acquisition in the
second quarter of 2012 of an interior systems operation;
- increased costs incurred at new facilities; and
- higher labour, including wage increases at certain operations,
and other costs to support the growth in sales.
These factors were partially offset by:
- a decrease in reported U.S. dollar SG&A due to the
weakening of the euro, Czech koruna and Polish zloty, each against
the U.S. dollar; and
- a $6 million revaluation gain in
respect of ABCP.
Equity Income
Equity income increased $5 million to $33
million for the third quarter of 2012 compared to
$28 million for the third quarter of
2011. Excluding the $2 million
reduction in the equity loss related to E-Car, the $3 million increase in equity income is primarily
as a result of higher income from most of our equity accounted
investments.
Other (Income) Expense, net
During the three months and nine months ended
September 30, 2012 and 2011, we
recorded Other Income items as follows:
| |
|
2012 |
|
2011 |
| |
|
|
|
|
|
Diluted |
|
|
|
|
|
Diluted |
| |
|
Operating |
|
Net |
|
Earnings |
|
Operating |
|
Net |
|
Earnings |
| |
|
Income |
|
Income |
|
per Share |
|
Income |
|
Income |
|
per Share |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Re-measurement gain of E-Car
(1) |
|
$ |
(153) |
|
$ |
(125) |
|
$ |
(0.53) |
|
$ |
- |
|
$ |
- |
|
$ |
- |
| |
Loss on disposal of facility
(2) |
|
|
- |
|
|
- |
|
|
- |
|
|
113 |
|
|
113 |
|
|
0.47 |
| |
Settlement agreement
(3) |
|
|
- |
|
|
- |
|
|
- |
|
|
11 |
|
|
11 |
|
|
0.05 |
| |
|
|
(153) |
|
|
(125) |
|
|
(0.53) |
|
|
124 |
|
|
124 |
|
|
0.52 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Second Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gain on disposal
(4) |
|
|
- |
|
|
- |
|
|
- |
|
|
(10) |
|
|
(10) |
|
|
(0.04) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Write down of real estate
(5) |
|
|
- |
|
|
- |
|
|
- |
|
|
9 |
|
|
9 |
|
|
0.04 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total year to date unusual
items |
|
$ |
(153) |
|
$ |
(125) |
|
$ |
(0.53) |
|
$ |
123 |
|
$ |
123 |
|
$ |
0.50 |
(1) Re- measurement gain of E-Car
On August 31,
2012, we acquired the controlling 27% interest in E-Car from
a company affiliated with the Stronach Group for cash consideration
of $75 million. The purchase was
reviewed, negotiated and approved by our independent directors with
the benefit of independent legal advice from Fasken Martineau
DuMoulin LLP, independent financial advice from TD Securities Inc.
("TD") and an independent valuation prepared by
PricewaterhouseCoopers LLP ("PwC"). The purchase price represents
the midpoint of the valuation range determined by PwC and TD
delivered a fairness opinion to the independent directors to the
effect that the transaction is fair, from a financial point of
view, to the Company.
Prior to the acquisition, we held the remaining
73% non-controlling interest in E-Car and accounted for this
investment using the equity method of accounting.
The incremental investment in E-Car was
accounted for under the business acquisition method of accounting
as a step acquisition which requires that we re-measure our
pre-existing investment in E-Car at fair value and recognize any
gains or losses in income. The estimated fair value of our
partnership interest immediately before the closing date was
$205 million, which resulted in the
recognition of a non-cash gain of $153
million ($125 million after
tax), which is recorded in Other Income on the Consolidated
Statements of Income.
In addition, the preliminary purchase equation
of the incremental investment in E-Car allocates $210 million to intangible assets. The intangible
assets are primarily customer relationships and technology based
intangibles. Given the continuing uncertainties regarding the
timing and magnitude of a viable electric vehicle industry,
competing electric vehicle technologies, significantly larger
competitors, and other factors, we have determined that the
intangible assets should be amortized on a straight-line basis over
the period ending December 31,
2013.
(2) Loss on disposal of facility
During the third quarter of 2011, we sold an
interior systems operation located in Germany and recorded a loss on disposal of
$113 million. This operation, whose
long-lived assets were substantially impaired in 2010, had a
history of losses which were projected to continue throughout the
business planning period. Under the terms of the 2011 sale
arrangements (the "SPA"), we agreed to fund the buyer $67 million, to be satisfied with certain working
capital items, cash and the assumption of certain liabilities. The
remaining net assets of the operation of $26
million were assigned no value by the buyer and accordingly,
were expensed as part of the total loss on disposal.
Simultaneously, we reached a commercial settlement with one of the
facility's customers regarding the cancellation of certain
production orders whereby we reimbursed the customer costs of
$20 million.
Final settlement of the SPA did not occur during
2011 and in the fourth quarter of 2011 an additional $16 million was accrued in relation to the
ongoing disputes with the purchaser bringing the total loss on
disposal to $129 million.
As more fully described in Note 5 of our
unaudited interim consolidated financial statements for the three
months and nine months ended September 31,
2012, on June 4, 2012, we
re-acquired the above operation.
(3) Settlement agreement
During the third quarter of 2011, a settlement
agreement was finalized in connection with the settlement of
certain patent infringement and other claims. We recorded an
$11 million expense in the third
quarter of 2011 in relation to these arrangements.
(4) Gain on disposal
During the second quarter of 2011, we sold our
40% non-controlling interest in an equity accounted investment for
$151 million and realized a
$10 million gain on the
disposition.
(5) Write down of real estate
During the first quarter of 2011, five excess
corporate real estate assets were sold to entities associated with
our Founder and Honorary Chairman, Mr. Stronach and/or our former
Co-Chief Executive Officer, Siegfried
Wolf. Based on the appraisals obtained by the Corporate
Governance and Compensation Committee, the appraised fair value
range for the properties was less than their carrying value and,
accordingly, we recorded a $9 million
impairment charge in the second quarter of 2011. The sales were
approved by the independent members of our Board of Directors based
on the recommendation of the Corporate Governance and Compensation
Committee and were completed during 2011.
Segment Analysis
Given the differences between the regions in
which we operate, our operations are segmented on a geographic
basis between North America,
Europe and Rest of World.
Consistent with the above, our internal financial reporting
segments key internal operating performance measures between
North America, Europe and Rest of World for purposes of
presentation to the chief operating decision maker to assist in the
assessment of operating performance, the allocation of resources,
and our long-term strategic direction and future global growth.
Our chief operating decision maker uses Adjusted
EBIT as the measure of segment profit or loss, since we believe
Adjusted EBIT is the most appropriate measure of operational
profitability or loss for our reporting segments. Adjusted EBIT
represents income from operations before income taxes; interest
expense (income), net; and other (income) expense, net.
As more fully described in Notes 2 and 5 of our
unaudited interim consolidated financial statements for the three
months and nine months ended September 31,
2012, on August 31, 2012 we
acquired the controlling 27% interest in the E-Car partnership.
Prior to the acquisition, we held the remaining 73% non-controlling
interest in E-Car and accounted for this investment using the
equity method of accounting. For segment reporting purposes, prior
to the closing date we recorded our proportionate share of the
losses of E-Car in the Corporate and Other segment. Beginning on
August 31, 2012, the consolidated
results of E-Car are recorded in our North America and Europe segments as follows:
| |
For the month
ended |
| |
September 30, 2012 |
| |
North |
|
|
|
|
| |
America |
|
Europe |
|
Total |
| |
|
|
|
|
|
| Total
Sales |
3 |
|
3 |
|
6 |
| Adjusted
EBIT |
(17) |
|
(2) |
|
(19) |
| Amortization of E-Car
Intangibles |
|
|
|
|
|
| |
included in Adjusted EBIT |
(13) |
|
- |
|
(13) |
| |
|
For the three months ended September 30, |
| |
|
External Sales |
|
Adjusted EBIT |
| |
|
2012 |
|
2011 |
|
Change |
|
2012 |
|
2011 |
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
$ |
3,953 |
|
$ |
3,616 |
|
$ |
337 |
|
$ |
328 |
|
$ |
300 |
|
$ |
28 |
| Europe |
|
|
2,911 |
|
|
2,950 |
|
|
(39) |
|
|
13 |
|
|
(35) |
|
|
48 |
| Rest of
World |
|
|
542 |
|
|
392 |
|
|
150 |
|
|
5 |
|
|
14 |
|
|
(9) |
| Corporate and
Other |
|
|
5 |
|
|
12 |
|
|
(7) |
|
|
6 |
|
|
7 |
|
|
(1) |
| Total reportable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
segments |
|
$ |
7,411 |
|
$ |
6,970 |
|
$ |
441 |
|
$ |
352 |
|
$ |
286 |
|
$ |
66 |
Excluded from Adjusted EBIT for the third
quarters of 2012 and 2011 were the following Other Income items,
which have been discussed in the "Other Income" section.
| |
For the three
months |
| |
ended
September 30, |
| |
2012 |
|
2011 |
| |
|
|
|
|
|
| North America |
|
|
|
|
|
| |
Settlement agreement |
$ |
- |
|
$ |
11 |
| |
|
|
|
|
|
| Europe |
|
|
|
|
|
| |
Loss on disposal of
facility |
|
- |
|
|
113 |
| |
|
|
|
|
|
| Corporate and Other |
|
|
|
|
|
| |
Re-measurement gain of E-Car |
|
(153) |
|
|
- |
| |
$ |
(153) |
|
$ |
124 |
North
America
Adjusted EBIT in North
America increased $28 million
to $328 million for the third quarter
of 2012 compared to $300 million
for the third quarter of 2011 primarily as a result of:
- margins earned on higher production sales, including margins
earned on the launch of new facilities and new programs;
- lower costs incurred in preparation for upcoming launches;
and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- intangible asset amortization of $13
million related to the acquisition and re-measurement of
E-Car;
- increased pre-operating costs incurred at new facilities;
- a larger amount of employee profit sharing;
- higher affiliation fees paid to corporate;
- higher incentive compensation;
- operational inefficiencies and other costs at certain
facilities;
- higher warranty costs of $3
million;
- rising commodity costs;
- programs that ended production during or subsequent to the
third quarter of 2011; and
- net customer price concessions subsequent to the third quarter
of 2011.
Europe
Adjusted EBIT in Europe increased $48
million to $13 million for the
third quarter of 2012 compared to a loss of $35 million for the third quarter of 2011
primarily as a result of:
- productivity and efficiency improvements at certain
facilities;
- lower warranty costs of $17
million;
- margin earned on the launch of new programs;
- decreased commodity costs;
- lower restructuring and downsizing costs; and
- lower costs incurred in preparation for upcoming launches.
These factors were partially offset by:
- the net effect of the disposition during the third quarter of
2011 and subsequent acquisition in the third quarter of 2012 of an
interior systems operation;
- a larger amount of employee profit sharing;
- higher incentive compensation;
- lower equity income;
- higher affiliation fees paid to corporate;
- operational inefficiencies and other costs at certain
facilities; and
- programs that ended production during or subsequent to the
third quarter of 2011.
Rest of World
Rest of World Adjusted EBIT decreased
$9 million to $5 million for the third quarter of 2012 compared
to $14 million for the third quarter
of 2011 primarily as a result of:
- operational inefficiencies and other costs at certain
facilities, in particular at certain facilities in South America;
- higher costs related to new facilities; and
- higher warranty costs of $1
million.
These factors were partially offset by higher
equity income.
Corporate and Other
Corporate and Other Adjusted EBIT decreased
$1 million to $6 million for the third quarter of 2012 compared
to $7 million for the third quarter
of 2011. The loss related to our equity accounted investment in
E-Car included in Corporate and Other was $13 million for the third quarter of 2012 and
$15 million for the third quarter of
2011. Excluding E-Car, Corporate and Other Adjusted EBIT decreased
$3 million to $19 million for the third quarter of 2012
compared to $22 million for the third
quarter of 2011 primarily as a result of higher incentive
compensation partially offset by a $6
million revaluation gain in respect of ABCP and an increase
in affiliation fees earned from our divisions.
Interest Expense (Income), net
During the third quarter of 2012, we recorded
net interest expense of $5 million
compared to net interest income of $2
million for the third quarter of 2011. The increase in
interest expense is primarily as a result of:
- an increase in interest expense as a result of higher debt in
Asia Pacific and South America; and
- interest expense on debt assumed in the BDW acquisition.
Income from Operations before Income
Taxes
Income from operations before income taxes
increased $336 million to
$500 million for the third quarter of
2012 compared to $164 million for the
third quarter of 2011. Excluding Other Income, discussed in the
"Other Income" section, income from operations before income taxes
for the third quarter of 2012 increased $59
million. The increase in income from operations before
income taxes is the result of the increase in EBIT partially offset
by the increase in net interest expense, as discussed above.
Income Taxes
The effective income tax rate on income from
operations before income taxes was 22.8% for the third quarter of
2012 compared to 39.0% for the third quarter of 2011. In the third
quarters of 2012 and 2011, income tax rates were impacted by the
items discussed in the "Other Income" section. Excluding Other
Income, after tax, the effective income tax rate increased to 24.8%
for the third quarter of 2012 compared to 22.2% for the third
quarter of 2011 primarily as result of a reduction in the
utilization of unbenefitted losses in the
United States partially offset by permanent items.
Net Income
Net income of $386
million for the third quarter of 2012 increased $286 million compared to the third quarter of
2011. Excluding Other Income, after tax, discussed in the "Other
Income" section, net income increased $37
million. The increase in net income is the result of the
increase in income from operations before income taxes partially
offset by higher income taxes, both as discussed above.
Net Loss Attributable to Non-controlling
Interests
The net loss attributable to non-controlling
interests of $4 million for the third
quarter of 2012 increased $2 million
compared to the third quarter of 2011.
Net Income attributable to Magna
International Inc.
Net income attributable to Magna International
Inc. of $390 million for the third
quarter of 2012 increased $288
million compared to the third quarter of 2011. Excluding
Other Income, after tax, discussed in the "Other Income" section,
net income attributable to Magna International Inc. increased
$39 million as a result of the
increases in net income and net loss attributable to
non-controlling interests, both as discussed above.
