Intier announces 2003 first quarter results
NEWMARKET, ON, May 7, 2003 -- Intier Automotive Inc. (TSX: IAI.A, NASDAQ: IAIA) today reported financial results for the first quarter ended March 31, 2003. Diluted earnings per share for the first quarter ended March 31, 2003 increased 8% to $0.27 as compared to diluted earnings per share of $0.25 for the first quarter ended March 31, 2002.
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All results are reported in millions of U.S. dollars, except earnings per
share figures, in accordance with Canadian Generally Accepted Accounting
Principles.
THREE MONTH PERIODS
ENDED MARCH 31,
(Unaudited)
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2003 2002
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Sales $ 1,031.6 $ 878.9
Operating income $ 30.1 $ 28.5
Net income $ 13.8 $ 13.0
Diluted earnings per share $ 0.27 $ 0.25
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Sales increased $152.7 million, or 17% to $1,031.6 million for the three month period ended March 31, 2003 compared to $878.9 million for the three month period ended March 31, 2002. Approximately $70 million, or nearly half, of this increase is due to the positive impact of foreign exchange translation related to the strengthening Canadian dollar, euro and British pound.
North American production sales grew to $575.6 million in the first quarter of 2003 compared to $521.3 million in the first quarter of 2002 as a result of the positive impact of higher production volumes, higher North American average dollar content per vehicle and the strengthening of the Canadian dollar relative to the U.S. dollar. North American light vehicle production volumes increased approximately 2% to 4.2 million units for the three month period ended March 31, 2003 as compared to 4.1 million units for the three month period ended March 31, 2002. North American average dollar content per vehicle increased to $139 for the first quarter of 2003 compared to $128 for the first quarter of 2002. New products that contributed to this increase included the Company's complete seats for the Chrysler Pacifica launched during the first quarter of 2003, as well as new products launched in the second half of 2002 such as the complete seats and overhead system for the Saturn ION.
Western European production sales increased to $372.6 million for the first quarter of 2003 compared to $275.3 million for the first quarter of 2002 as a result of growth in our Western European average dollar content per vehicle and the positive impact related to the strengthening of euro and British pound relative to the U.S. dollar. Western European vehicle production volumes remained relatively flat at approximately 4.3 million units for the three month periods ended March 31, 2003 and 2002. Western European average dollar content per vehicle increased to $87 for the first quarter of 2003 compared to $64 for the first quarter of 2002. New product launches that contributed to this increase included the instrument panel, console and door panels for the new Jaguar XJ Series, door panels for the Toyota Avensis and cockpit module for the Nissan Micra.
Consolidated tooling and engineering sales for the three month period ended March 31, 2003 increased by 1% to $83.4 from $82.3 million for the three month period ended March 31, 2002.
Operating income for the first quarter of 2003 increased to $30.1 million compared to $28.5 million for the first quarter of 2002. The increase in operating income was attributable to higher gross margin related to higher production sales partially offset by customer price reductions, start-up costs associated with a number of the Company's new product launches, the adverse impact of the strengthening euro at certain under-performing operations, higher selling, general and administrative costs associated with the increase in sales and higher affiliation and social fees.
The Company continued to generate significant free cash. During the first quarter of fiscal 2003, cash generated from operations before changes in working capital was $46.2 million. An additional $46.6 million of cash was generated from working capital resulting in total cash from operating activities of $92.8 million. Investment activities during the first quarter of 2003 were $26.9 million resulting in free cash before financing activities of $65.9 million for the quarter.
Diluted earnings per share was $0.27 for the three month period ended March 31, 2003, compared to diluted earnings per share of $0.25 for the three month period ended March 31, 2002.
Commenting on the first quarter results, Don Walker, the Company's President and Chief Executive Officer, stated "We are pleased with the progress that we continue to make and the on-going successful launches of our new products for our customers".
Intier Automotive's Board of Directors declared a dividend in respect of the first quarter of 2003 of US$0.10 per share on the Class A Subordinate Voting and Class B Shares payable on or after June 16, 2003 to shareholders of record on May 30, 2003. The Board also declared a dividend of US$2,812,500 on the outstanding Convertible Series 1 and 2 Preferred Shares payable on or after June 30, 2003 to holders of the Convertible Series Preferred Shares of record on May 30, 2003.
