AURORA, ON,
Nov. 6, 2013 /PRNewswire/ - Magna
International Inc. (TSX: MG; NYSE: MGA) today reported
financial results for the third quarter ended September 30, 2013.
|
THREE MONTHS ENDED
SEPTEMBER 30, |
|
NINE MONTHS ENDED
SEPTEMBER 30, |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
| Sales |
$ |
8,338 |
|
$ |
7,411 |
|
$ |
25,661 |
|
$ |
22,804 |
| Adjusted EBIT(1) |
$ |
444 |
|
$
|
352 |
|
$ |
1,458 |
|
$ |
1,271 |
| Income from operations before income taxes |
$ |
391 |
|
$ |
500 |
|
$ |
1,391 |
|
$ |
1,409
|
| Net income attributable to Magna International
Inc. |
$ |
319 |
|
$
|
390 |
|
$
|
1,103 |
|
$
|
1,082
|
| Diluted earnings per share |
$
|
1.39 |
|
$ |
1.66 |
|
$ |
4.74 |
|
$ |
4.60 |
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 (income), net. |
THREE MONTHS ENDED SEPTEMBER 30,
2013
We posted sales of $8.34 billion
for the third quarter ended September 30,
2013, an increase of 13% from the third quarter of 2012. We
achieved this sales increase in a period when vehicle production
increased 4% in North America and
1% in Europe, both relative to the
third quarter of 2012. In the third quarter of 2013, our North
American, European and Rest of World production sales, as well as
complete vehicle assembly sales and tooling, engineering and other
sales increased, in each case relative to the comparable quarter in
2012.
Complete vehicle assembly sales increased 10% to $680 million for the third quarter of 2013
compared to $620 million for the
third quarter of 2012, while complete vehicle assembly volumes
increased 16% to approximately 34,000 units.
During the third quarter of 2013, income from operations before
income taxes was $391 million, net
income attributable to Magna International Inc. was $319 million and diluted earnings per share were
$1.39, decreases of $109 million, $71
million and $0.27
respectively, each compared to the third quarter of 2012.
During the third quarter of 2013, we recorded restructuring
charges which negatively impacted income from operations before
income taxes by $48 million, net
income attributable to Magna International Inc. by $33 million and diluted earnings per share by
$0.14.
During the third quarter of 2012, we recorded a re-measurement
gain on the acquisition of the controlling 27% interest in Magna
E-Car Systems Partnership ("E-Car"). This positively impacted
income from operations before income taxes by $153 million, net income attributable to Magna
International Inc. by $125 million
and diluted earnings per share by $0.53.
During the third quarter ended September
30, 2013, we generated cash from operations of $574 million before changes in non‑cash operating
assets and liabilities, and invested $110
million in non‑cash operating assets and liabilities. Total
investment activities for the third quarter of 2013 were
$347 million, including $280 million in fixed asset additions and a
$67 million increase in investments
and other assets.
NINE MONTHS ENDED SEPTEMBER 30,
2013
We posted sales of $25.66 billion
for the nine months ended September 30,
2013, an increase of 13% from the nine months ended
September 30, 2012. This higher sales
level reflected increases in our North American, European and Rest
of World production sales, as well as complete vehicle assembly
sales and tooling, engineering and other sales, in each case
relative to the first nine months of 2012.
During the nine months ended September
30, 2013, vehicle production increased 4% to 12.09 million
units in North America and
decreased 2% to 14.38 million units in Europe, each compared to the first nine months
of 2012.
Complete vehicle assembly sales increased 22% to $2.27 billion for the nine months ended
September 30, 2013 compared to
$1.86 billion for the nine months
ended September 30, 2012, while
complete vehicle assembly volumes increased 19% to approximately
110,000 units.
During the nine months ended September
30, 2013, income from operations before income taxes was
$1.39 billion, net income
attributable to Magna International Inc. was $1.10 billion and diluted earnings per share were
$4.74, a decrease of $18 million, and increases of $21 million and $0.14, respectively, each compared to the first
nine months of 2012.
During the nine months ended September
30, 2013, we recorded restructuring charges which negatively
impacted income from operations before taxes by $54 million, net income attributable to Magna
International Inc. by $39 million and
diluted earnings per share by $0.17.
During the nine months ended September
30, 2012, we recorded a re-measurement gain on the
acquisition of the controlling 27% interest in E-Car. This
positively impacted income from operations before income taxes by
$153 million, net income attributable
to Magna International Inc. by $125
million and diluted EPS by $0.53.
During the nine months ended September
30, 2013, we generated cash from operations before changes
in non‑cash operating assets and liabilities of $1.90 billion, and invested $578 million in non‑cash operating assets and
liabilities. Total investment activities for the first nine months
of 2013 were $874 million, including
$706 million in fixed asset additions
and a $168 million increase in
investments and other assets.
Don Walker, Magna's Chief
Executive Officer commented: "I am pleased with our strong
results for the quarter, which were higher than the third quarter
of 2012, excluding unusual items. On a year to date basis,
all of our reporting segments have generated improved operating
results year over year. In our Europe segment, we have reported seven
consecutive quarters of year over year improvements in Adjusted
EBIT. We believe our strong share price performance reflects,
among other things, our continued increases in operating
results."
A more detailed discussion of our consolidated financial results
for the third quarter and nine months ended September 30, 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 September 30, 2013. This dividend is payable on
December 13, 2013 to shareholders of
record on November 29, 2013.
OTHER MATTERS
Subject to approval by the Toronto Stock Exchange and the New
York Stock Exchange, our Board of Directors approved a normal
course issuer bid to purchase up to 12 million of our Common
Shares, representing approximately 5.4% of our public float of
Common Shares. This new normal course issuer bid is expected to
commence on or about November 13,
2013 and will terminate one year later.
Vince Galifi, Magna's Chief
Financial Officer stated: "The Board's decision to approve a
new share repurchase program reflects their confidence in our
business prospects, our desire to maintain financial flexibility,
and our objective to provide increased value to shareholders."
UPDATED 2013 OUTLOOK
Light Vehicle Production (Units)
North America
Europe(1) |
|
|
16.1 million
18.8 million |
|
| |
|
|
|
|
Production Sales
North America
Europe
Rest of World |
|
|
$16.2 - $16.5 billion
$9.7 - $9.9 billion
$2.2 - $2.3 billion |
|
| Total
Production Sales |
|
|
$28.1 - $28.7 billion |
|
Complete Vehicle Assembly Sales |
|
|
$3.0 - $3.2 billion |
|
| Total Sales |
|
|
$33.9 - $34.8 billion |
|
Operating Margin(2)(3) |
|
|
Approximately 5.9% |
|
Tax Rate(2) |
|
|
Approximately 22.5% |
|
Capital Spending |
|
|
Approximately $1.3 billion |
|
(1) Effective the first quarter of 2013,
we disclose total European rather than Western European light
vehicle production
(2) Excluding other expense (income),
net
(3) Excluding $158 million amortization
of intangibles related to the 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 312
manufacturing operations and 87 product development, engineering
and sales centres in 29 countries. We have over 125,000 employees
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 third quarter results on Wednesday, November 6, 2013 at 8:00 a.m. EST. The conference call will be
chaired by Don Walker, Chief
Executive Officer. The number to use for this call is
1-800-757-8473. The number for overseas callers is 1-416-981-9011.
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 Wednesday morning prior to the call.
For teleconferencing questions, please contact Karin Kaminski at 905-726‑7103.
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: forecast light vehicle
production volumes in North
America and Europe; Magna's
expected production sales in its North
America, Europe and Rest of
World segments; total sales; complete vehicle assembly sales;
consolidated operating margin; average effective income tax rate;
capital spending; future repurchases of Common Shares under our
Normal Course Issuer Bid; and other matters. The forward-looking
information in this press release 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; continuing economic uncertainty
in various geographic regions, including Western Europe; 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,
Russia, 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; risk of production
disruptions due to natural disasters; pension liabilities; 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
Management's Discussion and Analysis of Results
of Operations and Financial Position
Unless otherwise noted, all amounts in this Management's
Discussion and Analysis of Results of Operations and Financial
Position ("MD&A") are in U.S. dollars and all tabular amounts
are in millions of U.S. dollars, except per share figures, which
are in U.S. dollars. When we use the terms "we", "us", "our" or
"Magna", we are referring to Magna International Inc. and its
subsidiaries and jointly controlled entities, unless the context
otherwise requires.
This MD&A should be read in conjunction with
the unaudited interim consolidated financial statements for the
three months and nine months ended September
30, 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
November 5, 2013.
OVERVIEW
We are a leading global automotive supplier with 312
manufacturing operations and 87 product development, engineering
and sales centres in 29 countries. We have over 125,000 employees
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). 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
Our third quarter 2013 sales increased 13% over the third
quarter of 2012 to $8.34 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. North
American light vehicle production increased 4% in the third quarter
of 2013 to 3.8 million units and European light vehicle production
increased 1% in the third quarter of 2013 to 4.4 million units, in
both cases relative to the third quarter of 2012.
Adjusted EBIT1 increased 26% to
$444 million for the third quarter of
2013, compared to $352 million in the
third quarter of 2012.
Our North
America segment continues to perform well, with Adjusted
EBIT of $365 million for the third
quarter of 2013, which included $39
million of amortization related to the August 2012 acquisition of Magna E-Car Systems
Partnership ("E-Car"). This result compares to Adjusted EBIT of
$328 million for the third quarter of
2012, which included only $13 million
in amortization related to the E-Car acquisition.
Our Europe
segment recorded another improved result in the third quarter of
2013, despite continued weak levels of vehicle production in
Europe. We generated Adjusted EBIT
of $72 million for the third quarter
of 2013, compared to $13 million for
the third quarter of 2012. This represents the seventh consecutive
quarter of improved Adjusted EBIT, relative to the comparable
quarter.
In our Rest of World segment, we reported
$2 million of Adjusted EBIT in the
third quarter of 2013, compared to $5
million in the third quarter of 2012. Within our Rest of
World segment, our Asia Pacific
business again generated a profit despite significant new facility
and launch costs, while our business in South America recorded a loss.
We continue to focus on improving operating
results in both Europe and
South America, and we expect to
generate improved Adjusted EBIT in both regions during 2013
compared to 2012.
Lastly, during the third quarter of 2013, we
purchased for cancellation 3.7 million Common Shares for aggregate
consideration of $298 million
pursuant to our current Normal Course Issuer Bid ("NCIB") which
expires in November of this year. Subsequent to the third quarter
of 2013, we purchased for cancellation the remaining 1.1 million
Common Shares under our NCIB for cash consideration of $92 million through a pre-defined automatic
securities purchase plan with a designated broker. As of
November 4, 2013, we have completed
the repurchase of the entire 12 million Common Shares authorized
under our NCIB.
Subject to approval by the Toronto Stock
Exchange ("TSX") and the New York Stock Exchange ("NYSE"), our
Board of Directors approved a normal course issuer bid to purchase
up to 12 million of our Common Shares, representing approximately
5.4% of our public float of Common Shares.
__________________
1 Adjusted EBIT represents income from operations before
income taxes; interest expense, net; and other expense (income),
net
FINANCIAL RESULTS SUMMARY
During the third quarter of 2013, we posted sales of
$8.34 billion, an increase of 13%
from the third quarter of 2012. This higher sales level was a
result of increases in our North American, European and Rest of
World production sales, our complete vehicle assembly sales and
tooling, engineering and other sales. Comparing the third quarter
of 2013 to 2012:
- North American vehicle production increased 4% and our North
American production sales increased 11% to $4.03 billion;
- European vehicle production increased 1% and our European
production sales increased 18% to $2.36
billion;
- Rest of World production sales increased 16% to $574 million;
- Complete vehicle assembly sales increased 10% to $680 million and complete vehicle assembly
volumes increased 16%; and
- Tooling, engineering and other sales increased 6% to
$695 million.
During the third quarter of 2013, we earned
income from operations before income taxes of $391 million compared to $500 million for the third quarter of 2012.
Excluding other expense (income), net ("Other Expense" or "Other
Income") recorded in the third quarters of 2013 and 2012, as
discussed in the "Other Expense" section, the $92 million increase in income from operations
before income taxes was primarily as a result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the third quarter of 2012;
- productivity and efficiency improvements at certain
facilities;
- higher equity income;
- acquisitions completed during or subsequent to the third
quarter of 2012, including ixetic Verwaltungs GmbH ("ixetic");
- lower commodity costs; and
- the benefit of restructuring and downsizing activities recently
undertaken in Europe.
These factors were partially offset by:
- incremental intangible asset amortization of $26 million related to the acquisition and
re-measurement of E-Car;
- programs that ended production during or subsequent to the
third quarter of 2012;
- higher costs incurred in preparation for upcoming
launches;
- a larger amount of employee profit sharing;
- increased pre-operating costs incurred at new facilities;
- a $6 million revaluation gain in
respect of asset-backed commercial paper ("ABCP") in the third
quarter of 2012; and
- operational inefficiencies and other costs at certain
facilities.
During the third quarter of 2013, net income was
$318 million, a decrease of
$68 million compared to the third
quarter of 2012. Net income was impacted by Other Expense and Other
Income, as discussed in the "Other Expense" section. Other Expense,
after tax, negatively impacted net income in the third quarter of
2013 by $33 million and Other Income,
after tax positively impacted net income in the third quarter of
2012 by $125 million. Excluding Other
Expense and Other Income, after tax, net income for the third
quarter of 2013 increased $90 million
compared to the third quarter of 2012.
