AURORA, ON, Aug. 8, 2014 /PRNewswire/ - Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the second quarter ended June
30, 2014.
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| THREE MONTHS ENDED JUNE 30, |
| SIX MONTHS ENDED JUNE 30, |
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| 2014 |
| 2013 |
| 2014 |
| 2013 |
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Sales
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| $ | 9,464 |
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$
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8,962
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| $ | 18,425 |
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$
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17,323
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Adjusted EBIT(1) |
| $ | 710 |
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$
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547
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| $ | 1,315 |
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$
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1,014
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Income from operations before income taxes
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| $ | 692 |
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$
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543
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| $ | 1,273 |
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$
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1,000
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Net income attributable to Magna International Inc.
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| $ | 510 |
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$
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415
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| $ | 903 |
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$
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784
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Diluted earnings per share
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| $ | 2.32 |
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$
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1.78
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| $ | 4.08 |
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$
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3.35
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All results are reported in millions of U.S. dollars, except per
share figures, which are in U.S. dollars.
(1) Adjusted EBIT is the measure of segment profit or loss as reported in
the Company's attached unaudited interim consolidated financial
statements.
Adjusted EBIT represents income from operations before income
taxes; interest expense, net; and other expense, net.
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THREE MONTHS ENDED JUNE 30, 2014
We posted record sales of $9.46 billion for the second quarter ended
June 30, 2014, an increase of 6% over the second quarter of 2013. We
achieved this sales increase in a period when vehicle production
increased 3% in North America and 2% in Europe, both relative to the
second quarter of 2013. In the second quarter of 2014, our North
American, European and Asian production sales increased, while Rest of
World production sales, complete vehicle assembly sales and tooling,
engineering and other sales decreased, in each case relative to the
comparable quarter in 2013.
Complete vehicle assembly sales decreased to $793 million for the second
quarter of 2014 compared to $796 million for the second quarter of
2013, while complete vehicle assembly volumes decreased 11% to
approximately 34,000 units.
During the second quarter of 2014, income from operations before income
taxes was $692 million, net income attributable to Magna International
Inc. was $510 million and diluted earnings per share were $2.32,
increases of $149 million, $95 million and $0.54 respectively, each
compared to the second quarter of 2013.
During the second quarter ended June 30, 2014, we generated cash from
operations of $748 million before changes in operating assets and
liabilities, and invested $148 million in operating assets and
liabilities. Total investment activities for the second quarter of 2014
were $432 million, including $384 million in fixed asset additions and
$48 million in investments and other assets.
Financing activities during the second quarter ended June 30, 2014
included the issuance of $750 million of 3.625% fixed rate Senior Notes
which mature on June 15, 2024, as well as the repurchase of $575
million of our Common Shares.
SIX MONTHS ENDED JUNE 30, 2014
We posted record sales of $18.43 billion for the six months ended June
30, 2014, an increase of 6% from the six months ended June 30, 2013.
This higher sales level reflected increases in our North American,
European and Asian production sales, as well as complete vehicle
assembly sales, partially offset by decreases in Rest of World
production sales and tooling, engineering and other sales, in each case
relative to the first six months of 2013.
During the six months ended June 30, 2014, vehicle production increased
4% to 8.6 million units in North America and 6% to 10.5 million units
in Europe, each compared to the first six months of 2013.
Complete vehicle assembly sales increased 1% to $1.61 billion for the
six months ended June 30, 2014 compared to the six months ended June
30, 2013, while complete vehicle assembly volumes decreased 8% to
approximately 70,000 units.
During the six months ended June 30, 2014, income from operations before
income taxes was $1.27 billion, net income attributable to Magna
International Inc. was $903 million and diluted earnings per share were
$4.08, increases of $273 million, $119 million and $0.73, respectively,
each compared to the first six months of 2013.
During the six months ended June 30, 2014, we generated cash from
operations before changes in operating assets and liabilities of $1.42
billion, and invested $345 million in operating assets and liabilities.
Total investment activities for the first six months of 2014 were $703
million, including $601 million in fixed asset additions and a $102
million increase in investments and other assets.
Financing activities during the six months ended June 30, 2014 included
the issuance of $750 million of 3.625% fixed rate Senior Notes which
mature on June 15, 2024, as well as the repurchase of $815 million of
our Common Shares.
A more detailed discussion of our consolidated financial results for the
second quarter and six months ended June 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
Yesterday, our Board of Directors declared a quarterly dividend of $0.38
with respect to our outstanding Common Shares for the quarter ended
June 30, 2014. This dividend is payable on September 12, 2014 to
shareholders of record on August 29, 2014.
UPDATED 2014 OUTLOOK
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Light Vehicle Production (Units)
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16.9 million
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North America
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19.8 million
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Europe
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Production Sales
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North America
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$17.6 - $18.2 billion
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Europe
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$9.9 - $10.3 billion
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Asia
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$1.6 - $1.8 billion
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Rest of World
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$0.7 - $0.8 billion
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Total Production Sales
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$29.8 - $31.1 billion
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Complete Vehicle Assembly Sales
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$3.0 - $3.3 billion
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Total Sales
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$35.6 - $37.3 billion
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Operating Margin(1) |
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High 6% range
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Tax Rate(1) |
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Approximately 24.5%
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Capital Spending
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Approximately $1.4 billion
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(1) | Excluding other expense, net |
In this 2014 outlook, in addition to 2014 light vehicle production, we
have assumed no material acquisitions or divestitures. In addition, we
have assumed that foreign exchange rates for the most common currencies
in which we conduct business relative to our U.S. dollar reporting
currency will approximate current rates.
ABOUT MAGNA
We are a leading global automotive supplier with 317 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.
We will hold a conference call for interested analysts and shareholders
to discuss our second quarter results on Friday, August 8, 2014 at 8:00
a.m. EDT. The conference call will be chaired by Don Walker, Chief
Executive Officer. The number to use for this call is 1-800-404-8174.
The number for overseas callers is 1-416-981-9093. Please call in at
least 10 minutes prior to the call. We will also webcast the conference
call at www.magna.com. The slide presentation accompanying the conference call will be
available on our website Friday 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: Magna's expected production sales,
based on expected light vehicle production in North America and Europe;
Magna's expected production sales in the North America, Europe, Asia
and Rest of World segments; total sales; complete vehicle assembly
sales; consolidated operating margin; effective income tax rate; fixed
asset expenditures; future purchases of our Common Shares under our
Normal Course Issuer Bid; and future issuances of debt securities. The
forward-looking information in this document is presented for the
purpose of providing information about management's current
expectations and plans and such information may not be appropriate for
other purposes. Forward-looking statements may include financial and
other projections, as well as statements regarding our future plans,
objectives or economic performance, or the assumptions underlying any
of the foregoing, and other statements that are not recitations of
historical fact. We use words such as "may", "would", "could",
"should", "will", "likely", "expect", "anticipate", "believe",
"intend", "plan", "forecast", "outlook", "project", "estimate" and
similar expressions suggesting future outcomes or events to identify
forward-looking statements. Any such forward-looking statements are
based on information currently available to us, and are based on
assumptions and analyses made by us in light of our experience and our
perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in
the circumstances. However, whether actual results and developments
will conform with our expectations and predictions is subject to a
number of risks, assumptions and uncertainties, many of which are
beyond our control, and the effects of which can be difficult to
predict, including, without limitation the impact of economic or
political conditions on consumer confidence, consumer demand for
vehicles and vehicle production; 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; 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
nontraditional 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 six months
ended June 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 August 7, 2014.
OVERVIEW
We are a leading global automotive supplier with 317 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 3% in the second
quarter of 2014, compared to the second quarter of 2013, to 4.4 million
units. In Europe, light vehicle production increased 2% in the second
quarter of 2014 to 5.3 million units.
Our second quarter 2014 sales increased 6% over the second quarter of
2013 to $9.46 billion. Our North American, European and Asian
production sales all increased over the comparable quarter, while Rest
of World production sales, complete vehicle assembly sales and tooling,
engineering and other sales all declined from the second quarter of
2013.
Adjusted EBIT(1) increased 30% to $710 million in the second quarter of 2014, compared
to $547 million in the second quarter of 2013.
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Our North America segment generated Adjusted EBIT of $537 million for
the second quarter of 2014. This compared to Adjusted EBIT of $422
million, including $40 million of amortization related to the August
2012 acquisition of Magna E-Car Systems partnership ("E-Car"), for the
second quarter of 2013. The E-Car acquisition intangibles were fully
amortized at the end of 2013
.
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Our Europe segment reported Adjusted EBIT of $125 million in the second
quarter of 2014, compared to $120 million in the second quarter of
2013. This represents our tenth consecutive quarter of year-over-year
improved Adjusted EBIT in our Europe segment.
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Our Asia segment posted Adjusted EBIT of $42 million in the second
quarter of 2014, compared to $19 million in the comparable quarter.
This increase largely reflects the launch of business in existing and
recently constructed facilities.
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Our Rest of World segment reported an Adjusted EBIT loss of $11 million
in the second quarter of 2014, compared to a loss of $17 million in the
second 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 second quarter of 2014, we issued $750 million of 3.625%
fixed-rate Senior Notes which mature on June 15, 2024 (the "Senior
Notes").
Lastly, during the second quarter of 2014, we repurchased 5.7 million
Common Shares for cash consideration of $575 million and subsequent to
the second quarter repurchased an additional 1.5 million Common Shares
for $161 million pursuant to our outstanding normal course issuer bid
that expires in November 2014.
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1 |
Adjusted EBIT represents income from operations before income taxes;
interest expense, net; and other expense, net
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FINANCIAL RESULTS SUMMARY
During the second quarter of 2014, we posted sales of $9.46 billion, an
increase of 6% over the second quarter of 2013. This higher sales level
was a result of increases in our North American, European and Asian
production sales partially offset by lower Rest of World production
sales, complete vehicle assembly sales and tooling, engineering and
other sales. Comparing the second quarter of 2014 to 2013:
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North American vehicle production increased 3% and our North American
production sales increased 10% to $4.75 billion;
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European vehicle production increased 2% and our European production
sales increased 4% to $2.66 billion;
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Asian production sales increased 23% to $402 million;
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Rest of World production sales decreased 33% to $163 million;
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Complete vehicle assembly volumes decreased 11% and sales decreased $3
million to $793 million; and
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Tooling, engineering and other sales decreased by 5% to $697 million.
