AURORA, ON,
May 8, 2014 /PRNewswire/ - Magna
International Inc. (TSX: MG; NYSE: MGA) today reported
financial results for the first quarter ended March 31, 2014.
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THREE MONTHS ENDED |
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March 31, 2014 |
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March 31, 2013 |
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Sales |
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$ |
8,961 |
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$ |
8,361 |
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Adjusted
EBIT(1) |
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$ |
605 |
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$ |
467 |
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Income from operations
before income taxes |
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$ |
581 |
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$ |
457 |
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Net income
attributable to Magna International Inc. |
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$ |
393 |
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$ |
369 |
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Diluted earnings per
share |
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$ |
1.76 |
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$ |
1.57 |
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All results are
reported in millions of U.S. dollars, except per share figures,
which are in U.S. dollars. |
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(1) |
Adjusted EBIT is the measure of
segment profit or loss as reported in the Company's attached
unaudited interim consolidated financial statements.
Adjusted EBIT represents income from operations before income
taxes; interest expense, net; and other expense, net. |
THREE MONTHS ENDED MARCH 31, 2014
We posted sales of $8.96
billion for the first quarter ended March 31, 2014, an increase of 7% over the first
quarter of 2013. We achieved this sales increase in a period when
vehicle production increased 4% in North
America and 8% in Europe,
each relative to the first quarter of 2013. In the first
quarter of 2014, our North American, European, and Asian production
sales, as well as tooling, engineering and other sales and complete
vehicle assembly sales all increased, while our Rest of World
production sales declined, each relative to the comparable quarter
in 2013.
Complete vehicle assembly sales increased 2% to
$813 million for the first quarter of
2014 compared to $798 million
for the first quarter of 2013, while complete vehicle assembly
volumes decreased 5% to approximately 36,000 units.
During the first quarter of 2014, income from
operations before income taxes was $581
million, net income attributable to Magna International Inc.
was $393 million and diluted earnings
per share were $1.76, increases of
$124 million, $24 million and $0.19, respectively, each compared to the first
quarter of 2013.
Excluding other expense, after tax in the first
quarters of 2014 and 2013 and the impact of the Austrian tax reform
in the first quarter of 2014, income from operations before income
taxes, net income attributable to Magna International Inc. and
diluted earnings per share increased $140
million, $70 million and
$0.40 respectively, each compared to
the first quarter of 2013.
During the first quarter ended March 31, 2014, we generated cash from operations
of $671 million before changes in
non-cash operating assets and liabilities, and invested
$197 million in non-cash operating
assets and liabilities. Total investment activities for the first
quarter of 2014 were $271 million,
including $217 million in fixed
asset additions and $54 million in
investments and other assets.
A more detailed discussion of our consolidated
financial results for the first quarter ended March 31, 2014 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 $0.38 with
respect to our outstanding Common Shares for the quarter ended
March 31, 2014. This dividend is
payable on June 13, 2014 to
shareholders of record on May 30,
2014.
OTHER MATTERS
Subject to approval by the Toronto Stock
Exchange and the New York Stock Exchange, our Board of Directors
approved an amendment to our normal course issuer bid to increase
the maximum number of Common Shares that may be purchased under the
Bid from 12 million to 20 million of our Common Shares. The
new maximum represents approximately 9.0% of our public float of
Common Shares as of November 6,
2013. No other terms of the Bid have been amended.
UPDATED 2014 OUTLOOK
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Light Vehicle Production (Units) |
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North America |
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16.8 million |
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Europe |
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19.5 million |
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Production Sales |
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North America |
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$17.1 - $17.7 billion |
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Europe |
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$9.8 - $10.2 billion |
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Asia |
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$1.6 - $1.8 billion |
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Rest of World |
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$0.7 -
$0.8 billion |
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Total Production Sales |
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$29.2 - $30.5 billion |
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Complete Vehicle
Assembly Sales |
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$2.9 - $3.2 billion |
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Total Sales |
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$34.9 - $36.6 billion |
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Operating
Margin(1) |
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Mid to high 6% range |
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Tax
Rate(1) |
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Approximately 24.5% |
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Capital Spending |
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Approximately $1.4 billion |
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(1) |
Excluding other
expense, net |
In this 2014 outlook, in addition to 2014 light
vehicle production, we have assumed no material acquisitions or
divestitures. In addition, we have assumed that foreign exchange
rates for the most common currencies in which we conduct business
relative to our U.S. dollar reporting currency will approximate
current rates.
ABOUT MAGNA
We are a leading global automotive supplier with
315 manufacturing operations and 82 product development,
engineering and sales centres in 29 countries. We have over
128,000 employees focused on delivering superior value to our
customers through innovative products and processes, and World
Class Manufacturing. Our product capabilities include
producing body, chassis, interior, exterior, seating, powertrain,
electronic, vision, closure and roof systems and modules, as well
as complete vehicle engineering and contract manufacturing.
Our Common Shares trade on the Toronto Stock Exchange (MG) and the
New York Stock Exchange (MGA). For further information about
Magna, visit our website at www.magna.com.
We will hold a conference call for interested analysts and
shareholders to discuss our first quarter results on Thursday, May
8, 2014 at 2:00 p.m. EDT. The conference call will be chaired by
Don Walker, Chief Executive Officer. The number to use for this
call is 1-800-272-6255. The number for overseas callers is
1-416-981-9093. Please call in at least 10 minutes prior to the
call. We will also webcast the conference call at
www.magna.com. The slide presentation accompanying the
conference call will be available on our website Thursday afternoon
prior to the call. |
FORWARD‑LOOKING STATEMENTS
The previous discussion contains statements that
constitute "forward-looking statements" or "forward-looking
information" within the meaning of applicable securities
legislation, including, but not limited to, statements relating to
Magna's expected production sales, based on expected light vehicle
production in North America and
Europe; Magna's expected
production sales in the North
America, Europe,
Asia and Rest of World segments;
total sales; complete vehicle assembly sales; consolidated
operating margin; effective income tax rate; fixed asset
expenditures; and future purchases of our Common Shares under the
Normal Course Issuer Bid. The forward-looking information in this
document is presented for the purpose of providing information
about management's current expectations and plans and such
information may not be appropriate for other purposes.
Forward-looking statements may include financial and other
projections, as well as statements regarding our future plans,
objectives or economic performance, or the assumptions underlying
any of the foregoing, and other statements that are not recitations
of historical fact. We use words such as "may", "would", "could",
"should", "will", "likely", "expect", "anticipate", "believe",
"intend", "plan", "forecast", "outlook", "project", "estimate" and
similar expressions suggesting future outcomes or events to
identify forward-looking statements. Any such forward-looking
statements are based on information currently available to us, and
are based on assumptions and analyses made by us in light of our
experience and our perception of historical trends, current
conditions and expected future developments, as well as other
factors we believe are appropriate in the circumstances. However,
whether actual results and developments will conform with our
expectations and predictions is subject to a number of risks,
assumptions and uncertainties, many of which are beyond our
control, and the effects of which can be difficult to predict,
including, without limitation: the impact of economic or political
conditions on consumer confidence, consumer demand for vehicles and
vehicle production; restructuring, downsizing or other significant
non-recurring costs, including in our European business; fines or
penalties imposed by antitrust and regulatory authorities,
including the German Cartel Office; our ability to grow our
business with Asian-based customers; continued underperformance of
one or more of our operating Divisions; ongoing pricing pressures,
including our ability to offset price concessions demanded by our
customers; our ability to successfully launch material new or
takeover business; shifts in market share away from our top
customers; shifts in market shares among vehicles or vehicle
segments, or shifts away from vehicles on which we have significant
content; risks of conducting business in foreign markets, including
China, India, Russia, Brazil, Argentina, Eastern
Europe and other non-traditional markets for us; a prolonged
disruption in the supply of components to us from our suppliers;
shutdown of our or our customers' or sub-suppliers' production
facilities due to a work stoppage or labour dispute; scheduled
shutdowns of our customers' production facilities (typically in the
third and fourth quarters of each calendar year); 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; our
ability to consistently develop innovative products or processes;
impairment charges related to goodwill and long-lived assets;
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 sufficient
due diligence on acquisition targets; warranty and recall costs;
risk of production disruptions due to natural disasters; pension
liabilities; legal claims and/or regulatory actions against us;
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; changes in
credit ratings assigned to us; changes in laws and governmental
regulations; costs associated with compliance with environmental
laws and regulations; liquidity risks as a result of an
unanticipated deterioration of economic conditions; our ability to
achieve future investment returns that equal or exceed past
returns; the unpredictability of, and fluctuation in, the trading
price of our Common Shares; and other factors set out in our Annual
Information Form filed with securities commissions in Canada and our annual report on Form 40-F
filed with the United States Securities and Exchange Commission,
and subsequent filings. In evaluating forward-looking statements,
we caution readers not to place undue reliance on any
forward-looking statements and readers should specifically consider
the various factors which could cause actual events or results to
differ materially from those indicated by such forward-looking
statements. Unless otherwise required by applicable securities
laws, we do not intend, nor do we undertake any obligation, to
update or revise any forward-looking statements to reflect
subsequent information, events, results or circumstances or
otherwise.
For further information about Magna, please see our website
at www.magna.com. Copies of financial data and other
publicly filed documents are available through the internet on the
Canadian Securities Administrators' System for Electronic Document
Analysis and Retrieval (SEDAR) which can be accessed at
www.sedar.com and on the United States Securities and Exchange
Commission's Electronic Data Gathering, Analysis and Retrieval
System (EDGAR) which can be accessed at www.sec.gov |
MAGNA INTERNATIONAL INC.
Management's Discussion and Analysis of Results of Operations
and Financial Position
Unless otherwise noted, all amounts in this
Management's Discussion and Analysis of Results of Operations and
Financial Position ("MD&A") are in U.S. dollars and all tabular
amounts are in millions of U.S. dollars, except per share figures,
which are in U.S. dollars. When we use the terms "we", "us", "our"
or "Magna", we are referring to Magna International Inc. and its
subsidiaries and jointly controlled entities, unless the context
otherwise requires.
This MD&A should be read in conjunction with
the unaudited interim consolidated financial statements for the
three months ended March 31, 2014
included in this press release, and the audited consolidated
financial statements and MD&A for the year ended December 31, 2013 included in our 2013
Annual Report to Shareholders.
This MD&A has been prepared as at
May 7, 2014.
OVERVIEW
We are a leading global automotive supplier with 315
manufacturing operations and 82 product development, engineering
and sales centres in 29 countries. We have over 128,000 employees
focused on delivering superior value to our customers through
innovative products and 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
North American light vehicle production increased 4% in the
first quarter of 2014, compared to the first quarter of 2013, to
4.2 million units. In Europe,
light vehicle production increased 8% in the first quarter of 2014
to 5.1 million units.
Our first quarter 2014 total sales increased 7%
over the first quarter of 2013 to $8.96
billion. Our North American, European and Asian production
sales, as well as complete vehicle assembly sales and tooling,
engineering and other sales all increased over the comparable
quarter while Rest of World production sales declined $54 million.
Adjusted EBIT(1) increased 30% to
$605 million in the first quarter of
2014, compared to $467 million in the
first quarter of 2013.
