Magna International Inc. (TSX: MG; NYSE: MGA) today reported financial results for the third quarter ended September 30, 2015.
| THREE MONTHS ENDED SEPTEMBER 30, |
NINE MONTHS ENDED SEPTEMBER 30, |
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| 2015 | 2014 | 2015 | 2014 | |||||||||||
| Sales | $ | 7,661 | $ | 8,247 | $ | 23,566 | $ | 25,613 | ||||||
| Adjusted EBIT(1) | $ | 565 | $ | 627 | $ | 1,873 | $ | 1,967 | ||||||
| Income from continuing operations before | ||||||||||||||
| income taxes | $ | 680 | $ | 611 | $ | 2,027 | $ | 1,909 | ||||||
| Net income from continuing operations | ||||||||||||||
| attributable to Magna International Inc. | $ | 470 | $ | 487 | $ | 1,463 | $ | 1,408 | ||||||
| Diluted earnings per share | ||||||||||||||
| from continuing operations | $ | 1.13 | $ | 1.14 | $ | 3.53 | $ | 3.21 | ||||||
| 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 (income) expense, net. | ||||||||||||||
BASIS OF PRESENTATION
In the third quarter of 2015, we sold substantially all of our interiors operations (excluding our seating operations). The assets and liabilities, and operating results for the previously reported interiors operations are presented as discontinued operations and have therefore been excluded from both continuing operations and segment results for all periods presented in the attached financial statements. This Press Release reflects the results of continuing operations, unless otherwise noted.
THREE MONTHS ENDED SEPTEMBER 30, 2015
We posted sales of $7.7 billion for the third quarter ended September 30, 2015, a decrease of 7% from the third 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 third quarter of 2015. Foreign currency translation reduced our sales by approximately $870 million, as compared to the third quarter of 2014. Excluding the impact of foreign currency translation, our sales increased 3% in the third quarter of 2015, compared to the third quarter of 2014. North American light vehicle production increased 4% to 4.3 million units and European light vehicle production increased 4% to 4.7 million units in the third quarter of 2015, compared to the third quarter of 2014.
Excluding the impact of foreign currency translation, our complete vehicle assembly sales decreased 18% in the third quarter of 2015, compared to the third quarter of 2014. Complete vehicle assembly volumes decreased 28% to approximately 23,000 units.
During the third quarter of 2015, income from continuing operations before income taxes was $680 million, an increase of $69 million over the third quarter of 2014. Net income from continuing operations attributable to Magna International Inc. was $470 million and diluted earnings per share from continuing operations were $1.13, decreases of $17 million and $0.01 respectively, both compared to the third quarter of 2014.
For the third quarter of 2015, other (income) expense positively impacted income from continuing operations before income taxes by $124 million, net income from continuing operations attributable to Magna International Inc. by $68 million, and diluted earnings per share from continuing operations by $0.16, respectively.
For the third quarter of 2014, other (income) expense negatively impacted income from continuing operations before income taxes by $7 million, net income from continuing operations attributable to Magna International Inc. by $6 million, and diluted earnings per share from continuing operations by $0.01, respectively.
During the third quarter ended September 30, 2015, we generated cash from operations of $563 million before changes in operating assets and liabilities, and $33 million in operating assets and liabilities. Total investment activities for the third quarter of 2015 were $434 million, including $360 million in fixed asset additions and $74 million in investments and other assets.
NINE MONTHS ENDED SEPTEMBER 30, 2015
We posted sales of $23.6 billion for the nine months ended September 30, 2015, a decrease of 8% from the nine months ended September 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 nine months of 2015. Foreign currency translation reduced our sales by approximately $2.6 billion, as compared to the first nine months of 2014. Excluding the impact of foreign currency translation, our sales increased 2% in the first nine months of 2015, compared to the first nine months of 2014.
During the nine months ended September 30, 2015, vehicle production increased 2% to 12.9 million units in North America and increased 2% to 15.3 million units in Europe, each compared to the first nine months of 2014.
Excluding the impact of foreign currency translation, our complete vehicle assembly sales decreased 12% in the first nine months of 2015, compared to the first nine months of 2014. Complete vehicle assembly volumes decreased 23% to approximately 79,000 units.
During the nine months ended September 30, 2015, income from continuing operations before income taxes was $2.0 billion, net income from continuing operations attributable to Magna International Inc. was $1.5 billion and diluted earnings per share from continuing operations were $3.53, increases of $118 million, $55 million and $0.32, respectively, each compared to the first nine months of 2014.
For the nine months ended September 30, 2015, other (income) expense positively impacted income from continuing operations before income taxes by $181 million, net income from continuing operations attributable to Magna International Inc. by $110 million, and diluted earnings per share from continuing operations by $0.26 respectively.
For the nine months ended September 30, 2014, other (income) expense negatively impacted income from continuing operations before income taxes by $40 million. In addition, for the nine months ended September 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 $68 million, and diluted earnings per share from continuing operations by $0.16, respectively.
During the nine months ended September 30, 2015, we generated cash from operations before changes in operating assets and liabilities of $1.9 billion, and invested $587 million in operating assets and liabilities. Total investment activities for the first nine months of 2015 were $1.1 billion, including $987 million in fixed asset additions, $152 million in investments and other assets and $1 million to purchase subsidiaries.
A more detailed discussion of our consolidated financial results for the third quarter and nine months ended September 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 September 30, 2015. This dividend is payable on December 11, 2015 to shareholders of record on November 27, 2015.
OTHER MATTERS
Subject to approval by the Toronto Stock Exchange and the New York Stock Exchange, our Board of Directors approved a normal course issuer bid to purchase up to 40 million of our Common Shares, representing approximately 9.9% of our public float of Common Shares. This normal course issuer bid is expected to commence on or about November 13, 2015 and will terminate one year later.
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 | 20.5 million | 20.1 million | |||||
| Production Sales | |||||||
| North America | $17.4 – $17.8 billion | $17.4 billion | |||||
| Europe | $7.0 – $7.3 billion | $8.8 billion | |||||
| Asia | $1.5 – $1.6 billion | $1.6 billion | |||||
| Rest of World | $0.4 – $0.5 billion | $0.7 billion | |||||
| Total Production Sales | $26.3 – $27.2 billion | $28.5 billion | |||||
| Complete Vehicle Assembly Sales | $2.3 – $2.5 billion | $3.2 billion | |||||
| Total Sales | $31.3 – $32.6 billion | $34.4 billion | |||||
| Operating Margin(1) | Approximately 7.7% | 7.7% | |||||
| Tax Rate(1) | Approximately 26% | 25.0% | |||||
| Capital Spending | Approximately $1.5 billion | $1.5 billion | |||||
| (1) Excluding other (income) expense, net |
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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.
