These factors were partially offset by:
- lower production volumes on certain existing programs;
- lower production volumes on the MINI Countryman and Paceman, as
well as substantially lower production content on the next
generation of these programs which launched during the fourth
quarter of 2016;
- a $61 million decrease in
reported U.S. dollar production sales primarily as a result of the
weakening of foreign currencies against the U.S. dollar, including
the British pound, euro and Turkish lira; and
- net customer price concessions subsequent to the fourth quarter
of 2015.
External Production Sales - Asia
External production sales in Asia increased 40% or $190 million to $663
million for the three months ended December 31, 2016 compared to $473 million for the three months ended
December 31, 2015 primarily as a
result of:
- the launch of new programs during or subsequent to the fourth
quarter of 2015, primarily in China; and
- acquisitions during or subsequent to the fourth quarter of
2015, including Getrag and the Xingqiaorui Partnership, which
positively impacted production sales by $105
million.
These factors were partially offset by:
- a $40 million decrease in
reported U.S. dollar production sales primarily 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 2015.
External Production Sales - Rest of World
External production sales in Rest of World increased 53% or
$46 million to $133 million for the three months ended
December 31, 2016 compared to $87
million for the three months ended December 31, 2015 primarily as a result of:
- net customer price increases subsequent to the fourth quarter
of 2015; and
- the launch of new programs during or subsequent to the fourth
quarter of 2015, primarily in Brazil and Argentina.
Complete Vehicle Assembly Sales
|
For the three
months
ended December
31,
|
|
|
|
|
2016
|
2015
|
Change
|
|
|
|
|
Complete Vehicle
Assembly
Sales
|
$
|
439
|
$
|
628
|
-
|
30%
|
|
|
|
|
Complete Vehicle
Assembly Volumes
(Units)
|
7,418
|
25,042
|
-
|
70%
|
Complete vehicle assembly sales decreased 30% or $189 million to $439
million for the three months ended December 31, 2016 compared to $628 million for the three months ended
December 31, 2015 and assembly
volumes decreased 70% or 17,624 units.
The decrease in complete vehicle assembly sales is primarily as
a result of:
- the end of production of the MINI Countryman and Paceman during
the fourth quarter of 2016; and
- a $7 million decrease in reported
U.S. dollar complete vehicle assembly sales as a result of the
weakening of the euro against the U.S. dollar.
These factors were partially offset by an increase in assembly
volumes for the Mercedes-Benz G-Class which has a higher average
selling price per vehicle compared to the MINI programs.
Tooling, Engineering and Other Sales
Tooling, engineering and other sales increased 7% or
$58 million to $936 million for the three months ended
December 31, 2016 compared to
$878 million for the three months
ended December 31, 2015.
In the three months ended December 31,
2016, the major programs for which we recorded tooling,
engineering and other sales were the:
- Chevrolet Equinox and GMC Terrain;
- BMW 5-Series;
- Opel Ampera-e;
- certain Jaguar Land Rover programs;
- Audi Q5;
- Skoda Yeti;
- Porsche Panamera; and
- Chevrolet Silverado and GMC Sierra.
In the three months ended December 31,
2015, the major programs for which we recorded tooling,
engineering and other sales were the:
- 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.
Acquisitions during or subsequent to the three months ended
December 31, 2015, including Getrag,
increased our reported tooling, engineering and other sales, while
the weakening of certain foreign currencies against the U.S.
dollar, including the euro, Chinese renminbi, and Great Britain pound had an unfavourable impact
of $13 million on our reported
tooling, engineering and other sales.
Segment Analysis
The following table reconciles net income from continuing
operations to Adjusted EBIT:
|
For the three
months
ended December 31,
|
|
|
2016
|
2015
|
|
|
|
Net income from
continuing operations
|
$
|
496
|
$
|
482
|
Add
(deduct):
|
|
|
|
Interest expense,
net
|
20
|
17
|
|
Other expense
(income), net
|
30
|
15
|
|
Income
taxes
|
150
|
142
|
Adjusted
EBIT
|
$
|
696
|
$
|
656
|
|
For the three
months ended December 31,
|
|
Total
Sales
|
|
Adjusted
EBIT
|
|
2016
|
2015
|
Change
|
|
2016
|
2015
|
Change
|
|
|
|
|
|
|
|
|
North
America
|
$
|
5,238
|
$
|
5,090
|
$
|
148
|
|
$
|
516
|
$
|
501
|
$
|
15
|
Europe
|
3,224
|
2,889
|
335
|
|
71
|
112
|
(41)
|
Asia
|
775
|
624
|
151
|
|
100
|
63
|
37
|
Rest of
World
|
144
|
88
|
56
|
|
4
|
(6)
|
10
|
Corporate and
Other
|
(128)
|
(123)
|
(5)
|
|
5
|
(14)
|
19
|
Total reportable
segments
|
$
|
9,253
|
$
|
8,568
|
$
|
685
|
|
$
|
696
|
$
|
656
|
$
|
40
|
North America
Adjusted EBIT in North America
increased $15 million to $516 million for the three months ended
December 31, 2016 compared to
$501 million for the three months
ended December 31, 2015 primarily as
a result of:
- productivity and efficiency improvements at certain
facilities;
- the acquisition of Getrag during the first quarter of
2016;
- higher recoveries associated with scrap steel;
- lower launch costs;
- a lower amount of employee profit sharing;
- decreased pre-operating costs incurred at new facilities;
and
- lower incentive compensation.
These factors were partially offset by:
- operational inefficiencies at certain facilities;
- higher warranty costs of $17
million;
- decreased margins earned on lower production sales on certain
programs;
- lower equity income; and
- net customer price concessions subsequent to the fourth quarter
of 2015.
Europe
Adjusted EBIT in Europe
decreased $41 million to $71 million for the three months ended
December 31, 2016 compared to
$112 million for the three months ended December 31, 2015 primarily as a result of:
- higher warranty costs of $18
million;
- a net loss associated with acquisitions during or subsequent to
the fourth quarter of 2015, including Getrag;
- operational inefficiencies at certain facilities;
- higher launch costs;
- higher pre-operating costs incurred at new facilities;
- decreased margins earned on lower production sales on certain
programs; and
- net customer price concessions subsequent to the fourth quarter
of 2015.
These factors were partially offset by:
- productivity and efficiency improvements at certain facilities;
and
- a lower amount of employee profit sharing.
Asia
Adjusted EBIT in Asia increased
$37 million to $100 million for the three months ended
December 31, 2016 compared to
$63 million for the three months
ended December 31, 2015 primarily as
a result of:
- margins earned on higher production sales;
- productivity and efficiency improvements at certain
facilities;
- lower launch costs;
- acquisitions during or subsequent to the fourth quarter of
2015, including Getrag and the Xingqiaorui Partnership; and
- higher equity income.
These factors were partially offset by:
- a decrease in reported U.S. dollar Adjusted EBIT due to the
weakening of the Chinese renminbi against the U.S. dollar;
- higher warranty costs of $2
million; and
- net customer price concessions subsequent to the fourth quarter
of 2015.
Rest of World
Adjusted EBIT in Rest of World increased $10 million to $4
million for the three months ended December 31, 2016 compared to a loss of
$6 million for the three months ended
December 31, 2015 primarily as a
result of:
- net customer price increases subsequent to the fourth quarter
of 2015;
- margins earned on higher production sales; and
- productivity and efficiency improvements at certain
facilities.
Corporate and Other
Corporate and Other Adjusted EBIT increased $19 million to $5
million for the three months ended December 31, 2016 compared to a loss of
$14 million for the three months
ended December 31, 2015 primarily as
a result of:
- lower costs to support our global compliance programs;
- higher foreign exchange gains;
- lower costs related to the investment in our information
technology infrastructure;
- lower consulting costs; and
- a $3 million net increase in
valuation gains in respect of ABCP.
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 16 of our unaudited interim consolidated financial
statements for the three months and year ended December 31, 2016, which describes these
claims.
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 December 31, 2015.
