Press Release - Magna Announces Fourth Quarter and 2015 Results
THREE MONTHS ENDED DECEMBER 31, |
YEAR ENDED DECEMBER 31, |
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2015 | 2014 | 2015 | 2014 | ||||||||||||
Sales | $ | 8,568 | $ | 8,790 | $ | 32,134 | $ | 34,403 | |||||||
Adjusted EBIT(1) | $ | 656 | $ | 714 | $ | 2,529 | $ | 2,681 | |||||||
Income from continuing operations before | |||||||||||||||
income taxes | $ | 624 | $ | 696 | $ | 2,651 | $ | 2,605 | |||||||
Net income from continuing operations | |||||||||||||||
attributable to Magna International Inc. | $ | 483 | $ | 516 | $ | 1,946 | $ | 1,924 | |||||||
Diluted earnings per share | |||||||||||||||
from continuing operations | $ | 1.19 | $ | 1.23 | $ | 4.72 | $ | 4.44 | |||||||
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
We posted sales of
Excluding the impact of foreign currency translation, our complete vehicle assembly sales decreased 3% in the fourth quarter of 2015, compared to the fourth quarter of 2014. Complete vehicle assembly volumes decreased 24% to approximately 25,000 units.
During the fourth quarter of 2015, income from continuing operations
before income taxes was
For the fourth quarter of 2015, other expense (income) negatively
impacted income from continuing operations before income taxes by
During the fourth quarter ended
YEAR ENDED
We posted sales of
In 2015, vehicle production increased 3% to 17.5 million units in
Excluding the impact of foreign currency translation, our complete vehicle assembly sales decreased 10% in 2015, compared to 2014. Complete vehicle assembly volumes decreased 23% to approximately 104,000 units.
For the year ended
For the year ended
During 2015, we generated cash from operations before changes in
operating assets and liabilities of
On the operations front, excluding the negative translation impact from the strengthening of the U.S. dollar, we reported strong results. We have experienced some challenges in certain facilities which we are working to overcome.
Looking forward, we are excited about Magna's future. We are confident that our ability to integrate our vast capabilities, a competitive advantage compared to our peers, together with our accelerated innovation activities, leave us well positioned to remain a key supplier partner to automotive manufacturers. We believe this strong positioning will enable us to drive continued growth."
A more detailed discussion of our consolidated financial results for the
fourth quarter and year ended
INCREASED QUARTERLY CASH DIVIDEND
Our Board of Directors also declared a quarterly dividend with respect
to our outstanding Common Shares for the quarter ended
UPDATED 2016 OUTLOOK
Light Vehicle Production (Units) | |||
North America | 18.0 million | ||
Europe | 21.0 million | ||
Production Sales | |||
North America | $19.2 billion - $19.8 billion | ||
Europe | $8.6 billion - $9.0 billion | ||
Asia | $2.1 billion - $2.3 billion | ||
Rest of World | $0.4 billion - $0.5 billion | ||
Total Production Sales | $30.3 billion - $31.6 billion | ||
Complete Vehicle Assembly Sales | $1.7 billion - $2.0 billion | ||
Total Sales | $34.6 billion - $36.3 billion | ||
Adjusted EBIT(1) | High 7% range | ||
Interest Expense, net | Approximately $80 million | ||
Tax Rate(2) | 25% - 26% | ||
Capital Spending | $1.8 billion - $2.0 billion | ||
(1) |
We believe Adjusted EBIT is the most appropriate measure of operational
profitability or loss for our reporting segments. Adjusted EBIT represents income from operations before income taxes; interest expense, net; and other expense (income), net. |
||
(2) | Excluding other expense (income), net |
In this outlook, in addition to 2016 light vehicle production, we have assumed no material unannounced acquisitions or divestitures. 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.
ABOUT MAGNA
We are a leading global automotive supplier with 305 manufacturing
operations and 93 product development, engineering and sales centres in
29 countries. We have over 139,000 employees focused on delivering
superior value to our customers through innovative products and
processes, and World Class Manufacturing. Our product capabilities
include producing body, chassis, exterior, seating, powertrain,
electronic, vision, closure and roof systems and modules, as well as
complete vehicle engineering and contract manufacturing. Our common
shares trade on the
We will hold a conference call for interested analysts and shareholders to discuss our fourth quarter and year end 2015 results on Friday, February 26, 2016 at 8:00 a.m. EST. The conference call will be chaired by Donald J. Walker, Chief Executive Officer. The number to use for this call is 1-800-682-8921. The number for overseas callers is 1-303-223-4361. Please call in at least 10 minutes prior to the call. We will also webcast the conference call at www.magna.com. The slide presentation accompanying the conference call will be available on our website Monday morning prior to the call. |
FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute "forward-looking
statements" or "forward-looking information" within the meaning of
applicable securities legislation, including, but not limited to,
statements relating to: Magna's forecasts of light vehicle production
in
For further information about Magna, please see our website at www.magna.com. Copies of financial data and other publicly filed documents are
available through the internet on the
Management's Discussion and Analysis of Results of Operations and
Financial Position
Unless otherwise noted, all amounts in this Management's Discussion and
Analysis of Results of Operations and Financial Position ("MD&A") are
in U.S. dollars and all tabular amounts are in millions of U.S.
dollars, except per share figures, which are in U.S. dollars. When we
use the terms "we", "us", "our" or "Magna", we are referring to
In 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 Management's Discussion and Analysis reflects the results of continuing operations, unless otherwise noted.
This MD&A should be read in conjunction with the unaudited interim
consolidated financial statements for the three months and year ended
This MD&A has been prepared as at
OVERVIEW
We are a leading global automotive supplier with 292 manufacturing
operations and 83 product development, engineering and sales centres in
29 countries. As of
HIGHLIGHTS
Operations
2015 marked the sixth consecutive year of increased global light vehicle production. In our two most significant markets, North American light vehicle production increased 3% to 17.5 million units and European light vehicle production increased 4% to 21.0 million units, each in 2015 compared to 2014.
We posted consolidated sales of
Overall, our Adjusted EBIT(1) decreased 6% to
During 2015, net income attributable to
__________________________________________________________ | |
1 | We believe Adjusted EBIT is the most appropriate measure of operational profitability or loss for our reporting segments. Adjusted EBIT represents income from continuing operations before income taxes; interest expense, net; and other (income) expense, net. |
Strategic Repositioning of Product Portfolio
We undertook a number of actions in 2015 to reposition our product portfolio including the expansion of our powertrain product segment, which is expected to grow more rapidly, while exiting other product areas which are not critical to our future growth plans. Some of these actions include:
-
Agreeing to acquire the
Getrag Group of Companies ("Getrag"), one of the world's largest suppliers of transmissions; -
Acquiring Stadco Automotive Ltd. ("Stadco") a supplier of steel and
aluminum stampings as well as vehicle assemblies based in the
United Kingdom ; -
Forming a partnership in
China with Chongqing Xingqiaorui (the "Xingqiaorui Partnership"), a Tier one supplier of automotive body-in-white components to Changan Ford; -
Buying the head-up display and electronic components business units of
Philips & Lite-On Digital Solutions ("PLDS") in
Germany , as well as the PLDS ultrasonic sensor business inTaiwan ; - Contributing our aftermarket Jeep roof tops business into a joint venture;
- Selling substantially all of our interiors operations (excluding our seating operations); and
- Selling our battery pack business.
Capital Structure
In early 2014, we announced our intention to move towards a capital structure that we believe is appropriate for our business, and also to reduce cash levels, while retaining enough cash to manage our day-to-day needs throughout the year. After giving effect to the closing of the Getrag transaction, we have achieved the target capital structure through investments for future growth in the form of capital spending and acquisitions, together with return of capital to shareholders through dividends and share repurchases. Some specific actions that realigned our capital structure include:
-
Investing
$1.29 billion in our business during 2015, including fixed assets, acquisitions net of divestitures, investments and other assets. In addition, we invested €1.75 billion in cash plus assumed debt inJanuary 2016 , to acquire Getrag; -
Returning a total of
$354 million to shareholders in the form of dividends. OnFebruary 25, 2016 , our Board of Directors declared a dividend of U.S$0.25 per share; -
Returning an additional
$515 million to shareholders through the repurchase of 10.6 million shares in 2015; and - Issuance of senior, unsecured debt denominated in U.S. dollars, Canadian dollars and euro, respectively.
INDUSTRY TRENDS AND RISKS
A number of general trends which have been impacting the automotive industry and our business in recent years are expected to continue, including the following:
- the consolidation of vehicle platforms and proliferation of high-volume platforms supporting multiple vehicles and produced in multiple locations;
-
the long-term growth of the automotive industry in
China ,India and other non-traditional markets, including accelerated movement of component and vehicle design, development, engineering and manufacturing to certain of these markets; - the growth of the B to D vehicle segments (subcompact to mid-size cars), particularly in developing markets;
- the extent to which innovation in the automotive industry is being driven by governmental regulation of fuel economy and carbon dioxide/greenhouse gas emissions, vehicle safety and vehicle recyclability;
- the growth of cooperative alliances and arrangements among competing automotive OEMs, including shared purchasing of components; joint engine, powertrain and/or platform development; engine, powertrain and platform sharing; and joint vehicle hybridization and electrification initiatives and other forms of cooperation;
- the growing importance of electronics in the automotive value chain;
- the consolidation of automotive suppliers; and
- the exertion of pricing pressure by OEMs.
The following are some of the more significant risks that could affect our ability to achieve our desired results:
-
The global automotive industry is cyclical. A worsening of economic and
political conditions, including through rising interest rates or
inflation, rising unemployment, increasing energy prices, declining
real estate values, increased volatility in global capital markets,
international conflicts, sovereign debt concerns, an increase in
protectionist measures and/or other factors, may result in lower
consumer confidence. Consumer confidence has a significant impact on
consumer demand for vehicles, which in turn impacts, vehicle
production. A significant decline in vehicle production volumes from
current levels could have a material adverse effect on our
profitability.
-
Although our financial results are reported in U.S. dollars, a
significant portion of our sales and operating costs are realized in
Canadian dollars, euros and other currencies. Our profitability is
affected by movements of the U.S. dollar against the Canadian dollar,
the euro and other currencies in which we generate revenues and incur
expenses. Significant long-term fluctuations in relative currency
values, in particular a significant change in the relative values of
the U.S. dollar, Canadian dollar or euro, could have an adverse effect
on our profitability and financial condition and any sustained change
in such relative currency values could adversely impact our
competitiveness in certain geographic regions.
-
The automotive industry has in recent years been the subject of
increased government enforcement of antitrust and competition laws,
particularly by the
United States Department of Justice and theEuropean Commission . Currently, investigations are being conducted in several product areas, and these regulators or those in other jurisdictions could choose to initiate investigations in these or other product areas.
InSeptember 2014 , the Conselho Administrativo de Defesa Economica,Brazil 's Federal competition authority, attended at one of the Company's operating divisions inBrazil to obtain information in connection with an ongoing antitrust investigation relating to suppliers of automotive door latches and related products.
Proceedings of this nature can often continue for several years. Where wrongful conduct is found, the relevant antitrust authority can, depending on the jurisdiction, initiate administrative or criminal legal proceedings and impose administrative or criminal fines or penalties taking into account several mitigating and aggravating factors.
At this time, management is unable to predict the duration or outcome of the Brazilian investigation, including whether any operating divisions of the Company will be found liable for any violation of law or the extent or magnitude of any liability, if found to be liable.
The Company's policy is to comply with all applicable laws, including antitrust and competition laws. The Company has initiated a global review focused on antitrust risk led by a team of external counsel. If any antitrust violation is found as a result of the above-referenced investigation or otherwise, Magna could be subject to fines, penalties and civil, administrative or criminal legal proceedings that could have a material adverse effect on Magna's profitability in the year in which any such fine or penalty is imposed or the outcome of any such proceeding is determined. Additionally, Magna could be subject to other consequences, including reputational damage, which could have a material adverse effect on the Company.
-
We may sell some product lines and/or downsize, close or sell some of
our operating divisions. By taking such actions, we may incur
restructuring, downsizing and/or other significant non-recurring costs.
These costs may be higher in some countries than others and could have
a material adverse effect on our profitability.
-
Although we are working to turn around underperforming operating
divisions, there is no guarantee that we will be successful in doing so
in the short to medium term or that the expected improvements will be
fully realized or realized at all. The continued underperformance of
one or more operating divisions could have a material adverse effect on
our profitability and operations.
- We face ongoing pricing pressure from OEMs, including through: long-term supply agreements with mutually agreed price reductions over the life of the agreement; incremental annual price concession demands; and pressure to absorb costs related to product design, engineering and tooling and other items previously paid for directly by OEMs; pressure to assume or offset commodities cost increases; and refusal to fully offset inflationary price increases. OEMs possess significant leverage over their suppliers due to their purchasing power and the highly competitive nature of the automotive supply industry. As a result of the broad portfolio of parts we supply to our six largest OEM customers, such customers may be able to exert greater leverage over us as compared to our competitors. We attempt to offset price concessions and costs in a number of ways, including through negotiations with our customers, improved operating efficiencies and cost reduction efforts. Our inability to fully offset price concessions or costs previously paid for by OEMs could have a material adverse effect on our profitability.
-
The launch of new business is a complex process, the success of which
depends on a wide range of factors, including the production readiness
of our and our suppliers' manufacturing facilities, as well as factors
related to manufacturing processes, tooling, equipment, employees,
initial product quality and other factors. Our failure to successfully
launch material new or takeover business could have an adverse effect
on our profitability.
-
We intend to continue to pursue acquisitions in those product areas
which we have identified as key to our business strategy. However, we
may not be able to identify suitable acquisition targets or
successfully acquire any suitable targets which we identify.
Additionally, we may not be able to successfully integrate or achieve
anticipated synergies from those acquisitions which we do complete,
and/or such acquisitions may be dilutive in the short to medium term,
which could have a material adverse effect on our profitability.
-
The successful completion of one or more significant acquisitions could
increase our risk profile, including through the assumption of
incremental regulatory/compliance, pricing, supply chain, commodities,
labour relations, litigation, environmental, pensions, warranty,
recall, IT, tax or other risks. Although we seek to conduct appropriate
levels of due diligence of our acquisition targets, these efforts may
not always prove to be sufficient in identifying all risks and
liabilities related to the acquisition, including as a result of
limited access to information, time constraints for conducting due
diligence, inability to access target company facilities and/or
personnel or other limitations in the due diligence process.
Additionally, we may identify risks and liabilities through our
acquisition due diligence efforts that we are not able to sufficiently
mitigate through appropriate contractual protections. The realization
of any such risks could have a material adverse effect on our
profitability.
-
Although we supply parts to all of the leading OEMs, a significant
majority of our sales are to six customers:
General Motors , Fiat Chrysler, Ford, Daimler,Volkswagen andBMW . While we have diversified our customer base somewhat in recent years and continue to attempt to further diversify, there is no assurance we will be successful. Shifts in market share away from our top customers could have a material adverse effect on our profitability.
-
While we supply parts for a wide variety of vehicles produced globally,
we do not supply parts for all vehicles produced, nor is the number or
value of parts evenly distributed among the vehicles for which we do
supply parts. Shifts in market shares among vehicles or vehicle
segments, particularly shifts away from vehicles on which we have
significant content and shifts away from vehicle segments in which our
sales may be more heavily concentrated, could have a material adverse
effect on our profitability.