2003 OUTLOOK ------------
For the full year, North American light vehicle production volumes are expected to decrease to approximately 15.8 million units from 16.3 million units in 2002. Western Europe production volumes are expected to decline slightly to approximately 16.1 million units compared to 16.3 million units in 2002. Full year average dollar content per vehicle is expected to be between 17% and 20% above the average dollar content per vehicle for 2002 for both North America and Europe. In North America, average dollar content per vehicle is expected to be below this range in the second quarter of 2003 and above this range in the fourth quarter of 2003. Based on these production volume estimates, product mix and foreign exchange rate assumptions and tooling and engineering sales estimates, 2003 total sales are expected to be between $4.35 billion and $4.45 billion.
Intier is a global full service supplier and integrator of automotive interior and closure components, systems and modules. It directly supplies most of the major automobile manufacturers in the world with approximately 22,000 employees at 65 manufacturing facilities, and 17 product development, engineering and testing centres in North America, Europe, Brazil, Japan and China.
Intier will hold a conference call to discuss the first quarter results and other developments on Wednesday, May 7, 2003 at 4:00 p.m. EST (Toronto Time). The number to use for this call is 1-888-313-7737. Overseas callers should use 212-346-6527. Please call in 10 minutes prior to the conference call. For anyone unable to listen to the scheduled call, the rebroadcast number will be 1-800-558-5253 and 416-626-4100 (reservation number is 21138116(number sign)). The conference call will be chaired by Don Walker, President and Chief Executive Officer and Michael McCarthy, Executive Vice- President 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 actual
future results and performance of Intier Automotive Inc. (the "Company")
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; trade and labour disruption; pricing concessions
and cost absorptions; product warranty, recall and product liability
costs; 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 certain other
risks, assumptions and uncertainties disclosed in the Company's public
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.
INTIER AUTOMOTIVE INC.
CONSOLIDATED BALANCE SHEETS
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(U.S. dollars in millions) As at As at
March 31, December 31,
2003 2002
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(Unaudited) (Audited)
ASSETS
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Current assets:
Cash and cash equivalents $ 306.3 $ 241.3
Accounts receivable 598.6 579.9
Inventories 295.5 261.7
Prepaid expenses and other 32.3 27.8
Income taxes receivable 1.4 5.5
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1,234.1 1,116.2
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Fixed assets, net 488.2 478.1
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Goodwill 104.0 100.7
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Future tax assets 74.3 75.5
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Other assets 13.6 11.3
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$ 1,914.2 $ 1,781.8
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness $ 54.9 $ 48.6
Accounts payable 755.4 658.0
Accrued salaries and wages 66.5 74.3
Other accrued liabilities 63.3 50.2
Long-term debt due within one year 4.1 4.2
Series 1 Convertible Series
Preferred Shares (note 9) 107.6 -
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1,051.8 835.3
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Long-term debt 31.8 31.8
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Other long-term liabilities 27.4 25.6
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Convertible Series Preferred Shares (note 9) 101.6 206.2
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Future tax liabilities 37.6 38.0
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Minority interest 1.0 0.9
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Shareholders' equity:
Convertible Series Preferred Shares (note 6) 19.6 22.0
Class A Subordinate Voting Shares (note 6) 71.8 71.8
Class B Shares (note 6) 495.8 495.8
Retained earnings 28.2 17.2
Currency translation adjustment 47.6 37.2
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663.0 644.0
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$ 1,914.2 $ 1,781.8
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INTIER AUTOMOTIVE INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (DEFICIT)
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(U.S. dollars in millions, except per share
figures and numbers of shares)
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Three month Three month
period ended period ended
March 31, March 31,
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2003 2002
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(Unaudited) (Unaudited)
Sales $ 1,031.6 $ 878.9
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Cost of goods sold 907.9 771.4
Depreciation and amortization 23.4 20.7
Selling, general and administrative 54.4 44.8
Affiliation and social fees 15.8 13.5
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Operating income 30.1 28.5
Interest expense, net 0.3 0.3
Amortization of discount on Convertible
Series Preferred Shares 3.0 2.8
Equity income (0.3) (0.1)
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Income before income taxes and
minority interest 27.1 25.5
Income taxes 13.2 12.6
Minority interest 0.1 (0.1)
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Net income $ 13.8 $ 13.0