During the third quarter of 2013, our diluted
earnings per share decreased $0.27 to
$1.39 compared to $1.66 for the third quarter of 2012. Other
Expense, after tax, negatively impacted diluted earnings per share
in the third quarter of 2013 by $0.14
and Other Income, after tax, positively impacted diluted earnings
per share in the third quarter of 2012 by $0.53, both as discussed in the "Other Expense"
section. Excluding Other Expense and Other Income, after tax, the
$0.40 increase in diluted earnings
per share is a result of the increase in net income attributable to
Magna International Inc. and a decrease in the weighted average
number of diluted shares outstanding during the third quarter of
2013. The decrease in the weighted average number of diluted shares
outstanding was due to the purchase and cancellation of Common
Shares, during or subsequent to the third quarter of 2012, pursuant
to our normal course issuer bids and the cashless exercise of
options, partially offset by the issue of Common Shares related to
the exercise of stock options, an increase in the number of diluted
options outstanding as a result of an increase in the trading price
of our common stock and stock options issued subsequent to the
third quarter of 2012.
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 other suppliers, are discussed
in our Annual Information Form and Annual Report on Form 40-F, each
in respect of the year ended December 31,
2012. The economic, industry and risk factors remain
substantially unchanged in respect of the third quarter ended
September 30, 2013.
RESULTS OF OPERATIONS
Average Foreign Exchange
| |
|
|
For the three
months |
|
|
|
For the nine months |
| |
|
|
ended September 30, |
|
|
|
ended September 30, |
| |
|
|
2013 |
|
|
2012 |
|
|
Change |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| 1 Canadian dollar equals U.S. dollars |
|
|
0.962 |
|
|
1.005 |
|
|
- |
4% |
|
|
|
0.977 |
|
|
0.998 |
|
|
- |
2% |
| 1 euro equals U.S. dollars |
|
|
1.325 |
|
|
1.252 |
|
|
+ |
6% |
|
|
|
1.317 |
|
|
1.282 |
|
|
+ |
3% |
| 1 British pound equals U.S. dollars |
|
|
1.552 |
|
|
1.580 |
|
|
- |
2% |
|
|
|
1.546 |
|
|
1.578 |
|
|
- |
2% |
The preceding table reflects the average foreign
exchange rates between the most common currencies in which we
conduct business and our U.S. dollar reporting currency. The
changes in these foreign exchange rates for the three months and
nine months ended September 30, 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
SEPTEMBER 30, 2013
| Sales |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the three months |
|
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| Vehicle Production Volumes
(millions of units) |
|
|
|
|
|
|
|
|
|
|
| |
North America |
|
|
|
3.815 |
|
|
3.673 |
|
|
+ |
4% |
| |
Europe |
|
|
|
4.418 |
|
|
4.384 |
|
|
+ |
1% |
| Sales |
|
|
|
|
|
|
|
|
|
|
|
| |
External Production |
|
|
|
|
|
|
|
|
|
|
|
| |
|
North America |
|
|
$ |
4,025 |
|
$ |
3,636 |
|
|
+ |
11% |
| |
|
Europe |
|
|
|
2,364 |
|
|
2,006 |
|
|
+ |
18% |
| |
|
Rest of World |
|
|
|
574 |
|
|
493 |
|
|
+ |
16% |
| |
Complete Vehicle Assembly |
|
|
|
680 |
|
|
620 |
|
|
+ |
10% |
| |
Tooling, Engineering and
Other |
|
|
|
695 |
|
|
656 |
|
|
+ |
6% |
| Total Sales |
|
|
$ |
8,338 |
|
$ |
7,411 |
|
|
+ |
13% |
External Production Sales - North America
External production sales in North America increased 11% or $389 million to $4.03
billion for the third quarter of 2013 compared to
$3.64 billion for the third 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 third
quarter of 2012, including the:
-
- Ford Fusion and Lincoln MKZ;
- Jeep Cherokee; and
- Honda Accord;
- higher production volumes on certain existing programs;
- acquisitions completed during or subsequent to the third
quarter of 2012 which positively impacted sales by $47 million, including STT Technologies ("STT");
and
- an increase in content on certain programs, including the Buick
Enclave, GMC Acadia and Chevrolet Traverse.
These factors were partially offset by:
- a decrease in reported U.S. dollar sales primarily as a result
of the weakening of the Canadian dollar against the U.S.
dollar;
- programs that ended production during or subsequent to the
third quarter of 2012; and
- net customer price concessions subsequent to the third quarter
of 2012.
External Production Sales - Europe
External production sales in Europe increased 18% or $358 million to $2.36
billion for the third quarter of 2013 compared to
$2.01 billion for the third 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 third
quarter of 2012, including the:
-
- MINI Paceman;
- Mercedes-Benz CLA-Class; and
- Ford Kuga;
- acquisitions completed during or subsequent to the third
quarter of 2012, which positively impacted sales by $101 million, including ixetic; 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 third quarter
of 2012.
External Production Sales - Rest of
World
External production sales in Rest of World
increased 16% or $81 million to
$574 million for the third quarter of
2013 compared to $493 million for the
third quarter of 2012, primarily as a result of the launch of new
programs during or subsequent to the third quarter of 2012,
primarily in China and
Brazil, partially offset by:
- a $25 million decrease in
reported U.S. dollar sales as a result of the net weakening of
foreign currencies against the U.S. dollar, including the Brazilian
real and Argentine peso; and
- net customer price concessions subsequent to the third quarter
of 2012.
| Complete Vehicle Assembly Sales |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the three months |
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| Complete Vehicle Assembly Sales |
|
|
$ |
680 |
|
$ |
620 |
|
|
+ |
10% |
| Complete Vehicle Assembly Volumes
(Units) |
|
|
|
33,818 |
|
|
29,153 |
|
|
+ |
16% |
Complete vehicle assembly sales increased 10%,
or $60 million, to $680 million for the third quarter of 2013
compared to $620 million for the
third quarter of 2012 and assembly volumes increased 16% or 4,665
units.
The increase in complete vehicle assembly sales
is primarily as a result of:
- the launch of the MINI Paceman during the fourth quarter of
2012; and
- a $35 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 a
decrease in assembly volumes for the Mercedes-Benz G-Class.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
6% or $39 million to $695 million for the third quarter of 2013
compared to $656 million for the
third quarter of 2012.
In the third quarter of 2013, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Ford Transit;
- GM full-size pickups and SUVs;
- Jeep Cherokee;
- BMW X5;
- Ford Fusion;
- Mercedes-Benz M-Class;
- Qoros 3;
- Mercedes-Benz CLA-Class; and
- Dodge Durango.
In the third quarter of 2012, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Chevrolet Trax;
- Ford Fusion;
- Chevrolet Spin;
- Honda Accord;
- Qoros 3;
- MINI Countryman;
- Dodge Dart;
- Mercedes-Benz M-Class; and
- Opel Cascada Convertible.
| Cost of Goods Sold and Gross
Margin |
|
|
|
|
| |
|
|
|
For the three months |
| |
|
|
|
ended September 30, |
| |
|
|
|
2013 |
|
|
2012 |
| Sales |
|
|
$ |
8,338 |
|
$ |
7,411 |
| Cost of goods sold |
|
|
|
|
|
|
|
| |
Material |
|
|
|
5,331 |
|
|
4,767 |
| |
Direct labour |
|
|
|
538 |
|
|
483 |
| |
Overhead |
|
|
|
1,404 |
|
|
1,295 |
| |
|
|
|
7,273 |
|
|
6,545 |
| Gross margin |
|
|
$ |
1,065 |
|
$ |
866 |
| Gross margin as a percentage of sales |
|
|
|
12.8% |
|
|
11.7% |
Cost of goods sold increased $0.73 billion to $7.27
billion for the third quarter of 2013 compared to
$6.55 billion for the third 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;
- $161 million related to
acquisitions completed during or subsequent to the third quarter of
2012, including ixetic, STT and E-Car;
- a net increase in reported U.S. dollar cost of goods sold
primarily due to the strengthening of the euro against the U.S.
dollar partially offset by the weakening of the Canadian dollar,
Brazilian real, Argentine peso and British pound, each against the
U.S. dollar;
- increased pre-operating costs incurred at new facilities;
and
- a larger amount of employee profit sharing.
Gross margin increased $199 million to $1.07
billion for the third quarter of 2013 compared to
$0.87 billion for the third quarter
of 2012 and gross margin as a percentage of sales increased to
12.8% for the third quarter of 2013 compared to 11.7% for the third
quarter of 2012. The increase in gross margin as a percentage of
sales was primarily due to:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the third quarter of 2012;
- lower commodity costs; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- higher costs incurred in preparation for upcoming
launches;
- a larger amount of employee profit sharing;
- increased pre-operating costs incurred at new facilities;
- 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;
- programs that ended production during or subsequent to the
third quarter of 2012; and
- operational inefficiencies and other costs at certain
facilities.
Depreciation and Amortization
Depreciation and amortization costs increased
$61 million to $264 million for the third quarter of 2013
compared to $203 million for the
third quarter of 2012. The higher depreciation and amortization was
primarily as a result of:
- incremental intangible asset amortization of $26 million related to the acquisition and
re-measurement of E-Car;
- $18 million related to
acquisitions completed during or subsequent to the third quarter of
2012, including ixetic, E-Car and STT;
- depreciation related to new facilities; and
- capital spending during or subsequent to the third quarter of
2012.
Selling, General and Administrative
("SG&A")
SG&A expense as a percentage of sales was
4.9% for the third quarter of 2013 compared to 4.6% for the third
quarter of 2012. SG&A expense increased $67 million to $411
million for the third quarter of 2012 compared to
$344 million for the third quarter of
2012 primarily as a result of:
- increased costs incurred at new facilities;
- an increase in reported U.S. dollar SG&A related to foreign
exchange;
- $7 million related to
acquisitions completed during or subsequent to the third quarter of
2012, including ixetic, E-Car, and STT;
- a $6 million revaluation gain in
respect of ABCP in the third quarter of 2012; and
- higher labour and other costs to support the growth in sales,
including wage increases at certain operations.
Equity Income
Equity income increased $21 million to $54
million for the third quarter of 2013 compared to
$33 million for the third quarter of
2012. Equity income for the third quarter of 2012 included
$13 million of equity loss related to
our investment in E-Car and $2
million of equity income related to our investment in STT.
Excluding this $11 million net equity
loss, the $10 million increase in
equity income is primarily as a result of higher income from most
of our equity accounted investments.
Other Expense (Income), net
During the three months and nine months ended
September 30, 2013 and 2012, we
recorded Other Expense and Other Income items as follows:
| |
|
|
|
2013 |
|
|
|
2012 |
| |
|
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
|
|
Diluted |
| |
|
|
|
Operating |
|
|
Net |
|
|
Earnings |
|
|
|
Operating |
|
|
Net |
|
|
Earnings |
| |
|
|
|
Income |
|
|
Income |
|
|
per Share |
|
|
|
Income |
|
|
Income |
|
|
per Share |
| Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Restructuring charges (1) |
|
|
$ |
48 |
|
$ |
33 |
|
$ |
0.14 |
|
|
$ |
— |
|
$ |
— |
|
$ |
— |
| |
Re-measurement gain of E-Car (2) |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
(153) |
|
|
(125) |
|
|
(0.53) |
| |
|
|
|
48 |
|
|
33 |
|
|
0.14 |
|
|
|
(153) |
|
|
(125) |
|
|
(0.53) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Restructuring charges (1) |
|
|
|
6 |
|
|
6 |
|
|
0.02 |
|
|
|
— |
|
|
— |
|
|
— |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total year to date unusual
items |
|
|
$ |
54 |
|
$ |
39 |
|
$ |
0.17 |
|
|
$ |
(153) |
|
$ |
(125) |
|
$ |
(0.53) |
(1) Restructuring charges
During the third and first quarters of 2013, we
recorded net restructuring charges of $48
million ($33 million after
tax) and $6 million ($6 million after tax), respectively, in
Europe at our exterior and
interior systems operations related primarily to the closure of a
facility in Belgium.
We expect full year 2013 restructuring charges
to be approximately $100 million.
(2) Re-measurement gain of E-Car
On August 31,
2012, we acquired the controlling 27% interest in E-Car from
a company affiliated with the Stronach Group for cash consideration
of $75 million.
Prior to the acquisition, we held the 73%
non-controlling interest in E-Car and accounted for this investment
using the equity method of accounting. The incremental investment
in E-Car was accounted for under the business acquisition method of
accounting as a step acquisition which requires that we re-measure
our pre-existing investment in E-Car at fair value and recognize
any gains or losses in income. The estimated fair value of our
partnership interest immediately before the closing date was
$205 million, which resulted in the
recognition of a non-cash gain of $153
million ($125 million after
tax), which is recorded in Other expense (income), net on the
Consolidated Statements of Income.
