Magna Announces Third Quarter and Year to Date Results

AURORA, Ontario, November 8, 2012 /PRNewswire/ --

Magna International Inc. (TSX: MG) (NYSE: MGA) today reported financial results for the third quarter ended September 30, 2012.

                                            THREE MONTHS ENDED        NINE MONTHS ENDED
                                               SEPTEMBER 30,              SEPTEMBER 30,
                                                2012        2011         2012        2011
 
    Sales                                   $  7,411    $  6,970     $ 22,804    $ 21,497
    Adjusted EBIT[(1)]                      $    352    $    286     $  1,271    $  1,046
    Income from operations before income 
    taxes                                   $    500    $    164     $  1,409    $    926
    Net income attributable to Magna 
    International Inc.                      $    390    $    102     $  1,082        $706
    Diluted earnings per share              $   1.66    $   0.42     $   4.60    $   2.89
    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 
    (income), net; and other (income) expense, net

THREE MONTHS ENDED SEPTEMBER 30, 2012

We posted sales of $7.4 billion for the third quarter ended September 30, 2012, an increase of 6% from the third quarter of 2011. We achieved this sales increase in a period when vehicle production increased 15% in North America and declined 7% in Western Europe, both relative to the third quarter of 2011. In the third quarter of 2012, our North American and Rest of World production sales, as well as tooling, engineering and other sales increased, while European production sales and complete vehicle assembly sales decreased, in each case relative to the comparable quarter in 2011.

Complete vehicle assembly sales decreased 6% to $620 million for the third quarter of 2012 compared to $663 million for the third quarter of 2011, while complete vehicle assembly volumes decreased 9% to approximately 29,000 units.

During the third quarter of 2012, adjusted EBIT increased 23% to $352 million compared to $286 million for the third quarter of 2011.

During the third quarter of 2012, income from operations before income taxes was $500 million, net income attributable to Magna International Inc. was $390 million and diluted earnings per share were $1.66, increases of $336 million, $288 million and $1.24, respectively, each compared to the third quarter of 2011. During the third quarter of 2012, we recorded other income related to a re-measurement gain on the acquisition of the controlling 27% interest in Magna E-Car Systems Partnership ("E-Car"). This positively impacted income from operations before income taxes by $153 million, net income attributable to Magna International Inc. by $125 million and diluted earnings per share by $0.53 for the third quarter of 2012. During the third quarter of 2011, we recorded other expense relating to the disposal of an interior systems operation and the cost of entering into an agreement pertaining to the settlement of certain claims. These items negatively impacted income from operations before income taxes and net income attributable to Magna International Inc. by $124 million and diluted earnings per share by $0.52 for the third quarter of 2011.

During the third quarter ended September 30, 2012, we generated cash from operations of $503 million before changes in non-cash operating assets and liabilities, and invested $63 million in non-cash operating assets and liabilities. Total investment activities for the third quarter of 2012 were $363 million, including $279 million in fixed asset additions, $28 million in investments and other assets and $56 million to purchase subsidiaries.

NINE MONTHS ENDED SEPTEMBER 30, 2012

We posted sales of $22.8 billion for the nine months ended September 30, 2012, an increase of 6% from the nine months ended September 30, 2011. This higher sales level reflected increases in our North American, European, and Rest of World production sales as well as higher tooling and engineering and other sales, partially offset by lower complete vehicle assembly sales.

During the nine months ended September 30, 2012, vehicle production increased 20% to 11.6 million units in North America and decreased 7% to 9.6 million units in Western Europe, each compared to the first nine months of 2011.

Complete vehicle assembly sales decreased 10% to $1.9 billion for the nine months ended September 30, 2012 compared to $2.1 billion for the nine months ended September 30, 2011, while complete vehicle assembly volumes decreased 8% to approximately 92,000 units.

During the nine months ended September 30, 2012, adjusted EBIT increased 22% to $1.3 billion compared to $1.0 billion for the nine months ended September 30, 2011.

