AURORA, ON, Nov. 5, 2014 /CNW/ - Magna International Inc.
(TSX: MG; NYSE: MGA) today reported financial results for the
third quarter ended September
30, 2014.
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THREE MONTHS ENDED
SEPTEMBER 30, |
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NINE MONTHS ENDED
SEPTEMBER 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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Sales |
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$ |
8,820 |
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$ |
8,338 |
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$ |
27,245 |
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$ |
25,661 |
Adjusted EBIT(1) |
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$ |
605 |
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$ |
444 |
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$ |
1,920 |
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$ |
1,458 |
Income from operations before income taxes |
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$ |
589 |
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$ |
391 |
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$ |
1,862 |
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$ |
1,391 |
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Net income attributable to Magna International
Inc. |
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$ |
470 |
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$ |
319 |
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$ |
1,373 |
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$ |
1,103 |
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Diluted earnings per share |
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$ |
2.19 |
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$ |
1.39 |
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$ |
6.26 |
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$ |
4.74 |
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All results are
reported in millions of U.S. dollars, except per share figures,
which are in U.S. dollars.
(1)We believe Adjusted EBIT is the most appropriate
measure of operational profitability or loss of our reporting
segments.
Adjusted EBIT represents income from operations before taxes;
interest expense, net; and other expense, net. |
THREE MONTHS ENDED SEPTEMBER 30, 2014
We posted sales of $8.82
billion for the third quarter ended September 30, 2014, an increase of 6% from the
third quarter of 2013. We achieved this sales increase in a period
when vehicle production increased 8% in North America and 4% in Europe, both relative to the third quarter of
2013. In the third quarter of 2014, our North American and Asian
production sales, complete vehicle assembly sales and tooling,
engineering and other sales increased, while our European and Rest
of World production sales decreased, in each case relative to the
comparable quarter in 2013.
Complete vehicle assembly sales increased 9% to
$740 million for the third quarter of
2014 compared to $680 million
for the third quarter of 2013, while complete vehicle assembly
volumes decreased 5% to approximately 32,000 units.
During the third quarter of 2014, income from
operations before income taxes was $589
million, net income attributable to Magna International Inc.
was $470 million and diluted earnings
per share were $2.19, increases of
$198 million, $151 million and $0.80 respectively, each compared to the third
quarter of 2013.
Excluding other expense, after tax for the third
quarters of 2014 and 2013, income from operations before income
taxes, net income attributable to Magna International Inc. and
diluted earnings per share increased $157
million, $124 million and
$0.69 respectively, each compared to
the third quarter of 2013.
During the third quarter ended September 30, 2014, we generated cash from
operations of $737 million before
changes in operating assets and liabilities, and invested
$18 million in operating assets and
liabilities. Total investment activities for the third quarter of
2014 were $365 million, including
$315 million in fixed asset
additions and a $50 million increase
in investments and other assets.
NINE MONTHS ENDED SEPTEMBER 30,
2014
We posted sales of $27.25
billion for the nine months ended September 30, 2014, an increase of 6% from the
nine months ended September 30, 2013.
This higher sales level reflected increases in our North American,
European and Asian production sales, complete vehicle assembly
sales and tooling, engineering and other sales partially offset by
a decrease in Rest of World production sales, in each case relative
to the first nine months of 2013.
During the nine months ended September 30, 2014, vehicle production increased
5% to 12.8 million units in North
America and increased 6% to 15.2 million units in
Europe, each compared to the first
nine months of 2013.
Complete vehicle assembly sales increased 3% to
$2.35 billion for the nine months
ended September 30, 2014 compared to
$2.27 billion for the nine months
ended September 30, 2013, while
complete vehicle assembly volumes decreased 7% to approximately
102,000 units.
During the nine months ended September 30, 2014, income from operations before
income taxes was $1.86 billion, net
income attributable to Magna International Inc. was $1.37 billion and diluted earnings per share were
$6.26, increases of $471 million, $270
million and $1.52,
respectively, each compared to the first nine months of 2013.
Excluding other expense, after tax for the nine
months ended September 30, 2014 and
2013, and the impact of the Austrian tax reform for the nine months
ended September 30, 2014, income from
operations before income taxes, net income attributable to Magna
International Inc. and diluted earnings per share increased
$457 million, $299 million and $1.67 respectively, each compared to the nine
months ended September 30, 2013.
During the nine months ended September 30, 2014, we generated cash from
operations before changes in operating assets and liabilities of
$2.16 billion, and invested
$363 million in operating assets and
liabilities. Total investment activities for the first nine months
of 2014 were $1.07 billion, including
$916 million in fixed asset additions
and a $152 million increase in
investments and other assets.
A more detailed discussion of our consolidated
financial results for the third quarter and nine months ended
September 30, 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
Today, our Board of Directors declared a
quarterly dividend of $0.38 with
respect to our outstanding Common Shares for the quarter ended
September 30, 2014. This dividend is
payable on December 12, 2014 to
shareholders of record on November 28,
2014.
OTHER MATTERS
Subject to approval by the Toronto Stock
Exchange and the New York Stock Exchange, our Board of Directors
approved a normal course issuer bid to purchase up to 20 million of
our Common Shares, representing approximately 9.8% of our public
float of Common Shares. This new normal course issuer bid is
expected to commence on or about November
13, 2014 and will terminate one year later.
UPDATED 2014 OUTLOOK
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Light Vehicle Production (Units) |
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North America |
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17.0 million |
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Europe |
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20.2 million |
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Production Sales |
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North America |
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$17.9 - $18.3 billion |
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Europe |
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$9.7 - $10.0 billion |
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Asia |
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$1.6 - $1.7 billion |
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Rest of World |
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$0.6 -
$0.7 billion |
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Total Production Sales |
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$29.8 - $30.7 billion |
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Complete Vehicle Assembly Sales |
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$3.1 - $3.3 billion |
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Total Sales |
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$35.8 - $37.0 billion |
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Operating
Margin(1) |
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Approximately 6.9% |
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Tax Rate(1,2) |
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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
(2)Excluding the impact of the Austrian tax
reform |
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
312 manufacturing operations and 83 product development,
engineering and sales centres in 29 countries. We have over 130,000
employees focused on delivering superior value to our customers
through innovative processes and World Class Manufacturing. Our
product capabilities include producing body, chassis, interior,
exterior, seating, powertrain, electronic, vision, closure and roof
systems and modules, as well as complete vehicle engineering and
contract manufacturing. Our common shares trade on the Toronto
Stock Exchange (MG) and the New York Stock Exchange (MGA). For
further information about Magna, visit our website at
www.magna.com.
We will hold a conference call for interested analysts and
shareholders to discuss our third quarter results on Wednesday,
November 5, 2014 at 8:30 a.m. EST. The conference call will be
chaired by Don Walker, Chief Executive Officer. The number to use
for this call is 1-800-381-7839. The number for overseas callers is
1-212-231-2913. Please call in at least 10 minutes prior to the
call. We will also webcast the conference call at
www.magna.com. The slide presentation accompanying the
conference call will be available on our website Wednesday morning
prior to the call. |
FORWARD-LOOKING STATEMENTS
The previous discussion contains statements that constitute
"forward-looking information" or "forward-looking statements"
within the meaning of applicable securities legislation, including,
but not limited to, statements relating to: forecast light vehicle
production volumes in North
America and Europe; Magna's
expected production sales in its North
America, Europe and Rest of
World segments; total sales; complete vehicle assembly sales;
consolidated operating margin; average effective income tax rate;
capital spending; future repurchases of Common Shares under our
Normal Course Issuer Bid; and other matters. The forward-looking
information in this press release is presented for the purpose of
providing information about management's current expectations and
plans and such information may not be appropriate for other
purposes. Forward-looking statements may include financial and
other projections, as well as statements regarding our future
plans, objectives or economic performance, or the assumptions
underlying any of the foregoing, and other statements that are not
recitations of historical fact. We use words such as "may",
"would", "could", "should", "will", "likely", "expect",
"anticipate", "believe", "intend", "plan", "forecast", "outlook",
"project", "estimate" and similar expressions suggesting future
outcomes or events to identify forward-looking statements. Any such
forward-looking statements are based on information currently
available to us, and are based on assumptions and analyses made by
us in light of our experience and our perception of historical
trends, current conditions and expected future developments, as
well as other factors we believe are appropriate in the
circumstances. However, whether actual results and developments
will conform with our expectations and predictions is subject to a
number of risks, assumptions and uncertainties, many of which are
beyond our control, and the effects of which can be difficult to
predict, including, without limitation: the impact of economic or
political conditions on consumer confidence, consumer demand for
vehicles and vehicle production; our ability to successfully launch
material new or takeover business; continued underperformance of
one or more of our operating Divisions; restructuring, downsizing
or other significant non-recurring costs, including in our European
business; ongoing pricing pressures, including our ability to
offset price concessions demanded by our customers; warranty and
recall costs; fines or penalties imposed by antitrust and
regulatory authorities, including the German Cartel Office or CADE,
Brazil's competition authority;
our ability to grow our business with Asian-based customers; 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; 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 and nine months ended September
30, 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
November 5, 2014.
OVERVIEW
We are a leading global automotive supplier with 312
manufacturing operations and 83 product development, engineering
and sales centres in 29 countries. We have over 130,000 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.
HIGHLIGHTS
North American light vehicle production increased 8% in the
third quarter of 2014 to 4.2 million units and European light
vehicle production increased 4% in the third quarter of 2014 to 4.7
million units, each compared to the third quarter of 2013.
Our third quarter 2014 sales increased 6% over
the third quarter of 2013 to $8.82
billion. North American and Asian production sales as well
as complete vehicle assembly sales and tooling, engineering and
other sales all increased over the comparable quarter, while
European and Rest of World production sales declined compared to
the third quarter of 2013.
Adjusted EBIT(1) increased 36% to
$605 million in the third quarter of
2014, compared to $444 million in the
third quarter of 2013.
- Our North America segment
generated Adjusted EBIT of $470
million for the third quarter of 2014. This compared to
Adjusted EBIT of $365 million,
including $39 million of amortization
related to the August 2012
acquisition of Magna E-Car Systems partnership ("E-Car"), for the
third quarter of 2013. The E-Car acquisition intangibles were fully
amortized at the end of 2013.
- Our Europe segment reported
Adjusted EBIT of $83 million in the
third quarter of 2014, compared to $72
million in the third quarter of 2013. This represents our
eleventh consecutive quarter of year-over-year improved Adjusted
EBIT in our Europe segment.
- Our Asia segment posted an
Adjusted EBIT of $39 million in the
third quarter of 2014, compared to $29
million in the comparable quarter of 2013. The increase
largely reflects the launch of business in existing and recently
constructed facilities.
- Our Rest of World segment reported an Adjusted EBIT loss of
$6 million in the third quarter of
2014, compared to a loss of $27
million in the third quarter of 2013. We continue to focus
on reducing operating losses and addressing commercial challenges
in South America, the most
substantial market in our Rest of World segment.
During the third quarter of 2014, we purchased
for cancellation 5.7 million Common Shares for cash consideration
of $614 million. Subsequent to the
third quarter we purchased, primarily for cancellation, an
additional 1.1 million Common Shares for $98
million, pursuant to our outstanding normal course issuer
bid ("NCIB") that expires in November of this year.
Lastly, subject to approval by the Toronto Stock
Exchange ("TSX") and the New York Stock Exchange ("NYSE"), our
Board of Directors approved a new NCIB to purchase up to 20 million
of our Common Shares, representing approximately 9.8% of our public
float of Common Shares.
1 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.
FINANCIAL RESULTS SUMMARY
During the third quarter of 2014, we posted sales of
$8.82 billion, an increase of 6% over
the third quarter of 2013. This higher sales level was a result of
increases in our North American and Asian production sales, as well
as complete vehicle assembly sales and tooling, engineering and
other sales partially offset by lower European and Rest of World
production sales. Comparing the third quarter of 2014 to 2013:
- North American vehicle production increased 8% and our North
American production sales increased 10% to $4.43 billion;
- European vehicle production increased 4% while our European
production sales decreased 1% to $2.35
billion;
- Asian production sales increased 13% to $406 million;
- Rest of World production sales decreased 17% to $179 million;
- Complete vehicle assembly volumes decreased 5% while sales
increased 9% to $740 million;
and
- Tooling, engineering and other sales increased by 3% to
$719 million.
