sup-10k_20191231.htm

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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.

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 Act). Yes ☐ No ☒

The aggregate market value of the registrant’s $0.01 par value common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second quarter was $86,896,509, based on a closing price of $3.46. On February 21, 2020, there were 25,128,158 shares of common stock issued and outstanding.

Portions of the registrant’s 2020 Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. We have included or incorporated by reference in this Annual Report on Form 10-K (including in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and from time to time our management may make statements that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Act of 1934. These forward-looking statements are based upon management’s current expectations, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth, future business plans and costs and potential liability for environmental-related matters. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “expects,” “anticipates,” “believes,” “will,” “will likely result,” “will continue,” “plans to”, “could”, “continue”, “approximately”, “forecast”, “estimates”, “pursue” and similar expressions. These statements include our belief regarding general automotive industry and market conditions and growth rates, as well as general domestic and international economic conditions.

Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, which could cause actual results to differ materially from such statements and from the Company’s historical results and experience. These risks, uncertainties and other factors include, but are not limited to, those described in Part I, Item 1A, “Risk Factors” and Part II - Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K and elsewhere in the Annual Report and those described from time to time in our other reports filed with the Securities and Exchange Commission.

Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results and that the risks described herein should not be considered to be a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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 aftermarket distributors in Europe. We employ approximately 8,400 employees, operating in eight manufacturing facilities in North America and Europe with a combined annual manufacturing capacity of approximately 20 million wheels. We are one of the largest 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 92 percent of our sales in 2019 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Daimler AG Company (Mercedes-Benz, AMG, Smart), FCA, Ford, GM, Honda, Jaguar-Land Rover, Mazda, Nissan, PSA, Renault, Subaru, 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 global presence and diversified customer base consisting of North American, European and Asian OEMs. We continue to deliver on our strategic plan to be one of the leading light vehicle aluminum wheel suppliers globally, delivering innovative wheel solutions to our customers.

Our global reach encompasses sales to the ten largest OEMs in the world. The following chart shows our sales by customer for the years ended December 31, 2019 and 2018.

Demand for our products is mainly driven by light-vehicle production levels in North America and Europe, as well as production levels at our key customers and take rates on programs we serve. North American light-vehicle production in 2019 was 16.3 million vehicles, as compared to 17.0 million vehicles in 2018. In Europe, light vehicle production level in 2019 was 17.7 million vehicles, as compared to 18.5 million vehicles in 2018. The majority of our customers’ wheel programs are awarded two to four years in advance. Our purchase orders with OEMs are typically specific to a particular vehicle model.

We have proven our ability to be a consistent producer of high quality aluminum wheels with the capability to meet our customers’ price, quality, delivery and service requirements. We continually strive to enhance our relationships with our customers through continuous improvement programs, not only through our manufacturing operations but in the engineering, design, development and quality areas as well.

GM, Ford and VW Group were our only customers individually accounting for 10 percent or more of our consolidated trade sales in 2019. Net sales to these customers in 2019 and 2018 were as follows (dollars in millions):

	2019			2018
	Percent of Net Sales	Dollars		Percent of Net Sales	Dollars
GM	22%	$	295.0	18%	$	272.6
Ford	15%	$	208.1	18%	$	265.3
VW Group	13%	$	180.1	12%	$	183.9

In addition, sales to Daimler AG Company, BMW, Toyota and Volvo exceed 5 percent of sales in 2019 and 2018. The loss of all or a substantial portion of our sales to these customers, and/or those listed in the table above, would have a significant adverse effect on our financial results. Refer to Item 1A, “Risk Factors,” of this Annual Report.

The raw materials used in manufacturing our products are readily available and are obtained through numerous suppliers with whom we have established trade relationships. Aluminum accounted for the vast majority of our total raw material requirements during 2019. Our aluminum requirements are met through purchase orders with major global producers. During 2019, we successfully secured aluminum commitments from our primary suppliers sufficient to meet our production requirements, and we anticipate being able to source aluminum requirements to meet our expected level of production in 2020.

When market conditions warrant, we may also enter into purchase commitments to secure the supply of certain other commodities used in the manufacture of our products, such as natural gas, electricity and other raw materials.

We establish price adjustment clauses with our OEM customers to minimize the aluminum price risk. In the aftermarket, we use hedging products to secure our aluminum purchase prices.

We manufacture the majority of our North American products in Mexico for sale in the United States, Canada and Mexico. Net sales of wheels manufactured in our Mexico operations in 2019 totaled $599.8 million and represented 85.2 percent of our total net sales in North America as compared to $673.2 million and 84.1 percent in 2018. Net property, plant and equipment used in our operations in Mexico totaled $223.2 million at December 31, 2019 and $221.5 million at December 31, 2018. The overall cost for us to manufacture wheels in Mexico is currently lower than in the United States, due to lower labor costs as a result of lower prevailing wage rates.

Similarly, we manufacture the majority of our products for the European market in Poland, for sale throughout Europe. For the year ended December 31, 2019, net sales of wheels manufactured in Poland were $422.4 million and 63.2 percent of total net European sales, as compared to $421.8 million and 60.1 percent in 2018. Net property, plant and equipment used in our operations in Poland totaled $217.6 million at December 31, 2019 and $221.0 million at December 31, 2018. Similar to our Mexican operations, the overall cost to manufacture wheels in Poland is substantially lower than in both the United States and Germany at the present time due principally to lower labor costs.

Our customers typically award programs two to four years before actual production is scheduled to begin. Each year, the automotive manufacturers introduce new models, update existing models and discontinue certain models. In this process, we may be selected as the supplier on a new model, we may continue as the supplier on an updated model or we may lose a new or updated model to a competitor. Our estimated net sales may be impacted by various assumptions, including new program vehicle production levels, customer price reductions, currency exchange rates and program launch timing. Our customers may terminate the awarded programs or reduce order levels at any time, based on market conditions or change in portfolio direction. Therefore, expected net sales information does not represent firm commitments or firm orders. We estimate that we have been awarded programs covering approximately 90 percent of our manufacturing capacity over the next three years.

Competition in the market for aluminum wheels is based primarily on delivery, overall customer service, price, quality and technology. We currently supply approximately 17 percent and 13 percent of the aluminum wheels installed on passenger cars and light-duty trucks in North America and Europe, respectively.

Competition is global in nature with a significant volume of exports from Asia into North America. There are several competitors with facilities in North America but we estimate that we have more than twice the North American production capacity of any competitor. Some of the key competitors in North America include Central Motor Wheel of America, CITIC Dicastal Co., Ltd., Prime Wheel Corporation, Enkei, Hands Corporation, and Ronal. Key European competitors include Ronal, Borbet, Maxion and CMS. We are the leading manufacturer of alloy wheels in the European aftermarket, where the competition is highly fragmented. Key competitors include Alcar, Brock, Borbet, ATU and Mak. Refer to Item 1A, “Risk Factors,” of this Annual Report.

Steel and other types of wheels also compete with our products. According to Ward’s Automotive Group, the aluminum wheel penetration rate on passenger cars and light-duty trucks in North America was approximately 88 percent for the 2019 and 2018 model

year. Although similar industry data is not available for Europe, we estimate aluminum wheel penetration continues to marginally increase year-over-year with further opportunity to increase. Several factors can affect this rate including price, fuel economy requirements and styling preferences. Although aluminum wheels currently cost more than steel, aluminum is a lighter material than steel, which is desirable for fuel efficiency and generally viewed as aesthetically superior to steel and, thus, more desirable to the OEMs and their customers.

Our policy is to continuously review, improve and develop our engineering capabilities to satisfy our customer requirements in the most efficient and cost-effective manner available. We strive to achieve this objective by attracting and retaining top engineering talent and by maintaining the latest state-of-the-art computer technology to support engineering development. Fully developed engineering centers located in Fayetteville, Arkansas, and in Lüdenscheid, Germany support our research and development. We also have a technical sales function at our corporate headquarters in Southfield, Michigan that maintains a complement of engineering staff located near some of our largest customers’ headquarters and engineering and purchasing offices. Aftermarket wheels are developed in Bad Dürkheim.

Safety standards in the manufacture of vehicles and automotive equipment have been established under the National Traffic and Motor Vehicle Safety Act of 1966, as amended. We believe that we are in compliance with all federal standards currently applicable to OEM suppliers and to automotive manufacturers.

Our manufacturing facilities, like most other manufacturing companies, are subject to solid waste, water and air pollution control standards mandated by federal, state and local laws. Violators of these laws are subject to fines and, in extreme cases, plant closure. We believe our facilities are in material compliance with all presently applicable standards. The cost of environmental compliance was approximately $0.7 million in 2019 and 2018 and $0.6 million in 2017. We expect that future environmental compliance expenditures will approximate these levels and will not have a material effect on our consolidated financial position or results of operations. However, climate change legislation or regulations restricting emission of “greenhouse gases” could result in increased operating costs and reduced demand for the vehicles that use our products. Refer to Item 1A, “Risk Factors - We are subject to various environmental laws” of this Annual Report.

As of December 31, 2019, we employed approximately 8,000 full-time employees and 400 contract employees, with 4,800 employees in North America and 3,600 employees in Europe. None of our employees in North America are covered by a collective bargaining agreement. Superior Industries Europe AG’s (“SEAG’s”) subsidiary, Superior Industries Production Germany GmbH (“SPG”), is a member of the employers’ association for the metal and electronic industry in North Rhine-Westphalia e.V. (Metall und Elektro-Industrie NORDRHEIN-WESTPFALEN e.V.) and is subject to various collective bargaining agreements entered into by the employers’ association with the trade union IG Metall. These collective bargaining agreements include provisions relating to wages, holiday, and partial retirement. It is estimated that approximately 200 employees of SEAG employed at SPG in Germany were unionized and 437 employees were subject to collective bargaining agreements in 2019. SPG and Superior Industries Automotive Germany GmbH operate statutory workers’ councils and Superior Industries Production (Poland) Sp. z o.o. operates a voluntary workers’ council.

Fiscal year 2019 and 2018 started on January 1 and ended December 31. The fiscal year for 2017 consisted of the 53-week period ended December 31, 2017. Thus, fiscal years 2019 and 2018 reflect one less calendar week of North America operations than fiscal year 2017. Historically our fiscal year ended on the last Sunday of the calendar year. While our European operations historically reported on a calendar year end, these fiscal periods aligned as of December 31, 2017. Beginning in 2018, both our North American and European operations are on a calendar fiscal year with each month ending on the last day of the calendar month. For convenience of presentation, all fiscal years are referred to as beginning as of January 1, and ending as of December 31, but actually reflect our financial position and results of operations for the periods described above.

We have aligned our executive management structure, organization and operations to focus on our performance in our North American and European regions. Financial information about our operating segments is contained in Note 6, “Business Segments” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report.

