Magna announces first quarter results
AURORA, ON, May 2 - Magna International Inc.
today reported sales, profits and earnings per share for the
first quarter ended March 31, 2001.
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THREE MONTHS ENDED
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March 31, 2001 March 31, 2000
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Sales $ 2,863 $ 2,808(1)
Net Income $ 147 $ 146
Diluted earnings per share $ 1.57 $ 1.57(2)
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(1) Effective December 31, 2000, Magna Entertainment Corp. ("MEC")
changed its revenue recognition policy. The change in accounting
policy, which has no impact on net income, has been retroactively
applied.
(2) Diluted earnings per share have been restated (previously $1.55) due
to an accounting policy change related to the adoption of the
treasury stock method.
For more information see note 2 to the First Quarter Consolidated
Financial Statements attached.
All results are reported in millions of U.S. dollars, except per share
figures.
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Sales for the first quarter ended March 31, 2001 were a record $2.9
billion, an increase of approximately 2% over the comparable 2000 quarter.
During the quarter, North American vehicle production decreased approximately
17% and European vehicle production increased approximately 2%, in each case
relative to the comparable period in 2000. In spite of the decline in North
American vehicle production, automotive sales were essentially level with the
first quarter of 2000. This reflects increases over the comparable quarter of
18% in North American content per vehicle, 4% in European content per vehicle
(excluding the 7% reduction related to the impact of foreign currency
translation on European sales) and a 13% increase in tooling and other sales.
In addition, sales at MEC for the first quarter of 2001 were $245 million, an
increase of approximately 31% over the comparable quarter in 2000.
Net income for the first quarter increased 1% to $147 million, a record
level excluding Other Income, compared to $146 million in the comparable
quarter in 2000.
Diluted earnings per share of $1.57 for the first quarter matched a
record for the Company, excluding Other Income, set in the comparable quarter
in 2000.
During the first quarter of 2001 cash generated from operations before
changes in working capital was $269 million. Total investment activities
during the quarter were $108 million, including $102 million in fixed assets
and $6 million in investments and other assets.
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
March 31, 2001. The dividend of U.S. $0.34 per share is payable on June 15,
2001 to shareholders of record on May 30, 2001.
2001 OUTLOOK
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Magna's results are expected to continue to be impacted by the negative
conditions that are affecting the automotive industry generally, including
production cut-backs, OEM price concessions under long-term arrangements,
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 3% in Europe relative to 2000 production volumes and
anticipated product mix, Magna expects its automotive sales for the full 2001
year to range from U.S. $9.9 billion to U.S. $10.5 billion, compared to fiscal
2000 automotive sales of U.S. $10.1 billion. In addition, diluted earnings per
share for 2001 are expected to be in the range of $4.90 to $5.40, compared to
fiscal 2000 earnings of $5.35, excluding Other Income. For the second quarter
of 2001, the Company has assumed that vehicle volumes will decline
approximately 15% in North America and 5% in Europe over the comparable
quarter of 2000. Based on these volume assumptions and the anticipated product
mix, Magna expects its automotive sales for the second quarter of 2001 to be
between $2.5 billion and $2.7 billion and diluted earnings per share to be in
the range of $1.20 to $1.40.
Magna, one of the most diversified automotive suppliers in the world,
designs, develops and manufactures automotive systems, assemblies, modules and
components, and engineers and assembles complete vehicles, primarily for sale
to original equipment manufacturers of cars and light trucks in North America,
Europe, Mexico, South America and Asia. Magna's products include: interior
products including complete seats, instrument and door panel systems, closure
systems and sound insulation through Intier Automotive Inc.; stamped,
hydroformed and welded metal parts and assemblies; exterior and interior
mirror systems through Magna Mirror Systems; a variety of plastic parts and
exterior decorative systems including body panels and fascias through Decoma
International Inc.; various engine, powertrain and fueling and cooling
components through Tesma International Inc.; and a variety of drivetrain
components and complete vehicle engineering and assembly through Magna Steyr.
Magna has over 63,000 employees in 166 manufacturing operations and 31
product development and engineering centres in 18 countries.
Magna will hold a conference call to discuss the first quarter results
and other developments on Thursday, May 3, 2001 at 10:30 a.m. EST. The
number to use for this call is 1-888-209-3797. Please call in 10 minutes
prior to the conference call. The number for overseas callers is 1-416-
620-2410. Magna will also webcast the conference call at http://www.magna.com.
The conference call will be chaired by James Nicol, President and Chief
Operating Officer and Vincent J. Galifi, Executive Vice-President,
Finance and Chief Financial Officer.
This press release may contain forward looking statements within the
meaning of applicable securities legislation. Such statements involve certain
risks, assumptions and uncertainties which may cause the Company's actual
future results and performance to be materially different from those expressed
or implied in these statements. These risks, assumptions and uncertainties
include, but are not limited to: industry cyclicality, including reductions or
increases in production volumes; the Company's financial performance; changes
in the economic and competitive markets in which the Company competes;
relationships with OEM customers; customer price pressures; the Company's
dependence on certain vehicle programs; currency exposure; energy prices; and
other factors as set out in the Company's Form 40-F for its financial year
ended December 31, 1999 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.
