Executing on Strategic Priorities as
Production Resumes
Second Quarter 2020 Financial
Highlights:
- Safe and efficient restart of production activities across
the manufacturing footprint
- Unit shipments of 2.1M; net sales of $145M
- Value-Added Sales(1) of $84M, growth over market of 11%(2),
per wheel growth of 4%(2)
- Net loss of $43M, includes $7 million of restructuring and
net other expense(3)
- Adjusted EBITDA(1) loss of $4M
- Executed approximately $40M of permanent and temporary cost
actions for 2020
- Aggressively managed cash – costs, working capital, and
capital expenditures
- Net debt of $596M; available liquidity of $245M(4); ongoing
compliance with covenants
Superior Industries International, Inc. (“Superior” or the
“Company”) (NYSE:SUP), one of the world’s leading light vehicle
aluminum wheel suppliers for OEMs and the European aftermarket,
today reported financial results for the second quarter ended June
30, 2020.
($ in millions, units in thousands)
Three Months Six
Months
Q2 2020
Q2 2019
YTD 2020
YTD 2019
Units North America
841
2,489
3,060
5,113
Europe
1,227
2,401
3,315
4,816
Global
2,068
4,890
6,375
9,929
Net Sales North America
$
58.9
$
180.4
$
214.5
$
365.5
Europe
85.9
172.1
231.4
344.7
Global
$
144.8
$
352.5
$
445.9
$
710.2
Value-Added Sales (1) North America
$
31.4
$
87.2
$
111.3
$
176.6
Europe
52.9
106.4
143.2
209.8
Global
$
84.3
$
193.6
$
254.4
$
386.4
“During the second quarter of 2020, Superior executed
significant actions to minimize the unprecedented impact of
COVID-19 on automotive production. Our team responded decisively
with safety, cost, and cash flow initiatives to ensure the health
and safety of our employees, manage our financial condition, and
conserve liquidity. After a complete shutdown of our facilities,
our employees efficiently brought production back online during the
quarter, while continuing to capture the previously executed
structural cost improvements. I am very pleased by the response of
the entire Superior team,” commented Majdi Abulaban, President and
Chief Executive Officer of Superior. “As we move through the second
half of 2020, I remain confident that our team’s flexibility and
the actions we have taken will allow us to navigate the evolving
market conditions ahead and position us for growth as we emerge
from the pandemic.”
Business Update
Second quarter 2020 automotive production was severely impacted
by the broad-based shutdown across the automotive industry in North
America and Europe due to COVID-19. By June 1, 2020, Superior had
resumed production at all its facilities following the temporary
suspension of operations between late March and early April 2020.
To ensure the health and safety of its employees, the Company is
executing its Safe Work Playbook across its footprint, which
includes expanded cleaning, social distancing measures,
distribution of personal protective equipment, and daily
temperature checks, among other activities.
While Superior is experiencing stronger demand compared to April
and May from its customers in North America, specifically on
pickup/SUV platforms, as well as in Europe, the Company continues
to pursue cost reduction initiatives to align to the lower
production environment. To date, Superior has executed temporary
and permanent cost savings including furloughs, compensation and
benefit reductions, deferral of merit increases, reduced travel,
personnel restructurings, and use of government subsidies where
available. These cost initiatives are expected to benefit 2020
results by approximately $40 million. Further, Superior may utilize
in the future selective, temporary facility closures to efficiently
balance capacity with production costs and inventory levels. In
addition to these cost reductions, the Company is taking other
measures to improve cash flow through targeted working capital
initiatives and by reducing capital expenditures.
Despite the Company’s cost saving actions, COVID-19 factors had
a negative financial impact on the results for the second quarter
of 2020 by reducing:
- Net sales by approximately $200 million;
- Value-Added Sales, a non-GAAP financial measure, by
approximately $110 million; and
- Adjusted EBITDA, a non-GAAP financial measure, by approximately
$55 million.
Most of the negative impact on revenue occurred in April and
May. In June, Superior’s Value-Added Sales rebounded from April and
May, declining 14% compared to June of 2019, and free cash flow,
defined as the sum of operating, investing, and financing
activities before net debt repayments, was positive.
