Decoma announces results for the second quarter of 2001
CONCORD, ON, Aug. 13 - Decoma International Inc.
today announced its financial results for the second
quarter and six months ended June 30, 2001. (All amounts are in U.S. dollars.)
Three Month Periods Six Month Periods
Ended June 30 Ended June 30
(in millions except
per share figures)
2001 2000 2001 2000
Sales $485.4 $379.3 $929.5 $766.8
Operating Income $ 45.5 $ 28.8 $ 80.2 $ 67.6
Net Income $ 22.7 $ 12.3 $ 38.3 $ 32.8
Diluted earnings per share $ 0.28 N/A $ 0.49 N/A
Proforma diluted earnings
per share ((x)) N/A $ 0.16 N/A $ 0.41
Weighted average number
of shares outstanding
on a diluted basis
(millions) 85.3 N/A 83.4 N/A
(x) See note 9 to the interim consolidated financial statements.
Sales for the second quarter of 2001 grew by 28% over the comparable
period in 2000 to $485.4 million. North American (including Mexican)
production sales grew by 30% to $320.1 million in the second quarter of 2001
compared to $245.7 million in the second quarter of 2000. North American
(including Mexican) content per vehicle grew to approximately $74 compared to
$51 for the second quarter of 2000. This increase was achieved during a period
when North American (including Mexican) vehicle production volumes decreased
10% to 4.3 million units from 4.9 million units in the second quarter of 2000.
Western European production sales increased by 21% to $117.1 million for
the second quarter of 2001 compared to $96.7 million for the second quarter of
2000. Western European content per vehicle was approximately $26 for the
second quarter of 2001 compared to $21 for the second quarter of 2000. Western
European vehicle production volumes were stable at 4.5 million units for the
second quarter of 2001 compared to the second quarter of 2000.
The increase in sales in North America and Western Europe is attributable
to a number of factors including the full consolidation of the Conix Group in
the current quarter, (as compared to 51% of the Conix Group which was
proportionately consolidated in the three month period ended June 30, 2000),
constant volumes on certain existing programs, take over programs from
competitors and the launch of new incremental programs. Sales were partially
offset by customer launch delays, customer pricing concessions and the overall
slow down in North American vehicle production volumes.
Tooling sales, on a global basis, increased by 31% to $48.2 million in
the second quarter of 2001 compared to $36.9 million for the three months
ended June 30, 2000. The increase in Decoma's tooling sales was primarily in
Europe. North American tooling sales were down slightly from the comparative
period level as a result of the softer automotive market.
Operating income increased 58% to $45.5 million for the three month
period ended June 30, 2001 compared to $28.8 million for the three month
period ended June 30, 2000. The improvement in operating income was driven by
operational and sales improvements at the Company's Mexican facility (now 100%
owned), improved performance at a new exterior trim facility that experienced
previous start-up difficulties in calendar 2000, contributions from new
incremental programs, synergy savings resulting from the acquisitions
completed during the past twelve months and the Company's continued emphasis
on cost reduction. These improvements were partially offset by customer
pricing pressures, lower production volumes on certain long running programs,
the delayed launch of certain new vehicle programs and launch challenges
experienced at Decoma's new Conix U.K. facility which had an operating loss of
$9.1 million in the second quarter of 2001.
Net income for the second quarter ended June 30, 2001 increased 85% to
$22.7 million compared to $12.3 million for the comparable period in 2000.
This increase is attributable to higher operating income and a decrease in the
Company's effective tax rate, partially offset by increases in interest
expense, amortization of the discount on the Convertible Series Preferred
Shares and minority interest expense.
For the second quarter ended June 30, 2001 diluted earnings per share
were $0.28. Pro forma diluted earnings per share for the three month period
ended June 30, 2000, before pro forma adjustments for the Conix Group
acquisition and Decoma's June 2001 equity offering, were $0.16. The increase
in diluted earnings per share was achieved despite a 3.8 million increase in
the weighted average number of shares outstanding as a result of the June 2001
equity offering. Diluted earnings per share for the six months ended June 30,
2001 were $0.49 compared to pro forma diluted earnings per share of $0.41 for
the comparable period in 2000.