Earnings per Share
| |
|
|
For the three
months |
| |
|
|
ended
September 30, |
| |
|
|
2012 |
|
|
2011 |
|
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
$ |
1.68 |
|
|
$ |
0.43 |
|
|
+ |
291% |
| |
Diluted |
|
|
$ |
1.66 |
|
|
$ |
0.42 |
|
|
+ |
295% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Average number of Common Shares
outstanding (millions) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
232.5 |
|
|
|
239.7 |
|
|
- |
3% |
| |
Diluted |
|
|
|
235.1 |
|
|
|
242.5 |
|
|
- |
3% |
Diluted earnings per share increased
$1.24 to $1.66 for the third quarter of 2012 compared to
$0.42 for the third quarter of 2011.
Other Income, after tax, positively impacted diluted earnings per
share in the third quarter of 2012 by $0.53 and negatively impacted diluted earnings
per share in third quarter of 2011 by $0.52, both as discussed in the "Other Income"
section. Excluding Other Income, after tax, the $0.19 increase in diluted earnings per share is a
result of the increase in net income attributable to Magna
International Inc. and a decrease in the weighted average number of
diluted shares outstanding during the third quarter of 2012.
The decrease in the weighted average number of
diluted shares outstanding was primarily due to the repurchase and
cancellation of Common Shares, during or subsequent to the third
quarter of 2011, pursuant to our normal course issuer bids.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations
| |
|
For the three months |
| |
|
ended
September 30, |
| |
|
2012 |
|
|
2011 |
|
|
Change |
| Net income |
$ |
386 |
|
$ |
100 |
|
|
|
| Items not involving current cash
flows |
|
117 |
|
|
293 |
|
|
|
| |
|
503 |
|
|
393 |
|
$ |
110 |
| Changes in non-cash operating assets and
liabilities |
|
(63) |
|
|
(148) |
|
|
|
| Cash provided from operating activities |
$ |
440 |
|
$ |
245 |
|
$ |
195 |
Cash flow from operations before changes in
non-cash operating assets and liabilities increased $110 million to $503
million for the third quarter of 2012 compared to
$393 million for the third quarter of
2011. The increase in cash flow from operations was due to a
$286 million increase in net income,
as discussed above, partially offset by a $176 million decrease in items not involving
current cash flows. Items not involving current cash flows are
comprised of the following:
| |
For the three
months |
| |
ended September 30, |
| |
|
2012 |
|
|
2011 |
| |
|
|
|
|
|
| Depreciation and amortization |
$ |
203 |
|
$ |
170 |
| Other non-cash
charges |
|
39 |
|
|
30 |
| Amortization of other assets included in cost of
goods sold |
|
26 |
|
|
19 |
| Deferred income
taxes |
|
35 |
|
|
(11) |
| Equity income |
|
(33) |
|
|
(28) |
| Non-cash portion of Other
Income |
|
(153) |
|
|
113 |
| Items not involving current cash
flows |
|
$ 117 |
|
|
$ 293 |
Cash invested in non-cash operating assets and
liabilities amounted to $63 million
for the third quarter of 2012 compared to $148 million for the third quarter of 2011. The
change in non-cash operating assets and liabilities is comprised of
the following sources (and uses) of cash:
| |
|
For the three
months |
| |
|
ended September 30, |
| |
|
|
2012 |
|
|
2011 |
| |
|
|
|
|
|
|
| Accounts receivable |
|
$ |
69 |
|
$ |
(227) |
| Inventories |
|
|
(73) |
|
|
(135) |
| Prepaid expenses and
other |
|
|
(22) |
|
|
(14) |
| Accounts payable |
|
|
(85) |
|
|
241 |
| Accrued salaries and
wages |
|
|
49 |
|
|
18 |
| Other accrued
liabilities |
|
|
13 |
|
|
(16) |
| Income taxes
payable |
|
|
(14) |
|
|
(15) |
| Changes in non-cash operating assets and
liabilities |
|
$ |
(63) |
|
$ |
(148) |
The decrease in accounts receivable and accounts
payable in the third quarter of 2012 was primarily due to a
decrease in production activities at the end of the third quarter
of 2012 compared to the second quarter of 2012. The increase in
inventories was primarily due to increased production inventory to
support launch activities and higher tooling inventory.
Capital and Investment
Spending
| |
For the three
months |
| |
ended
September 30, |
| |
2012 |
|
2011 |
|
Change |
| |
|
|
|
|
|
|
|
|
| Fixed asset additions |
$ |
(279) |
|
$ |
(338) |
|
|
|
| Investments and other assets |
|
(28) |
|
|
(40) |
|
|
|
| Fixed assets, investments and other assets
additions |
|
(307) |
|
|
(378) |
|
|
|
| Purchase of subsidiaries |
|
(56) |
|
|
(5) |
|
|
|
| Disposal of facility |
|
― |
|
|
(39) |
|
|
|
| Proceeds from disposition |
|
15 |
|
|
34 |
|
|
|
| Cash used for investment activities |
$ |
(348) |
|
$ |
(388) |
|
$ |
40 |
Fixed assets, investments and other assets additions
In the third quarter of 2012, we invested
$279 million in fixed assets.
While investments were made to refurbish or replace assets consumed
in the normal course of business and for productivity improvements,
a large portion of the investment in the third quarter of 2012 was
for facilities and manufacturing equipment for programs that will
be launching subsequent to the third quarter of 2012. Consistent
with our strategy to expand in developing markets, approximately
25% (2011 - 24%) of this investment was in China, India,
Brazil and Russia.
In the third quarter of 2012, we invested
$28 million in other assets related
primarily for fully reimbursable tooling and engineering costs for
programs that launched during the third quarter of 2012 or will be
launching subsequent to the third quarter of 2012.
Purchase of subsidiaries
On August 31, 2012
we acquired the controlling 27% interest in the E-Car partnership
for cash consideration of $56
million, net of $19 million
cash acquired.
Proceeds from disposition
The $15 million of
proceeds include normal course fixed and other asset disposals.
Financing
| |
For the three
months |
| |
ended
September 30, |
| |
2012 |
|
2011 |
|
Change |
| Increase in bank indebtedness |
$ |
36 |
|
$ |
73 |
|
|
|
| Repayments of debt |
|
(26) |
|
|
(10) |
|
|
|
| Issues of debt |
|
23 |
|
|
1 |
|
|
|
| Settlement of stock
options |
|
(15) |
|
|
(5) |
|
|
|
| Issue of Common Shares |
|
2 |
|
|
7 |
|
|
|
| Contribution to subsidiaries by non-controlling
interest |
|
― |
|
|
1 |
|
|
|
| Repurchase of Common
Shares |
|
(21) |
|
|
(197) |
|
|
|
| Dividends paid |
|
(62) |
|
|
(58) |
|
|
|
| Cash used for financing activities |
$ |
(63) |
|
$ |
(188) |
|
$ |
125 |
Repayments of debt for the third quarter of 2012
relates primarily to BDW and Pabsa S.A. debt payments subsequent to
acquisition, while issues of debt relates primarily to higher debt
levels in our Rest of World segment.
During the third quarter of 2012, our Honorary
Chairman and Founder, Mr. Stronach exercised 900,001 options on a
cashless basis in accordance with the applicable stock option
plans. On exercise, cash payments totalling $15 million were made to Mr. Stronach which
represented the difference between the aggregate fair market value
of the Option Shares based on the closing price of our Common
Shares on the Toronto Stock Exchange ("TSX") on the date of
exercise and the aggregate Exercise Price of all such options
surrendered.
During the third quarter of 2012, we repurchased
0.5 million Common Shares for an aggregate purchase price of
$21 million under our normal course
issuer bid.
Cash dividends paid per Common Share were
$0.275 for the third quarter of 2012,
for a total of $62 million.
Financing Resources
| |
As
at |
|
As at |
|
|
|
| |
September
30, |
|
December 31, |
|
|
|
| |
2012 |
|
2011 |
|
Change |
| Liabilities |
|
|
|
|
|
|
|
|
| Bank indebtedness |
$ |
151 |
|
$ |
162 |
|
|
|
| Long-term debt due within one
year |
|
148 |
|
|
25 |
|
|
|
| Long-term debt |
|
110 |
|
|
46 |
|
|
|
| |
|
409 |
|
|
233 |
|
|
|
| Non-controlling interest |
|
28 |
|
|
27 |
|
|
|
| Shareholders' equity |
|
9,161 |
|
|
8,175 |
|
|
|
| Total capitalization |
$ |
9,598 |
|
$ |
8,435 |
|
$ |
1,163 |
Total capitalization increased by $1.2 billion to $9.6
billion at September 30, 2012
compared to $8.4 billion at
December 31, 2011,
primarily as a result of a $1.0
billion increase in shareholders' equity and a $0.2 billion increase in liabilities.
The increase in shareholders' equity was
primarily as a result of:
- net income earned in the first nine months of 2012;
- the $76 million net unrealized
gain on cash flow hedges; and
- the $32 million net unrealized
loss on translation of net investment in foreign operations.
These factors were partially offset by dividends
paid during the first nine months of 2012.
The increase in liabilities relates primarily to
an increase in debt in our Rest of World segment and debt assumed
in connection with the BDW acquisition.
Cash Resources
During the third quarter of 2012, our cash
resources increased by $54 million to $1.45
billion as a result of the cash provided from operating
activities and the favourable effect of foreign exchange partially
offset by cash used for investing and financing activities, as
discussed above. In addition to our cash resources at September 30, 2012, we had term and operating
lines of credit totalling $2.5
billion of which $2.1 billion
was unused and available.
Maximum Number of Shares Issuable
The following table presents the maximum number
of shares that would be outstanding if all of the outstanding
options at November 7, 2012 were
exercised:
| Common Shares |
|
|
|
|
|
|
|
|
|
|
233,228,126 |
| Stock options (i) |
|
|
|
|
|
|
|
|
|
|
6,926,542 |
| |
|
|
|
|
|
|
|
|
|
|
240,154,668 |
| (i) |
Options to purchase Common Shares are exercisable by the
holder in accordance with the vesting provisions and upon payment
of the exercise price as may be determined from time to time
pursuant to our stock option plans. |
Contractual Obligations and Off-Balance Sheet
Financing
There have been no material changes with respect
to the contractual obligations requiring annual payments during the
third quarter of 2012 that are outside the ordinary course of our
business. Refer to our MD&A included in our 2011 Annual
Report.
RESULTS OF OPERATIONS - FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2012
Sales
| |
For the nine
months |
| |
ended
September 30, |
| |
|
2012 |
|
|
2011 |
|
Change |
| Vehicle Production Volumes (millions of
units) |
|
|
|
|
|
|
|
|
| North America |
|
11.625 |
|
|
9.699 |
|
+ |
20% |
| Western Europe |
|
9.569 |
|
|
10.280 |
|
- |
7% |
| Sales |
|
|
|
|
|
|
|
|
| External Production |
|
|
|
|
|
|
|
|
| North America |
$ |
11,458 |
|
$ |
10,478 |
|
+ |
9% |
| Europe |
|
6,577 |
|
|
6,484 |
|
+ |
1% |
| Rest of
World |
|
1,316 |
|
|
1,016 |
|
+ |
30% |
| Complete Vehicle
Assembly |
|
1,864 |
|
|
2,065 |
|
- |
10% |
| Tooling, Engineering and
Other |
|
1,589 |
|
|
1,454 |
|
+ |
9% |
| Total Sales |
$ |
22,804 |
|
$ |
21,497 |
|
+ |
6% |
External Production Sales - North America
External production sales in North America increased 9% or $1.0 billion to $11.5
billion for the nine months ended September 30, 2012 compared to $10.5 billion for the nine months ended
September 30, 2011. The increase in
external production sales is primarily as a result of:
- higher production volumes on certain existing programs;
- the launch of new programs during or subsequent to the nine
months ended September 30, 2011,
including the:
-
- Volkswagen Passat;
- Mercedes-Benz M-Class and GL-Class;
- Chevrolet Sonic;
- Chevrolet Malibu;
- Lancia Grand Voyager and Ram Cargo Van; and
- Honda CR-V;
- growth in sales for non-traditional markets; and
- acquisitions completed during or subsequent to the nine months
ended September 30, 2011, which
positively impacted sales by $41
million.
These factors were partially offset by:
- a decrease in content on certain programs, including the:
-
- Ford Escape; and
- Ram Pickup;
- programs that ended production during or subsequent to the nine
months ended September 30, 2011,
including the:
-
- Ford Crown Victoria;
- Chevrolet HHR;
- Ford Ranger; and
- Dodge Caliber;
- a decrease in reported U.S. dollar sales due to the weakening
of the Canadian dollar against the U.S. dollar; and
- net customer price concessions subsequent to the nine months
ended September 30, 2011.
External Production Sales - Europe
External production sales in Europe increased 1% or $0.1 billion to $6.6
billion for the nine months ended September 30, 2012 compared to $6.5 billion for the nine months ended
September 30, 2011. The increase in
external production sales is primarily as a result of:
- the launch of new programs during or subsequent to the nine
months ended September 30, 2011,
including the:
-
- Range Rover Evoque;
- Kia Rio;
- Hyundai Solaris;
- Volkswagen up!, SEAT Mii and Skoda Citigo;
- Audi Q3; and
- MINI Coupe and MINI Roadster;
- acquisitions completed during or subsequent to the nine months
ended September 30, 2011, which
positively impacted sales by $159
million, including BDW; and
- growth in sales for non-traditional markets.
These factors were partially offset by:
- a decrease in reported U.S. dollar sales primarily as a result
of the weakening of the euro against the U.S. dollar;
- the net effect of the disposition during the third quarter of
2011 and subsequent acquisition in the third quarter of 2012 of an
interior systems operation;
- lower production volumes on certain existing programs; and
- net customer price concessions subsequent to the nine months
ended September 30, 2011.
External Production Sales - Rest of
World
External production sales in Rest of World
increased 30% or $0.3 billion to
$1.3 billion for the nine months
ended September 30, 2012
compared to $1.0 billion for the nine
months ended September 30, 2011,
primarily as a result of:
- acquisitions completed during or subsequent to the nine months
ended September 30, 2011, which
positively impacted sales by $204
million, including TKASB; and
- the launch of new programs during or subsequent to the nine
months ended September 30, 2011,
primarily in China, Brazil, Argentina and South
Korea.