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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Three months ended
March 31, March 31,
2001 2000
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(restated,
see note 2)
Sales:
Automotive $2,618 $2,621
Magna Entertainment Corp. (note 2) 245 187
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2,863 2,808
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Automotive costs and expenses:
Cost of goods sold 2,140 2,134
Depreciation and amortization 100 94
Selling, general and administrative 167 174
Interest expense, net 1 7
Equity income (3) (5)
Magna Entertainment Corp. costs and
expenses (note 2) 207 166
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Operating income - automotive 213 217
Operating income - Magna Entertainment Corp. 38 21
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Income before income taxes and minority interest 251 238
Income taxes 90 85
Minority interest 14 7
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Net income $ 147 $ 146
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Financing charges on Preferred Securities
and other paid-in capital $ (12) $ (11)
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Net income available to Class A Subordinate
Voting and Class B Shareholders 135 135
Retained earnings, beginning of period 1,789 1,446
Dividends on Class A Subordinate Voting
and Class B Shares (note 3) (27) (135)
Distribution on transfer of
business to subsidiary (note 4) 14 -
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Retained earnings, end of period $1,911 $1,446
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Earnings per Class A Subordinate Voting
or Class B Share:
Basic $ 1.72 $ 1.71
Diluted (note 2) $ 1.57 $ 1.57
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Cash dividends paid per Class A Subordinate
Voting or Class B Share $ 0.34 $ 0.30
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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
Diluted (note 2) 91.5 91.2
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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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Three months ended
March 31, March 31,
2001 2000
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Cash provided from (used for):
OPERATING ACTIVITIES
Net income $ 147 $ 146
Items not involving current cash flows 122 123
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269 269
Changes in non-cash working capital 18 (92)
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287 177
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INVESTMENT ACTIVITIES
Fixed asset additions (102) (112)
Increase in investments and other (6) (12)
Proceeds from disposition of investments and other 24 21
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(84) (103)
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FINANCING ACTIVITIES
Net repayments of debt (9) (152)
Issues of shares by subsidiaries - 1
Repayments of debentures' interest obligations (10) (9)
Preferred Securities distributions (7) (7)
Dividends paid to minority interests (2) (1)
Dividends (27) (24)
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(55) (192)
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Effect of exchange rate changes on cash
and cash equivalents (18) (10)
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Net increase (decrease) in cash and
cash equivalents during the period 130 (128)
Cash and cash equivalents, beginning of period 620 632
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Cash and cash equivalents, end of period $ 750 $ 504
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MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
(United States dollars in millions)
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March 31, December 31,
2001 2000
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ASSETS
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Current assets:
Cash and cash equivalents $ 750 $ 620
Accounts receivable 1,695 1,684
Inventories 752 767
Prepaid expenses and other 68 66
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3,265 3,137
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Investments 84 86
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Fixed assets, net 3,455 3,589
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Goodwill, net 279 295
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Future tax assets 100 96
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Other assets 204 205
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$7,387 $7,408
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness $ 316 $ 338
Accounts payable 1,321 1,314
Accrued salaries and wages 219 215
Other accrued liabilities 130 119
Income taxes payable 66 51
Long-term debt due within one year 36 46
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2,088 2,083
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Long-term debt 263 268
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Debentures' interest obligation 178 191
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Other long term liabilities 80 84
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Future tax liabilities 222 224
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Minority interest 344 356
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Shareholders' equity:
Capital stock
Class A Subordinate Voting Shares
(issued: 77,468,354; December 31, 2000 -
77,467,153) 1,442 1,442
Class B Shares
(convertible into Class A Subordinate
Voting Shares)
(issued: 1,097,909) 1 1
Preferred Securities 277 277
Other paid-in capital 745 734
Retained earnings 1,911 1,789
Currency translation adjustment (164) (41)
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4,212 4,202
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$7,387 $7,408
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Notes:
1. Basis of Presentation
The unaudited interim consolidated financial statements have been
prepared in U.S. dollars following the accounting policies as set out
in the fiscal 2000 annual consolidated financial statements, except
as described in note 2(b).
The unaudited interim consolidated financial statements do not
conform in all respects to the requirements of generally accepted
accounting principles for annual financial statements. Accordingly,
these unaudited interim consolidated financial statements should be
read in conjunction with the fiscal 2000 annual consolidated
financial statements.
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 March 31, 2001 and the results of operations
and cash flows for the three month periods ended March 31, 2001 and
2000.
2. Accounting Changes
(a) During the fourth quarter of fiscal 2000, Magna Entertainment
Corp. ("MEC") changed its method of reporting revenues and costs
and expenses. MEC now reports wagering revenues before deducting
purses, stakes, awards and certain taxes. These amounts are now
included in costs and expenses. Previously, MEC reported wagering
revenues net of purses, stakes, awards and certain taxes. The
comparative period amounts have been restated on this basis.
