Magna announces second quarter and year to date results
AURORA, ON, Aug. 6, 2003 -- Magna International Inc. (TSX: MG.A, MG.B; NYSE: MGA) today reported sales, profits and earnings per share for the second quarter and six month period ended June 30, 2003.
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SIX MONTHS ENDED THREE MONTHS ENDED
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
---------- ------------ ----------- ------------
Sales $ 7,614 $ 6,394 $ 3,848 $ 3,273
Net income(1) $ 336 $ 312 $ 174 $ 159
Net income from
operations(2) $ 336 $ 323 $ 174 $ 170
Diluted earnings
per share(1) $ 3.41 $ 3.33 $ 1.76 $ 1.63
Diluted earnings
per share from
operations(2) $ 3.41 $ 3.45 $ 1.76 $ 1.81
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(1) Net income and diluted earnings per share have been prepared in
accordance with Canadian Generally Accepted Accounting Principles
("Canadian GAAP").
(2) The Company measures and presents net income from operations and
diluted earnings per share from operations because they are measures
that are widely used by analysts and investors in evaluating the
operating performance of the Company. However, net income from
operations and diluted earnings per share from operations do not
have any standardized meaning under Canadian GAAP and are therefore
unlikely to be comparable to similar measures presented by other
companies.
Net income from operations for the six months and three months ended
June 30, 2002 is based on net income but excludes an ownership
dilution loss of $11 million from public subsidiary share issuances.
Diluted earnings per share from operations for the six months and
three months ended June 30, 2002 is based on diluted earnings per
share and calculated using 90.8 million and 91.0 million diluted
shares outstanding, respectively, but excludes the ownership
dilution loss described above and an $11 million charge to retained
earnings related to foreign exchange on the redemption of the 4.875%
Convertible Subordinated Debentures.
For more information see notes 3 and 5 to the Second Quarter
Consolidated Financial Statements attached.
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All results are reported in millions of U.S. dollars,
except per share figures.
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THREE MONTHS ENDED JUNE 30, 2003
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The Company posted sales of $3.8 billion for the second quarter ended June 30, 2003, an increase of 18% over the second quarter of 2002. The higher sales level in the second quarter of 2003 reflects increases of 31% in European content per vehicle and 23% in North American content per vehicle over the comparable quarter in 2002. European content per vehicle increased $67 for the second quarter ended June 30, 2003, of which $55 was due to the strengthening of the euro and British pound against the U.S. dollar. North American content per vehicle increased $97 for the second quarter ended June 30, 2003, of which $28 was due to the strengthening of the Canadian dollar against the U.S. dollar. During the second quarter of 2003, North American vehicle production declined approximately 9% and European vehicle production remained substantially unchanged from the comparable period.
The Company earned net income from operations for the quarter ended June 30, 2003 of $174 million, representing an increase over the comparable quarter of 2% or $4 million. Net income for the quarter ended June 30, 2003 was $174 million.
Diluted earnings per share from operations were $1.76 for the quarter ended June 30, 2003, compared to $1.81 for the quarter ended June 30, 2002. Diluted earnings per share for the second quarter of 2003 reflects an increase in net income offset by a higher average number of diluted shares outstanding substantially due to the Donnelly acquisition, which added approximately 5.2 million shares in the fourth quarter of 2002. Diluted earnings per share for the quarter ended June 30, 2003 were $1.76.
The Company generated cash from operations before changes in non-cash working capital of $350 million and invested $291 million in non-cash working capital in the second quarter of 2003. Total investment activities for the second quarter of 2003 were $253 million, including $196 million in automotive fixed assets, $15 million in fixed asset additions at Magna Entertainment Corp. ("MEC"), and $42 million in other assets.
Belinda Stronach, Magna's President and Chief Executive Officer stated: "We posted strong second quarter results, despite a significant decline in North American vehicle production and continued costs to support the unprecedented amount of business launching this year. In addition, we continue to be awarded a significant amount of new business from our customers that is expected to lead to continued content growth in the future."
