Magna Announces Third Quarter and Year to Date Results (Part 1)
AURORA, ON, November 6 -- Magna International Inc. (TSX: MG.A, MG.B; NYSE: MGA) has 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
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Sept 30, Sept 30, Sept 30, Sept 30,
2003 2002 2003 2002
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Sales US$3,566 US$2,962 US$10,722 US$8,979
Net income (1) US$ 48 US$ 132 US$ 384 US$ 444
Net income from continuing
operations(1),(2) US$ 122 US$ 138 US$ 451 US$ 446
Net income from operations(3) US$ 122 US$ 117 US$ 458 US$ 440
Diluted earnings per share (1) US$ 0.44 US$ 1.40 US$ 3.84 US$ 4.74
Diluted earnings per share from
continuing operations (1) ,(2) US$ 1.21 US$ 1.46 US$ 4.54 US$ 4.76
Diluted earnings per share
from operations (3) US$ 1.22 US$ 1.24 US$ 4.62 US$ 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 US$68 million related to MEC and US$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
US$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 US$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 US$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 US$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 US$122 million, representing an increase over the comparable quarter of 4% or US$5 million. Net income and net income from continuing operations for the third quarter ended September 30, 2003 were US$48 million and US$122 million, respectively.
Diluted earnings per share from operations were US$1.22 for the third quarter ended September 30, 2003, compared to US$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 US$0.44 and US$1.21, respectively.
The Company generated cash from operations before changes in non-cash working capital of US$310 million and invested US$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 US$249 million, including US$188 million in fixed asset additions, US$8 million to purchase subsidiaries, and a US$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
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Sales for the nine months ended September 30, 2003 were US$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 US$458 million, representing an increase over the nine months ended September 30, 2002 of 4% or US$18 million. Net income and net income from continuing operations for the nine months ended September 30, 2003 were US$384 million and US$451 million, respectively.
Diluted earnings per share from operations were US$4.62 for the nine months ended September 30, 2003, compared to US$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 US$3.84 and US$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 US$961 million and invested US$620 million in non-cash working capital. Total investment activities for the first nine months of 2003 were US$624 million, including US$499 million in fixed asset additions, US$8 million to purchase subsidiaries, and a US$117 million increase in other assets.
OTHER MATTERS
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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. US$0.34 per share is payable on December 15, 2003 to shareholders of record on November 28, 2003.
2003 OUTLOOK
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For the fourth quarter of 2003, the Company expects average dollar content per vehicle to range between US$560 and US$575 in North America and between US$390 and US$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 US$4.0 billion and US$4.2 billion. The Company expects diluted earnings per share from operations to be in the range of US$1.50 to US$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 US$1.43.
The Company expects full year 2003 average dollar content per vehicle to range between US$515 and US$520 in North America and between US$320 and US$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 US$14.6 billion to US$14.9 billion, compared to 2002 automotive sales of US$12.4 billion, and diluted earnings per share from operations for 2003 to be in the range of US$6.12 to US$6.32. In addition, the Company expects that full year 2003 spending for automotive fixed assets will be approximately US$800 million, compared to US$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.
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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 http://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.
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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 US$3,566 US$2,962 US$10,722 US$8,979
Cost of goods sold 2,981 2,476 8,865 7,407
Depreciation and amortization 131 104 369 306
Selling, general and
administrative 244 187 726 559
Interest income, net (3) (5) (10) (5)
Equity income (3) (6) (10) (17)
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Operating income 216 206 782 729
Other income (loss) 2, 4 (6) 15 (6) 15
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Income from continuing
operations before
income taxes and
minority interest 210 221 776 744
Income taxes 74 67 266 243
Minority interest 14 16 59 55
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Net income from
continuing operations 122 138 451 446
Net loss from
discontinued operations
- MEC 3 (74) (6) (67) (2)
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Net income US$ 48 US$ 132 US$ 384 US$ 444
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Financing charges on
Preferred Securities and
other paid-in capital US$ (5) US$ (5) US$ (15) US$ (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 US$2,291 US$2,498 US$2,291 US$2,498
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Earnings per Class A
Subordinate Voting or
Class B Share from
continuing operations:
Basic US$ 1.22 US$ 1.48 US$ 4.56 US$ 4.79
Diluted US$ 1.21 US$ 1.46 US$ 4.54 US$ 4.76
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Earnings per Class A
Subordinate Voting or
Class B Share:
Basic US$ 0.45 US$ 1.41 US$ 3.86 US$ 4.77
Diluted US$ 0.44 US$ 1.40 US$ 3.84 US$ 4.74
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Cash dividends paid per
Class A Subordinate
Voting or Class B Share US$ 0.34 US$ 0.34 US$ 1.02 US$ 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 US$ 122 US$ 138 US$ 451 US$ 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 US$1,067 US$1,040 US$1,067 US$1,040
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See accompanying notes
Continued. (See part 2)
For further information: please contact Vincent Galifi or Louis Tonelli at +1 (905) 726-7100. For teleconferencing questions, please call +1 (905) 726-7103. (MG.A. MG.B. MGA)