Intier Automotive Inc. | 521 Newpark Blvd., |
PRESS RELEASE
INTIER ANNOUNCES 2002 FISCAL YEAR AND FOURTH QUARTER RESULTS
Thursday, February 13, 2003, Newmarket, Ontario, Canada Intier Automotive Inc. (TSX: IAI.A, NASDAQ: IAIA) today reported financial results for the fiscal year and fourth quarter ended December 31, 2002.
Diluted earnings per share for the fiscal year and fourth quarter ended December 31, 2002 were $0.95 earnings per share and $0.09 loss per share, respectively. As previously disclosed on February 3, 2003, 2002 fourth quarter results have been negatively impacted by a non-cash impairment charge of $23.6 million and an associated $1.5 million income tax charge. The impact of this $25.1 million charge to diluted earnings per share for the fiscal year and fourth quarter ended December 31, 2002 was a reduction of $0.39 per share and $0.47 per share, respectively.
All results are reported in millions of U.S. dollars, except earnings per share figures, in accordance with Canadian Generally Accepted Accounting Principles. | ||||||||||||||
THREE MONTH PERIODS ENDED DECEMBER 31, | YEAR ENDED DECEMBER 31, | |||||||||||||
(Unaudited) | (Audited) | |||||||||||||
2002 | 2001 | 2002 | 2001 | |||||||||||
Sales | $ | 1,054.7 | $ | 866.7 | $ | 3,861.6 | $ | 3,268.1 | ||||||
Operating income (1) | $ | 15.3 | $ | 27.5 | $ | 121.7 | $ | 101.6 | ||||||
Diluted (loss) earnings per share (1) (2) | $ | (0.09) | $ | 0.25 | $ | 0.95 | $ | 0.37 | ||||||
Pro forma diluted earnings per share (3) | $ | 0.90 | ||||||||||||
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(2) | The reorganization and new capital structure of the Company was established at the beginning of August 2001. As a result, diluted earnings per share for the fiscal year ended December 31, 2001 is calculated based upon the net income for the five month period ended December 31, 2001. For more information see note 8 to the attached Consolidated Financial Statements. | |||||||||||||
(3) | Pro forma diluted earnings per share have been presented to give effect to the reorganization and new capital structure of the Company established at the beginning of August 2001. For more information see note 9 to the attached Consolidated Financial Statements. | |||||||||||||
Sales increased 22% to $1,054.7 million for the three month period ended December 31, 2002 compared to $866.7 million for the three month period ended December 31, 2001. North American production sales grew 12% to $551.5 million in the fourth quarter of 2002 compared to $491.2 million in the fourth quarter of 2001 as a result of growth in production volumes and our North American content per vehicle. North American light vehicle production volumes increased approximately 1% to3.9 million units for the three month period ended December 31, 2002 compared to the three month period ended December 31, 2001. North American average content per vehicle increased 12% to $143 for the fourth quarter of 2002 compared to $128 for the fourth quarter of 2001 primarily due to the launch of a number of new programs during 2002, including the complete seats and overhead system for the Saturn ION, as well as products launched in late 2001, such as the complete seats and overhead system for the Saturn VUE and the cockpit module, door panels and overhead system for the Cadillac CTS.
Western European production sales increased 34% to $327.2 million for the fourth quarter of 2002 compared to $243.3 million for the fourth quarter of 2001. Western European vehicle production volumes increased by approximately 5% to 4.2 million units for the three month period ended December 31, 2002 compared to the three month period ended December 31, 2001. Western European average content per vehicle increased 28% to $78 for the fourth quarter of 2002 compared to $61 for the fourth quarter of 2001. The increase in average content per vehicle was primarily due to favourable product mix and new product launches in 2002. The Company produces the cockpit module, door panels and other interior trim for the BMW MINI, the production volume of which increased approximately 76% quarter over quarter. New products launched in 2002 included the latch system for the Ford Fiesta/Ka, the instrument panel for the Opel Epsilon platform, the cockpit module for the Nissan Micra and the door pane ls for the Toyota Avensis.
