MGA Magna International Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of:  August 2015

Commission File Number:  001-11444

MAGNA INTERNATIONAL INC.

(Exact Name of Registrant as specified in its Charter)

337 Magna Drive, Aurora, Ontario, Canada L4G 7K1

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F o         Form 40-F x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Note:  Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Note:  Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K  submission or other  Commission filing on EDGAR.

Indicate by check mark whether the registrant, by furnishing the information contained in this Form, is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.   Yes o   No x

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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EXHIBITS

Exhibit 99.1

The Second Quarter Report of the Registrant, including its unaudited interim consolidated financial statements and Management’s Discussion and Analysis of Results of Operations and Financial Position for the period ended June 30, 2015.

Exhibit 99.2

Certificate of the Chief Executive Officer of the Registrant, Donald J. Walker, dated August 13, 2015 on Form 52-109F2 pursuant to the Canadian Securities Administrators’ Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings.

Exhibit 99.3

Certificate of the Chief Financial Officer of the Registrant, Vincent J. Galifi, dated August 13, 2015 on Form 52-109F2 pursuant to the Canadian Securities Administrators’ Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings.

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Exhibit 99.1

Magna International Inc.

Second Quarter Report

2015

MAGNA INTERNATIONAL INC.

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 Magna International Inc. and its subsidiaries and jointly controlled entities, unless the context otherwise requires.

This MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the three months and six months ended June 30, 2015 included in this Quarterly Report, and the audited consolidated financial statements and MD&A for the year ended December 31, 2014 included in our 2014 Annual Report to Shareholders.

This MD&A has been prepared as at August 5, 2015.

OVERVIEW

We are a leading global automotive supplier with 319 manufacturing operations and 85 product development, engineering and sales centres in 29 countries. We have over 136,000 employees focused on delivering superior value to our customers through innovative products, processes and World Class Manufacturing. Our product capabilities include producing body, chassis, interior, 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 Toronto Stock Exchange (MG) and the New York Stock Exchange (MGA). For further information about Magna, visit our website at www.magna.com.

HIGHLIGHTS

Basis of Presentation

In the second quarter of 2015, we signed an agreement to sell substantially all of our interiors operations to Grupo Antolin, a leading global supplier of automotive interior systems. The purchase price for the operations, excluding certain assets, is approximately $525 million, subject to customary closing adjustments. We will continue managing our seating operations which are not included in this arrangement. The assets and liabilities, and operating results for the previously reported interiors operations are presented as discontinued operations, and have therefore been excluded from 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.

Operations

North American light vehicle production increased 3% to 4.5 million units and European light vehicle production increased marginally to 5.3 million units, each in the second quarter of 2015 compared to the second quarter of 2014.

We posted sales of $8.13 billion for the second quarter of 2015, a decrease of $778 million or 9% from the second quarter of 2014. The weakening of certain currencies against our U.S. dollar reporting currency, in particular the euro and Canadian dollar, once again had a significant impact on our reported sales in the second quarter of 2015. Foreign exchange translation reduced our sales in the second quarter of 2015 by approximately $890 million, as compared to the second quarter of 2014. Excluding the negative impact of foreign currency translation, sales increased 1% in the second quarter of 2015, compared to the second quarter of 2014.

Our Adjusted EBIT(1) decreased 6% to $677 million in the second quarter of 2015, compared to the second quarter of 2014.

·                  North America: Adjusted EBIT of $525 million for the second quarter of 2015 declined 3% compared to $539 million for the second quarter of 2014. Segment total sales declined modestly in the second quarter of 2015 compared to the second quarter of 2014.

·                  Europe: Adjusted EBIT of $120 million for the second quarter of 2015 declined 16% or $23 million from the second quarter of 2014, while segment total sales declined 21% from the second quarter of 2014 to the second quarter of 2015.

·                  Asia:  Adjusted EBIT was $31 million in the second quarter of 2015, compared to $41 million for the second quarter of 2014. Segment total sales declined modestly in the second quarter of 2015 compared to the second quarter of 2014.