During the second quarter of 2001, cash generated from operations before
changes in non-cash working capital was $50.8 million compared to $35.8
million for the three months ended June 30, 2000. Investment spending in the
second quarter of 2001 included fixed asset additions of $16.0 million and
$2.6 million representing the initial cash paid on the acquisition of the
remaining minority interest in the Company's Mexican facility.
During June 2001, Decoma completed the issuance from treasury of an
additional 16,100,000 Class A Subordinate Voting Shares for net proceeds of
$111.1 million. This transaction has significantly improved the public market
liquidity of Decoma's Class A Subordinate Voting Shares increasing the number
of freely tradeable Class A Subordinate Voting Shares not held by Magna
International Inc. ("Magna") from 4.6 million to 20.7 million. As a
consequence of the June 2001 equity offering, Decoma was recently added to the
TSE 300 Composite, the TSE 300 Capped, the S&P/TSE Canadian SmallCap and the
TSE 200 Indices.
The proceeds of the June 2001 equity offering and cash generated from
operations (net of cash used for investment spending and dividends) were used
to reduce Decoma's debt load. As a result, there has been a significant
improvement in Decoma's balance sheet. Debt to total capitalization has
improved to 57% from 69% at March 31, 2001 and 72% at December 31, 2000.
In addition to the June 2001 equity offering, the Company successfully
completed a new $300 million syndicated, global, revolving credit facility
that expires on May 30, 2002 at which time Decoma may request further
revolving 364-day extensions.
Commenting on these results, Al Power, Decoma's President and Chief
Executive Officer stated: "We are very pleased with our demonstrated ability
to weather the current economic downturn and we intend to continue our focus
on operational improvements and cost savings in order to maintain this
positive momentum going forward".
At its meeting today, Decoma's Board of Directors declared a dividend in
respect of the second quarter of 2001 of U.S.$0.05 per share on the Class A
Subordinate Voting and Class B Shares payable on September 14, 2001 to
shareholders of record on August 31, 2001. This dividend is consistent with
the dividend declared in respect of the first quarter of 2001, also U.S.$0.05
per share, notwithstanding the additional 16.1 million shares issued during
the second quarter.
2001 Outlook
Decoma'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 agreements,
continued weakness of the Euro and general economic uncertainty. Based on the
Company's forecasted declines in 2001 production volumes of approximately 9%
in North America and approximately 3% in Europe relative to 2000 production
volumes and anticipated product mix, Decoma expects its sales for the full
2001 year to range from $1,750 million to $1,900 million, compared to actual
fiscal 2000 sales of $1,559 million. In addition, diluted earnings per share
for 2001 are expected to be in the range of $0.83 to $0.90 compared to 2000
pro forma diluted earnings per share of $0.67. Our most recent guidance
reflects the dilutive effects of our June 2001 equity offering. The future
impact on diluted earnings per share of continued operating losses at our
Conix U.K. facility are expected to be offset in part by operating
improvements at this facility and continued strong performance at a number of
our other facilities. We are continuing to address our market position and
capacity utilization in the U.K. As, such, the above guidance does not reflect
the potential impact, if any, of these activities.
DECOMA INTERNATIONAL INC.
Consolidated Balance Sheets
(Unaudited)
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As at As at
(U.S. dollars in thousands) June 30, 2001 December 31, 2000
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ASSETS
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Current assets:
Cash and cash equivalents $ 39,136 $ 50,041
Accounts receivable 313,726 265,913
Inventories 131,497 127,748
Income taxes receivable - 6,991
Prepaid expenses and other 22,749 18,920
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507,108 469,613
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Investments 17,616 16,984
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Fixed assets, net 488,075 507,646
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Goodwill, net 74,932 78,737
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Future tax assets (note 11) 9,902 4,662
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Other assets 9,172 12,208
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$ 1,106,805 $ 1,089,850
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness (note 7) $ 56,148 $ 83,695
Accounts payable 169,707 159,386
Accrued salaries and wages 44,288 36,375
Other accrued liabilities 41,619 31,387
Income taxes payable 4,636 -
Long-term debt due within one year 15,957 7,736
Debt due to Magna within
one year (note 7) 39,626 114,560
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371,981 433,139
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Long-term debt 20,209 32,604
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Long-term debt due to Magna (note 7) 122,503 140,408
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Convertible Series Preferred Shares,
held by Magna (note 7) 205,702 203,101
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Debenture interest obligation 11,250 20,763
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Future tax liabilities (note 11) 47,478 40,967
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Minority interest (note 12) - 6,872
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Shareholders' equity:
Subordinated Debentures 47,343 70,153
Convertible Series Preferred
Shares (note 6) 30,026 32,424
Class A Subordinate Voting
Shares (note 6) 167,610 56,479
Class B Shares (note 6) 30,594 30,594
Retained earnings 30,831 -
Currency translation adjustment 21,278 22,346
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327,682 211,996
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$ 1,106,805 $ 1,089,850
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See accompanying notes
DECOMA INTERNATIONAL INC.
