AURORA, Ontario, Nov. 08, 2018for full third quarter Financial Statements and MD&A.
| THREE MONTHS ENDED SEPTEMBER 30, | NINE MONTHS ENDED SEPTEMBER 30, | |||||||||||||||
| 2018 | 2017(2) | 2018 | 2017(2) | |||||||||||||
| Reported | ||||||||||||||||
| Sales | $ | 9,618 | $ | 8,864 | $ | 30,690 | $ | 26,904 | ||||||||
| Income from operations before income taxes | $ | 674 | $ | 683 | $ | 2,344 | $ | 2,220 | ||||||||
| Net income attributable to Magna International Inc. | $ | 554 | $ | 512 | $ | 1,840 | $ | 1,637 | ||||||||
| Diluted earnings per share | $ | 1.62 | $ | 1.38 | $ | 5.22 | $ | 4.33 | ||||||||
| Non-GAAP Financial Measures(1) | ||||||||||||||||
| Adjusted EBIT | $ | 699 | $ | 705 | $ | 2,377 | $ | 2,281 | ||||||||
| Adjusted diluted earnings per share | $ | 1.56 | $ | 1.39 | $ | 5.08 | $ | 4.36 | ||||||||
| All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars. (1)Adjusted EBIT, Adjusted diluted earnings per share and Adjusted EBIT as a percentage of sales are Non-GAAP financial measures that have no standardized meaning under U.S. GAAP, and as a result may not be comparable to the calculation of similar measures by other companies. A reconciliation of these Non-GAAP financial measures is included in the back of this press release. | ||||||||||||||||
(2)2017 amounts included in this Press Release have been adjusted for our adoption of the new revenue standard (Accounting Standards Codification 606) and recast for our new reportable segments. | ||||||||||||||||
THREE MONTHS ENDED SEPTEMBER 30, 2018
We set third quarter records for sales, diluted earnings per share and Adjusted diluted earnings per share, and returned $629 million to shareholders through share repurchases and dividends. All of our operating segments reported sales growth compared to the third quarter of 2017 and, excluding both acquisitions net of divestitures and foreign exchange movements, sales for all segments outgrew global light vehicle production. However, our sales were slightly lower than we had anticipated, mainly due to lower than expected light vehicle production. Adjusted EBIT was below the comparable quarter in 2017 and was less than what we expected. After taking into account the impact of lower than anticipated volumes, our Power & Vision, Seating Systems and Complete Vehicles segments performed substantially in line with our expectations. However, our Body Exteriors & Structures segment reported results below our expectations, mainly as a result of higher than anticipated launch costs and underperformance at certain facilities, largely offset by a favourable customer pricing resolution.
On a consolidated basis, we posted sales of $9.62 billion for the third quarter of 2018, an increase of 9% over the third quarter of 2017. The strong growth was achieved in a period in which light vehicle production increased 4% in North America and was essentially unchanged in Europe. Excluding the impact of foreign currency translation and net divestitures, sales increased 11% on a consolidated basis, and by segment: 6% in both Body Exteriors & Structures and Power & Vision, 5% in Seating Systems, and 50% in Complete Vehicles.
Adjusted EBIT of $699 million in the third quarter of 2018 decreased 1.0%, resulting in an adjusted EBIT as a percentage of sales of 7.3% in the third quarter of 2018 compared to 8.0% in the third quarter of 2017. This margin decline was largely driven by:
- an increase in the proportion of sales generated in our Complete Vehicles segment relative to total sales, which have a significantly lower margin than our consolidated average;
- lower margins in the third quarter of 2018 in our Seating Systems segment, mainly associated with pre-operating costs incurred at new facilities and favourable customer pricing resolutions in the third quarter of 2017; and
- lower margins in our Power & Vision segment, largely reflecting increased spending for electrification and autonomy.
Income from operations before income taxes of $674 million decreased 1.0% in the third quarter of 2018.
Net income attributable to Magna International Inc. increased 8% to $554 million for the third quarter of 2018, substantially reflecting a lower income tax rate.
Diluted earnings per share increased 17% to $1.62 in the third quarter of 2018, reflecting higher net income attributable to Magna International Inc., and the favourable impact of a reduced share count. Adjusted diluted earnings per share increased 12% to $1.56 compared to $1.39 for the third quarter of 2017.
In the third quarter of 2018, we generated cash from operations before changes in operating assets and liabilities of $899 million, and $177 million in operating assets and liabilities. Investment activities for the third quarter of 2018 included $381 million in fixed asset additions, and a $114 million increase in investments, other assets and intangible assets.
