Item 1. Financial Statements
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
The accompanying unaudited notes are an integral part of these condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nature of Operations
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 to the aftermarket in Europe. We employ approximately 7,700 full-time employees, operating in eight manufacturing facilities in North America and Europe. We are one of the largest aluminum wheel 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 the first six months of 2021 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Daimler AG Company (Mercedes-Benz, AMG, Smart), Ford, GM, Honda, Jaguar-Land Rover, Lucid Motors, Mazda, Nissan, PSA, Renault, Subaru, Stellantis, 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 diversified global customer base consisting of North American, European and Asian OEMs. We have determined that our North American and European operations should be treated as separate reportable segments as further described in Note 5, “Business Segments.”
Presentation of Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements, in our opinion, include all adjustments, of a normal and recurring nature, which are necessary for fair presentation of (i) the condensed consolidated statements of income (loss) for the three and six-month periods ended June 30, 2021 and June 30, 2020, (ii) the condensed consolidated statements of comprehensive income (loss) for the three and six-month periods ended June 30, 2021 and June 30, 2020, (iii) the condensed consolidated balance sheets at June 30, 2021 and December 31, 2020, (iv) the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2021 and June 30, 2020, and (v) the condensed consolidated statements of shareholders’ equity (deficit) for the three and six-month periods ended June 30, 2021 and June 30, 2020. This Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and notes thereto filed with the SEC in our 2020 Annual Report on Form 10-K.
Interim financial reporting standards require us to make estimates that are based on assumptions regarding the outcome of future events and circumstances not known at that time. Inevitably, some assumptions will not materialize, unanticipated events or circumstances may occur which vary from those estimates and such variations may significantly affect our future results. Additionally, interim results may not be indicative of our results for future interim periods or our annual results.
Certain prior year amounts have been reclassified to conform with the current year presentation.
Cash Paid for Interest and Taxes and Non-Cash Investing Activities
Cash paid for interest was $18.3 million and $21.5 million for the six months ended June 30, 2021 and June 30, 2020, respectively. Net cash paid for income taxes was $5.9 million and $5.4 million for the six months ended June 30, 2021 and June 30, 2020, respectively. As of June 30, 2021 and June 30, 2020, $7.8 million and $2.9 million, respectively, of equipment had been purchased but not yet paid and was included in accounts payable in our condensed consolidated balance sheets.
Accounting Standards Issued but Not Yet Adopted
Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires entities to use a new impairment model based on current expected credit losses (“CECL”) rather than incurred losses. Under CECL, estimated credit losses would incorporate relevant information about past events, current conditions and reasonable and supportable forecasts and any expected credit losses would be recognized at the time of sale. The Company is not required to adopt the standard until January 1, 2023. We are evaluating the impact this standard will have on our financial statements and disclosures.
7
NOTE 2 – REVENUE
The Company disaggregates revenue from contracts with customers into our reportable segments, North America and Europe. Revenues by segment for the three and six-month periods ended June 30, 2021 and June 30, 2020, respectively, are summarized in Note 5, “Business Segments.”
The opening and closing balances of the Company’s customer receivables and current and long-term contract liabilities balances are as follows:
(Dollars in thousands)
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
Change
|
|
Customer receivables
|
|
$
|
77,001
|
|
|
$
|
40,785
|
|
|
$
|
36,216
|
|
Contract liabilities—current
|
|
|
7,376
|
|
|
|
8,249
|
|
|
|
(873
|
)
|
Contract liabilities—noncurrent
|
|
|
11,264
|
|
|
|
13,106
|
|
|
|
(1,842
|
)
|
NOTE 3 – 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 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 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short period of time until maturity.
Derivative Financial Instruments
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.