·                  Rest of World: Our Adjusted EBIT loss of $8 million for the second quarter of 2015 compared to an Adjusted EBIT loss of $11 million in the second quarter of 2014. Segment total sales declined 26% to $125 million for the second quarter of 2015 compared to the second quarter of 2014.

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, net.

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Investment

Subsequent to the second quarter of 2015, we signed an agreement to acquire the Getrag Group of Companies (“Getrag”), one of the world’s largest suppliers of transmissions. Getrag has an 80-year history in transmissions and is a technology leader, offering a range of transmission systems. The purchase price for 100% of the equity of Getrag is approximately €1.75 billion. This represents an enterprise value of approximately €2.45 billion less proportionate net debt and proportionate pension liabilities, which together are estimated to be approximately €700 million at closing. The purchase price is subject to working capital and other customary purchase price adjustments. The transaction is subject to customary closing conditions including regulatory approval, and is expected to close near the end of 2015.

FINANCIAL RESULTS SUMMARY

During the second quarter of 2015, we posted sales of $8.13 billion, a decrease of 9% from the second quarter of 2014. This lower sales level was substantially a result of a decrease in reported U.S. dollar sales due to the weakening of foreign currencies against the U.S. dollar. Comparing the second quarter of 2015 to 2014:

·                  North American vehicle production increased 3% and our North American production sales increased 1% to $4.58 billion;

·                  European vehicle production increased marginally but our European production sales decreased 23% to $1.83 billion;

·                  Asian production sales increased marginally to $390 million;

·                  Rest of World production sales decreased 23% to $125 million;

·                  Complete vehicle assembly volumes decreased 17% and sales decreased 26% to $607 million; and

·                  Tooling, engineering and other sales decreased 10% to $599 million.

During the second quarter of 2015, we earned income from continuing operations before income taxes of $726 million compared to $704 million for the second quarter of 2014. Excluding other (income) expense, net (“Other Income” or “Other Expense”), as discussed in the “Other Income” section, income from continuing operations before income taxes decreased $46 million primarily as a result of:

·                  the negative impact of foreign exchange translation from the weakening of foreign currencies, including the euro and Canadian dollar, against the U.S. dollar;

·                  lower recoveries associated with scrap steel;

·                  higher launch costs;

·                  operational inefficiencies at certain facilities;

·                  higher warranty costs of $3 million;

·                  higher incentive compensation;

·                  lower equity income;

·                  a $1 million net decrease in valuation gains in respect of ABCP; and

·                  net customer price concessions subsequent to the second quarter of 2014.

These factors were partially offset by:

·                  incremental margin earned on new programs that launched during or subsequent to the second quarter of 2014;

·                  costs incurred related to a fire at a body and chassis facility in North America, during the second quarter of 2014;

·                  the expiration, at the end of 2014, of our consulting agreements with Frank Stronach;

·                  decreased commodity costs;

·                  a lower amount of employee profit sharing; and

·                  productivity and efficiency improvements at certain facilities.

During the second quarter of 2015, net income attributable to Magna International Inc. from continuing operations was $538 million, an increase of $19 million compared to the second quarter of 2014 and diluted earnings per share from continuing operations increased $0.11 to $1.29 for the second quarter of 2015 compared to the second quarter of 2014. Other Income and Other Expense, after tax, as discussed in the “Other Income” section impacted net income attributable to Magna International Inc. from continuing operations and diluted earnings per share from continuing operations as follows:

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Excluding the $42 million positive impact for the second quarter of 2015 and the $10 million negative impact for the second quarter of 2014, net income attributable to Magna International Inc. from continuing operations for the second quarter of 2015 decreased $33 million compared to the second quarter of 2014.

