Magna announces third quarter and year to date results
AURORA, ON, Nov. 5, 2003 -- Magna International Inc. (TSX: MG.A, MG.B; NYSE: MGA) today reported sales, profits and earnings per share for the third quarter and nine-month period ended September 30, 2003.
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THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------
Sept 30, Sept 30, Sept 30, Sept 30,
2003 2002 2003 2002
-------- -------- -------- --------
Sales $ 3,566 $ 2,962 $ 10,722 $ 8,979
Net income (1) $ 48 $ 132 $ 384 $ 444
Net income from continuing
operations(1),(2) $ 122 $ 138 $ 451 $ 446
Net income from operations(3) $ 122 $ 117 $ 458 $ 440
Diluted earnings per share (1) $ 0.44 $ 1.40 $ 3.84 $ 4.74
Diluted earnings per share from
continuing operations (1) ,(2) $ 1.21 $ 1.46 $ 4.54 $ 4.76
Diluted earnings per share
from operations (3) $ 1.22 $ 1.24 $ 4.62 $ 4.69
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(1) Net income, net income from continuing operations, diluted earnings
per share and diluted earnings per share from continuing operations
have been prepared in accordance with Canadian Generally Accepted
Accounting Principles ("Canadian GAAP").
(2) Net income from continuing operations and diluted earnings per share
from continuing operations reflect the disclosure of Magna
Entertainment Corp. ("MEC") as discontinued operations until
August 29, 2003. On September 2, 2003, the Company distributed 100%
of the Class A Subordinate Voting and Class B Shares of
MI Developments Inc. ("MID") to the Company's shareholders of record
as of August 29, 2003.
(3) 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 nine months and three months ended
September 30, 2003 is based on net income but excludes non-cash
impairment losses of $68 million related to MEC and $6 million
related to certain real estate properties of MID, associated with the
distribution of shares of MID on September 2, 2003. Diluted earnings
per share from operations for the nine months and three months ended
September 30, 2003 are based on diluted earnings per share but
exclude the non-cash impairment losses described above.
Net income from operations for the nine months ended September 30,
2002 is based on net income but excludes ownership dilution gains and
losses from public subsidiary share issuances totaling a net gain of
$4 million. Diluted earnings per share from operations for the nine
months ended September 30, 2002 are based on diluted earnings per
share, but exclude the ownership dilution gains and losses described
above and an $11 million charge to retained earnings related to
foreign exchange on the redemption of the 4.875% Convertible
Subordinated Debentures.
Net income from operations for the three months ended September 30,
2002 is based on net income but excludes ownership dilution gains
from public subsidiary share issuances totaling $15 million. Diluted
earnings per share from operations for the three months ended
September 30, 2002 are based on diluted earnings per share, but
exclude the ownership dilution gains described above.
For more information see notes 2, 3, 4 and 5 to the Third Quarter
Consolidated Financial Statements attached.
See Appendix A for pro forma consolidated statements of income which
are presented assuming that the MID distribution had been completed
as of December 31, 2001.
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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 SEPTEMBER 30, 2003
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The Company posted sales of $3.6 billion for the third quarter ended September 30, 2003, an increase of 20% over the third quarter of 2002. The higher sales level in the third quarter of 2003 reflects increases of 22% in North American content per vehicle and 42% in European content per vehicle over the comparable quarter in 2002. The increase in content per vehicle in North America was largely attributable to new product launches, the strengthening of the Canadian dollar against the U.S. dollar and acquisitions completed subsequent to the third quarter of 2002. The increase in content per vehicle in Europe was largely attributable to new product launches, the strengthening of the euro and British pound against the U.S. dollar and acquisitions completed subsequent to the third quarter of 2002. During the third quarter of 2003, North American vehicle production declined approximately 5% and European vehicle production increased approximately 2% from the comparable quarter.
The Company earned net income from operations for the third quarter ended September 30, 2003 of $122 million, representing an increase over the comparable quarter of 4% or $5 million. Net income and net income from continuing operations for the third quarter ended September 30, 2003 were $48 million and $122 million, respectively.
Diluted earnings per share from operations were $1.22 for the third quarter ended September 30, 2003, compared to $1.24 for the quarter ended September 30, 2002. Diluted earnings per share from operations for the third 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 and diluted earnings per share from continuing operations for the third quarter ended September 30, 2003 were $0.44 and $1.21, respectively.
The Company generated cash from operations before changes in non-cash working capital of $310 million and invested $391 million in non-cash working capital in the third quarter of 2003. The investment in non-cash working capital was primarily attributable to new program launches and the delayed timing of cash receipts to the fourth quarter of 2003. Total investment activities for the third quarter of 2003 were $249 million, including $188 million in fixed asset additions, $8 million to purchase subsidiaries, and a $53 million increase in other assets.
Belinda Stronach, Magna's President and Chief Executive Officer stated: "We reported strong third quarter results, despite lower vehicle production in North America and costs to support the heavy program launch activity ongoing in both North America and Europe. We continue to focus on the execution of successful launches, including the all-new BMW X3 currently underway at Magna Steyr."
NINE MONTHS ENDED SEPTEMBER 30, 2003 ------------------------------------
Sales for the nine months ended September 30, 2003 were $10.7 billion, an increase of 19% over the nine months ended September 30, 2002. The higher sales level for the first nine months of 2003 reflects increases of 20% in North American content per vehicle and 36% in European content per vehicle over the first nine months of 2002. During the first nine 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 nine months ended September 30, 2003 of $458 million, representing an increase over the nine months ended September 30, 2002 of 4% or $18 million. Net income and net income from continuing operations for the nine months ended September 30, 2003 were $384 million and $451 million, respectively.
Diluted earnings per share from operations were $4.62 for the nine months ended September 30, 2003, compared to $4.69 for the nine months ended September 30, 2002. Diluted earnings per share and diluted earnings per share from continuing operations for the nine months ended September 30, 2003 were $3.84 and $4.54, respectively.