- Our North America segment
reported Adjusted EBIT of $443
million for the first quarter of 2014. This compared to
Adjusted EBIT of $381 million,
including $39 million of amortization
related to the August 2012
acquisition of Magna E-Car Systems partnership ("E-Car"), for the
first quarter of 2013. The E-Car acquisition intangibles were fully
amortized at the end of 2013.
- Our Europe segment generated
Adjusted EBIT of $127 million in the
first quarter of 2014 compared to $72
million in the first quarter of 2013, which represents our
ninth consecutive quarter of year-over-year improvement.
- Our Asia segment reported
Adjusted EBIT of $29 million in the
first quarter of 2014 compared to $11
million in the first quarter of 2013. This increase in part
reflects the launch of business in existing and recently
constructed facilities.
- Our Rest of World segment posted an Adjusted EBIT loss of
$13 million for the first quarter of
2014, compared to an Adjusted EBIT loss of $11 million in the first quarter of 2013. We
remain highly focused on reducing our losses in South America over the next couple of years by
addressing commercial challenges and reducing operational
inefficiencies.
Lastly, during the first quarter of 2014, we
repurchased 2.7 million Common Shares, and subsequent to the first
quarter repurchased an additional 1.4 million Common Shares for
aggregate consideration of $377
million pursuant to our outstanding normal course issuer bid
that expires in November 2014.
|
1 Adjusted EBIT represents income from operations
before income taxes; interest expense, net; and other expense,
net |
FINANCIAL RESULTS SUMMARY
During the first quarter of 2014, we posted
sales of $8.96 billion, an increase
of 7% over the first quarter of 2013. This higher sales level was a
result of increases in our North American, European and Asian
production sales, complete vehicle assembly sales, and tooling,
engineering and other sales partially offset by lower Rest of World
production sales. Comparing the first quarter of 2014 to 2013:
- North American vehicle production increased 4% and our North
American production sales increased 9% to $4.41 billion;
- European vehicle production increased 8% and our European
production sales increased 8% to $2.63
billion;
- Asian production sales increased 25% to $381 million;
- Rest of World production sales decreased 26% to $157 million;
- Complete vehicle assembly volumes decreased 5% while sales
increased 2% to $813 million;
and
- Tooling, engineering and other sales increased by 3% to
$569 million.
During the first quarter of 2014, we earned
income from operations before income taxes of $581 million compared to $457 million for the first quarter of 2013.
Excluding Other Expense recorded in the first quarters of 2014 and
2013, as discussed in the "Other Expense" section, the $140 million increase in income from operations
before income taxes was primarily as a result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the first quarter of 2013;
- intangible asset amortization of $39
million, recorded in the first quarter of 2013, related to
the acquisition and re-measurement of E-Car;
- productivity and efficiency improvements at certain
facilities;
- the benefit of restructuring and downsizing activities recently
undertaken; and
- higher equity income.
These factors were partially offset by:
- operational inefficiencies and other costs at certain
facilities;
- $10 million of cash received
related to the settlement of asset-backed commercial paper ("ABCP")
between the Investment Industry Regulatory Organization of
Canada and financial institutions
in the first quarter of 2013;
- higher incentive compensation;
- increased pre-operating costs incurred at new facilities;
- a larger amount of employee profit sharing;
- a $2 million net decrease in
valuation gains in respect of ABCP; and
- net customer price concessions subsequent to the first quarter
of 2013.
During the first quarter of 2014, net income
attributable to Magna International Inc. was $393 million, an increase of $24 million compared to the first quarter of 2013
and diluted earnings per share increased $0.19 to $1.76 for
the first quarter of 2014 compared to $1.57 for the first quarter of 2013. Other
Expense, after tax, and the Austrian Tax Reform impacted net income
attributable to Magna International Inc. and diluted earnings per
share as follows:
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For
the three months ended March 31, |
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2014 |
2013 |
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Net Income
Attributable
to Magna |
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Diluted
Earnings
per Share |
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Net Income
Attributable
to Magna |
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Diluted
Earnings
per Share |
Other
expense |
$ |
22 |
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$ |
0.10 |
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$ |
6 |
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$ |
0.02 |
Income tax effect: |
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Other expense |
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(2) |
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(0.01) |
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— |
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— |
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Austrian tax reform |
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32 |
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0.14 |
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— |
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— |
Net income
impact |
$ |
52 |
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$ |
0.23 |
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$ |
6 |
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$ |
0.02 |
Other Expense and the Austrian Tax Reform are
discussed in the "Other Expense" and "Income Taxes" sections,
respectively.
Excluding the negative impact for the first
quarters of 2014 and 2013 of $52
million and $6 million,
respectively, net income attributable to Magna International Inc.
for the first quarter of 2014 increased $70
million compared to the first quarter of 2013.
Excluding the $0.23 per share negative impact for the first
quarter of 2014 and the $0.02 per
share negative impact for the first quarter of 2013, diluted
earnings per share increased $0.40,
as a result of the increase in net income attributable to Magna
International Inc. and a decrease in the weighted average number of
diluted shares outstanding during the first quarter of 2014. The
decrease in the weighted average number of diluted shares
outstanding was primarily due to the repurchase and cancellation of
Common Shares, during or subsequent to the first quarter of 2013,
pursuant to our normal course issuer bids partially offset by the
issue of Common Shares related to the exercise of stock options and
an increase in the number of diluted options outstanding as a
result of an increase in the trading price of our common stock.
INDUSTRY TRENDS AND RISKS
Our success is primarily dependent upon the levels of North
American and European car and light truck production by our
customers and the relative amount of content we have on various
programs. OEM production volumes in different regions may be
impacted by factors which may vary from one region to the next,
including but not limited to general economic and political
conditions, consumer confidence levels, interest rates, credit
availability, energy and fuel prices, international conflicts,
labour relations issues, regulatory requirements, trade agreements,
infrastructure, legislative changes, and environmental emissions
and safety standards. These factors and a number of other economic,
industry and risk factors which also affect our success, including
such things as relative currency values, commodities prices, price
reduction pressures from our customers, the financial condition of
our supply base and competition from manufacturers with operations
in low cost countries, are discussed in our Annual Information Form
and Annual Report on Form 40-F, each in respect of the year ended
December 31, 2013, and remain
substantially unchanged in respect of the first quarter ended
March 31, 2014.
RESULTS OF OPERATIONS
Average Foreign Exchange
|
For the
three months
ended March 31, |
|
2014 |
2013 |
Change |
1 Canadian dollar equals U.S.
dollars |
0.907 |
0.991 |
- 8% |
1 euro equals U.S.
dollars |
1.371 |
1.319 |
+ 4% |
1 British pound equals U.S.
dollars |
1.655 |
1.550 |
+ 7% |
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 ended
March 31, 2014 impacted the reported
U.S. dollar amounts of our sales, expenses and income.
The results of operations whose functional
currency is not the U.S. dollar are translated into U.S. dollars
using the average exchange rates in the table above for the
relevant period. Throughout this MD&A, reference is made to the
impact of translation of foreign operations on reported U.S. dollar
amounts where relevant.
Our results can also be affected by the impact
of movements in exchange rates on foreign currency transactions
(such as raw material purchases or sales denominated in foreign
currencies). However, as a result of hedging programs employed by
us, foreign currency transactions in the current period have not
been fully impacted by movements in exchange rates. We record
foreign currency transactions at the hedged rate where
applicable.
Finally, foreign exchange gains and losses on
revaluation and/or settlement of monetary items denominated in a
currency other than an operation's functional currency impact
reported results. These gains and losses are recorded in selling,
general and administrative expense.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED
MARCH 31, 2014
Sales |
|
|
|
|
|
|
|
|
|
|
For the
three months
ended March 31, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
Vehicle Production Volumes (millions of
units) |
|
|
|
|
|
|
|
|
|
|
North America |
|
|
4.190 |
|
|
4.015 |
|
+ |
4% |
|
Europe |
|
|
5.130 |
|
|
4.762 |
|
+ |
8% |
Sales |
|
|
|
|
|
|
|
|
|
|
External Production |
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
4,407 |
|
$ |
4,047 |
|
+ |
9% |
|
|
Europe |
|
|
2,634 |
|
|
2,446 |
|
+ |
8% |
|
|
Asia |
|
|
381 |
|
|
305 |
|
+ |
25% |
|
|
Rest of World |
|
|
157 |
|
|
211 |
|
- |
26% |
|
Complete Vehicle Assembly |
|
|
813 |
|
|
798 |
|
+ |
2% |
|
Tooling, Engineering and
Other |
|
|
569 |
|
|
554 |
|
+ |
3% |
Total Sales |
|
$ |
8,961 |
|
$ |
8,361 |
|
+ |
7% |
External Production Sales - North America
External production sales in North America increased 9% or $360 million to $4.41
billion for the first quarter of 2014 compared to
$4.05 billion for the first quarter
of 2013, primarily as a result of:
- the launch of new programs during or subsequent to the first
quarter of 2013, including the:
-
- Jeep Cherokee; and
- GM full-size pickups and SUVs; and
- higher production volumes on certain existing programs.
These factors were partially offset by:
- a $133 million decrease in
reported U.S. dollar sales primarily as a result of the weakening
of the Canadian dollar against the U.S. dollar; and
- net customer price concessions subsequent to the first quarter
of 2013.
External Production Sales - Europe
External production sales in Europe increased 8% or $188 million to $2.63
billion for the first quarter of 2014 compared to
$2.45 billion for the first quarter
of 2013, primarily as a result of:
- a $73 million increase in
reported U.S. dollar sales primarily as a result of the
strengthening of the euro against the U.S. dollar;
- the launch of new programs during or subsequent to the first
quarter of 2013, including the:
-
- Skoda Octavia;
- Range Rover Sport; and
- Mercedes-Benz GLA; and
- higher production volumes on certain existing programs.
These factors were partially offset by:
- a decrease in content on certain programs, including the MINI
Cooper; and
- net customer price concessions subsequent to the first quarter
of 2013.
External Production Sales - Asia
External production sales in Asia increased 25% or $76 million to $381
million for the first quarter of 2014 compared to
$305 million for the first quarter of
2013, primarily as a result of:
- higher production volumes on certain existing programs;
and
- the launch of new programs during or subsequent to the first
quarter of 2013, primarily in China.
These factors were partially offset by net
customer price concessions subsequent to the first quarter of
2013.
External Production Sales - Rest of
World
External production sales in Rest of World
decreased 26% or $54 million to
$157 million for the first quarter of
2014 compared to $211 million for the
first quarter of 2013, primarily as a result of:
- a $39 million decrease in
reported U.S. dollar sales as a result of the weakening of foreign
currencies against the U.S. dollar, including the Brazilian real
and Argentine peso; and
- lower production volumes on certain existing programs.
Complete Vehicle Assembly Sales
|
|
|
For the
three months
ended March 31, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
Complete Vehicle Assembly
Sales |
|
$ |
813 |
|
$ |
798 |
|
+ |
2% |
Complete Vehicle Assembly Volumes
(Units) |
|
|
|
|
|
|
|
|
|
|
MINI Countryman, Mercedes-Benz G-Class, MINI
Paceman, and Peugeot RCZ |
|
|
35,658 |
|
|
37,439 |
|
- |
5% |
Complete vehicle assembly sales increased 2% or
$15 million to $813 million for the first quarter of 2014
compared to $798 million for the
first quarter of 2013 while assembly volumes decreased 5% or 1,781
units.