-
In light of the amount of business we currently have with our largest
customers in
North America andEurope , our opportunities for incremental growth with these customers may be limited. The amount of business we have with Japanese, Korean and Chinese-based OEMs generally lags that of our largest customers, due in part to the existing relationships between such OEMs and their preferred suppliers. There is no certainty that we can achieve growth with Asian-based OEMs, nor that any such growth will offset slower growth we may experience with our largest customers inNorth America andEurope . As a result, our inability to grow our business with Asian-based OEMs could have a material adverse effect on our profitability.
-
While we continue to expand our manufacturing footprint with a view to
taking advantage of opportunities in markets such as
China ,India ,Eastern Europe ,Thailand ,Brazil and other non-traditional markets for us, we cannot guarantee that we will be able to fully realize such opportunities. Additionally, the establishment of manufacturing operations in new markets carries its own risks, including those relating to: political, civil and economic instability and uncertainty; corruption risks; high inflation and our ability to recover inflation-related cost increases; trade, customs and tax risks; expropriation risks; currency exchange rates; currency controls; limitations on the repatriation of funds; insufficient infrastructure; competition to attract and retain qualified employees; and other risks associated with conducting business internationally. Expansion of our business in non-traditional markets is an important element of our strategy and, as a result, our exposure to the risks described above may be greater in the future. The likelihood of such occurrences and their potential effect on us vary from country to country and are unpredictable, however, the occurrence of any such risks could have an adverse effect on our operations, financial condition and profitability.
- A disruption in the supply of components to us from our suppliers could cause the temporary shut-down of our or our customers' production lines. Any prolonged supply disruption, including due to the inability to re-source or in-source production, could have a material adverse effect on our profitability.
-
Some of our manufacturing facilities are unionized, as are many
manufacturing facilities of our customers and suppliers. Unionized
facilities are subject to the risk of labour disruptions from time to
time, including as a result of restructuring actions taken by us, our
customers and other suppliers. We cannot predict whether or when any
labour disruption may arise, or how long such a disruption could last.
A significant labour disruption could lead to a lengthy shutdown of our
or our customers' and/or our suppliers' production lines, which could
have a material adverse effect on our operations and profitability.
-
Our business is generally not seasonal. However, our sales and profits
are closely related to our automotive customers' vehicle production
schedules. Our largest North American customers typically halt
production for approximately two weeks in July and one week in
December. In addition, many of our customers in
Europe typically shut down vehicle production during portions of August and one week in December. These scheduled shutdowns of our customers' production facilities could cause our sales and profitability to fluctuate when comparing fiscal quarters in any given year.
-
The automotive supply industry is highly competitive. As a result of our
diversified automotive business, some competitors have greater market
share than we do in some product areas or geographic regions, or
increasing market share in product areas or geographic regions which
are experiencing higher growth rates. As the trends towards
globalization and consolidation of automotive suppliers continue, we
expect our competitors will be larger and have greater access to
financial and other resources than is currently the case. We may also
face new, global competitors in some product areas which emerge from
non-traditional markets, such as
China , and act as industry consolidators. Failure to successfully compete with existing or new competitors could have an adverse effect on our operations and profitability.
-
We depend on the outsourcing of components, modules and assemblies, as
well as complete vehicles, by OEMs. The extent of OEM outsourcing is
influenced by a number of factors, including: relative cost, quality
and timeliness of production by suppliers as compared to OEMs; capacity
utilization; OEMs' perceptions regarding the strategic importance of
certain components/modules to them; labour relations among OEMs, their
employees and unions; and other considerations. A reduction in
outsourcing by OEMs, or the loss of any material production or assembly
programs combined with the failure to secure alternative programs with
sufficient volumes and margins, could have a material adverse effect on
our profitability.
-
Contracts from our customers consist of blanket purchase orders which
generally provide for the supply of components for a customer's annual
requirements for a particular vehicle, instead of a specific quantity
of products. These blanket purchase orders can be terminated by a
customer at any time and, if terminated, could result in our incurring
various pre-production, engineering and other costs which we may not
recover from our customer and which could have an adverse effect on our
profitability.
-
We continue to invest in technology and innovation which we believe will
be critical to our long-term growth. Our ability to anticipate changes
in technology and to successfully develop and introduce new and
enhanced products and/or manufacturing processes on a timely basis will
be a significant factor in our ability to remain competitive. If we are
unsuccessful or are less successful than our competitors in
consistently developing innovative products and/or processes, we may be
placed at a competitive disadvantage, which could have a material
adverse effect on our profitability and financial condition.
- Prices for certain key raw materials and commodities used in our parts, including steel and resin, continue to be volatile. To the extent we are unable to offset commodity price increases by passing such increases to our customers, by engineering products with reduced commodity content, through hedging strategies, or otherwise, such additional commodity costs could have an adverse effect on our profitability. Some of our manufacturing facilities generate a significant amount of scrap steel and recover some of the value through scrap steel sales. Scrap steel prices declined significantly in 2015 and may decline further, which could have an adverse effect on our profitability.
-
Our customers continue to demand that we bear the cost of the repair and
replacement of defective products which are either covered under their
warranty or are the subject of a recall by them. Warranty provisions
are established based on our best estimate of the amounts necessary to
settle existing or probable claims on product defect issues. Recall
costs are costs incurred when government regulators and/or our
customers decide to recall a product due to a known or suspected
performance issue and we are required to participate either voluntarily
or involuntarily. Currently, under most customer agreements, we only
account for existing or probable warranty claims. Under certain
complete vehicle engineering and assembly contracts, we record an
estimate of future warranty-related costs based on the terms of the
specific customer agreements and the specific customer's warranty
experience. While we possess considerable historical warranty and
recall data and experience with respect to the products we currently
produce, we have little or no warranty and recall data which allows us
to establish accurate estimates of, or provisions for, future warranty
or recall costs relating to new products, assembly programs or
technologies being brought into production or acquired by us. The
obligation to repair or replace such products could have a material
adverse effect on our profitability and financial condition.
-
Our manufacturing facilities are subject to risks associated with
natural disasters or other catastrophic event, including fires, floods,
hurricanes and earthquakes. The occurrence of any of these disasters or
catastrophic event could cause the total or partial destruction of our
or our sub-supplier's manufacturing facility, thus preventing us from
supplying products to our customers and disrupting production at their
facilities for an indeterminate period of time. The inability to
promptly resume the supply of products following a natural disaster or
catastrophic event at a manufacturing facility could have a material
adverse effect on our operations and profitability.
-
The reliability and security of our information technology (IT) systems
is important to our business and operations. Although we have
established and continue to enhance security controls intended to
protect our IT systems and infrastructure, there is no guarantee that
such security measures will be effective in preventing unauthorized
physical access or cyber-attacks. A significant breach of our IT
systems could: cause disruptions in our manufacturing operations; lead
to the loss, destruction or inappropriate use of sensitive data; or
result in theft of our or our customers' intellectual property or
confidential information. If any of the foregoing events occurs, we may
be subject to a number of consequences, including reputational damage,
which could have a material adverse effect on our Company.
-
Some of our current and former employees in
Canada andthe United States participate in defined benefit pension plans. Although these plans have been closed to new participants, existing participants inCanada continue to accrue benefits. Our defined benefit pension plans are not fully funded and our pension funding obligations could increase significantly due to a reduction in the funding status caused by a variety of factors, including: weak performance of capital markets; declining interest rates; failure to achieve sufficient investment returns; investment risks inherent in the investment portfolios of the plans; and other factors. A significant increase in our pension funding obligations could have a material adverse effect on our profitability and financial condition.
-
From time to time, we may become involved in regulatory proceedings, or
become liable for legal, contractual and other claims by various
parties, including customers, suppliers, former employees, class action
plaintiffs and others. Depending on the nature or duration of any
potential proceedings or claims, we may incur substantial costs and
expenses and may be required to devote significant management time and
resources to the matters. On an ongoing basis, we attempt to assess the
likelihood of any adverse judgments or outcomes to these proceedings or
claims, although it is difficult to predict final outcomes with any
degree of certainty. Except as disclosed from time to time in our
consolidated financial statements and/or our Management's Discussion &
Analysis, we do not believe that any of the proceedings or claims to
which we are party will have a material adverse effect on our
profitability; however, we cannot provide any assurance to this effect.
-
We have incurred losses in some countries which we may not be able to
fully or partially offset against income we have earned in those
countries. In some cases, we may not be able to utilize these losses at
all if we cannot generate profits in those countries and/or if we have
ceased conducting business in those countries altogether. Our inability
to utilize tax losses could materially adversely affect our
profitability. At any given time, we may face other tax exposures
arising out of changes in tax or transfer pricing laws, tax
reassessments or otherwise. To the extent we cannot implement measures
to offset these exposures, they may have a material adverse effect on
our profitability.
- We recorded significant impairment charges related to goodwill and long-lived assets in recent years and may continue to do so in the future. The early termination, loss, renegotiation of the terms of, or delay in the implementation of, any significant production contract could be indicators of impairment. In addition, to the extent that forward-looking assumptions regarding: the impact of turnaround plans on underperforming operations; new business opportunities; program price and cost assumptions on current and future business; the timing and success of new program launches; and forecast production volumes; are not met, any resulting impairment loss could have a material adverse effect on our profitability.
-
We believe we will have sufficient financial resources available to
successfully execute our business plan, even in the event of another
global recession similar to that of 2008-2009. However, as a result of
the reduction of our excess cash in connection with our capital
structure strategy, we may have less financial flexibility than we have
had in the last few years. The occurrence of an economic shock not
contemplated in our business plan, a rapid deterioration of economic
conditions or a more prolonged recession than that experienced in
2008-2009 could result in the depletion of our cash resources, which
could have a material adverse effect on our operations and financial
condition.
-
In recent years, we have invested significant amounts of money in our
business through capital expenditures to support new facilities,
expansion of existing facilities, purchases of production equipment and
acquisitions. Returns achieved on such investments in the past are not
necessarily indicative of the returns we may achieve on future
investments and our inability to achieve returns on future investments
which equal or exceed returns on past investments could have a material
adverse effect on our level of profitability.
- Trading prices of our Common Shares cannot be predicted and may fluctuate significantly due to a variety of factors, many of which are outside our control, including: general economic and stock market conditions; variations in our operating results and financial condition; differences between our actual operating and financial results and those expected by investors and stock analysts; changes in recommendations made by stock analysts, whether due to factors relating to us, our customers, the automotive industry or otherwise; significant news or events relating to our primary customers, including the release of vehicle production and sales data; investor and stock analyst perceptions about the prospects for our or our primary customers' respective businesses or the automotive industry; and other factors.
RESULTS OF OPERATIONS
Average Foreign Exchange
For the three months | For the year | |||||||||||
ended December 31, | ended December 31, | |||||||||||
2015 | 2014 | Change | 2015 | 2014 | Change | |||||||
1 Canadian dollar equals U.S. dollars | 0.749 | 0.881 | - 15% | 0.784 | 0.906 | - 13% | ||||||
1 euro equals U.S. dollars | 1.094 | 1.250 | - 12% | 1.111 | 1.330 | - 16% | ||||||
1 British pound equals U.S. dollars | 1.516 | 1.583 | - 4% | 1.529 | 1.648 | - 7% | ||||||
1 Chinese renminbi equals U.S. dollars | 0.156 | 0.163 | - 4% | 0.159 | 0.162 | - 2% | ||||||
1 Brazilian real equals U.S. dollars | 0.260 | 0.393 | - 34% | 0.305 | 0.426 | - 28% |
The preceding table reflects the average foreign exchange rates between
the most common currencies in which we conduct business and our U.S.
dollar reporting currency. The changes in these foreign exchange rates
for the three months and year ended
The results of operations whose functional currency is not the U.S. dollar are translated into U.S. dollars using the average exchange rates in the table above for the relevant period. Throughout this MD&A, reference is made to the impact of translation of foreign operations on reported U.S. dollar amounts where relevant.
Our results can also be affected by the impact of movements in exchange rates on foreign currency transactions (such as raw material purchases or sales denominated in foreign currencies). However, as a result of hedging programs employed by us, foreign currency transactions in the current period have not been fully impacted by movements in exchange rates. We record foreign currency transactions at the hedged rate where applicable.
Finally, foreign exchange gains and losses on revaluation and/or settlement of monetary items denominated in a currency other than an operation's functional currency impact reported results. These gains and losses are recorded in selling, general and administrative expense.
RESULTS OF OPERATIONS - FOR THE YEAR ENDED
Sales
For the year | |||||||||||
ended December 31, | |||||||||||
2015 | 2014 | Change | |||||||||
Vehicle Production Volumes (millions of units) | |||||||||||
North America | 17.473 | 17.003 | + 3% | ||||||||
Europe | 20.992 | 20.108 | + 4% | ||||||||
Sales | |||||||||||
External Production | |||||||||||
North America | $ | 17,759 | $ | 17,398 | + 2% | ||||||
Europe | 7,252 | 8,843 | - 18% | ||||||||
Asia | 1,612 | 1,579 | + 2% | ||||||||
Rest of World | 454 | 668 | - 32% | ||||||||
Complete Vehicle Assembly | 2,357 | 3,160 | - 25% | ||||||||
Tooling, Engineering and Other | 2,700 | 2,755 | - 2% | ||||||||
Total Sales | $ | 32,134 | $ | 34,403 | - 7% |
External Production Sales -
External production sales in
- Ford Transit;
- Ford Mustang;
- Ford Edge;
-
Chevrolet Colorado and
GMC Canyon ; - Mercedes-Benz C-Class; and
- GM full-size SUVs.
These factors were partially offset by:
-
an
$863 million decrease in reported U.S. dollar sales primarily as a result of the weakening of the Canadian dollar against the U.S. dollar; - lower production sales on existing programs;
-
net divestitures during or subsequent to 2014, which negatively impacted
sales by
$87 million ; and - net customer price concessions subsequent to 2014.
External Production Sales -
External production sales in
-
a
$1.46 billion decrease in reported U.S. dollar sales as a result of the weakening of foreign currencies against the U.S. dollar, including the euro, Russian ruble, Czech koruna and Polish zloty; - lower production sales on existing programs;
- programs that ended production during or subsequent to 2014; and
- net customer price concessions subsequent to 2014.
These factors were partially offset by the launch of new programs during or subsequent to 2014, including the:
- Volkswagen Caddy;
- Volkswagen Passat;
- Ford Transit;
-
BMW 2-Series; and - BMW X4.
External Production Sales -
External production sales in
-
the launch of new programs during or subsequent to 2014, primarily in
China andIndia ; and -
acquisitions subsequent to 2014, including the
Xingqiaorui Partnership , which positively impacted sales by$18 million .
These factors were partially offset by:
-
a
$47 million decrease in reported U.S. dollar as a result of the weakening of foreign currencies against the U.S. dollar, including the Chinese renminbi; - lower production sales on existing programs; and
- net customer price concessions subsequent to 2014.
External Production Sales - Rest of World
External production sales in Rest of World decreased 32% or
-
a
$149 million decrease in reported U.S. dollar sales as a result of the weakening of foreign currencies against the U.S. dollar, including the Brazilian real; and - lower production sales on existing programs.
These factors were partially offset by:
-
the launch of new programs during or subsequent to 2014, primarily in
Brazil ; and - net customer price increases subsequent to 2014.