These factors were partially offset by an
$88 million decrease in reported U.S.
dollar sales as a result of the net weakening of foreign currencies
against the U.S. dollar, including the Brazilian real.
Complete Vehicle Assembly Sales
| |
For the nine
months |
| |
ended
September 30, |
| |
2012 |
|
2011 |
|
Change |
| |
|
|
|
|
|
|
|
|
| Complete Vehicle Assembly
Sales |
$ |
1,864 |
|
$ |
2,065 |
|
- |
10% |
| Complete Vehicle Assembly Volumes
(Units) |
|
|
|
|
|
|
|
|
| |
MINI Countryman, Peugeot RCZ, Mercedes-Benz
G-Class |
|
|
|
|
|
|
|
|
| |
and Aston Martin Rapide |
|
92,152 |
|
|
100,465 |
|
- |
8% |
Complete vehicle assembly sales decreased 10% or
$0.2 billion to $1.9 billion for the nine months ended
September 30, 2012 compared to
$2.1 billion for the nine months
ended September 30, 2011 while
assembly volumes decreased 8% or 8,313 units.
The decrease in complete vehicle assembly sales
is primarily as a result of:
- a $171 million decrease in
reported U.S. dollar sales as a result of the weakening of the euro
against the U.S. dollar;
- a decrease in assembly volumes for the Peugeot RCZ; and
- the end of production of the Aston Martin Rapide at our
Magna Steyr facility during the
second quarter of 2012.
These factors were partially offset by an
increase in assembly volumes for the Mercedes-Benz G-Class.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
9% or $0.1 billion to $1.6 billion for the nine months ended
September 30, 2012 compared to
$1.5 billion for the nine months
ended September 30, 2011.
In the nine months ended September 30, 2012, the major programs for which
we recorded tooling, engineering and other sales were the:
- Ford Fusion;
- Chevrolet Trax;
- MINI Countryman;
- QOROS C/Sedan/Hatch;
- Mercedes-Benz M-Class;
- Chevrolet Spin;
- Opel Cascada Convertible; and
- Freightliner Cascadia.
In the nine months ended September 30, 2011, the major programs for which
we recorded tooling, engineering and other sales were the:
- MINI Cooper and Countryman;
- Mercedes-Benz M-Class;
- Chrysler 300C, Dodge Charger and Challenger;
- Opel Cascada Convertible;
- BMW X3;
- Chery A6 Coupe;
- Peugeot RCZ;
- Dodge Journey;
- Chevrolet Camaro; and
- Skoda Fabia.
In addition, tooling, engineering and other
sales decreased as a result of the weakening of the euro against
the U.S. dollar.
Segment Analysis
| |
|
For
the nine months ended September 30, |
| |
|
External Sales |
|
Adjusted EBIT |
| |
|
2012 |
|
|
2011 |
|
|
Change |
|
|
2012 |
|
|
2011 |
|
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
$ |
12,143 |
|
$ |
11,115 |
|
$ |
1,028 |
|
$ |
1,148 |
|
$ |
1,038 |
|
$ |
110 |
| Europe |
|
9,230 |
|
|
9,266 |
|
|
(36) |
|
|
141 |
|
|
(19) |
|
|
160 |
| Rest of World |
|
1,414 |
|
|
1,081 |
|
|
333 |
|
|
(20) |
|
|
42 |
|
|
(62) |
| Corporate and
Other |
|
17 |
|
|
35 |
|
|
(18) |
|
|
2 |
|
|
(15) |
|
|
17 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total reportable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
segments |
$ |
22,804 |
|
$ |
21,497 |
|
$ |
1,307 |
|
$ |
1,271 |
|
$ |
1,046 |
|
$ |
225 |
Excluded from Adjusted EBIT for the nine month
periods ended 2012 and 2011 were the following Other Income items,
which have been discussed in the "Other Income" section.
| |
For the nine
months |
| |
ended September 30, |
| |
|
2012 |
|
|
2011 |
| North America |
|
|
|
|
|
| |
Settlement agreement |
$ |
- |
|
$ |
11 |
| Europe |
|
|
|
|
|
| |
Loss on disposal of
facility |
|
- |
|
|
113 |
| Corporate and Other |
|
|
|
|
|
| |
Re-measurement gain of E-Car |
|
(153) |
|
|
- |
| |
Gain on disposal of
investment |
|
- |
|
|
(10) |
| |
Write down of real estate |
|
- |
|
|
9 |
| |
|
(153) |
|
|
(1) |
| |
$ |
(153) |
|
$ |
123 |
North
America
Adjusted EBIT in North
America increased $0.1 billion
to $1.1 billion for the nine months
ended September 30, 2012 compared to
$1.0 billion for the nine months
ended September 30, 2011 primarily as
a result of:
- margins earned on higher production sales, including margins
earned on the launch of new facilities and new programs;
- lower costs incurred in preparation for upcoming launches;
and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- increased pre-operating costs incurred at new facilities;
- intangible asset amortization of $13
million related to the acquisition and re-measurement of
E-Car;
- higher affiliation fees paid to corporate;
- higher incentive compensation;
- a larger amount of employee profit sharing;
- rising commodity costs;
- higher warranty costs of $7
million;
- operational inefficiencies and other costs at certain
facilities;
- programs that ended production during or subsequent to the nine
months ended September 30, 2011;
and
- net customer price concessions subsequent to the nine months
ended September 30, 2011.
Europe
Adjusted EBIT in Europe increased $160
million to $141 million for
the nine months ended September 30,
2012 compared to a loss of $19 million for the nine months ended
September 30, 2011 primarily as a
result of:
- lower warranty costs of $22
million;
- lower costs incurred in preparation for upcoming launches;
- the net effect of the disposition during the third quarter of
2011 and subsequent acquisition in the third quarter of 2012 of an
interior systems operation;
- favourable settlement of certain commercial items;
- productivity and efficiency improvements at certain
facilities;
- higher equity income; and
- lower pre-operating costs incurred at new facilities.
These factors were partially offset by:
- a larger amount of employee profit sharing;
- rising commodity costs;
- higher affiliation fees paid to corporate;
- higher incentive compensation;
- operational inefficiencies and other costs at certain
facilities; and
- programs that ended production during or subsequent to the nine
months ended September 30, 2011.
Rest of World
Rest of World Adjusted EBIT decreased
$62 million to a loss of $20 million for the nine months ended
September 30, 2012 compared to income
of $42 million for the nine months
ended September 30, 2011 primarily as
a result of:
- operational inefficiencies and other costs at certain
facilities, in particular at certain facilities in South America;
- higher costs related to new facilities;
- higher affiliation fees paid to Corporate;
- higher warranty costs of $2
million; and
- net customer price concessions subsequent to the nine months
ended September 30, 2011.
These factors were partially offset by higher
equity income.
Corporate and Other
Corporate and Other Adjusted EBIT increased
$17 million to $2 million for the nine months ended September 30, 2012 compared to a loss of
$15 million for the nine months ended
September 30, 2011. The loss related
to our equity accounted investment in E-Car included in Corporate
and Other was $35 million for the
nine months ended September 30, 2012
and $53 million for the nine months
ended September 30, 2011. Excluding
E-Car, Corporate and Other Adjusted EBIT decreased $1 million to $37
million for the nine months ended September 30, 2012 compared to $38 million for the nine months ended
September 30, 2011 primarily as a
result of:
- higher incentive compensation;
- lower equity income; and
- a loss on disposal of an investment.
These factors were partially offset by:
- an increase in affiliation fees earned from our divisions;
- a $13 million revaluation gain in
respect of ABCP;
- the recovery of due diligence costs; and
- lower stock-based compensation.
SUBSEQUENT EVENTS
[a] Acquisitions
In October 2012,
we signed an agreement to acquire ixetic Verwaltungs GmbH, a
manufacturer of automotive vacuum, engine and transmission pumps
with facilities in Germany,
Bulgaria and China, for a purchase price of approximately
$400 million (€308 million). This
transaction is expected to close in the fourth quarter of 2012,
subject to obtaining European anti-trust approval.
In addition, we signed an agreement with a joint
venture partner to purchase the remaining 50% interest in STT
Technologies Inc., a supplier of transmission and engine related
oil pumps with facilities in Canada and Mexico. This transaction closed on
October 26, 2012.
[b] Normal Course Issuer Bid
Subject to approval by the TSX and the NYSE, our
Board of Directors approved a normal course issuer bid to purchase
up to 12 million of our Common Shares, representing approximately
5% of our public float of Common Shares. The primary purposes of
the normal course issuer bid are purchases for cancellation as well
as purchases to fund our stock-based compensation awards or
programs and/or our obligations to our deferred profit sharing
plans. The normal course issuer bid is expected to commence on or
about November 13, 2012 and will
terminate one year later. All purchases of Common Shares will be
made at the market price at the time of purchase in accordance with
the rules and policies of the TSX. Purchases may also be made on
the NYSE in compliance with Rule 10b-18 under the U.S. Securities
Exchange Act of 1934.
COMMITMENTS AND CONTINGENCIES
From time to time, we may be contingently liable
for litigation, legal and/or regulatory actions and proceedings and
other claims.
Refer to note 15 of our unaudited interim
consolidated financial statements for the nine months ended
September 30, 2012, which describes
these claims.
For a discussion of risk factors relating to
legal and other claims/actions against us, refer to "Item 3.
Description of the Business - Risk Factors" in our Annual
Information Form and Annual Report on Form 40-F, each in respect of
the year ended December 31, 2011.
CONTROLS AND PROCEDURES
There have been no changes in our internal
controls over financial reporting that occurred during the nine
months ended September 30, 2012
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
FORWARD-LOOKING STATEMENTS
The previous discussion contains statements that
constitute "forward-looking statements" within the meaning of
applicable securities legislation, including, but not limited to,
statements relating to implementation of improvement plans in our
underperforming operations, particularly in Europe and Rest of World; future sales and
earnings growth in Rest of World; the impact to Adjusted EBIT of
new facilities launches in Rest of World; the future growth of the
automotive pump market and the potential benefits expected to be
achieved from our acquisitions of ixetic Verwaltungs GmbH and the
remaining 50% interest in STT Technologies Inc.; the integration of
and potential benefits expected to be achieved from our completed
acquisition of the outstanding 27% interest in Magna E-Car Systems;
and future purchases of our Common Shares under the Normal Course
Issuer Bid. The forward-looking information in this MD&A is
presented for the purpose of providing information about
management's current expectations and plans and such information
may not be appropriate for other purposes. Forward-looking
statements may include financial and other projections, as well as
statements regarding our future plans, objectives or economic
performance, or the assumptions underlying any of the foregoing,
and other statements that are not recitations of historical fact.
We use words such as "may", "would", "could", "should", "will",
"likely", "expect", "anticipate", "believe", "intend", "plan",
"forecast", "outlook", "project", "estimate" and similar
expressions suggesting future outcomes or events to identify
forward-looking statements. Any such forward-looking statements are
based on information currently available to us, and are based on
assumptions and analyses made by us in light of our experience and
our perception of historical trends, current conditions and
expected future developments, as well as other factors we believe
are appropriate in the circumstances. However, whether actual
results and developments will conform with our expectations and
predictions is subject to a number of risks, assumptions and
uncertainties, many of which are beyond our control, and the
effects of which can be difficult to predict, including, without
limitation: the potential for a deterioration of economic
conditions or an extended period of economic uncertainty; declines
in consumer confidence and the impact on production volume levels;
risks arising from uncertain economic conditions in Europe, including the potential for a
deterioration of sales of our three largest German-based OEM
customers; restructuring actions by OEMs, including plant closures;
restructuring, downsizing and/or other significant non-recurring
costs; continued underperformance of one or more of our operating
divisions; our ability to successfully launch material new or
takeover business; liquidity risks; risks arising due to the
failure of a major financial institution; bankruptcy or insolvency
of a major customer or supplier; a prolonged disruption in the
supply of components to us from our suppliers; scheduled production
shutdowns of our customers' production facilities (typically in the
third and fourth quarters of each calendar year); shutdown of our
or our customers' or sub-suppliers' production facilities due to a
labour disruption; our ability to successfully compete with other
automotive suppliers; a reduction in outsourcing by our customers
or the loss of a material production or assembly program; the
termination or non-renewal by our customers of any material
production purchase order; a shift away from technologies in which
we are investing; impairment charges related to goodwill,
long-lived assets and deferred tax assets; shifts in market share
away from our top customers; shifts in market shares among vehicles
or vehicle segments, or shifts away from vehicles on which we have
significant content; risks of conducting business in foreign
markets, including China,
India, Brazil, Russia and other non-traditional markets for
us; exposure to, and ability to offset, volatile commodities
prices; fluctuations in relative currency values; our ability to
successfully identify, complete and integrate acquisitions or
achieve anticipated synergies; ongoing pricing pressures, including
our ability to offset price concessions demanded by our customers;
warranty and recall costs; our ability to understand and compete
successfully in non-automotive businesses in which we pursue
opportunities; risks related to natural disasters and potential
production disruptions; factors that could cause an increase in our
pension funding obligations; changes in our mix of earnings between
jurisdictions with lower tax rates and those with higher tax rates,
as well as our ability to fully benefit tax losses; other potential
tax exposures; legal claims and/or regulatory actions against us;
the unpredictability of, and fluctuation in, the trading price of
our Common Shares; work stoppages and labour relations disputes;
changes in credit ratings assigned to us; changes in laws and
governmental regulations; costs associated with compliance with
environmental laws and regulations; risks related to the electric
vehicle industry; and other factors set out in our Annual
Information Form filed with securities commissions in Canada and our annual report on Form 40-F
filed with the United States Securities and Exchange Commission,
and subsequent filings. In evaluating forward-looking statements,
we caution readers not to place undue reliance on any
forward-looking statements and readers should specifically consider
the various factors which could cause actual events or results to
differ materially from those indicated by such forward-looking
statements. Unless otherwise required by applicable securities
laws, we do not intend, nor do we undertake any obligation, to
update or revise any forward-looking statements to reflect
subsequent information, events, results or circumstances or
otherwise.
