Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2024

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

The principal business of Superior Industries International, Inc. (referred herein as the “Company” or “Superior”) 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. The Company’s aluminum wheels are primarily sold to OEMs for factory installation on new light vehicles. Aluminum wheels sold in the European aftermarket are under the brands ATS, RIAL, ALUTEC, and ANZIO. North America and Europe represent the primary markets for the Company’s products, but it has a diversified global customer base consisting of North American, European, and Asian OEMs.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions are eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts presented and related disclosures. The Company believes that the accounting estimates employed are appropriate and the resulting balances are reasonable. Due to the inherent uncertainty involved in developing estimates, actual results in future periods could differ from the original estimates.

Reclassifications

Reclassifications

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

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash, certificates of deposit, fixed deposits, and money market funds with original maturities of three months or less. The Company is required to provide cash collateral in connection with certain contractual arrangements. The Company has $0.4 million of restricted cash as of December 31, 2024 and December 31, 2023 in support of these arrangements and requirements.

Derivative Financial Instruments

Derivative Financial Instruments

The Company accounts for derivative instruments as either assets or liabilities and adjust them to fair value each period. Derivative instruments that qualify as hedging instruments must be designated as a cash flow hedge. The gain or loss related to a hedge are either recognized in income immediately to offset the gain or loss on the hedged item or are deferred and reported as a component of accumulated other comprehensive income or loss and subsequently recognized in earnings when the hedged item affects earnings. Derivatives that do not qualify or have not been designated as hedges are adjusted to fair value and recognized immediately in earnings through the financial statement line item to which the derivative relates.

Accounts Receivable

Accounts Receivable

Accounts receivable primarily consist of amounts that are due and payable from customers for the sale of aluminum wheels. Receivables are stated at net realizable value, which approximates fair value. Receivables are reduced by an allowance for amounts that may become uncollectible in the future. The allowance is an estimate based on expected losses, current economic and market conditions, and a review of the current status of each customer’s accounts receivable. Adjustments to the allowance are recognized in selling, general, and administrative expenses. The allowance for doubtful accounts balances were $0.1 million and $0.7 million as of December 31, 2024 and December 31, 2023.

Inventory

Inventory

Inventories are stated at the lower of cost or net realizable value. The cost of inventories is measured using the FIFO (first-in, first-out) method or the average cost method. Inventories are reviewed to determine if inventory quantities are in excess of forecasted usage or if they have become obsolete.

Property, Plant, and Equipment

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost, less accumulated depreciation. The cost of additions, improvements, and interest during construction, if any, are capitalized. Maintenance and repair costs are charged to expense when incurred. Depreciation is calculated generally on the straight-line method based on the estimated useful lives of the assets.

Leases

Leases

The Company determines whether an arrangement is or contains a lease at the inception of the arrangement. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Finance and operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. Since the Company generally does not have access to the interest rate implicit in the lease, it uses its incremental borrowing rate (for fully collateralized debt) at the inception of the lease in determining the present value of the lease payments. The implicit rate is, however, used where readily available. Lease expense under operating leases is recognized on a straight-line basis over the term of the lease. Certain of the Company's leases contain both lease and nonlease components, which are accounted for separately.

The remaining terms of the Company’s leases range from less than one year to four years. Certain leases include options to extend the lease term for up to ten years, as well as an option to terminate, both of which have been excluded from the term of the lease since exercise of the options is not reasonably certain.

Intangible Assets

Intangible Assets

Definite-lived intangible assets are carried at fair value established at acquisition and consist of customer relationships. Amortization is calculated on a straight-line basis over the estimated useful lives of the assets.

Valuation of Long-Lived Assets, including Definite-Lived Intangible Assets

Valuation of Long-Lived Assets, including Definite-Lived Intangible Assets

Long-lived assets, such as property, plant, and equipment and definite-lived intangible assets, are evaluated for impairment when impairment indicators exist. The recoverability of the carrying value of the long-lived asset or asset group is assessed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If the carrying amount of the long-lived asset or asset group is impaired, an impairment charge is recorded for the amount by which the carrying value exceeds its fair value.

Fair Value Measurements

Fair Value Measurements

A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. A financial instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy definition prioritizes the inputs used in measuring fair value into the following levels:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Foreign Currency Transactions and Translation

Foreign Currency Transactions and Translation

The assets and liabilities of foreign subsidiaries that use local currency as their functional currency are translated to U.S. dollars based on the current exchange rate prevailing at each balance sheet date and any resulting translation adjustments are included in accumulated other comprehensive income or loss. The assets and liabilities of foreign subsidiaries whose local currency is not their functional currency are remeasured from their local currency to their functional currency and then translated to U.S. dollars. Revenues and expenses are translated into U.S. dollars using the average exchange rates prevailing for each period presented.

Gains and losses arising from foreign currency transactions and the effects of remeasurement discussed in the preceding paragraph are recorded in other income or expense. The Company recognized a foreign currency transaction and remeasurement gain of $0.7 million in 2024 and a loss of $0.1 million in 2023.