(b) In December 2000, the Canadian Institute of Chartered Accountants
issued new accounting recommendations for the presentation and
disclosure of basic and diluted earnings per share. Effective
January 1, 2001, the Company adopted these new recommendations on
a retroactive basis. The most significant change under the new
recommendations is the use of the 'treasury stock method' instead
of the 'imputed earnings approach' in computing diluted earnings
per share. Under the treasury stock method:
- exercise of options are assumed at the beginning of the period
(or at the time of issuance, if later);
- the proceeds from exercise are assumed to be used to purchase
common stock at the average market price during the period; and
- the incremental shares (the difference between the number of
shares assumed issued and the number of shares assumed
purchased) are included in the denominator of the diluted
earnings per share computation.
The retroactive impact of adopting the new recommendations on the
three months ended March 31, 2000 was to increase diluted earnings
per Class A Subordinate Voting or Class B share by $0.02 and to
reduce the average number of diluted Class A Subordinate Voting and
Class B shares outstanding by 1.9 million.
3. MEC Special Dividend
On March 10, 2000, the Company paid a special stock dividend of
approximately 20% of MEC's equity to Magna Class A Subordinate Voting
and Class B shareholders of record on February 25, 2000 (the "special
dividend"). Dividends for the three month period ended March 31, 2000
include $111 million related to the special dividend.
4. Distribution on Transfer of Business to Subsidiary
In January 2001, Decoma International Inc. ("Decoma"), a publicly
traded subsidiary of the Company, purchased Magna Exterior Systems
("MES") and the remaining 60% of Decoma Exterior Trim ("DET") owned
by Magna. The aggregate purchase price paid by Decoma was $203
million which was satisfied in cash by $3 million, through the
issuance of 8,333,333 Decoma Class A Subordinate Voting Shares and
2,000,000 5.75% convertible, redeemable and retractable Decoma
preferred shares. In addition, Decoma assumed the debt of MES and DET
owing to the Company which totalled $220 million at the closing date.
Given that the proceeds received from Decoma exceeded the net book
value of the Company's investment in MES and DET on the transaction
date, the minority interest portion of such excess has been recorded
as a distribution on the transfer of MES and DET to Decoma. Such
distribution also includes the effect of the increase in Magna's
equity interest in Decoma as a result of this transaction, from
approximately 89% to approximately 91%. The distribution on the
transfer of MES and DET to Decoma has been recorded in the
consolidated retained earnings of the Company.
5. Capital Stock
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 March 31, 2001 were
exercised:
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Class A Subordinate Voting and Class B Shares
outstanding at March 31, 2001 78.5
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 3.1
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94.6
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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. Segmented Information
In January 2001, Decoma purchased MES and the remaining 60% of DET
owned by Magna. Previously, MES was reported in the Tier One and Two
Automotive Manufacturing segment whereas 100% of DET was included in
the Publicly Traded Tier One and Two Automotive Manufacturing
segment. As a result of Decoma's purchase of MES in January 2001,
MES is now included in the Publicly Traded Tier One and Two
Automotive Manufacturing segment. Segment reporting has been restated
to reflect the Company's new structure.
Three months ended Three months ended
March 31, 2001 March 31, 2000
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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 $ 268 $ 21 $ 140 $ 284 $ 18 $ 169
North America 3 (3) 26 4 (7) 5
Tier One and Two
Automotive
Manufacturing
North America 1,311 132 946 1,324 110 989
Europe 438 (4) 355 424 6 365
Publicly Traded Tier
One and Two
Automotive
Manufacturing
North America 471 31 523 460 53 492
Europe 177 12 171 160 7 149
MEC 245 38 547 187 21 570
Corporate and other (50) 24 747 (35) 30 697
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Total reportable
segments $2,863 $ 251 $3,455 $2,808 $ 238 3,436
Current assets 3,265 3,043
Investments, goodwill
and other assets 667 612
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Consolidated total assets $7,387 $7,091
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7. Subsequent Event
(a) On April 5, 2001, MEC completed the previously announced
agreement with Ladbroke Racing Corp. and one of its subsidiaries
(collectively "LRC") to acquire LRC's account wagering
operations, The Meadows harness track, four off-track betting
facilities and an 18.3% interest in The Racing Network. In
accordance with the terms of the agreement, one-half of the $53
million purchase price was paid in cash, one-quarter was
satisfied by the issuance of 3,178,297 shares of Class A
Subordinate Voting Stock of MEC and one-quarter was satisfied
through the issuance of a promissory note which is payable in two
equal installments on the first and second anniversaries of
closing, and bears interest at 6% per annum.
(b) On April 30, 2001, Decoma filed a preliminary prospectus with the
applicable regulatory authorities in Canada for an offering from
treasury of Decoma Class A Subordinate Voting Shares.