The automotive industry is cyclical and varies based on the timing of consumer purchases of vehicles, which in turn varies based on a variety of factors such as general economic conditions, availability of consumer credit, interest rates and fuel costs. While there have been no significant seasonal variations in the past few years, production schedules in our industry can vary significantly from quarter to quarter to meet the scheduling demands of our customers. Typically, our aftermarket business experiences two seasonal peaks, which require substantially higher levels of production. The higher demand for aftermarket wheels from our customers occurs in March and October leading into the spring and winter peak consumer selling seasons.

We were initially incorporated in Delaware in 1969. Our entry into the OEM aluminum wheel business in 1973 resulted from our successful development of manufacturing technology, quality control and quality assurance techniques that enabled us to satisfy the quality and volume requirements of the OEM market for aluminum wheels. The first aluminum wheel for a domestic OEM customer was a Mustang wheel for Ford. We reincorporated in California in 1994, and in 2015, we moved our headquarters from Van Nuys, California to Southfield, Michigan and reincorporated in Delaware. On May 30, 2017, we acquired a majority interest in Uniwheels AG, which was a European supplier of OEM and aftermarket aluminum wheels. Uniwheels AG was renamed in 2018 to Superior Industries Europe AG. Our stock is traded on the New York Stock Exchange under the symbol “SUP.”

Our Annual Report on Form 10-K, quarterly reports on Form 10-Q and any amendments thereto are available, without charge, on or through our website, www.supind.com, under “Investor Relations,” as soon as reasonably practicable after they are filed electronically with the Securities and Exchange Commission (“SEC”). Also included on our website, www.supind.com, under “Investor Relations,” is our Code of Conduct, which, among others, applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. Copies of all SEC filings and our Code of Conduct are also available, without charge, upon request from Superior Industries International, Inc., Shareholder Relations, 26600 Telegraph Road, Suite 400, Southfield, Michigan 48033.

The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information related to issuers that file electronically with the SEC. The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference in this Annual Report on Form 10-K.

The following discussion of risk factors contains “forward-looking” statements, which may be important to understanding any statement in this Annual Report or elsewhere. The following information should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” and Item 8, “Financial Statements and Supplementary Data” of this Annual Report.

Our business routinely encounters and addresses risks and uncertainties. Our business, results of operations, financial condition and cash flows could be materially adversely affected by the factors described below. Discussion about the important operational risks that our business encounters can also be found in the MD&A section and in the business description in Item 1, “Business” of this Annual Report. Below, we have described our present view of the most significant risks and uncertainties we face. Additional risks and uncertainties not presently known to us, or that we currently do not consider significant, could also potentially impair our business, results of operations, financial condition and cash flows. Our reactions to these risks and uncertainties as well as our competitors’ and customers’ reactions will affect our future operating results.

The automotive industry is cyclical and volatility in the automotive industry could adversely affect our financial performance.

Predominantly, our sales are made to the European and U.S. automotive markets. Therefore, our financial performance depends largely on conditions in the European and U.S. automotive industry, which in turn can be affected significantly by broad economic and financial market conditions. Consumer demand for automobiles is subject to considerable volatility as a result of consumer confidence in general economic conditions, levels of employment, prevailing wages, fuel prices and the availability and cost of consumer credit, as well as changing consumer preferences. Demand for aluminum wheels can be further affected by other factors, including pricing and performance comparisons to competitive materials such as steel. Finally, the demand for our products is influenced by shifts of market share between vehicle manufacturers and the specific market penetration of individual vehicle platforms being sold by our customers. Decreases in demand for automobiles in Europe and the United States could adversely affect the valuation of our productive assets, results of operations, financial condition and cash flows.

A limited number of customers represent a large percentage of our sales. The loss of a significant customer or decrease in demand could adversely affect our operating results.

Ford, GM, Toyota, VW Group and BMW, together, represented 60 percent in 2019 and 64 percent of our sales in 2018. Our OEM customers are not required to purchase any minimum amount of products from us. Increasingly global procurement practices, the pace of new vehicle introduction and demand for price reductions may make it more difficult to maintain long-term supply arrangements with our customers, and there are no guarantees that we will be able to negotiate supply arrangements with our customers on terms acceptable to us in the future. The contracts we have entered into with most of our customers provide that we will manufacture wheels for a particular vehicle model, rather than manufacture a specific quantity of products. Such contracts range from one year to the life of the model (usually three to five years), typically are non-exclusive and do not require the purchase by the customer of any minimum number of wheels from us. Therefore, a significant decrease in consumer demand for certain key models or group of related models sold by any of our major customers, or a decision by a manufacturer not to purchase from us, or to discontinue purchasing from us, for a particular model or group of models, could adversely affect our results of operations, financial condition and cash flows.

We operate in a highly competitive industry and efforts by our competitors to gain market share could adversely affect our financial performance.

The global automotive component supply industry is highly competitive. Competition is based on a number of factors, including delivery, overall customer service, price, quality, technology and available capacity to meet customer demands. Some of our competitors are companies, or divisions or subsidiaries of companies, which are larger and have greater financial and other resources than we do. We cannot ensure that our products will be able to compete successfully with the products of these competitors. In particular, our ability to increase manufacturing capacity typically requires significant investments in facilities, equipment and personnel. The majority of our operating facilities are at full or near to full capacity levels which may cause us to incur labor costs at premium rates in order to meet customer requirements, experience increased maintenance expenses or require us to replace our machinery and equipment on an accelerated basis. Furthermore, the nature of the markets in which we compete has attracted new entrants, particularly from low-cost countries. Such competition with lower cost structures poses a significant threat to our ability to compete internationally and domestically. These factors have led to our customers awarding business to foreign competitors in the past, and they may continue to do so in the future. In addition, any of our competitors may foresee the course of market development more accurately, develop products that are superior to our products, have the ability to produce similar products at a lower cost or adapt more quickly to new technologies or evolving customer requirements. Consequently, our products may not be able to compete successfully with competitors’ products.

The global vehicle market is highly competitive at the OEM level, which drives continual cost-cutting initiatives by our customers. Customer concentration, relative supplier fragmentation and product commoditization have translated into continual pressure from OEMs to reduce the price of our products. It is possible that pricing pressures beyond our expectations could intensify as OEMs pursue restructuring and cost-cutting initiatives. If we are unable to generate sufficient production cost savings in the future to offset such price reductions, our gross margin and cash flows could be adversely affected. In addition, changes in OEMs’ purchasing policies or payment practices could have an adverse effect on our business. Our OEM customers typically attempt to qualify more than one supplier for the programs we participate on and for programs we may bid on in the future. As such, our OEM customers are able to negotiate favorable pricing or may decrease wheel orders from us. Such actions may result in decreased sales volumes and unit price reductions for the Company, resulting in lower revenues, gross profit, operating income and cash flows.

We may be unable to successfully implement cost-saving measures or achieve expected benefits under our plans to improve operations.

As part of our ongoing focus to provide high quality products, we continually analyze our business to further improve our operations and identify cost-cutting measures. We may be unable to successfully identify or implement plans targeting these initiatives or fail to realize the benefits of the plans we have already implemented, as a result of operational difficulties, a weakening of the economy or other factors. Cost reductions may not fully offset decreases in the prices of our products due to the time required to develop and implement cost reduction initiatives. Additional factors such as inconsistent customer ordering patterns, increasing product complexity and heightened quality standards are making it increasingly more difficult to reduce our costs. It is possible that the costs we incur to implement improvement strategies may negatively impact our financial position, results of operations and cash flow.

We may be unable to successfully launch new products and/or achieve technological advances.

In order to compete effectively in the global automotive component supply industry, we must be able to launch new products and adopt technology to meet our customers’ demands in a timely manner. However, we cannot ensure that we will be able to install and certify the equipment needed for new product programs in time for the start of production, or that the transitioning of our manufacturing facilities and resources under new product programs will not impact production rates or other operational efficiency measures at our facilities. In addition, we cannot ensure that our customers will execute the launch of their new product programs on schedule. We are also subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in product development and failure of products to operate properly. The global automotive industry is experiencing a period of significant technological change. As a result, the success of our business requires us to develop and/or incorporate leading technologies. Such technologies are subject to rapid obsolescence. Our inability to maintain access to these technologies (either through development or licensing) may adversely affect our ability to compete. If we are unable to differentiate our products, maintain a low-cost footprint or compete effectively with technology-focused new market entrants, we may lose market share or be forced to reduce prices, thereby lowering our margins. Any such occurrences could adversely affect our financial condition, operating results and cash flows.

International trade agreements, including the ratification of the USMCA, and our international operations make us vulnerable to risks associated with doing business in foreign countries that can affect our business, financial condition and results of operations.

We manufacture our products in Mexico, Germany and Poland and we sell our products internationally. Accordingly, unfavorable changes in foreign cost structures, trade protection laws, tariffs on aluminum, regulations and policies affecting trade and investments and social, political, labor or economic conditions in a specific country or region, among other factors, could have a negative effect on our business and results of operations. Legal and regulatory requirements differ among jurisdictions worldwide. Violations of these laws and regulations could result in fines, criminal sanctions, prohibitions on the conduct of our business and damage to our reputation. Although we have policies, controls and procedures designed to ensure compliance with these laws, our employees, contractors, or agents may violate our policies.

As a result of changes to U.S. administrative policy, among other possible changes, there may be (i) changes to existing trade agreements, such as the North American Free Trade Agreement (“NAFTA”) and its anticipated successor agreement, the U.S.-Mexico-Canada Agreement (“USMCA”); (ii) greater restrictions on free trade generally; and (iii) significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactured in Mexico. It remains unclear what the U.S. administration or foreign governments, including China, will or will not do with respect to tariffs, NAFTA, USMCA or other international trade agreements and policies. However, Mexico and the United States have ratified the USMCA and it is expected that Canada will ratify it in 2020. The USMCA currently includes several provisions relating to automobile manufacturing. One provision requires that automobiles must have 75 percent of their components manufactured in Mexico, the United States, or Canada to qualify for zero tariffs (up from 62.5 percent under NAFTA). Another provision requires that 40 percent to 45 percent of automobile parts must be made by workers who earn $16 per hour by 2023. Currently, our workers in Mexico make less than $16 per hour. Mexico has also agreed to pass new labor laws that are intended to make it easier for Mexican workers to unionize. We do not know whether the USMCA will be ratified by Canada or, if ratified, what the final provisions of the USMCA will contain and how those provisions will impact us but it is possible that the USMCA, if ratified, could increase our cost of manufacturing in Mexico which could have an adverse effect on our business, financial condition, results of operations and cash flows.

A trade war, other governmental action related to tariffs or international trade agreements, changes in United States social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently manufacture and sell products, and any resulting negative sentiments towards the United States as a result of such changes, likely would have an adverse effect on our business, financial condition, results of operations and cash flows.

Cost of manufacturing our products in Mexico, Germany and Poland may be affected by tariffs imposed by the United States, trade protection laws, policies and other regulations affecting trade and investments, social, political, labor, or general economic conditions. Other factors that can affect the business and financial results of our Mexican, German and Polish operations include, but are not limited to, changes in cost structures, currency effects of the Mexican Peso, Euro and Polish Zloty, availability and competency of personnel and tax regulations.