The following tables categorize items measured at fair value as of June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using
|
|
June 30, 2021
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
$
|
12,770
|
|
|
$
|
—
|
|
|
$
|
12,770
|
|
|
$
|
—
|
|
Total
|
|
$
|
12,770
|
|
|
$
|
—
|
|
|
$
|
12,770
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
.
|
|
|
|
|
|
Derivative contracts
|
|
$
|
10,502
|
|
|
$
|
—
|
|
|
$
|
10,502
|
|
|
$
|
—
|
|
Total
|
|
$
|
10,502
|
|
|
$
|
—
|
|
|
$
|
10,502
|
|
|
$
|
—
|
|
8
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using
|
|
December 31, 2020
|
|
|
|
|
|
Quoted Prices in
Active Markets
for Identical Assets (Level 1)
|
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
$
|
10,218
|
|
|
$
|
—
|
|
|
$
|
10,218
|
|
|
$
|
—
|
|
Total
|
|
$
|
10,218
|
|
|
$
|
—
|
|
|
$
|
10,218
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
$
|
15,259
|
|
|
$
|
—
|
|
|
$
|
15,259
|
|
|
$
|
—
|
|
Total
|
|
$
|
15,259
|
|
|
$
|
—
|
|
|
$
|
15,259
|
|
|
$
|
—
|
|
Debt Instruments
The carrying values of the Company’s debt instruments vary from their fair values. The fair values were determined by reference to transacted prices and quotes for these instruments (Level 2). The estimated fair value, as well as the carrying value, of the Company’s debt instruments are shown below:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
Estimated aggregate fair value
|
|
$
|
632,197
|
|
|
$
|
624,207
|
|
Aggregate carrying value (1)
|
|
|
632,941
|
|
|
|
643,184
|
|
(1)
|
Total debt excluding the impact of unamortized debt issuance costs.
|
NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS
We use derivatives to partially offset our exposure to foreign currency, interest rate, aluminum and other commodity price risks. We may enter into forward contracts, option contracts, swaps, collars or other derivative instruments to offset some of the risk on expected future cash flows and on certain existing assets and liabilities. However, we may choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting considerations and the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset the full financial impact resulting from movements in foreign currency exchange rates, interest rates, and aluminum or other commodity prices.
To help mitigate gross margin fluctuations due to changes in foreign currency exchange rates, certain of our subsidiaries, whose functional currency is the U.S. dollar or the Euro, hedge a portion of their forecasted foreign currency costs denominated in the Mexican Peso and Polish Zloty, respectively. We may hedge portions of our forecasted foreign currency exposure up to 48 months.
We record all derivatives in the condensed consolidated balance sheets at fair value. Our accounting treatment for these instruments is based on the hedge designation. Gains or losses on derivatives that are designated as hedging instruments are recorded in accumulated other comprehensive income (loss) (“AOCI”) until the hedged item is recognized in earnings, at which point accumulated gains or losses will be recognized in earnings and classified with the underlying hedged transaction. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates. The Company has derivatives that are designated as hedging instruments, as well as derivatives that do not qualify for designation as hedging instruments.
9
The following tables display the fair value of derivatives by balance sheet line item at June 30, 2021 and December 31, 2020:
|
|
June 30, 2021
|
|
|
|
Other
Current
Assets
|
|
|
Other
Non-current
Assets
|
|
|
Accrued
Liabilities
|
|
|
Other
Non-current
Liabilities
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts designated as
hedging instruments
|
|
$
|
2,642
|
|
|
$
|
6,404
|
|
|
$
|
456
|
|
|
$
|
2,147
|
|
Foreign exchange forward contracts not
designated as hedging instruments
|
|
|
277
|
|
|
|
—
|
|
|
|
1,237
|
|
|
|
—
|
|
Aluminum forward contracts designated as
hedging instruments
|
|
|
1,609
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Natural gas forward contracts designated as
hedging instruments
|
|
|
1,509
|
|
|
|
329
|
|
|
|
4
|
|
|
|
—
|
|
Interest rate swap contracts designated as hedging
instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
4,754
|
|
|
|
1,904
|
|
Total derivative financial instruments
|
|
$
|
6,037
|
|
|
$
|
6,733
|
|
|
$
|
6,451
|
|
|
$
|
4,051
|
|
|
|
December 31, 2020
|
|
|
|
Other
Current
Assets
|
|
|
Other
Non-current
Assets
|
|
|
Accrued
Liabilities
|
|
|
Other