SIX MONTHS ENDED JUNE 30, 2003 ------------------------------
Sales for the six months ended June 30, 2003 were $7.6 billion, an increase of 19% over the six months ended June 30, 2002. The higher sales level for the first six months of 2003 reflects increases of 32% in European content per vehicle and 18% in North American content per vehicle over the first six months of 2002. European content per vehicle increased $68 for the six months ended June 30, 2003, of which $53 was due to the strengthening of the euro and British pound against the U.S. dollar. North American content per vehicle increased $77 for the six months ended June 30, 2003, of which $22 was due to the strengthening of the Canadian dollar against the U.S. dollar. During the first six months of 2003, North American vehicle production declined approximately 4% and European vehicle production increased approximately 1% from the comparable period.
The Company earned net income from operations for the six months ended June 30, 2003 of $336 million, representing an increase over the six months ended June 30, 2002 of 4% or $13 million. Net income for the six months ended June 30, 2003 was $336 million.
Diluted earnings per share from operations were $3.41 for the six months ended June 30, 2003, compared to $3.45 for the six months ended June 30, 2002. Diluted earnings per share for the six months ended June 30, 2003 were $3.41.
During the six months ended June 30, 2003, the Company generated cash from operations before changes in non-cash working capital of $680 million and invested $236 million in non-cash working capital. Total investment activities for the first six months of 2003 were $415 million, including $311 million in automotive fixed assets, $28 million in fixed assets at MEC, and $76 million in other assets.
OTHER MATTERS -------------
The Company also announced that its Board of Directors today declared its regular quarterly dividend with respect to its outstanding Class A Subordinate Voting Shares and Class B Shares in respect of the fiscal quarter ended June 30, 2003. The dividend of U.S. $0.34 per share is payable on September 15, 2003 to shareholders of record on August 29, 2003.
The Company also announced today that The Toronto Stock Exchange ("TSX") and the New York Stock Exchange ("NYSE") have accepted notices of the Company's intention to purchase for cancellation and/or for purposes of its long-term retention (restricted share) program up to 3,000,000 of its Class A Subordinate Voting Shares, representing less than 5% of the Company's issued and outstanding Class A Subordinate Voting Shares, pursuant to a normal course issuer bid effected through the facilities of the TSX and NYSE. The Company's bid will commence on August 12, 2003, and will expire no later than August 11, 2004. The Company will not purchase any Class A Subordinate Voting Shares during the period commencing on August 12, 2003 and ending on August 22, 2003, two (2) business days following the August 19, 2003 date of the Company's special meeting of shareholders (or two (2) business days following any adjournment or postponement thereof) to consider and, if deemed advisable by the Company's shareholders, pass the special resolution relating to the spin-off of MI Developments Inc. ("MID"). All purchases of Class A Subordinate Voting Shares will be made at the market price at the time of purchase in accordance with the by-laws, rules and policies of the TSX and the NYSE, subject to a maximum aggregate expenditure of U.S.$200 million. The actual number of Class A Subordinate Voting Shares and the timing of any purchases will be determined by the Company. The Company will not purchase any of its Class B Shares pursuant to the bid. As of July 31, 2003, the Company had 94,664,801 Class A Subordinate Voting Shares issued and outstanding and its public float consisted of 90,074,455 Class A Subordinate Voting Shares. The Company had previously initiated a normal course issuer bid on August 12, 2002 which expires on August 11, 2003. Under this prior bid, the Company purchased for cancellation an aggregate of 33,900 Class A Subordinate Voting Shares and paid an average price of Cdn.$97.3759 for each such share.
2003 OUTLOOK ------------
For the third quarter of 2003, the Company expects average dollar content per vehicle to range between $510 and $525 in North America and between $330 and $345 in Europe. In addition, the Company has assumed that third quarter 2003 vehicle volumes will be approximately 3.7 million units in both North America and Europe. Based on expected average dollar content per vehicle in North America and Europe, the above volume assumptions and anticipated tooling and other automotive sales, Magna expects its automotive sales for the third quarter of 2003 to be between $3.4 billion and $3.6 billion and diluted earnings per share from operations to be in the range of $1.05 to $1.25.