Second Quarter 2020 Results
Wheel unit shipments were 2.1 million in the second quarter of
2020, a decrease of 58%, compared to unit shipments of 4.9 million
in the prior year period. The change in units was driven by
production declines at our key customers related to COVID-19.
During the quarter, wheels 19 inches and greater accounted for
approximately 35% of Superior’s portfolio compared to just over 28%
in the prior year period.
Net sales for the second quarter of 2020 were $145 million,
compared to net sales of $353 million in the prior year period. The
decrease in the quarter was driven primarily by lower volumes and
lower aluminum prices, partially offset by the shift towards larger
wheels with more premium content.
Value-Added Sales, a non-GAAP financial measure, defined as net
sales less the value of aluminum and services provided by
outsourced service providers that are included in net sales, were
$84 million for the second quarter of 2020 compared to $194 million
in the prior year period. The continued portfolio shift to larger
diameter wheels with more premium content partially offset lower
volume. See “Non-GAAP Financial Information” below and the
reconciliation of consolidated net sales to Value-Added Sales in
this press release.
The gross loss for the second quarter of 2020 was $23 million,
compared to gross profit of $40 million in the prior year period.
The gross loss for the quarter was due to lower sales, partially
offset by temporarily closing manufacturing facilities, reducing
personnel and operating expenses, rationalizing the Company’s
manufacturing footprint in the prior year, and realizing purchasing
savings.
Selling, general, and administrative expenses for the second
quarter of 2020 were $11 million compared to $16 million in the
prior year period. The 29% decrease was primarily a result of
furloughs, compensation and benefit reductions, reduced travel, and
personnel restructurings.
The Company reported an operating loss of $34 million in the
second quarter of 2020 compared to operating income of $24 million
in the prior year period. The operating loss for the quarter was
primarily driven by lower sales partially offset by the initiatives
mentioned above.
The income tax benefit for the second quarter of 2020 was $4
million on a pre-tax loss of $47 million. The tax benefit for the
quarter was primarily due to Superior’s mix of earnings among tax
jurisdictions, partially offset by the recognition of a valuation
allowance on non-deductible interest.
For the second quarter of 2020, the Company reported a net loss
of $43 million, or a loss per diluted share of $2.00, including the
impact of $0.23 per share from restructuring and net other items.
This compares to net income of $7 million, or a loss per diluted
share of $0.04, in the second quarter of 2019. See attached pages
for a reconciliation of net income to diluted earnings per
share.
Adjusted EBITDA, a non-GAAP financial measure, amounted to a
loss of $4 million for the second quarter of 2020. This compares to
a profit of $49 million for the second quarter of 2019. The
decrease in Adjusted EBITDA was driven by lower volumes in North
America and Europe, including production shutdowns related to
COVID-19, partially offset by the initiatives listed above. See
“Non-GAAP Financial Information” below and the reconciliation of
net income to Adjusted EBITDA in this press release.
The Company reported net cash used by operating activities of
$38 million in the second quarter of 2020, compared to net cash
provided by operating activities of $41 million in the prior year
period. Operating cash flow declined due to lower profit.
Additionally, despite significantly lower overall working capital
balances in the second quarter of 2020 compared to the prior year
period, working capital was a use of cash in the second quarter of
2020 compared to a source of cash in the prior year period.
Net cash used for investing activities was $9 million in the
second quarter of 2020 compared to $7 million in the prior year
period. The increased usage of cash for investing activities
year-over-year was driven by a one-time $8 million benefit from the
sale of other assets in the second quarter of 2019, partially
offset by a reduction in capital expenditures from $15 million in
the prior year period to $9 million in the second quarter of
2020.
During the second quarter of 2020, Superior repaid $101 million
on its U.S. revolving credit facility. Superior also paid preferred
dividends of $3 million and purchased $1 million of shares from
minority equity holders of Superior Industries Europe AG during the
quarter, leaving approximately $2 million worth of shares
outstanding.