CONTROLS AND PROCEDURES
During the first quarter of 2016, we acquired Getrag. Other than
the addition of Getrag's operations to our internal control over
financial reporting and any related changes in control to integrate
Getrag, there have been no changes in our internal control over
financial reporting that occurred during the year ended
December 31, 2016 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 Dual Clutch Transmission (DCT) product segment. The
forward-looking statements or 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 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; a decline in consumer confidence, which would
typically result in lower production volume levels; the growth of
protectionism and the implementation of measures that impede the
free movement of goods, services, people and capital; planning
risks created by rapidly changing economic or political conditions;
fluctuations in relative currency values; legal claims and/or
regulatory actions against us, including without limitation any
proceedings that may arise out of our global review focused on
anti-trust risk; our ability to successfully launch material new or
takeover business; underperformance of one or more of our operating
divisions; ongoing pricing pressures, including our ability to
offset price concessions demanded by our customers; warranty and
recall costs; our ability to successfully identify, complete and
integrate acquisitions or achieve anticipated synergies; our
ability to conduct appropriate due diligence on acquisition
targets; an increase in our risk profile as a result of completed
acquisitions; 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;
inability to sustain or grow our business; risks of conducting
business in foreign markets, including China, India,
Eastern Europe, Brazil and other non-traditional markets for
us; our ability to successfully compete with other automotive
suppliers, including disruptive technology innovators which are
entering or expanding in the automotive industry; our
ability to consistently develop innovative products or processes;
our changing risk profile due to the increasing importance to
us of product areas such as powertrain and electronics;
restructuring, downsizing and/or other significant non-recurring
costs; a reduction in outsourcing by our customers or the loss
of a material production or assembly programs; a prolonged
disruption in the supply of components to us from our suppliers;
shutdown of our or our customers' or sub-suppliers' production
facilities due to a labour disruption; scheduled shutdowns of our
customers' production facilities (typically in the third and fourth
quarters of each calendar year); the termination or non-renewal by
our customers of any material production purchase order; exposure
to, and ability to offset, commodities price increases;
restructuring actions by OEMs, including plant closures; work
stoppages and labour relations disputes; risk of production
disruptions due to natural disasters or catastrophic event; the
security and reliability of our information technology systems;
pension liabilities; 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; impairment
charges related to goodwill, long-lived assets and deferred tax
assets; other potential tax exposures; changes in credit ratings
assigned to us; changes in laws and governmental regulations;
including tax and transfer pricing laws; costs associated with
compliance with environmental laws and regulations; liquidity
risks; inability to achieve future investment returns that equal or
exceed past returns; the unpredictability of, and fluctuation in,
the trading price of our Common Shares; 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 or forward-looking information, we caution readers not
to place undue reliance on any forward-looking statements or
forward-looking information, 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 or forward-looking information. 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 or forward-looking information to
reflect subsequent information, events, results or circumstances or
otherwise.
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF
INCOME
[Unaudited]
[U.S. dollars in millions,
except per share figures]
|
|
|
Three months
ended
|
|
Year
ended
|
|
|
|
December
31,
|
|
December
31,
|
|
Note
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
$
|
9,253
|
|
$
|
8,568
|
|
$
|
36,445
|
|
$
|
32,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
|
|
7,901
|
|
|
7,336
|
|
|
31,123
|
|
|
27,559
|
|
Depreciation and
amortization
|
|
|
|
278
|
|
|
213
|
|
|
1,056
|
|
|
802
|
|
Selling, general and
administrative
|
|
|
|
424
|
|
|
412
|
|
|
1,601
|
|
|
1,448
|
|
Interest
expense,net
|
|
|
|
20
|
|
|
17
|
|
|
88
|
|
|
44
|
|
Equity
income
|
|
|
|
(46)
|
|
|
(49)
|
|
|
(233)
|
|
|
(204)
|
|
Other expense
(income), net
|
3
|
|
|
30
|
|
|
15
|
|
|
30
|
|
|
(166)
|
Income from
continuing operations before income
taxes
|
|
|
|
646
|
|
|
624
|
|
|
2,780
|
|
|
2,651
|
Income
taxes
|
|
|
|
150
|
|
|
142
|
|
|
706
|
|
|
711
|
Net income from
continuing operations
|
|
|
|
496
|
|
|
482
|
|
|
2,074
|
|
|
1,940
|
(Loss) income from
discontinued operations, net of tax
|
2
|
|
|
—
|
|
|
(7)
|
|
|
—
|
|
|
67
|
Net
income
|
|
|
|
496
|
|
|
475
|
|
|
2,074
|
|
|
2,007
|
(Income) loss from
continuing operations attributable to non-controlling
interests
|
|
|
|
(18)
|
|
|
1
|
|
|
(43)
|
|
|
6
|
Net income
attributable to Magna International Inc.
|
|
|
$
|
478
|
|
$
|
476
|
|
$
|
2,031
|
|
$
|
2,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share:
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
$
|
1.25
|
|
$
|
1.20
|
|
$
|
5.19
|
|
$
|
4.78
|
|
Discontinued
operations
|
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
0.16
|
|
Attributable to Magna
International Inc.
|
|
|
$
|
1.25
|
|
$
|
1.18
|
|
$
|
5.19
|
|
$
|
4.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share:
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
|
$
|
1.24
|
|
$
|
1.19
|
|
$
|
5.16
|
|
$
|
4.72
|
|
Discontinued
operations
|
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
0.16
|
|
Attributable to Magna
International Inc.
|
|
|
$
|
1.24
|
|
$
|
1.17
|
|
$
|
5.16
|
|
$
|
4.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
per Common Share
|
|
|
$
|
0.25
|
|
$
|
0.22
|
|
$
|
1.00
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of Common Shares outstanding
during the period [in
millions]:
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
383.0
|
|
|
402.6
|
|
|
391.0
|
|
|
407.5
|
|
Diluted
|
|
|
|
385.0
|
|
|
407.0
|
|
|
393.2
|
|
|
412.7
|
See accompanying
notes
|
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
[Unaudited]
[U.S. dollars
in millions]
|
|
|
Three months
ended
|
|
Year
ended
|
|
|
|
December
31,
|
|
December
31,
|
|
Note
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
$
|
496
|
|
$
|
475
|
|
$
|
2,074
|
|
$
|
2,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss, net of tax:
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss
on translation of net investment in foreign operations
|
|
|
|
(300)
|
|
|
(149)
|
|
|
(134)
|
|
|
(800)
|
|
Net unrealized (loss)
gain on cash flow hedges
|
|
|
|
(38)
|
|
|
(54)
|
|
|
1
|
|
|
(244)
|
|
Reclassification of
net loss on cash flow hedges to net income
|
|
|
|
28
|
|
|
39
|
|
|
126
|
|
|
95
|
|
Reclassifications of
net loss on investments to net income
|
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
3
|
|
Reclassification of
net loss on pensions to net income
|
|
|
|
6
|
|
|
2
|
|
|
9
|
|
|
7
|
|
Pension and post
retirement benefits
|
|
|
|
(27)
|
|
|
16
|
|
|
(29)
|
|
|
14
|
Other
comprehensive loss
|
|
|
|
(330)
|
|
|
(146)
|
|
|
(26)
|
|
|
(925)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
|
|
166
|
|
|
329
|
|
|
2,048
|
|
|
1,082
|
Comprehensive loss
(income) attributable to non-controlling interests
|
|
|
|
1
|
|
|
2
|
|
|
(18)
|
|
|
8
|
Comprehensive
income attributable to Magna International Inc.
|
|
|
$
|
167
|
|
$
|
331
|
|
$
|
2,030
|
|
$
|
1,090
|
See accompanying
notes
|
MAGNA INTERNATIONAL INC.
CONSOLIDATED BALANCE
SHEETS
[Unaudited]
[U.S. dollars in
millions]
|
|
|
|
As
at
|
|
|
As at
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
Note
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
5
|
|
$
|
974
|
|
$
|
2,863
|
Accounts
receivable
|
|
|
|
6,165
|
|
|
5,439
|
Inventories
|
7
|
|
|
2,804
|
|
|
2,564
|
Prepaid expenses and
other
|
10
|
|
|
220
|
|
|
278
|
|
|
|
|
10,163
|
|
|
11,144
|
|
|
|
|
|
|
|
|
Investments
|
6, 15
|
|
|
1,850
|
|
|
399
|
Fixed assets,
net
|
|
|
|
7,022
|
|
|
5,948
|
Goodwill
|
6, 8
|
|
|
1,923
|
|
|
1,344
|
Deferred tax
assets
|
|
|
|
268
|
|
|
271
|
Other
assets
|
9
|
|
|
1,340
|
|
|
581
|
|
|
|
$
|
22,566
|
|
$
|
19,687
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Short-term
borrowings
|
10
|
|
$
|
623
|
|
$
|
25
|
Accounts
payable
|
|
|
|
5,430
|
|
|
4,746
|
Accrued salaries and
wages
|
|
|
|
768
|
|
|
660
|
Other accrued
liabilities
|
11
|
|
|
1,639
|
|
|
1,512
|
Income taxes
payable
|
|
|
|
96
|
|
|
122
|
Long‑term debt due
within one year
|
|
|
|
139
|
|
|
211
|
|
|
|
|
8,695
|
|
|
7,276
|
|
|
|
|
|
|
|
|
Long‑term
debt
|
|
|
|
2,394
|
|
|
2,327
|
Long-term employee
benefit liabilities
|
|
|
|
667
|
|
|
504
|
Other long‑term
liabilities
|
|
|
|
298
|
|
|
331
|
Deferred tax
liabilities
|
|
|
|
293
|
|
|
132
|
|
|
|
|
12,347
|
|
|
10,570
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
|
|
|
|
|
|
[issued: 382,252,522;
December 31, 2015 – 402,264,201]
|
13
|
|
|
3,796
|
|
|
3,942
|
Contributed
surplus
|
|
|
|
105
|
|
|
107
|
Retained
earnings
|
|
|
|
7,318
|
|
|
6,387
|
Accumulated other
comprehensive loss
|
14
|
|
|
(1,451)
|
|
|
(1,470)
|
|
|
|
|
