AURORA,ON, May 10, 2013
/PRNewswire/ - Magna International Inc. (TSX: MG; NYSE: MGA)
today reported financial results for the first quarter ended
March 31, 2013.
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THREE
MONTHS ENDED |
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March 31,
2013 |
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March 31,
2012 |
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Sales |
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$ 8,361 |
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$ 7,666 |
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Adjusted EBIT(1) |
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$
467 |
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$ 444 |
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Income from operations before income taxes |
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$ 457 |
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$ 439 |
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Net income attributable to Magna International
Inc. |
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$ 369 |
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$ 343 |
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Diluted earnings per share |
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$ 1.57 |
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$ 1.46 |
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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, net; and other expense, net. |
THREE MONTHS ENDED MARCH 31, 2013
We posted sales of $8.36
billion for the first quarter ended March 31, 2013, an increase of 9% over the first
quarter of 2012. We achieved this sales increase in a period when
vehicle production increased 1% in North
America and decreased 9% in Europe, each relative to the first quarter of
2012. Our North American, European and Rest of World
production sales, as well as tooling, engineering and other sales
all increased in the first quarter of 2013 relative to the
comparable quarter in 2012.
Complete vehicle assembly sales increased 33% to
$798 million for the first quarter of
2013 compared to $599 million
for the first quarter of 2012, while complete vehicle assembly
volumes increased 25% to approximately 37,000 units.
During the first quarter of 2013, income from
operations before income taxes was $457
million, net income attributable to Magna International Inc.
was $369 million and diluted earnings
per share were $1.57, increases of
$18 million, $26 million and $0.11, respectively, each compared to the first
quarter of 2012.
During the first quarter ended March 31, 2013, we generated cash from operations
of $607 million before changes in
non-cash operating assets and liabilities, and invested
$456 million in non-cash operating
assets and liabilities. Total investment activities for the first
quarter of 2013 were $242 million,
including $194 million in fixed
asset additions and $48 million in
investments and other assets.
A more detailed discussion of our consolidated
financial results for the first quarter ended March 31, 2013 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
Yesterday, our Board of Directors declared a
quarterly dividend of $0.32 with
respect to our outstanding Common Shares for the quarter ended
March 31, 2013. This dividend is
payable on June 17, 2013 to
shareholders of record on May 31,
2013.
UPDATED 2013 OUTLOOK
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Light Vehicle Production (Units) |
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North
America |
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15.9 million |
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Europe(1) |
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18.4 million |
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Production Sales |
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North
America |
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$15.7 - $16.1 billion |
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Europe |
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$9.3 - $9.6 billion |
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Rest of
World |
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$2.2 - $2.5
billion |
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Total
Production Sales |
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$27.2 - $28.2 billion |
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Complete Vehicle Assembly Sales |
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$2.8 - $3.1 billion |
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Total Sales |
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$32.6 - $34.0 billion |
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Operating Margin(2)(3) |
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Mid to high 5% range |
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Tax Rate(2) |
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Approximately 24% |
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Capital Spending |
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Approximately $1.4 billion |
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(1) Beginning in the first quarter
of 2013, we disclose total European light vehicle production rather
than
Western European light vehicle production
(2) Excluding other expense,
net
(3) Excluding $158 million
amortization of intangibles related to acquisition of
E-Car |
In this 2013 outlook, in addition to 2013 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
315 manufacturing operations and 87 product development,
engineering and sales centres in 29 countries. Our 121,000
employees are focused on delivering superior value to our customers
through innovative processes and World Class Manufacturing. Our
product capabilities include producing body, chassis, interior,
exterior, seating, powertrain, electronic, vision, closure 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 first quarter results on Friday, May 10, 2013 at 2:00 p.m. EDT. The conference call will be
chaired by Don Walker, Chief
Executive Officer. The number to use for this call is
1-800-728-2056. The number for overseas callers is 1-416-641-6705.
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 Friday afternoon prior to the call.
FORWARD-LOOKING STATEMENTS
The previous discussion contains statements that
constitute "forward-looking statements" or "forward-looking
information" 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
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; implementation of improvement plans in our
underperforming operations, and/or restructuring actions; 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 the recession in Europe, including the potential for a
deterioration of sales of our three largest German-based OEM
customers; inability to sustain or grow our business with OEMs;
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; bankruptcy or insolvency of a
major customer or supplier; a prolonged disruption in the supply of
components to us from our suppliers; scheduled 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;
risks arising due to the failure of a major financial institution;
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, South
America 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; our ability to conduct appropriate
due diligence on acquisition targets; ongoing pricing pressures,
including our ability to offset price concessions demanded by our
customers; warranty and recall costs; risks related to natural
disasters and potential production disruptions; factors that could
cause an increase in our pension funding obligations; legal claims
and/or regulatory actions against us; our ability to understand and
compete successfully in non-automotive businesses in which we
pursue opportunities; 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; inability to achieve future investment returns that
equal or exceed past returns; 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;
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 ended March 31, 2013
included in this press release, and the audited consolidated
financial statements and MD&A for the year ended December 31, 2012 included in our 2012
Annual Report to Shareholders.
This MD&A has been prepared as at
May 9, 2013.
OVERVIEW
We are a leading global automotive supplier with 315
manufacturing operations and 87 product development, engineering
and sales centres in 29 countries. Our 121,000 employees are
focused on delivering superior value to our customers through
innovative processes and World Class Manufacturing. Our product
capabilities include body, chassis, interior, exterior, seating,
powertrain, electronic, vision, closure 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 1% in the
first quarter of 2013, compared to the first quarter of 2012, to
4.0 million units. In Europe,
light vehicle production in the first quarter of 2013 declined 9%
to 4.8 million units.
Our first quarter 2013 total sales increased 9%
over the first quarter of 2012 to an all-time record of
$8.36 billion, as North American,
European and Rest of World production sales, as well as complete
vehicle assembly sales and tooling, engineering and other sales all
increased over the comparable quarter.
Our income from operations before income taxes
increased 4% to $457 million in the
first quarter of 2013, compared to $439
million in the first quarter of 2012. Our diluted earnings
per Common Share increased 8% to $1.57 in the first quarter of 2013, compared to
$1.46 in the first quarter of
2012.
Our North
America segment reported another strong quarter with an
Adjusted EBIT(1) of $381
million, which included $39
million of amortization related to the August 2012 acquisition of Magna E-Car Systems
partnership ("E-Car"). This result compared to Adjusted EBIT of
$405 million in the first quarter of
2012.
We continue to improve our financial performance
in our Europe segment. Despite the
decline in European vehicle production, we generated Adjusted EBIT
of $72 million in the first quarter
of 2013, compared to $63 million in
the first quarter of 2012.
In our Rest of World segment, we reported a
break-even Adjusted EBIT for the first quarter of 2013, compared to
an Adjusted EBIT loss of $9 million
in the first quarter of 2012. Within our Rest of World segment, for
the first quarter of 2013, our Asia
Pacific business generated a profit while our business in
South America recorded a loss.
Both Europe and
South America continue to be areas
of focus for us, and we expect to be able to generate improved
Adjusted EBIT in both regions during 2013 compared to 2012.
Lastly, during the first quarter of 2013, we
repurchased 1.6 million Common Shares for aggregate consideration
of $88 million pursuant to our
outstanding Normal Course issuer bid that expires in November 2013.
_________________________
1 Adjusted EBIT represents income from operations before
income taxes; interest expense, net; and other expense, net
FINANCIAL RESULTS SUMMARY
During the first quarter of 2013, we posted
sales of $8.36 billion, an increase
of 9% over the first quarter of 2012. This higher sales level was a
result of increases in our North American, Rest of World and
European production sales, complete vehicle assembly sales, and
tooling, engineering and other sales. Comparing the first quarters
of 2013 to 2012:
- North American vehicle production increased 1% and our North
American production sales increased 3% to $4.05 billion;
- European vehicle production decreased 9% while our European
production sales increased 5% to $2.45
billion;
- Rest of World production sales increased 26% to $516 million;
- Complete vehicle assembly sales increased 33% to $798 million and complete vehicle assembly
volumes increased 25%; and
- Tooling, engineering and other sales increased by 31% to
$554 million.
During the first quarter of 2013, we earned
income from operations before income taxes of $457 million compared to $439 million for the first quarter of 2012.
Excluding Other Expense recorded in the first quarter of 2013, as
discussed in the "Other Expense" section, the $24 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 first quarter of 2012;
- productivity and efficiency improvements at certain
facilities;
- higher equity income;
- lower costs incurred in preparation for upcoming launches;
- decreased pre-operating costs incurred at new facilities;
- lower restructuring and downsizing costs;
- a $3 million revaluation gain in
respect of asset-backed commercial paper ("ABCP"); and
- lower warranty costs of $1
million.
These factors were partially offset by:
- intangible asset amortization of $39
million related to the acquisition and re-measurement of
E-Car;
- increased commodity costs;
- a larger amount of employee profit sharing;
- the re-acquisition, in the second quarter of 2012, of an
interior systems operation;
- operational inefficiencies and other costs at certain
facilities; and
- net customer price concessions subsequent to the first quarter
of 2012.