Complete Vehicle Assembly Sales
For the year | |||||||||
ended December 31, | |||||||||
2015 | 2014 | Change | |||||||
Complete Vehicle Assembly Sales | $ | 2,357 | $ | 3,160 | - 25% | ||||
Complete Vehicle Assembly Volumes (Units) | 103,904 | 135,126 | - 23% |
Complete vehicle assembly sales decreased 25% or
The decrease in complete vehicle assembly sales is primarily as a result of:
-
a
$494 million decrease in reported U.S. dollar sales as a result of the weakening of the euro against the U.S. dollar; - a decrease in assembly volumes for the MINI Countryman and Paceman, as these programs near the end of production; and
-
the end of production of the Peugeot RCZ at our
Magna Steyr facility during the third quarter of 2015.
These factors were partially offset by an increase in assembly volumes for the Mercedes-Benz G-Class.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales decreased 2% or
In 2015, the major programs for which we recorded tooling, engineering and other sales were the:
- Chevrolet Cruze;
- GMC Acadia, Buick Enclave and Chevrolet Traverse;
- Ford F-Series and F-Series Super Duty;
- Audi A4;
- MINI Countryman;
- Chevrolet Equinox and GMC Terrain;
- Ford Edge;
- Chrysler Pacifica and Dodge Caravan;
-
BMW 2-Series; and - Mercedes-Benz M-Class.
In 2014, the major programs for which we recorded tooling, engineering and other sales were the:
- Ford Transit;
- MINI Countryman;
- Ford Mustang;
- QOROS 3;
- Ford F-Series and F-Series Super Duty;
- Mercedes-Benz M-Class;
- BMW X4;
- Mercedes-Benz C-Class; and
- Volkswagen Golf;
The weakening of certain foreign currencies against the U.S. dollar,
including the euro, Canadian dollar and Czech koruna had an unfavourable impact of
Cost of Goods Sold and Gross Margin
For the year | |||||||
ended December 31, | |||||||
2015 | 2014 | ||||||
Sales | $ | 32,134 | $ | 34,403 | |||
Cost of goods sold | |||||||
Material | 20,270 | 21,864 | |||||
Direct labour | 2,115 | 2,130 | |||||
Overhead | 5,174 | 5,474 | |||||
27,559 | 29,468 | ||||||
Gross margin | $ | 4,575 | $ | 4,935 | |||
Gross margin as a percentage of sales | 14.2% | 14.3% |
Cost of goods sold decreased
- a decrease in reported U.S. dollar cost of goods sold as a result of the weakening of foreign currencies against the U.S. dollar, including the euro and Canadian dollar;
- decreased commodity costs;
-
lower warranty costs of
$20 million ; -
costs incurred, net of insurance recoveries, related to a fire at a body
and chassis facility in
North America , during 2014; and - productivity and efficiency improvements at certain facilities.
These factors were partially offset by:
-
higher material, overhead and labour costs associated with the increase
in local currency sales, in particular in
North America ; -
operational inefficiencies at certain facilities, in particular at
certain body and chassis operations in
North America ; - lower recoveries associated with scrap steel; and
- higher launch costs.
Gross margin decreased
- lower recoveries associated with scrap steel;
-
operational inefficiencies at certain facilities, in particular at
certain body and chassis operations in
North America ; - higher launch costs; and
- an increase in the proportion of tooling, engineering and other sales relative to total sales, that have low or no margins.
These factors were partially offset by:
- a decrease in the proportion of complete vehicle assembly sales relative to total sales, which have a higher material content than our consolidated average;
-
a decrease in the proportion of sales earned in
Europe relative to total sales, which have a lower margin than our consolidated average; - decreased commodity costs;
- lower warranty costs;
-
costs incurred, net of insurance recoveries, related to a fire at a body
and chassis facility in
North America , during 2014; and - productivity and efficiency improvements at certain facilities.
Depreciation and Amortization
Depreciation and amortization costs decreased
Selling, General and Administrative ("SG&A")
SG&A expense as a percentage of sales was 4.5% for 2015 compared to 4.7%
for 2014. SG&A expense decreased
- the weakening of the euro, Canadian dollar, Russian ruble and Brazilian real, each against the U.S. dollar; and
-
the expiration, at the end of 2014, of our consulting agreements with
Frank Stronach .
These factors were partially offset by:
- higher costs to support our global compliance programs;
- costs related to the investment in our information technology infrastructure;
- higher professional and consulting costs; and
-
a
$4 million net decrease in valuation gains in respect of asset-backed commercial paper ("ABCP").
Equity Income
Equity income increased
Other (Income) Expense, net
During the three months and years ended
2015 | 2014 | ||||||||||||||||||
Net Income | Diluted | Net Income | Diluted | ||||||||||||||||
Operating | Attributable | Earnings | Operating | Attributable | Earnings | ||||||||||||||
Income | to Magna | per Share | Income | to Magna | per Share | ||||||||||||||
Fourth Quarter | |||||||||||||||||||
Restructuring (1) | $ | 15 | $ | 15 | $ | 0.03 | $ | 6 | $ | 5 | $ | 0.01 | |||||||
Third Quarter | |||||||||||||||||||
Gain on disposal (2) | (136) | (80) | (0.19) | — | — | — | |||||||||||||
Restructuring (1) | 12 | 12 | 0.03 | 7 | 6 | 0.01 | |||||||||||||
(124) | (68) | (0.16) | 7 | 6 | 0.01 | ||||||||||||||
Second Quarter | |||||||||||||||||||
Gain on disposal (2) | (57) | (42) | (0.10) | — | — | — | |||||||||||||
Restructuring (1) | — | — | — | 11 | 10 | 0.02 | |||||||||||||
(57) | (42) | (0.10) | 11 | 10 | 0.02 | ||||||||||||||
First Quarter | |||||||||||||||||||
Restructuring (1) | — | — | — | 22 | 20 | 0.05 | |||||||||||||
Full year other (income) expense, net | $ | (166) | $ | (95) | $ | (0.23) | $ | 46 | $ | 41 | $ | 0.09 |
(1) Restructuring
[a] For the year ended
During 2015, we recorded net restructuring charges of
[b] For the year ended
During 2014, we recorded net restructuring charges of
(2) Gains on disposal
During the third quarter of 2015, we entered into a joint venture
arrangement for the manufacture and sale of roof and other accessories
for the Jeep market to original equipment manufacturers as well as
aftermarket customers. We contributed two manufacturing facilities and
received a 49% interest in the newly formed joint venture and cash
proceeds of
During the second quarter of 2015, we sold our battery pack business to
Segment Analysis
Given the differences between the regions in which we operate, our
operations are segmented on a geographic basis. Consistent with the
above, our internal financial reporting separately segments key
internal operating performance measures between
Our chief operating decision maker uses Adjusted EBIT as the measure of segment profit or loss, since we believe Adjusted EBIT is the most appropriate measure of operational profitability or loss for our reporting segments. Adjusted EBIT represents income from continuing operations before income taxes; interest expense, net; and other expense (income), net.
For the year ended December 31, | |||||||||||||||||||
Total Sales | Adjusted EBIT | ||||||||||||||||||
2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||
North America | $ | 19,015 | $ | 18,761 | $ | 254 | $ | 1,934 | $ | 2,003 | $ | (69) | |||||||
Europe | 11,123 | 13,502 | (2,379) | 451 | 502 | (51) | |||||||||||||
Asia | 1,981 | 1,919 | 62 | 149 | 150 | (1) | |||||||||||||
Rest of World | 461 | 695 | (234) | (25) | (35) | 10 | |||||||||||||
Corporate and Other | (446) | (474) | 28 | 20 | 61 | (41) | |||||||||||||
Total reportable | |||||||||||||||||||
segments | $ | 32,134 | $ | 34,403 | $ | (2,269) | $ | 2,529 | $ | 2,681 | $ | (152) |
Excluded from Adjusted EBIT for 2015 and 2014 were the following other expense (income), net items, which have been discussed in the "Other Expense" section.
For the year | |||||||
ended December 31, | |||||||
2015 | 2014 | ||||||
North America | |||||||
Gain on sale | $ | (136) | $ | — | |||
Europe | |||||||
Gain on sale | (57) | — | |||||
Restructuring | 27 | 46 | |||||
(30) | 46 | ||||||
$ | (166) | $ | 46 |
Adjusted EBIT in
- lower recoveries associated with scrap steel;
- a decrease in reported U.S. dollar EBIT due to the weakening of the Canadian dollar against the U.S. dollar;
- higher launch costs;
- operational inefficiencies at certain facilities, in particular at certain body and chassis operations;
- a higher amount of employee profit sharing; and
- net customer price concessions subsequent to of 2014.
These factors were partially offset by:
- margins earned on higher production sales;
- lower affiliation fees paid to Corporate;
- decreased commodity costs;
- costs incurred, net of insurance recoveries, related to a fire at a body and chassis facility, during the second quarter of 2014;
-
lower warranty costs of
$11 million ; - higher equity income; and
- productivity and efficiency improvements at certain facilities.
Adjusted EBIT in
- a decrease in reported U.S. dollar EBIT as a result of the weakening of foreign currencies against the U.S. dollar, including the euro, Czech koruna and Russian ruble;
- higher launch costs;
- decreased margins earned on lower production sales;
- operational inefficiencies at certain facilities;
- lower equity income; and
- net customer price concessions subsequent to 2014.
These factors were partially offset by:
- lower affiliation fees paid to Corporate;
- decreased commodity costs;
-
lower warranty costs of
$5 million ; - productivity and efficiency improvements at certain facilities; and
- a lower amount of employee profit sharing.
Adjusted EBIT in
- increased pre-operating costs incurred at new facilities;
- higher launch costs;
- a decrease in reported U.S. dollar EBIT as a result of the weakening of foreign currencies against the U.S. dollar, including the Chinese renminbi; and
- net customer price concessions subsequent to 2014.
These factors were partially offset by:
- increased margins due to higher production sales;
- a lower amount of employee profit sharing;
- lower affiliation fees paid to Corporate;
-
lower warranty costs of
$4 million ; - higher equity income; and
- decreased commodity costs.
Rest of World
Adjusted EBIT in Rest of World increased
- productivity and efficiency improvements at certain facilities;
- a decrease in reported U.S. dollar EBIT loss due to the weakening of the Brazilian real against the U.S. dollar;
- decreased commodity costs;
- lower affiliation fees paid to Corporate; and
- net customer price increases subsequent to 2014.
These factors were partially offset by:
- decreased margins earned on lower production sales;
- higher production costs, including inflationary increases, that we have not been fully successful in passing through to our customers; and
- lower equity income.
Corporate and Other
Corporate and Other Adjusted EBIT decreased
- a decrease in affiliation fees earned from our divisions;
- higher costs to support our global compliance program;
- costs related to the investment in our information technology infrastructure;
- higher professional and consulting costs;
-
a
$4 million net decrease in valuation gains in respect of ABCP; - increased stock-based compensation; and
- a higher amount of employee profit sharing.
These factors were partially offset by the expiration, at the end of
2014, of our consulting agreements with
Interest Expense, net
During 2015, we recorded net interest expense of
- the following issuances of senior, unsecure debt (the "Senior Debt") during 2015:
-
$650 million of 4.150% fixed-rate senior notes maturing onOctober 1, 2025 ; -
€550 million of 1.900% fixed-rate senior notes maturing on
November 24, 2023 ; and -
Cdn$425 million of 3.100% fixed-rate senior notes maturing onDecember 15, 2022 ; and -
$750 million of 3.625% fixed rate senior notes issued during 2014.
These factors were partially offset by lower interest expense as a
result of lower debt in
Income from Continuing Operations before Income Taxes
Income from continuing operations before income taxes increased
- the negative impact of foreign exchange translation from the weakening of foreign currencies, including the Canadian dollar and euro, each against the U.S. dollar;
-
operational inefficiencies at certain facilities, in particular at
certain body and chassis operations in
North America ; - lower recoveries associated with scrap steel;
- higher launch costs;
-
the
$14 million increase in interest expense, net, as discussed above; -
a
$4 million net decrease in valuation gains in respect of ABCP; - a higher amount of employee profit sharing;
- increased pre-operating costs incurred at new facilities; and
- net customer price concessions subsequent to 2014.
These factors were partially offset by:
- increased margins due to higher production sales;
-
the expiration, at the end of 2014, of our consulting agreements with
Frank Stronach ; - decreased commodity costs;
-
lower warranty costs of
$20 million ; -
costs incurred, net of insurance recoveries, related to a fire at a body
and chassis facility in
North America , during 2014; - lower incentive compensation; and
- productivity and efficiency improvements at certain facilities.
Income Taxes
2015 | 2014 | |||||||||||
$ | % | $ | % | |||||||||
Income taxes as reported | $ | 711 | 26.8 | $ | 683 | 26.2 | ||||||
Tax effect on Other Income and Other Expense | (71) | (1.0) | 5 | (0.3) | ||||||||
Austrian Tax Reform | — | — | (32) | (1.2) | ||||||||
$ | 640 | 25.8 | $ | 656 | 24.7 |
For 2014, the Austrian government enacted legislation abolishing the
utilization of foreign losses where the foreign subsidiary is not a
member of the
Excluding Other Income and Other Expense, after tax, and the Austrian Tax Reform, the effective income tax rate increased to 25.8% for 2015 compared to 24.7% for 2014 primarily as result of:
- higher non-creditable withholding tax;
- lower favourable audit settlements in 2015; and
- an increase in permanent items.
These factors were partially offset by a benefit recorded on the write-off of historical tax basis in one of our South American subsidiaries.
Income (loss) from Discontinued Operations, net of tax
Income (loss) from discontinued operations, net of tax reflects the results of our interiors operations which are classified as discontinued operations. During the third quarter of 2015, we sold these operations.
