Magna announces record first quarter results
19 May 2000
Magna announces record first quarter results
AURORA, ON, May 18 /CNW-PRN/ - Magna International Inc.
today reported record sales, profits and earnings per share for the
first quarter ended March 31, 2000.
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THREE MONTHS ENDED
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March 31 March 31
2000 1999
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Sales $2,702 $2,271
Net Income $ 146 $ 104(1)
Fully diluted earnings per share $1.55 $ 1.17(1)
(1) Net income and fully diluted earnings per share have been restated
(previously $109 million and $1.22 respectively) due to an accounting
policy change relating to design and engineering and pre-production
start-up costs. For more information see note 2 to the First Quarter
Consolidated Financial Statements attached.
All results are reported in millions of U.S. dollars, except per share
figures.
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Sales for the first quarter ended March 31, 2000 were a record $2.7
billion, an increase of approximately 19% over the comparable period ended
March 31, 1999. The higher sales level in the first quarter of 2000 reflects
an 11% and a 10% increase in North American and European content per vehicle,
respectively, over the comparable quarter, a period in which North American
and European vehicle production increased approximately 7% and 2%
respectively. Tooling and other sales increased by 23% to $263 million in the
first quarter.
Net income for the first quarter increased 40% to a record $146 million
compared to $104 million in the comparable period in 1999. Fully diluted
earnings per share also set a record for the Company at $1.55 for the first
quarter, representing an increase of 32% over the comparable period.
During the first quarter of 2000, cash generated from operations before
changes in working capital was $269 million. Total investment activities
during the quarter were $124 million, including $112 million in fixed assets
and $12 million in investments and other assets.
The Board of Directors declared a dividend of $0.30 per share with
respect to the outstanding Class A Subordinate Voting Shares and Class B
Shares for the quarter ended March 31, 2000. The dividend is payable on June
15, 2000 to shareholders of record on May 31, 2000.
In addition, Magna and Decoma International Inc. ("Decoma") jointly
announced today that they have entered into a non-binding letter of intent
respecting the purchase by Decoma of Magna's European exterior parts
operations ("MES") and Magna's existing majority interest in Decoma Exterior
Trim Inc. This proposed acquisition by Decoma would solidify Decoma's position
as a premier worldwide supplier of a full range of exterior automotive parts
and components to the world's leading automotive manufacturers and is in
keeping with Magna's previously stated objective of restructuring its
operating groups along global product lines. For more information, see the
Magna and Decoma joint press release, which was issued concurrently with this
press release.
On March 10, 2000, Magna completed the previously announced
transformation of MEC into a public company by distributing 20% of MEC's
equity to Magna's shareholders in the form of Class A Subordinate Voting Stock
or Exchangeable Shares. The record date for the distribution of the special
stock dividend was February 25, 2000. MEC is listed under the following
trading symbols
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
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(Unaudited)
(United States dollars in millions, except per share figures)
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Three months ended
March 31, March 31,
2000 1999
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(restated, see
notes 2 and 3)
Sales:
Automotive $2,621 $2,231
Magna Entertainment Corp. 81 40
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2,702 2,271
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Automotive costs and expenses:
Cost of goods sold 2,134 1,854
Depreciation and amortization 94 80
Selling, general and administrative 174 150
Interest expense, net 7 2
Equity income (5) (5)
Magna Entertainment Corp. costs and expenses 60 24
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Operating income - automotive 217 150
Operating income - Magna Entertainment Corp. 21 16
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Income before income taxes and minority interest 238 166
Income taxes 85 57
Minority interest 7 5
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Net Income $ 146 $ 104
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Financing charges on Preferred Securities
and other paid-in capital $ (11) $ (6)
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Net income available to Class A Subordinate
Voting and Class B Shareholders 135 98
Retained earnings, beginning of period 1,531 1,202
Dividends on Class A Subordinate Voting
and Class B Shares (24) (11)
Special Magna Entertainment Corp. dividend (note 3) (111) -
Cumulative adjustment for change
in accounting policy (note 2) (85) (74)
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Retained earnings, end of period $1,446 $1,215
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Earnings per Class A Subordinate Voting
or Class B Share:
Basic $ 1.71 $ 1.25
Fully diluted $ 1.55 $ 1.17
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Cash dividends paid per Class A Subordinate Voting
or Class B Share $ 0.30 $ 0.22
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Average number of Class A Subordinate Voting and
Class B Shares outstanding during the period
(in millions):
Basic 78.5 78.4
Fully diluted 93.1 91.3
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MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
(United States dollars in millions)
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Three months ended
March 31, March 31,
2000 1999
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(restated,
Cash provided from (used for) see note 2)
OPERATING ACTIVITIES
Net income $ 146 $ 104
Items not involving current cash flows 123 83
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269 187
Changes in non-cash working capital (92) (74)
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177 113
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INVESTMENT ACTIVITIES
Fixed asset additions (112) (212)
Purchase of subsidiaries - (6)
Increase in investments and other (12) -
Proceeds from disposition of investments and other 21 41
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(103) (177)
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FINANCING ACTIVITIES
Net issue (repayment) of debt (152) 72
Issues of shares by subsidiaries 1 -
Repayments of debentures' interest obligations (9) (7)
Preferred Securities distributions (7) -
Dividends paid to minority interests (1) (1)
Dividends (24) (17)
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(192) 47
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Effect of exchange rate changes on cash
and cash equivalents (10) (9)
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Net increase (decrease) in cash and
cash equivalents during the period (128) (26)
Cash and cash equivalents, beginning of period 632 484
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Cash and cash equivalents, end of period $ 504 $ 458
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MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
(United States dollars in millions)
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March 31, December 31,
2000 1999
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ASSETS
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(restated,
Current assets: see note 2)
Cash and cash equivalents $ 504 $ 632
Accounts receivable 1,826 1,584
Inventories 662 672
Prepaid expenses and other 51 46
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3,043 2,934
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Investments 98 89
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Fixed assets, net 3,436 3,498
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Goodwill, net 248 267
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Future tax assets 93 93
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Other assets 173 181
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$7,091 $7,062
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness $ 194 $ 339
Accounts payable 1,571 1,391
Accrued salaries and wages 207 202
Other accrued liabilities 168 213
Income taxes payable 46 56
Long-term debt due within one year 49 70
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2,235 2,271
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Long-term debt 258 253
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Debentures' interest obligation 198 208
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Other long-term liabilities 84 85
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Future tax liabilities 181 188
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Minority interest 240 124
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Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinate Voting Shares
(issued: 77,439,409; December 31,
1999 - 77,438,465) 1,441 1,441
Class B Shares
(convertible into Class A Subordinate
Voting Shares)
(issued: 1,097,909; December 31,
1999 - 1,097,909) 1 1
Preferred Securities 277 277
Other paid-in capital 700 689
Retained earnings 1,446 1,446
Currency translation adjustment 30 79
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3,895 3,933
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$7,091 $7,062
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Notes:
1. 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 March 31, 2000 and the results of operations
and cash flows for the three- month periods ended March 31, 2000 and
1999.