Excluding the $0.10 per share positive impact for the second quarter of 2015 and the $0.02 per share negative impact for the second quarter of 2014, diluted earnings per share from continuing operations decreased $0.01, as a result of the decrease in net income attributable to Magna International Inc. from continuing operations partially offset by a decrease in the weighted average number of diluted shares outstanding during the second quarter of 2015. 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 the second quarter of 2014, pursuant to our normal course issuer bids.

INDUSTRY TRENDS AND RISKS

Our success is primarily dependent upon the levels of North American and European car and light truck production by our customers and the relative amount of content we have on various programs. OEM production volumes in different regions may be impacted by factors which may vary from one region to the next, including but not limited to: general economic and political conditions; consumer confidence levels; interest rates; credit availability; energy and fuel prices; relative currency values; commodities prices; international conflicts; labour relations issues; regulatory requirements; trade agreements; infrastructure; legislative changes; and environmental emissions and safety standards. These factors together with other factors affecting our performance such as: operational inefficiencies; costs incurred to launch new or takeover business; price reduction pressures from our customers; warranty and recall costs; commodities and scrap prices; restructuring, downsizing and other significant non-recurring costs; and the financial condition of our supply base, are discussed in our Annual Information Form and Annual Report on Form 40-F, each in respect of the year ended December 31, 2014, and remain substantially unchanged in respect of the second quarter ended June 30, 2015.

RESULTS OF OPERATIONS

Average Foreign Exchange

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 six months ended June 30, 2015 impacted the reported U.S. dollar amounts of our sales, expenses and income.

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.

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RESULTS OF OPERATIONS — FOR THE THREE MONTHS ENDED JUNE 30, 2015

Sales

External Production Sales - North America

Reported external production sales in North America increased 1% or $64 million to $4.58 billion for the second quarter of 2015 compared to $4.52 billion for the second quarter of 2014, primarily as a result of:

·                  the launch of new programs during or subsequent to the second quarter of 2014, including the:

·                  Ford Transit;

·                  Ford Edge;

·                  Mercedes-Benz C-Class;

·                  Ford Mustang; and

·                  Chevrolet Colorado and GMC Canyon.

This factor was partially offset by:

·                  a $175 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 volumes on certain existing programs;

·                  programs that ended production during or subsequent to the second quarter of 2014;

·                  net divestitures subsequent to the second quarter of 2014, which negatively impacted sales by $27 million; and

·                  net customer price concessions subsequent to the second quarter of 2014.

External Production Sales - Europe

Reported external production sales in Europe decreased 23% or $531 million to $1.83 billion for the second quarter of 2015 compared to $2.36 billion for the second quarter of 2014, primarily as a result of:

·                  a $444 million decrease in reported U.S. dollar sales primarily as a result of the weakening of foreign currencies against the U.S. dollar, including the euro and Czech koruna;

·                  lower production volumes on certain existing programs;

·                  programs that ended production during or subsequent to the second quarter of 2014; and

·                  net customer price concessions subsequent to the second quarter of 2014.

These factors were partially offset by the launch of new programs during or subsequent to the second quarter of 2014.

External Production Sales - Asia

Reported external production sales in Asia increased $1 million to $390 million for the second quarter of 2015 compared to $389 million for the second quarter of 2014, primarily as a result of the launch of new programs during or subsequent to the second quarter of 2014, primarily in China and India.

This factor was partially offset by:

·                  lower production volumes on certain existing programs;

·                  a $4 million decrease in reported U.S. dollar sales primarily as a result of the weakening of foreign currencies against the U.S. dollar, including the South Korean won; and

·                  net customer price concessions subsequent to the second quarter of 2014.

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External Production Sales - Rest of World

Reported external production sales in Rest of World decreased 23% or $38 million to $125 million for the second quarter of 2015 compared to $163 million for the second quarter of 2014, primarily as a result of:

·                  lower production volumes on certain existing programs; and

·                  a $40 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.

These factors were partially offset by:

·                  the launch of new programs during or subsequent to the second quarter of 2014, primarily in Brazil; and

·                  net customer price increases subsequent to the second quarter of 2014.