During the third quarter of 2014, we earned
income from operations before income taxes of $589 million compared to $391 million for the third quarter of 2013.
Excluding other expense, net ("Other Expense") recorded in each of
the third quarters of 2014 and 2013, as discussed in the "Other
Expense" section, the $157 million
increase in income from operations before income taxes was
primarily as a result of:
- margins earned on higher production sales;
- incremental margin earned on new programs that launched during
or subsequent to the third quarter of 2013;
- intangible asset amortization of $39
million, recorded in the third quarter of 2013, related to
the acquisition and re-measurement of E-Car;
- approximately $10 million of
insurance recoveries related to a fire, in the second quarter of
2014, at a body and chassis facility in North America;
- productivity and efficiency improvements at certain
facilities;
- the benefit of restructuring and downsizing activities recently
undertaken; and
- a $1 million net increase in
valuation gains in respect of asset-backed commercial paper
("ABCP").
These factors were partially offset by:
- higher launch costs, including unanticipated costs at certain
interiors facilities;
- higher warranty costs of $21
million;
- higher incentive compensation;
- increased pre-operating costs incurred at new facilities;
- operational inefficiencies and other costs at certain
facilities;
- a greater amount of employee profit sharing;
- increased commodity costs;
- lower equity income; and
- net customer price concessions subsequent to the third quarter
of 2013.
During the third quarter of 2014, net income
attributable to Magna International Inc. was $470 million, an increase of $151 million compared to the third quarter
of 2013 and diluted earnings per share increased $0.80 to $2.19 for
the third quarter of 2014 compared to $1.39 for the third quarter of 2013. Other
Expense, after tax, as discussed in the "Other Expense" section,
negatively impacted net income attributable to Magna International
Inc. and diluted earnings per share as follows:
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For
the three months ended September 30, |
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2014 |
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2013 |
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Net Income |
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Diluted |
|
Net Income |
|
Diluted |
|
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Attributable |
|
Earnings |
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Attributable |
|
Earnings |
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|
to Magna |
|
per Share |
|
to Magna |
|
per Share |
Other expense |
|
$ |
7 |
|
$ |
0.03 |
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$ |
48 |
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$ |
0.20 |
Income tax
effect |
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(1) |
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— |
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(15) |
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(0.06) |
Net income impact |
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$ |
6 |
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$ |
0.03 |
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$ |
33 |
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$ |
0.14 |
Excluding the negative impact of Other Expense, after tax, for
the third quarters of 2014 and 2013 of $6
million and $33 million,
respectively, net income attributable to Magna International Inc.
for the third quarter of 2014 increased $124
million compared to the third quarter of 2013.
Excluding the $0.03 and the $0.14
per share negative impact of Other Expense, after tax, for the
third quarters of 2014 and 2013, respectively, diluted earnings per
share increased $0.69, 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 third 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 third quarter of 2013, pursuant to our normal
course issuer bids partially offset by an increase in the number of
diluted options outstanding as a result of an increase in the
trading price of our common stock and the issue of Common Shares
related to the exercise of stock options.
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; relative currency values;
commodities prices; international conflicts; labour relations
issues; regulatory requirements; trade agreements; infrastructure;
legislative changes; and environmental emissions and safety
standards. These factors together with such specific factors as:
operational inefficiencies; costs incurred to launch new or
takeover business; restructuring, downsizing and other significant
non-recurring costs; price reduction pressures from our customers;
warranty and recall costs; 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 third quarter ended
September 30, 2014.
RESULTS OF OPERATIONS
Average Foreign Exchange
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|
For the three months |
|
For the nine months |
|
|
ended
September 30, |
|
ended
September 30, |
|
|
2014 |
|
2013 |
|
Change |
|
2014 |
|
2013 |
Change |
1 Canadian dollar equals U.S. dollars |
|
0.919 |
|
0.962 |
|
- |
4% |
|
0.914 |
|
0.977 |
- |
6% |
1 euro equals U.S. dollars |
|
1.326 |
|
1.325 |
|
|
— |
|
1.356 |
|
1.317 |
+ |
3% |
1 British pound equals U.S. dollars |
|
1.669 |
|
1.552 |
|
+ |
8% |
|
1.669 |
|
1.546 |
+ |
8% |
The preceding table reflects the average foreign
exchange rates between the most common currencies in which we
conduct business and our U.S. dollar reporting currency. The
changes in these foreign exchange rates for the three months and
nine months ended September 30, 2014
impacted the reported U.S. dollar amounts of our sales, expenses
and income.
The results of operations for which the
functional currency is not the U.S. dollar are translated into U.S.
dollars using the average exchange rates in the table above for the
relevant period. Throughout this MD&A, reference is made to the
impact of translation of foreign operations on reported U.S. dollar
amounts where relevant.
Our results can also be affected by the impact
of movements in exchange rates on foreign currency transactions
(such as raw material purchases or sales denominated in foreign
currencies). However, as a result of hedging programs employed by
us, foreign currency transactions in the current period have not
been fully impacted by movements in exchange rates. We record
foreign currency transactions at the hedged rate where
applicable.
Finally, foreign exchange gains and losses on
revaluation and/or settlement of monetary items denominated in a
currency other than an operation's functional currency impact
reported results. These gains and losses are recorded in selling,
general and administrative expense.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2014
Sales
|
|
For the three months |
|
|
|
|
|
ended
September 30, |
|
|
|
|
|
2014 |
|
2013 |
|
Change |
Vehicle Production Volumes
(millions of units) |
|
|
|
|
|
|
|
|
|
|
North America |
|
|
4.180 |
|
|
3.873 |
|
+ |
8% |
|
Europe |
|
|
4.651 |
|
|
4.483 |
|
+ |
4% |
Sales |
|
|
|
|
|
|
|
|
|
|
External Production |
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
4,429 |
|
$ |
4,025 |
|
+ |
10% |
|
|
Europe |
|
|
2,347 |
|
|
2,364 |
|
- |
1% |
|
|
Asia |
|
|
406 |
|
|
359 |
|
+ |
13% |
|
|
Rest of World |
|
|
179 |
|
|
215 |
|
- |
17% |
|
Complete Vehicle
Assembly |
|
|
740 |
|
|
680 |
|
+ |
9% |
|
Tooling, Engineering and
Other |
|
|
719 |
|
|
695 |
|
+ |
3% |
Total Sales |
|
$ |
8,820 |
|
$ |
8,338 |
|
+ |
6% |
External Production Sales - North America
External production sales in North America increased 10% or $404 million to $4.43
billion for the third quarter of 2014 compared to
$4.03 billion for the third quarter
of 2013 primarily as a result of:
- the launch of new programs during or subsequent to the third
quarter of 2013, including the:
-
- Lincoln MKC;
- Chrysler 200; and
- BMW X4; and
- higher production volumes on certain existing programs.
The launch of new programs was partially offset
by:
- a $69 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 third quarter
of 2013.
External Production Sales - Europe
External production sales in Europe decreased 1% or $17 million to $2.35
billion for the third quarter of 2014 compared to
$2.36 billion for the third quarter
of 2013 primarily as a result of:
- a decrease in content on certain programs, including the:
-
- MINI Cooper; and
- Mercedes-Benz C-Class;
- lower production volumes on certain existing programs; and
- net customer price concessions subsequent to the third quarter
of 2013.
These factors were partially offset by the
launch of new programs during or subsequent to the third quarter of
2013, including the Mercedes-Benz GLA, the Porsche Macan and the
Ford Transit.
External Production Sales - Asia
External production sales in Asia increased 13% or $47 million to $406
million for the third quarter of 2014 compared to
$359 million for the third 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 third quarter of 2013, primarily in China. These factors were partially offset by
net customer price concessions subsequent to the third quarter of
2013.
External Production Sales - Rest of World
External production sales in Rest of World
decreased 17% or $36 million to
$179 million for the third quarter of
2014 compared to $215 million for the
third quarter of 2013 primarily as a result of:
- lower production volumes on certain existing programs; and
- a $14 million decrease in
reported U.S. dollar sales as a result of the net weakening of
foreign currencies against the U.S. dollar, including the Argentine
peso.
These factors were partially offset by net
customer price increases subsequent to the third quarter of
2013.
Complete Vehicle Assembly Sales
|
|
For the three months |
|
|
|
|
|
ended
September 30, |
|
|
|
|
|
|
2014 |
|
2013 |
|
Change |
Complete Vehicle Assembly Sales |
|
$ |
740 |
|
$ |
680 |
|
+ |
9% |
Complete Vehicle Assembly Volumes
(Units) |
|
|
32,204 |
|
|
33,818 |
|
- |
5% |
Complete vehicle assembly sales increased
$60 million to $740 million for the third quarter of 2014
compared to $680 million for the
third quarter of 2013 while assembly volumes decreased 5% or 1,614
units.
The increase in complete vehicle assembly sales
is primarily as a result of an increase in assembly volumes for the
Mercedes-Benz G-Class partially offset by a decrease in assembly
volumes for the MINI Paceman and Peugeot RCZ.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
3% or $24 million to $719 million for the third quarter of 2014
compared to $695 million for the
third quarter of 2013.
In the third quarter of 2014, the major programs
for which we recorded tooling, engineering and other sales were
the:
- BMW X6;
- Ford Mustang;
- Dodge Charger;
- MINI Countryman;
- Porsche Panamera;
- Chevrolet Cruze; and
- Volkswagen Golf.
In the third quarter of 2013, the major programs
for which we recorded tooling, engineering and other sales were
the:
- Ford Transit;
- GM full-size pickups and SUVs;
- Jeep Cherokee;
- BMW X5;
- Ford Fusion;
- Mercedes-Benz M-Class;
- QOROS 3;
- Mercedes-Benz CLA-Class; and
- Dodge Durango.
Cost of Goods Sold and Gross
Margin
|
|
For the three months |
|
|
ended
September 30, |
|
|
2014 |
|
2013 |
Sales |
|
$ |
8,820 |
|
$ |
8,338 |
Cost of goods sold |
|
|
|
|
|
|
|
Material |
|
|
5,611 |
|
|
5,331 |
|
Direct labour |
|
|
556 |
|
|
538 |
|
Overhead |
|
|
1,469 |
|
|
1,404 |
|
|
|
7,636 |
|
|
7,273 |
Gross margin |
|
$ |
1,184 |
|
$ |
1,065 |
Gross margin as a percentage of
sales |
|
|
13.4% |
|
|
12.8% |
Cost of goods sold increased $363 million to $7.64
billion for the third quarter of 2014 compared to
$7.27 billion for the third 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;
- higher launch costs, including unanticipated costs at certain
interiors facilities; and
- a greater amount of employee profit sharing.
These factors were partially offset by a
decrease in cost of goods sold as a result of the net weakening of
foreign currencies against the U.S. dollar, including the weakening
of the Canadian dollar and Argentine peso partially offset by the
strengthening of the British pound.
Gross margin increased $119 million to $1.18
billion for the third quarter of 2014 compared to
$1.07 billion for the third quarter
of 2013 and gross margin as a percentage of sales increased to
13.4% for the third quarter of 2014 compared to 12.8% for the third
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; and
- insurance recoveries related to a fire, in the second quarter
of 2014, at a body and chassis facility in North America.
These factors were partially offset by:
- higher launch costs, including unanticipated costs at certain
interiors facilities in North
America and Europe;
- operational inefficiencies and other costs at certain
facilities;
- higher warranty costs;
- a greater amount of employee profit sharing;
- increased pre-operating costs incurred at new facilities;
- increased commodity costs; and
- an increase in tooling, engineering and other sales that have
low or no margins.
Depreciation and Amortization
Depreciation and amortization costs decreased
$40 million to $224 million for the third quarter of 2014
compared to $264 million for the
third quarter of 2013 primarily as a result of intangible asset
amortization of $39 million recorded
in the third 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
4.6% for the third quarter of 2014 compared to 4.9% for the third
quarter of 2013. SG&A expense decreased $4 million to $407
million for the third quarter of 2014 compared to
$411 million for the third quarter of
2013 primarily as a result of:
- a decrease in reported U.S. dollar SG&A related to foreign
exchange; and
- a $1 million net increase in
valuation gains in respect of ABCP.
These factors were partially offset by:
- higher labour and other costs to support the growth in sales,
including wage increases at certain operations; and
- higher incentive compensation.
