Magna announces third quarter results
15 November 2000
Magna announces third quarter results
AURORA, ON, Nov. 15 /PRNewswire/ - Magna International Inc.
today reported sales, profits and earnings per share for the
third quarter ended September 30, 2000.
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NINE MONTHS ENDED THREE MONTHS ENDED
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Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2000 1999 2000 1999
---- ---- ---- ----
(1) (1)
Sales $ 7,607 $ 6,796 $ 2,343 $ 2,180
Net Income $ 478 (2) $ 292 $ 162 (3) $ 80
Excl. Other Income $ 377 $ 292 $ 89 $ 80
Fully diluted earnings
per share $ 5.08 (2) $ 3.27 $ 1.71 (3) $ 0.89
Excl. Other Income $ 4.00 $ 3.27 $ 0.93 $ 0.89
(1) Net Income and fully diluted earnings per share have been restated
due to an accounting policy change relating to design and engineering and
pre-production costs. For more information see note 2 to the Third
Quarter Consolidated Financial Statements attached.
(2) Includes a $28 million gain ($0.30 per share) on the sale of the
Company's remaining Class A Subordinate Voting shares of Tesma
International Inc. ("Tesma"), and gains totalling $73 million ($0.78 per
share) on the sale of Invotronics Manufacturing ("Invotronics") and the
Company's equity interest in Webasto Sunroofs Inc. ("Webasto").
(3) Includes gains totalling $73 million ($0.78 per share) on the sale of
Invotronics and the Company's equity interest in Webasto.
All results are reported in millions of U.S. dollars, except per share
figures.
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Sales for the first nine months and third quarter of fiscal 2000 were
$7.6 billion and $2.3 billion, respectively, increases of approximately 12%
and 7% over the comparable periods ended September 30, 1999. The higher sales
level in the third quarter of 2000 reflects increases over the comparable
quarter of 11% in North American content per vehicle, and 1% in European
content per vehicle, excluding the 14% reduction related to the impact of
foreign currency translation on European sales. During the third quarter,
North American vehicle production decreased approximately 1% and European
vehicle production increased approximately 2% over the comparable period.
Tooling and other sales increased over the comparable quarter by 36% to $332
million in the third quarter.
Net income, excluding Other Income, increased 29% and 11% to $377 million
and $89 million for the first nine months and third quarter of fiscal 2000,
respectively. Including Other Income, net income for the first nine months and
third quarter of fiscal 2000 increased to $478 million and $162 million,
respectively. Other Income for the third quarter totalled $73 million on the
sale of Invotronics and the Company's equity interest in Webasto. For the
first nine months of fiscal 2000, Other Income also included a gain of $28
million on the sale of Tesma shares.
Fully diluted earnings per share were $4.00 and $0.93 for the first nine
months and third quarter of fiscal 2000, excluding Other Income, representing
increases of 22% and 4%, respectively, over the comparable periods. Including
Other Income, fully diluted earnings per share increased to $5.08 and $1.71,
respectively.
During the third quarter of 2000, cash generated from operations before
changes in working capital was $218 million. Total investment activities
during the quarter were $169 million, including $163 million in fixed assets.
The Board of Directors declared a dividend of $0.34 per share with
respect to the outstanding Class A Subordinate Voting Shares and Class B
Shares for the quarter ended September 30, 2000. This represents a 13%
increase from the previous quarterly dividend. The dividend is payable on
December 15, 2000 to shareholders of record on November 30, 2000.
Magna also announced today that it will reorganize its vehicle assembly
and powertrain groups, formerly known as Steyr Daimler Puch and Steyr
Powertrain, under the name "Magna Steyr". Magna Steyr will work with the
hydroforming and the European stamping divisions of the Cosma group to create
complete chassis on wheels. Siegfried Wolf, President of Magna Europe, will
become President of Magna Steyr. By combining the hydroforming activities of
Cosma with the powertrain and full vehicle assembly capabilities of Magna
Steyr, Magna believes that Magna Steyr will be the market leader in providing
complete hydroformed chassis on wheels and other advanced hydroformed modules
to its customers.
Magna, one of the most diversified automotive suppliers 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: exterior
decorative systems; interior products including complete seats, instrument and
door panel systems and sound insulation; stamped and welded metal parts and
assemblies; electro-mechanical devices and assemblies and navigation systems;
a variety of plastic parts, including body panels and fascias through Decoma
International Inc.; various engine, powertrain and fueling and cooling
components through Tesma International Inc.; a variety of drivetrain
components through Steyr Powertrain; and complete vehicle engineering and
assembly through SteyrSymatec.
