Decoma announces results for the five months
ended December 31, 2000
CONCORD, ON, Feb. 22 - Decoma International Inc.
today announced its financial results for the five months ended
December 31, 2000.
<<
Two Months Ended Five Months Ended
December 31 December 31
(millions of Canadian dollars, 2000 1999 2000 1999
except per share figures)
Sales $204.5 $149.6 $530.1 $408.9
Operating Income 14.4 5.7 52.2 31.3
Net Income 6.2 2.4 29.7 20.1
Fully diluted earnings per share $0.10 $0.04 $0.51 $0.38
Weighted average number of
shares outstanding on a
fully diluted basis (millions) 59.4 59.2 59.4 59.2
>>
As previously announced, the Board of Directors of Decoma International
Inc. approved the change in the Company's year end from July 31 to December
31. This change was made to reflect the global nature of Decoma's business and
will enable the Company's financial performance to be compared more readily to
that of its peer group within the automotive parts supply industry.
Sales increased an impressive 37% to $204.5 million for the two month
period ended December 31, 2000 compared to the same two month period ended
December 31, 1999. This substantial increase was achieved during a period when
North American and Mexican vehicle production volumes fell 13% from 2.8
million units to 2.5 million units. The increase in sales is attributable to a
number of factors including the successful launch of new programs, additional
incremental programs and the impact of the Conix acquisition which was
completed on October 16, 2000. The higher sales level reflects an impressive
54% increase in Decoma's North American and Mexican content per vehicle to
$71.04 for the two month period ended December 31, 2000. For the five months
ended December 31, 2000 sales rose 30% to $530.1 million.
Tooling sales included in the above were $27.7 million for the two month
period ended December 31, 2000 and $66.0 million for the five months ended
December 31, 2000, compared to $17.9 million and $31.9 million for the
comparable periods ended December 31, 1999. The increase in tooling sales for
the five months ended December 31, 2000 is the result of significant new
program launches in fiscal 2001.
Operating income in the two month period ended December 31, 2000
increased more than 150% to $14.4 million compared to $5.7 million for the
same period ended December 31, 1999. The improvement reflects the higher
profit contribution from the Company's continued growth and improved operating
margins resulting from Decoma's continuing focus on cost management and
successful program launches. Operating income for the five month period ended
December 31, 2000 increased 67% to $52.2 million from $31.3 million for the
same period ended December 31, 1999. These results for the five month period
ended December 31, 2000 are impressive given the slow down in our customers'
production schedules during the period.
Equity income for the two month period ended December 31, 2000 was a loss
of $0.8 million compared to income of $0.7 million for the comparable period
ended December 31, 1999. Equity income was affected in the period by costs
associated with the launch of a new facility by Decoma Exterior Trim Inc., by
delays in the launch of a significant new program and the general slowing of
industry production volumes. For the five month period ended December 31, 2000
equity income generated a profit of $0.6 million as compared to a $4.9 million
profit for the same period ended December 31, 1999.
Net income for the two month period ended December 31, 2000 rose 158% to
$6.2 million compared to $2.4 million in the same two month period ended
December 31, 1999. Net income for the five months ended December 31, 2000
increased 48% to $29.7 million compared to $20.1 million in the same period
ended December 31, 1999. The improvement in net income reflects improved
operating margins resulting from the sales growth in the period and the
Company's continuing focus on cost reduction and production efficiencies.
For the two month period ended December 31, 2000 fully diluted earnings
per share increased 150% to $0.10 compared to $0.04 for the same two month
period ended December 31, 1999. For the five month period ended December 31,
2000 fully diluted earnings per share increased 34% to $0.51 from $0.38 for
the same period ended December 31, 1999.
During the five months ended December 31, 2000, cash generated from
operations was $62.1 million after changes in non-cash working capital. During
the period the Company invested $21.2 million in fixed assets.
Commenting on the above results, Al Power, Decoma's President and Chief
Executive Officer stated "we are very pleased with the financial results for
the period, particularly given the impact of industry wide slowdowns in
production volume and the launch delays we have experienced. Decoma's
continuing focus on production efficiencies and cost management will be
important factors in helping Decoma offset the potential negative impacts of
the current economic climate on Decoma's overall performance. As well, our
increased content per vehicle and the implementation of our new global product
mandate should continue to positively impact Decoma's performance in the
coming quarters."
On February 22, 2001 Decoma announced that its Board of Directors
declared a dividend in respect of the two month period ended December 31, 2000
of U.S. $0.03 per share on the Class A Subordinate Voting Shares and Class B
Shares payable on April 16, 2001 to shareholders of record on March 30, 2001.
