AURORA, ON, May 7, 2015 /CNW/ - Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the first quarter ended March
31, 2015.
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THREE MONTHS ENDED |
| March 31, 2015 |
| March 31, 2014 |
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Sales
| $ | 8,330 |
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$
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8,961
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Adjusted EBIT(1) | $ | 642 |
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$
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605
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Income from operations before income taxes
| $ | 631 |
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$
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581
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Net income attributable to Magna International Inc.
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$ | 465 |
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$
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393
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Diluted earnings per share
| $ | 1.12 |
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$
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0.88
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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 statement. Adjusted EBIT represents
income from operations before income taxes;
interest expense, net; and other expense, net.
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THREE MONTHS ENDED MARCH 31, 2015
We posted sales of $8.33 billion for the first quarter ended March 31,
2015, a decrease of $631 million or 7% from the first quarter of 2014.
The weakening of certain currencies against our U.S. dollar reporting
currency, in particular the euro and Canadian dollar, had a significant
negative impact on our reported sales for the first quarter of 2015.
Foreign currency translation reduced our sales by approximately $880
million, as compared to the first quarter of 2014. Excluding the
impact of foreign currency translation, our sales increased 3% in the
first quarter of 2015, compared to the first quarter of 2014. North
American and European light vehicle production each declined marginally
in the first quarter of 2015, compared to the first quarter of 2014.
Complete vehicle assembly sales decreased 28% to $584 million for the
first quarter of 2015 compared to $813 million for the first quarter of
2014, of which foreign currency translation accounted for $127 million
of the decrease. Complete vehicle assembly volumes decreased 23% to
approximately 27,000 units in the first quarter of 2015 compared to the
first quarter of 2014.
During the first quarter of 2015, income from operations before income
taxes was $631 million, net income attributable to Magna International
Inc. was $465 million and diluted earnings per share were $1.12,
increases of $50 million, $72 million and $0.24, respectively, each
compared to the first quarter of 2014.
Excluding other expense, after tax and the impact of the Austrian tax
reform, each in the first quarter of 2014, income from operations
before income taxes, net income attributable to Magna International
Inc. and diluted earnings per share for the first quarter of 2015
increased $28 million, $20 million and $0.12 respectively, each
compared to the first quarter of 2014.
During the first quarter ended March 31, 2015, we generated cash from
operations of $652 million before changes in non-cash operating assets
and liabilities, and invested $358 million in operating assets and
liabilities. Total investment activities for the first quarter of 2015
were $323 million, including $280 million in fixed asset additions, $42
million in investments and other assets and $1 million to purchase
subsidiaries.
Don Walker, Magna's Chief Executive Officer commented: "We posted
improved earnings and return on funds employed, as well as excellent
cash flow generation. While the strengthened U.S. dollar negatively
impacted our reported sales and earnings, our underlying operations
performed well in the quarter.
We have been refining our product portfolio to focus on certain key
areas of the vehicle, reflected in our agreements this year to sell
substantially all of our interiors operations, our battery pack
business, as well as our sale last year of certain non-core composites
operations. At the same time, we have been taking steps to expand in
other areas such as metalforming, where we recently announced a joint
venture in China."
A more detailed discussion of our consolidated financial results for the
first quarter ended March 31, 2015 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 $0.22
with respect to our outstanding Common Shares for the quarter ended
March 31, 2015. This dividend is payable on June 12, 2015 to
shareholders of record on May 29, 2015.
UPDATED 2015 OUTLOOK
Our updated 2015 outlook below excludes full year 2015 financial
information for the interiors operations we intend to sell, pursuant to
our agreement with Grupo Antolin announced on April 16, 2015. This
will be consistent with disclosure of the business as discontinued
operations beginning with the reporting of our financial results for
the second quarter ended June 30, 2015.
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Light Vehicle Production (Units)
North America
Europe
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17.4 million
20.2 million
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Production Sales
North America
Europe
Asia
Rest of World
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$17.2 billion - $17.8 billion
$6.9 billion - $7.3 billion
$1.7 billion - $1.9 billion
$0.6 billion - $0.7 billion
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Total Production Sales
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$26.4 billion - $27.7 billion
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Complete Vehicle Assembly Sales
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$2.1 billion - $2.4 billion
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Total Sales
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$30.8 billion - $32.5 billion
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Operating Margin(1) |
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High 7% range
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Tax Rate(1) |
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Approximately 26%
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Capital Spending
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$1.3 billion - $1.5 billion
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(1) Excluding other expense, net
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In this 2015 outlook, in addition to 2015 light vehicle production, we
have assumed no material acquisitions or divestitures other than the
interiors divestiture noted above. 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 316 manufacturing
operations and 87 product development, engineering and sales centres in
29 countries. We have approximately 133,000 employees focused on
delivering superior value to our customers through innovative products
and processes, and World Class Manufacturing. Our product capabilities
include producing body, chassis, interior, exterior, seating,
powertrain, electronic, vision, closure and roof systems and modules,
as well as complete vehicle engineering and contract manufacturing.
Our Common Shares trade on the Toronto Stock Exchange (MG) and the New
York Stock Exchange (MGA). For further information about Magna, visit
our website at www.magna.com.
We will hold a conference call for interested analysts and shareholders
to discuss our first quarter results on Thursday, May 7, 2015 at 2:00
p.m. EDT. The conference call will be chaired by Don Walker, Chief
Executive Officer. The number to use for this call is 1-800-735-5968.
The number for overseas callers is 1-416-620-9188. Please call in at
least 10 minutes prior to the call. We will also webcast the conference
call at www.magna.com. The slide presentation accompanying the conference call will be
available on our website Thursday afternoon prior to the call. |
FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute "forward-looking
statements" or "forward-looking information" within the meaning of
applicable securities legislation, including, but not limited to,
statements relating to: Magna's forecasts of light vehicle production
in North America and Europe; expected consolidated sales, based on such
light vehicle production volumes; production sales, including expected
split by segment, in its North America, Europe, Asia and Rest of World
segments for 2015; complete vehicle assembly sales; consolidated
operating margin, effective income tax rate; fixed asset expenditures;
and statements relating to the refinement of our product portfolio
through acquisitions, divestitures, joint ventures or otherwise,
including the strategic benefits expected to result from the sale of
substantially all of our Interiors operations (the "Transaction") . 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; fluctuations in relative currency
values; restructuring, downsizing and/or other significant
non-recurring costs; continued underperformance of one or more of our
operating Divisions; ongoing pricing pressures, including our ability
to offset price concessions demanded by our customers; our ability to
successfully launch material new or takeover business; shifts in market
share away from our top customers; inability to grow our business with
OEMs; 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, Eastern Europe, Thailand, Brazil, Argentina 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 labour disruption;
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; 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; our ability to successfully identify,
complete and integrate acquisitions or achieve anticipated synergies;
our ability to conduct appropriate due diligence on acquisition
targets; the consummation of the Transaction, including required
antitrust and other regulatory approvals; the satisfaction or waiver of
conditions to complete the Transaction; warranty or required indemnity
obligations to the purchaser in the Transaction in relation to
pre-closing liabilities; warranty and recall costs; risk of production
disruptions due to natural disasters or other catastrophic events; the
security and reliability of our IT systems; pension liabilities; legal
claims and/or regulatory actions against us, including the ongoing
antitrust investigations being conducted by German and Brazilian
authorities; changes in our mix of earnings between jurisdictions with
lower tax rates and those with higher tax rates, as well as our ability
to fully benefit tax losses; other potential tax exposures; changes in
credit ratings assigned to us; changes in laws and governmental
regulations; costs associated with compliance with environmental laws
and regulations; liquidity risks as a result of an unanticipated
deterioration of economic conditions; our ability to achieve future
investment returns that equal or exceed past returns; the
unpredictability of, and fluctuation in, the trading price of our
Common Shares; and other factors set out in our Annual Information Form
filed with securities commissions in Canada and our annual report on
Form 40-F filed with the United States Securities and Exchange
Commission, and subsequent filings. In evaluating forward-looking
statements, we caution readers not to place undue reliance on any
forward-looking statements and readers should specifically consider the
various factors which could cause actual events or results to differ
materially from those indicated by such forward-looking statements.
Unless otherwise required by applicable securities laws, we do not
intend, nor do we undertake any obligation, to update or revise any
forward-looking statements to reflect subsequent information, events,
results or circumstances or otherwise.
For further information about Magna, please see our website at www.magna.com. Copies of financial data and other publicly filed documents are
available through the internet on the Canadian Securities
Administrators' System for Electronic Document Analysis and Retrieval
(SEDAR) which can be accessed at www.sedar.com and on the United States Securities and Exchange Commission's
Electronic Data Gathering, Analysis and Retrieval System (EDGAR) which
can be accessed at www.sec.gov |
MAGNA INTERNATIONAL INC.
Management's Discussion and Analysis of Results of Operations and
Financial Position
Unless otherwise noted, all amounts in this Management's Discussion and
Analysis of Results of Operations and Financial Position ("MD&A") are
in U.S. dollars and all tabular amounts are in millions of U.S.
dollars, except per share figures, which are in U.S. dollars. When we
use the terms "we", "us", "our" or "Magna", we are referring to Magna
International Inc. and its subsidiaries and jointly controlled
entities, unless the context otherwise requires.
This MD&A should be read in conjunction with the unaudited interim
consolidated financial statements for the three months ended March
31, 2015 included in this press release, and the audited consolidated
financial statements and MD&A for the year ended December 31, 2014
included in our 2014 Annual Report to Shareholders.
This MD&A has been prepared as at May 6, 2015.
OVERVIEW
We are a leading global automotive supplier with 316 manufacturing
operations and 87 product development, engineering and sales centres in
29 countries. We have approximately 133,000 employees focused on
delivering superior value to our customers through innovative products,
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 and European light vehicle production each declined
marginally in the first quarter of 2015, compared to the first quarter
of 2014, to 4.1 million and 5.1 million units, respectively.
We posted sales of $8.33 billion for the first quarter of 2015, a
decrease of $631 million or 7% from the first quarter of 2014. The
weakening of certain currencies against our U.S. dollar reporting
currency, in particular the euro and Canadian dollar, had a significant
negative impact on our reported sales in the first quarter of 2015.
Foreign exchange translation reduced our sales in the first quarter of
2015 by approximately $880 million, as compared to the first quarter of
2014. Excluding the negative impact of foreign exchange translation,
sales increased 3% in the first quarter of 2015, compared to the first
quarter of 2014.
OurAdjusted EBIT(1) increased 6% to $642 million in the first quarter of 2015, compared to
the first quarter of 2014.
- North America: Adjusted EBIT of $460 million for the first quarter of
2015, increased 4% compared to $443 million for the first quarter of
2014. This compares to the segment's total sales which increased less
than 1% to $4.70 billion in the first quarter of 2015 compared to the
first quarter of 2014.