During the nine months ended September 30, 2003, the Company generated cash from operations before changes in non-cash working capital of $961 million and invested $620 million in non-cash working capital. Total investment activities for the first nine months of 2003 were $624 million, including $499 million in fixed asset additions, $8 million to purchase subsidiaries, and a $117 million increase 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 September 30, 2003. The dividend of U.S. $0.34 per share is payable on December 15, 2003 to shareholders of record on November 28, 2003.
2003 OUTLOOK ------------
For the fourth quarter of 2003, the Company expects average dollar content per vehicle to range between $560 and $575 in North America and between $390 and $410 in Europe. In addition, the Company has assumed that fourth quarter 2003 vehicle production volumes will be approximately 3.9 million units in North America and 3.7 million units in Europe. Based on expected average dollar content per vehicle in North America and Europe, current exchange rates, the above volume assumptions and anticipated tooling and other automotive sales, Magna expects its automotive sales for the fourth quarter of 2003 to be between $4.0 billion and $4.2 billion. The Company expects diluted earnings per share from operations to be in the range of $1.50 to $1.70, compared to pro forma diluted earnings per share from operations, excluding impairment charges, for the fourth quarter of 2002 (as disclosed in Appendix A) of $1.43.
The Company expects full year 2003 average dollar content per vehicle to range between $515 and $520 in North America and between $320 and $325 in Europe. Further, the Company has assumed 2003 vehicle production volumes will be 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, current exchange rates, the above volume assumptions and anticipated tooling and other automotive sales, Magna expects its automotive sales for the full year 2003 to range from $14.6 billion to $14.9 billion, compared to 2002 automotive sales of $12.4 billion, and diluted earnings per share from operations for 2003 to be in the range of $6.12 to $6.32. In addition, the Company expects that full year 2003 spending for automotive fixed assets will be approximately $800 million, compared to $791 million in 2002.
The 2003 outlook above excludes the potential effects, if any, of the Company's impairment review associated with the Canadian Institute of Chartered Accountants ("CICA") Handbook Sections 3062 and 3063 related to Goodwill and Other Intangible Assets and Impairment of Long-lived Assets, respectively.
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 has approximately 72,000 employees in 201 manufacturing operations and 48 product development and engineering centres in 22 countries.
------------------------------------------------------------------------- Magna will hold a conference call for interested analysts and shareholders to discuss the third quarter results and other developments on Thursday, November 6, 2003 at 9:00 a.m. EST. The number to use for this call is 1 800 840-6238. The number for overseas callers is 1 416 641-6684. 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. For further information, please contact Vincent Galifi or Louis Tonelli at (905) 726-7100. For teleconferencing questions, please call (905) 726-7103. -------------------------------------------------------------------------
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)
Three months ended Nine months ended
September 30, September 30,
Note 2003 2002 2003 2002
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(restated (restated
note 2) note 2)
Sales $ 3,566 $ 2,962 $ 10,722 $ 8,979
Cost of goods sold 2,981 2,476 8,865 7,407
Depreciation and amortization 131 104 369 306
Selling, general and
administrative 244 187 726 559
Interest income, net (3) (5) (10) (5)
Equity income (3) (6) (10) (17)
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Operating income 216 206 782 729
Other income (loss) 2, 4 (6) 15 (6) 15
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Income from continuing
operations before
income taxes and
minority interest 210 221 776 744
Income taxes 74 67 266 243
Minority interest 14 16 59 55
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Net income from
continuing operations 122 138 451 446
Net loss from
discontinued operations
- MEC 3 (74) (6) (67) (2)
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Net income $ 48 $ 132 $ 384 $ 444
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Financing charges on
Preferred Securities and
other paid-in capital $ (5) $ (5) $ (15) $ (21)
Foreign exchange loss
on the redemption of the
4.875% Convertible
Subordinated Debentures 7 - - - (11)
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Net income available to
Class A Subordinate
Voting and Class B
Shareholders 43 127 369 412
Retained earnings,
beginning of period 2,832 2,403 2,570 2,217
Dividends on Class A
Subordinate Voting and
Class B Shares (32) (31) (96) (88)
Distribution of MID shares 2 (552) - (552) -
Adjustment for change in
accounting policy related
to goodwill 5 - - - (42)
Repurchase of Class A
Subordinate Voting Shares 8 - (1) - (1)
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Retained earnings,
end of period $ 2,291 $ 2,498 $ 2,291 $ 2,498
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Earnings per Class A
Subordinate Voting or
Class B Share from
continuing operations:
Basic $ 1.22 $ 1.48 $ 4.56 $ 4.79
Diluted $ 1.21 $ 1.46 $ 4.54 $ 4.76
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Earnings per Class A
Subordinate Voting or
Class B Share:
Basic $ 0.45 $ 1.41 $ 3.86 $ 4.77
Diluted $ 0.44 $ 1.40 $ 3.84 $ 4.74
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Cash dividends paid per
Class A Subordinate
Voting or Class B Share $ 0.34 $ 0.34 $ 1.02 $ 1.02
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Average number of Class A
Subordinate Voting and
Class B Shares outstanding
during the period
(in millions):
Basic 95.9 90.3 95.7 86.4
Diluted 96.5 90.7 96.1 90.7
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See accompanying notes
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(United States dollars in millions)
Three months ended Nine months ended
September 30, September 30,
Note 2003 2002 2003 2002
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(restated (restated
note 2) note 2)
Cash provided from
(used for):
OPERATING ACTIVITIES
Net income from
continuing operations $ 122 $ 138 $ 451 $ 446
Items not involving
current cash flows 188 126 510 380
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310 264 961 826
Changes in non-cash
working capital (391) (145) (620) 18
Increase in deferred
revenue 12 - 14 69
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(69) 119 355 913
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INVESTMENT ACTIVITIES
Fixed asset additions (188) (280) (499) (521)
Purchase of subsidiaries (8) - (8) (3)
Decrease (increase) in
investments 5 1 9 (2)
Increase in other assets (53) (15) (117) (73)
Proceeds from disposition
of investments and other 15 6 25 15
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(229) (288) (590) (584)
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FINANCING ACTIVITIES
Net issues (repayments)
of debt 119 16 111 (78)
Issues of subordinated
debentures by
subsidiaries 6 - - 66 -
Repayments of debentures'
interest obligations (1) (1) (4) (13)