9,768
|
|
|
8,966
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
|
451
|
|
|
151
|
|
|
|
|
10,219
|
|
|
9,117
|
|
|
|
$
|
22,566
|
|
$
|
19,687
|
See accompanying
notes
|
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
[Unaudited]
[U.S. dollars in
millions]
|
|
|
Three months
ended
|
|
Year
ended
|
|
|
|
December
31,
|
|
December
31,
|
|
Note
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided from
(used for):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
|
|
$
|
496
|
|
$
|
482
|
|
$
|
2,074
|
|
$
|
1,940
|
Items not involving
current cash flows
|
5
|
|
|
382
|
|
|
291
|
|
|
1,231
|
|
|
736
|
|
|
|
|
878
|
|
|
773
|
|
|
3,305
|
|
|
2,676
|
Changes in operating
assets and liabilities
|
5
|
|
|
840
|
|
|
243
|
|
|
81
|
|
|
(344)
|
Cash provided from
operating activities
|
|
|
|
1,718
|
|
|
1,016
|
|
|
3,386
|
|
|
2,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset
additions
|
|
|
|
(662)
|
|
|
(604)
|
|
|
(1,807)
|
|
|
(1,591)
|
Purchase of
subsidiaries
|
6
|
|
|
(117)
|
|
|
(221)
|
|
|
(1,930)
|
|
|
(222)
|
Increase in
investments and other assets
|
|
|
|
(155)
|
|
|
(69)
|
|
|
(478)
|
|
|
(221)
|
Increase in
restricted cash deposits
|
|
|
|
(14)
|
|
|
—
|
|
|
(194)
|
|
|
—
|
Proceeds from
disposition
|
|
|
|
75
|
|
|
11
|
|
|
138
|
|
|
61
|
Sale of
Interiors
|
3
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
520
|
Proceeds on disposal
of
facilities
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
221
|
Cash used in
discontinued
operations
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56)
|
Cash used for
investing
activities
|
|
|
|
(873)
|
|
|
(836)
|
|
|
(4,271)
|
|
|
(1,288)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issues of
debt
|
|
|
|
18
|
|
|
918
|
|
|
282
|
|
|
1,608
|
Increase (decrease)
in short-term borrowings
|
|
|
|
24
|
|
|
(4)
|
|
|
386
|
|
|
25
|
Repayments of
debt
|
|
|
|
(82)
|
|
|
(29)
|
|
|
(417)
|
|
|
(99)
|
Issue of Common
Shares on exercise of stock
options
|
|
|
|
5
|
|
|
16
|
|
|
33
|
|
|
35
|
Repurchase of Common
Shares
|
13
|
|
|
(114)
|
|
|
(164)
|
|
|
(913)
|
|
|
(515)
|
Contributions to
subsidiaries by non-controlling interests
|
|
|
|
(1)
|
|
|
31
|
|
|
(1)
|
|
|
41
|
Dividends paid to
non-controlling
interests
|
|
|
|
(5)
|
|
|
—
|
|
|
(5)
|
|
|
—
|
Dividends
|
|
|
|
(95)
|
|
|
(84)
|
|
|
(385)
|
|
|
(354)
|
Cash (used for)
provided from financing
activities
|
|
|
|
(250)
|
|
|
684
|
|
|
(1,020)
|
|
|
741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash
equivalents
|
|
|
|
15
|
|
|
(16)
|
|
|
16
|
|
|
(171)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents during the
period
|
|
|
|
610
|
|
|
848
|
|
|
(1,889)
|
|
|
1,614
|
Cash and cash
equivalents, beginning of period
|
|
|
|
364
|
|
|
2,015
|
|
|
2,863
|
|
|
1,249
|
Cash and cash
equivalents, end of
period
|
|
|
$
|
974
|
|
$
|
2,863
|
|
$
|
974
|
|
$
|
2,863
|
See accompanying
notes
|
MAGNA INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF
CHANGES IN EQUITY
[Unaudited]
[U.S. dollars in
millions]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
|
Number
|
|
|
Stated
Value
|
|
|
Contri-
buted
Surplus
|
|
|
Retained
Earnings
|
|
|
AOCL
(i)
|
|
|
Non-
controlling
Interest
|
|
|
Total Equity
|
|
|
|
[in
millions]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2014
|
|
|
410.3
|
|
$
|
3,979
|
|
$
|
83
|
|
$
|
5,155
|
|
$
|
(558)
|
|
$
|
14
|
|
$
|
8,673
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
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 stock and
stock units
|
|
|
0.5
|
|
|
17
|
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Repurchase and
cancellation under normal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
course issuer
bid
|
13
|
|
(11.1)
|
|
|
(108)
|
|
|
|
|
|
(418)
|
|
|
11
|
|
|
|
|
|
(515)
|
Contributions by
non-controlling interest
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
29
|
|
|
46
|
Purchase of
non-controlling interests
|
|
|
|
|
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Acquisition
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116
|
|
|
116
|
Stock-based
compensation expense
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
2,031
|
|
|
|
|
|
43
|
|
|
2,074
|
Other comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(25)
|
|
|
(26)
|
Shares issued on
exercise of stock options
|
|
|
2.1
|
|
|
47
|
|
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
33
|
Release of stock and
stock units
|
|
|
0.4
|
|
|
25
|
|
|
(25)
|
|
|
|
|
|
|
|
|
|
|
|
—
|
Repurchase and
cancellation under normal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
course issuer
bid
|
13
|
|
(22.6)
|
|
|
(222)
|
|
|
|
|
|
(711)
|
|
|
20
|
|
|
|
|
|
(913)
|
Contribution by
non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
Acquisition
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288
|
|
|
288
|
Stock-based
compensation expense
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
37
|
Dividends paid to
non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
|
(5)
|
Dividends
paid
|
|
|
0.1
|
|
|
4
|
|
|
|
|
|
(389)
|
|
|
|
|
|
|
|
|
(385)
|
Balance, December
31, 2016
|
|
|
382.3
|
|
$
|
3,796
|
|
$
|
105
|
|
$
|
7,318
|
|
$
|
(1,451)
|
|
$
|
451
|
|
$
|
10,219
|
|
(i) AOCL is
Accumulated Other Comprehensive Loss.
|
|
See accompanying
notes
|
MAGNA INTERNATIONAL INC.
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 Magna
International Inc. and its subsidiaries [collectively "Magna" or
the "Company"] have been prepared in U.S. dollars following
accounting principles generally accepted in the United States of America
["GAAP"]. 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 December 31,
2015 audited consolidated financial statements and notes
thereto included in the Company's 2015 Annual Report.
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
December 31, 2016 and the results of
operations, changes in equity and cash flows for the three-months
and years ended December 31, 2016 and
2015.
[b] Accounting changes
Pension and other Post Retirement Benefit Plans
At December 31, 2016, the Company
changed the method used to estimate the service and interest
components of net periodic benefit cost for pension and other
postretirement benefits for plans that utilize a yield curve
approach. This change compared to the previous method will result
in different service and interest components of net periodic
benefit cost (credit) in future periods. Historically, the Company
estimated these service and interest cost components utilizing a
single weighted-average discount rate derived from the yield curve
used to measure the benefit obligation at the beginning of the
period. The Company elected to utilize a full yield curve approach
in the estimation of these components by applying the specific spot
rates along the yield curve used in the determination of the
benefit obligation to the relevant projected cash flows. The
Company made this change to provide a more precise measurement of
service and interest costs by improving the correlation between
projected benefit cash flows to the corresponding spot yield curve
rates. This change does not affect the measurement of the total
benefit obligations or annual net periodic benefit cost (credit) as
the change in the service and interest costs is completely
offset in the net actuarial (gain) loss reported. The change
in the service and interest costs was not significant. The Company
has accounted for this change as a change in accounting
estimate.
[c] Future Accounting Standards
Revenue Recognition
In May 2014, the FASB issued ASU
No. 2014-09, "Revenue from Contracts with Customers: Topic 606 (ASU
2014-09)", to supersede nearly all existing revenue recognition
guidance under GAAP. The core principle of ASU 2014-09 is to
recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration that is
expected to be received for those goods or services. In
July 2015, the FASB deferred the
effective date to annual reporting periods beginning after
December 15, 2017 [including interim
reporting periods within those periods]. ASU 2014-09 is
effective for the Company in the first quarter of fiscal 2018 using
either of two methods: [i] retrospective to each prior reporting
period presented with the option to elect certain practical
expedients as defined within ASU 2014-09; or [ii] retrospective
with the cumulative effect of initially applying ASU 2014-09
recognized at the date of initial application and providing certain
additional disclosures as defined per ASU 2014-09. The Company has
not yet selected a transition method and continues to evaluate the
impact that ASU 2014-09 will have on its consolidated financial
statements and related disclosures.
Leases
In February 2016, the FASB issued
ASU No. 2016-02, "Leases: Topic 842 (ASU 2016-02)", to supersede
nearly all existing lease guidance under GAAP. The guidance would
require lessees to recognize most leases on their balance sheets as
lease liabilities with corresponding right-of-use
assets. ASU 2016-02 is effective for the Company in the
first quarter of fiscal 2019 using a modified retrospective
approach with the option to elect certain practical
expedients. The Company is currently evaluating the impact of
ASU 2016-02 on its consolidated financial statements.
Statement of Cash Flows
In November 2016, the FASB issued
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
(ASU 2016-18), which provides amendments to current guidance to
address the classification and presentation of changes in
restricted cash in the statement of cash flows. ASU 2016-18
is effective for the Company in the first quarter of fiscal 2018
and earlier adoption is permitted. The Company is currently
evaluating the impact of adoption of ASU 2016-18 on its
consolidated financial statements.