Consolidated Statements of Income, Retained Earnings and Magna's
Net Investment
(Unaudited)
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Three Month Periods Six Month Periods
Ended Ended
June 30 June 30
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(U.S. dollars in thousands,
except per share figures) 2001 2000 2001 2000
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Sales $ 485,419 $ 379,371 $ 929,469 $ 766,847
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Cost of goods sold 386,172 306,881 742,812 613,360
Depreciation and
amortization 20,158 15,156 39,680 30,395
Selling, general and
administrative 26,142 22,711 51,989 44,008
Affiliation fees and
other charges 7,468 5,800 14,819 11,444
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Operating income 45,479 28,823 80,169 67,640
Equity income (217) (235) (160) (412)
Interest expense, net 4,860 4,325 10,814 8,975
Amortization of discount
on Convertible Series
Preferred Shares 2,455 992 4,889 1,974
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Income before income taxes
and minority interest 38,381 23,741 64,626 57,103
Income taxes (note 11) 15,147 12,697 25,519 26,081
Minority interest 556 (1,294) 843 (1,775)
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Net income $ 22,678 $ 12,338 $ 38,264 $ 32,797
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Financing charges on
Convertible Series
Preferred Shares and
Subordinated Debentures $ 1,943 $ 427 $ 3,316 $ 863
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Net income attributable
to Class A Subordinate
Voting and Class
B Shares 20,735 11,911 34,948 31,934
Retained earnings,
beginning of period 12,669 65,945 - 47,359
Magna's net investment,
beginning of period - 206,883 - 236,832
Dividends on Class A
Subordinate Voting and
Class B Shares (2,573) (1,725) (4,117) (3,162)
Net distribution to Magna - (1,450) - (31,399)
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Retained earnings and
Magna's net investment,
end of period $ 30,831 $ 281,564 $ 30,831 $ 281,564
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Earnings per Class A
Subordinate Voting
or Class B Share
Basic (notes 8 and 9) $ 0.38 - $ 0.66 -
Diluted (notes 8 and 9) $ 0.28 - $ 0.49 -
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Average number of Class
A Subordinate Voting
and Class B Shares
outstanding (in millions)
Basic (notes 8 and 9) 55.2 - 53.3 -
Diluted (notes 8 and 9) 85.3 - 83.4 -
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See accompanying notes
DECOMA INTERNATIONAL INC.