Fluctuations in foreign currencies and commodity and energy prices may adversely impact our financial results.

Due to our operations outside of the United States, we experience exposure to foreign currency gains and losses in the ordinary course of our business. We settle transactions between currencies - i.e., in particular, U.S. dollar to Mexican Peso, Euro to U.S. dollar and Euro to Polish Zloty. To the extent possible, we attempt to match the timing and magnitude of transaction settlements between currencies to create a “natural hedge.” Based on our current business model and levels of production and sales activity, the net imbalance between currencies depends on specific circumstances. While changes in the terms of the contracts with our customers will create an imbalance between currencies that we hedge with foreign currency forward or option contracts, there can be no assurances that our hedging program will effectively offset the impact of the imbalance between currencies or that the net transaction balance will not change significantly in the future.

Additionally, we are exposed to commodity and energy price risks due to significant aluminum raw material requirements and the energy intensive nature of our operations. Natural gas and electricity prices are subject a to large number of variables that are outside of our control. We use financial derivatives and fixed-price agreements with suppliers to reduce the effect of any volatility on our financial results.

The foreign currency forward or option contracts, the natural gas forward contracts, and the fixed-price agreements we enter into with financial institutions and suppliers are designed to protect against foreign exchange risks and price risks associated with certain existing assets and liabilities, certain firmly committed transactions and forecasted future cash flows. We have a program to hedge a portion of our material foreign exchange or commodity and energy price exposures, typically for up to 48 months. However, we may choose not to hedge certain foreign exchange or commodity or energy price exposures for a variety of reasons including, but not limited to, accounting considerations, the prohibitive economic cost of hedging particular exposures, or our inability to identify willing counterparties. There is no guarantee that our hedge program will effectively mitigate our exposures to foreign exchange and commodity and energy price changes which could have material adverse effects on our cash flows and results of operations.

Fluctuations in foreign currency exchange rates may also affect the USD value of assets and liabilities of our foreign operations, as well as assets and liabilities denominated in non-functional currencies such as the Euro, and may adversely affect reported earnings and, accordingly, the comparability of period-to-period results of operations. Changes in currency exchange rates or commodity and energy prices may affect the relative prices at which we and our foreign competitors sell products in the same market. In addition, changes in the value of the relevant currencies or commodities and energy prices may affect the cost of certain items required in our operations. We cannot ensure that fluctuations in exchange rates or commodities and energy prices will not otherwise have a material adverse effect on our financial condition or results of operations or cause significant fluctuations in quarterly and annual results of operations.

We do not expect to generate sufficient cash to repay all of our indebtedness (including the Term Loan Facility and Notes) or obligations relating to the redeemable preferred stock by their respective maturity dates and may be forced to take other actions to satisfy these obligations, which may not be successful.

Our ability to make scheduled payments or to refinance our debt obligations or redeemable preferred stock depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business, economic and other factors beyond our control. We may not be able to maintain a sufficient level of cash flow from operating activities to permit us to pay the principal, premium, if any, interest and/or dividends on our debt, redeemable preferred stock and other indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations or redeemable preferred stock obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our indebtedness, including the Notes. Our ability to restructure or refinance our debt will depend on the condition of the capital and credit markets and our financial condition at such time.

We do not expect to generate sufficient cash to repay all principal due under the €250.0 million aggregate principal amount of 6.0% Senior Notes due June 15, 2025 (the “Notes”) of $243.1 million and the $400.0 million Senior Secured Term Loan Facility (“Term Loan Facility” or “Term Loan B”) due May 23, 2024 of $371.8 million (together with the Revolving Credit Facility referred to as the USD Senior Secured Credit Facility, “USD SSCF”), in full by the respective maturity dates, which will likely require us to refinance a portion or all of the outstanding debt. We might not be able to refinance the debt at satisfactory terms. Any refinancing of our debt could be at higher interest rates and associated transactions costs and may require us to comply with more onerous covenants, which could further restrict our business operations and limit our financial flexibility. In addition, any failure to make payments of interest and principal on our outstanding indebtedness and dividends or redemption payments on our redeemable preferred stock on a timely basis would likely result in a reduction of our credit ratings, which could harm our ability to incur additional indebtedness or issue equity, or to refinance all or portions of these obligations. These alternative measures may not be successful and may not permit us to meet our scheduled debt service or other payment obligations, including (i) redemption of our redeemable preferred stock at a redemption price equal to the greater of $300.0 million (2.0 times stated value) or the product of the number of common shares into which the redeemable preferred stock could be converted (5.3 million shares currently) and the then current market price of our common stock and (ii) the repurchase of the Notes or redemption of the redeemable preferred stock upon a change of control or repurchase of the Notes upon sales of certain assets. The holders of the preferred stock have redemption rights that allow them to force us to redeem the preferred stock on or after September 14, 2025 to the extent allowable under Delaware Law. In the absence of such cash flows and resources, we could face substantial liquidity constraints and might be required to sell material assets or operations to attempt to meet our debt service and other obligations. The credit agreements governing the USD SSCF and the EUR 45.0 million credit line under the EUR Senior Secured Credit Facility (“EUR SSCF”), taken together the Global Senior Secured Credit Facility (“GSSCF”), and the Indenture for the Notes restrict our ability to conduct asset sales and/or use the proceeds from asset sales. We may not be able to consummate these asset sales to raise capital or sell assets at prices and on terms that we believe are fair, and any proceeds that we do receive may not be adequate to meet any debt service obligations then due, as well as payments due with respect to our redeemable preferred stock. If we cannot meet our debt service obligations, the holders of our debt may accelerate our debt and, to the extent such debt is secured, foreclose on our assets. In such an event, we may not have sufficient assets to repay all of our debt.

Under the USD SSCF and EUR SSCF, we had available unused commitments of $156.4 million and 44.6 million Euros, respectively, as of December 31, 2019, which are critical to the Company’s ability to pay all of its obligations in a timely manner.

The credit lines under the USD SSCF and EUR SSFC will mature on May 23, 2022 and May 22, 2022, respectively, which is prior to the maturities of our other outstanding debt. We might not be able to extend these credit lines beyond the current due dates or may only be able to extend them for smaller amounts. This in turn might reduce our ability to refinance our other outstanding debt or other obligations in future years. It might also cause the rating agencies to downgrade our credit ratings. Additionally, it might require us to hold more cash in our bank accounts to ensure our ability to pay our obligations in a timely manner, which in turn could reduce our ability to pay down debt or other obligations.

Our substantial indebtedness and the corresponding interest expense could adversely affect our financial condition

We have a significant amount of indebtedness. As of December 31, 2019, our total debt was $630.6 million ($615.0 million net of unamortized debt issuance costs of $15.6 million). Additionally, we had availability of $156.4 million under the USD SSCF as well as 44.6 million Euros under the EUR SSCF at December 31, 2019.

A significant portion of our cash flow from operations will be used to pay our interest expense and will not be available for other business purposes. We cannot be certain that our business will generate sufficient cash flow or that we will be able to enter into future financings that will provide sufficient proceeds to meet or pay the interest on our debt.

Subject to the limits contained in the credit agreements governing our GSSCF and the indenture governing our €250.0 million aggregate principal amount of 6.0% Senior Notes due June 15, 2025 (the “Notes”) (with outstanding principal balance of €217.0 million at December 31 2019) and our other debt instruments, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify.

In addition, the indenture covering the Notes (the “Indenture”) and the credit agreements governing the GSSCF and our other debt instruments contain restrictive covenants that among other things, could limit our ability to incur liens, engage in mergers and acquisitions, sell, transfer or otherwise dispose of assets, make investments, acquisitions, redeem our capital stock or pay dividends. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of the maturity of all of our debt.

A downgrade of our credit rating or a decrease of the prices of the Company’s common stock, the USD SSCF or the Notes could adversely impact our financial performance.

The Company, its USD SSCF, and the Notes, are rated by Standard and Poor’s and Moody’s. These ratings are widely followed by investors, customers, and suppliers, and a downgrade by one or both of these rating agencies might cause: suppliers to cancel our contracts, demand price increases, or decrease payment terms; customers to reduce their business activities with us; or investors to reconsider investments in financial instruments issued by Superior, all of which might cause a decrease of the price of our common stock, our Notes, and the price of the bilaterally traded Term Loan B which is a part of the USD SSCF.

A decrease in our common stock, Notes and/or Term Loan B prices, in turn, might accelerate such negative trends. A reduction in the price of the Notes and Term Loan B implies an increase of the yield debt investors demand to provide us with financing, which, in turn, would make it more difficult for us to refinance our existing debt, redeemable preferred stock obligations and/or future debt or redeemable preferred stock obligations.

The terms of the credit agreement governing the GSSCF, the Indenture, and other debt instruments, as well as the documents governing other debt that we may incur in the future, may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The Indenture, the credit agreements governing the GSSCF and our other debt instruments, and the documents governing other debt that we may incur in the future, may contain a number of covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including restrictions on our ability to:

In addition, the restrictive covenants in the credit agreement governing the GSSCF and other debt instruments require us to maintain specified financial ratios and satisfy other financial condition tests to the extent subject to certain financial covenant conditions. Our ability to meet those financial ratios and tests can be affected by events beyond our control. We may not meet those ratios and tests.

A breach of the covenants or restrictions under the Indenture governing the Notes, under the credit agreement governing the GSSCF, or under other debt instruments could result in an event of default under the applicable indebtedness. Such a default may allow the creditors under such facility to accelerate the related debt, which may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement governing our GSSCF would permit the lenders under our revolving credit facilities to terminate all commitments to extend further credit under these facilities. Furthermore, if we were unable to repay the amounts due and payable under the GSSCF or under other secured debt instruments, those lenders could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under the GSSCF. In the event our lenders or holders of the Notes accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness or be able to borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms acceptable to us. As a result of these restrictions, we may be:

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our GSSCF are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net

income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. As of December 31, 2019, approximately $371.8 million of our debt was variable rate debt. Our anticipated annual interest expense on $371.8 million variable rate debt at the current rate of 5.7 percent would be $21.2 million. We have entered into interest rate swaps exchanging floating for fixed rate interest payments in order to reduce interest rate volatility. As of December 31, 2019, we have executed interest rate swaps for $260.0 million, maturing $25.0 million March 31, 2020, $35.0 million December 31, 2020, $50 million September 30, 2022, and $150 million December 31, 2022. In the future, we may again enter into interest rate swaps to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the use of alternative reference rates.

The interest rates under our USD SSCF are calculated using LIBOR. On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021 and it is unclear whether new methods of calculating LIBOR will be established. If LIBOR ceases to exist, a comparable or successor reference rate as approved by the Administrative Agent under the USD SSCF will apply or such other reference rate as may be agreed by the Company and the lenders under the credit agreement governing the USD SSCF. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S. dollar LIBOR with a newly created index, calculated based on repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere. To the extent these interest rates increase, our interest expense will increase, which could adversely affect our financial condition, operating results and cash flows.

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. We are also subject to ongoing tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly subjective. Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes against us. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.