During the second quarter of 2014, we earned income from operations
before income taxes of $692 million compared to $543 million for the
second quarter of 2013. Excluding other expense, net ("Other Expense")
recorded in the second quarter of 2014, as discussed in the "Other
Expense" section, the $160 million increase in income from operations
before income taxes was primarily as a result of:
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margins earned on higher production sales;
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incremental margin earned on new programs that launched during or
subsequent to the second quarter of 2013;
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intangible asset amortization of $40 million, recorded in the second
quarter of 2013, related to the acquisition and re-measurement of
E-Car;
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productivity and efficiency improvements at certain facilities;
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the benefit of restructuring and downsizing activities recently
undertaken;
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higher equity income;
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lower warranty costs of $4 million; and
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decreased commodity costs.
These factors were partially offset by:
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higher launch costs, including unanticipated costs at certain interiors
facilities;
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approximately $25 million of costs incurred related to a fire at a body
and chassis facility in North America;
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operational inefficiencies and other costs at certain facilities;
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a larger amount of employee profit sharing;
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higher incentive compensation;
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increased pre-operating costs incurred at new facilities;
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a $1 million net decrease in valuation gains in respect of ABCP; and
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net customer price concessions subsequent to the second quarter of 2013.
During the second quarter of 2014, net income attributable to Magna
International Inc. was $510 million, an increase of $95 million
compared to the second quarter of 2013 and diluted earnings per share
increased $0.54 to $2.32 for the second quarter of 2014 compared to
$1.78 for the second 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 June 30, |
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| 2014 |
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2013
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| Net Income |
| Diluted |
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Net Income
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Diluted
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| Attributable |
| Earnings |
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Attributable
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Earnings
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| to Magna |
| per Share |
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to Magna
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per Share
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Other expense |
| $ | 11 |
| $ | 0.05 |
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$
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—
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$
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—
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Income tax effect |
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| (1) | | | — |
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—
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—
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Net income impact |
| $ | 10 | | $ | 0.05 |
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$
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—
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$
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—
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Excluding the negative impact of Other Expense, after tax, for the
second quarter of 2014 of $10 million, net income attributable to Magna
International Inc. for the second quarter of 2014 increased $105
million compared to the second quarter of 2013.
Excluding the $0.05 per share negative impact of Other Expense, after
tax, for the second quarter of 2014, diluted earnings per share
increased $0.59, 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 second 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 second 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 second quarter ended June 30, 2014.
RESULTS OF OPERATIONS
Average Foreign Exchange
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| For the three months |
| For the six months |
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| ended June 30, |
| ended June 30, |
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| 2014 |
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2013
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Change
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| 2014 |
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2013
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Change
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1 Canadian dollar equals U.S. dollars
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| 0.917 |
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0.977
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-
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6%
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0.912 |
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0.984
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-
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7%
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1 euro equals U.S. dollars
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| 1.371 |
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1.307
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+
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5%
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1.371 |
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1.313
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+
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4%
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1 British pound equals U.S. dollars
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| 1.683 |
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1.536
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+
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10%
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1.669 |
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1.543
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+
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8%
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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 six months ended June 30, 2014 impacted the
reported U.S. dollar amounts of our sales, expenses and income.
The results of operations whose functional currency is not the U.S.
dollar are translated into U.S. dollars using the average exchange
rates in the table above for the relevant period. Throughout this MD&A,
reference is made to the impact of translation of foreign operations on
reported U.S. dollar amounts where relevant.
Our results can also be affected by the impact of movements in exchange
rates on foreign currency transactions (such as raw material purchases
or sales denominated in foreign currencies). However, as a result of
hedging programs employed by us, foreign currency transactions in the
current period have not been fully impacted by movements in exchange
rates. We record foreign currency transactions at the hedged rate where
applicable.
Finally, foreign exchange gains and losses on revaluation and/or
settlement of monetary items denominated in a currency other than an
operation's functional currency impact reported results. These gains
and losses are recorded in selling, general and administrative expense.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED JUNE 30, 2014
Sales
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| For the three months |
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| ended June 30, |
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| 2014 |
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2013
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Change
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Vehicle Production Volumes (millions of units) |
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North America
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| 4.402 |
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4.260
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+
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3%
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Europe |
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| 5.272 |
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5.155
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+
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2%
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Sales |
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External Production
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North America
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| $ | 4,747 |
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$
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4,301
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+
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10%
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Europe |
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| 2,662 |
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2,560
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+
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4%
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Asia |
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| 402 |
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| 328
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+
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23%
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Rest of World |
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| 163 |
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| 244
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-
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33%
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Complete Vehicle Assembly |
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| 793 |
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796
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—
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Tooling, Engineering and Other
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| | 697 |
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733
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-
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5%
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Total Sales
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| $ | 9,464 |
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$
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8,962
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+
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6%
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External Production Sales - North America
External production sales in North America increased 10% or $446 million
to $4.75 billion for the second quarter of 2014 compared to $4.30
billion for the second quarter of 2013 primarily as a result of the
launch of new programs during or subsequent to the second quarter of
2013, including GM full-size pickups and SUVs, the Jeep Cherokee and
the Nissan Rogue.
The launch of new programs was partially offset by:
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a $105 million decrease in reported U.S. dollar sales primarily as a
result of the weakening of the Canadian dollar against the U.S. dollar;
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lower production volumes on certain existing programs; and
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net customer price concessions subsequent to the second quarter of 2013.
External Production Sales - Europe
External production sales in Europe increased 4% or $102 million to
$2.66 billion for the second quarter of 2014 compared to $2.56 billion
for the second quarter of 2013 primarily as a result of:
-
a $105 million increase in reported U.S. dollar sales primarily as a
result of the strengthening of the euro against the U.S. dollar; and
-
the launch of new programs during or subsequent to the second quarter of
2013, including the:
-
Mercedes-Benz GLA; and
-
Range Rover Sport.
These factors were partially offset by:
-
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 second quarter of 2013.
External Production Sales - Asia
External production sales in Asia increased 23% or $74 million to $402
million for the second quarter of 2014 compared to $328 million for the
second 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 second quarter of 2013, primarily in China.
These factors were partially offset by net customer price concessions
subsequent to the second quarter of 2013.
External Production Sales - Rest of World
External production sales in Rest of World decreased 33% or $81 million
to $163 million for the second quarter of 2014 compared to $244 million
for the second quarter of 2013 primarily as a result of:
-
lower production volumes on certain existing programs; and
-
a $27 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.
These factors were partially offset by net customer price increases
subsequent to the second quarter of 2013.
Complete Vehicle Assembly Sales
|
| For the three months |
|
|
|
|
| ended June 30, |
|
|
|
|
| 2014 |
|
2013
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
Complete Vehicle Assembly Sales
|
| $ | 793 |
|
$
|
796
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Complete Vehicle Assembly Volumes (Units)
|
|
| 34,299 |
|
|
38,605
|
|
-
|
11%
|
Complete vehicle assembly sales decreased $3 million to $793 million for
the second quarter of 2014 compared to $796 million for the second
quarter of 2013 while assembly volumes decreased 11% or 4,306 units.
The decrease in complete vehicle assembly sales is primarily as a result
of a decrease in assembly volumes for the MINI Paceman, which was
partially offset by:
-
a $39 million increase in reported U.S. dollar sales as a result of the
strengthening of the euro against the U.S. dollar; and
-
an increase in assembly volumes for the Mercedes-Benz G-Class and the
MINI Countryman.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales decreased 5% or $36 million to $697
million for the second quarter of 2014 compared to $733 million for the
second quarter of 2013.
In the second quarter of 2014, the major programs for which we recorded
tooling, engineering and other sales were the:
-
BMW X4;
-
MINI Countryman;
-
Ford Transit;
-
Mercedes-Benz M-Class;
-
QOROS 3;
-
Lincoln MKC:
-
Dodge Challenger; and
-
Acura TL.
In the second quarter of 2013, the major programs for which we recorded
tooling, engineering and other sales were the:
-
Skoda Octavia;
-
GM full-size pickups and SUVs;
-
Ford Transit;
-
Ford Fusion;
-
MINI Paceman;
-
QOROS 3;
-
Range Rover Evoque; and
-
Mercedes-Benz M-Class.
Cost of Goods Sold and Gross Margin
|
| For the three months |
|
| ended June 30, |
|
| 2014 |
|
2013
|
|
|
|
|
|
|
|
Sales |
|
$ | 9,464 | |
$
|
8,962
|
Cost of goods sold |
|
Material |
|
| 6,023 |
|
| 5,800
|
|
Direct labour |
|
| 603 |
|
|
556
|
|
Overhead |
|
| 1,529 |
|
|
1,438
|
|
|
| 8,155 |
|
| 7,794
|
Gross margin
|
| $ | 1,309 |
|
$
|
1,168
|
|
|
|
|
|
|
|
Gross margin as a percentage of sales
|
|
| 13.8% |
|
|
13.0%
|
Cost of goods sold increased $361 million to $8.16 billion for the
second quarter of 2014 compared to $7.79 billion for the second 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;
-
a net increase in reported U.S. dollar cost of goods sold primarily due
to the strengthening of the euro and British pound, both against the
U.S. dollar partially offset by the weakening of the Canadian dollar,
Argentine peso and Brazilian real, each against the U.S. dollar;
-
costs incurred related to a fire at a body and chassis facility in North
America; and
-
a larger amount of employee profit sharing.
Gross margin increased $141 million to $1.31 billion for the second
quarter of 2014 compared to $1.17 billion for the second quarter of
2013 and gross margin as a percentage of sales increased to 13.8% for
the second quarter of 2014 compared to 13.0% for the second 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;
-
a decrease in tooling, engineering and other sales that have low or no
margins;
-
lower warranty costs; and
-
decreased commodity costs.
These factors were partially offset by:
-
higher launch costs, including unanticipated costs at certain interiors
facilities;
-
operational inefficiencies and other costs at certain facilities;
-
costs incurred related to a fire at a body and chassis facility in North
America;
-
a larger amount of employee profit sharing; and
-
increased pre-operating costs incurred at new facilities.
Depreciation and Amortization
Depreciation and amortization costs decreased $37 million to
$223 million for the second quarter of 2014 compared to $260 million
for the second quarter of 2013 primarily as a result of intangible
asset amortization of $40 million recorded in the second 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 second quarters
of 2014 and 2013. SG&A expense increased $23 million to $433 million
for the second quarter of 2014 compared to $410 million for the second
quarter of 2013 primarily as a result of:
-
higher labour and other costs to support the growth in sales, including
wage increases at certain operations;
-
higher incentive compensation;
-
an increase in reported U.S. dollar SG&A related to foreign exchange;
-
increased costs incurred at new facilities; and
-
a $1 million net decrease in valuation gains in respect of ABCP.
Equity Income
Equity income increased $8 million to $57 million for the second quarter
of 2014 compared to $49 million for the second quarter of 2013
primarily as a result of higher income generated by most of our equity
accounted investments.