Preferred Securities
distributions (7) (6) (20) (18)
Issues of Class A
Subordinate Voting
Shares 32 - 38 19
Issues of shares by
subsidiaries 1 64 13 66
Repurchase of Class A
Subordinate Voting
Shares - (2) - (2)
Dividends paid to
minority interests (4) (3) (11) (9)
Dividends 2 (51) (29) (115) (86)
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89 39 78 (121)
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Effect of exchange rate
changes on cash and
cash equivalents (11) (29) 103 -
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Net increase (decrease)
in cash and cash
equivalents during
the period (220) (159) (54) 208
Cash and cash equivalents,
beginning of period 1,287 1,199 1,121 832
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Cash and cash equivalents,
end of period $ 1,067 $ 1,040 $ 1,067 $ 1,040
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See accompanying notes
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(United States dollars in millions)
September 30, December 31,
Note 2003 2002
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(restated
note 2)
ASSETS
Current assets
Cash and cash equivalents $ 1,067 $ 1,121
Accounts receivable 2,784 2,094
Inventories 1,099 916
Prepaid expenses and other 124 78
Discontinued operations - MEC 3 - 160
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5,074 4,369
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Investments 130 114
Fixed assets, net 2,984 3,663
Goodwill, net 5 489 466
Future tax assets 162 164
Other assets 312 270
Discontinued operations - MEC 3 - 1,096
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$ 9,151 $ 10,142
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 319 $ 223
Accounts payable 2,241 1,954
Accrued salaries and wages 372 304
Other accrued liabilities 210 180
Income taxes payable 3 67
Long-term debt due within one year 34 36
Discontinued operations - MEC 3 - 172
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3,179 2,936
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Deferred revenue 78 86
Long-term debt 247 248
Debentures' interest obligation 41 39
Other long-term liabilities 212 186
Future tax liabilities 190 159
Minority interest 6 586 410
Discontinued operations - MEC 3 - 657
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4,533 4,721
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Shareholders' equity
Capital stock 8
Class A Subordinate
Voting Shares
(issued: 95,229,304; December
31, 2002 - 94,477,224) 1,586 2,487
Class B Shares
(convertible into Class A
Subordinate Voting Shares)
(issued: 1,096,509) - 1
Preferred Securities 277 277
Other paid-in capital 67 64
Retained earnings 2,291 2,570
Currency translation adjustment 397 22
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4,618 5,421
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$ 9,151 $ 10,142
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See accompanying notes
MAGNA INTERNATIONAL INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(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 September 30, 2003 and the results of
operations and cash flows for the three-month and nine-month periods
ended September 30, 2003 and 2002.
2. DISTRIBUTION OF MID SHARES
(a) On August 19, 2003, Magna shareholders approved the distribution
to shareholders of 100% of the outstanding shares of
MI Developments Inc. ("MID"), a wholly owned subsidiary of the
Company. MID owns substantially all of Magna's automotive real
estate and the Company's former controlling interest in Magna
Entertainment Corp. ("MEC"). On September 2, 2003, the Company
distributed 100% of MID's Class A Subordinate Voting and Class B
Shares to shareholders of record as of August 29, 2003 and,
accordingly, no longer has any ownership interest in MID and
MEC.
As required by recent amendments to The Canadian Institute of
Chartered Accountants ("CICA") Handbook Section 3475, "Disposal
of Long-Lived Assets and Discontinued Operations" ("CICA 3475"),
the Company recognized a non-cash impairment loss at the date of
the distribution equal to the excess of the Company's carrying
value of the distributed assets over their fair values on the
distribution date. The Company recorded impairment losses of
$68 million related to MEC and $6 million related to certain
real estate properties of MID. The impairment evaluation was
completed on an individual asset basis for the real estate
properties of MID and based on an assessment of the fair value
of MID's controlling interest in MEC.
Immediately prior to the distribution of the MID shares, the
Company increased the stated capital of its Class B Shares by
way of a transfer from retained earnings of $10 million. On
August 29, 2003, the Company recorded the distribution of the
MID shares as a reduction of shareholders' equity of
$1,492 million, representing Magna's net investment in MID,
after the impairment charges described above, plus costs related
to the distribution. The distribution was structured as a return
of stated capital of the Class A Subordinate Voting and Class B
Shares of $939 million and $1 million, respectively. The
remaining reduction in shareholders' equity has been recorded as
a charge to retained earnings of $552 million.
In accordance with CICA 3475, the financial results of MEC have
been disclosed as discontinued operations until August 29, 2003
(note 3). However, because Magna and its operating subsidiaries
will continue to occupy their facilities under long-term leases
with MID, the operations of the real estate business of MID
cannot be reflected as discontinued operations. Therefore, the
results of the real estate business are disclosed in continuing
operations in the consolidated financial statements until
August 29, 2003.
(b) Pro forma impact
If the distribution of the Class A Subordinate Voting and
Class B Shares of MID had occurred on December 31, 2001, the
Company's unaudited pro forma consolidated financial results
would have been as follows:
Statements of income
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
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Sales $ 3,565 $ 2,962 $ 10,721 $ 8,979
Cost of goods sold 2,997 2,494 8,927 7,456
Depreciation and
amortization 125 97 350 290
Selling, general and
administrative 245 187 727 559
Interest income, net (3) (5) (10) (5)
Equity income (3) (6) (10) (17)
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Operating income 204 195 737 696
Other income - 15 - 15
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Income before income
taxes and minority
interest 204 210 737 711
Income taxes 72 63 256 235
Minority interest 14 16 59 55
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Net income $ 118 $ 131 $ 422 $ 421
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Diluted earnings per
Class A Subordinate
Voting or Class B
Share $ 1.17 $ 1.39 $ 4.24 $ 4.43
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The pro forma income statements eliminate the results of MEC,
which have been reported as discontinued operations, and the
revenues and expenses of the real estate business of MID prior
to August 29, 2003. The pro forma income statements also include
adjustments, net of income taxes, to eliminate intercompany
interest expense on advances from the Company to MID, to reflect
the impact of amending certain leases effective January 1, 2003
and to reflect the impact of the MID distribution on the
Company's deferred profit sharing expense and executive
compensation.