In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. The impact of tax law changes could result in an overall tax rate increase to our business.

Increases in the costs and restrictions on availability of raw materials could adversely affect our operating margins and cash flow.

Generally, we obtain our raw materials, supplies and energy requirements from various sources. Although we currently maintain alternative sources, our business is subject to the risk of price increases and periodic delays in delivery. Fluctuations in the prices of raw materials may be driven by the supply and demand for that commodity or governmental regulation, including trade laws and tariffs. In addition, if any of our suppliers seek bankruptcy relief or otherwise cannot continue their business as anticipated, the availability or price of raw materials could be adversely affected.

Although we are able to periodically pass certain aluminum cost increases on to our customers, we may not be able to pass along all changes in aluminum costs (e.g. for aftermarket), or there may be a delay in passing the aluminum costs onto our customers. Our customers are not obligated to accept energy or other supply cost increases that we may attempt to pass along to them. This inability to pass on these cost increases to our customers could adversely affect our operating margins and cash flows.

Aluminum and alloy pricing, and the timing of our receipt of payment from customers for aluminum price fluctuations, may have a material effect on our operating margins and cash flows.

The cost of aluminum is a significant component in the overall cost of a wheel and in our selling prices to customers. Customer prices are adjusted for fluctuations in aluminum prices based on changes in certain published market indices, but the timing of price adjustments is based on specific customer agreements and can vary from monthly to quarterly. As a result, the timing of aluminum price adjustments with customers flowing through sales rarely will match the timing of such changes in cost and can result in fluctuations to our gross profit. This is especially true during periods of frequent increases or decreases in the market price of aluminum.

The aluminum we use to manufacture wheels also contains additional alloy materials, including silicon. The cost of alloying materials is also a component of the overall cost of a wheel. The price of the alloys we purchase is also based on certain published market indices; however, most of our customer agreements do not provide price adjustments for changes in market prices of alloying materials. Increases or decreases in the market prices of these alloying materials could have a material effect on our operating margins and cash flows.

There is a risk of discontinuation of the E.U. anti-dumping duty from China which may increase the competitive pressure from Chinese producers, including in the aftermarket.

In 2010, the European Commission imposed provisional anti-dumping duties of 22.3 percent on imports of aluminum road wheels from China after a complaint of unfair competition from European manufacturers. The European Commission argued that the EU manufacturers had suffered a significant decrease in production and sales, and a loss of market share, as well as price depression due to cheaper imports from China. On January 23, 2017, the European Commission decided to maintain the anti-dumping duties (Commission Implementing Regulation (EU) 2017/109) for another five-year period. The anti-dumping duties protect the EU producers until January 24, 2022. After this date, the competitive pressures from Chinese producers, which have cost advantages, may adversely affect the Company’s financial condition, results of operations and cash flows.

We incur costs to comply with applicable environmental, health and safety laws and regulations in the ordinary course of our business. We cannot ensure that we have been or will be at all times in complete compliance with such laws and regulations. Failure to be in compliance with such laws and regulations could result in material fines or sanctions. Additionally, changes to such laws or regulations may have a significant impact on our cash flows, financial condition and results of operations.

We are also subject to various foreign, federal, state and local environmental laws, ordinances and regulations, including those governing discharges into the air and water, the storage, handling and disposal of solid and hazardous wastes, the remediation of soil and groundwater contaminated by hazardous substances or wastes and the health and safety of our employees. The nature of our current and former operations and the history of industrial uses at some of our facilities expose us to the risk of liabilities or claims with respect to environmental and worker health and safety matters which could have a material adverse effect on our financial condition. In addition, some of our properties are subject to indemnification and/or cleanup obligations of third parties with respect to environmental matters. However, in the event of the insolvency or bankruptcy of such third parties, we could be required to assume the liabilities that would otherwise be the responsibility of such third parties.

Further, changes in legislation or regulation imposing reporting obligations on, or limiting emissions of greenhouse gases from, or otherwise impacting or limiting our equipment and operations or from the vehicles that use our products could adversely affect demand for those vehicles or require us to incur costs to become compliant with such regulations.

We are from time to time subject to litigation, which could adversely affect our financial condition or results of operations.

The nature of our business exposes us to litigation in the ordinary course of our business. We are exposed to potential product liability and warranty risks that are inherent in the design, manufacture and sale of automotive products, the failure of which could result in property damage, personal injury or death. Accordingly, individual or class action suits alleging product liability or warranty claims could result. Although we currently maintain what we believe to be suitable and adequate product liability insurance in excess of our self-insured amounts, we cannot guarantee that we will be able to maintain such insurance on acceptable terms or that such insurance will provide adequate protection against future liabilities. In addition, if any of our products prove to be defective, we may be required to participate in a recall. A successful claim brought against us in excess of available insurance coverage, if any, or a requirement to participate in any product recall, could have a material adverse effect on our results of operations, financial condition or cash flows.

Our business requires extensive product development activities to launch new products. Accordingly, there is a risk that wheels under development may not be ready by the start of production or may fail to meet the customer’s specifications. In any such case, warranty or compensation claims might be raised, or litigation might be commenced, against the Company.

Moreover, there are risks related to civil liability under our customer supply contracts (civil liability clauses in contracts with customers, contractual risks related to civil liability for causing delay in production launch, etc.). If we fail to ensure production launch as and when required by the customer, thus jeopardizing production processes at the customer’s facilities, this could lead to increased costs, giving rise to recourse claims against, or causing loss of orders by the Company. This could also have an adverse effect on our financial condition, results of operations or cash flows.

We may be unable to attract and retain key personnel, including our senior management team, which may adversely affect our ability to conduct our business.

Our success depends, in part, on our ability to attract, hire, train and retain qualified managerial, operational, engineering, sales and marketing personnel. We face significant competition for these types of employees in our industry. We may be unsuccessful in attracting and retaining the personnel we require to conduct our operations successfully. In addition, key personnel may leave us and compete against us. Our success also depends, to a significant extent, on the continued service of our senior management team. We may be unsuccessful in replacing key managers who either resign or retire. During the last several years we have experienced significant turnover in our senior management members, additional losses of members of our senior management team or other experienced senior employees could impair our ability to execute our business plans and strategic initiatives, cause us to lose customers and experience reduced net sales, or lead to employee morale problems and/or the loss of other key employees.

A disruption in our information technology systems, including a disruption related to cybersecurity, could adversely affect our financial performance.

We rely on the accuracy, capacity and security of our information technology systems. Despite the security measures that we have implemented, including those measures related to cybersecurity, our systems, as well as those of our customers, suppliers and other service providers could be breached or damaged by computer viruses, malware, phishing attacks, denial-of-service attacks, natural or man-made incidents or disasters or unauthorized physical or electronic access. These types of incidents have become more prevalent and pervasive across industries, including in our industry, and are expected to continue in the future. A breach could result in business disruption, theft of our intellectual property, trade secrets or customer information and unauthorized access to personnel information. Although cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our information technology systems from attack, damage or unauthorized access are a high priority for us, our activities and investment may not be deployed quickly enough or successfully protect our systems against all vulnerabilities, including technologies developed to bypass our security measures. In addition, outside parties may attempt to fraudulently induce employees or customers to disclose access credentials or other sensitive information in order to gain access to our secure systems and networks. There are no assurances that our actions and investments to improve the maturity of our systems, processes and risk management framework or remediate vulnerabilities will be sufficient or completed quickly enough to prevent or limit the impact of any cyber intrusion. Moreover, because the techniques used to gain access to or sabotage systems often are not recognized until launched against a target, we may be unable to anticipate the methods necessary to defend against these types of attacks and we cannot predict the extent, frequency or impact these problems may have on us. To the extent that our business is interrupted or data is lost, destroyed or inappropriately used or disclosed, such disruptions could adversely affect our competitive position, relationships with our customers, financial condition, operating results and cash flows. In addition, we may be required to incur significant costs to protect against the damage caused by these disruptions or security breaches in the future.

We are also dependent on security measures that some of our third-party customers, suppliers and other service providers take to protect their own systems and infrastructures. Some of these third parties store or have access to certain of our sensitive data, as well as confidential information about their own operations, and as such are subject to their own cybersecurity threats. Any security breach of any of these third-parties’ systems could result in unauthorized access to our information technology systems, cause us to be non-compliant with applicable laws or regulations, subject us to legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, any of which could adversely affect our financial performance.

Competitors could copy our products or technologies and we could violate protected intellectual property rights or trade secrets of our competitors or other third parties.

We register business-related intellectual property rights, such as industrial designs and trademarks, hold licenses and other agreements covering the use of intellectual property rights, and have taken steps to ensure that our trade secrets and technological know-how remain confidential. Nevertheless, there is a risk that third parties would attempt to copy, in full or in part, our products, technologies or industrial designs, or to obtain unauthorized access and use of Company secrets, technological know-how or other protected intellectual property rights. Also, other companies could successfully develop technologies, products or industrial designs similar to ours, and thus potentially compete with us.

Further, there can be no assurance that we will not unknowingly infringe intellectual property rights of our competitors, such as patents and industrial designs, especially due to the fact that the interpretations of what constitutes protected intellectual property may differ. Similarly, there is a risk that we will illegitimately use intellectual property developed by our employees, which is subject in each case to relevant regulations governing employee-created innovations. If a dispute concerning intellectual property rights arises, in which the relevant court issues an opinion on the disputed intellectual property rights contrary to us, identifying a breach of intellectual property rights, we may be required to pay substantial damages or to stop the use of such intellectual property. In addition, we are exposed to the risk of injunctions being imposed to prevent further infringement, leading to a decrease in the number of customer orders.

All these events could have a material adverse effect on our assets, financial condition, results of operations or cash flows.

Impairment of goodwill would negatively impact our consolidated results of operations and net worth.

As of December 31, 2019, we had approximately $184.8 million of goodwill which represented approximately 14.1 percent of total assets on our consolidated balance sheet related to our acquisition of Uniwheels. Goodwill is not amortized but we test it for impairment on an annual basis as of December 31, or on an interim basis if an event or circumstance indicates that an impairment is more likely than not to have occurred, which could result in recognition of a goodwill impairment. A goodwill impairment could materially adversely affect our results of operations for the period in which such charge is recorded.

Our business could be negatively impacted by a threatened proxy contest with two stockholders who have each nominated an individual for election to our Board of Directors at the 2020 annual meeting.

We recently received notices from each of GAMCO Asset Management Inc. (“GAMCO”) and D.C. Capital LLC (“D.C. Capital”) announcing their intent to each nominate one individual for election to our Board of Directors at the 2020 annual meeting. If a proxy contest results from one or both notices received from GAMCO or D.C. Capital, our business could be adversely affected. Responding to nominations by activist stockholders are costly and time-consuming, and divert the attention of our Board of Directors and senior management team from the pursuit of business strategies, which could adversely affect our results of operations and financial condition.

We may fail to comply with conditions of the state tax incentive programs in Poland.