Consolidated Statements of Cash Flows
(Unaudited)
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Three Month Periods Six Month Periods
Ended Ended
June 30 June 30
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(U.S. dollars in thousands) 2001 2000 2001 2000
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Cash provided from (used for):
OPERATING ACTIVITIES
Net income $ 22,678 $ 12,338 $ 38,264 $ 32,797
Items not involving
current cash flows 28,093 23,468 48,813 39,981
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50,771 35,806 87,077 72,778
Changes in non-cash
working capital (4,810) (12,738) (9,748) (5,489)
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45,961 23,068 77,329 67,289
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INVESTING ACTIVITIES
Fixed asset additions (16,049) (18,352) (31,255) (44,528)
Acquisition of subsidiary
(note 12) (2,594) - (2,594) -
Decrease (increase) in
investments and other 749 (103) (1,291) (2,049)
Proceeds from disposition
of fixed assets 810 18 1,423 219
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(17,084) (18,437) (33,717) (46,358)
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FINANCING ACTIVITIES
(Decrease) increase in
bank indebtedness (32,888) (6,634) (26,582) 25,308
Issues (repayments) of
long term debt, net 730 3,968 (7,233) (23,623)
(Repayments) issues of
debt due to Magna, net (70,732) 5,324 (84,912) (4,433)
Repayments of debenture
interest obligation (8,458) - (9,513) -
Repayments of Subordinated
Debentures (25,824) - (25,824) -
Issuance of Class A
Subordinate Voting
Shares, net (note 6) 111,131 - 111,131 -
Dividends on Convertible
Series Preferred Shares (3,770) (1,250) (5,020) (2,500)
Dividends on Class A
Subordinate Voting and
Class B Shares (4,117) (1,725) (5,842) (3,162)
Net distribution to Magna - (2,035) - (16,114)
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(33,928) (2,352) (53,795) (24,524)
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Effect of exchange rate
changes on cash and
cash equivalents (275) (348) (722) 21
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Net (decrease) increase
in cash and cash
equivalents during
the period (5,326) 1,931 (10,905) (3,572)
Cash and cash equivalents,
beginning of period 44,462 23,450 50,041 28,953
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Cash and cash equivalents,
end of period $ 39,136 $ 25,381 $ 39,136 $ 25,381
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See accompanying notes
DECOMA INTERNATIONAL INC.
Management's Discussion and Analysis of Results of Operations and
Financial Position
Three and six month periods ended June 30, 2001 and 2000
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1. The Company
Decoma International Inc. ("Decoma") is a full service supplier
of exterior vehicle appearance systems for the world's automotive
industry. Decoma designs, engineers and manufactures automotive
exterior components and systems which include fascias (bumpers),
front and rear end modules, plastic body panels, roof modules,
exterior trim components and sealing and greenhouse systems for
cars and light trucks (including sport utility vehicles and mini
vans).
The Company changed its fiscal year end from July 31 to December 31
effective December 31, 2000. As a result, interim results are now
presented on a calendar quarter basis.
2. Basis of Presentation
The unaudited interim consolidated financial statements of Decoma
International Inc. and its subsidiaries have been prepared following
Canadian generally accepted accounting principles except that certain
disclosures required for annual financial statements have not been
included.
On January 5, 2001, Decoma acquired 100% of Magna International
Inc.'s ("Magna") European exterior parts operations ("MES") and
Magna's 60% equity interest in Decoma Exterior Trim Inc. ("DET")
(collectively the "Global Exteriors Transaction"). Prior to the
completion of the Global Exteriors Transaction, Magna held an
approximate 89% equity interest in Decoma. On completion of the
Global Exteriors Transaction, Magna held an approximate 91% equity
interest in Decoma. Accordingly, the Global Exteriors Transaction
has been accounted for by Decoma using continuity of interest
accounting, which is similar to pooling of interests accounting.
Under this basis of accounting, the historical consolidated financial
statements of Decoma prior to the completion of the Global Exteriors
Transaction ("Old Decoma"), MES and DET are combined at book value
on a retroactive basis. These unaudited interim consolidated
financial statements give retroactive effect to the Global
Exteriors Transaction and combine the financial position, results
of operations and cash flows of Old Decoma, MES and DET (collectively
the "Company") and should be read in conjunction with the Company's
audited supplemental consolidated financial statements for the five
month period ended December 31, 2000 which were included in the
Company's Report to Shareholders for the period then ended. The
supplemental consolidated financial statements have now become
the historical consolidated financial statements of the Company
and supersede the historical consolidated financial statements
previously published by Old Decoma.
On October 16, 2000, the Company acquired Visteon Corporation's 49%
minority interest in Conix Canada Inc., Conix Corporation, Conix U.K.
Limited and Conix Belgium N.V. (collectively, the "Conix Group"),
thereby increasing the Company's ownership level of the Conix Group
to 100% (the "Conix Transaction"). Prior to October 16, 2000, the
unaudited interim consolidated financial statements reflect the
Company's 51% interest in the Conix Group using the proportionate
consolidation method. From October 16, 2000 forward, the unaudited
interim consolidated financial statements reflect the Company's 100%
interest in the Conix Group on a fully consolidated basis.