Complete Vehicle Assembly Sales

Reported complete vehicle assembly sales decreased $210 million, to $607 million for the second quarter of 2015 compared to $817 million for the second quarter of 2014 and assembly volumes decreased 17% or 5,956 units.

The decrease in complete vehicle assembly sales is primarily as a result of:

·                  a $146 million decrease in reported U.S. dollar sales as a result of the weakening of the euro against the U.S. dollar; and

·                  a decrease in assembly volumes for the MINI Countryman.

These factors were partially offset by an increase in assembly volumes for the Mercedes-Benz G-Class.

Tooling, Engineering and Other Sales

Reported tooling, engineering and other sales decreased 10% or $64 million to $599 million for the second quarter of 2015 compared to $663 million for the second quarter of 2014.

In the second quarter of 2015, the major programs for which we recorded tooling, engineering and other sales were the:

·                  Ford F-Series and F-Series SuperDuty;

·                  GMC Acadia, Buick Enclave and Chevrolet Traverse;

·                  Ford Edge;

·                  Honda Pilot;

·                  MINI Countryman;

·                  Lincoln MKX; and

·                  Chevrolet Cruze.

In the second quarter of 2014, the major programs for which we recorded tooling, engineering and other sales were the:

·                  BMW X4;

·                  MINI Countryman;

·                  Ford Transit;

·                  Mercedes-Benz M-Class;

·                  Lincoln MKC;

·                  Dodge Challenger;

·                  QOROS 3; and

·                  Acura TL.

The weakening of certain foreign currencies against the U.S. dollar, including the euro and Canadian dollar had an unfavourable impact of $80 million on our reported tooling, engineering and other sales.

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Cost of Goods Sold and Gross Margin

Reported cost of goods sold decreased $664 million to $6.96 billion for the second quarter of 2015 compared to $7.63 billion for the second quarter of 2014. Reported U.S. dollar cost of goods sold decreased due to the weakening of foreign currencies against the U.S. dollar, including the euro, Canadian dollar and Czech koruna. Excluding the effect of foreign exchange translation, costs of goods sold increased primarily as a result of:

·                  higher material, overhead and labour costs associated with the increase in sales;

·                  lower recoveries associated with scrap steel;

·                  higher launch costs; and

·                  operational inefficiencies at certain facilities.

These factors were partially offset by:

·                  costs incurred related to a fire at a body and chassis facility in North America, during the second quarter of 2014;

·                  decreased commodity costs; and

·                  productivity and efficiency improvements at certain facilities.

Gross margin decreased $114 million to $1.17 billion for the second quarter of 2015 compared to $1.29 billion for the second quarter of 2014 and gross margin as a percentage of sales was 14.4% for the second quarters of 2015 and 2014. Gross margin as a percentage of sales was positively impacted 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;

·                  productivity and efficiency improvements at certain facilities;

·                  costs incurred related to a fire at a body and chassis facility in North America, during the second quarter of 2014;

·                  a decrease in the proportion of sales earned in Europe relative to total sales, which have a lower margin than our consolidated average, primarily due to the weakening of the euro against the U.S. dollar;

·                  decreased commodity costs; and

·                  a lower amount of employee profit sharing.

These factors were partially offset by:

·                  operational inefficiencies at certain facilities;

·                  lower recoveries associated with scrap steel;

·                  higher launch costs; and

·                  higher warranty costs.

Depreciation and Amortization

Depreciation and amortization costs decreased $13 million to $198 million for the second quarter of 2015 compared to $211 million for the second quarter of 2014. The lower depreciation and amortization was primarily as a result of a decrease in reported U.S. dollar depreciation and amortization largely as a result of the weakening of the euro, Canadian dollar and Russian ruble, each against the U.S. dollar partially offset by higher depreciation related to new facilities.