We have three production plants in a special Poland economic zone, Tanobrzeska Specjalna Strefa Ekonomiczna Euro-Park Wislosan in Stalowa Wola, Poland. Our Polish operations were granted eight permits to operate in this special economic zone, which allows us to benefit from Polish state tax incentives. The permits require certain conditions to be met, which include increasing the number of employees, keeping the number of employees at such level and incurring required capital expenditures. In addition, particular permits indicate deadlines for completion of respective stages of investments. For three of the eight permits, conditions have already been fulfilled. If we do not fulfill the conditions required by the permits, the permits might be withdrawn and we would no longer benefit from state tax incentives, which may impact our assets, financial condition, results of operations or cash flows in a material way. Furthermore, under current Polish regulations, special economic zones are scheduled to cease to exist in 2026.

We are currently unable to fully deduct interest charges on German and US indebtedness.

The interest deduction barrier under German tax law (Zinsschranke) and US tax law limit the tax deductibility of interest expenses. If no exception to these limits apply, the net interest expense (interest expense less interest income) is deductible up to 30 percent of the EBITDA taxable in Germany and the US, respectively, in a given financial year. Non-deductible interest expenses can be carried forward. Interest carry-forwards are subject to the same tax cancellation rules as tax loss carry-forwards. Whenever interest expenses are not deductible or if an interest carry-forward is lost, the tax burden in future assessment periods could rise, which might have alone, or in combination, a material adverse effect on our assets, financial condition, results of operation or cash flows.

We may be exposed to risks related to existing and future profit and loss transfer agreements executed with German subsidiaries of our European operations.

Profit and loss transfer agreements are one of the prerequisites of the taxation of Superior and its German subsidiaries as a German tax group. For tax purposes, a profit and loss transfer agreement must have a contract term for a minimum of five years. In addition, such agreement must be fully executed. If a profit and loss transfer agreement or its actual execution does not meet the prerequisites for the taxation as a German tax group, Superior Industries International AG (“SII AG”) and each subsidiary are taxed on their own income (and under certain circumstances even with retrospective effect). Additionally, 5 percent of dividends from the subsidiary to SII AG, or other Superior European controlling entities within the European Union would be regarded as non-deductible expenses at the SII AG level, or level of other Superior European controlling entities. Furthermore, the compensation of a loss of a subsidiary would be regarded as a contribution by SII AG into the subsidiary and thus, would not directly reduce SII AG’s profits. As a consequence, if the profit and loss transfer agreements do not meet the prerequisites of a German tax group, this could have a future material adverse effect on our assets, financial condition, results of operations or cash flows.

Superior executed a Domination and Profit Loss Transfer Agreement, “DPLTA”, which became effective in January 2018. According to the terms of the DPLTA, SII AG offered to purchase any outstanding shares of Uniwheels for cash consideration of Euro 62.18. The cash consideration paid to shareholders, which tendered under the DPTLA may be subject to change based on appraisal proceedings that the minority shareholders of Uniwheels have initiated.

Our worldwide headquarters is located in Southfield, Michigan. In our North American operations, we maintain and operate four facilities that manufacture aluminum wheels for the automotive industry including our facility for finishing wheels with physical vapor deposition. These facilities are located in Chihuahua, Mexico. These manufacturing facilities currently encompass approximately two million square feet of manufacturing space. We own all of our manufacturing facilities in North America, and we lease our worldwide headquarters located in Southfield, Michigan. During the third quarter of 2019, the Company initiated a plan to significantly reduce production and manufacturing operations at its Fayetteville, Arkansas, location. As of December 31, 2019, we are continuing to use the Arkansas facility for research and development activities and service wheel storage.

Our European operations include five locations. The European headquarters is situated in Bad Dürkheim, Germany which includes our European management, sales and distribution functions, as well as the logistics center and warehouse for the aftermarket business. The largest of European production facilities is in Stalowa Wola, Poland, which consists of 3 plants. The newest plant in Poland was put into operation in the beginning of June 2016. Another production facility is situated in Werdohl, Germany, where most development work is performed. Forged wheels are manufactured in Fußgönheim, Germany, near the Bad Dürkheim offices. The European locations also include a research and development center in Lüdenscheid, Germany. Our European production facilities encompass approximately 1.5 million square feet. We own all of our manufacturing facilities in Europe, and we lease our European headquarters located in Bad Dürkheim, Germany.

In general, our manufacturing facilities, which have been constructed at various times, are in good operating condition and are adequate to meet our current production capacity requirements. There are active maintenance programs to keep these facilities in good condition, and we have an active capital spending program to replace equipment as needed to maintain factory reliability and remain technologically competitive on a worldwide basis.

Additionally, reference is made to Note 1, “Summary of Significant Accounting Policies,” Note 9, “Property, Plant and Equipment” and Note 16 “Leases,” in the Notes to the Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report.

We are party to various legal and environmental proceedings incidental to our business. Certain claims, suits and complaints arising in the ordinary course of business have been filed or are pending against us. Based on facts now known, we believe all such matters are adequately provided for, covered by insurance, are without merit, and/or involve such amounts that would not materially adversely affect our consolidated results of operations, cash flows or financial position. Refer to under Item 1A, “Risk Factors - We are from time to time subject to litigation, which could adversely impact our financial condition or results of operations” of this Annual Report.

Information regarding executive officers who are also Directors is contained in our 2020 Proxy Statement under the caption “Election of Directors.” Such information is incorporated into Part III, Item 10, “Directors, Executive Officers and Corporate Governance.” All executive officers are appointed annually by the Board of Directors and serve at the will of the Board of Directors. The following table sets forth the names, ages and positions of our executive officers.

Set forth below is a description of the business experience of each of our executive officers.


Majdi B. Abulaban	Mr. Abulaban is the Company’s President and Chief Executive Officer, a position he has held since May 2019. Mr. Abulaban was previously employed by Aptiv PLC (formerly Delphi Automotive) (NYSE: APTV) (“Aptiv”), a technology company that develops safer, greener and more connected solutions for a diverse array of global customers, from 1985 to April 2019, most recently as Senior Vice President and Group President, Global Signal and Power Solutions Segment from January 2017 to April 2019. From February 2012 to January 2017, Mr. Abulaban served as the Senior Vice President and Group President, Global Electrical and Electronic Architecture Segment and President of Aptiv Asia Pacific. Prior to that, Mr. Abulaban held various business unit leadership positions with Delphi in China, Singapore and the United States. Mr. Abulaban is currently a member of the Board of Directors of SPX FLOW, Inc. (NYSE: FLOW), a global supplier of highly specialized, engineered solutions. Mr. Abulaban holds a bachelor’s degree in mechanical engineering from the University of Pittsburgh and a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University.

Kevin Burke	Mr. Burke is the Company’s Senior Vice President and Chief Human Resources Officer, a position he has held since October 2019. He joined Superior from Valeo North America, a Tier One auto supplier and technology company, where he was Head of Human Resources – North America since March 2018, with responsibility for all human resources across the United States, Mexico and Canada. From 2015 to 2017, he was at Lear Corporation, a Tier One auto supplier, as Vice President of Human Resources – Asia Pacific based in Shanghai, China. From 2013 to 2015, Mr. Burke was the Chief Human Resources Officer for ITC Holdings, an independent electric transmission company. Prior to that, he held various HR leadership positions with General Mills, Pulte Homes and Dow Corning Corporation. Mr. Burke earned a Bachelor of Arts in Communication and a Master of Labor & Industrial Relations from Michigan State University, as well as a Master of Business Administration from Northwestern University’s Kellogg School.

Joanne M. Finnorn	Ms. Finnorn is the Company’s Senior Vice President, General Counsel and Corporate Secretary, a position she has held since September 2017. Previously, Ms. Finnorn served as the Vice President, General Counsel and Chief Compliance Officer of Amerisure Mutual Insurance Company from February 2016 to August 2017. From 2013 to January 2016, Ms. Finnorn served as General Counsel of HouseSetter LLC, a home monitoring company and was the Principal of Finnorn Law & Advisory Services. Ms. Finnorn began her career as an attorney with General Motors, served as General Counsel of GMAC’s European Operations in Zurich, Switzerland and Vice President & General Counsel and Vice President, Subscriber Services, for OnStar LLC. Ms. Finnorn obtained a Bachelor degree from Alma College and a Juris Doctor from Stanford Law School.

Michael J. Hatzfeld Jr.	Mr. Hatzfeld Jr. is the Company’s Vice President of Finance and Corporate Controller, a position he has held since December 2018. Prior to joining the Company, Mr. Hatzfeld Jr. held various positions with General Motors Company since 2011, most recently as Controller, US Sales and Marketing Unit in 2018, Controller, Global Revenue Recognition Project from 2016 to 2017, Controller, Customer Care and Aftersales Units from 2014 to 2016 and Assistant Director, Corporate Reporting and Analysis from 2013 to 2014. Mr. Hatzfeld Jr. began his career in public accounting at Ernst & Young LLP. Mr. Hatzfeld Jr. holds a Bachelor of Science degree from Duquesne University. Mr. Hatzfeld Jr. is also a Certified Public Accountant.

Parveen Kakar	Mr. Kakar is the Company’s Senior Vice President of Sales, Marketing and Product Development, a position that he has held since September 2014. Mr. Kakar joined the Company in 1989 as the Director of Engineering Services and has held various positions at the Company since then. From July 2008 to September 2014, Mr. Kakar served as the Company’s Senior Vice President of Corporate Engineering and Product Development and from 2003 to 2008 as the Vice President of Program Development. Mr. Kakar holds a Bachelor of Science in Mechanical Engineering from Punjab Engineering College in India.

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the New York Stock Exchange under the symbol “SUP.”

The following graph compares the cumulative total stockholder return from December 31, 2014 through December 31, 2019, for our common stock, the Russell 2000 and a peer group⁽¹⁾ of companies that we have selected for purposes of this comparison. We have assumed that dividends have been reinvested, and the returns of each company in the Russell 2000 and the peer group have been weighted to reflect relative stock market capitalization. The graph below assumes that $100 was invested on December 31, 2014, in each of our common stock, the stocks comprising the Russell 2000 and the stocks comprising the peer group.

	Superior Industries International, Inc.		Russel 2000		Peer Group⁽¹⁾
2014	$	100	$	100	$	100
2015	$	96	$	95	$	92
2016	$	141	$	116	$	115
2017	$	81	$	132	$	135
2018	$	27	$	118	$	111
2019	$	22	$	148	$	144

As of February 21, 2020, there were approximately 356 holders of record of our common stock.

The information about securities authorized for issuance under Superior’s equity compensation plans is included in Note 19, “Stock-Based Compensation” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report and will also be included in our 2020 Proxy Statement under the caption “Securities Authorized for Issuance under the Equity Compensation Plans.”

The following selected consolidated financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Financial Statements and Supplementary Data” of this Annual Report.