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 (income), net.
| |
|
|
|
For the three months ended September
30, |
| |
|
|
|
External Sales |
|
|
|
Adjusted EBIT |
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| North America |
|
|
$ |
4,355 |
|
$ |
3,953 |
|
$ |
402 |
|
|
$ |
365 |
|
$ |
328 |
|
$ |
37 |
| Europe |
|
|
|
3,366 |
|
|
2,911 |
|
|
455 |
|
|
|
72 |
|
|
13 |
|
|
59 |
| Rest of World |
|
|
|
612 |
|
|
542 |
|
|
70 |
|
|
|
2 |
|
|
5 |
|
|
(3) |
| Corporate and
Other |
|
|
|
5 |
|
|
5 |
|
|
— |
|
|
|
5 |
|
|
6 |
|
|
(1) |
| Total reportable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
segments |
|
|
$ |
8,338 |
|
$ |
7,411 |
|
$ |
927 |
|
|
$ |
444 |
|
$ |
352 |
|
$ |
92 |
Excluded from Adjusted EBIT for the third
quarters of 2013 and 2012 were the following Other Expense and
Other Income items, which have been discussed in the "Other
Expense" section.
| |
|
|
|
For the three months |
| |
|
|
|
ended September 30, |
| |
|
|
|
2013 |
|
|
2012 |
| Europe |
|
|
|
|
|
|
|
| |
Restructuring charges |
|
|
$ |
48 |
|
$ |
— |
| |
|
|
|
|
|
|
|
| Corporate and Other |
|
|
|
|
|
|
|
| |
Re-measurement gain of E-Car |
|
|
|
— |
|
|
(153) |
| |
|
|
$ |
48 |
|
$ |
(153) |
North
America
Adjusted EBIT in North
America increased $37 million
to $365 million for the third quarter
of 2013 compared to $328 million
for the third quarter of 2012 primarily as a result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the third quarter of 2012;
- lower commodity costs;
- decreased pre-operating costs incurred at new facilities;
and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- incremental intangible asset amortization of $26 million related to the acquisition and
re-measurement of E-Car;
- programs that ended production during or subsequent to the
third quarter of 2012;
- higher costs incurred in preparation for upcoming
launches;
- a larger amount of employee profit sharing;
- higher affiliation fees paid to corporate; and
- operational inefficiencies and other costs at certain
facilities.
Europe
Adjusted EBIT in Europe increased $59
million to $72 million for the
third quarter of 2013 compared to $13 million for the third quarter of 2012
primarily as a result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the third quarter of 2012;
- acquisitions completed during or subsequent to the third
quarter of 2012, including ixetic;
- favourable settlement of certain commercial items;
- the benefit of restructuring and downsizing activities recently
undertaken; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- higher costs incurred in preparation for upcoming launches;
and
- a larger amount of employee profit sharing.
Rest of World
Rest of World Adjusted EBIT decreased
$3 million to $2 million for the third quarter of 2013 compared
to $5 million for the third quarter
of 2012 primarily as a result of:
- increased costs related to new facilities;
- higher production costs, including inflationary increases, that
we have not been successful in passing through to our
customers;
- a larger amount of employee profit sharing;
- higher affiliation fees paid to corporate; and
- higher incentive compensation.
These factors were partially offset by:
- margins earned on higher production sales, including margins
earned on the launch of new facilities and new programs;
- higher equity income; and
- productivity and efficiency improvements at certain
facilities.
Corporate and Other
Corporate and Other Adjusted EBIT decreased
$1 million to $5 million for the third quarter of 2013 compared
to $6 million for the third quarter
of 2012. The loss related to our equity accounted investment in
E-Car included in Corporate and Other was $13 million for the third quarter of 2012.
Excluding E-Car, Corporate and Other Adjusted EBIT decreased
$14 million to $5 million for the third quarter of 2013 compared
to $19 million for the third quarter
of 2012 primarily as a result of
- a $6 million revaluation gain in
respect of ABCP in the third quarter of 2012;
- higher incentive compensation; and
- increased consulting costs.
These factors were partially offset by an
increase in affiliation fees earned from our divisions.
Interest Expense, net
During the third quarters of 2013 and 2012, we
recorded net interest expense of $5
million.
Income from Operations before Income
Taxes
Income from operations before income taxes
decreased $109 million to
$391 million for the third quarter of
2013 compared to $500 million for the
third quarter of 2012. Excluding Other Expense and Other Income,
discussed in the "Other Expense" section, income from operations
before income taxes for the third quarter of 2013 increased
$92 million. The increase in income
from operations before income taxes is the result of the increase
in EBIT, as discussed above.
Income Taxes
The effective income tax rate on income from
operations before income taxes decreased to 18.7% for the third
quarter of 2013 compared to 22.8% for the third quarter of 2012. In
the third quarters of 2012 and 2013, income tax rates were impacted
by the items discussed in the "Other Expense" section. Excluding
Other Expense and Other Income, after tax, the effective income tax
rate decreased to 20.0% for the third quarter of 2013 compared to
24.8% for the third quarter of 2012 primarily as a result of
favourable audit settlements of prior taxation years and a
valuation allowance release, partially offset by non-creditable
withholding tax on the repatriation of funds to Canada.
Net Income
Net income of $318
million for the third quarter of 2013 decreased $68 million compared to the third quarter of
2012. Excluding Other Expense and Other Income, after tax,
discussed in the "Other Expense" section, net income increased
$90 million. The increase in net
income is the result of the increase in income from operations
before income taxes partially offset by higher income taxes.
Net Loss Attributable to Non-controlling
Interests
Net loss attributable to non-controlling
interests was $1 million for the
third quarter of 2013 compared to $4
million for the third quarter of 2012.
Net Income attributable to Magna
International Inc.
Net income attributable to Magna International
Inc. of $319 million for the third
quarter of 2013 decreased $71 million
compared to the third quarter of 2012. Excluding Other Expense and
Other Income, after tax, discussed in the "Other Expense" section,
net income attributable to Magna International Inc. increased
$87 million as a result of the
increase in net income, as discussed above.
| Earnings per Share |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the three months |
|
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| Earnings per Common Share |
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
$ |
1.41 |
|
$ |
1.68 |
|
|
- |
16% |
| |
Diluted |
|
|
$ |
1.39 |
|
$ |
1.66 |
|
|
- |
16% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Average number of Common Shares
outstanding (millions) |
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
226.4 |
|
|
232.5 |
|
|
- |
3% |
| |
Diluted |
|
|
|
229.5 |
|
|
235.1 |
|
|
- |
2% |
Diluted earnings per share decreased
$0.27 to $1.39 for the third quarter of 2013 compared to
$1.66 for the third quarter of 2012.
Other Expense, after tax, negatively impacted diluted earnings per
share in the third quarter of 2013 by $0.14 and Other Income positively impacted
diluted earnings per share in the third quarter of 2012 by
$0.53, both as discussed in the
"Other Expense" section. Excluding Other Expense and Other Income,
after tax, the $0.40 increase in
diluted earnings per share was a result of the increase in net
income attributable to Magna International Inc. and a decrease in
the weighted average number of diluted shares outstanding during
the third quarter of 2013.
The decrease in the weighted average number of
diluted shares outstanding was due to the purchase and cancellation
of Common Shares, during or subsequent to the third quarter of
2012, pursuant to our normal course issuer bids and the cashless
exercise of options, partially offset by the issue of Common Shares
related to the exercise of stock options, an increase in the number
of diluted options outstanding as a result of an increase in the
trading price of our common stock and stock options issued
subsequent to the third quarter of 2012.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
| Cash Flow from Operations |
|
|
|
|
|
|
|
|
| |
|
|
|
For the three months |
|
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| Net income |
|
|
$ |
318 |
|
$ |
386 |
|
|
|
|
| Items not involving current cash flows |
|
|
|
256 |
|
|
117 |
|
|
|
|
| |
|
|
|
574 |
|
|
503 |
|
|
$ |
71 |
| Changes in non-cash operating assets and
liabilities |
|
|
|
(110) |
|
|
(63) |
|
|
|
|
| Cash provided from operating activities |
|
|
$ |
464 |
|
$ |
440 |
|
|
$ |
24 |
Cash flow from operations before changes in
non-cash operating assets and liabilities increased $71 million to $574
million for the third quarter of 2013 compared to
$503 million for the third quarter of
2012. The increase in cash flow from operations was due to a
$139 million increase in items not
involving current cash flows partially offset by a $68 million decrease in net income, as discussed
above. Items not involving current cash flows are comprised of the
following:
| |
|
|
|
For the three months |
| |
|
|
|
ended September 30, |
| |
|
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
$ |
264 |
|
$ |
203 |
| Other non-cash charges |
|
|
|
40 |
|
|
39 |
| Amortization of other assets included in cost of goods
sold |
|
|
|
34 |
|
|
26 |
| Re-measurement gain of E-Car |
|
|
|
― |
|
|
(153) |
| Deferred income taxes |
|
|
|
(28) |
|
|
35 |
| Equity income |
|
|
|
(54) |
|
|
(33) |
| Items not involving current cash flows |
|
|
$ |
256 |
|
$ |
117 |
Cash invested in non-cash operating assets and
liabilities amounted to $110 million
for the third quarter of 2013 compared to $63 million for the third 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 September 30, |
| |
|
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
|
| Accounts receivable |
|
|
$ |
(223) |
|
$ |
69 |
| Inventories |
|
|
|
48 |
|
|
(73) |
| Prepaid expenses and other |
|
|
|
(13) |
|
|
(22) |
| Accounts payable |
|
|
|
(71) |
|
|
(85) |
| Accrued salaries and wages |
|
|
|
71 |
|
|
49 |
| Other accrued liabilities |
|
|
|
77 |
|
|
13 |
| Income taxes payable |
|
|
|
― |
|
|
(14) |
| Deferred revenue |
|
|
|
1 |
|
|
― |
| Changes in non-cash operating assets and
liabilities |
|
|
$ |
(110) |
|
$ |
(63) |
Higher accounts receivable relate primarily to
increased tooling receivables and higher production sales at the
end of the third quarter of 2013. The decrease in inventories was
primarily due to lower tooling inventory partially offset by
increased production inventory to support launch activities. The
decrease in accounts payable was primarily due to timing of
payments. The increase in accrued salaries and wages was primarily
due to restructuring, employee profit sharing and vacation
accruals.
| Capital and Investment Spending |
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the three months |
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
| Fixed asset additions |
|
|
$ |
(280) |
|
$ |
(279) |
|
|
|
| Investments and other assets |
|
|
|
(67) |
|
|
(28) |
|
|
|
| Fixed assets, investments and other assets
additions |
|
|
|
(347) |
|
|
(307) |
|
|
|
| Purchase of subsidiaries |
|
|
|
― |
|
|
(56) |
|
|
|
| Proceeds from disposition |
|
|
|
30 |
|
|
15 |
|
|
|
| Cash used for investment activities |
|
|
$ |
(317) |
|
$ |
(348) |
|
|
$ |
31 |
Fixed assets, investments and other assets additions
In the third quarter of 2013, we invested
$280 million in fixed assets.
While investments were made to refurbish or replace assets consumed
in the normal course of business and for productivity improvements,
a large portion of the investment in the third quarter of 2013 was
for manufacturing equipment for programs that will be launching
subsequent to the third quarter of 2013.
In the third quarter of 2013, we invested
$66 million in other assets related
primarily to fully reimbursable tooling and engineering costs for
programs that launched during the third quarter of 2013 or will be
launching subsequent to the third quarter of 2013, as well as
$1 million in equity accounted
investments.
Purchase of subsidiaries
On August 31, 2012
we acquired the controlling 27% interest in E-Car for cash
consideration of $56 million, net of
$19 million cash acquired.
Proceeds from disposition
In the third quarter of 2013, the $30 million of proceeds include normal course
fixed and other asset disposals.
| Financing |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the three months |
|
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
| (Decrease) increase in bank indebtedness |
|
|
$ |
(9) |
|
$ |
42 |
|
|
|
|
| Repayments of debt |
|
|
|
(41) |
|
|
(66) |
|
|
|
|
| Issues of debt |
|
|
|
26 |
|
|
57 |
|
|
|
|
| Issues of Common Shares on exercise of stock
options |
|
|
|
10 |
|
|
2 |
|
|
|
|
| Repurchase of Common Shares |
|
|
|
(298) |
|
|
(21) |
|
|
|
|
| Settlement of stock options |
|
|
|
― |
|
|
(15) |
|
|
|
|
| Dividends paid |
|
|
|
(71) |
|
|
(62) |
|
|
|
|
| Cash used for financing activities |
|
|
$ |
(383) |
|
$ |
(63) |
|
|
$ |
(320) |
During the third quarter of 2013, we purchased
for cancellation 3.7 million Common Shares for an aggregate
purchase price of $298 million under
our NCIB.
Cash dividends paid per Common Share were
$0.32 for the third quarter of 2013,
for a total of $71 million.
| Financing Resources |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
As at |
|
|
|
As at |
|
|
|
| |
|
|
|
September 30, |
|
|
|
December 31, |
|
|
|
| |
|
|
|
2013 |
|
|
|
2012 |
|
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| |
Bank indebtedness |
|
|
$ |
46 |
|
|
$ |
71 |
|
|
|
| |
Long-term debt due within one year |
|
|
|
199 |
|
|
|
249 |
|
|
|
| |
Long-term debt |
|
|
|
96 |
|
|
|
112 |
|
|
|
| |
|
|
|
341 |
|
|
|
432 |
|
|
|
| Non-controlling interest |
|
|
|
26 |
|
|
|
29 |
|
|
|
| Shareholders' equity |
|
|
|
9,566 |
|
|
|
9,429 |
|
|
|
| Total capitalization |
|
|
$ |
9,933 |
|
|
$ |
9,890 |
|
|
$ |
43 |
Total capitalization increased by $43 million to $9.93
billion at September 30, 2013
compared to $9.89 billion at
December 31, 2012,
primarily as a result of a $137
million increase in shareholders' equity partially offset by
a $91 million decrease in
liabilities.
The increase in shareholders' equity was
primarily as a result of net income earned in the first nine months
of 2013 partially offset by:
- the repurchase of Common Shares in connection with our
NCIB;
- dividends paid during the first nine months of 2013; and
- the $82 million net unrealized
loss on translation of net investment in foreign operations.
The decrease in liabilities relates primarily to
lower bank term debt in our Rest of World segment and reduced bank
indebtedness.