The dividend is approximately a 12% increase compared to the dividend issued
for the three month period ended October 31, 2000, prorated for the two month
period. The dividend is in addition to that paid on the 5% Convertible Series
Preferred Shares.
2001 OUTLOOK
As previously announced, on January 5, 2001, Decoma completed its
acquisition of Magna's European exterior operations and its majority interest
in Decoma Exterior Trim Inc.
Decoma'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, Decoma expects given
the effect of the above mentioned European and Decoma Exterior Trim
acquisitions, sales for the full 2001 year to range from US$1.75 billion to
US$1.9 billion and fully diluted earnings per share for 2001 are expected to
be in the range of US$0.90 to US$1.00. 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, Decoma expects sales to
be between US$390 million and US$410 million and earnings per share to be in
the range of US$0.09 to US$0.13.
Decoma will hold a conference call to discuss the results for the five
month period ended December 31, 2000 on Friday, February 23, 2001 at 9:30 a.m.
EST. The dial-in numbers for the conference call are (416) 641-6448 and
(877) 331-7860 for out of town callers with call-in required 10 minutes prior
to the start of the conference call. The conference call will be chaired by S.
Randall Smallbone, Vice President, Finance and Chief Financial Officer.
Attending the conference call will be Alan J. Power, President and Chief
Executive Officer of Decoma together with other members of senior management.
The conference call will be recorded and copies of the recording will be made
available by request. The conference call will also be available by live
webcast at http://www.newswire.ca/webcast and will be available for a period of 30
days.
Decoma designs, engineers and manufactures automotive fascias, and
related components and plastic body panels and exterior appearance systems for
cars and light trucks, principally for automobile manufacturers in North
America, Mexico and Europe. Decoma has approximately 14,000 employees in 35
manufacturing, engineering and product development facilities in Canada, the
United States, Mexico, Germany, Belgium and England.
This press release contains "forward looking statements" within the
meaning of applicable securities legislation. Such statements involve
important risks and uncertainties that may cause actual results or anticipated
events to be materially different from those expressed or implied herein.
These factors include, but are not limited to, industry cyclicality, changes
in the economic and competitive environments in which Decoma operates and
Decoma's dependence on certain vehicle programs and major OEM customer
relationships. In this regard, readers are referred to the Company's Form 20-F
for its fiscal year ended July 31, 2000, and subsequent SEC filings. The
Company disclaims any intention and undertakes no obligation to update or
revise any forward-looking statements to reflect subsequent information,
events or circumstances or otherwise.
<<
DECOMA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------
(Unaudited)
(Canadian dollars in thousands)
------------------------------------------------------------------------
As at As at
December 31, 2000 July 31, 2000
------------------------------------------------------------------------
ASSETS
------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 75,072 $ 50,702
Accounts receivable 182,273 115,339
Inventories 92,720 83,429
Prepaid expenses and other 15,984 7,405
Income taxes receivable 6,550 -
Accounts receivable from related
companies 2,399 3,006
------------------------------------------------------------------------
374,998 259,881
------------------------------------------------------------------------
Investments 50,846 50,264
------------------------------------------------------------------------
Fixed assets, net 534,730 412,561
------------------------------------------------------------------------
Goodwill, net (note 5) 95,474 -
------------------------------------------------------------------------
Future tax assets (note 4) 2,793 3,179
------------------------------------------------------------------------
Other assets 10,590 10,198
------------------------------------------------------------------------
$1,069,431 $ 736,083
------------------------------------------------------------------------
------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------------------------------------------
Current liabilities:
Bank indebtedness $ 114,752 $ 20,821
Accounts payable 133,925 76,781
Accrued salaries and wages 26,138 24,264
Other accrued liabilities 25,311 22,912
Income taxes payable - 401
Long-term debt due within one year 11,436 831
Debt due to Magna within one year 34,479 40,280
------------------------------------------------------------------------
346,041 186,290
------------------------------------------------------------------------
Long-term debt 42,836 35,511
------------------------------------------------------------------------
Debenture interest obligation
(note 5) 31,148 -
------------------------------------------------------------------------
Future tax liabilities (note 4) 39,790 32,879
------------------------------------------------------------------------
Convertible Series Preferred Shares 145,480 143,802
------------------------------------------------------------------------
Minority interest 10,310 10,365
------------------------------------------------------------------------
Shareholders' equity:
Subordinated Debentures (note 5) 105,243 -
Convertible Series Preferred
Shares (note 6) (convertible into
Class A Subordinate Voting Shares)
(authorized: 1,500,000,
issued: 1,500,000) 7,853 9,939
Class A Subordinate Voting Shares
(note 6) (authorized: unlimited,
issued: 11,218,316) 103,661 103,661
Class B Shares (note 6)
(convertible into Class A
Subordinate Voting Shares)
(authorized: unlimited,
