Magna announces fourth quarter and record fiscal year 2000
results
AURORA, ON, Feb. 21 - Magna International Inc.
today reported sales, profits and earnings per share for the
fiscal year and fourth quarter ended December 31, 2000.
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YEARS ENDED THREE MONTHS ENDED
------------ ------------------
December December December December
31, 31, 31, 31,
2000 1999 (1) 2000 1999 (1)
---- ---- ---- ----
Sales (3) $10,513 $9,447 $2,741 $2,579
Net Income $ 598 (2) $ 419 $ 120 $ 127
Excl. Other Income $ 497 $ 419 $ 120 $ 127
Fully diluted earnings
per share $ 6.34 (2) $ 4.63 $ 1.26 $ 1.36
Excl. Other Income $ 5.26 $ 4.63 $ 1.26 $ 1.36
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(1) Net Income and fully diluted earnings per share have been
restated due to an accounting policy change relating to design
and engineering and pre-production costs. For more information
see note 2 to the Consolidated Financial Statements attached.
(2) Includes after tax gains totalling $101 million ($1.08 per
share) on the sale of the Company's remaining Class A Subordinate
Voting shares of Tesma International Inc. ("Tesma"), Invotronics
Manufacturing ("Invotronics") and the Company's equity interest
in Webasto Sunroofs Inc. ("Webasto").
(3) Effective December 31, 2000, Magna Entertainment Corp.
("MEC") changed its method of accounting for revenue
recognition. The change in accounting presentation has been
retroactively applied.
All results are reported in millions of U.S. dollars, except per
share figures.
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Sales for the fiscal year and fourth quarter ended December 31, 2000 were
$10.5 billion and $2.7 billion, respectively, increases of approximately 11%
and 6% over the comparable periods ended December 31, 1999. The record sales
level in fiscal 2000 reflects increases over the prior year of 12% in North
American content per vehicle and 8% in European content per vehicle, excluding
the 13% reduction related to the impact of foreign currency translation on
European sales. During fiscal 2000, North American and European vehicle
production each increased approximately 1% over 1999. Tooling and other sales
increased over the prior year by 23% to $1.3 billion.
Net income for fiscal 2000, excluding Other Income, was a record $497
million, an increase of 19% over 1999. For the fourth quarter of 2000, net
income was $120 million, compared to $127 million in the comparable quarter.
Including Other Income, net income for fiscal 2000 increased to $598 million.
Other Income for the fiscal year included gains totalling $101 million on the
sale of Tesma shares, Invotronics and the Company's equity interest in
Webasto.
Fully diluted earnings per share were a record $5.26 for fiscal 2000
excluding Other Income, representing an increase of 14% over fiscal 1999. For
the fourth quarter of 2000, fully diluted earnings per share were $1.26
compared to $1.36 in the comparable quarter. Including Other Income, fully
diluted earnings per share for fiscal 2000 increased to $6.34.
During the fourth quarter of 2000, cash generated from operations before
changes in working capital was $259 million. Total investment activities
during the quarter were $312 million, including $237 million in fixed assets
and $68 million in acquisitions. Acquisitions included Decoma's purchase of
the remaining interest in the Conix joint venture and MEC's purchase of Bay
Meadows.
The Company also announced that its Board of Directors had today declared
its regular quarterly dividend with respect to its outstanding Class A
Subordinate Voting Shares and Class B Shares for the fiscal quarter ended
December 31, 2000. The dividend of $0.34 per share is payable on March 16,
2001 to shareholders of record on March 5, 2001.