- Europe: Adjusted EBIT of $124 million for the first quarter of 2015,
declined $3 million or 2% from the first quarter of 2014, while segment
total sales declined $660 million or 17% from the first quarter of 2014
to the first quarter of 2015.
- Asia: This segment reported its ninth consecutive quarter of improved
year over year results, with Adjusted EBIT of $47 million for the first
quarter of 2015, compared to $29 million for the first quarter of 2014.
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Rest of World: Our Adjusted EBIT loss of $4 million for the first
quarter of 2015 compared to an Adjusted EBIT loss of $13 million in the
first quarter of 2014, reflecting our progress in reducing operating
losses in this segment.
Lastly, subsequent to the first quarter of 2015, we signed an agreement
to sell substantially all of our interiors operations to Grupo Antolin,
a leading global supplier of automotive interior systems. The purchase
price for the operations, excluding certain assets, is approximately
$525 million, subject to customary closing adjustments. We will
continue managing our seating operations, which are not included in
this agreement.
1 We believe Adjusted EBIT is the most appropriate measure of operational
profitability or loss for our reporting segments. Adjusted EBIT
represents income from operations before income taxes; interest
expense, net; and other expense, net.
FINANCIAL RESULTS SUMMARY
During the first quarter of 2015, we posted sales of $8.33 billion, a
decrease of 7% from the first quarter of 2014. This lower sales level
was a result of a decrease in reported U.S. dollar sales due to the
weakening of foreign currencies against the U.S. dollar. Comparing the
first quarter of 2015 to 2014:
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North American vehicle production decreased marginally but our North
American production sales increased 1% to $4.46 billion;
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European vehicle production decreased marginally and our European
production sales decreased 17% to $2.18 billion;
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Asian production sales increased 10% to $421 million;
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Rest of World production sales decreased 17% to $131 million;
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Complete vehicle assembly volumes decreased 23% and sales decreased $229
million to $584 million; and
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Tooling, engineering and other sales decreased 2% to $559 million.
During the first quarter of 2015, we earned income from operations
before income taxes of $631 million compared to $581 million for the
first quarter of 2014. Excluding other expense, net ("Other Expense")
recorded in the first quarter of 2014, as discussed in the "Other
Expense" section, income from operations before income taxes increased
$28 million. Excluding the negative impact of foreign exchange
translation, the increase was primarily as a result of:
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incremental margin earned on new programs that launched during or
subsequent to the first quarter of 2014;
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the expiration, at the end of 2014, of our consulting agreements with
Frank Stronach;
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productivity and efficiency improvements at certain facilities; and
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higher equity income.
These factors were partially offset by:
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lower recoveries associated with scrap steel;
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higher launch costs;
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a greater amount of employee profit sharing;
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operational inefficiencies at certain 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 first quarter of 2014.
During the first quarter of 2015, net income attributable to Magna
International Inc. was $465 million, an increase of $72 million
compared to the first quarter of 2014 and diluted earnings per share
increased $0.24 to $1.12 for the first quarter of 2015 compared to
$0.88 for the first quarter of 2014. Other Expense, after tax and the
Austrian Tax Reform, as discussed in the "Other Expense" and "Income
Taxes" sections, respectively, impacted net income attributable to
Magna International Inc. and diluted earnings per share as follows:
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| For the three months ended March 31, |
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| 2015
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2014
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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 |
| $ | — | $ | —
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$
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22
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$
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0.05
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Income tax effect:
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Other expense |
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(2)
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—
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Austrian tax reform |
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32
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0.07
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| $ | — | $ | — |
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$
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52
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$
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0.12
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Excluding the $52 million negative impact for the first quarter of 2014,
net income attributable to Magna International Inc. for the first
quarter of 2015 increased $20 million compared to the first quarter of
2014.
Excluding the $0.12 per share negative impact for the first quarter of
2014, diluted earnings per share increased $0.12, as a result of the
increase in net income attributable to Magna International Inc. and a
decrease in the weighted average number of diluted shares outstanding
during the first quarter of 2015. The decrease in the weighted average
number of diluted shares outstanding was due to the purchase and
cancellation of Common Shares, during or subsequent to the first
quarter of 2014, pursuant to our normal course issuer bids.
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, 2014, and remain substantially
unchanged in respect of the first quarter ended March 31, 2015.
RESULTS OF OPERATIONS
Average Foreign Exchange
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| For the three months |
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| 2015 |
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2014
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Change
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1 Canadian dollar equals U.S. dollars
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| 0.808 |
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0.907
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11%
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1 euro equals U.S. dollars
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| 1.129 |
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1.371
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-
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18%
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1 British pound equals U.S. dollars
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| 1.517 |
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1.655
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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 ended March 31, 2015 impacted the reported U.S.
dollar amounts of our sales, expenses and income.
The results of operations whose functional currency is not the U.S.
dollar are translated into U.S. dollars using the average exchange
rates in the table above for the relevant period. Throughout this MD&A,
reference is made to the impact of translation of foreign operations on
reported U.S. dollar amounts where relevant.
Our results can also be affected by the impact of movements in exchange
rates on foreign currency transactions (such as raw material purchases
or sales denominated in foreign currencies). However, as a result of
hedging programs employed by us, foreign currency transactions in the
current period have not been fully impacted by movements in exchange
rates. We record foreign currency transactions at the hedged rate where
applicable.
Finally, foreign exchange gains and losses on revaluation and/or
settlement of monetary items denominated in a currency other than an
operation's functional currency impact reported results. These gains
and losses are recorded in selling, general and administrative expense.
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED MARCH 31, 2015
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Sales |
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| For the three months |
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| ended March 31, |
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| 2015
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2014
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Change
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Vehicle Production Volumes (millions of units) |
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North America |
| 4.102 |
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4.118
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—
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Europe |
| 5.095 |
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5.119
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—
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Sales |
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External Production
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North America
| $ | 4,456 | |
$
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4,407
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+ 1%
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Europe |
| 2,179 |
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2,634
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- 17%
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Asia |
| 421 |
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381
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+ 10%
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Rest of World |
| 131 |
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157
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- 17%
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Complete Vehicle Assembly |
| 584 |
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813
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- 28%
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Tooling, Engineering and Other |
| 559 |
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569
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- 2%
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Total Sales
| $ | 8,330 |
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$
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8,961
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- 7%
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External Production Sales - North America
Reported external production sales in North America increased 1% or $49
million to $4.46 billion for the first quarter of 2015 compared to
$4.41 billion for the first quarter of 2014, primarily as a result of:
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the launch of new programs during or subsequent to the first quarter of
2014, including the:
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GM full-size pickups and SUVs;
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Ford Transit;
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Ford Mustang;
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BWM X4; and
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Chrysler 200.
This factor was partially offset by:
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lower production volumes on certain existing programs;
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a $159 million decrease in reported U.S. dollar sales primarily as a
result of the weakening of the Canadian dollar against the U.S. dollar;
-
net divestitures subsequent to the first quarter of 2014, which
negatively impacted sales by $22 million; and
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net customer price concessions subsequent to the first quarter of 2014.
External Production Sales - Europe
Reported external production sales in Europe decreased 17% or $455
million to $2.18 billion for the first quarter of 2015 compared to
$2.63 billion for the first quarter of 2014, primarily as a result of:
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a $477 million decrease in reported U.S. dollar sales primarily as a
result of the weakening of foreign currencies against the U.S. dollar,
including the euro and Russian ruble;
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lower production volumes on certain existing programs;
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programs that ended production during or subsequent to the first quarter
of 2014; and
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net customer price concessions subsequent to the first quarter of 2014.
These factors were partially offset by:
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the launch of new programs during or subsequent to the first quarter of
2014, including the:
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MINI 3-Door and 5-Door Hatchback;
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Ford Transit; and
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Land Rover Discovery Sport.
External Production Sales - Asia
Reported external production sales in Asia increased 10% or $40 million
to $421 million for the first quarter of 2015 compared to $381 million
for the first quarter of 2014, primarily as a result of the launch of
new programs during or subsequent to the first quarter of 2014,
primarily in China.
This factor was partially offset by:
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lower production volumes on certain existing programs;
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a $10 million decrease in reported U.S. dollar sales primarily as a
result of the weakening of foreign currencies against the U.S. dollar,
including the Chinese renminbi and South Korean won;
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programs that ended production during or subsequent to the first quarter
of 2014; and
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net customer price concessions subsequent to the first quarter of 2014.
External Production Sales - Rest of World
Reported external production sales in Rest of World decreased 17% or $26
million to $131 million for the first quarter of 2015 compared to $157
million for the first quarter of 2014, primarily as a result of:
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lower production volumes on certain existing programs;
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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
Brazilian real and Argentine peso; and
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programs that ended production during or subsequent to the first quarter
of 2014.
These factors were partially offset by:
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the launch of new programs during or subsequent to the first quarter of
2014, primarily in Brazil; and
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net customer price increases subsequent to the first quarter of 2014.
Complete Vehicle Assembly Sales
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| For the three months |
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|
|
|
| ended March 31, |
|
|
|
|
|
|
|
|
| 2015 |
|
2014
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Complete Vehicle Assembly Sales
|
|
|
|
|
|
| $ | 584 |
|
$
|
813
|
|
- 28%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Complete Vehicle Assembly Volumes (Units) |
|
|
|
|
|
|
| 27,343 |
|
|
35,658
|
|
- 23%
|
Reported complete vehicle assembly sales decreased $229 million, to $584
million for the first quarter of 2015 compared to $813 million for the
first quarter of 2014 while assembly volumes decreased 23% or 8,315
units.
The decrease in complete vehicle assembly sales is primarily as a result
of:
-
a $127 million decrease in reported U.S. dollar sales as a result of the
weakening of the euro against the U.S. dollar; and
-
a decrease in assembly volumes for the MINI Countryman.
These factors were partially offset by an increase in assembly volumes
for the Mercedes-Benz G-Class.
Tooling, Engineering and Other Sales
Reported tooling, engineering and other sales decreased 2% or $10
million to $559 million for the first quarter of 2015 compared to $569
million for the first quarter of 2014.
In the first quarter of 2015, the major programs for which we recorded
tooling, engineering and other sales were the:
-
Ford F-Series;
-
Skoda Fabia;
-
Honda HR-V and Vezel;
-
MINI Countryman;
-
Land Rover Discovery Sport;
-
Ford Edge;
-
BMW 1-Series; and
-
GMC Acadia, Buick Enclave and Chevrolet Traverse.
In the first quarter of 2014, the major programs for which we recorded
tooling, engineering and other sales were the:
-
MINI Countryman;
-
Ford Mustang;
-
QOROS 3;
-
Chrysler 200;
-
Chevrolet Suburban and Tahoe, GMC Yukon and Cadillac Escalade;
-
Ford Transit;
-
Honda Fit;
-
Ford F-Series; and
-
Peugeot RCZ.