The increase in complete vehicle assembly sales
is primarily as a result of:
- a $31 million increase in
reported U.S. dollar sales as a result of the strengthening of the
euro against the U.S. dollar; and
- an increase in assembly volumes for the:
-
- Mercedes-Benz G-Class; and
- MINI Countryman.
These factors were partially offset by a
decrease in assembly volumes for the MINI Paceman.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
3% or $15 million to $569 million for the first quarter of 2014
compared to $554 million for the
first quarter of 2013.
In the first quarter of 2014, the major programs
for which we recorded tooling, engineering and other sales were
the:
- MINI Countryman;
- Ford Mustang;
- QOROS 3;
- Chrysler 200;
- Chevrolet Suburban and Tahoe, GMC Yukon and Cadillac
Escalade;
- Ford Transit;
- Honda Fit;
- Ford F-Series; and
- Peugeot RCZ.
In the first quarter of 2013, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Jeep Grand Cherokee;
- Chevrolet Suburban, Tahoe, Silverado and Avalanche;
- QOROS 3;
- MINI Countryman;
- Ford Fusion;
- Mercedes-Benz Actros;
- Ford Fiesta;
- Chevrolet Impala;
- GMC Acadia; and
- Ford Transit.
Cost of Goods Sold and Gross
Margin
|
|
|
For the
three months
ended March 31, |
|
|
|
2014 |
|
|
2013 |
Sales |
|
$ |
8,961 |
|
$ |
8,361 |
Cost of goods sold |
|
|
|
|
|
|
|
Material |
|
|
5,712 |
|
|
5,345 |
|
Direct labour |
|
|
575 |
|
|
520 |
|
Overhead |
|
|
1,475 |
|
|
1,452 |
|
|
|
7,762 |
|
|
7,317 |
Gross margin |
|
$ |
1,199 |
|
$ |
1,044 |
|
|
|
|
|
|
|
Gross margin as a percentage of
sales |
|
|
13.4% |
|
|
12.5% |
Cost of goods sold increased $445 million to $7.76
billion for the first quarter of 2014 compared to
$7.32 billion for the first quarter
of 2013 primarily as a result of:
- higher material, overhead and labour costs associated with the
increase in sales, including wage increases at certain operations;
and
- a larger amount of employee profit sharing.
These factors were partially offset by:
- a net decrease in reported U.S. dollar cost of goods sold
primarily due to the weakening of the Canadian dollar and Brazilian
real, both against the U.S. dollar partially offset by the
strengthening of the euro against the U.S. dollar; and
- lower warranty costs of $2
million.
Gross margin increased $155
million to $1.20 billion for
the first quarter of 2014 compared to $1.04
billion for the first quarter of 2013 and gross margin as a
percentage of sales increased to 13.4% for the first quarter of
2014 compared to 12.5% for the first quarter of 2013. The increase
in gross margin as a percentage of sales was primarily due to:
- productivity and efficiency improvements at certain
facilities;
- a decrease in the proportion of complete vehicle assembly sales
relative to total sales, which have a higher material content than
our consolidated average;
- lower restructuring and downsizing costs; and
- lower warranty costs.
These factors were partially offset by:
- operational inefficiencies and other costs at certain
facilities;
- increased pre-operating costs incurred at new facilities;
- a larger amount of employee profit sharing;
- higher costs incurred in preparation for upcoming launches;
and
- an increase in tooling, engineering and other sales that have
low or no margins.
Depreciation and Amortization
Depreciation and amortization costs decreased
$38 million to $217 million for the first quarter of 2014
compared to $255 million for the
first quarter of 2013 primarily as a result of intangible asset
amortization of $39 million, recorded
in the first quarter of 2013, related to the acquisition and
re-measurement of E-Car.
Selling, General and Administrative
("SG&A")
SG&A expense as a percentage of sales was
4.7% for the first quarter of 2014 compared to 4.4% for the first
quarter of 2013. SG&A expense increased $58 million to $425
million for the first quarter of 2014 compared to
$367 million for the first quarter of
2013 primarily as a result of:
- an increase in reported U.S. dollar SG&A related to foreign
exchange;
- $10 million of cash received
related to the settlement of ABCP between the Investment Industry
Regulatory Organization of Canada
and financial institutions in the first quarter of 2013;
- higher labour and other costs to support the growth in sales,
including wage increases at certain operations;
- higher incentive compensation;
- increased costs incurred at new facilities; and
- a $2 million net decrease in
valuation gains in respect of ABCP.
These factors were partially offset by lower
stock-based compensation.
Equity Income
Equity income increased $3 million to $48
million for the first quarter of 2014 compared to
$45 million for the first quarter of
2013 primarily as a result of higher income generated by most of
our equity accounted investments.
Other Expense, net
During the first quarters of 2014 and 2013, we
recorded net restructuring charges of $22
million and $6 million,
($20 million and $6 million after tax) respectively, in
Europe at our exterior and
interior systems operations. We expect full year 2014 restructuring
charges to be approximately $75
million.
Segment Analysis
Given the differences between the regions in
which we operate, our operations are segmented on a geographic
basis. Consistent with the above, our internal financial reporting
segments key internal operating performance measures between
North America, Europe, Asia
and Rest of World for purposes of presentation to the chief
operating decision maker to assist in the assessment of operating
performance, the allocation of resources, and our long-term
strategic direction and future global growth.
Our chief operating decision maker uses Adjusted
EBIT as the measure of segment profit or loss, since we believe
Adjusted EBIT is the most appropriate measure of operational
profitability or loss for our reporting segments. Adjusted EBIT
represents income from operations before income taxes; interest
expense, net; and other expense, net.
During the fourth quarter of 2013, we began
reporting Asia and Rest of World
as separate reporting segments.
|
|
|
For
the three months ended March 31, |
|
|
|
External Sales |
|
|
Adjusted EBIT |
|
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
2014 |
|
|
2013 |
|
|
Change |
North America |
|
$ |
4,642 |
|
$ |
4,288 |
|
$ |
354 |
|
$ |
443 |
|
$ |
381 |
|
$ |
62 |
Europe |
|
|
3,727 |
|
|
3,505 |
|
|
222 |
|
|
127 |
|
|
72 |
|
|
55 |
Asia |
|
|
428 |
|
|
334 |
|
|
94 |
|
|
29 |
|
|
11 |
|
|
18 |
Rest of World |
|
|
161 |
|
|
231 |
|
|
(70) |
|
|
(13) |
|
|
(11) |
|
|
(2) |
Corporate and Other |
|
|
3 |
|
|
3 |
|
|
— |
|
|
19 |
|
|
14 |
|
|
5 |
Total reportable
segments |
|
$ |
$ 8,961 |
|
$ |
8,361 |
|
$ |
600 |
|
$ |
605 |
|
$ |
467 |
|
$ |
138 |
Excluded from Adjusted EBIT for the three months
ended March 31, 2014 and 2013 was
$22 million and $6 million, respectively, of net restructuring
costs recorded in our Europe
segment, as discussed in the "Other Expense" section.
North
America
Adjusted EBIT in North
America increased $62 million
to $443 million for the first quarter
of 2014 compared to $381 million
for the first quarter of 2013 primarily as a result of:
- margins earned on higher production sales;
- intangible asset amortization of $39
million, recorded in the first quarter of 2013, related to
the acquisition and re-measurement of E-Car;
- the benefit of restructuring and downsizing activities recently
undertaken;
- lower warranty costs of $2
million; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- operational inefficiencies and other costs at certain
facilities;
- higher costs incurred in preparation for upcoming
launches;
- increased pre-operating costs incurred at new facilities;
- increased stock-based compensation;
- higher incentive compensation;
- higher affiliation fees paid to Corporate;
- a larger amount of employee profit sharing; and
- lower equity income.
Europe
Adjusted EBIT in Europe increased $55
million to $127 million for
the first quarter of 2014 compared to $72 million for the first quarter of 2013
primarily as a result of:
- margins earned on higher production sales;
- the benefit of restructuring and downsizing activities recently
undertaken;
- lower costs incurred in preparation for upcoming launches;
and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- higher affiliation fees paid to Corporate;
- higher pre-operating costs incurred at new facilities;
- a larger amount of employee profit sharing;
- operational inefficiencies and other costs at certain
facilities; and
- increased stock-based compensation.
Asia
Adjusted EBIT in Asia increased $18
million to $29 million for the
first quarter of 2014 compared to $11
million for the first quarter of 2013 primarily as a result
of:
- margins earned on higher production sales, including margins
earned on the launch of new facilities and new programs; and
- higher equity income.
These factors were partially offset by:
- higher launch costs; and
- higher affiliation fees paid to Corporate.
Rest of World
Rest of World Adjusted EBIT decreased
$2 million to a loss of $13 million for the first quarter of 2014
compared to a loss of $11 million for
the first quarter of 2013 primarily as a result of:
- higher production costs, including inflationary increases, that
we have not been fully successful in passing through to our
customers;
- increased commodity costs;
- higher incentive compensation;
- lower equity income; and
- higher launch costs.
These factors were partially offset by:
- productivity and efficiency improvements at certain
facilities;
- the benefit of restructuring and downsizing activities recently
undertaken; and
- net customer price increases subsequent to the first quarter of
2013.
Corporate and Other
Corporate and Other Adjusted EBIT increased
$5 million to $19 million for the first quarter of 2014
compared to $14 million for the first
quarter of 2013 primarily as a result of:
- an increase in affiliation fees earned from our divisions;
and
- decreased stock-based compensation.
These factors were partially offset by:
- $10 million of cash received
related to the settlement of ABCP between the Investment Industry
Regulatory Organization of Canada
and financial institutions in the first quarter of 2013; and
- a $2 million net decrease in
valuation gains in respect of ABCP.
Interest Expense, net
During the first quarter of 2014, we recorded
net interest expense of $2 million
compared to $4 million for the first
quarter of 2013. The decrease in interest expense is primarily as a
result of higher interest income and a decrease in interest expense
as a result of lower debt.
Income from Operations before Income
Taxes
Income from operations before income taxes
increased $124 million to
$581 million for the first quarter of
2014 compared to $457 million for the
first quarter of 2013. Excluding Other Expense, discussed in the
"Other Expense" section, income from operations before income taxes
for the first quarter of 2014 increased $140
million. The increase in income from operations before
income taxes is the result of the increase in Adjusted EBIT and the
decrease in net interest expense, as discussed above.
Income Taxes
|
|
|
For
the three months ended March 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
Income taxes as
reported |
|
$ |
189 |
|
|
32.5 |
|
$ |
90 |
|
|
19.7 |
Austrian Tax
Reform |
|
|
(32) |
|
|
(5.3) |
|
|
— |
|
|
— |
Tax effect on Other expense,
net |
|
|
2 |
|
|
(0.8) |
|
|
— |
|
|
(0.3) |
|
|
$ |
159 |
|
|
26.4 |
|
$ |
90 |
|
|
19.4 |
For the first quarter of 2014, the Austrian
government enacted legislation abolishing the utilization of
foreign losses, where the foreign subsidiary is not a member of the
European Union. Furthermore, any foreign losses used by Austrian
entities arising in those non European Union subsidiaries are
subject to recapture in Austria.