The Company expects full year 2003 average dollar content per vehicle to range between $500 and $520 in North America and between $300 and $320 in Europe. Further, the Company is forecasting 2003 production volumes of approximately 15.9 million units in North America and approximately 16.0 million units in Europe. Based on expected average dollar content per vehicle in North America and Europe, the above volume assumptions and anticipated tooling and other automotive sales, Magna expects its automotive sales for the full year 2003 to range from $14.0 billion to $14.8 billion, compared to 2002 automotive sales of $12.4 billion. In addition, diluted earnings per share from operations for 2003 are expected to be in the range of $6.20 to $6.55.
In addition, the Company expects that full year 2003 spending for fixed assets for its automotive business will be approximately $800 million, compared to $791 million in 2002.
Last month, the Company announced that, subject to shareholders' approval, it proposes to spin off to its shareholders 100% of MID. The expected reduction in diluted earnings per share from operations associated with the spin-off of MID has not been reflected in the 2003 outlook above.
Magna, the most diversified automotive supplier 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: automotive interior and closure components, systems and modules through Intier Automotive Inc.; metal body systems, components, assemblies and modules through Cosma International; exterior and interior mirror and engineered glass systems through Magna Donnelly; fascias, front and rear end modules, plastic body panels, exterior trim components and systems, greenhouse and sealing systems, roof modules and lighting components through Decoma International Inc.; various engine, transmission and fueling systems and components through Tesma International Inc.; and a variety of drivetrain components and complete vehicle engineering and assembly through Magna Steyr. Magna's non-automotive activities are conducted through Magna Entertainment Corp.
Magna has approximately 74,000 employees in 206 manufacturing operations and 47 product development and engineering centres in 22 countries.
Magna will hold a conference call for interested analysts and shareholders to discuss the second quarter results and other developments on Wednesday, August 6, 2003 at 5:30 p.m. EDT. The number to use for this call is 1-800-428-5596. The number for overseas callers is 1-416-641-6659. Please call in 10 minutes prior to the conference call. Magna will also webcast the conference call at www.magna.com. The conference call will be chaired by Belinda Stronach, President and Chief Executive 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: global economic conditions causing decreases in production volumes; price reduction pressures; pressure to absorb certain fixed costs; increased warranty, recall and product liability risk; the impact of financially distressed sub-suppliers; dependence on outsourcing by automobile manufacturers; rapid technological and regulatory change; increased crude oil and energy prices; dependence on certain vehicle programs; fluctuations in relative currency values; unionization activity; threat of work stoppages; the competitive nature of the auto parts supply market; program cancellations, delays in launching new programs and delays in constructing new facilities; completion and integration of acquisitions; disruptions caused by terrorism or war; changes in governmental regulations; the impact of environmental regulations; and other factors as set out in the Company's Annual information Form and annual report on Form 40-F for its financial year ended December 31, 2002 filed with the Canadian securities commissions and the SEC respectively and subsequent 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.
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Unaudited)
(United States dollars in millions, except per share figures)
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Six months ended Three months ended
June 30, June 30, June 30, June 30,
Note 2003 2002 2003 2002
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Sales:
Automotive $ 7,156 $ 6,017 $ 3,660 $ 3,145
Magna Entertainment Corp. 458 377 188 128
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7,614 6,394 3,848 3,273
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Automotive costs and
expenses:
Cost of goods sold 5,884 4,931 2,997 2,569
Depreciation and
amortization 238 202 120 103
Selling, general and
administrative 482 372 247 192
Interest income, net (7) - (4) (1)
Equity income (7) (11) (3) (7)
Magna Entertainment Corp.
