UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Trading Symbol |
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Name of Each Exchange on Which Registered |
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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.
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).
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 |
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Non-Accelerated Filer |
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Smaller Reporting Company |
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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
Number of shares of common stock outstanding as of August 2, 2024:
TABLE OF CONTENTS
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PART I |
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Item 1 |
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1 |
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1 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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3 |
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4 |
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Condensed Consolidated Statements of Shareholders’ Equity (Deficit) |
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7 |
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Item 2 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3 |
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30 |
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Item 4 |
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30 |
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PART II |
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Item 1 |
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32 |
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Item 1A |
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32 |
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Item 2 |
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32 |
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Item 3 |
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32 |
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Item 4 |
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32 |
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Item 5 |
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32 |
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Item 6 |
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33 |
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34 |
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PART I
FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Dollars in thousands, except per share amounts)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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June 30, |
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June 30, |
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NET SALES |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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GROSS PROFIT |
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Selling, general and administrative expenses |
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INCOME (LOSS) FROM OPERATIONS |
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Interest expense, net |
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Other income (expense), net |
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INCOME (LOSS) BEFORE INCOME TAXES |
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Income tax (provision) benefit |
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NET INCOME (LOSS) |
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$ |
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$ |
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$ |
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$ |
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EARNINGS (LOSS) PER SHARE – BASIC |
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$ |
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$ |
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$ |
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$ |
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EARNINGS (LOSS) PER SHARE – DILUTED |
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$ |
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$ |
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$ |
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$ |
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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)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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June 30, |
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June 30, |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation gain (loss) |
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Change in unrecognized gains (losses) on derivative instruments: |
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Change in fair value of derivatives |
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Tax (provision) benefit |
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Change in unrecognized gains (losses) on derivative instruments, net of tax |
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Defined benefit pension plan: |
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Amortization of actuarial losses on pension obligation |
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— |
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— |
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Tax (provision) benefit |
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— |
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— |
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— |
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Pension changes, net of tax |
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— |
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— |
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Other comprehensive income (loss), net of tax |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
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$ |
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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)
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June 30, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Income taxes receivable |
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Current derivative financial instruments |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Deferred income tax assets, net |
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Intangibles, net |
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Derivative financial instruments |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT) |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Short-term debt |
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Accrued expenses |
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Income taxes payable |
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Total current liabilities |
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Long-term debt (less current portion) |
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Noncurrent income tax liabilities |
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Deferred income tax liabilities, net |
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Other noncurrent liabilities |
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(Note 15) |
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— |
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Mezzanine equity: |
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Preferred stock, $ |
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Authorized – |
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Issued and outstanding – |
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Noncontrolling redeemable equity |
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Shareholders’ equity (deficit): |
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Common stock, $ |
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Authorized – |
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Issued and outstanding – |
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Accumulated other comprehensive income (loss) |
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( |
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( |
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Retained earnings (deficit) |
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( |
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( |
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Total shareholders’ equity (deficit) |
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( |
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( |
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Total liabilities, mezzanine equity and shareholders’ equity (deficit) |
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$ |
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$ |
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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)
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Six Months Ended |
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June 30, |
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June 30, |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: |
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Depreciation and amortization |
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Income tax, noncash changes |
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Stock-based compensation |
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Amortization of debt issuance costs |
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Other noncash items |
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( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
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( |
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Other assets and liabilities |
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( |
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Accounts payable |
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( |
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Income taxes |
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( |
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( |
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to property, plant, and equipment |
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( |
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( |
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NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Repayments of debt |
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( |
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Cash dividends paid |
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( |
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( |
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Financing costs paid and other |
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( |
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( |
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Payments related to tax withholdings for stock-based compensation |
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( |
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( |
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Finance lease payments |