Cash Resources
During the third quarter of 2013, our cash
resources decreased by $215 million to $1.06
billion as a result of the cash used for investing and
financing activities partially offset by cash provided from
operating activities, as discussed above. In addition to our cash
resources at September 30, 2013, we
had term and operating lines of credit totalling $2.56 billion of which $2.22 billion was unused and available.
On June 20, 2013,
we amended our existing $2.25 billion
revolving credit facility to become a five year facility with a
maturity of June 20, 2018. The
facility now includes a $200 million
Asian tranche, a $50 million Mexican
tranche and a tranche for Canada,
U.S. and Europe, which is fully
transferable between jurisdictions and can be drawn in U.S.
dollars, Canadian dollars or euros.
Maximum Number of Shares Issuable
The following table presents the maximum number
of shares that would be outstanding if all of the outstanding
options at November 5, 2013 were
exercised:
| Common Shares |
|
|
|
|
|
223,589,183 |
| Stock options (i) |
|
|
|
|
|
4,784,608 |
| |
|
|
|
|
|
228,373,791 |
| (i) |
Options to purchase Common Shares are exercisable by the
holder in accordance with the vesting provisions and upon payment
of the exercise price as may be determined from time to time
pursuant to our stock option plans. |
Contractual Obligations and Off-Balance Sheet
Financing
There have been no material changes with respect
to the contractual obligations requiring annual payments during the
third quarter of 2013 that are outside the ordinary course of our
business. Refer to our MD&A included in our 2012 Annual
Report.
|
RESULTS OF OPERATIONS - FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2013 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Sales |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the nine
months |
|
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
| Vehicle Production Volumes
(millions of units) |
|
|
|
|
|
|
|
|
|
|
|
| |
North America |
|
|
|
12.093 |
|
|
11.633 |
|
|
+ |
4% |
| |
Europe |
|
|
|
14.375 |
|
|
14.726 |
|
|
- |
2% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Sales |
|
|
|
|
|
|
|
|
|
|
|
| |
External Production |
|
|
|
|
|
|
|
|
|
|
|
| |
|
North America |
|
|
$ |
12,373 |
|
$ |
11,458 |
|
|
+ |
8% |
| |
|
Europe |
|
|
|
7,370 |
|
|
6,577 |
|
|
+ |
12% |
| |
|
Rest of World |
|
|
|
1,662 |
|
|
1,316 |
|
|
+ |
26% |
| |
Complete Vehicle Assembly |
|
|
|
2,274 |
|
|
1,864 |
|
|
+ |
22% |
| |
Tooling, Engineering and
Other |
|
|
|
1,982 |
|
|
1,589 |
|
|
+ |
25% |
| Total Sales |
|
|
$ |
25,661 |
|
$ |
22,804 |
|
|
+ |
13% |
External Production Sales - North America
External production sales in North America increased 8% or $915 million to $12.37
billion for the nine months ended September 30, 2013 compared to
$11.46 billion for the nine months
ended September 30, 2012. The
increase in external production sales is primarily as a result
of:
- the launch of new programs during or subsequent to the nine
months ended September 30, 2012,
including the:
-
- Ford Fusion and Lincoln MKZ;
- Honda Accord;
- Jeep Cherokee; and
- Tesla Model S;
- higher production volumes on certain existing programs;
- acquisitions completed during or subsequent to the nine months
ended September 30, 2012 which
positively impacted sales by $134
million, including STT; and
- an increase in content on certain programs, including the Buick
Enclave, GMC Acadia and Chevrolet Traverse.
These factors were partially offset by:
- programs that ended production during or subsequent to the nine
months ended September 30, 2012,
including the:
-
- Jeep Liberty; and
- Mazda 6;
- 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 September 30, 2012.
External Production Sales - Europe
External production sales in Europe increased 12% or $793 million to $7.37
billion for the nine months ended September 30, 2013 compared to $6.58 billion for the nine months ended
September 30, 2012. The increase in
external production sales is primarily as a result of:
- the launch of new programs during or subsequent to the nine
months ended September 30, 2012,
including the:
-
- Mercedes-Benz A-Class;
- MINI Paceman;
- Ford Kuga;
- Mercedes-Benz CLA-Class;
- Skoda Rapid and SEAT Toledo; and
- Ford Transit Custom;
- acquisitions completed during or subsequent to the nine months
ended September 30, 2012, which
positively impacted sales by $391
million, including ixetic and BDW technologies group and the
re-acquisition of an interior systems operation; 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;
- programs that ended production during or subsequent to the nine
months ended September 30, 2012;
and
- net customer price concessions subsequent to September 30, 2012.
External Production Sales - Rest of
World
External production sales in Rest of World
increased 26% or $346 million to
$1.66 billion for the nine months
ended September 30, 2013
compared to $1.32 billion for the
nine months ended September 30, 2012,
primarily as a result of the launch of new programs during or
subsequent to the nine months ended September 30, 2012, primarily in Brazil and China.
This factor was partially offset by:
- a $62 million decrease in
reported U.S. dollar sales as a result of the net weakening of
foreign currencies against the U.S. dollar, including the Brazilian
real and Argentine peso; and
- net customer price concessions subsequent to September 30, 2012.
| Complete Vehicle Assembly Sales |
|
|
|
|
|
|
|
|
| |
|
|
|
For the nine
months |
|
|
|
|
| |
|
|
|
ended September 30, |
|
|
|
|
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| |
|
|
|
|
|
|
|
|
|
|
|
| Complete Vehicle Assembly Sales |
|
|
$ |
2,274 |
|
$ |
1,864 |
|
|
+ |
22% |
| |
|
|
|
|
|
|
|
|
|
|
|
| Complete Vehicle Assembly Volumes (Units) |
|
|
|
109,862 |
|
|
92,152 |
|
|
+ |
19% |
Complete vehicle assembly sales increased 22%,
or $410 million, to $2.27 billion for the nine months ended
September 30, 2013 compared to
$1.86 billion for the nine
months ended September 30, 2012 and
assembly volumes increased 19% or 17,710 units.
The increase in complete vehicle assembly sales
is primarily as a result of:
- the launch of the MINI Paceman during the fourth quarter of
2012;
- an increase in assembly volumes for the Mercedes-Benz G-Class;
and
- a $54 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:
-
- MINI Countryman; and
- Peugeot RCZ.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
25% or $393 million to $1.98 billion for the nine months ended
September 30, 2013 compared to
$1.59 billion for the nine months
ended September 30, 2012.
In the nine months ended September 30, 2013, the major programs for which
we recorded tooling, engineering and other sales were the:
- Ford Transit;
- GM full-size pickups and SUVs;
- Ford Fusion;
- Qoros 3;
- Skoda Octavia;
- Jeep Grand Cherokee;
- MINI Countryman; and
- MINI Paceman;
In the nine months ended September 30, 2012, the major programs for which
we recorded tooling, engineering and other sales were the:
- Ford Fusion;
- Chevrolet Trax;
- MINI Countryman;
- Qoros 3;
- Mercedes-Benz M-Class;
- Chevrolet Spin;
- Opel Cascada Convertible; and
- Freightliner Cascadia.
| Segment Analysis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
For the nine months ended September
30, |
| |
|
|
|
External Sales |
|
|
|
Adjusted EBIT |
| |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
|
|
|
2013 |
|
|
2012 |
|
|
Change |
| North America |
|
|
$ |
13,232 |
|
$ |
12,143 |
|
$ |
1,089 |
|
|
$ |
1,168 |
|
$ |
1,148 |
|
$ |
20 |
| Europe |
|
|
|
10,626 |
|
|
9,230 |
|
|
1,396 |
|
|
|
264 |
|
|
141 |
|
|
123 |
| Rest of World |
|
|
|
1,786 |
|
|
1,414 |
|
|
372 |
|
|
|
4 |
|
|
(20) |
|
|
24 |
| Corporate and Other |
|
|
|
17 |
|
|
17 |
|
|
― |
|
|
|
22 |
|
|
2 |
|
|
20 |
| Total reportable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
segments |
|
|
$ |
25,661 |
|
$ |
22,804 |
|
$ |
2,857 |
|
|
$ |
1,458 |
|
$ |
1,271 |
|
$ |
187 |
Excluded from Adjusted EBIT for the nine months
ended September 30, 2013 and 2012
were the following Other Expense and Other Income items, which have
been discussed in the "Other Expense" section.
| |
|
|
|
For the nine months |
| |
|
|
|
ended September 30, |
| |
|
|
|
2013 |
|
|
2012 |
| Europe |
|
|
|
|
|
|
|
| |
Restructuring charges |
|
|
$ |
54 |
|
$ |
— |
| |
|
|
|
|
|
|
|
| Corporate and Other |
|
|
|
|
|
|
|
| |
Re-measurement gain of E-Car |
|
|
|
— |
|
|
(153) |
| |
|
|
$ |
54 |
|
$ |
(153) |
North
America
Adjusted EBIT in North
America increased $20 million
to $1.17 billion for the nine months
ended September 30, 2013 compared to
$1.15 billion for the nine
months ended September 30, 2012
primarily as a result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the nine months ended September 30, 2012;
- lower restructuring and downsizing costs;
- decreased pre-operating costs incurred at new facilities;
and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- incremental intangible asset amortization of $105 million related to the acquisition and
re-measurement of E-Car;
- programs that ended production during or subsequent to the nine
months ended September 30, 2012;
- operational inefficiencies and other costs at certain
facilities;
- a larger amount of employee profit sharing;
- higher affiliation fees paid to Corporate; and
- increased commodity costs.
Europe
Adjusted EBIT in Europe increased $123
million to $264 million for
the nine months ended September 30,
2013 compared to $141 million for the nine months ended
September 30, 2012 primarily as a
result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the nine months ended September 30, 2012;
- acquisitions completed during or subsequent to the nine months
ended September 30, 2012, including
ixetic;
- the benefit of restructuring and downsizing activities recently
undertaken;
- decreased commodity costs;
- higher equity income; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- a larger amount of employee profit sharing;
- higher restructuring and downsizing 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
$24 million to $4 million for the nine months ended September 30, 2013 compared to a loss of
$20 million for the nine months ended
September 30, 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;
- higher equity income; and
- lower restructuring and downsizing costs.
These factors were partially offset by:
- increased costs related to new facilities;
- higher production costs, including inflationary increases, that
we have not been successful in passing through to our
customers;
- higher affiliation fees paid to Corporate; and
- a larger amount of employee profit sharing.
Corporate and Other
Corporate and Other Adjusted EBIT increased
$20 million to $22 million for the nine months ended
September 30, 2013 compared to
$2 million for the nine months ended
September 30, 2012. The loss related
to our equity accounted investment in E-Car included in Corporate
and Other was $35 million for the
nine months ended September 30, 2012.
Excluding E-Car, Corporate and Other Adjusted EBIT decreased
$15 million to $22 million for the nine months ended
September 30, 2013 compared
to $37 million for the nine months
ended September 30, 2012 primarily as
a result of:
- the recovery of due diligence costs in the second quarter of
2012;
- an $8 million net decrease in
revaluation gains in respect of ABCP;
- increased consulting costs; and
- higher incentive compensation.
These factors were partially offset by:
- an increase in affiliation fees earned from our divisions;
- $10 million of cash received
related to the settlement of ABCP between the Investment Industry
Regulatory Organization of Canada
and financial institutions; and
- a loss on disposal of an investment in the second quarter of
2012.
SUBSEQUENT EVENTS
Normal Course Issuer Bid
Subsequent to the end of the third quarter of
2013, we purchased for cancellation the remaining 1.1 million
Common Shares under an existing normal course issuer bid for cash
consideration of $92 million through
a pre-defined automatic securities purchase plan with a designated
broker. As of November 4, 2013 we
have completed the repurchase of the entire 12 million Common
Shares authorized under the Normal Course Issuer Bid.
Subject to approval by the TSX and the NYSE, our
Board of Directors approved a normal course issuer bid to purchase
up to 12 million of our Common Shares, representing approximately
5.4% of our public float of Common Shares. The primary purposes of
the normal course issuer bid are purchases for cancellation as well
as purchases to fund our stock-based compensation awards or
programs and/or our obligations to our deferred profit sharing
plans. The normal course issuer bid is expected to commence on or
about November 13, 2013 and will
terminate one year later. All purchases of Common Shares will be
made at the market price at the time of purchase in accordance with
the rules and policies of the TSX. Purchases may also be made on
the NYSE in compliance with Rule 10b-18 under the U.S. Securities
Exchange Act of 1934. We may enter into a pre-defined automatic
securities purchase plan with a designated broker in order that
purchases may be made under our normal course issuer bid during
periods when the corporation's trading blackouts are in effect.
COMMITMENTS AND CONTINGENCIES
From time to time, we may be contingently liable for litigation,
legal and/or regulatory actions and proceedings and other
claims.