Capital Structure and Liquidity
Total funded debt and net debt as of June 30, 2020 were $727
million and $596 million, respectively, which compares to funded
debt and net debt of $658 million and $601 million, respectively,
in the prior year period. The increase in funded debt was due to
the borrowings on the Company’s revolving credit facilities.
Total liquidity, including cash and available amounts under
revolving credit facilities, was $245 million as of June 30, 2020.
Total cash on hand as of June 30, 2020 was $131 million.
The Company remains in full compliance with all lending
covenants, including leverage ratio limits on its lines of credit.
Based on various forecast scenarios, Superior does not currently
anticipate any issues meeting the covenant requirements under its
credit facilities. After repaying $101 million on its U.S.
revolving credit facility during the second quarter of 2020,
Superior was less than 35% drawn on the facility and therefore not
required to test the net leverage covenant of 4.5x. If the Company
had been required to test the covenant at the end of the second
quarter, it would have been in compliance. Further, after the
second quarter of 2020, the Company has made net repayments on the
U.S. and European revolving credit facilities totaling an
additional $69 million.
2020 Outlook
On March 23, 2020, the Company withdrew its 2020 outlook given
the unprecedented economic uncertainty resulting from COVID-19. The
Company continues to monitor the impact of COVID-19 and will
revisit providing additional full-year 2020 outlook once conditions
stabilize.
In the interim, based on the latest IHS industry production
forecast, which indicates a decline in industry production in
Superior’s key regions of approximately 24%, 23% in North America
and 25% in Western and Central Europe, Superior anticipates free
cash flow, defined as the sum of operating, investing, and
financing activities before net debt repayment, to be neutral for
full year 2020. Production schedules in North America remain strong
due to inventory rebuild at Superior’s key customers while the ramp
up in the European market has been slower. While the volume outlook
continues to evolve rapidly, Superior anticipates its third quarter
2020 Value-Added Sales to decline in the low-teens percentage range
compared to the prior year period.
Conference Call
Superior will host a conference call beginning at 8:30 AM ET on
Wednesday, August 5, 2020. The conference call may be accessed by
dialing 800-367-2403 for participants in the U.S./Canada or +1
334-777-6978 for participants outside the U.S./Canada using the
required conference ID 9232215. The live conference call can also
be accessed by logging into the Company’s website at www.supind.com
or by clicking this link: earnings call webcast. A replay of the
webcast will be available on the Company’s website immediately
following the conclusion of the call.
During the conference call, the Company's management plans to
review operating results and discuss other financial and operating
matters. In addition, management may disclose material information
in response to questions posed by participants during the call.
About Superior Industries
Superior is one of the world’s leading aluminum wheel suppliers.
Superior’s team collaborates and partners with customers to design,
engineer, and manufacture a wide variety of innovative and
high-quality products utilizing the latest lightweighting and
finishing technologies. Superior also maintains leading aftermarket
brands ATS®, RIAL®, ALUTEC®, and ANZIO®. Headquartered in
Southfield, Michigan, Superior is listed on the New York Stock
Exchange. For more information, please visit www.supind.com.
Non-GAAP Financial Information
In addition to the results reported in accordance with GAAP
included throughout this earnings release, this release refers to
“Adjusted EBITDA,” which Superior has defined as earnings before
interest income and expense, income taxes, depreciation,
amortization, restructuring charges and other closure costs,
impairments of long-lived assets and investments, changes in fair
value of redeemable preferred stock embedded derivative,
acquisition and integration costs, certain hiring and separation
related costs, proxy contest fees, gains associated with early debt
extinguishment and accounts receivable factoring fees. This release
also refers to “Value-Added Sales,” which Superior defines as net
sales less the value of aluminum and services provided by
outsourced service providers that are included in net sales. For
reconciliations of these non-GAAP measures to the most directly
comparable GAAP measure, see the attached supplemental data
pages.
Management believes these non-GAAP measures are useful to
management and may be useful to investors in their analysis of
Superior’s financial position and results of operations. Further,
management uses these non-GAAP financial measures for planning and
forecasting purposes. This non-GAAP financial information is
provided as additional information for investors and is not in
accordance with or an alternative to GAAP and may be different from
similar measures used by other companies.