(c) Cash Distribution
Dividends include $19 million with respect to the MID
distribution, which represents the amount of cash held by MID on
August 29, 2003.
3. DISCONTINUED OPERATIONS - MEC
The Company's revenues and expenses, cash flows, and assets,
liabilities and equity related to MEC are as follows:
Statements of income:
Two Three Eight Nine
months months months months
ended ended ended ended
August 29, Sept. 30, August 29, Sept. 30,
2003 2002 2003 2002
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Sales $ 67 $ 65 $ 525 $ 442
Costs and expenses 84 82 520 425
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Operating income (loss) (17) (17) 5 17
Impairment loss recorded
on distribution (note 2) (68) - (68) -
Dilution loss (a) - - - (11)
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Income (loss) before income
taxes and minority interest (85) (17) (63) 6
Income taxes (7) (7) 3 7
Minority interest (4) (4) 1 1
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Net loss $ (74) $ (6) $ (67) $ (2)
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(a) In April 2002, 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.
Statements of cash flows:
Two Three Eight Nine
months months months months
ended ended ended ended
August 29, Sept. 30, August 29, Sept. 30,
2003 2002 2003 2002
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Cash provided from
(used for):
OPERATING ACTIVITIES
Net loss $ (74) $ (6) $ (67) $ (2)
Items not involving
current cash flows 70 (1) 92 26
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(4) (7) 25 24
Changes in non-cash
working capital - (4) (7) (17)
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(4) (11) 18 7
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INVESTMENT ACTIVITIES
Fixed asset additions (17) (39) (45) (72)
Increase in other assets (4) (10) (16) (13)
Proceeds from disposition
of investments and other 1 2 2 9
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(20) (47) (59) (76)
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FINANCING ACTIVITIES
Net repayments of debt (3) (1) (46) (10)
Issues of subordinated
debentures by subsidiaries - - 145 -
Issues of shares by
subsidiaries - - - 142
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(3) (1) 99 132
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Effect of exchange rate
changes on cash and cash
equivalents (3) - 3 4
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Net increase (decrease) in
cash and cash equivalents
during the period (30) (59) 61 67
Cash and cash equivalents,
beginning of period 197 184 106 58
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Cash and cash equivalents,
end of period $ 167 $ 125 $ 167 $ 125
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Balance Sheet:
December 31,
2002
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ASSETS
Current assets
Cash and cash equivalents $ 106
Accounts receivable 46
Inventories 2
Prepaid expenses and other 6
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160
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Fixed assets, net 752
Future tax assets 12
Other assets 332
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$ 1,256
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LIABILITIES AND MAGNA'S NET INVESTMENT
Current liabilities
Bank indebtedness $ 49
Accounts payable and other accrued liabilities 108
Long-term debt due within one year 15
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172
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Deferred revenue 6
Long-term debt 118
Debentures' interest obligation 67
Future tax liabilities 166
Minority interest 300
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829
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Magna's net investment in MEC 427
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$ 1,256
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4. OTHER INCOME (LOSS)
Other income for 2003 includes $6 million of impairment losses
related to certain real estate properties of MID (note 2).
In July 2002, Tesma International Inc. ("Tesma") completed a public
offering by issuing 2.85 million of its Class A Subordinate Voting
Shares for aggregate cash consideration, net of share issue expenses,
of Cdn$97 million. Magna recognized a gain of $13 million from its
ownership dilution arising from the issue.
In July 2002, Decoma International Inc. ("Decoma") issued 451,400
shares of its Class A Subordinate Voting Stock to satisfy its
obligations under Decoma's Deferred Profit Sharing Plan. Magna
recognized a gain of $2 million from its ownership dilution arising
from the issue.
The gains recognized were not subject to income taxes as the issues
were completed on a primary basis by Tesma and Decoma, respectively.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
In 2002, the Company adopted the new accounting recommendations of
the 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's
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.
6. DEBENTURES ISSUED BY SUBSIDIARIES
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.
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. Accordingly, such
amounts are classified as minority interest in the Company's
consolidated balance sheet.
7. REDEMPTION OF THE 4.875% CONVERTIBLE SUBORDINATED DEBENTURES
In May 2002, the Company called for the 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.
8. CAPITAL STOCK
(a) On August 6, 2003, the Company announced that The Toronto Stock
Exchange ("TSX") and the New York Stock Exchange ("NYSE")
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 million 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, commenced on August 12, 2003, following the
expiry of its prior bid on August 11, 2003, and will expire no
later than August 11, 2004.
During the three months ended September 30, 2003, a subsidiary
of the Company purchased 75,356 Magna Class A Subordinate Voting
Shares for cash consideration of $5 million, which were then
awarded on a restricted basis to three executives. During the
three months ended September 30, 2002, the Company repurchased
for cancellation 33,900 Class A Subordinate Voting Shares for
aggregate cash consideration of approximately $2 million. In
accordance with the recommendations of the CICA, the excess of
the cash paid over the book value of the Class A Subordinate
Voting Shares repurchased of $1 million was charged to retained
earnings.
(b) As a result of the MID distribution, the stated capital of the
Class A Subordinate Voting and Class B Shares was reduced by
$939 million and $1 million, respectively (note 2).
(c) 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 September 30, 2003
were exercised:
Class A Subordinate Voting and Class B Shares
outstanding at September 30, 2003 96.3
Stock options 2.9
----------------------------------------------------------------
99.2
----------------------------------------------------------------
----------------------------------------------------------------
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.
9. 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
----------------------------------------------------------------
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)
----------------------------------------------------------------
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)
----------------------------------------------------------------
Outstanding at June 30, 2003 3,521,875 Cdn$89.73 1,888,375
Exercised (621,025) Cdn$73.63 (621,025)
Vested - - 25,000
Option repricing related to
MID distribution(b) - (Cdn$11.98) -
----------------------------------------------------------------
Outstanding at September 30,
2003 2,900,850 Cdn$80.74 1,292,350
----------------------------------------------------------------
----------------------------------------------------------------
(b) As a result of the dilutive impact of the MID distribution (note
2), all issued but unexercised options for Magna Class A
Subordinate Voting Shares were adjusted down by Cdn$11.98 in
accordance with the adjustment mechanism prescribed by the TSX.