NINE MONTHS ENDED SEPTEMBER 30, 2018
We posted sales of $30.69 billion for the nine months ended September 30, 2018, an increase of 14% from the nine months ended September 30, 2017. North American light vehicle production remained relatively unchanged and European light vehicle production increased 2%, in the first nine months of 2018 compared to the first nine months of 2017.
During the nine months ended September 30, 2018, income from operations before income taxes was $2.34 billion, net income attributable to Magna International Inc. was $1.84 billion and diluted earnings per share was $5.22, increases of $124 million, $203 million and $0.89, respectively, each compared to the first nine months of 2017.
During the nine months ended September 30, 2018, Adjusted EBIT increased 4% to $2.38 billion, compared to $2.28 billion for the nine months ended September 30, 2017. Our Body Exteriors & Structures, Power & Vision, and Complete Vehicles segments each posted higher Adjusted EBIT compared to the first nine months of 2017.
During the nine months ended September 30, 2018, we generated cash from operations before changes in operating assets and liabilities of $2.87 billion, and invested $750 million in operating assets and liabilities. Investment activities for the nine months of 2018 included $1.00 billion in fixed asset additions, and $331 million in investments, other assets and intangible assets.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three and nine months ended September 30, 2018, we paid dividends of $109 million and $342 million, respectively. In addition, we repurchased 9.2 million shares for $520 million and 22.7 million shares for $1.35 billion, respectively, for the three and nine months ended September 30, 2018.
Our Board of Directors declared a quarterly dividend of $0.33 with respect to our outstanding Common Shares for the quarter ended September 30, 2018. This dividend is payable on December 7, 2018 to shareholders of record on November 23, 2018.
OTHER MATTERS
Subject to the approval by the Toronto Stock Exchange and the New York Stock Exchange, our Board of Directors approved a new Normal Course Issuer Bid ("NCIB") to purchase up to 33.2 million of our Common Shares, representing approximately 10% of our public float of Common Shares. This NCIB is expected to commence on or about November 15, 2018 and will terminate one year later.
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/6dd59a22-822f-444c-b864-78e2f6a7068f
SEGMENT SUMMARY(2)
| ($Millions unless otherwise noted) | For the three months ended September 30, | |||||||||||||||
| Sales | Adjusted EBIT | |||||||||||||||
| 2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||
| Body Exteriors & Structures | $ | 4,180 | $ | 4,004 | $ | 176 | $ | 322 | $ | 306 | $ | 16 | ||||
| Power & Vision | 2,947 | 2,830 | 117 | 258 | 267 | (9 | ) | |||||||||
| Seating Systems | 1,219 | 1,217 | 2 | 69 | 95 | (26 | ) | |||||||||
| Complete Vehicles | 1,391 | 938 | 453 | 24 | 17 | 7 | ||||||||||
| Corporate and Other | (119 | ) | (125 | ) | 6 | 26 | 20 | 6 | ||||||||
| Total Reportable Segments | $ | 9,618 | $ | 8,864 | $ | 754 | $ | 699 | $ | 705 | $ | (6 | ) | |||
| For the three months ended September 30, | |||||||||||||||||||
| Adjusted EBIT as a percentage of sales | |||||||||||||||||||
| 2018 | 2017 | Change | |||||||||||||||||
| Body Exteriors & Structures | 7.7 | % | 7.6 | % | 0.1 | % | |||||||||||||
| Power & Vision | 8.8 | % | 9.4 | % | (0.6 | )% | |||||||||||||
| Seating Systems | 5.7 | % | 7.8 | % | (2.1 | )% | |||||||||||||
| Complete Vehicles | 1.7 | % | 1.8 | % | (0.1 | )% | |||||||||||||
| Consolidated Average | 7.3 | % | 8.0 | % | (0.7 | )% | |||||||||||||
| ($Millions unless otherwise noted) | For the nine months ended September 30, | ||||||||||||||||||
| Sales | Adjusted EBIT | ||||||||||||||||||
| 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||
| Body Exteriors & Structures | $ | 13,350 | $ | 12,280 | $ | 1,070 | $ | 1,047 | $ | 992 | $ | 55 | |||||||
| Power & Vision | 9,334 | 8,685 | 649 | 915 | 861 | 54 | |||||||||||||
| Seating Systems | 4,113 | 3,919 | 194 | 315 | 328 | (13 | ) | ||||||||||||
| Complete Vehicles | 4,331 | 2,334 | 1,997 | 44 | 38 | 6 | |||||||||||||
| Corporate and Other | (438 | ) | (314 | ) | (124 | ) | 56 | 62 | (6 | ) | |||||||||
| Total Reportable Segments | $ | 30,690 | $ | 26,904 | $ | 3,786 | $ | 2,377 | $ | 2,281 | $ | 96 | |||||||
| For the nine months ended September 30, | ||||||||||
| Adjusted EBIT as a percentage of sales | ||||||||||
| 2018 | 2017 | Change | ||||||||
| Body Exteriors & Structures | 7.8 | % | 8.1 | % | (0.3 | )% | ||||
| Power & Vision | 9.8 | % | 9.9 | % | (0.1 | )% | ||||
| Seating Systems | 7.7 | % | 8.4 | % | (0.7 | )% | ||||
| Complete Vehicles | 1.0 | % | 1.6 | % | (0.6 | )% | ||||
| Consolidated Average | 7.7 | % | 8.5 | % | (0.8 | )% | ||||
(2)2017 amounts included in this Press Release have been adjusted for our adoption of the new revenue standard (Accounting Standards Codification 606) and recast for our new reportable segments. | ||||||||||
For further details on our segment results, please see our Management's Discussion and Analysis of Results of Operations and Financial Position and our Interim Financial Statements.