Refer to note 15 of our unaudited interim
consolidated financial statements for the nine months ended
September 30, 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 nine months ended
September 30, 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: light vehicle
production and operating performance in our reporting segments;
implementation of improvement plans in our underperforming
operations, and/or restructuring actions, including but not limited
to, Europe and South America; the expected amount of
restructuring charges; improved future financial results, including
Adjusted EBIT in South America and
Europe; and future repurchases of
Common Shares under our 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; continuing economic uncertainty
in various geographic regions, including Western Europe; 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,
Russia, 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; risk of production
disruptions due to natural disasters; pension liabilities; 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 |
|
|
|
Nine months ended |
| |
|
|
|
|
|
|
|
September 30, |
|
|
|
September 30, |
| |
|
|
|
Note |
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
| Sales |
|
|
|
|
|
|
$ |
8,338 |
|
$ |
7,411 |
|
|
$ |
25,661 |
|
$ |
22,804 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cost of goods sold |
|
|
|
|
|
|
|
7,273 |
|
|
6,545 |
|
|
|
22,384 |
|
|
19,972 |
| |
Depreciation and amortization |
|
|
|
|
|
|
|
264 |
|
|
203 |
|
|
|
779 |
|
|
558 |
| |
Selling, general and administrative |
|
|
|
11 |
|
|
|
411 |
|
|
344 |
|
|
|
1,188 |
|
|
1,110 |
| |
Interest expense, net |
|
|
|
|
|
|
|
5 |
|
|
5 |
|
|
|
13 |
|
|
15 |
| |
Equity income |
|
|
|
|
|
|
|
(54) |
|
|
(33) |
|
|
|
(148) |
|
|
(107) |
| |
Other expense (income), net |
|
|
|
2 |
|
|
|
48 |
|
|
(153) |
|
|
|
54 |
|
|
(153) |
| Income from operations before income
taxes |
|
|
|
|
|
|
|
391 |
|
|
500 |
|
|
|
1,391 |
|
|
1,409 |
| Income taxes |
|
|
|
|
|
|
|
73 |
|
|
114 |
|
|
|
294 |
|
|
333 |
| Net income |
|
|
|
|
|
|
|
318 |
|
|
386 |
|
|
|
1,097 |
|
|
1,076 |
| Net loss attributable to non-controlling
interests |
|
|
|
|
|
|
|
1 |
|
|
4 |
|
|
|
6 |
|
|
6 |
| Net income attributable to Magna
International Inc. |
|
|
|
|
|
|
$ |
319 |
|
$ |
390 |
|
|
$ |
1,103 |
|
$ |
1,082 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per Common Share: |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
|
|
|
$ |
1.41 |
|
$ |
1.68 |
|
|
$ |
4.80 |
|
$ |
4.65 |
| |
Diluted |
|
|
|
|
|
|
$ |
1.39 |
|
$ |
1.66 |
|
|
$ |
4.74 |
|
$ |
4.60 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash dividends paid per Common Share |
|
|
|
|
|
|
$ |
0.32 |
|
$ |
0.275 |
|
|
$ |
0.96 |
|
$ |
0.825 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average number of Common Shares outstanding
during |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| the period [in
millions]: |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
|
|
|
|
|
226.4 |
|
|
232.5 |
|
|
|
229.8 |
|
|
232.5 |
| |
Diluted |
|
|
|
|
|
|
|
229.5 |
|
|
235.1 |
|
|
|
232.6 |
|
|
235.3 |
| See accompanying
notes |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars in millions]
| |
|
|
|
|
|
|
|
Three months
ended |
|
|
|
Nine months ended |
| |
|
|
|
|
|
|
|
September 30, |
|
|
|
September 30, |
| |
|
|
|
Note |
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
| Net income |
|
|
|
|
|
|
$ |
318 |
|
$ |
386 |
|
|
$ |
1,097 |
|
$ |
1,076 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income (loss), net of
tax: |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net unrealized gain (loss) on translation of
net investment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
in foreign
operations |
|
|
|
|
|
|
|
142 |
|
|
127 |
|
|
|
(82) |
|
|
32 |
| |
Net unrealized (loss) gain on
available-for-sale investments |
|
|
|
|
|
|
|
(1) |
|
|
2 |
|
|
|
(5) |
|
|
(2) |
| |
Net unrealized gain (loss) on cash flow hedges |
|
|
|
|
|
|
|
23 |
|
|
39 |
|
|
|
(5) |
|
|
76 |
| |
Reclassification of net gain on cash flow hedges to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
net income |
|
|
|
|
|
|
|
— |
|
|
(2) |
|
|
|
(12) |
|
|
(7) |
| |
Reclassification of net loss on pensions to net
income |
|
|
|
|
|
|
|
3 |
|
|
— |
|
|
|
9 |
|
|
— |
| Other comprehensive income
(loss) |
|
|
|
|
|
|
|
167 |
|
|
166 |
|
|
|
(95) |
|
|
99 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Comprehensive income |
|
|
|
|
|
|
|
485 |
|
|
552 |
|
|
|
1,002 |
|
|
1,175 |
| Comprehensive loss attributable to non-controlling
interests |
|
|
|
|
|
|
|
2 |
|
|
5 |
|
|
|
7 |
|
|
6 |
| Comprehensive income
attributable to Magna International Inc. |
|
|
|
|
|
|
$ |
487 |
|
$ |
557 |
|
|
$ |
1,009 |
|
$ |
1,181 |
| See accompanying
notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
| |
|
|
|
|
|
|
|
Three months
ended |
|
|
|
Nine months ended |
| |
|
|
|
|
|
|
|
September 30, |
|
|
|
September 30, |
| |
|
|
|
Note |
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash provided from (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income |
|
|
|
|
|
|
$ |
318 |
|
$ |
386 |
|
|
$ |
1,097 |
|
$ |
1,076 |
| Items not involving current cash flows |
|
|
|
4 |
|
|
|
256 |
|
|
117 |
|
|
|
798 |
|
|
544 |
| |
|
|
|
|
|
|
|
574 |
|
|
503 |
|
|
|
1,895 |
|
|
1,620 |
| Changes in non-cash operating assets and liabilities |
|
|
|
4 |
|
|
|
(110) |
|
|
(63) |
|
|
|
(578) |
|
|
(487) |
| Cash provided from operating activities |
|
|
|
|
|
|
|
464 |
|
|
440 |
|
|
|
1,317 |
|
|
1,133 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| INVESTMENT ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fixed asset additions |
|
|
|
|
|
|
|
(280) |
|
|
(279) |
|
|
|
(706) |
|
|
(796) |
| Purchase of subsidiaries |
|
|
|
|
|
|
|
— |
|
|
(56) |
|
|
|
— |
|
|
(79) |
| Increase in investments and other assets |
|
|
|
|
|
|
|
(67) |
|
|
(28) |
|
|
|
(168) |
|
|
(97) |
| Proceeds from disposition |
|
|
|
|
|
|
|
30 |
|
|
15 |
|
|
|
90 |
|
|
93 |
| Cash used for investing activities |
|
|
|
|
|
|
|
(317) |
|
|
(348) |
|
|
|
(784) |
|
|
(879) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Decrease) increase in bank indebtedness |
|
|
|
|
|
|
|
(9) |
|
|
42 |
|
|
|
(14) |
|
|
20 |
| Repayments of debt |
|
|
|
|
|
|
|
(41) |
|
|
(66) |
|
|
|
(142) |
|
|
(281) |
| Issues of debt |
|
|
|
|
|
|
|
26 |
|
|
57 |
|
|
|
83 |
|
|
329 |
| Settlement of stock options |
|
|
|
|
|
|
|
— |
|
|
(15) |
|
|
|
(23) |
|
|
(19) |
| Issue of Common Shares |
|
|
|
|
|
|
|
10 |
|
|
2 |
|
|
|
60 |
|
|
5 |
| Repurchase of Common Shares |
|
|
|
12 |
|
|
|
(298) |
|
|
(21) |
|
|
|
(723) |
|
|
(21) |
| Contribution to subsidiaries by non-controlling
interests |
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
4 |
|
|
— |
| Dividends paid |
|
|
|
|
|
|
|
(71) |
|
|
(62) |
|
|
|
(216) |
|
|
(189) |
| Cash used for financing activities |
|
|
|
|
|
|
|
(383) |
|
|
(63) |
|
|
|
(971) |
|
|
(156) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash and cash
equivalents |
|
|
|
|
|
|
|
21 |
|
|
25 |
|
|
|
(20) |
|
|
24 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (decrease) increase in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| during the period |
|
|
|
|
|
|
|
(215) |
|
|
54 |
|
|
|
(458) |
|
|
122 |
| Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
1,279 |
|
|
1,393 |
|
|
|
1,522 |
|
|
1,325 |
| Cash and cash equivalents, end of period |
|
|
|
|
|
|
$ |
1,064 |
|
$ |
1,447 |
|
|
$ |
1,064 |
|
$ |
1,447 |
| See accompanying
notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
| |
|
|
|
|
|
|
|
As at |
|
|
As at |
| |
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
| |
|
|
|
Note |
|
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
4 |
|
|
$ |
1,064 |
|
$ |
1,522 |
| Accounts receivable |
|
|
|
|
|
|
|
5,867 |
|
|
4,774 |
| Inventories |
|
|
|
5 |
|
|
|
2,701 |
|
|
2,512 |
| Deferred tax assets |
|
|
|
|
|
|
|
238 |
|
|
170 |
| Prepaid expenses and other |
|
|
|
|
|
|
|
199 |
|
|
157 |
| |
|
|
|
|
|
|
|
10,069 |
|
|
9,135 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Investments |
|
|
|
14 |
|
|
|
424 |
|
|
385 |
| Fixed assets, net |
|
|
|
|
|
|
|
5,259 |
|
|
5,273 |
| Goodwill |
|
|
|
|
|
|
|
1,472 |
|
|
1,473 |
| Deferred tax assets |
|
|
|
|
|
|
|
103 |
|
|
90 |
| Other assets |
|
|
|
6 |
|
|
|
739 |
|
|
753 |
| |
|
|
|
|
|
|
$ |
18,066 |
|
$ |
17,109 |
| |
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
| Bank indebtedness |
|
|
|
|
|
|
$ |
46 |
|
$ |
71 |
| Accounts payable |
|
|
|
|
|
|
|
4,903 |
|
|
4,450 |
| Accrued salaries and wages |
|
|
|
|
|
|
|
716 |
|
|
617 |
| Other accrued liabilities |
|
|
|
7 |
|
|
|
1,555 |
|
|
1,185 |
| Income taxes payable |
|
|
|
|
|
|
|
20 |
|
|
93 |
| Deferred tax liabilities |
|
|
|
|
|
|
|
25 |
|
|
19 |
| Long-term debt due within one year |
|
|
|
8 |
|
|
|
199 |
|
|
249 |
| |
|
|
|
|
|
|
|
7,464 |
|
|
6,684 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Long-term employee benefit liabilities |
|
|
|
9 |
|
|
|
562 |
|
|
560 |
| Long-term debt |
|
|
|
8 |
|
|
|
96 |
|
|
112 |
| Other long-term liabilities |
|
|
|
10 |
|
|
|
184 |
|
|
154 |
| Deferred tax liabilities |
|
|
|
|
|
|
|
168 |
|
|
141 |
| |
|
|
|
|
|
|
|
8,474 |
|
|
7,651 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Shareholders' equity |
|
|
|
|
|
|
|
|
|
|
|
| Capital stock |
|
|
|
|
|
|
|
|
|
|
|
| Common Shares |
|
|
|
|
|
|
|
|
|
|
|
| [issued:
224,664,115; December 31, 2012 - 233,115,783] |
|
|
|
12 |
|
|
|
4,287 |
|
|
4,391 |
| Contributed surplus |
|
|
|
|
|
|
|
69 |
|
|
80 |
| Retained earnings |
|
|
|
|
|
|
|
4,841 |
|
|
4,462 |
| Accumulated other comprehensive income |
|
|
|
13 |
|
|
|
369 |
|
|
496 |
| |
|
|
|
|
|
|
|
9,566 |
|
|
9,429 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Non-controlling interests |
|
|
|
|
|
|
|
26 |
|
|
29 |
| |
|
|
|
|
|
|
|
9,592 |
|
|
9,458 |
| |
|
|
|
|
|
|
$ |
18,066 |
|
$ |
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,103 |
|
|
|
|
|
(6) |
|
|
1,097 |
| Other comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94) |
|
|
(1) |
|
|
(95) |
| Issues of shares by
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
4 |
| Shares issued on exercise of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| options |
|
|
|
|
|
|
1.9 |
|
|
81 |
|
|
(21) |
|
|
|
|
|
|
|
|
|
|
|
60 |
| Repurchase and cancellation under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| normal course issuer
bid |
|
|
|
12 |
|
|
(10.5) |
|
|
(200) |
|
|
|
|
|
(490) |
|
|
(33) |
|
|
|
|
|
(723) |
| Release of restricted stock |
|
|
|
|
|
|
|
|
|
7 |
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
|
— |
| Stock-based compensation expense |
|
|
|
11 |
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
26 |
| Settlement of stock options |
|
|
|
11 |
|
|
|
|
|
|
|
|
(9) |
|
|
(10) |
|
|
|
|
|
|
|
|
(19) |
| Dividends paid |
|
|
|
|
|
|
0.2 |
|
|
8 |
|
|
|
|
|
(224) |
|
|
|
|
|
|
|
|
(216) |
| Balance, September 30,
2013 |
|
|
|
|
|
|
224.7 |
|
$ |
4,287 |
|
$ |
69 |
|
$ |
4,841 |
|
$ |
369 |
|
$ |
26 |
|
$ |
9,592 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Note |
|
|
Number |
|
|
Stated
Value |
|
|
Contributed
Surplus |
|
|
Retained
Earnings |
|
|
AOCI
(i) |
|
|
Non-
controlling
Interest |
|
|
Total
Equity |
| |
|
|
|
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2011 |
|
|
|
|
|
|
233.3 |
|
$ |
4,373 |
|
$ |
63 |
|
$ |
3,317 |
|
$ |
422 |
|
$ |
27 |
|
$ |
8,202 |
| Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,082 |
|
|
|
|
|
(6) |
|
|
1,076 |
| Other comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99 |
|
|
|
|
|
99 |
| Divestiture of
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
7 |
| Shares issued on exercise of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| options |
|
|
|
|
|
|
0.2 |
|
|
8 |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
5 |
| Repurchase and cancellation under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| normal course issuer
bid |
|
|
|
12 |
|
|
(0.4) |
|
|
(9) |
|
|
|
|
|
(10) |
|
|
(2) |
|
|
|
|
|
(21) |
| Release of restricted stock |
|
|
|
|
|
|
|
|
|
5 |
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
— |
| Stock-based compensation expense |
|
|
|
11 |
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
26 |
| Settlement of stock options |
|
|
|
11 |
|
|
|
|
|
|
|
|
(7) |
|
|
(9) |
|
|
|
|
|
|
|
|
(16) |
| Dividends paid |
|
|
|
|
|
|
0.1 |
|
|
4 |
|
|
|
|
|
(193) |
|
|
|
|
|
|
|
|
(189) |
| Balance, September 30, 2012 |
|
|
|
|
|
|
233.2 |
|
$ |
4,381 |
|
$ |
74 |
|
$ |
4,187 |
|
$ |
519 |
|
$ |
28 |
|
$ |
9,189 |
|
(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 September 30, 2013 and the results of operations,
changes in equity and cash flows for the three-month and nine-month
periods ended September 30, 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 (INCOME), NET
| |
|
|
|
|
|
|
|
Nine months ended |
| |
|
|
|
|
|
|
|
September 30, |
| |
|
|
|
|
|
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Third Quarter |
|
|
|
|
|
|
|
|
|
|
|
| |
Restructuring |
[i] |
|
|
|
|
|
$ |
48 |
|
$ |
— |
| |
Re-measurement gain of E-Car |
[ii] |
|
|
|
|
|
|
— |
|
|
(153) |
| |
|
|
|
|
|
|
|
48 |
|
|
(153) |
| |
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
|
|
|
|
|
|
|
|
|
|
|
| |
Restructuring |
[i] |
|
|
|
|
|
|
6 |
|
|
— |
| |
|
|
|
|
|
|
$ |
54 |
|
$ |
(153) |
For the nine months ended September
30, 2013:
[i] Restructuring
During the third and first quarters of 2013, the
Company recorded net restructuring charges of $48 million [$33
million after tax] and $6
million [$6 million after
tax], respectively, in Europe at
its exterior and interior systems operations related primarily to
the closure of a facility in Belgium.