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
[Unaudited]
[U.S. dollars in millions, except per share figures]
| |
|
|
|
Three months ended |
|
|
Nine months
ended |
| |
|
|
|
September 30, |
|
|
September 30, |
| |
Note |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales |
|
|
$ |
7,411 |
|
$ |
6,970 |
|
$ |
22,804 |
|
$ |
21,497 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cost of goods sold |
|
|
|
6,540 |
|
|
6,201 |
|
|
19,951 |
|
|
18,993 |
| |
Depreciation and amortization |
|
|
|
203 |
|
|
170 |
|
|
558 |
|
|
507 |
| |
Selling, general and administrative |
11 |
|
|
349 |
|
|
341 |
|
|
1,131 |
|
|
1,044 |
| |
Interest expense (income), net |
|
|
|
5 |
|
|
(2) |
|
|
15 |
|
|
(3) |
| |
Equity income |
|
|
|
(33) |
|
|
(28) |
|
|
(107) |
|
|
(93) |
| |
Other (income) expense, net |
2 |
|
|
(153) |
|
|
124 |
|
|
(153) |
|
|
123 |
| Income from operations before income
taxes |
|
|
|
500 |
|
|
164 |
|
|
1,409 |
|
|
926 |
| Income taxes |
|
|
|
114 |
|
|
64 |
|
|
333 |
|
|
222 |
| Net income |
|
|
|
386 |
|
|
100 |
|
|
1,076 |
|
|
704 |
| Net loss attributable to
non-controlling interests |
|
|
|
4 |
|
|
2 |
|
|
6 |
|
|
2 |
| Net income
attributable to Magna International Inc. |
|
|
$ |
390 |
|
$ |
102 |
|
$ |
1,082 |
|
$ |
706 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per Common Share: |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
$ |
1.68 |
|
$ |
0.43 |
|
$ |
4.65 |
|
$ |
2.93 |
| |
Diluted |
|
|
$ |
1.66 |
|
$ |
0.42 |
|
$ |
4.60 |
|
$ |
2.89 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash dividends paid per Common
Share |
|
|
$ |
0.275 |
|
$ |
0.250 |
|
$ |
0.825 |
|
$ |
0.750 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average number of Common Shares
outstanding during |
|
|
|
|
|
|
|
|
|
|
|
|
|
| the period [in millions]: |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
232.5 |
|
|
239.7 |
|
|
232.5 |
|
|
240.9 |
| |
Diluted |
|
|
|
235.1 |
|
|
242.5 |
|
|
235.3 |
|
|
244.7 |
| See accompanying notes
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars in millions]
| |
|
|
|
Three months
ended |
|
|
Nine months
ended |
| |
|
|
|
September 30, |
|
|
September 30, |
| |
Note |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
| Net income |
|
|
$ |
386 |
|
$ |
100 |
|
$ |
1,076 |
|
$ |
704 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss), net
of tax: |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net unrealized gain (loss) on translation of net
investment in foreign operations |
|
|
|
127 |
|
|
(415) |
|
|
32 |
|
|
(110) |
| |
Net unrealized gain (loss) on available-for-sale
investments |
|
|
|
2 |
|
|
(6) |
|
|
(2) |
|
|
(9) |
| |
Net unrealized gain (loss) on cash flow
hedges |
|
|
|
39 |
|
|
(69) |
|
|
76 |
|
|
(39) |
| |
Reclassification of net gain on cash flow hedges
to net income |
|
|
|
(2) |
|
|
(10) |
|
|
(7) |
|
|
(28) |
| |
Pension and post retirement benefits |
|
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
| Other comprehensive (loss)
income |
|
|
|
166 |
|
|
(500) |
|
|
99 |
|
|
(185) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income (loss) |
|
|
|
552 |
|
|
(400) |
|
|
1,175 |
|
|
519 |
| Comprehensive loss attributable to
non-controlling interests |
|
|
|
5 |
|
|
2 |
|
|
6 |
|
|
3 |
| Comprehensive income (loss)
attributable to Magna International Inc. |
|
|
$ |
557 |
|
$ |
(398) |
|
$ |
1,181 |
|
$ |
522 |
| |
See accompanying notes
|
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
| |
|
|
|
Three months
ended |
|
|
Nine months
ended |
| |
|
|
|
September 30, |
|
|
September 30, |
| |
Note |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
| Cash provided from (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
$ |
386 |
|
$ |
100 |
|
$ |
1,076 |
|
$ |
704 |
| Items not involving current cash flows |
4 |
|
|
117 |
|
|
293 |
|
|
544 |
|
|
670 |
| |
|
|
|
503 |
|
|
393 |
|
|
1,620 |
|
|
1,374 |
| Changes in non‑cash operating assets and
liabilities |
4 |
|
|
(63) |
|
|
(148) |
|
|
(487) |
|
|
(926) |
| Cash provided from operating
activities |
|
|
|
440 |
|
|
245 |
|
|
1,133 |
|
|
448 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| INVESTMENT ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fixed asset additions |
|
|
|
(279) |
|
|
(338) |
|
|
(796) |
|
|
(708) |
| Purchase of subsidiaries |
5 |
|
|
(56) |
|
|
(5) |
|
|
(79) |
|
|
(19) |
| Increase in investments and other assets |
|
|
|
(28) |
|
|
(40) |
|
|
(97) |
|
|
(140) |
| Disposals of facilities |
|
|
|
— |
|
|
(39) |
|
|
— |
|
|
112 |
| Proceeds from disposition |
2 |
|
|
15 |
|
|
34 |
|
|
93 |
|
|
110 |
| Cash used for investing activities |
|
|
|
(348) |
|
|
(388) |
|
|
(879) |
|
|
(645) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Increase (decrease) in bank indebtedness |
|
|
|
36 |
|
|
73 |
|
|
(5) |
|
|
106 |
| Repayments of debt |
|
|
|
(26) |
|
|
(10) |
|
|
(145) |
|
|
(22) |
| Settlement of stock options |
|
|
|
(15) |
|
|
(5) |
|
|
(19) |
|
|
(30) |
| Issues of debt |
|
|
|
23 |
|
|
1 |
|
|
218 |
|
|
10 |
| Issue of Common Shares |
|
|
|
2 |
|
|
7 |
|
|
5 |
|
|
58 |
| Repurchase of Common Shares |
|
|
|
(21) |
|
|
(197) |
|
|
(21) |
|
|
(285) |
| Contribution to subsidiaries by non-controlling
interests |
|
|
|
— |
|
|
1 |
|
|
— |
|
|
9 |
| Dividends paid |
|
|
|
(62) |
|
|
(58) |
|
|
(189) |
|
|
(177) |
| Cash used for financing activities |
|
|
|
(63) |
|
|
(188) |
|
|
(156) |
|
|
(331) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash and cash
equivalents |
|
|
|
25 |
|
|
(86) |
|
|
24 |
|
|
(26) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net increase (decrease) in cash and cash
equivalents during the period |
|
|
|
54 |
|
|
(417) |
|
|
122 |
|
|
(554) |
| Cash and cash equivalents, beginning of
period |
|
|
|
1,393 |
|
|
1,744 |
|
|
1,325 |
|
|
1,881 |
| Cash and cash equivalents, end of
period |
|
|
$ |
1,447 |
|
$ |
1,327 |
|
$ |
1,447 |
|
$ |
1,327 |
| See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
| |
Note |
|
|
As at
September 30,
2012 |
|
|
As at
December 31,
2011 |
| ASSETS |
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
| Cash and cash equivalents |
4 |
|
$ |
1,447 |
|
$ |
1,325 |
| Accounts receivable |
|
|
|
5,170 |
|
|
4,398 |
| Inventories |
6 |
|
|
2,501 |
|
|
2,045 |
| Deferred tax assets |
|
|
|
114 |
|
|
206 |
| Prepaid expenses and other |
|
|
|
201 |
|
|
172 |
| |
|
|
|
9,433 |
|
|
8,146 |
| |
|
|
|
|
|
|
|
| Investments |
14 |
|
|
409 |
|
|
438 |
| Fixed assets, net |
|
|
|
4,747 |
|
|
4,236 |
| Goodwill |
|
|
|
1,232 |
|
|
1,196 |
| Deferred tax assets |
|
|
|
124 |
|
|
69 |
| Other assets |
7 |
|
|
728 |
|
|
594 |
| |
|
|
$ |
16,673 |
|
$ |
14,679 |
| |
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
| Bank indebtedness |
|
|
$ |
151 |
|
$ |
162 |
| Accounts payable |
|
|
|
4,361 |
|
|
3,961 |
| Accrued salaries and wages |
|
|
|
623 |
|
|
525 |
| Other accrued liabilities |
8 |
|
|
1,230 |
|
|
1,002 |
| Income taxes payable |
|
|
|
29 |
|
|
5 |
| Deferred tax liabilities |
|
|
|
59 |
|
|
44 |
| Long‑term debt due within one year |
|
|
|
148 |
|
|
25 |
| |
|
|
|
6,601 |
|
|
5,724 |
| |
|
|
|
|
|
|
|
| Long-term employee benefit liabilities |
9 |
|
|
432 |
|
|
419 |
| Long‑term debt |
|
|
|
110 |
|
|
46 |
| Other long‑term liabilities |
10 |
|
|
211 |
|
|
207 |
| Deferred tax liabilities |
|
|
|
130 |
|
|
81 |
| |
|
|
|
7,484 |
|
|
6,477 |
| |
|
|
|
|
|
|
|
| Shareholders' equity |
|
|
|
|
|
|
|
| Capital stock |
|
|
|
|
|
|
|
| |
Common Shares |
|
|
|
|
|
|
|
| |
[issued: 233,228,126; December 31, 2011 - 233,317,792] |
|
|
|
4,381 |
|
|
4,373 |
| Contributed surplus |
|
|
|
74 |
|
|
63 |
| Retained earnings |
|
|
|
4,187 |
|
|
3,317 |
| Accumulated other comprehensive income |
13 |
|
|
519 |
|
|
422 |
| |
|
|
|
9,161 |
|
|
8,175 |
| |
|
|
|
|
|
|
|
| Non-controlling interests |
|
|
|
28 |
|
|
27 |
| |
|
|
|
9,189 |
|
|
8,202 |
| |
|
|
$ |
16,673 |
|
$ |
14,679 |
| |
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[Unaudited]
[U.S. dollars in millions]
| |
|
|
|
Common
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Note |
|
|
Number |
|
Stated
Value |
|
Contri-
buted
Surplus |
|
Retained
Earnings |
|
AOCI (i) |
|
Non-
controlling
interest |
|
Total
Equity |
| |
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31,
2011 |
|
|
|
233.3 |
|
$ |
4,373 |
|
$ |
63 |
|
$ |
3,317 |
|
$ |
422 |
|
$ |
27 |
|
$ |
8,202 |
| Net income |
|
|
|
|
|
|
|
|
|
|
|
|
1,082 |
|
|
|
|
|
(6) |
|
|
1,076 |
| Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99 |
|
|
|
|
|
99 |
| Divestiture of subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
7 |
| Shares issued on exercise of stock options |
|
|
|
0.2 |
|
|
8 |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
5 |
| Repurchase and cancellation under normal course
issuer bid |
|
|
|
(0.4) |
|
|
(9) |
|
|
|
|
|
(10) |
|
|
(2) |
|
|
|
|
|
(21) |
| Release of restricted stock |
|
|
|
|
|
|
5 |
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
-- |
| Stock-based compensation expense |
11 |
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
26 |
| Settlement of stock options |
11 |
|
|
|
|
|
|
|
|
(7) |
|
|
(9) |
|
|
|
|
|
|
|
|
(16) |
| Dividends paid |
|
|
|
0.1 |
|
|
4 |
|
|
|
|
|
(193) |
|
|
|
|
|
|
|
|
(189) |
| Balance, September 30,
2012 |
|
|
|
233.2 |
|
$ |
4,381 |
|
$ |
74 |
|
$ |
4,187 |
|
$ |
519 |
|
$ |
28 |
|
$ |
9,189 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Common
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Note |
|
|
Number |
|
Stated
Value |
|
Contri-
buted
Surplus |
|
Retained
Earnings |
|
AOCI
(i) |
|
Non-
controlling
interest |
|
Total
Equity |
| |
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2010 |
|
|
|
242.6 |
|
$ |
4,500 |
|
$ |
56 |
|
$ |
2,715 |
|
$ |
752 |
|
$ |
3 |
|
$ |
8,026 |
| Net income |
|
|
|
|
|
|
|
|
|
|
|
|
706 |
|
|
|
|
|
(2) |
|
|
704 |
| Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(184) |
|
|
(1) |
|
|
(185) |
| Contributions to subsidiaries by
non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
9 |
| Acquisition of subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
5 |
| Shares issued on exercise of stock options |
|
|
|
1.4 |
|
|
69 |
|
|
(11) |
|
|
|
|
|
|
|
|
|
|
|
58 |
| Release of restricted stock |
|
|
|
|
|
|
5 |
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
-- |
| Repurchase and cancellation
under normal course issuer bid |
|
|
|
(7.2) |
|
|
(136) |
|
|
|
|
|
(119) |
|
|
(30) |
|
|
|
|
|
(285) |
| Stock-based compensation
expense |
11 |
|
|
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
29 |
| Settlement of stock options |
11 |
|
|
|
|
|
|
|
|
(8) |
|
|
(16) |
|
|
|
|
|
|
|
|
(24) |
| Dividends paid |
|
|
|
|
|
|
2 |
|
|
|
|
|
(179) |
|
|
|
|
|
|
|
|
(177) |
| Balance, September 30, 2011 |
|
|
|
236.8 |
|
$ |
4,440 |
|
$ |
61 |
|
$ |
3,107 |
|
$ |
538 |
|
$ |
14 |
|
$ |
8,160 |
| (i) AOCI is
Accumulated Other Comprehensive Income. |
| See accompanying notes |
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
[Unaudited]
[All amounts in U.S. dollars and all tabular amounts in millions
unless otherwise noted]
1. SIGNIFICANT ACCOUNTING POLICIES
[a] Basis of Presentation
The unaudited interim consolidated financial
statements of Magna International Inc. and its subsidiaries
[collectively "Magna" or the "Company"] have been prepared in
United States dollars following
United States generally accepted
accounting principles ["GAAP"] as further discussed in note 1[b]
and the accounting policies as set out in note 1 to the annual
consolidated financial statements for the year ended December 31, 2011.