Effective January 1, 2001, the Company changed its reporting currency
to the U.S. dollar. In accordance with accounting principles
generally accepted in Canada, the comparative amounts have been
restated to U.S. dollars using the January 1, 2001 exchange rate
of Cdn. $1.5002 per U.S. $1.00. All current period amounts for the
Company's operations having a functional currency other than the U.S.
dollar have been translated to U.S. dollars using the current rate
method which uses the average exchange rate during the period to
translate revenues, expenses and cash flows and the period-end rate
to translate assets and liabilities.
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 of the Company as at June 30, 2001 and the results
of its operations and cash flows for the three and six month periods
ended June 30, 2001 and 2000.
3. Cyclicality of Operations
Substantially all revenue is derived from sales to the North American
and European facilities of the major automobile manufacturers. The
Company's operations are exposed to the cyclicality inherent in the
automotive industry and to changes in the economic and competitive
environments in which the Company operates. The Company is dependent
on continued relationships with the major automobile manufacturers.
4. Use of Estimates
The preparation of the unaudited interim consolidated financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the amounts reported in the unaudited interim
consolidated financial statements and accompanying notes. Management
believes that the estimates utilized in preparing its unaudited
interim consolidated financial statements are reasonable and prudent;
however, actual results could differ from these estimates.
5. Contingencies
In the ordinary course of business activities, the Company may be
contingently liable for litigation and claims with customers,
suppliers and former employees. Management believes that adequate
provisions have been recorded in the accounts where required.
Although it is not possible to estimate the extent of potential costs
and losses, if any, management believes, but can provide no
assurance, that the ultimate resolution of such contingencies would
not have a material adverse effect on the financial position of the
Company.
6. Capital Stock
Class and Series of Outstanding Securities
For details concerning the nature of the Company's securities, please
refer to Note 11 "Convertible Series Preferred Shares" and Note 12
"Capital Stock" of the Company's December 31, 2000 supplemental
consolidated financial statements which were included in the
Company's Report to Shareholders for the five month period then
ended.
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The following table summarizes the outstanding share capital
of the Company:
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Authorized Issued
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Convertible Series Preferred Shares
(Convertible into Class A
Subordinate Voting Shares) 3,500,000 3,500,000
Preferred Shares, issuable in series Unlimited -
Class A Subordinate Voting Shares (i) Unlimited 35,651,649
Class B Shares
(Convertible into Class A Subordinate
Voting Shares) Unlimited 31,909,091
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Note:
(i) On May 31, 2001, the Company filed a final prospectus with the
securities regulatory authorities in Canada for a public offering
of Class A Subordinate Voting Shares. The offering was completed
in June 2001. The details of the proceeds from the public offering
of Class A Subordinate Voting Shares are as follows:
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(U.S. dollars in thousands)
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Total proceeds on 16,100,000 shares
at Cdn. $10.85 per share $114,621
Expenses of the issue, net of taxes (3,490)
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Net proceeds $111,131
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Options and Convertible Securities
The following table presents the maximum number of Class A Subordinate
Voting and Class B Shares that would be outstanding if all of the
outstanding options and Convertible Series Preferred Shares issued and
outstanding as at June 30, 2001 were exercised or converted:
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Number of Shares
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Class A Subordinate Voting Shares outstanding
at June 30, 2001 35,651,649
Class B Shares outstanding at June 30, 2001 31,909,091
Options to purchase Class A Subordinate Voting Shares 1,511,250
Convertible Series Preferred Shares, convertible
at Cdn. $10.07 per share 14,895,729
Convertible Series Preferred Shares, convertible
at Cdn. $13.20 per share 15,151,515
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99,119,234
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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.
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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 at June 30, 2001 is 2,588,750.
The Company has reserved 1,000,000 Class A Subordinate Voting Shares
for future issuances to the Company's employee deferred profit
sharing plan.