costs and expenses 436 343 188 126
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Operating income - automotive 566 523 303 289
Operating income - Magna
Entertainment Corp. 22 34 - 2
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Operating income 588 557 303 291
Other loss 3 - (11) - (11)
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Income before income taxes
and minority interest 588 546 303 280
Income taxes 202 190 103 98
Minority interest 50 44 26 23
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Net income $ 336 $ 312 $ 174 $ 159
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Financing charges on
Preferred Securities
and other paid-in capital $ (10) $ (16) $ (6) $ (7)
Foreign exchange loss on
the redemption of the
4.875% Convertible
Subordinated
Debentures 5 - (11) - (11)
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Net income available to
Class A Subordinate
Voting and Class B
Shareholders 326 285 168 141
Retained earnings,
beginning of period 2,570 2,217 2,696 2,290
Dividends on Class A
Subordinate Voting
and Class B Shares (64) (57) (32) (28)
Adjustment for change
in accounting policy
related to goodwill 2 - (42) - -
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Retained earnings,
end of period $ 2,832 $ 2,403 $ 2,832 $ 2,403
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Earnings per Class A
Subordinate Voting
or Class B Share:
Basic $ 3.41 $ 3.37 $ 1.76 $ 1.64
Diluted $ 3.41 $ 3.33 $ 1.76 $ 1.63
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Cash dividends paid per
Class A Subordinate
Voting or Class B Share $ 0.68 $ 0.68 $ 0.34 $ 0.34
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Average number of Class A
Subordinate Voting and
Class B Shares outstanding
during the period (in millions):
Basic 95.6 84.5 95.7 85.5
Diluted 95.9 90.8 96.0 86.2
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See accompanying notes
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(United States dollars in millions)
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Six months ended Three months ended
June 30, June 30, June 30, June 30,
Note 2003 2002 2003 2002
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Cash provided from (used for):
OPERATING ACTIVITIES
Net income $ 336 $ 312 $ 174 $ 159
Items not involving
current cash flows 344 281 176 144
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680 593 350 303
Changes in non-cash
working capital (236) 150 (291) 71
Increase in deferred revenue 2 69 2 68
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446 812 61 442
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INVESTMENT ACTIVITIES
Automotive fixed asset
additions (311) (240) (196) (131)
Magna Entertainment Corp.
fixed asset additions (28) (34) (15) (20)
Purchase of subsidiaries - (3) - (2)
Decrease (increase) in
investments 4 (3) 3 (4)
Increase in other assets (76) (61) (42) (48)
Proceeds from disposition
of investments and other 11 16 6 7
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(400) (325) (244) (198)
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FINANCING ACTIVITIES
Net repayments of debt (51) (103) (44) (50)
Issues of subordinated
debentures by
subsidiaries 4 211 - 145 -
Repayments of
debentures'
interest
obligations (3) (12) (2) (2)
Preferred Securities
distributions (13) (12) (7) (5)
Issues of Class A
Subordinate Voting
Shares 6 19 4 3
Issues of shares by
subsidiaries 12 144 12 143
Dividends paid to
minority interests (7) (6) (4) (3)
Dividends (64) (57) (32) (28)
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91 (27) 72 58
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Effect of exchange rate
changes on cash and
cash equivalents 120 33 87 34
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Net increase (decrease) in
cash and cash equivalents
during the period 257 493 (24) 336
Cash and cash equivalents,
beginning of period 1,227 890 1,508 1,047
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Cash and cash equivalents,
end of period $ 1,484 $ 1,383 $ 1,484 $ 1,383
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See accompanying notes
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(United States dollars in millions)
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June December
30, 31,
Note 2003 2002
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ASSETS
Current assets
Cash and cash equivalents $ 1,484 $ 1,227
Accounts receivable 2,589 2,140
Inventories 1,045 918
Prepaid expenses and other 104 84
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5,222 4,369
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Investments 127 114
Fixed assets, net 4,835 4,415
Goodwill, net 2 489 467
Future tax assets 176 176
Other assets 672 601
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$ 11,521 $ 10,142
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 200 $ 272
Accounts payable 2,348 2,040
Accrued salaries and wages 349 312
Other accrued liabilities 231 199
Income taxes payable 18 62
Long-term debt due within one year 45 51
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3,191 2,936
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Deferred revenue 92 92
Long-term debt 426 366
Debentures' interest obligation 250 106
Other long-term liabilities 205 186
Future tax liabilities 356 325
Minority interest 3 896 710
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5,416 4,721
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Shareholders' equity
Capital stock 7
Class A Subordinate Voting Shares
(issued: 94,592,026; December 31,
2002 - 94,477,224) 2,492 2,487
Class B Shares
(convertible into Class A Subordinate
Voting Shares)
(issued: 1,096,509) 1 1
Preferred Securities 277 277
Other paid-in capital 66 64
Retained earnings 2,832 2,570
Currency translation adjustment 437 22
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6,105 5,421
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$ 11,521 $ 10,142
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See accompanying notes
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
(All amounts in U.S. dollars and all tabular amounts in millions
unless otherwise noted)
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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 2002 annual consolidated financial statements.