The adjustment mechanism is intended to ensure that the
difference between the fair market value of a Class A
Subordinate Voting Share and the exercise price of the stock
options after the MID distribution is not greater than the
difference between the fair market value of a Class A
Subordinate Voting Share and the exercise price of the stock
options immediately before the MID distribution.
(c) The Company does not recognize compensation expense for its
outstanding fixed price stock options. Under CICA 3870 "Stock-
Based Compensation and Other Stock-Based Payments", 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:
----------------------------------------------------------------
Risk free interest rate 5%
Expected dividend yield 1.45%
Expected volatility 24%
Expected time until exercise 4 years
----------------------------------------------------------------
----------------------------------------------------------------
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 three months and nine months ended
September 30, 2003 and 2002 would have been as follows:
Three months Nine months
ended ended
September 30, September 30,
2003 2002 2003 2002
----------------------------------------------------------------
Pro forma net income $ 46 $ 434 $ 378 $ 131
Pro forma earnings per Class
A Subordinate Voting or
Class B Share
Basic $ 0.43 $ 4.65 $ 3.79 $ 1.40
Diluted $ 0.42 $ 4.63 $ 3.78 $ 1.39
----------------------------------------------------------------
----------------------------------------------------------------
The weighted average fair value of options granted during the
first nine months of 2003 was Cdn$21.17 (2002 - Cdn$25.08).
(c) The Company has awarded to three executives an entitlement to
Class A Subordinate Voting Shares of the Company and its public
subsidiaries in the form of restricted stock. Such shares become
available to the executive, subject to acceleration on death and
disability, on December 31, 2006, provided certain conditions
are met and are to be released in equal amounts over a ten-year
period commencing January 1, 2007, subject to forfeiture under
certain circumstances. The fair value of the restricted stock
grant is amortized to compensation expense from the effective
date of the grant to the final vesting date. At September 30,
2003, unamortized compensation expense related to the restricted
stock arrangements was $17 million.
10. SEGMENTED INFORMATION
Three months ended Three months ended
September 30, 2003 September 30, 2002
---------------------------------------------- --------------------------
Fixed Fixed
Total Operating assets, Total Operating assets,
sales income net sales income net
---------------------------------------------- --------------------------
Public Automotive
Operations
Decoma International
Inc. $ 574 $ 26 $ 631 $ 480 $ 31 $ 493
Intier Automotive
Inc. 1,069 18 504 932 24 444
Tesma International
Inc. 255 22 288 226 20 273
Wholly Owned
Automotive
Operations
Magna Steyr 659 11 485 528 (4) 509
Other Automotive
Operations 1,041 92 1,002 816 69 820
Corporate and other (32) 47 74 (20) 66 765
---------------------------------------------- --------------------------
Total reportable
segments $ 3,566 $ 216 2,984 $ 2,962 $ 206 3,304
Current assets 5,074 4,350
Investments, goodwill
and other assets 1,093 568
Discontinued
operations long-
term assets - 824
---------------------------------------------- --------------------------
Consolidated total
assets $ 9,151 $ 9,046
---------------------------------------------- --------------------------
---------------------------------------------- --------------------------
Nine months ended Nine months ended
September 30, 2003 September 30, 2002
---------------------------------------------- --------------------------
Fixed Fixed
Total Operating assets, Total Operating assets,
sales income net sales income net
---------------------------------------------- --------------------------
Public Automotive
Operations
Decoma International
Inc. $ 1,763 $ 126 $ 631 $ 1,583 $ 131 $ 493
Intier Automotive
Inc. 3,233 85 504 2,807 98 444
Tesma International
Inc. 803 78 288 678 67 273
Wholly Owned
Automotive
Operations
Magna Steyr 1,703 23 485 1,471 11 509
Other Automotive
Operations 3,327 321 1,002 2,513 266 820
Corporate and other (107) 149 74 (73) 156 765
---------------------------------------------- --------------------------
Total reportable
segments $10,722 $ 782 2,984 $ 8,979 $ 729 3,304
Current assets 5,074 4,350
Investments, goodwill
and other assets 1,093 568
Discontinued
operations long-
term assets - 824
---------------------------------------------- --------------------------
Consolidated total
assets $ 9,151 $ 9,046
---------------------------------------------- --------------------------
---------------------------------------------- --------------------------
Substantially all of MID's automotive real estate assets that were
distributed to shareholders on August 29, 2003 (note 2) were
previously included in the Corporate and other segment.
11. COMPARATIVE FIGURES
Certain of the comparative figures have been reclassified to conform
to the current period's method of presentation.
MAGNA INTERNATIONAL INC.
APPENDIX A - PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(United States dollars in millions, except per share figures)
The following unaudited pro forma consolidated financial information has
been presented assuming that the MID distribution as described in note 2
to the unaudited interim consolidated financial statements had been
completed as of December 31, 2001 for the consolidated statements of
income and are unaudited.
The unaudited pro forma consolidated statements of income are provided
for information purposes only and may not be indicative of the results
that would have occurred if the transactions had been effected on the
date indicated or which may be obtained in the future. The unaudited pro
forma consolidated financial statements and accompanying notes should be
read in conjunction with the Company's consolidated financial statements
for the periods presented.
In addition, the Company measures and presents pro forma net income from
operations, excluding impairment charges and pro forma diluted earnings
per share from operations, excluding impairment charges because they are
measures that are widely used by analysts and investors in evaluating the
operating performance of the Company. However, such measures do not have
any standardized meaning under Canadian GAAP and are therefore unlikely
to be comparable to similar measures presented by other companies.