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( |
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( |
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES |
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( |
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( |
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Effect of exchange rate changes on cash |
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( |
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Net changes in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period |
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$ |
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$ |
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Supplemental Cash Flow Information |
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Cash paid during the period for interest |
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$ |
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$ |
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Cash paid during the period for income taxes, net of refunds |
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$ |
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$ |
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Non-cash Investing Activities |
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Period end balance of accounts payable for property, plant, and equipment |
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$ |
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$ |
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The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
4
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(Dollars in thousands)
(Unaudited)
For the three months ended June 30, 2024 |
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Common Stock |
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Accumulated Other Comprehensive Income (Loss) |
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Number of |
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Amount |
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Cumulative |
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Hedging Instruments |
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Pension |
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Retained |
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Total |
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BALANCE AT APRIL 1, 2024 |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Change in accumulated other comprehensive |
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— |
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— |
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( |
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( |
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— |
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( |
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Common stock issued, net of shares withheld |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Redeemable preferred |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Noncontrolling redeemable equity |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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BALANCE AT JUNE 30, 2024 |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
( |
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$ |
( |
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For the six months ended June 30, 2024 |
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Common Stock |
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Accumulated Other Comprehensive Income (Loss) |
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Number of |
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Amount |
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Cumulative |
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Hedging Instruments |
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Pension |
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Retained |
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Total |
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BALANCE AT JANUARY 1, 2024 |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Change in accumulated other comprehensive |
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— |
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— |
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( |
) |
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( |
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— |
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( |
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Common stock issued, net of shares withheld |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Redeemable preferred |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Noncontrolling redeemable equity |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
BALANCE AT JUNE 30, 2024 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
||||
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
5
For the three months ended June 30, 2023 |
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Common Stock |
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Accumulated Other Comprehensive Income (Loss) |
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||||||||||||||||
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Number of |
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Amount |
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Cumulative |
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Hedging Instruments |
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Pension |
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Retained |
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Total |
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|||||||
BALANCE AT APRIL 1, 2023 |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
||||
Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Change in accumulated other comprehensive |
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— |
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— |
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— |
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— |
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|||
Common stock issued, net of shares withheld |
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— |
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— |
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— |
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— |
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— |
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— |
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|
Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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||
Redeemable preferred |
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— |
|
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— |
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— |
|
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— |
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|
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— |
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|
( |
) |
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|
( |
) |
Noncontrolling redeemable equity |
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— |
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— |
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— |
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— |
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|
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— |
|
|
|
( |
) |
|
|
( |
) |
BALANCE AT JUNE 30, 2023 |
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|
$ |
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|
$ |
( |
) |
|
$ |
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$ |
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$ |
( |
) |
|
$ |
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|||||
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For the six months ended June 30, 2023 |
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|||||||||
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|
Common Stock |
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|
Accumulated Other Comprehensive Income (Loss) |
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||||||||||||||||
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Number of |
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Amount |
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Cumulative |
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Hedging Instruments |
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Pension |
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Retained |
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Total |
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|||||||
BALANCE AT JANUARY 1, 2023 |
|
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|
|
$ |
|
|
$ |
( |
) |
|
$ |
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|
$ |
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$ |
( |
) |
|
$ |
( |
) |
||||
Net income (loss) |
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|
— |
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|
|
— |
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— |
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|
|
— |
|
|
|
— |
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|
( |
) |
|
|
( |
) |
Change in accumulated other comprehensive |
|
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— |
|
|
|
— |
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|
|
|
|
|
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|
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— |
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|
|
— |
|
|
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|
|||
Common stock issued, net of shares withheld |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
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|
( |
) |
Redeemable preferred |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Noncontrolling redeemable equity |
|
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— |
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|
|
— |
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|
|
— |
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|
— |
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|
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— |
|
|
|
( |
) |
|
|
( |
) |
BALANCE AT JUNE 30, 2023 |
|
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|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
6
Superior Industries International, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2024
(in thousands, except share or per share amounts, or as otherwise noted)
NOTE 1 – NATURE OF OPERATIONS AND PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nature of Operations
The principal business of Superior Industries International, Inc. (referred herein as the “Company,” “Superior,” or “we” and “our”) 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. Our aluminum wheels are primarily sold to OEMs for factory installation on new light vehicles. We also sell aluminum wheels to the European aftermarket under the brands ATS, RIAL, ALUTEC and ANZIO. North America and Europe represent the primary markets for our products, but we have a diversified global customer base consisting of North American, European and Asian OEMs.