Consolidated tooling and engineering sales for the three month period ended December 31, 2002 increased by 33% to $176.0 million from $132.2 million for the three month period ended December 31, 2001.
Operating income for the three month period ended December 31, 2002 was $15.3 million compared to $27.5 million for the comparable period of the prior year. The decline in operating income was primarily attributable to the $23.6 million non-cash impairment charge and continued start up costs associated with a number of launches offset by higher sales.
CICA 3062 requires the Company to review goodwill for impairment on an annual basis based upon new measurement criteria. As a result of this review, the Company reduced the carrying value of goodwill by $3.5 million in the Interiors Europe reporting segment. In conjunction with its review, the Company also assessed the recoverability of its long-lived assets in the reporting segment and determined that it was appropriate to reduce the carrying value by $20.1 million. In addition, net tax assets of $1.5 million associated with these operations were charged against the Company's earnings for 2002.
The Company continued to generate significant free cash. During the fourth quarter of fiscal 2002, cash generated from operations before changes in working capital was $60.9 million. An additional $22.0 million of cash was generated from working capital resulting in total cash from operating activities of $82.9 million. Investment activities during the fourth quarter of 2002 were $48.4 million resulting in free cash before financing activities of $34.5 million for the quarter.
Commenting on the fourth quarter, Don Walker, the Company's President and Chief Executive Officer, stated "In 2002, Intier continued its focus on developing new innovative products and processes, improving its operating efficiencies to world class levels and helping its customers to meet their objectives in lowering their overall costs and improving customer satisfaction. We are pleased with our growth in 2002. During the past three months, we successfully launched many complex programs including the complete seats and overhead system for the new Saturn ION, the cockpit module for the Nissan Micra, the door panels for the Toyota Avensis and the instrument panel, console and door panels for the new Jaguar XJ series. Looking forward to 2003, our strong order book will contribute to our continued growth".
At its meeting today, Intier Automotive's Board of Directors declared a dividend in respect of the fourth quarter of 2002 of US$0.05 per share on the Class A Subordinate Voting and Class B Shares payable on or after March 17, 2003 to shareholders of record on February 28, 2003. The Board also declared a dividend of US$2,812,500 on the outstanding Convertible Series 1 and 2 Preferred Shares payable on April 1, 2003 to holders of the Convertible Series Preferred Shares of record on February 28, 2003.
2003 OUTLOOK
For the full year, North American light vehicle production volumes are expected to decrease to approximately 16.0 million units from 16.3 million units in 2002. Western Europe production volumes are expected to decline slightly to approximately 16.2 million units compared to 16.3 million units in 2002. Based on these volume estimates, product mix assumptions and tooling and engineering sales estimates, 2003 total sales are expected to increase 9% to 14% to be between $4.2 billion and $4.4 billion. The first quarter 2003 sales are expected to range between $950 million to $1,025 million, compared to first quarter 2002 sales of $879 million.
Intier is a global full service supplier and integrator of automotive interior and closure components, systems and modules. It directly supplies most of the major automobile manufacturers in the world with approximately 22,000 employees at 65 manufacturing facilities, and 17 product development, engineering and testing centres in North America, Europe, Brazil, Japan and China.
Intier will hold a conference call to discuss the fourth quarter results and other developments on Friday, February 14, 2002 at 3:30 p.m. EST (Toronto Time). The number to use for this call is 1-888-313-7737. Overseas callers should use 212-346-6527. Please call in 10 minutes prior to the conference call. For anyone unable to listen to the scheduled call, the rebroadcast number will be 1-800-558-5253 (reservation number is 21114743#) and will be available until Friday, February 21, 2003. The conference call will be chaired by Don Walker, President and Chief Executive Officer and Michael McCarthy, Executive Vice-President and Chief Financial Officer.
For further information please contact Michael McCarthy, Executive Vice-President and Chief Financial Officer of Intier at (905) 830-5824. For teleconferencing questions, please call Karen Lesey at Intier at (905) 898-5200 Ext. 7042.