Other Expense, net
During the second quarter of 2014, we recorded net restructuring charges
of $11 million ($10 million after tax) in Europe at our exterior and
interior systems operations. We expect full year 2014 restructuring
charges to be approximately $75 million.
In addition, during the first quarter of 2014 and 2013, we recorded net
restructuring charges of $22 million and $6 million ($20 million and $6
million after tax), respectively, in Europe at our exterior and
interior systems operations.
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 June 30, |
|
| External Sales |
| Adjusted EBIT |
|
| 2014 |
|
2013
|
|
Change
|
|
2014 |
|
2013
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
| $ | 5,098 |
|
$
|
4,589
|
|
$
|
509
|
|
$ | 537 |
| $
|
422
|
|
$
|
115
|
Europe |
|
| 3,744 |
|
|
3,755
|
|
|
(11)
|
|
|
125 |
|
| 120
|
|
|
5
|
Asia |
|
| 450 |
|
|
361
|
|
|
89
|
|
|
42 |
|
| 19
|
|
|
23
|
Rest of World |
|
| 168 |
|
|
248
|
|
|
(80)
|
|
|
(11) |
|
| (17)
|
|
|
6
|
Corporate and Other |
|
| 4 |
|
| 9
|
|
|
(5)
|
|
|
17 |
|
| 3
|
|
|
14
|
Total reportable segments
|
| $ | 9,464 |
|
$
|
8,962
|
|
$
|
502
|
|
$ | 710 |
|
$
|
547
|
|
$
|
163
|
Excluded from Adjusted EBIT for the three months ended June 30, 2014 was
$11 million of net restructuring costs recorded in our Europe segment,
as discussed in the "Other Expense" section.
North America
Adjusted EBIT in North America increased $115 million to $537 million
for the second quarter of 2014 compared to $422 million for the second
quarter of 2013 primarily as a result of:
-
margins earned on higher production sales;
-
intangible asset amortization of $40 million, recorded in the second
quarter of 2013, related to the acquisition and re-measurement of
E-Car;
-
higher equity income;
-
lower warranty costs of $3 million; and
-
productivity and efficiency improvements at certain facilities.
These factors were partially offset by:
-
approximately $25 million of costs incurred related to a fire at a body
and chassis facility in North America;
-
higher launch costs, including unanticipated costs at certain interiors
facilities;
-
operational inefficiencies and other costs at certain facilities;
-
a larger amount of employee profit sharing;
-
higher affiliation fees paid to Corporate;
-
increased pre-operating costs incurred at new facilities; and
-
higher incentive compensation and stock-based compensation.
Europe
Adjusted EBIT in Europe increased $5 million to $125 million for the
second quarter of 2014 compared to $120 million for the second quarter
of 2013 primarily as a result of:
-
margins earned on higher production sales;
-
lower downsizing costs;
-
higher equity income;
-
productivity and efficiency improvements at certain facilities;
-
the benefit of restructuring and downsizing activities recently
undertaken;
-
decreased commodity costs; and
-
lower warranty costs of $2 million.
These factors were partially offset by:
-
higher launch costs, including unanticipated costs at certain interiors
facilities in the United Kingdom;
-
higher pre-operating costs incurred at new facilities;
-
a larger amount of employee profit sharing;
-
higher affiliation fees paid to Corporate; and
-
operational inefficiencies and other costs at certain facilities.
Asia
Adjusted EBIT in Asia increased $23 million to $42 million for the
second quarter of 2014 compared to $19 million for the second 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;
-
lower pre-operating costs incurred at new facilities;
-
lower launch costs; and
-
higher equity income.
These factors were partially offset by:
-
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 $6 million to a loss of $11 million
for the second quarter of 2014 compared to a loss of $17 million for
the second quarter of 2013 primarily as a result of:
-
the benefit of restructuring and downsizing activities recently
undertaken;
-
productivity and efficiency improvements at certain facilities;
-
decreased commodity costs;
-
lower affiliation fees paid to Corporate; and
-
net customer price increases subsequent to the second 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; and
-
higher warranty costs of $1 million.
Corporate and Other
Corporate and Other Adjusted EBIT increased $14 million to $17 million
for the second quarter of 2014 compared to $3 million for the second
quarter of 2013 primarily as a result of an increase in affiliation
fees earned from our divisionspartially offset by a $1 million net decrease in valuation gains in
respect of ABCP.
Interest Expense, net
During the second quarter of 2014, we recorded net interest expense of
$7 million compared to $4 million for the second quarter of 2013. The
$3 million increase is primarily as a result of interest incurred on
government debt in Europe and interest expense on the $750 million
Senior Notes issued during the second quarter of 2014.
Income from Operations before Income Taxes
Income from operations before income taxes increased $149 million to
$692 million for the second quarter of 2014 compared to $543 million
for the second quarter of 2013. Excluding Other Expense, discussed in
the "Other Expense" section, income from operations before income taxes
for the second quarter of 2014 increased $160 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 June 30, |
|
|
|
| 2014 |
|
2013
|
|
|
|
| $ |
| % |
|
$
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes as reported |
|
|
| $ | 182 |
| 26.3 |
|
$
|
131
|
|
24.1
|
Tax effect on Other expense, net |
|
|
|
| 1 |
| (0.3) |
|
| —
|
|
—
|
|
|
|
| $ | 183 |
| 26.0 |
|
$
|
131
|
|
24.1
|
Excluding Other Expense, after tax, the effective income tax rate
increased to 26.0% for the second quarter of 2014 compared to 24.1% for
the second quarter of 2013 primarily as a result of favourable audit
settlements, recorded in the second quarter of 2013.
Net Income
Net income of $510 million for the second quarter of 2014 increased $98
million compared to the second quarter of 2013. Excluding Other
Expense, after tax, discussed in the "Other Expense" section, net
income increased $108 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 $nil for the
second quarter of 2014 compared to $3 million for the second quarter of
2013.
Net Income Attributable to Magna International Inc.
Net income attributable to Magna International Inc. of $510 million for
the second quarter of 2014 increased $95 million compared to the second
quarter of 2013. Excluding Other Expense, after tax, discussed in the
"Other Expense" section, net income attributable to Magna International
Inc. increased $105 million as a result of the increase in net income,
as discussed above.
Earnings per Share
|
| For the three months |
|
|
|
|
| ended June 30, |
|
|
|
|
| 2014 |
|
2013
|
|
Change
|
|
|
Earnings per Common Share
|
|
|
Basic
|
|
$ | 2.36 |
|
$
|
1.80
|
|
+
|
31%
|
|
Diluted
|
|
$ | 2.32 |
|
$
|
1.78
|
|
+
|
30%
|
|
|
Weighted average number of Common Shares outstanding (millions)
|
|
|
Basic
|
|
| 216.6 |
|
|
230.6
|
|
-
|
6%
|
|
Diluted
|
|
| 219.6 |
|
|
233.2
|
|
-
|
6%
|
Diluted earnings per share increased $0.54 to $2.32 for the second
quarter of 2014 compared to $1.78 for the second quarter of 2013. Other
Expense, after tax, negatively impacted diluted earnings per share in
the second quarter of 2014 by $0.05 as discussed in the "Other Expense"
section. Excluding this amount, diluted earnings per share increased
$0.59 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 second 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 second 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 June 30, |
|
|
|
|
|
|
| 2014 |
|
2013
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
| $ | 510 |
|
$
|
412
|
|
|
|
Items not involving current cash flows |
|
|
|
| 238 |
|
|
292
|
|
|
|
|
|
|
|
| 748 |
|
|
704
|
|
$
|
44
|
Changes in operating assets and liabilities |
|
|
|
| (148) |
|
|
(12)
|
|
|
|
Cash provided from operating activities
|
|
|
| $ | 600 |
|
$
|
692
|
|
$
|
(92)
|
Cash flow from operations before changes in operating assets and
liabilities increased $44 million to $748 million for the second
quarter of 2014 compared to $704 million for the second quarter of
2013. The increase in cash flow from operations was due to the $98
million increase in net income, as discussed above, partially offset by
a $54 million decrease in items not involving current cash flows. Items
not involving current cash flows are comprised of the following:
|
|
|
| For the three months |
|
|
|
| ended June 30, |
|
|
|
| 2014 |
|
2013
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
| $ | 223 |
|
$
|
260
|
Amortization of other assets included in cost of goods sold |
|
|
|
| 42 |
|
|
36
|
Other charges |
|
|
|
| 10 |
|
|
2
|
Deferred income taxes and portion of current taxes |
|
|
|
| (13) |
|
| (3)
|
Equity income in excess of dividends received |
|
|
|
| (24) |
|
|
(3)
|
Items not involving current cash flows
|
|
|
| $ | 238 |
|
$
|
292
|
Cash invested in operating assets and liabilities amounted to $148
million for the second quarter of 2014 compared to $12 million for the
second 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 June 30, |
|
|
|
| 2014 |
|
2013
|
Accounts receivable
|
|
|
| $ | (39) |
|
$
|
26
|
Inventories
|
|
|
|
|
(98) |
|
|
(93)
|
Prepaid expenses and other
|
|
|
|
|
(5) |
|
| (6)
|
Accounts payable
|
|
|
|
|
114 |
|
| 197
|
Accrued salaries and wages
|
|
|
|
| (107) |
|
|
(72)
|
Other accrued liabilities
|
|
|
|
|
(21) |
|
|
(53)
|
Income taxes payable |
|
|
|
| 11 |
|
|
(9)
|
Deferred revenue |
|
|
|
| (3) |
|
|
(2)
|
Changes in operating assets and liabilities
|
|
|
|
$ | (148) |
|
$
|
(12)
|
The increase in inventories was primarily due to higher tooling
inventory and increased production inventory to support launch
activities. The increase in accounts payable was due to the timing of
payments and an increase in production activities at the end of the
second quarter of 2014. The decrease in accrued salaries and wages was
primarily due to employee profit sharing payments.
Capital and Investment Spending
|
| For the three months |
|
|
|
|
|
| ended June 30, |
|
|
|
|
|
|
| 2014 |
|
|
2013
|
|
|
|
Change
|
Fixed asset additions
|
| $ | (384) |
|
$
|
(232)
|
|
|
|
|
Investments and other assets
|
|
|
(48) |
|
|
(43)
|
|
|
|
|
Fixed assets, investments and other assets additions |
|
| (432) |
|
|
(275)
|
|
|
|
|
Proceeds from disposition |
|
| 15 |
|
|
30
|
|
|
|
|
Cash used for investment activities
|
| $ | (417) |
|
$
|
(245)
|
|
|
$
|
(172)
|
Fixed assets, investments and other assets additions
In the second quarter of 2014, we invested $384 million in fixed assets,
including $105 million for the purchase of eight leased facilities in
Mexico from Granite Real Estate Investment Trust ("Mexican
Properties").