2015 | 2014 | ||||||
Sales | $ | 1,737 | $ | 2,394 | |||
Costs and expenses | |||||||
Cost of goods sold | 1,635 | 2,310 | |||||
Depreciation and amortization | 13 | 45 | |||||
Selling, general and administrative | 58 | 95 | |||||
Equity income | (11) | (8) | |||||
Other expense, net | — | 18 | |||||
Income (loss) from discontinued operations before income taxes | 42 | (66) | |||||
Income taxes | 20 | (24) | |||||
22 | (42) | ||||||
Gain on divestiture of discontinued operations, net of tax | 45 | — | |||||
Income (loss) from discontinued operations, net of tax | $ | 67 | $ | (42) |
Income (loss) from discontinued operations, net of tax increased
Loss from Continuing Operations Attributable to Non-controlling Interests
Loss from continuing operations attributable to non-controlling
interests increased
Net Income Attributable to
Net income attributable to
Earnings per Share (restated)
For the year | ||||||||||
ended December 31, | ||||||||||
2015 | 2014 | Change | ||||||||
Basic earnings per Common Share | ||||||||||
Continuing operations | $ | 4.78 | $ | 4.50 | + 6% | |||||
Attributable to Magna International Inc. | $ | 4.94 | $ | 4.41 | + 12% | |||||
Diluted earnings per Common Share | ||||||||||
Continuing operations | $ | 4.72 | $ | 4.44 | + 6% | |||||
Attributable to Magna International Inc. | $ | 4.88 | $ | 4.34 | + 12% | |||||
Weighted average number of Common Shares outstanding (millions) | ||||||||||
Basic | 407.5 | 427.1 | - 5% | |||||||
Diluted | 412.7 | 433.2 | - 5% |
Diluted earnings per share from continuing operations increased
The decrease in the weighted average number of diluted shares outstanding was due to the purchase and cancellation of Common Shares, during or subsequent to 2014, pursuant to our normal course issuer bids.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operations
For the year | |||||||||
ended December 31, | |||||||||
2015 | 2014 | Change | |||||||
Net income from continuing operations | $ | 1,940 | $ | 1,922 | |||||
Items not involving current cash flows | 736 | 1,102 | |||||||
2,676 | 3,024 | $ | (348) | ||||||
Changes in operating assets and liabilities | (344) | (202) | |||||||
Cash provided from operating activities | $ | 2,332 | $ | 2,822 | $ | (490) |
Cash flow from operations before changes in operating assets and
liabilities decreased
For the year | ||||||
ended December 31, | ||||||
2015 | 2014 | |||||
Depreciation and amortization | $ | 802 | $ | 845 | ||
Amortization of other assets included in cost of goods sold | 110 | 132 | ||||
Other non-cash charges | 44 | 35 | ||||
Deferred income taxes | (7) | 113 | ||||
Equity income in excess of dividends received | (20) | (23) | ||||
Non-cash portion of Other Income | (193) | — | ||||
Items not involving current cash flows | $ | 736 | $ | 1,102 |
Cash invested in operating assets and liabilities amounted to
For the year | ||||||
ended December 31, | ||||||
2015 | 2014 | |||||
Accounts receivable | $ | (410) | $ | (760) | ||
Inventories | (241) | (275) | ||||
Prepaid expenses and other | 13 | 3 | ||||
Accounts payable | 139 | 634 | ||||
Accrued salaries and wages | 43 | 74 | ||||
Other accrued liabilities | 72 | 80 | ||||
Income taxes payable | 40 | 42 | ||||
Changes in non-cash operating assets and liabilities | $ | (344) | $ | (202) |
Higher accounts receivable relate primarily to higher tooling
receivables related to program launches. The increase in inventories
was primarily due to higher production inventory to support launch
activities and increased tooling inventory in
Capital and Investment Spending
For the year | |||||||||
ended December 31, | |||||||||
2015 | 2014 | Change | |||||||
Fixed asset additions | $ | (1,591) | $ | (1,495) | |||||
Investments and other assets | (221) | (172) | |||||||
Fixed assets, investments and other assets additions | (1,812) | (1,667) | |||||||
Purchase of subsidiaries | (222) | (23) | |||||||
Proceeds from disposition | 61 | 164 | |||||||
Proceeds on disposal of facilities | 221 | — | |||||||
Sale of Interiors | 520 | — | |||||||
Cash used in discontinued operations | (56) | (120) | |||||||
Cash used for investment activities | $ | (1,288) | $ | (1,646) | $ | 358 |
Fixed assets, investments and other assets additions
In 2015, we invested
In 2015, we invested
Purchase of subsidiaries
During 2015, we invested
-
forming a
Xingqiaorui Partnership . Under the terms of the arrangement, Chongqing Xingqiaorui ("Xingqiaorui"), tranferred a 53% controlling interest in its threeChina manufacturing facilities and cash consideration of$36 million . In exchange, we transferred a 47% non-controlling equity interest in ourChongqing manufacturing facility and cash consideration of$130 million to Xingqiaorui; and -
Stadco, based in the
United Kingdom , is a supplier of steel and aluminum stampings as well as vehicle assemblies primarily to Jaguar and Land Rover.
Proceeds from disposition
In 2015, the
Proceeds on disposal of facilities
During 2015, we received
-
sale of our battery pack business to
Samsung SDI ; and - formation of a joint venture for the manufacture and sale of roof and other accessories for the Jeep market to original equipment manufacturers as well as aftermarket customers.
Sale of Interiors
On
Financing
For the year | |||||||||
ended December 31, | |||||||||
2015 | 2014 | Change | |||||||
Issues of debt | $ | 1,608 | $ | 860 | |||||
Increase (decrease) in bank indebtedness | 25 | (2) | |||||||
Repayments of debt | (99) | (188) | |||||||
Issues of Common Shares | 35 | 49 | |||||||
Repurchase of Common Shares | (515) | (1,783) | |||||||
Contribution to subsidiaries by non-controlling interests | 41 | — | |||||||
Dividends paid | (354) | (316) | |||||||
Cash provided by (used for) financing activities | $ | 741 | $ | (1,380) | $ | 2,121 |
Issues of debt relates primarily to the issue of the Senior Debt during 2015. The Senior Debt are senior unsecured obligations and do not include any financial covenants. We may redeem the Senior Debt in whole or in part at any time, at specified redemption prices determined in accordance with the terms of each of the respective indentures governing the Senior Debt. The funds raised through these offerings were used for general corporate purposes, including capital expenditures, as well as the acquisition of Getrag.
During 2015, we purchased for cancellation 10.6 million Common Shares
for an aggregate purchase price of
Cash dividends paid per Common Share were
Financing Resources
As at | As at | |||||||||
December 31, | December 31, | |||||||||
2015 | 2014 | Change | ||||||||
Liabilities | ||||||||||
Bank indebtedness | $ | 25 | $ | 30 | ||||||
Long-term debt due within one year | 211 | 183 | ||||||||
Long-term debt | 2,346 | 812 | ||||||||
2,582 | 1,025 | |||||||||
Non-controlling interest | 151 | 14 | ||||||||
Shareholders' equity | 8,966 | 8,659 | ||||||||
Total capitalization | $ | 11,699 | $ | 9,698 | $ | 2,001 |
Total capitalization increased by
The increase in liabilities relates primarily to the Senior Debt issued during 2015.
The increase in shareholders' equity was primarily as a result of the
This factor was partially offset by:
-
the
$798 million net unrealized loss on translation of our net investment in foreign operations whose functional currency is not the U.S. dollar; -
the
$515 million repurchase and cancellation of 10.6 million Common Shares under our normal course issuer bid during 2015; -
$354 million of dividends paid during 2015; and -
the
$244 million net unrealized loss on cash flow hedges.
The increase in non-controlling interest primarily relates to the
formation of the
Cash Resources
During 2015, our cash resources increased by
On
During the first quarter of 2014, we filed a short form base shelf
prospectus with the
Maximum Number of Shares Issuable
The following table presents the maximum number of shares that would be
outstanding if all of the outstanding options at
Common Shares | 402,264,201 | ||||||||||||
Stock options (i) | 7,310,160 | ||||||||||||
409,574,361 |
(i) | Options to purchase Common Shares are exercisable by the holder in accordance with the vesting provisions and upon payment of the exercise price as may be determined from time to time pursuant to our stock option plans. |
Contractual Obligations and Off-Balance Sheet Financing
A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Consistent with our customer obligations, substantially all of our purchases are made under purchase orders with our suppliers which are requirements based and accordingly do not specify minimum quantities. Other long-term liabilities are defined as long-term liabilities that are recorded on our consolidated balance sheet. Based on this definition, the following table includes only those contracts which include fixed or minimum obligations.
At
2017- | 2019 - | |||||||||||||||
2016 | 2018 | 2020 | Thereafter | Total | ||||||||||||
Operating leases | $ | 268 | $ | 417 | $ | 299 | $ | 283 | $ | 1,267 | ||||||
Long-term debt | 211 | 30 | 5 | 2,311 | 2,557 | |||||||||||
Unconditional purchase obligations: | ||||||||||||||||
Materials and services | 2,325 | 144 | 26 | 6 | 2,501 | |||||||||||
Capital | 442 | 73 | 40 | 18 | 573 | |||||||||||
Total contractual obligations | $ | 3,246 | $ | 664 | $ | 370 | $ | 2,618 | $ | 6,898 |
Our unfunded obligations with respect to employee future benefit plans,
which have been actuarially determined, were
Termination and | ||||||||||||
Pension | Retirement | Long Service | ||||||||||
Liability | Liability | Arrangements | Total | |||||||||
Projected benefit obligation | $ | 493 | $ | 32 | $ | 295 | $ | 820 | ||||
Less plan assets | (326) | — | — | (326) | ||||||||
Unfunded amount | $ | 167 | $ | 32 | $ | 295 | $ | 494 |
Our off-balance sheet financing arrangements are limited to operating lease contracts.
We have facilities that are subject to operating leases. Operating lease
payments in 2015 for facilities were
We also have operating lease commitments for equipment. These leases are
generally of shorter duration. Operating lease payments for equipment
were
Although our consolidated contractual annual lease commitments decline year by year, we expect that existing leases will either be renewed or replaced, or alternatively, we will incur capital expenditures to acquire equivalent capacity.
Foreign Currency Activities
Our North American operations negotiate sales contracts with OEMs for payment in both U.S. and Canadian dollars. Materials and equipment are purchased in various currencies depending upon competitive factors, including relative currency values. Our North American operations use labour and materials which are paid for in both U.S. and Canadian dollars. Our Mexican operations generally use the U.S. dollar as the functional currency.
Our European operations negotiate sales contracts with OEMs for payment principally in euros and British pounds. The European operations' material, equipment and labour are paid for principally in euros and British pounds.
We employ hedging programs, primarily through the use of foreign exchange forward contracts, in an effort to manage our foreign exchange exposure, which arises when manufacturing facilities have committed to the delivery of products for which the selling price has been quoted in foreign currencies. These commitments represent our contractual obligations to deliver products over the duration of the product programs, which can last a number of years. The amount and timing of the forward contracts will be dependent upon a number of factors, including anticipated production delivery schedules and anticipated production costs, which may be paid in the foreign currency. In addition, we enter into foreign exchange contracts to manage foreign exchange exposure with respect to internal funding arrangements. Despite these measures, significant long-term fluctuations in relative currency values, in particular a significant change in the relative values of the U.S. dollar, Canadian dollar, euro or British pound, could have an adverse effect on our profitability and financial condition (as discussed throughout this MD&A).
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED
Sales
For the three months | |||||||||||
ended December 31, | |||||||||||
2015 | 2014 | Change | |||||||||
Vehicle Production Volumes (millions of units) | |||||||||||
North America | 4.546 | 4.377 | + 4% | ||||||||
Europe | 5.538 | 5.193 | + 7% | ||||||||
Sales | |||||||||||
External Production | |||||||||||
North America | $ | 4,670 | $ | 4,465 | + 5% | ||||||
Europe | 1,832 | 2,077 | - 12% | ||||||||
Asia | 473 | 431 | + 10% | ||||||||
Rest of World | 87 | 169 | - 49% | ||||||||
Complete Vehicle Assembly | 628 | 743 | - 15% | ||||||||
Tooling, Engineering and Other | 878 | 905 | - 3% | ||||||||
Total Sales | $ | 8,568 | $ | 8,790 | - 3% |
External Production Sales -
External production sales in
- the launch of new programs during or subsequent to the fourth quarter of 2014, including the:
- Ford F-Series;
- Lincoln MKX;
- Nissan Navara; and
- Mercedes-Benz GLE Coupe; and
- higher production sales on existing programs.
These factors were partially offset by:
-
a
$264 million decrease in reported U.S. dollar sales primarily as a result of the weakening of the Canadian dollar against the U.S. dollar; -
net divestitures subsequent to the fourth quarter of 2014, which
negatively impacted sales by
$21 million ; and - net customer price concessions subsequent to the fourth quarter of 2014.
External Production Sales -
External production sales in
-
a
$269 million decrease in reported U.S. dollar sales as a result of the weakening of foreign currencies against the U.S. dollar, including the euro, Russian ruble and Czech koruna; - lower production sales on existing programs;
- programs that ended production during or subsequent to the fourth quarter of 2014; and
- net customer price concessions subsequent to the fourth quarter of 2014.
These factors were partially offset by:
- launch of new programs during or subsequent to the fourth quarter of 2014, including the:
- BMW X1;
-
BMW 7-Series; - Audi A4; and
- Volkswagen Touran; and
-
acquisitions subsequent to the fourth quarter of 2014, which positively
impacted sales by
$20 million .
External Production Sales -
External production sales in
-
the launch of new programs during or subsequent to the fourth quarter of
2014, primarily in
China andIndia ; and -
acquisitions subsequent to the fourth quarter of 2014, including the
Xingqiaorui Partnership , which positively impacted sales by$16 million .
These factors were partially offset by:
-
a
$21 million decrease in reported U.S. dollar as a result of the weakening of foreign currencies against the U.S. dollar, including the Chinese renminbi; and - net customer price concessions subsequent to the fourth quarter of 2014.
External Production Sales - Rest of World
External production sales in Rest of World decreased 49% or
-
a
$37 million decrease in reported U.S. dollar sales as a result of the weakening of foreign currencies against the U.S. dollar, including the Brazilian real; and - lower production sales on existing programs.
These factors were partially offset by net customer price increases subsequent to the fourth quarter of 2014.
Complete Vehicle Assembly Sales
For the three months | |||||||||
ended December 31, | |||||||||
2015 | 2014 | Change | |||||||
Complete Vehicle Assembly Sales | $ | 628 | $ | 743 | - 15% | ||||
Complete Vehicle Assembly Volumes (Units) | 25,042 | 32,965 | - 24% |
Complete vehicle assembly sales decreased 15%, or
The decrease in complete vehicle assembly sales is primarily as a result of:
-
a
$94 million decrease in reported U.S. dollar sales as a result of the weakening of the euro against the U.S. dollar; - a decrease in assembly volumes for the MINI Countryman and Paceman, as these programs near the end of production; and
-
the end of production of the Peugeot RCZ at our
Magna Steyr facility during the third quarter of 2015.
These factors were partially offset by an increase in assembly volumes for the Mercedes-Benz G-Class.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales decreased 3% or
In the three months ended
- Chevrolet Cruze;
- Buick Enclave, GMC Acadia and Chevrolet Traverse;
- Chevrolet Malibu;
- Audi A4;
- Chrysler Pacifica and Dodge Caravan;
- Chevrolet Volt;
- Chevrolet Equinox and GMC Terrain; and
- Cadillac CT6.
In the three months ended
- Ford F-Series and F-Series Super Duty;
- Ford Transit;
- Nissan NP300 Navara;
- Mercedes-Benz C-Class;
- Ford Mondeo;
- Buick Enclave, GMC Acadia and Chevrolet Traverse;
- Skoda Octavia; and
- Volkswagen Golf.
The weakening of certain foreign currencies against the U.S. dollar,
including the euro and Canadian dollar had an unfavourable impact of
Segment Analysis
For the three months ended December 31, | |||||||||||||||||||
Total Sales | Adjusted EBIT | ||||||||||||||||||
2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||
North America | $ | 5,090 | $ | 4,871 | $ | 219 | $ | 501 | $ | 537 | $ | (36) | |||||||
Europe | 2,889 | 3,348 | (459) | 112 | 116 | (4) | |||||||||||||
Asia | 624 | 518 | 106 | 63 | 47 | 16 | |||||||||||||
Rest of World | 88 | 176 | (88) | (6) | (5) | (1) | |||||||||||||
Corporate and Other | (123) | (123) | — | (14) | 19 | (33) | |||||||||||||
Total reportable | |||||||||||||||||||
segments | $ | 8,568 | $ | 8,790 | $ | (222) | $ | 656 | $ | 714 | $ | (58) |
Excluded from Adjusted EBIT for the three months ended
Adjusted EBIT in
- lower recoveries associated with scrap steel;
- higher launch costs;
- a decrease in reported U.S. dollar EBIT due to the weakening of the Canadian dollar against the U.S. dollar;
- operational inefficiencies and other costs at certain facilities, in particular at certain body and chassis operations;
- lower equity income;
- a higher amount of employee profit sharing; and
-
net customer price concessions subsequent to the three months ended
December 31, 2014 .