2001 OUTLOOK
------------
Magna's results are expected to be impacted by the negative conditions
that are affecting the automotive industry generally, including production cut-
backs, OEM requests for price concessions, continued weakness of the Euro and
general economic uncertainty. Based on the Company's forecasted declines in
2001 production volumes of approximately 10% in North America and 5% in Europe
over 2000 production volumes and anticipated product mix, Magna expects
automotive sales for the full 2001 year to range from US $9.8 billion to US
$10.3 billion, compared to fiscal 2000 automotive sales of US $10.1 billion,
and fully diluted earnings per share for 2001 are expected to be in the range
of $4.70 to $5.30, compared to fiscal 2000 earnings of $5.26, excluding Other
Income. For the first quarter of 2001, the Company has assumed that vehicle
volumes will decline approximately 19% in North America and 7% in Europe.
Based on these volume assumptions and the anticipated product mix for the
first quarter of 2001, Magna expects automotive sales to be between $2.3
billion and $2.5 billion and earnings per share to be in the range of $1.05 to
$1.20.
SPINOFF PROPOSAL
----------------
Magna also announced that its Board of Directors, based on the report and
recommendations of a special board committee, unanimously approved today the
creation of two new global operating groups or systems corporations, Magna
Interiors and Magna Steyr, with the intention that both systems corporations
subsequently become publicly traded corporations when market conditions permit
and subject to regulatory approvals. In reaching this decision, the Board
determined that it was in the best interests of Magna and its shareholders to
provide Interiors and Magna Steyr with access to capital markets following the
successful examples of Tesma and Decoma. This will be accomplished by spinning
off Interiors and Magna Steyr in accordance with Magna's spinoff policy and
shareholder guidelines approved by Magna's shareholders in 1982 and 1987.
Magna will retain ownership of Cosma, the world's leading independent metal
former. The Board reached this decision based on the unanimous recommendation
of the special board committee which was composed entirely of independent
outside directors after extensive consideration and the receipt of advice from
independent outside financial and legal advisers.
Interiors, composed of the Company's existing Atoma Closure Systems
(ACES) group, Magna Seating Systems (MSS) group and Magna Interior Systems
(MIS) group, will be a leading global interior systems integrator and supplier
of complete seats, instrument and trim panels and closure systems.
As previously announced in November 2000, Magna's Steyr-Daimler-Puch
vehicle assembly and Steyr Powertrain groups have been reorganized under the
name "Magna Steyr". In order to further the strategic objective of the Magna
Steyr group to become the market leader in providing complete hydroformed
chassis-on-wheels and advanced hydroformed chassis modules to OEM customers,
Magna Steyr will work with the hydroforming and European stamping operations
of Cosma to exploit these markets.
MANAGEMENT CHANGES
------------------
The Company also announced today that Mr. Donald Walker and Mr. Siegfried
Wolf have agreed to lead the management teams at Interiors and Magna Steyr.
Mr. Walker was formerly the President and Chief Executive Officer of Magna.
Mr. Wolf was formerly the Vice-Chairman of Magna and President of Magna
Europe. Ms. Belinda Stronach has been appointed as Chief Executive Officer and
Vice-Chairman and Mr. James Nicol as President and Chief Operating Officer as
a result of Mr. Walker's and Mr. Wolf's new appointments. Mr. Walker will
chair, and Mr. Wolf will be a member of, the Executive Strategy Committee,
along with the other group presidents and members of senior Magna management,
including Ms. Stronach and Mr. Nicol. This Committee will be responsible for,
amongst other things, co-ordinating global program strategies and customer
requests across Magna.
Mr. Walker stated: "I strongly support this decision of the Board to
create Interiors and Magna Steyr as formidable global competitors in their
product areas. I am also delighted to be taking on the challenge of
establishing Interiors as the premier global supplier of interior modules and
total integrated interior solutions. My interest, and where I believe I can
add the best value, is by running a company where I am closer to day-to-day
operating issues and Interiors offers me this opportunity. Magna is left with
a strong management team led by Belinda Stronach and Jim Nicol who have many
years of experience with Magna in the automotive industry and I look forward
to working with them as the chair of the Executive Strategy Committee."