Equity Income
Equity income decreased $2 million to $52
million for the third quarter of 2014 compared to
$54 million for the third quarter of
2013.
Other Expense, net
During the three and nine months ended
September 30, 2014, we recorded net
restructuring charges of $7 million
($6 million after tax) and
$40 million ($36 million after tax), respectively, in
Europe at our exterior and
interior systems operations.
During the three and nine months ended
September 30, 2013, we recorded net
restructuring charges of $48 million
($33 million after tax) and
$54 million ($39 million after tax), respectively, in
Europe at our exterior and
interior systems operations related primarily to the closure of a
facility in Belgium.
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 September 30, |
|
|
External Sales |
|
Adjusted EBIT |
|
|
2014 |
|
2013 |
|
Change |
|
2014 |
|
2013 |
|
Change |
North America |
|
$ |
4,760 |
|
$ |
4,355 |
|
$ |
405 |
|
$ |
470 |
|
$ |
365 |
|
$ |
105 |
Europe |
|
|
3,410 |
|
|
3,366 |
|
|
44 |
|
|
83 |
|
|
72 |
|
|
11 |
Asia |
|
|
456 |
|
|
395 |
|
|
61 |
|
|
39 |
|
|
29 |
|
|
10 |
Rest of World |
|
|
190 |
|
|
217 |
|
|
(27) |
|
|
(6) |
|
|
(27) |
|
|
21 |
Corporate and
Other |
|
|
4 |
|
|
5 |
|
|
(1) |
|
|
19 |
|
|
5 |
|
|
14 |
Total reportable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segments |
|
$ |
8,820 |
|
$ |
8,338 |
|
$ |
482 |
|
$ |
605 |
|
$ |
444 |
|
$ |
161 |
Excluded from Adjusted EBIT for the third
quarters of 2014 and 2013 was $7
million and $48 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 $105 million
to $470 million for the third quarter
of 2014 compared to $365 million
for the third quarter of 2013 primarily as a result of:
- margins earned on higher production sales;
- intangible asset amortization of $39
million, recorded in the third quarter of 2013, related to
the acquisition and re-measurement of E-Car;
- approximately $10 million of
insurance recoveries related to a fire, in the second quarter of
2014, at a body and chassis facility in North America; and
- productivity and efficiency improvements at certain
facilities.
These factors were partially offset by:
- higher warranty costs of $16
million;
- higher launch costs, including unanticipated costs at certain
interiors facilities;
- higher affiliation fees paid to Corporate;
- higher incentive compensation and stock-based
compensation;
- operational inefficiencies and other costs at certain
facilities;
- increased pre-operating costs incurred at new facilities;
- a greater amount of employee profit sharing;
- higher commodity costs; and
- lower equity income.
Europe
Adjusted EBIT in Europe increased $11
million to $83 million for the
third quarter of 2014 compared to $72 million for the third quarter of 2013
primarily as a result of:
- the benefit of restructuring and downsizing activities recently
undertaken;
- productivity and efficiency improvements at certain
facilities;
- lower downsizing costs; and
- higher equity income.
These factors were partially offset by:
- higher launch costs, including unanticipated costs at certain
interiors facilities in the United
Kingdom;
- higher warranty costs of $5
million;
- higher pre-operating costs incurred at new facilities;
- a greater amount of employee profit sharing;
- higher affiliation fees paid to Corporate;
- increased commodity costs; and
- operational inefficiencies and other costs at certain
facilities.
Asia
Adjusted EBIT in Asia increased $10
million to $39 million for the
third quarter of 2014 compared to $29
million for the third 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 partially
offset by:
- higher launch costs;
- lower equity income; and
- operational inefficiencies and other costs at certain
facilities.
Rest of World
Rest of World Adjusted EBIT improved
$21 million to a loss of $6 million for the third quarter of 2014 compared
to a loss of $27 million for the
third quarter of 2013 primarily as a result of:
- the benefit of restructuring and downsizing activities recently
undertaken;
- productivity and efficiency improvements at certain facilities;
and
- net customer price increases subsequent to the third quarter of
2013.
These factors were partially offset by:
- higher production costs, including inflationary increases, that
we have not been fully successful in passing through to our
customers;
- higher launch costs;
- increased commodity costs; and
- higher affiliation fees paid to Corporate.
Corporate and Other
Corporate and Other Adjusted EBIT increased
$14 million to $19 million for the third quarter of 2014
compared to $5 million for the third
quarter of 2013 primarily as a result of an increase in affiliation
fees earned from our divisions and a $1
million net increase in valuation gains in respect of ABCP
partially offset by higher incentive compensation.
Interest Expense, net
During the third quarter of 2014, we recorded
net interest expense of $9 million
compared to $5 million for the third
quarter of 2013. The $4 million
increase is primarily as a result of interest expense on the
$750 million 3.625% fixed rate Senior
Notes issued during the second quarter of 2014 (the "Senior
Notes"), partially offset by interest income earned on higher
investment balances.
Income from Operations before Income
Taxes
Income from operations before income taxes
increased $198 million to
$589 million for the third quarter of
2014 compared to $391 million for the
third quarter of 2013. Excluding Other Expense, discussed in the
"Other Expense" section, income from operations before income taxes
for the third quarter of 2014 increased $157
million. The increase in income from operations before
income taxes is the result of the increase in Adjusted EBIT
partially offset by the increase in net interest expense, as
discussed above.
Income Taxes
|
For the
three months ended September 30, |
|
2014 |
|
2013 |
|
|
$ |
|
% |
|
$ |
|
|
% |
Income taxes as
reported |
$ |
120 |
|
20.4 |
|
$ |
73 |
|
18.7 |
Tax effect on Other expense,
net |
|
1 |
|
(0.1) |
|
|
15 |
|
1.3 |
|
$ |
121 |
|
20.3 |
|
$ |
88 |
|
20.0 |
Excluding Other Expense, after tax, the
effective income tax rate increased to 20.3% for the third quarter
of 2014 compared to 20.0% for the third quarter of 2013 primarily
as a result of:
- lower favourable audit settlements;
- a valuation allowance release in the third quarter of 2013;
and
- a change in mix of earnings, whereby proportionately more
income was earned in jurisdictions with higher tax rates.
These factors were partially offset by:
- a reduction in losses not benefitted in Europe and South
America; and
- non-creditable withholding tax recorded in the third quarter of
2013.
Net Income
Net income of $469
million for the third quarter of 2014 increased $151 million compared to the third quarter of
2013. Excluding Other Expense, after tax, discussed in the "Other
Expense" section, net income increased $124
million. The increase in net income is the result of the
increase in income from operations before income taxes partially
offset by higher income taxes.
Net Loss Attributable to Non-controlling
Interests
Net loss attributable to non-controlling
interests was $1 million for the
third quarters of 2014 and 2013.
Net Income Attributable to Magna
International Inc.
Net income attributable to Magna International
Inc. of $470 million for the third
quarter of 2014 increased $151
million compared to the third quarter of 2013. Excluding
Other Expense, after tax, discussed in the "Other Expense" section,
net income attributable to Magna International Inc. increased
$124 million as a result of the
increase in net income, as discussed above.
Earnings per Share
|
|
For the three months |
|
|
|
|
|
ended
September 30, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
Earnings per Common Share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.22 |
|
$ |
1.41 |
|
+ |
57% |
|
Diluted |
|
$ |
2.19 |
|
$ |
1.39 |
|
+ |
58% |
Weighted average number of Common
Shares outstanding (millions) |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
211.2 |
|
|
226.4 |
|
- |
7% |
|
Diluted |
|
|
214.2 |
|
|
229.5 |
|
- |
7% |
Diluted earnings per share increased
$0.80 to $2.19 for the third quarter of 2014 compared to
$1.39 for the third quarter of 2013.
Other Expense, after tax, negatively impacted diluted earnings per
share in the third quarters of 2014 and 2013 by $0.03 and $0.14,
respectively, as discussed in the "Other Expense" section.
Excluding these amounts, diluted earnings per share increased
$0.69 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 third 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 third
quarter of 2013, pursuant to our normal course issuer bids
partially offset by an increase in the number of diluted options
outstanding as a result of an increase in the trading price of our
common stock and the issue of Common Shares related to the exercise
of stock options.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations
|
|
|
For the three months |
|
|
|
|
|
|
ended
September 30, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
Net income |
|
$ |
469 |
|
$ |
318 |
|
|
|
Items not involving current cash
flows |
|
|
268 |
|
|
256 |
|
|
|
|
|
|
737 |
|
|
574 |
|
$ |
163 |
Changes in operating assets and
liabilities |
|
|
(18) |
|
|
(110) |
|
|
|
Cash provided from operating activities |
|
$ |
719 |
|
$ |
464 |
|
$ |
255 |
Cash flow from operations before changes in
operating assets and liabilities increased $163 million to $737
million for the third quarter of 2014 compared to
$574 million for the third quarter of
2013. The increase in cash flow from operations was due to the
$151 million increase in net income,
as discussed above, and a $12 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
September 30, |
|
|
|
2014 |
|
|
2013 |
Depreciation and
amortization |
|
$ |
224 |
|
$ |
264 |
Amortization of other assets included in cost of
goods sold |
|
|
41 |
|
|
34 |
Deferred income
taxes |
|
|
6 |
|
|
(28) |
Other non-cash
charges |
|
|
9 |
|
|
7 |
Equity income in excess of dividends
received |
|
|
(12) |
|
|
(21) |
Items not involving current cash
flows |
|
$ |
268 |
|
$ |
256 |
Cash invested in operating assets and
liabilities amounted to $18 million
for the third quarter of 2014 compared to $110 million for the third quarter of 2013.
The change in operating assets and liabilities is comprised of the
following sources (and uses) of cash:
|
|
For the three months |
|
|
ended
September 30, |
|
|
|
2014 |
|
|
2013 |
Accounts receivable |
|
$ |
119 |
|
$ |
(223) |
Inventories |
|
|
(184) |
|
|
48 |
Prepaid expenses and
other |
|
|
8 |
|
|
(13) |
Accounts
payable |
|
|
(1) |
|
|
(71) |
Accrued salaries and
wages |
|
|
81 |
|
|
71 |
Other accrued
liabilities |
|
|
(31) |
|
|
77 |
Income taxes
payable |
|
|
(10) |
|
|
— |
Deferred
revenue |
|
|
— |
|
|
1 |
Changes in operating assets and
liabilities |
|
$ |
(18) |
|
$ |
(110) |
The decrease in accounts receivable was
primarily due to lower production sales at the end of the third
quarter of 2014. The increase in inventories was primarily due to
higher tooling inventory and increased production inventory to
support launch activities. The increase in accrued salaries and
wages was primarily due to employee profit sharing.
Capital and Investment
Spending
|
|
For the three months |
|
|
|
|
|
ended
September 30, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
Fixed asset additions |
|
$ |
(315) |
|
$ |
(280) |
|
|
|
Investments and other assets |
|
|
(50) |
|
|
(67) |
|
|
|
Fixed assets, investments and other assets
additions |
|
|
(365) |
|
|
(347) |
|
|
|
Proceeds from disposition |
|
|
74 |
|
|
30 |
|
|
|
Cash used for investment activities |
|
$ |
(291) |
|
$ |
(317) |
|
$ |
26 |
Fixed assets, investments and other assets additions
In the third quarter of 2014, we invested
$315 million in fixed assets.
While investments were made to refurbish or replace assets consumed
in the normal course of business and for productivity improvements,
a large portion of the investment in the third quarter of 2014 was
for manufacturing equipment for programs that will be launching
subsequent to the third quarter of 2014.
In the third quarter of 2014, we invested
$40 million in other assets related
primarily for fully reimbursable engineering costs and tooling for
programs that launched during the third quarter of 2014 or will be
launching subsequent to the third quarter of 2014. In addition, we
invested $10 million related to an
equity accounted investment.
Proceeds from disposition
In the third quarter of 2014, the $74 million of proceeds include cash related to
the disposal of certain non-core exteriors facilities in
North America and normal course
fixed and other asset disposals.