During the first quarter of 2013, net income of
$367 million increased $26 million compared to the first quarter of
2012. Net income was impacted by Other Expense, as discussed in the
"Other Expense" section. Other Expense negatively impacted net
income in the first quarter of 2013 by $6
million. Excluding Other Expense, after tax, net income for
the first quarter of 2013 increased $32
million.
During the first quarter of 2013, our diluted
earnings per share increased $0.11 to
$1.57 compared to $1.46 for the first quarter of 2012. Other
Expense, after tax, negatively impacted diluted earnings per share
in the first quarter of 2013 by $0.02, as discussed in the "Other Expense"
section. Excluding Other Expense, after tax, the $0.13 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 first quarter of 2013. 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 first quarter of 2012,
pursuant to our normal course issuer bids and the cashless exercise
of options, partially offset by options granted during or
subsequent to the first quarter of 2012 and an increase in the
number of diluted options outstanding as a result of an increase in
the trading price of our common stock.
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 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
political conditions, consumer confidence levels, interest rates,
credit availability, energy and fuel prices, international
conflicts, labour relations issues, regulatory requirements, trade
agreements, infrastructure, legislative changes, and environmental
emissions and safety standards. 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 reduction pressures from our customers, the financial
condition of our supply base and competition from manufacturers
with operations in low cost countries, are discussed in our Annual
Information Form and Annual Report on Form 40-F, each in respect of
the year ended December 31, 2012, and
remain substantially unchanged in respect of the first quarter
ended March 31, 2013.
RESULTS OF OPERATIONS
Average Foreign Exchange |
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For the three
months |
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ended March 31, |
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2013 |
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2012 |
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Change |
1 Canadian dollar equals U.S.
dollars |
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0.991 |
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0.998 |
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- 1% |
1 euro equals U.S.
dollars |
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1.319 |
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1.310 |
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+ 1% |
1 British pound equals U.S.
dollars |
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1.550 |
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1.571 |
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- 1% |
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 ended March 31, 2013 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, foreign exchange gains and losses on
revaluation and/or settlement of monetary items denominated in a
currency other than an operation's functional currency impact
reported results. These gains and losses are recorded in selling,
general and administrative expense.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED
MARCH 31, 2013
Sales |
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For the three
months |
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ended March 31, |
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2013 |
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2012 |
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Change |
Vehicle Production
Volumes (millions of units) |
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North America |
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4.003 |
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3.970 |
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+ 1% |
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Europe |
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4.794 |
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5.292 |
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- 9% |
Sales |
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External Production |
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North America |
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$ |
4,047 |
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$ |
3,915 |
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+ 3% |
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Europe |
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2,446 |
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2,322 |
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+ 5% |
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Rest of World |
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516 |
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|
408 |
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+ 26% |
|
Complete Vehicle
Assembly |
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|
|
|
798 |
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|
599 |
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+ 33% |
|
Tooling, Engineering and
Other |
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|
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554 |
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422 |
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+ 31% |
Total Sales |
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$ |
8,361 |
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$ |
7,666 |
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+ 9% |
External Production Sales - North America
External production sales in North America increased 3% or $132 million to $4.05
billion for the first quarter of 2013 compared to
$3.92 billion for the first quarter
of 2012. The increase in external production sales is primarily as
a result of:
- the launch of new programs during or subsequent to the first
quarter of 2012, including the:
-
- Ford Fusion and Lincoln MKZ;
- Honda Accord; and
- Ford C-MAX; and
- acquisitions completed during or subsequent to the first
quarter of 2012 which positively impacted sales by $42 million, including STT Technologies
("STT").
These factors were partially offset by:
- lower production volumes on certain existing programs;
- programs that ended production during or subsequent to the
first quarter of 2012, including the:
-
- Jeep Liberty; and
- Mazda 6;
- a decrease in content on certain programs, including the Ford
Escape;
- a decrease in reported U.S. dollar sales primarily as a result
of the weakening of the Canadian dollar against the U.S. dollar;
and
- net customer price concessions subsequent to the first quarter
of 2012.
External Production Sales - Europe
External production sales in Europe increased $124
million to $2.45 billion for
the first quarter of 2013 compared to $2.32
billion for the first quarter of 2012. The increase in
external production sales is primarily as a result of:
- acquisitions completed during or subsequent to the first
quarter of 2012, which positively impacted sales by $164 million, including ixetic Verwaltungs GmbH
("ixetic"), the re-acquisition of an interior systems operation and
BDW technologies group ("BDW");
- the launch of new programs during or subsequent to the first
quarter of 2012, including the:
-
- Ford Transit Custom;
- MINI Paceman;
- Ford Kuga; and
- Skoda Rapid and SEAT Toledo; and
- an increase in reported U.S. dollar sales primarily as a result
of the strengthening of the euro against the U.S. dollar.
These factors were partially offset by:
- lower production volumes on certain existing programs; and
- net customer price concessions subsequent to the first quarter
of 2012.
External Production Sales - Rest of
World
External production sales in Rest of World
increased 26% or $108 million to
$516 million for the first quarter of
2013 compared to $408 million for the
first quarter of 2012, primarily as a result of the launch of new
programs during or subsequent to the first quarter of 2012,
primarily in Brazil and
China.
This factor was partially offset by a
$22 million decrease in reported U.S.
dollar sales as a result of the weakening of foreign currencies
against the U.S. dollar, including the Brazilian real.
Complete Vehicle Assembly
Sales |
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For the three
months |
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ended
March 31, |
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2013 |
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2012 |
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Change |
Complete Vehicle Assembly
Sales |
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$ |
798 |
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$ |
599 |
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+ 33% |
Complete Vehicle Assembly Volumes
(Units) |
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MINI Countryman, MINI Paceman, Mercedes-Benz
G-Class, |
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Peugeot RCZ and Aston Martin Rapide |
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37,439 |
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29,935 |
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+ 25% |
Complete vehicle assembly sales increased 33% or
$199 million to $798 million for the first quarter of 2013
compared to $599 million for the
first quarter of 2012 and assembly volumes increased 25% or 7,504
units.
The increase in complete vehicle assembly sales
is primarily as a result of:
- an increase in assembly volumes for the:
-
- Mercedes-Benz G-Class; and
- MINI Countryman;
- the launch of the MINI Paceman during the fourth quarter of
2012; and
- a $5 million increase in reported
U.S. dollar sales as a result of the strengthening of the euro
against the U.S. dollar.
These factors were partially offset by:
- the end of production of the Aston Martin Rapide at our
Magna Steyr facility during the
second quarter of 2012; and
- a decrease in assembly volumes for the Peugeot RCZ.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
31% or $132 million to $554 million for the first quarter of 2013
compared to $422 million for the
first quarter of 2012.
In the first quarter of 2013, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Jeep Grand Cherokee;
- Chevrolet Suburban, Tahoe, Silverado and Avalanche;
- Qoros 3;
- MINI Countryman;
- Ford Fusion;
- Mercedes-Benz Actros;
- Ford Fiesta;
- Chevrolet Impala;
- GMC Acadia; and
- Ford Transit.
In the first quarter of 2012, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Mercedes-Benz M-Class;
- MINI Countryman;
- Qoros 3;
- Ford Escape;
- Ford Fusion;
- Audi A8; and
- Opel Calibra.
Cost of Goods Sold and Gross
Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
|
|
|
ended March 31, |
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
Sales |
|
|
|
|
|
$ |
8,361 |
|
|
$ |
7,666 |
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
Material |
|
|
|
|
|
|
5,345 |
|
|
|
4,856 |
|
Direct labour |
|
|
|
|
|
|
520 |
|
|
|
510 |
|
Overhead |
|
|
|
|
|
|
1,452 |
|
|
|
1,319 |
|
|
|
|
|
|
|
7,317 |
|
|
|
6,685 |
Gross margin |
|
|
|
|
|
$ |
1,044 |
|
|
$ |
981 |
Gross margin as a percentage of sales |
|
|
|
|
|
|
12.5% |
|
|
|
12.8% |
Cost of goods sold increased $632 million to $7.32
billion for the first quarter of 2013 compared to
$6.69 billion for the first quarter
of 2012 primarily as a result of:
- higher material, overhead and labour costs associated with the
increase in sales, including wage increases at certain
operations;
- $225 million related to
acquisitions completed during or subsequent to the first quarter of
2012, including ixetic, the re-acquisition of an interior systems
operation, STT, BDW and E-Car;
- increased commodity costs; and
- a larger amount of employee profit sharing.
These factors were partially offset by:
- a net decrease in reported U.S. dollar cost of goods sold
primarily due to the weakening of the Brazilian real, Canadian
dollar and British pound, each against the U.S. dollar partially
offset by the strengthening of the euro against the U.S.
dollar;
- lower restructuring and downsizing costs; and
- lower warranty costs of $1
million.