During the nine months ended September 30, 2012, income from operations before income taxes was $1.4 billion, net income attributable to Magna International Inc. was $1.1 billion and diluted earnings per share were $4.60, increases of $483 million, $376 million and $1.71, respectively, each compared to the first nine months of 2011. During the nine months ended September 30, 2012, we recorded other income related to a re-measurement gain on the acquisition of the controlling 27% interest in E-Car. This positively impacted income from operations before income taxes by $153 million, net income attributable to Magna International Inc. by $125 million and diluted EPS by $0.53 for the nine months ended September 30, 2012. During the nine months ended September 30, 2011, we recorded other expense relating to the disposal of an interior systems operation, the cost of entering into an agreement pertaining to the settlement of certain claims, the write down of real estate, and a gain on disposal of an equity accounted investment. These items negatively impacted income from operations before income taxes and net income attributable to Magna International Inc. by $123 million and diluted earnings per share by $0.50 for the nine months ended September 30, 2011.

During the nine months ended September 30, 2012, we generated cash from operations before changes in non-cash operating assets and liabilities of $1.6 billion, and invested $487 million in non-cash operating assets and liabilities. Total investment activities for the first nine months of 2012 were $972 million, including $796 million in fixed asset additions, a $97 million increase in investments and other assets and $79 million to purchase subsidiaries.

A more detailed discussion of our consolidated financial results for the third quarter and nine months ended September 30, 2012 is contained in the Management's Discussion and Analysis of Results of Operations and Financial Position and the unaudited interim consolidated financial statements and notes thereto, which are attached to this Press Release.

DIVIDENDS

Today, our Board of Directors declared a quarterly dividend of $0.275 with respect to our outstanding Common Shares for the quarter ended September 30, 2012. This dividend is payable on December 14, 2012 to shareholders of record on November 30, 2012.

NORMAL COURSE ISSUER BID

Subject to approval by the Toronto Stock Exchange and the New York Stock Exchange, our Board of Directors approved a normal course issuer bid to purchase up to 12.0 million of our Common Shares. This new normal course issuer bid is expected to commence on or about November 13, 2012 and will terminate one year later.

OTHER MATTERS

We also announced that Frank Stronach, Magna's Founder and Honorary Chairman has decided to step down as a member of Magna's Board of Directors, effective immediately.

Magna's Chairman, Bill Young, stated: "On behalf of the Board, I would like to thank Frank for his enormous contribution to Magna's success over the past six decades."

Frank Stronach commented: "It has been two years since control of Magna has changed hands and, in that time, I have become involved in numerous activities outside of the automotive industry. One of these activities involves politics in Austria and I do not want my political views to be confused with my role on Magna's Board. As a result, I feel the time is right to step down as a member of Magna's Board. Magna is in excellent hands, with a seasoned management team and very capable Board members. Of course, as Honorary Chairman, I will always be available to provide any guidance that management or the Board requires."

Don Walker, Magna's Chief Executive Officer added: "Personally and on behalf of all our employees, I would like to thank Frank for all he has done for this company. Also, I would like to assure all our stakeholders that we remain fully committed to the Corporate Constitution, Employee Charter and Operational Principles. These and other elements of the Fair Enterprise culture that Frank founded have been the cornerstone of Magna's success over the years and we expect they will be key to our future success."

UPDATED 2012 OUTLOOK

    Light Vehicle Production
    (Units)
                  North America               15.3 million
                  Western
                  Europe                      12.6 million
 
    Production Sales
                                              $15.1 billion
                                                 - $15.4
                  North America                  billion
                                              $8.6 billion
                                                 - $8.8
                  Europe                         billion
                                              $1.8 billion
                                                 - $1.9
                  Rest of World                  billion
                  Total                       $25.5 billion
                  Production                     - $26.1
                  Sales                          billion
 
                                              $2.4 billion
    Complete Vehicle Assembly                    - $2.6
    Sales                                        billion
 
                                              $30.3 billion
                                                 - $31.2
    Total Sales                                  billion
 
                                              Low to mid 5%
    Operating Margin(*) (**)                      range
 
                                              Approximately
    Tax Rate*                                      25%
 
                                              Approximately
    Capital Spending                          $1.4 billion

    * Excluding other income, net (unusual items)
    ** Excluding $52 million amortization of intangibles related to acquisition
    of E-Car

In this 2012 outlook, in addition to 2012 light vehicle production, we have assumed no material 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 88 product development, engineering and sales centres in 27 countries. Our 117,000 employees are focused on delivering superior value to our customers through innovative processes and World Class Manufacturing. Our product capabilities include producing body, chassis, interiors, exteriors, seating, powertrain, electronics, mirrors, closures and roof systems and modules, as well as complete vehicle engineering and contract manufacturing. Our common shares trade on the Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). For further information about Magna, visit our website at http://www.magna.com.