The weakening of certain foreign currencies against the U.S. dollar,
including the euro, Czech koruna, Canadian dollar and Russian ruble had
an unfavourable impact of $78 million on our reported tooling,
engineering and other sales.
Cost of Goods Sold and Gross Margin
|
| For the three months |
|
| ended March 31, |
|
| 2015 |
2014
|
|
|
|
|
|
|
Sales
|
| $ | 8,330 |
$
|
8,961
|
|
|
|
|
|
|
Cost of goods sold |
|
|
|
|
|
|
Material |
|
| 5,241 |
|
5,712
|
|
Direct labour |
|
| 563 |
|
575
|
|
Overhead |
|
| 1,379 |
|
1,475
|
|
|
| 7,183 |
|
7,762
|
Gross margin
|
| $ | 1,147 |
$
|
1,199
|
|
|
|
|
|
|
Gross margin as a percentage of sales
|
|
| 13.8% |
|
13.4%
|
Reported cost of goods sold decreased $579 million to $7.18 billion for
the first quarter of 2015 compared to $7.76 billion for the first
quarter of 2014. The decrease in reported U.S. dollar cost of goods
sold was due to the weakening of foreign currencies against the U.S.
dollar, including the euro, Canadian dollar, Russian ruble and Czech
koruna. Excluding the effect of foreign exchange translation, costs of
goods sold increased primarily as a result of:
-
higher material, overhead and labour costs associated with the increase
in sales;
-
higher launch costs; and
-
a greater amount of employee profit sharing.
These factors were partially offset by productivity and efficiency
improvements at certain facilities.
Gross margin decreased $52 million to $1.15 billion for the first
quarter of 2015 compared to $1.20 billion for the first quarter of 2014
and gross margin as a percentage of sales increased to 13.8% for the
first quarter of 2015 compared to 13.4% for the first quarter of 2014.
The increase in gross margin as a percentage of sales was primarily due
to:
-
productivity and efficiency improvements at certain facilities; and
-
a decrease in the proportion of complete vehicle assembly sales relative
to total sales, which have a higher material content than our
consolidated average.
These factors were partially offset by:
-
operational inefficiencies at certain facilities;
-
lower recoveries associated with scrap steel;
-
higher launch costs;
-
an increase in the proportion of tooling, engineering and other sales
relative to total sales, that have low or no margins; and
-
a greater amount of employee profit sharing.
Depreciation and Amortization
Depreciation and amortization costs decreased $12 million to
$205 million for the first quarter of 2015 compared to $217 million for
the first quarter of 2014. The lower depreciation and amortization was
primarily as a result of a decrease in reported U.S. dollar
depreciation and amortization largely as a result of the weakening of
the euro, Canadian dollar and Russian ruble, each against the U.S.
dollar partially offset by higher depreciation related to new
facilities.
Selling, General and Administrative ("SG&A")
SG&A expense as a percentage of sales was 4.3% for the first quarter of
2015 compared to 4.7% for the first quarter of 2014. SG&A expense
decreased $70 million to $355 million for the first quarter of 2015
compared to $425 million for the first quarter of 2014 primarily as a
result of weakening of the euro, Canadian dollar and Russian ruble,
each against the U.S. dollar and the expiration, at the end of 2014, of
our consulting agreements with Frank Stronach.
Equity Income
Equity income increased $7 million to $55 million for the first quarter
of 2015 compared to $48 million for the first quarter of 2014.
Other Expense, net
During the first quarter of 2014, we recorded net restructuring charges
of $22 million ($20 million after tax) in Europe at our exterior and
interior systems operations. We expect full year 2015 restructuring
charges to be approximately $15 million.
Segment Analysis
Given the differences between the regions in which we operate, our
operations are segmented on a geographic basis. Consistent with the
above, our internal financial reporting 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 our long-term strategic
direction and future global growth.
Our chief operating decision maker uses Adjusted EBIT as the measure of
segment profit or loss, since we believe Adjusted EBIT is the most
appropriate measure of operational profitability or loss for our
reporting segments. Adjusted EBIT represents income from operations
before income taxes; interest expense, net; and other expense, net.
|
| For the three months ended March 31, |
|
| Total Sales |
| Adjusted EBIT |
|
| 2015 |
2014
|
Change
|
| 2015 |
2014
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
| $ | 4,697 |
$
|
4,668
|
$
|
29
|
| $ | 460 | $
|
443
|
$
|
17
|
Europe |
|
| 3,113 |
|
3,773
|
|
(660)
|
|
| 124 |
|
127
|
|
(3)
|
Asia |
|
| 483 |
|
463
|
|
20
|
|
| 47 |
|
29
|
|
18
|
Rest of World |
|
| 133 |
|
161
|
|
(28)
|
|
| (4) |
|
(13)
|
|
9
|
Corporate and Other |
|
| (96) |
|
(104)
|
|
8
|
|
| 15 |
|
19
|
|
(4)
|
Total reportable segments
|
| $ | 8,330 |
$
|
8,961
|
$
|
(631)
|
| $ | 642 |
$
|
605
|
$
|
37
|
Excluded from Adjusted EBIT for the three months ended March 31, 2014
was $22 million of net restructuring costs recorded in our Europe
segment, as discussed in the "Other Expense" section.
North America
Reported Adjusted EBIT in North America increased $17 million to $460
million for the first quarter of 2015 compared to $443 million for the
first quarter of 2014. Reported U.S. dollar Adjusted EBIT was
negatively impacted by the weakening of the Canadian dollar against the
U.S. dollar. Excluding the effect of foreign exchange translation,
Adjusted EBIT increased primarily as a result of:
-
higher equity income;
-
lower affiliation fees paid to Corporate;
-
margins earned on higher production sales;
-
decreased pre-operating costs incurred at new facilities;
-
decreased stock-based compensation; and
-
productivity and efficiency improvements at certain facilities.
These factors were partially offset by:
-
lower recoveries associated with scrap steel;
-
higher launch costs;
-
a greater amount of employee profit sharing;
-
operational inefficiencies at certain facilities;
-
higher warranty costs of $4 million; and
-
net customer price concessions subsequent to the first quarter of 2014.
Europe
Reported Adjusted EBIT in Europe decreased $3 million to $124 million
for the first quarter of 2015 compared to $127 million for the first
quarter of 2014. The decrease in reported Adjusted EBIT was due to the
weakening of foreign currencies against the U.S. dollar, including the
euro, Russian ruble and Czech koruna. Excluding the effect of foreign
exchange translation, Adjusted EBIT increased primarily as a result of:
-
productivity and efficiency improvements at certain facilities;
-
lower affiliation fees paid to Corporate; and
-
lower warranty costs of $4 million.
These factors were partially offset by:
-
lower equity income;
-
higher launch costs;
-
operational inefficiencies at certain facilities; and
-
net customer price concessions subsequent to the first quarter of 2014.
Asia
Adjusted EBIT in Asia increased $18 million to $47 million for the first
quarter of 2015 compared to $29 million for the first quarter of 2014
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 affiliation fees paid to Corporate.
These factors were partially offset by:
-
increased pre-operating costs incurred at new facilities;
-
higher launch costs; and
-
net customer price concessions subsequent to the first quarter of 2014.
Rest of World
Adjusted EBIT in Rest of World increased $9 million to a loss of $4
million for the first quarter of 2015 compared to a loss of $13 million
for the first quarter of 2014 primarily as a result of:
-
productivity and efficiency improvements at certain facilities;
-
a decrease in reported U.S. dollar EBIT loss due to the weakening of the
Brazilian real against the U.S. dollar;
-
lower launch costs; and
-
net customer price increases subsequent to the first quarter of 2014.
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.
Corporate and Other
Corporate and Other Adjusted EBIT decreased $4 million to $15 million
for the first quarter of 2015 compared to $19 million for the first
quarter of 2014 primarily as a result of:
-
a decrease in affiliation fees earned from our divisions;
-
increased stock-based compensation; and
-
a $1 million net decrease in valuation gains in respect of ABCP.
These factors were partially offset by the expiration, at the end of
2014, of our consulting agreements with Frank Stronach.
Interest Expense, net
During the first quarter of 2015, we recorded net interest expense of
$11 million compared to $2 million for the first quarter of 2014. The
$9 million increase is primarily as a result of interest expense on the
$750 million 3.625% fixed rate Senior Notes issued during the second
quarter of 2014 (the "Senior Notes").
Income from Operations before Income Taxes
Income from operations before income taxes increased $50 million to $631
million for the first quarter of 2015 compared to $581 million for the
first quarter of 2014. Excluding Other Expense, discussed in the "Other
Expense" section, income from operations before income taxes for the
first quarter of 2015 increased $28 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 |
| 2015 |
2014
|
| $ |
| % |
$
|
|
%
|
|
|
|
|
|
|
|
|
|
Income taxes as reported | $ | 167 |
| 26.5 |
$
|
189
|
|
32.5
|
Tax effect on Other expense, net |
| — |
| — |
|
2
|
|
(0.8)
|
Austrian Tax Reform |
| — |
| —
|
|
(32)
|
|
(5.3)
|
| $ | 167 |
| 26.5 |
$
|
159
|
|
26.4
|
For the first quarter of 2014, the Austrian government enacted
legislation abolishing the utilization of foreign losses, where the
foreign subsidiary is not a member of the European Union. Furthermore,
any foreign losses used by Austrian entities arising in those non
European Union subsidiaries are subject to recapture in Austria. As a
consequence of this change, we recorded a charge to income tax expense
of $32 million ("Austrian Tax Reform") in the first quarter of 2014.
Excluding the Austrian Tax Reform and Other Expense, after tax, the
effective income tax rate increased to 26.5% for the first quarter of
2015 compared to 26.4% for the first quarter of 2014 primarily as a
result of lower favourable audit settlements and an increase in
permanent items offset by a reduction in losses not benefitted in
Europe, South America and Asia.
Net Income
Net income of $464 million for the first quarter of 2015 increased $72
million compared to the first quarter of 2014. Excluding Other Expense,
after tax, as discussed in the "Other Expense" section and the Austrian
Tax Reform as discussed in the "Income Taxes" section, net income
increased $20 million or 5%. The increase in net income is the result
of the increase in income from operations before income taxes partially
offset by higher income taxes.
Net Loss Attributable to Non-controlling Interests
Net loss attributable to non-controlling interests was $1 million for
the first quarters of 2015 and 2014.
Net Income Attributable to Magna International Inc.
Net income attributable to Magna International Inc. of $465 million for
the first quarter of 2015 increased $72 million compared to the first
quarter of 2014. Excluding Other Expense, after tax, as discussed in
the "Other Expense" section and the Austrian Tax Reform as discussed in
the "Income Taxes" section, net income attributable to Magna
International Inc. increased $20 million primarily as a result of the
increase in net income, as discussed above.