If the MID distribution had occurred on December 31, 2001, the Company's
unaudited pro forma consolidated financial results would have been as
follows:
2002
--------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-------------------------------------------------------------------------
Sales $ 2,872 $ 3,145 $ 2,962 $ 3,443 $12,422
Cost of goods sold 2,377 2,585 2,494 2,884 10,340
Depreciation and amortization 95 98 97 110 400
Selling, general and
administrative 180 192 187 221 780
Interest expense (income),
net 1 (1) (5) (8) (13)
Equity income (4) (7) (6) (6) (23)
Impairment charges - - - 36 36
-------------------------------------------------------------------------
Operating income 223 278 195 206 902
Other income - - 15 - 15
-------------------------------------------------------------------------
Income before income taxes
and minority interest 223 278 210 206 917
Income taxes 77 95 63 80 315
Minority interest 16 23 16 11 66
-------------------------------------------------------------------------
Net income $ 130 $ 160 $ 131 $ 115 $ 536
Addback (deduct):
Other income - - (15) - (15)
Impairment charges
(net of tax) - - - 27 27
-------------------------------------------------------------------------
Pro forma net income from
operations, excluding
impairment charges $ 130 $ 160 $ 116 $ 142 $ 548
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per
Class A Subordinate
Voting or Class B Share $ 1.39 $ 1.65 $ 1.39 $ 1.15 $ 5.62
Addback (deduct):
Other income - - (0.17) - (0.16)
Impairment charges - - - 0.28 0.29
Dilutive impact of foreign
exchange loss on redemption
of debentures - 0.05 - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share
from operations, excluding
impairment charges $ 1.39 $ 1.70 $ 1.22 $ 1.43 $ 5.75
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2003
-----------------------------------
First Second Third Year to
Quarter Quarter Quarter Date
-------------------------------------------------------------------------
Sales $ 3,496 $ 3,660 $ 3,565 $10,721
Cost of goods sold 2,909 3,021 2,997 8,927
Depreciation and amortization 112 113 125 350
Selling, general and
administrative 235 247 245 727
Interest expense (income),
net (3) (4) (3) (10)
Equity income (4) (3) (3) (10)
Impairment charges - -
-------------------------------------------------------------------------
Operating income 247 286 204 737
Other income - - - -
-------------------------------------------------------------------------
Income before income taxes
and minority interest 247 286 204 737
Income taxes 85 99 72 256
Minority interest 19 26 14 59
-------------------------------------------------------------------------
Net income $ 143 $ 161 $ 118 $ 422
Addback (deduct):
Other income - - - -
Impairment charges
(net of tax) - - - -
-------------------------------------------------------------------------
Pro forma net income from
operations, excluding
impairment charges $ 143 $ 161 $ 118 $ 422
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per
Class A Subordinate
Voting or Class B Share $ 1.45 $ 1.61 $ 1.17 $ 4.24
Addback (deduct):
Other income - - - -
Impairment charges - - - -
Dilutive impact of foreign
exchange loss on redemption
of debentures - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share
from operations, excluding
impairment charges $ 1.45 $ 1.61 $ 1.17 $ 4.24
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MAGNA INTERNATIONAL INC.
APPENDIX A - NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(United States dollars in millions, except per share figures)
1. BASIS OF PRESENTATION
The unaudited pro forma consolidated statements of income for the
periods presented have been prepared from the unaudited consolidated
statements of income of the Company. The unaudited pro forma
consolidated statements of income have been prepared on the basis of
the assumptions and adjustments described in note 2 below and should
be read in conjunction with the historical consolidated financial
statements of the Company, including the related notes thereto.
The unaudited pro forma consolidated statements of income have been
prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP")
The unaudited pro forma consolidated statements of income are not
necessarily indicative of the results of operations that would have
resulted had the relevant transactions taken place at the date
referred to below.
2. PRO FORMA ASSUMPTIONS AND ADJUSTMENTS
The unaudited pro forma consolidated statements of income have been
presented assuming that the reorganization of MID and the
distribution by the Company of 100% of the Class A Subordinate Voting
and Class B Shares of MID (the "Spin-Off Transactions") had been
completed as of December 31, 2001 and give effect to the following
items:
(a) MEC
As a result of the Spin-Off Transactions, the Company will
restate its historical consolidated financial statements to
reflect the operating results of MEC prior to August 29, 2003
as discontinued operations in accordance with CICA Handbook
Section 3475, "Disposal of Long-Lived Assets and Discontinued
Operations". The pro forma adjustment for MEC eliminates the
results for MEC from the Company's income.
(b) Pro forma MID
Under CICA 3475, the operations of the real estate business of
MID cannot be reflected as discontinued operations. The pro
forma adjustments for MID eliminate the revenues and expenses
of the real estate business of MID prior to August 29, 2003 in
the manner in which such amounts were recorded in the
preparation of the Company's consolidated financial statements
and reflect the following adjustments:
(i) Intercompany interest
An adjustment to interest expense to eliminate interest
expense incurred by MID on historical advances from the
Company since all intercompany advances were eliminated
in the initial capitalization of MID.
(ii) Lease amendments
Effective January 1, 2003, the Company amended the terms
of certain leases with MID to reduce the remaining lease
terms and minimum lease payments, and replace scheduled
rent increases with periodic rent increases based on a
local price index. As a result of these amendments, the
classification of certain leases changed from
capital/direct financing to operating.
(iii) Deferred profit sharing and incentive compensation
adjustment
As a result of the Spin-Off Transactions, the reduction
in the Company's pre-tax income will result in a
reduction in deferred profit sharing expense and
executive management compensation as determined under the
Company's Corporate Constitution.
(iv) Income tax
The tax effect on the foregoing adjustments, where
applicable, has been computed at applicable income tax
rates by jurisdiction. In addition, as a result of the
distribution, the Company will lose certain tax benefits
derived from intercompany interest that was historically
charged to MID.
(c) Earnings per Class A Subordinate Voting or Class B Share
The unaudited pro forma earnings per Class A Subordinate Voting
or Class B Shares is based on the average number of shares that
were issued and outstanding for the periods presented as
follows (in millions):
2002
--------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-------------------------------------------------------------------------
Diluted 90.6 86.2 90.7 95.8 92.0
Pro forma diluted, from
operations, excluding
impairment charges 90.6 91.0 90.7 95.8 92.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2003
-----------------------------------
First Second Third Year to
Quarter Quarter Quarter Date
-------------------------------------------------------------------------
Diluted 95.8 96.0 96.5 96.1
Pro forma diluted, from
operations, excluding
impairment charges 95.8 96.0 96.5 96.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MAGNA INTERNATIONAL INC.