This press release may contain forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions and uncertainties which may cause actual future results and performance of Intier Automotive Inc. (the "Company") to be materially different from those expressed or implied in these statements. These risks, assumptions and uncertainties include, but are not limited to: industry cyclicality, including reductions or increases in production volumes; trade and labour disruption; pricing concessions and cost absorptions; product warranty, recall and product liability costs; the Company's financial performance; changes in the economic and competitive markets in which the Company competes; relationships with OEM customers; customer price pressures; the Company's dependence on certain vehicle programs; currency exposure; energy prices; and certain other risks, assumptions and uncertainties disclosed in the Company's public filings. The Company discla ims any intention and undertakes no obligation to update or revise any forward-looking statements to reflect subsequent information, events or circumstances or otherwise.
INTIER AUTOMOTIVE INC.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in millions) | As at | As at | |||||
(Audited) | (Audited) | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 241.3 | $ | 77.1 | |||
Accounts receivable | 579.9 | 574.3 | |||||
Inventories | 261.7 | 240.9 | |||||
Prepaid expenses and other | 27.8 | 23.6 | |||||
Income taxes receivable | 5.5 | - | |||||
1,116.2 | 915.9 | ||||||
Fixed assets, net | 478.1 | 424.0 | |||||
Goodwill | 100.7 | 132.5 | |||||
Future tax assets | 75.5 | 96.0 | |||||
Other assets | 11.3 | 11.0 | |||||
$ | 1,781.8 | $ | 1,579.4 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Bank indebtedness | $ | 48.6 | $ | 46.0 | |||
Accounts payable | 658.0 | 527.6 | |||||
Accrued salaries and wages | 74.3 | 53.7 | |||||
Other accrued liabilities | 50.2 | 49.6 | |||||
Income taxes payable | - | 1.8 | |||||
Long-term debt due within one year | 4.2 | 6.8 | |||||
835.3 | 685.5 | ||||||
Long-term debt | 31.8 | 30.6 | |||||
Other long-term liabilities | 25.6 | 22.1 | |||||
Convertible Series Preferred Shares | 206.2 | 194.6 | |||||
Future tax liabilities | 38.0 | 35.0 | |||||
Minority interest | 0.9 | 1.7 | |||||
Shareholders' equity: | |||||||
Convertible Series Preferred Shares | 22.0 | 31.4 | |||||
Class A Subordinate Voting Shares | 71.8 | 71.7 | |||||
Class B Shares | 495.8 | 495.8 | |||||
Retained earnings | 17.2 | 15.9 | |||||
Currency translation adjustment | 37.2 | (4.9) | |||||
644.0 | 609.9 | ||||||
$ | 1,781.8 | $ | 1,579.4 | ||||
INTIER AUTOMOTIVE INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(U.S. dollars in millions, except per share figures and numbers of shares) | ||||||||||||
Three month periods ended December 31, | Twelve month periods ended December 31, | |||||||||||
2002 | 2001 | 2002 | 2001 | |||||||||
(Unaudited) | (Audited) | |||||||||||
Sales | $ | 1,054.7 | $ | 866.7 | $ | 3,861.6 | $ | 3,268.1 | ||||
Cost of goods sold | 926.2 | 764.7 | 3,374.9 | 2,861.6 | ||||||||
Depreciation and amortization | 24.4 | 21.5 | 88.5 | 88.0 | ||||||||
Selling, general and administrative | 53.2 | 40.9 | 197.6 | 168.1 | ||||||||
Affiliation and social fees | 12.0 | 12.1 | 55.3 | 48.8 | ||||||||
Other charges | 23.6 | - | 23.6 | - | ||||||||
Operating income | 15.3 | 27.5 | 121.7 | 101.6 | ||||||||
Interest (income) expense, net | (0.9) | 0.1 | (1.5) | 16.2 | ||||||||
Amortization of discount on Convertible Series | 3.0 | 2.9 | 11.6 | 4.8 | ||||||||
Equity (income) loss | (0.6) | - | (0.6) | 0.4 | ||||||||
Income before income taxes and minority | 13.8 | 24.5 | 112.2 | 80.2 | ||||||||
