“2019 was a challenging year on a number of fronts, however we continued to make significant investments in new technologies to support customer plans to produce lighter, safer, and cleaner vehicles. I believe we are as well-positioned as ever to continue to grow.” – Don Walker, Magna’s Chief Executive Office
Fourth Quarter 2019 Highlights
- Cash from operations increased to $1.70 billion, despite lower sales and earnings
- Returned $365 million to shareholders through share repurchases and dividends
- Raised quarterly cash dividend by 10% to $0.40 per share
Full Year 2019 Highlights
- Record cash from operations of $3.96 billion, despite lower sales and earnings
- Returned approximately $1.7 billion to shareholders through share repurchases and dividends
Magna International Inc. (TSX: MG; NYSE: MGA) reported financial results for the fourth quarter and year ended December 31, 2019.
| THREE MONTHS ENDED DECEMBER 31, |
YEAR ENDED DECEMBER 31, |
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| 2019 | 2018 | 2019 | 2018 | |||||||||
| Reported
Sales |
$ | 9,395 | $ | 10,137 | $ | 39,431 | $ | 40,827 | ||||
| Income from operations before income taxes |
$ | 579 | $ | 607 | $ | 2,223 | $ | 2,951 | ||||
| Net income attributable to Magna International Inc. |
$ | 440 | $ | 456 | $ | 1,765 | $ | 2,296 | ||||
| Diluted earnings per share | $ | 1.43 | $ | 1.37 | $ | 5.59 | $ | 6.61 | ||||
| Non-GAAP Financial Measures(1)
Adjusted EBIT |
$ | 590 | $ | 730 | $ | 2,545 | $ | 3,107 | ||||
| Adjusted diluted earnings per share | $ | 1.41 | $ | 1.63 | $ | 6.05 | $ | 6.71 | ||||
| All results are reported in millions of U.S. dollars, except per share figures, which are in U.S. dollars. (1) Adjusted EBIT and Adjusted diluted earnings per share are Non-GAAP financial measures that have no standardized meaning under U.S. GAAP, and as a result may not be comparable to the calculation of similar measures by other companies. A reconciliation of these Non-GAAP financial measures is included in the back of this press release. |
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A 40-day labour strike at General Motors [“GM”], which began late in September of 2019 and extended into late October, had a negative impact on North American light vehicle production and consequently negatively impacted our sales and profitability for both the third and fourth quarters of 2019.
THREE MONTHS ENDED DECEMBER 31, 2019
Our fourth quarter results were ahead of our expectations for sales and diluted earnings per share.
On a consolidated basis, we posted sales of $9.40 billion for the fourth quarter of 2019, a decrease of 7% from the fourth quarter of 2018. Our sales in the fourth quarter of 2019 were negatively impacted by, among other factors, declines in light vehicle production of 7% in North America, including the impact of the labour strike at GM, and 3% in Europe, the divestiture of our Fluid Pressure & Controls [“FP&C”] business in the first quarter of 2019, as well as the weakening of a number of currencies against the U.S. dollar. Excluding the impact of foreign currency and divestitures, net of acquisitions, sales decreased by 3% on a consolidated basis, and by segment: Complete Vehicles decreased 11%, Body Exteriors & Structures decreased 5%, and Seating Systems decreased 3%, while Power & Vision increased 4%. These compare to global light vehicle production which was essentially level in the fourth quarter of 2019.
Adjusted EBIT of $590 million in the fourth quarter of 2019 decreased by 19% from the fourth quarter of 2018, driven by lower sales and a lower adjusted EBIT as a percentage of sales. Adjusted EBIT as a percentage of sales declined to 6.3% compared to 7.2% in the fourth quarter of 2018, reflecting:
- lower margins in our Power & Vision segment, mainly associated with higher engineering costs in our ADAS business, substantially associated with three programs that will be utilizing new technologies, the labour strike at GM and higher net warranty costs, partially offset by the impact of the divestiture of FP&C during 2019 and higher net favourable commercial items;
- lower margins in our Body Exteriors & Structures segment, largely due to the labour strike at GM; and
- lower margins in our Seating segment, mainly associated with foreign exchange losses in the fourth quarter of 2019 compared to gains in the fourth quarter of 2018, launch and operational inefficiencies at a new facility, higher net warranty costs, higher commodity costs, and the labour strike at GM, partially offset by higher equity income.