Selling, General and Administrative (“SG&A”)

SG&A expense as a percentage of sales was 4.3% for the second quarter of 2015 compared to 4.6% for the second quarter of 2014. SG&A expense decreased $59 million to $348 million for the second quarter of 2015 compared to $407 million for the second quarter of 2014 primarily as a result of weakening of the euro, Canadian dollar, Brazilian real and Russian ruble, each against the U.S. dollar and the expiration, at the end of 2014, of our consulting agreements with Frank Stronach partially offset by higher incentive compensation.

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Equity Income

Equity income decreased $3 million to $52 million for the second quarter of 2015 compared to $55 million for the second quarter of 2014.

Other (Income) Expense, net

During the second quarter of 2015, we sold our battery pack business to Samsung SDI for proceeds of approximately $120 million, resulting in a gain of $57 million ($42 million after tax).

During the second and first quarters of 2014, we recorded net restructuring charges of $11 million and $22 million ($10 million and $20 million after tax), respectively, in Europe at our exterior systems operations.

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 North America, Europe, Asia and Rest of World for purposes of presentation to the chief operating decision maker to assist in the assessment of operating performance, the allocation of resources, and our long-term strategic direction and future global growth.

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 operations before income taxes; interest expense, net; and other expense, net.

Excluded from Adjusted EBIT for the three months ended June 30, 2015 and 2014 were the following Other Income and Other Expense items, which have been discussed in the “Other Income” section.

North America

Reported Adjusted EBIT in North America decreased $14 million to $525 million for the second quarter of 2015 compared to $539 million for the second quarter of 2014. Reported U.S. dollar Adjusted EBIT was negatively impacted by the weakening of the Canadian dollar against the U.S. dollar. Excluding the effect of foreign exchange translation, Adjusted EBIT increased primarily as a result of:

·                  costs incurred related to a fire at a body and chassis facility, during the second quarter of 2014;

·                  lower affiliation fees paid to Corporate;

·                  margins earned on higher production sales;

·                  decreased commodity costs;

·                  a lower amount of employee profit sharing;

·                  decreased pre-operating costs incurred at new facilities; and

·                  productivity and efficiency improvements at certain facilities.

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These factors were partially offset by:

·                  lower recoveries associated with scrap steel;

·                  higher launch costs;

·                  operational inefficiencies at certain facilities;

·                  higher warranty costs of $4 million; and

·                  net customer price concessions subsequent to the second quarter of 2014.

Europe

Reported Adjusted EBIT in Europe decreased $23 million to $120 million for the second quarter of 2015 compared to $143 million for the second quarter of 2014. Reported U.S. dollar Adjusted EBIT was negatively impacted by the weakening of foreign currencies against the U.S. dollar, including the euro and Czech koruna. Excluding the effect of foreign exchange translation, Adjusted EBIT increased primarily as a result of:

·                  productivity and efficiency improvements at certain facilities;

·                  lower affiliation fees paid to Corporate;

·                  decreased commodity costs;

·                  a lower amount of employee profit sharing; and

·                  lower warranty costs of $1 million.

These factors were partially offset by:

·                  higher launch costs;

·                  operational inefficiencies at certain facilities;

·                  lower equity income;

·                  increased pre-operating costs incurred at new facilities; and

·                  net customer price concessions subsequent to the second quarter of 2014.

Asia

Adjusted EBIT in Asia decreased $10 million to $31 million for the second quarter of 2015 compared to $41 million for the second quarter of 2014 primarily as a result of:

·                  increased pre-operating costs incurred at new facilities;

·                  higher launch costs; and

·                  net customer price concessions subsequent to the second quarter of 2014.

These factors were partially offset by:

·                  margins earned on higher production sales, including margins earned on the launch of new facilities and new programs;

·                  higher equity income; and

·                  lower affiliation fees paid to Corporate.

Rest of World

Adjusted EBIT in Rest of World increased $3 million to a loss of $8 million for the second quarter of 2015 compared to a loss of $11 million for the second quarter of 2014 primarily as a result of:

·                  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; and

·                  net customer price increases subsequent to the second quarter of 2014.