These factors were partially offset by:
- decreased commodity costs;
- lower affiliation fees paid to Corporate;
-
lower warranty costs of
$5 million ; - margins earned on higher production sales; and
- productivity and efficiency improvements at certain facilities.
Adjusted EBIT in
- a decrease in reported U.S. dollar EBIT as a result of the weakening of foreign currencies against the U.S. dollar, including the euro;
-
higher warranty costs of
$5 million ; - higher launch costs;
- a higher amount of employee profit sharing;
- operational inefficiencies and other costs at certain facilities; and
-
net customer price concessions subsequent to the three months ended
December 31, 2014 .
These factors were partially offset by:
- lower affiliation fees paid to Corporate;
- decreased commodity costs; and
- productivity and efficiency improvements at certain facilities.
Adjusted EBIT in
- increased margins due to higher production sales;
-
lower warranty costs of
$3 million ; - higher equity income;
- lower launch costs; and
- lower affiliation fees paid to Corporate.
These factors were partially offset by:
- a decrease in reported U.S. dollar EBIT as a result of the weakening of foreign currencies against the U.S. dollar, including the Chinese renminbi; and
-
net customer price concessions subsequent to the three months ended
December 31, 2014 .
Rest of World
Adjusted EBIT in Rest of World decreased
- decreased margins earned on lower production sales; and
- higher production costs, including inflationary increases, that we have not been fully successful in passing through to our customers.
These factors were partially offset by:
- a decrease in reported U.S. dollar EBIT loss due to the weakening of the Brazilian real against the U.S. dollar;
- productivity and efficiency improvements at certain facilities; and
-
net customer price increases subsequent to the three months ended
December 31, 2014 .
Corporate and Other
Corporate and Other Adjusted EBIT decreased
- a decrease in affiliation fees earned from our divisions;
- higher costs to support our global compliance program; and
- costs related to the investment in our information technology infrastructure.
These factors were partially offset by the expiration, at the end of
2014, of our consulting agreements with
SUBSEQUENT EVENT
Acquisition of Getrag
In the third quarter of 2015, we signed an agreement to acquire 100% of
the common shares and voting interest of Getrag. Getrag is a global
supplier of automotive transmission systems including manual,
automated-manual, dual clutch, hybrid and other advanced systems. The
transaction was completed on
The total consideration transferred by Magna was €1.75 billion in cash, and is subject to working capital and other customary purchase price adjustments. The acquisition of Getrag will be accounted for as a business combination under the acquisition method of accounting. We will record the assets acquired and liabilities assumed at their fair values as of the acquisition date. Due to the limited amount of time since the acquisition date, the preliminary acquisition valuation for the business combination is incomplete at this time. As a result, we are unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, including the information required for valuation of intangible assets and goodwill.
COMMITMENTS AND CONTINGENCIES
From time to time, we may be contingently liable for litigation, legal and/or regulatory actions and proceedings and other claims.
Refer to note 18 of our unaudited interim consolidated financial
statements for the three months and year ended
For a discussion of risk factors relating to legal and other
claims/actions against us, refer to "Item 3. Description of the
Business - Risk Factors" in our Annual Information Form and Annual
Report on Form 40-F, each in respect of the year ended
CONTROLS AND PROCEDURES
There have been no changes in our internal controls over financial reporting that occurred during 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
FORWARD-LOOKING STATEMENTS
The previous discussion contains statements that constitute
"forward-looking information" or "forward-looking statements" within
the meaning of applicable securities legislation, including, but not
limited to, statements relating to: the expected growth of the
powertrain product segment; and continued implementation of our capital
structure strategy, including investments in our business through
capital expenditures and acquisitions, and returns of capital to our
shareholders through dividends and share repurchases. The
forward-looking statements or forward-looking information in this press
release is presented for the purpose of providing information about
management's current expectations and plans and such information may
not be appropriate for other purposes. Forward-looking statements or
forward-looking information may include financial and other
projections, as well as statements regarding our future plans,
objectives or economic performance, or the assumptions underlying any
of the foregoing, and other statements that are not recitations of
historical fact. We use words such as "may", "would", "could",
"should", "will", "likely", "expect", "anticipate", "believe",
"intend", "plan", "forecast", "outlook", "project", "estimate" and
similar expressions suggesting future outcomes or events to identify
forward-looking statements or forward-looking information. Any such
forward-looking statements or forward-looking information are based on
information currently available to us, and are based on assumptions and
analyses made by us in light of our experience and our perception of
historical trends, current conditions and expected future developments,
as well as other factors we believe are appropriate in the
circumstances. However, whether actual results and developments will
conform with our expectations and predictions is subject to a number of
risks, assumptions and uncertainties, many of which are beyond our
control, and the effects of which can be difficult to predict,
including, without limitation: the potential for a deterioration of
economic conditions or an extended period of economic uncertainty;
declines in consumer confidence and the impact on production volume
levels; continuing global or regional economic uncertainty;
underperformance of one or more of our operating divisions; our ability
to successfully launch material new or takeover business; risks of
conducting business in foreign markets, including
CONSOLIDATED STATEMENTS OF INCOME
[Unaudited]
[U.S. dollars in millions, except per share figures]
Three months ended | Year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
Note | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Sales | $ | 8,568 | $ | 8,790 | $ | 32,134 | $ | 34,403 | ||||||||
Costs and expenses | ||||||||||||||||
Cost of goods sold | 7,336 | 7,493 | 27,559 | 29,468 | ||||||||||||
Depreciation and amortization | 213 | 214 | 802 | 845 | ||||||||||||
Selling, general and administrative | 14 | 412 | 420 | 1,448 | 1,612 | |||||||||||
Interest expense, net | 17 | 12 | 44 | 30 | ||||||||||||
Equity income | (49) | (51) | (204) | (203) | ||||||||||||
Other expense (income), net | 3 | 15 | 6 | (166) | 46 | |||||||||||
Income from operations before income taxes | 624 | 696 | 2,651 | 2,605 | ||||||||||||
Income taxes | 13 | 142 | 180 | 711 | 683 | |||||||||||
Net income from continuing operations | 482 | 516 | 1,940 | 1,922 | ||||||||||||
(Loss) income from discontinued operations, net of tax | 2 | (7) | (7) | 67 | (42) | |||||||||||
Net income | 475 | 509 | 2,007 | 1,880 | ||||||||||||
Loss from continuing operations attributable to | ||||||||||||||||
non-controlling interests | 1 | — | 6 | 2 | ||||||||||||
Net income attributable to Magna International Inc. | $ | 476 | $ | 509 | $ | 2,013 | $ | 1,882 | ||||||||
Basic earnings per share (restated): | 1, 4 | |||||||||||||||
Continuing operations | $ | 1.20 | $ | 1.25 | $ | 4.78 | $ | 4.50 | ||||||||
Discontinued operations | (0.02) | (0.02) | 0.16 | (0.09) | ||||||||||||
Attributable to Magna International Inc. | $ | 1.18 | $ | 1.23 | $ | 4.94 | $ | 4.41 | ||||||||
Diluted earnings per share (restated): | 1, 4 | |||||||||||||||
Continuing operations | $ | 1.19 | $ | 1.23 | $ | 4.72 | $ | 4.44 | ||||||||
Discontinued operations | (0.02) | (0.01) | 0.16 | (0.10) | ||||||||||||
Attributable to Magna International Inc. | $ | 1.17 | $ | 1.22 | $ | 4.88 | $ | 4.34 | ||||||||
Cash dividends paid per Common Share (restated) | 1 | $ | 0.22 | $ | 0.38 | $ | 0.88 | $ | 0.76 | |||||||
Weighted average number of Common Shares outstanding | ||||||||||||||||
during the period [in millions] (restated): | 4 | |||||||||||||||
Basic | 402.6 | 412.4 | 407.5 | 427.1 | ||||||||||||
Diluted | 407.0 | 418.3 | 412.7 | 433.2 | ||||||||||||
See accompanying notes | ||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars in millions]
Three months ended | Year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
Note | 2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income | $ | 475 | $ | 509 | $ | 2,007 | $ | 1,880 | ||||||||
Other comprehensive loss, net of tax: | 16 | |||||||||||||||
Net unrealized loss on translation of net investment | ||||||||||||||||
in foreign operations | (149) | (323) | (800) | (681) | ||||||||||||
Net unrealized loss on cash flow hedges | (54) | (79) | (244) | (103) | ||||||||||||
Reclassification of net loss on cash flow hedges to | ||||||||||||||||
net income | 39 | 6 | 95 | 10 | ||||||||||||
Reclassification of net loss on pensions to net income | 2 | — | 7 | 3 | ||||||||||||
Reclassification of net loss on investments to net income | — | — | 3 | — | ||||||||||||
Pension and post retirement benefits | 16 | (72) | 14 | (72) | ||||||||||||
Other comprehensive loss | (146) | (468) | (925) | (843) | ||||||||||||
Comprehensive income | 329 | 41 | 1,082 | 1,037 | ||||||||||||
Comprehensive loss attributable to non-controlling interests | 2 | - | 8 | 2 | ||||||||||||
Comprehensive income attributable to Magna International Inc. | $ | 331 | $ | 41 | $ | 1,090 | $ | 1,039 | ||||||||
See accompanying notes | ||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited]
[U.S. dollars in millions]
Three months ended | Year ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
Note | 2015 | 2014 | 2015 | 2014 | |||||||||||
Cash provided from (used for): | |||||||||||||||
OPERATING ACTIVITIES | |||||||||||||||
Net income from continuing operations | $ | 482 | $ | 516 | $ | 1,940 | $ | 1,922 | |||||||
Items not involving current cash flows | 5 | 291 | 343 | 736 | 1,102 | ||||||||||
773 | 859 | 2,676 | 3,024 | ||||||||||||
Changes in operating assets and liabilities | 5 | 243 | 130 | (344) | (202) | ||||||||||
Cash provided from operating activities | 1,016 | 989 | 2,332 | 2,822 | |||||||||||
INVESTMENT ACTIVITIES | |||||||||||||||
Fixed asset additions | (604) | (632) | (1,591) | (1,495) | |||||||||||
Purchase of subsidiaries | 6 | (221) | (23) | (222) | (23) | ||||||||||
Increase in investments and other assets | (69) | (22) | (221) | (172) | |||||||||||
Proceeds from disposition | 11 | 38 | 61 | 164 | |||||||||||
Proceeds on disposal of facilities | 3 | — | — | 221 | — | ||||||||||
Sale of Interiors | 2 | 47 | — | 520 | — | ||||||||||
Cash used in discontinued operations | 2 | — | (27) | (56) | (120) | ||||||||||
Cash used for investing activities | (836) | (666) | (1,288) | (1,646) | |||||||||||
FINANCING ACTIVITIES | |||||||||||||||
Issues of debt | 11 | 918 | 36 | 1,608 | 860 | ||||||||||
(Decrease) increase in bank indebtedness | (4) | (21) | 25 | (2) | |||||||||||
Repayments of debt | (29) | (58) | (99) | (188) | |||||||||||
Issue of Common Shares | 16 | 6 | 35 | 49 | |||||||||||
Repurchase of Common Shares | 15 | (164) | (354) | (515) | (1,783) | ||||||||||
Contribution to subsidiaries by non-controlling interests | 31 | — | 41 | — | |||||||||||
Dividends paid | (84) | (75) | (354) | (316) | |||||||||||
Cash provided from (used for) financing activities | 684 | (466) | 741 | (1,380) | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | (16) | (44) | (171) | (98) | |||||||||||
Net increase (decrease) in cash and cash equivalents | |||||||||||||||
during the period | 848 | (187) | 1,614 | (302) | |||||||||||
Cash and cash equivalents, beginning of period | 2,015 | 1,436 | 1,249 | 1,551 | |||||||||||
Cash and cash equivalents, end of period | $ | 2,863 | $ | 1,249 | $ | 2,863 | $ | 1,249 | |||||||
See accompanying notes | |||||||||||||||
CONSOLIDATED BALANCE SHEETS
[Unaudited]
[U.S. dollars in millions]
As at | As at | |||||||||
December 31, | December 31, | |||||||||
Note | 2015 | 2014 | ||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash and cash equivalents | 5 | $ | 2,863 | $ | 1,249 | |||||
Accounts receivable | 5,439 | 5,316 | ||||||||
Inventories | 7 | 2,564 | 2,525 | |||||||
Income taxes receivable | — | 13 | ||||||||
Prepaid expenses and other | 278 | 150 | ||||||||
Assets held for sale | 2 | — | 609 | |||||||
11,144 | 9,862 | |||||||||
Investments | 17 | 399 | 379 | |||||||
Fixed assets, net | 6,005 | 5,402 | ||||||||
Goodwill | 6, 8 | 1,344 | 1,337 | |||||||
Deferred tax assets | 271 | 220 | ||||||||
Other assets | 9 | 543 | 526 | |||||||
Noncurrent assets held for sale | 2 | — | 348 | |||||||
$ | 19,706 | $ | 18,074 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
Current liabilities | ||||||||||
Bank indebtedness | $ 25 | $ 30 | ||||||||
Accounts payable | 4,746 | 4,765 | ||||||||
Accrued salaries and wages | 660 | 686 | ||||||||
Other accrued liabilities | 10 | 1,512 | 1,448 | |||||||
Income taxes payable | 122 | — | ||||||||
Long-term debt due within one year | 211 | 183 | ||||||||
Liabilities held for sale | 2 | — | 514 | |||||||
7,276 | 7,626 | |||||||||
Long-term debt | 11 | 2,346 | 812 | |||||||
Long-term employee benefit liabilities | 12 | 504 | 559 | |||||||
Other long-term liabilities | 331 | 278 | ||||||||
Deferred tax liabilities | 132 | 92 | ||||||||
Long-term liabilities held for sale | 2 | — | 34 | |||||||
10,589 | 9,401 | |||||||||
Shareholders' equity | ||||||||||
Capital stock | ||||||||||
Common Shares | ||||||||||
[issued: 402,264,201; December 31, 2014 - 410,325,270 (restated)] | 1, 15 | 3,942 | 3,979 | |||||||
Contributed surplus | 107 | 83 | ||||||||
Retained earnings | 6,387 | 5,155 | ||||||||
Accumulated other comprehensive loss | 16 | (1,470) | (558) | |||||||
8,966 | 8,659 | |||||||||
Non-controlling interests | 151 | 14 | ||||||||
9,117 | 8,673 | |||||||||
$ | 19,706 | $ | 18,074 | |||||||
See accompanying notes | ||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[Unaudited]
[U.S. dollars in millions]
Common Shares | Contri- | Non- | ||||||||||||||||||||||
Stated | buted | Retained | controlling | Total | ||||||||||||||||||||
Note | Number | Value | Surplus | Earnings | AOCL (i) | Interests | Equity | |||||||||||||||||
[in millions | ||||||||||||||||||||||||
(restated)] | ||||||||||||||||||||||||
Balance, December 31, 2013 | 442.3 | $ | 4,230 | $ | 69 | $ | 5,011 | $ | 313 | $ | 16 | $ | 9,639 | |||||||||||
Net income attributable to Magna | ||||||||||||||||||||||||
International Inc. | 1,882 | (2) | 1,880 | |||||||||||||||||||||
Other comprehensive loss | (843) | (843) | ||||||||||||||||||||||
Shares issued on exercise of stock | ||||||||||||||||||||||||
options | 2.6 | 63 | (12) | 51 | ||||||||||||||||||||
Repurchase and cancellation under | ||||||||||||||||||||||||
normal course issuer bid | 14 | (34.8) | (342) | (1,413) | (28) | (1,783) | ||||||||||||||||||
Release of restricted stock | 5 | (5) | — | |||||||||||||||||||||
Release of restricted stock units | 14 | (14) | — | |||||||||||||||||||||
Stock-based compensation expense | 13 | 38 | 38 | |||||||||||||||||||||
Reclassification of liability | 13 | 7 | 7 | |||||||||||||||||||||
Dividends paid | 0.2 | 9 | (325) | (316) | ||||||||||||||||||||
Balance, December 31, 2014 | 410.3 | 3,979 | 83 | 5,155 | (558) | 14 | 8,673 | |||||||||||||||||
Net income attributable to Magna | ||||||||||||||||||||||||
International Inc. | 2,013 | (6) | 2,007 | |||||||||||||||||||||
Other comprehensive loss | (923) | (2) | (925) | |||||||||||||||||||||
Shares issued on exercise of stock | ||||||||||||||||||||||||
options | 2.4 | 45 | (10) | 35 | ||||||||||||||||||||
Release of restricted stock | 5 | (5) | — | |||||||||||||||||||||
Release of restricted stock units | 12 | (12) | — | |||||||||||||||||||||
Repurchase and cancellation under | ||||||||||||||||||||||||
normal course issuer bid | 14 | (10.6) | (108) | (418) | 11 | (515) | ||||||||||||||||||
Contribution by non-controlling interests | 6 | 17 | 29 | 46 | ||||||||||||||||||||
Purchase of non-controlling interests | (2) | (2) | ||||||||||||||||||||||
Acquisition | 6 | 116 | 116 | |||||||||||||||||||||
Stock-based compensation expense | 13 | 36 | 36 | |||||||||||||||||||||
Dividends paid | 0.2 | 9 | (363) | (354) | ||||||||||||||||||||
Balance, December 31, 2015 | 402.3 | $ | 3,942 | $ | 107 | $ | 6,387 | $ | (1,470) | $ | 151 | $ | 9,117 | |||||||||||
(i) AOCL is Accumulated Other Comprehensive Loss. | ||||||||||||||||||||||||
See accompanying notes | ||||||||||||||||||||||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
[Unaudited]
[All amounts in U.S. dollars and all tabular amounts in millions unless
otherwise noted]
1. SIGNIFICANT ACCOUNTING POLICIES
[a] Basis of Presentation
The unaudited interim consolidated financial statements of
The unaudited interim consolidated financial statements do not conform
in all respects to the requirements of GAAP for annual financial
statements. Accordingly, these unaudited interim consolidated financial
statements should be read in conjunction with the
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
[b] Stock Split
On
Accordingly, all of the Company's issued and outstanding Common Shares, incentive stock options, and restricted and deferred stock units have been restated for all periods presented to reflect the stock split. In addition, earnings per Common Share, Cash dividends paid per Common Share, weighted average exercise price for stock options and the weighted average fair value of options granted have been restated for all periods presented to reflect the stock split.