In the second quarter of 2014, we invested $48 million in other assets
related primarily for fully reimbursable engineering costs and tooling
for programs that launched during the second quarter of 2014 or will be
launching subsequent to the second quarter of 2014.
Proceeds from disposition
In the second quarter of 2014, the $15 million of proceeds include
normal course fixed and other asset disposals.
Financing
|
| For the three months |
|
| |
|
|
| ended June 30, |
|
|
|
|
|
|
| 2014 |
|
|
2013
|
|
|
|
Change
|
Issues of debt
|
| $ | 764 |
| $
|
25
|
|
|
|
|
Increase (decrease) in bank indebtedness |
|
| 2 |
|
|
21
|
|
|
|
|
Repayments of debt
|
|
|
(15) |
|
|
(60)
|
|
|
|
|
Issues of Common Shares on exercise of stock options |
|
| 12 |
|
|
11
|
|
|
|
|
Repurchase of Common Shares |
|
| (575) |
|
|
(337)
|
|
|
|
|
Contribution to subsidiaries by non-controlling interests |
|
| — |
|
|
4
|
|
|
|
|
Dividends
| |
| (79) |
|
|
(72)
|
|
|
|
|
Cash used for financing activities
|
| $ | 109 |
| $
|
(408)
|
|
|
$
|
517
|
Issues of debt relates primarily to the issue of the $750 million Senior
Notes. 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. We 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.
During the second quarter of 2014, we repurchased 5.7 million Common
Shares for aggregate cash consideration of $575 million under our
normal course issuer bid.
Cash dividends paid per Common Share were $0.38 for the second quarter
of 2014, for a total of $79 million.
Financing Resources
|
|
| As at |
|
|
As at
|
|
|
|
|
|
|
| June 30, |
|
|
December 31,
|
|
|
|
|
|
|
| 2014 |
|
|
2013
|
|
|
|
Change
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
| $ | 49 |
|
$
|
41
|
|
|
|
|
|
Long-term debt due within one year |
|
| 212 |
|
|
230
|
|
|
|
|
|
Long-term debt |
|
| 837 |
|
|
102
|
|
|
|
|
|
|
| 1,098 |
|
|
373
|
|
|
|
|
Non-controlling interest |
|
| 15 |
|
|
16
|
|
|
|
|
Shareholders' equity |
|
| 9,626 |
|
|
9,623
|
|
|
|
|
Total capitalization
|
| $ | 10,739 |
|
$
|
10,012
|
|
|
$
|
727
|
Total capitalization increased by $727 million to $10.74 billion at June
30, 2014 compared to $10.01 billion at December 31, 2013 primarily as a
result of a $725 million increase in liabilities ans a $3 million
increase in shareholders' equity.
The increase in liabilities relates primarily to long-term debt issued
in relation to the $750 million Senior Notes.
The increase in shareholders' equity was primarily as a result of:
- $903 million of net income earned in the first six months of 2014;
- $37 million of shares issued on exercise of stock options; and
-
the $18 million net unrealized gain on cash flow hedges.
These factors were partially offset by:
-
the $815 million repurchase and cancellation of 8.4 million Common
Shares under our normal course issuer bid in the first six months of
2014;
- $167 million of dividends paid during the first six months of 2014; and
-
the $12 million net unrealized loss on translation of our net investment
in foreign operations.
Cash Resources
During the second quarter of 2014, our cash resources increased by
$317 million to $1.76 billion as a result of the cash provided from
operating and financing activities and the favourable effect of foreign
exchange partially offset by cash used for investing activities, all as
discussed above. In addition to our cash resources, at June 30, 2014 we
had term and operating lines of credit totalling $2.57 billion of which
$2.22 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, as discussed in the "Financing"
section.
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 August 7, 2014 were
exercised:
Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,302,563
|
Stock options (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,486,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,789,248
|
(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 second 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 the Mexican Properties. Refer
to our MD&A included in our 2013 Annual Report.
RESULTS OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2014
Sales
|
| For the six months |
|
|
|
|
|
| ended June 30, |
|
|
|
|
|
|
| 2014 |
|
|
2013
|
|
|
|
Change
|
Vehicle Production Volumes (millions of units) |
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
8.600 |
|
|
8.275
|
|
|
+
|
4%
|
|
Europe
|
|
| 10.493 |
|
|
9.916
|
|
|
+
|
6%
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
External Production
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
| $ | 9,154 |
|
$
|
8,348
|
|
|
+
|
10%
|
|
|
Europe
|
|
| 5,296 |
|
|
5,006
|
|
|
+
|
6%
|
|
|
Asia |
|
| 783 |
|
|
633
|
|
|
+
|
24%
|
|
|
Rest of World |
|
| 320 |
|
|
455
|
|
|
-
|
30%
|
|
Complete Vehicle Assembly |
|
| 1,606 |
|
|
1,594
|
|
|
+
|
1%
|
|
Tooling, Engineering and Other |
|
| 1,266 |
|
|
1,287
|
|
|
-
|
2%
|
Total Sales
|
| $ | 18,425 |
|
$
|
17,323
|
|
|
+
|
6%
|
External Production Sales - North America
External production sales in North America increased 10% or $806 million
to $9.15 billion for the six months ended June 30, 2014 compared to
$8.35 billion for the six months ended June 30, 2013 primarily as a
result of:
-
the launch of new programs during or subsequent to the six months ended
June 30, 2013, including the:
-
Jeep Cherokee;
-
GM full-size pickups and SUVs;
-
Nissan Rogue; and
-
Cadillac CTS; and
-
higher production volumes on certain existing programs.
These factors were partially offset by:
-
a $237 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 June 30, 2013.
External Production Sales - Europe
External production sales in Europe increased 6% or $290 million to
$5.30 billion for the six months ended June 30, 2014 compared to $5.01
billion for the six months ended June 30, 2013 primarily as a result
of:
-
the launch of new programs during or subsequent to the six months ended
June 30, 2013, including the:
-
Mercedes-Benz GLA;
-
Skoda Octavia; and
-
Range Rover Sport; and
-
a $179 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; and
-
net customer price concessions subsequent to June 30, 2013.
External Production Sales - Asia
External production sales in Asia increased 24% or $150 million to $783
million for the six months ended June 30, 2014 compared to $633 million
for the six months ended June 30, 2013 primarily as a result of:
-
higher production volumes on certain existing programs; and
-
the launch of new programs during or subsequent to the six months ended
June 30, 2013, primarily in China, including the Audi Q3 and the Ford
Mondeo.
These factors were partially offset by net customer price concessions
subsequent to June 30, 2013.
External Production Sales - Rest of World
External production sales in Rest of World decreased 30% or $135 million
to $320 million for the six months ended June 30, 2014 compared to $455
million for the six months ended June 30, 2013 primarily as a result
of:
-
lower production volumes on certain existing programs; and
-
a $65 million decrease in reported U.S. dollar sales as a result of the
weakening of foreign currencies against the U.S. dollar, including the
Brazilian real and Argentine peso.
These factors were partially offset by net customer price increases
subsequent to the six months ended June 30, 2013.
Complete Vehicle Assembly Sales
|
| For the six months |
|
|
|
|
|
| ended June 30, |
|
|
|
|
|
|
| 2014 |
|
|
2013
|
|
|
|
Change
|
Complete Vehicle Assembly Sales
|
| $ | 1,606 |
|
$
|
1,594
|
|
|
+
|
1%
|
Complete Vehicle Assembly Volumes (Units)
|
|
| 69,957 |
|
|
76,044
|
|
|
-
|
8%
|
Complete vehicle assembly sales increased 1%, or $12 million, to $1.61
billion for the six months ended June 30, 2014 compared to
$1.59 billion for the six months ended June 30, 2013 while assembly
volumes decreased 8% or 6,087 units.
The increase in complete vehicle assembly sales is primarily as a result
of:
-
a $70 million increase in reported U.S. dollar sales as a result of the
strengthening of the euro against the U.S. dollar; and
-
an increase in assembly volumes for the Mercedes-Benz G-Class and the
MINI Countryman.
These factors were partially offset by a decrease in assembly volumes
for the MINI Paceman.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales decreased 2% or $21 million to
$1.27 billion for the six months ended June 30, 2014 compared to $1.29
billion for the six months ended June 30, 2013.
In the six months ended June 30, 2014, the major programs for which we
recorded tooling, engineering and other sales were the:
-
BMW X4;
-
MINI Countryman;
-
Ford Transit;
-
QOROS 3;
-
Mercedes-Benz M-Class;
-
Ford Mustang;
-
Honda Fit;
-
Peugeot RCZ;
-
Chrysler 200; and
-
Lincoln MKC.
In the six months ended June 30, 2013, the major programs for which we
recorded tooling, engineering and other sales were the:
-
GM full-size pickups and SUVs;
-
Ford Transit;
-
Ford Fusion;
-
Skoda Octavia;
-
Jeep Grand Cherokee;
-
QOROS 3;
-
MINI Paceman; and
-
MINI Countryman.
Segment Analysis
|
| For the six months ended June 30, |
|
| External Sales |
| Adjusted EBIT |
|
|
| 2014 |
|
|
2013
|
|
|
|
Change
|
|
| 2014 |
|
|
2013
|
|
|
|
Change
|
North America
|
| $ | 9,740 |
|
$
|
8,877
|
|
|
$
|
863
|
|
$ | 980 |
|
$
|
803
|
|
|
$
|
177
|
Europe |
|
| 7,471 |
|
|
7,260
|
|
|
|
211
|
|
| 252 |
|
|
192
|
|
|
|
60
|
Asia |
|
| 878 |
|
|
695
|
|
|
|
183
|
|
| 71 |
|
|
30
|
|
|
|
41
|
Rest of World |
|
| 329 |
|
|
479
|
|
|
|
(150)
|
|
| (24) |
|
|
(28)
|
|
|
|
4
|
Corporate and Other |
|
| 7 |
|
|
12
|
|
|
|
(5)
|
|
| 36 |
|
|
17
|
|
|
|
19
|
Total reportable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
segments
|
| $ | 18,425 |
|
$
|
17,323
|
|
|
$
|
1,102
|
| $ | 1,315 |
|
$
|
1,014
|
|
|
$
|
301
|
Excluded from Adjusted EBIT for the six months ended June 30, 2014 and
2013 was $33 million and $6 million, respectively, of net restructuring
costs recorded in our Europe segment, as discussed in the "Other
Expense" section.
North America
Adjusted EBIT in North America increased $177 million to $980 million
for the six months ended June 30, 2014 compared to $803 million for the
six months ended June 30, 2013 primarily as a result of:
-
margins earned on higher production sales;
-
intangible asset amortization of $79 million, recorded in the first six
months of 2013, related to the acquisition and re-measurement of E-Car;
-
lower warranty costs of $5 million;
-
decreased commodity costs;
-
higher equity income; and
-
productivity and efficiency improvements at certain facilities.