These factors were partially offset by higher margins in our Complete Vehicles segment, primarily due to earnings on higher sales of certain vehicles, lower launch costs and operational improvements, as well as higher earnings in our Corporate segment.
Income from operations before income taxes of $579 million decreased $28 million in the fourth quarter of 2019 compared to the fourth quarter of 2018. The decrease reflects lower Adjusted EBIT, partially offset by other income, net in the fourth quarter of 2019 compared to other expense, net in the fourth quarter of 2018, and lower interest expense.
Net income attributable to Magna International Inc. decreased $16 million in the fourth quarter of 2019 compared to the fourth quarter of 2018 primarily as a result of lower income from operations before income taxes, partially offset by lower income taxes and lower income attributable to non-controlling interests.
Diluted earnings per share increased by 4% to $1.43 in the fourth quarter of 2019, reflecting the favourable impact of a reduced share count, partially offset by lower net income attributable to Magna International Inc. Adjusted diluted earnings per share decreased 13% to $1.41 compared to $1.63 for the fourth quarter of 2018.
In the fourth quarter of 2019, we generated cash from operations before changes in operating assets and liabilities of $954 million and $742 million in operating assets and liabilities. Investment activities for the fourth quarter of 2019 included $513 million in fixed asset additions, a $122 million increase in investments, other assets and intangible assets, and $5 million in acquisitions. We also received proceeds of $221 million relating to the sale of our publicly traded equity securities in Lyft, Inc.
YEAR ENDED DECEMBER 31, 2019
We posted sales of $39.4 billion for the year ended December 31, 2019, a decrease of 3% from the year ended December 31, 2018. Excluding the impact of foreign currency translation and divestitures, net of acquisitions, sales increased 2%. This compares favourably to global light vehicle production, which declined 4%.
Income from operations before income taxes was $2.22 billion, a decrease of $728 million from 2018.
Net income attributable to Magna International Inc. was $1.77 billion and diluted earnings per share were $5.59, decreases of $531 million and $1.02, respectively, each compared to 2018.
Adjusted EBIT decreased to $2.55 billion in 2019, compared to $3.11 billion for 2018.
Our adjusted diluted earnings per share decreased 10% to $6.05 for 2019 compared to $6.71 for 2018.
During 2019, we generated cash from operations before changes in operating assets and liabilities of $3.61 billion, and $352 million in operating assets and liabilities. Investment activities for 2019 included $1.44 billion in fixed asset additions, $394 million increase in investments, other assets and intangible assets and $147 million in acquisitions. We also received proceeds of $1.13 billion and $231 million related to the sale of our FP&C business and the sale of our publicly traded equity securities in Lyft, Inc., respectively.
RETURN OF CAPITAL TO SHAREHOLDERS
During the three months and year ended December 31, 2019, Magna repurchased 4.7 million shares for $254 million and 25.8 million shares for $1.29 billion, respectively. In addition, we paid dividends of $111 million and $449 million for the three months and year ended December 31, 2019, respectively.
Our Board of Directors declared a quarterly dividend of $0.40 with respect to our outstanding Common Shares for the quarter ended December 31, 2019. This represents a 10% increase in the dividend. The dividend is payable on March 20, 2020 to shareholders of record on March 6, 2020.
2020 OUTLOOK
Our 2020 outlook remains unchanged from the outlook provided in our January 16, 2020 press release. We have not included any adjustment to our outlook related to COVID-19 (coronavirus), as it is difficult to forecast when our customers’ facilities in China will be fully operational, their ability to recover lost production, the risk of supply chain disruptions in the event that Chinese factories are unable to resume normal operations promptly, any adverse impact on the economy in China and/or the possibility that the economies of other regions could be adversely impacted by any further COVID-19-related slowdown in China. For further details, refer to the „2020 Outlook“ section later in this press release.
REVIEW OF SELECT FOURTH QUARTER 2019 FINANCIAL INFORMATION
Other (Income) Expense, net
For the three months ended December 31, 2019, we recorded Other income, net of $8 million ($7 million after tax), which had a favourable impact of $0.02 on diluted earnings per common share.
For the three months ended December 31, 2018, we recorded Other expense, net of $97 million ($86 million after tax) which had an unfavourable impact of $0.26 on diluted earnings per common share.