Earnings per Share (restated)
|
| For the three months |
|
|
|
| ended March 31, |
|
|
|
| 2015 |
2014
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Common Share
|
|
|
|
|
|
|
|
Basic
| $ | 1.14 |
$
|
0.89
|
+
|
28%
|
|
Diluted
|
$ | 1.12 |
$
|
0.88
|
+
|
27%
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Common Shares outstanding (millions)
|
|
|
|
|
|
|
|
Basic |
| 409.3 |
|
440.6
|
-
|
7%
|
|
Diluted |
| 415.0 |
|
447.0
|
-
|
7%
|
Diluted earnings per share increased $0.24 to $1.12 for the first
quarter of 2015 compared to $0.88 for the first quarter of 2014. Other
Expense, after tax, and the Austrian Tax Reform, negatively impacted
diluted earnings per share by $0.12 in the first quarter of 2014. Other
Expense and the Austrian Tax Reform are discussed in the "Other
Expense" and "Income Taxes" sections, respectively. Excluding the $0.12
per share negative impact for the first quarter of 2014, diluted
earnings per share increased $0.12 or 12%, as a result of the increase
in net income attributable to Magna International Inc. and a decrease
in the weighted average number of diluted shares outstanding during the
first quarter of 2015.
The decrease in the weighted average number of diluted shares
outstanding was due to the purchase and cancellation of Common Shares,
during or subsequent to the first quarter of 2014, pursuant to our
normal course issuer bids.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations
| For the three months |
|
|
|
| ended March 31, |
|
|
|
| 2015 |
|
2014
|
|
Change
|
|
|
|
|
|
|
|
|
|
Net income
| $ | 464 |
|
$
|
392
|
|
|
|
Items not involving current cash flows |
| 188 |
|
|
279
|
|
|
|
|
| 652 |
|
|
671
|
|
$
|
(19)
|
Changes in operating assets and liabilities |
| (358) |
|
|
(197)
|
|
|
|
Cash provided from operating activities
| $ | 294 |
|
$
|
474
|
|
$
|
(180)
|
Cash flow from operations before changes in operating assets and
liabilities decreased $19 million to $652 million for the first quarter
of 2015 compared to $671 million for the first quarter of 2014. The
decrease in cash flow from operations was due to a $91 million decrease
in items not involving current cash flows partially offset by a $72
million increase in net income, as discussed above. Items not involving
current cash flows are comprised of the following:
|
| For the three months |
|
| ended March 31, |
|
| 2015 |
|
2014
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$ | 205 |
|
$
|
217
|
Amortization of other assets included in cost of goods sold |
|
| 29 |
|
|
29
|
Other non-cash charges |
|
| 3 |
|
|
6
|
Equity income in excess of dividends received |
|
| (18) |
|
|
(11)
|
Deferred income taxes |
|
| (31) |
|
|
38
|
Items not involving current cash flows
|
| $ | 188 |
|
$
|
279
|
Cash invested in operating assets and liabilities amounted to $358
million for the first quarter of 2015 compared to $197 million for the
first quarter of 2014. The change in operating assets and liabilities
is comprised of the following sources (and uses) of cash:
|
| For the three months |
|
| ended March 31, |
|
| 2015
|
|
2014
|
|
|
|
|
|
|
|
Accounts receivable
|
| $ | (543) |
|
$
|
(834)
|
Inventories |
|
| (124) |
|
|
(29)
|
Prepaid expenses and other |
|
| (15) |
|
|
9
|
Accounts payable |
|
| 146 |
|
|
328
|
Accrued salaries and wages |
|
| 74 |
|
|
105
|
Other accrued liabilities |
|
| 51 |
|
|
168
|
Income taxes payable/receivable |
|
| 53 |
|
|
56
|
Changes in operating assets and liabilities
|
| $ | (358) |
|
$
|
(197)
|
The increase in accounts receivable, accounts payable and accrued
salaries and wages in the first quarter of 2015 was primarily due to an
increase in production activities at the end of the first quarter of
2015 compared to the end of 2014. The increase in inventories was
primarily due to increased tooling inventory to support upcoming
launches and higher production inventory due to the increase in
production activities at the end of the first quarter of 2015 compared
to the end of 2014.
Capital and Investment Spending
|
| For the three months |
|
|
|
|
| ended March 31, |
|
|
|
|
| 2015 |
|
2014
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
Fixed asset additions
|
| $ | (280) |
|
$
|
(217)
|
|
|
|
Investments and other assets
|
|
| (42) |
|
|
(54)
|
|
|
|
Fixed assets, investments and other assets additions |
|
| (322) |
|
|
(271)
|
|
|
|
Purchase of subsidiaries |
|
| (1) |
|
|
—
|
|
|
|
Proceeds from disposition |
|
| 25 |
|
|
37
|
|
|
|
Cash used for investment activities
|
| $ | (298) |
|
$
|
(234)
|
|
$
|
(64)
|
Fixed assets, investments and other assets additions
In the first quarter of 2015, we invested $280 million in fixed assets.
While investments were made to refurbish or replace assets consumed in
the normal course of business and for productivity improvements, a
large portion of the investment in the first quarter of 2015 was for
manufacturing equipment for programs that will be launching subsequent
to the first quarter of 2015.
In the first quarter of 2015, we invested $38 million in other assets
related primarily to fully reimbursable tooling and engineering costs
for programs that launched during the first quarter of 2015 or will be
launching subsequent to the first quarter of 2015. In addition, we
invested $4 million in equity accounted investments.
Proceeds from disposition
In the first quarter of 2015, the $25 million of proceeds include normal
course fixed and other asset disposals.
Financing
| For the three months |
|
|
|
| ended March 31, |
|
|
|
| 2015 |
|
2014
|
|
Change
|
|
|
|
|
|
|
|
|
|
Increase in bank indebtedness
|
$ | 73 |
|
$
|
3
|
|
|
|
Issues of debt |
| 15 |
|
|
31
|
|
|
|
Issues of Common Shares on exercise of stock options |
| 6 |
|
|
25
|
|
|
|
Repayments of debt
|
|
(45) |
|
|
(70)
|
|
|
|
Repurchase of Common Shares |
| —
|
|
|
(240)
|
|
|
|
Dividends paid |
| (89) |
|
|
(83)
|
|
|
|
Cash used for financing activities
| $ | (40) |
|
$
|
(334)
|
|
$
|
294
|
The increase in bank indebtedness primarily relates to an increase in
outstanding cheques.
Repayments of debt consist of reductions of term debt in our Asia and
Rest of World segments.
Cash dividends paid per Common Share were $0.22 for the first quarter of
2015, for a total of $89 million.
Financing Resources
|
| As at |
|
As at
|
|
|
|
|
| March 31, |
|
December 31,
|
|
|
|
|
| 2015 |
|
2014 |
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
| $ | 85 |
|
$
|
33
|
|
|
|
|
Long-term debt due within one year |
|
| 160 |
|
|
184
|
|
|
|
|
Long-term debt |
|
| 797 |
|
|
811
|
|
|
|
|
|
| 1,042 |
|
|
1,028
|
|
|
|
Non-controlling interests |
|
| 13 |
|
|
14
|
|
|
|
Shareholders' equity |
|
| 8,560 |
|
|
8,659
|
|
|
|
Total capitalization
|
| $ | 9,615 |
|
$
|
9,701
|
|
$
|
(86)
|
Total capitalization decreased by $86 million to $9.62 billion at March
31, 2015 compared to $9.70 billion at December 31, 2014, primarily as a
result of a $99 million decrease in shareholders' equity partially
offset by a $14 million increase in liabilities.
The decrease in shareholders' equity was primarily as a result of:
-
the $438 million net unrealized loss on translation of our net
investment in operations whose functional currency is not the U.S.
dollar;
- $89 million of dividends paid during the first quarter of 2015; and
-
the $65 million net unrealized loss on cash flow hedges.
These factors were partially offset by the $464 million of net income
earned in the first quarter of 2015.
Cash Resources
During the first quarter of 2015, our cash resources decreased by
$120 million to $1.13 billion as a result of the cash used for
investing and financing activities partially offset by cash provided
from operating activities, as discussed above. In addition to our cash
resources at March 31, 2015, we had term and operating lines of credit
totalling $2.54 billion of which $2.23 billion was unused and
available.
On April 24, 2015, our $2.25 billion revolving credit facility maturing
June 20, 2019 was extended to June 22, 2020. 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.
Maximum Number of Shares Issuable
The following table presents the maximum number of shares that would be
outstanding if all of the outstanding options at May 6, 2015 were
exercised:
|
Common Shares
|
|
|
410,776,410
|
|
Stock options (i)
|
|
|
9,390,712
|
|
|
|
|
420,167,122
|
(i) | Options to purchase Common Shares are exercisable by the holder in
accordance with the vesting provisions and upon payment of the exercise price as may be determined from time to time
pursuant to our stock option plans. |
Contractual Obligations and Off-Balance Sheet Financing
There have been no material changes with respect to the contractual
obligations requiring annual payments during the first quarter of 2015
that are outside the ordinary course of our business. Refer to our MD&A
included in our 2014 Annual Report.
SUBSEQUENT EVENTS
Consistent with our strategy to refine our product portfolio and
increase our footprint in emerging markets, we recently announced the
following:
(a) Divestiture of Interiors Operations
On April 16, 2015, we announced the signing of an agreement to sell
substantially all of our interiors operations to Grupo Antolin. The
purchase price for the operations, excluding certain assets, is
approximately $525 million, subject to customary closing adjustments.
The transaction is subject to customary closing conditions, including
regulatory approval, and is expected to close in the third quarter of
2015. The planned divestiture will be reported as discontinued
operations upon closing. Sales related to the interiors operations
being divested were approximately $2.4 billion and $2.5 billion for the
years ended December 31, 2014 and 2013, respectively. We will continue
managing our seating operations, which are not included in this
agreement.
(b) Formation of Joint Venture
On May 4, 2015, Magna and Chongqing Xingqiaorui ("Xingqiaorui")
announced the signing of an agreement to form a strategic joint venture
in China to supply body and chassis components to the Chinese market.
Under the terms of the agreement, we will hold a 53% stake in the joint
venture while Xingqiaorui will hold the remaining 47%. The transaction
is expected to close in late 2015 or early 2016, subject to regulatory
approvals.
(c) Sale of Battery Systems
On May 5 2015, we sold our battery pack business to Samsung SDI for
proceeds of approximately $120 million.
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 three months ended March 31, 2015, 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,
2014.
CONTROLS AND PROCEDURES
There have been no changes in our internal controls over financial
reporting that occurred during the three months ended March 31, 2015
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;
statements relating to the strategic benefits expected to result from
the sale of substantially all of our interiors operations (the
"Transaction"). The forward-looking statements or forward-looking
information in this press release is presented for the purpose of
providing information about management's current expectations and plans
and such information may not be appropriate for other purposes.