These factors were partially offset by higher production costs, including inflationary increases, that we have not been fully successful in passing through to our customers.

Corporate and Other

Corporate and Other Adjusted EBIT decreased $1 million to $9 million for the second quarter of 2015 compared to $10 million for the second quarter of 2014 primarily as a result of:

·                  a decrease in affiliation fees earned from our divisions;

·                  a greater amount of employee profit sharing;

·                  higher incentive compensation; and

·                  a $1 million net decrease in valuation gains in respect of ABCP.

These factors were partially offset by the expiration, at the end of 2014, of our consulting agreements with Frank Stronach.

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Interest Expense, net

During the second quarter of 2015, we recorded net interest expense of $8 million compared to $7 million for the second quarter of 2014. The $1 million increase is primarily as a result of incremental interest expense on the $750 million 3.625% fixed rate Senior Notes issued during the second quarter of 2014 (the “Senior Notes”).

Income from Continuing Operations before Income Taxes

Income from continuing operations before income taxes increased $22 million to $726 million for the second quarter of 2015 compared to $704 million for the second quarter of 2014. Excluding Other Income and Other Expense, discussed in the “Other Income” section, income from continuing operations before income taxes for the second quarter of 2015 decreased $46 million. The decrease in income from continuing operations before income taxes is the result of the decrease in Adjusted EBIT and the increase in net interest expense, as discussed above.

Income Taxes

Excluding Other Income and Other Expense, after tax, the effective income tax rate increased to 26.3% for the second quarter of 2015 compared to 26.0% for the second quarter of 2014 primarily as a result of a change in the mix of earnings whereby proportionately more income was earned in jurisdictions with higher income tax rates.

Loss from Discontinued Operations, net of tax

Loss income from discontinued operations, net of tax reflects the results of our interiors operations which have been reclassified to discontinued operations as a result of the agreement, during the second quarter of 2015, for the sale of this business.

Loss from discontinued operations, net of tax increased $46 million to $55 million for the second quarter of 2015 compared to $9 million for the second quarter of 2014 primarily as a result of increased income taxes, including $60 million of deferred tax expense relating to timing differences that will become payable upon closing of the transaction partially offset by productivity and efficiency improvements at certain facilities, particularly in North America and lower depreciation costs.

Loss from Continuing Operations Attributable to Non-Controlling Interests

Loss from continuing operations attributable to non-controlling interests was $3 million for the second quarter of 2015 and $nil for the second quarter of 2014.

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Net Income Attributable to Magna International Inc.

Net income attributable to Magna International Inc. of $483 million for the second quarter of 2015 decreased $27 million compared to the second quarter of 2014. Excluding Other Income and Other Expense, after tax, as discussed in the “Other Income” section, net income attributable to Magna International Inc. decreased $79 million primarily as a result of the decrease in net income from continuing operations before income taxes and the increase in the loss from discontinued operations, net of tax, partially offset by lower income taxes, as discussed above.

Earnings per Share (restated)

Diluted earnings per share from continuing operations increased $0.11 to $1.29 for the second quarter of 2015 compared to $1.18 for the second quarter of 2014. Other Income and Other Expense, after tax, positively impacted diluted earnings per share from continuing operations by $0.10 in the second quarter of 2015 and negatively impacted diluted earnings per share from continuing operations by $0.02 in the second quarter of 2014 as discussed in the “Other Income” section. Excluding the $0.10 per share positive impact for the second quarter of 2015 and the $0.02 per share negative impact for the second quarter of 2014, diluted earnings per share from continuing operations decreased $0.01, as a result of the decrease in net income attributable to Magna International Inc. from continuing operations partially offset by a decrease in the weighted average number of diluted shares outstanding during the second quarter of 2015.

