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 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number: 1-6615

 

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

95-2594729

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

26600 Telegraph Road, Suite 400

 

Southfield, Michigan

48033

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (248) 352-7300

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

 

Title of Each Class

 

Trading Symbol

 

Name of Each Exchange on Which Registered

Common Stock, $0.01 par value

 

SUP

 

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

 

 

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of shares of common stock outstanding as of April 29, 2021: 25,947,462 

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I

-

FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1

-

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income (Loss)

1

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

2

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

3

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

4

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity (Deficit)

5

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

 

 

 

 

 

Item 2

-

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

 

 

 

 

 

 

Item 3

-

Quantitative and Qualitative Disclosures About Market Risk

32

 

 

 

 

 

 

 

 

Item 4

-

Controls and Procedures

32

 

 

 

 

PART II

-

OTHER INFORMATION

34

 

 

 

 

 

 

 

 

Item 1

-

Legal Proceedings

34

 

 

 

 

 

 

 

 

Item 2

-

Unregistered Sales of Equity Securities and Use of Proceeds

34

 

 

 

 

 

 

 

 

Item 5

-

Other Information

34

 

 

 

 

 

 

 

 

Item 6

-

Exhibits

35

 

 

 

 

 

 

Signatures

36

 

 


 

 

 

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Dollars in thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2021

 

 

March 31,

2020

 

NET SALES

 

$

358,196

 

 

$

301,112

 

Cost of sales

 

 

315,156

 

 

 

277,951

 

GROSS PROFIT

 

 

43,040

 

 

 

23,161

 

Selling, general and administrative expenses

 

 

17,321

 

 

 

12,535

 

Impairment of goodwill and indefinite-lived intangibles

 

 

 

 

 

193,641

 

INCOME (LOSS) FROM OPERATIONS

 

 

25,719

 

 

 

(183,015

)

Interest expense, net

 

 

(10,273

)

 

 

(11,850

)

Other (expense) income, net

 

 

(1,514

)

 

 

1,323

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

13,932

 

 

 

(193,542

)

Income tax (provision) benefit

 

 

(810

)

 

 

3,460

 

NET INCOME (LOSS)

 

$

13,122

 

 

$

(190,082

)

EARNINGS (LOSS) PER SHARE – BASIC

 

$

0.19

 

 

$

(7.84

)

EARNINGS (LOSS) PER SHARE – DILUTED

 

$

0.18

 

 

$

(7.84

)

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.


1


 

 

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2021

 

 

March 31,

2020

 

Net income (loss)

 

$

13,122

 

 

$

(190,082

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(15,678

)

 

 

(35,533

)

Change in unrecognized gains (losses) on derivative instruments:

 

 

 

 

 

 

 

 

Change in fair value of derivatives

 

 

(9,140

)

 

 

(58,426

)

Tax benefit

 

 

678

 

 

 

13,129

 

Change in unrecognized losses on derivative instruments, net of tax

 

 

(8,462

)

 

 

(45,297

)

Defined benefit pension plan:

 

 

 

 

 

 

 

 

Actuarial gains on pension obligation, net of amortization

 

 

97

 

 

 

72

 

Tax provision

 

 

(21

)

 

 

(17

)

Pension changes, net of tax

 

 

76

 

 

 

55

 

Other comprehensive loss, net of tax

 

 

(24,064

)

 

 

(80,775

)

Comprehensive loss

 

$

(10,942

)

 

$

(270,857

)

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

2


 

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

153,848

 

 

$

152,423

 

Accounts receivable, net

 

 

83,569

 

 

 

48,995

 

Inventories, net

 

 

164,695

 

 

 

154,980

 

Income taxes receivable

 

 

5,322

 

 

 

4,957

 

Other current assets

 

 

21,567

 

 

 

22,301

 

Total current assets

 

 

429,001

 

 

 

383,656

 

Property, plant and equipment, net

 

 

496,659

 

 

 

522,124

 

Deferred income tax assets, net

 

 

30,017

 

 

 

30,860

 

Goodwill

 

 

 

 

 

 

Intangibles, net

 

 

99,041

 

 

 

110,796

 

Other non-current assets

 

 

55,072

 

 

 

61,889

 

Total assets

 

$

1,109,790

 

 

$

1,109,325

 

LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

168,351

 

 

$

151,839

 

Short-term debt

 

 

6,516

 

 

 

6,112

 

Accrued expenses

 

 

80,053

 

 

 

71,079

 

Income taxes payable

 

 

2,841

 

 

 

2,107

 

Total current liabilities

 

 

257,761

 

 

 

231,137

 

Long-term debt (less current portion)

 

 

613,140

 

 

 

625,492

 

Non-current income tax liabilities

 

 

7,972

 

 

 

7,635

 

Deferred income tax liabilities, net

 

 

5,582

 

 

 

9,104

 

Other non-current liabilities

 

 

79,698

 

 

 

76,426

 

Commitments and contingent liabilities (Note 17)

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 1,000,000 shares

 

 

 

 

 

 

 

 