7. Debt
(a) Credit Facility
During June 2001, the Company consolidated and restructured its
global lines of credit. At June 30, 2001 the Company had lines of
credit totalling $339 million. Of this amount, $300 million is
represented by an extendible, revolving credit facility that
expires on May 30, 2002, at which time the Company may request
further revolving 364-day extensions. The unused and available
lines of credit at June 30, 2001 were approximately $256 million.
(b) Amounts Due to Magna
The liability amounts for the Series 1 and 2 Convertible Series
Preferred Shares are presented as long-term liabilities since
Magna has indicated that it will not exercise its retraction
rights related to these shares before July 1, 2002.
The Company's debt due to Magna consists of the following:
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June 30 December 31
(U.S. dollars in thousands) 2001 2000
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Notes payable denominated in both
Canadian and U.S. dollars $ - $ 1,596
Notes payable denominated primarily
in U.S. dollars - 21,387
Assumed Magna debt on closing
of the Global Exteriors Transaction:
Cash consideration due January 5, 2001 - 3,087
Debt settled prior to January 5, 2001 - 9,079
Debt denominated in Canadian dollars (i) 39,626 79,411
Debt denominated in Euros and
British Pounds (ii) 122,503 140,408
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162,129 254,968
Less due within one year 39,626 114,560
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$ 122,503 $ 140,408
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Notes:
(i) The debt denominated in Canadian dollars bears interest
at 7.5% and the remaining amount outstanding at June 30,
2001 matures on December 31, 2001.
(ii) The debt denominated in Euros and British Pounds bears
interest at 7% to 7.5% and is repayable over the period to
December 31, 2004.
8. Earnings Per Share
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:
- the exercise of options is assumed to be at the beginning of the
period (or at the time of issuance, if later);
- the proceeds from the exercise of options are assumed to be used
to purchase Class A Subordinate Voting Shares at the average market
price during the period; and
- the incremental number of Class A Subordinate Voting 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.
9. Pro Forma Earnings Per Share for the Three and Six Month Periods
Ended June 30, 2000
The following pro forma adjustments, each as a result of the Global
Exteriors Transaction, have been made to arrive at pro forma earnings
per share for the three and six month periods ended June 30, 2000.
- adjustments to reflect the Company's new capital structure;
- adjustments that give effect to the affiliation fees and other
charges that would have been payable to Magna had the Company
been the owner of MES and DET throughout the period;
- changes to employee profit sharing expense arising from
the inclusion of DET profits and eligible DET employees
in the revised Company profit sharing pool; and
- the tax effect of the foregoing adjustments, where applicable,
using an assumed income tax rate of 38% and 40% for adjustments
applicable to Canada and Germany, respectively.
In addition to the Class A Subordinate Voting Shares, Class B Shares
and other Decoma dilutive instruments outstanding as of December 31,
2000, pro forma earnings per Class A Subordinate Voting or Class B
Share also reflect the issuance to Magna of 8,333,333 Class A
Subordinate Voting Shares as part of the Global Exteriors Transaction
and also reflect 15,151,515 Class A Subordinate Voting Shares
issuable to Magna on conversion of the Series 4 and 5 Convertible
Series Preferred Shares also issued to Magna as part of the Global
Exteriors Transaction.
Pro forma earnings per Class A Subordinate Voting or Class B Shares
do not reflect the Conix Transaction or the public offering of Class
A Subordinate Voting Shares completed in June 2001 (see note 6).
The following table summarizes the calculation of pro forma earnings per
share:
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Three Month Six Month
Period Ended Period Ended
June 30 June 30
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(U.S. dollars in thousands) 2000 2000
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Net income attributable to Class
A Subordinate Voting and Class B Shares $ 11,911 $ 31,934
Proforma adjustments (net of tax effects):
Series 4 and 5 Convertible
Series Preferred Shares (2,182) (4,364)
Interest on debt due to Magna (93) (119)
Net adjustment to affiliation fees
and other charges (179) (563)
Net adjustment to employee profit
sharing expense 10 (744)
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Pro forma net income attributable to Class A
Subordinate Voting and Class B Shares $ 9,467 $ 26,144
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Pro forma earnings per Class A Subordinate
Voting or Class B Share
Basic $ 0.18 $ 0.50
Diluted $ 0.16 $ 0.41
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Average number of pro forma Class A
Subordinate Voting and Class
B Shares outstanding (in millions)
Basic 51.5 51.5
Diluted 81.5 81.5
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The retroactive adoption of the new recommendations of the Canadian
Institute of Chartered Accountants for the presentation and disclosure of
basic and diluted earnings per share (see note 8) reduced the average
number of pro forma diluted Class A Subordinate Voting and Class B Shares
outstanding by 1.4 million and had no impact on pro forma diluted
earnings per Class A Subordinate Voting or Class B Share for the three
and six month periods ended June 30, 2000.