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 the second quarter of 2014, pursuant to our normal course issuer bids.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash Flow from Operations

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Cash flow from operations before changes in operating assets and liabilities decreased $35 million to $711 million for the second quarter of 2015 compared to $746 million for the second quarter of 2014. The decrease in cash flow from operations was due to a $51 million decrease in items not involving current cash flows partially offset by a $16 million increase in net income from continuing operations. Items not involving current cash flows are comprised of the following:

Cash invested in operating assets and liabilities amounted to $271 million for the second quarter of 2015 compared to $136 million for the second quarter of 2014. The change in operating assets and liabilities is comprised of the following sources (and uses) of cash:

The increase in inventories was primarily due to increased tooling inventory to support upcoming launches. The decrease in accrued salaries and wages was primarily due to employee profit sharing payments.

Capital and Investment Spending

Fixed assets, investments and other assets additions

In the second quarter of 2015, we invested $361 million in fixed assets. While investments were made to refurbish or replace assets consumed in the normal course of business and for productivity improvements, a large portion of the investment in the second quarter of 2015 was for manufacturing equipment for programs that will be launching subsequent to the second quarter of 2015.

In the second quarter of 2015, we invested $41 million in other assets related primarily to fully reimbursable tooling and engineering costs for programs that launched during the second quarter of 2015 or will be launching subsequent to the second quarter of 2015.

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Proceeds from disposition

In the second quarter of 2015, the $118 million of proceeds include cash related to the sale of our battery pack business to Samsung SDI.

Financing

Cash dividends paid per Common Share were $0.22 for the second quarter of 2015, for a total of $90 million.

Financing Resources

Total capitalization increased by $402 million to $10.10 billion at June 30, 2015 compared to $9.70 billion at December 31, 2014, primarily as a result of a $391 million increase in shareholders’ equity and a $15 million increase in liabilities.

The increase in shareholders’ equity was primarily as a result of the $948 million of net income earned in the first six months of 2015.

These factors were partially offset by:

·                  the $375 million net unrealized loss on translation of our net investment in operations whose functional currency is not the U.S. dollar;

·                  $179 million of dividends paid during the first six months of 2015; and

·                  the $67 million net unrealized loss on cash flow hedges.

Cash Resources

During the second quarter of 2015, our cash resources increased by $64 million to $1.16 billion as a result of the cash provided from operating activities partially offset by cash used for investing and financing activities, as discussed above. In addition to our cash resources at June 30, 2015, we had term and operating lines of credit totalling $2.52 billion of which $2.21 billion was unused and available.

On April 24, 2015, our $2.25 billion revolving credit facility maturing June 20, 2019 was extended to June 22, 2020. The facility includes a $200 million Asian tranche, a $50 million Mexican tranche and a tranche for Canada, U.S. and Europe, which is fully transferable between jurisdictions and can be drawn in U.S. dollars, Canadian dollars or euros.

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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 August 5, 2015 were exercised:

(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

There have been no material changes with respect to the contractual obligations requiring annual payments during the second quarter of 2015 that are outside the ordinary course of our business. Refer to our MD&A included in our 2014 Annual Report.

RESULTS OF OPERATIONS — FOR THE SIX MONTHS ENDED JUNE 30, 2015

Sales

External Production Sales - North America

External production sales in North America increased 1% or $79 million to $8.81 billion for the six months ended June 30, 2015 compared to $8.73 billion for the six months ended June 30, 2014 primarily as a result of:

·                  the launch of new programs during or subsequent to the six months ended June 30, 2014, including the:

·                  Ford Transit;

·                  GM full-size pickups and SUVs;

·                  Ford Mustang;

·                  Chrysler 200; and

·                  Mercedes-Benz C-Class.

This factor was partially offset by:

·                  lower production volumes on certain existing programs;

·                  a $336 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 second quarter of 2014, which negatively impacted sales by $50 million;

·                  programs that ended production during or subsequent to the six months ended June 30, 2014; and

·                  net customer price concessions subsequent to the six months ended June 30, 2014.