Non-current
Liabilities
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts designated as
hedging instruments
|
|
$
|
1,218
|
|
|
$
|
6,531
|
|
|
$
|
3,435
|
|
|
$
|
2,645
|
|
Foreign exchange forward contracts not
designated as hedging instruments
|
|
|
1,167
|
|
|
|
—
|
|
|
|
122
|
|
|
|
—
|
|
Aluminum forward contracts designated as
hedging instruments
|
|
|
262
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Natural gas forward contracts designated as
hedging instruments
|
|
|
816
|
|
|
|
224
|
|
|
|
22
|
|
|
|
70
|
|
Interest rate swap contracts designated as hedging
instruments
|
|
|
—
|
|
|
|
—
|
|
|
|
4,771
|
|
|
|
4,194
|
|
Total derivative financial instruments
|
|
$
|
3,463
|
|
|
$
|
6,755
|
|
|
$
|
8,350
|
|
|
$
|
6,909
|
|
The following table summarizes the notional amount and estimated fair value of our derivative financial instruments:
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
Notional
U.S. Dollar
Amount
|
|
|
Fair
Value
|
|
|
Notional
U.S. Dollar
Amount
|
|
|
Fair
Value
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts designated as
hedging instruments
|
|
$
|
472,229
|
|
|
$
|
6,443
|
|
|
$
|
421,253
|
|
|
$
|
1,669
|
|
Foreign exchange forward contracts not designated
as hedging instruments
|
|
|
22,243
|
|
|
|
(960
|
)
|
|
|
71,217
|
|
|
|
1,045
|
|
Aluminum forward contracts designated as
hedging instruments
|
|
|
12,446
|
|
|
|
1,609
|
|
|
|
4,068
|
|
|
|
262
|
|
Natural gas forward contracts designated as hedging
instruments
|
|
|
5,447
|
|
|
|
1,834
|
|
|
|
5,523
|
|
|
|
948
|
|
Interest rate swap contracts designated as hedging
instruments
|
|
|
200,000
|
|
|
|
(6,658
|
)
|
|
|
200,000
|
|
|
|
(8,965
|
)
|
Total derivative financial instruments
|
|
$
|
712,365
|
|
|
$
|
2,268
|
|
|
$
|
702,061
|
|
|
$
|
(5,041
|
)
|
10
Notional amounts are presented on a net basis. The notional amounts of the derivative financial instruments do not represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks. The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest rates, foreign currency exchange rates or commodity prices.
The following tables summarize the gain or loss recognized in AOCI, the amounts reclassified from AOCI into earnings and the amounts recognized directly into earnings for the three and six months ended June 30, 2021 and 2020:
Three Months Ended June 30, 2021
|
|
Amount of Gain or
(Loss) Recognized in
AOCI on Derivatives
|
|
|
Amount of Pre-tax
Gain or (Loss) Reclassified
from AOCI into Income
|
|
|
Amount of Pre-tax
Gain or (Loss)
Recognized in Income
on Derivatives
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Contracts
|
|
$
|
15,447
|
|
|
$
|
758
|
|
|
$
|
1,638
|
|
Total
|
|
$
|
15,447
|
|
|
$
|
758
|
|
|
$
|
1,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
Amount of Gain or
(Loss) Recognized in
AOCI on Derivatives
|
|
|
Amount of Pre-tax
Gain or (Loss) Reclassified
from AOCI into Income
|
|
|
Amount of Pre-tax
Gain or (Loss)
Recognized in Income
on Derivatives
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Contracts
|
|
$
|
6,985
|
|
|
$
|
319
|
|
|
$
|
(1,266
|
)
|
Total
|
|
$
|
6,985
|
|
|
$
|
319
|
|
|
$
|
(1,266
|
)
|
Three Months Ended June 30, 2020
|
|
Amount of Gain or
(Loss) Recognized in
AOCI on Derivatives
|
|
|
Amount of Pre-tax
Gain or (Loss) Reclassified
from AOCI into Income
|
|
|
Amount of Pre-tax
Gain or (Loss)
Recognized in Income
on Derivatives
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Contracts
|
|
$
|
15,298
|
|
|
$
|
(3,980
|
)
|
|
$
|
1,692
|
|
Total
|
|
$
|
15,298
|
|
|
$
|
(3,980
|
)
|
|
$
|
1,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
Amount of Gain or
(Loss) Recognized in
AOCI on Derivatives
|
|
|
Amount of Pre-tax
Gain or (Loss) Reclassified
from AOCI into Income
|
|
|
Amount of Pre-tax
Gain or (Loss)
Recognized in Income
on Derivatives
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Contracts
|
|
$
|
(29,999
|
)
|
|
$
|
(5,094
|
)
|
|
$
|
(3,747
|
)
|
Total
|
|
$
|
(29,999
|
)
|
|
$
|
(5,094
|
)
|
|
$
|
(3,747
|
)
|
11
NOTE 5 - BUSINESS SEGMENTS
The North American and European businesses represent separate operating segments in view of significantly different markets, customers and products in each of these regions. Within each of these regions, markets, customers, products and production processes are similar. Moreover, our business within each region generally leverages common systems, processes and infrastructure. Accordingly, North America and Europe comprise the Company’s reportable segments.