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Financing charge on Convertible Series
Preferred Shares 0.4 0.5
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Net income attributable to Class A
Subordinate Voting and Class B Shares 13.4 12.5
Retained earnings, beginning of period 17.2 15.9
Adjustment for change in accounting
policy for goodwill (note 4) - (35.7)
Dividends on Class A Subordinate Voting
and Class B Shares (2.4) (2.4)
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Retained earnings (deficit), end of period $ 28.2 $ (9.7)
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Earnings per Class A Subordinate Voting
or Class B Share (note 8)
Basic $ 0.28 $ 0.26
Diluted $ 0.27 $ 0.25
Average number of Class A Subordinate
Voting and Class B Shares outstanding
(in millions) (note 8)
Basic 48.2 48.2
Diluted 63.1 63.6
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INTIER AUTOMOTIVE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(U.S. dollars in millions)
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Three month Three month
period ended period ended
March 31, March 31,
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2003 2002
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(Unaudited) (Unaudited)
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Cash provided from (used for):
OPERATING ACTIVITIES
Net income $ 13.8 $ 13.0
Items not involving current cash flows 32.4 28.8
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46.2 41.8
Change in non-cash working capital 46.6 2.5
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92.8 44.3
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INVESTMENT ACTIVITIES
Fixed asset additions (23.9) (24.5)
Increase in investments and other assets (3.1) (0.3)
Proceeds from disposition of fixed assets 0.1 1.7
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(26.9) (23.1)
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FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness 3.8 (8.4)
(Repayments) issues of long-term debt and
other long-term liabilities (1.0) 1.0
Dividends on Class A Subordinate Voting
and Class B Shares (2.4) (2.4)
Dividends on Convertible Series
Preferred Shares (2.8) (2.8)
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(2.4) (12.6)
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Effect of exchange rate changes on
cash and cash equivalents 1.5 (0.6)
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Net increase in cash and cash equivalents
during the period 65.0 8.0
Cash and cash equivalents, beginning of period 241.3 77.1
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Cash and cash equivalents, end of period $ 306.3 $ 85.1
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in U.S. dollars unless otherwise noted and all tabular
amounts in millions, except per share figures and number of shares)
(All amounts as at March 31, 2003 and for the three month periods ended
March 31, 2003 and 2002 are unaudited).
1. BASIS OF PRESENTATION
The unaudited interim consolidated financial statements have been
prepared following the accounting policies as set out in the 2002
annual consolidated financial statements included in the Company's
2002 annual report to shareholders.
The unaudited interim consolidated financial statements do not
conform in all respects to the requirements of Canadian generally
accepted accounting principles for annual financial statements.
Accordingly, these unaudited interim consolidated financial
statements should be read in conjunction with the 2002 annual
consolidated financial statements as included in the Company's 2002
Annual Report.
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 of the Company at March 31, 2003, and the results
of operations and cash flows for the three month periods ended
March 31, 2003 and 2002.
2. CYCLICALITY
Substantially all revenue is derived from sales to North American and
European facilities of the major automobile manufacturers. The
Company's operations are exposed to the cyclicality inherent in the
automobile 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.
3. USE OF ESTIMATES
The preparation of the unaudited interim consolidated financial
statements in conformity with Canadian generally accepted accounting
principles require 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.
4. CHANGE IN ACCOUNTING POLICY FOR GOODWILL
In 2002, the Company adopted the new accounting recommendations of
The Canadian Institute of Chartered Accountants for goodwill. Upon
initial adoption of these recommendations, the Company recorded a
goodwill writedown of $35.7 million, of which $27.6 million, $5.6
million and $2.5 million related to reporting units in the Interiors
Europe, Closures Europe and Interiors North America reporting
segments, respectively. The total goodwill writedown was charged
against January 1, 2002 opening retained earnings.
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 and for environmental remediation
costs. 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 and results of operations of the
Company. Please refer to Note 22 "Contingencies" in the 2002 audited
consolidated financial statements included in the Company's 2002
Annual Report.
In February 2003, the CICA issued Accounting Guideline No. 14,
Disclosure of Guarantees ("AcG-14"). Consistent with AcG-14, the
Company has provided disclosure about guarantees as required for
interim periods beginning on or after January 1, 2003.
The Company has guarantees to third parties that include future rent,
utility costs, workers compensation claims under development,
commitments linked to maintaining specific employment, customs duties
and obligations linked to performance of specific vehicle programs.