Income Taxes
In October 2016, the FASB issued
ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset
Transfers of Assets Other than Inventory. This guidance
requires that the tax effects of all intra-entity sales of assets
other than inventory be recognized in the period in which the
transaction occurs. The new guidance is effective for fiscal years
beginning after December 15, 2017,
and interim periods within those fiscal years. Early adoption as of
the beginning of an annual reporting period is permitted. The
guidance is to be applied on a modified retrospective basis through
a cumulative-effect adjustment to retained earnings as of the
beginning of the period of adoption. The adoption of this
guidance is not expected to have a significant impact on the
Company's consolidated financial statements.
Goodwill
In January 2017, the FASB issued
new guidance, ASU No. 2017-4, Intangibles–Goodwill and Other (Topic
350): Simplifying the test for Goodwill Impairment. This
guidance simplifies subsequent goodwill measurement by eliminating
Step 2 from the goodwill impairment test. Under this update, an
entity should perform its annual, or interim, goodwill impairment
test by comparing the fair value of a reporting unit with its
carrying amount. An entity should recognize an impairment charge
for the amount by which the carrying amount exceeds the reporting
unit's fair value; however, the loss recognized should not exceed
the total amount of goodwill allocated to that reporting unit. The
new standard is effective for annual periods, and interim periods
within those annual periods, beginning after December 15, 2019 with early adoption permitted
for annual goodwill impairment tests performed after January 1, 2017. The standard must be applied
prospectively. Upon adoption, the standard will impact how the
Company assesses goodwill for impairment. The adoption of
this guidance is not expected to have a significant impact on the
Company's consolidated financial statements.
[d] 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 Europe typically shutdown vehicle production
during portions of August and one week in December.
2. DISCONTINUED
OPERATIONS
On August 31, 2015, the Company
sold substantially all of its interiors operations ["the interiors
operations"]. Refer to the Company's 2015 Annual Report for
additional information on the Company's Discontinued Operations.
There were no amounts related to the interiors operations
classified as discontinued operations for the three months and year
ended December 31, 2016.
The following table summarizes the results of the interiors
operations classified as discontinued operations for the three
months and year ended December 31,
2015:
|
|
Three months
ended
|
|
Year ended
|
|
|
December 31,
2015
|
|
December 31,
2015
|
|
|
|
|
|
|
|
Sales
|
|
$
|
—
|
|
$
|
1,737
|
|
|
|
|
|
|
|
Costs and
expense
|
|
|
|
|
|
|
|
Cost of goods
sold
|
|
|
—
|
|
|
1,635
|
|
Depreciation and
amortization
|
|
|
—
|
|
|
13
|
|
Selling, general and
administrative
|
|
|
—
|
|
|
58
|
|
Equity
income
|
|
|
—
|
|
|
(11)
|
Income from
discontinued operations before income taxes
|
|
|
—
|
|
|
42
|
Income
taxes
|
|
|
—
|
|
|
20
|
Income from
discontinued operations before gain on
divestiture
|
|
|
—
|
|
|
22
|
(Loss) gain on
divestiture of discontinued operations, net of
tax
|
|
|
(7)
|
|
|
45
|
Income from
discontinued operations, net of
tax
|
|
$
|
(7)
|
|
$
|
67
|
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,
|
|
|
|
|
2016
|
|
|
2015
|
Fourth
Quarter
|
|
|
|
|
|
|
|
|
Restructuring
|
[a]
|
|
$
|
17
|
|
$
|
15
|
|
Pension
settlement
|
[b]
|
|
|
13
|
|
|
—
|
|
|
|
|
30
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
|
|
|
|
|
|
|
Gain on
disposal
|
[c]
|
|
|
—
|
|
|
(136)
|
|
Restructuring
|
[a]
|
|
|
—
|
|
|
12
|
|
|
|
|
—
|
|
|
(124)
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
|
|
|
|
|
|
Gain on
disposal
|
[c]
|
|
|
—
|
|
|
(57)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30
|
|
$
|
(166)
|
[a] Restructuring
During the fourth quarter, the Company recorded net
restructuring charges of $17 million
[$17 million after tax], in
Germany at a powertrain systems
facility.
During 2015, the Company recorded net restructuring charges of
$27 million [$27 million after tax], primarily in Germany related to its exterior systems and
roof systems operations.
[b] Pension
settlement
During the fourth quarter of 2016, the Company offered a limited
lump-sum payout to certain terminated vested plan participants of
its U.S. defined benefit pension plans. As a result of the
partial settlement, the Company recognized a $13 million [$9
million after tax] non-cash settlement charge.
[c] Gain on disposal
During the third quarter of 2015, the Company contributed two
manufacturing facilities and received a 49% interest in a newly
formed joint venture and cash proceeds of $118 million. Total consideration was valued at
$160 million and as a result the
Company recognized a gain of $136
million [$80 million after
tax].
During the second quarter of 2015, the Company sold its battery
pack business to Samsung SDI for gross proceeds of approximately
$120 million, resulting in a gain of
$57 million [$42 million after tax].
4. EARNINGS PER SHARE
Earnings per share are computed as follows:
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available
to Common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
|
$
|
496
|
|
$
|
482
|
|
$
|
2,074
|
|
$
|
1,940
|
(Income) loss from
continuing operations attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
non-controlling
interests
|
|
|
(18)
|
|
|
1
|
|
|
(43)
|
|
|
6
|
Net income
attributable to Magna International Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from continuing
operations
|
|
|
478
|
|
|
483
|
|
|
2,031
|
|
|
1,946
|
(Loss) income from
discontinued operations
|
|
|
—
|
|
|
(7)
|
|
|
—
|
|
|
67
|
Net income
attributable to Magna International
Inc.
|
|
$
|
478
|
|
$
|
476
|
|
$
|
2,031
|
|
$
|
2,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
383.0
|
|
|
402.6
|
|
|
391.0
|
|
|
407.5
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and
restricted stock
[a]
|
|
|
2.0
|
|
|
4.4
|
|
|
2.2
|
|
|
5.2
|
Diluted
|
|
|
385.0
|
|
|
407.0
|
|
|
393.2
|
|
|
412.7
|
[a] For the three months and year ended December 31, 2016, diluted earnings per Common
Share excludes 1.6 million [2015 – 1.6 million] and 3.4 million
[2015 – 0.9 million] Common Shares issuable under the Company's
Incentive Stock Option Plan because these options were not
"in-the-money".
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.25
|
|
$
|
1.20
|
|
$
|
5.19
|
|
$
|
4.78
|
|
Discontinued
operations
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
0.16
|
|
Attributable to Magna
International Inc.
|
|
$
|
1.25
|
|
$
|
1.18
|
|
$
|
5.19
|
|
$
|
4.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
1.24
|
|
$
|
1.19
|
|
$
|
5.16
|
|
$
|
4.72
|
|
Discontinued
operations
|
|
|
—
|
|
|
(0.02)
|
|
|
—
|
|
|
0.16
|
|
Attributable to Magna
International Inc.
|
|
$
|
1.24
|
|
$
|
1.17
|
|
$
|
5.16
|
|
$
|
4.88
|
5. DETAILS OF CASH FROM
OPERATING ACTIVITIES
[a] Cash and cash
equivalents
|
|
December
31,
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
Bank term deposits,
bankers' acceptances and government paper
|
|
$
|
498
|
|
$
|
2,572
|
Cash
|
|
|
476
|
|
|
291
|
|
|
$
|
974
|
|
$
|
2,863
|
[b] Items not involving current cash
flows:
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
$
|
278
|
|
$
|
213
|
|
$
|
1,056
|
|
$
|
802
|
Amortization of other
assets included in cost of goods sold
|
|
|
35
|
|
|
28
|
|
|
135
|
|
|
110
|
Deferred income
taxes
|
|
|
14
|
|
|
(2)
|
|
|
22
|
|
|
(7)
|
Other non-cash
charges
|
|
|
6
|
|
|
23
|
|
|
27
|
|
|
44
|
Equity income in
excess of dividends
received
|
|
|
49
|
|
|
29
|
|
|
(9)
|
|
|
(20)
|
Non-cash portion of
Other Income [note
3]
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(193)
|
|
|
$
|
382
|
|
$
|
291
|
|
$
|
1,231
|
|
$
|
736
|
[c] Changes in operating assets and
liabilities:
|
|
Three months
ended
|
|
Year
ended
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Accounts
receivable
|
|
$
|
558
|
|
$
|
178
|
|
$
|
(446)
|
|
$
|
(410)
|
Inventories
|
|
|
203
|
|
|
90
|
|
|
(159)
|
|
|
(241)
|
Prepaid expenses and
other
|
|
|
13
|
|
|
22
|
|
|
189
|
|
|
13
|
Accounts
payable
|
|
|
159
|
|
|
(28)
|
|
|
562
|
|
|
139
|
Accrued salaries and
wages
|
|
|
(2)
|
|
|
(27)
|
|
|
94
|
|
|
43
|
Other accrued
liabilities
|
|
|
(99)
|
|
|
45
|
|
|
(145)
|
|
|
72
|
Income taxes
payable
|
|
|
8
|
|
|
(37)
|
|
|
(14)
|
|
|
40
|
|
|
$
|
840
|
|
$
|
243
|
|
$
|
81
|
|
$
|
(344)
|
6. ACQUISITIONS
Acquisition of Getrag
On January 4, 2016, the Company
completed the acquisition of 100% of the common shares and voting
interests of the Getrag Group of Companies ["Getrag"]. Getrag
is a global supplier of automotive transmission systems, including
manual, automated-manual, dual clutch, hybrid and other advanced
systems. The purchase price was $1.8
billion [net of $136 million
cash acquired], and is subject to working capital and other
customary purchase price adjustments. The acquired business
has sales primarily to BMW, Audi, Jiangling Motors, Ford, Volvo and
Dongfeng.