Issued and outstanding – 150,000 shares outstanding at

   March 31, 2021 and December 31, 2020

 

 

184,308

 

 

 

179,387

 

European non-controlling redeemable equity

 

 

1,591

 

 

 

1,666

 

Shareholders’ equity (deficit):

 

 

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 100,000,000 shares

 

 

 

 

 

 

 

 

Issued and outstanding – 25,947,462 and 25,591,930 shares at

   March 31, 2021 and December 31, 2020

 

 

95,752

 

 

 

95,247

 

Accumulated other comprehensive loss

 

 

(123,510

)

 

 

(99,446

)

Retained earnings

 

 

(12,504

)

 

 

(17,323

)

Total shareholders’ equity (deficit)

 

 

(40,262

)

 

 

(21,522

)

Total liabilities, mezzanine equity and shareholders’ equity (deficit)

 

$

1,109,790

 

 

$

1,109,325

 

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

3


 

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

2021

 

 

March 31,

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

13,122

 

 

$

(190,082

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

25,361

 

 

 

24,392

 

Income tax, non-cash changes

 

 

(2,818

)

 

 

(5,849

)

Impairment of goodwill and indefinite-lived intangibles

 

 

 

 

 

193,641

 

Stock-based compensation

 

 

1,847

 

 

 

(653

)

Amortization of debt issuance costs

 

 

870

 

 

 

1,385

 

Other non-cash items

 

 

(4,528

)

 

 

(3,600

)

     Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(36,981

)

 

 

(423

)

Inventories

 

 

(14,702

)

 

 

(5,209

)

Other assets and liabilities

 

 

13,875

 

 

 

2,897

 

Accounts payable

 

 

21,328

 

 

 

16,904

 

Income taxes

 

 

779

 

 

 

(2,090

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

 

18,153

 

 

 

31,313

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions to property, plant, and equipment

 

 

(10,479

)

 

 

(13,865

)

NET CASH USED IN INVESTING ACTIVITIES

 

 

(10,479

)

 

 

(13,865

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

1,658

 

 

 

11,690

 

Repayments of debt

 

 

(830

)

 

 

(22,600

)

Proceeds from borrowings on revolving credit facility

 

 

 

 

 

213,825

 

Repayments of borrowings on revolving credit facility

 

 

 

 

 

(5,992

)

Cash dividends paid

 

 

(3,368

)

 

 

(3,392

)

Purchase of non-controlling redeemable shares

 

 

(9

)

 

 

(4,190

)

Payments related to tax withholdings for stock-based compensation

 

 

(1,342

)

 

 

 

Finance lease payments

 

 

(288

)

 

 

(292

)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

 

 

(4,179

)

 

 

189,049

 

Effect of exchange rate changes on cash

 

 

(2,070

)

 

 

(2,261

)

Net increase in cash and cash equivalents

 

 

1,425

 

 

 

204,236

 

Cash and cash equivalents at the beginning of the period

 

 

152,423

 

 

 

77,927

 

Cash and cash equivalents at the end of the period

 

$

153,848

 

 

$

282,163

 

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.


4


 

 

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Dollars in thousands)

(Unaudited)

 

For the three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Accumulated Other Comprehensive (Loss)

Income

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Unrecognized

Gains (Losses)

on Derivative

Instruments

 

 

Pension

Obligations

 

 

Cumulative

Translation

Adjustment

 

 

Retained

Earnings

 

 

Total

 

 

BALANCE AT DECEMBER 31, 2019

 

 

25,128,158

 

 

$

93,331

 

 

$

9,951

 

 

$

(5,571

)

 

$

(104,458

)

 

$

258,437

 

 

$

251,690

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(190,082

)

 

 

(190,082

)

 

Change in unrecognized gains/losses on

   derivative instruments, net of tax

 

 

 

 

 

 

 

 

(45,297

)

 

 

 

 

 

 

 

 

 

 

 

(45,297

)

 

Change in defined benefit plans, net of taxes

 

 

 

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

55

 

 

Net foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,533

)

 

 

 

 

 

(35,533

)

 

Common stock issued, net of shares withheld

   for employee taxes

 

 

346,319

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

(653

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(653

)

 

Redeemable preferred 9% dividend

    and accretion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,850

)

 

 

(7,850

)

 

European non-controlling redeemable

    equity dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20

)

 

 

(20

)

 

BALANCE AT MARCH 31, 2020

 

 

25,474,477

 

 

$

92,678

 

 

$

(35,346

)

 

$

(5,516

)

 

$

(139,991

)

 

$

60,485

 

 

$

(27,690

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Accumulated Other Comprehensive (Loss)

Income

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Unrecognized

Gains (Losses)

on Derivative

Instruments

 

 

Pension

Obligations

 

 

Cumulative

Translation

Adjustment

 

 

Retained

Earnings

 

 

Total

 

 

BALANCE AT DECEMBER 31, 2020

 

 

25,591,930

 

 

$

95,247

 

 

$

(1,738

)

 

$

(7,447

)

 

$

(90,261

)