Financing
|
|
For the three months |
|
|
|
|
|
ended
September 30, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
Issues of debt |
|
$ |
29 |
|
$ |
26 |
|
|
|
Increase (decrease) in bank
indebtedness |
|
|
14 |
|
|
(9) |
|
|
|
Repayments of debt |
|
|
(46) |
|
|
(41) |
|
|
|
Issues of Common Shares on exercise of stock
options |
|
|
6 |
|
|
10 |
|
|
|
Repurchase of Common
Shares |
|
|
(614) |
|
|
(298) |
|
|
|
Dividends |
|
|
(79) |
|
|
(71) |
|
|
|
Cash used for financing activities |
|
$ |
(690) |
|
$ |
(383) |
|
$ |
(307) |
During the third quarter of 2014, we repurchased
5.7 million Common Shares for aggregate cash consideration of
$614 million under our normal
course issuer bid.
Cash dividends paid per Common Share were
$0.38 for the third quarter of 2014,
for a total of $79 million.
Financing Resources
|
|
|
As at |
|
|
As at |
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
|
Change |
Liabilities |
|
|
|
|
|
|
|
|
|
|
Bank indebtedness |
|
$ |
58 |
|
$ |
41 |
|
|
|
|
Long-term debt due within one
year |
|
|
195 |
|
|
230 |
|
|
|
|
Long-term debt |
|
|
822 |
|
|
102 |
|
|
|
|
|
|
1,075 |
|
|
373 |
|
|
|
Non-controlling
interests |
|
|
14 |
|
|
16 |
|
|
|
Shareholders'
equity |
|
|
9,031 |
|
|
9,623 |
|
|
|
Total capitalization |
|
$ |
10,120 |
|
$ |
10,012 |
|
$ |
108 |
Total capitalization increased by $108 million to $10.12
billion at September 30, 2014
compared to $10.01 billion at
December 31, 2013 primarily
as a result of a $702 million
increase in liabilities partially offset by a $592 million decrease in shareholders'
equity.
The increase in liabilities relates primarily to
long-term debt issued in relation to the $750 million Senior Notes partially offset by net
repayments of our bank term debt.
The decrease in shareholders' equity was
primarily as a result of:
- the $1.43 billion repurchase and
cancellation of 14.1 million Common Shares under our normal course
issuer bid in the first nine months of 2014;
- the $358 million net unrealized
loss on translation of our net investment in foreign
operations;
- $241 million of dividends paid
during the first nine months of 2014; and
- the $24 million net unrealized
loss on cash flow hedges.
These factors were partially offset by:
- $1.37 billion of net income
earned in the first nine months of 2014; and
- $43 million of shares issued on
exercise of stock options.
Cash Resources
During the third quarter of 2014, our cash
resources decreased by $321 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 September 30, 2014 we
had term and operating lines of credit totalling $2.57 billion of which $2.25 billion was unused and available.
On May 16, 2014,
our $2.25 billion revolving credit
facility maturing June 20, 2018 was
extended to June 20, 2019. The
facility includes a $200 million
Asian tranche, a $50 million Mexican
tranche and a tranche for Canada,
U.S. and Europe, which is fully
transferable between jurisdictions and can be drawn in U.S.
dollars, Canadian dollars or euros.
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 $2.00 billion of debt securities from time to
time over a 25 month period. During the second quarter of 2014, we
issued $750 million of Senior Notes
under the filings.
Maximum Number of Shares Issuable
The following table presents the maximum number
of shares that would be outstanding if all of the outstanding
options at November 5, 2014 were
exercised:
Common Shares |
|
|
|
207,354,943 |
Stock options (i) |
|
|
|
4,324,471 |
|
|
|
|
211,679,414 |
(i) |
Options to purchase Common Shares are exercisable by the
holder in accordance with the vesting provisions and upon payment
of the exercise price as may be determined from time to time
pursuant to our stock option plans. |
Contractual Obligations and Off-Balance Sheet
Financing
There have been no material changes with respect
to the contractual obligations requiring annual payments during the
third quarter of 2014 that are outside the ordinary course of our
business, other than the issue of the $750
million Senior Notes that require $27
million of annual interest payments and the reduction of
annual operating lease payments as a result of the purchase of
eight leased facilities in Mexico.
Refer to our MD&A included in our 2013 Annual Report.
RESULTS OF OPERATIONS - FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2014
Sales
|
|
|
|
|
|
For the nine months |
|
|
|
|
ended
September 30, |
|
|
|
|
|
2014 |
|
|
2013 |
|
Change |
Vehicle Production Volumes
(millions of units) |
|
|
|
|
|
|
|
|
North America |
|
12.787 |
|
|
12.148 |
|
+ |
5% |
Europe |
|
15.199 |
|
|
14.403 |
|
+ |
6% |
Sales |
|
|
|
|
|
|
|
|
|
External Production |
|
|
|
|
|
|
|
|
|
|
North America |
$ |
13,583 |
|
$ |
12,373 |
|
+ |
10% |
|
|
Europe |
|
7,643 |
|
|
7,370 |
|
+ |
4% |
|
|
Asia |
|
1,189 |
|
|
992 |
|
+ |
20% |
|
|
Rest of World |
|
499 |
|
|
670 |
|
- |
26% |
|
Complete Vehicle
Assembly |
|
2,346 |
|
|
2,274 |
|
+ |
3% |
|
Tooling, Engineering and
Other |
|
1,985 |
|
|
1,982 |
|
|
— |
Total Sales |
$ |
27,245 |
|
$ |
25,661 |
|
+ |
6% |
External Production Sales - North America
External production sales in North America increased 10% or $1.21 billion to $13.58
billion for the nine months ended September 30, 2014 compared to $12.37 billion for the nine months ended
September 30, 2013 primarily as a
result of:
- the launch of new programs during or subsequent to the nine
months ended September 30, 2013,
including the:
-
- Jeep Cherokee;
- GM full-size pickups and SUVs;
- Nissan Rogue;
- Lincoln MKC; and
- BMW X4; and
- higher production volumes on certain existing programs.
These factors were partially offset by:
- a $305 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 September 30, 2013.
External Production Sales - Europe
External production sales in Europe increased 4% or $273 million to $7.64
billion for the nine months ended September 30, 2014 compared to $7.37 billion for the nine months ended
September 30, 2013 primarily as a
result of:
- the launch of new programs during or subsequent to the nine
months ended September 30, 2013,
including the:
-
- Mercedes-Benz GLA;
- Skoda Octavia; and
- Range Rover Sport; and
- a $181 million increase in
reported U.S. dollar sales primarily as a result of the
strengthening of the euro against the U.S. dollar.
These factors were partially offset by:
- a decrease in content on certain programs, including the MINI
Cooper and the Mercedes-Benz C-Class;
- lower production volumes on certain existing programs; and
- net customer price concessions subsequent to September 30, 2013.
External Production Sales - Asia
External production sales in Asia increased 20% or $197 million to $1.19
billion for the nine months ended September 30, 2014 compared to $992 million for the nine months ended
September 30, 2013 primarily as a
result of:
- higher production volumes on certain existing programs;
- the launch of new programs during or subsequent to the nine
months ended September 30, 2013,
primarily in China, including the
Audi Q3 and the Ford Mondeo; and
- a $5 million net increase in
reported U.S. dollar sales as a result of the strengthening of
foreign currencies against the U.S. dollar, including the Korean
won.
These factors were partially offset by net
customer price concessions subsequent to September 30, 2013.
External Production Sales - Rest of
World
External production sales in Rest of World
decreased 26% or $171 million to
$499 million for the nine months
ended September 30, 2014
compared to $670 million for the nine
months ended September 30, 2013
primarily as a result of:
- lower production volumes on certain existing programs;
- a $80 million decrease in
reported U.S. dollar sales as a result of the weakening of foreign
currencies against the U.S. dollar, including the Argentine peso
and Brazilian real; and
- a decrease in content on certain programs, including the
Mercedes-Benz C-Class.
These factors were partially offset by net
customer price increases subsequent to the nine months ended
September 30, 2013.
Complete Vehicle Assembly Sales
|
|
For the nine months |
|
|
|
|
|
ended
September 30, |
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Change |
Complete Vehicle Assembly Sales |
|
$ |
2,346 |
|
$ |
2,274 |
|
+ |
3% |
Complete Vehicle Assembly Volumes
(Units) |
|
|
102,161 |
|
|
109,862 |
|
- |
7% |
Complete vehicle assembly sales increased 3%, or
$72 million, to $2.35 billion for the nine months ended
September 30, 2014 compared to
$2.27 billion for the nine
months ended September 30, 2013 while
assembly volumes decreased 7% or 7,701 units.
The increase in complete vehicle assembly sales is primarily as
a result of:
- an increase in assembly volumes for the Mercedes-Benz G-Class
and the MINI Countryman; and
- a $72 million increase in
reported U.S. dollar sales as a result of the strengthening of the
euro against the U.S. dollar.
These factors were partially offset by a
decrease in assembly volumes for the MINI Paceman.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased
$3 million to $1.99 billion for the nine months ended
September 30, 2014 compared to
$1.98 billion for the nine months
ended September 30, 2013.
In the nine months ended September 30, 2014, the major programs for which
we recorded tooling, engineering and other sales were the:
- MINI Countryman;
- Ford Mustang;
- Ford Transit;
- BMW X6;
- BMW X4;
- QOROS 3;
- Mercedes-Benz M-Class;
- Porsche Panamera; and
- Peugeot RCZ.
In the nine months ended September 30, 2013, the major programs for which
we recorded tooling, engineering and other sales were the:
- Ford Transit;
- GM full-size pickups and SUVs;
- Ford Fusion;
- QOROS 3;
- Skoda Octavia;
- Jeep Grand Cherokee;
- MINI Countryman; and
- MINI Paceman.
Segment Analysis
|
|
For
the nine months ended September 30, |
|
|
External Sales |
|
Adjusted EBIT |
|
|
|
2014 |
|
|
2013 |
|
|
Change |
|
|
2014 |
|
|
2013 |
|
|
Change |
North America |
|
$ |
14,500 |
|
$ |
13,232 |
|
$ |
1,268 |
|
$ |
1,450 |
|
$ |
1,168 |
|
$ |
282 |
Europe |
|
|
10,881 |
|
|
10,626 |
|
|
255 |
|
|
335 |
|
|
264 |
|
|
71 |
Asia |
|
|
1,334 |
|
|
1,090 |
|
|
244 |
|
|
110 |
|
|
59 |
|
|
51 |
Rest of World |
|
|
519 |
|
|
696 |
|
|
(177) |
|
|
(30) |
|
|
(55) |
|
|
25 |
Corporate and
Other |
|
|
11 |
|
|
17 |
|
|
(6) |
|
|
55 |
|
|
22 |
|
|
33 |
Total reportable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segments |
|
$ |
27,245 |
|
$ |
25,661 |
|
$ |
1,584 |
|
$ |
1,920 |
|
$ |
1,458 |
|
$ |
462 |
Excluded from Adjusted EBIT for the nine months
ended September 30, 2014 and 2013 was
$40 million and $54 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 $282 million
to $1.45 billion for the nine months
ended September 30, 2014 compared to
$1.17 billion for the nine
months ended September 30, 2013
primarily as a result of:
- margins earned on higher production sales;
- intangible asset amortization of $118
million, recorded in the first nine months of 2013, related
to the acquisition and re-measurement of E-Car;
- productivity and efficiency improvements at certain facilities;
and
- higher equity income.
These factors were partially offset by:
- higher launch costs, including unanticipated costs at certain
interiors facilities;
- operational inefficiencies and other costs at certain
facilities;
- higher affiliation fees paid to Corporate;
- a greater amount of employee profit sharing;
- approximately $15 million of
costs incurred, net of insurance recoveries, related to a fire, in
the second quarter of 2014, at a body and chassis facility in
North America;
- increased pre-operating costs incurred at new facilities;
- higher warranty costs of $11
million;
- higher incentive compensation; and
- increased stock-based compensation.
Europe
Adjusted EBIT in Europe increased $71
million to $335 million for
the nine months ended September 30,
2014 compared to $264 million for the nine months ended
September 30, 2013 primarily as a
result of:
- margins earned on higher production sales;
- the benefit of restructuring and downsizing activities recently
undertaken;
- productivity and efficiency improvements at certain
facilities;
- lower downsizing costs; and
- higher equity income.
These factors were partially offset by:
- higher launch costs, including unanticipated costs at certain
interiors facilities in the United
Kingdom;
- higher affiliation fees paid to Corporate;
- higher pre-operating costs incurred at new facilities;
- a greater amount of employee profit sharing;
- operational inefficiencies and other costs at certain
facilities;
- higher warranty costs of $3
million; and
- increased stock-based compensation.