Forward-Looking Statements
This press release contains statements that are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include all
statements that do not relate solely to historical or current facts
and can generally be identified by the use of future dates or words
such as “may,” “should,” “could,” “will,” “expects,” “expected,”
“seeks to,” “anticipates,” “plans,” “believes,” “estimates,”
“intends,” “outlook”, “predicts,” “projects,” “projecting,”
“potential,” “targeting,” “will likely result” or “continue,” or
the negative of such terms and other comparable terminology. These
statements also include, but are not limited to, the 2020 Superior
and industry outlook as well as our liquidity and debt covenants
included herein, the impact of COVID-19 on our future business
results, operations and prospects, Superior’s strategic and
operational initiatives, product mix and overall cost improvement
and are based on current expectations, estimates, and projections
about Superior's business based, in part, on assumptions made by
management. These statements are not guarantees of future
performance and involve risks, uncertainties, and assumptions that
are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in such
forward-looking statements due to numerous factors, risks, and
uncertainties discussed in Superior's Securities and Exchange
Commission filings and reports, including Superior's current Annual
Report on Form 10-K, and other reports from time to time filed with
the Securities and Exchange Commission. You are cautioned not to
unduly rely on such forward-looking statements when evaluating the
information presented in this press release. Such forward-looking
statements speak only as of the date on which they are made, and
Superior does not undertake any obligation to update any
forward-looking statement to reflect events or circumstances after
the date of this release.
SUPERIOR INDUSTRIES INTERNATIONAL, INC. Condensed
Consolidated Statements of Operations (Unaudited) (Dollars
in Millions, Except Per Share Amounts)
Three Months Six Months
2Q 2020
2Q 2019
YTD 2020 YTD 2019 Net Sales
$
144.8
$
352.5
$
445.9
$
710.2
Cost of Sales
167.7
312.5
445.6
637.1
Gross (Loss) Profit
$
(22.8
)
$
40.0
$
0.3
$
73.1
SG&A
11.3
16.0
23.8
30.4
Impairment of Goodwill and Indefinite-Lived Intangibles
-
-
193.6
-
(Loss) Income From Operations
$
(34.1
)
$
24.0
$
(217.1
)
$
42.7
Interest Expense, net
(12.2
)
(11.9
)
(24.0
)
(23.7
)
Other (Expense) Income, net
(0.7
)
2.6
0.7
2.7
Change in Fair Value of Preferred Derivative
-
-
-
-
(Loss) Income Before Income Taxes
$
(47.0
)
$
14.8
$
(240.5
)
$
21.7
Income Tax Benefit (Provision)
3.8
(7.5
)
7.2
(12.5
)
Net (Loss) Income
$
(43.2
)
$
7.3
$
(233.3
)
$
9.2
Loss Per Share: Basic
$
(2.00
)
$
(0.04
)
$
(9.81
)
$
(0.27
)
Diluted
$
(2.00
)
$
(0.04
)
$
(9.81
)
$
(0.27
)
Weighted Average and Equivalent SharesOutstanding
for EPS (in Thousands): Basic
25,562
25,106
25,403
25,070
Diluted
25,562
25,106
25,403
25,070
SUPERIOR INDUSTRIES INTERNATIONAL,
INC. Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in Millions)
6/30/2020
12/31/2019
Current Assets
$
362.4
$
354.2
Property, Plant and Equipment, net
502.4
529.3
Intangibles and Other Assets
221.2
428.4
Total Assets
$
1,086.0
$
1,311.9
Current Liabilities
$
216.5
$
191.1
Long-Term Liabilities
751.2
701.6
Redeemable Preferred Shares
170.0
161.0
European Non-controlling Redeemable Equity
1.5
6.5
Shareholders’ Equity (Deficit)
(53.2
)
251.7
Total Liabilities and Shareholders’ Equity (Deficit)
$
1,086.0
$
1,311.9
SUPERIOR INDUSTRIES
INTERNATIONAL, INC.