Fiscal Year Ended December 31,	2019			2018		2017			2016		2015
Income Statement (000s)
Net sales ⁽¹⁾	$	1,372,487		$	1,501,827	$	1,108,055		$	732,677	$	727,946
Value added sales ⁽²⁾	$	755,325		$	797,187	$	616,753		$	408,690	$	360,846
Gross profit ⁽³⁾	$	116,062		$	163,527	$	102,897		$	86,204	$	71,217
Income (loss) from operations ⁽⁴⁾	$	(50,059	)	$	85,805	$	21,518		$	54,602	$	36,294
Net income (loss) attributable to Superior ⁽⁴⁾	$	(96,460	)	$	25,961	$	(6,203	)	$	41,381	$	23,944
Adjusted EBITDA ⁽⁵⁾	$	168,795		$	185,623	$	140,085		$	88,511	$	76,053
Balance Sheet (000s)
Total assets ⁽⁶⁾	$	1,311,867		$	1,451,616	$	1,551,252		$	542,756	$	539,929
Long-term debt	$	611,025		$	661,426	$	679,552		$	—	$	—
Redeemable preferred stock	$	160,980		$	144,463	$	144,694		$	—	$	—
Share Data
Net income (loss)
- Basic	$	(5.10	)	$	0.29	$	(1.01	)	$	1.63	$	0.90
- Diluted	$	(5.10	)	$	0.29	$	(1.01	)	$	1.62	$	0.90
Dividends declared	$	0.18		$	0.36	$	0.45		$	0.72	$	0.72

During 2015, we recorded $4.3 million in impairment of fixed assets and asset relocation costs, $2.0 million of carrying costs for the closed Rogers facility and $1.7 million in depreciation.

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report. This discussion contains forward-looking statements, which involve risks and uncertainties. Please refer to the section entitled “Forward Looking Statements” at the beginning of this Annual Report immediately prior to Item 1. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those discussed in Item 1A, “Risk Factors” and elsewhere in this Annual Report.

Our principal business is the design and manufacture of aluminum wheels for sale to OEMs in North America and Europe and aftermarket suppliers in Europe. We employ approximately 8,400 employees, operating in eight manufacturing facilities in North America and Europe with a combined annual manufacturing capacity of approximately 20 million wheels. We are one of the largest 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 92 percent of our sales in 2019 and are sold for factory installation on vehicle models manufactured by BMW-Mini, Daimler AG Company (Mercedes-Benz, AMG, Smart), FCA, Ford, GM, Honda, Jaguar-Land Rover, Mazda, Nissan, PSA, Renault, Subaru, Suzuki, Toyota, VW Group (Volkswagen, Audi, SEAT, Skoda, Porsche, Bentley) and Volvo. We 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 global presence and influence with North American, European and Asian OEMs. The following chart shows our sales by customer for the years ended December 31, 2019, 2018 and 2017:

Globally, we shipped 19.2 million units down from 21.0 million in 2018, generally consistent with overall industry volume trends. Demand for our products is mainly driven by light-vehicle production levels in North America and Europe, as well as production levels at our key customers and take rates on programs we serve. North American light-vehicle production in 2019 was 16.3 million vehicles, as compared to 17.0 million vehicles in 2018. In Europe, light vehicle production level in 2019 was 17.7 million vehicles, as compared to 18.5 million vehicles in 2018.

The following chart shows the comparison of our operational performance in 2019, 2018 and 2017:

For the calendar year 2019, sales were lower due to reduced volumes in both North America and Europe. Our 2019 Adjusted EBITDA was lower than 2018 primarily due to lower industry volumes in North America and Europe, rising energy rates, the impact of the GM strike and launch challenges in North America, partially offset by a shift toward larger more sophisticated finishes and larger wheel diameter.

The following table is a summary of the Company’s operating results for 2019, 2018 and 2017:

Fiscal Year Ended December 31,	2019			2018			2017
(Thousands of dollars, except per share amounts)
Net Sales
North America	$	704,320		$	800,383		$	732,418
Europe		668,167			701,444			375,637
Net sales		1,372,487			1,501,827			1,108,055
Cost of sales		(1,256,425	)		1,338,300			1,005,158
Gross profit		116,062			163,527			102,897
Percentage of net sales		8.5	%		10.9	%		9.3	%
Selling, general and administrative		63,883			77,722			81,379
Impairment of goodwill and indefinite-lived intangibles		102,238			—			—
Income (loss) from operations		(50,059	)		85,805			21,518
Percentage of net sales		(3.6	)%		5.7	%		1.9	%
Interest expense, net		(47,011	)		(50,097	)		(40,004	)
Other (expense) income, net		4,815			(6,936	)		13,188
Change in fair value of redeemable preferred stock embedded derivative		(782	)		3,480			6,164
Income tax provision		(3,423	)		(6,291	)		(6,875	)
Consolidated net income (loss)		(96,460	)		25,961			(6,009	)
Less: net loss attributable to non-controlling interests		—			—			(194	)
Net income (loss) attributable to Superior		(96,460	)		25,961			(6,203	)
Percentage of net sales		(7.0	)%		1.7	%		(0.6	)%
Diluted earnings (loss) per share	$	(5.10	)	$	0.29		$	(1.01	)
Value added sales ⁽¹⁾	$	755,325		$	797,187		$	616,753
Adjusted EBITDA ⁽²⁾	$	168,795		$	185,623		$	140,085
Percentage of net sales		12.3	%		12.4	%		12.6	%
Percentage of value added sales		22.3	%		23.3	%		22.7	%
Unit shipments in thousands		19,246			20,991			17,008

Wheel unit shipments were 19.2 million for 2019, compared to unit shipments of 21.0 million in the prior year, a decrease of 8.3 percent. The decrease occurred primarily in our North American operations and was driven by softer industry production levels, lower production at our key customers, including the impact of the UAW labor strike at General Motors, and lower take rates on the programs we serve.

Net sales for 2019 were $1,372.5 million, compared to net sales of $1,501.8 million for the same period in 2018. The reduction in net sales is primarily driven by reduced volumes, lower aluminum prices in both North America and Europe, and a weaker Euro, partially offset by improved product mix comprised of larger diameter wheels and premium finishes in both regions.

Cost of sales were $1,256.4 million in 2019, compared to $1,338.3 million in the prior year period. The decrease in cost of sales was due primarily due to lower volumes, lower aluminum prices, and a weaker Euro partially offset by higher aluminum content associated with larger diameter wheels and $14.8 million of restructuring and relocation costs related to our Fayetteville, Arkansas manufacturing location.

Selling, general and administrative expenses for 2019 were $63.9 million, or 4.7 percent of net sales, compared to $77.7 million, or 5.2 percent of net sales for the same period in 2018. The decrease is primarily due to a reduction in acquisition and integration expenses and the alignment of reporting for SG&A between our North American and European operations.

In 2019 we recognized a goodwill and indefinite-lived intangibles impairment charge of $102.2 million relating to our European reporting unit (refer to Note 10, “Goodwill and Other Intangible Assets” in the Notes to the Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report).

Net interest expense for 2019 was $47.0 million, compared to interest expense of $50.1 million in 2018. The reduction in interest expense was primarily due to the 2018 repricing of the Company’s $400.0 million Senior Secured Term Loan Facility (“Term Loan Facility”), the early extinguishment of a portion of the 6% Senior Notes due June 15, 2025 (“Notes”) in 2019 and decreased loan reference rates, primarily US Dollar LIBOR rates.

Other income was $4.8 million in 2019, compared with other expense of $(6.9) million in 2018. The increase in other income was primarily driven by a $3.7 million gain on the early extinguishment of a portion of the Notes in 2019 and a foreign exchange gain in 2019 versus a foreign exchange loss in 2018.

During 2019, the redeemable preferred stock embedded derivative liability associated with the conversion and the early redemption options increased $0.8 million to $3.9 million primarily due to higher volatility and lower dividend assumptions with the respect to the conversion option and a shorter expected time horizon with respect to the redemption option.

The income tax provision for 2019 was $3.4 million on pre-tax loss of $93.0 million, representing an effective tax rate of (3.7) percent. The effective tax rate was lower than the statutory rate primarily due to the effects of U.S. taxation on foreign earnings under Global Intangible Low-Tax Income (GILTI) provisions of tax reform, goodwill impairment in Germany offset by a favorable split of jurisdictional pre-tax income, and the generation of a new polish SEZ Credit. The income tax provision for 2018 was $6.3 million on pre-tax earnings of $32.3 million, representing an effective income tax rate of 19.5 percent.

Net loss attributable to Superior in 2019 was $(96.5) million, or a loss of $(5.10) per diluted share, compared to net income attributable to Superior of $26.0 million, or an earnings per diluted share of $0.29, in 2018.

	Year Ended December 31,
	2019			2018		Change
(Dollars in thousands)
Selected data
Net Sales
North America	$	704,320		$	800,383	$	(96,063	)
Europe		668,167			701,444		(33,277	)
Total net sales	$	1,372,487		$	1,501,827	$	(129,340	)
Income (loss) from Operations
North America	$	16,713		$	29,702	$	(12,989	)
Europe		(66,772	)		56,103		(122,875	)
Total income from operations	$	(50,059	)	$	85,805	$	(135,864	)

In 2019, net sales of our North America segment decreased 12.0 percent, compared to 2018, primarily due to a 13.2 percent decrease in volumes, including the impact of the UAW labor strike at General Motors, and lower aluminum prices, partially offset by improved product mix comprised of larger diameter wheels and premium wheel finishes. The decline in unit shipments was primarily due to lower sales to Ford, Nissan, Toyota and FCA. U.S. and Mexico sales as a percentage of North American total sales were approximately 14.8 percent and 85.2 percent, respectively, during 2019, which compares to 15.9 percent and 84.1 percent for 2018. North American segment income from operations decreased in 2019 due primarily to a decrease in volumes and restructuring and relocation costs related to our Fayetteville, Arkansas facility, partially offset by favorable procurement savings, product mix and foreign exchange.

Net sales of our European segment for 2019 decreased 4.7 percent, compared to 2018, primarily due to a weaker Euro, lower aluminum prices and lower volume, partially offset by improved product mix comprised of larger diameter wheels and premium wheel finishes. Sales in Germany and Poland as a percentage of total European segment sales were approximately 36.8 percent and 63.2 percent, respectively, during 2019, which compares to 39.9 percent and 60.1 percent for 2018. European segment income from operations for the year ended 2019 decreased primarily due to a $102.2 million charge for impairment of goodwill and indefinite-lived intangibles. Additionally, segment income was lower due to reduced cost performance related to higher energy costs, lower volumes and negative foreign exchange effects from the Euro, which was partially offset by favorable mix.

Wheel unit shipments were 21 million for 2018, an increase of 23.4 percent, compared to unit shipments of 17 million in the prior year period. The increase in unit shipments was primarily due to the inclusion of an additional five months of the European operation’s units, which drove 4.2 million units of improvement.

Net sales for 2018 were $1,501.8 million, compared to net sales of $1,108.1 million in 2017. The increase was driven by the inclusion of an additional five months of our European operations, which contributed $305.0 million of the increase. Additionally, a 9.8 percent increase in our global average selling price per wheel contributed $89.0 million of the sales increase, due to increases in aluminum prices and improved product mix comprised of larger diameter wheels and premium finishes.