On behalf of the Board, Magna's Chairman, Mr. Stronach said: "Don has
made a great contribution to this Company over the last decade during which
Magna's sales and profits have grown significantly. Siegfried has made a
similar contribution to our European operations. We are pleased that both Don
and Siegfried have agreed to undertake this new challenge and will continue as
Magna directors. The Board is also confident that the management team led by
Belinda Stronach and Jim Nicol have the complementary skills and experience to
continue to provide strong leadership and ensure the continued application of
the unique Magna culture and principles." Commenting on the proposed spinoffs,
Mr. Stronach said: "By spinning out these two groups, we believe we will
unlock shareholder value and unleash the human capital within these groups by
bringing ownership closer to our employees."
<<
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
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(Unaudited)
(United States dollars in millions,
except per share figures)
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Twelve months ended Three months ended
December December December December
31, 31, 31, 31,
2000 1999 2000 1999
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(restated, see (restated, see
notes 2 and 3) notes 2 and 3)
Sales:
Automotive $10,099 $ 9,260 $ 2,666 $ 2,535
Magna Entertainment Corp. 414 187 75 44
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10,513 9,447 2,741 2,579
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Automotive costs and expenses:
Cost of goods sold 8,264 7,659 2,192 2,072
Depreciation and amortization 372 332 94 87
Selling, general and
administrative 655 607 170 166
Interest expense, net 13 16 - 11
Equity income (14) (17) (2) (4)
Magna Entertainment Corp. costs
and expenses 412 183 90 47
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Operating income - automotive 809 663 212 203
Operating income (loss) - Magna
Entertainment Corp. 2 4 (15) (3)
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Operating income 811 667 197 200
Other income - automotive
(note 4) 161 - - -
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Income before income taxes and
minority interest 972 667 197 200
Income taxes 348 229 71 67
Minority interest 26 19 6 6
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Net Income $ 598 $ 419 $ 120 $ 127
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Financing charges on Preferred
Securities and other paid-in
capital $ (45) $ (31) $ (11) $ (10)
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Net income available to Class A
Subordinate Voting and Class B
Shareholders 553 388 109 117
Retained earnings, beginning
of period 1,446 1,202 1,707 1,349
Dividends on Class A Subordinate
Voting and Class B Shares
(note 3) (209) (70) (27) (20)
Surrender of subsidiary stock
options (1) - - -
Cumulative adjustment for change
in accounting policy (note 2) (74) - -
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Retained earnings, end of
period $ 1,789 $ 1,446 $ 1,789 $ 1,446
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Earnings per Class A Subordinate
Voting or Class B Share:
Basic $ 7.04 $ 4.94 $ 1.38 $ 1.48
Fully diluted $ 6.34 $ 4.63 $ 1.26 $ 1.36
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Cash dividends paid per Class A
Subordinate Voting or Class B
Share $ 1.24 $ 1.11 $ 0.34 $ 0.25
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Average number of Class A
Subordinate Voting and Class B
Shares outstanding during the
period (in millions):
Basic 78.5 78.5 78.5 78.5
Fully diluted 93.3 91.8 93.4 92.5
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MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
(United States dollars in millions)
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Twelve months ended Three months ended
December December December December
31, 31, 31, 31,
2000 1999 2000 1999
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(restated, (restated,
see note 2) see note 2)
Cash provided from (used for):
OPERATING ACTIVITIES
Net income $ 598 $ 419 $ 120 $ 127
Items not involving current
cash flows 393 373 139 124
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991 792 259 251
Changes in non-cash working
capital (336) (79) 43 82
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655 713 302 333
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INVESTMENT ACTIVITIES
Fixed asset additions (653) (859) (237) (223)
Purchase of subsidiaries (68) (211) (68) (72)
Increase in investments and other (28) (26) (7) (19)
Proceeds from disposition of
investments and other 346 146 (13) 36
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(403) (950) (325) (278)
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FINANCING ACTIVITIES
Net issue (repayment) of debt (80) 144 93 65
Repayments of debentures'
interest obligations (33) (30) (9) (8)
Preferred Securities distribution (26) (3) (7) (3)
Issue of Preferred Securities - 274 - -
Issue of 7.08% Subordinated
Debentures - 104 - -
Surrender of subsidiary stock
options (2) - - -
Issues of shares by subsidiaries 4 1 - 1
Dividends paid to minority
interests (6) (3) (2) (1)
Dividends (97) (87) (27) (20)