10. Segmented Information
The Company operates in one industry segment, the automotive
exteriors business. As at June 30, 2001, the Company had 22
manufacturing facilities in North America and 10 in Europe.
In addition, the Company had 5 product development and engineering
centres.
The Company's European divisions are managed separately from its
North American divisions as a result of differences in customer mix
and business environment. The Company's internal financial reports,
which are reviewed by executive management including the Company's
President and Chief Executive Officer, segment divisional results
between North America and Europe. This segmentation recognizes the
different geographic business risks faced by the Company's North
American and European divisions, including vehicle production volumes
in North America and Europe, foreign currency exposures, differences
in customer mix, the level of customer outsourcing and the nature of
products and systems outsourced.
The accounting policies of each segment are consistent with those
used in the preparation of the unaudited interim consolidated
financial statements. Inter-segment sales and transfers are accounted
for at fair market value.
The following tables show certain information with respect to segment
disclosures:
-------------------------------------------------------------------------
Three Month Period Ended June 30, 2001
-------------------------------------------------------------------------
(U.S. dollars in thousands) North
America Europe Corporate Total
-------------------------------------------------------------------------
Sales $ 352,029 $ 135,253 $ - $ 487,282
Intersegment sales (1,863) - - (1,863)
-------------------------------------------------------------------------
Sales to external customers $350,166 $ 135,253 $ - $ 485,419
-------------------------------------------------------------------------
Depreciation and
amortization $ 14,760 $ 5,398 $ - $ 20,158
-------------------------------------------------------------------------
Operating income (loss) $ 47,489 $ (308) $ (1,702) $ 45,479
-------------------------------------------------------------------------
Equity income $ (217) $ - $ - $ (217)
-------------------------------------------------------------------------
Interest expense, net $ 6,121 $ 4,560 $ (5,821) $ 4,860
-------------------------------------------------------------------------
Amortization of discount
on Convertible Series
Preferred Shares $ - $ - $ 2,455 $ 2,455
-------------------------------------------------------------------------
Fixed assets, net $ 362,117 $ 125,958 $ - $ 488,075
-------------------------------------------------------------------------
Capital expenditures $ 13,152 $ 2,897 $ - $ 16,049
-------------------------------------------------------------------------
Goodwill, net $ 46,788 $ 28,144 $ - $ 74,932
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three Month Period Ended June 30, 2000
-------------------------------------------------------------------------
(U.S. dollars in thousands) North
America Europe Corporate Total
-------------------------------------------------------------------------
Sales $ 279,960 $ 100,947 $ - $ 380,907
Intersegment sales (1,536) - - (1,536)
-------------------------------------------------------------------------
Sales to external customers $ 278,424 $ 100,947 $ - $ 379,371
-------------------------------------------------------------------------
Depreciation and
amortization $ 10,690 $ 4,466 $ - $ 15,156
-------------------------------------------------------------------------
Operating income $ 26,593 $ 2,181 $ 49 $ 28,823
-------------------------------------------------------------------------
Equity income $ (235) $ - $ - $ (235)
-------------------------------------------------------------------------
Interest expense, net $ 2,713 $ 2,452 $ (840) $ 4,325
-------------------------------------------------------------------------
Amortization of discount
on Convertible Series
Preferred Shares $ - $ - $ 992 $ 992
-------------------------------------------------------------------------
Fixed assets, net $ 311,386 $ 108,775 $ - $ 420,161
-------------------------------------------------------------------------
Capital expenditures $ 12,443 $ 5,909 $ - $ 18,352
-------------------------------------------------------------------------
Goodwill, net $ - $ 15,561 $ - $ 15,561
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six Month Period Ended June 30, 2001
-------------------------------------------------------------------------