Gross margin increased $63 million to $1.04
billion for the first quarter of 2013 compared to
$0.98 billion for the first quarter
of 2012 and gross margin as a percentage of sales decreased to
12.5% for the first quarter of 2013 compared to 12.8% for the first
quarter of 2012. The decrease in gross margin as a percentage of
sales was substantially due to:
- an increase in complete vehicle assembly sales which have a
higher material content than our consolidated average;
- an increase in tooling, engineering and other sales that have
low or no margins;
- increased commodity costs;
- the re-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 first quarter
of 2012.
These factors were partially offset by:
- lower costs incurred in preparation for upcoming launches;
- the closure of certain facilities;
- decreased pre-operating costs incurred at new facilities;
- lower warranty costs;
- lower restructuring and downsizing costs; and
- productivity and efficiency improvements at certain
facilities
Depreciation and Amortization
Depreciation and amortization costs increased
$84 million to $255 million for the first quarter of 2013
compared to $171 million for the
first quarter of 2012. The higher depreciation and amortization was
primarily as a result of:
- intangible asset amortization of $39
million related to the acquisition and re-measurement of
E-Car;
- $22 million related to
acquisitions completed during or subsequent to the first quarter of
2012, including ixetic, E-Car and BDW;
- depreciation related to new facilities; and
- capital spending during or subsequent to the first quarter of
2012.
Selling, General and Administrative
("SG&A")
SG&A expense as a percentage of sales was
4.4% for the first quarter of 2013 compared to 5.2% for the first
quarter of 2012. SG&A expense decreased $31 million to $367
million for the first quarter of 2013 compared to
$398 million for the first quarter of
2012 primarily as a result of:
- a decrease in reported U.S. dollar SG&A related to foreign
exchange;
- lower restructuring and downsizing costs; and
- a $3 million revaluation gain in
respect of ABCP.
These factors were partially offset by:
- $7 million related to
acquisitions completed during or subsequent to the first quarter of
2012, including E-Car, the re-acquisition of an interior systems
operation and ixetic;
- higher labour, including wage increases at certain operations,
and other costs to support the growth in sales;
- increased costs incurred at new facilities; and
- higher employee profit sharing.
Equity Income
Equity income increased $13 million to $45
million for the first quarter of 2013 compared to
$32 million for the first quarter of
2012. Equity income for the first quarter of 2012 included
$12 million of equity loss related to
our investment in E-Car. Excluding this $12
million equity loss, the $1
million increase in equity income is primarily as a result
of higher income from most of our equity accounted investments.
Other Expense, net
During the first quarter of 2013, we recorded
net restructuring charges of $6
million ($6 million after tax)
in Europe at our exterior and
interior systems operations. We expect full year 2013 restructuring
charges to be approximately $100
million.
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, net; and other expense, net.
|
|
|
|
For the three months ended March 31, |
|
|
|
|
External Sales |
|
|
|
Adjusted EBIT |
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
Change |
|
|
|
2013 |
|
|
|
2012 |
|
|
|
Change |
North America |
|
|
|
$ |
4,288 |
|
|
$ |
4,079 |
|
|
$ |
209 |
|
|
$ |
381 |
|
|
$ |
405 |
|
|
$ |
(24) |
Europe |
|
|
|
|
3,505 |
|
|
|
3,153 |
|
|
|
352 |
|
|
|
72 |
|
|
|
63 |
|
|
|
9 |
Rest of World |
|
|
|
|
565 |
|
|
|
428 |
|
|
|
137 |
|
|
|
— |
|
|
|
(9) |
|
|
|
9 |
Corporate and
Other |
|
|
|
|
3 |
|
|
|
6 |
|
|
|
(3) |
|
|
|
14 |
|
|
|
(15) |
|
|
|
29 |
Total reportable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segments |
|
|
|
$ |
8,361 |
|
|
$ |
7,666 |
|
|
$ |
695 |
|
|
$ |
467 |
|
|
$ |
444 |
|
|
$ |
23 |
Excluded from Adjusted EBIT for the three months
ended March 31, 2013 was the
$6 million net restructuring costs
recorded in our Europe segment, as
discussed in the "Other Expense" section.
North
America
Adjusted EBIT in North
America decreased $24 million
to $381 million for the first quarter
of 2013 compared to $405 million
for the first quarter of 2012 primarily as a result of:
- intangible asset amortization of $39
million related to the acquisition and re-measurement of
E-Car;
- programs that ended production during or subsequent to the
first quarter of 2012;
- operational inefficiencies and other costs at certain
facilities;
- increased commodity costs;
- higher affiliation fees paid to corporate;
- a larger amount of employee profit sharing; and
- net customer price concessions subsequent to the first quarter
of 2012.
These factors were partially offset by:
- margins earned on higher production sales, including margins
earned on the launch of new facilities and new programs;
- lower restructuring and downsizing costs;
- lower costs incurred in preparation for upcoming launches;
- higher equity income;
- decreased pre-operating costs incurred at new facilities;
and
- productivity and efficiency improvements at certain
facilities.
Europe
Adjusted EBIT in Europe increased $9
million to $72 million for the
first quarter of 2013 compared to $63 million for the first quarter of 2012
primarily as a result of:
- lower pre-operating costs incurred at new facilities;
- higher equity income;
- lower costs incurred in preparation for upcoming launches;
- lower warranty costs of $1
million; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- the re-acquisition, in the second quarter of 2012, of an
interior systems operation;
- a larger amount of employee profit sharing;
- higher restructuring and downsizing costs;
- increased commodity costs;
- higher affiliation fees paid to corporate; and
- operational inefficiencies and other costs at certain
facilities.
Rest of World
Rest of World Adjusted EBIT increased
$9 million to $nil for the first
quarter of 2013 compared to a loss of $9
million for the first quarter of 2012 primarily as a result
of:
- margins earned on higher production sales, including margins
earned on the launch of new facilities and new programs;
- productivity and efficiency improvements at certain
facilities;
- lower costs related to new facilities;
- lower restructuring and downsizing costs; and
- lower launch costs.
These factors were partially offset by:
- higher affiliation fees paid to Corporate;
- a larger amount of employee profit sharing;
- lower equity income; and
- net customer price concessions subsequent to the first quarter
of 2012.
Corporate and Other
Corporate and Other Adjusted EBIT increased
$29 million to $14 million for the first quarter of 2013
compared to a loss of $15 million for
the first quarter of 2012. The loss related to our equity accounted
investment in E-Car included in Corporate and Other was
$12 million for the first quarter of
2012. Excluding E-Car, Corporate and Other Adjusted EBIT increased
$17 million to $14 million for the first quarter of 2013
compared to a loss of $3 million for
the first quarter of 2012 primarily as a result of:
- $10 million of cash received
related to the settlement of ABCP between the Investment Industry
Regulatory Organization of Canada
and financial institutions;
- an increase in affiliation fees earned from our divisions;
and
- a $3 million revaluation gain in
respect of ABCP.
These factors were partially offset by lower
equity income.
Interest Expense, net
During the first quarter of 2013, we recorded
net interest expense of $4 million
compared to $5 million for the first
quarter of 2012. The decrease in interest expense is primarily as a
result of higher interest income partially offset by an increase in
interest expense as a result of higher debt in Asia Pacific.
Income from Operations before Income
Taxes
Income from operations before income taxes
increased $18 million to $457 million for the first quarter of 2013
compared to $439 million for the
first quarter of 2012. Excluding Other Expense, discussed in the
"Other Expense" section, income from operations before income taxes
for the first quarter of 2013 increased $24
million. The increase in income from operations before
income taxes is the result of the increase in EBIT and the decrease
in net interest expense, as discussed above.
Income Taxes
The effective income tax rate on income from
operations before income taxes was 19.7% for the first quarter of
2013 compared to 22.3% for the first quarter of 2012. In the first
quarter of 2013, income tax rates were impacted by the items
discussed in the "Other Expense" section. Excluding Other Expense,
after tax, the effective income tax rate decreased to 19.4% for the
first quarter of 2013 compared to 22.3% for the first quarter of
2012 primarily as result of a decrease in our reserve for uncertain
tax positions, resulting mainly from favourable audit settlements
of prior taxation years.
Net Income
Net income of $367
million for the first quarter of 2013 increased $26 million compared to the first quarter of
2012. Excluding Other Expense, after tax, discussed in the "Other
Expense" section, net income increased $32
million. The increase in net income is the result of the
increase in income from operations before income taxes and lower
income taxes, both as discussed above.
Net Loss Attributable to Non-controlling
Interests
Net loss attributable to non-controlling
interests was $2 million for the
first quarters of 2013 and 2012.
Net Income Attributable to Magna
International Inc.
Net income attributable to Magna International
Inc. of $369 million for the first
quarter of 2013 increased $26 million
compared to the first quarter of 2012. Excluding Other Expense,
after tax, discussed in the "Other Expense" section, net income
attributable to Magna International Inc. increased $32 million as a result of the increase in net
income, as discussed above.