Magna has over 59,000 employees in 166 manufacturing operations and 32
product development and engineering centres in 19 countries.
Magna will hold a conference call to discuss the third quarter results on
Thursday, November 16, 2000 at 10:30 a.m. EST. The number to use for this call
is 1-877-871-1828. Please call in 10 minutes prior to the conference call. The
number for overseas callers is 1-416-641-6444. Magna will also webcast the
conference call at http://www.magnaint.com. The conference call will be chaired by
James Nicol, Vice-Chairman and Vincent Galifi, Executive Vice-President of
Finance and Chief Financial Officer.
For further information, please contact Vincent Galifi at 905-726-7100 or
Louis Tonelli at 905-726-7035.
This press release may contain "forward looking statements" within the
meaning of applicable securities legislation. Such statements involve certain
risks and uncertainties which may cause actual results to be materially
different from those expressed or implied herein. These factors include, but
are not limited to, industry cyclicality, the Company's financial performance,
changes in the economic and competitive markets in which the Company competes,
relationships with OEM customers, the Company's dependence on certain vehicle
programs, currency exposure and other factors as set out in the Company's Form
40-F for its financial year ended December 31, 1999 and subsequent SEC
filings.
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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Nine months ended Three months ended
September September September September
30, 30, 30, 30,
2000 1999 2000 1999
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(restated, see (restated, see
notes 2 and 3) notes 2 and 3)
Sales:
Automotive $ 7,433 $ 6,725 $ 2,304 $ 2,170
Magna Entertainment Corp., net 174 71 39 10
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7,607 6,796 2,343 2,180
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Automotive costs and expenses:
Cost of goods sold 6,072 5,587 1,901 1,805
Depreciation and amortization 278 245 92 83
Selling, general and
administrative 485 441 159 147
Interest expense, net 13 5 1 3
Equity income (12) (13) (3) (4)
Magna Entertainment Corp. costs
and expenses 157 64 48 18
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Operating income - automotive 597 460 154 136
Operating income (loss) - Magna
Entertainment Corp. 17 7 (9) (8)
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Operating income 614 467 145 128
Other income - automotive (note 4) 161 - 125 -
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Income before income taxes and
minority interest 775 467 270 128
Income taxes 277 162 103 44
Minority interest 20 13 5 4
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Net Income $ 478 $ 292 $ 162 $ 80
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Financing charges on Preferred
Securities and other paid-in
capital $ (34) $ (21) $ (12) $ (8)
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Net income available to Class A
Subordinate Voting and Class B
Shareholders 444 271 150 72
Retained earnings, beginning
of period 1,531 1,202 1,581 1,296
Dividends on Class A Subordinate
Voting and Class B Shares
(note 3) (182) (50) (24) (19)
Surrender of subsidiary stock
options (1) - - -
Cumulative adjustment for change
in accounting policy (note 2) (85) (74) - -
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Retained earnings, end of period $ 1,707 $ 1,349 $ 1,707 $ 1,349
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Earnings per Class A Subordinate
Voting or Class B Share:
Basic $ 5.66 $ 3.46 $ 1.91 $ 0.92
Fully diluted $ 5.08 3.27 1.71 0.89
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Cash dividends paid per Class A
Subordinate Voting or Class B
Share $ 0.90 $ 0.86 $ 0.30 $ 0.25
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Average number of Class A
Subordinate Voting and
Class B Shares outstanding
during the period
(in millions):
Basic 78.5 78.5 78.5 78.5
Fully diluted 93.3 91.6 93.4 91.7
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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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Nine months ended Three months ended
September September September September
30, 30, 30, 30,
2000 1999 2000 1999
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(restated, (restated,
Cash provided from (used for): see note 2) see note 2)
OPERATING ACTIVITIES
Net income $ 478 $ 292 $ 162 $ 80
Items not involving current
cash flows 254 249 56 80
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732 541 218 160
Changes in non-cash working
capital (379) (161) (157) (99)
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353 380 61 61
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INVESTMENT ACTIVITIES
Fixed asset additions (416) (636) (163) (220)
Purchase of subsidiaries - (139) - (127)
Increase in investments and other (21) (7) (6) (2)
Proceeds from disposition of
investments and other 359 110 198 22
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(78) (672) 29 (327)
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FINANCING ACTIVITIES
Net issue (repayment) of debt (173) 79 7 (54)
Repayments of debentures'
interest obligations (24) (22) (8) (8)
Preferred Securities distribution (19) - (7) -
Issue of Preferred Securities - 274 - 274
Issue of 7.08% Subordinated
Debentures - 104 - 104
Surrender of subsidiary stock
options (2) - - -
Issues of shares by subsidiaries 4 - - -
Dividends paid to minority
interests (4) (2) (2) (1)
Dividends (70) (67) (23) (19)
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(288) 366 (33) 296
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Effect of exchange rate changes
on cash and cash equivalents (33) (7) (21) 8
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Net increase (decrease) in cash
and cash equivalents during
the period (46) 67 36 38
Cash and cash equivalents,
beginning of period 632 484 550 513
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Cash and cash equivalents,
end of period $ 586 $ 551 $ 586 $ 551