The acquisition of Getrag was accounted for as a business
combination. The following table summarizes the amounts
recognized for assets acquired and liabilities assumed at their
estimated fair values as of the acquisition date, as well as
adjustments made during the three-months ended December 31,
2016:
|
|
Preliminary
amounts recognized
at September 30, 2016
|
|
Measurement
period
adjustments
|
|
Final
allocation
|
Cash
|
|
$
|
136
|
|
$
|
—
|
|
$
|
136
|
Non-cash working
capital
|
|
|
(459)
|
|
|
64
|
|
|
(395)
|
Investments
|
|
|
1,736
|
|
|
(239)
|
|
|
1,497
|
Fixed
assets
|
|
|
483
|
|
|
(38)
|
|
|
445
|
Goodwill
|
|
|
442
|
|
|
148
|
|
|
590
|
Other
assets
|
|
|
59
|
|
|
(35)
|
|
|
24
|
Intangibles
|
|
|
223
|
|
|
149
|
|
|
372
|
Deferred tax
assets
|
|
|
43
|
|
|
(9)
|
|
|
34
|
Long-term employee
benefit liabilities
|
|
|
(125)
|
|
|
(12)
|
|
|
(137)
|
Long-term
debt
|
|
|
(117)
|
|
|
—
|
|
|
(117)
|
Other long-term
liabilities
|
|
|
(52)
|
|
|
—
|
|
|
(52)
|
Deferred tax
liabilities
|
|
|
(144)
|
|
|
25
|
|
|
(119)
|
Non-controlling
interest
|
|
|
(307)
|
|
|
20
|
|
|
(287)
|
Consideration
paid
|
|
|
1,918
|
|
|
73
|
|
|
1,991
|
Less: Cash
acquired
|
|
|
(136)
|
|
|
—
|
|
|
(136)
|
Net cash
outflow
|
|
$
|
1,782
|
|
$
|
73
|
|
$
|
1,855
|
The measurement period adjustments primarily reflect: (i)
changes in the estimated fair value of the acquired equity method
investments; (ii) changes in the estimated fair value of the
acquired patents and customer relationship intangibles; and (iii) a
working capital adjustment due to an increase in the total fair
value of consideration transferred. This resulted in a net
adjustment to goodwill of $148
million.
The measurement period adjustments did not result from
intervening events subsequent to the acquisition date and did not
have a material impact on the Company's earnings in any
period. The final allocation of the consideration transferred
to the assets acquired and liabilities assumed has been
completed.
The investments amount includes the following equity investments
that were acquired as part of the business
combination:
|
Ownership
percentage
|
|
Investment
balance
|
Getrag Ford
Transmission
GmbH
|
50.0%
|
|
$
|
340
|
Getrag (Jiangxi)
Transmission Co., Ltd ["GJT"] (i)
|
50.0%
|
|
$
|
1,077
|
Dongfeng Getrag
Transmission Co.
Ltd
|
50.0%
|
|
$
|
80
|
(i)
|
GJT is 66.7% owned
by one of the Company's consolidated subsidiaries
which has a 25% non-controlling interest. As a result, the
preliminary investment balance was derived using 66.7% of the fair
value.
|
The Company accounts for the investments under the equity method
since it has the ability to exercise significant influence but does
not hold a controlling financial interest.
Recognized goodwill is attributable to the assembled workforce,
expected synergies and other intangible assets that do not qualify
for separate recognition. All of the goodwill recognized was
assigned to the Company's European segment.
Intangible assets consist primarily of amounts recognized for
the fair value of customer relationship intangibles and
patents. These amortizable intangible assets are being
amortized on a straight-line basis over a 15 year estimated useful
life.
Sales for the acquired Getrag entities for the three months and
year ended December 31, 2016 were
$528 million and $2.0 billion, respectively. Net income for the
three months and year ended December 31,
2016 were $8 million and
$45 million, respectively.
The following table provides consolidated supplemental pro forma
information as if the acquisition of Getrag had occurred on
January 1,
2015.
|
|
Three months
ended
|
|
Year ended
|
|
|
December 31,
2015
|
|
December 31,
2015
|
Sales
|
|
$
|
9,108
|
|
$
|
34,150
|
Net income
attributable to Magna International Inc.
|
|
$
|
447
|
|
$
|
1,992
|
The unaudited pro forma financial results do not include any
anticipated synergies or other expected benefits of the
acquisition. This information is presented for informational
purposes only and is not indicative of future operating
results.
Other
During the fourth quarter of 2016, the Company acquired 100% of
the equity interest in the BÖCO Group of Companies [BÖCO].
BÖCO is an automotive supplier of latches, hinges and
strikers, with sales primarily to the BMW Group, Daimler and
Audi.
During the second quarter of 2016, the Company acquired 100% of
the equity interest in Telemotive AG, an engineering service
provider in the field of automotive electronics. The acquired
business has sales primarily to BMW, Volkswagen and Daimler.
These entities have been included in our consolidated results of
operations since their respective acquisition dates. Pro forma
results of operations during the current period have not been
presented because the effects of these acquisitions, individually
and in aggregate, were not material to the Company's consolidated
results of operations.
Acquisitions in the year ended December 31, 2015
On December 10, 2015, the Company
entered into a partnership agreement in China with Chongqing Xingqiaorui [the
"Xingqiaorui Partnership"]. Chongqing Xingqiaorui
["Xingqiaorui"] is a Tier one supplier of automotive body-in-white
components to Changan Ford. Under the terms of the arrangement,
Xingqiaorui transferred a 53% controlling interest in its three
China manufacturing facilities and
cash consideration of $36
million. In exchange, the Company transferred a 47%
non-controlling equity interest in its Chongqing manufacturing facility and cash
consideration of $130 million to
Xingqiaorui.
The acquisition of the 53% controlling interest in the
China manufacturing facilities was
accounted for as a business combination, and the Company recorded
the assets acquired and liabilities assumed at their acquisition
date fair values. For the partial sale of the Company's
Chongqing manufacturing facility,
no revaluation occurred since the Company maintained its
controlling interest. The difference between the cash consideration
received and the amount allocated to the Non-controlling interest
resulted in a gain of $20 million,
which was credited to contributed surplus.
On November 30, 2015, the Company
acquired a 100% interest in Stadco Automotive Ltd. ["Stadco"] for
total cash consideration of $115
million. 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.
The final allocation of the consideration transferred to the
assets acquired and liabilities assumed for both the Xingqiaorui
Partnership and Stadco has been completed. As a result of
additional information obtained, changes to the preliminary fair
values of certain property, plant and equipment, definite-lived
intangible assets and contingent tax liabilities, from the amounts
disclosed as of December 31, 2015
were recorded during the three months ended December 31, 2016,
resulting in a net adjustment to goodwill of $14 million. These adjustments did not have a
material impact on the Company's earnings for the three months or
year ended December 31, 2016.
7. INVENTORIES
Inventories consist of:
|
December
31,
|
December
31,
|
|
2016
|
2015
|
Raw materials and
supplies
|
$
|
1,007
|
$
|
843
|
Work-in-process
|
|
264
|
|
246
|
Finished
goods
|
|
327
|
|
311
|
Tooling and
engineering
|
|
1,206
|
|
1,164
|
|
$
|
2,804
|
$
|
2,564
|
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:
|
|
2016
|
|
2015
|
Balance at December
31, 2015
|
$
|
1,344
|
$
|
1,337
|
Acquisitions [note
6]
|
|
430
|
|
—
|
Foreign exchange and
other
|
|
57
|
|
(74)
|
Balance, March 31,
2016
|
|
1,831
|
|
1,263
|
Acquisitions [note
6]
|
|
52
|
|
—
|
Divestiture
|
|
—
|
|
(7)
|
Foreign exchange and
other
|
|
(34)
|
|
16
|
Balance, June 30,
2016
|
|
1,849
|
|
1,272
|
Foreign exchange and
other
|
|
16
|
|
(21)
|
Balance, September
30, 2016
|
|
1,865
|
|
1,251
|
Acquisitions [note
6]
|
|
132
|
|
120
|
Foreign exchange and
other
|
|
(74)
|
|
(27)
|
Balance, December 31,
2016
|
$
|
1,923
|
|
1,344
|
9. OTHER ASSETS
Other assets consist of:
|
December
31,
|
December
31,
|
|
2016
|
2015
|
|
|
|
|
|
Preproduction costs
related to long-term supply agreements
|
|
|
|
|
|
with contractual
guarantee for reimbursement
|
$
|
420
|
$
|
276
|
Customer relationship
intangibles
|
|
296
|
|
75
|
Long-term
receivables
|
|
229
|
|
87
|
Patents and licences,
net
|
|
251
|
|
37
|
Computer
software
|
|
74
|
|
57
|
Unrealized gain on
cash flow hedges
|
|
6
|
|
5
|
Pension overfunded
status
|
|
21
|
|
17
|
Other,
net
|
|
43
|
|
27
|
|
$
|
1,340
|
$
|
581
|
10. SHORT-TERM BORROWINGS
The Company's short-term borrowings consist of the
following:
|
December
31,
|
December
31,
|
|
2016
|
2015
|
Bank indebtedness
[i]
|
$
|
8
|
$
|
25
|
Commercial paper
[ii]
|
|
615
|
|
—
|
|
$
|
623
|
$
|
25
|
[i]
|
In the third quarter
of 2016, the Company entered into an agreement for a credit
facility that is drawn in euros. The Company is required to
secure any amounts drawn on the facility with a USD cash deposit of
105% of the outstanding euro balance. As of December 31,
2016, the gross amount outstanding under the credit facility was
$185 million [€175 million]. The credit agreement includes a
netting arrangement with the bank that provides for the legal right
of setoff. Accordingly, as at December 31, 2016, this
liability balance was offset against the related restricted cash
deposit of $194 million. The remaining net cash deposit of $9
million was included in the prepaid expenses and other balance, and
is restricted under the terms of the loan.
|
[ii]
|
During the third
quarter of 2016, the Company established a U.S. commercial paper
program [the "U.S. Program"]. Under the U.S. Program, the
Company may issue U.S. commercial paper notes [the "U.S. notes"] up
to a maximum aggregate amount of U.S. $500 million. The U.S.