Cost of sales were $1,338.3 million in 2018 compared to $1,005.2 million in the prior year period. The increase in cost of sales was due mainly to $263.0 million associated with the inclusion of an additional five months of the European operations. Additionally, cost of sales increased due to higher aluminum prices and increased manufacturing costs associated with larger diameter wheels, energy rates in Mexico and launch costs in North America.

Selling, general and administrative expenses for 2018 were $77.7 million, or 5.2 percent of net sales, compared to $81.4 million, or 7.3 percent of net sales in 2017. The decrease as a percentage of sales is due to $22.4 million of reduced acquisition and integration expenses.

Net interest expense for 2018 was $50.1 million and $40.0 million for 2017. The increase is due to the full year of interest on the acquisition debt in 2018, partially offset by a non-recurring interest cost related to the bridge loan financing for the European business acquisition incurred in 2017.

Net other expense was $(6.9) million in 2018 compared with net other income of $13.2 million in 2017. The change was primarily due to foreign exchange losses of $(1.0) million in 2018 compared to gains of $12.9 million in 2017 and $2.2 million to year-over-year changes in derivative contracts. The remaining items were of an individually insignificant nature.

During 2018 and 2017, we recognized a $3.5 million and $6.2 million change in the fair value of our redeemable preferred stock embedded derivative liability, respectively, primarily due to the declines in our stock price experienced in the respective years.

The income tax provision for 2018 was $6.3 million on pre-tax income of $32.3 million primarily due to the split of jurisdictional pre-tax income or loss and finalizing 2017 provisional amounts recorded for the enactment-date-effects of The Tax Cuts and Jobs Act (“the Act”). The income tax provision for 2017 was $6.9 million on pre-tax income of $0.9 million primarily due to earnings in countries with tax rates lower than the U.S. statutory rate, acquisition costs and the effects of the Act.

Net income attributable to Superior in 2018 was $26.0 million, or $0.29 per diluted share, compared to a net loss in 2017 of $(6.2) million, or $(1.01) loss per diluted share.

	Year Ended December 31,
	2018		2017		Change
(Dollars in thousands)
Selected data
Net Sales
North America	$	800,383	$	732,418	$	67,965
Europe		701,444		375,637		325,807
Total net sales	$	1,501,827	$	1,108,055	$	393,772
Income from Operations
North America	$	29,702	$	9,808	$	19,894
Europe		56,103		11,710		44,393
Total income from operations	$	85,805	$	21,518	$	64,287

In 2018, net sales of our North America segment increased 9.3 percent due to an 11.1 percent increase in average selling price per wheel partially offset by a 1.7 percent decrease in volumes. The increase in average selling price per wheel, contributed $81.5 million, and was driven by higher aluminum pricing, which we generally pass through to our customers, and improved product mix comprised of larger diameter wheels and premium finishes. Unit shipments declined from 11.5 million in 2017 to 11.3 million in 2018 resulting in a $12.2 million reduction in revenue. The decline in unit shipments was primarily due to lower sales to Ford, FCA, BMW and Subaru, partially offset by increased sales to GM. North American segment sales between U.S. and Mexico were approximately 15.9 percent and 84.1 percent, respectively during 2018, which compares to 17.0 percent and 83.0 percent for 2017. The North America

segment income from operations increased in 2018 due primarily to lower integration costs and favorable product mix, partially offset by increased launch and energy costs.

In 2018, net sales of our European segment increased 86.7 percent primarily due to an additional five months of sales, which contributed $283.3 million, and a 6.5 percent increase in the average selling price per wheel. The increase in average selling price per wheel, was driven by higher aluminum pricing, which we generally pass through to our customers. European segment sales between Germany and Poland were approximately 39.9 percent and 60.1 percent, respectively, during 2018, which compares to 41.3 percent and 58.7 percent for 2017. European segment income from operations for the year ended 2018 increased consistent with increasing sales, as well as a reduction in integration related expenses from $14.8 million in 2017 to $2.4 million in 2018.

Our sources of liquidity primarily include cash, cash equivalents and short-term investments, net cash provided by operating activities, our senior notes and borrowings under available debt facilities, factoring arrangements for trade receivables and, from time to time, other external sources of funds. Working capital (current assets minus current liabilities) and our current ratio (current assets divided by current liabilities) were $163.1 million and 1.9, respectively, at December 31, 2019, versus $192.0 million and 2.1:1 at December 31, 2018. As of December 31, 2019, our cash, cash equivalents and short-term investments totaled $77.9 million compared to $48.2 million at December 31, 2018.

Our working capital requirements, investing activities and cash dividend payments have historically been funded from internally generated funds, debt facilities, cash equivalents and short-term investments, and we believe these sources will continue to meet our capital requirements, as well as our currently anticipated short-term needs. Capital expenditures consist of ongoing maintenance and operational improvements (“maintenance”), as well as capital related to new product offerings and expanded capacity for existing products (“new business”). Over time capital expenditures have consisted of roughly equal components of maintenance and new business, the most significant of which in recent years has been our investment in physical vapor deposition (PVD) technology which went into production in 2019.

In connection with the acquisition of our European business, we entered into several debt and equity financing arrangements during 2017. On March 22, 2017, we entered into a USD Senior Secured Credit facility (“USD SSCF”) consisting of a $400.0 million Senior Secured Term Loan Facility (“Term Loan Facility”) and a $160.0 million revolving credit facility (“Revolving Credit Facility”). On May 22, 2017, we issued 150,000 shares of redeemable preferred stock to TPG Growth III Sidewall, L.P. (“TPG”) for an aggregate purchase price of $150.0 million. On June 15, 2017, we issued €250.0 aggregate principal amount of 6% Senior Notes due June 15, 2025 (“Notes”). In addition, as a part of our European business acquisition, we assumed $70.7 million of outstanding debt.

During the second quarter of 2019, the Company amended the EUR Senior Secured Credit Facility (“EUR SSCF”), our European revolving credit facility, increasing the available borrowing limit from 30.0 million Euro to 45.0 million Euro and extending the term to May 22, 2022. In addition, the European business entered into equipment loan agreements totaling $13.4 million (12.0 million Euro) in the fourth quarter of 2019, but the Company had not drawn down on the loans as of December 31, 2019. On January 1, 2020, the available borrowing limit of the EUR SSCF was increased from 45.0 million Euro to 60.0 million Euro. All other terms of the EUR SSCF remained unchanged.

Balances outstanding under the Term Loan Facility, Notes, and an equipment loan as of December 31, 2019 were $371.8 million, $243.1 million, $12.7 million, respectively. The redeemable preferred stock balance issued to TPG amounted to $161.0 million as of December 31, 2019. There was no balance outstanding under the Revolving Credit Facility of the USD SSCF at December 31, 2019 and unused commitments were $156.4 million. In addition, there was 44.6 million Euro available under our EUR SSCF as of December 31, 2019. Cash and funds available under credit facilities were $284.2 million at December 31, 2019.

On September 3, 2019, the Company announced that its Board of Directors determined to suspend the Company’s quarterly common dividend.

The following table summarizes the cash flows from operating, investing and financing activities as reflected in the consolidated statements of cash flows.

Fiscal Year Ended December 31,	2019			2018			2017
(Thousands of dollars)
Net cash provided by operating activities	$	162,842		$	156,116		$	63,710
Net cash used in investing activities		(54,663	)		(77,097	)		(777,614	)
Net cash (used in) provided by financing activities		(76,599	)		(76,338	)		701,107
Effect of exchange rate changes on cash		(1,117	)		(1,577	)		1,371
Net increase (decrease) in cash and cash equivalents	$	30,463		$	1,104		$	(11,426	)

Net cash provided by operating activities was $162.8 million in 2019 compared to $156.1 million in 2018. The year-over-year increase in operating cash flow is primarily due to improved working capital management. The reduction in inventory was driven by lower production volumes and aluminum prices. The increase in payables due to improved terms with aluminum suppliers was largely offset by the lower year-over-year reduction in accounts receivable.

Net cash used in investing activities was $54.7 million in 2019 compared to $77.1 million in 2018. The decline in cash used in investing activities in 2019 was due to the year-over-year reduction in capital expenditures, as well as cash proceeds received upon sale of other assets in 2019.

Net cash used in financing activities was $76.6 million compared to $76.3 million in 2018. The modest increase in cash used in financing activities was due to prepayments on the term loan and early extinguishment of the 6% Notes in 2019, substantially offset by lower purchases of non-controlling redeemable shares and, to a lesser extent, lower cash dividends largely due to suspension of the common share dividend in the third quarter of 2019.

Net cash provided by operating activities was $156.1 million in 2018 and $63.7 million in 2017. The increase in cash flow provided by operating activities was mainly due to the inclusion of a full year of our European operations as compared to seven months in 2017, improved working capital management and the introduction of a receivables factoring program in North America, which generated $30.1 million of operating cash flows in the year.

Net cash used in investing activities was $77.1 million in 2018 compared to $777.6 million in 2017. Net cash used in investing activities was higher in 2017 due to our European business acquisition in 2017.

Net cash used in financing activities was $76.3 million compared to net cash provided by financing activities of $701.1 million in 2017. Net cash provided by financing activities was higher in 2017 due to the issuance of debt to finance the European business acquisition.

Contractual obligations as of December 31, 2019 are as follows (amounts in millions):

	Payments Due by Fiscal Year
Contractual Obligations	2020		2021		2022		2023		2024		Thereafter		Total
Long-term debt	$	3.0	$	3.0	$	3.0	$	3.0	$	372.4	$	243.1	$	627.5
Retirement plans		1.5		1.5		1.5		1.5		1.5		41.7		49.2
Purchase obligations		18.6		1.8		—		—		—		—		20.4
Finance leases		1.1		0.9		0.5		0.1		0.1		0.4		3.1
Operating leases		2.9		2.6		2.2		1.9		1.8		4.8		16.2
Total	$	27.1	$	9.8	$	7.2	$	6.5	$	375.8	$	290.0	$	716.4

The table above does not reflect unrecognized tax benefits and related interest and penalties of $34.3 million, for which the timing of settlement is uncertain, $8.7 million of liabilities for derivative financial instruments maturing in 2020 through 2023 nor the redeemable preferred stock embedded derivative liability of $3.9 million. In addition, the table does not include dividend payments due quarterly nor the redemption value of the redeemable preferred stock in 2025.

As of December 31, 2019, we had no significant off-balance sheet arrangements other than factoring of $49.6 million of our trade receivables.

In this Annual Report, we discuss two important measures that are not calculated according to U.S. GAAP, value added sales and Adjusted EBITDA.

Value added sales is a key measure that is not calculated according to GAAP. In the discussion of operating results, we provide information regarding value added sales. Value added sales represents net sales less the value of aluminum and services provided by outsourced service providers (“OSPs”) that are included in net sales. As discussed further below, arrangements with our customers allow us to pass on changes in aluminum prices; therefore, fluctuations in underlying aluminum price generally do not directly impact our profitability. Accordingly, value added sales is worthy of being highlighted for the benefit of users of our financial statements. Our intent is to allow users of the financial statements to consider our net sales information both with and without the aluminum and OSP cost components thereof. Management utilizes value added sales as a key metric to determine growth of the Company because it eliminates the volatility of aluminum prices.