The unaudited interim consolidated financial
statements do not conform in all respects to the requirements of
GAAP for annual financial statements. Accordingly, these unaudited
interim consolidated financial statements should be read in
conjunction with the December 31,
2011 audited consolidated financial statements and notes
included in the Company's 2011 Annual Report.
In the opinion of management, the unaudited
interim consolidated financial statements reflect all adjustments,
which consist only of normal and recurring adjustments, necessary
to present fairly the financial position at September 30, 2012 and the results of operations,
changes in equity and cash flows for the three-month and nine-month
periods ended September 30, 2012 and
2011.
[b] Accounting Changes
Comprehensive Income
During 2011, the Financial Accounting Standards
Board ["FASB"] issued Accounting Standards Update ["ASU"] 2011-05
and ASU 2011-12, "Comprehensive Income (Topic 220)", requiring
entities to present net income and other comprehensive income in
either a single continuous statement or in two consecutive
statements of net income and other comprehensive income. The
adoption of this ASU did not have a material impact on the interim
consolidated financial statements.
Fair Value Measurement
During 2011, the FASB issued ASU 2011-04, "Fair
Value Measurement (Topic 820)", clarifying the existing measurement
and disclosure requirements and expanding the disclosure
requirements for certain fair value measurements. The adoption of
this ASU did not have a material impact on the interim consolidated
financial statements.
Goodwill
In September 2011,
the FASB issued ASU 2011-08, "Intangibles - Goodwill and Other
(Topic 350): Testing Goodwill for Impairment". ASU 2011-08 provides
an option to perform a qualitative assessment to determine whether
further goodwill impairment testing is necessary. If, as a result
of the qualitative assessment, it is determined that it is
more-likely-than-not that a reporting unit's fair value is less
than its carrying amount, the two-step quantitative impairment test
is required. Otherwise, no further testing is required. ASU 2011-08
is effective for the Company for the year ending December 31, 2012. The adoption of this ASU did
not have a material impact on the interim consolidated financial
statements.
[c] Future Accounting Policies
Intangibles
In July 2012, the
FASB issued ASU 2012-02, "Intangibles - Goodwill and Other (Topic
350): Testing Indefinite-Lived Intangible Assets for Impairment".
ASU 2012-02 provides an option to first perform a qualitative
assessment to determine whether it is more-likely-than-not that an
indefinite-lived intangible asset is impaired. This new standard
will be effective for the Company in the first quarter of 2013. The
adoption of this ASU is not expected to have a material impact on
the interim consolidated financial statements.
[d] Seasonality
The Company's businesses are generally not
seasonal. However, the Company's sales and profits are closely
related to its automotive customers' vehicle production schedules.
The Company's largest North American customers typically halt
production for approximately two weeks in July and one week in
December. Additionally, many of the Company's customers in
Europe typically shutdown vehicle
production during portions of August and one week in December.
2. OTHER (INCOME) EXPENSE, NET
| |
|
|
Nine months ended |
| |
|
|
September 30, |
| |
|
|
|
|
2012 |
|
|
2011 |
| |
|
|
|
|
|
|
|
|
| Third Quarter |
|
|
|
|
|
|
|
|
| |
Re-measurement gain of E-Car |
|
[i] |
|
$ |
(153) |
|
$ |
— |
| |
Loss on disposal of facility |
|
[ii] |
|
|
— |
|
|
113 |
| |
Settlement agreement |
|
[iii] |
|
|
— |
|
|
11 |
| |
|
|
|
|
(153) |
|
|
124 |
| |
|
|
|
|
|
|
|
|
| Second Quarter |
|
|
|
|
|
|
|
|
| |
Gain on disposal of investment |
|
[iv] |
|
|
— |
|
|
(10) |
| |
|
|
|
|
— |
|
|
(10) |
| |
|
|
|
|
|
|
|
|
| First Quarter |
|
|
|
|
|
|
|
|
| |
Write down of real estate |
|
[v] |
|
|
— |
|
|
9 |
| |
|
|
|
|
— |
|
|
9 |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
$ |
(153) |
|
$ |
123 |
For the nine months ended September 30, 2012:
[i] Re-measurement gain of E-Car
On August 31,
2012, the Company acquired the controlling 27% interest in
the Magna E-Car Systems L.P. ["E-Car"] partnership from a company
affiliated with the Stronach Group for cash consideration of
$75 million. The purchase was
reviewed, negotiated and approved by the Company's independent
directors with the benefit of independent legal advice from Fasken
Martineau DuMoulin LLP, independent financial advice from TD
Securities Inc. ["TD"] and an independent valuation prepared by
PricewaterhouseCoopers LLP ["PwC"]. The purchase price represents
the midpoint of the valuation range determined by PwC and TD
delivered a fairness opinion to the independent directors to the
effect that the transaction is fair, from a financial point of
view, to the Company.
Prior to the acquisition, the Company held the
remaining 73% non-controlling interest in E-Car and accounted for
this investment using the equity method of accounting.
The incremental investment in E-Car was
accounted for under the business acquisition method of accounting
as a step acquisition which requires that Magna re-measure its
pre-existing investment in E-Car at fair value and recognize any
gains or losses in income. The estimated fair value of Magna's
partnership interest immediately before the closing date was
$205 million, which resulted in the
recognition of a non-cash gain of $153
million [$125 million after
tax], which is recorded in Other (income) expense, net on the
Consolidated Statements of Income.
For the nine months ended September
30, 2011:
[ii] Loss on disposal of facility
During the third quarter of 2011, the Company
sold an interior systems operation located in Germany and recorded a loss on disposal of
$113 million. This operation, whose
long-lived assets of which were substantially impaired in 2010, had
a history of losses which were projected to continue throughout the
business planning period. Under the terms of the 2011 sale
arrangements [the "SPA"], the Company agreed to fund the buyer
$67 million, to be satisfied with
certain working capital items, cash and the assumption of certain
liabilities. The remaining net assets of the operation of
$26 million were assigned no value by
the buyer and accordingly, were expensed as part of the total loss
on disposal. Simultaneously, the Company reached a commercial
settlement with one of the facility's customers regarding the
cancellation of certain production orders whereby the Company
reimbursed the customer costs of $20
million.
Final settlement of the SPA did not occur during
2011 and in the fourth quarter of 2011 an additional $16 million was accrued in relation to the
ongoing disputes with the purchaser bringing the total loss on
disposal to $129 million.
As more fully described in Note 5, on
June 4, 2012, the Company re-acquired
the above operation.
[iii] Settlement agreement
During the third quarter of 2011, a settlement
agreement was finalized in connection with the settlement of
certain patent infringement and other claims. The Company recorded
an $11 million expense in the third
quarter of 2011 in relation to these arrangements.
[iv] Gain on disposal of investment
During the second quarter of 2011, the Company
sold its 40% non-controlling interest in an equity accounted
investment for proceeds of $151
million [Cdn$147 million] and
recognized a $10 million gain on
disposal.
[v] Write down of real estate
During 2011, five excess corporate real estate
assets were sold to entities associated with the Company's Founder
and Honorary Chairman, Mr. Stronach and/or the Company's former
Co-Chief Executive Officer, Siegfried
Wolf. Based on the appraisals obtained by the Corporate
Governance and Compensation Committee, the appraised fair value
range for the properties was less than their carrying value and,
accordingly, the Company recorded a $9
million impairment charge in the first quarter of 2011. The
sales were approved by the independent members of Magna's Board of
Directors based on the recommendation of the Corporate Governance
and Compensation Committee and were completed during 2011.
3. EARNINGS PER SHARE
| |
|
|
Three months ended |
|
|
Nine months ended |
| |
|
|
September 30, |
|
|
September 30, |
| |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Magna
International Inc. |
|
$ |
390 |
|
$ |
102 |
|
$ |
1,082 |
|
$ |
706 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Average number of Common Shares
outstanding |
|
|
232.5 |
|
|
239.7 |
|
|
232.5 |
|
|
240.9 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per Common Share |
|
$ |
1.68 |
|
$ |
0.43 |
|
$ |
4.65 |
|
$ |
2.93 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net income attributable to Magna
International Inc. |
|
$ |
390 |
|
$ |
102 |
|
$ |
1,082 |
|
$ |
706 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Average number of Common Shares
outstanding |
|
|
232.5 |
|
|
239.7 |
|
|
232.5 |
|
|
240.9 |
| Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Stock options and restricted stock [a] |
|
|
2.6 |
|
|
2.8 |
|
|
2.8 |
|
|
3.8 |
| |
|
|
235.1 |
|
|
242.5 |
|
|
235.3 |
|
|
244.7 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per Common Share |
|
$ |
1.66 |
|
$ |
0.42 |
|
$ |
4.60 |
|
$ |
2.89 |
[a] For the three and nine months ended September 30, 2012, diluted earnings per Common
Share exclude 2.6 million [2011 - 2.7 million] and 2.3 million
[2011 - 1.8 million] Common Shares issuable under the Company's
Incentive Stock Option Plan because these options were not
"in-the-money".
4. DETAILS OF CASH FROM OPERATING ACTIVITIES
[a] Cash and cash equivalents:
| |
|
|
September 30, |
|
|
December 31, |
| |
|
|
2012 |
|
|
2011 |
| Bank term deposits, bankers' acceptances and
government paper |
|
$ |
1,191 |
|
$ |
968 |
| Cash |
|
|
256 |
|
|
357 |
| |
|
$ |
1,447 |
|
$ |
1,325 |
[b] Items not involving current cash
flows:
| |
|
|
Three months ended |
|
|
Nine months ended |
| |
|
|
September 30, |
|
|
September 30, |
| |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
| Depreciation and amortization |
|
$ |
203 |
|
$ |
170 |
|
$ |
558 |
|
$ |
507 |
| Other non-cash charges |
|
|
39 |
|
|
30 |
|
|
106 |
|
|
88 |
| Deferred income taxes |
|
|
35 |
|
|
(11) |
|
|
58 |
|
|
(6) |
| Amortization of other assets included in cost of goods
sold |
|
|
26 |
|
|
19 |
|
|
82 |
|
|
56 |
| Amortization of employee wage buydown |
|
|
— |
|
|
— |
|
|
— |
|
|
6 |
| Equity income |
|
|
(33) |
|
|
(28) |
|
|
(107) |
|
|
(93) |
| Non-cash portion of Other (income) expense, net |
|
|
(153) |
|
|
113 |
|
|
(153) |
|
|
112 |
| |
|
$ |
117 |
|
$ |
293 |
|
$ |
544 |
|
$ |
670 |
[c] Changes in non-cash operating assets and
liabilities:
| |
|
|
Three months ended |
|
|
Nine months ended |
| |
|
|
September 30, |
|
|
September 30, |
| |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
| Accounts receivable |
|
$ |
69 |
|
$ |
(227) |
|
$ |
(626) |
|
$ |
(1,237) |
| Inventories |
|
|
(73) |
|
|
(135) |
|
|
(375) |
|
|
(323) |
| Prepaid expenses and other |
|
|
(22) |
|
|
(14) |
|
|
(4) |
|
|
(21) |
| Accounts payable |
|
|
(85) |
|
|
241 |
|
|
222 |
|
|
513 |
| Accrued salaries and wages |
|
|
49 |
|
|
18 |
|
|
58 |
|
|
84 |
| Other accrued liabilities |
|
|
13 |
|
|
(16) |
|
|
214 |
|
|
120 |
| Income taxes payable |
|
|
(14) |
|
|
(15) |
|
|
27 |
|
|
(57) |
| Deferred revenue |
|
|
— |
|
|
— |
|
|
(3) |
|
|
(5) |
| |
|
$ |
(63) |
|
$ |
(148) |
|
$ |
(487) |
|
$ |
(926) |
5. ACQUISITIONS
For the three months ended March 31, 2012
In January 2012,
the Company acquired BDW technologies group, a structural casting
supplier of aluminium components, which has operations in
Germany, Poland and Hungary. The acquired business has sales
primarily to Volkswagen, Audi, Porsche, Mercedes-Benz, Ferrari and
ZF.
The total consideration for this and other small
acquisitions was $182 million,
consisting of $42 million paid in
cash [net of cash acquired] and $140
million of assumed debt
For the three months ended June 30, 2012
As more fully described in Note 2, during the
third quarter of 2011 the Company sold an interior systems
operation [the "Business"] located in Germany. Subsequent to disposal, the Business
continued to incur significant financial losses. By the end of the
first quarter of 2012, the Business was experiencing severe
liquidity issues. Although the Company had no legal obligation to
do so, in light of customer relationship issues and other relevant
considerations, on June 4, 2012, the
Company re-acquired the Business. This acquisition resulted in
acquired cash of $19 million [net of
$1 million cash paid].
As part of the acquisition, the Company was able
to obtain some pricing concessions from a majority of the Business'
customers. However, the Business is still expected to incur
significant losses over the next three years.
For the three months ended September
30, 2012
As more fully described in Note 2, on
August 31, 2012 the Company acquired
the controlling 27% interest in the E-Car partnership for cash
consideration of $56 million [net of
$19 million cash acquired]. The
incremental investment in E-Car was accounted for under the
business acquisition method of accounting as a step acquisition
which requires that all assets acquired and liabilities assumed are
recorded at fair value. The preliminary purchase equation is as
follows:
| |
|
| Cash |
$ 19 |
| Non-cash working capital |
(32) |
| Property, plant and equipment |
87 |
| Intangible assets |
210 |
| Other assets |
9 |
| Goodwill |
16 |
| Deferred tax liabilities |
(16) |
| Other long-term liabilities |
(2) |
| Non-controlling interests |
(11) |
| Fair value of E-Car net assets |
280 |
| Less: Carrying
value of Magna's equity accounted investment in
E-Car |
(52) |
| Gain on re-measurement |
(153) |
| Consideration paid |
75 |
| Less: Cash acquired |
(19) |
| Net cash outflow |
$ 56 |
The intangible assets are primarily technology
based intangibles. Given the continuing uncertainties regarding the
timing and magnitude of a viable electric vehicle industry,
competing electric vehicle technologies, significantly larger
competitors, and other factors, the Company has determined that the
intangible assets should be amortized on a straight-line basis over
the period ending December 31,
2013.