Earnings per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
|
|
|
|
|
|
ended March 31, |
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
Change |
Earnings per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
$ |
1.59 |
|
|
$ |
1.47 |
|
|
|
+ 8% |
|
Diluted |
|
|
|
$ |
1.57 |
|
|
$ |
1.46 |
|
|
|
+ 8% |
Average number of
Common Shares outstanding (millions) |
|
Basic |
|
|
|
|
232.5 |
|
|
|
232.4 |
|
|
|
— |
|
Diluted |
|
|
|
|
235.2 |
|
|
|
235.4 |
|
|
|
— |
Diluted earnings per share increased
$0.11 to $1.57 for the first quarter of 2013 compared to
$1.46 for the first quarter of 2012.
Other Expense, after tax, negatively impacted diluted earnings per
share in the first quarter of 2013 by $0.02, as discussed in the "Other Expense"
section. Excluding Other Expense, after tax, the $0.13 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 first quarter of 2013.
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 first
quarter of 2012, pursuant to our normal course issuer bids and the
cashless exercise of options, partially offset by options granted
during or subsequent to the first quarter of 2012 and an increase
in the number of diluted options outstanding as a result of an
increase in the trading price of our common stock.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
|
|
|
|
|
|
ended March 31, |
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
Change |
Net income |
|
|
|
$ |
367 |
|
|
$ |
341 |
|
|
|
|
Items not involving current cash
flows |
|
|
|
|
240 |
|
|
|
190 |
|
|
|
|
|
|
|
|
|
607 |
|
|
|
531 |
|
|
$ |
76 |
Changes in non-cash operating
assets and liabilities |
|
|
|
|
(456) |
|
|
|
(302) |
|
|
|
|
Cash provided from operating
activities |
|
|
|
$ |
151 |
|
|
$ |
229 |
|
|
$ |
(78) |
Cash flow from operations before changes in
non-cash operating assets and liabilities increased $76 million to $607
million for the first quarter of 2013 compared to
$531 million for the first quarter of
2012. The increase in cash flow from operations was due to a
$26 million increase in net income,
as discussed above, and a $50 million
increase in items not involving current cash flows. Items not
involving current cash flows are comprised of the following:
|
|
|
|
|
For the three
months |
|
|
|
|
|
ended
March 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
Depreciation and amortization |
|
|
|
$ |
255 |
|
|
$ |
171 |
Amortization of other assets included in cost of
goods sold |
|
|
|
|
30 |
|
|
|
25 |
Other non-cash
charges |
|
|
|
|
24 |
|
|
|
19 |
Deferred income taxes and non-cash portion of
current taxes |
|
|
|
|
(24) |
|
|
|
7 |
Equity income |
|
|
|
|
(45) |
|
|
|
(32) |
Items not involving current cash
flows |
|
|
|
$ |
240 |
|
|
$ |
190 |
Cash invested in non-cash operating assets and
liabilities amounted to $456 million
for the first quarter of 2013 compared to $302 million for the first quarter of 2012. The
change in non-cash operating assets and liabilities is comprised of
the following sources (and uses) of cash:
|
|
|
|
|
For the three
months |
|
|
|
|
|
ended
March 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
Accounts receivable |
|
|
|
$ |
(974) |
|
|
$ |
(751) |
Inventories |
|
|
|
|
(158) |
|
|
|
(154) |
Prepaid expenses and
other |
|
|
|
|
(27) |
|
|
|
1 |
Accounts payable |
|
|
|
|
328 |
|
|
|
429 |
Accrued salaries and
wages |
|
|
|
|
101 |
|
|
|
73 |
Other accrued
liabilities |
|
|
|
|
315 |
|
|
|
118 |
Income taxes
payable |
|
|
|
|
(42) |
|
|
|
(16) |
Deferred
revenue |
|
|
|
|
1 |
|
|
|
(2) |
Changes in non-cash operating assets and
liabilities |
|
|
|
$ |
(456) |
|
|
$ |
(302) |
The increase in accounts receivable, inventories, accounts payable,
accrued salaries and wages and other accrued liabilities in the
first quarter of 2013 was primarily due to an increase in
production activities at the end of the first quarter of 2013
compared to the end of 2012.
Capital and Investment
Spending
|
|
|
|
|
For the three
months |
|
|
|
|
|
|
|
|
|
ended
March 31, |
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
Change |
Fixed asset additions |
|
|
|
$ |
(194) |
|
|
$ |
(250) |
|
|
|
|
Investments and other assets |
|
|
|
|
(48) |
|
|
|
(34) |
|
|
|
|
Fixed assets, investments and other assets
additions |
|
|
|
|
(242) |
|
|
|
(284) |
|
|
|
|
Purchase of subsidiaries |
|
|
|
|
― |
|
|
|
(42) |
|
|
|
|
Proceeds from disposition |
|
|
|
|
30 |
|
|
|
53 |
|
|
|
|
Cash used for investment activities |
|
|
|
$ |
(212) |
|
|
$ |
(273) |
|
|
$ |
61 |
Fixed assets, investments and other assets additions
In the first quarter of 2013, we invested
$194 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 first quarter of 2013 was
for facilities and manufacturing equipment for programs that will
be launching subsequent to 2012. Consistent with our strategy to
expand in developing markets, approximately 22% (2012 - 26%) of
this investment was in China,
India, Brazil and Russia.
In the first quarter of 2013, we invested
$48 million in other assets related
primarily to fully reimbursable engineering costs and tooling for
programs that launched during the first quarter of 2013 or will be
launching subsequent to the first quarter of 2013.
Purchase of subsidiaries
During the first quarter of 2012, we invested
$42 million to purchase subsidiaries,
including the acquisition of BDW, 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.
Proceeds from disposition
In the first quarter of 2013, the $30 million of proceeds include normal course
fixed and other asset disposals.
Financing
|
|
|
|
|
For the three
months |
|
|
|
|
|
|
|
|
|
ended
March 31, |
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
Change |
(Decrease) increase in bank indebtedness |
|
|
|
$ |
(26) |
|
|
$ |
1 |
|
|
|
|
Repayments of debt |
|
|
|
|
(41) |
|
|
|
(95) |
|
|
|
|
Issues of debt |
|
|
|
|
32 |
|
|
|
114 |
|
|
|
|
Issues of Common Shares on exercise of stock
options |
|
|
|
|
39 |
|
|
|
3 |
|
|
|
|
Settlement of stock options |
|
|
|
|
(23) |
|
|
|
(4) |
|
|
|
|
Repurchase of Common
Shares |
|
|
|
|
(88) |
|
|
|
— |
|
|
|
|
Dividends |
|
|
|
|
(73) |
|
|
|
(63) |
|
|
|
|
Cash used for financing activities |
|
|
|
$ |
(180) |
|
|
$ |
(44) |
|
|
$ |
(136) |
During the first quarter of 2013, our Honorary
Chairman and Founder, Mr. Stronach, exercised 716,666 options on a
cashless basis in accordance with the applicable stock option
plans. On exercise, cash payments totalling $20 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 first quarter of 2013, we repurchased
1.6 million Common Shares for an aggregate purchase price of
$88 million under our normal course
issuer bid.
Cash dividends paid per Common Share were
$0.32 for the first quarter of 2013,
for a total of $73 million.
Financing Resources
|
|
|
|
|
As at |
|
|
|
As at |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
December 31, |
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
Change |
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness |
|
|
|
$ |
33 |
|
|
$ |
71 |
|
|
|
|
|
Long-term debt due within one year |
|
|
|
|
245 |
|
|
|
249 |
|
|
|
|
|
Long-term debt |
|
|
|
|
105 |
|
|
|
112 |
|
|
|
|
|
|
|
|
|
383 |
|
|
|
432 |
|
|
|
|
Non-controlling
interest |
|
|
|
|
27 |
|
|
|
29 |
|
|
|
|
Shareholders'
equity |
|
|
|
|
9,539 |
|
|
|
9,429 |
|
|
|
|
Total capitalization |
|
|
|
$ |
9,949 |
|
|
$ |
9,890 |
|
|
$ |
59 |
Total capitalization increased by $59 million to $9.95
billion at March 31, 2013
compared to $9.89 billion at
December 31, 2012,
primarily as a result of a $110
million increase in shareholders' equity partially offset by
a $49 million decrease in
liabilities.
The increase in shareholders' equity was primarily as a result
of net income earned in the first quarter of 2013.
This factor was partially offset by:
- the $133 million net unrealized
loss on translation of net investment in foreign operations;
- the repurchase of Common Shares in connection with our normal
course issuer bid; and
- dividends paid during the first quarter of 2013.
The decrease in liabilities relates primarily to
a decrease in our bank indebtedness.