APPENDIX A - PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(United States dollars in millions, except per share figures)
If the MID distribution had occurred on December 31, 2001, the Company's
unaudited pro forma consolidated financial results would have been as
follows:
First Quarter - 2003
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $ 3,766 $ (270) $ 3,496 $ - $ 3,496
Cost of goods sold 2,887 2,887 22 2,909
Depreciation and amortization 118 118 (6) 112
Selling, general and
administrative 235 235 235
Interest expense (income),
net (3) (3) (3)
Equity income (4) (4) (4)
Impairment charges - - -
MEC costs and expenses 248 (248) - -
-------------------------------------------------------------------------
Operating income (loss) 285 (22) 263 (16) 247
Other income - - - - -
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 285 (22) 263 (16) 247
Income taxes 99 (10) 89 (4) 85
Minority interest 24 (5) 19 19
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 162 $ (7) $ 155 $ (12) $ 143
Addback (deduct):
Other income - - - - -
Impairment charges
(net of tax) - - - - -
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 162 $ (7) $ 155 $ (12) $ 143
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per Class A
Subordinate Voting or
Class B Share $ 1.65 $ (0.07) $ 1.58 $ (0.13) $ 1.45
Addback (deduct):
Other income - - - - -
Impairment charges - - - - -
Dilutive impact of foreign
exchange loss on redemption
of debentures - - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share from
operations, excluding
impairment charges $ 1.65 $ (0.07) $ 1.58 $ (0.13) $ 1.45
-------------------------------------------------------------------------
-------------------------------------------------------------------------
First Quarter - 2002
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $ 3,121 $ (249) $ 2,872 $ - $ 2,872
Cost of goods sold 2,362 2,362 15 2,377
Depreciation and amortization 99 99 (4) 95
Selling, general and
administrative 180 180 180
Interest expense (income),
net 1 1 1
Equity income (4) (4) (4)
Impairment charges - - -
MEC costs and expenses 217 (217) - -
-------------------------------------------------------------------------
Operating income (loss) 266 (32) 234 (11) 223
Other income - - - - -
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 266 (32) 234 (11) 223
Income taxes 92 (13) 79 (2) 77
Minority interest 21 (5) 16 16
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 153 $ (14) $ 139 $ (9) $ 130
Addback (deduct):
Other income - - - -
Impairment charges
(net of tax) - - - -
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 153 $ (14) $ 139 $ (9) $ 130
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per Class A
Subordinate Voting or
Class B Share $ 1.65 $ (0.16) $ 1.49 $ (0.10) $ 1.39
Addback (deduct):
Other income - - - - -
Impairment charges - - - - -
Dilutive impact of foreign
exchange loss on redemption
of debentures - - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share from
operations, excluding
impairment charges $ 1.65 $ (0.16) $ 1.49 $ (0.10) $ 1.39
-------------------------------------------------------------------------
-------------------------------------------------------------------------
If the MID distribution had occurred on December 31, 2001, the Company's
unaudited pro forma consolidated financial results would have been as
follows:
Second Quarter - 2003
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $ 3,848 $ (188) $ 3,660 $ - $ 3,660
-------------------------------------------------------------------------
Cost of goods sold 2,997 2,997 24 3,021
Depreciation and amortization 120 120 (7) 113
Selling, general and
administrative 247 247 247
Interest expense (income),
net (4) (4) (4)
Equity income (3) (3) (3)
Impairment charges - - -
MEC costs and expenses 188 (188) - -
-------------------------------------------------------------------------
Operating income (loss) 303 - 303 (17) 286
Other income (loss) - - - - -
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 303 - 303 (17) 286
Income taxes 103 - 103 (4) 99
Minority interest 26 - 26 26
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 174 $ - $ 174 $ (13) $ 161
Addback (deduct):
Other income (loss) - - - - -
Impairment charges
(net of tax) - - - - -
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 174 $ - $ 174 $ (13) $ 161
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per
Class A Subordinate
Voting or Class B Share $ 1.76 $ 0.00 $ 1.76 $ (0.15) $ 1.61
Addback (deduct):
Other income (loss) - - - - -
Impairment charges - - - - -
Dilutive impact of foreign
exchange loss on redemption
of debentures - - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share
from operations, excluding
impairment charges $ 1.76 $ 0.00 $ 1.76 $ (0.15) $ 1.61
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Second Quarter - 2002
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $ 3,273 $ (128) $ 3,145 $ - $ 3,145
-------------------------------------------------------------------------
Cost of goods sold 2,569 2,569 16 2,585
Depreciation and amortization 103 103 (5) 98
Selling, general and
administrative 192 192 192
Interest expense (income),
net (1) (1) (1)
Equity income (7) (7) (7)
Impairment charges - - -
MEC costs and expenses 126 (126) - -
-------------------------------------------------------------------------
Operating income (loss) 291 (2) 289 (11) 278
Other income (loss) (11) 11 - - -
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 280 9 289 (11) 278
Income taxes 98 (1) 97 (2) 95
Minority interest 23 - 23 23
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 159 $ 10 $ 169 $ (9) $ 160
Addback (deduct):
Other income (loss) 11 (11) - - -
Impairment charges
(net of tax) - - - - -
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 170 $ (1) $ 169 $ (9) $ 160
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per
Class A Subordinate Voting
or Class B Share $ 1.63 $ 0.12 $ 1.75 $ (0.10) $ 1.65
Addback (deduct):
Other income (loss) 0.13 (0.13) - - -
Impairment charges - - - - -
Dilutive impact of foreign
exchange loss on redemption
of debentures 0.05 - 0.05 - 0.05
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share
from operations, excluding
impairment charges $ 1.81 $ (0.01) $ 1.80 $ (0.10) $ 1.70
-------------------------------------------------------------------------
-------------------------------------------------------------------------
If the MID distribution had occurred on December 31, 2001, the Company's
unaudited pro forma consolidated financial results would have been as
follows:
Third Quarter - 2003
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $ 3,633 $ (67) $ 3,566 $ (1) $ 3,565