The purchase price allocations for these
acquisitions are preliminary and adjustments to the allocations may
occur as a result of obtaining more information regarding asset
valuations.
6. INVENTORIES
Inventories consist of:
| |
|
|
September 30, |
|
|
December 31, |
| |
|
|
2012 |
|
|
2011 |
| Raw materials and supplies |
|
$ |
905 |
|
$ |
800 |
| Work-in-process |
|
|
271 |
|
|
229 |
| Finished goods |
|
|
291 |
|
|
253 |
| Tooling and engineering |
|
|
1,034 |
|
|
763 |
| |
|
$ |
2,501 |
|
$ |
2,045 |
Tooling and engineering inventory represents
costs incurred on tooling and engineering services contracts in
excess of billed and unbilled amounts included in accounts
receivable.
7. OTHER ASSETS
Other assets consist of:
| |
|
|
September 30, |
|
|
December 31, |
| |
|
|
2012 |
|
|
2011 |
| Preproduction costs related to
long-term supply agreements with contractual guarantee for
reimbursement |
|
$ |
307 |
|
$ |
301 |
| Long-term receivables |
|
|
95 |
|
|
176 |
| Patents and licences, net |
|
|
22 |
|
|
30 |
| Unrealized gain on cash flow hedges |
|
|
43 |
|
|
15 |
| E-Car intangible [note 5] |
|
|
197 |
|
|
— |
| Other, net |
|
|
64 |
|
|
72 |
| |
|
$ |
728 |
|
$ |
594 |
8. WARRANTY
The following is a continuity of the Company's
warranty accruals:
| |
|
|
2012 |
|
|
2011 |
| Balance, beginning of period |
|
$ |
76 |
|
$ |
68 |
| Expense, net |
|
|
10 |
|
|
10 |
| Settlements |
|
|
(5) |
|
|
(9) |
| Foreign exchange and other |
|
|
2 |
|
|
4 |
| Balance, March 31 |
|
|
83 |
|
|
73 |
| Expense, net |
|
|
9 |
|
|
9 |
| Settlements |
|
|
(7) |
|
|
(12) |
| Foreign exchange and other |
|
|
(1) |
|
|
3 |
| Balance, June 30 |
|
|
84 |
|
|
73 |
| Expense, net |
|
|
4 |
|
|
17 |
| Settlements |
|
|
(10) |
|
|
(5) |
| Foreign exchange and other |
|
|
5 |
|
|
(5) |
| Balance, September 30 |
|
$ |
83 |
|
$ |
80 |
9. LONG-TERM EMPLOYEE BENEFIT LIABILITIES
The Company recorded long-term employee benefit
expenses as follows:
| |
|
|
Three months ended |
|
|
Nine months ended |
| |
|
|
September 30, |
|
|
September 30, |
| |
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
| Defined benefit pension plan and other |
|
$ |
3 |
|
$ |
3 |
|
$ |
8 |
|
$ |
11 |
| Termination and long service
arrangements |
|
|
5 |
|
|
6 |
|
|
20 |
|
|
21 |
| Retirement medical benefit plan |
|
|
1 |
|
|
1 |
|
|
2 |
|
|
1 |
| |
|
$ |
9 |
|
$ |
10 |
|
$ |
30 |
|
$ |
33 |
10. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of:
| |
September
30, |
|
December 31, |
| |
2012 |
|
2011 |
| |
|
|
|
|
|
| Long-term portion of income taxes
payable |
$ |
152 |
|
$ |
119 |
| Asset retirement obligation |
|
38 |
|
|
36 |
| Long-term portion of fair value of hedges |
|
13 |
|
|
41 |
| Deferred revenue |
|
8 |
|
|
11 |
| |
$ |
211 |
|
$ |
207 |
11. STOCK-BASED COMPENSATION
[a] Incentive Stock Option Plan
The following is a continuity schedule of
options outstanding [number of options in the table below are
expressed in whole numbers]:
| |
2012 |
|
2011 |
| |
Options
outstanding |
|
|
|
Options
outstanding |
|
|
| |
|
|
|
|
Number |
|
|
|
|
|
Number |
| |
Number |
|
Exercise |
|
of options |
|
Number |
|
Exercise |
|
of options |
| |
of options |
|
price (i) |
|
exercisable |
|
of options |
|
price (i) |
|
exercisable |
| |
|
|
|
|
|
|
|
|
|
|
|
| Beginning of period |
6,867,367 |
|
31.54 |
|
2,066,700 |
|
11,142,450 |
|
34.22 |
|
3,362,116 |
| Granted |
1,341,500 |
|
48.22 |
|
— |
|
— |
|
— |
|
— |
| Exercised |
(321,454) |
|
25.83 |
|
(321,454) |
|
(1,079,779) |
|
44.94 |
|
(1,079,779) |
| Vested |
— |
|
— |
|
2,366,667 |
|
— |
|
— |
|
2,400,001 |
| March 31 |
7,887,413 |
|
34.61 |
|
4,111,913 |
|
10,062,671 |
|
33.07 |
|
4,682,338 |
| Granted |
47,500 |
|
48.22 |
|
— |
|
— |
|
— |
|
— |
| Exercised (ii) |
(5,000) |
|
32.75 |
|
(5,000) |
|
(1,216,973) |
|
25.72 |
|
(1,216,973) |
| Cancelled |
(46,966) |
|
57.14 |
|
(36,966) |
|
(66,666) |
|
30.00 |
|
— |
| Vested |
— |
|
— |
|
— |
|
— |
|
— |
|
72,000 |
| June 30 |
7,882,947 |
|
34.56 |
|
4,069,947 |
|
8,779,032 |
|
34.11 |
|
3,537,365 |
| Exercised (iii) |
(950,405) |
|
27.46 |
|
(950,405) |
|
(426,501) |
|
25.57 |
|
(426,501) |
| Cancelled |
(6,000) |
|
50.66 |
|
(2,000) |
|
— |
|
— |
|
— |
| Vested |
— |
|
— |
|
— |
|
— |
|
— |
|
2,000 |
| September 30 |
6,926,542 |
|
35.52 |
|
3,117,542 |
|
8,352,531 |
|
34.55 |
|
3,112,864 |
| (i) |
The exercise price noted above represents the weighted
average exercise price in Canadian dollars. |
| |
|
| (ii) |
During the second quarter of 2011, the Company's Honorary
Chairman and Founder, Mr. Stronach exercised 1,083,333 options on a
cashless basis in accordance with the applicable stock option
plans. On exercise, cash payments totalling $25 million were made
to Mr. Stronach which represented the difference between the
aggregate fair market value of the Option Shares based on the
closing price of the Company's Common Shares on the Toronto Stock
Exchange ["TSX"] on the date of exercise and the aggregate Exercise
Price of all such options surrendered. |
| |
|
| (iii) |
During the third quarter of 2012, Mr. Stronach exercised
900,001 options on a cashless basis in accordance with the
applicable stock option plans. On exercise, cash payments totalling
$15 million were made to Mr. Stronach which represented the
difference between the aggregate fair market value of the Option
Shares based on the closing price of the Company's Common Shares on
the TSX on the date of exercise and the aggregate Exercise Price of
all such options surrendered. |
The weighted average assumptions used in
measuring the fair value of stock options granted or modified and
the compensation expense recorded in selling, general and
administrative expenses are as follows:
| |
Nine months
ended |
| |
September 30, |
| |
|
2012 |
|
2011 |
| |
|
|
|
|
| Risk free interest
rate |
|
2.23% |
|
— |
| Expected dividend
yield |
|
2.00% |
|
— |
| Expected
volatility |
|
43% |
|
— |
| Expected time until
exercise |
|
4.5 years |
|
— |
| |
|
|
|
|
| Weighted average fair
value of options |
|
|
|
|
| |
granted or modified in period
[Cdn$] |
$ |
15.37 |
|
— |
[b] Long-term retention program
The following is a continuity of the stock that
has not been released to the executives and is reflected as a
reduction in the stated value of the Company's Common Shares
[number of Common Shares in the table below are expressed in whole
numbers]:
| |
2012 |
|
2011 |
| |
Number |
|
Stated |
|
Number |
|
Stated |
| |
of shares |
|
value |
|
of Shares |
|
value |
| |
|
|
|
|
|
|
|
|
|
| Awarded and not released, beginning of
period |
1,026,304 |
|
$ |
35 |
|
1,182,736 |
|
$ |
40 |
| Release of restricted stock |
(143,316) |
|
|
(5) |
|
(156,432) |
|
|
(5) |
| Awarded and not released, March 31, June 30 and
September 30 |
882,988 |
|
$ |
30 |
|
1,026,304 |
|
$ |
35 |
[c] Restricted stock unit
program
The following is a continuity schedule of
Restricted stock units ["RSUs"] and Independent Director stock
units ["DSUs"] outstanding [number of stock units in the table
below are expressed in whole numbers]:
| |
2012 |
|
2011 |
| |
Equity |
|
Liability |
|
Liability |
|
|
|
Equity |
|
Liability |
|
Liability |
|
|
| |
classified |
|
classified |
|
classified |
|
|
|
classified |
|
classified |
|
classified |
|
|
| |
RSUs |
|
RSUs |
|
DSUs |
|
Total |
|
RSUs |
|
RSUs |
|
DSUs |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, beginning |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
of period |
364,665 |
|
28,765 |
|
205,065 |
|
598,495 |
|
175,405 |
|
34,847 |
|
174,751 |
|
385,003 |
| Granted |
92,762 |
|
15,814 |
|
6,076 |
|
114,652 |
|
— |
|
3,150 |
|
4,955 |
|
8,105 |
| Dividend equivalents |
467 |
|
300 |
|
1,201 |
|
1,968 |
|
439 |
|
197 |
|
882 |
|
1,518 |
| Released |
(8,259) |
|
— |
|
— |
|
(8,259) |
|
(8,259) |
|
— |
|
— |
|
(8,259) |
| Balance, March 31 |
449,635 |
|
44,879 |
|
212,342 |
|
706,856 |
|
167,585 |
|
38,194 |
|
180,588 |
|
386,367 |
| Granted |
95,710 |
|
— |
|
12,754 |
|
108,464 |
|
130,480 |
|
— |
|
4,917 |
|
135,397 |
| Dividend equivalents |
558 |
|
321 |
|
1,522 |
|
2,401 |
|
421 |
|
183 |
|
982 |
|
1,586 |
| Released |
(10,123) |
|
— |
|
— |
|
(10,123) |
|
(9,869) |
|
— |
|
— |
|
(9,869) |
| Balance, June 30 |
535,780 |
|
45,200 |
|
226,618 |
|
807,598 |
|
288,617 |
|
38,377 |
|
186,487 |
|
513,481 |
| Granted |
71,854 |
|
— |
|
10,209 |
|
82,063 |
|
27,913 |
|
— |
|
7,972 |
|
35,885 |
| Dividend equivalents |
438 |
|
276 |
|
1,251 |
|
1,965 |
|
551 |
|
278 |
|
1,266 |
|
2,095 |
| Released |
— |
|
— |
|
(34,124) |
|
(34,124) |
|
— |
|
— |
|
— |
|
— |
| Balance, September 30 |
608,072 |
|
45,476 |
|
203,954 |
|
857,502 |
|
317,081 |
|
38,655 |
|
195,725 |
|
551,461 |
[d] Compensation expense related to stock-based
compensation
Stock-based compensation expense recorded in
selling, general and administrative expenses related to the above
programs is as follows:
| |
|
|
Three months
ended |
|
Nine months
ended |
| |
|
|
September 30, |
|
September 30, |
| |
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive Stock Option Plan |
|
|
$ |
5 |
|
$ |
5 |
|
$ |
14 |
|
$ |
17 |
| Long-term retention |
|
|
|
1 |
|
|
2 |
|
|
3 |
|
|
5 |
| Restricted stock unit |
|
|
|
3 |
|
|
1 |
|
|
11 |
|
|
5 |
| |
|
|
|
9 |
|
|
8 |
|
|
28 |
|
|
27 |
| Fair value adjustment for liability classified
DSUs |
|
|
|
1 |
|
|
(3) |
|
|
3 |
|
|
(2) |
| Total stock-based compensation expense |
|
|
$ |
10 |
|
$ |
5 |
|
$ |
31 |
|
$ |
25 |
12. COMMON SHARES
The following table presents the maximum number
of shares that would be outstanding if all the dilutive instruments
outstanding at November 7, 2012 were
exercised or converted:
| Common Shares |
233,228,126 |
|
| Stock options (i) |
6,926,542 |
|
| |
240,154,668 |
|
| (i) |
Options to purchase Common Shares are exercisable by the
holder in accordance with the vesting provisions and upon payment
of the exercise price as may be determined from time to time
pursuant to the Company's stock option plans.
