UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

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

For the transition period from                      to                     .

Commission file number: 1-6615

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	95-2594729
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
26600 Telegraph Road, Suite 400
Southfield, Michigan	48033
(Address of Principal Executive Offices)	(Zip Code)

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

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

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

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

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

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

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☒
		Emerging Growth Company	☐

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

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

Number of shares of common stock outstanding as of October 26, 2020: 25,591,930 

TABLE OF CONTENTS

					Page
PART I	-	FINANCIAL INFORMATION
		Item 1	-	Financial Statements (Unaudited)
				Condensed Consolidated Statements of Income (Loss)	1
				Condensed Consolidated Statements of Comprehensive Income (Loss)	2
				Condensed Consolidated Balance Sheets	3
				Condensed Consolidated Statements of Cash Flows	4
				Condensed Consolidated Statements of Shareholders’ Equity (Deficit)	5
				Notes to Condensed Consolidated Financial Statements	7
		Item 2	-	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
		Item 3	-	Quantitative and Qualitative Disclosures About Market Risk	40
		Item 4	-	Controls and Procedures	40
PART II	-	OTHER INFORMATION			41
		Item 1	-	Legal Proceedings	41
		Item 1A	-	Risk Factors	41
		Item 2	-	Unregistered Sales of Equity Securities and Use of Proceeds	42
		Item 5	-	Other Information	42
		Item 6	-	Exhibits	43
		Signatures			44

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
NET SALES	$	317,103		$	352,014		$	763,050		$	1,062,206
Cost of sales		285,135			335,967			730,762			973,042
GROSS PROFIT		31,968			16,047			32,288			89,164
Selling, general and administrative expenses		12,730			16,290			36,541			46,737
Impairment of goodwill and indefinite-lived intangibles		—			—			193,641			—
INCOME (LOSS) FROM OPERATIONS		19,238			(243	)		(197,894	)		42,427
Interest expense, net		(10,414	)		(11,807	)		(34,448	)		(35,532	)
Other (expense) income, net		(1,576	)		634			(923	)		3,393
INCOME (LOSS) BEFORE INCOME TAXES		7,248			(11,416	)		(233,265	)		10,288
Income tax benefit (provision)		3,898			4,785			11,111			(7,699	)
NET INCOME (LOSS)	$	11,146		$	(6,631	)	$	(222,154	)	$	2,589
EARNINGS (LOSS) PER SHARE – BASIC	$	0.12		$	(0.57	)	$	(9.66	)	$	(0.84	)
EARNINGS (LOSS) PER SHARE – DILUTED	$	0.12		$	(0.57	)	$	(9.66	)	$	(0.84	)

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

1

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Net income (loss)	$	11,146		$	(6,631	)	$	(222,154	)	$	2,589
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		16,384			(22,143	)		(9,706	)		(21,459	)
Change in unrecognized gains (losses) on derivative instruments:
Change in fair value of derivatives		5,818			(10,406	)		(32,934	)		(1,862	)
Tax (provision) benefit		(1,135	)		2,104			7,618			342
Change in unrecognized gains (losses) on derivative instruments, net of tax		4,683			(8,302	)		(25,316	)		(1,520	)
Defined benefit pension plan:
Amortization of actuarial losses on pension obligations		72			50			216			155
Tax (provision)		(15	)		(11	)		(45	)		(33	)
Pension changes, net of tax		57			39			171			122
Other comprehensive income (loss), net of tax		21,124			(30,406	)		(34,851	)		(22,857	)
Comprehensive income (loss)	$	32,270		$	(37,037	)	$	(257,005	)	$	(20,268	)

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

2

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

	September 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	111,131		$	77,927
Accounts receivable, net		77,675			76,786
Inventories, net		141,287			168,470
Income taxes receivable		4,067			4,630
Other current assets		16,329			26,375
Total current assets		350,489			354,188
Property, plant and equipment, net		507,037			529,282
Deferred income tax assets, net		53,307			38,607
Goodwill		—			184,832
Intangibles, net		112,341			137,078
Other non-current assets		55,837			67,880
Total assets	$	1,079,011		$	1,311,867
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	149,808		$	123,112
Short-term debt		6,034			4,010
Accrued expenses		72,857			60,845
Income taxes payable		2,208			3,148
Total current liabilities		230,907			191,115
Long-term debt (less current portion)		611,706			611,025
Non-current income tax liabilities		7,451			6,523
Deferred income tax liabilities, net		—			12,369
Other non-current liabilities		81,321			71,640
Commitments and contingent liabilities (Note 17)		—			—
Mezzanine equity:
Preferred stock, $0.01 par value
Authorized - 1,000,000 shares
Issued and outstanding – 150,000 shares outstanding at    September 30, 2020 and December 31, 2019		174,597			160,980
European non-controlling redeemable equity		1,580			6,525
Shareholders’ equity (deficit):
Common stock, $0.01 par value
Authorized - 100,000,000 shares
Issued and outstanding – 25,591,930 and 25,128,158 shares at    September 30, 2020 and December 31, 2019		94,058			93,331
Accumulated other comprehensive loss		(134,929	)		(100,078	)
Retained earnings		12,320			258,437
Total shareholders’ equity (deficit)		(28,551	)		251,690
Total liabilities, mezzanine equity and shareholders’ equity (deficit)	$	1,079,011		$	1,311,867