Presentation of Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “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 include all adjustments, of a normal and recurring nature, which management believes are necessary for fair presentation of the financial statements. 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 2023 Annual Report on Form 10-K.
These unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions are eliminated in consolidation.
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.
Accounting Standards Issued But Not Yet Adopted
Accounting Standards Update (ASU) 2023-07, “Segment Reporting.” In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, allowing financial statement users to better understand the components of a segment's profit or loss to assess potential future cash flows for each reportable segment and the entity as a whole. The amendments expand a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company is currently evaluating the effects of adopting this guidance.
Accounting Standards Update (ASU) 2023-09, “Income Taxes (Topic 740).” In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public entity is also required to provide a qualitative description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments are effective prospectively for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. The Company is currently evaluating the effects of adopting this guidance.
7
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 and six months ended June 30, 2024 and June 30, 2023 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:
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June 30, |
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December 31, |
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Change |
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|||
Customer receivables |
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$ |
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$ |
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$ |
|
|||
Contract liabilities—current |
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Contract liabilities—noncurrent |
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( |
) |
||
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
Market Risks
Foreign Currency Exchange Rate Risk
The Company has manufacturing locations primarily in Mexico and Poland, and sells its products globally. As a result, the Company’s financial results could be significantly affected by foreign currency exchange rates. To help mitigate gross margin and cash flow fluctuations due to changes in foreign currency exchange rates, certain subsidiaries in Mexico and Poland, whose functional currency is the U.S. dollar or the Euro, hedge a portion of their forecasted foreign currency costs denominated in the Mexican Peso and Polish Zloty. The Company may hedge portions of its forecasted foreign currency exposure up to
Interest Rate Risk
The Company has borrowings under its Senior Secured Credit Facilities that are at variable rates of interest and expose it to interest rate risk. If interest rates increase, debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same. The Company has entered into interest rate swaps exchanging floating for fixed rate interest payments in order to reduce its interest rate volatility.
Commodity Price Risk
The principal raw material used in manufacturing aluminum wheels is aluminum alloys. While wheel prices under OEM customer contracts are adjusted for fluctuations in the cost of this material, the prices of our aftermarket wheels are generally fixed months in advance of the spring and winter sales seasons. Accordingly, the Company hedges a portion of its aftermarket aluminum purchases to offset the effect of fluctuating aluminum cost on its margins. In addition, the manufacture of aluminum wheels is energy intensive, so the Company fixes a portion of its natural gas and electricity purchases with derivatives or contractual arrangements with energy suppliers.
Derivative Financial Instruments
8
The following tables display the fair value of derivatives by financial statement line item as of June 30, 2024 and December 31, 2023:
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June 30, 2024 |
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|
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Current Derivative Financial Instruments |
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Derivative Financial Instruments |
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Accrued |
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Other |
|
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Derivatives designated as hedging instruments: |
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|
||||
Foreign exchange contracts |
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$ |
|
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$ |
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$ |
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$ |
|
||||
Commodity contracts |
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|
||||
Interest rate contracts |
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|
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|
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|
|
— |
|
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|
— |
|
||
Derivatives not designated as hedging instruments: |
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|
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|
||||
Foreign exchange contracts |
|
|
— |
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— |
|
|
|
|
|
|
— |
|
|
Total derivative financial instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
December 31, 2023 |
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|||||||||||||
|
|
Current Derivative Financial Instruments |
|
|
Derivative Financial Instruments |
|
|
Accrued |
|
|
Other |
|
||||
Derivatives designated as hedging instruments: |
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|
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|
|
|
||||
Foreign exchange contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commodity contracts |
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|
||||
Interest rate contracts |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Derivatives not designated as hedging instruments: |
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|
||||
Foreign exchange contracts |
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|
|
|
|
— |
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|
|
|
|
|
— |
|
||
Total derivative financial instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the notional amount of the Company's derivative financial instruments as of June 30, 2024 and December 31, 2023:
|
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Notional Amount |
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|||||
|
|
June 30, |
|
|
December 31, |
|
||
Derivatives designated as hedging instruments: |
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|
|
|
|
|
||
Foreign exchange contracts |
|
$ |
|
|
||||