The amount of these guarantees are not individually or in aggregate
significant.
6. CAPITAL STOCK
Class and Series of Outstanding Securities
The Company's share structure has remained consistent with that in
place as at December 31, 2002. For details concerning the nature of
the Company's securities, please refer to Note 13 "Convertible Series
Preferred Shares" and note 14 "Capital Stock" in the 2002 audited
consolidated financial statements included in the Company's 2002
Annual Report.
The following table summarizes the outstanding share capital of the
Company:
Authorized Issued
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Convertible Series Preferred Shares
(Convertible into Class A
Subordinate Voting Shares) 2,250,000 2,250,000
Preferred Shares, issuable in series Unlimited -
Class A Subordinate Voting Shares Unlimited 5,481,191
Class B Shares
(Convertible into Class A
Subordinate Voting Shares) Unlimited 42,751,938
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Maximum Number of Shares
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 March 31, 2003 were exercised or
converted:
Number of Shares
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Class A Subordinate Voting Shares
outstanding as at March 31, 2003 5,481,191
Class B Shares outstanding as at March 31, 2003 42,751,938
Options to purchase Class A Subordinate
Voting Shares 3,095,000
Convertible Series Preferred Shares,
convertible at $15.09 per share 14,910,537
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66,238,666
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The number of shares reserved to be issued for stock options is
5,995,000 Class A Subordinate Voting Shares of which 2,780,000 are
reserved but unoptioned at March 31, 2003. The total number of shares
issued from exercised stock options, from the inception date of the
plan, is 5,000. The total number of options to purchase Class A
Subordinate Voting Shares that have been cancelled, from the
inception of the plan, is 131,000. The total number of options to
purchase Class A Subordinate Voting Shares that have expired, from
the inception of the plan, is 4,000.
7. STOCK-BASED COMPENSATION
(a) Information concerning the Company's Incentive Stock Option Plan
is included in note 14 "Capital Stock" of the 2002 audited
consolidated financial statements included in the Company's 2002
Annual Report. The following is a continuity schedule of options
outstanding:
Canadian dollar options
Weighted
average
exercise Options
Number price exercisable
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Outstanding at
December 31, 2002 1,720,000 Cdn.$ 21.92 641,000
Cancelled (10,000) Cdn.$ 21.00 (4,000)
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Outstanding at
March 31, 2003 1,710,000 Cdn.$ 21.92 637,000
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U.S. dollar options
Weighted
average
exercise Options
Number price exercisable
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Outstanding at
December 31, 2002 1,435,000 U.S.$ 14.38 587,000
Cancelled (20,000) U.S.$ 13.70 (8,000)
Cancelled (30,000) U.S.$ 16.40 (6,000)
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Outstanding at
March 31, 2003 1,385,000 U.S.$ 14.35 573,000
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(b) The Company does not recognize compensation expense for its
outstanding fixed price stock options. Under CICA 3870, the
Company is required to disclose compensation expense for fixed
stock options issued subsequent to January 1, 2002, assuming
compensation expense for the stock option plan had been
determined based upon the fair value at the grant date,
consistent with the methodology prescribed by the CICA.
The fair value of stock options is estimated at the date of grant
using the Black-Scholes option pricing model with the following
weighted average assumptions:
Three month periods
ended March 31,
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2003 2002
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Risk free interest rate - 5.27%
Expected dividend yield - 1.20%
Expected volatility - 26%
Expected time until exercise - 5 years
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For the three month period ending March 31, 2003 no options were
granted under the Company's Incentive Stock Option Plan.
The Black-Scholes options valuation model used by the Company to
determine fair values was developed for use in estimating the fair
value of freely traded options which are fully transferable and have
no vesting restrictions. In addition, this model requires the input
of highly subjective assumptions, including future stock price
volatility and expected time until exercise. Because the Company's
outstanding stock options have characteristics which are
significantly different from those of traded options, and because
changes in any of the assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of
the stock options.