These factors were partially offset by:
-
higher launch costs, including unanticipated costs at certain interiors
facilities;
-
operational inefficiencies and other costs at certain facilities;
-
approximately $25 million of costs incurred related to a fire at a body
and chassis facility in North America;
-
a larger amount of employee profit sharing;
-
higher affiliation fees paid to Corporate;
-
increased pre-operating costs incurred at new facilities;
-
higher incentive compensation; and
-
increased stock-based compensation.
Europe
Adjusted EBIT in Europe increased $60 million to $252 million for the
six months ended June 30, 2014 compared to $192 million for the six
months ended June 30, 2013 primarily as a result of:
-
margins earned on higher production sales;
-
lower downsizing costs;
-
the benefit of restructuring and downsizing activities recently
undertaken;
-
higher equity income;
-
decreased commodity costs;
-
lower warranty costs of $2 million; and
-
productivity and efficiency improvements at certain facilities.
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 larger amount of employee profit sharing;
-
operational inefficiencies and other costs at certain facilities; and
-
increased stock-based compensation.
Asia
Adjusted EBIT in Asia increased $41 million to $71 million for the six
months ended June 30, 2014 compared to $30 million for the six months
ended June 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 $4 million to a loss of $24 million
for the six months ended June 30, 2014 compared to a loss of $28
million for the six months ended June 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 six months ended June 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;
-
lower equity income;
-
increased commodity costs; and
-
higher warranty costs of $1 million.
Corporate and Other
Corporate and Other Adjusted EBIT increased $19 million to $36 million
for the six months ended June 30, 2014 compared to $17 million for the
six months ended June 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:
- $10 million of cash received related to the settlement of ABCP between
the Investment Industry Regulatory Organization of Canada and financial
institutions in the first quarter of 2013;
-
higher incentive compensation; and
-
a $3 million net decrease in valuation gains in respect of ABCP.
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 six months ended June 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 six months ended June 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; 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 |
| Six months ended |
|
|
| June 30, |
| June 30, |
|
Note
|
| 2014 |
|
2013
|
|
2014 |
|
2013
|
Sales
|
|
| $ | 9,464 |
|
$
|
8,962
|
| $ | 18,425 |
| $
|
17,323
|
|
Costs and expenses |
|
Cost of goods sold
|
|
|
| 8,155 |
| |
7,794
|
|
|
15,917 |
|
| 15,111
|
|
Depreciation and amortization
|
|
|
|
223 |
|
|
260
|
|
|
440 |
|
|
515
|
|
Selling, general and administrative
|
11
|
|
|
433 |
|
|
410
|
|
|
858 |
|
|
777
|
|
Interest expense, net
|
|
|
| 7 |
|
|
4
|
|
|
9 |
|
|
8
|
|
Equity income
|
|
|
| (57) |
|
|
(49)
|
|
|
(105) |
|
|
(94)
|
|
Other expense, net
|
2
|
|
|
11 |
|
|
—
|
|
|
33 |
|
|
6
|
Income from operations before income taxes
|
|
|
| 692 |
|
|
543
|
|
|
1,273 |
|
|
1,000
|
Income taxes
|
6
|
|
|
182 |
|
|
131
|
|
|
371 |
|
|
221
|
Net income |
|
|
| 510 |
|
|
412
|
|
| 902 |
|
|
779
|
Net loss attributable to non-controlling interests
|
|
|
|
— |
|
|
3
|
|
|
1 |
|
|
5
|
Net income attributable to Magna International Inc.
|
|
|
$ |
510 |
|
$
|
415
|
|
$ |
903 |
| $
|
784
|
|
|
Earnings per Common Share:
|
3
|
|
Basic
|
|
| $ | 2.36 |
| $
|
1.80
|
|
$ | 4.13 |
|
$
|
3.39
|
|
Diluted
|
|
| $ | 2.32 |
| $
|
1.78
|
|
$ | 4.08 |
| $
|
3.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid per Common Share
|
|
|
$ | 0.38 |
| $
|
0.32
|
|
$ | 0.76 |
|
$
|
0.64
|
|
|
Average number of Common Shares outstanding during the period [in
millions]:
|
3
|
|
Basic |
|
|
| 216.6 |
|
| 230.6
|
|
|
218.4 |
|
|
231.5
|
|
Diluted |
|
|
| 219.6 |
|
| 233.2
|
|
|
221.6 |
|
|
234.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars in millions]
|
|
| Three months ended |
| Six months ended |
|
|
| June 30, |
| June 30, |
|
Note
|
|
2014 |
|
2013
|
|
2014 |
|
2013
|
Net income
|
|
| $ | 510 |
| $
|
412
|
|
$ | 902 |
| $
|
779
|
|
|
Other comprehensive income (loss), net of tax:
|
13
|
|
Net unrealized gain (loss) on translation of net investment in foreign
operations
|
|
|
| 100 |
|
|
(91)
|
|
|
(12) |
|
|
(224)
|
|
Net unrealized loss on available-for-sale investments
|
|
|
|
—
|
|
|
(5)
|
|
|
(1) |
|
|
(4)
|
|
Net unrealized gain (loss) on cash flow hedges
|
|
|
| 49 |
|
|
(36)
|
|
|
18 |
|
|
(28)
|
|
Reclassification of net loss (gain) on cash flow hedges to net income
|
|
|
| 6 |
|
|
(6)
|
|
|
5 |
|
|
(12)
|
|
Reclassification of net loss on pensions to net income
|
|
|
| 2 |
|
|
3
|
|
|
3 |
|
|
6
|
Other comprehensive income (loss) |
|
|
| 157 |
|
| (135)
|
|
| 13 |
|
| (262)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
| 667 |
|
|
277
|
|
|
915 |
|
|
517
|
Comprehensive loss attributable to non-controlling interests
|
|
|
|
— |
|
|
3
|
|
|
1 |
|
|
5
|
Comprehensive income attributable to Magna International Inc. | |
| $ | 667 |
| $
|
280
|
| $ | 916 |
| $
|
522
|
|
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
|
|
| Three months ended |
| Six months ended |
|
|
| June 30, |
| June 30, |
|
Note
|
| 2014
|
|
2013
|
|
2014 |
|
2013
|
Cash provided from (used for): |
|
|
|
OPERATING ACTIVITIES |
|
Net income
|
|
| $ |
510 |
| $
|
412
|
| $ |
902 |
| $
|
779
|
Items not involving current cash flows
|
4
|
|
| 238 |
|
|
292
|
|
|
517 |
|
| 532
|
|
|
|
| 748 |
|
| 704
|
|
|
1,419 |
|
|
1,311
|
Changes in operating assets and liabilities
|
4
|
|
|
(148) |
|
|
(12)
|
|
|
(345) |
|
| (468)
|
Cash provided from operating activities
|
|
|
| 600 |
|
| 692
|
|
|
1,074 |
|
| 843
|
|
|
INVESTMENT ACTIVITIES |
|
Fixed asset additions
|
|
|
|
(384) |
|
| (232)
|
|
|
(601) |
|
|
(426)
|
Increase in investments and other assets
|
|
|
| (48) |
|
| (43)
|
|
|
(102) |
|
|
(91)
|
Proceeds from disposition
|
|
|
|
15 | |
|
30
|
|
|
52 |
|
| 60
|
Cash used for investing activities
|
|
|
|
(417) |
|
| (245)
|
|
|
(651) |
|
|
(457)
|
|
|
FINANCING ACTIVITIES |
|
Issues of debt
|
9
|
|
|
764 |
|
| 25
|
| | 795 |
|
| 57
|
Increase (decrease) in bank indebtedness
|
|
|
| 2 |
|
| 21
|
|
|
5 |
|
|
(5)
|
Repayments of debt
|
|
|
|
(15) |
|
| (60)
|
|
|
(85) |
|
| (101)
|
Settlement of stock options
|
|
|
| — |
|
| —
|
|
|
— |
|
|
(23)
|
Issue of Common Shares
|
|
|
|
12 |
|
|
11
|
|
|
37 |
|
| 50
|
Repurchase of Common Shares
|
12
|
|
| (575) |
|
|
(337)
|
|
|
(815) |
|
| (425)
|
Contribution to subsidiaries by non-controlling interests
|
|
|
|
— |
|
| 4
|
|
|
— |
|
|
4
|
Dividends paid
|
|
|
|
(79) |
|
| (72)
|
|
|
(162) |
|
|
(145)
|
Cash provided from (used for) financing activities
|
|
|
|
109 |
|
| (408)
|
|
|
(225) |
|
|
(588)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
25 |
|
| (7)
|
|
|
4 |
|
|
(41)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents during the period
|
|
|
| 317 |
|
| 32
|
|
|
202 |
|
| (243)
|
Cash and cash equivalents, beginning of period
|
|
|
|
1,439 |
|
| 1,247
|
|
|
1,554 |
|
|
1,522
|
Cash and cash equivalents, end of period
|
|
| $ |
1,756 |
| $
|
1,279
|
|
$ | 1,756 |
|
$
|
1,279
|
|
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
|
|
| As at |
| As at
|
|
|
| June 30, |
|
December 31,
|
|
Note
|
|
2014
|
|
2013
|
|
|
ASSETS |
|
Current assets |
|
Cash and cash equivalents
|
4
|
|
$ | 1,756 |
| $
|
1,554
|
Accounts receivable
|
|
|
| 6,107 |
|
|
5,246
|
Inventories
|
5
|
|
|
2,756 |
|
|
2,637
|
Deferred tax assets
|
|
|
| 239 |
|
| 275
|
Prepaid expenses and other
|
|
|
| 205 |
|
|
211
|
|
|
|
| 11,063 |
|
|
9,923
|
|
|
|
|
|
|
|
|
Investments
|
14
|
|
| 442 |
|
|
391
|
Fixed assets, net
|
|
|
| 5,586 |
|
|
5,441
|
Goodwill
|
|
|
| 1,434 |
|
|
1,440
|
Deferred tax assets
|
|
|
| 136 |
|
|
120
|
Other assets
|
7
|
|
|
663 |
|
|
675
|
|
|
| $ | 19,324 |
| $
|
17,990
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
Current liabilities |
Bank indebtedness
|
|
| $ | 49 |
|
$
|
41
|
Accounts payable
|
|
|
| 5,166 |
|
|
4,781
|
Accrued salaries and wages
|
|
|
|
698 |
|
|
704
|
Other accrued liabilities
|
8
|
|
|
1,671 |
|
|
1,538
|
Income taxes payable
|
|
|
| 33 |
|
|
6
|
Deferred tax liabilities |
|
|
| 29 |
|
| 9
|
Long-term debt due within one year
|
|
|
| 212 |
|
|
230
|
|
|
|
| 7,858 |
|
|
7,309
|
|
|
|
|
|
|
|
|
Long-term debt
|
9
|
|
|
837 |
|
|
102
|
Long-term employee benefit liabilities
|
10
|
|
|
534 |
|
|
532
|
Other long-term liabilities
|
|
|
| 265 |
|
|
208
|
Deferred tax liabilities
|
6
|
|
|
189 |
|
|
200
|
|
|
|
| 9,683 |
|
|
8,351
|
|
|
Shareholders' equity |
|
Capital stock
|
|
|
Common Shares
|
|
|
|
[issued: 213,749,157; December 31, 2013 - 221,151,704]
|
12
|
|
| 4,125 |
|
|
4,230
|
Contributed surplus
|
|
|
| 81 |
|
|
69
|
Retained earnings
|
|
|
| 5,109 |
|
|
5,011
|
Accumulated other comprehensive income
|
13
|
|
|
311 |
|
|
313
|
|
|
|
| 9,626 |
|
|
9,623
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
| 15 |
|
|
16
|
|
|
|
| 9,641 |
|
|
9,639
|
|
|
| $ | 19,324 |
|
$
|
17,990
|
|
See accompanying notes |
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[Unaudited]
[U.S. dollars in millions]
|
|
| Common Shares |
| Contri- |
|
|
|
|
|
|
| Non- |
|
|
|
|
| Stated |
| buted | | Retained |
|
|
|
| controlling |
| Total |
|
Note
|
| Number |
| Value |
| Surplus | | Earnings |
| AOCI (i) |
| Interest |
| Equity |
|
|
| [in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013 |
|
|
221.2
|
|
$
|
4,230
|
|
$
|
69
|
|
$
|
5,011
|
|
$
|
313
|
|
$
|