|
13. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following is a continuity schedule of
accumulated other comprehensive income:
| |
2012 |
|
2011 |
| |
|
|
|
|
|
| Accumulated net
unrealized gain on translation of net investment in foreign
operations |
|
|
|
|
|
| |
Balance, beginning of period |
$ |
547 |
|
$ |
744 |
| |
Net unrealized gain on translation
of net investment in foreign operations |
|
98 |
|
|
235 |
| |
Repurchase of shares under normal
course issuer bid |
|
— |
|
|
(9) |
| |
Balance, March 31 |
|
645 |
|
|
970 |
| |
Net unrealized (loss) gain on translation of net
investment in foreign operations |
|
(194) |
|
|
71 |
| |
Balance, June 30 |
|
451 |
|
|
1,041 |
| |
Net unrealized gain (loss) on
translation of net investment in foreign operations |
|
128 |
|
|
(415) |
| |
Repurchase of shares under normal course issuer
bid |
|
(2) |
|
|
(21) |
| |
Balance, September 30 |
|
577 |
|
|
605 |
| |
|
|
|
|
|
| Accumulated net
unrealized (loss) gain on cash flow hedges (i) |
|
|
|
|
|
| |
Balance, beginning of
period |
|
(23) |
|
|
55 |
| |
Net unrealized gain on cash flow
hedges |
|
51 |
|
|
25 |
| |
Reclassification of net loss (gain) on cash flow
hedges to net income |
|
3 |
|
|
(7) |
| |
Balance, March 31 |
|
31 |
|
|
73 |
| |
Net unrealized (loss) gain on cash flow
hedges |
|
(14) |
|
|
5 |
| |
Reclassification of net gain on cash flow hedges
to net income |
|
(8) |
|
|
(11) |
| |
Balance, June 30 |
|
9 |
|
|
67 |
| |
Net unrealized gain (loss) on cash flow
hedges |
|
39 |
|
|
(69) |
| |
Reclassification of net gain on
cash flow hedges to net income |
|
(2) |
|
|
(10) |
| |
Balance, September 30 |
|
46 |
|
|
(12) |
| |
|
|
|
|
|
| Accumulated net
unrealized gain on available-for-sale investments |
|
|
|
|
|
| |
Balance, beginning of
period |
|
5 |
|
|
11 |
| |
Net unrealized loss on
investments |
|
(3) |
|
|
(3) |
| |
Balance, March 31 |
|
2 |
|
|
8 |
| |
Net unrealized loss on
investments |
|
(1) |
|
|
— |
| |
Balance, June 30 |
|
1 |
|
|
8 |
| |
Net unrealized gain (loss) on
investments |
|
2 |
|
|
(6) |
| |
Balance, September 30 |
|
3 |
|
|
2 |
| |
|
|
|
|
|
| Accumulated net
unrealized loss on other long-term liabilities (ii) |
|
|
|
|
|
| |
Balance, beginning of
period |
|
(107) |
|
|
(58) |
| |
Net unrealized gain on other long-term
liabilities |
|
— |
|
|
1 |
| |
Balance, March 31 |
|
(107) |
|
|
(57) |
| |
Net unrealized loss on other long-term
liabilities |
|
— |
|
|
— |
| |
Balance, June 30 |
|
(107) |
|
|
(57) |
| |
Net unrealized loss on other long-term
liabilities |
|
— |
|
|
— |
| |
Balance, September 30 |
|
(107) |
|
|
(57) |
| |
|
|
|
|
|
| Total accumulated
other comprehensive income |
$ |
519 |
|
$ |
538 |
| (i) |
The amount of income tax (obligation) benefit that has been
netted in the accumulated net unrealized (loss) gain on cash flow
hedges is as follows: |
| |
2012 |
|
|
2011 |
| |
|
|
|
|
|
|
| Balance, beginning of period |
$ |
12 |
|
|
$ |
(15) |
| Net unrealized gain |
|
(21) |
|
|
|
(8) |
| Reclassifications of net (loss) gain to net
income |
|
(1) |
|
|
|
3 |
| Balance, March 31 |
|
(10) |
|
|
|
(20) |
| Net unrealized loss (gain) |
|
7 |
|
|
|
(4) |
| Reclassifications of net gain to net
income |
|
2 |
|
|
|
3 |
| Balance, June 30 |
|
(1) |
|
|
|
(21) |
| Net unrealized (gain) loss |
|
(14) |
|
|
|
26 |
| Reclassifications of net gain to net
income |
|
1 |
|
|
|
4 |
| Balance, September 30 |
$ |
(14) |
|
|
$ |
9 |
| (ii) |
The amount of income tax benefit that has been netted in the
accumulated net unrealized loss on other long-term liabilities is
as follows: |
| |
|
|
2012 |
|
|
|
2011 |
| |
|
|
|
|
|
|
|
| Balance, beginning of period |
|
$ |
24 |
|
|
$ |
1 |
| Net unrealized loss |
|
|
— |
|
|
|
1 |
| Balance, March 31 |
|
|
24 |
|
|
|
2 |
| Reclassification of net gain to net
income |
|
|
1 |
|
|
|
— |
| Balance, June 30 |
|
|
25 |
|
|
|
2 |
| Reclassification of net gain to net
income |
|
|
— |
|
|
|
— |
| Balance, September 30 |
|
$ |
25 |
|
|
$ |
2 |
The amount of other comprehensive income that is
expected to be reclassified to net income over the next 12 months
is $19 million [net of income
taxes of $7 million].
14. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and
financial liabilities consist of the following:
| |
|
September 30, |
|
December 31, |
| |
|
2012 |
|
2011 |
| |
|
|
|
|
|
|
| Held for trading |
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
$ |
1,447 |
|
$ |
1,325 |
| |
Investment in asset-backed commercial paper |
|
|
89 |
|
|
82 |
| |
|
$ |
1,536 |
|
$ |
1,407 |
| |
|
|
|
|
|
|
| Held to maturity investments |
|
|
|
|
|
|
| |
Severance investments |
|
$ |
4 |
|
$ |
5 |
| |
|
|
|
|
|
|
| Available-for-sale |
|
|
|
|
|
|
| |
Equity investments |
|
$ |
10 |
|
$ |
12 |
| |
|
|
|
|
|
|
| Loans and receivables |
|
|
|
|
|
|
| |
Accounts receivable |
|
$ |
5,170 |
|
$ |
4,398 |
| |
Long-term receivables included in other
assets |
|
|
95 |
|
|
176 |
| |
|
$ |
5,265 |
|
$ |
4,574 |
| |
|
|
|
|
|
|
| Other financial liabilities |
|
|
|
|
|
|
| |
Bank indebtedness |
|
$ |
151 |
|
$ |
162 |
| |
Long-term debt [including portion due within one year] |
|
|
258 |
|
|
71 |
| |
Accounts payable |
|
|
4,361 |
|
|
3,961 |
| |
|
$ |
4,770 |
|
$ |
4,194 |
| |
|
|
|
|
|
|
| Derivatives designated as effective
hedges, measured at fair value |
|
|
|
|
|
|
| |
Foreign currency contracts |
|
|
|
|
|
|
| |
Prepaid expenses |
|
$ |
44 |
|
$ |
21 |
| |
Other assets |
|
|
43 |
|
|
15 |
| |
Other accrued liabilities |
|
|
(12) |
|
|
(31) |
| |
Other long-term liabilities |
|
|
(11) |
|
|
(38) |
| |
|
|
|
64 |
|
|
(33) |
| |
Commodity contracts |
|
|
|
|
|
|
| |
Other accrued liabilities |
|
|
(6) |
|
|
(6) |
| |
Other long-term liabilities |
|
|
(2) |
|
|
(3) |
| |
|
|
(8) |
|
|
(9) |
| |
|
$ |
56 |
|
$ |
(42) |
| |
|
|
|
|
|
|
[b] Fair value
The Company determined the estimated fair values
of its financial instruments based on valuation methodologies it
believes are appropriate; however, considerable judgment is
required to develop these estimates. Accordingly, these estimated
fair values are not necessarily indicative of the amounts the
Company could realize in a current market exchange. The estimated
fair value amounts can be materially affected by the use of
different assumptions or methodologies. The methods and assumptions
used to estimate the fair value of financial instruments are
described below:
Cash and cash equivalents, accounts
receivable, bank indebtedness and accounts payable.
Due to the short period to maturity of the
instruments, the carrying values as presented in the interim
consolidated balance sheets are reasonable estimates of fair
values.
Investments
At September 30,
2012, the Company held Canadian third party asset-backed
commercial paper ["ABCP"] with a face value of Cdn$107 million [December
31, 2011 - Cdn$125 million]. The carrying value and
estimated fair value of this investment was Cdn$88 million [December
31, 2011 - Cdn$84 million]. As fair value information is not
readily determinable for the Company's investment in ABCP, the fair
value was based on a valuation technique estimating the fair value
from the perspective of a market participant.
At September 30,
2012, the Company held available-for-sale investments in
publicly traded companies. The carrying value and fair value of
these investments was $10 million,
which was based on the closing share price of the investments on
September 30, 2012.
Term debt
The Company's term debt includes $148 million due within one year. Due to the
short period to maturity of this debt, the carrying value as
presented in the interim consolidated balance sheets is a
reasonable estimate of its fair value.
[c] Credit risk
The Company's financial assets that are exposed
to credit risk consist primarily of cash and cash equivalents,
accounts receivable, held to maturity investments, and foreign
exchange forward contracts with positive fair values.
The Company's held for trading investments
include an investment in ABCP. Given the continuing uncertainties
regarding the value of the underlying assets, the amount and timing
over cash flows and the risk of collateral calls in the event that
spreads widened considerably, the Company could be exposed to
further losses on its investment.
Cash and cash equivalents, which consists of
short-term investments, are only invested in governments, bank term
deposits and bank commercial paper with an investment grade credit
rating. Credit risk is further reduced by limiting the amount which
is invested in certain governments or any major financial
institution.
The Company is also exposed to credit risk from
the potential default by any of its counterparties on its foreign
exchange forward contracts. The Company mitigates this credit risk
by dealing with counterparties who are major financial institutions
that the Company anticipates will satisfy their obligations under
the contracts.
In the normal course of business, the Company is
exposed to credit risk from its customers, substantially all of
which are in the automotive industry and are subject to credit
risks associated with the automotive industry. For the three and
nine-month periods ended September 30,
2012, sales to the Company's six largest customers
represented 84% and 83% of the Company's total sales, respectively,
and substantially all of the Company's sales are to customers in
which it has ongoing contractual relationships.
[d] Interest rate risk
The Company is not exposed to significant
interest rate risk due to the short-term maturity of its monetary
current assets and current liabilities. In particular, the amount
of interest income earned on the Company's cash and cash
equivalents is impacted more by the investment decisions made and
the demands to have available cash on hand, than by movements in
the interest rates over a given period.
In addition, the Company is not exposed to
interest rate risk on its term debt instruments as the interest
rates on these instruments are fixed.
[e] Currency risk and foreign exchange
contracts
The Company operates globally, which gives rise
to a risk that its earnings and cash flows may be adversely
impacted by fluctuations in foreign exchange rates. The Company is
exposed to fluctuations in foreign exchange rates when
manufacturing facilities have committed to the delivery of products
for which the selling price has been quoted in currencies other
than the facilities' functional currency, or when materials and
equipment are purchased in currencies other than the facilities'
functional currency.
In an effort to manage this net foreign exchange
exposure, the Company uses foreign exchange forward contracts for
the sole purpose of hedging certain of the Company's future
committed Canadian dollar, U.S. dollar and euro outflows and
inflows. All derivative instruments, including foreign exchange
contracts, are recorded on the interim consolidated balance sheet
at fair value. To the extent that cash flow hedges are effective,
the change in their fair value is recorded in other comprehensive
income; any ineffective portion is recorded in net income. Amounts
accumulated in other comprehensive income are reclassified to net
income in the period in which the hedged item affects net
income.
At September 30,
2012, the Company had outstanding foreign exchange forward
contracts representing commitments to buy and sell various foreign
currencies. Significant commitments are as follows:
| |
|
|
Buys |
|
Sells |
| |
|
|
|
|
|
| For Canadian dollars |
|
|
|
|
|
| |
U.S. amount |
|
|
254 |
|
759 |
| |
euro amount |
|
|
49 |
|
7 |
| |
|
|
|
|
|
| For U.S. dollars |
|
|
|
|
|
| |
Peso amount |
|
|
4,975 |
|
145 |
| |
|
|
|
|
|
| For euros |
|
|
|
|
|
| |
U.S. amount |
|
|
67 |
|
169 |
| |
GBP amount |
|
|
111 |
|
21 |
| |
Czech Koruna amount |
|
|
3,541 |
|
25 |
| |
Polish Zlotys amount |
|
|
138 |
|
6 |
Forward contracts mature at various dates
through 2016. Foreign currency exposures are reviewed
quarterly.
As a result of the hedging programs employed,
foreign currency transactions in any given period may not be fully
impacted by movements in exchange rates. As at September 30, 2012, the net foreign exchange
exposure was not material.
15. CONTINGENCIES
[a] In the ordinary course of business
activities, the Company may be contingently liable for litigation
and claims with customers, suppliers, former employees and other
parties. In addition, the Company may be, or could become, liable
to incur environmental remediation costs to bring environmental
contamination levels back within acceptable legal limits. On an
ongoing basis, the Company assesses the likelihood of any adverse
judgments or outcomes to these matters as well as potential ranges
of probable costs and losses.
A determination of the provision required, if
any, for these contingencies is made after analysis of each
individual issue. The required provision may change in the future
due to new developments in each matter or changes in approach such
as a change in settlement strategy in dealing with these
matters.
In November 1997,
the Company and two of its subsidiaries were sued by KS Centoco
Ltd., an Ontario-based steering
wheel manufacturer in which the Company has a 23% equity interest,
and by Centoco Holdings Limited, the owner of the remaining 77%
equity interest in KS Centoco Ltd. In March
1999, the plaintiffs were granted leave to make substantial
amendments to the original statement of claim in order to add
several new defendants and claim additional remedies, and in
February 2006, the plaintiffs further
amended their claim to add an additional remedy. The amended
statement of claim alleges, among other things:
- breach of fiduciary duty by the Company and two of its
subsidiaries;
- breach by the Company of its binding letter of intent with KS
Centoco Ltd., including its covenant not to have any interest,
directly or indirectly, in any entity that carries on the airbag
business in North America, other
than through MST Automotive Inc., a company to be 77% owned by
Magna and 23% owned by Centoco Holdings Limited;
- the plaintiff's exclusive entitlement to certain airbag
technologies in North America
pursuant to an exclusive licence agreement, together with an
accounting of all revenues and profits resulting from the alleged
use by the Company, TRW Inc. ["TRW"] and other unrelated third
party automotive supplier defendants of such technology in
North America;
- a conspiracy by the Company, TRW and others to deprive KS
Centoco Ltd. of the benefits of such airbag technology in
North America and to cause Centoco
Holdings Limited to sell to TRW its interest in KS Centoco Ltd. in
conjunction with the Company's sale to TRW of its interest in MST
Automotive GmbH and TEMIC Bayern-Chemie Airbag GmbH; and
- oppression by the defendants.
The plaintiffs are seeking, amongst other
things, damages of approximately Cdn$3.5
billion. Document production, completion of undertakings and
examinations for discovery are substantially complete, although
limited additional examinations for discovery may occur. A trial is
not expected to commence until mid-2014, at the earliest. The
Company believes it has valid defences to the plaintiffs' claims
and therefore intends to continue to vigorously defend this case.