Cash Resources
During the first quarter of 2013, our cash
resources decreased by $275 million to $1.25
billion as a result of the cash used for investing and
financing activities and the unfavourable effect of foreign
exchange, partially offset by cash provided from operating
activities, as discussed above. In addition to our cash resources
at March 31, 2013, we had term and
operating lines of credit totalling $2.47
billion of which $2.08 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 May 9, 2013 were
exercised:
Common Shares |
|
|
|
232,914,147 |
Stock options (i) |
|
|
|
5,430,692 |
|
|
|
|
238,344,839 |
|
|
|
|
|
(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
first quarter of 2013 that are outside the ordinary course of our
business. Refer to our MD&A included in our 2012 Annual
Report.
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 14 of our unaudited interim
consolidated financial statements for the three months ended
March 31, 2013, 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, 2012.
CONTROLS AND PROCEDURES
There have been no changes in our internal controls over
financial reporting that occurred during the three months ended
March 31, 2013 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 information" or "forward-looking statements"
within the meaning of applicable securities legislation, including,
but not limited to, statements relating to: expected light vehicle
production and operating performance in North America, Europe and South
America; implementation of improvement plans in our
underperforming operations, and/or restructuring actions, including
but not limited to, Europe and
South America; improved future
results in South America and
Europe; 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 the
recession in Europe, including the
potential for a deterioration of sales of our three largest
German-based OEM customers; inability to sustain or grow our
business with OEMs; 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; bankruptcy or
insolvency of a major customer or supplier; a prolonged disruption
in the supply of components to us from our suppliers; scheduled
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; risks arising due to the failure of a major
financial institution; 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, South America 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; our ability to
conduct appropriate due diligence on acquisition targets; ongoing
pricing pressures, including our ability to offset price
concessions demanded by our customers; warranty and recall costs;
risks related to natural disasters and potential production
disruptions; factors that could cause an increase in our pension
funding obligations; legal claims and/or regulatory actions against
us; our ability to understand and compete successfully in
non-automotive businesses in which we pursue opportunities; 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; inability to
achieve future investment returns that equal or exceed past
returns; 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; 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 |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
Note |
|
|
|
|
2013 |
|
|
|
2012 |
Sales |
|
|
|
|
|
|
|
$ |
8,361 |
|
|
$ |
7,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
|
|
7,317 |
|
|
|
6,685 |
|
Depreciation and
amortization |
|
|
|
|
|
|
|
|
255 |
|
|
|
171 |
|
Selling, general and administrative |
|
|
|
10 |
|
|
|
|
367 |
|
|
|
398 |
|
Interest expense, net |
|
|
|
|
|
|
|
|
4 |
|
|
|
5 |
|
Equity income |
|
|
|
|
|
|
|
|
(45) |
|
|
|
(32) |
|
Other expense, net |
|
|
|
2 |
|
|
|
|
6 |
|
|
|
— |
Income from operations before income
taxes |
|
|
|
|
|
|
|
|
457 |
|
|
|
439 |
Income taxes |
|
|
|
|
|
|
|
|
90 |
|
|
|
98 |
Net
income |
|
|
|
|
|
|
|
|
367 |
|
|
|
341 |
Net loss attributable to
non-controlling interests |
|
|
|
|
|
|
|
|
2 |
|
|
|
2 |
Net income attributable to Magna
International Inc. |
|
|
|
|
|
|
|
$ |
369 |
|
|
$ |
343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Common Share: |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
$ |
1.59 |
|
|
$ |
1.47 |
|
Diluted |
|
|
|
|
|
|
|
$ |
1.57 |
|
|
$ |
1.46 |
Cash dividends paid per Common
Share |
|
|
|
|
|
|
|
$ |
0.320 |
|
|
$ |
0.275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of Common Shares
outstanding during the
period [in millions]: |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
232.5 |
|
|
|
232.4 |
|
Diluted |
|
|
|
|
|
|
|
|
235.2 |
|
|
|
235.4 |
See accompanying
notes |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
|
|
|
|
|
Three months
ended |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
Note |
|
|
|
|
2013 |
|
|
|
2012 |
Net
income |
|
|
|
|
|
|
|
$ |
367 |
|
|
$ |
341 |
Other comprehensive income (loss), net
of tax: |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
Net unrealized (loss) gain on translation of net
investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in foreign operations
|
|
|
|
|
|
|
|
|
(133) |
|
|
|
99 |
|
Net unrealized gain (loss) on available-for-sale
investments |
|
|
|
|
|
|
|
|
1 |
|
|
|
(3) |
|
Net unrealized gain on cash flow
hedges |
|
|
|
|
|
|
|
|
8 |
|
|
|
51 |
|
Reclassification of net (gain) loss on cash flow
hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to net income |
|
|
|
|
|
|
|
|
(6) |
|
|
|
3 |
|
Reclassification of net loss on pensions to net
income |
|
|
|
|
|
|
|
|
3 |
|
|
|
— |
Other comprehensive (loss)
income |
|
|
|
|
|
|
|
|
(127) |
|
|
|
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income |
|
|
|
|
|
|
|
|
240 |
|
|
|
491 |
Comprehensive loss attributable to
non-controlling |
|
|
|
|
|
|
|
|
|
|
|
|
|
interests |
|
|
|
|
|
|
|
|
2 |
|
|
|
1 |
Comprehensive income attributable
to |
|
|
|
|
|
|
|
|
|
|
|
|
|
Magna International
Inc. |
|
|
|
|
|
|
|
$ |
242 |
|
|
$ |
492 |
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
|
|
|
|
|
Three months
ended |
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
Note |
|
|
|
|
2013 |
|
|
|
2012 |
Cash provided from (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
$ |
367 |
|
|
$ |
341 |
Items not involving current cash flows |
|
|
|
4 |
|
|
|
|
240 |
|
|
|
190 |
|
|
|
|
|
|
|
|
|
607 |
|
|
|
531 |
Changes in non-cash operating assets and
liabilities |
|
|
|
4 |
|
|
|
|
(456) |
|
|
|
(302) |
Cash provided from operating
activities |
|
|
|
|
|
|
|
|
151 |
|
|
|
229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset additions |
|
|
|
|
|
|
|
|
(194) |
|
|
|
(250) |
Purchase of subsidiaries |
|
|
|
|
|
|
|
|
— |
|
|
|
(42) |
Increase in investments and other
assets |
|
|
|
|
|
|
|
|
(48) |
|
|
|
(34) |
Proceeds from
disposition |
|
|
|
|
|
|
|
|
30 |
|
|
|
53 |
Cash used for investing
activities |
|
|
|
|
|
|
|
|
(212) |
|
|
|
(273) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in bank
indebtedness |
|
|
|
|
|
|
|
|
(26) |
|
|
|
1 |
Repayments of debt |
|
|
|
|
|
|
|
|
(41) |
|
|
|
(95) |
Issues of debt |
|
|
|
|
|
|
|
|
32 |
|
|
|
114 |
Issues of Common Shares on exercise of stock
options |
|
|
|
|
|
|
|
|
39 |
|
|
|
3 |
Settlement of stock options |
|
|
|
|
|
|
|
|
(23) |
|
|
|
(4) |
Repurchase of Common Shares |
|
|
|
11 |
|
|
|
|
(88) |
|
|
|
— |
Dividends |
|
|
|
|
|
|
|
|
(73) |
|
|
|
(63) |
Cash used for financing
activities |
|
|
|
|
|
|
|
|
(180) |
|
|
|
(44) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
|
|
|
|
|
|
|
|
(34) |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents during
the |
|
|
|
|
|
|
|
|
|
|
|
|
|
period |
|
|
|
|
|
|
|
|
(275) |
|
|
|
(60) |
Cash and cash equivalents, beginning of
period |
|
|
|
|
|
|
|
|
1,522 |
|
|
|
1,325 |
Cash and cash equivalents, end of
period |
|
|
|
|
|
|
|
$ |
1,247 |
|
|
$ |
1,265 |
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
|
|
|
|
As at |
|
|
|
As at |
|
|
|
|
|
|
|
|
March 31, |
|
|
|
December 31, |
|
|
|
|
Note |
|
|
|
2013 |
|
|
|
2012 |
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
4 |
|
|
$ |
1,247 |
|
|
$ |
1,522 |
Accounts receivable |
|
|