Forward-looking statements or forward-looking information 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 or forward-looking information. Any such
forward-looking statements or forward-looking information 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; fluctuations in relative currency values;
restructuring, downsizing and/or other significant non-recurring costs;
continued underperformance of one or more of our operating Divisions;
ongoing pricing pressures, including our ability to offset price
concessions demanded by our customers; our ability to successfully
launch material new or takeover business; shifts in market share away
from our top customers; inability to grow our business with OEMs;
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,
Eastern Europe, Thailand, Brazil, Argentina 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 labour disruption;
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; 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; our ability to successfully identify,
complete and integrate acquisitions or achieve anticipated synergies;
our ability to conduct appropriate due diligence on acquisition
targets; the consummation of the Transaction, including required
antitrust and other regulatory approvals; the satisfaction or waiver of
conditions to complete the Transaction; warranty or indemnity
obligations to the purchaser in the Transaction in relation to
pre-closing liabilities; warranty and recall costs; risk of production
disruptions due to natural disasters or other catastrophic events; the
security and reliability of our IT systems; pension liabilities; legal
claims and/or regulatory actions against us, including the ongoing
antitrust investigations being conducted by German and Brazilian
authorities; 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 or forward-looking information, we caution readers not to
place undue reliance on any forward-looking statements or
forward-looking information, 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 or forward-looking information. 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 or
forward-looking information to reflect subsequent information, events,
results or circumstances or otherwise.
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
[Unaudited]
[U.S. dollars in millions, except per share figures]
|
|
|
| Three months ended March 31, |
|
Note
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Sales
|
|
| $ | 8,330 |
|
|
$
| 8,961
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
| 7,183 |
|
|
| 7,762
|
|
Depreciation and amortization
|
|
|
| 205 |
|
|
| 217
|
|
Selling, general and administrative
|
10
|
|
| 355 |
|
|
|
425
|
|
Interest expense, net
|
|
|
| 11 |
|
|
|
2
|
|
Equity income
|
|
|
| (55) |
|
|
|
(48)
|
|
Other expense, net
|
2
|
|
| — |
|
|
|
22
|
Income from operations before income taxes
|
|
|
|
631 |
|
|
| 581
|
Income taxes
|
6
|
|
| 167 |
|
|
| 189
|
Net income
|
|
|
| 464 |
|
|
|
392
|
Net loss attributable to non-controlling interests
|
|
|
| 1 |
|
|
|
1
|
Net income attributable to Magna International Inc.
|
|
| $ | 465 |
|
|
$
| 393
|
|
|
|
|
|
|
|
|
|
Earnings per Common Share (restated - see note 1):
|
3
|
|
|
|
|
|
|
|
|
Basic
|
|
| $ | 1.14 |
|
|
$
|
0.89
|
|
Diluted
|
|
| $ |
1.12 |
|
|
$
| 0.88
|
|
|
|
|
|
|
|
|
|
Cash dividends paid per Common Share (restated)
|
|
| $ |
0.22 |
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
Weighted average number of Common Shares outstanding
during the period [in millions] (restated):
|
3
|
|
|
|
|
|
|
|
|
Basic |
|
|
| 409.3 |
|
|
|
440.6
|
|
Diluted |
|
|
| 415.0 |
|
|
|
447.0
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
[Unaudited]
[U.S. dollars in millions]
|
|
|
| Three months ended March 31, |
|
Note
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Net income
|
|
| $ | 464 |
|
|
$
| 392
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax:
|
12
|
|
|
|
|
|
|
|
|
Net unrealized loss on translation of net investment in foreign
operations
|
|
|
|
(438) |
|
|
| (112)
|
|
Net unrealized gain (loss) on available-for-sale investments
|
|
|
|
1 |
|
|
| (1)
|
|
Net unrealized loss on cash flow hedges
|
|
|
| (65) |
|
|
|
(31)
|
|
Reclassification of net loss (gain) on cash flow hedges to net income
|
|
|
|
11 |
|
|
|
(1)
|
|
Reclassification of net loss on pensions to net income
|
|
|
| 1 |
|
|
|
1
|
|
Pension and post retirement benefits
|
|
|
| (1) |
|
|
| —
|
Other comprehensive loss
|
|
|
| (491) |
|
|
| (144)
|
Comprehensive (loss) income
|
|
|
|
(27) |
|
|
|
248
|
Comprehensive loss attributable to non-controlling interests
|
|
|
|
1 |
|
|
|
1
|
Comprehensive (loss) income attributable to Magna International Inc.
|
|
| $ |
(26) |
|
|
$
| 249
|
See accompanying notes
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
|
|
|
| Three months ended March 31, |
|
Note
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Cash provided from (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income
|
|
| $ |
464 |
|
|
$
| $ 392
|
Items not involving current cash flows
|
4
|
|
|
188 |
|
|
| 279
|
|
|
|
| 652 |
|
|
| 671
|
Changes in non-cash operating assets and liabilities
|
4
|
|
|
(358) |
|
|
| (197)
|
Cash provided from operating activities |
|
|
|
294 |
|
|
| 474
|
|
|
|
|
|
|
|
|
|
INVESTMENT ACTIVITIES |
|
|
|
|
|
|
|
|
Fixed asset additions
|
|
|
|
(280) |
|
|
|
(217)
|
Purchase of subsidiaries
|
|
|
|
(1) |
|
|
| —
|
Increase in investments and other assets
|
|
|
|
(42) |
|
|
|
(54)
|
Proceeds from disposition |
|
|
|
25 |
|
|
| 37
|
Cash used for investing activities
|
|
|
| (298) |
|
|
|
(234)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Increase in bank indebtedness
|
|
|
|
73 |
|
|
|
3
|
Repayments of debt
|
|
|
|
(45) |
|
|
| (70)
|
Issues of debt |
|
|
| 15 |
|
|
| 31
|
Issues of Common Shares on exercise of stock options
|
|
|
|
6 |
|
|
|
25
|
Repurchase of Common Shares
|
11
|
|
|
— |
|
|
|
(240)
|
Dividends
|
|
|
|
(89) |
|
|
|
(83)
|
Cash used for financing activities
|
|
|
|
(40) |
|
|
|
(334)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
(76) |
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents during the period
|
|
|
|
(120) |
|
|
|
(115)
|
Cash and cash equivalents, beginning of period
|
|
|
|
1,253 |
|
|
|
1,554
|
Cash and cash equivalents, end of period
|
|
| $ |
1,133 |
|
|
$
|
1,439
|
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
|
Note
|
|
| As at March 31,
2015 |
|
|
|
As at
December 31,
2014
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
4
|
| $ |
1,133 |
|
|
$
| 1,253
|
Accounts receivable
|
|
|
|
5,895 |
|
|
|
5,635
|
Inventories
|
5
|
|
|
2,731 |
|
|
|
2,757
|
Income taxes receivable
|
|
|
|
— |
|
|
|
16
|
Deferred tax assets
|
|
|
|
208 |
|
|
|
186
|
Prepaid expenses and other
|
|
|
|
184 |
|
|
|
160
|
|
|
|
| 10,151 |
|
|
| 10,007
|
|
|
|
|
|
|
|
|
|
Investments
|
13
|
|
|
422 |
|
|
|
419
|
Fixed assets, net
|
|
|
|
5,468 |
|
|
|
5,664
|
Goodwill
|
|
|
|
1,275 |
|
|
|
1,350
|
Deferred tax assets
|
|
|
| 154 |
|
|
|
147
|
Other assets
|
7
|
|
|
516 |
|
|
|
552
|
|
|
| $ | 17,986 |
|
|
$
| 18,139
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
| $ |
85 |
|
|
$
|
33
|
Accounts payable
|
|
|
|
5,013 |
|
|
|
5,105
|
Accrued salaries and wages
|
|
|
|
758 |
|
|
|
730
|
Other accrued liabilities
|
8
|
|
|
1,541 |
|
|
|
1,538
|
Income taxes payable
|
|
|
| 27 |
|
|
|
—
|
Deferred tax liabilities
|
|
|
|
22 |
|
|
|
21
|
Long-term debt due within one year
|
|
|
| 160 |
|
|
|
184
|
|
|
|
| 7,606 |
|
|
|
7,611
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
797 |
|
|
|
811
|
Long-term employee benefit liabilities
|
9
|
|
|
535 |
|
|
|
580
|
Other long-term liabilities
|
|
|
| 327 |
|
|
|
292
|
Deferred tax liabilities
|
|
|
|
148 |
|
|
|
172
|
|
|
|
| 9,413 |
|
|
|
9,466
|
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
|
Capital stock
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
|
|
|
|
|
[issued: 410,613,154; December 31, 2014 - 410,325,270 (restated)]
|
11
|
|
|
3,995 |
|
|
|
3,979
|
Contributed surplus
|
|
|
|
86 |
|
|
|
83
|
Retained earnings
|
|
|
|
5,528 |
|
|
|
5,155
|
Accumulated other comprehensive loss
|
12
|
|
|
(1,049) |
|
|
|
(558)
|
|
|
|
| 8,560 |
|
|
|
8,659
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
|
13 |
|
|
|
14
|
|
|
|
| 8,573 |
|
|
|
8,673
|
|
|
| $ | 17,986 |
|
|
$
|
18,139
|
See accompanying notes
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[Unaudited]
[U.S. dollars in millions]
|
|
|
| Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
| Number |
|
| Stated Value |
|
| Contri- buted Surplus |
|
| Retained Earnings |
|
| AOCI (i) |
|
| Non- controlling Interest |
|
| Total Equity |
|
| [in millions] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014 | |
|
| 410.3
|
|
$
|
3,979
|
|
$
|
83
|
|
$
|
5,155
|
|
$
|
(558)
|
|
$
|
14
|
|
$
|
8,673
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
(1)
|
|
|
464
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(491)
|
|
|
|
|
|
(491)
|
Shares issued on exercise of stock options
|
|
|
|
0.3
|
|
|
8
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
6
|
Release of restricted stock
|
|
|
|
|
|
|
5
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Stock-based compensation expense
|
10
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
10
|
Dividends paid
|
|
|
|
|
|
|
3
|
|
|
|
|
|
(92)
|
|
|
|
|
|
|
|
|
(89)
|
Balance, March 31, 2015 |
|
|
| 410.6 |
| $ | 3,995 |
| $ | 86 |
| $ | 5,528 |
| $ | (1,049) |
| $ | 13 |
| $ | 8,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
| Number |
|
| Stated Value |
|
| Contri- buted Surplus |
|
| Retained Earnings |
|
| AOCI (i) |
|
| Non- controlling Interest |
|
| Total Equity |
|
| [in millions (restated)] |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013 |
|
|
| 442.3
|
|
$
|
4,230
|
|
$
|
69
|
|
$
|
5,011
|
|
$
|
313
|
|
$
|
16
|
|
$
|
9,639
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
393
|
|
|
|
|
|
(1)
|
|
|
392
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144)
|
|
|
|
|
|
(144)
|
Shares issued on exercise of stock options
|
|
|
|
1.3
|
|
|
32
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
25
|
Release of restricted stock
|
|
|
|
|
|
|
5
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Repurchase and cancellation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
under normal course issuer bid
|
11
|
|
|
(5.4)
|
|
|
(52)
|
|
|
|
|
|
(184)
|
|
|
(4)
|
|
|
|
|
|
(240)
|
Stock-based compensation expense
|
10
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
10
|
Reclassification from liability
|
10
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
Dividends paid
|
|
|
|
0.1
|
|
|
2
|
|
|
|
|
|
(85)
|
|
|
|
|
|
|
|
|
(83)
|
Balance, March 31, 2014 |
|
|
| 438.3 |
| $ | 4,217 |
| $ | 74 |
| $ | 5,135 |
| $ | 165 |
| $ | 15 |
| $ | 9,606 |
(i) AOCI is Accumulated Other Comprehensive Income. |
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 U.S. dollars following U.S. generally
accepted accounting principles ["GAAP"] and the accounting policies as
set out in note 1 to the annual consolidated financial statements for
the year ended December 31, 2014.