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(240) 400 48 34
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Effect of exchange rate changes
on cash and cash equivalents (24) (15) 9 (8)
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Net increase (decrease) in cash
and cash equivalents during
the period (12) 148 34 81
Cash and cash equivalents,
beginning of period 632 484 586 551
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Cash and cash equivalents,
end of period $ 620 $ 632 $ 620 $ 632
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MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
(United States dollars in millions)
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December 31, December 31,
2000 1999
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ASSETS
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(restated,
Current assets: see note 2)
Cash and cash equivalents $ 620 $ 632
Accounts receivable 1,684 1,467
Inventories 767 760
Prepaid expenses and other 66 46
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3,137 2,905
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Investments 86 89
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Fixed assets, net 3,589 3,498
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Goodwill, net 295 267
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Future tax assets 96 93
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Other assets 205 181
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$7,408 $7,033
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness $ 338 $ 339
Accounts payable 1,314 1,362
Accrued salaries and wages 215 202
Other accrued liabilities 119 213
Income taxes payable 51 56
Long-term debt due within one year 46 70
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2,083 2,242
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Long-term debt 268 253
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Debentures' interest obligation 191 208
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Other long-term liabilities 84 85
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Future tax liabilities 224 188
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Minority interest 356 124
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Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinate Voting Shares
(issued: 77,467,153; December 31, 1999
-77,438,465) 1,442 1,441
Class B Shares
(convertible into Class A Subordinate
Voting Shares)(issued: 1,097,909;
December 31, 1999 - 1,097,909) 1 1
Preferred Securities 277 277
Other paid-in capital 734 689
Retained earnings 1,789 1,446
Currency translation adjustment (41) 79
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4,202 3,933
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$7,408 $7,033
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Notes:
1. In the opinion of management, the unaudited interim consolidated
financial statements reflect all adjustments, which consist only of
normal and recurring adjustments, necessary to present fairly the
financial position at December 31, 2000 and the results of
operations and cash flows for the years ended December 31, 2000 and
1999.
2. In September 1999, the United States Emerging Issues Task Force
issued consensus number 99-5 on accounting for pre-production costs
related to long-term supply agreements which requires that design
and development costs for products to be sold under long-term
supply agreements be expensed as incurred unless a contractual
guarantee for reimbursement exists. The consensus also requires
that design and development costs for moulds, dies and other tools
that a supplier will not own and that will be used in producing the
products under the long-term supply agreement be expensed as
incurred unless the supply arrangement provides the supplier the
non-cancelable right to use the moulds, dies and other tools during
the supply arrangement. Canadian generally accepted accounting
principles ("Canadian GAAP") do not explicitly address these types
of costs.
In addition, in April 1998, the American Institute of Certified
Public Accountants issued new recommendations for the accounting
for costs of start-up activities. These recommendations require
costs of start-up activities to be expensed as incurred. Under
Canadian GAAP, costs incurred in establishing new facilities which
require substantial time to reach commercial production capability
("start-up costs") may be capitalized.
As previously disclosed, the Company has changed its Canadian GAAP
accounting policies for preproduction costs. The Company now:
- expenses start-up costs as incurred;
- expenses design and engineering costs, that are paid for as part
of subsequent related parts production piece price amounts, as
incurred unless a contractual guarantee for reimbursement exists;
and
- expenses design and development costs for moulds, dies and other
tools (that the Company does not own and that will be used in,
and paid for as part of the piece price amounts for, subsequent
related parts production) as incurred unless the supply agreement
provides a contractual guarantee for reimbursement or the non-
cancelable right to use the moulds, dies and other tools during
the supply agreement.