16
|
|
$
|
9,639
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
903
|
|
|
|
|
|
(1)
|
|
|
902
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
13
|
Issues of shares by subsidiaries
|
Shares issued on exercise of stock options
|
|
|
0.9
|
|
|
47
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
37
|
Repurchase and cancellation under
|
normal course issuer bid
|
12
|
|
(8.4)
|
|
|
(162)
|
|
|
|
|
|
(638)
|
|
|
(15)
|
|
|
|
|
|
(815)
|
Release of restricted stock
|
|
|
|
|
|
5
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Stock-based compensation expense
|
11
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
20
|
Reclassification from liability
|
11
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
Dividends paid
|
|
|
|
|
|
5
|
|
|
|
|
|
(167)
|
|
|
|
|
|
|
|
|
(162)
|
Balance, June 30, 2014 |
|
| 213.7 | | $ | 4,125 |
| $ | 81 |
| $ | 5,109 |
| $ | 311 |
| $ | 15 |
| $ | 9,641 |
|
|
|
|
|
|
|
|
|
|
| Common Shares |
| Contri- |
|
|
|
|
|
| Non- |
|
|
|
|
| Stated |
| buted |
| Retained |
|
|
| controlling |
| Total |
|
Note
| | Number |
| Value |
| Surplus |
| Earnings |
| AOCI (i) | | Interest |
| Equity |
|
|
| [in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012 |
|
|
233.1
|
|
$
|
4,391
|
|
$
|
80
|
|
$
|
4,462
|
|
$
|
496
|
|
$
|
29
|
|
$
|
9,458
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
784
|
|
|
|
|
|
(5)
|
|
|
779
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(262)
|
|
|
|
|
|
(262)
|
Divestiture of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
4
|
Shares issued on exercise of stock options
|
|
|
1.7
|
|
|
68
|
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
50
|
Repurchase and cancellation under normal course issuer bid
|
12
|
|
(6.8)
|
|
|
(129)
|
|
|
|
|
|
(274)
|
|
|
(22)
|
|
|
|
|
|
(425)
|
Release of restricted stock
|
|
|
|
|
|
7
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Stock-based compensation expense
|
11
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
18
|
Settlement of stock options
|
11
|
|
|
|
|
|
|
|
(9)
|
|
|
(10)
|
|
|
|
|
|
|
|
|
(19)
|
Dividends paid
|
|
|
0.1
|
|
|
5
|
|
|
|
|
|
(150)
|
|
|
|
|
|
|
|
|
(145)
|
Balance, June 30, 2013 |
|
| 228.1 | | $ | 4,342 |
| $ | 64 |
| $ | 4,812 |
| $ | 212 |
| $ | 28 |
| $ | 9,458 |
|
(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 in that 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.
In the opinion of management, the unaudited interim consolidated
financial statements reflect all adjustments, which consist only of
normal and recurring adjustments, necessary to present fairly the
financial position at June 30, 2014 and the results of operations,
changes in equity and cash flows for the three-month and six-month
periods ended June 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
|
|
|
|
|
|
|
| Six months ended |
|
|
|
|
|
|
|
| June 30, |
|
|
|
|
|
|
|
| 2014 |
|
2013
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
[a]
|
|
|
|
$ |
11 |
| $
| —
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
|
|
|
|
|
Restructuring
|
|
|
|
[a, b]
|
|
|
|
| 22 |
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 33 |
|
$
|
6
|
For the six months ended June 30, 2014:
[a] Restructuring
During the second and first quarters of 2014, the Company recorded net
restructuring charges of $11 million and $22 million [$10 million and
$20 million after tax], respectively, in Europe at its exterior and
interior systems operations.
For the six months ended June 30, 2013:
[b] Restructuring
During the first quarter of 2013, the Company recorded net restructuring
charges of $6 million [$6 million after tax] in Europe at its exterior
and interior systems operations.
3. EARNINGS PER SHARE
|
| Three months ended |
| Six months ended |
|
| June 30, |
| June 30, |
|
| 2014 |
|
2013
|
|
2014 |
|
2013
|
|
Basic earnings per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Magna International Inc.
|
| $ | 510 |
| $
|
415
|
|
$ | 903 |
| $
|
784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of Common Shares outstanding |
|
| 216.6 |
|
| 230.6
|
|
|
218.4 |
| |
231.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per Common Share
|
|
$ | 2.36 |
| $
|
1.80
|
|
$ | 4.13 |
| $
|
3.39
|
|
Diluted earnings per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Magna International Inc.
|
| $ | 510 |
| $
|
415
|
|
$ | 903 |
| $
|
784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of Common Shares outstanding
|
|
|
216.6 |
|
| 230.6
|
|
|
218.4 |
|
| 231.5
|
Adjustments
|
|
Stock options and restricted stock [a]
|
|
| 3.0 |
|
|
2.6
|
|
|
3.2 |
|
|
2.7
|
|
|
| 219.6 |
|
| 233.2
|
|
|
221.6 |
|
|
234.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per Common Share
|
| $ | 2.32 |
| $
|
1.78
|
|
$ | 4.08 |
| $
|
3.35
|
[a]
|
For the three and six months ended June 30, 2014, diluted earnings per
Common Share exclude nil [2013 - nil] and 0.1 million [2013 - 0.2
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:
|
|
|
| June 30, |
|
December 31,
|
|
|
|
| 2014 |
|
2013
|
|
|
|
|
|
|
|
|
|
Bank term deposits, bankers' acceptances and government paper
|
|
|
| $ | 1,599 |
|
$
|
1,331
|
Cash
|
|
|
|
| 157 |
|
|
223
|
|
|
|
| $ | 1,756 |
|
$
|
1,554
|
[b] Items not involving current cash flows:
|
| Three months ended | | Six months ended |
|
| June 30, |
| June 30, |
|
| 2014 |
|
2013
|
|
2014 |
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
| $ | 223 | |
$
|
260
|
|
$ | 440 |
| $
|
515
|
Amortization of other assets included in cost of goods sold |
|
| 42 |
|
| 36
|
|
|
71 |
|
| 66
|
Other non-cash charges
|
|
| 10 |
|
| 2
|
|
|
16 |
|
| 5
|
Deferred income taxes
|
|
|
(13) |
|
| (3)
|
|
|
25 |
|
| (27)
|
Equity income in excess of dividends received
|
|
| (24) |
|
| (3)
|
|
|
(35) |
|
| (27)
|
|
| $ | 238 |
| $
|
292
|
|
$ | 517 |
| $
|
532
|
[c] Changes in operating assets and liabilities:
|
| Three months ended |
| Six months ended |
|
| June 30, |
| June 30, |
|
| 2014 |
|
2013
|
|
2014 |
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
| $ | (39) |
| $
|
26
|
|
$ | (873) |
| $
|
(948)
|
Inventories |
|
| (98) |
|
| (93)
|
|
|
(127) | |
|
(251)
|
Prepaid expenses and other
|
|
| (5) |
|
| (6)
|
|
|
4 |
| |
(33)
|
Accounts payable
|
|
| 114 |
|
| 197
|
|
|
442 |
|
| 525
|
Accrued salaries and wages
|
|
|
(107) |
|
| (72)
|
|
|
(2) |
|
| 29
|
Other accrued liabilities
|
|
|
(21) |
|
| (53)
|
|
|
147 |
|
| 262
|
Income taxes payable
|
|
| 11 |
|
| (9)
|
|
|
67 |
|
| (51)
|
Deferred revenue
|
|
| (3) |
|
| (2)
|
|
|
(3) |
|
| (1)
|
|
| $ | (148) |
| $
|
(12)
|
|
$ | (345) |
| $
|
(468)
|
5. INVENTORIES
Inventories consist of:
|
|
|
| June 30, |
|
December 31,
|
|
|
|
| 2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Raw materials and supplies
|
|
|
| $ | 971 |
|
$
|
947
|
Work-in-process
|
|
|
|
| 274 |
|
|
273
|
Finished goods
|
|
|
|
| 354 |
|
|
339
|
Tooling and engineering
|
|
|
|
| 1,157 |
|
|
1,078
|
|
|
|
| $ | 2,756 |
|
$
|
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:
|
| June 30, |
|
December 31,
|
|
| 2014 |
|
2013
|
|
|
|
|
|
|
|
Preproduction costs related to long-term supply agreements with
contractual guarantee for reimbursement
|
| $ | 298 |
|
$
|
291
|
Customer relationship intangibles
|
|
| 129 |
|
| 143
|
Long-term receivables
|
|
| 106 |
|
|
111
|
Patents and licences, net
|
|
| 41 |
|
|
44
|
Pension overfunded status
|
|
| 26 |
|
|
26
|
Unrealized gain on cash flow hedges
|
|
| 20 |
|
|
20
|
Other, net
|
|
| 43 |
|
|
40
|
|
| $ | 663 |
|
$
|
675
|
8. WARRANTY
The following is a continuity of the Company's warranty accruals:
|
|
|
| 2014 |
|
2013
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
| $ | 91 |
| $
|
94
|
Expense, net
|
|
|
|
| 7 |
|
| 9
|
Settlements
|
|
|
|
| (7) |
|
| (5)
|
Foreign exchange and other
|
|
|
|
| — |
|
| 8
|
Balance, March 31 |
|
|
|
| 91 |
|
|
106
|
Expense, net
|
|
|
|
| 7 |
|
|
11
|
Settlements
|
|
|
|
| (8) |
|
|
(6)
|
Foreign exchange and other
|
|
|
|
| — |
|
|
(9)
|
Balance, June 30
|
|
|
| $ | 90 |
|
$
|
102
|
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 |
| Six months ended |
|
| June 30, |
| June 30, |
|
| 2014 |
|
2013
|
|
2014 |
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plan and other
|
| $ | 4 |
| $
|
4
|
|
$ | 7 |
| $
|
8
|
Termination and long service arrangements |
|
| 7 |
|
| 6
|
|
|
16 |
|
| 14
|
Retirement medical benefit plan
|
|
| 1 |
|
|
1
|
|
|
1 |
|
|
1
|
|
| $ | 12 |
| $
|
11
|
|
$ | 24 |
| $
|
23
|
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
|
(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 $23 million were
made to the stock option holders. |
|
|
| All cash payments were calculated usingthe difference between the aggregate fair market value of the Option
Shares based on the closing price of the Company's Common Shares on the
Toronto Stock Exchange on the date of exercise and the aggregate
Exercise Price of all such options surrendered. |
The weighted average assumptions used in measuring the fair value of
stock options granted are as follows:
|
| Six months ended |
|
| June 30, |
|
| 2014 |
|
2013
|
|
|
|
|
|
|
|
Risk free interest rate |
|
| 1.60% |
|
|
1.32%
|
Expected dividend yield |
|
| 2.00% |
|
|
2.00%
|
Expected volatility |
|
| 29% |
|
|
34%
|
Expected time until exercise |
| 4.5 years |
|
4.5 years
|
|
|
|
|
|
|
|
Weighted average fair value of options granted in period [Cdn$]
|
| $ | 22.94 |
|
$
|
14.02
|
[b] Long-term retention program
The following is a continuity of the stock that has not been released to
executives and is reflected as a reduction in the stated value of the
Company's Common Shares [number of Common Shares in the table below are
expressed in whole numbers]:
|
| 2014 |
|
2013 |
|
| Number |
| Stated |
|
Number
|
|
Stated
|
|
| of shares |
| value |
|
of shares
|
|
value