[c] Discontinued Operations
The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial impact of disposal transactions from ongoing operations. Discontinued operations reporting only occurs when the disposal of a component or a group of components of the Company represents a strategic shift that will have a major impact on the Company's operations and financial results. In the third quarter of 2015, the Company sold substantially all of its interiors operations. Accordingly, the assets and liabilities, operating results and operating cash flows for the previously reported interiors operations are presented as discontinued operations separate from the Company's continuing operations. Prior period financial information has been reclassified to present the interiors operations as a discontinued operation, and has therefore been excluded from both continuing operations and segment results in these interim consolidated financial statements and the notes to the interim consolidated financial statements, unless otherwise noted. Refer to Note 2 Discontinued Operations for further information regarding the Company's discontinued operations.
[d] Accounting Changes
In
[e] Future Accounting Standards
Simplifying the Presentation of Debt Issuance Costs
In
Revenue Recognition
In
Leases
In
[f] Seasonality
The Company's businesses are generally not seasonal. However, the
Company's sales and profits are closely related to its automotive
customers' vehicle production schedules. The Company's largest North
American customers typically halt production for approximately two
weeks in July and one week in December. Additionally, many of the
Company's customers in
2. DISCONTINUED OPERATIONS
On
Proceeds on disposal, net of transaction costs | $ | 549 | |||
Net assets disposed | 438 | ||||
Pretax gain on divestiture | 111 | ||||
Income taxes | 66 | ||||
Gain on divestiture, net of tax | $ | 45 |
The following table summarizes the carrying value of the major classes
of assets and liabilities of the discontinued operations which were
reflected as held for sale in the consolidated balance sheet at
Cash and cash equivalents | $ | 4 | |||
Accounts receivable | 355 | ||||
Inventories | 232 | ||||
Income taxes receivable | 3 | ||||
Prepaid expenses and other | 10 | ||||
Deferred tax assets | 12 | ||||
Fixed assets, net | 263 | ||||
Goodwill | 12 | ||||
Investments | 40 | ||||
Other assets | 26 | ||||
Total assets of the discontinued operations classified as held for sale | $ | 957 | |||
Bank indebtedness | $ | 3 | |||
Accounts payable | 376 | ||||
Accrued salaries and wages | 44 | ||||
Other accrued liabilities | 91 | ||||
Long-term debt due within one year | 1 | ||||
Long-term employee benefit liabilities | 20 | ||||
Other long-term liabilities | 12 | ||||
Deferred tax liabilities | 1 | ||||
Total liabilities of the discontinued operations classified as held for sale | $ | 548 |
A reconciliation of the major classes of line items constituting (loss) income from discontinued operations, net of tax as presented in the statements of income is as follows:
Three months ended | Year ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
Sales | $ | — | $ | 642 | $ | 1,737 | $ | 2,394 | |||||
Costs and expenses | |||||||||||||
Cost of goods sold | — | 612 | 1,635 | 2,310 | |||||||||
Depreciation and amortization | — | 12 | 13 | 45 | |||||||||
Selling, general and administrative | — | 22 | 58 | 95 | |||||||||
Equity income | — | (3) | (11) | (8) | |||||||||
Other expense, net | — | 18 | — | 18 | |||||||||
(Loss) income from discontinued operations | |||||||||||||
before income taxes and gain on divestiture | — | (19) | 42 | (66) | |||||||||
Income taxes | — | (12) | 20 | (24) | |||||||||
(Loss) income from discontinued operations | |||||||||||||
before gain on divestiture | — | (7) | 22 | (42) | |||||||||
(Loss) gain on divestiture of discontinued operations, net of tax | (7) | — | 45 | — | |||||||||
(Loss) income from discontinued operations, net of tax | $ | (7) | $ | (7) | $ | 67 | $ | (42) |
The interiors operations were previously included within all of the Company's reporting segments except for Rest of World.
3. OTHER EXPENSE (INCOME), NET
Year ended | |||||||||||
December 31, | |||||||||||
2015 | 2014 | ||||||||||
Fourth Quarter | |||||||||||
Restructuring | [a, c] | $ | 15 | $ | 6 | ||||||
Third Quarter | |||||||||||
Gain on disposal | [b] | (136) | — | ||||||||
Restructuring | [a, c] | 12 | 7 | ||||||||
(124) | 7 | ||||||||||
Second Quarter |
|||||||||||
Gain on disposal | [a] | (57) | — | ||||||||
Restructuring | [c] | — | 11 | ||||||||
(57) | 11 | ||||||||||
First Quarter |
|||||||||||
Restructuring | [c] | — | 22 | ||||||||
$ | (166) | $ | 46 |
For the year ended
[a] Restructuring
During 2015, the Company recorded net restructuring charges of
[b] Gain on disposal
During the third quarter of 2015, the Company entered into a joint
venture arrangement for the manufacture and sale of roof and other
accessories for the Jeep market to original equipment manufacturers as
well as aftermarket customers. The Company contributed two
manufacturing facilities and received a 49% interest in the newly
formed joint venture and cash proceeds of
During the second quarter of 2015, the company sold its battery pack
business to
For the year ended
[c] Restructuring
During 2014, the Company recorded net restructuring charges of
4. EARNINGS PER SHARE
Earnings per share are computed as follows [restated [note 1]]:
Three months ended | Year ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||
Income available to Common shareholders: | ||||||||||||||
Net income from continuing operations | $ | 482 | $ | 516 | $ | 1,940 | $ | 1,922 | ||||||
Loss from continuing operations attributable to | ||||||||||||||
non-controlling interests | 1 | — | 6 | 2 | ||||||||||
Net income attributable to Magna International Inc. from | ||||||||||||||
continuing operations | 483 | 516 | 1,946 | 1,924 | ||||||||||
(Loss) income from discontinued operations, net of tax | (7) | (7) | 67 | (42) | ||||||||||
Net income attributable to Magna International Inc. | $ | 476 | $ | 509 | $ | 2,013 | $ | 1,882 | ||||||
Weighted average shares outstanding: | ||||||||||||||
Basic | 402.6 | 412.4 | 407.5 | 427.1 | ||||||||||
Adjustments | ||||||||||||||
Stock options and restricted stock [i] | 4.4 | 5.9 | 5.2 | 6.1 | ||||||||||
Diluted | 407.0 | 418.3 | 412.7 | 433.2 |
[i] | For the three months and year ended December 31, 2015, diluted earnings per Common Share exclude 1.6 million and 0.9 million [2014 - 0.1 million] Common Shares issuable under the Company's Incentive Stock Option Plan because these options were not "in-the-money". |
Earnings per Common Share:
Basic: | |||||||||||||
Continuing operations | $ | 1.20 | $ | 1.25 | $ | 4.78 | $ | 4.50 | |||||
Discontinued operations | (0.02) | (0.02) | 0.16 | (0.09) | |||||||||
Attributable to Magna International Inc. | $ | 1.18 | $ | 1.23 | $ | 4.94 | $ | 4.41 | |||||
Diluted: | |||||||||||||
Continuing operations | $ | 1.19 | $ | 1.23 | $ | 4.72 | $ | 4.44 | |||||
Discontinued operations | (0.02) | (0.01) | 0.16 | (0.10) | |||||||||
Attributable to Magna International Inc. | $ | 1.17 | $ | 1.22 | $ | 4.88 | $ | 4.34 |
5. DETAILS OF CASH FROM OPERATING ACTIVITIES
[a] Cash and cash equivalents:
December 31, | December 31, | |||||||
2015 | 2014 | |||||||
Bank term deposits, bankers' acceptances and government paper | $ | 2,572 | $ | 1,058 | ||||
Cash | 291 | 191 | ||||||
$ | 2,863 | $ | 1,249 |
[b] Items not involving current cash flows:
Three months ended | Year ended | |||||||||||
December 31, | December 31, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Depreciation and amortization | $ | 213 | $ | 214 | $ | 802 | $ | 845 | ||||
Equity income in excess of dividends received | 29 | 21 | (20) | (23) | ||||||||
Amortization of other assets included in cost of goods sold | 28 | 28 | 110 | 132 | ||||||||
Other non-cash charges | 23 | 8 | 44 | 35 | ||||||||
Non-cash portion of Other expense (income), net [note 3] | — | — | (193) | — | ||||||||
Deferred income taxes | (2) | 72 | (7) | 113 | ||||||||
$ | 291 | $ | 343 | $ | 736 | $ | 1,102 |
[c] Changes in operating assets and liabilities:
Three months ended | Year ended | |||||||||||
December 31, | December 31, | |||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||
Accounts receivable | $ | 178 | $ | (62) | $ | (410) | $ | (760) | ||||
Inventories | 90 | (11) | (241) | (275) | ||||||||
Prepaid expenses and other | 22 | 2 | 13 | 3 | ||||||||
Accounts payable | (28) | 230 | 139 | 634 | ||||||||
Accrued salaries and wages | (27) | 17 | 43 | 74 | ||||||||
Other accrued liabilities | 45 | (20) | 72 | 80 | ||||||||
Income taxes payable | (37) | (26) | 40 | 42 | ||||||||
$ | 243 | $ | 130 | $ | (344) | $ | (202) |
6. BUSINESS COMBINATIONS
Acquisitions in the year ended
On
The acquisition of the 53% controlling interest in the
On
The net effect of the acquisitions on the Company's 2015 consolidated balance sheet is as follows:
Xingqiaorui | |||||||||||||
Partnership | Stadco | Other | Total | ||||||||||
Cash | $ | 23 | $ | 1 | $ | — | $ | 24 | |||||
Non-cash working capital | (35) | (3) | 1 | (37) | |||||||||
Fixed assets | 164 | 107 | — | 271 | |||||||||
Goodwill, net | 107 | 13 | — | 120 | |||||||||
Other assets | 10 | — | 1 | 11 | |||||||||
Long-term employee benefit liabilities | — | — | (1) | (1) | |||||||||
Other long-term liabilities | (5) | — | — | (5) | |||||||||
Deferred tax liabilities | (18) | (3) | — | (21) | |||||||||
Non-controlling interests | (116) | — | — | (116) | |||||||||
Consideration paid | 130 | 115 | 1 | 246 | |||||||||
Less: Cash acquired | (23) | (1) | — | (24) | |||||||||
Net cash outflow | $ | 107 | $ | 114 | $ | 1 | $ | 222 |
The Company's purchase price allocations are preliminary and subject to revision as additional information regarding the fair value of assets and liabilities becomes available. Adjustments in the purchase price allocations may require an adjustment to the amounts allocated to goodwill.
Acquisitions in the year ended
In
The net effect of this acquisition on the Company's 2014 consolidated
balance sheet were increases in fixed assets of
7. INVENTORIES
Inventories consist of:
December 31, | December 31, | |||||||
2015 | 2014 | |||||||
Raw materials and supplies | $ | 843 | $ | 846 | ||||
Work-in-process | 246 | 233 | ||||||
Finished goods | 311 | 338 | ||||||
Tooling and engineering | 1,164 | 1,108 | ||||||
$ | 2,564 | $ | 2,525 |
Tooling and engineering inventory represents costs incurred on tooling and engineering services contracts in excess of billed and unbilled amounts included in accounts receivable.