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 2002 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 June 30, 2003 and the results of operations and
cash flows for the three-month and six-month periods ended June 30,
2003 and 2002.
2. Goodwill and Other Intangible Assets
In 2002, the Company adopted the new accounting recommendations of
The Canadian Institute of Chartered Accountants ("CICA") for goodwill
and other intangible assets. Upon initial adoption of these
recommendations, the Company recorded a goodwill writedown of $51
million, of which $15 million related to Decoma International Inc.'s
("Decoma") U.K. reporting unit and $36 million related to Intier
Automotive Inc.'s ("Intier") Interiors Europe, Closures Europe and
Interiors North America reporting units. Of the total goodwill
writedown of $51 million, $42 million was charged against January 1,
2002 opening retained earnings, representing Magna's ownership
interest in the writedowns of Decoma and Intier. The balance of the
goodwill writedown of $9 million was reflected as a reduction in
January 1, 2002 opening minority interest.
3. Other Loss
In April 2002, Magna Entertainment Corp. ("MEC") completed a public
offering by issuing 23 million shares of its Class A Subordinate
Voting Stock for aggregate cash consideration, net of share issue
expenses, of $142 million. The Company recognized a loss of $11
million from its ownership dilution arising from the issue. The loss
incurred was not subject to income taxes as the issue was completed
on a primary basis by MEC.
4. Debentures Issued by Subsidiaries
(a) On March 27, 2003, Decoma issued Cdn$100 million of 6.5%
convertible unsecured subordinated debentures maturing March 31,
2010. The subordinated debentures are convertible at any time
into Decoma Class A Subordinate Voting Shares at a fixed
conversion price of Cdn$13.25 per share. All or part of the
subordinated debentures are redeemable at Decoma's option between
March 31, 2007 and March 31, 2008 if the weighted average trading
price of Decoma's Class A Subordinate Voting Shares is not less
than Cdn$16.5625 for the 20 consecutive trading days ending five
trading days preceding the date on which notice of redemption is
given. Subsequent to March 31, 2008, all or part of the
subordinated debentures are redeemable at Decoma's option at any
time. On redemption or maturity, Decoma will have the option of
retiring the Debentures with Decoma Class A Subordinate Voting
Shares and in addition, Decoma may elect from time to time to
issue and deliver freely tradable Class A Subordinate Voting
Shares to a trustee in order to raise funds to satisfy the
obligation to pay interest on the Debentures.
(b) In June 2003, MEC issued $150 million of 8.55% convertible
subordinated notes at par. The unsecured notes, which are
denominated in U.S. dollars, are convertible at any time at the
option of the holders into shares of MEC Class A Subordinate
Voting Stock at a conversion price of $7.05 per share and mature
on June 15, 2010. The notes are redeemable, at MEC's option, in
whole or in part at par plus accrued and unpaid interest at any
time after June 15, 2008, and on and after June 2, 2006, if the
closing price of MEC's Class A Subordinate Voting Stock exceeds
125% of the conversion price for at least 20 trading days in the
previous 30 consecutive trading day period. Interest on the notes
is payable in U.S. dollars on a semi-annual basis.
The present value of the principal and interest of the Decoma
subordinated debentures and the value ascribed to the holders'
conversion option are included in Decoma's equity and, in the case of
the MEC notes, the value ascribed to the holders' conversion option
is included in MEC's equity. Accordingly, such amounts are classified
as minority interest in the Company's consolidated balance sheet.
5. Redemption of the 4.875% Convertible Subordinated Debentures
In May 2002, the Company called for redemption of the 4.875%
Convertible Subordinated Debentures effective June 6, 2002. Prior to
June 6, 2002, an aggregate $29 million principal amount of such
debentures was converted into 389,719 Class A Subordinate Voting
Shares. The $451 million principal amount that remained outstanding
was redeemed by issuing 6,155,863 Class A Subordinate Voting Shares.