The unaudited interim consolidated financial statements do not conform
in all respects to the requirements of GAAP for annual financial
statements. Accordingly, these unaudited interim consolidated financial
statements should be read in conjunction with the December 31, 2014
audited consolidated financial statements and notes included in the
Company's 2014 Annual Report.
The unaudited interim consolidated financial statements reflect all
adjustments, which consist only of normal and recurring adjustments,
necessary to present fairly the financial position at March 31, 2015
and the results of operations, changes in equity and cash flows for the
three-months ended March 31, 2015 and 2014.
[b] Stock Split
On March 25, 2015, the Company completed a two-for-one stock split,
which was implemented by way of a stock dividend, whereby shareholders
received an additional Common Share for each Common Share held. All
equity-based compensation plans or arrangements were adjusted to
reflect the issuance of additional Common Shares.
Accordingly, all of the Company's issued and outstanding Common Shares,
incentive stock options, and restricted and deferred stock units have
been restated for all periods presented to reflect the stock split. In
addition, earnings per Common Share, Cash dividends paid per Common
Share, weighted average exercise price for stock options and the
weighted average fair value of options granted have been restated for
all periods presented to reflect the stock split.
[c] Future Accounting Standard
Revenue Recognition
In May 2014, the FASB issued ASU 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.
[d] Seasonality
The Company's businesses are generally not seasonal. However, the
Company's sales and profits are closely related to its automotive
customers' vehicle production schedules. The Company's largest North
American customers typically halt production for approximately two
weeks in July and one week in December. Additionally, many of the
Company's customers in Europe typically shutdown vehicle production
during portions of August and one week in December.
2. OTHER EXPENSE, NET
During the first quarter 2014, the Company recorded net restructuring
charges of $22 million [$20 million after tax] in Europe at its
exterior and interior systems operations.
3. EARNINGS PER SHARE
Earnings per share are computed as follows and have been restated to
reflect the effect of the Stock Split [Note 1]:
|
| Three months ended March 31, |
|
|
| 2015 |
|
|
|
2014
|
Basic earnings per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Magna International Inc.
|
| $ |
465 |
|
|
$
|
393
|
|
|
|
|
|
|
|
|
Weighted average number of Common Shares outstanding
|
|
| 409.3 |
|
|
|
440.6
|
|
|
|
|
|
|
|
|
Basic earnings per Common Share
|
| $ |
1.14 |
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
Diluted earnings per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Magna International Inc.
|
| $ |
465 |
|
|
$
|
393
|
|
|
|
|
|
|
|
|
Weighted average number of Common Shares outstanding
|
|
|
409.3 |
|
|
| 440.6
|
Adjustments
|
|
|
|
|
|
|
|
|
Stock options and restricted stock [a]
|
|
|
5.7 |
|
|
|
6.4
|
|
|
| 415.0 |
|
|
|
447.0
|
|
|
|
|
|
|
|
|
Diluted earnings per Common Share
|
| $ |
1.12 |
|
|
$
|
0.88
|
[a]
|
For the three months ended March 31, 2015, diluted earnings per Common
Share exclude 0.5 million [2014 - 0.4 million (restated)]
Common Shares issuable under the Company's Incentive Stock Option Plan
because these options were not "in-the-money".
|
4.DETAILS OF CASH FROM OPERATING ACTIVITIES
[a] Cash and cash equivalents:
|
|
| March 31, |
|
|
|
December 31,
|
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
Bank term deposits, bankers acceptances and government paper
|
| $ |
993 |
|
|
$
|
1,058
|
Cash
|
|
| 140 |
|
|
|
195
|
|
| $ | 1,133 |
|
|
$
|
1,253
|
[b] Items not involving current cash flows:
|
| Three months ended March 31, |
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
| $ |
205 |
|
|
$
| 217
|
Amortization of other assets included in cost of goods sold
|
|
|
29 |
|
|
| 29
|
Other non-cash charges
|
|
|
3 |
|
|
|
6
|
Equity income in excess of dividends received
|
|
|
(18) |
|
|
| (11)
|
Deferred income taxes
|
|
|
(31) |
|
|
| 38
|
|
| $ | 188 |
|
|
$
| 279
|
[c] Changes in non-cash operating assets and liabilities:
| Three months ended |
| March 31, |
|
|
|
| 2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
| $ |
(543) |
|
|
$
|
(834)
|
Inventories |
|
|
| (124) |
|
|
|
(29)
|
Prepaid expenses and other
|
|
|
| (15) |
|
|
|
9
|
Accounts payable
|
|
|
| 146 |
|
|
| 328
|
Accrued salaries and wages
|
|
|
| 74 |
|
|
|
105
|
Other accrued liabilities |
|
|
| 51 |
|
|
|
168
|
Income taxes receivable/payable
|
|
|
|
53 |
|
|
| 56
|
|
|
| $ | (358) |
|
|
$
|
(197)
|
5. INVENTORIES
Inventories consist of:
|
|
|
| March 31, |
|
|
|
December 31,
|
|
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Raw materials and supplies
|
|
| $ | 898 |
|
|
$
|
914
|
Work-in-process
|
|
|
| 242 |
|
|
|
241
|
Finished goods
|
|
|
| 316 |
|
|
|
362
|
Tooling and engineering
|
|
|
|
1,275 |
|
|
|
1,240
|
|
|
| $ | 2,731 |
|
|
$
|
2,757
|
Tooling and engineering inventory represents costs incurred on tooling
and engineering services contracts in excess of billed and unbilled
amounts included in accounts receivable.
6. INCOME TAXES
For the first quarter of 2014, the Austrian government enacted
legislation abolishing the utilization of foreign losses, where the
foreign subsidiary is not a member of the European Union. Furthermore,
any foreign losses used by Austrian entities arising in those non
European Union subsidiaries are subject to recapture in Austria. As a
consequence of this change, the Company recorded a charge to tax
expense of $32 million.
7. OTHER ASSETS
Other assets consist of:
|
|
|
| March 31, |
|
|
|
December 31,
|
|
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Preproduction costs related to long-term supply agreements with
contractual guarantee for reimbursement
|
|
|
$ | 247 |
|
|
$
|
259
|
Customer relationship intangibles
|
|
|
|
92 |
|
|
|
108
|
Long-term receivables
|
|
|
|
82 |
|
|
|
87
|
Patents and licences, net
|
|
|
|
34 |
|
|
|
36
|
Pension overfunded status
|
|
|
|
13 |
|
|
|
13
|
Unrealized gain on cash flow hedges
|
|
|
|
12 |
|
|
|
8
|
Other, net
|
|
|
|
36 |
|
|
|
41
|
|
|
| $ | 516 |
|
|
$
|
552
|
8. WARRANTY
The following is a continuity of the Company's warranty accruals:
|
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
| $ | 88 |
|
| $
|
91
|
Expense, net
|
|
|
| 7 |
|
|
| 7
|
Settlements
|
|
|
| (10) |
|
|
| (7)
|
Foreign exchange and other
|
|
|
| (6) |
|
|
| —
|
Balance, March 31
|
|
| $ | 79 |
|
|
$
|
91
|
9. LONG-TERM EMPLOYEE BENEFIT LIABILITIES
The Company recorded long-term employee benefit expenses as follows:
| Three months ended |
| March 31, |
|
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans and other
|
|
| $ | 4 |
|
| $
|
3
|
Termination and long service arrangements |
|
|
| 7 |
|
|
| 9
|
|
|
| $ | 11 |
|
| $
|
12
|
10. STOCK-BASED COMPENSATION
[a] Incentive Stock Option Plan
The following is a continuity schedule of options outstanding [number of
options in the table below are expressed in whole numbers] and has been
restated to reflect the effect of the Stock Split [note 1]:
|
| 2015 |
|
2014
|
|
| 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
|
|
| 8,314,658 |
|
| 27.03 |
|
| 4,614,488 |
|
| 9,516,216
|
|
|
20.91
|
|
|
5,694,218
|
Granted
|
|
| 1,614,336 |
|
|
68.24 |
|
|
— |
|
| 1,502,600
|
|
|
53.36
|
|
|
—
|
Exercised
|
|
| (239,362) |
|
| 29.49 |
|
| (239,362) |
|
| (1,360,704)
|
|
|
19.75
|
|
|
(1,360,704)
|
Cancelled
|
|
|
(103,332) |
|
| 34.30 |
|
| — |
|
|
(33,998)
|
|
|
26.10
|
|
|
(12,000)
|
Vested
|
|
|
— |
|
| — |
|
|
1,965,904 |
|
| —
|
|
|
—
|
|
|
1,558,768
|
March 31
|
|
| 9,586,300 |
|
|
33.83 |
|
|
6,341,030 |
|
| 9,624,114
|
|
|
26.12
|
|
|
5,880,282
|
(i)
| The exercise price noted above represents the weighted average exercise
price in Canadian dollars. |
The weighted average assumptions used in measuring the fair value of
stock options granted are as follows:
| Three months ended |
| March 31, |
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
Risk free interest rate |
|
| 0.97% |
|
|
|
1.60%
|
Expected dividend yield |
|
| 2.00% |
|
|
|
2.00%
|
Expected volatility |
|
| 26% |
|
|
|
29%
|
Expected time until exercise |
|
| 4.6 years |
|
|
|
4.5 years
|
|
|
|
|
|
|
|
|
Weighted average fair value of options granted in period [Cdn$]
(restated)
|
|
$ | 12.84 |
|
|
$
|
11.47
|
[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] and has been restated to reflect the effect
of the Stock Split [note 1]:
|
|
| 2015 |
|
|
| 2014
|
|
|
| Number |
|
|
| Stated |
|
|
|
Number
|
|
|
|
Stated
|
|
|
| of shares |
|
|
| value |
|
|
|
of shares
|
|
|
|
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awarded and not released, beginning of period |
|
| 1,174,648 |
|
| $ | 20 |
|
|
|
1,460,952
|
|
|
$
|
25
|
Release of restricted stock
|
|
| (286,312) |
|
|
| (4) |
|
|
|
(286,304)
|
|
|
|
(5)
|
Awarded and not released, March 31
|
|
| 888,336 |
|
| $ |
16 |
|
|
|
1,174,648
|
|
|
$
|
20
|
[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] and has been restated to reflect the effect of the Stock
Split [note 1]:
|
| 2015 |
|
2014
|
|
| Equity |
| Liability |
|
| Equity |
|
|
|
|
| Equity
|
|
|
Liability
|
|
|
Equity
|
|
|
|
|
| classified |
|
classified |
|
| classified |
|
|
|
|
| classified
|
|
|
classified
|
|
|
classified
|
|
|
|
|
| RSUs |
| RSUs |
|
| DSUs |
|
| Total |
|
|
RSUs
|
|
|
RSUs
|
|
|
DSUs
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
| 985,278 |
| 46,052 |
|
| 303,261 |
|
| 1,334,591 |
|
|
1,263,708
|
|
|
60,238
|
|
|
254,894
|
|
|
1,578,840
|
Granted
|
|
120,958 |
| 15,790 |
|
| 12,112 |
|
| 148,860 |
|
|
101,618
|
|
|
16,050
|
|
|
12,630
|
|
|
130,298
|
Dividend equivalents
|
| 424 |
| 262 |
|
| 1,009 |
|
| 1,695 |
|
|
505
|
|
|
306
|
|
|
1,058
|
|
|
1,869
|
Released
|
|
(16,518) |
|
— |
|
| — |
|
| (16,518) |
|
|
(16,518)
|
|
|
—
|
|
|
—
|
|
|
(16,518)
|
Balance, March 31 |
| 1,090,142 |
| 62,104 |
|
| 316,382 |
|
| 1,468,628 |
|
|
1,349,313
|
|
|
76,594
|
|
|
268,582
|
|
|
1,694,489
|
[d] Compensation expense related to Stock-based compensation
Stock-based compensation expense recorded in selling, general and
administrative expenses related to the above programs is as follows:
|
| Three months ended March 31, |
|
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Incentive Stock Option Plan
|
|
| $ | 3 |
|
|
$
|
4
|
Long-term retention
|
|
|
| 1 |
|
|
|
1
|
Restricted stock unit
|
|
|
| 6 |
|
|
|
5
|
Total stock-based compensation expense
|
|
| $ | 10 |
|
|
$
|
10
|
11. COMMON SHARES
[a] During the first quarter of 2014, the Company repurchased 5,420,000
shares [restated to reflect the effect of the Stock Split [note 1]] under a normal course issuer bid for cash consideration of $240
million.