8. GOODWILL
The following is a continuity of the Company's goodwill:
2015 | 2014 | |||||||||
Balance, beginning of period | $ | 1,337 | $ | 1,427 | ||||||
Foreign exchange and other | (74) | (13) | ||||||||
Balance, March 31 | 1,263 | 1,414 | ||||||||
Divestiture | (7) | — | ||||||||
Foreign exchange and other | 16 | 7 | ||||||||
Balance, June 30 | 1,272 | 1,421 | ||||||||
Foreign exchange and other | (21) | (51) | ||||||||
Balance, September 30 | 1,251 | 1,370 | ||||||||
Acquisitions [note 6] | 120 | 3 | ||||||||
Foreign exchange and other | (27) | (36) | ||||||||
Balance, December 31 | $ | 1,344 | $ | 1,337 |
9. OTHER ASSETS
Other assets consist of:
December 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Preproduction costs related to long-term supply agreements with contractual guarantee for reimbursement |
$ | 276 | $ | 243 | |||||
Long-term receivables | 87 | 85 | |||||||
Customer relationship intangibles | 75 | 108 | |||||||
Patents and licences, net | 37 | 32 | |||||||
Pension overfunded status | 17 | 13 | |||||||
Unrealized gain on cash flow hedges | 5 | 8 | |||||||
Other, net | 46 | 37 | |||||||
$ | 543 | $ | 526 |
10. WARRANTY
The following is a continuity of the Company's warranty accruals:
2015 | 2014 | |||||||||
Balance, beginning of period | $ | 80 | $ | 81 | ||||||
Expense, net | 8 | 7 | ||||||||
Settlements | (10) | (7) | ||||||||
Foreign exchange and other | (6) | — | ||||||||
Balance, March 31 | 72 | 81 | ||||||||
Expense, net | 10 | 7 | ||||||||
Settlements | (10) | (8) | ||||||||
Foreign exchange and other | 1 | (1) | ||||||||
Balance, June 30 | 73 | 79 | ||||||||
Expense, net | 1 | 23 | ||||||||
Settlements | (10) | (9) | ||||||||
Foreign exchange and other | (5) | (5) | ||||||||
Balance, September 30 | 59 | 88 | ||||||||
Expense, net | 7 | 9 | ||||||||
Settlements | (23) | (14) | ||||||||
Foreign exchange and other | 16 | (3) | ||||||||
Balance, December 31 | $ | 59 | $ | 80 |
11. LONG-TERM DEBT
[a] On
On
On
On
All of the Senior Notes are senior unsecured obligations and do not include any financial covenants. The Company may redeem the Senior Notes in whole or in part at any time, at specified redemption prices determined in accordance with the terms of each of the respective indentures governing the Senior Notes. All of the Senior Notes were issued for general corporate purposes.
[b] On
12. LONG-TERM EMPLOYEE BENEFIT LIABILITIES
The Company recorded long-term employee benefit expenses as follows:
Three months ended | Year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Defined benefit pension plan and other | $ | 4 | $ | 6 | $ | 14 | $ | 15 | ||||||||
Termination and long service arrangements | 21 | 23 | 41 | 47 | ||||||||||||
Retirement medical benefit plan | — | (2) | 1 | — | ||||||||||||
$ | 25 | $ | 27 | $ | 56 | $ | 62 |
13. INCOME TAXES
During 2014, the Austrian government enacted legislation abolishing the
utilization of foreign losses, where the foreign subsidiary is not a
member of the
14. STOCK-BASED COMPENSATION
[a] Incentive Stock Option Plan
The following is a continuity schedule of options outstanding [number of options in the table below are expressed in whole numbers - restated [note 1]]:
2015 | 2014 | |||||||||||
Options outstanding | Options outstanding | |||||||||||
Number | Number | |||||||||||
Number | Exercise | of options | Number | Exercise | of options | |||||||
of options | price (i) | exercisable | of options | price (i) | exercisable | |||||||
Beginning of period | 8,314,658 | 27.03 | 4,614,488 | 9,516,216 | 20.91 | 5,694,218 | ||||||
Granted | 1,614,336 | 68.24 | — | 1,502,600 | 53.36 | — | ||||||
Exercised | (239,362) | 29.49 | (239,362) | (1,360,704) | 19.75 | (1,340,704) | ||||||
Cancelled | (103,332) | 34.30 | — | (33,998) | 26.10 | (12,000) | ||||||
Vested | — | — | 1,965,904 | — | — | 1,558,768 | ||||||
March 31 | 9,586,300 | 33.83 | 6,341,030 | 9,624,114 | 26.12 | 5,880,282 | ||||||
Exercised | (308,424) | 26.33 | (308,424) | (592,070) | 20.99 | (592,070) | ||||||
Cancelled | (48,906) | 46.96 | (2) | (21,000) | 36.93 | — | ||||||
June 30 | 9,228,970 | 34.01 | 6,032,604 | 9,011,044 | 26.43 | 5,288,212 | ||||||
Exercised | (600,834) | 14.22 | (600,833) | (342,102) | 19.27 | (342,102) | ||||||
Cancelled | (10,910) | 56.11 | — | — | — | — | ||||||
September 30 | 8,617,226 | 35.36 | 5,431,771 | 8,668,942 | 26.72 | 4,946,110 | ||||||
Exercised | (1,238,412) | 15.87 | (1,238,412) | (354,284) | 19.39 | (354,284) | ||||||
Cancelled | (29,398) | 49.56 | — | — | — | — | ||||||
Vested | — | — | — | — | — | 22,662 | ||||||
December 31 | 7,349,416 | 38.59 | 4,193,359 | 8,314,658 | 27.03 | 4,614,488 |
(i) | The exercise price noted above represents the weighted average exercise price in Canadian dollars. |
The weighted average assumptions used in measuring the fair value of stock options granted are as follows:
2015 | 2014 | |||||||
Risk free interest rate | 0.97% | 1.60% | ||||||
Expected dividend yield | 2.00% | 2.00% | ||||||
Expected volatility | 26% | 29% | ||||||
Expected time until exercise | 4.6 years | 4.5 years | ||||||
Weighted average fair value of options granted in period [Cdn$] [restated [note 1]] | $ | 12.84 | $ | 11.47 |
[b] Long-term retention program
The following is a continuity of the stock that has not been released to the executives and is reflected as a reduction in the stated value of the Company's Common Shares [number of Common Shares in the table below are expressed in whole numbers - restated [note 1]]:
2015 | 2014 | |||||||||||
Number | Stated | Number | Stated | |||||||||
of shares | value | of shares | value | |||||||||
Awarded and not released, beginning of period | 1,174,648 | $ | 20 | 1,460,952 | $ | 25 | ||||||
Release of restricted stock | (286,312) | (4) | (286,304) | (5) | ||||||||
Awarded and not released, March 31, June 30, September 30 | ||||||||||||
and December 31 | 888,336 | $ | 16 | 1,174,648 | $ | 20 |
[c] Restricted stock unit program
The following is a continuity schedule of Restricted stock units ["RSUs"] and Independent Director stock units ["DSUs"] outstanding [number of stock units in the table below are expressed in whole numbers - restated [note 1]]:
2015 | 2014 | ||||||||||||||||
Equity | Liability | Equity | Equity | Liability | Equity | ||||||||||||
classified | classified | classified | classified | classified | classified | ||||||||||||
RSUs | RSUs | DSUs | Total | RSUs | RSUs | DSUs | Total | ||||||||||
Balance, beginning | |||||||||||||||||
of period | 985,278 | 46,052 | 303,261 | 1,334,591 | 1,263,709 | 60,238 | 254,894 | 1,578,841 | |||||||||
Granted | 120,958 | 15,922 | 12,112 | 148,992 | 101,619 | 16,050 | 12,630 | 130,299 | |||||||||
Dividend equivalents | 424 | 262 | 1,009 | 1,695 | 505 | 306 | 1,058 | 1,869 | |||||||||
Released | (16,518) | — | — | (16,518) | (16,518) | — | — | (16,518) | |||||||||
Balance, March 31 | 1,090,142 | 62,236 | 316,382 | 1,468,760 | 1,349,315 | 76,594 | 268,582 | 1,694,491 | |||||||||
Granted | 93,821 | — | 9,793 | 103,614 | 110,484 | 2,000 | 10,714 | 123,198 | |||||||||
Dividend equivalents | 475 | 235 | 1,199 | 1,909 | 467 | 278 | 979 | 1,724 | |||||||||
Balance, June 30 | 1,184,438 | 62,471 | 327,374 | 1,574,283 | 1,460,266 | 78,872 | 280,275 | 1,819,413 | |||||||||
Granted | 72,317 | — | 10,953 | 83,270 | 71,314 | — | 9,684 | 80,998 | |||||||||
Dividend equivalents | 347 | 281 | 1,491 | 2,119 | 342 | 262 | 977 | 1,581 | |||||||||
Forfeitures | — | — | — | — | — | (820) | — | (820) | |||||||||
Released | (25,861) | — | — | (25,861) | (25,460) | — | — | (25,460) | |||||||||
Balance, September 30 | 1,231,241 | 62,752 | 339,818 | 1,633,811 | 1,506,462 | 78,314 | 290,936 | 1,875,712 | |||||||||
Granted | 69,326 | — | 11,097 | 80,423 | 79,636 | — | 11,244 | 90,880 | |||||||||
Dividend equivalents | 387 | 316 | 1,769 | 2,472 | 364 | 286 | 1,081 | 1,731 | |||||||||
Released | (453,248) | (28,236) | — | (481,484) | (601,184) | (32,548) | — | (633,732) | |||||||||
Balance, December 31 | 847,706 | 34,832 | 352,684 | 1,235,222 | 985,278 | 46,052 | 303,261 | 1,334,591 |
[d] Compensation expense related to stock-based compensation
Stock-based compensation expense recorded in selling, general and administrative expenses related to the above programs is as follows:
Three months ended December 31, |
Year ended December 31, |
|||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Incentive Stock Option Plan | $ | 3 | $ | 4 | $ | 12 | $ | 15 | ||||||||
Long-term retention | 1 | 1 | 4 | 4 | ||||||||||||
Restricted stock unit | 4 | 4 | 20 | 21 | ||||||||||||
Total stock-based compensation expense | $ | 8 | $ | 9 | $ | 36 | $ | 40 |
15. COMMON SHARES
[a] The Company repurchased shares under normal course issuer bids as follows [restated [note1]]:
2015 | 2014 | |||||||||||||
Number of shares |
Cash consideration |
Number of shares |
Cash consideration |
|||||||||||
First Quarter | — | $ | — | 5,420,000 | $ | 240 | ||||||||
Second Quarter | — | — | 11,436,362 | 575 | ||||||||||
Third Quarter | 7,246,514 | 346 | 11,308,844 | 614 | ||||||||||
Fourth Quarter | 3,505,970 | 155 | 6,904,598 | 337 | ||||||||||
10,752,484 | $ | 501 | 35,069,804 | $ | 1,766 |
The Company can purchase up to 40 million shares under a normal course
issuer bid that will terminate no later than
[b] The following table presents the maximum number of shares that would
be outstanding if all the dilutive instruments outstanding at
Common Shares | 402,264,201 | |||||
Stock options (i) | 7,310,160 | |||||
409,574,361 |
(i) | Options to purchase Common Shares are exercisable by the holder in accordance with the vesting provisions and upon payment of the exercise price as may be determined from time to time pursuant to the Company's stock option plans. |
16. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following is a continuity schedule of accumulated other comprehensive loss:
2015 | 2014 | |||||||
Accumulated net unrealized loss on translation of net investment in foreign operations | ||||||||
Balance, beginning of period | $ | (255) | $ | 454 | ||||
Net unrealized loss | (438) | (112) | ||||||
Repurchase of shares under normal course issuer bids | — | (4) | ||||||
Balance, March 31 | (693) | 338 | ||||||
Net unrealized gain | 63 | 100 | ||||||
Repurchase of shares under normal course issuer bids | — | (11) | ||||||
Balance, June 30 | (630) | 427 | ||||||
Net unrealized loss | (275) | (346) | ||||||
Repurchase of shares under normal course issuer bids | 7 | (10) | ||||||
Balance, September 30 | (898) | 71 | ||||||
Net unrealized loss | (148) | (323) | ||||||
Repurchase of shares under normal course issuer bids | 4 | (3) | ||||||
Balance, December 31 | (1,042) | (255) | ||||||
Accumulated net unrealized loss on cash flow hedges (i) | ||||||||
Balance, beginning of period | (113) | (20) | ||||||
Net unrealized loss | (65) | (31) | ||||||
Reclassification of net loss (gain) to net income | 11 | (1) | ||||||
Balance, March 31 | (167) | (52) | ||||||
Net unrealized (loss) gain | (2) | 49 | ||||||
Reclassification of net loss to net income | 21 | 6 | ||||||
Balance, June 30 | (148) | 3 | ||||||
Net unrealized loss | (123) | (42) | ||||||
Reclassification of net loss (gain) on cash flow hedges to net income | 24 | (1) | ||||||
Balance, September 30 | (247) | (40) | ||||||
Net unrealized loss | (54) | (79) | ||||||
Reclassification of net loss on cash flow hedges to net income | 39 | 6 | ||||||
Balance, December 31 | (262) | (113) | ||||||
Accumulated net unrealized loss on available-for-sale investments | ||||||||
Balance, beginning of period | (4) | (4) | ||||||
Net unrealized gain (loss) | 1 | (1) | ||||||
Balance, March 31 | (3) | (5) | ||||||
Net unrealized gain | 1 | — | ||||||
Balance, June 30 | (2) | (5) | ||||||
Net unrealized (loss) gain | (2) | 1 | ||||||
Reclassification of net loss to net income | 3 | — | ||||||
Balance, September 30, December 31 | (1) | (4) | ||||||
Accumulated net unrealized loss on pension (ii) | ||||||||
Balance, beginning of period | (186) | (117) | ||||||
Net unrealized loss | (1) | — | ||||||
Reclassification of net loss to net income | 1 | 1 | ||||||
Balance, March 31 | (186) | (116) | ||||||
Reclassification of net loss to net income | 2 | 2 | ||||||
Balance, June 30 | (184) | (114) | ||||||
Net unrealized loss | (1) | — | ||||||
Reclassification of net loss to net income | 2 | — | ||||||
Balance, September 30 | (183) | (114) | ||||||
Net unrealized gain (loss) | 16 | (72) | ||||||
Reclassification of net loss to net income | 2 | — | ||||||
Balance, December 31 | (165) | (186) | ||||||
Total accumulated other comprehensive loss | $ | (1,470) | $ | (558) |
(i) The amount of income tax benefit that has been netted in the accumulated net unrealized loss on cash flow hedges is as follows:
2015 | 2014 | |||||||||
Balance, beginning of period | $ | 44 | $ | 5 | ||||||
Net unrealized loss | 27 | 10 | ||||||||
Reclassifications of net (loss) gain to net income | (5) | 1 | ||||||||
Balance, March 31 | 66 | 16 | ||||||||
Net unrealized gain | (1) | (18) | ||||||||
Reclassifications of net loss to net income | (8) | (1) | ||||||||
Balance, June 30 | 57 | (3) | ||||||||
Net unrealized loss | 47 | 16 | ||||||||
Reclassifications of net (loss) gain to net income | (10) | 1 | ||||||||
Balance, September 30 | 94 | 14 | ||||||||
Net unrealized loss | 19 | 32 | ||||||||
Reclassifications of net loss to net income | (16) | (2) | ||||||||
Balance, December 31 | $ | 97 | $ | 44 | ||||||
(ii) The amount of income tax benefit that has been netted in the accumulated net unrealized loss on pension is as follows
2015 | 2014 | |||||||||
Balance, beginning of period | $ | 36 | $ | 14 | ||||||
Reclassification of net loss to net income | — | — | ||||||||
Balance, March 31 | 36 | 14 | ||||||||
Reclassification of net loss to net income | (1) | — | ||||||||
Balance, June 30 | 35 | 14 | ||||||||
Net unrealized gain | (1) | — | ||||||||
Reclassification of net loss to net income | (1) | (1) | ||||||||
Balance, September 30 | 33 | 13 | ||||||||
Net unrealized (gain) loss | (2) | 23 | ||||||||
Balance, December 31 | $ | 31 | $ | 36 |
The amount of other comprehensive loss that is expected to be
reclassified to net income over the next 12 months is
17. FINANCIAL INSTRUMENTS
[a] The Company's financial assets and financial liabilities consist of the following:
December 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
Trading | |||||||||
Cash and cash equivalents | $ | 2,863 | $ | 1,249 | |||||
Investment in asset-backed commercial paper | 73 | 88 | |||||||
Equity investments | 4 | — | |||||||
$ | 2,940 | $ | 1,337 | ||||||
Available-for-sale | |||||||||
Equity investments | $ | — | $ | 5 | |||||
Held to maturity investments | |||||||||
Severance investments | $ | 3 | $ | 4 | |||||
Loans and receivables | |||||||||
Accounts receivable | $ | 5,439 | $ | 5,316 | |||||
Long-term receivables included in other assets | 87 | 85 | |||||||
$ | 5,526 | $ | 5,401 | ||||||
Other financial liabilities | |||||||||
Bank indebtedness | $ | $ 25 | $ | 30 | |||||
Long-term debt (including portion due within one year) | 2,557 | 995 | |||||||
Accounts payable | 4,746 | 4,765 | |||||||
$ | 7,328 | $ | 5,790 | ||||||
Derivatives designated as effective hedges, measured at fair value | |||||||||
Foreign currency contracts | |||||||||
Prepaid expenses | $ | 27 | $ | $ 21 | |||||
Other assets | 4 | 8 | |||||||
Other accrued liabilities | (191) | (90) | |||||||
Other long-term liabilities | (152) | (80) | |||||||
(312) | (141) | ||||||||
Commodity contracts | |||||||||
Other accrued liabilities | — | (1) | |||||||
$ | (312) | $ | (142) |
[b] Derivatives designated as effective hedges, measured at fair value
The Company presents derivatives that are designated as effective hedges at gross fair value in the consolidated balance sheets. However, master netting and other similar arrangements allow net settlements under certain conditions. The following table shows the Company's derivative foreign currency contracts at gross fair value as reflected in the consolidated balance sheets and the unrecognized impact of master netting arrangements:
Gross amounts presented in consolidated balance sheets |
Gross amounts not offset in consolidated balance sheets |
Net amounts | ||||||||||
December 31, 2015 | ||||||||||||
Assets | $ | 31 | $ | 30 | $ | 1 | ||||||
Liabilities | $ | (343) | $ | (30) | $ | (313) | ||||||
December 31, 2014 | ||||||||||||
Assets | $ | 29 | $ | 28 | $ | 1 | ||||||
Liabilities | $ | (170) | $ | (28) | $ | (142) |
[c] Fair value
The Company determined the estimated fair values of its financial instruments based on valuation methodologies it believes are appropriate; however, considerable judgment is required to develop these estimates. Accordingly, these estimated fair values are not necessarily indicative of the amounts the Company could realize in a current market exchange. The estimated fair value amounts can be materially affected by the use of different assumptions or methodologies. The methods and assumptions used to estimate the fair value of financial instruments are described below:
Cash and cash equivalents, accounts receivable, bank indebtedness and accounts payable.