As a consequence of this change, we have taken a charge to income
tax expense of $32 million ("Austrian
Tax Reform").
Excluding the Austrian Tax Reform and Other
Expense, after tax, the effective income tax rate increased to
26.4% for the first quarter of 2014 compared to 19.4% for the first
quarter of 2013 primarily a result of:
- favourable audit settlements, recorded in the first quarter of
2013; and
- the benefit of permanent items, recorded in the first quarter
of 2013.
These factors were partially offset by a
reduction in losses not benefitted in Europe and South
America.
Net Income
Net income of $392
million for the first quarter of 2014 increased $25 million compared to the first quarter of
2013. Excluding Other Expense, after tax, discussed in the "Other
Expense" section and the Austrian Tax Reform as discussed in the
"Income Taxes" section, net income increased $71 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
first quarter of 2014 compared to $2
million for the first quarter of 2013.
Net Income Attributable to Magna
International Inc.
Net income attributable to Magna International
Inc. of $393 million for the first
quarter of 2014 increased $24 million
compared to the first quarter of 2013. Excluding Other Expense,
after tax, discussed in the "Other Expense" section and the
Austrian Tax Reform as discussed in the "Income Taxes" section, net
income attributable to Magna International Inc. increased
$70 million as a result of the
increase in net income, as discussed above.
Earnings per Share
|
|
|
For the
three months
ended March 31, |
|
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Earnings per Common Share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.78 |
|
$ |
1.59 |
|
+ |
12% |
|
Diluted |
|
$ |
1.76 |
|
$ |
1.57 |
|
+ |
12% |
|
|
|
|
|
|
|
|
|
|
Weighted average
number of Common Shares outstanding (millions) |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
220.3 |
|
|
232.5 |
|
- |
5% |
|
Diluted |
|
|
223.5 |
|
|
235.2 |
|
- |
5% |
Diluted earnings per share increased
$0.19 to $1.76 for the first quarter of 2014 compared to
$1.57 for the first quarter of 2013.
Other Expense, after tax and the Austrian Tax Reform negatively
impacted diluted earnings per share in the first quarter of 2014
and 2013 by $0.23 and $0.02 respectively. Other Expense and Austrian
Tax Reform are discussed in the "Other Expense" and "Income Taxes"
sections, respectively. Excluding these amounts, diluted earnings
per share increased $0.40 as a result
of the increase in net income attributable to Magna International
Inc. and a decrease in the weighted average number of diluted
shares outstanding during the first quarter of 2014.
The decrease in the weighted average number of
diluted shares outstanding was primarily due to the repurchase and
cancellation of Common Shares, during or subsequent to the first
quarter of 2013, pursuant to our normal course issuer bids
partially offset by the issue of Common Shares related to the
exercise of stock options and an increase in the number of diluted
options outstanding as a result of an increase in the trading price
of our common stock.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations
|
|
For the
three months
ended March 31, |
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
|
|
|
|
|
|
|
Net income |
$ |
392 |
|
$ |
367 |
|
|
|
Items not involving current cash
flows |
|
279 |
|
|
240 |
|
|
|
|
|
671 |
|
|
607 |
|
$ |
64 |
Changes in non-cash operating assets and
liabilities |
|
(197) |
|
|
(456) |
|
|
|
Cash provided from operating activities |
$ |
474 |
|
$ |
151 |
|
$ |
323 |
Cash flow from operations before changes in
non-cash operating assets and liabilities increased $64 million to $671
million for the first quarter of 2014 compared to
$607 million for the first quarter of
2013. The increase in cash flow from operations was due to the
$25 million increase in net income,
as discussed above, and a $39 million
increase in items not involving current cash flows. Items not
involving current cash flows are comprised of the following:
|
|
|
For the
three months
ended March 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Depreciation and
amortization |
|
$ |
217 |
|
$ |
255 |
Other non-cash
charges |
|
|
43 |
|
|
24 |
Deferred income taxes and non-cash portion of
current taxes |
|
|
38 |
|
|
(24) |
Amortization of other assets included in cost of
goods sold |
|
|
29 |
|
|
30 |
Equity income |
|
|
(48) |
|
|
(45) |
Items not involving current cash
flows |
|
$ |
279 |
|
$ |
240 |
Cash invested in non-cash operating assets and
liabilities amounted to $197 million
for the first quarter of 2014 compared to $456 million for the first quarter of 2013. The
change in non-cash operating assets and liabilities is comprised of
the following sources (and uses) of cash:
|
|
|
For the
three months
ended March 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
(834) |
|
$ |
(974) |
Inventories |
|
|
(29) |
|
|
(158) |
Prepaid expenses and
other |
|
|
9 |
|
|
(27) |
Accounts
payable |
|
|
328 |
|
|
328 |
Accrued salaries and
wages |
|
|
105 |
|
|
101 |
Other accrued
liabilities |
|
|
168 |
|
|
315 |
Income taxes
payable |
|
|
56 |
|
|
(42) |
Deferred
revenue |
|
|
― |
|
|
1 |
Changes in non-cash operating assets and
liabilities |
|
$ |
(197) |
|
$ |
(456) |
The increase in accounts receivable, accounts
payable, accrued salaries and wages and other accrued liabilities
in the first quarter of 2014 was primarily due to an increase in
production activities at the end of the first quarter of 2014
compared to the end of 2013.
Capital and Investment
Spending
|
|
|
For the
three months
ended March 31, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Fixed asset additions |
|
$ |
(217) |
|
$ |
(194) |
|
|
|
Investments and other assets |
|
|
(54) |
|
|
(48) |
|
|
|
Fixed assets, investments and other assets
additions |
|
|
(271) |
|
|
(242) |
|
|
|
Proceeds from disposition |
|
|
37 |
|
|
30 |
|
|
|
Cash used for investment activities |
|
$ |
(234) |
|
$ |
(212) |
|
$ |
(22) |
Fixed assets, investments and other assets additions
In the first quarter of 2014, we invested
$217 million in fixed assets.
While investments were made to refurbish or replace assets consumed
in the normal course of business and for productivity improvements,
a large portion of the investment in the first quarter of 2014 was
for facilities and manufacturing equipment for programs that will
be launching subsequent to the first quarter of 2014.
In the first quarter of 2014, we invested $44 million in other assets related primarily to
fully reimbursable engineering costs and tooling for programs that
launched during the first quarter of 2014 or will be launching
subsequent to the first quarter of 2014.
Proceeds from disposition
In the first quarter of 2014, the $37 million of proceeds include normal course
fixed and other asset disposals.
Financing
|
|
|
For the
three months
ended March 31, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in bank
indebtedness |
|
$ |
3 |
|
$ |
(26) |
|
|
|
Repayments of debt |
|
|
(70) |
|
|
(41) |
|
|
|
Issues of debt |
|
|
31 |
|
|
32 |
|
|
|
Issues of Common Shares on exercise of stock
options |
|
|
25 |
|
|
39 |
|
|
|
Settlement of stock
options |
|
|
― |
|
|
(23) |
|
|
|
Repurchase of Common
Shares |
|
|
(240) |
|
|
(88) |
|
|
|
Dividends |
|
|
(83) |
|
|
(73) |
|
|
|
Cash used for financing activities |
|
$ |
(334) |
|
$ |
(180) |
|
$ |
(154) |
During the first quarter of 2014, we repurchased
2.7 million Common Shares for aggregate cash consideration of
$240 million under our normal course
issuer bid.
Cash dividends paid per Common Share were
$0.38 for the first quarter of 2014,
for a total of $83 million.
Financing Resources
|
|
|
As at |
|
|
As at |
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
Bank indebtedness |
|
$ |
46 |
|
$ |
41 |
|
|
|
|
Long-term debt due within one
year |
|
|
196 |
|
|
230 |
|
|
|
|
Long-term debt |
|
|
97 |
|
|
102 |
|
|
|
|
|
|
339 |
|
|
373 |
|
|
|
Non-controlling
interest |
|
|
15 |
|
|
16 |
|
|
|
Shareholders'
equity |
|
|
9,591 |
|
|
9,623 |
|
|
|
Total capitalization |
|
$ |
9,945 |
|
$ |
10,012 |
|
$ |
(67) |
|
|
|
|
|
|
|
|
|
|
Total capitalization decreased by $67 million to $9.95
billion at March 31, 2014
compared to $10.01 billion at
December 31, 2013,
primarily as a result of a $34
million decrease in liabilities and a $32 million decrease in shareholders' equity.
The decrease in shareholders' equity was primarily as a result
of:
- the $240 million repurchase and
cancellation of 2.7 million Common Shares in connection with our
normal course issuer bid;
- the $112 million net unrealized
loss on translation of our net investment in foreign
operations;
- dividends paid during the first quarter of 2014; and
- the $31 million net unrealized
loss on cash flow hedges.
This factor was partially offset by net income
earned of $392 million in the first
quarter of 2014.
The decrease in liabilities relates primarily to
the net repayments of our bank term debt.
Cash Resources
During the first quarter of 2014, our cash
resources decreased by $115 million to $1.44
billion as a result of the cash used for financing and
investing activities and the unfavourable effect of foreign
exchange, partially offset by cash provided from operating
activities, all as discussed above. In addition to our cash
resources, at March 31, 2014 we had
term and operating lines of credit totalling $2.55 billion of which $2.22 billion was unused and available.
During the first quarter of 2014, we filed a
short form base shelf prospectus with the Ontario Securities
Commission and a corresponding shelf registration statement with
the United States Securities and Exchange Commission on Form F-10.
The filings provide for the potential offering in Ontario and the
United States of up to an aggregate of U.S. $2.00 billion of debt securities from time to
time over a 25 month period.
Maximum Number of Shares Issuable
The following table presents the maximum number
of shares that would be outstanding if all of the outstanding
options at May 7, 2014 were
exercised:
Common
Shares |
217,843,968 |
Stock options (i) |
4,709,053 |
|
222,553,021 |
(i) |
Options to purchase Common Shares
are exercisable by the holder in accordance with the vesting
provisions and upon payment of the exercise price as may be
determined from time to time pursuant to our stock option
plans. |
Contractual Obligations and Off-Balance Sheet
Financing
There have been no material changes with respect
to the contractual obligations requiring annual payments during the
first quarter of 2014 that are outside the ordinary course of our
business. Refer to our MD&A included in our 2013 Annual
Report.
SUBSEQUENT EVENTS
Subject to approval by the Toronto Stock
Exchange and the New York Stock Exchange, our Board of Directors
approved an amendment to our normal course issuer bid to increase
the maximum number of Common Shares that may be purchased from 12
million to 20 million. The new maximum represents approximately
9.0% of our public float of Common Shares as of November 6, 2013. No other terms of the normal
course issuer bid have been amended.
COMMITMENTS AND CONTINGENCIES
From time to time, we may be contingently liable
for litigation, legal and/or regulatory actions and proceedings and
other claims.