|
|
|
|
|
|
|
|
|
|
|
|
Awarded and not released, beginning of period |
| 730,476 | | $ | 25 |
| 882,988
|
| $
|
30
|
Release of restricted stock
|
|
(143,152) |
|
| (4) |
|
(152,512)
|
|
|
(5)
|
Awarded and not released, March 31 and June 30
|
| 587,324 |
| $ | 21 |
|
730,476
|
|
$
|
25
|
[c] Restricted stock unit program
The following is a continuity schedule of restricted stock unit programs
outstanding [number of stock units in the table below are expressed in
whole numbers]:
|
| 2014 |
|
2013
|
|
| Equity |
| Liability |
| Equity (i) |
|
|
| Equity
|
|
Liability
|
|
Liability
|
|
|
|
| classified |
| classified |
| classified |
|
|
| classified
|
|
classified
|
|
classified
|
|
|
|
| RSUs |
| RSUs |
| DSUs |
| Total |
|
RSUs
|
|
RSUs
|
|
DSUs
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| 631,854 |
| 30,119 |
| 127,447 |
| 789,420 |
| 605,430
|
|
20,099
|
|
206,923
|
|
832,452
|
Granted
|
| 50,809 |
| 8,025 | | 6,315 |
| 65,149 |
| 70,636
|
|
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
|
(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 |
| Six months ended |
|
| June 30, |
| June 30, |
|
| 2014 |
|
2013
|
|
2014 |
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Stock Option Plan
|
| $ |
3 |
| $
|
4
|
| $ | 7 |
|
$
|
8
|
Long-term retention
|
|
| 1 |
|
| 1
|
|
| 2 |
|
|
2
|
Restricted stock unit
|
|
| 5 |
|
| 5
|
|
| 10 |
|
|
8
|
|
|
| 9 |
|
|
10
|
|
| 19 |
|
| 18
|
Fair value adjustment for liability classified DSUs
|
|
| — | | |
2
|
|
|
— | |
| 4
|
Total stock-based compensation expense
|
| $ | 9 |
|
$
|
12
|
|
$ | 19 |
|
$
|
22
|
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
|
|
|
|
| 8,428,181 |
|
$ | 815 |
|
6,787,803
|
|
$
|
425
|
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 July 1, 2014 and August 7, 2014, the Company purchased for
cancellation 1,465,431 Common Shares for cash consideration of $161
million through a pre-defined automatic securities purchase plan with a
designated broker. As at August 7, 2014, the Company had 7,596,665
shares remaining to be repurchased under the normal course issuer bid.
[b] The following table presents the maximum number of shares that would
be outstanding if all the dilutive instruments outstanding at August 7,
2014 were exercised or converted:
Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,302,563
|
Stock options (i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,486,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
216,789,248
|
(i) | Options to purchase Common Shares are exercisable by the holder in
accordance with the vesting provisions and upon payment of the exercise
price as may be determined from time to time pursuant to the Company's
stock option plans. |
13. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following is a continuity schedule of accumulated other
comprehensive income:
|
| 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
|
|
Accumulated net unrealized gain (loss) 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)
|
|
|
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)
|
|
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)
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income
|
| $ | 311 |
| $
|
212
|
|
| (i) | The amount of income tax (obligation) benefit that has been netted in
the accumulated net unrealized gain (loss) 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 |
|
| (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 |
The amount of other comprehensive income that is expected to be
reclassified to net income over the next 12 months is $5 million [net
of income taxes of $3 million].
14. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and financial liabilities consist of
the following:
|
| June 30, |
|
December 31,
|
|
| 2014 |
|
2013
|
|
Held for trading
|
|
Cash and cash equivalents
|
| $ | 1,756 |
|
$
|
1,554
|
|
Investment in asset-backed commercial paper
|
|
|
94 |
|
|
92
|
|
| $ | 1,850 |
|
$
|
1,646
|
|
Held to maturity investments
|
|
Severance investments
|
| $ | 5 |
|
$
|
5
|
|
Available-for-sale
|
|
Equity investments
|
|
$ | 4 |
|
$
|
4
|
|
Loans and receivables
|
|
Accounts receivable
|
|
$ | 6,107 |
|
$
|
5,246
|
|
Long-term receivables included in other assets
|
|
|
106 |
|
|
111
|
|
| $ | 6,213 |
|
$
|
5,357
|
|
Other financial liabilities
|
|
Bank indebtedness
|
| $ | 49 |
|
$
|
41
|
|
Long-term debt (including portion due within one year)
|
|
| 1,049 |
|
|
332
|
|
Accounts payable
|
|
| 5,166 |
|
|
4,781
|
|
| $ | 6,264 |
|
$
|
5,154
|
|
Derivatives designated as effective hedges, measured at fair value
|
|
Foreign currency contracts
|
|
|
Prepaid expenses
|
|
$ | 39 |
|
$
|
42
|
|
|
Other assets
|
|
|
20 |
|
|
20
|
|
|
Other accrued liabilities
|
|
|
(29) |
|
|
(37)
|
|
|
Other long-term liabilities
|
|
|
(16) |
|
|
(28)
|
|
|
| 14 |
|
|
(3)
|
|
Natural gas contracts
|
|
|
Other accrued liabilities
|
|
|
(1) |
|
|
(1)
|
|
| $ | 13 |
|
$
|
(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 |
|
|
|
|
|
June 30, 2014 |
|
|
|
|
|
Assets |
|
|
|
| $ | 59 | | $ | 33 |
| $ | 26 |
|
Liabilities
|
|
|
|
|
$ | (45) | | $ | (33) | | $ | (12) |
|
|
|
|
|
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 June 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 June 30, 2014, the Company held available-for-sale investments in
publicly traded companies. The carrying value and fair value of these
investments was $4 million, which was based on the closing share price
of the investments on June 30, 2014.
Term debt
The Company's term debt includes $212 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 June 30, 2014, the total estimated fair value of the Senior Notes was
approximately $754 million, determined primarily using active market
prices, categorized as Level 1 inputs within the ASC 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 both the three and six-month periods ended June 30, 2014,
sales to the Company's six largest customers represented 83% of the
Company's total sales, and substantially all of the Company's sales are
to customers in which it has ongoing contractual relationships.
[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 June 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. amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280
|
|
1,273
|
|
euro amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
|
|
12
|
|
Korean won amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,956
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For U.S. dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peso amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,050
|
|
278
|
|
Korean won amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,212
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For euros
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
|
|
254
|
|
GBP amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
23
|
|
Czech Koruna amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,468
|
|
8
|
|
Polish Zlotys amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224
|
|
—
|
Forward contracts mature at various dates through 2019. Foreign currency
exposures are reviewed quarterly.
15. CONTINGENCIES
In the ordinary course of business activities, the Company may be
contingently liable for litigation and claims with customers,
suppliers, former employees and other parties. In addition, the Company
may be, or could become, liable to incur environmental remediation
costs to bring environmental contamination levels back within
acceptable legal limits. On an ongoing basis, the Company assesses the
likelihood of any adverse judgments or outcomes to these matters as
well as potential ranges of probable costs and losses.
A determination of the provision required, if any, for these
contingencies is made after analysis of each individual issue. The
required provision may change in the future due to new developments in
each matter or changes in approach such as a change in settlement
strategy in dealing with these matters.
[a] In November 1997, the Company and two of its subsidiaries were sued
by KS Centoco Ltd., an Ontario-based steering wheel manufacturer in
which the Company has a 23% equity interest, and by Centoco Holdings
Limited, the owner of the remaining 77% equity interest in KS Centoco
Ltd. In March 1999, the plaintiffs were granted leave to make
substantial amendments to the original statement of claim in order to
add several new defendants and claim additional remedies, and in
February 2006, the plaintiffs further amended their claim to add an
additional remedy. The amended statement of claim alleges, among other
things:
-
breach of fiduciary duty by the Company and two of its subsidiaries;
-
breach by the Company of its binding letter of intent with KS Centoco
Ltd., including its covenant not to have any interest, directly or
indirectly, in any entity that carries on the airbag business in North
America, other than through MST Automotive Inc., a company to be 77%
owned by Magna and 23% owned by Centoco Holdings Limited;
-
the plaintiff's exclusive entitlement to certain airbag technologies in
North America pursuant to an exclusive licence agreement, together with
an accounting of all revenues and profits resulting from the alleged
use by the Company, TRW Inc. ["TRW"] and other unrelated third party
automotive supplier defendants of such technology in North America;
-
a conspiracy by the Company, TRW and others to deprive KS Centoco Ltd.
of the benefits of such airbag technology in North America and to cause
Centoco Holdings Limited to sell to TRW its interest in KS Centoco Ltd.
in conjunction with the Company's sale to TRW of its interest in MST
Automotive GmbH and TEMIC Bayern-Chemie Airbag GmbH; and
-
oppression by the defendants.