UPDATED 2018 OUTLOOK
| We have updated our 2018 outlook largely to reflect our third quarter 2018 results, as well as fourth quarter 2018 expectations for lower light vehicle production, lower equity earnings in our European transmission joint venture and higher costs in our Body Exteriors & Structures segment. | |||||
| Current | Previous | ||||
| Light Vehicle Production (Units) North America Europe | 17.0 million 22.5 million | 17.2 million 22.6 million | |||
| Segment Sales Body Exteriors & Structures Power & Vision Seating Systems Complete Vehicles | $17.3 - $17.7 billion $12.3 - $12.6 billion $5.4 - $5.6 billion $5.9 - $6.1 billion | $17.1 - $17.9 billion $12.2 - $12.8 billion $5.5 - $5.9 billion $6.1 - $6.5 billion | |||
| Total Sales | $40.3 - $41.4 billion | $40.3 - $42.5 billion | |||
| Adjusted EBIT Margin(3) | Approximately 7.7% | 7.7% - 7.9% | |||
| Equity Income (included in EBIT) | $255 - $280 million | $270 - $305 million | |||
| Interest Expense, net | Approximately $95 million | Approximately $90 million | |||
| Income Tax Rate(4) | Approximately 22% | 22% - 23% | |||
| Adjusted Net Income attributable to Magna(5) | $2.3 - $2.4 billion | $2.3 - $2.5 billion | |||
| Capital Spending | Approximately $1.7 billion | Approximately $1.9 billion | |||
| (3)Adjusted EBIT Margin is the ratio of Adjusted EBIT to Total Sales (4)The Income Tax Rate has been calculated using Adjusted EBIT and is based on current tax legislation (5)Adjusted Net Income attributable to Magna is Net Income attributable to Magna after excluding Other expense (income), net after-tax and Reassessment of deferred tax balances | |||||
In this 2018 outlook, we have assumed:
- 2018 light vehicle production volumes (as set out above);
- no material unannounced acquisitions or divestitures; and
- foreign exchange rates for the most common currencies in which we conduct business relative to our U.S. dollar reporting currency as follows:
º 1 Canadian dollar equals U.S. dollars 0.772
º 1 euro equals U.S. dollars 1.184
NON-GAAP FINANCIAL MEASURES RECONCILIATION
| Adjusted EBIT | |||||||
| The following table reconciles net income to Adjusted EBIT: | |||||||
| For the three months ended September 30, | |||||||
| 2018 | 2017 | ||||||
| Net Income | $ | 560 | $ | 521 | |||
| Add: | |||||||
| Interest expense, net | 23 | 20 | |||||
| Other expense (income), net | 2 | 2 | |||||
| Income taxes | 114 | 162 | |||||
| Adjusted EBIT | $ | 699 | $ | 705 | |||
| Adjusted EBIT as a percentage of sales ("Adjusted EBIT margin") | |||||||
| Adjusted EBIT as a percentage of sales is calculated in the table below: | |||||||
| For the three months ended September 30, | |||||||
| 2018 | 2017 | ||||||
| Sales | $ | 9,618 | $ | 8,864 | |||
| Adjusted EBIT | $ | 699 | $ | 705 | |||
| Adjusted EBIT as a percentage of sales | 7.3 | % | 8.0 | % | |||
| Adjusted diluted earnings per share | |||||||
| The following table reconciles net income attributable to Magna International Inc. to Adjusted diluted earnings per share: | |||||||
| For the three months ended September 30, | |||||||
| 2018 | 2017 | ||||||
| Net income attributable to Magna International Inc. | $ | 554 | $ | 512 | |||
| Add: | |||||||
| Other expense (income), net | 2 | 2 | |||||
| Reassessment of deferred tax balances | (21 | ) | - | ||||
| Adjusted net income attributable to Magna International Inc. | $ | 535 | $ | 514 | |||
| Diluted weighted average number of Common Shares outstanding during the period (millions): | 343.0 | 370.4 | |||||
| Adjusted diluted earnings per share | $ | 1.56 | $ | 1.39 | |||
NON-GAAP FINANCIAL MEASURES RECONCILIATION
| Adjusted EBIT | |||||||
| The following table reconciles net income to Adjusted EBIT: | |||||||
| For the nine months ended September 30, | |||||||
| 2018 | 2017 | ||||||
| Net Income | $ | 1,865 | $ | 1,669 | |||
| Add: | |||||||
| Interest expense, net | 67 | 50 | |||||
| Other expense (income), net | (34 | ) | 11 | ||||
| Income taxes | 479 | 551 | |||||
| Adjusted EBIT | $ | 2,377 | $ | 2,281 | |||
| Adjusted EBIT as a percentage of sales ("Adjusted EBIT margin") | |||||||
| Adjusted EBIT as a percentage of sales is calculated in the table below: | |||||||
| For the nine months ended September 30, | |||||||
| 2018 | 2017 | ||||||
| Sales | $ | 30,690 | $ | 26,904 | |||