Income taxes | 18.3 | 12.1 | 64.5 | 40.7 | ||||||||
Minority interest | (0.8) | (0.3) | (0.9) | (0.4) | ||||||||
Net (loss) income | $ | (3.7) | $ | 12.7 | $ | 48.6 | $ | 39.9 | ||||
Financing charge on Convertible Series | 0.6 |
| 1.9 | 0.9 | ||||||||
Net (loss) income attributable to Class A Subordinate Voting and Class B Shares | (4.3) | 12.0 | 46.7 | 39.0 | ||||||||
Retained earnings and Magna's net | 24.0 | 5.9 |
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Adjustment for change in accounting policy for |
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Net distribution to Magna | - | - | - | (869.5) | ||||||||
Dividends on Class A Subordinate Voting and | (2.5) | (2.0) | (9.7) | (2.0) | ||||||||
Change in currency translation adjustment | - | - | - | (1.8) | ||||||||
Retained earnings, end of period | $ | 17.2 | $ | 15.9 | $ | 17.2 | $ | 15.9 | ||||
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Basic | $ | (0.09) | $ | 0.25 | $ | 0.97 | $ | 0.37 | ||||
Diluted | $ | (0.09) | $ | 0.25 | $ | 0.95 | $ | 0.37 | ||||
Average number of Class A Subordinate Voting | ||||||||||||
Basic | 48.2 | 48.2 | 48.2 | 47.9 | ||||||||
Diluted | 48.2 | 63.1 | 63.6 | 47.9 | ||||||||
Pro forma earnings per Class A Subordinate | ||||||||||||
Basic | - | - | - | $ | 0.91 | |||||||
Diluted | - | - | - | $ | 0.90 | |||||||
Average number of Class A Subordinate Voting | ||||||||||||
Basic | - | - | - | 44.9 | ||||||||
Diluted | - | - | - | 59.8 | ||||||||
INTIER AUTOMOTIVE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in millions) | |||||||||||||
Three month periods ended December 31, | Twelve month periods | ||||||||||||
2002 | 2001 | 2002 | 2001 | ||||||||||
(Unaudited) | (Audited) | ||||||||||||
Cash provided from (used for): | |||||||||||||
OPERATING ACTIVITIES | |||||||||||||
Net (loss) income | $ | (3.7) | $ | 12.7 | $ | 48.6 | $ | 39.9 | |||||
Items not involving current cash flows | 64.6 | 38.6 | 155.5 | 101.2 | |||||||||
60.9 | 51.3 | 204.1 | 141.1 | ||||||||||
Change in non-cash working capital | 22.0 | 34.5 | 111.4 | 25.9 | |||||||||
82.9 | 85.8 | 315.5 | 167.0 | ||||||||||
INVESTMENT ACTIVITIES | |||||||||||||
Fixed asset additions | (49.4) | (31.7) | (136.8) | (87.6) | |||||||||
Increase in investments and other assets | (1.0) | - | (3.1) | (5.0) | |||||||||
Proceeds from disposition of fixed assets | 2.0 | 0.2 | 4.8 | 2.6 | |||||||||
(48.4) | (31.5) | (135.1) | (90.0) | ||||||||||
FINANCING ACTIVITIES | |||||||||||||
(Decrease) increase in bank indebtedness | (31.1) | (58.7) | 0.6 | 34.5 | |||||||||
Repayments of long-term debt | (1.3) | (1.2) | (4.6) | (8.1) | |||||||||
Net distribution to Magna | - | (36.6) | - | (144.4) | |||||||||
Issue of Class A Subordinate Voting Shares, net | - | - | 0.1 | 71.7 | |||||||||
Dividends on Class A Subordinate Voting and | (2.5) | (2.0) | (9.7) | (2.0) | |||||||||
Dividends on Convertible Series Preferred Shares | (2.8) | (1.9) | (8.4) | (1.9) | |||||||||
(37.7) | (100.4) | (22.0) | (50.2) | ||||||||||
Effect of exchange rate changes on cash and | 2.8 | (0.6) | 5.8 | (1.3) | |||||||||
Net (decrease) increase in cash and cash | (0.4) | (46.7) | 164.2 | 25.5 | |||||||||
Cash and cash equivalents, beginning of period | 241.7 | 123.8 | 77.1 | 51.6 | |||||||||
Cash and cash equivalents, end of period | $ | 241.3 | $ | 77.1 | $ | 241.3 | $ | 77.1 | |||||
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in U.S. dollars unless otherwise noted and all tabular amounts in millions, except per share figures and number of shares)
(All amounts as at December 31, 2002 and years ended December 31, 2002 and 2001 are audited, and all amounts for the three months ended December 31, 2002 and 2001 are unaudited).