Due to the short period to maturity of the instruments, the carrying values as presented in the interim consolidated balance sheets are reasonable estimates of fair values.
Investments
At
Term debt
The Company's term debt includes
Senior Notes
At
[d] Credit risk
The Company's financial assets that are exposed to credit risk consist primarily of cash and cash equivalents, accounts receivable, held to maturity investments, and foreign exchange forward contracts with positive fair values.
Cash and cash equivalents, which consists of short-term investments, are only invested in governments, bank term deposits and bank commercial paper with an investment grade credit rating. Credit risk is further reduced by limiting the amount which is invested in certain governments or any major financial institution.
The Company is also exposed to credit risk from the potential default by any of its counterparties on its foreign exchange forward contracts. The Company mitigates this credit risk by dealing with counterparties who are major financial institutions that the Company anticipates will satisfy their obligations under the contracts.
In the normal course of business, the Company is exposed to credit risk
from its customers, substantially all of which are in the automotive
industry and are subject to credit risks associated with the automotive
industry. For the three month period and year ended
[e] Interest rate risk
The Company is not exposed to significant interest rate risk due to the short-term maturity of its monetary current assets and current liabilities. In particular, the amount of interest income earned on the Company's cash and cash equivalents is impacted more by the investment decisions made and the demands to have available cash on hand, than by movements in the interest rates over a given period.
In addition, the Company is not exposed to interest rate risk on its term debt and Senior Notes as the interest rates on these instruments are fixed.
[f] Currency risk and foreign exchange contracts
At
Buys | Sells | ||||||||
For Canadian dollars | |||||||||
U.S. dollar amount | 283 | 2,320 | |||||||
euro amount | 58 | 11 | |||||||
Korean won amount | 32,600 | — | |||||||
For U.S. dollars | |||||||||
Peso amount | 7,717 | — | |||||||
Korean won amount | 29,618 | — | |||||||
For euros | |||||||||
U.S. dollar amount | 159 | (301) | |||||||
British pounds amount | 11 | (33) | |||||||
Czech koruna amount | 6,576 | (2) |
Forward contracts mature at various dates through 2020. Foreign currency exposures are reviewed quarterly.
18. CONTINGENCIES
From time to time, the Company may become involved in regulatory proceedings, or become liable for legal, contractual and other claims by various parties, including customers, suppliers, former employees, class action plaintiffs and others. On an ongoing basis, the Company attempts to assess the likelihood of any adverse judgments or outcomes to these proceedings or claims, together with potential ranges of probable costs and losses. A determination of the provision required, if any, for these contingencies is made after analysis of each individual issue. The required provision may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters.
[a] In
- breach of fiduciary duty by the Company and two of its subsidiaries;
-
breach by the Company of its binding letter of intent with
KS Centoco Ltd. , including its covenant not to have any interest, directly or indirectly, in any entity that carries on the airbag business inNorth America , other than throughMST Automotive Inc. , a company to be 77% owned by Magna and 23% owned byCentoco Holdings Limited ; -
the plaintiff's exclusive entitlement to certain airbag technologies in
North America pursuant to an exclusive licence agreement [the "Licence Agreement"], together with an accounting of all revenues and profits resulting from the alleged use by the Company,TRW Inc. ["TRW"] and other unrelated third party automotive supplier defendants of such technology inNorth America ; - inducement by the Company of a breach of the Licence Agreement by TRW;
-
a conspiracy by the Company, TRW and others to deprive
KS Centoco Ltd. of the benefits of such airbag technology inNorth America and to causeCentoco Holdings Limited to sell to TRW its interest inKS Centoco Ltd. in conjunction with the Company's sale to TRW of its interest inMST Automotive GmbH andTEMIC Bayern-Chemie Airbag GmbH ; and - oppression by the defendants.
The plaintiffs are seeking, amongst other things, damages of
approximately
[b] In
In
Proceedings of this nature can often continue for several years. Where wrongful conduct is found, the relevant antitrust authority can, depending on the jurisdiction, initiate administrative or criminal legal proceedings and impose administrative or criminal fines or penalties taking into account several mitigating and aggravating factors. At this time, management is unable to predict the duration or outcome of the Brazilian investigation, including whether any operating divisions of the Company will be found liable for any violation of law or the extent or magnitude of any liability, if found to be liable.
The Company's policy is to comply with all applicable laws, including antitrust and competition laws. The Company has initiated a global review focused on antitrust risk led by a team of external counsel. If any antitrust violation is found as a result of the above-referenced investigations or otherwise, Magna could be subject to fines, penalties and civil, administrative or criminal legal proceedings that could have a material adverse effect on Magna's profitability in the year in which any such fine or penalty is imposed or the outcome of any such proceeding is determined. Additionally, Magna could be subject to other consequences, including reputational damage, which could have a material adverse effect on the Company.
[c] In certain circumstances, the Company is at risk for warranty costs including product liability and recall costs. Due to the nature of the costs, the Company makes its best estimate of the expected future costs [note 10]; however, the ultimate amount of such costs could be materially different. The Company continues to experience increased customer pressure to assume greater warranty responsibility. Currently, under most customer agreements, the Company only accounts for existing or probable claims. Under certain complete vehicle engineering and assembly contracts, the Company records an estimate of future warranty-related costs based on the terms of the specific customer agreements, and the specific customer's warranty experience.
19. SEGMENTED INFORMATION
The Company's chief operating decision maker uses Adjusted EBIT as the measure of segment profit or loss, since management believes Adjusted EBIT is the most appropriate measure of operational profitability or loss for its reporting segments. Adjusted EBIT represents income from continuing operations before income taxes; interest expense, net; and other expense (income), net.
The following tables show segment information for the Company's reporting segments and a reconciliation of Adjusted EBIT to the Company's consolidated income from continuing operations before income taxes:
Three months ended December 31, 2015 |
Three months ended December 31, 2014 |
|||||||||||||||||||||||||||||||||
Total sales |
External sales |
Adjusted EBIT |
Fixed assets, net |
Total sales |
External sales |
Adjusted EBIT |
Fixed assets, net |
|||||||||||||||||||||||||||
North America | ||||||||||||||||||||||||||||||||||
Canada | $ | 1,751 | $ | 1,619 | $ | 647 | $ | 1,759 | $ | 1,648 | $ | 638 | ||||||||||||||||||||||
United States | 2,491 | 2,378 | 1,431 | 2,388 | 2,241 | 1,204 | ||||||||||||||||||||||||||||
Mexico | 1,176 | 1,066 | 756 | 1,039 | 955 | 626 | ||||||||||||||||||||||||||||
Eliminations | (328) | — | — | (315) | — | — | ||||||||||||||||||||||||||||
5,090 | 5,063 | $ | 501 | 2,834 | 4,871 | 4,844 | $ | 537 | 2,468 | |||||||||||||||||||||||||
Europe | ||||||||||||||||||||||||||||||||||
Western Europe (excluding Great Britain) | 2,283 | 2,202 | 1,279 | 2,686 | 2,611 | 1,302 | ||||||||||||||||||||||||||||
Great Britain | 129 | 129 | 145 | 108 | 107 | 36 | ||||||||||||||||||||||||||||
Eastern Europe | 562 | 500 | 474 | 690 | 570 | 498 | ||||||||||||||||||||||||||||
Eliminations | (85) | — | — | (136) | — | — | ||||||||||||||||||||||||||||
2,889 | 2,831 | 112 | 1,898 | 3,348 | 3,288 | 116 | 1,836 | |||||||||||||||||||||||||||
Asia | 624 | 584 | 63 | 820 | 518 | 481 | 47 | 648 | ||||||||||||||||||||||||||
Rest of World | 88 | 88 | (6) | 54 | 176 | 175 | (5) | 82 | ||||||||||||||||||||||||||
Corporate and Other | (123) | 2 | (14) | 399 | (123) | 2 | 19 | 368 | ||||||||||||||||||||||||||
Total reportable segments | 8,568 | 8,568 | 656 | 6,005 | 8,790 | 8,790 | 714 | 5,402 | ||||||||||||||||||||||||||
Other expense, net | (15) | (6) | ||||||||||||||||||||||||||||||||
Interest expense, net | (17) | (12) | ||||||||||||||||||||||||||||||||
$ | 8,568 | $ | 8,568 | $ | 624 | 6,005 | $ | 8,790 | $ | 8,790 | $ | 696 | 5,402 | |||||||||||||||||||||
Current assets | 11,144 | 9,862 | ||||||||||||||||||||||||||||||||
Investments, goodwill | ||||||||||||||||||||||||||||||||||
deferred tax assets and | ||||||||||||||||||||||||||||||||||
other assets | 2,557 | 2,462 | ||||||||||||||||||||||||||||||||
Noncurrent assets held for | ||||||||||||||||||||||||||||||||||
Sale | — | 348 | ||||||||||||||||||||||||||||||||
Consolidated total assets | $ | 19,706 | $ | 18,074 |
Year ended December 31, 2015 |
Year ended December 31, 2014 |
|||||||||||||||||||||||||||||||||
Total sales |
External sales |
Adjusted EBIT |
Fixed assets, net |
Total sales |
External sales |
Adjusted EBIT |
Fixed assets, net |
|||||||||||||||||||||||||||
North America | ||||||||||||||||||||||||||||||||||
Canada | $ | 6,329 | $ | 5,856 | $ | 647 | $ | 6,799 | $ | 6,324 | $ | 638 | ||||||||||||||||||||||
United States | 9,603 | 9,183 | 1,431 | 9,194 | 8,666 | 1,204 | ||||||||||||||||||||||||||||
Mexico | 4,261 | 3,869 | 756 | 3,984 | 3,653 | 626 | ||||||||||||||||||||||||||||
Eliminations | (1,178) | — | — | (1,216) | — | — | ||||||||||||||||||||||||||||
19,015 | 18,908 | $ | 1,934 | 2,834 | 18,761 | 18,643 | $ | 2,003 | 2,468 | |||||||||||||||||||||||||
Europe | ||||||||||||||||||||||||||||||||||
Western Europe (excluding Great Britain) | 8,936 | 8,635 | 1,279 | 11,086 | 10,794 | 1,302 | ||||||||||||||||||||||||||||
Great Britain | 404 | 404 | 145 | 385 | 384 | 36 | ||||||||||||||||||||||||||||
Eastern Europe | 2,110 | 1,873 | 474 | 2,397 | 2,102 | 498 | ||||||||||||||||||||||||||||
Eliminations | (327) | — | — | (366) | — | — | ||||||||||||||||||||||||||||
11,123 | 10,912 | 451 | 1,898 | 13,502 | 13,280 | 502 | 1,836 | |||||||||||||||||||||||||||
Asia | 1,981 | 1,846 | 149 | 820 | 1,919 | 1,773 | 150 | 648 | ||||||||||||||||||||||||||
Rest of World | 461 | 461 | (25) | 54 | 695 | 694 | (35) | 82 | ||||||||||||||||||||||||||
Corporate and Other | (446) | 7 | 20 | 399 | (474) | 13 | 61 | 368 | ||||||||||||||||||||||||||
Total reportable segments | 32,134 | 32,134 | 2,529 | 6,005 | 34,403 | 34,403 | 2,681 | 5,402 | ||||||||||||||||||||||||||
Other income (expense), net | 166 | (46) | ||||||||||||||||||||||||||||||||
Interest expense, net | (44) | (30) | ||||||||||||||||||||||||||||||||
$ | 32,134 | $ | 32,134 | $ | 2,651 | 6,005 | $ | 34,403 | $ | 34,403 | $ | 2,605 | 5,402 | |||||||||||||||||||||
Current assets | 11,144 | 9,862 | ||||||||||||||||||||||||||||||||
Investments, goodwill | ||||||||||||||||||||||||||||||||||
deferred tax assets and | ||||||||||||||||||||||||||||||||||
other assets | 2,557 | 2,462 | ||||||||||||||||||||||||||||||||
Noncurrent assets held for | ||||||||||||||||||||||||||||||||||
Sale | — | 348 | ||||||||||||||||||||||||||||||||
Consolidated total assets | $ | 19,706 | $ | 18,074 |
20. SUBSEQUENT EVENT
Acquisition of Getrag
In the third quarter of 2015, the Company signed an agreement to acquire
100% of the common shares and voting interest of the
The total consideration transferred by the Company was €1.75 billion in cash, and is subject to working capital and other customary purchase price adjustments. The acquisition of Getrag will be accounted for as a business combination under the acquisition method of accounting. The Company will record the assets acquired and liabilities assumed at their fair values as of the acquisition date. Due to the limited amount of time since the acquisition date, the preliminary acquisition valuation for the business combination is incomplete at this time. As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, including the information required for valuation of intangible assets and goodwill.
SOURCE
Louis Tonelli, Vice-President, Investor Relations at 905-726-7035.
For teleconferencing questions, please contact Nancy Hansford at 905-726-7108.