Refer to note 14 of our unaudited interim
consolidated financial statements for the three months ended
March 31, 2014, 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, 2013.
CONTROLS AND PROCEDURES
There have been no changes in our internal
controls over financial reporting that occurred during the three
months ended March 31, 2014 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:
implementation of improvement plans in our underperforming
operations, and/or restructuring actions; improved future results
in South America through actions
to address commercial challenges and reduce operational
inefficiencies; and future purchases of our Common Shares under the
Normal Course Issuer Bid. The forward-looking information in this
MD&A is presented for the purpose of providing information
about management's current expectations and plans and such
information may not be appropriate for other purposes.
Forward-looking statements may include financial and other
projections, as well as statements regarding our future plans,
objectives or economic performance, or the assumptions underlying
any of the foregoing, and other statements that are not recitations
of historical fact. We use words such as "may", "would", "could",
"should", "will", "likely", "expect", "anticipate", "believe",
"intend", "plan", "forecast", "outlook", "project", "estimate" and
similar expressions suggesting future outcomes or events to
identify forward-looking statements. Any such forward-looking
statements are based on information currently available to us, and
are based on assumptions and analyses made by us in light of our
experience and our perception of historical trends, current
conditions and expected future developments, as well as other
factors we believe are appropriate in the circumstances. However,
whether actual results and developments will conform with our
expectations and predictions is subject to a number of risks,
assumptions and uncertainties, many of which are beyond our
control, and the effects of which can be difficult to predict,
including, without limitation the impact of economic or political
conditions on consumer confidence, consumer demand for vehicles and
vehicle production; restructuring, downsizing or other significant
non-recurring costs, including in our European business; fines or
penalties imposed by antitrust and regulatory authorities,
including the German Cartel Office; our ability to grow our
business with Asian-based customers; continued underperformance of
one or more of our operating Divisions; ongoing pricing pressures,
including our ability to offset price concessions demanded by our
customers; our ability to successfully launch material new or
takeover business; shifts in market share away from our top
customers; shifts in market shares among vehicles or vehicle
segments, or shifts away from vehicles on which we have significant
content; risks of conducting business in foreign markets, including
China, India, Russia, Brazil, Argentina, Eastern
Europe and other non-traditional markets for us; a prolonged
disruption in the supply of components to us from our suppliers;
shutdown of our or our customers' or sub-suppliers' production
facilities due to a work stoppage or labour dispute; scheduled
shutdowns of our customers' production facilities (typically in the
third and fourth quarters of each calendar year); 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; our
ability to consistently develop innovative products or processes;
impairment charges related to goodwill and long-lived assets;
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 sufficient
due diligence on acquisition targets; warranty and recall costs;
risk of production disruptions due to natural disasters; pension
liabilities; legal claims and/or regulatory actions against us;
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; changes in
credit ratings assigned to us; changes in laws and governmental
regulations; costs associated with compliance with environmental
laws and regulations; liquidity risks as a result of an
unanticipated deterioration of economic conditions; our ability to
achieve future investment returns that equal or exceed past
returns; the unpredictability of, and fluctuation in, the trading
price of our Common Shares; and other factors set out in our Annual
Information Form filed with securities commissions in Canada and our annual report on Form 40-F
filed with the United States Securities and Exchange Commission,
and subsequent filings. In evaluating forward-looking statements,
we caution readers not to place undue reliance on any
forward-looking statements and readers should specifically consider
the various factors which could cause actual events or results to
differ materially from those indicated by such forward-looking
statements. Unless otherwise required by applicable securities
laws, we do not intend, nor do we undertake any obligation, to
update or revise any forward-looking statements to reflect
subsequent information, events, results or circumstances or
otherwise.
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
[Unaudited]
[U.S. dollars in millions, except per share figures]
|
|
|
|
Three
months ended
March 31, |
|
Note |
|
|
2014 |
|
|
2013 |
Sales |
|
|
$ |
8,961 |
|
$ |
8,361 |
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
7,762 |
|
|
7,317 |
|
Depreciation and
amortization |
|
|
|
217 |
|
|
255 |
|
Selling, general and administrative |
10 |
|
|
425 |
|
|
367 |
|
Interest expense, net |
|
|
|
2 |
|
|
4 |
|
Equity income |
|
|
|
(48) |
|
|
(45) |
|
Other expense, net |
2 |
|
|
22 |
|
|
6 |
Income from operations before income
taxes |
|
|
|
581 |
|
|
457 |
Income taxes |
6 |
|
|
189 |
|
|
90 |
Net
income |
|
|
|
392 |
|
|
367 |
Net loss attributable to
non-controlling interests |
|
|
|
1 |
|
|
2 |
Net income attributable to Magna
International Inc. |
|
|
$ |
393 |
|
$ |
369 |
|
|
|
|
|
|
|
|
Earnings per Common Share: |
3 |
|
|
|
|
|
|
|
Basic |
|
|
$ |
1.78 |
|
$ |
1.59 |
|
Diluted |
|
|
$ |
1.76 |
|
$ |
1.57 |
Cash dividends paid per Common
Share |
|
|
$ |
0.38 |
|
$ |
0.32 |
|
|
|
|
|
|
|
|
Average number of Common Shares
outstanding during the
period [in millions]: |
3 |
|
|
|
|
|
|
|
Basic |
|
|
|
220.3 |
|
|
232.5 |
|
Diluted |
|
|
|
223.5 |
|
|
235.2 |
|
|
|
|
|
|
|
|
|
See accompanying notes |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars in millions]
|
|
|
Three
months ended
March 31, |
|
Note |
|
|
2014 |
|
|
2013 |
Net
income |
|
|
$ |
392 |
|
$ |
367 |
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net
of tax: |
12 |
|
|
|
|
|
|
|
Net unrealized loss on translation of net
investment
in foreign operations |
|
|
|
(112) |
|
|
(133) |
|
Net unrealized (loss) gain on available-for-sale
investments |
|
|
|
(1) |
|
|
1 |
|
Net unrealized (loss) gain on cash flow
hedges |
|
|
|
(31) |
|
|
8 |
|
Reclassification of net gain on cash flow
hedges
to net income |
|
|
|
(1) |
|
|
(6) |
|
Reclassification of net loss on pensions to net
income |
|
|
|
1 |
|
|
3 |
Other comprehensive
loss |
|
|
|
(144) |
|
|
(127) |
|
|
|
|
|
|
|
|
Comprehensive
income |
|
|
|
248 |
|
|
240 |
Comprehensive loss attributable to
non-controlling interests |
|
|
|
1 |
|
|
2 |
Comprehensive income attributable
to |
|
|
|
|
|
|
|
Magna International
Inc. |
|
|
$ |
249 |
|
$ |
242 |
|
|
|
|
|
|
|
|
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
Three
months ended
March 31, |
|
Note |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Cash provided from (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net income
|
|
|
$ |
392 |
|
$ |
367 |
Items not involving current cash flows |
4 |
|
|
279 |
|
|
240 |
|
|
|
|
671 |
|
|
607 |
Changes in non-cash operating assets and
liabilities |
4 |
|
|
(197) |
|
|
(456) |
Cash provided from operating
activities |
|
|
|
474 |
|
|
151 |
|
|
|
|
|
|
|
|
INVESTMENT ACTIVITIES |
|
|
|
|
|
|
|
Fixed asset additions |
|
|
|
(217) |
|
|
(194) |
Increase in investments and other
assets |
|
|
|
(54) |
|
|
(48) |
Proceeds from
disposition |
|
|
|
37 |
|
|
30 |
Cash used for investing
activities |
|
|
|
(234) |
|
|
(212) |
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Increase (decrease) in bank
indebtedness |
|
|
|
3 |
|
|
(26) |
Repayments of debt |
|
|
|
(70) |
|
|
(41) |
Issues of debt |
|
|
|
31 |
|
|
32 |
Issues of Common Shares on exercise of stock
options |
|
|
|
25 |
|
|
39 |
Settlement of stock
options |
|
|
|
— |
|
|
(23) |
Repurchase of Common Shares |
11 |
|
|
(240) |
|
|
(88) |
Dividends |
|
|
|
(83) |
|
|
(73) |
Cash used for financing
activities |
|
|
|
(334) |
|
|
(180) |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
|
|
|
(21) |
|
|
(34) |
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents during
the period |
|
|
|
(115) |
|
|
(275) |
Cash and cash equivalents, beginning of
period |
|
|
|
1,554 |
|
|
1,522 |
Cash and cash equivalents, end of
period |
|
|
$ |
1,439 |
|
$ |
1,247 |
|
|
|
|
|
|
|
|
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
As at |
|
|
As at |
|
|
|
|
March 31, |
|
|
December 31, |
|
Note |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
4 |
|
$ |
1,439 |
|
$ |
1,554 |
Accounts receivable |
|
|
|
6,026 |
|
|
5,246 |
Inventories |
5 |
|
|
2,646 |
|
|
2,637 |
Deferred tax assets |
|
|
|
241 |
|
|
275 |
Prepaid expenses and other |
|
|
|
199 |
|
|
211 |
|
|
|
|
10,551 |
|
|
9,923 |
|
|
|
|
|
|
|
|
Investments |
13 |
|
|
390 |
|
|
391 |
Fixed assets, net |
|
|
|
5,388 |
|
|
5,441 |
Goodwill |
|
|
|
1,427 |
|
|
1,440 |
Deferred tax assets |
|
|
|
129 |
|
|
120 |
Other assets |
7 |
|
|
663 |
|
|
675 |
|
|
|
$ |
18,548 |
|
$ |
17,990 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Bank indebtedness |
|
|
$ |
46 |
|
$ |
41 |
Accounts payable |
|
|
|
5,027 |
|
|
4,781 |
Accrued salaries and wages |
|
|
|
805 |
|
|
704 |
Other accrued liabilities |
8 |
|
|
1,709 |
|
|
1,538 |
Income taxes payable |
|
|
|
38 |
|
|
6 |
Deferred tax liabilities |
|
|
|
27 |
|
|
9 |
Long-term debt due within one
year |
|
|
|
196 |
|
|
230 |
|
|
|
|
7,848 |