For the nine months ended September
30, 2012:
[ii] Re-measurement gain of E-Car
On August 31,
2012, the Company acquired the controlling 27% interest in
the Magna E-Car Systems L.P. ["E-Car"] partnership from a company
affiliated with the Stronach Group for cash consideration of
$75 million.
Prior to the acquisition, the Company held the
remaining 73% non-controlling interest in E-Car and accounted for
this investment using the equity method of accounting. The
incremental investment in E-Car was accounted for under the
business acquisition method of accounting as a step acquisition
which requires that Magna re-measure its pre-existing investment in
E-Car at fair value and recognize any gains or losses in income.
The estimated fair value of Magna's partnership interest
immediately before the closing date was $205
million, which resulted in the recognition of a non-cash
gain of $153 million [$125 million after tax], which is recorded in
Other expense (income), net on the Consolidated Statements of
Income.
3. EARNINGS PER SHARE
| |
Three months
ended |
|
Nine months ended |
| |
September 30, |
|
September 30, |
| |
2013 |
|
2012 |
|
2013 |
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Net income
attributable to Magna International Inc. |
$ |
319 |
|
$ |
390 |
|
$ |
1,103 |
|
$ |
1,082 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Average number of
Common Shares outstanding |
|
226.4 |
|
|
232.5 |
|
|
229.8 |
|
|
232.5 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Basic earnings per Common
Share |
$ |
1.41 |
|
$ |
1.68 |
|
$ |
4.80 |
|
$ |
4.65 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Diluted earnings
per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Net income
attributable to Magna International Inc. |
$ |
319 |
|
$ |
390 |
|
$ |
1,103 |
|
$ |
1,082 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Average number of
Common Shares outstanding |
|
226.4 |
|
|
232.5 |
|
|
229.8 |
|
|
232.5 |
| Adjustments |
|
|
|
|
|
|
|
|
|
|
|
| |
Stock options and restricted stock
[a] |
|
3.1 |
|
|
2.6 |
|
|
2.8 |
|
|
2.8 |
| |
|
229.5 |
|
|
235.1 |
|
|
232.6 |
|
|
235.3 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Diluted earnings per Common
Share |
$ |
1.39 |
|
$ |
1.66 |
|
$ |
4.74 |
|
$ |
4.60 |
| [a] |
For the three and nine months ended September 30, 2013, diluted
earnings per Common Share exclude nil [2012 - 2.6 million] and 0.1
million [2012 - 2.3 million] Common Shares issuable under the
Company's Incentive Stock Option Plan because these options were
not "in-the-money". |
4. DETAILS OF CASH FROM OPERATING ACTIVITIES
[a] Cash and cash equivalents:
| |
|
September
30, |
|
December 31, |
| |
|
2013 |
|
2012 |
| |
|
|
|
|
|
|
| Bank term deposits, bankers' acceptances and
government paper |
|
$ |
889 |
|
$ |
1,220 |
| Cash |
|
|
175 |
|
|
302 |
| |
|
$ |
1,064 |
|
$ |
1,522 |
[b] Items not involving current cash
flows:
| |
Three months
ended |
|
Nine months
ended |
| |
September 30, |
|
September 30, |
| |
2013 |
|
2012 |
|
2013 |
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
$ |
264 |
|
$ |
203 |
|
$ |
779 |
|
$ |
558 |
| Other non-cash charges |
|
40 |
|
|
39 |
|
|
122 |
|
|
106 |
| Amortization of other assets included in cost of
goods sold |
|
34 |
|
|
26 |
|
|
100 |
|
|
82 |
| Re-measurement gain of E-Car |
|
— |
|
|
(153) |
|
|
— |
|
|
(153) |
| Deferred income taxes |
|
(28) |
|
|
35 |
|
|
(55) |
|
|
58 |
| Equity income |
|
(54) |
|
|
(33) |
|
|
(148) |
|
|
(107) |
| |
$ |
256 |
|
$ |
117 |
|
$ |
798 |
|
$ |
544 |
[c] Changes in non-cash operating assets and
liabilities:
| |
Three months
ended |
|
Nine months
ended |
| |
September 30, |
|
September 30, |
| |
2013 |
|
2012 |
|
2013 |
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
| Accounts receivable |
$ |
(223) |
|
$ |
69 |
|
$ |
(1,171) |
|
$ |
(626) |
|
Inventories |
|
48 |
|
|
(73) |
|
|
(203) |
|
|
(375) |
| Prepaid expenses and other |
|
(13) |
|
|
(22) |
|
|
(46) |
|
|
(4) |
| Accounts payable |
|
(71) |
|
|
(85) |
|
|
454 |
|
|
222 |
| Accrued salaries and wages |
|
71 |
|
|
49 |
|
|
100 |
|
|
58 |
| Other accrued liabilities |
|
77 |
|
|
13 |
|
|
339 |
|
|
214 |
| Income taxes payable |
|
— |
|
|
(14) |
|
|
(51) |
|
|
27 |
| Deferred revenue |
|
1 |
|
|
— |
|
|
— |
|
|
(3) |
| |
$ |
(110) |
|
$ |
(63) |
|
$ |
(578) |
|
$ |
(487) |
5. INVENTORIES
Inventories consist of:
| |
|
September
30, |
|
December 31, |
| |
|
2013 |
|
2012 |
| |
|
|
|
|
|
|
| Raw materials and supplies |
|
$ |
993 |
|
$ |
911 |
| Work-in-process |
|
|
292 |
|
|
260 |
| Finished goods |
|
|
315 |
|
|
283 |
| Tooling and engineering |
|
|
1,101 |
|
|
1,058 |
| |
|
$ |
2,701 |
|
$ |
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:
| |
|
|
September 30, |
|
|
December 31, |
| |
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
Preproduction costs related to
long-term supply agreements with
contractual guarantee for reimbursement |
|
$ |
317 |
|
$ |
297 |
| Long-term receivables |
|
|
120 |
|
|
95 |
| Patents and licences, net |
|
|
33 |
|
|
34 |
| Unrealized gain on cash flow hedges |
|
|
22 |
|
|
32 |
| E-Car intangible |
|
|
40 |
|
|
158 |
| Other, net |
|
|
207 |
|
|
137 |
| |
|
$ |
739 |
|
$ |
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 |
| Expense, net |
|
|
|
|
11 |
|
|
|
9 |
| Settlements |
|
|
|
|
(6) |
|
|
|
(7) |
| Foreign exchange and other |
|
|
|
|
(9) |
|
|
|
(1) |
| Balance, June 30 |
|
|
|
|
102 |
|
|
|
84 |
| Expense, net |
|
|
|
|
2 |
|
|
|
4 |
| Settlements |
|
|
|
|
(16) |
|
|
|
(10) |
| Foreign exchange and other |
|
|
|
|
2 |
|
|
|
5 |
| Balance, September 30 |
|
|
|
$ |
90 |
|
|
$ |
83 |
8. LONG-TERM DEBT
On June 20, 2013,
the Company amended its existing $2.25
billion revolving credit facility to become a five year
facility with a maturity of June 20,
2018. The facility now includes a $200 million Asian tranche, a $50 million Mexican tranche and a tranche for
Canada, U.S. and Europe, which is fully transferable between
jurisdictions and can be drawn in U.S. dollars, Canadian dollars or
euros.
9. LONG-TERM EMPLOYEE BENEFIT LIABILITIES
The Company recorded long-term employee benefit
expenses as follows:
| |
|
Three months
ended |
|
Nine months
ended |
| |
|
September 30, |
|
September 30, |
| |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Defined benefit pension plan and
other |
|
$ |
4 |
|
$ |
3 |
|
$ |
12 |
|
$ |
8 |
| Termination and long service
arrangements |
|
|
10 |
|
|
5 |
|
|
24 |
|
|
20 |
| Retirement medical benefit
plan |
|
|
— |
|
|
1 |
|
|
1 |
|
|
2 |
| |
|
$ |
14 |
|
$ |
9 |
|
$ |
37 |
|
$ |
30 |
10. OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of:
| |
|
|
September 30, |
|
|
December 31, |
| |
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
| Long-term portion of income taxes
payable |
|
$ |
119 |
|
$ |
94 |
| Asset retirement obligation |
|
|
40 |
|
|
39 |
| Long-term portion of fair value of
hedges |
|
|
15 |
|
|
10 |
| Deferred revenue |
|
|
10 |
|
|
11 |
| |
|
$ |
184 |
|
$ |
154 |
11. STOCK-BASED COMPENSATION
[a] Incentive Stock Option Plan
The following is a continuity schedule of
options outstanding [number of options in the table below are
expressed in whole numbers]:
| |
|
2013 |
|
|
2012 |
| |
|
Options
outstanding |
|
|
|
|
|
Options
outstanding |
|
|
|
| |
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
|
|
Number |
| |
|
Number |
|
|
Exercise |
|
|
of options |
|
|
Number |
|
|
Exercise |
|
|
of options |
| |
|
of options |
|
|
price (i) |
|
|
exercisable |
|
|
of options |
|
|
price (i) |
|
|
exercisable |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of period |
|
6,623,242 |
|
|
35.39 |
|
|
3,227,574 |
|
|
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 |
|
— |
|
|
— |
|
|
2,105,503 |
|
|
— |
|
|
— |
|
|
2,366,667 |
| March 31 |
|
5,467,359 |
|
|
41.73 |
|
|
3,134,694 |
|
|
7,887,413 |
|
|
34.61 |
|
|
4,111,913 |
| Granted |
|
— |
|
|
— |
|
|
— |
|
|
47,500 |
|
|
48.22 |
|
|
— |
| Exercised |
|
(329,881) |
|
|
37.05 |
|
|
(329,881) |
|
|
(5,000) |
|
|
32.75 |
|
|
(5,000) |
| Cancelled |
|
(81,665) |
|
|
52.05 |
|
|
(11,667) |
|
|
(46,966) |
|
|
57.14 |
|
|
(36,966) |
| June 30 |
|
5,055,813 |
|
|
41.87 |
|
|
2,793,146 |
|
|
7,882,947 |
|
|
34.56 |
|
|
4,069,947 |
| Exercised (iii) |
|
(259,315) |
|
|
41.56 |
|
|
(259,315) |
|
|
(950,405) |
|
|
27.46 |
|
|
(905,405) |
| Cancelled |
|
— |
|
|
— |
|
|
— |
|
|
(6,000) |
|
|
50.66 |
|
|
(2,000) |
| September 30 |
|
4,796,498 |
|
|
41.89 |
|
|
2,533,831 |
|
|
6,926,542 |
|
|
35.52 |
|
|
3,117,542 |
| (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. |
| |
|
| (iii) |
During the third quarter of 2012, Mr. Stronach exercised
900,001 options on a cashless basis in accordance with the
applicable stock option plans. On exercise, cash payments totalling
$15 million were made to Mr. Stronach. |
| |
|
| |
All cash payments were calculated using the
difference between the aggregate fair market value of the Option
Shares based on the closing price of the Company's Common Shares on
the Toronto Stock Exchange ["TSX"] on the date of exercise and the
aggregate Exercise Price of all such options surrendered. |
The weighted average assumptions used in
measuring the fair value of stock options granted or modified are
as follows:
| |
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
| Risk free interest
rate |
|
|
1.32% |
|
|
2.23% |
| Expected dividend
yield |
|
|
2.00% |
|
|
2.00% |
| Expected
volatility |
|
|
34% |
|
|
43% |
| Expected time until
exercise |
|
|
4.5 years |
|
|
4.5 years |
| |
|
|
|
|
|
|
| Weighted average fair value of options |
|
|
|
|
|
|
| granted or modified in period
[Cdn$] |
|
$ |
14.02 |
|
$ |
15.37 |
[b] Long-term retention program
The following is a continuity of the stock that
has not been released to the executives and is reflected as a
reduction in the stated value of the Company's Common Shares
[number of Common Shares in the table below are expressed in whole
numbers]:
| |
|
|
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, June 30 and
September 30 |
|
|
730,476 |
|
$ |
25 |
|
|
882,988 |
|
$ |
30 |
[c] Restricted stock unit
program
The following is a continuity schedule of
Restricted stock units ["RSUs"] and Independent Director stock
units ["DSUs"] outstanding [number of stock units in the table
below are expressed in whole numbers]:
| |
|
|
2013 |
|
|
2012 |
| |
|
|
Equity |
|
|
Liability |
|
|
Liability |
|
|
|
|
|
Equity |
|
|
Liability |
|
|
Liability |
|
|
|
| |
|
|
classified |
|
|
classified |
|
|
classified |
|
|
|
|
|
classified |
|
|
classified |
|
|
classified |
|
|
|
| |
|
|
RSUs |
|
|
RSUs |
|
|
DSUs |
|
|
Total |
|
|
RSUs |
|
|
RSUs |
|
|
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 |