Asia
Adjusted EBIT in Asia increased $51
million to $110 million for
the nine months ended September 30,
2014 compared to $59 million
for the nine months ended September 30,
2013 primarily as a result of:
- margins earned on higher production sales, including margins
earned on the launch of new facilities and new programs;
- higher equity income; and
- lower pre-operating costs incurred at new facilities.
These factors were partially offset by:
- higher costs incurred in preparation for upcoming
launches;
- higher affiliation fees paid to Corporate;
- higher incentive compensation; and
- operational inefficiencies and other costs at certain
facilities.
Rest of World
Rest of World Adjusted EBIT improved
$25 million to a loss of $30 million for the nine months ended
September 30, 2014 compared to a loss
of $55 million for the nine months
ended September 30, 2013 primarily as
a result of:
- productivity and efficiency improvements at certain
facilities;
- the benefit of restructuring and downsizing activities recently
undertaken;
- an decrease in reported U.S. dollar EBIT loss due to the
weakening of the Brazilian real and Argentine peso, each against
the U.S. dollar;
- lower affiliation fees paid to Corporate; and
- net customer price increases subsequent to the nine months
ended September 30, 2013.
These factors were partially offset by:
- higher production costs, including inflationary increases, that
we have not been fully successful in passing through to our
customers;
- higher costs incurred in preparation for upcoming
launches;
- increased commodity costs; and
- higher warranty costs of $1
million.
Corporate and Other
Corporate and Other Adjusted EBIT increased
$33 million to $55 million for the nine months ended
September 30, 2014 compared to
$22 million for the nine months ended
September 30, 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:
- higher incentive compensation;
- $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.
SUBSEQUENT EVENTS
Normal Course Issuer Bid
Subject to approval by the TSX and the NYSE, the Board of
Directors approved a new normal course issuer bid to purchase up to
20 million of our Common Shares, representing approximately 9.8% of
our public float of Common Shares. The primary purposes of the
normal course issuer bid are purchases for cancellation as well as
purchases to fund our stock-based compensation awards or programs
and/or our obligations to our deferred profit sharing plans. The
normal course issuer bid is expected to commence on or about
November 13, 2014 and will terminate
one year later. All purchases of Common Shares will be made at the
market price at the time of purchase in accordance with the rules
and policies of the TSX or on the NYSE in compliance with Rule
10b-8 under the U.S. Securities Exchange Act of 1934. Purchases may
also be made through other published markets, or by such other
means permitted by the TSX, including by private agreement at a
discount to the prevailing market price, pursuant to an issuer bid
exemption order issued by a securities regulatory authority.
COMMITMENTS AND CONTINGENCIES
From time to time, we may be contingently liable
for litigation, legal and/or regulatory actions and proceedings and
other claims.
Refer to note 15 of our unaudited interim
consolidated financial statements for the nine months ended
September 30, 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 nine months ended
September 30, 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; future purchases of our Common Shares under the
Normal Course Issuer Bid; and future issuances of debt securities.
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; our ability to successfully launch
material new or takeover business; continued underperformance of
one or more of our operating Divisions; restructuring, downsizing
or other significant non-recurring costs, including in our European
business; ongoing pricing pressures, including our ability to
offset price concessions demanded by our customers; warranty and
recall costs; fines or penalties imposed by antitrust and
regulatory authorities, including the German Cartel Office or CADE,
Brazil's competition authority;
our ability to grow our business with Asian-based customers; 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; 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 |
|
Nine months ended |
|
|
|
September 30, |
|
September 30, |
|
Note |
|
|
2014 |
|
2013 |
|
|
2014 |
|
2013 |
Sales |
|
|
$ |
8,820 |
$ |
8,338 |
|
$ |
27,245 |
$ |
25,661 |
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
7,636 |
|
7,273 |
|
|
23,553 |
|
22,384 |
|
Depreciation and amortization |
|
|
|
224 |
|
264 |
|
|
664 |
|
779 |
|
Selling, general and administrative |
11 |
|
|
407 |
|
411 |
|
|
1,265 |
|
1,188 |
|
Interest expense, net |
|
|
|
9 |
|
5 |
|
|
18 |
|
13 |
|
Equity income |
|
|
|
(52) |
|
(54) |
|
|
(157) |
|
(148) |
|
Other expense, net |
2 |
|
|
7 |
|
48 |
|
|
40 |
|
54 |
Income from operations before income
taxes |
|
|
|
589 |
|
391 |
|
|
1,862 |
|
1,391 |
Income taxes |
6 |
|
|
120 |
|
73 |
|
|
491 |
|
294 |
Net income |
|
|
|
469 |
|
318 |
|
|
1,371 |
|
1,097 |
Net loss attributable to non-controlling
interests |
|
|
|
1 |
|
1 |
|
|
2 |
|
6 |
Net income attributable to Magna International
Inc. |
|
|
$ |
470 |
$ |
319 |
|
$ |
1,373 |
$ |
1,103 |
Earnings per Common Share: |
3 |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
2.22 |
$ |
1.41 |
|
$ |
6.35 |
$ |
4.80 |
|
Diluted |
|
|
$ |
2.19 |
$ |
1.39 |
|
$ |
6.26 |
$ |
4.74 |
Cash dividends paid per Common Share |
|
|
$ |
0.38 |
$ |
0.32 |
|
$ |
1.14 |
$ |
0.96 |
Average number of Common
Shares outstanding during |
|
the period [in millions]: |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
211.2 |
|
226.4 |
|
|
216.0 |
|
229.8 |
|
|
Diluted |
|
|
|
214.2 |
|
229.5 |
|
|
219.1 |
|
232.6 |
See accompanying
notes |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars in millions]
|
|
|
Three months
ended |
|
Nine months ended |
|
|
|
September 30, |
|
September 30, |
|
Note |
|
|
2014 |
|
2013 |
|
|
2014 |
|
2013 |
Net income |
|
|
$ |
469 |
$ |
318 |
|
$ |
1,371 |
$ |
1,097 |
Other comprehensive (loss) income, net of
tax: |
13 |
|
|
|
|
|
|
|
|
|
|
|
Net unrealized (loss) gain on translation of net investment in
foreign operations |
|
|
|
(346) |
|
142 |
|
|
(358) |
|
(82) |
|
Net unrealized gain (loss) on available-for-sale
investments |
|
|
|
1 |
|
(1) |
|
|
— |
|
(5) |
|
Net unrealized (loss) gain on cash flow hedges |
|
|
|
(42) |
|
23 |
|
|
(24) |
|
(5) |
|
Reclassification of net (gain) loss on cash flow hedges to net
income |
|
|
|
(1) |
|
— |
|
|
4 |
|
(12) |
|
Reclassification of net loss on pensions to net
income |
|
|
|
— |
|
3 |
|
|
3 |
|
9 |
Other comprehensive (loss)
income |
|
|
|
(388) |
|
167 |
|
|
(375) |
|
(95) |
Comprehensive income |
|
|
|
81 |
|
485 |
|
|
996 |
|
1,002 |
Comprehensive loss attributable to non-controlling
interests |
|
|
|
1 |
|
2 |
|
|
2 |
|
7 |
Comprehensive income attributable to Magna
International Inc. |
|
|
$ |
82 |
$ |
487 |
|
$ |
998 |
$ |
1,009 |
See accompanying
notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
|
|
|
Three months
ended |
|
Nine months
ended |
|
|
|
September 30, |
|
September 30, |
|
|
Note |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
Cash provided from (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
$ |
469 |
|
$ |
318 |
|
$ |
1,371 |
|
$ |
1,097 |
Items not involving current cash flows |
|
4 |
|
268 |
|
|
256 |
|
|
785 |
|
|
788 |
|
|
|
|
737 |
|
|
574 |
|
|
2,156 |
|
|
1,885 |
Changes in operating assets and
liabilities |
|
4 |
|
(18) |
|
|
(110) |
|
|
(363) |
|
|
(578) |
Cash provided from operating
activities |
|
|
|
719 |
|
|
464 |
|
|
1,793 |
|
|
1,307 |
INVESTMENT ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset additions |
|
|
|
(315) |
|
|
(280) |
|
|
(916) |
|
|
(706) |
Increase in investments and other
assets |
|
|
|
(50) |
|
|
(67) |
|
|
(152) |
|
|
(158) |
Proceeds from disposition |
|
|
|
74 |
|
|
30 |
|
|
126 |
|
|
90 |
Cash used for investing
activities |
|
|
|
(291) |
|
|
(317) |
|
|
(942) |
|
|
(774) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issues of debt |
|
9 |
|
29 |
|
|
26 |
|
|
824 |
|
|
83 |
Increase (decrease) in bank
indebtedness |
|
|
|
14 |
|
|
(9) |
|
|
19 |
|
|
(14) |
Repayments of debt |
|
|
|
(46) |
|
|
(41) |
|
|
(131) |
|
|
(142) |
Settlement of stock options |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(23) |
Issue of Common Shares |
|
|
|
6 |
|
|
10 |
|
|
43 |
|
|
60 |
Repurchase of Common Shares |
|
12 |
|
(614) |
|
|
(298) |
|
|
(1,429) |
|
|
(723) |
Contribution to subsidiaries by non-controlling
interests |
|
|
|
— |
|
|
— |
|
|
— |
|
|
4 |
Dividends paid |
|
|
|
(79) |
|
|
(71) |
|
|
(241) |
|
|
(216) |
Cash used for financing
activities |
|
|
|
(690) |
|
|
(383) |
|
|
(915) |
|
|
(971) |
Effect of exchange rate changes on
cash and cash equivalents |
|
|
|
(59) |
|
|
21 |
|
|
(55) |
|
|
(20) |
Net decrease in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
during the
period |
|
|
|
(321) |
|
|
(215) |
|
|
(119) |
|
|
(458) |
Cash and cash equivalents, beginning of
period |
|
|
|
1,756 |
|
|
1,279 |
|
|
1,554 |
|
|
1,522 |
Cash and cash equivalents, end of
period |
|
|
$ |
1,435 |
|
$ |
1,064 |
|
$ |
1,435 |
|
$ |
1,064 |
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
|
|
|
|
As at |
|
|
As at |
|
|
|
|
September 30, |
|
|
December 31, |
|
|
Note |
|
2014 |
|
|
2013 |
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
4 |
$ |
1,435 |
|
$ |
1,554 |
Accounts receivable |
|
|
|
5,776 |
|
|
5,246 |
Inventories |
|
5 |
|
2,810 |
|
|
2,637 |
Deferred tax assets |
|
|
|
206 |
|
|
275 |
Prepaid expenses and
other |
|
|
|
180 |
|
|
211 |
|
|
|
|
10,407 |
|
|
9,923 |
Investments |
|
14 |
|
454 |
|
|
391 |
Fixed assets, net |
|
|
|
5,413 |
|
|
5,441 |
Goodwill |
|
|
|
1,382 |
|
|
1,440 |
Deferred tax assets |
|
|
|
146 |
|
|
120 |
Other assets |
|
7 |
|
623 |
|
|
675 |
|
|
|
$ |
18,425 |
|
$ |
17,990 |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Bank indebtedness |
|
|
$ |
58 |
|
$ |
41 |
Accounts payable |
|
|
|
4,993 |
|
|
4,781 |
Accrued salaries and
wages |
|
|
|
746 |
|
|
704 |
Other accrued liabilities |
|
8 |
|
1,582 |
|
|
1,538 |
Income taxes payable |
|
|
|
33 |
|
|
6 |
Deferred tax
liabilities |
|
|
|
26 |
|
|
9 |
Long-term debt due within one
year |
|
|
|
195 |
|
|
230 |
|
|
|
|
7,633 |
|
|
7,309 |
Long-term debt |
|
9 |
|
822 |
|
|
102 |
Long-term employee benefit
liabilities |
|
10 |
|
505 |
|
|
532 |
Other long-term
liabilities |
|
|
|
260 |
|
|
208 |
Deferred tax liabilities |
|
6 |
|
160 |
|
|
200 |
|
|
|
|
9,380 |
|
|
8,351 |
Shareholders' equity |
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