Fiscal Year Ended December 31,	2019			2018			2017			2016			2015
(Thousands of dollars)
Net sales	$	1,372,487		$	1,501,827		$	1,108,055		$	732,677		$	727,946
Less, aluminum value and OSP		(617,162	)		(704,640	)		(491,302	)		(323,987	)		(367,100	)
Value added sales	$	755,325		$	797,187		$	616,753		$	408,690		$	360,846

Adjusted EBITDA is a key measure that is not calculated according to U.S. GAAP. Adjusted EBITDA is defined as earnings before interest income and expense, income taxes, depreciation, amortization, restructuring charges and other closure costs and impairments of long-lived assets and investments, changes in the fair value of the redeemable preferred stock embedded derivative liability, acquisition and integration costs, certain hiring and separation related costs, gains associated with early debt extinguishment, and accounts receivable factoring fees. We use Adjusted EBITDA as an important indicator of the operating performance of our business. Adjusted EBITDA is used in our internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors and evaluating short-term and long-term trends in our operations. We believe the Adjusted EBITDA financial measure assists in providing a more complete understanding of our underlying operational measures to manage our business, to evaluate our performance compared to prior periods and the marketplace and to establish operational goals. Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with U.S. GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies.

The following table reconciles our net income, the most directly comparable GAAP financial measure, to our Adjusted EBITDA:

Fiscal Year Ended December 31,	2019			2018			2017			2016			2015
(Thousands of dollars)
Net income (loss)	$	(96,460	)	$	25,961		$	(6,009	)	$	41,381		$	23,944
Interest expense (income), net		47,011			50,097			40,004			(245	)		(103	)
Income tax provision		3,423			6,291			6,875			13,340			11,339
Depreciation ⁽¹⁾		75,773			68,753			54,167			34,261			34,530
Amortization		24,944			26,303			15,168			—			—
Impairment of goodwill and indefinite-lived intangibles ⁽⁵⁾		102,238			—			—			—			—
Acquisition, integration, restructuring, debt extinguishment gains and factoring fees ⁽²⁾		11,084			11,698			36,044			1,210			6,343
Change in fair value of redeemable preferred stock embedded derivative liability ⁽³⁾		782			(3,480	)		(6,164	)		—			—
Gain on sale of facility ⁽⁴⁾		—			—			—			(1,436	)		—
Adjusted EBITDA	$	168,795		$	185,623		$	140,085		$	88,511		$	76,053
Adjusted EBITDA as a percentage of net sales		12.3	%		12.4	%		12.6	%		12.1	%		10.4	%
Adjusted EBITDA as a percentage of value added sales		22.3	%		23.3	%		22.7	%		21.7	%		21.1	%

In 2018, we incurred approximately $9.7 million in integration costs, $1.5 million of CEO separation costs and $0.5 million of accounts receivable factoring fees.

In 2017, we incurred $25.1 million of costs related to the acquisition of Uniwheels and $10.8 million in integration costs.

During 2016, we incurred $1.2 million in closure and operating costs (excluding $0.3 million in depreciation) associated with the closure of our facility in Rogers, Arkansas.

During 2015, we had completed the shutdown of the Rogers facility which resulted in recording $4.3 million in impairment of fixed assets, and $2.0 million of closure costs.

Accounting estimates are an integral part of the consolidated financial statements. These estimates require the use of judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the periods presented. We believe the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in developing estimates actual results could differ from the original estimates, requiring adjustments to these balances in future periods (refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report for our significant accounting policies related to our critical accounting estimates).

Wheel Revenue Recognition - Sales of our products and related costs are recognized when control transfers to the customer, generally upon shipment. Tooling reimbursement revenues, related to initial tooling reimbursed by our customers, are deferred and recognized over the expected life of the wheel program on a straight-line basis. A portion of our selling prices to OEM customers is attributable to the aluminum content of our wheels. Our selling prices are adjusted for changes in the current aluminum market based upon specified aluminum price indices during specific pricing periods, as agreed with our customers. Our selling prices also incorporate a wheel weight price component which is based on customer product specifications. Weights are monitored, and prices are adjusted as variations arise. Customer contract prices are generally adjusted quarterly to incorporate these price adjustments. Price adjustments due to production efficiencies are generally recognized as and when negotiated with customers.

Redeemable Preferred Stock Embedded Derivative -We issued redeemable preferred stock as a part of the financing for the acquisition of our European business. The redeemable preferred stock includes embedded derivatives relating to the conversion and early redemption options. Accordingly, we have recorded an embedded derivative liability representing the combined fair value of the right of holders to receive common stock upon conversion of redeemable preferred stock at any time (the “conversion option”) and the right of the holders to exercise their early redemption option upon the occurrence of a redemption event (the “early redemption option”). The embedded derivative liability is adjusted to reflect fair value at each period end with changes in fair value recorded in the “Change in fair value of redeemable preferred stock embedded derivative liability” financial statement line item of the Company’s consolidated income statement.

A binomial option pricing model is used to estimate the fair value of the conversion and early redemption options embedded in the redeemable preferred stock. The binomial model utilizes a “decision tree” whereby future movement in the Company’s common stock price is estimated based on the volatility factor. The binomial option pricing model requires the development and use of assumptions. These assumptions include estimated volatility of the value of our common stock, assumed possible conversion or early redemption dates, an appropriate risk-free interest rate, risky bond rate and dividend yield (refer to Note 5, “Derivative Financial Instruments” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report for additional information pertaining to these embedded derivatives).

Fair Value Measurements - The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis, while other assets and liabilities are measured at fair value on a nonrecurring basis, such as when we have an asset impairment. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

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.

Our derivatives are over-the-counter customized derivative transactions and are not exchange traded. We estimate the fair value of these instruments using industry-standard valuation models such as discounted cash flow. These models project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates, foreign exchange rates, commodity prices and the contractual terms of the derivative instruments. The discount rate used is the relevant interbank deposit rate (e.g., LIBOR) plus an adjustment for non-performance risk. In certain cases, market data may not be available, and we may use broker quotes and models (e.g., Black-Scholes) to determine fair value. This includes situations where there is lack of liquidity for a particular currency or commodity or when the instrument is longer dated. The fair value measurements of the redeemable preferred shares embedded derivatives are based upon Level 3 unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the liability (refer to Note 5, “Derivative Financial Instruments” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report).

Impairment of Goodwill - As of December 31, 2019 and 2018, we had recorded goodwill of $184.8 million and $291.4 million a

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)

Title of Each Class		Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value		SUP	New York Stock Exchange

PART I		PAGE
Item 1	Business.	1
Item 1A	Risk Factors.	4
Item 1B	Unresolved Staff Comments.	14
Item 2	Properties.	14
Item 3	Legal Proceedings.	14
Item 4	Mine Safety Disclosures.	14
Item 4A	Information About Executive Officers.	14

PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	17
Item 6	Selected Financial Data.	18
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	19
Item 7A	Quantitative and Qualitative Disclosures About Market Risk.	31
Item 8	Financial Statements and Supplementary Data.	32
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	71
Item 9A	Controls and Procedures.	71
Item 9B	Other Information.	71

PART III
Item 10	Directors, Executive Officers and Corporate Governance.	72
Item 11	Executive Compensation.	72
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	72
Item 13	Certain Relationships and Related Transactions, and Director Independence.	72
Item 14	Principal Accountant Fees and Services.	72

PART IV
Item 15	Exhibits, Financial Statement Schedules.	73
Schedule II	Valuation and Qualifying Accounts.	77
Item 16	Form 10-K Summary.	78

SIGNATURES

Name	Age	Position

Majdi B. Abulaban Kevin Burke Joanne M. Finnorn	56 51 55	President and Chief Executive Officer Senior Vice President and Chief Human Resources Officer Senior Vice President, General Counsel and Corporate Secretary
Michael J. Hatzfeld Jr.	47	Vice President of Finance and Corporate Controller
Parveen Kakar	53	Senior Vice President of Sales, Marketing and Product Development
Matti M. Masanovich	48	Executive Vice President and Chief Financial Officer
Andreas Meyer Dr. Karsten Obenaus	54 55	Senior Vice President, President, Europe Senior Vice President and Chief Financial Officer Europe


Matti Masanovich	Mr. Masanovich is the Company’s Executive Vice President and Chief Financial Officer, a position he has held since September 2018. Prior to joining the Company, Mr. Masanovich was the Senior Vice President and Chief Financial Officer at General Cable Corporation (NYSE: BGC), a publicly held global wire and cable manufacturer, from November 2016 to July 2018. Prior to that, Mr. Masanovich served as the short-term Vice President and Controller of International Automotive Components, an automotive interiors supplier, from August 2016 to October 2016. From November 2013 to April 2016, Mr. Masanovich served as Global Vice President of Finance, Packard Electrical and Electronic Architecture (E/EA) Division in Shanghai, China at APTIV (NYSE: APTV) (formerly Delphi Automotive), an automotive technology company. Mr. Masanovich previously served in various executive positions with both public and private companies. Mr. Masanovich began his career in public accounting at Coopers & Lybrand and PricewaterhouseCoopers LLP. Mr. Masanovich holds a Bachelor of Commerce degree and a Master of Business Administration degree from the University of Windsor. Mr. Masanovich is also a Chartered Accountant.

Andreas Meyer	Mr. Meyer is the Company’s Senior Vice President, President, Europe, a position he has held since November 1, 2019. He was previously the Senior Vice President of Snop / Tower Automotive Holding GmbH, a first tier automotive supplier, from January 2017 to October 2019. Prior to that, he served as Tower’s Vice President of Operations from July 2015 to January 2017. From July 2013 to June 2015, Mr. Meyer was the Managing Director of Hörmann Automotive GmbH (“Hörmann”), a first tier automotive supplier. Mr. Meyer also served as Managing Director of Hörmann Automotive Components from October 2007 to June 2015. Mr. Meyer graduated from Helmut Schmidt University Hamburg with a degree in business management.
Dr. Karsten Obenaus	Dr. Obenaus is the Company’s Senior Vice President, Chief Financial Officer Europe; Global ERM & Strategic Planning, a position he has held since July 2017. Prior to that, Dr. Obenaus served as the Chief Financial Officer of UNIWHEELS AG from November 2014 and Head of Accounting, Head of Risk Management, Head of Controlling and Chief Financial Officer Polish Operations from 2008. Before that, he served as the Head of Controlling at the German alloy wheel producer ATS, which was later acquired by Uniwheels. Dr. Obenaus started his professional career in 1994 and obtained accounting and finance positions at Deutsche Industrie-Treuhand, Goedecke AG (Pfizer Group) and EMTEC (BASF Group). He holds a Master degree in Economics and subsequently acquired a Doctorate in Economics at the Johann Wolfgang Goethe-University of Frankfurt/Main.

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		Emerging growth company	☐