[b] The following table presents the maximum number of shares that would
be outstanding if all the dilutive instruments outstanding at May 6,
2015 were exercised or converted:
Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
410,776,410
|
Stock options (i)
|
|
|
|
|
|
|
|
|
|
|
|
9,390,712
|
|
|
|
|
|
|
|
|
|
|
|
|
420,167,122
|
(i) | Options to purchase Common Shares are exercisable by the holder in
accordance with the vesting provisions and upon payment of the exercise
price as may be determined from time to time pursuant to the Company's
stock option plans. |
12. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following is a continuity schedule of accumulated other
comprehensive (loss) income:
|
|
|
| 2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Accumulated net unrealized (loss) gain on translation of net investment
in foreign operations
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
$ | (255) |
|
|
$
|
454
|
|
Net unrealized loss
|
|
|
| (438) |
|
|
| (112)
|
|
Repurchase of shares under normal course issuer bid |
|
|
| — |
|
|
| (4)
|
|
Balance, March 31
|
|
|
| (693) |
|
|
|
338
|
|
|
|
|
|
|
|
|
|
Accumulated net unrealized loss on cash flow hedges (i) |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
| (113) |
|
|
| (20)
|
|
Net unrealized loss
|
|
|
| (65) |
|
|
| (31)
|
|
Reclassification of net loss (gain) to net income
|
|
|
|
11 |
|
|
| (1)
|
|
Balance, March 31
|
|
|
|
(167) |
|
|
|
(52)
|
|
|
|
|
|
|
|
|
|
Accumulated net unrealized loss on pensions (ii) |
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
| (186) |
|
|
|
(117)
|
|
Net unrealized loss
|
|
|
|
(1) |
|
|
| —
|
|
Reclassification of net loss to net income
|
|
|
|
1 |
|
|
| 1
|
|
Balance, March 31
|
|
|
|
(186) |
|
|
|
(116)
|
|
|
|
|
|
|
|
|
|
Accumulated net unrealized loss on available-for-sale investments
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
| (4) |
|
|
| (4)
|
|
Net unrealized gain (loss)
|
|
|
| 1 |
|
|
|
(1)
|
|
Balance, March 31
|
|
|
|
(3) |
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive (loss) income
|
|
|
$ | (1,049) |
|
|
$
|
165
|
(i) The amount of income tax benefit that has been netted in the
accumulated net unrealized loss on cash flow hedges is as follows:
|
|
|
| 2015 |
|
|
| 2014 |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
| $ 44 |
|
|
| $ 5 |
Net unrealized loss |
|
|
| 27 |
|
|
| 10 |
Reclassification of net (loss) gain to net income |
|
|
| (5) |
|
|
| 1 |
Balance, March 31 |
|
|
| $ 66 |
|
|
| $ 16 |
|
|
|
|
|
|
|
|
|
(ii) The amount of income tax benefit that has been netted in the
accumulated net unrealized loss on pensions is as follows:
|
|
|
| 2015 |
|
|
| 2014 |
|
|
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
| $ 36 |
|
|
| $ 14 |
Reclassification of net loss to net income |
|
|
| — |
|
|
| — |
Balance, March 31 |
|
|
| $ 36 |
|
|
| $ 14 |
|
|
|
|
|
|
|
|
|
The amount of other comprehensive loss that is expected to be
reclassified to net income over the next 12 months is $80 million [net
of income taxes of $33 million].
13. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and financial liabilities consist of
the following:
|
|
| March 31, |
|
|
December 31,
|
|
|
|
| 2015 |
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
| $ | 1,133 |
|
|
$
|
1,253
|
|
Investment in ABCP |
|
|
| 82 |
|
|
|
88
|
|
|
| $ | 1,215 |
|
|
$
|
1,341
|
|
|
|
|
|
|
|
|
|
Held to maturity investments
|
|
|
|
|
|
|
|
|
|
Severance investments
|
|
| $ | 4 |
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
Equity investments
|
|
| $ | 6 |
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
Loans and receivables
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
| $ | 5,895 |
|
|
$
|
5,635
|
|
Long-term receivables included in other assets
|
|
|
|
82 |
|
|
|
87
|
|
|
| $ | 5,977 |
|
|
$
|
5,722
|
|
|
|
|
|
|
|
|
|
Other financial liabilities
|
|
|
|
|
|
|
|
|
|
Bank indebtedness
|
|
| $ | 85 |
|
|
$
|
33
|
|
Long-term debt (including portion due within one year)
|
|
|
| 957 |
|
|
|
995
|
|
Accounts payable
|
|
|
|
5,013 |
|
|
|
5,105
|
|
|
| $ | 6,055 |
|
|
$
|
6,133
|
|
|
|
|
|
|
|
|
|
Derivatives designated as effective hedges, measured at fair value
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
| $ | 40 |
|
|
$
|
22
|
|
Other assets
|
|
|
| 12 |
|
|
|
8
|
|
Other accrued liabilities
|
|
|
|
(144) |
|
|
|
(93)
|
|
Other long-term liabilities
|
|
|
| (124) |
|
|
|
(82)
|
|
|
|
| (216) |
|
|
|
(145)
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
|
|
|
|
|
|
|
Other accrued liabilities
|
|
|
|
(1) |
|
|
|
(1)
|
|
|
| $ | (217) |
|
|
$
|
(146)
|
[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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
| $ | 52 |
|
| $ | 49 |
|
| $ | 3 |
|
Liabilities
|
|
|
$ | (267) |
|
| $ | (49) |
|
| $ | (218) |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
| $
| 30
|
|
|
$
|
28
|
|
|
$
|
2
|
|
Liabilities |
|
|
$
| (174)
|
|
|
$
|
(28)
|
|
|
$
|
(146)
|
[c] Fair value
The Company determined the estimated fair values of its financial
instruments based on valuation methodologies it believes are
appropriate; however, considerable judgment is required to develop
these estimates. Accordingly, these estimated fair values are not
necessarily indicative of the amounts the Company could realize in a
current market exchange. The estimated fair value amounts can be
materially affected by the use of different assumptions or
methodologies. The methods and assumptions used to estimate the fair
value of financial instruments are described below:
Cash and cash equivalents, accounts receivable, bank indebtedness and
accounts payable.
Due to the short period to maturity of the instruments, the carrying
values as presented in the consolidated balance sheets are reasonable
estimates of fair values.
Investments
At March 31, 2015, the Company held Canadian third party asset-backed
commercial paper ["ABCP"] with a face value of Cdn$107 million
[December 31, 2014 - Cdn$107 million]. The carrying value and estimated
fair value of this investment was Cdn$103 million [December 31, 2014 -
Cdn$102 million]. As fair value information is not readily determinable
for the Company's investment in ABCP, the fair value was based on a
valuation technique estimating the fair value from the perspective of a
market participant.
At March 31, 2015, the Company held available-for-sale investments in
publicly traded companies. The carrying value and fair value of these
investments was $6 million, which was based on the closing share price
of the investments on March 31, 2015.
Term debt
The Company's term debt includes $160 million due within one year. Due
to the short period to maturity of this debt, the carrying value as
presented in the consolidated balance sheets is a reasonable estimate
of its fair value.
Senior Notes
At March 31, 2015, the total estimated fair value of the Senior Notes
was approximately $766 million, determined primarily using active
market prices, categorized as Level 1 inputs within GAAP's fair value
hierarchy.
[d] Currency risk and foreign exchange contracts
At March 31, 2015, 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
|
|
|
|
283
|
|
|
|
1,372
|
|
euro amount
|
|
|
|
56
|
|
|
|
10
|
|
Korean won amount
|
|
|
|
22,022
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
For U.S. dollars
|
|
|
|
|
|
|
|
|
|
Peso amount
|
|
|
| 8,146
|
|
|
|
113
|
|
Korean won amount
|
|
|
|
35,210
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
For euros
|
|
|
|
|
|
|
|
|
|
U.S. amount
|
|
|
|
207
|
|
|
|
406
|
|
GBP amount
|
|
|
|
18
|
|
|
|
45
|
|
Czech Koruna amount
|
|
|
|
6,245
|
|
|
|
—
|
|
Polish Zlotys amount
|
|
|
|
271
|
|
|
|
—
|
Forward contracts mature at various dates through 2019. Foreign
currency exposures are reviewed quarterly.
