Magna International Inc. ( MGA - Analyst Report ) reported earnings of $102 million or 42 cents per share in the third quarter of 2011, significantly down from $266 million or $1.14 per share in the year-ago quarter.

However, the company incurred a loss of $113 million or 37 cents per share related to the disposal of a non-strategic interior systems operation and an expense of $11 million or 5 cents per share related to certain settlement agreements in the reported quarter versus a gain of $10 million or 4 cents per share in the year-ago quarter on disposal of investment.

Excluding these items, the company’s adjusted income in the quarter amounted to $226 million or 94 cents per share compared with $256 million or $1.10 per share a year ago. Adjusted income per share was lower than the Zacks Consensus Estimate of $1.01 per share.

Revenues in the quarter rose 21% year over year to $6.97 billion driven by higher sales across all its operations. Gross profit improved 2% to $769 million, despite a 24% rise in cost of goods sold to $6.20 billion. However, gross profit, as a percentage of sales, dropped to 11.0% from 13.1% in the third quarter of 2010.

Segment Performance

Revenue from the External Production Sales segment (which comprises three geographic regions – North America, Europe, and Rest of World or ROW) climbed 22% to $5.79 billion, driven by higher vehicle production volumes in North America (up 8%) and Western Europe (up 4%).

External production sales in North America increased 15% to $3.38 billion, the same in Europe spiked 28% to $2.04 billion while in ROW it swelled 73% to $365 million.

Sales in the Complete Vehicle Assembly segment grew 28% to $663 million, while assembly volumes surged 55% or 11,275 units. Sales in the Tooling, Engineering and Other rose marginally by 1% to $516 million.

Financial Position

Magna had cash and cash equivalents of $1.33 billion as of September 30, 2011 compared with $1.88 billion as of December 31, 2010. Long-term debt increased to $52 million as of September 30, 2011 from $47 million as of December 31, 2010. Alongside, inventories also increased to $2.09 billion at the end of the third quarter of 2011 from $1.82 billion at the end of the fourth quarter of 2010.

In the first nine months of the year, the company’s cash generation from operating activities decreased to $245 million from $388 million. Meanwhile, capital expenditures increased to $338 million in the first three quarters from $175 million incurred in the corresponding period of 2010.

Dividend

Magna’s board of directors also announced a quarterly dividend of 25 cents per share to be paid on December 15, 2011 to shareholders of record as of November 30, 2011.

Outlook

Management expects total sales to range between $28.1 billion and $28.9 billion, production sales to range from $23.4 billion to $24.0 billion and complete Vehicle Assembly sales to be in the $2.6 billion and $2.8 billion range for 2011.

Magna also provided guidance for production sales for the full year in each of the operating regions: in North America sales are expected in the range of $13.6 billion to $13.9 billion, for Europe the range is $8.5 billion to $8.7 billion and in the ROW the range is $23.4 billion to $24.0 billion. Capital expenditure for the full year is estimated between $1.0 billion and $1.1 billion.

Based in Aurora, Canada, Magna International, a Zacks#3 Rank (Hold rating) stock, is a leading manufacturer and supplier of automotive components. The company designs, develops and manufactures automotive systems, assemblies, modules and components, besides engineering and assembling complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks. Its primary competitors include Dana Holding Corporation ( DAN - Snapshot Report ) and Lear Corp. ( LEA - Snapshot Report ) .