 

$

(17,323

)

 

$

(21,522

)

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,122

 

 

 

13,122

 

 

Change in unrecognized gains/losses on

   derivative instruments, net of tax

 

 

 

 

 

 

 

 

(8,462

)

 

 

 

 

 

 

 

 

 

 

 

(8,462

)

 

Change in defined benefit plans, net of taxes

 

 

 

 

 

 

 

 

 

 

 

76

 

 

 

 

 

 

 

 

 

76

 

 

Net foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,678

)

 

 

 

 

 

(15,678

)

 

Common stock issued, net of shares withheld

   for employee taxes

 

 

355,532

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

505

 

 

Redeemable preferred 9% dividend

    and accretion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,290

)

 

 

(8,290

)

 

European non-controlling redeemable equity

   dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(13

)

 

BALANCE AT MARCH 31, 2021

 

 

25,947,462

 

 

$

95,752

 

 

$

(10,200

)

 

$

(7,371

)

 

$

(105,939

)

 

$

(12,504

)

 

$

(40,262

)

 

 

The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.

5


 

Superior Industries International, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2021

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nature of Operations

Superior Industries International, Inc.’s (referred herein as the “Company,” “Superior,” or “we” and “our”) principal business is the design and manufacture of aluminum wheels for sale to original equipment manufacturers (“OEMs”) in North America and Europe and to the aftermarket in Europe. We employ approximately 7,600 full-time employees, operating in eight manufacturing facilities in North America and Europe. We are one of the largest aluminum wheel suppliers to global OEMs and we believe we are the #1 European aluminum wheel aftermarket manufacturer and supplier. Our OEM aluminum wheels accounted for approximately 93 percent of our sales in the first three months of 2021 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Daimler AG Company (Mercedes-Benz, AMG, Smart), Ford, GM, Honda, Jaguar-Land Rover, Mazda, Nissan, PSA, Renault, Subaru, Stellantis, Suzuki, Toyota, VW Group (Volkswagen, Audi, SEAT, Skoda, Porsche, Bentley) and Volvo. We also sell aluminum wheels to the European aftermarket under the brands ATS, RIAL, ALUTEC and ANZIO. North America and Europe represent the principal markets for our products, but we have a diversified global customer base consisting of North American, European and Asian OEMs. We have determined that our North American and European operations should be treated as separate reportable segments as further described in Note 5, “Business Segments.”

Presentation of Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements, in our opinion, include all adjustments, of a normal and recurring nature, which are necessary for fair presentation of (i) the condensed consolidated statements of income (loss) for the three-month periods ended March 31, 2021 and March 31, 2020, (ii) the condensed consolidated statements of comprehensive income (loss) for the three-month periods ended March 31, 2021 and March 31, 2020, (iii) the condensed consolidated balance sheets at March 31, 2021 and December 31, 2020, (iv) the condensed consolidated statements of cash flows for the three-month periods ended March 31, 2021 and March 31, 2020, and (v) the condensed consolidated statements of shareholders’ equity (deficit) for the three-month periods ended March 31, 2021 and March 31, 2020. This Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and notes thereto filed with the SEC in our 2020 Annual Report on Form 10-K.

Interim financial reporting standards require us to make estimates that are based on assumptions regarding the outcome of future events and circumstances not known at that time. Inevitably, some assumptions will not materialize, unanticipated events or circumstances may occur which vary from those estimates and such variations may significantly affect our future results. Additionally, interim results may not be indicative of our results for future interim periods or our annual results.

Certain prior year amounts have been reclassified to conform with the current year presentation.

Cash Paid for Interest and Taxes and Non-Cash Investing Activities

 

Cash paid for interest was $5.2 million and $6.0 million for the three months ended March 31, 2021 and March 31, 2020, respectively. Net cash income taxes paid was $2.8 million and $4.4 million for the three months ended March 31, 2021 and March 31, 2020, respectively. As of March 31, 2021 and March 31, 2020, $4.3 million and $4.1 million, respectively, of equipment had been purchased but not yet paid and was included in accounts payable in our condensed consolidated balance sheets.

6


 

Accounting Standards Issued but Not Yet Adopted

Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires entities to use a new impairment model based on current expected credit losses (“CECL”) rather than incurred losses. Under CECL, estimated credit losses would incorporate relevant information about past events, current conditions and reasonable and supportable forecasts and any expected credit losses would be recognized at the time of sale. As a smaller reporting company (as defined under SEC regulations), the Company is not required to adopt the standard until fiscal years beginning after December 31, 2022. We are evaluating the impact this standard will have on our financial statements and disclosures.

 

NOTE 2 – REVENUE

The Company disaggregates revenue from contracts with customers into our reportable segments, North America and Europe. Revenues by segment for the three-month periods ended March 31, 2021 and March 31, 2020, respectively, are summarized in Note 5, “Business Segments.”

The opening and closing balances of the Company’s customer receivables and current and long-term contract liabilities balances are as follows:

 

(Dollars in thousands)

 

March 31,

2021

 

 

December 31,

2020