14. CONTINGENCIES
From time to time, the Company may become involved in regulatory
proceedings, or become liable for legal, contractual and other claims
by various parties, including customers, suppliers, former employees,
class action plaintiffs and others. On an ongoing basis, the Company
attempts to assess the likelihood of any adverse judgments or outcomes
to these proceedings or claims, together with potential ranges of
probable costs and losses. A determination of the provision required,
if any, for these contingencies is made after analysis of each
individual issue. The required provision may change in the future due
to new developments in each matter or changes in approach such as a
change in settlement strategy in dealing with these matters.
[a] In November 1997, the Company and two of its subsidiaries were sued
by KS Centoco Ltd., an Ontario-based steering wheel manufacturer in
which the Company has a 23% equity interest, and by Centoco Holdings
Limited, the owner of the remaining 77% equity interest in KS Centoco
Ltd. In March 1999, the plaintiffs were granted leave to make
substantial amendments to the original statement of claim in order to
add several new defendants and claim additional remedies, and in
February 2006, the plaintiffs further amended their claim to add an
additional remedy. The amended statement of claim alleges, among other
things:
-
breach of fiduciary duty by the Company and two of its subsidiaries;
-
breach by the Company of its binding letter of intent with KS Centoco
Ltd., including its covenant not to have any interest, directly or
indirectly, in any entity that carries on the airbag business in North
America, other than through MST Automotive Inc., a company to be 77%
owned by Magna and 23% owned by Centoco Holdings Limited;
-
the plaintiff's exclusive entitlement to certain airbag technologies in
North America pursuant to an exclusive licence agreement, together with
an accounting of all revenues and profits resulting from the alleged
use by the Company, TRW Inc. ["TRW"] and other unrelated third party
automotive supplier defendants of such technology in North America;
-
a conspiracy by the Company, TRW and others to deprive KS Centoco Ltd.
of the benefits of such airbag technology in North America and to cause
Centoco Holdings Limited to sell to TRW its interest in KS Centoco Ltd.
in conjunction with the Company's sale to TRW of its interest in MST
Automotive GmbH and TEMIC Bayern-Chemie Airbag GmbH; and
-
oppression by the defendants.
The plaintiffs are seeking, amongst other things, damages of
approximately Cdn$3.5 billion. Document production, completion of
undertakings and examinations for discovery are substantially complete,
although limited additional examinations for discovery may occur. A
trial is not expected to commence until 2016, at the earliest. The
Company believes it has valid defences to the plaintiffs' claims and
therefore intends to continue to vigorously defend this case.
Notwithstanding the amount of time which has transpired since the claim
was filed, these legal proceedings remain at an early stage and,
accordingly, it is not possible to predict their outcome.
[b] In September 2013, representatives of the Bundeskartellamt, the
German Federal Cartel Office, attended at one of the Company's
operating divisions in Germany to obtain information in connection with
an ongoing antitrust investigation relating to suppliers of automotive
textile coverings and components, particularly trunk linings.
In September 2014, the Conselho Administrativo de Defesa Economica,
Brazil's Federal competition authority, attended at one of the
Company's operating divisions in Brazil to obtain information in
connection with an ongoing antitrust investigation relating to
suppliers of automotive door latches and related products.
Proceedings of this nature can often continue for several years. Where
wrongful conduct is found, the relevant antitrust authority can,
depending on the jurisdiction, initiate administrative or criminal
legal proceedings and impose administrative or criminal fines or
penalties taking into account several mitigating and aggravating
factors. In the case of the German Federal Cartel Office,
administrative fines are tied to the level of affected sales and the
consolidated sales of the group of companies to which the offending
entity belongs. At this time, management is unable to predict the
duration or outcome of the German and Brazilian investigations,
including whether any operating divisions of the Company will be found
liable for any violation of law or the extent or magnitude of any
liability, if found to be liable.
The Company's policy is to comply with all applicable laws, including
antitrust and competition laws. The Company has initiated a global
review focused on antitrust risk led by a team of external counsel. If
any antitrust violation is found as a result of the above-referenced
investigations or otherwise, Magna could be subject to fines, penalties
and civil, administrative or criminal legal proceedings that could have
a material adverse effect on Magna's profitability in the year in which
any such fine or penalty is imposed or the outcome of any such
proceeding is determined. Additionally, Magna could be subject to other
consequences, including reputational damage, which could have a
material adverse effect on the Company.
[c] In certain circumstances, the Company is at risk for warranty costs
including product liability and recall costs. Due to the nature of the
costs, the Company makes its best estimate of the expected future costs
[note 8]; however, the ultimate amount of such costs could be materially
different. The Company continues to experience increased customer
pressure to assume greater warranty responsibility. Currently, under
most customer agreements, the Company only accounts for existing or
probable claims. Under certain complete vehicle engineering and
assembly contracts, the Company records an estimate of future
warranty-related costs based on the terms of the specific customer
agreements, and the specific customer's warranty experience.
15. SEGMENTED INFORMATION
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 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
|
|
| March 31, 2015 |
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
| Fixed |
|
|
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
| Total |
|
| External |
|
| Adjusted |
|
| assets, |
|
|
Total
|
|
|
External
|
|
|
Adjusted
|
|
|
assets,
|
|
|
| sales |
|
|
sales |
|
| EBIT |
|
| net |
|
|
sales
|
|
|
sales
|
|
|
EBIT
|
|
|
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
$ | 1,464 |
| $ | 1,359 |
|
| |
| $ | 610 |
|
$
|
1,604
|
|
$
|
1,487
|
|
|
|
|
$
|
574
|
|
United States
|
|
| 2,408 |
|
| 2,303 |
|
|
|
|
| 1,280 |
|
| 2,321
|
|
|
2,197
|
|
|
|
|
|
1,117
|
|
Mexico
|
|
|
1,095 |
|
| 1,011 |
|
|
|
|
| 671 |
|
| 1,039
|
|
|
958
|
|
|
|
|
|
609
|
|
Eliminations
|
|
|
(270) |
|
| — |
|
|
|
|
| — |
|
| (296)
|
|
|
—
|
|
|
|
|
|
—
|
|
|
| 4,697 |
|
| 4,673 |
|
| $ 460 |
|
| 2,561 |
|
|
4,668
|
|
|
4,642
|
|
|
$ 443
|
|
|
2,300
|
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding Great Britain) |
|
| 2,404 |
|
| 2,342 |
|
| |
|
| 1,213 |
|
|
3,080
|
|
|
3,015
|
|
|
|
|
|
1,392
|
|
Great Britain |
|
| 200 |
|
| 199 |
|
| |
|
| 105 |
|
| 182
|
|
|
182
|
|
|
|
|
|
73
|
|
Eastern Europe |
|
| 602 |
|
| 528 |
|
|
|
|
| 499 |
|
|
628
|
|
|
530
|
|
|
|
|
|
656
|
|
Eliminations
|
|
|
(93) |
|
| — |
|
|
|
|
| — |
|
|
(117)
|
|
|
—
|
|
|
|
|
|
—
|
|
|
| 3,113 |
|
| 3,069 |
|
| 124 |
|
| 1,817 |
|
| 3,773
|
|
|
3,727
|
|
|
127
|
|
|
2,121
|
Asia |
|
|
483 |
|
| 455 |
|
| 47 |
|
| 665 |
|
|
463
|
|
|
428
|
|
|
29
|
|
|
596
|
Rest of World
|
|
| 133 |
|
| 133 |
|
| (4) |
|
| 67 |
|
|
161
|
|
|
161
|
|
|
(13)
|
|
|
102
|
Corporate and Other |
|
| (96) |
|
| — |
|
| 15 |
|
| 358 |
|
| (104)
|
|
|
3
|
|
|
19
|
|
|
269
|
Total reportable segments |
|
| 8,330 |
|
| 8,330 |
|
| 642 |
|
| 5,468 |
|
| 8,961
|
|
|
8,961
|
|
|
605
|
|
|
5,388
|
Other expense, net
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
(22)
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
| (11) |
|
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
|
|
| $ | 8,330 |
| $ | 8,330 |
| $ | 631 |
|
| 5,468 |
| $
|
8,961
|
|
$
|
8,961
|
|
$
|
581
|
|
|
5,388
|
Current assets |
|
| |
|
|
|
|
|
|
|
| 10,151 |
|
|
|
|
|
|
|
|
|
|
|
10,551
|
Investments, goodwill, deferred tax assets and other assets |
|
|
|
|
|
|
|
|
|
|
| 2,367 |
|
|
|
|
|
|
|
|
|
|
|
2,609
|
Consolidated total assets |
|
|
|
|
| |
|
|
|
| $ | 17,986 |
|
|
|
|
|
|
|
|
|
|
$
|
18,548
|
16. SUBSEQUENT EVENTS
[a] Divestiture of Interiors Operations
On April 16, 2015, the Company announced the signing of an agreement to
sell substantially all of its interiors operations to Grupo Antolin.
The purchase price for the operations, excluding certain assets, is
approximately $525 million, subject to customary closing adjustments.
The transaction is subject to customary closing conditions, including
regulatory approval, and is expected to close in the third quarter of
2015. The planned divestiture will be reported as discontinued
operations upon closing. Sales related to the interiors operations
being divested were approximately $2.4 billion and $2.5 billion for the
years ended December 31, 2014 and 2013, respectively. Magna will
continue managing its seating operations, which are not included in
this agreement.
[b] Formation of Joint Venture
On May 4, 2015, the Company and Chongqing Xingqiaorui ["Xingqiaorui"]
announced the signing of an agreement to form a strategic joint venture
in China to supply body and chassis components to the Chinese market.
Under the terms of the agreement, the Company will hold a 53% stake in
the joint venture while Xingqiaorui will hold the remaining 47%. The
transaction is expected to close in late 2015 or early 2016, subject to
regulatory approvals.
[c] Sale of Battery Systems
On May 5, 2015, the Company sold its battery pack business to Samsung
SDI for proceeds of approximately $120 million.
[d] Credit Facility Extension
On April 24, 2015, the Company's $2.25 billion revolving credit facility
maturing June 20, 2019 was extended to June 22, 2020. 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.
SOURCE Magna International Inc.
<p> <b>Louis Tonelli, Vice-President, Investor Relations at 905-726-7035.</b> </p> <p> <b>For teleconferencing questions, please contact Nancy Hansford at 905-726-7108.</b> </p>