|
|
[issued: 208,284,943;
December 31, 2013 - 221,151,704] |
|
12 |
|
4,026 |
|
|
4,230 |
Contributed surplus |
|
|
|
88 |
|
|
69 |
Retained earnings |
|
|
|
5,004 |
|
|
5,011 |
Accumulated other comprehensive (loss)
income |
|
13 |
|
(87) |
|
|
313 |
|
|
|
|
9,031 |
|
|
9,623 |
Non-controlling
interests |
|
|
|
14 |
|
|
16 |
|
|
|
|
9,045 |
|
|
9,639 |
|
|
|
$ |
18,425 |
|
$ |
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) |
|
Interests |
|
Equity |
|
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2013 |
|
|
|
221.2 |
$ |
4,230 |
$ |
69 |
$ |
5,011 |
$ |
313 |
$ |
16 |
$ |
9,639 |
Net
income |
|
|
|
|
|
|
|
|
|
1,373 |
|
|
|
(2) |
|
1,371 |
Other comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
(375) |
|
|
|
(375) |
Shares issued on exercise of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options |
|
|
|
1.1 |
|
55 |
|
(12) |
|
|
|
|
|
|
|
43 |
Repurchase and cancellation under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
normal course issuer
bid |
|
12 |
|
(14.1) |
|
(272) |
|
|
|
(1,132) |
|
(25) |
|
|
|
(1,429) |
Release of restricted
stock |
|
|
|
|
|
5 |
|
(5) |
|
|
|
|
|
|
|
— |
Release of restricted stock
units |
|
|
|
|
|
1 |
|
(1) |
|
|
|
|
|
|
|
— |
Stock-based compensation
expense |
|
11 |
|
|
|
|
|
30 |
|
|
|
|
|
|
|
30 |
Reclassification of
liability |
|
11 |
|
|
|
|
|
7 |
|
|
|
|
|
|
|
7 |
Dividends paid |
|
|
|
0.1 |
|
7 |
|
|
|
(248) |
|
|
|
|
|
(241) |
Balance, September 30,
2014 |
|
|
|
208.3 |
$ |
4,026 |
$ |
88 |
$ |
5,004 |
$ |
(87) |
$ |
14 |
$ |
9,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
|
Contri- |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Stated |
|
buted |
|
Retained |
|
|
|
controlling |
|
Total |
|
|
Note |
|
Number |
|
Value |
|
Surplus |
|
Earnings |
|
AOCI
(i) |
|
Interests |
|
Equity |
|
|
|
|
[in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2012 |
|
|
|
233.1 |
$ |
4,391 |
$ |
80 |
$ |
4,462 |
$ |
496 |
$ |
29 |
$ |
9,458 |
Net income |
|
|
|
|
|
|
|
|
|
1,103 |
|
|
|
(6) |
|
1,097 |
Other comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
(94) |
|
(1) |
|
(95) |
Issues of shares by
subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
4 |
Shares issued on exercise of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
options |
|
|
|
1.9 |
|
81 |
|
(21) |
|
|
|
|
|
|
|
60 |
Repurchase and cancellation
under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
normal course issuer bid |
|
12 |
|
(10.5) |
|
(200) |
|
|
|
(490) |
|
(33) |
|
|
|
(723) |
Release of restricted stock |
|
|
|
|
|
6 |
|
(6) |
|
|
|
|
|
|
|
— |
Release of restricted stock
units |
|
|
|
|
|
1 |
|
(1) |
|
|
|
|
|
|
|
— |
Stock-based compensation
expense |
|
11 |
|
|
|
|
|
26 |
|
|
|
|
|
|
|
26 |
Settlement of stock options |
|
11 |
|
|
|
|
|
(9) |
|
(10) |
|
|
|
|
|
(19) |
Dividends paid |
|
|
|
0.2 |
|
8 |
|
|
|
(224) |
|
|
|
|
|
(216) |
Balance, September 30,
2013 |
|
|
|
224.7 |
$ |
4,287 |
$ |
69 |
$ |
4,841 |
$ |
369 |
$ |
26 |
$ |
9,592 |
(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 because they do not include
all of the information and notes required for complete 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.
The unaudited interim consolidated financial
statements reflect all adjustments, which consist only of normal
and recurring adjustments, necessary to present fairly the
financial position at September 30,
2014 and the results of operations, changes in equity and
cash flows for the three-month and nine-month periods ended
September 30, 2014 and 2013.
[b] Accounting Changes
Revenue Recognition
In May 2014, the
FASB issued Accounting Standards Update No. 2014-09, Revenue from
Contracts with Customers: Topic 606 (ASU 2014-09), to supersede
nearly all existing revenue recognition guidance under GAAP. The
core principle of ASU 2014-09 is to recognize revenues when
promised goods or services are transferred to customers in an
amount that reflects the consideration that is expected to be
received for those goods or services. ASU 2014-09 is effective for
the Company in the first quarter of fiscal 2017 using either of two
methods: [i] retrospective to each prior reporting period presented
with the option to elect certain practical expedients as defined
within ASU 2014-09; or [ii] retrospective with the cumulative
effect of initially applying ASU 2014-09 recognized at the date of
initial application and providing certain additional disclosures as
defined per ASU 2014-09. The Company is currently evaluating the
impact of its pending adoption of ASU 2014-09 on its consolidated
financial statements.
[c] Seasonality
The Company's businesses are generally not
seasonal. However, the Company's sales and profits are closely
related to its automotive customers' vehicle production schedules.
The Company's largest North American customers typically halt
production for approximately two weeks in July and one week in
December. Additionally, many of the Company's customers in
Europe typically shutdown vehicle
production during portions of August and one week in December.
2. OTHER EXPENSE, NET
During the three and nine months ended
September 30, 2014, the Company
recorded net restructuring charges of $7 million [$6
million after tax] and $40
million [$36 million after
tax], respectively, in Europe at
its exterior and interior systems operations.
During the three and nine months ended
September 30, 2013, the Company
recorded net restructuring charges of $48 million [$33
million after tax] and $54
million [$39 million after
tax], respectively, in Europe at
its exterior and interior systems operations related primarily to
the closure of a facility in Belgium.
3. EARNINGS PER SHARE
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September
30, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Basic earnings per
Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Magna International Inc. |
|
$ |
470 |
|
$ |
319 |
|
$ |
1,373 |
|
$ |
1,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of Common
Shares outstanding |
|
|
211.2 |
|
|
226.4 |
|
|
216.0 |
|
|
229.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per Common
Share |
|
$ |
2.22 |
|
$ |
1.41 |
|
$ |
6.35 |
|
$ |
4.80 |
|
Diluted earnings
per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Magna International Inc. |
|
$ |
470 |
|
$ |
319 |
|
$ |
1,373 |
|
$ |
1,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of Common
Shares outstanding |
|
|
211.2 |
|
|
226.4 |
|
|
216.0 |
|
|
229.8 |
Adjustments |
|
Stock options and restricted stock
[a] |
|
|
3.0 |
|
|
3.1 |
|
|
3.1 |
|
|
2.8 |
|
|
|
214.2 |
|
|
229.5 |
|
|
219.1 |
|
|
232.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
Common Share |
|
$ |
2.19 |
|
$ |
1.39 |
|
$ |
6.26 |
|
$ |
4.74 |
[a] |
For the nine months ended September
30, 2013, diluted earnings per Common Share exclude 0.1 million
Common Shares issuable under the Company's Incentive Stock Option
Plan because these options were not "in-the-money". |
4. DETAILS OF CASH FROM OPERATING ACTIVITIES
[a] Cash and cash equivalents:
|
|
September
30, |
|
December
31, |
|
|
2014 |
|
2013 |
Bank term deposits, bankers'
acceptances and government paper |
|
$ |
1,268 |
|
$ |
1,331 |
Cash |
|
|
167 |
|
|
223 |
|
|
$ |
1,435 |
|
$ |
1,554 |
[b] Items not involving current cash
flows:
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Depreciation and
amortization |
|
$ |
224 |
|
$ |
264 |
|
$ |
664 |
|
$ |
779 |
Amortization of other assets included
in cost of goods sold |
|
|
41 |
|
|
34 |
|
|
112 |
|
|
100 |
Other non-cash charges |
|
|
9 |
|
|
7 |
|
|
25 |
|
|
12 |
Deferred income taxes |
|
|
6 |
|
|
(28) |
|
|
31 |
|
|
(55) |
Equity income in excess of dividends
received |
|
|
(12) |
|
|
(21) |
|
|
(47) |
|
|
(48) |
|
|
$ |
268 |
|
$ |
256 |
|
$ |
785 |
|
$ |
788 |
[c] Changes in operating assets and
liabilities:
|
|
Three months
ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Accounts receivable |
|
$ |
119 |
|
$ |
(223) |
|
$ |
(754) |
|
$ |
(1,171) |
Inventories |
|
|
(184) |
|
|
48 |
|
|
(311) |
|
|
(203) |
Prepaid expenses and other |
|
|
8 |
|
|
(13) |
|
|
12 |
|
|
(46) |
Accounts payable |
|
|
(1) |
|
|
(71) |
|
|
441 |
|
|
454 |
Accrued salaries and wages |
|
|
81 |
|
|
71 |
|
|
79 |
|
|
100 |
Other accrued liabilities |
|
|
(31) |
|
|
77 |
|
|
116 |
|
|
339 |
Income taxes payable |
|
|
(10) |
|
|
— |
|
|
57 |
|
|
(51) |
Deferred revenue |
|
|
— |
|
|
1 |
|
|
(3) |
|
|
— |
|
|
$ |
(18) |
|
$ |
(110) |
|
$ |
(363) |
|
$ |
(578) |
5. INVENTORIES
Inventories consist of:
|
|
September 30, |
|
December 31, |
|
|
2014 |
|
2013 |
Raw materials and supplies |
|
$ |
972 |
|
$ |
947 |
Work-in-process |
|
|
265 |
|
|
273 |
Finished goods |
|
|
349 |
|
|
339 |
Tooling and engineering |
|
|
1,224 |
|
|
1,078 |
|
|
$ |
2,810 |
|
$ |
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
During 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 recorded a charge to
tax expense of $32 million in the
first quarter of 2014.
7. OTHER ASSETS
Other assets consist of:
|
|
September 30, |
|
December 31, |
|
|
2014 |
|
2013 |
Preproduction costs related to
long-term supply agreements with contractual guarantee for
reimbursement |
|
$ |
281 |
|
$ |
291 |
Customer relationship intangibles
|
|
|
114 |
|
|
143 |
Long-term receivables |
|
|
112 |
|
|
111 |
Patents and licences, net |
|
|
39 |
|
|
44 |
Unrealized gain on cash flow
hedges |
|
|
10 |
|
|
20 |
Pension overfunded status |
|
|
26 |
|
|
26 |
Other, net |
|
|
41 |
|
|
40 |
|
|
$ |
623 |
|
$ |
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 |
Expense, net |
|
|
7 |
|
|
11 |
Settlements |
|
|
(8) |
|
|
(6) |
Foreign exchange and other |
|
|
— |
|
|
(9) |
Balance, June 30 |
|
|
90 |
|
|
102 |
Expense, net |
|
|
23 |
|
|
2 |
Settlements |
|
|
(10) |
|
|
(16) |
Foreign exchange and other |
|
|
(6) |
|
|
2 |
Balance, September 30 |
|
$ |
97 |
|
$ |
90 |
9. LONG-TERM DEBT
[a] On June 16,
2014, the Company issued $750
million of 3.625% fixed-rate Senior Notes which mature
on June 15, 2024. The Senior Notes are senior
unsecured obligations, interest is payable on June 15 and December 15 of each year, and do not include
any financial covenants. The Company may redeem the Senior Notes in
whole or in part at any time, and from time to time, at specified
redemption prices determined in accordance with the terms of the
indenture governing the Senior Notes.
[b] On May 16,
2014, the Company's $2.25
billion revolving credit facility maturing June 20, 2018 was extended to June 20, 2019. The facility includes a
$200 million Asian tranche, a
$50 million Mexican tranche and a
tranche for Canada, U.S. and
Europe, which is fully
transferable between jurisdictions and can be drawn in U.S.
dollars, Canadian dollars or euros.