On redemption, the Company incurred a foreign exchange loss of
$11 million related to the equity component of the 4.875% Convertible
Subordinated Debentures. Accordingly, such amount was recorded as a
charge to retained earnings. In accordance with the recommendations
of the CICA, the foreign exchange loss of $11 million has been
recorded as a charge to income available to Class A Subordinate
Voting or Class B Shareholders and reflected in the calculation of
basic and diluted earnings per share.
6. Acquisitions
On October 18, 2002, the shares of Flamboro Downs Holdings Limited,
the owner and operator of Flamboro Downs, were acquired by Ontario
Racing Inc. ("ORI"). On April 16, 2003, MEC received all necessary
regulatory approvals for the acquisition of Flamboro Downs, and
accordingly the shares of ORI were transferred to MEC. The purchase
price, net of cash acquired, was approximately $56 million and was
previously funded by MEC through a cash advance to ORI of
$23 million, with the remainder satisfied by ongoing payments under
secured notes of approximately $33 million. The results of operations
of ORI were accounted for under the equity method for the period from
October 18, 2002 to April 16, 2003.
7. 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 June 30, 2003 were exercised:
Class A Subordinate Voting and Class B Shares
outstanding at June 30, 2003 95.7
Stock options 3.5
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99.2
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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.
8. Stock Based Compensation
(a) The following is a continuity schedule of options outstanding
(number of options in the table below are expressed in whole
numbers and have not been rounded to the nearest million):
Options outstanding
-----------------------
Weighted
average Number
Number exercise of options
of options price exercisable
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Outstanding at
December 31, 2002 3,377,875 Cdn$89.19 1,958,375
Granted 320,000 Cdn$93.19 64,000
Exercised (36,850) Cdn$66.55 (36,850)
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Outstanding at March 31, 2003 3,661,025 Cdn$89.77 1,985,525
Granted 40,000 Cdn$93.17 8,000
Exercised (64,150) Cdn$68.46 (64,150)
Cancelled (115,000) Cdn$104.08 (41,000)
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Outstanding at June 30, 2003 3,521,875 Cdn$89.73 1,888,375
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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
price 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.
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:
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Risk free interest rate 5%
Expected dividend yield 1.45%
Expected volatility 24%
Expected time until exercise 4 years
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The Black-Scholes option 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 its 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 six months and three months ended June 30,
2003 and 2002 would have been as follows:
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Six months ended Three months ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
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Pro forma net
income $ 332 $ 303 $ 172 $ 157
Pro forma earnings
per Class A
Subordinate
Voting or Class B
Share
Basic $ 3.36 $ 3.27 $ 1.74 $ 1.62
Diluted $ 3.36 $ 3.23 $ 1.74 $ 1.61
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The weighted average fair value of options granted during the
first six months of 2003 was Cdn$21.17 (2002 - Cdn$25.08).