|
|
7,309 |
|
|
|
|
|
|
|
|
Long-term employee benefit liabilities |
9 |
|
|
535 |
|
|
532 |
Long-term debt |
|
|
|
97 |
|
|
102 |
Other long-term liabilities |
|
|
|
274 |
|
|
208 |
Deferred tax liabilities |
6 |
|
|
188 |
|
|
200 |
|
|
|
|
8,942 |
|
|
8,351 |
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
|
|
Common Shares
[issued: 219,148,064; December 31, 2013 -
221,151,704] |
11 |
|
|
4,217 |
|
|
4,230 |
Contributed surplus |
|
|
|
74 |
|
|
69 |
Retained earnings |
|
|
|
5,135 |
|
|
5,011 |
Accumulated other comprehensive income |
12 |
|
|
165 |
|
|
313 |
|
|
|
|
9,591 |
|
|
9,623 |
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
|
15 |
|
|
16 |
|
|
|
|
9,606 |
|
|
9,639 |
|
|
|
$ |
18,548 |
|
$ |
17,990 |
|
|
|
|
|
|
|
|
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
Common
Shares |
|
|
Contri- |
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
Stated |
|
|
buted |
|
|
Retained |
|
|
|
|
|
controlling |
|
|
Total |
|
Note |
|
|
Number |
|
|
Value |
|
|
Surplus |
|
|
Earnings |
|
|
AOCI
(i) |
|
|
Interest |
|
|
Equity |
|
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2013 |
|
|
|
221.2 |
|
$ |
4,230 |
|
$ |
69 |
|
$ |
5,011 |
|
$ |
313 |
|
$ |
16 |
|
$ |
9,639 |
Net
income |
|
|
|
|
|
|
|
|
|
|
|
|
393 |
|
|
|
|
|
(1) |
|
|
392 |
Other comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144) |
|
|
|
|
|
(144) |
Shares issued on exercise of stock
options |
|
|
|
0.6 |
|
|
32 |
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
|
25 |
Release of restricted
stock |
|
|
|
|
|
|
5 |
|
|
(5) |
|
|
|
|
|
|
|
|
|
|
|
— |
Repurchase and cancellation under
normal course issuer bid |
11 |
|
|
(2.7) |
|
|
(52) |
|
|
|
|
|
(184) |
|
|
(4) |
|
|
|
|
|
(240) |
Stock-based
compensation expense |
10 |
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
10 |
Settlement of stock options |
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification from
liability |
10 |
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
7 |
Dividends
paid |
|
|
|
|
|
|
2 |
|
|
|
|
|
(85) |
|
|
|
|
|
|
|
|
(83) |
Balance, March 31,
2014 |
|
|
|
219.1 |
|
$ |
4,217 |
|
$ |
74 |
|
$ |
5,135 |
|
$ |
165 |
|
$ |
15 |
|
$ |
9,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares |
|
|
Contri- |
|
|
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
|
Stated |
|
|
buted |
|
|
Retained |
|
|
|
|
|
controlling |
|
|
Total |
|
Note |
|
|
Number |
|
|
Value |
|
|
Surplus |
|
|
Earnings |
|
|
AOCI
(i) |
|
|
Interest |
|
|
Equity |
|
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2012 |
|
|
|
233.1 |
|
$ |
4,391 |
|
$ |
80 |
|
$ |
4,462 |
|
$ |
496 |
|
$ |
29 |
|
$ |
9,458 |
Net
income |
|
|
|
|
|
|
|
|
|
|
|
|
369 |
|
|
|
|
|
(2) |
|
|
367 |
Other comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127) |
|
|
|
|
|
(127) |
Shares issued on exercise of stock
options |
|
|
|
1.3 |
|
|
53 |
|
|
(14) |
|
|
|
|
|
|
|
|
|
|
|
39 |
Release of restricted
stock |
|
|
|
|
|
|
7 |
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
|
— |
Repurchase and
cancellation under normal course issuer bid |
11 |
|
|
(1.6) |
|
|
(30) |
|
|
|
|
|
(53) |
|
|
(5) |
|
|
|
|
|
(88) |
Stock-based compensation
expense |
10 |
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
9 |
Settlement of stock options |
10 |
|
|
|
|
|
|
|
|
(9) |
|
|
(10) |
|
|
|
|
|
|
|
|
(19) |
Dividends paid |
|
|
|
0.1 |
|
|
2 |
|
|
|
|
|
(75) |
|
|
|
|
|
|
|
|
(73) |
Balance, March 31,
2013 |
|
|
|
232.9 |
|
$ |
4,423 |
|
$ |
59 |
|
$ |
4,693 |
|
$ |
364 |
|
$ |
27 |
|
$ |
9,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2013.
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,
2013 audited consolidated financial statements and notes
included in the Company's 2013 Annual Report.
In the opinion of management, the unaudited
interim consolidated financial statements reflect all adjustments,
which consist only of normal and recurring adjustments, necessary
to present fairly the financial position at March 31, 2014 and the results of operations,
cash flows and changes in equity for the three months ended
March 31, 2014 and 2013.
[b] Seasonality
The Company's businesses are generally not
seasonal. However, the Company's sales and profits are closely
related to its automotive customers' vehicle production schedules.
The Company's largest North American customers typically halt
production for approximately two weeks in July and one week in
December. Additionally, many of the Company's customers in
Europe typically shutdown vehicle
production during portions of August and one week in December.
2. OTHER EXPENSE, NET
During the first quarters of 2014 and 2013, the
Company recorded net restructuring charges of $22 million and $6
million [$20 million and
$6 million after tax], respectively,
in Europe at its exterior and
interior systems operations.
3. EARNINGS PER SHARE
|
|
Three months ended |
|
|
March
31, |
|
|
2014 |
|
|
2013 |
Basic earnings per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Magna
International Inc. |
|
$ |
393 |
|
|
$ |
369 |
|
|
|
|
|
|
|
|
Weighted average number of Common
Shares outstanding |
|
|
220.3 |
|
|
|
232.5 |
|
|
|
|
|
|
|
|
Basic earnings per Common
Share |
|
$ |
1.78 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
Diluted earnings per Common
Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Magna
International Inc. |
|
$ |
393 |
|
|
$ |
369 |
|
|
|
|
|
|
|
|
Weighted average number of Common
Shares outstanding |
|
|
220.3 |
|
|
|
232.5 |
Adjustments |
|
|
|
|
|
|
|
|
Stock options and restricted stock [a] |
|
|
3.2 |
|
|
|
2.7 |
|
|
|
223.5 |
|
|
|
235.2 |
|
|
|
|
|
|
|
|
|
Diluted earnings per Common
Share |
|
$ |
1.76 |
|
|
$ |
1.57 |
[a] |
For the three months ended March 31, 2014, diluted earnings per
Common Share exclude 0.2 million [2013 - 0.3 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:
|
March
31, |
|
December 31, |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
Bank term deposits, bankers acceptances and
government paper |
$ |
1,269 |
|
|
$ |
1,331 |
Cash |
|
170 |
|
|
|
223 |
|
$ |
1,439 |
|
|
$ |
1,554 |
[b] Items not involving current cash
flows:
|
Three months ended |
|
March
31, |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Depreciation and
amortization |
$ |
217 |
|
|
$ |
255 |
Deferred income taxes and non-cash portion of
current taxes |
|
38 |
|
|
|
(24) |
Amortization of other assets included in cost of
goods sold |
|
29 |
|
|
|
30 |
Equity income |
|
(48) |
|
|
|
(45) |
Other non-cash
charges |
|
43 |
|
|
|
24 |
|
$ |
279 |
|
|
$ |
240 |
[c] Changes in non-cash operating assets
and liabilities:
|
Three months ended |
|
March
31, |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Accounts receivable |
$ |
(834) |
|
|
$ |
(974) |
Inventories |
|
(29) |
|
|
|
(158) |
Prepaid expenses and other |
|
9 |
|
|
|
(27) |
Accounts payable |
|
328 |
|
|
|
328 |
Accrued salaries and wages |
|
105 |
|
|
|
101 |
Other accrued liabilities |
|
168 |
|
|
|
315 |
Income taxes receivable/payable |
|
56 |
|
|
|
(42) |
Deferred revenue |
|
— |
|
|
|
1 |
|
$ |
(197) |
|
|
$ |
(456) |
5. INVENTORIES
Inventories consist of:
|
March
31, |
|
|
December 31, |
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Raw materials and supplies |
$ |
959 |
|
|
$ |
947 |
Work-in-process |
|
279 |
|
|
|
273 |
Finished goods |
|
326 |
|
|
|
339 |
Tooling and engineering |
|
1,082 |
|
|
|
1,078 |
|
$ |
2,646 |
|
|
$ |
2,637 |
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. INCOME TAXES
For the first quarter of 2014, the Austrian government enacted
legislation abolishing the utilization of foreign losses, where the
foreign subsidiary is not a member of the European Union.
Furthermore, any foreign losses used by Austrian entities arising
in those non European Union subsidiaries are subject to recapture
in Austria. As a consequence of
this change, the Company has taken a charge to tax expense of
$32 million.
7. OTHER ASSETS
Other assets consist of:
|
March
31, |
|
|
December 31, |
|
2014 |
|
|
2013 |
Preproduction costs related to
long-term supply agreements with
contractual guarantee for reimbursement |
$ |
298 |
|
|
$ |
291 |
Customer relationship intangibles |
|
135 |
|
|
|
143 |
Long-term receivables |
|
107 |
|
|
|
111 |
Patents and licences, net |
|
42 |
|
|
|
44 |
Pension overfunded status |
|
26 |
|
|
|
26 |
Unrealized gain on cash flow hedges |
|
18 |
|
|
|
20 |
Other, net |
|
37 |
|
|
|
40 |
|
$ |
663 |
|
|
$ |
675 |
8. WARRANTY
The following is a continuity of the Company's
warranty accruals:
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Balance, beginning of
period |
|
$ |
91 |
|
|
$ |
94 |
Expense, net |
|
|
7 |
|
|
|
9 |
Settlements |
|
|
(7) |
|
|
|
(5) |
Foreign exchange and other |
|
|
— |
|
|
|
8 |
Balance, March 31 |
|
$ |
91 |
|
|
$ |
106 |
9. LONG-TERM EMPLOYEE BENEFIT LIABILITIES
The Company recorded long-term employee benefit
expenses as follows:
|
Three months ended |
|
March
31, |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Defined benefit pension plans and
other |
|
$ |
3 |
|
|
$ |
4 |
Termination and long service
arrangements |
|
|
9 |
|
|
|
8 |
|
|
$ |
12 |
|
|
$ |
12 |
10. STOCK-BASED COMPENSATION
[a] Incentive Stock Option Plan
The following is a continuity schedule of
options outstanding [number of options in the table below are
expressed in whole numbers]:
|
|
|
2014 |
|
|
2013 |
|
|
|
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 |
|
|
4,758,108 |
|
|
41.82 |
|
|
2,847,109 |
|
|
6,623,242 |
|
|
35.39 |
|
|
3,227,574 |
Granted |
|
|
751,300 |
|
|
106.71 |
|
|
— |
|
|
1,060,000 |
|
|
57.02 |
|
|
— |
Exercised (ii) |
|
|
(680,352) |
|
|
39.49 |
|
|
(680,352) |
|
|
(2,178,383) |
|
|
29.76 |
|
|
(2,178,383) |
Cancelled |
|
|
(16,999) |
|
|
52.19 |
|
|
(6,000) |
|
|
(37,500) |
|
|
50.17 |
|
|
(20,000) |
Vested |
|
|
— |
|
|
— |
|
|
779,384 |
|
|
— |
|
|
— |
|
|
2,105,503 |
March 31 |
|
|
4,812,057 |
|
|
52.24 |
|
|
2,940,141 |
|
|
5,467,359 |
|
|
41.73 |
|
|
3,134,694 |
(i) |
The exercise price noted above represents the weighted
average exercise price in Canadian dollars.
