Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the second quarter ended June 30, 2015.
| Three months ended, June 30 | Six months ended, June 30 | |||
| 2015 | 2014 | 2015 | 2014 | |
| Sales | $8,133 | $8,911 | $15,905 | $17,366 |
| Adjusted EBIT(1) | $677 | $722 | $1,308 | $1,340 |
| Income from continuing operations before |
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| income taxes | $726 | $704 | $1347 | $1,298 |
| Net income from continuing operations |
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| attributable to Magna International Inc. | $538 | $519 | $ 993 | $921 |
| Diluted earnings per share |
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| from continuing operations | $ 1.29 | $1.18 | $2.39 | $2.08 |
All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars.
¹ Adjusted EBIT is the measure of segment profit or loss as reported in the Company’s attached unaudited interim consolidated financial statements.
Adjusted EBIT represents income from operations before income taxes; interest expense, net; and other expense, net.
BASIS OF PRESENTATION
In the second quarter of 2015, we signed an agreement to sell substantially all of our interiors operations to Grupo Antolin, a leading global supplier of automotive interior systems. The purchase price for the operations, excluding certain assets, is approximately $525 million, subject to customary closing adjustments. We will continue managing our seating operations which are not included in this arrangement. The assets and liabilities, and operating results for the previously reported interiors operations are presented as discontinued operations, and have therefore been excluded from continuing operations for all periods presented in this press release.
THREE MONTHS ENDED JUNE 30, 2015
We posted sales of $8.1 billion for the second quarter ended June 30, 2015, a decrease of 9% from the second quarter of 2014. The weakening of certain currencies against our U.S. dollar reporting currency, in particular the euro and Canadian dollar, had a significant negative impact on our reported sales for the second quarter of 2015. Foreign currency translation reduced our sales by approximately $890 million, as compared to the second quarter of 2014. Excluding the impact of foreign currency translation, our sales increased 1% in the second quarter of 2015, compared to the second quarter of 2014. North American light vehicle production increased 3% to 4.6 million units and European light vehicle production increased marginally to 5.4 million units in the second quarter of 2015, compared to the second quarter of 2014.
Excluding the impact of foreign currency translation, our complete vehicle assembly sales decreased 8% in the second quarter of 2015, compared to the second quarter of 2014. Complete vehicle assembly volumes decreased 17% to approximately 28,500 units.
During the second quarter of 2015, income from continuing operations before income taxes was $726 million, net income from continuing operations was $538 million and diluted earnings per share from continuing operations were $1.29, increases of $22 million, $19 million and $0.11 respectively, each compared to the second quarter of 2014.
For the second quarter of 2015, other (income) expense positively impacted income from continuing operations before income taxes by $57 million, net income from continuing operations attributable to Magna International Inc. by $42 million, and diluted earnings per share from continuing operations by $0.10, respectively.
For the second quarter of 2014, other (income) expense negatively impacted income from continuing operations before income taxes by $11 million, net income from continuing operations attributable to Magna International Inc. by $10 million, and diluted earnings per share from continuing operations by $0.02, respectively.
During the second quarter ended June 30, 2015, we generated cash from operations of $711 million before changes in operating assets and liabilities, and invested $271 million in operating assets and liabilities. Total investment activities for the second quarter of 2015 were $402 million, including $361 million in fixed asset additions and $41 million in investments and other assets.
SIX MONTHS ENDED JUNE 30, 2015
We posted sales of $15.9 billion for the six months ended June 30, 2015, a decrease of 8% from the six months ended June 30, 2014. The weakening of certain currencies against our U.S. dollar reporting currency, in particular the euro and Canadian dollar, had a significant negative impact on our reported sales for the first six months of 2015. Foreign currency translation reduced our sales by approximately $1.7 billion, as compared to the first six months of 2014. Excluding the impact of foreign currency translation, our sales increased 2% in the first six months of 2015, compared to the first six months of 2014.
During the six months ended June 30, 2015, vehicle production increased 1% to 8.7 million units in North America and increased 1% to 10.6 million units in Europe, each compared to the first six months of 2014.
Excluding the impact of foreign currency translation, our complete vehicle assembly sales decreased 10% in the first six months of 2015, compared to the first six months of 2014. Complete vehicle assembly volumes decreased 20% to approximately 56,000 units.
During the six months ended June 30, 2015, income from continuing operations before income taxes was $1.4 billion, net income from continuing operations was $993 million and diluted earnings per share from continuing operations were $2.39, increases of $49 million, $72 million and $0.31, respectively, each compared to the first six months of 2014.
For the six months ended June 30, 2015, other (income) expense positively impacted income from continuing operations before income taxes by $57 million, net income from continuing operations attributable to Magna International Inc. by $42 million, and diluted earnings per share from continuing operations by $0.10, respectively.
For the six months ended June 30, 2014, other (income) expense negatively impacted income from continuing operations before income taxes by $33 million. In addition, for the six months ended June 30, 2014, other (income) expense and the impact of the Austrian tax reform together negatively impacted net income from continuing operations attributable to Magna International Inc. by $62 million, and diluted earnings per share from continuing operations by $0.14, respectively.
During the six months ended June 30, 2015, we generated cash from operations before changes in operating assets and liabilities of $1.3 billion, and invested $620 million in operating assets and liabilities. Total investment activities for the first six months of 2015 were $706 million, including $627 million in fixed asset additions, $78 million in investments and other assets and $1 million to purchase subsidiaries.
A more detailed discussion of our consolidated financial results for the second quarter and six months ended June 30, 2015 is contained in the Management’s Discussion and Analysis of Results of Operations and Financial Position and the unaudited interim consolidated financial statements and notes thereto, which are attached to this Press Release.
DIVIDENDS
Yesterday, our Board of Directors declared a quarterly dividend of $0.22 with respect to our outstanding Common Shares for the quarter ended June 30, 2015. This dividend is payable on September 11, 2015 to shareholders of record on August 28, 2015.
UPDATED 2015 OUTLOOK
The table below reflects our 2015 outlook and 2014 actual results, both from continuing operations:
| 2015 Outlook | 2014 Actual | ||
| Light Vehicle Production (Units) | |||
| North America | 17.4 million | 17.0 million | |
| Europe | 20.3 million | 20.1 million | |
| Production Sales | |||
| North America | $17.3 – $17.9 billion | $17.4 billion | |
| Europe | $6.8 – $7.2 billion | $8.8 billion | |
| Asia | $1.6 – $1.8 billion | $1.6 billion | |
| Rest of World | $0.5 – $0.6 billion | $0.7 billion | |
| Total Production Sales | $26.2 – $27.5 billion | $28.5 billion | |
| Complete Vehicle Assembly Sales | $2.2 – $2.5 billion | $3.2 billion | |
| Total Sales | $30.9 – $32.6 billion | $34.4 billion | |
| Operating Margin(1) | Approximately 8% | 7.70% | |
| Tax Rate(1) | Approximately 26% | 25.00% | |
| Capital Spending | $1.3 – $1.5 billion | $1.5 billion | |
¹ Excluding other (income) expense, net
In this 2015 outlook, in addition to 2015 light vehicle production, we have assumed no material acquisitions or divestitures other than the divestiture of substantially all of our interior operations as discussed above. In addition, we have assumed that foreign exchange rates for the most common currencies in which we conduct business relative to our U.S. dollar reporting currency will approximate current rates.
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