Program is supported by the Company's existing global credit
facility. The proceeds from the issuance of the U.S. notes
are being used for general corporate purposes. As of December
31, 2016, $295 million of U.S notes were outstanding, with a
weighted-average interest rate of 1.04%, and maturities generally
less than three months.
|
|
In the first quarter
of 2016, the Company established a euro-commercial paper program
[the "euro-Program"]. Under the euro-Program, the Company may issue
euro-commercial paper notes [the "euro notes"] up to a maximum
aggregate amount of €500 million or its equivalent in alternative
currencies. The euro notes issued are guaranteed by the Company's
existing global credit facility. The proceeds from the issuance of
the euro notes are being used for general corporate purposes. As of
December 31, 2016, $320 million [€304 million] of euro notes were
outstanding, with a negative weighted-average interest rate of
0.07%, and maturities generally less than three months.
|
11. WARRANTY
The following is a continuity of the Company's warranty
accruals:
|
2016
|
2015
|
Balance, beginning of
period
|
$
|
59
|
$
|
80
|
Expense,
net
|
|
19
|
|
8
|
Settlements
|
|
(17)
|
|
(10)
|
Acquisitions [note
6]
|
|
172
|
|
—
|
Foreign exchange and
other
|
|
4
|
|
(6)
|
Balance, March
31
|
|
237
|
|
72
|
Expense,
net
|
|
12
|
|
10
|
Settlements
|
|
(14)
|
|
(10)
|
Foreign exchange and
other
|
|
(2)
|
|
1
|
Balance, June
30
|
|
233
|
|
73
|
Expense,
net
|
|
26
|
|
1
|
Settlements
|
|
(4)
|
|
(10)
|
Foreign exchange and
other
|
|
(1)
|
|
(5)
|
Balance, September
30
|
|
254
|
|
59
|
Expense,
net
|
|
44
|
|
7
|
Settlements
|
|
(24)
|
|
(23)
|
Acquisitions [note
6]
|
|
2
|
|
—
|
Foreign exchange and
other
|
|
(6)
|
|
16
|
Balance, December
31
|
$
|
270
|
$
|
59
|
During the first quarter of 2016, the warranty obligation
assumed as a result of the acquisition was recognized at its
estimated fair value of $172
million. Of this amount, $127
million relates to a pre-acquisition settlement agreement
negotiated with a customer and a supplier for a specific
performance issue.
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,
|
|
2016
|
2015
|
|
2016
|
2015
|
Defined benefit
pension plan and other
|
$
|
18
|
$
|
4
|
|
$
|
31
|
$
|
14
|
Termination and long
service arrangements
|
|
7
|
|
21
|
|
|
29
|
|
41
|
Retirement medical
benefit plan
|
|
(1)
|
|
—
|
|
|
—
|
|
1
|
|
$
|
24
|
$
|
25
|
|
$
|
60
|
$
|
56
|
13. CAPITAL STOCK
[a] The Company repurchased shares under normal
course issuer bids as follows:
|
2016
|
|
2015
|
|
Number
|
|
Cash
|
|
Number
|
|
Cash
|
|
of
shares
|
|
consideration
|
|
of shares
|
|
consideration
|
First
Quarter
|
7,277,425
|
$
|
300
|
|
—
|
$
|
—
|
Second
Quarter
|
7,823,637
|
|
308
|
|
—
|
|
—
|
Third
Quarter
|
4,706,220
|
|
190
|
|
7,246,514
|
|
346
|
Fourth
Quarter
|
2,527,736
|
|
106
|
|
3,505,970
|
|
155
|
|
22,335,018
|
$
|
904
|
|
10,752,484
|
$
|
501
|
[b] The following table presents the maximum number
of shares that would be outstanding if all the dilutive instruments
outstanding at February 23, 2017 were
exercised or converted:
Common
Shares
|
382,456,855
|
Stock options
(i)
|
7,174,665
|
|
389,631,520
|
(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.
|
14. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following is a
continuity schedule of accumulated other comprehensive
loss:
|
|
|
2016
|
|
2015
|
Accumulated net
unrealized loss on translation of net investment in foreign
operations
|
|
|
|
|
|
Balance, beginning of
period
|
$
|
(1,042)
|
$
|
(255)
|
|
Net unrealized gain
(loss)
|
|
256
|
|
(438)
|
|
Repurchase of shares
under normal course issuer bid
|
|
7
|
|
—
|
|
Balance, March
31
|
|
(779)
|
|
(693)
|
|
Net unrealized (loss)
gain
|
|
(108)
|
|
63
|
|
Repurchase of shares
under normal course issuer bid
|
|
6
|
|
—
|
|
Balance, June
30
|
|
(881)
|
|
(630)
|
|
Net unrealized gain
(loss)
|
|
24
|
|
(275)
|
|
Repurchase of shares
under normal course issuer bid
|
|
4
|
|
7
|
|
Balance, September
30
|
|
(853)
|
|
(898)
|
|
Net unrealized
loss
|
|
(281)
|
|
(148)
|
|
Repurchase of shares
under normal course issuer bid
|
|
3
|
|
4
|
|
Balance, December
31
|
|
(1,131)
|
|
(1,042)
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Accumulated net
unrealized loss on cash flow hedges (i)
|
|
|
|
|
|
Balance, beginning of
period
|
|
(262)
|
|
(113)
|
|
Net unrealized gain
(loss)
|
|
69
|
|
(65)
|
|
Reclassification of
net loss to net income
|
|
36
|
|
11
|
|
Balance, March
31
|
|
(157)
|
|
(167)
|
|
Net unrealized
loss
|
|
(11)
|
|
(2)
|
|
Reclassification of
net loss to net income
|
|
35
|
|
21
|
|
Balance, June
30
|
|
(133)
|
|
(148)
|
|
Net unrealized
loss
|
|
(19)
|
|
(123)
|
|
Reclassification of
net loss to net income
|
|
27
|
|
24
|
|
Balance, September
30
|
|
(125)
|
|
(247)
|
|
Net unrealized
loss
|
|
(38)
|
|
(54)
|
|
Reclassification of
net loss to net income
|
|
28
|
|
39
|
|
Balance, December
31
|
|
(135)
|
|
(262)
|
|
|
|
|
|
Accumulated net
unrealized loss on available-for-sale investments
|
|
|
|
|
|
Balance, beginning of
period
|
|
(1)
|
|
(4)
|
|
Net unrealized
gain
|
|
—
|
|
1
|
|
Balance, March
31
|
|
(1)
|
|
(3)
|
|
Net unrealized
gain
|
|
—
|
|
1
|
|
Balance, June
30
|
|
(1)
|
|
(2)
|
|
Net unrealized
loss
|
|
—
|
|
(2)
|
|
Reclassification of
net loss to net income
|
|
—
|
|
3
|
|
Balance, September
30
|
|
(1)
|
|
(1)
|
|
Reclassification of
net loss to net income
|
|
1
|
|
—
|
|
Balance, December
31
|
|
—
|
|
(1)
|
|
|
|
|
|
Accumulated net
unrealized loss on pensions (ii)
|
|
|
|
|
|
Balance, beginning of
period
|
|
(165)
|
|
(186)
|
|
Net unrealized
loss
|
|
(2)
|
|
(1)
|
|
Acquisitions [note
6]
|
|
(1)
|
|
—
|
|
Reclassification of
net loss to net income
|
|
1
|
|
1
|
|
Balance, March
31
|
|
(167)
|
|
(186)
|
|
Acquisitions [note
6]
|
|
1
|
|
—
|
|
Reclassification of
net loss to net income
|
|
1
|
|
2
|
|
Balance, June
30
|
|
(165)
|
|
(184)
|
|
Net unrealized
loss
|
|
—
|
|
(1)
|
|
Reclassification of
net loss to net income
|
|
1
|
|
2
|
|
Balance, September
30
|
|
(164)
|
|
(183)
|
|
Net unrealized (loss)
gain
|
|
(27)
|
|
16
|
|
Reclassification of
net loss to net income
|
|
6
|
|
2
|
|
Balance, December
31
|
|
(185)
|
|
(165)
|
|
|
|
|
|
Total accumulated
other comprehensive loss
|
$
|
(1,451)
|
$
|
(1,470)
|
(i) The
amount of income tax benefit that has been netted in the
accumulated net unrealized loss on cash flow hedges is as
follows:
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Balance, beginning
of period
|
$
|
97
|
$
|
44
|
Net unrealized
(loss) gain
|
|
(24)
|
|
27
|
Reclassifications
of net loss to net income
|
|
(14)
|
|
(5)
|
Balance, March
31
|
|
59
|
|
66
|
Net unrealized
gain (loss)
|
|
6
|
|
(1)
|
Reclassifications
of net loss to net income
|
|
(13)
|
|
(8)
|
Balance, June
30
|
|
52
|
|
57
|
Net unrealized
gain
|
|
7
|
|
47
|
Reclassifications
of net loss to net income
|
|
(10)
|
|
(10)
|
Balance, September
30
|
|
49
|
|
94
|
Net unrealized
gain
|
|
15
|
|
19
|
Reclassification
of net loss to net income
|
|
(11)
|
|
(16)
|
Balance, December
31
|
$
|
53
|
$
|
97
|
|
|
|
|
|
(ii) The amount of
income tax benefit that has been netted in the accumulated net
unrealized loss on pensions is as follows:
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
Balance, beginning
of period
|
$
|
31
|
$
|
36
|
Net unrealized
loss
|
|
(2)
|
|
—
|
Balance, March
31
|
|
29
|
|
36
|
Reclassification
of net loss to net income
|
|
(1)
|
|
(1)
|
Balance, June
30
|
|
28
|
|
35
|
Net unrealized
loss
|
|
—
|
|
(1)
|
Reclassification
of net loss to net income
|
|
—
|
|
(1)
|
Balance, September
30
|
|
28
|
|
33
|
Net unrealized
gain (loss)
|
|
5
|
|
(2)
|
Reclassification
of net loss to net income
|
|
(3)
|
|
—
|
Balance, December
31
|
$
|
30
|
$
|
31
|
|
|
|
|
|
The amount of other
comprehensive loss that is expected to be reclassified to net
income over the next 12 months is $130 million.