| Adjusted EBIT | $ | 2,377 | $ | 2,281 | |||
| Adjusted EBIT as a percentage of sales | 7.7 | % | 8.5 | % | |||
| Adjusted diluted earnings per share | |||||||
| The following table reconciles net income attributable to Magna International Inc. to Adjusted diluted earnings per share: | |||||||
| For the nine months ended September 30, | |||||||
| 2018 | 2017 | ||||||
| Net income attributable to Magna International Inc. | $ | 1,840 | $ | 1,637 | |||
| Add: | |||||||
| Other expense (income), net | (34 | ) | 11 | ||||
| Tax effect on Other expense (income), net | 3 | - | |||||
| Reassessment of deferred tax balances | (21 | ) | - | ||||
| Adjusted net income attributable to Magna International Inc. | $ | 1,788 | $ | 1,648 | |||
| Diluted weighted average number of Common Shares outstanding during the period (millions): | 352.3 | 377.7 | |||||
| Adjusted diluted earnings per share | $ | 5.08 | $ | 4.36 | |||
Certain of the forward-looking financial measures above are provided on a Non-GAAP basis. We do not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. To do so would be potentially misleading and not practical given the difficulty of projecting items that are not reflective of on-going operations in any future period. The magnitude of these items, however, may be significant.
This press release together with our Management's Discussion and Analysis of Results of Operations and Financial Position and our Interim Financial Statements are available in the Investor Relations section of our website at www.magna.com/company/investorsand filed electronically through the System for Electronic Document Analysis and Retrievalas well as on the United States Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval System.
We will hold a conference call for interested analysts and shareholders to discuss our third quarter ended September 30, 2018 results on Thursday, November 8, 2018 at 8:00 a.m. EDT. The conference call will be chaired by Don Walker, Chief Executive Officer. The number to use for this call from North America is
1-800-682-8914. International callers should use 1-303-223-4366. Please call in at least 10 minutes prior to the call start time. We will also webcast the conference call at www.magna.com. The slide presentation accompanying the conference call will be available on our website Thursday prior to the call.
TAGS
Quarterly earnings, record quarter, financial results, sales growth
INVESTOR CONTACT
Louis Tonelli, Vice-President, Investor Relations
louis.tonelli@magna.com¦ 905.726.7035
MEDIA CONTACT
Tracy Fuerst, Director of Corporate Communications & PR
tracy.fuerst@magna.com¦ 248.631.5396
OUR BUSINESS.
(6) Manufacturing operations, product development, engineering and sales centres and employee figures include certain equity-accounted operations.
FORWARD-LOOKING STATEMENTS
We disclose "forward-looking information" or "forward-looking statements" (collectively, "forward-looking statements") to provide information about management's current expectations and plans. Such forward-looking statements 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", "aim", "forecast", "outlook", "project", "estimate", "target" and similar expressions suggesting future outcomes or events to identify
forward-looking statements.
Forward-looking statements in this press release include, but are not limited to, statements related to:
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Our 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.
While we believe we have a reasonable basis for making such forward-looking statements, they are not a guarantee of future performance or outcomes. Whether actual results and developments conform to 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:
Risks Related to the Automotive Industry
| Warranty / Recall Risks
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In evaluating forward-looking statements or forward-looking information, we caution readers not to place undue reliance on any forward-looking statement, 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, including the risks, assumptions and uncertainties above which are discussed in greater detail in this document under the section titled "Industry Trends and Risks" and 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.