At this time, notwithstanding the amount of time which has
transpired since the claim was filed, these legal proceedings
remain at an early stage and, accordingly, it is not possible to
predict their outcome.
[b] During the fourth quarter of 2011, the
Company announced that it is cooperating with the United States
Department of Justice ["DOJ"] with respect to an ongoing antitrust
investigation of the automobile tooling industry. The scope of the
DOJ inquiry subsequently changed to include tooling quotation and
program management practices. The Company's policy is to comply
with all applicable laws and it is fully cooperating with the
DOJ.
[c] A putative class action lawsuit
alleging violations of the United States Securities Exchange Act of
1934 has been filed in the United States District Court, Southern
District of New York, against the
Company, as well as its Chief Executive Officer, Chief Financial
Officer and Founder and Honorary Chairman. Boilermaker-Blacksmith
National Pension Trust ["BBNPT"] was appointed the lead plaintiff
on an uncontested motion. BBNPT has since filed an amended
complaint, with the defendants' response being due on November 30, 2012. The defendants believe the
lawsuit is without merit and therefore intend to vigorously defend
the case. Given the early stages of the legal proceedings, it is
not possible to predict the outcome of the claim.
[d] In certain circumstances, the Company
is at risk for warranty costs including product liability and
recall costs. Due to the nature of the costs, the Company makes its
best estimate of the expected future costs [note 8];
however, the ultimate amount of such costs could be materially
different. The Company continues to experience increased customer
pressure to assume greater warranty responsibility. Currently,
under most customer agreements, the Company only accounts for
existing or probable claims. Under certain complete vehicle
engineering and assembly contracts, the Company records an estimate
of future warranty-related costs based on the terms of the specific
customer agreements, and the specific customer's warranty
experience.
16. SEGMENTED INFORMATION
Given the differences between the regions in
which the Company operates, Magna's operations are segmented on a
geographic basis between North
America, Europe and Rest of
World. Consistent with the above, the Company's internal financial
reporting segments key internal operating performance measures
between North America,
Europe and Rest of World for
purposes of presentation to the chief operating decision maker to
assist in the assessment of operating performance, the allocation
of resources, and the long-term strategic direction and future
global growth of the Company.
The Company's chief operating decision maker
uses Adjusted EBIT as the measure of segment profit or loss, since
management believes Adjusted EBIT is the most appropriate measure
of operational profitability or loss for its reporting segments.
Adjusted EBIT represents income from operations before income
taxes; interest expense (income), net; and other (income) expense,
net.
The accounting policies of each segment are the
same as those set out under "Significant Accounting Policies"
[note 1] and intersegment sales and transfers are accounted
for at fair market value.
As more fully described in Notes 2 and 5, on
August 31, 2012 the Company acquired
the controlling 27% interest in the E-Car partnership. Prior to the
acquisition, the Company held the remaining 73% non-controlling
interest in E-Car and accounted for this investment using the
equity method of accounting. For segment reporting purposes, prior
to the closing date the Company recorded its proportionate share of
the losses of E-Car in the Corporate and Other segment.
Beginning on August 31, 2012, the
consolidated results of E-Car are recorded in the Company's
North America and Europe segments as follows:
| |
For the month
ended |
| |
September 30, |
| |
North |
|
|
|
|
|
|
| |
America |
|
Europe |
|
Total |
| |
|
|
|
|
|
|
|
|
| Total Sales |
$ |
3 |
|
$ |
3 |
|
$ |
6 |
| Adjusted EBIT |
$ |
(17) |
|
$ |
(2) |
|
$ |
(19) |
| Amortization of E-Car Intangibles |
|
|
|
|
|
|
|
|
| |
included in Adjusted EBIT [note
5] |
$ |
(13) |
|
$ |
— |
|
$ |
(13) |
The following tables show segment information
for the Company's reporting segments and a reconciliation of
Adjusted EBIT to the Company's consolidated income from operations
before income taxes:
| |
|
Three months ended |
|
Three months ended |
| |
|
September 30, 2012 |
|
September
30, 2011 |
| |
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
|
Fixed |
| |
|
Total |
|
External |
|
Adjusted |
|
assets, |
|
Total |
|
External |
|
Adjusted |
|
assets, |
| |
|
sales |
|
sales |
|
EBIT |
|
net |
|
sales |
|
sales |
|
EBIT |
|
net |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Canada |
|
$ |
1,473 |
|
$ |
1,373 |
|
|
|
|
$ |
614 |
|
$ |
1,438 |
|
$ |
1,330 |
|
|
|
|
$ |
554 |
| |
United States |
|
|
1,789 |
|
|
1,683 |
|
|
|
|
|
884 |
|
|
1,722 |
|
|
1,607 |
|
|
|
|
|
727 |
| |
Mexico |
|
|
962 |
|
|
897 |
|
|
|
|
|
543 |
|
|
730 |
|
|
679 |
|
|
|
|
|
431 |
| |
Eliminations |
|
|
(249) |
|
|
— |
|
|
|
|
|
— |
|
|
(249) |
|
|
— |
|
|
|
|
|
— |
| |
|
|
3,975 |
|
|
3,953 |
|
|
$ 328 |
|
|
2,041 |
|
|
3,641 |
|
|
3,616 |
|
$ |
300 |
|
|
1,712 |
| Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Western Europe
excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Great Britain |
|
|
2,391 |
|
|
2,361 |
|
|
|
|
|
1,243 |
|
|
2,393 |
|
|
2,353 |
|
|
|
|
|
1,097 |
| |
Great Britain |
|
|
189 |
|
|
187 |
|
|
|
|
|
57 |
|
|
231 |
|
|
230 |
|
|
|
|
|
54 |
| |
Eastern Europe |
|
|
399 |
|
|
363 |
|
|
|
|
|
545 |
|
|
396 |
|
|
367 |
|
|
|
|
|
408 |
| |
Eliminations |
|
|
(33) |
|
|
— |
|
|
|
|
|
— |
|
|
(41) |
|
|
— |
|
|
|
|
|
— |
| |
|
|
2,946 |
|
|
2,911 |
|
|
13 |
|
|
1,845 |
|
|
2,979 |
|
|
2,950 |
|
|
(35) |
|
|
1,559 |
| Rest of World |
|
|
567 |
|
|
542 |
|
|
5 |
|
|
610 |
|
|
407 |
|
|
392 |
|
|
14 |
|
|
309 |
| Corporate and Other
(i) |
|
|
(77) |
|
|
5 |
|
|
6 |
|
|
251 |
|
|
(57) |
|
|
12 |
|
|
7 |
|
|
319 |
| Total reportable
segments |
|
|
7,411 |
|
|
7,411 |
|
|
352 |
|
|
4,747 |
|
|
6,970 |
|
|
6,970 |
|
|
286 |
|
|
3,899 |
| Other income (expense),
net |
|
|
|
|
|
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
(124) |
|
|
|
| Interest (expense) income, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
net |
|
|
|
|
|
|
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
| |
|
$ |
7,411 |
|
$ |
7,411 |
|
$ |
500 |
|
|
4,747 |
|
$ |
6,970 |
|
$ |
6,970 |
|
$ |
164 |
|
|
3,899 |
| Current
assets |
|
|
|
|
|
|
|
|
|
|
|
9,433 |
|
|
|
|
|
|
|
|
|
|
|
8,384 |
| Investments, goodwill, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
deferred tax assets, and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
other
assets |
|
|
|
|
|
|
|
|
|
|
|
2,493 |
|
|
|
|
|
|
|
|
|
|
|
2,333 |
| Consolidated total
assets |
|
|
|
|
|
|
|
|
|
|
$ |
16,673 |
|
|
|
|
|
|
|
|
|
|
$ |
14,616 |
|
(i) |
Prior to the Company's acquisition
of the 27% controlling interest in E-Car, Corporate and Other
includes the Company's proportionate share of the net loss in E-Car
which was recorded as equity loss. For the two months ended August
31, 2012, the partnership recorded sales of $15 million and an EBIT
loss of $19 million. For the three months ended September 30,
2011, the partnership recorded sales of $26 million and an EBIT
loss of $20 million. |
| |
|
|
Nine months
ended |
|
Nine months ended |
| |
|
|
September 30, 2012 |
|
September
30, 2011 |
| |
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
|
|
|
|
|
Fixed |
| |
|
|
Total |
|
|
External |
|
|
Adjusted |
|
|
assets, |
|
|
Total |
|
|
External |
|
|
Adjusted |
|
|
assets, |
| |
|
|
sales |
|
|
sales |
|
|
EBIT |
|
|
net |
|
|
sales |
|
|
sales |
|
|
EBIT |
|
|
net |
| North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Canada |
|
$ |
4,722 |
|
$ |
4,411 |
|
|
|
|
$ |
614 |
|
$ |
4,510 |
|
$ |
4,203 |
|
|
|
|
$ |
554 |
| |
United States |
|
|
5,616 |
|
|
5,265 |
|
|
|
|
|
884 |
|
|
5,297 |
|
|
4,905 |
|
|
|
|
|
727 |
| |
Mexico |
|
|
2,638 |
|
|
2,467 |
|
|
|
|
|
543 |
|
|
2,162 |
|
|
2,007 |
|
|
|
|
|
431 |
| |
Eliminations |
|
|
(766) |
|
|
— |
|
|
|
|
|
— |
|
|
(789) |
|
|
— |
|
|
|
|
|
— |
| |
|
|
12,210 |
|
|
12,143 |
|
|
$ 1,148 |
|
|
2,041 |
|
|
11,180 |
|
|
11,115 |
|
$ |
1,038 |
|
|
1,712 |
| Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Western Europe excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Great Britain |
|
|
7,436 |
|
|
7,321 |
|
|
|
|
|
1,243 |
|
|
7,569 |
|
|
7,452 |
|
|
|
|
|
1,097 |
| |
Great Britain |
|
|
700 |
|
|
695 |
|
|
|
|
|
57 |
|
|
649 |
|
|
647 |
|
|
|
|
|
54 |
| |
Eastern Europe |
|
|
1,331 |
|
|
1,214 |
|
|
|
|
|
545 |
|
|
1,257 |
|
|
1,167 |
|
|
|
|
|
408 |
| |
Eliminations |
|
|
(131) |
|
|
— |
|
|
|
|
|
— |
|
|
(119) |
|
|
— |
|
|
|
|
|
— |
| |
|
|
9,336 |
|
|
9,230 |
|
|
141 |
|
|
1,845 |
|
|
9,356 |
|
|
9,266 |
|
|
(19) |
|
|
1,559 |
| Rest of World |
|
|
1,489 |
|
|
1,414 |
|
|
(20) |
|
|
610 |
|
|
1,148 |
|
|
1,081 |
|
|
42 |
|
|
309 |
| Corporate and Other
(i) |
|
|
(231) |
|
|
17 |
|
|
2 |
|
|
251 |
|
|
(187) |
|
|
35 |
|
|
(15) |
|
|
319 |
| Total reportable
segments |
|
|
22,804 |
|
|
22,804 |
|
|
1,271 |
|
|
4,747 |
|
|
21,497 |
|
|
21,497 |
|
|
1,046 |
|
|
3,899 |
| Other income
(expense), net |
|
|
|
|
|
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
(123) |
|
|
|
| Interest (expense) income, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
net |
|
|
|
|
|
|
|
|
(15) |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
| |
|
$ |
22,804 |
|
$ |
22,804 |
|
$ |
1,409 |
|
|
4,747 |
|
$ |
21,497 |
|
$ |
21,497 |
|
$ |
926 |
|
|
3,899 |
| Current
assets |
|
|
|
|
|
|
|
|
|
|
|
9,433 |
|
|
|
|
|
|
|
|
|
|
|
8,384 |
| Investments,
goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
deferred tax assets
and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
other
assets |
|
|
|
|
|
|
|
|
|
|
|
2,493 |
|
|
|
|
|
|
|
|
|
|
|
2,333 |
| Consolidated total
assets |
|
|
|
|
|
|
|
|
|
|
$ |
16,673 |
|
|
|
|
|
|
|
|
|
|
$ |
14,616 |
|
(i) |
Prior to the Company's acquisition of the 27% controlling
interest in E-Car, Corporate and Other includes the Company's
proportionate share of the net loss in E-Car which was recorded as
equity loss. For the eight months ended August 31, 2012, the
partnership recorded sales of $67 million and an EBIT loss of $49
million. For the nine months ended September 30, 2011, the
partnership recorded sales of $62 million and an EBIT loss of $73
million.
|
17. SUBSEQUENT EVENTS
[a] Acquisitions
In October 2012,
the Company signed an agreement to acquire ixetic Verwaltungs GmbH,
a manufacturer of automotive vacuum, engine and transmission pumps
with facilities in Germany,
Bulgaria and China, for a purchase price of approximately
$400 million [€308 million].
This transaction is expected to close in the fourth quarter of
2012, subject to obtaining European anti-trust approval.
In addition, the Company, signed an agreement
with a joint venture partner to purchase the remaining 50% interest
in STT Technologies Inc., a supplier of transmission and engine
related oil pumps with facilities in Canada and Mexico. This transaction closed on
October 26, 2012.
[b] Normal Course Issuer Bid
Subject to approval by the TSX and the New York
Stock Exchange ["NYSE"], the Board of Directors approved a normal
course issuer bid to purchase up to 12 million of the Company's
Common Shares, representing approximately 5% of the Company's
public float of Common Shares. The primary purposes of the normal
course issuer bid are purchases for cancellation as well as
purchases to fund the Company's stock-based compensation awards or
programs and/or its obligations to its deferred profit sharing
plans. The normal course issuer bid is expected to commence on or
about November 13, 2012 and will
terminate one year later. All purchases of Common Shares will be
made at the market price at the time of purchase in accordance with
the rules and policies of the TSX. Purchases may also be made on
the NYSE in compliance with Rule 10b-18 under the U.S. Securities
Exchange Act of 1934.
18. COMPARATIVE FIGURES
Certain of the comparative figures have been
reclassified to conform to the current period's method of
presentation.
SOURCE Magna International Inc.