10. LONG-TERM EMPLOYEE BENEFIT
LIABILITIES
The Company recorded long-term employee benefit
expenses as follows:
|
|
Three months
ended |
|
Nine months
ended |
|
|
September 30, |
|
September 30, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Defined benefit pension plan and
other |
|
$ |
2 |
|
$ |
4 |
|
$ |
9 |
|
$ |
12 |
Termination and long service
arrangements |
|
|
8 |
|
|
10 |
|
|
24 |
|
|
24 |
Retirement medical benefit
plan |
|
|
1 |
|
|
— |
|
|
2 |
|
|
1 |
|
|
$ |
11 |
|
$ |
14 |
|
$ |
35 |
|
$ |
37 |
11. STOCK-BASED COMPENSATION
[a] Incentive Stock Option Plan
The following is a continuity schedule of
options outstanding [number of options in the table below are
expressed in whole numbers]:
|
|
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 |
Exercised |
|
(296,035) |
|
41.97 |
|
(296,035) |
|
(329,881) |
|
37.05 |
|
(329,881) |
Cancelled |
|
(10,500) |
|
73.85 |
|
— |
|
(81,665) |
|
52.05 |
|
(11,667) |
June 30 |
|
4,505,522 |
|
52.86 |
|
2,644,106 |
|
5,055,813 |
|
41.87 |
|
2,793,146 |
Exercised |
|
(171,051) |
|
38.53 |
|
(171,051) |
|
(259,315) |
|
41.56 |
|
(259,315) |
September 30 |
|
4,334,471 |
|
53.43 |
|
2,473,055 |
|
4,796,498 |
|
41.89 |
|
2,533,831 |
(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 $23 million were made to the stock option
holders. |
|
|
|
All cash payments were calculated
using the difference between the aggregate fair market value
of the Option Shares based on the closing price of the Company's
Common Shares on the Toronto Stock Exchange ["TSX"] on the date of
exercise and the aggregate Exercise Price of all such options
surrendered. |
The weighted average assumptions used in
measuring the fair value of stock options granted are as
follows:
|
|
Nine months
ended |
|
|
September 30, |
|
|
2014 |
|
2013 |
Risk free interest rate |
|
|
1.60% |
|
|
1.32% |
Expected dividend yield |
|
|
2.00% |
|
|
2.00% |
Expected
volatility |
|
|
29% |
|
|
34% |
Expected time until
exercise |
|
|
4.5 years |
|
|
4.5 years |
Weighted average fair value of
options granted in period [Cdn$] |
|
$ |
22.94 |
|
$ |
14.02 |
[b] Long-term retention program
The following is a continuity of the stock that
has not been released to the executives and is reflected as a
reduction in the stated value of the Company's Common Shares
[number of Common Shares in the table below are expressed in whole
numbers]:
|
|
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) |
|
|
(5) |
|
|
(152,512) |
|
|
(5) |
Awarded and not released, March 31,
June 30 and September 30 |
|
|
587,324 |
|
$ |
20 |
|
|
730,476 |
|
$ |
25 |
[c] Restricted stock unit
program
The following is a continuity schedule of
Restricted stock units ["RSUs"] and Independent Director stock
units ["DSUs"] outstanding [number of stock units in the table
below are expressed in whole numbers]:
|
|
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 |
|
13,825 |
|
10,013 |
|
94,474 |
Dividend equivalents |
|
253 |
|
153 |
|
529 |
|
935 |
|
415 |
|
189 |
|
1,206 |
|
1,810 |
Released |
|
(8,259) |
|
— |
|
— |
|
(8,259) |
|
(8,259) |
|
— |
|
(113,007) |
|
(121,266) |
Balance, March 31 |
|
674,657 |
|
38,297 |
|
134,291 |
|
847,245 |
|
668,222 |
|
34,113 |
|
105,135 |
|
807,470 |
Granted |
|
55,242 |
|
1,000 |
|
5,357 |
|
61,599 |
|
71,391 |
|
— |
|
7,523 |
|
78,914 |
Dividend equivalents |
|
233 |
|
139 |
|
489 |
|
861 |
|
348 |
|
158 |
|
626 |
|
1,132 |
Released |
|
— |
|
— |
|
— |
|
— |
|
(10,386) |
|
— |
|
— |
|
(10,386) |
Balance, June 30 |
|
730,132 |
|
39,436 |
|
140,137 |
|
909,705 |
|
729,575 |
|
34,271 |
|
113,284 |
|
877,130 |
Granted |
|
35,657 |
|
— |
|
4,842 |
|
40,499 |
|
40,779 |
|
— |
|
7,538 |
|
48,317 |
Dividend equivalents |
|
171 |
|
131 |
|
489 |
|
791 |
|
252 |
|
136 |
|
463 |
|
851 |
Forfeitures |
|
— |
|
(410) |
|
— |
|
(410) |
|
— |
|
— |
|
— |
|
— |
Released |
|
(12,730) |
|
— |
|
— |
|
(12,730) |
|
— |
|
— |
|
— |
|
— |
Balance, September 30 |
|
753,230 |
|
39,157 |
|
145,468 |
|
937,855 |
|
770,606 |
|
34,407 |
|
121,285 |
|
926,298 |
(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 |
|
Nine months
ended |
|
|
September 30, |
|
September 30, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Incentive Stock Option
Plan |
|
$ |
4 |
|
$ |
4 |
|
$ |
11 |
|
$ |
12 |
Long-term retention |
|
|
1 |
|
|
1 |
|
|
3 |
|
|
3 |
Restricted stock unit |
|
|
5 |
|
|
3 |
|
|
17 |
|
|
11 |
|
|
|
10 |
|
|
8 |
|
|
31 |
|
|
26 |
Fair value adjustment for liability
classified DSUs |
|
|
— |
|
|
1 |
|
|
— |
|
|
5 |
Total stock-based compensation
expense |
|
$ |
10 |
|
$ |
9 |
|
$ |
31 |
|
$ |
31 |
12. 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 |
Second Quarter |
|
5,718,181 |
|
|
575 |
|
5,194,188 |
|
|
337 |
Third Quarter |
|
5,654,422 |
|
|
614 |
|
3,697,973 |
|
|
298 |
|
|
14,082,603 |
|
$ |
1,429 |
|
10,485,776 |
|
$ |
723 |
The Company can purchase up to 20 million shares
under a normal course issuer bid that will terminate no later than
November 12, 2014. Between
October 1, 2014 and November 5, 2014, the Company purchased primarily
for cancellation 1,053,111 Common Shares for cash consideration of
$98 million through a pre-defined
automatic securities purchase plan with a designated broker. As at
November 5, 2014, the Company had
2,354,563 shares remaining to be repurchased under the normal
course issuer bid.
Refer to Subsequent Event Note 17 for more
information regarding the Company's Normal Course Issuer Bids.
[b] The following table presents the
maximum number of shares that would be outstanding if all the
dilutive instruments outstanding at November
5, 2014 were exercised or converted:
Common Shares |
|
|
|
|
|
|
|
|
|
|
207,354,943 |
Stock options (i) |
|
|
|
|
|
|
|
|
|
|
4,324,471 |
|
|
|
|
|
|
|
|
|
|
|
211,679,414 |
(i) |
Options to purchase Common Shares
are exercisable by the holder in accordance with the vesting
provisions and upon payment of the exercise price as may be
determined from time to time pursuant to the Company's stock option
plans. |
13. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following is a continuity schedule of
accumulated other comprehensive (loss) 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 |
|
Net unrealized gain (loss)
|
|
|
100 |
|
|
(91) |
|
Repurchase of shares under normal
course issuer bid |
|
|
(11) |
|
|
(17) |
|
Balance, June 30 |
|
|
427 |
|
|
383 |
|
Net unrealized (loss) gain |
|
|
(346) |
|
|
143 |
|
Repurchase of shares under normal
course issuer bid |
|
|
(10) |
|
|
(11) |
|
Balance, September 30 |
|
|
71 |
|
|
515 |
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 |
|
Net unrealized gain (loss) |
|
|
49 |
|
|
(36) |
|
Reclassification of net loss (gain)
to net income |
|
|
6 |
|
|
(6) |
|
Balance, June 30 |
|
|
3 |
|
|
(6) |
|
Net unrealized (loss) gain |
|
|
(42) |
|
|
23 |
|
Reclassification of net gain to net
income |
|
|
(1) |
|
|
— |
|
Balance, September 30 |
|
|
(40) |
|
|
17 |
Accumulated net
unrealized loss on available-for-sale investments |
|
Balance, beginning of period |
|
|
(4) |
|
|
1 |
|
Net unrealized (loss) gain |
|
|
(1) |
|
|
1 |
|
Balance, March 31 |
|
|
(5) |
|
|
2 |
|
Net unrealized loss |
|
|
— |
|
|
(5) |
|
Balance, June 30 |
|
|
(5) |
|
|
(3) |
|
Net unrealized gain (loss) |
|
|
1 |
|
|
(1) |
|
Balance, September 30 |
|
|
(4) |
|
|
(4) |
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) |
|
Reclassification of net loss to net
income |
|
|
2 |
|
|
3 |
|
Balance, June 30 |
|
|
(114) |
|
|
(162) |
|
Reclassification of net loss to net
income |
|
|
— |
|
|
3 |
|
Balance, September 30 |
|
|
(114) |
|
|
(159) |
|
Total accumulated other comprehensive
(loss) income |
|
$ |
(87) |
|
$ |
369 |
|
|
|
(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) |
|
|
|
|
|
|
Reclassifications of net gain to net income |
|
|
1 |
|
|
2 |
|
|
|
|
|
|
Balance, March 31 |
|
|
16 |
|
|
(15) |
|
|
|
|
|
|
Net unrealized (gain)
loss |
|
|
(18) |
|
|
13 |
|
|
|
|
|
|
Reclassifications of net (loss) gain to net
income |
|
|
(1) |
|
|
3 |
|
|
|
|
|
|
Balance, June 30 |
|
|
(3) |
|
|
1 |
|
|
|
|
|
|
Net unrealized loss
(gain) |
|
|
16 |
|
|
(8) |
|
|
|
|
|
|
Reclassifications of net gain to net income |
|
|
1 |
|
|
— |
|
|
|
|
|
|
Balance, September 30 |
|
$ |
14 |
|
$ |
(7) |
|
|
|
(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 |
|
|
|
|
|
|
Reclassification of net loss to net income |
|
|
|
|
|
|
|
|
— |
|
|
(1) |
|
|
|
|
|
|
Balance, June
30 |
|
|
|
|
|
|
|
|
14 |
|
|
34 |
|
|
|
|
|
|
Reclassification of net loss to net income |
|
|
|
|
|
|
|
|
(1) |
|
|
(1) |
|
|
|
|
|
|
Balance, September 30 |
|
|
|
|
|
|
|
$ |
13 |
|
$ |
33 |
The amount of other comprehensive loss that is
expected to be reclassified to net income over the next 12 months
is $18 million [net of income
taxes of $6 million].
14. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and
financial liabilities consist of the following:
|
|
September
30, |
|
December 31, |
|
|
2014 |
|
2013 |
Held for trading |
|
|
|
Cash and cash equivalents |
|
$ |
1,435 |
|
$ |
1,554 |
|
Investment in asset-backed commercial
paper |
|
|
90 |
|
|
92 |
|
|
$ |
1,525 |
|
$ |
1,646 |
Held to maturity
investments |
|
|
|
Severance investments |
|
$ |
5 |
|
$ |
5 |
Available-for-sale |
|
|
|
Equity investments |
|
$ |
6 |
|
$ |
4 |
Loans and
receivables |
|
|
|
Accounts receivable |
|
$ |
5,776 |
|
$ |
5,246 |
|
Long-term receivables included in
other assets |
|
|
112 |
|
|
111 |
|
|
$ |
5,888 |
|
$ |
5,357 |
Other financial
liabilities |
|
|
|
Bank indebtedness |
|
$ |
58 |
|
$ |
41 |
|
Long-term debt [including portion due
within one year] |
|
|
1,017 |
|
|
332 |
|
Accounts payable |
|
|
4,993 |
|
|
4,781 |
|
|
$ |
6,068 |
|
$ |
5,154 |
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
Derivatives designated
as effective hedges, measured at fair value |
|
|
|
|
|
|
|
Foreign currency contracts |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
$ |
29 |
|
$ |
42 |
|
|
Other assets |
|
|
10 |
|
|
20 |
|
|
Other accrued liabilities |
|
|
(50) |
|
|
(37) |
|
|
Other long-term liabilities |
|
|
(36) |
|
|
(28) |
|
|
|
(47) |
|
|
(3) |
|
Natural gas contracts |
|
|
|
|
|
|
|
|
Other accrued liabilities |
|
|
— |
|
|
(1) |
|
|
$ |
(47) |
|
$ |
(4) |
[b] Derivatives designated as effective
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 |
September 30,
2014 |
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
39 |
|
$ |
34 |
|
$ |
5 |
|
Liabilities |
|
$ |
(86) |
|
$ |
(34) |
|
$ |
(52) |
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 interim
consolidated balance sheets are reasonable estimates of fair
values.