Revenue Recognition

Revenue Recognition

Revenue is recognized when performance obligations under the Company's contracts are satisfied. Generally, this occurs upon shipment when control of the product transfers to the customer. At this point, revenue is recognized in an amount reflecting the consideration the Company expects to be entitled to under the terms of its contract. Sales do not involve any significant financing component since customer payment is generally due 40-60 days after shipment.

The Company maintains long-term business relationships with OEM customers and aftermarket distributors; however, there are no definitive long-term volume commitments under these arrangements. Volume commitments are limited to near-term customer requirements and a performance obligation is established by the enforceable contract, which is generally considered to be the purchase order or production release schedule. The purchase order, or related production release schedule, generally have delivery periods of approximately 30-60 days. The Company does not disclose the remaining performance obligations under its contracts since contract terms are substantially less than a year.

Prices for production wheels are based on prices established in customer purchase orders which represent the standalone selling price. Prices are subject to adjustment for changes in commodity prices for aluminum, alloy premium, and silicon, as well as production efficiencies and wheel weight variations from specifications used in pricing. These price adjustments are treated as variable consideration.

The Company estimates variable consideration by using the “most likely” amount estimation approach. For commodity prices, initial estimates are based on the commodity index at contract inception. Changes in commodity prices are monitored and revenue is adjusted as changes in the respective commodity index occur or as contracts with customers otherwise stipulate. Prices incorporate the wheel weight price component based on product specifications. Weights are measured initially during the quotation process and remeasured upon final design, and prices are adjusted as variations arise. In North America, OEM price adjustments due to manufacturing efficiencies are generally recognized as and when negotiated with customers. Contracts with European OEMs generally include annual price reductions based on expected manufacturing efficiencies over the life of the vehicle wheel program which are accrued as revenue is recognized. Customer contract prices are generally adjusted quarterly to incorporate price adjustments.

The Company collects and remits taxes assessed by various governmental authorities that are both imposed on and concurrent with revenue-producing transactions with its customers. These taxes may include, but are not limited to, sales, use, and value-added taxes. The collection and remittance of these taxes is reported on a net basis. Shipping costs are treated as a cost of fulfillment.

The Company’s warranties are limited to product specifications and the Company does not accept product returns unless the item is defective as manufactured. Accordingly, warranty costs are treated as a cost of fulfillment subject to accrual, rather than a performance obligation. The Company establishes provisions for both estimated returns and warranty when revenue is recognized for aftermarket sales. The Company establishes provisions for estimated returns and warranties for OEM sales when specific defective product or warranty issues are identified on the OEM products. In addition, the Company does not typically provide customers with the right to a refund but provides for product replacement.

Refer to Note 2, “Revenue” for further discussion on the Company’s revenue recognition.

Pre-Production Costs

Pre-Production Costs

The Company develops tooling necessary to produce wheels for its customers. Customer tooling reimbursement is generally based on quoted prices or cost not to exceed quoted prices. Tooling costs, which are explicitly recoverable from customers, are capitalized as preproduction costs and amortized to cost of sales over the average life of the vehicle wheel program. Similarly, customer reimbursements for tooling costs are deferred and amortized to net sales over the average life of the vehicle wheel program.

Income Taxes

Income Taxes

Deferred tax assets and liabilities are recognized on the basis of future tax consequences attributable to temporary differences that exist between the financial reporting carrying value of assets and liabilities and their tax reporting values. Deferred tax assets and liabilities are measured using enacted tax rates that will apply in the years the temporary differences are expected to be recovered or paid. Adjustments based on filed returns are recorded when identified in the subsequent years. Changes in tax laws or accounting standards and methods may affect recorded deferred taxes in future periods.

Valuation allowances are recorded to reduce deferred tax assets to an amount that is more likely than not to be realized. Deferred tax assets are assessed quarterly to determine if a valuation allowance is required or should be adjusted. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income in future years. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and considers all available positive and negative evidence. Accounting for the valuation of deferred tax assets represents the Company's best estimate of future events.

Uncertain tax positions are recognized if it is more likely than not to be sustained upon examination and measured using a cumulative probability assessment of future outcomes. Uncertain tax positions are evaluated on a quarterly basis, including consideration of changes in circumstances, such as new regulations, recent judicial opinions or the results of recent examinations by tax authorities. Any changes are recorded in the period in which the change occurs.

Adoption of New Accounting Standards and Accounting Standards Issued but Not Yet Adopted

Adoption of New Accounting Standard

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 enhance disclosures for significant segment expenses. The standard did not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating segments into reportable segments. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this standard for the year ended December 31, 2024, and applied the amendments retrospectively to all prior periods presented (refer to Note 4 “Business Segments”). The adoption of this standard did not have a material effect on the financial statements or disclosures.

Accounting Standards Issued But Not Yet Adopted

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. This amendment requires 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 effect of adopting this guidance.

Accounting Standards Update (ASU) 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures.” In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses (Subtopic 220-40): Disaggregation of Income Statement Expenses”, which is intended to provided disaggregated information about a public business entity's expenses to help financial statement users better understand the entity's performance, better assess the entity's prospects for future cash flows, and compare an entity's performance over time and with that of other entities. The amendments are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The new standard may be applied either on a prospective or retrospective basis. The Company is currently evaluating the effect of adopting this guidance.