|
|
13,825 |
|
|
10,013 |
|
|
94,474 |
|
|
94,238 |
|
|
15,364 |
|
|
8,565 |
|
|
118,167 |
| Dividend equivalents |
|
|
415 |
|
|
189 |
|
|
1,206 |
|
|
1,810 |
|
|
467 |
|
|
263 |
|
|
1,201 |
|
|
1,931 |
| Released |
|
|
(8,259) |
|
|
— |
|
|
(113,007) |
|
|
(121,266) |
|
|
(8,259) |
|
|
— |
|
|
— |
|
|
(8,259) |
| Balance, March 31 |
|
|
668,222 |
|
|
34,113 |
|
|
105,135 |
|
|
807,470 |
|
|
454,172 |
|
|
45,433 |
|
|
208,212 |
|
|
707,817 |
| Granted |
|
|
71,391 |
|
|
— |
|
|
7,523 |
|
|
78,914 |
|
|
101,672 |
|
|
— |
|
|
8,838 |
|
|
110,510 |
| Dividend equivalents |
|
|
348 |
|
|
158 |
|
|
626 |
|
|
1,132 |
|
|
558 |
|
|
325 |
|
|
1,522 |
|
|
2,405 |
| Released |
|
|
(10,386) |
|
|
— |
|
|
— |
|
|
(10,386) |
|
|
(10,123) |
|
|
— |
|
|
— |
|
|
(10,123) |
| Balance, June 30 |
|
|
729,575 |
|
|
34,271 |
|
|
113,284 |
|
|
877,130 |
|
|
546,279 |
|
|
45,758 |
|
|
218,572 |
|
|
810,609 |
| Granted |
|
|
40,779 |
|
|
— |
|
|
7,538 |
|
|
48,317 |
|
|
68,540 |
|
|
— |
|
|
9,778 |
|
|
78,318 |
| Dividend equivalents |
|
|
252 |
|
|
136 |
|
|
463 |
|
|
851 |
|
|
438 |
|
|
279 |
|
|
1,252 |
|
|
1,969 |
| Released |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(34,124) |
|
|
(34,124) |
| Balance, September 30 |
|
|
770,606 |
|
|
34,407 |
|
|
121,285 |
|
|
926,298 |
|
|
615,257 |
|
|
46,037 |
|
|
195,478 |
|
|
856,772 |
[d] Compensation expense related to stock-based
compensation
Stock-based compensation expense recorded in
selling, general and administrative expenses related to the above
programs is as follows:
| |
|
Three months
ended |
|
Nine months
ended |
| |
|
September 30, |
|
September 30, |
| |
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Incentive Stock Option Plan |
|
$ |
4 |
|
$ |
5 |
|
$ |
12 |
|
$ |
14 |
| Long-term retention |
|
|
1 |
|
|
1 |
|
|
3 |
|
|
3 |
| Restricted stock unit |
|
|
3 |
|
|
3 |
|
|
11 |
|
|
11 |
| |
|
|
8 |
|
|
9 |
|
|
26 |
|
|
28 |
| Fair value adjustment for liability classified
DSUs |
|
|
1 |
|
|
1 |
|
|
5 |
|
|
3 |
| Total stock-based compensation expense |
|
$ |
9 |
|
$ |
10 |
|
$ |
31 |
|
$ |
31 |
12. COMMON SHARES
[a] The Company repurchased shares under a
normal course issuer bid as follows:
| |
|
|
2013 |
|
|
2012 |
| |
|
|
Number |
|
|
Cash |
|
|
Number |
|
|
Cash |
| |
|
|
of shares |
|
|
consideration |
|
|
of shares |
|
|
consideration |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| First Quarter |
|
|
1,593,615 |
|
$ |
88 |
|
|
— |
|
$ |
— |
| Second Quarter |
|
|
5,194,188 |
|
|
337 |
|
|
— |
|
|
— |
| Third Quarter |
|
|
3,697,973 |
|
|
298 |
|
|
361,200 |
|
|
21 |
| |
|
|
10,485,776 |
|
$ |
723 |
|
|
361,200 |
|
$ |
21 |
Refer to Subsequent Event Note 17 for more
information regarding the Company's Normal Course Issuer Bids.
[b] The following table presents the
maximum number of shares that would be outstanding if all the
dilutive instruments outstanding at November
5, 2013 were exercised or converted:
| Common
Shares |
|
|
|
|
|
|
|
223,589,183 |
| Stock options (i) |
|
|
|
|
|
|
|
4,784,608 |
| |
|
|
|
|
|
|
|
228,373,791 |
| |
|
| (i) |
Options to purchase Common Shares are exercisable by the
holder in accordance with the vesting provisions and upon payment
of the exercise price as may be determined from time to time
pursuant to the Company's stock option plans. |
13. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following is a continuity schedule of
accumulated other comprehensive income:
| |
|
|
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 |
| |
Net unrealized loss on translation of net
investment in foreign operations |
|
|
(91) |
|
|
(194) |
| |
Repurchase of shares under normal course issuer
bid |
|
|
(17) |
|
|
— |
| |
Balance, June 30 |
|
|
383 |
|
|
451 |
| |
Net unrealized gain on translation of net
investment in foreign operations |
|
|
143 |
|
|
128 |
| |
Repurchase of shares under normal course issuer
bid |
|
|
(11) |
|
|
(2) |
| |
Balance, September 30 |
|
|
515 |
|
|
577 |
| |
|
|
|
|
|
|
| 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 |
| |
Net unrealized loss on cash flow hedges |
|
|
(36) |
|
|
(14) |
| |
Reclassification of net gain on cash flow hedges
to net income |
|
|
(6) |
|
|
(8) |
| |
Balance, June 30 |
|
|
(6) |
|
|
9 |
| |
Net unrealized gain on cash flow
hedges |
|
|
23 |
|
|
39 |
| |
Reclassification of net gain on cash flow hedges
to net income |
|
|
— |
|
|
(2) |
| |
Balance, September 30 |
|
|
17 |
|
|
46 |
| |
|
|
|
|
|
|
| Accumulated net unrealized (loss) 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 |
| |
Net unrealized loss on
investments |
|
|
(5) |
|
|
(1) |
| |
Balance, June 30 |
|
|
(3) |
|
|
1 |
| |
Net unrealized (loss) gain on
investments |
|
|
(1) |
|
|
2 |
| |
Balance, September 30 |
|
|
(4) |
|
|
3 |
| |
|
|
|
|
|
|
| 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) |
| |
Reclassification of net loss on pensions to net
income |
|
|
3 |
|
|
— |
| |
Balance, June 30 |
|
|
(162) |
|
|
(107) |
| |
Reclassification of net loss on pensions to net
income |
|
|
3 |
|
|
— |
| |
Balance, September 30 |
|
|
(159) |
|
|
(107) |
| |
|
|
|
|
|
|
| Total accumulated other comprehensive
income |
|
$ |
369 |
|
$ |
519 |
(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) |
| Reclassifications of net gain (loss) to net
income |
|
|
2 |
|
|
(1) |
| Balance, March 31 |
|
|
(15) |
|
|
(10) |
| Net unrealized loss |
|
|
13 |
|
|
7 |
| Reclassifications of net gain to net
income |
|
|
3 |
|
|
2 |
| Balance, June 30 |
|
|
1 |
|
|
(1) |
| Net unrealized gain |
|
|
(8) |
|
|
(14) |
| Reclassifications of net gain to net
income |
|
|
— |
|
|
1 |
| Balance, September 30 |
|
$ |
(7) |
|
$ |
(14) |
| (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 |
| Reclassification of net (loss) gain to net
income |
|
|
(1) |
|
|
1 |
| Balance, June 30 |
|
|
34 |
|
|
25 |
| Reclassification of net loss to net
income |
|
|
(1) |
|
|
— |
| Balance, September 30 |
|
$ |
33 |
|
$ |
25 |
The amount of other comprehensive income that is
expected to be reclassified to net income over the next 12 months
is $13 million [net of income
taxes of $6 million].
14. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and
financial liabilities consist of the following:
| |
|
September 30, |
|
|
December 31, |
| |
|
2013 |
|
|
2012 |
| |
|
|
|
|
|
| Held for trading |
|
|
|
|
|
| |
Cash and cash equivalents |
$ |
1,064 |
|
$ |
1,522 |
| |
Investment in asset-backed commercial
paper |
|
92 |
|
|
90 |
| |
$ |
1,156 |
|
$ |
1,612 |
| Held to maturity investments |
|
|
|
|
|
| |
Severance investments |
$ |
5 |
|
$ |
8 |
| Available-for-sale |
|
|
|
|
|
| |
Equity investments |
$ |
3 |
|
$ |
9 |
| Loans and receivables |
|
|
|
|
|
| |
Accounts receivable |
$ |
5,867 |
|
$ |
4,774 |
| |
Long-term receivables included in
other assets |
|
120 |
|
|
95 |
| |
$ |
5,987 |
|
$ |
4,869 |
| Other financial liabilities |
|
|
|
|
|
| |
Bank indebtedness |
$ |
46 |
|
|
$ 71 |
| |
Long-term debt [including portion due
within one year] |
|
295 |
|
|
361 |
| |
Accounts payable |
|
4,903 |
|
|
4,450 |
| |
$ |
5,244 |
|
$ |
4,882 |
| Derivatives designated
as effective hedges, measured at fair value |
|
|
|
|
|
| |
Foreign currency contracts |
|
|
|
|
|
| |
|
Prepaid expenses |
$ |
38 |
|
$ |
37 |
| |
|
Other assets |
|
22 |
|
|
32 |
| |
|
Other accrued liabilities |
|
(16) |
|
|
(11) |
| |
|
Other long-term liabilities |
|
(15) |
|
|
(9) |
| |
|
29 |
|
|
49 |
| |
Commodity contracts |
|
|
|
|
|
| |
|
Prepaid expenses |
|
— |
|
|
2 |
| |
|
Other accrued liabilities |
|
(2) |
|
|
(3) |
| |
|
Other long-term liabilities |
|
— |
|
|
(1) |
| |
|
(2) |
|
|
(2) |
| |
$ |
27 |
|
$ |
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 interim
consolidated balance sheets are reasonable estimates of fair
values.
Investments
At September 30,
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$95 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 September 30,
2013, the Company held available-for-sale investments in
publicly traded companies. The carrying value and fair value of
these investments was $3 million,
which was based on the closing share price of the investments on
September 30, 2013.
Term debt
The Company's term debt includes $199 million due within one year. Due to the
short period to maturity of this debt, the carrying value as
presented in the interim consolidated balance sheets is a
reasonable estimate of its fair value.
[c] Credit risk
The Company's financial assets that are exposed
to credit risk consist primarily of cash and cash equivalents,
accounts receivable, held to maturity investments, and foreign
exchange forward contracts with positive fair values.
The Company's held for trading investments
include an investment in ABCP. Given the continuing uncertainties
regarding the value of the underlying assets, the amount and timing
over cash flows and the risk of collateral calls in the event that
spreads widened considerably, the Company could be exposed to
further losses on its investment.
Cash and cash equivalents, which consists of
short-term investments, are only invested in governments, bank term
deposits and bank commercial paper with an investment grade credit
rating. Credit risk is further reduced by limiting the amount which
is invested in certain governments or any major financial
institution.
The Company is also exposed to credit risk from
the potential default by any of its counterparties on its foreign
exchange forward contracts. The Company mitigates this credit risk
by dealing with counterparties who are major financial institutions
that the Company anticipates will satisfy their obligations under
the contracts.
In the normal course of business, the Company is
exposed to credit risk from its customers, substantially all of
which are in the automotive industry and are subject to credit
risks associated with the automotive industry. For both the three
and nine-month periods ended September 30,
2013, sales to the Company's six largest customers
represented 83% of the Company's total sales, and substantially all
of the Company's sales are to customers in which it has ongoing
contractual relationships.
[d] Interest rate risk
The Company is not exposed to significant
interest rate risk due to the short-term maturity of its monetary
current assets and current liabilities. In particular, the amount
of interest income earned on the Company's cash and cash
equivalents is impacted more by the investment decisions made and
the demands to have available cash on hand, than by movements in
the interest rates over a given period.
In addition, the Company is not exposed to
interest rate risk on its term debt instruments as the interest
rates on these instruments are fixed.