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Millions) Three
Months Six Months
2Q 2020
2Q 2019
YTD 2020 YTD 2019 Net (Loss) Income
$
(43.2
)
$
7.3
$
(233.3
)
$
9.2
Depreciation and Amortization
23.9
23.3
48.3
46.7
Income tax, Non-cash changes
(8.1
)
3.3
(14.0
)
1.6
Impairments of Goodwill and Indefinite-Lived Intangibles
-
-
193.6
-
Stock-based Compensation
0.9
1.4
0.2
1.9
Amortization of Debt Issuance Costs
0.9
1.5
2.3
2.5
Other Non-cash items
1.1
(3.9
)
(2.5
)
(1.6
)
Changes in Operating Assets and Liabilities:
Accounts Receivable
10.3
8.7
9.8
(22.5
)
Inventories
22.3
(10.1
)
17.1
(2.7
)
Other Assets and Liabilities
(1.7
)
2.9
1.2
12.6
Accounts Payable
(48.2
)
5.4
(31.3
)
10.7
Income Taxes
3.5
1.2
1.4
11.4
Cash Flow Provided by Operating Activities
$
(38.4
)
$
40.9
$
(7.1
)
$
69.6
Capital Expenditures
(8.9
)
(15.3
)
(22.8
)
(28.7
)
Other Investing Activities
-
8.2
-
9.6
Cash Flow Used by Investing Activities
$
(8.9
)
$
(7.1
)
$
(22.8
)
$
(19.0
)
Proceeds from the Issuance of Long-term Debt
-
-
11.7
-
Debt Repayment
(1.5
)
(23.2
)
(24.1
)
(24.2
)
Cash Dividends
(3.4
)
(6.8
)
(6.8
)
(12.9
)
Purchase of Non-controlling Redeemable Shares
(0.7
)
-
(4.9
)
(1.4
)
Payments Related to Tax Withholdings for Stock-Based Compensation
-
-
-
(0.1
)
Proceeds from Borrowings on Revolving Credit Facility
-
18.8
213.8
43.8
Repayments of Borrowings on Revolving Credit Facility
(101.0
)
(18.8
)
(107.0
)
(43.8
)
Other Financing Activities
(0.3
)
(0.7
)
(0.5
)
(0.7
)
Cash Flow Used by Financing Activities
$
(106.9
)
$
(30.6
)
$
82.2
$
(39.3
)
Effect of Exchange Rate on Cash
2.8
0.1
0.5
(1.9
)
Net Change in Cash
$
(151.4
)
$
3.3
$
52.8
$
9.5
Cash - Beginning
282.2
53.6
77.9
47.5
Cash - Ending
$
130.7
$
56.9
$
130.7
$
56.9
SUPERIOR INDUSTRIES INTERNATIONAL, INC. Earnings Per
Share Calculation (Unaudited) (Dollars and Shares in
Millions) Three Months Six
Months
2Q 2020
2Q 2019
YTD 2020
YTD 2019
Basic EPS Calculation(1)
Net (Loss) Income
$
(43.2
)
$
7.3
$
(233.3
)
$
9.2
Less: Accretion of Preferred Stock
(4.4
)
(4.1
)
(9.0
)
(8.0
)
Less: Redeemable Preferred Stock Dividends
(3.5
)
(3.8
)
(6.8
)
(7.7
)
Less: European Noncontrolling Redeemable Equity Dividends
-
(0.3
)
-
(0.4
)
Numerator
$
(51.1
)
$
(0.9
)
$
(249.1
)
$
(6.9
)
Denominator: Weighted Avg. Shares Outstanding
25.6
25.1
25.4
25.1
Basic Loss Per Share
$
(2.00
)
$
(0.04
)
$
(9.81
)
$
(0.27
)
Diluted EPS
Calculation(1) Net (Loss) Income
$
(43.2
)
$
7.3
$
(233.3
)
$
9.2
Less: Accretion of Preferred Stock
(4.4
)
(4.1
)
(9.0
)
(8.0
)
Less: Redeemable Preferred Stock Dividends
(3.5
)
(3.8
)
(6.8
)
(7.7
)
Less: European Noncontrolling Redeemable Equity Dividends
-
(0.3
)
-
(0.4
)
Numerator
$
(51.1
)
$
(0.9
)
$
(249.1
)
$
(6.9
)
Weighted Avg. Shares Outstanding-Basic
25.6
25.1
25.4
25.1
Dilutive Stock Options and Restricted Stock Units
-
-
-
-
Denominator: Weighted Avg. Shares Outstanding
25.6
25.1
25.4
25.1
Diluted Loss Per Share
$