2. In September 1999, the United States Emerging Issues Task Force
reached a consensus on accounting for pre-production costs related to
long-term supply agreements. The consensus requires that design and
development costs for products to be sold under long-term supply
agreements should be expensed as incurred unless a contractual
guarantee for reimbursement exists. The consensus also requires that
design and development costs for moulds, dies and other tools that a
supplier will not own and that will be used in producing the products
under the long-term supply agreement should be expensed as incurred
unless the supply arrangement provides the supplier the noncancelable
right to use the moulds, dies and other tools during the supply
arrangement. Canadian generally accepted accounting principles
("Canadian GAAP") do not explicitly address these types of costs.
In addition, in April 1998, the American Institute of Certified
Public Accountants issued new recommendations for the accounting for
costs of start-up activities. These recommendations require costs of
start-up activities to be expensed as incurred. Under Canadian GAAP,
costs incurred in establishing new facilities which require
substantial time to reach commercial production may be capitalized.
In an effort to minimize future differences between Canadian GAAP and
United States generally accepted accounting principles ("U.S. GAAP"),
the Company previously disclosed that in the first quarter of 2000,
it would adopt for Canadian reporting purposes, accounting policies,
for each type of preproduction costs described above, that are
consistent with the requirements under U.S. GAAP. Canadian GAAP
requires retroactive restatement when a change in accounting policy
is made. The most significant changes to the consolidated financial
statements are as follows:
Three months ended
March 31,
1999
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Increase in cost of sales $12
Decrease in depreciation and amortization (4)
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Decrease in operating income - automotive (8)
Decrease in income taxes (3)
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Decrease in net income $(5)
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Decrease in earnings per Class A Subordinate
Voting or Class B Share:
Basic $(0.06)
Fully diluted $(0.05)
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December 31,
1999
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Decrease in fixed assets $(45)
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Decrease in other assets $(91)
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Decrease in future tax liabilities $(45)
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Decrease in retained earnings $(85)
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Decrease in currency translation adjustment $ (6)
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3. On February 14, 2000, the Company declared a special stock dividend
of approximately 20% of Magna Entertainment Corp's ("MEC") equity to
the Company's Class A Subordinate Voting and Class B shareholders of
record on February 25, 2000 (the "special dividend"). On March 10,
2000, the special dividend was paid.
In connection with the special dividend, on March 17, 2000, the
holders' conversion prices with respect to the Company's 4.875% and
5% convertible subordinated debentures were adjusted to $74.27 and
$53.04, respectively.
The comparative MEC sales, costs and expenses have been adjusted from
those previously reported. The adjustments were necessary to reflect
the final structure of MEC and do not impact Magna's consolidated net
income.
4. 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 March 31, 2000 were
exercised:
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Class A Subordinate Voting and Class B Shares
outstanding at March 31, 2000 78.5
5% convertible subordinated debentures
(based on holders' conversion option) 6.5
4.875% convertible subordinated debentures
(based on holders' conversion option) 6.5
Stock options 1.8
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93.3
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The above amounts exclude Class A Subordinate Voting Shares issuable,
at the Company's option, to settle the 7.08% subordinated debentures
and Preferred Securities on redemption or maturity.
5. The Company's segmented results of operations are as follows:
Three months ended Three months ended
March 31, 2000 March 31, 1999
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Total Operating Fixed Total Operating Fixed
sales income assets, sales income assets,
(loss) net (loss) net
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Tier 0.5(TM)
Vehicle and
Systems
Integration
Europe $ 284 $ 18 $ 169 $ 245 $ 6 $ 357
North America 4 (7) 5 - (2) -
Tier One and Two
Automotive
Manufacturing
North America 1,324 110 989 1,114 91 824
Europe 542 11 453 498 2 386
Publicly Traded
Tier One and Two
Automotive
Manufacturing
North America 460 53 492 361 26 464
Europe 39 2 61 40 3 38
MEC 81 21 570 40 16 328
Corporate
and other (32) 30 697 (27) 24 558
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Total reportable
segments $2,702 $238 3,436 $2,271 $166 2,955
Current assets 3,043 2,686
Investments,
goodwill and
other assets 612 565
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Consolidated total assets $7,091 $6,206
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