[e] Currency risk and foreign exchange contracts
The Company operates globally, which gives rise
to a risk that its earnings and cash flows may be adversely
impacted by fluctuations in foreign exchange rates. The Company is
exposed to fluctuations in foreign exchange rates when
manufacturing facilities have committed to the delivery of products
for which the selling price has been quoted in currencies other
than the facilities' functional currency, or when materials and
equipment are purchased in currencies other than the facilities'
functional currency.
In an effort to manage this net foreign exchange
exposure, the Company uses foreign exchange forward contracts for
the sole purpose of hedging certain of the Company's future
committed Canadian dollar, U.S. dollar, euro and British pound
outflows and inflows. All derivative instruments, including foreign
exchange contracts, are recorded on the interim consolidated
balance sheet at fair value. To the extent that cash flow hedges
are effective, the change in their fair value is recorded in other
comprehensive income; any ineffective portion is recorded in net
income. Amounts accumulated in other comprehensive income are
reclassified to net income in the period in which the hedged item
affects net income.
At September 30,
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. dollar amount |
|
190 |
|
1,024 |
| |
euro amount |
|
47 |
|
7 |
| For U.S. dollars |
|
|
|
|
| |
Peso amount |
|
5,923 |
|
271 |
| For euros |
|
|
|
|
| |
U.S. dollar amount |
|
48 |
|
170 |
| |
British pounds amount |
|
54 |
|
49 |
| |
Czech koruna amount |
|
3,797 |
|
2 |
| |
Polish zlotys amount |
|
228 |
|
— |
| For British pound |
|
|
|
|
| |
Czech koruna amount |
|
20 |
|
3 |
Forward contracts mature at various dates
through 2018. Foreign currency exposures are reviewed
quarterly.
As a result of the hedging programs employed,
foreign currency transactions in any given period may not be fully
impacted by movements in exchange rates. As at September 30, 2013, the net foreign exchange
exposure was not material.
15. CONTINGENCIES
[a] In the ordinary course of business
activities, the Company may be contingently liable for litigation
and claims with customers, suppliers, former employees and other
parties. In addition, the Company may be, or could become, liable
to incur environmental remediation costs to bring environmental
contamination levels back within acceptable legal limits. On an
ongoing basis, the Company assesses the likelihood of any adverse
judgments or outcomes to these matters as well as potential ranges
of probable costs and losses.
A determination of the provision required, if
any, for these contingencies is made after analysis of each
individual issue. The required provision may change in the future
due to new developments in each matter or changes in approach such
as a change in settlement strategy in dealing with these
matters.
In November 1997, the Company and
two of its subsidiaries were sued by KS Centoco Ltd., an
Ontario-based steering wheel
manufacturer in which the Company has a 23% equity interest, and by
Centoco Holdings Limited, the owner of the remaining 77% equity
interest in KS Centoco Ltd. In March
1999, the plaintiffs were granted leave to make substantial
amendments to the original statement of claim in order to add
several new defendants and claim additional remedies, and in
February 2006, the plaintiffs further
amended their claim to add an additional remedy. The amended
statement of claim alleges, among other things:
- breach of fiduciary duty by the Company and two of its
subsidiaries;
- breach by the Company of its binding letter of intent with KS
Centoco Ltd., including its covenant not to have any interest,
directly or indirectly, in any entity that carries on the airbag
business in North America, other
than through MST Automotive Inc., a company to be 77% owned by
Magna and 23% owned by Centoco Holdings Limited;
- the plaintiff's exclusive entitlement to certain airbag
technologies in North America
pursuant to an exclusive licence agreement, together with an
accounting of all revenues and profits resulting from the alleged
use by the Company, TRW Inc. ["TRW"] and other unrelated third
party automotive supplier defendants of such technology in
North America;
- a conspiracy by the Company, TRW and others to deprive KS
Centoco Ltd. of the benefits of such airbag technology in
North America and to cause Centoco
Holdings Limited to sell to TRW its interest in KS Centoco Ltd. in
conjunction with the Company's sale to TRW of its interest in MST
Automotive GmbH and TEMIC Bayern-Chemie Airbag GmbH; and
- oppression by the defendants.
The plaintiffs are seeking, amongst other
things, damages of approximately Cdn$3.5
billion. Document production, completion of undertakings and
examinations for discovery are substantially complete, although
limited additional examinations for discovery may occur. A trial is
not expected to commence until 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. On August 23,
2013, the Court granted the Company's motion and dismissed
the lawsuit "with prejudice". BBNPT has filed a notice of appeal to
the United States Court of Appeals
for the Second Circuit. The appeal is not expected to be fully
briefed until the second quarter of 2014. The defendants believe
the lawsuit is without merit and therefore will continue to
vigorously defend the case. Given the stage of the legal
proceedings, it is not possible to predict the outcome of the
claim.
[c] On September 24, 2013, the
Bundeskartellamt, the German Federal Cartel Office, attended at an
operating division of the Company in Germany under the authority of a search
warrant, in connection with an ongoing antitrust investigation of
the automobile textile coverings and components industry
[particularly trunk linings]. The Company's policy is to comply
with all applicable laws, including antitrust and competition laws,
and it intends to cooperate with the German Federal Cartel
Office.
[d] In certain circumstances, the Company is at risk for
warranty costs including product liability and recall costs. Due to
the nature of the costs, the Company makes its best estimate of the
expected future costs [note 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.
16. SEGMENTED INFORMATION
Given the differences between the regions in
which the Company operates, Magna's operations are segmented on a
geographic basis between North
America, Europe and Rest of
World. Consistent with the above, the Company's internal financial
reporting 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 (income), 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.
The following tables show segment information
for the Company's reporting segments and a reconciliation of
Adjusted EBIT to the Company's consolidated income from operations
before income taxes:
| |
Three months
ended |
|
Three months
ended |
| |
September 30, 2013 |
|
September 30, 2012 |
|
Total
sales |
External
sales |
Adjusted
EBIT |
Fixed
assets,
net |
|
Total
sales |
External
sales |
Adjusted
EBIT |
Fixed
assets,
net |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Canada |
$ |
1,578 |
$ |
1,453 |
|
|
$ |
617 |
|
$ |
1,473 |
$ |
1,373 |
|
|
$ |
614 |
| |
United States |
|
2,071 |
|
1,956 |
|
|
|
1,083 |
|
|
1,789 |
|
1,683 |
|
|
|
884 |
| |
Mexico |
|
1,020 |
|
946 |
|
|
|
585 |
|
|
962 |
|
897 |
|
|
|
543 |
| |
Eliminations |
|
(286) |
|
— |
|
|
|
— |
|
|
(249) |
|
— |
|
|
|
— |
| |
|
4,383 |
|
4,355 |
$ |
365 |
|
2,285 |
|
|
3,975 |
|
3,953 |
$ |
328 |
|
2,041 |
| Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Western Europe excluding Great Britain |
|
2,735 |
|
2,680 |
|
|
|
1,413 |
|
|
2,391 |
|
2,361 |
|
|
|
1,243 |
| |
Great Britain |
|
222 |
|
220 |
|
|
|
62 |
|
|
189 |
|
187 |
|
|
|
57 |
| |
Eastern Europe |
|
538 |
|
466 |
|
|
|
587 |
|
|
399 |
|
363 |
|
|
|
545 |
| |
Eliminations |
|
(89) |
|
— |
|
|
|
— |
|
|
(33) |
|
— |
|
|
|
— |
| |
|
3,406 |
|
3,366 |
|
72 |
|
2,062 |
|
|
2,946 |
|
2,911 |
|
13 |
|
1,845 |
| Rest of World |
|
652 |
|
612 |
|
2 |
|
690 |
|
|
567 |
|
542 |
|
5 |
|
610 |
| Corporate and Other
(i) |
|
(103) |
|
5 |
|
5 |
|
222 |
|
|
(77) |
|
5 |
|
6 |
|
251 |
| Total reportable segments |
|
8,338 |
|
8,338 |
|
444 |
|
5,259 |
|
|
7,411 |
|
7,411 |
|
352 |
|
4,747 |
| Other (expense) income, net |
|
|
|
|
|
(48) |
|
|
|
|
|
|
|
|
153 |
|
|
| Interest expense, net |
|
|
|
|
|
(5) |
|
|
|
|
|
|
|
|
(5) |
|
|
| |
$ |
8,338 |
$ |
8,338 |
$ |
391 |
|
5,259 |
|
$ |
7,411 |
$ |
7,411 |
$ |
500 |
|
4,747 |
| Current assets |
|
|
|
|
|
|
|
10,069 |
|
|
|
|
|
|
|
|
9,433 |
Investments, goodwill,
deferred tax assets, and
other assets |
|
|
|
|
|
|
|
2,738 |
|
|
|
|
|
|
|
|
2,493 |
| Consolidated total
assets |
|
|
|
|
|
|
$ |
18,066 |
|
|
|
|
|
|
|
$ |
16,673 |
| (i) |
For the three months ended September 30, 2012, Corporate and
Other includes $13 million equity loss related to the Company's
investment in E-Car. |
| |
Nine months
ended |
|
Nine months
ended |
| |
September 30, 2013 |
|
September 30, 2012 |
|
Total
sales |
External
sales |
Adjusted
EBIT |
Fixed
assets,
net |
|
Total
sales |
External
sales |
Adjusted
EBIT |
Fixed
assets,
net |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Canada |
$ |
5,001 |
$ |
4,620 |
|
|
$ |
617 |
|
$ |
4,722 |
$ |
4,411 |
|
|
$ |
614 |
| |
United States |
|
6,189 |
|
5,839 |
|
|
|
1,083 |
|
|
5,616 |
|
5,265 |
|
|
|
884 |
| |
Mexico |
|
2,998 |
|
2,773 |
|
|
|
585 |
|
|
2,638 |
|
2,467 |
|
|
|
543 |
| |
Eliminations |
|
(874) |
|
— |
|
|
|
— |
|
|
(766) |
|
— |
|
|
|
— |
| |
|
13,314 |
|
13,232 |
$ |
1,168 |
|
2,285 |
|
|
12,210 |
|
12,143 |
$ |
1,148 |
|
2,041 |
| Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Western Europe excluding Great
Britain |
|
8,643 |
|
8,451 |
|
|
|
1,413 |
|
|
7,436 |
|
7,321 |
|
|
|
1,243 |
| |
Great Britain |
|
717 |
|
711 |
|
|
|
62 |
|
|
700 |
|
695 |
|
|
|
57 |
| |
Eastern Europe |
|
1,684 |
|
1,464 |
|
|
|
587 |
|
|
1,331 |
|
1,214 |
|
|
|
545 |
| |
Eliminations |
|
(280) |
|
— |
|
|
|
— |
|
|
(131) |
|
— |
|
|
|
— |
| |
|
10,764 |
|
10,626 |
|
264 |
|
2,062 |
|
|
9,336 |
|
9,230 |
|
141 |
|
1,845 |
| Rest of World |
|
1,891 |
|
1,786 |
|
4 |
|
690 |
|
|
1,489 |
|
1,414 |
|
(20) |
|
610 |
| Corporate and Other
(i) |
|
(308) |
|
17 |
|
22 |
|
222 |
|
|
(231) |
|
17 |
|
2 |
|
251 |
| Total reportable
segments |
|
25,661 |
|
25,661 |
|
1,458 |
|
5,259 |
|
|
22,804 |
|
22,804 |
|
1,271 |
|
4,747 |
| Other (expense) income, net |
|
|
|
|
|
(54) |
|
|
|
|
|
|
|
|
153 |
|
|
| Interest expense, net |
|
|
|
|
|
(13) |
|
|
|
|
|
|
|
|
(15) |
|
|
| |
$ |
25,661 |
$ |
25,661 |
$ |
1,391 |
|
5,259 |
|
$ |
22,804 |
$ |
22,804 |
$ |
1,409 |
|
4,747 |
| Current assets |
|
|
|
|
|
|
|
10,069 |
|
|
|
|
|
|
|
|
9,433 |
Investments, goodwill,
deferred tax assets, and
other assets |
|
|
|
|
|
|
|
2,738 |
|
|
|
|
|
|
|
|
2,493 |
| Consolidated total
assets |
|
|
|
|
|
|
$ |
18,066 |
|
|
|
|
|
|
|
$ |
16,673 |
(i) For
the nine months ended September 30,
2012, Corporate and Other includes $35 million equity loss related to the Company's
investment in E-Car.
17. SUBSEQUENT EVENTS
Normal Course Issuer Bid
Subsequent to quarter end, the Company purchased
for cancellation the remaining 1,086,822 Common Shares under an
existing normal course issuer bid for cash consideration of
$92 million through a pre-defined
automatic securities purchase plan with a designated broker.
As of November 4, 2013 the Company
has completed the repurchase of the entire 12 million Common Shares
authorized under the Normal Course Issuer Bid.
Subject to approval by the TSX and the New York
Stock Exchange ["NYSE"], the Board of Directors approved a new
normal course issuer bid to purchase up to 12 million of the
Company's Common Shares, representing approximately 5.4% of the
Company's public float of Common Shares. The primary purposes of
the normal course issuer bid are purchases for cancellation as well
as purchases to fund the Company's stock-based compensation awards
or programs and/or its obligations to its deferred profit sharing
plans. The normal course issuer bid is expected to commence on or
about November 13, 2013 and will
terminate one year later. All purchases of Common Shares will be
made at the market price at the time of purchase in accordance with
the rules and policies of the TSX. Purchases may also be made on
the NYSE in compliance with Rule 10b-18 under the U.S. Securities
Exchange Act of 1934.
18. COMPARATIVE FIGURES
Certain of the comparative figures have been
reclassified to conform to the current period's method of
presentation.
SOURCE Magna International Inc.