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

3

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended
	September 30, 2020			September 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(222,154	)	$	2,589
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		73,134			77,500
Income tax, non-cash changes		(19,389	)		(3,472	)
Impairment of goodwill and indefinite-lived intangibles		193,641			—
Stock-based compensation		727			3,695
Amortization of debt issuance costs		3,140			3,681
Other non-cash items		(1,493	)		444
Changes in operating assets and liabilities:
Accounts receivable		(4,062	)		(30,464	)
Inventories		29,292			9,028
Other assets and liabilities		11,520			20,313
Accounts payable		27,438			11,176
Income taxes		717			7,861
NET CASH PROVIDED BY OPERATING ACTIVITIES		92,511			102,351
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment		(33,592	)		(47,584	)
Proceeds from sale of fixed assets		859			—
Other investing activities		—			9,631
NET CASH USED IN INVESTING ACTIVITIES		(32,733	)		(37,953	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		11,690			—
Repayments of debt		(24,851	)		(35,015	)
Cash dividends paid		(10,161	)		(19,171	)
Purchase of non-controlling redeemable shares		(4,981	)		(3,888	)
Payments related to tax withholdings for stock-based compensation		—			(108	)
Proceeds from borrowings on revolving credit facility		313,825			69,600
Repayments of borrowings on revolving credit facility		(316,910	)		(69,600	)
Other financing activities		(723	)		(1,035	)
NET CASH USED IN FINANCING ACTIVITIES		(32,111	)		(59,217	)
Effect of exchange rate changes on cash		5,537			(3,337	)
Net increase in cash and cash equivalents		33,204			1,844
Cash and cash equivalents at the beginning of the period		77,927			47,464
Cash and cash equivalents at the end of the period	$	111,131		$	49,308

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

4

SUPERIOR INDUSTRIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(Dollars in thousands)

For the nine months ended September 30, 2019

(Unaudited)	Common Stock				Accumulated Other Comprehensive (Loss) Income
	Number of Shares		Amount		Unrecognized Gains (Losses) on Derivative Instruments			Pension Obligations			Cumulative Translation Adjustment			Retained Earnings			Total
BALANCE AT DECEMBER 31, 2018		25,019,237	$	87,723	$	(3,205	)	$	(3,000	)	$	(99,290	)	$	391,037		$	373,265
Net income		—		—		—			—			—			2,589			2,589
Change in unrecognized gains/losses on derivative    instruments, net of tax		—		—		(1,520	)		—			—			—			(1,520	)
Change in employee benefit plans, net of taxes		—		—		—			122			—			—			122
Net foreign currency translation adjustment		—		—		—			—			(21,459	)		—			(21,459	)
Common stock issued, net of shares withheld for    employee taxes		108,921		—		—			—			—			—			—
Stock-based compensation		—		3,587		—			—			—			—			3,587
Cash dividend declared ($0.09 per common    share)		—		—		—			—			—			(4,597	)		(4,597	)
Redeemable preferred 9% dividend, participating    dividend and accretion		—		—		—			—			—			(23,275	)		(23,275	)
European non-controlling redeemable equity    dividend		—		—		—			—			—			(496	)		(496	)
BALANCE AT SEPTEMBER 30, 2019		25,128,158	$	91,310	$	(4,725	)	$	(2,878	)	$	(120,749	)	$	365,258		$	328,216
For the three months ended September 30, 2019
(Unaudited)	Common Stock				Accumulated Other Comprehensive (Loss) Income
	Number of Shares		Amount		Unrecognized Gains (Losses) on Derivative Instruments			Pension Obligations			Cumulative Translation Adjustment			Retained Earnings			Total
BALANCE AT JUNE 30, 2019		25,114,598	$	89,532	$	3,577		$	(2,917	)	$	(98,606	)	$	379,604		$	371,190
Net loss		—		—