issued 31,909,091) 95,303 95,303
Retained earnings 127,048 103,994
Currency translation adjustment 14,718 14,339
------------------------------------------------------------------------
453,826 327,236
------------------------------------------------------------------------
$1,069,431 $ 736,083
------------------------------------------------------------------------
------------------------------------------------------------------------
-------------------------------------------------------------------------
DECOMA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
-------------------------------------------------------------------------
(Unaudited)
(Canadian dollars in thousands,
except per share figures)
-------------------------------------------------------------------------
Two Months Ended Five Months Ended
December 31 December 31
2000 1999 2000 1999
-------------------------------------------------------------------------
Sales $ 204,545 $ 149,618 $ 530,106 $ 408,882
-------------------------------------------------------------------------
Cost of goods sold 161,785 123,518 413,664 324,817
Depreciation and
amortization 12,658 8,361 26,769 21,267
Selling, general and
administrative 12,027 9,748 28,134 24,888
Affiliation fees and
other charges 3,714 2,317 9,309 6,626
-------------------------------------------------------------------------
Operating income (note 2) 14,361 5,674 52,230 31,284
Equity income (876) 748 582 4,913
Interest expense, net (2,265) (986) (3,572) (2,398)
Amortization of discount
on Convertible Series
Preferred Shares (675) (973) (1,678) (2,420)
-------------------------------------------------------------------------
Income before income taxes
and minority interest 10,545 4,463 47,562 31,379
Income taxes (note 4) 3,863 2,818 17,398 12,352
Minority interest 486 (779) 436 (1,079)
-------------------------------------------------------------------------
Net income 6,196 2,424 29,728 20,106
Dividends on Convertible
Series Preferred Shares,
net of return of capital (1,036) (666) (1,664) (1,345)
Financing charges on
Subordinated Debentures
(note 5) (948) - (1,178) -
-------------------------------------------------------------------------
Net income attributable
to Class A Subordinate
Voting Shares and
Class B Shares 4,212 1,758 26,886 18,761
Retained earnings,
beginning of period 125,424 71,447 103,994 56,600
Dividends on Class A
Subordinate Voting
Shares and Class B Shares (2,588) (2,156) (5,176) (4,312)
Cumulative adjustment for
change in accounting
policy (note 4) - - 1,344 -
-------------------------------------------------------------------------
Retained earnings, end
of period $ 127,048 $ 71,049 $ 127,048 $ 71,049
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per Class A
Subordinate Voting
Share or Class B Share
Basic $0.10 $0.04 $0.63 $0.44
Fully diluted $0.10 $0.04 $0.51 $0.38
-------------------------------------------------------------------------
Average number of Class
A Subordinate Voting
Shares and Class B Shares
outstanding (in millions)
Basic 43.1 43.1 43.1 43.1
Fully diluted 59.4 59.2 59.4 59.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DECOMA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
(Unaudited)
(Canadian dollars in thousands)
-------------------------------------------------------------------------
Two Months Ended Five Months Ended
December 31 December 31
2000 1999 2000 1999
-------------------------------------------------------------------------
Cash provided from (used for):
OPERATING ACTIVITIES
Net income $ 6,196 $ 2,424 $ 29,728 $ 20,106
Items not involving current
cash flows 13,754 7,627 29,183 15,782
-------------------------------------------------------------------------
19,950 10,051 58,911 35,888
Changes in non-cash working
capital 6,711 (17,635) 3,151 (36,328)
-------------------------------------------------------------------------
26,661 (7,584) 62,062 (440)
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Fixed asset additions (11,657) (8,265) (21,199) (29,286)
Acquisition of subsidiary net of
cash acquired (note 5) - - (65,145) -
(Increase) decrease in
investments and other (1,186) 237 (1,839) 718
Proceeds from disposition of
fixed assets 28 15 31 38
-------------------------------------------------------------------------
(12,815) (8,013) (88,152) (28,530)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Decrease in debt due to Magna (3,663) (958) (6,175) (6,049)
Increase (decrease) in bank
indebtedness 15,933 7,431 65,216 (19,464)
Issues of long-term debt 721 8,463 1,651 23,010
Repayments of long-term debt (3,043) (482) (3,441) (482)
Repayment of debenture
interest obligation (2,025) - (2,025) -
Dividends on Class A Subordinate
Voting Shares and Class B Shares - - (2,588) (2,156)
Dividends on Convertible Series
Preferred Shares - - (1,875) (1,875)
-------------------------------------------------------------------------
7,923 14,454 50,763 (7,016)
-------------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents (1,663) (277) (303) (1,119)
-------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents during
the period 20,106 (1,420) 24,370 (37,105)
Cash and cash equivalents,
beginning of period 54,966 32,126 50,702 67,811
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 75,072 $ 30,706 $ 75,072 $ 30,706
-------------------------------------------------------------------------
-------------------------------------------------------------------------
DECOMA INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------
(Unaudited)
-------------------------------------------------------------------------
December 31, 2000
1. Basis of Presentation
In the opinion of management, the unaudited interim Consolidated
Financial Statements reflect all adjustments, which consist only of
normal and recurring items, necessary to present fairly the financial
position at December 31, 2000 and the results of operations and cash
flows for the five month periods ended December 31, 2000 and December
31, 1999.