|
|
|
(ii) |
During the three months ended March 31, 2013, 849,999
options were exercised on a cashless basis in accordance with the
applicable stock option plans. On exercise, cash payments
totalling $23 million were made to the stock option
holders. |
|
|
|
All cash payments were calculated using the
difference between the aggregate fair market value of the Option
Shares based on the closing price of the Company's Common Shares on
the Toronto Stock Exchange ["TSX"] on the date of exercise and the
aggregate Exercise Price of all such options surrendered. |
The weighted average assumptions used in
measuring the fair value of stock options granted and/or modified
and the compensation expense recorded in selling, general and
administrative expenses are as follows:
|
|
|
Three months ended |
|
|
|
March
31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
Risk free interest rate |
|
|
1.60% |
|
|
1.32% |
Expected dividend yield |
|
|
2.00% |
|
|
2.00% |
Expected volatility |
|
|
29% |
|
|
34% |
Expected time until exercise |
|
|
4.5 years |
|
|
4.5 years |
|
|
|
|
|
|
|
Weighted average fair value of options granted
period [Cdn$] |
|
$ |
22.94 |
|
$ |
14.02 |
[b] Long-term retention program
The following is a continuity of the stock that
has not been released to 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]:
|
|
|
2014 |
|
|
2013 |
|
|
|
Number |
Stated |
|
|
Number |
Stated |
|
|
|
of shares |
value |
|
|
of Shares |
value |
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded and not released, beginning of period |
|
|
730,476 |
|
$ |
25 |
|
|
882,988 |
|
$ |
30 |
Release of restricted stock |
|
|
(143,152) |
|
|
(4) |
|
|
(152,512) |
|
|
(5) |
Awarded and not released, March 31 |
|
|
587,324 |
|
$ |
21 |
|
|
730,476 |
|
$ |
25 |
[c] Restricted stock unit program
The following is a continuity schedule of
restricted stock unit programs outstanding [number of stock units
in the table below are expressed in whole numbers]:
|
|
|
2014 |
|
|
2013 |
|
|
|
Equity |
|
|
Liability |
|
|
Equity (i) |
|
|
|
|
|
Equity |
|
|
Liability |
|
|
Liability |
|
|
|
|
|
|
classified |
|
|
classified |
|
|
classified |
|
|
|
|
|
classified |
|
|
classified |
|
|
classified |
|
|
|
|
|
|
RSUs |
|
|
RSUs |
|
|
DSUs |
|
|
Total |
|
|
RSUs |
|
|
RSUs |
|
|
DSUs |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
beginning
of period |
|
|
631,854 |
|
|
30,119 |
|
|
127,447 |
|
|
789,420 |
|
|
605,430 |
|
|
20,099 |
|
|
206,923 |
|
|
832,452 |
Granted |
|
|
50,809 |
|
|
8,025 |
|
|
6,315 |
|
|
65,149 |
|
|
70,636 |
|
|
14,825 |
|
|
10,013 |
|
|
95,474 |
Dividend equivalents |
|
|
253 |
|
|
153 |
|
|
529 |
|
|
935 |
|
|
415 |
|
|
194 |
|
|
1,206 |
|
|
1,815 |
Released |
|
|
(8,259) |
|
|
— |
|
|
— |
|
|
(8,259) |
|
|
(8,259) |
|
|
— |
|
|
(113,007) |
|
|
(121,266) |
Balance, March 31 |
|
|
674,657 |
|
|
38,297 |
|
|
134,291 |
|
|
847,245 |
|
|
668,222 |
|
|
35,118 |
|
|
105,135 |
|
|
808,475 |
|
|
(i) |
Effective January 1, 2014, the Deferred Share Units ["DSUs"]
awarded under the Non-Employee Director Share-Based Compensation
Plan will be settled by delivering Magna Common Shares equal to the
whole DSUs credited to the Independent Director in satisfaction of
the redemption value of the DSUs. Previously, the DSUs were
settled in cash. Accordingly, effective January 1, 2014, the
DSUs are accounted for through equity. |
[d] Compensation expense related to
Stock-based compensation
Stock-based compensation expense recorded in
selling, general and administrative expenses related to the above
programs is as follows:
|
Three months ended |
|
March
31, |
|
|
2014 |
|
2013 |
|
|
|
|
|
|
|
Incentive Stock Option Plan |
|
$ |
4 |
|
$ |
4 |
Long-term retention |
|
|
1 |
|
|
1 |
Restricted stock unit |
|
|
5 |
|
|
3 |
|
|
|
10 |
|
|
8 |
Fair value adjustment for liability classified
DSUs |
|
|
— |
|
|
2 |
Total stock-based compensation expense |
|
$ |
10 |
|
$ |
10 |
11. COMMON SHARES
[a] The Company repurchased shares
under normal course issuer bids as follows:
|
|
|
2014 |
|
|
2013 |
|
|
|
Number |
|
|
Cash |
|
|
Number |
|
|
Cash |
|
|
|
of shares |
|
|
consideration |
|
|
of shares |
|
|
consideration |
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
2,710,000 |
|
$ |
240 |
|
|
1,593,615 |
|
$ |
88 |
Subsequent to quarter end, the Company purchased
for cancellation 1,407,100 Common Shares under a normal course
issuer bid for cash consideration of $137
million through a pre-defined automatic securities purchase
plan with a designated broker.
[b] The following table presents the
maximum number of shares that would be outstanding if all the
dilutive instruments outstanding at May 7,
2014 were exercised or converted:
Common
Shares |
|
|
217,843,968 |
Stock options (i) |
|
|
4,709,053 |
|
|
|
222,553,021 |
(i) |
Options to purchase Common Shares are exercisable by the holder
in accordance with the vesting provisions and upon payment of the
exercise price as may be determined from time to time pursuant to
the Company's stock option plans. |
12. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following is a continuity schedule of
accumulated other comprehensive income:
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Accumulated net unrealized gain on
translation of net investment in foreign operations |
|
|
|
|
|
|
|
Balance, beginning of period |
|
$ |
454 |
|
$ |
629 |
|
Net unrealized loss |
|
|
(112) |
|
|
(133) |
|
Repurchase of shares under normal course issuer
bid |
|
|
(4) |
|
|
(5) |
|
Balance, March 31 |
|
|
338 |
|
|
491 |
|
|
|
|
|
|
|
|
Accumulated net unrealized (loss) gain
on cash flow hedges (i) |
|
|
|
|
|
|
|
Balance, beginning of
period |
|
|
(20) |
|
|
34 |
|
Net unrealized (loss) gain |
|
|
(31) |
|
|
8 |
|
Reclassification of net gain to net income |
|
|
(1) |
|
|
(6) |
|
Balance, March 31 |
|
|
(52) |
|
|
36 |
|
|
|
|
|
|
|
|
Accumulated net unrealized loss on
pensions (ii) |
|
|
|
|
|
|
|
Balance, beginning of
period |
|
|
(117) |
|
|
(168) |
|
Reclassification of net loss to net income
|
|
|
1 |
|
|
3 |
|
Balance, March 31 |
|
|
(116) |
|
|
(165) |
|
|
|
|
|
|
|
|
Accumulated net unrealized (loss) gain
on available-for-sale investments |
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
(4) |
|
|
1 |
|
Net unrealized (loss) gain |
|
|
(1) |
|
|
1 |
|
Balance, March 31 |
|
|
(5) |
|
|
2 |
|
|
|
|
|
|
|
|
Total accumulated other comprehensive
income |
|
$ |
165 |
|
$ |
364 |
|
|
(i) |
The amount of income tax benefit (obligation) that has been
netted in the accumulated net unrealized (loss) gain on cash flow
hedges is as follows: |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
$ |
5 |
|
|
$ |
(13) |
|
|
Net unrealized loss (gain) |
|
|
10 |
|
|
|
(4) |
|
|
Reclassification of net gain to net
income |
|
|
1 |
|
|
|
2 |
|
|
Balance, March 31 |
|
$ |
16 |
|
|
$ |
(15) |
|
|
(ii) |
The amount of income tax benefit that has been netted in the
accumulated net unrealized loss on pensions is as follows: |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
$ |
14 |
|
|
$ |
36 |
|
|
Reclassification of net loss to net
income |
|
|
— |
|
|
|
(1) |
|
|
Balance, March 31 |
|
$ |
14 |
|
|
$ |
35 |
The amount of other comprehensive loss that is
expected to be reclassified to net income over the next 12 months
is $15 million [net of income taxes
of $3 million].
13. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and
financial liabilities consist of the following:
|
|
March 31, |
|
|
December 31, |
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Held for trading |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,439 |
|
|
$ |
1,554 |
|
Investment in
ABCP |
|
|
90 |
|
|
|
92 |
|
|
$ |
1,529 |
|
|
$ |
1,646 |
|
|
|
|
|
|
|
|
Held to maturity investments |
|
|
|
|
|
|
|
|
Severance investments |
|
$ |
5 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
Available-for-sale |
|
|
|
|
|
|
|
|
Equity investments |
|
$ |
4 |
|
|
$ |
4 |
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
6,026 |
|
|
$ |
5,246 |
|
Long-term receivables included in
other assets |
|
|
107 |
|
|
|
111 |
|
|
$ |
6,133 |
|
|
$ |
5,357 |
|
|
|
|
|
|
|
|
Other financial liabilities |
|
|
|
|
|
|
|
|
Bank indebtedness |
|
$ |
46 |
|
|
$ |
41 |
|
Long-term debt (including portion due
within one year) |
|
|
293 |
|
|
|
332 |
|
Accounts payable |
|
|
5,027 |
|
|
|
4,781 |
|
|
$ |
5,366 |
|
|
$ |
5,154 |
|
|
|
|
|
|
|
|
Derivatives designated as effective
hedges, measured at fair value |
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
$ |
40 |
|
|
$ |
42 |
|
|
Other assets |
|
|
18 |
|
|
|
20 |
|
|
Other accrued liabilities |
|
|
(50) |
|
|
|
(37) |
|
|
Other long-term liabilities |
|
|
(40) |
|
|
|
(28) |
|
|
|
(32) |
|
|
|
(3) |
|
Natural gas contracts |
|
|
|
|
|
|
|
|
|
Other accrued liabilities |
|
|
(1) |
|
|
|
(1) |
|
|
$ |
(33) |
|
|
$ |
(4) |
[b] Derivatives designated as effected
hedges, measured at fair value
The Company presents derivatives that are
designated as effective hedges at gross fair values in the
Consolidated Balance Sheets. However, master netting and other
similar arrangements allow net settlements under certain
conditions. The following table shows the Company's derivative
foreign currency contracts at gross fair value as reflected in the
Consolidated Balance Sheets and the unrecognized impacts of master
netting arrangements:
|
|
Gross |
|
Gross |
|
|
|
|
|
amounts |
|
amounts |
|
|
|
|
|
presented |
|
not offset |
|
|
|
|
|
in Consolidated |
|
in Consolidated |
|
|
|
|
|
Balance Sheets |
|
Balance Sheets |
|
Net amounts |
|
|
|
|
|
|
|
|
|
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
58 |
|
$ |
49 |
|
$ |
9 |
Liabilities |
|
$ |
(90) |
|
$ |
(49) |
|
$ |
(41) |
|
|
|
|
|
|
|
|
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
62 |
|
$ |
42 |
|
$ |
20 |
Liabilities |
|
$ |
(65) |
|
$ |
(42) |
|
$ |
(23) |
[c] Fair value
The Company determined the estimated fair values
of its financial instruments based on valuation methodologies it
believes are appropriate; however, considerable judgment is
required to develop these estimates. Accordingly, these estimated
fair values are not necessarily indicative of the amounts the
Company could realize in a current market exchange. The estimated
fair value amounts can be materially affected by the use of
different assumptions or methodologies. The methods and assumptions
used to estimate the fair value of financial instruments are
described below:
Cash and cash equivalents, accounts
receivable, bank indebtedness and accounts payable.