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MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
(United States dollars in millions)
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September 30, December 31,
2000 1999
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ASSETS
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(restated,
see note 2)
Current assets:
Cash and cash equivalents $ 586 $ 632
Accounts receivable 1,761 1,584
Inventories 687 672
Prepaid expenses and other 65 46
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3,099 2,934
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Investments 95 89
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Fixed assets, net 3,331 3,498
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Goodwill, net 224 267
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Future tax assets 84 93
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Other assets 158 181
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$6,991 $7,062
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Bank indebtedness $ 261 $ 339
Accounts payable 1,297 1,391
Accrued salaries and wages 207 202
Other accrued liabilities 113 213
Income taxes payable 75 56
Long-term debt due within one year 43 70
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1,996 2,271
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Long-term debt 209 253
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Debentures' interest obligation 180 208
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Other long-term liabilities 77 85
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Future tax liabilities 199 188
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Minority interest 281 124
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Shareholders' equity:
Capital stock issued and outstanding -
Class A Subordinate Voting Shares
(issued: 77,462,669; December 31, 1999 -
77,438,465) 1,442 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 722 689
Retained earnings 1,707 1,446
Currency translation adjustment (100) 79
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4,049 3,933
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$6,991 $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 September 30, 2000 and the results of
operations and cash flows for the nine month periods ended September
30, 2000 and 1999.
2. In September 1999, the United States Emerging Issues Task Force
issued consensus number 99-5 on accounting for pre-production costs
related to long-term supply agreements which requires that design and
development costs for products to be sold under long-term supply
agreements 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 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:
Nine months ended Three months ended
September 30, September 30,
1999 1999
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Increase in cost of sales $ 33 $ 7
Decrease in depreciation and amortization (16) (7)
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Decrease in operating income - automotive (17) -
Decrease in income taxes (4) -
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Decrease in net income $ (13) $ -
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Decrease in earnings per Class A Subordinate
Voting or Class B Share:
Basic $(0.16) $ -
Fully diluted $(0.14) $ -
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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. In the first quarter of the current year, Magna completed the spin-
off of Magna Entertainment Corp. ("MEC") by paying a dividend of
approximately 20% of MEC's equity to Magna's shareholders. Dividends
include $111 million related to the MEC spin-off.
MEC sales, costs and expenses for the three and nine months ended
September 30, 1999 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. During the three months ended September 30, 2000, the Company
completed the sale of its 50% interest in Webasto Sunroofs Inc.,
a joint venture, and its related real estate. The Company recognized
a pretax gain of $94 million on this disposal. Also during the third
quarter of the current year, the Company completed the sale of
Invotronics, a wholly-owned manufacturing division. The pretax gain
recognized on this transaction amounted to $31 million.
During the three months ended June 30, 2000, the Company recognized a
pretax gain of $36 million on the sale of 4.4 million Class A
Subordinate Voting Shares of Tesma International Inc., a publicly
traded subsidiary of the Company.
5. 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, 2000 were
exercised:
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Class A Subordinate Voting and Class B Shares
outstanding at September 30, 2000 78.6
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 1.9
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93.5
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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.
6. The Company's segmented results of operations are as follows:
Nine months ended Nine months ended
September 30, 2000 September 30, 1999
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Operating Fixed Operating Fixed
Total income assets, Total income assets,
sales (loss) net sales (loss) net
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Tier 0.5(TM) Vehicle
and Systems Integration
Europe 760 50 144 819 56 192
North America 11 (17) 10 - (15) -
Tier One and Two
Automotive
Manufacturing
North America 3,780 303 945 3,285 281 927
Europe 1,514 12 431 1,458 (11) 458
Publicly Traded
Tier One and Two
Automotive
Manufacturing
North America 1,372 133 477 1,144 84 464
Europe 109 6 64 119 6 54
MEC 174 17 538 71 7 451
Corporate and other (113) 110 722 (100) 59 741
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Total reportable
segments 7,607 614 3,331 6,796 467 3,287
Current assets 3,099 2,934
Investments, goodwill
and other assets 561 636
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Consolidated total assets 6,991 6,857
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