2. Operating Income
Operating income, as defined in the Company's July 31, 2000 year-end
Consolidated Financial Statements includes the deduction of financing
costs. The interim Consolidated Financial Statements have changed
operating income to exclude any deduction for financing costs.
Management believes the new presentation to be a better measurement of
operating income as a result of the anticipated increase in financing
costs arising from the completion of the transaction as described in
note 9 (a).
3. Change of Fiscal Year End and Change in Reporting Currency
On August 4, 2000, the Board of Directors of the Company approved a
change in the fiscal year end of Decoma from July 31 to December 31.
Accordingly, the current fiscal year is the five month period ended
December 31, 2000. In addition, commencing with the new fiscal year
ending December 31, 2001, the Board also approved the change in the
Company's financial reporting currency to U.S. dollars. These changes
place the Company on a basis consistent with its parent company, Magna
International Inc., reflect the increasingly global nature of Decoma's
business and will enable the Company's financial performance to be
compared more readily with that of its peer group within the
automotive parts supply industry.
4. Change in Accounting Policy - Future Tax
In the five month period ended December 31, 2000, the Company adopted
the liability method of tax allocation for accounting for income taxes
as provided for in the new recommendations of The Canadian Institute
of Chartered Accountants. Prior-year Consolidated Financial Statements
have not been restated. Under the liability method of tax allocation,
future tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and
liabilities and are measured using the substantively enacted tax rates
and laws that will be in effect when the differences are expected to
reverse.
Prior to the adoption of the new recommendations, income tax expense
was determined using the deferral method of tax allocation. Under this
method, future tax expense was based on items of income and expense
that were reported in different years in the financial statements and
tax returns and measured at the tax rate in effect in the year the
difference originated.
The cumulative effect, as at August 1, 2000, of adopting these
recommendations was a reduction in future tax liabilities and an
increase in retained earnings of $1.3 million. There was no material
impact on the comparative five month period's net income.
5. Acquisition of Subsidiary
On October 16, 2000, the Company acquired the minority interest from
Visteon Corporation in Conix Canada Inc., Conix Corporation, Conix
U.K. Ltd. and Conix Belgium N.V., (collectively the "Conix Group").
The Conix Group operates fascia moulding and finishing operations in
Canada, the United States, England and Belgium. Prior to the
completion of this transaction, Decoma and Visteon Corporation jointly
controlled the Conix Group and the results of the Conix Group were
included in Decoma's Consolidated Financial Statements on a 51%
proportionate basis.
The total consideration paid in connection with the acquisition
amounted to $201.9 million (net of cash acquired of $10.7 million).
The acquisition has been accounted for by the purchase method with the
results of operations of the acquired 49% interest in the Conix Group
included in the Consolidated Financial Statements of the Company from
the date of acquisition.
The net effect of the transaction on the Company's consolidated
balance sheet was as follows:
(Canadian dollars in thousands)
----------------------------------------------------------------------
Non-cash working capital $ 36,140
Fixed assets, net (including deferred preproduction
costs of $5,740) 124,463
Bank indebtedness (28,715)
Future income taxes (8,217)
Long-term debt (including portion due within one year) (18,498)
----------------------------------------------------------------------
Net assets 105,173
Goodwill (i) 96,691
----------------------------------------------------------------------
Total purchase price, net of cash acquired 201,864
9.5% Subordinated Debentures (U.S. $90,000) issued
on acquisition (ii) 136,719
----------------------------------------------------------------------
Cash paid, net of cash acquired $ 65,145
----------------------------------------------------------------------
Notes:
i. Goodwill arising on the purchase is being amortized over 20 years.