The plaintiffs are seeking, amongst other things, damages of
approximately Cdn$3.5 billion. Document production, completion of
undertakings and examinations for discovery are substantially complete,
although limited additional examinations for discovery may occur. A
trial is not expected to commence until 2015, at the earliest. The
Company believes it has valid defences to the plaintiffs' claims and
therefore intends to continue to vigorously defend this case.
Notwithstanding the amount of time which has transpired since the claim
was filed, these legal proceedings remain at an early stage and,
accordingly, it is not possible to predict their outcome.
[b] On September 24, 2013, representatives of the Bundeskartellamt, the
German Federal Cartel Office [the "Cartel Office"], attended at one of
the Company's operating divisions in Germany to obtain information in
connection with an ongoing antitrust investigation relating to
suppliers of automobile textile coverings and components, particularly
trunk linings. Investigations of this nature can continue for several
years. Where wrongful conduct is found, the Cartel Office has the
authority to impose administrative fines that are calculated in
accordance with formula-based guidelines tied to the level of affected
sales, the gravity of the infringement, the consolidated sales of the
group of companies to which the offending entity belongs, as well as
other mitigating and aggravating factors.
The Company's policy is to comply with all applicable laws, including
antitrust and competition laws. In light of the early stage of the
investigation, management is unable to predict its duration or outcome,
including whether any operating division of the Company could be found
liable for any violation of law or the extent of any fine, if found to
be liable. In the event of any such violation, any fines imposed under
the Cartel Office guidelines referred to above could have a material
adverse effect on Magna's profitability in the year such fine is
imposed.
[c] In certain circumstances, the Company is at risk for warranty costs
including product liability and recall costs. Due to the nature of the
costs, the Company makes its best estimate of the expected future costs
[note 8]; however, the ultimate amount of such costs could be materially
different. The Company continues to experience increased customer
pressure to assume greater warranty responsibility. Currently, under
most customer agreements, the Company only accounts for existing or
probable claims. Under certain complete vehicle engineering and
assembly contracts, the Company records an estimate of future
warranty-related costs based on the terms of the specific customer
agreements, and the specific customer's warranty experience.
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
|
|
| June 30, 2014 |
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
| Fixed |
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
| Total |
|
External |
| Adjusted |
| assets, |
|
Total
|
|
External
|
|
Adjusted
|
|
assets,
|
|
| sales |
|
sales |
| EBIT |
| net |
|
sales
|
|
sales
|
|
EBIT
|
|
net
|
|
North America |
|
Canada
|
| $ | 1,795 |
| $ | 1,660 |
|
|
|
| $ | 596 |
| $
|
1,742
|
|
$
|
1,614
|
|
|
|
|
$
|
608
|
|
United States
|
|
| 2,550 |
|
| 2,415 |
|
|
|
|
| 1,143 |
|
| 2,164
|
|
|
2,040
|
|
|
|
|
|
1,020
|
|
Mexico
|
|
| 1,109 |
|
| 1,023 |
|
|
|
|
| 612 |
|
| 1,013
|
|
|
935
|
|
|
|
|
|
573
|
|
Eliminations
|
|
|
(326) |
|
| — |
|
|
|
|
| — |
|
| (300)
|
|
|
—
|
|
|
|
|
|
—
|
|
|
| 5,128 |
|
| 5,098 |
| $ | 537 |
|
| 2,351 |
|
|
4,619
|
|
|
4,589
|
|
$
|
422
|
|
|
2,201
|
Europe |
|
Western Europe (excluding Great Britain) |
|
| 3,050 |
|
| 2,977 |
|
|
|
| | 1,396 |
|
| 3,006
|
|
|
2,936
|
|
|
|
|
|
1,411
|
|
Great Britain |
|
| 195 |
|
| 195 |
|
|
|
|
| 88 |
|
| 277
|
|
|
275
|
|
|
|
|
|
57
|
|
Eastern Europe |
|
| 668 |
|
| 572 |
| |
|
|
| 675 |
|
| 619
|
|
|
544
|
|
|
|
|
|
569
|
|
Eliminations |
|
| (117) |
| | — |
| |
|
|
| — |
|
| (96)
|
|
|
—
|
|
|
|
|
|
—
|
|
|
| 3,796 |
|
| 3,744 |
|
| 125 |
|
| 2,159 |
|
| 3,806
|
|
|
3,755
|
|
|
120
|
|
|
2,037
|
Asia |
|
| 486 |
|
| 450 |
|
| 42 |
|
| 613 |
|
| 398
|
|
|
361
|
|
|
19
|
|
|
570
|
Rest of World
|
|
| 168 |
|
| 168 |
|
| (11) |
|
| 103 |
|
| 248
|
|
|
248
|
|
|
(17)
|
|
|
110
|
Corporate and Other |
|
| (114) |
|
| 4 |
|
| 17 |
|
| 360 |
|
| (109)
|
|
|
9
|
|
|
3
|
|
|
225
|
Total reportable segments |
|
| 9,464 |
|
| 9,464 |
|
| 710 |
|
| 5,586 |
|
| 8,962
|
|
|
8,962
|
|
|
547
|
|
|
5,143
|
Other expense, net
|
|
|
|
|
|
|
|
| (11) |
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
(7) |
|
|
|
|
|
|
|
|
|
| | (4)
|
|
|
|
|
| $ | 9,464 |
| $ | 9,464 |
| $ | 692 |
|
| 5,586 |
| $
|
8,962
|
|
$
|
8,962
|
|
$
|
543
|
|
|
5,143
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
| 11,063 |
|
|
|
|
|
|
|
|
|
|
|
9,918
|
Investments, goodwill, deferred tax assets, and other assets |
|
|
|
|
|
|
|
|
|
|
| 2,675 |
|
|
|
|
|
|
|
|
|
|
|
2,633
|
Consolidated total assets |
|
|
|
|
|
|
|
|
|
| $ | 19,324 |
|
|
|
|
|
|
|
|
|
|
$
|
17,694
|
|
|
|
|
|
|
| Six months ended |
|
Six months ended
|
|
| June 30, 2014 |
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
| Fixed |
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
| Total |
|
External |
| Adjusted |
| assets, |
|
Total
|
|
External
|
|
Adjusted
|
|
assets,
|
|
| sales |
|
sales |
| EBIT |
| net |
|
sales
|
|
sales
|
|
EBIT
|
|
net
|
|
|
North America |
|
|
Canada
|
| $ | 3,399 |
| $ | 3,147 |
|
|
|
| $ | 596 |
| $
|
3,423
|
|
$
|
3,167
|
|
|
|
|
$
|
608
|
|
United States
|
|
| 4,871 |
|
| 4,612 |
|
|
|
|
| 1,143 |
|
| 4,118
|
|
|
3,883
|
|
|
|
|
|
1,020
|
|
Mexico
|
|
| 2,148 |
|
| 1,981 |
|
|
|
|
| 612 |
|
| 1,978
|
|
|
1,827
|
|
|
|
|
|
573
|
|
Eliminations
|
|
| (622) |
|
| — |
|
|
|
|
| — |
|
| (588)
|
|
|
—
|
|
|
|
|
|
—
|
|
|
| 9,796 |
|
| 9,740 |
| $ | 980 |
|
| 2,351 |
|
|
8,931
|
|
|
8,877
|
|
$
|
803
|
|
|
2,201
|
Europe |
|
Western Europe (excluding Great Britain) |
|
| 6,130 |
|
| 5,992 |
|
|
|
|
| 1,396 |
|
| 5,908
|
|
|
5,771
|
|
|
|
|
|
1,411
|
|
Great Britain |
|
| 377 |
|
| 377 |
|
|
|
|
| 88 |
|
| 495
|
|
|
491
|
|
|
|
|
|
57
|
|
Eastern Europe |
|
| 1,297 |
|
| 1,102 | |
|
|
|
| 675 |
|
| 1,146
|
|
|
998
|
|
|
|
|
|
569
|
|
Eliminations
|
|
| (235) |
|
| — |
|
|
|
|
| — |
|
|
(191)
|
|
|
—
|
|
|
|
|
|
—
|
|
|
| 7,569 |
|
| 7,471 |
|
| 252 |
|
| 2,159 |
|
| 7,358
|
|
|
7,260
|
|
|
192
|
|
|
2,037
|
Asia |
|
| 949 |
|
| 878 |
|
| 71 |
|
| 613 |
|
| 762
|
|
|
695
|
|
|
30
|
|
|
570
|
Rest of World |
|
|
329 |
|
| 329 |
|
| (24) |
|
| 103 |
|
| 479
|
|
|
479
|
|
|
(28)
|
|
|
110
|
Corporate and Other |
|
| (218) |
|
| 7 |
|
| 36 |
|
| 360 |
|
| (207)
|
|
|
12
|
|
|
17
|
|
|
225
|
Total reportable segments |
|
| 18,425 |
|
| 18,425 |
|
| 1,315 |
|
| 5,586 |
|
| 17,323
|
|
|
17,323
|
|
|
1,014
|
|
|
5,143
|
Other expense, net
|
|
|
|
|
|
|
|
|
(33) |
|
|
|
|
|
|
|
|
|
|
|
(6)
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
(9) |
|
|
|
|
|
|
|
|
|
|
|
(8)
|
|
|
|
|
| $ | 18,425 |
| $ | 18,425 |
| $ | 1,273 |
|
| 5,586 |
| $
|
17,323
|
|
$
|
17,323
|
|
$
|
1,000
|
|
|
5,143
|
Current assets |
|
|
|
|
|
|
|
|
|
|
| 11,063 |
|
|
|
|
|
|
|
|
|
|
|
9,918
|
Investments, goodwill deferred tax assets and other assets
|
|
|
|
|
|
|
|
|
|
|
| 2,675 |
|
|
|
|
|
|
|
|
|
|
|
2,633
|
Consolidated total assets |
|
|
|
|
|
|
|
|
|
| $ | 19,324 |
|
|
|
|
|
|
|
|
|
|
$
|
17,694
|
17. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform to
the current period's method of presentation.
SOURCE Magna International Inc.