Due to the short period to maturity of the
instruments, the carrying values as presented in the consolidated
balance sheets are reasonable estimates of fair values.
Investments
At March 31, 2014,
the Company held Canadian third party asset-backed commercial paper
["ABCP"] with a face value of Cdn$107
million [December 31, 2013 -
Cdn$107 million]. The carrying value and estimated fair value of
this investment was Cdn$100 million
[December 31, 2013 - Cdn$99 million]. As fair value information is not
readily determinable for the Company's investment in ABCP, the fair
value was based on a valuation technique estimating the fair value
from the perspective of a market participant.
At March 31, 2014,
the Company held available-for-sale investments in publicly traded
companies. The carrying value and fair value of these investments
was $4 million, which was based on
the closing share price of the investments on March 31, 2014.
Term debt
The Company's term debt includes $196 million due within one year. Due to the
short period to maturity of this debt, the carrying value as
presented in the consolidated balance sheets is a reasonable
estimate of its fair value.
[d] 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
of cash flows and the risk of collateral calls in the event that
spreads widened considerably, the Company could be exposed to
further losses on its investment.
Cash and cash equivalents, which consists of
short-term investments, are only invested in governments, bank term
deposits and bank commercial paper with an investment grade credit
rating. Credit risk is further reduced by limiting the amount which
is invested in certain governments or any major financial
institution.
The Company is also exposed to credit risk from
the potential default by any of its counterparties on its foreign
exchange forward contracts. The Company mitigates this credit risk
by dealing with counterparties who are major financial institutions
that the Company anticipates will satisfy their obligations under
the contracts.
In the normal course of business, the Company is
exposed to credit risk from its customers, substantially all of
which are in the automotive industry and are subject to credit
risks associated with the automotive industry. For the three- month
period ended March 31, 2014, sales to
the Company's six largest customers represented 83% of the
Company's total sales and substantially all of its sales are to
customers in which the Company has ongoing contractual
relationships.
[e] Interest rate risk
The Company is not exposed to significant
interest rate risk due to the short-term maturity of its monetary
current assets and current liabilities. In particular, the amount
of interest income earned on the Company's cash and cash
equivalents is impacted more by the investment decisions made and
the demands to have available cash on hand, than by movements in
the interest rates over a given period.
In addition, the Company is not exposed to
interest rate risk on its term debt instruments as the interest
rates on these instruments are fixed.
[f] 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 March 31, 2014,
the Company had outstanding foreign exchange forward contracts
representing commitments to buy and sell various foreign
currencies. Significant commitments are as follows:
|
|
|
Buys |
|
|
Sells |
|
|
|
|
|
|
|
For Canadian
dollars |
|
|
|
|
|
|
|
U.S. amount |
|
|
222 |
|
|
1,328 |
|
euro amount |
|
|
53 |
|
|
9 |
|
Korean won amount |
|
|
19,605 |
|
|
— |
|
|
|
|
|
|
|
|
For U.S. dollars |
|
|
|
|
|
|
|
Peso amount |
|
|
7,306 |
|
|
278 |
|
Korean won amount |
|
|
1,301 |
|
|
— |
|
|
|
|
|
|
|
|
For euros |
|
|
|
|
|
|
|
U.S. amount |
|
|
99 |
|
|
235 |
|
GBP amount |
|
|
30 |
|
|
38 |
|
Czech Koruna amount |
|
|
4,734 |
|
|
8 |
|
Polish Zlotys amount |
|
|
189 |
|
|
— |
Forward contracts mature at various dates
through 2019. Foreign currency exposures are reviewed
quarterly.
14. CONTINGENCIES
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.
[a] 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 2015, 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] On September 24,
2013, representatives of the Bundeskartellamt, the German
Federal Cartel Office [the "Cartel Office"], attended at one of the
Company's operating divisions in Germany to obtain information in connection
with an ongoing antitrust investigation relating to suppliers of
automobile textile coverings and components, particularly trunk
linings. Investigations of this nature can continue for several
years. Where wrongful conduct is found, the Cartel Office has the
authority to impose administrative fines that are calculated in
accordance with formula-based guidelines tied to the level of
affected sales, the gravity of the infringement, the consolidated
sales of the group of companies to which the offending entity
belongs, as well as other mitigating and aggravating factors.
The Company's policy is to comply with all
applicable laws, including antitrust and competition laws. In light
of the early stage of the investigation, management is unable to
predict its duration or outcome, including whether any operating
division of the Company could be found liable for any violation of
law or the extent of any fine, if found to be liable. In the event
of any such violation, any fines imposed under the Cartel Office
guidelines referred to above could have a material adverse effect
on Magna's profitability in the year such fine is imposed.
[c] In certain circumstances, the Company
is at risk for warranty costs including product liability and
recall costs. Due to the nature of the costs, the Company makes its
best estimate of the expected future costs [note 8];
however, the ultimate amount of such costs could be materially
different. The Company continues to experience increased customer
pressure to assume greater warranty responsibility. Currently,
under most customer agreements, the Company only accounts for
existing or probable claims. Under certain complete vehicle
engineering and assembly contracts, the Company records an estimate
of future warranty-related costs based on the terms of the specific
customer agreements, and the specific customer's warranty
experience.
15. SEGMENTED INFORMATION
Given the differences between the regions in
which the Company operates, Magna's operations are segmented on a
geographic basis. Consistent with the above, the Company's
internal financial reporting separately segments key internal
operating performance measures between North America, Europe, Asia
and Rest of World for purposes of presentation to the chief
operating decision maker to assist in the assessment of operating
performance, the allocation of resources, and the long-term
strategic direction and future global growth of the Company.
The Company's chief operating decision maker
uses Adjusted EBIT as the measure of segment profit or loss, since
management believes Adjusted EBIT is the most appropriate measure
of operational profitability or loss for its reporting segments.
Adjusted EBIT represents income from operations before income
taxes; interest expense, net; and other expense, net.
The accounting policies of each segment are the
same as those set out under "Significant Accounting Policies"
[note 1] and intersegment sales and transfers are accounted
for at fair market value. During the fourth quarter of 2013, the
Company began reporting Asia and
Rest of World as separate reporting segments.
|
|
|
Three months ended |
|
|
Three months ended |
|
|
|
March
31, 2014 |
|
|
March 31,
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
Total |
|
|
External |
|
|
Adjusted |
|
|
assets, |
|
|
Total |
|
|
External |
|
|
Adjusted |
|
|
assets, |
|
|
|
sales |
|
|
sales |
|
|
EBIT |
|
|
net |
|
|
sales |
|
|
sales |
|
|
EBIT |
|
|
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
1,604 |
|
$ |
1,487 |
|
|
|
|
$ |
574 |
|
$ |
1,681 |
|
$ |
1,553 |
|
|
|
|
$ |
633 |
|
United States |
|
|
2,321 |
|
|
2,197 |
|
|
|
|
|
1,117 |
|
|
1,954 |
|
|
1,843 |
|
|
|
|
|
987 |
|
Mexico |
|
|
1,039 |
|
|
958 |
|
|
|
|
|
609 |
|
|
965 |
|
|
892 |
|
|
|
|
|
577 |
|
Eliminations |
|
|
(296) |
|
|
— |
|
|
|
|
|
— |
|
|
(288) |
|
|
— |
|
|
|
|
|
— |
|
|
|
4,668 |
|
|
4,642 |
|
$ |
443 |
|
|
2,300 |
|
|
4,312 |
|
|
4,288 |
|
$ |
381 |
|
|
2,197 |
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding Great Britain) |
|
|
3,080 |
|
|
3,015 |
|
|
|
|
|
1,392 |
|
|
2,902 |
|
|
2,835 |
|
|
|
|
|
1,416 |
|
Great Britain |
|
|
182 |
|
|
182 |
|
|
|
|
|
73 |
|
|
218 |
|
|
216 |
|
|
|
|
|
53 |
|
Eastern Europe |
|
|
628 |
|
|
530 |
|
|
|
|
|
656 |
|
|
527 |
|
|
454 |
|
|
|
|
|
570 |
|
Eliminations |
|
|
(117) |
|
|
— |
|
|
|
|
|
— |
|
|
(95) |
|
|
— |
|
|
|
|
|
— |
|
|
|
3,773 |
|
|
3,727 |
|
|
127 |
|
|
2,121 |
|
|
3,552 |
|
|
3,505 |
|
|
72 |
|
|
2,039 |
Asia |
|
|
463 |
|
|
428 |
|
|
29 |
|
|
596 |
|
|
364 |
|
|
334 |
|
|
11 |
|
|
570 |
Rest of World |
|
|
161 |
|
|
161 |
|
|
(13) |
|
|
102 |
|
|
231 |
|
|
231 |
|
|
(11) |
|
|
129 |
Corporate and Other |
|
|
(104) |
|
|
3 |
|
|
19 |
|
|
269 |
|
|
(98) |
|
|
3 |
|
|
14 |
|
|
237 |
Total reportable
segments |
|
|
8,961 |
|
|
8,961 |
|
|
605 |
|
|
5,388 |
|
|
8,361 |
|
|
8,361 |
|
|
467 |
|
|
5,172 |
Other expense,
net |
|
|
|
|
|
|
|
|
(22) |
|
|
|
|
|
|
|
|
|
|
|
(6) |
|
|
|
Interest expense,
net |
|
|
|
|
|
|
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
|
|
|
|
$ |
8,961 |
|
$ |
8,961 |
|
$ |
581 |
|
|
5,388 |
|
$ |
8,361 |
|
$ |
8,361 |
|
$ |
457 |
|
|
5,172 |
Current assets |
|
|
|
|
|
|
|
|
|
|
|
10,551 |
|
|
|
|
|
|
|
|
|
|
|
9,866 |
Investments, goodwill, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deferred tax assets and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
assets |
|
|
|
|
|
|
|
|
|
|
|
2,609 |
|
|
|
|
|
|
|
|
|
|
|
2,723 |
Consolidated total
assets |
|
|
|
|
|
|
|
|
|
|
$ |
18,548 |
|
|
|
|
|
|
|
|
|
|
$ |
17,761 |
16. SUBSEQUENT EVENTS
Subject to approval by the TSX and the New York
Stock Exchange, the Board of Directors approved an amendment to the
Company's normal course issuer bid to increase the maximum number
of Common Shares that may be purchased from 12 million to 20
million. The new maximum represents approximately 9.0% of the
Company's public float of Common Shares as of November 6, 2013. No other terms of the normal
course issuer bid have been amended.
17. COMPARATIVE FIGURES
Certain of the comparative figures have been
reclassified to conform to the current period's method of
presentation.
SOURCE Magna International Inc.