The Company reviews the valuation and amortization periods of
goodwill whenever events or changes in circumstances warrant such
a review. In doing so, the Company evaluates whether there has
been a permanent impairment in the value of the unamortized
goodwill based on the estimated undiscounted cash flows of each
business to which the goodwill relates.
ii. The Company issued $136.7 million (U.S. $90 million) of 9.5%
Subordinated Debentures at par, payable to Visteon Corporation.
The Subordinated Debentures are unsecured and are denominated in
U.S. dollars. The Subordinated Debentures are redeemable at any
time at par plus accrued and unpaid interest. Upon their
redemption or on their maturity on October 16, 2003, the Company
may, at its option, satisfy the amounts payable under the
Subordinated Debentures by delivering such number of Class A
Subordinate Voting Shares to a registered trustee for sale to open
bidders as required to satisfy the payment obligation. Interest on
the obligation is payable in U.S. dollars on a quarterly basis.
The Subordinated Debentures are recorded in part as debt and in
part as shareholders' equity.
The debt component of the Subordinated Debentures consists of the
present value of the future interest payments to maturity and is
presented as Debentures' interest obligation. Interest on the debt
component is accrued over time and recognized as a charge against
income.
The equity component of the Subordinated Debentures represents the
present value of the principal amount which, as noted above, can
be satisfied by the issuance of Class A Subordinate Voting Shares
of the Company at the option of the Company. This amount will be
accreted to the face value of the Subordinated Debentures over the
term to maturity through periodic charges, net of income taxes, to
retained earnings. The equity component is disclosed as
Subordinated Debentures in shareholders' equity.
6. Capital Stock
Class and Series of Outstanding Securities
The Company's share structure has remained consistent with that in
place as at July 31, 2000. For details concerning the nature of the
Company's securities, please refer to Note 10 "Convertible Series
Preferred Shares" and Note 11 "Capital Stock" of the Company's 2000
Annual Report.
Options and Convertible Securities
The following table presents the maximum number of shares that would
be outstanding if all of the outstanding options and Convertible
Series Preferred Shares issued and outstanding as at December 31, 2000
were exercised or converted:
----------------------------------------------------------------------
Number of
Shares
----------------------------------------------------------------------
Class A Subordinate Voting Shares outstanding as at
December 31, 2000 11,218,316
Class B Shares outstanding as at December 31, 2000 31,909,091
Options to purchase Class A Subordinate Voting Shares 1,426,250
Convertible Series Preferred Shares, convertible at
$10.07 per share 14,895,729
----------------------------------------------------------------------
59,449,386
----------------------------------------------------------------------
The maximum number of shares reserved to be issued for stock options
is 4,100,000 Class A Subordinate Voting Shares. The number of
reserved but unoptioned shares as at December 31, 2000 is 2,673,750.
The above amounts exclude Class A Subordinate Voting Shares that can
be issued at the Company's option to settle the Subordinated
Debentures on redemption or maturity (refer to note 5 for further
details).
7. Segmented Information
Decoma follows a corporate policy of functional and operational
decentralization. The Company conducts its operations through
divisions that function as autonomous operating units. Divisional
operating results and each division's annual business plan and
capital spending budget are reviewed by executive management,
including the Company's President and Chief Executive Officer.
Prior to the acquisition of the minority interest from Visteon
Corporation in the Conix Group (refer to note 5) management reviewed
the operating results of the Company along two primary segments;
namely, directly controlled and jointly controlled. As a result of
the acquisition, management has reorganized responsibilities such
that segment reporting will now be along geographic boundaries.