(2.00
)
$
(0.04
)
$
(9.81
)
$
(0.27
)
(1) Basic earnings per share is computed by dividing net income
(loss) attributable to Superior, after deducting preferred
dividends and accretion and European non-controlling redeemable
equity dividends, by the weighted average number of common shares
outstanding. For purposes of calculating diluted earnings per
share, the weighted average shares outstanding includes the
dilutive effect of outstanding stock options and time and
performance based restricted stock units under the treasury stock
method. The redeemable preferred shares are not included in the
diluted earnings per share because the conversion would be
anti-dilutive for the periods ended March 31, 2020 and 2019
SUPERIOR INDUSTRIES INTERNATIONAL, INC. Impact of
Acquisition, Restructuring and Other Items on EPS (Unaudited)
(Dollars in Millions, except EPS amounts)
Three Months Six Months Before Tax Impact
on Net Income (Loss)
2Q 2020
2Q 2019
YTD 2020 YTD 2019 Location on Inc. Stat.
Acquisition, Integration, Certain Hiring & Separation Costs
$
(1.3
)
$
(1.3
)
$
(1.3
)
$
(2.0
)
SG&A Acquisition, Integration, Certain Hiring & Separation
Costs
(3.7
)
(0.2
)
(4.6
)
(0.8
)
COGS Restructuring Costs
(2.0
)
-
(4.1
)
-
COGS Debt Extinguishment Gains
0.0
2.4
0.0
2.4
Other Income Change in Fair Value of Preferred Derivative
0.0
0.1
0.0
0.7
Other Income Impairment of Goodwill and Indefinite-Lived
Intangibles
0.0
-
(193.6
)
-
Operating Income
Total Before Tax Impact on Net Income
(Loss)
$
(7.0
)
$
1.0
$
(203.7
)
$
0.3
After Tax Impact on Net Income (Loss)
$
(5.9
)
$
0.6
$
(199.1
)
$
0.1
Impact on Loss Per Share
$
(0.23
)
$
0.02
$
(7.84
)
$
0.00
SUPERIOR INDUSTRIES INTERNATIONAL, INC. Non-GAAP
Financial Measures (Unaudited) (Dollars in Millions)
Value-Added Sales
Three Months Six Months
2Q 2020
2Q 2019
YTD 2020 YTD 2019 Net Sales
$
144.8
$
352.5
$
445.9
$
710.2
Less: Aluminum Value and Outside Service Provider Costs
(60.6
)
(158.9
)
(191.6
)
(323.8
)
Value-Added Sales
$
84.3
$
193.6
$
254.4
$
386.4
Three Months Six Months
2Q 2020
2Q 2019
YTD 2020 YTD 2019 Net (Loss) Income
$
(43.2
)
$
7.3
$
(233.3
)
$
9.2
Adjusting Items: - Interest Expense, net
12.2
11.9
24.0
23.7
- Income Tax (Benefit) Provision
(3.8
)
7.5
(7.2
)
12.5
- Depreciation
17.8
16.6
36.1
33.2
- Amortization
6.1
6.7
12.3
13.5
- Acquisition, integration, hiring/separation/restructuring
costs, and debt extinguishment gains
7.0
(1.0
)
10.0
(0.3
)
- Factoring Fees
0.2
0.2
0.3
0.6
- Impairment of Goodwill and Indefinite-Lived Intangibles
-
-
193.6
-
$
39.5
$
41.9
$
269.1
$
83.2
Adjusted EBITDA
$
(3.7
)
$
49.2
$
35.8
$
92.4
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805005323/en/
Superior Investor Relations Troy Ford (248) 234-7104
Investor.Relations@supind.com
Superior Industries (NYSE:SUP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Superior Industries (NYSE:SUP)
Historical Stock Chart
From Apr 2023 to Apr 2024