Investments
At September 30,
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$101 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 September 30,
2014, the Company held available-for-sale investments in
publicly traded companies. The carrying value and fair value of
these investments was $6 million,
which was based on the closing share price of the investments on
September 30, 2014.
Term debt
The Company's term debt includes $195 million due within one year. Due to the
short period to maturity of this debt, the carrying value as
presented in the interim consolidated balance sheets is a
reasonable estimate of its fair value.
Senior Notes
At September 30,
2014, the total estimated fair value of the Senior Notes was
approximately $748 million,
determined primarily using active market prices, categorized as
Level 1 inputs within the Accounting Standards Codification 820
fair value hierarchy.
[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
over cash flows and the risk of collateral calls in the event that
spreads widened considerably, the Company could be exposed to
further losses on its investment.
Cash and cash equivalents, which consists of
short-term investments, are only invested in governments, bank term
deposits and bank commercial paper with an investment grade credit
rating. Credit risk is further reduced by limiting the amount which
is invested in certain governments or any major financial
institution.
The Company is also exposed to credit risk from
the potential default by any of its counterparties on its foreign
exchange forward contracts. The Company mitigates this credit risk
by dealing with counterparties who are major financial institutions
that the Company anticipates will satisfy their obligations under
the contracts.
In the normal course of business, the Company is
exposed to credit risk from its customers, substantially all of
which are in the automotive industry and are subject to credit
risks associated with the automotive industry. For the three and
nine-month periods ended September 30,
2014, sales to the Company's six largest customers
represented 82% and 83% of the Company's total sales, respectively,
and substantially all of the Company's sales are to customers in
which it has ongoing contractual relationships.
[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 and Senior Notes 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, British pound and
Indian rupee outflows and inflows. All derivative instruments,
including foreign exchange contracts, are recorded on the interim
consolidated balance sheet at fair value. To the extent that cash
flow hedges are effective, the change in their fair value is
recorded in other comprehensive income; any ineffective portion is
recorded in net income. Amounts accumulated in other comprehensive
income are reclassified to net income in the period in which the
hedged item affects net income.
At September 30,
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. dollar amount |
|
229 |
|
1,187 |
|
euro amount |
|
74 |
|
10 |
|
|
|
|
|
For U.S. dollars |
|
|
|
|
|
Peso amount |
|
6,608 |
|
314 |
|
|
|
|
|
For euros |
|
|
|
|
|
U.S. dollar amount |
|
84 |
|
224 |
|
British pounds amount |
|
13 |
|
17 |
|
Czech koruna amount |
|
3,823 |
|
7 |
Forward contracts mature at various dates
through 2019. Foreign currency exposures are reviewed
quarterly.
15. CONTINGENCIES
From time to time, the Company may become
involved in regulatory proceedings, or become liable for legal,
contractual and other claims by various parties, including
customers, suppliers, former employees, class action plaintiffs and
others. On an ongoing basis, the Company attempts to assess the
likelihood of any adverse judgments or outcomes to these
proceedings or claims, together with 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] In September
2013, representatives of the Bundeskartellamt, the German
Federal 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 automotive textile coverings and
components, particularly trunk linings.
In September 2014,
the Conselho Administrativo de Defesa Economica, Brazil's Federal competition authority,
attended at the offices of one of the Company's operating divisions
in Brazil in connection with an
ongoing antitrust investigation involving door latches and related
products.
Proceedings of this nature can continue for
several years. Where wrongful conduct is found, the relevant
antitrust authority can impose administrative fines in accordance
with formula-based guidelines tied to the level of affected sales,
subject to other mitigating and aggravating factors including, in
the case of the German Federal Cartel Office, the consolidated
sales of the group of companies to which the offending entity
belongs.
The Company's policy is to comply with all
applicable laws, including antitrust and competition laws. In
light of the early stage of the investigations, management is
unable to predict their duration or outcome, including whether any
operating divisions 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 fine imposed
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.
16. 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.
The following tables show segment information for the Company's
reporting segments and a reconciliation of Adjusted EBIT to the
Company's consolidated income from operations before income
taxes:
|
|
|
Three months
ended |
|
Three months
ended |
|
|
|
September 30, 2014 |
|
September
30, 2013 |
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
|
|
Fixed |
|
|
|
Total |
|
External |
|
Adjusted |
|
assets, |
|
|
Total |
|
External |
|
Adjusted |
|
assets, |
|
|
|
sales |
|
sales |
|
EBIT |
|
net |
|
|
sales |
|
sales |
|
EBIT |
|
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
|
$ |
1,641 |
$ |
1,529 |
|
|
$ |
578 |
|
$ |
1,578 |
$ |
1,453 |
|
|
$ |
617 |
|
United States |
|
|
2,362 |
|
2,239 |
|
|
|
1,152 |
|
|
2,071 |
|
1,956 |
|
|
|
1,083 |
|
Mexico |
|
|
1,071 |
|
992 |
|
|
|
605 |
|
|
1,020 |
|
946 |
|
|
|
585 |
|
Eliminations |
|
|
(286) |
|
— |
|
|
|
— |
|
|
(286) |
|
— |
|
|
|
— |
|
|
|
4,788 |
|
4,760 |
$ |
470 |
|
2,335 |
|
|
4,383 |
|
4,355 |
$ |
365 |
|
2,285 |
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great Britain |
|
|
2,771 |
|
2,697 |
|
|
|
1,323 |
|
|
2,735 |
|
2,680 |
|
|
|
1,413 |
|
Great
Britain |
|
|
190 |
|
190 |
|
|
|
89 |
|
|
222 |
|
220 |
|
|
|
62 |
|
Eastern
Europe |
|
|
545 |
|
523 |
|
|
|
614 |
|
|
538 |
|
466 |
|
|
|
587 |
|
Eliminations |
|
|
(40) |
|
— |
|
|
|
— |
|
|
(89) |
|
— |
|
|
|
— |
|
|
|
3,466 |
|
3,410 |
|
83 |
|
2,026 |
|
|
3,406 |
|
3,366 |
|
72 |
|
2,062 |
Asia |
|
|
494 |
|
456 |
|
39 |
|
637 |
|
|
436 |
|
395 |
|
29 |
|
578 |
Rest of
World |
|
|
190 |
|
190 |
|
(6) |
|
90 |
|
|
217 |
|
217 |
|
(27) |
|
112 |
Corporate and Other |
|
|
(118) |
|
4 |
|
19 |
|
325 |
|
|
(104) |
|
5 |
|
5 |
|
222 |
Total reportable
segments |
|
|
8,820 |
|
8,820 |
|
605 |
|
5,413 |
|
|
8,338 |
|
8,338 |
|
444 |
|
5,259 |
Other expense,
net |
|
|
|
|
|
|
(7) |
|
|
|
|
|
|
|
|
(48) |
|
|
Interest expense,
net |
|
|
|
|
|
|
(9) |
|
|
|
|
|
|
|
|
(5) |
|
|
|
|
$ |
8,820 |
$ |
8,820 |
$ |
589 |
|
5,413 |
|
$ |
8,338 |
$ |
8,338 |
$ |
391 |
|
5,259 |
Current
assets |
|
|
|
|
|
|
|
|
10,407 |
|
|
|
|
|
|
|
|
10,069 |
Investments, goodwill, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deferred tax assets,
and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
assets |
|
|
|
|
|
|
|
|
2,605 |
|
|
|
|
|
|
|
|
2,738 |
Consolidated total
assets |
|
|
|
|
|
|
|
$ |
18,425 |
|
|
|
|
|
|
|
$ |
18,066 |
|
|
Nine months
ended |
|
Nine months ended |
|
|
September 30, 2014 |
|
September
30, 2013 |
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
|
|
Fixed |
|
|
Total |
|
External |
|
Adjusted |
|
assets, |
|
|
Total |
|
External |
|
Adjusted |
|
assets, |
|
|
sales |
|
sales |
|
EBIT |
|
net |
|
|
sales |
|
sales |
|
EBIT |
|
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada |
$ |
5,040 |
$ |
4,676 |
|
|
$ |
578 |
|
$ |
5,001 |
$ |
4,620 |
|
|
$ |
617 |
|
United States |
|
7,233 |
|
6,851 |
|
|
|
1,152 |
|
|
6,189 |
|
5,839 |
|
|
|
1,083 |
|
Mexico |
|
3,219 |
|
2,973 |
|
|
|
605 |
|
|
2,998 |
|
2,773 |
|
|
|
585 |
|
Eliminations |
|
(908) |
|
— |
|
|
|
— |
|
|
(874) |
|
— |
|
|
|
— |
|
|
14,584 |
|
14,500 |
$ |
1,450 |
|
2,335 |
|
|
13,314 |
|
13,232 |
|
$ 1,168 |
|
2,285 |
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Great Britain |
|
8,901 |
|
8,689 |
|
|
|
1,323 |
|
|
8,643 |
|
8,451 |
|
|
|
1,413 |
|
Great Britain |
|
567 |
|
567 |
|
|
|
89 |
|
|
717 |
|
711 |
|
|
|
62 |
|
Eastern Europe |
|
1,842 |
|
1,625 |
|
|
|
614 |
|
|
1,684 |
|
1,464 |
|
|
|
587 |
|
Eliminations |
|
(275) |
|
— |
|
|
|
— |
|
|
(280) |
|
— |
|
|
|
— |
|
|
11,035 |
|
10,881 |
|
335 |
|
2,026 |
|
|
10,764 |
|
10,626 |
|
264 |
|
2,062 |
Asia |
|
1,443 |
|
1,334 |
|
110 |
|
637 |
|
|
1,198 |
|
1,090 |
|
59 |
|
578 |
Rest of World |
|
519 |
|
519 |
|
(30) |
|
90 |
|
|
696 |
|
696 |
|
(55) |
|
112 |
Corporate and Other |
|
(336) |
|
11 |
|
55 |
|
325 |
|
|
(311) |
|
17 |
|
22 |
|
222 |
Total reportable
segments |
|
27,245 |
|
27,245 |
|
1,920 |
|
5,413 |
|
|
25,661 |
|
25,661 |
|
1,458 |
|
5,259 |
Other expense,
net |
|
|
|
|
|
(40) |
|
|
|
|
|
|
|
|
(54) |
|
|
Interest expense,
net |
|
|
|
|
|
(18) |
|
|
|
|
|
|
|
|
(13) |
|
|
|
$ |
27,245 |
$ |
27,245 |
$ |
1,862 |
|
5,413 |
|
$ |
25,661 |
$ |
25,661 |
$ |
1,391 |
|
5,259 |
Current
assets |
|
|
|
|
|
|
|
10,407 |
|
|
|
|
|
|
|
|
10,069 |
Investments, goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deferred tax assets and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
assets |
|
|
|
|
|
|
|
2,605 |
|
|
|
|
|
|
|
|
2,738 |
Consolidated total
assets |
|
|
|
|
|
|
$ |
18,425 |
|
|
|
|
|
|
|
$ |
18,066 |
17. Subsequent events
Normal Course Issuer Bid
Subject to approval by the TSX and the New York
Stock Exchange ["NYSE"], the Board of Directors approved a new
normal course issuer bid to purchase up to 20 million of the
Company's Common Shares, representing approximately 9.8% of the
Company's public float of Common Shares. The primary purposes of
the normal course issuer bid are purchases for cancellation as well
as purchases to fund the Company's stock-based compensation awards
or programs and/or its obligations to its deferred profit sharing
plans. The normal course issuer bid is expected to commence on or
about November 13, 2014 and will
terminate one year later. All purchases of Common Shares will be
made at the market price at the time of purchase in accordance with
the rules and policies of the TSX or on the NYSE in compliance with
Rule 10b-8 under the U.S. Securities Exchange Act of 1934.
Purchases may also be made through other published markets, or by
such other means permitted by the TSX, including by private
agreement at a discount to the prevailing market price, pursuant to
an issuer bid exemption order issued by a securities regulatory
authority.
18. Comparative Figures
Certain of the comparative figures have been
reclassified to conform to the current period's method of
presentation.
SOURCE Magna International Inc.