The following tables show certain information with respect to segment
disclosures:
(Canadian dollars in thousands) Five months ended December 31, 2000
---------------------------------------------------------------------
---------------------------------------------------------------------
North
America Europe Total
---------------------------------------------------------------------
Sales $510,389 $ 20,330 $530,719
---------------------------------------------------------------------
Inter-segment sales (613) - (613)
---------------------------------------------------------------------
Sales to external customers $509,776 $ 20,330 $530,106
---------------------------------------------------------------------
---------------------------------------------------------------------
Depreciation and amortization $ 25,092 $ 1,677 $ 26,769
---------------------------------------------------------------------
Operating income (loss) $ 53,188 $ (958) $ 52,230
---------------------------------------------------------------------
Interest expense, net $ 3,049 $ 523 $ 3,572
---------------------------------------------------------------------
Fixed assets, net $449,365 $ 85,365 $534,730
---------------------------------------------------------------------
Fixed asset additions $ 13,192 $ 8,007 $ 21,199
---------------------------------------------------------------------
Goodwill, net $ 54,364 $ 41,110 $ 95,474
---------------------------------------------------------------------
---------------------------------------------------------------------
(Canadian dollars in thousands) Five months ended December 31, 1999
---------------------------------------------------------------------
---------------------------------------------------------------------
North
America Europe Total
---------------------------------------------------------------------
Sales $399,428 $ 11,566 $410,994
---------------------------------------------------------------------
Inter-segment sales (2,112) - (2,112)
---------------------------------------------------------------------
Sales to external customers $397,316 $ 11,566 $408,882
---------------------------------------------------------------------
---------------------------------------------------------------------
Depreciation and amortization $ 20,966 $ 301 $ 21,267
---------------------------------------------------------------------
Operating income (loss) $ 31,455 $ (171) $ 31,284
---------------------------------------------------------------------
Interest expense, net $ 2,209 $ 189 $ 2,398
---------------------------------------------------------------------
Fixed assets, net $370,409 $ 31,844 $402,253
---------------------------------------------------------------------
Fixed asset additions $ 16,924 $ 12,362 $ 29,286
---------------------------------------------------------------------
---------------------------------------------------------------------
8. Comparative Consolidated Financial Statements
Certain comparative figures have been reclassified to conform to the
current period's method of presentation.
9. Subsequent Event
(a) Global Exteriors Transaction
On January 5, 2001, the Company completed the previously announced
Global Exteriors Transaction which included the acquisition of
Magna's European exteriors parts operations ("MES") and Magna's 60%
equity interest in Decoma Exterior Trim Inc. ("DET"). The aggregate
purchase price paid to Magna was $304.6 million which was satisfied
in cash by $4.6 million, by the issuance of 8,333,333 Class A
Subordinate Voting Shares and 2,000,000 5.75% convertible, redeemable
and retractable preferred shares at an issue price of $100 per share.
The preferred shares are convertible into Class A Subordinate Voting
Shares at a conversion price of $13.20 per share. In addition, the
Company has assumed the debt of MES and DET owing to Magna and its
subsidiaries which totaled $329.7 million. On closing of the Global
Exteriors Transaction, the total DET debt due to Magna was $119.1
million. In accordance with the purchase agreement with Magna, the
amount in excess of $100.0 million will be repaid by DET in March
2001. The long-term debt due Magna and its subsidiaries will be
repayable and bears interest as follows:
---------------------------------------------------------------------
(Canadian dollars in thousands)
---------------------------------------------------------------------
Debt denominated in Canadian dollars, bearing interest
at 7.5% per annum and due December 31, 2001 $100,000
Debt denominated in Euros, bearing interest at 7% per
annum and due October 1, 2002 52,650
Debt denominated in Euros, bearing interest at 7% per
annum and due October 1, 2003 52,650
Debt denominated in Euros, bearing interest at 7.5% per
annum and due December 31, 2004 105,299
---------------------------------------------------------------------
$310,599
---------------------------------------------------------------------
Prior to the completion of the acquisition, Magna held an approximate
89% equity interest in Decoma. Accordingly, the acquisition will be
accounted for by Decoma using continuity of interest accounting,
which is similar to pooling of interest accounting. Under this basis
of accounting, the historical financial statements of Decoma, MES and
DET will be combined at book value on a retroactive basis. These
restated financial statements will present the combined financial
position, results of operations and cash flows of Decoma, MES and DET
and will become the historical consolidated financial statements of
Decoma superseding the historical consolidated financial statements
previously presented by the Company.
(b) Adoption of Pension Plan
On January 1, 2001, the Company adopted a defined benefit pension
plan (the "Pension Plan") covering certain eligible employees. The
cost of benefits earned by employees is actuarially determined using
the projected benefit method pro rated on service and management's
best estimates of compensation increases, retirement ages of
employees, future attrition levels and expected returns on plan
assets. Since employees have until May 15, 2001 to opt into the plan,
an actuarial valuation of the cost on implementation is not currently
available. On May 15, 2001, benefits will be retroactively calculated
to January 1, 2001 for those employees who join the Pension Plan.
>>