     
    We will hold a conference call for interested analysts and shareholders to
    discuss our third quarter results on Thursday, November 8, 2012 at 8:00
    a.m. EST. The conference call will be chaired by Don Walker, Chief
    Executive Officer. The number to use for this call is 1-877-360-1773. The
    number for overseas callers is 1-706-679-9940. Please call in at least 10
    minutes prior to the call. We will also webcast the conference call at
    http://www.magna.com. The slide presentation accompanying the conference
    call will be available on our website Thursday morning prior to the call.
 
    For further information, please contact Louis Tonelli, Vice-President,
    Investor Relations at +1-905-726-7035.
 
    For teleconferencing questions, please contact Karin Kaminski at
    +1-905-726-7103.

FORWARD-LOOKING STATEMENTS

The previous discussion contains statements that constitute "forward-looking statements" within the meaning of applicable securities legislation, including, but not limited to, statements relating to Magna's expected production sales, based on expected light vehicle production in North America and Western Europe; Magna's expected production sales in the North America, Europe and Rest of World segments; total sales; complete vehicle assembly sales; consolidated operating margin; effective income tax rate; fixed asset expenditures; and future purchases of our Common Shares under the Normal Course Issuer Bid. The forward-looking information in this document 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 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. Any such forward-looking statements 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; risks arising from uncertain economic conditions in Europe, including the potential for a deterioration of sales of our three largest German-based OEM customers; restructuring actions by OEMs, including plant closures; restructuring, downsizing and/or other significant non-recurring costs; continued underperformance of one or more of our operating divisions; our ability to successfully launch material new or takeover business; liquidity risks; risks arising due to the failure of a major financial institution; bankruptcy or insolvency of a major customer or supplier; a prolonged disruption in the supply of components to us from our suppliers; scheduled production shutdowns of our customers' production facilities (typically in the third and fourth quarters of each calendar year); shutdown of our or our customers' or sub-suppliers' production facilities due to a labour disruption; our ability to successfully compete with other automotive suppliers; a reduction in outsourcing by our customers or the loss of a material production or assembly program; the termination or non-renewal by our customers of any material production purchase order; a shift away from technologies in which we are investing; impairment charges related to goodwill, long-lived assets and deferred tax assets; shifts in market share away from our top customers; shifts in market shares among vehicles or vehicle segments, or shifts away from vehicles on which we have significant content; risks of conducting business in foreign markets, including China, India, Brazil, Russia and other non-traditional markets for us; exposure to, and ability to offset, volatile commodities prices; fluctuations in relative currency values; our ability to successfully identify, complete and integrate acquisitions or achieve anticipated synergies; ongoing pricing pressures, including our ability to offset price concessions demanded by our customers; warranty and recall costs; our ability to understand and compete successfully in non-automotive businesses in which we pursue opportunities; risks related to natural disasters and potential production disruptions; factors that could cause an increase in our pension funding obligations; changes in our mix of earnings between jurisdictions with lower tax rates and those with higher tax rates, as well as our ability to fully benefit tax losses; other potential tax exposures; legal claims and/or regulatory actions against us; the unpredictability of, and fluctuation in, the trading price of our Common Shares; work stoppages and labour relations disputes; changes in credit ratings assigned to us; changes in laws and governmental regulations; costs associated with compliance with environmental laws and regulations; risks related to the electric vehicle industry; and other factors set out in our Annual Information Form filed with securities commissions in Canada and our annual report on Form 40-F filed with the United States Securities and Exchange Commission, and subsequent filings. In evaluating forward-looking statements, we caution readers not to place undue reliance on any forward-looking statements and readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements. Unless otherwise required by applicable securities laws, we do not intend, nor do we undertake any obligation, to update or revise any forward-looking statements to reflect subsequent information, events, results or circumstances or otherwise.

For further information about Magna, please see our website at http://www.magna.com. Copies of financial data and other publicly filed documents are available through the internet on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval (SEDAR) which can be accessed at http://www.sedar.com and on the United States Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval System (EDGAR) which can be accessed at http://www.sec.gov

For further information: Please contact Louis Tonelli, Vice-President, Investor Relations at +1-905-726-7035.