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External Production Sales - Europe

External production sales in Europe decreased 21% or $982 million to $3.72 billion for the six months ended June 30, 2015 compared to $4.71 billion for the six months ended June 30, 2014 primarily as a result of:

·                  a $872 million decrease in reported U.S. dollar sales primarily as a result of the weakening of foreign currencies against the U.S. dollar, including the euro, Russian ruble and Czech koruna;

·                  lower production volumes on certain existing programs;

·                  programs that ended production during or subsequent to the six months ended June 30, 2014; and

·                  net customer price concessions subsequent to the six months ended June 30, 2014.

These factors were partially offset by the launch of new programs during or subsequent to the six months ended June 30, 2014, including the Ford Transit.

External Production Sales - Asia

External production sales in Asia increased 5% or $36 million to $793 million for the six months ended June 30, 2015 compared to $757 million for the six months ended June 30, 2014 primarily as a result of the launch of new programs during or subsequent to the six months ended June 30, 2014, primarily in China and India.

This factor was partially offset by:

·                  lower production volumes on certain existing programs;

·                  a $12 million decrease in reported U.S. dollar sales primarily as a result of the weakening of foreign currencies against the U.S. dollar, including the Chinese renminbi and South Korean won;

·                  programs that ended production during or subsequent to the six months ended June 30, 2014; and

·                  net customer price concessions subsequent to the second quarter of 2014.

External Production Sales - Rest of World

External production sales in Rest of World decreased 20% or $64 million to $256 million for the six months ended June 30, 2015 compared to $320 million for the six months ended June 30, 2014 primarily as a result of:

·                  lower production volumes on certain existing programs;

·                  a $66 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

·                  programs that ended production during or subsequent to the six months ended June 30, 2014.

These factors were partially offset by:

·                  the launch of new programs during or subsequent to the second quarter of 2014, primarily in Brazil; and

·                  net customer price increases subsequent to the six months ended June 30, 2014.

Complete Vehicle Assembly Sales

Complete vehicle assembly sales decreased 27%, or $447 million, to $1.21 billion for the six months ended June 30, 2015 compared to $1.65 billion for the six months ended June 30, 2014 and assembly volumes decreased 20% or 14,271 units.

The decrease in complete vehicle assembly sales is primarily as a result of:

·                  a $276 million decrease in reported U.S. dollar sales as a result of the weakening of the euro against the U.S. dollar; and

·                  a decrease in assembly volumes for the MINI Countryman.

These factors were partially offset by an increase in assembly volumes for the Mercedes-Benz G-Class.

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Tooling, Engineering and Other Sales

Tooling, engineering and other sales decreased 7% or $83 million to $1.12 billion for the six months ended June 30, 2015 compared to $1.20 billion for the six months ended June 30, 2014.

In the six months ended June 30, 2015, the major programs for which we recorded tooling, engineering and other sales were the:

·                  Ford F-Series and F-Series SuperDuty;

·                  GMC Acadia, Buick Enclave and Chevrolet Traverse;

·                  Ford Edge;

·                  MINI Countryman;

·                  Skoda Fabia;

·                  Honda HR-V and Vezel; and

·                  Honda Pilot.

In the six months ended June 30, 2014, the major programs for which we recorded tooling, engineering and other sales were the:

·                  BMW X4;

·                  MINI Countryman;

·                  Ford Transit;

·                  QOROS 3;

·                  Mercedes-Benz M-Class;

·                  Ford Mustang;

·                  Honda Fit;

·                  Peugeot RCZ; and

·                  Chrysler 200.

The weakening of certain foreign currencies against the U.S. dollar, including the euro, Canadian dollar and Czech koruna had an unfavourable impact of $153 million on our reported tooling, engineering and other sales.

Segment Analysis

Excluded from Adjusted EBIT for the six months ended June 30, 2015 and 2014 were the following Other Income and Other Expense items, which have been discussed in the “Other Income” section.