These Canadian GAAP policy changes have been applied retroactively.
Year ended Three months ended
December 31, December 31,
1999 1999
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Increase in cost of sales $ 37 $ 4
Decrease in depreciation and amortization (22) (6)
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Increase (decrease) in operating income -
automotive (15) 2
Decrease in income taxes (4) -
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Increase (decrease) in net income $ (11) $ 2
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Increase (decrease) in earnings per Class A
Subordinate Voting or Class B Share:
Basic $(0.14) $ 0.02
Fully diluted $(0.12) $ 0.02
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December 31, 1999
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Decrease in fixed assets $ (45)
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Decrease in other assets $ (91)
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Decrease in future tax liabilities $ (45)
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Decrease in retained earnings $ (85)
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Decrease in currency translation adjustment $ (6)
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3. In the first quarter of the current year, Magna completed the spin-
off of Magna Entertainment Corp. ("MEC") by paying a dividend of
approximately 20% of MEC's equity to Magna's shareholders. Dividends
include $111 million related to the MEC spin-off.
During the quarter ended December 31, 2000, MEC changed its method of
reporting revenues and costs and expenses. MEC now reports gross
revenues before deducting purses, stakes, awards and certain taxes.
These amounts are now included in costs and expenses. Previously, MEC
reported revenues net of purses, stakes, awards and certain taxes.
All comparative period amounts have been restated on this basis.
4. During the year ended December 31, 2000, the Company recognized a
pretax gain of $36 million on the sale of 4.4 million Class A
Subordinate Voting Shares of Tesma International Inc., a publicly
traded subsidiary of the Company. The Company also completed the sale
of its 50% interest in Webasto Sunroofs Inc., a joint venture, and
related real estate and completed the sale of Invotronics, a wholly-
owned manufacturing division. The Company recognized pretax gains of
$94 million and $31 million on these disposals, respectively.
5. The following table presents the maximum number of Class A Subordinate
Voting and Class B Shares that would be outstanding if all dilutive
instruments outstanding at December 31, 2000 were exercised:
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Class A Subordinate Voting and Class B Shares
outstanding at September 30, 2000 78.6
5% convertible subordinated debentures
(based on holders' conversion option) 6.5
4.875% convertible subordinated debentures
(based on holders' conversion option) 6.5
Stock options 1.9
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93.5
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The above amounts exclude Class A Subordinate Voting Shares issuable,
at the Company's option, to settle the 7.08% subordinated debentures
and Preferred Securities on redemption or maturity.
6. The Company's segmented results of operations are as follows:
Year ended Year ended
December 31, 2000 December 31, 1999
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Operating Fixed Operating Fixed
Total income assets, Total income assets,
sales (loss) net sales (loss) net
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Tier 0.5(TM) Vehicle
and Systems
Integration
Europe $1,036 $ 74 $ 154 $1,136 $ 73 $ 183
North America 14 (26) 24 - (22) 5
Tier One and Two
Automotive
Manufacturing
North America 5,119 424 978 4,485 380 982
Europe 2,075 13 467 2,048 (2) 481
Publicly Traded Tier
One and Two
Automotive
Manufacturing
North America 1,852 172 535 1,571 123 478
Europe 163 9 97 160 8 53
MEC 414 2 569 187 4 567
Corporate and other (160) 143 765 (140) 103 749
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Total reportable
segments 10,513 811 3,589 9,447 667 3,498
Current assets 3,137 2,905
Investments, goodwill
and other assets 682 630
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Consolidated total
assets $ 7,408 $ 7,033
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7. Certain comparative figures have been reclassified to conform to the
current period's method of presentation.
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