|
15. FINANCIAL INSTRUMENTS
[a] Financial assets and
liabilities
The Company's financial assets and financial liabilities consist
of the following:
|
December
31, 2016
|
|
December 31,
2015
|
|
|
|
|
|
Trading
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
974
|
$
|
2,863
|
|
Investment in
asset-backed commercial paper
|
|
60
|
|
73
|
|
Equity
investments
|
|
—
|
|
4
|
|
$
|
1,034
|
$
|
2,940
|
|
|
|
|
|
Held to maturity
investments
|
|
|
|
|
|
Severance
investments
|
$
|
3
|
$
|
3
|
|
|
|
|
|
Loans and
receivables
|
|
|
|
|
|
Accounts
receivable
|
$
|
6,165
|
$
|
5,439
|
|
Long-term receivables
included in other assets
|
|
229
|
|
87
|
|
$
|
6,394
|
$
|
5,526
|
|
|
|
|
|
Other financial
liabilities
|
|
|
|
|
|
Bank
indebtedness
|
$
|
8
|
$
|
25
|
|
Commercial
paper
|
|
615
|
|
—
|
|
Long-term debt
(including portion due within one year)
|
|
2,533
|
|
2,557
|
|
Accounts
payable
|
|
5,430
|
|
4,746
|
|
$
|
8,586
|
$
|
7,328
|
|
|
|
|
|
Derivatives
designated as effective hedges, measured at fair value
|
|
|
|
|
Foreign currency
contracts
|
|
|
|
|
|
Prepaid
expenses
|
$
|
12
|
$
|
27
|
|
Other
assets
|
|
6
|
|
4
|
|
Other accrued
liabilities
|
|
(134)
|
|
(191)
|
|
Other long-term
liabilities
|
|
(61)
|
|
(152)
|
|
$
|
(177)
|
$
|
(312)
|
[b] Derivatives designated as effective hedges,
measured at fair value
The Company presents derivatives that are designated as
effective hedges at gross fair values 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 impacts of master netting arrangements:
|
Gross
amounts
presented
in
consolidated
balance
sheets
|
Gross
amounts
not offset
in consolidated
balance sheets
|
Net
amounts
|
|
|
|
|
December 31,
2016
|
|
|
|
|
|
|
|
Assets
|
$
|
18
|
$
|
17
|
$
|
1
|
|
Liabilities
|
$
|
(195)
|
$
|
(17)
|
$
|
(178)
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
Assets
|
$
|
31
|
$
|
30
|
$
|
1
|
|
Liabilities
|
$
|
(343)
|
$
|
(30)
|
$
|
(313)
|
[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, short-term
borrowings and accounts payable.
Due to the short period to maturity of the instruments, the
carrying values as presented in the consolidated balance sheets are
reasonable estimates of fair values.
Investments
At December 31, 2016, the Company
held Canadian third party asset-backed commercial paper ["ABCP"]
with a face value of Cdn$81 million
[December 31, 2015 - Cdn$107
million]. The carrying value and estimated fair value of this
investment was Cdn$81 million
[December 31, 2015 - Cdn$101
million]. The investment had a carrying value of Cdn$81 million [December
31, 2015 – Cdn$101
million]. At December 31,
2016, the fair value of the ABCP was Cdn$81 million based on its maturity value in
January 2017.
Commercial Paper
Due to the short period to maturity of the commercial paper, the
carrying value as presented in the consolidated balance sheet is a
reasonable estimate of its fair value.
Term debt
The Company's term debt includes $139
million due within one year. Due to the short period to
maturity of this debt, the carrying value as presented in the
consolidated balance sheets is a reasonable estimate of its fair
value.
Senior Notes
The fair value of our Senior Notes are classified as Level 1
when we use quoted prices in active markets and Level 2 when the
quoted prices are from less active markets or when other observable
inputs are used to determine fair value. At December 31, 2016, the net book value of the
Company's Senior Notes was $2.30
billion and the estimated fair value was $2.36 billion, determined primarily using active
market prices.
[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 December 31, 2016, sales to the
Company's six largest customers represented 81% and 82% of the
Company's total sales, respectively, and substantially all of the
Company's sales are to customers in which it has ongoing
contractual relationships.
[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
The Company is exposed to fluctuations in foreign exchange rates
when manufacturing facilities have committed to the delivery of
products for which the selling price has been quoted in currencies
other than the facilities' functional currency, and when materials
and equipment are purchased in currencies other than the
facilities' functional currency. In an effort to manage this net
foreign exchange exposure, the Company employs hedging programs,
primarily through the use of foreign exchange forward
contracts.
At December 31, 2016, the Company
had outstanding foreign exchange forward contracts representing
commitments to buy and sell various foreign currencies. Significant
commitments are as follows:
|
Buys
|
Sells
|
|
|
|
For Canadian
dollars
|
|
|
|
U.S.
amount
|
123
|
(1,954)
|
|
euro
amount
|
24
|
(17)
|
|
Korean won
amount
|
21,600
|
—
|
|
|
|
For U.S.
dollars
|
|
|
|
Peso
amount
|
5,883
|
—
|
|
Korean won
amount
|
23,861
|
—
|
|
|
|
For euros
|
|
|
|
U.S.
amount
|
187
|
(191)
|
|
GBP amount
|
6
|
(59)
|
|
Czech Koruna
amount
|
7,805
|
—
|
|
Polish Zlotys
amount
|
327
|
—
|
Forward contracts mature at various dates through 2021. Foreign
currency exposures are reviewed quarterly.
16. 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 November 1997,
the Company and two of its subsidiaries were sued by KS Centoco
Ltd., an Ontario-based steering
wheel manufacturer in which the Company has a 23% equity interest,
and by Centoco Holdings Limited, the owner of the remaining 77%
equity interest in KS Centoco Ltd. In March
1999, the plaintiffs were granted leave to make substantial
amendments to the original statement of claim in order to add
several new defendants and claim additional remedies and, in
February 2006, the plaintiffs further
amended their claim to add an additional remedy. In February 2016, a consent order was granted
allowing the Plaintiffs to file a fresh statement of claim which
includes an additional remedy and reduces certain aggravated and
punitive damages claimed [the "Main Action"]. The fresh
statement of claim alleges, among other things:
- 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 in North America, other
than through MST Automotive Inc., a company to be 77% owned by
Magna and 23% owned by Centoco 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 in North
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 in
North America and to cause Centoco
Holdings Limited to sell to TRW its interest in KS Centoco Ltd. in
conjunction with the Company's sale to TRW of its interest in MST
Automotive GmbH and TEMIC Bayern-Chemie Airbag GmbH; and
- oppression by the defendants.
The plaintiffs are seeking, among other things, damages of
approximately Cdn$2.56 billion in the
Main Action. Document production, completion of undertakings and
examinations for discovery are substantially complete, although
limited additional examinations for discovery are expected to
occur.
In April 2016, the Company filed a
new claim against Centoco Holdings Limited and KS Centoco Ltd.
seeking an order under the Ontario
Business Corporations Act to wind-up the business and
affairs of KS Centoco Ltd. and distribute its assets to the
shareholders [the "Wind-Up Action"]. In June
2016, Centoco Holdings Limited and KS Centoco Ltd. filed a
statement of defence and counterclaim in the Wind-Up Action
alleging breach of fiduciary duty and bad faith performance of
contractual obligations by the Company and two of its officers who
were the Company's representatives on KS Centoco Ltd.'s Board of
Directors for a number of years [the "Centoco Counterclaim"].