9. Segmented Information
Six months ended Six months ended
June 30, 2003 June 30, 2002
--------------------------------------------- -------------------------
Oper- Fixed Oper- Fixed
Total ating assets, Total ating assets,
sales income net sales income net
--------------------------------------------- -------------------------
Public Automotive
Operations
Decoma
International
Inc. $ 1,189 $ 100 $ 603 $ 1,103 $ 100 $ 501
Intier
Automotive Inc. 2,164 67 501 1,875 74 438
Tesma
International Inc. 548 56 289 452 47 280
Wholly Owned Automotive
Operations
Magna Steyr 1,044 12 482 943 15 377
Other Automotive
Operations 2,286 229 1,038 1,697 197 823
Corporate and other (75) 102 1,119 (53) 90 771
--------------------------------------------- -------------------------
Total Automotive
Operations 7,156 566 4,032 6,017 523 3,190
MEC 458 22 803 377 34 605
--------------------------------------------- -------------------------
Total reportable
segments $ 7,614 $ 588 4,835 $ 6,394 $ 557 3,795
Current assets 5,222 4,277
Investments,
goodwill and
other assets 1,464 813
--------------------------------------------- -------------------------
Consolidated total
assets $ 11,521 $ 8,885
--------------------------------------------- -------------------------
--------------------------------------------- -------------------------
Three months ended Three months ended
June 30, 2003 June 30, 2002
--------------------------------------------- -------------------------
Oper- Fixed Oper- Fixed
Total ating assets, Total ating assets,
sales income net sales income net
--------------------------------------------- -------------------------
Public Automotive
Operations
Decoma
International
Inc. $ 612 $ 55 $ 603 $ 588 $ 60 $ 501
Intier
Automotive Inc. 1,132 38 501 996 48 438
Tesma
International Inc. 279 31 289 241 26 280
Wholly Owned
Automotive
Operations
Magna Steyr 517 8 482 464 5 377
Other Automotive
Operations 1,160 120 1,038 881 101 823
Corporate and other (40) 51 1,119 (25) 49 771
--------------------------------------------- -------------------------
Total Automotive
Operations 3,660 303 4,032 3,145 289 3,190
MEC 188 - 803 128 2 605
--------------------------------------------- -------------------------
Total reportable
segments $ 3,848 $ 303 4,835 $ 3,273 $ 291 3,795
Current assets 5,222 4,277
Investments,
goodwill and
other assets 1,464 813
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Consolidated total assets $ 11,521 $ 8,885
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10. Subsequent Events
(a) On July 7, 2003, the Company announced that, subject to
shareholder approval, it proposes to distribute to its
shareholders 100% of the outstanding shares of MI Developments
Inc. ("MID"), a wholly-owned subsidiary of the Company. Prior to
the distribution, MID will be reorganized to own substantially all
the Company's automotive real estate and the Company's controlling
interest in MEC. If the spin-off is approved, Magna and its
operating subsidiaries will continue to occupy their facilities
under long-term leases with MID and Magna will cease to have any
interest in MID and MEC.
As required by recent amendments to CICA Handbook Section 3475,
"Disposal of Long-Lived Assets and Discontinued Operations", the
Company is required to recognize an impairment loss, if any,
related to the spin-off based on any excess of the Company's
carrying value of the distributed assets over their fair values on
the distribution date, which is currently expected to be August
29, 2003. This impairment evaluation will be completed at the date
of distribution on an individual asset basis for the properties in
the real estate business of MID and based on an assessment of the
fair value of MID's controlling interest in MEC.
On the distribution date, the Company's shareholders' equity will
be reduced by the carrying value of its net investment in MID. The
reduction in shareholders' equity will consist of a charge to
income for impairment in the value of the distributed assets, if
any, and a direct charge to shareholders' equity for the excess of
the net investment in MID over any impairment charge.
At March 31, 2003, Magna's net investment in MID was $1,475
million. Magna's net investment in MID will be fixed effective
June 30, 2003 and, as a result, there will be a payable to, or
receivable from, MID created due to certain changes in Magna's net
investment in MID during the period between June 30, 2003 and the
effective date of the distribution.
(b) On August 4, 2003, the Company delivered notice to Decoma that it
will convert Cdn$150 million of Decoma Convertible Series
Preferred Shares into Decoma Class A Subordinate Voting Shares
effective August 30, 2003. This share conversion will increase
Magna's ownership interest in Decoma from 69% to 74%.
(c) On August 6, 2003, the Company announced that The Toronto Stock
Exchange ("TSX") and the New York Stock Exchange ("NYSE") have
accepted notices of the Company's intention to purchase for
cancellation and/or for purposes of its long-term retention
(restricted share) program up to 3,000,000 of its Class A
Subordinate Voting Shares, representing less than 5% of the
Company's issued and outstanding Class A Subordinate Voting
Shares, pursuant to a normal course issuer bid. The Company's bid,
which is subject to a maximum aggregate expenditure of U.S.$200
million, will commence on August 12, 2003, following the expiry of
its prior bid on August 11, 2003, and will expire no later than
August 11, 2004. The Company will not purchase any Class A
Subordinate Voting Shares during the period commencing on August
12, 2003 and ending on August 22, 2003.
11. Comparative Figures
Certain of the comparative figures have been reclassified to
conform to the current period's method of presentation.