|
|
|
|
|
5,629 |
|
|
|
4,774 |
Inventories |
|
|
|
5 |
|
|
|
2,629 |
|
|
|
2,512 |
Deferred tax assets |
|
|
|
|
|
|
|
172 |
|
|
|
170 |
Prepaid expenses and other |
|
|
|
|
|
|
|
189 |
|
|
|
157 |
|
|
|
|
|
|
|
|
9,866 |
|
|
|
9,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
13 |
|
|
|
406 |
|
|
|
385 |
Fixed assets, net |
|
|
|
|
|
|
|
5,172 |
|
|
|
5,273 |
Goodwill |
|
|
|
|
|
|
|
1,501 |
|
|
|
1,473 |
Deferred tax assets |
|
|
|
|
|
|
|
97 |
|
|
|
90 |
Other assets |
|
|
|
6 |
|
|
|
719 |
|
|
|
753 |
|
|
|
|
|
|
|
$ |
17,761 |
|
|
$ |
17,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness |
|
|
|
|
|
|
$ |
33 |
|
|
$ |
71 |
Accounts payable |
|
|
|
|
|
|
|
4,710 |
|
|
|
4,450 |
Accrued salaries and wages |
|
|
|
|
|
|
|
705 |
|
|
|
617 |
Other accrued liabilities |
|
|
|
7 |
|
|
|
1,504 |
|
|
|
1,185 |
Income taxes payable |
|
|
|
|
|
|
|
38 |
|
|
|
93 |
Deferred tax liabilities |
|
|
|
|
|
|
|
17 |
|
|
|
19 |
Long-term debt due within one year |
|
|
|
|
|
|
|
245 |
|
|
|
249 |
|
|
|
|
|
|
|
|
7,252 |
|
|
|
6,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term employee benefit liabilities |
|
|
|
8 |
|
|
|
545 |
|
|
|
560 |
Long-term debt |
|
|
|
|
|
|
|
105 |
|
|
|
112 |
Other long-term liabilities |
|
|
|
9 |
|
|
|
165 |
|
|
|
154 |
Deferred tax liabilities |
|
|
|
|
|
|
|
128 |
|
|
|
141 |
|
|
|
|
|
|
|
|
8,195 |
|
|
|
7,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[issued: 232,897,480; December 31,
2012 - 233,115,783] |
|
|
|
11 |
|
|
|
4,423 |
|
|
|
4,391 |
Contributed surplus |
|
|
|
|
|
|
|
59 |
|
|
|
80 |
Retained earnings |
|
|
|
|
|
|
|
4,693 |
|
|
|
4,462 |
Accumulated other comprehensive income |
|
|
|
12 |
|
|
|
364 |
|
|
|
496 |
|
|
|
|
|
|
|
|
9,539 |
|
|
|
9,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
|
|
|
|
|
27 |
|
|
|
29 |
|
|
|
|
|
|
|
|
9,566 |
|
|
|
9,458 |
|
|
|
|
|
|
|
|
$ 17,761 |
|
|
$ |
17,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
|
Number |
|
|
Stated
Value |
|
|
Contributed
Surplus |
|
|
Retained
Earnings |
|
|
AOCI
(i) |
|
|
Non-
controlling
Interest |
|
|
Total
Equity |
|
|
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012 |
|
|
|
|
233.1 |
|
$ |
4,391 |
|
$ |
80 |
|
$ |
4,462 |
|
$ |
496 |
|
$ |
29 |
|
$ |
9,458 |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
369 |
|
|
|
|
|
(2) |
|
|
367 |
Other comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127) |
|
|
|
|
|
(127) |
Shares issued on exercise of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock options |
|
|
|
|
1.3 |
|
|
53 |
|
|
(14) |
|
|
|
|
|
|
|
|
|
|
|
39 |
Release of restricted stock |
|
|
|
|
|
|
|
7 |
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
|
— |
Repurchase and cancellation under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
normal course issuer bid |
|
11 |
|
|
(1.6) |
|
|
(30) |
|
|
|
|
|
(53) |
|
|
(5) |
|
|
|
|
|
(88) |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense |
|
10 |
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
9 |
Settlement of stock options |
|
10 |
|
|
|
|
|
|
|
|
(9) |
|
|
(10) |
|
|
|
|
|
|
|
|
(19) |
Dividends paid |
|
|
|
|
0.1 |
|
|
2 |
|
|
|
|
|
(75) |
|
|
|
|
|
|
|
|
(73) |
Balance, March 31, 2013 |
|
|
|
|
232.9 |
|
$ |
4,423 |
|
$ |
59 |
|
$ |
4,693 |
|
$ |
364 |
|
$ |
27 |
|
$ |
9,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2011 |
|
|
|
|
233.3 |
|
$ |
4,373 |
|
$ |
63 |
|
$ |
3,317 |
|
$ |
422 |
|
$ |
27 |
|
$ |
8,202 |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
343 |
|
|
|
|
|
(2) |
|
|
341 |
Other comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149 |
|
|
1 |
|
|
150 |
Shares issued on exercise of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock options |
|
|
|
|
0.1 |
|
|
4 |
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
3 |
Release of restricted stock |
|
|
|
|
|
|
|
5 |
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
— |
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense |
|
10 |
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
8 |
Settlement of stock options |
|
10 |
|
|
|
|
|
|
|
|
(1) |
|
|
(2) |
|
|
|
|
|
|
|
|
(3) |
Dividends paid |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
(64) |
|
|
|
|
|
|
|
|
(63) |
Balance, March 31, 2012 |
|
|
|
|
233.4 |
|
$ |
4,383 |
|
$ |
64 |
|
$ |
3,594 |
|
$ |
571 |
|
$ |
26 |
|
$ |
8,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2012.
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,
2012 audited consolidated financial statements and notes
included in the Company's 2012 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 March 31, 2013 and the results of operations,
cash flows and changes in equity for the three months ended
March 31, 2013 and 2012.
[b] Accounting Changes
Intangibles
In July 2012, the
Financial Accounting Standards Board issued Accounting Standards
Update ["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. The adoption of this
ASU did not have a material impact on the Company's consolidated
financial statements.
[c] 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 EXPENSE, NET
During the first quarter of 2013, the Company
recorded net restructuring charges of $6
million [$6 million after tax]
in Europe at its exterior and
interior systems operations.
3. EARNINGS PER SHARE
|
|
|
|
|
Three months
ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
Basic earnings per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Magna International Inc. |
|
|
|
$ |
369 |
|
|
$ |
343 |
|
|
|
|
|
|
|
|
|
|
Average number of Common Shares
outstanding |
|
|
|
|
232.5 |
|
|
|
232.4 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per Common
Share |
|
|
|
$ |
1.59 |
|
|
$ |
1.47 |
Diluted earnings per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Magna International Inc. |
|
|
|
$ |
369 |
|
|
$ |
343 |
|
|
|
|
|
|
|
|
|
|
Average number of Common Shares
outstanding |
|
|
|
|
232.5 |
|
|
|
232.4 |
Adjustments |
|
|
|
|
|
|
|
|
|
|
Stock options and restricted stock
[a] |
|
|
|
|
2.7 |
|
|
|
3.0 |
|
|
|
|
|
235.2 |
|
|
|
235.4 |
Diluted earnings per Common Share |
|
|
|
$ |
1.57 |
|
|
$ |
1.46 |
[a] |
For the three months ended March 31, 2013, diluted earnings per
Common Share exclude 0.3 million [2012 - 1.7 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:
|
|
|
|
March 31, |
|
|
|
December 31, |
|
|
|
|
2013 |
|
|
|
2012 |
Bank term deposits, bankers acceptances and government
paper |
|
|
$ |
1,080 |
|
|
$ |
1,220 |
Cash |
|
|
|
167 |
|
|
|
302 |
|
|
|
$ |
1,247 |
|
|
$ |
1,522 |
|
|
|
|
|
|
|
|
|
[b] Items not involving current cash
flows:
|
|
|
|
Three months ended |
|
|
|
|
March 31, |
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
$ |
255 |
|
|
$ |
171 |
Amortization of other assets included in cost of goods
sold |
|
|
|
30 |
|
|
|
25 |
Other non-cash
charges |
|
|
|
24 |
|
|
|
19 |
Deferred income taxes and non-cash portion of current
taxes |
|
|
|
(24) |
|
|
|
7 |
Equity income |
|
|
|
(45) |
|
|
|
(32) |
|
|
|
$ |
240 |
|
|
$ |
190 |
[c] Changes in non-cash operating assets
and liabilities:
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
$ |
(974) |
|
|
|
$ (751) |
Inventories |
|
|
|
|
(158) |
|
|
|
(154) |
Prepaid expenses and other |
|
|
|
|
(27) |
|
|
|
1 |
Accounts payable |
|
|
|
|
328 |
|
|
|
429 |
Accrued salaries and wages |
|
|
|
|
101 |
|
|
|
73 |
Other accrued liabilities |
|
|
|
|
315 |
|
|
|
118 |
Income taxes receivable/payable |
|
|
|
|
(42) |
|
|
|
(16) |
Deferred revenue |
|
|
|
|
1 |
|
|
|
(2) |
|
|
|
|
$ |
(456) |
|
|
$ |
(302) |
5. INVENTORIES
Inventories consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
December 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Raw materials and supplies |
|
|
|
$ |
942 |
|
|
$ |
911 |
Work-in-process |
|
|
|
|
262 |
|
|
|
260 |
Finished goods |
|
|
|
|
280 |
|
|
|
283 |
Tooling and engineering |
|
|
|
|
1,145 |
|
|
|
1,058 |
|
|
|
|
$ |
2,629 |
|
|
$ |
2,512 |
Tooling and engineering inventory represents
costs incurred on tooling and engineering services contracts in
excess of billed and unbilled amounts included in accounts
receivable.