Pursuant to the Centoco Counterclaim, Centoco Holdings Limited and
KS Centoco Ltd. are claiming damages of approximately Cdn$1.8 billion.
Both actions will be tried together at a trial scheduled to
commence on October 30, 2017. The
claims and damages in the Centoco Counterclaim substantially
duplicate those described in the Main Action and, as a result, the
Company believes that there is no incremental liability due to the
Centoco Counterclaim. The Company also believes it has valid
defences to the claims made by Centoco Holdings Limited and KS
Centoco Ltd. in both actions and therefore intends to continue to
vigorously defend these two cases. Due to the nature of the claims
made and potential damages alleged by Centoco Holdings Limited and
KS Centoco Ltd., the Company is unable to predict the final outcome
of these claims.
[b] In September
2014, the Conselho Administrativo de Defesa Economica,
Brazil's Federal competition
authority, attended at one of the Company's operating divisions in
Brazil 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 previously
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 such review, a regulatory investigation or otherwise,
Magna could be subject to fines, penalties, restitution settlements
and civil, administrative or criminal legal proceedings and other
consequences, including reputational damage.
[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 11]; 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, and with respect to our powertrain systems
programs, the Company records an estimate of future
warranty-related costs based on the terms of the specific customer
agreements, and the specific customer's [or the Company's] warranty
experience.
17. 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 is
calculated by taking net income from continuing operations and
adding back 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
|
|
Three months
ended
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
|
|
|
|
|
|
Fixed
|
|
|
Total
|
|
External
|
|
Adjusted
|
|
assets,
|
|
|
Total
|
|
External
|
|
Adjusted
|
|
assets,
|
|
|
sales
|
|
sales
|
|
EBIT
[ii]
|
|
net
|
|
|
sales
|
|
sales
|
|
EBIT [ii]
|
|
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
$
|
1,764
|
$
|
1,597
|
|
|
$
|
721
|
|
$
|
1,751
|
$
|
1,619
|
|
|
$
|
645
|
|
United
States
|
|
2,590
|
|
2,506
|
|
|
|
1,573
|
|
|
2,491
|
|
2,378
|
|
|
|
1,422
|
|
Mexico
|
|
1,269
|
|
1,119
|
|
|
|
999
|
|
|
1,176
|
|
1,066
|
|
|
|
755
|
|
Eliminations
|
|
(385)
|
|
—
|
|
|
|
—
|
|
|
(328)
|
|
—
|
|
|
|
—
|
|
|
5,238
|
|
5,222
|
$
|
516
|
|
3,293
|
|
|
5,090
|
|
5,063
|
$
|
501
|
|
2,822
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding Great
Britain)
|
|
2,569
|
|
2,472
|
|
|
|
1,912
|
|
|
2,283
|
|
2,202
|
|
|
|
1,263
|
|
Great
Britain
|
|
147
|
|
147
|
|
|
|
127
|
|
|
129
|
|
129
|
|
|
|
145
|
|
Eastern
Europe
|
|
622
|
|
541
|
|
|
|
545
|
|
|
562
|
|
500
|
|
|
|
471
|
|
Eliminations
|
|
(114)
|
|
—
|
|
|
|
—
|
|
|
(85)
|
|
—
|
|
|
|
—
|
|
|
3,224
|
|
3,160
|
|
71
|
|
2,584
|
|
|
2,889
|
|
2,831
|
|
112
|
|
1,879
|
Asia
|
|
775
|
|
726
|
|
100
|
|
679
|
|
|
624
|
|
584
|
|
63
|
|
811
|
Rest of
World
|
|
144
|
|
144
|
|
4
|
|
62
|
|
|
88
|
|
88
|
|
(6)
|
|
51
|
Corporate and
Other [i]
|
|
(128)
|
|
1
|
|
5
|
|
404
|
|
|
(123)
|
|
2
|
|
(14)
|
|
385
|
Total reportable
segments
|
|
9,253
|
|
9,253
|
|
696
|
|
7,022
|
|
|
8,568
|
|
8,568
|
|
656
|
|
5,948
|
Other expense,
net
|
|
|
|
|
|
(30)
|
|
|
|
|
|
|
|
|
(15)
|
|
|
Interest expense,
net
|
|
|
|
|
|
(20)
|
|
|
|
|
|
|
|
|
(17)
|
|
|
|
$
|
9,253
|
$
|
9,253
|
$
|
646
|
|
7,022
|
|
$
|
8,568
|
$
|
8,568
|
$
|
624
|
|
5,948
|
Current
assets
|
|
|
|
|
|
|
|
10,163
|
|
|
|
|
|
|
|
|
11,144
|
Investments,
goodwill,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deferred tax assets,
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
assets
|
|
|
|
|
|
|
|
5,381
|
|
|
|
|
|
|
|
|
2,595
|
Consolidated total
assets
|
|
|
|
|
|
|
$
|
22,566
|
|
|
|
|
|
|
|
$
|
19,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
ended
|
|
Year ended
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
|
Fixed
|
|
|
|
|
|
|
|
Fixed
|
|
Total
|
External
|
Adjusted
|
assets,
|
|
Total
|
External
|
Adjusted
|
assets,
|
|
sales
|
sales
|
EBIT
[ii]
|
|
net
|
|
sales
|
sales
|
EBIT [ii]
|
net
|
North
America
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
$
|
6,784
|
$
|
6,214
|
|
|
$
|
721
|
|
$
|
6,329
|
$
|
5,856
|
|
|
$
|
645
|
|
United
States
|
|
10,226
|
|
9,857
|
|
|
|
1,573
|
|
|
9,603
|
|
9,183
|
|
|
|
1,422
|
|
Mexico
|
|
5,121
|
|
4,586
|
|
|
|
999
|
|
|
4,261
|
|
3,869
|
|
|
|
755
|
|
Eliminations
|
|
(1,387)
|
|
—
|
|
|
|
—
|
|
|
(1,178)
|
|
—
|
|
|
|
—
|
|
|
20,744
|
|
20,657
|
$
|
2,061
|
|
3,293
|
|
|
19,015
|
|
18,908
|
$
|
1,934
|
|
2,822
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Western
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(excluding Great
Britain)
|
|
10,537
|
|
10,159
|
|
|
|
1,912
|
|
|
8,936
|
|
8,635
|
|
|
|
1,263
|
|
Great
Britain
|
|
658
|
|
656
|
|
|
|
127
|
|
|
404
|
|
404
|
|
|
|
145
|
|
Eastern
Europe
|
|
2,285
|
|
2,000
|
|
|
|
545
|
|
|
2,110
|
|
1,873
|
|
|
|
471
|
|
Eliminations
|
|
(400)
|
|
—
|
|
|
|
—
|
|
|
(327)
|
|
—
|
|
|
|
—
|
|
|
13,080
|
|
12,815
|
|
543
|
|
2,584
|
|
|
11,123
|
|
10,912
|
|
451
|
|
1,879
|
Asia
|
|
2,674
|
|
2,502
|
|
266
|
|
679
|
|
|
1,981
|
|
1,846
|
|
149
|
|
811
|
Rest of
World
|
|
465
|
|
464
|
|
(17)
|
|
62
|
|
|
461
|
|
461
|
|
(25)
|
|
51
|
Corporate and
Other [i]
|
|
(518)
|
|
7
|
|
45
|
|
404
|
|
|
(446)
|
|
7
|
|
20
|
|
385
|
Total reportable
segments
|
|
36,445
|
|
36,445
|
|
2,898
|
|
7,022
|
|
|
32,134
|
|
32,134
|
|
2,529
|
|
5,948
|
Other (expense)
income, net
|
|
|
|
|
|
(30)
|
|
|
|
|
|
|
|
|
166
|
|
|
Interest expense,
net
|
|
|
|
|
|
(88)
|
|
|
|
|
|
|
|
|
(44)
|
|
|
|
$
|
36,445
|
$
|
36,445
|
$
|
2,780
|
|
7,022
|
|
$
|
32,134
|
$
|
32,134
|
$
|
2,651
|
|
5,948
|
Current
assets
|
|
|
|
|
|
|
|
10,163
|
|
|
|
|
|
|
|
|
11,144
|
Investments,
goodwill,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deferred tax assets
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
assets
|
|
|
|
|
|
|
|
5,381
|
|
|
|
|
|
|
|
|
2,595
|
Consolidated total
assets
|
|
|
|
|
|
|
$
|
22,566
|
|
|
|
|
|
|
|
$
|
19,687
|
[i] Included in Corporate and
Other Adjusted EBIT are intercompany fees charged to the automotive
segments.
|
|
[ii] The following table reconciles
Net income from continuing operations to Adjusted EBIT:
|
|
Three months
ended
|
|
Year
ended
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
Net income from
continuing operations
|
$
|
496
|
$
|
482
|
|
$
|
2,074
|
$
|
1,940
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
20
|
|
17
|
|
|
88
|
|
44
|
|
Other expense
(income), net
|
|
30
|
|
15
|
|
|
30
|
|
(166)
|
|
Income
taxes
|
|
150
|
|
142
|
|
|
706
|
|
711
|
Adjusted
EBIT
|
$
|
696
|
$
|
656
|
|
$
|
2,898
|
$
|
2,529
|
SOURCE Magna International Inc.