1. | BASIS OF PRESENTATION |
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2. | ACCOUNTING CHANGES |
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3. | CYCLICALITY |
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4. | USE OF ESTIMATES |
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5. | CAPITAL STOCK |
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Authorized | Issued | |||||
Convertible Series Preferred Shares |
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Preferred Shares, issuable in series | Unlimited | - | ||||
Class A Subordinate Voting Shares [i], [ii] | Unlimited | 5,481,191 | ||||
Class B Shares |
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Notes: | ||||||
[i] | On July 31, 2001, the Company filed a final prospectus with the securities regulatory authorities in Canada and the United States for a public offering of Class A Subordinate Voting Shares. The offering was completed in August, 2001. The details of the proceeds from the public offering of Class A Subordinate Voting Shares are as follows: | |||||
Total proceeds on 5,476,191 shares | $ | 74.8 | ||||
Expenses of the issue, net of taxes | (3.1) | |||||
Net proceeds | $ | 71.7 | ||||
[ii] | Class A Subordinate Voting Shares increased by $0.1 million during the twelve month period ended December 31, 2002, representing 5,000 shares issued as a result of the exercise of stock options. |
Options and Convertible Securities | |
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Number of Shares | ||
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Class B Shares outstanding as at December 31, 2002 | 42,751,938 | |
Options to purchase Class A Subordinate Voting Shares | 3,155,000 | |
Convertible Series Preferred Shares, convertible at $15.09 per share | 14,910,537 | |
66,298,666 | ||
The remaining number of shares reserved to be issued for stock options is 5,995,000 Class A Subordinate Voting Shares. The number of reserved but unoptioned shares at December 31, 2002 is 2,840,000. The total number of shares issued from exercised stock options, from the inception date of the plan, is 5,000. The total number of options to purchase Class A Subordinate Voting Shares that have been cancelled, from the inception of the plan, is 71,000. The total number of options to purchase Class A Subordinate Voting Shares that have expired, from the inception of the plan, is 4,000. |
6. | GOODWILL AND LONG-LIVED ASSET IMPAIRMENT |
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Three month period ended December 31, 2001 | Twelve month period ended December 31, 2001 | ||||
Net income as reported | $ | 12.7 | $ | 39.9 | |
Goodwill amortization, net of taxes | 1.8 | 7.2 | |||
Adjusted net income | $ | 14.5 | $ | 47.1 | |
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7. | STOCK BASED COMPENSATION |
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Risk free interest rate | 3.96% | |
Expected dividend yield | 1.20% | |
Expected volatility | 37% | |
Expected time until exercise | 5 years | |
The Black-Scholes options valuation model used by the Company to determine fair values was developed for use in estimating the fair value of freely traded options which are fully transferable and have no vesting restrictions. In addition, this model requires the input of highly subjective assumptions, including future stock price volatility and expected time until exercise. Because the Company's outstanding stock options have characteristics which are significantly different from those of traded options, and because changes in any of the assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the stock options. |
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8. | (LOSS) EARNINGS PER SHARE FOR THE THREE MONTH PERIODS ENDED DECEMBER 31, 2002 AND 2001, FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 2002 AND THE FIVE MONTH PERIOD ENDED DECEMBER 31, 2001. |
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Three month period ended December 31, 2002 | Three month period ended December 31, 2001 | Twelve month period ended December 31, 2002 | Five month period ended December 31, 2001 | ||||||
Basic (loss) earnings per Class A Subordinate Voting or Class B Share: | |||||||||