6. Other assets
Other assets consist of:
|
|
|
|
|
March 31, |
|
|
|
December 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Preproduction costs related to long-term supply agreements
with
contractual guarantee for
reimbursement |
|
|
|
$ |
307 |
|
|
$ |
297 |
Long-term receivables |
|
|
|
|
95 |
|
|
|
95 |
Patents and licences, net |
|
|
|
|
33 |
|
|
|
34 |
Unrealized gain on cash flow hedges |
|
|
|
|
35 |
|
|
|
32 |
E-Car intangible |
|
|
|
|
119 |
|
|
|
158 |
Other, net |
|
|
|
|
130 |
|
|
|
137 |
|
|
|
|
$ |
719 |
|
|
$ |
753 |
7. Warranty
The following is a continuity of the Company's
warranty accruals:
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
|
$ |
94 |
|
|
$ |
76 |
Expense, net |
|
|
|
|
9 |
|
|
|
10 |
Settlements |
|
|
|
|
(5) |
|
|
|
(5) |
Foreign exchange and other |
|
|
|
|
8 |
|
|
|
2 |
Balance, March 31 |
|
|
|
$ |
106 |
|
|
$ |
83 |
8. LONG-TERM EMPLOYEE BENEFIT LIABILITIES
The Company recorded long-term employee benefit
expenses as follows:
|
|
|
|
|
Three months ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans and
other |
|
|
|
$ |
4 |
|
|
$ |
2 |
Termination and long service
arrangements |
|
|
|
|
8 |
|
|
|
8 |
|
|
|
|
$ |
12 |
|
|
$ |
10 |
9. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of:
|
|
|
|
|
March 31, |
|
|
|
December 31, |
|
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
Long-term portion of income taxes payable |
|
|
|
$ |
102 |
|
|
$ |
94 |
Asset retirement obligation |
|
|
|
|
38 |
|
|
|
39 |
Long-term portion of fair value of hedges |
|
|
|
|
13 |
|
|
|
10 |
Deferred revenue |
|
|
|
|
12 |
|
|
|
11 |
|
|
|
|
$ |
165 |
|
|
$ |
154 |
10. 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]:
|
2013 |
|
|
|
|
2012 |
|
Options outstanding |
|
|
|
|
|
Options outstanding |
|
|
Number
of options |
Exercise
price (i) |
Number
of options
exercisable |
|
|
|
|
Number
of options |
Exercise
price (i) |
Number
of options
exercisable |
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
6,623,242 |
35.39 |
3,275,074 |
|
|
|
|
6,867,367 |
31.54 |
2,066,700 |
Granted |
1,060,000 |
57.02 |
— |
|
|
|
|
1,341,500 |
48.22 |
— |
Exercised (ii) |
(2,178,383) |
29.76 |
(2,178,383) |
|
|
|
|
(321,454) |
25.83 |
(321,454) |
Cancelled |
(37,500) |
50.17 |
(20,000) |
|
|
|
|
— |
— |
— |
Vested |
— |
— |
3,149,667 |
|
|
|
|
— |
— |
2,366,667 |
March 31 |
5,467,359 |
41.73 |
4,226,358 |
|
|
|
|
7,887,413 |
34.61 |
4,111,913 |
(i) |
The exercise price noted above represents the weighted
average exercise price in Canadian dollars. |
|
|
(ii) |
On February 27, 2013, 133,333 options were exercised on a
cashless basis in accordance with the applicable stock option
plans. On exercise, cash payments totalling $3 million were
made to the stock option holder. |
|
|
|
On March 14, 2013, the Company's Honorary Chairman and
Founder, Mr. Stronach exercised 716,666 options on a cashless basis
in accordance with the applicable stock option plans. On exercise,
cash payments totalling $20 million were made to Mr.
Stronach. |
|
|
|
All cash payments were calculated using the
difference between the aggregate fair market value of the Option
Shares based on the closing price of the Company's Common Shares on
the Toronto Stock Exchange ["TSX"] on the date of exercise and the
aggregate Exercise Price of all such options surrendered. |
The weighted average assumptions used in
measuring the fair value of stock options granted and/or modified
and the compensation expense recorded in selling, general and
administrative expenses are as follows:
|
Three months ended |
|
March 31, |
|
2013 |
2012 |
|
|
|
Risk free interest
rate |
1.32% |
2.23% |
Expected dividend
yield |
2.00% |
2.00% |
Expected
volatility |
34% |
43% |
Expected time until
exercise |
4.5 years |
4.5 years |
|
|
|
Weighted average fair value of
options |
|
|
|
granted or modified in period
[Cdn$] |
$ 14.02 |
$ 15.49 |
[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]:
|
2013 |
|
|
2012 |
|
Number |
Stated |
|
|
Number |
Stated |
|
of shares |
value |
|
|
of Shares |
value |
|
|
|
|
|
|
|
|
|
Awarded and not released, beginning of
period |
882,988 |
$ |
30 |
|
|
1,026,304 |
$ |
35 |
Release of restricted stock |
(152,512) |
|
(5) |
|
|
(143,316) |
|
(5) |
Awarded and not released, March 31 |
730,476 |
$ |
25 |
|
|
882,988 |
$ |
30 |
[c] Restricted stock unit program
The following is a continuity schedule of
restricted stock unit programs outstanding [number of stock units
in the table below are expressed in whole numbers]:
|
2013 |
|
|
|
|
2012 |
|
Equity
classified
RSUs |
Liability
classified
RSUs |
Liability
classified
DSUs |
Total |
|
|
|
|
Equity
classified
RSUs |
Liability
classified
RSUs |
Liability
classified
DSUs |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of
period |
605,430 |
20,099 |
206,923 |
832,452 |
|
|
|
|
367,726 |
29,806 |
198,446 |
595,978 |
Granted |
70,636 |
14,825 |
10,013 |
95,474 |
|
|
|
|
94,238 |
15,364 |
8,565 |
118,167 |
Dividend equivalents |
415 |
194 |
1,206 |
1,815 |
|
|
|
|
467 |
263 |
1,201 |
1,931 |
Released |
(8,259) |
— |
(113,007) |
(121,266) |
|
|
|
|
(8,259) |
— |
— |
(8,259) |
Balance, March 31 |
668,222 |
35,118 |
105,135 |
808,475 |
|
|
|
|
454,172 |
45,433 |
208,212 |
707,817 |
[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 |
|
March 31, |
|
2013 |
2012 |
|
|
|
|
|
Incentive Stock Option Plan |
$ |
4 |
$ |
4 |
Long-term retention |
|
1 |
|
1 |
Restricted stock unit |
|
3 |
|
4 |
|
|
8 |
|
9 |
Fair value adjustment for liability classified
DSUs |
|
2 |
|
3 |
Total stock-based compensation expense |
$ |
10 |
$ |
12 |
11. COMMON SHARES
[a] During the first quarter of 2013, the
Company purchased for cancellation 1,593,615 Common Shares under a
normal course issuer bid for cash consideration of $88 million.
[b] The following table presents the
maximum number of shares that would be outstanding if all the
dilutive instruments outstanding at May 9,
2013 were exercised or converted:
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
232,914,147 |
Stock options (i) |
|
|
|
|
|
|
|
|
|
|
|
5,430,692 |
|
|
|
|
|
|
|
|
|
|
|
|
238,344,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
12. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following is a continuity schedule of
accumulated other comprehensive income:
|
2013 |
2012 |
|
|
|
|
|
Accumulated net unrealized gain on
translation of net investment in foreign operations |
|
|
|
|
|
Balance, beginning of period |
$ |
629 |
$ |
547 |
|
Net unrealized (loss) gain on translation of net
investment in foreign operations |
|
(133) |
|
98 |
|
Repurchase of shares under normal course issuer
bid |
|
(5) |
|
— |
|
Balance, March 31 |
|
491 |
|
645 |
|
|
|
|
|
Accumulated net unrealized gain on
cash flow hedges (i) |
|
|
|
|
|
Balance, beginning of
period |
|
34 |
|
(23) |
|
Net unrealized gain on cash flow
hedges |
|
8 |
|
51 |
|
Reclassification of net (gain) loss on cash flow
hedges to net income |
|
(6) |
|
3 |
|
Balance, March 31 |
|
36 |
|
31 |
|
|
|
|
|
Accumulated net unrealized gain on
available-for-sale investments |
|
|
|
|
|
Balance, beginning of
period |
|
1 |
|
5 |
|
Net unrealized gain (loss) on
investments |
|
1 |
|
(3) |
|
Balance, March 31 |
|
2 |
|
2 |
|
|
|
|
|
Accumulated net unrealized loss on
long-term employee benefit liabilities (ii) |
|
|
|
|
|
Balance, beginning of period |
|
(168) |
|
(107) |
|
Reclassification of net loss on pensions to net
income |
|
3 |
|
— |
|
Balance, March 31 |
|
(165) |
|
(107) |
|
|
|
|
|
Total accumulated other comprehensive
income |
$ |
364 |
$ |
571 |
|
|
|
|
|
(i) The amount of income tax obligation
that has been netted in the accumulated net unrealized gain on cash
flow hedges is as follows:
|
2013 |
2012 |
|
|
|
|
|
Balance, beginning of period |
$ |
(13) |
$ |
12 |
Net unrealized gain |
|
(4) |
|
(21) |
Reclassification of net gain (loss) on cash
flow hedges to net income |
|
2 |
|
(1) |
Balance, March 31 |
$ |
(15) |
$ |
(10) |
|
|
|
|
|
(ii) The amount of income tax benefit
that has been netted in the accumulated net unrealized loss on
long-term employee benefit liabilities is as follows:
|
2013 |
2012 |
|
|
|
|
|
Balance, beginning of period |
$ |
36 |
$ |
24 |
Reclassification of net loss to net
income |
|
(1) |
|
— |
Balance, March 31 |
$ |
35 |
$ |
24 |
The amount of other comprehensive income that is
expected to be reclassified to net income over the next 12 months
is $16 million [net of income taxes
of $9 million].
13. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and
financial liabilities consist of the following:
|
March 31, |
December 31, |
|
2013 |
2012 |
|
|
|
|
|
Held for trading |
|
|
|
|
|
Cash and cash equivalents |
$ |
1,247 |
$ |
1,522 |
|
Investment in
ABCP |
|
92 |
|
90 |
|
$ |
1,339 |
$ |
1,612 |
|
|
|
|
|
Held to maturity investments |
|
|
|
|
|
Severance investments |
$ |
5 |
$ |
8 |
|
|
|
|
|
Available-for-sale |
|
|
|
|
|
Equity investments |
$ |
10 |
$ |
9 |
|
|
|
|
|
Loans and receivables |
|
|
|
|
|
Accounts receivable |
$ |
5,629 |
$ |
4,774 |
|
Long-term receivables included in
other assets |
|
95 |
|
95 |
|
$ |
5,724 |
$ |
4,869 |
|
|
|
|
|
Other financial liabilities |
|
|
|
|
|
Bank indebtedness |
$ |
33 |
$ |
71 |
|
Long-term debt (including portion due
within one year) |
|
350 |
|
361 |
|
Accounts payable |
|
4,710 |
|
4,450 |
|
$ |
5,093 |
$ |
4,882 |
|
|
|
|
|
Derivatives designated as effective
hedges, measured at fair value |
|
|
|
|
|
Foreign currency contracts |
|
|
|
|
|
|
Prepaid expenses |
$ |
45 |
$ |
37 |
|
|
Other assets |
|
35 |
|
32 |
|
|
Other accrued liabilities |
|
(16) |
|
(11) |
|
|
Other long-term liabilities |
|
(12) |
|
(9) |
|
|
52 |
|
49 |
|
Natural gas contracts |
|
|
|
|
|
|
Prepaid expenses |
|
1 |
|
2 |
|
|
Other accrued liabilities |
|
(2) |
|
(3) |
|
|
Other long-term liabilities |
|
(1) |
|
(1) |
|
|
(2) |
|
(2) |
|
$ |
50 |
$ |
47 |
[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 consolidated
balance sheets are reasonable estimates of fair values.
Investments
At March 31, 2013,
the Company held Canadian third party asset-backed commercial paper
["ABCP"] with a face value of Cdn$107
million [December 31, 2012 -
Cdn$107 million]. The carrying value and estimated fair value of
this investment was Cdn$93 million
[December 31, 2012 - Cdn$90 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 March 31, 2013,
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 March 31, 2013.
Term debt
The Company's term debt includes $245 million due within one year. Due to the
short period to maturity of this debt, the carrying value as
presented in the 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, long-term receivables, 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 consist 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
derivative instruments. 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-month
period ended March 31, 2013, sales to
the Company's six largest customers represented 83% of the
Company's total sales and substantially all of its sales are to
customers in which the Company has ongoing contractual
relationships.
[d] Currency risk
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
employs hedging programs, primarily through the use of foreign
exchange forward contracts.
As at March 31,
2013, the net foreign exchange exposure was not
material.
[e] 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.
[f] 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. However, as a
result of hedging programs employed, foreign currency transactions
in any given period may not be fully impacted by movements in
exchange rates.
In particular, 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 sheets 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 March 31, 2013,
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 |
273 |
1,016 |
|
euro amount |
79 |
6 |
|
|
|
For U.S. dollars |
|
|
|
Peso amount |
5,662 |
128 |
|
|
|
For euros |
|
|
|
U.S. amount |
64 |
176 |
|
GBP amount |
76 |
51 |
|
Czech Koruna amount |
4,568 |
6 |
|
Polish Zlotys amount |
102 |
— |
Forward contracts mature at various dates
through 2016. Foreign currency exposures are reviewed
quarterly.
14. 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 late 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.
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] A putative class action lawsuit
alleging violations of the United States Securities Exchange Act of
1934 was filed in May 2012 in the
United States District Court, Southern District of New York, against the Company, as well as its
Chief Executive Officer and Chief Financial Officer, as well as its
founder. Boilermaker-Blacksmith National Pension Trust
["BBNPT"] was appointed the lead plaintiff on an uncontested motion
in July 2012. BBNPT
subsequently filed an amended complaint in October 2012, following which the defendants
filed a motion seeking dismissal of the lawsuit. By March 12, 2013, the motion was fully briefed and
submitted to the Court and the parties are now awaiting the Court's
decision. 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.
[c] 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 7];
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.
15. 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 separately 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, net; and other 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.
|
Three months ended |
|
Three months ended |
|
March 31, 2013 |
|
March 31,
2012 |
|
|
|
|
Fixed |
|
|
|
|
Fixed |
|
Total |
External |
Adjusted |
assets, |
|
Total |
External |
Adjusted |
assets, |
|
sales |
sales |
EBIT |
net |
|
sales |
sales |
EBIT |
net |
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
$ |
1,681 |
$ |
1,553 |
|
|
$ |
633 |
|
$ |
1,607 |
$ |
1,498 |
|
|
$ |
582 |
|
United States |
|
1,954 |
|
1,843 |
|
|
|
987 |
|
|
1,920 |
|
1,798 |
|
|
|
807 |
|
Mexico |
|
965 |
|
892 |
|
|
|
577 |
|
|
834 |
|
783 |
|
|
|
505 |
|
Eliminations |
|
(288) |
|
— |
|
|
|
— |
|
|
(259) |
|
— |
|
|
|
— |
|
|
4,312 |
|
4,288 |
$ |
381 |
|
2,197 |
|
|
4,102 |
|
4,079 |
$ |
405 |
|
1,894 |
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding Great Britain) |
|
2,902 |
|
2,835 |
|
|
|
1,416 |
|
|
2,500 |
|
2,459 |
|
|
|
1,266 |
|
Great Britain |
|
218 |
|
216 |
|
|
|
53 |
|
|
267 |
|
265 |
|
|
|
54 |
|
Eastern Europe |
|
527 |
|
454 |
|
|
|
570 |
|
|
469 |
|
429 |
|
|
|
552 |
|
Eliminations |
|
(95) |
|
— |
|
|
|
— |
|
|
(48) |
|
— |
|
|
|
— |
|
|
3,552 |
|
3,505 |
|
72 |
|
2,039 |
|
|
3,188 |
|
3,153 |
|
63 |
|
1,872 |
Rest of World |
|
594 |
|
565 |
|
— |
|
699 |
|
|
453 |
|
428 |
|
(9) |
|
528 |
Corporate and Other
(i) |
|
(97) |
|
3 |
|
14 |
|
237 |
|
|
(77) |
|
6 |
|
(15) |
|
269 |
Total reportable
segments |
|
8,361 |
|
8,361 |
|
467 |
|
5,172 |
|
|
7,666 |
|
7,666 |
|
444 |
|
4,563 |
Other expense,
net |
|
|
|
|
|
(6) |
|
|
|
|
|
|
|
|
— |
|
|
Interest expense,
net |
|
|
|
|
|
(4) |
|
|
|
|
|
|
|
|
(5) |
|
|
|
$ |
8,361 |
$ |
8,361 |
$ |
457 |
|
5,172 |
|
$ |
7,666 |
$ |
7,666 |
$ |
439 |
|
4,563 |
Current
assets |
|
|
|
|
|
|
|
9,866 |
|
|
|
|
|
|
|
|
9,203 |
Investments, goodwill, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deferred tax assets and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
assets |
|
|
|
|
|
|
|
2,723 |
|
|
|
|
|
|
|
|
2,293 |
Consolidated total
assets |
|
|
|
|
|
|
$ |
17,761 |
|
|
|
|
|
|
|
$ |
16,059 |
(i) |
For the three months ended March 31, 2012, Corporate and
Other includes $12 million equity loss related to the Company's
investment in E-Car. |
16. COMPARATIVE FIGURES
Certain of the comparative figures have been
reclassified to conform to the current period's method of
presentation.
SOURCE Magna International Inc.