-------------------------------------------------------------------------
Cost of goods sold 2,981 2,981 16 2,997
Depreciation and
amortization 131 131 (6) 125
Selling, general and
administrative 244 244 1 245
Interest expense (income),
net (3) (3) (3)
Equity income (3) (3) (3)
Impairment charges 68 (68) - -
MEC costs and expenses 84 (84) - -
-------------------------------------------------------------------------
Operating income 131 85 216 (12) 204
Other income (loss) (6) - (6) 6 -
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 125 85 210 (6) 204
Income taxes 67 7 74 (2) 72
Minority interest 10 4 14 14
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 48 $ 74 $ 122 $ (4) $ 118
Addback (deduct):
Other income (loss) 6 - 6 (6) -
Impairment charges
(net of tax) 68 (68) - - -
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 122 $ 6 $ 128 $ (10) $ 118
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per Class A
Subordinate Voting or
Class B Share $ 0.44 $ 0.77 $ 1.21 $ (0.04) $ 1.17
Addback (deduct):
Other income (loss) 0.07 - 0.07 - 0.07
Impairment charges 0.70 (0.71) (0.01) (0.06) (0.07)
Dilutive impact of foreign
exchange loss on redemption
of debentures - - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share from
operations, excluding
impairment charges $ 1.21 $ 0.06 $ 1.27 $ (0.10) $ 1.17
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Third Quarter - 2002
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $ 3,027 $ (65) $ 2,962 $ - $ 2,962
-------------------------------------------------------------------------
Cost of goods sold 2,476 2,476 18 2,494
Depreciation and
amortization 104 104 (7) 97
Selling, general and
administrative 187 187 187
Interest expense (income),
net (5) (5) (5)
Equity income (6) (6) (6)
Impairment charges - - -
MEC costs and expenses 82 (82) - -
-------------------------------------------------------------------------
Operating income 189 17 206 (11) 195
Other income (loss) 15 - 15 - 15
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 204 17 221 (11) 210
Income taxes 60 7 67 (4) 63
Minority interest 12 4 16 16
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 132 $ 6 $ 138 $ (7) $ 131
Addback (deduct):
Other income (loss) (15) - (15) - (15)
Impairment charges
(net of tax) - - - -
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 117 $ 6 $ 123 $ (7) $ 116
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per Class A
Subordinate Voting or
Class B Share $ 1.40 $ 0.06 $ 1.46 $ (0.07) $ 1.39
Addback (deduct):
Other income (loss) (0.16) - (0.16) - (0.16)
Impairment charges - - - - -
Dilutive impact of foreign
exchange loss on redemption
of debentures - - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share
from operations, excluding
impairment charges $ 1.24 $ 0.06 $ 1.30 $ (0.07) $ 1.23
-------------------------------------------------------------------------
-------------------------------------------------------------------------
If the MID distribution had occurred on December 31, 2001, the Company's
unaudited pro forma consolidated financial results would have been as
follows:
Fourth Quarter - 2002
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $ 3,550 $ (107) $ 3,443 $ - $ 3,443
-------------------------------------------------------------------------
Cost of goods sold 2,866 2,866 18 2,884
Depreciation and amortization 116 116 (6) 110
Selling, general and
administrative 221 221 221
Interest expense (income),
net (8) (8) (8)
Equity income (6) (6) (6)
Impairment charges 54 (18) 36 36
MEC costs and expenses 129 (129) - -
-------------------------------------------------------------------------
Operating income (loss) 178 40 218 (12) 206
Other income - - - - -
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 178 40 218 (12) 206
Income taxes 67 16 83 (3) 80
Minority interest 1 10 11 11
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 110 $ 14 $ 124 $ (9) $ 115
Addback (deduct):
Other income - - - - -
Impairment charges
(net of tax) 34 (7) 27 - 27
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 144 $ 7 $ 151 $ (9) $ 142
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per Class A
Subordinate Voting or
Class B Share $ 1.10 $ 0.15 $ 1.25 $ (0.10) $ 1.15
Addback (deduct):
Other income (loss) - - - - -
Impairment charges 0.35 (0.08) 0.27 - 0.28
Dilutive impact of foreign
exchange loss on
redemption of debentures - - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share
from operations, excluding
impairment charges $ 1.45 $ 0.07 $ 1.52 $ (0.10) $ 1.43
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Full Year - 2002
--------------------------------------------
Pro Pro
As forma forma
reported MEC Restated MID Magna
-------------------------------------------------------------------------
Sales $12,971 $ (549) $12,422 $ - $12,422
-------------------------------------------------------------------------
Cost of goods sold 10,273 10,273 67 10,340
Depreciation and amortization 422 422 (22) 400
Selling, general and
administrative 780 780 780
Interest expense (income),
net (13) (13) (13)
Equity income (23) (23) (23)
Impairment charges 54 (18) 36 36
MEC costs and expenses 554 (554) - -
-------------------------------------------------------------------------
Operating income (loss) 924 23 947 (45) 902
Other income 4 11 15 - 15
-------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 928 34 962 (45) 917
Income taxes 317 9 326 (11) 315
Minority interest 57 9 66 66
-------------------------------------------------------------------------
Net income (loss) from
continuing operations $ 554 $ 16 $ 570 $ (34) $ 536
Addback (deduct):
Other income (4) (11) (15) - (15)
Impairment charges
(net of tax) 34 (7) 27 - 27
-------------------------------------------------------------------------
Pro forma net income (loss)
from operations, excluding
impairment charges $ 584 $ (2) $ 582 $ (34) $ 548
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted earnings per Class A
Subordinate Voting or
Class B Share $ 5.82 $ 0.17 $ 5.99 $ (0.37) $ 5.62
Addback (deduct):
Other income (loss) (0.04) (0.12) (0.16) - (0.16)
Impairment charges 0.36 (0.07) 0.29 - 0.29
Dilutive impact of foreign
exchange loss on
redemption of debentures - - - - -
-------------------------------------------------------------------------
Pro forma diluted earnings
per Class A Subordinate
Voting or Class B Share
from operations, excluding
impairment charges $ 6.14 $ (0.02) $ 6.12 $ (0.37) $ 5.75
-------------------------------------------------------------------------
-------------------------------------------------------------------------