(U.S. dollars in thousands) North
America Europe Corporate Total
-------------------------------------------------------------------------
Sales $ 659,668 $ 272,672 $ - $ 932,340
Intersegment sales (2,871) - - (2,871)
-------------------------------------------------------------------------
Sales to external customers $ 656,797 $ 272,672 $ - $ 929,469
-------------------------------------------------------------------------
Depreciation and
amortization $ 28,690 $ 10,990 $ - $ 39,680
-------------------------------------------------------------------------
Operating income (loss) $ 77,212 $ 5,252 $ (2,295) $ 80,169
-------------------------------------------------------------------------
Equity income $ (160) $ - $ - $ (160)
-------------------------------------------------------------------------
Interest expense, net $ 13,388 $ 9,179 $(11,753) $ 10,814
-------------------------------------------------------------------------
Amortization of discount
on Convertible Series
Preferred Shares $ - $ - $ 4,889 $ 4,889
-------------------------------------------------------------------------
Fixed assets, net $ 362,117 $ 125,958 $ - $ 488,075
-------------------------------------------------------------------------
Capital expenditures $ 24,346 $ 6,909 $ - $ 31,255
-------------------------------------------------------------------------
Goodwill, net $ 46,788 $ 28,144 $ - $ 74,932
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Six Month Period Ended June 30, 2000
-------------------------------------------------------------------------
North
(U.S. dollars in thousands) America Europe Corporate Total
-------------------------------------------------------------------------
Sales $551,068 $217,906 $ - $768,974
Intersegment sales (2,127) - - (2,127)
-------------------------------------------------------------------------
Sales to external customers $548,941 $217,906 $ - $766,847
-------------------------------------------------------------------------
Depreciation and amortization $ 21,401 $ 8,994 $ - $ 30,395
-------------------------------------------------------------------------
Operating income (loss) $ 58,887 $ 8,890 $ (137) $ 67,640
-------------------------------------------------------------------------
Equity income $ (412) $ - $ - $ (412)
-------------------------------------------------------------------------
Interest expense, net $ 4,820 $ 5,126 $ (971) $ 8,975
-------------------------------------------------------------------------
Amortization of discount on
Convertible Series Preferred
Shares $ - $ - $ 1,974 $ 1,974
-------------------------------------------------------------------------
Fixed assets, net $311,386 $108,775 $ - $420,161
-------------------------------------------------------------------------
Capital expenditures $ 28,811 $ 15,717 $ - $ 44,528
-------------------------------------------------------------------------
Goodwill, net $ - $ 15,561 $ - $ 15,561
-------------------------------------------------------------------------
11. Future Taxes
As previously reported in the December 31, 2000 supplemental
consolidated financial statements included in the Company's Report
to Shareholders for the period then ended, commencing August 1, 2000
on a prospective basis, 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. 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, and as accounted
for in the three and six month periods ended June 30, 2000, 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.
There was no material impact on net income for the three and six
month periods ended June 30, 2000 as a result of applying the
deferral method rather than the liability method of tax allocation.
12. Acquisition
In May 2001, the Company acquired the remaining minority interest
in Decomex Inc. ("Decomex") from Corporacion Activa, S.A. de C.V.
("Activa"). Decomex operates fascia moulding and finishing operations
in Mexico.
Total consideration paid in connection with the acquisition amounted
to $7.8 million (Cdn. $12 million), which gave rise to goodwill of
$0.1 million. The purchase price was satisfied with cash of $2.6
million and by the issuance of $5.2 million of prime rate promissory
notes, denominated in Canadian dollars, at par, payable to Activa and
maturing $2.6 million on May 31, 2002 and $2.6 million on May 31,
2003. Interest on the promissory notes is payable in Canadian dollars
on a quarterly basis.
The acquisition has been accounted for by the purchase method
in these unaudited interim consolidated financial statements from
the date of acquisition.