Net (loss) income attributable to Class A Subordinate Voting and Class B Shares | $ | (4.3) | $ | 12.0 |
| 46.7 |
| 17.9 | |
Average number of Class A Subordinate Voting and Class B Shares outstanding during the period | 48.2 | 48.2 | 48.2 | 47.9 | |||||
Basic (loss) earnings per Class A Subordinate Voting or Class B Share | $ | (0.09) | $ | 0.25 |
| 0.97 |
| 0.37 | |
Diluted (loss) earnings per Class A Subordinate Voting or Class B Share: | |||||||||
Net (loss) income attributable to Class A Subordinate Voting and Class B Shares | $ | (4.3) | $ | 12.0 |
| 46.7 |
| 17.9 | |
Adjustments (net of related tax effects): | |||||||||
Amortization of discount on Convertible Series Preferred Shares | - | 2.9 | 11.6 |
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Financing charge on Convertible Series | - | 0.7 | 1.9 |
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$ | (4.3) | $ | 15.6 | $ | 60.2 | $ | 17.9 | ||
Average number of Class A Subordinate Voting and Class B Shares outstanding during the period | 48.2 | 48.2 | 48.2 | 47.9 | |||||
Convertible Series Preferred Shares | - | 14.9 | 14.9 | - | |||||
Stock options | - | - | 0.5 | - | |||||
48.2 | 63.1 | 63.6 | 47.9 | ||||||
Diluted (loss) earnings per Class A Subordinate Voting or Class B Share | $ | (0.09) | $ | 0.25 |
| 0.95 |
| 0.37 | |
At December 31, 2002, the Company had outstanding 3,155,000 incentive stock options and 2,250,000 Convertible Series Preferred Shares, which are anti-dilutive and, therefore, not included in the three month period ended December 31, 2002 earnings per share calculation, above. | |
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9. | PRO FORMA EARNINGS PER SHARE FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 2001 |
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· | Adjustments to reflect the Company's new capital structure described under Principles of Consolidation in Significant Accounting Policies in the 2001 audited consolidated financial statements included in the Company's 2001 Annual Report and other corporate charges; | |
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Basic and diluted pro forma earnings per Class A Subordinate Voting or Class B Share are based on the public offering of 5,476,191 Class A Subordinate Voting Shares completed in August 2001 and on the assumption that 42,751,938 Class B Shares and 2,250,000 Convertible Series Preferred Shares were issued and outstanding for the entire periods presented. |
The following table summarizes the calculation of pro forma earnings per share for the twelve month period ended December 31, 2001: |
Twelve month period ended December 31, 2001 | |||||
Pro forma basic earnings per Class A Subordinate Voting or Class B Share: | |||||
Net income attributable to Class A Subordinate Voting and Class B Shares |
| 39.0 | |||
Pro forma adjustments (net of related tax effects): | |||||
Amortization of discount on Convertible Series Preferred Shares | (6.1) | ||||
Interest on debt due to Magna | 9.5 | ||||
Corporate charges | (0.6) | ||||
Financing charge on Convertible Series Preferred Shares | (0.8) | ||||
Pro forma net income attributable to Class A Subordinate Voting and Class B Shares |
| 41.0 | |||
Average number of Class A Subordinate Voting and Class B Shares outstanding during the period | 44.9 | ||||
Pro forma basic earnings per Class A Subordinate Voting or Class B Share |
| 0.91 | |||
Pro forma diluted earnings per Class A Subordinate Voting or Class B Share: | |||||
Pro forma net income attributable to Class A Subordinate Voting and Class B Shares |
| 41.0 | |||
Pro forma adjustments (net of related tax effects): | |||||
Amortization of discount on Convertible Series Preferred Shares | 10.9 | ||||
Financing charge on Convertible Series Preferred Shares | 1.7 | ||||
$ | 53.6 | ||||
Average number of Class A Subordinate Voting and Class B Shares outstanding during the period | 44.9 | ||||
Convertible Series Preferred Shares | 14.9 | ||||
59.8 | |||||
Pro forma diluted earnings per Class A Subordinate Voting or Class B Share |
| 0.90 | |||
10. | COMPARATIVE FIGURES |
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