For purposes of pro forma disclosures, the Company's net income and
basic and diluted earnings per Class A Subordinate Voting or Class B
Share for the three month periods ended March 31, 2003 and 2002 would
have been:
Three month periods
ended March 31,
---------------------
2003 2002
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Pro forma net income attributable to
Class A Subordinate Voting and
Class B Shares $ 13.3 $ 12.4
Pro forma earnings per Class A
Subordinate Voting or Class B Share
Basic $ 0.28 $ 0.26
Diluted $ 0.26 $ 0.25
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The weighted average fair value of options granted subsequent to
January 1, 2002 and outstanding during the three month period ending
March 31, 2003 was $5.63 per option. The weighted average fair value
of the 60,000 options granted during the three month period ending
March 31, 2002 was $4.66 per option.
8. EARNINGS PER SHARE
The following table summarizes the calculation of earnings per share
for the three month periods ended March 31, 2003 and 2002.
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Three month Three month
period ended period ended
March 31, 2003 March 31, 2002
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Basic earnings per Class A
Subordinate Voting or Class B Share:
Net income attributable to Class A
Subordinate Voting and Class B Shares $ 13.4 $ 12.5
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Average number of Class A Subordinate
Voting and Class B Shares outstanding
during the period 48.2 48.2
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Basic earnings per Class A Subordinate
Voting or Class B Share $ 0.28 $ 0.26
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Diluted earnings per Class A
Subordinate Voting or Class B Share:
Net income attributable to Class A
Subordinate Voting and Class B Shares $ 13.4 $ 12.5
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Adjustments (net of related tax effects):
Amortization of discount on
Convertible Series Preferred Shares 3.0 2.8
Financing charge on Convertible Series
Preferred Shares 0.4 0.5
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$ 16.8 $ 15.8
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Average number of Class A Subordinate
Voting and Class B Shares outstanding
during the period 48.2 48.2
Convertible Series Preferred Shares 14.9 14.9
Stock options - 0.5
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63.1 63.6
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Diluted earnings per Class A Subordinate
Voting or Class B Share $ 0.27 $ 0.25
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For the three month period ending March 31, 2003, diluted earnings
per Class A Subordinate Voting or Class B Share exclude the 3.1
million Class A Subordinate Voting Shares issuable under the
Company's Incentive Stock Option Plan as such options were not in the
money during the period.
9. CONVERTIBLE SERIES PREFERRED SHARES
The liability amount for Series 1 Convertible Series Preferred Shares
are presented as current liabilities. The Series 1 Convertible Series
Preferred Shares are retractable by Magna International Inc. (Magna)
at their carrying value of $112.5 million, together with all declared
and unpaid dividends, after December 31, 2003. These shares are also
convertible by Magna into the Company's Class A Subordinate Voting
Shares at a fixed conversion price of U.S.$15.09 per Class A
Subordinate Voting Share.
The liability amounts for Series 2 Convertible Series Preferred
Shares are presented as long-term liabilities, as they are not
retractable by Magna until after December 31, 2004. These shares are
also convertible by Magna into the Company's Class A Subordinate
Voting Shares at a fixed conversion price of U.S.$15.09 per Class A
Subordinate Voting Share.
The Series 1 and 2 Convertible Series Preferred Shares are redeemable
by the Company commencing December 31, 2005.
10. SEGMENTED INFORMATION
The Company's segmented results of operations are as follows:
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Three month period Three month period
ended March 31, 2003 ended March 31, 2002
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Fixed Fixed
Total Operating assets, Total Operating assets,
Sales income net Sales income net
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Interior Systems
North
America $ 427.7 $ 12.6 $ 230.2 $ 423.9 $ 23.5 $ 198.2
Europe 367.8 2.7 160.2 264.6 0.5 146.4
Closures
Systems 236.9 14.6 97.2 190.8 6.9 80.9
Corporate,
other and
inter-
segment
elimi-
nations (0.8) 0.2 0.6 (0.4) (2.4) 0.2
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Total
reportable
segments $1,031.6 $ 30.1 488.2 $ 878.9 $ 28.5 425.7
Current
assets 1,234.1 958.8
Goodwill,
future
tax and
other
assets 191.9 235.6
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Consolidated
total assets $1,914.2 $1,620.1
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Effective January 2003, the Company's Closures operations underwent
an organizational structure change, effectively changing management's
reporting and assessment of operating results for resource allocation
decisions and performance assessment to be on a global basis.
Consistent with these changes in the Company's business operations,
the Closures segment, beginning January 2003 is reported on a global
basis. All comparative period amounts have been restated to conform
with the current period's presentation.