(Dollars in thousands)
|
|
Net Sales
|
|
|
Income (loss) from Operations
|
|
Three Months Ended
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
North America
|
|
$
|
176,990
|
|
|
$
|
58,916
|
|
|
$
|
7,542
|
|
|
$
|
(19,792
|
)
|
Europe
|
|
|
170,474
|
|
|
|
85,919
|
|
|
|
7,978
|
|
|
|
(14,325
|
)
|
|
|
$
|
347,464
|
|
|
$
|
144,835
|
|
|
$
|
15,520
|
|
|
$
|
(34,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Depreciation and Amortization
|
|
|
Capital Expenditures
|
|
Three Months Ended
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
North America
|
|
$
|
9,499
|
|
|
$
|
8,420
|
|
|
$
|
3,447
|
|
|
$
|
5,876
|
|
Europe
|
|
|
16,110
|
|
|
|
15,504
|
|
|
|
6,625
|
|
|
|
3,020
|
|
|
|
$
|
25,609
|
|
|
$
|
23,924
|
|
|
$
|
10,072
|
|
|
$
|
8,896
|
|
(Dollars in thousands)
|
|
Net Sales
|
|
|
Income (loss) from Operations
|
|
Six Months Ended
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
North America
|
|
$
|
368,961
|
|
|
$
|
214,467
|
|
|
$
|
25,383
|
|
|
$
|
(13,683
|
)
|
Europe
|
|
|
336,699
|
|
|
|
231,480
|
|
|
|
15,856
|
|
|
|
(203,449
|
)
|
|
|
$
|
705,660
|
|
|
$
|
445,947
|
|
|
$
|
41,239
|
|
|
$
|
(217,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Depreciation and Amortization
|
|
|
Capital Expenditures
|
|
Six Months Ended
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
North America
|
|
$
|
18,720
|
|
|
$
|
17,225
|
|
|
$
|
8,107
|
|
|
$
|
12,436
|
|
Europe
|
|
|
32,250
|
|
|
|
31,091
|
|
|
|
12,444
|
|
|
|
10,325
|
|
|
|
$
|
50,970
|
|
|
$
|
48,316
|
|
|
$
|
20,551
|
|
|
$
|
22,761
|
|
(Dollars in thousands)
|
|
Property, Plant and Equipment, net
|
|
|
Intangible Assets
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
North America
|
|
$
|
209,016
|
|
|
$
|
220,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Europe
|
|
|
294,070
|
|
|
|
301,979
|
|
|
|
93,942
|
|
|
|
110,796
|
|
|
|
$
|
503,086
|
|
|
$
|
522,124
|
|
|
$
|
93,942
|
|
|
$
|
110,796
|
|
(Dollars in thousands)
|
|
Total Assets
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
North America
|
|
$
|
494,285
|
|
|
$
|
479,873
|
|
Europe
|
|
|
654,070
|
|
|
|
629,452
|
|
|
|
$
|
1,148,355
|
|
|
$
|
1,109,325
|
|
12
Geographic information
Net sales and long-lived assets by location are as follows:
(Dollars in thousands)
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
1,549
|
|
|
$
|
3,619
|
|
|
$
|
2,819
|
|
|
$
|
19,796
|
|
|
Mexico
|
|
|
175,441
|
|
|
|
55,297
|
|
|
|
366,142
|
|
|
|
194,671
|
|
|
Germany
|
|
|
62,511
|
|
|
|
33,726
|
|
|
|
123,398
|
|
|
|
83,764
|
|
|
Poland
|
|
|
107,963
|
|
|
|
52,193
|
|
|
|
213,301
|
|
|
|
147,716
|
|
|
Consolidated net sales
|
|
$
|
347,464
|
|
|
$
|
144,835
|
|
|
$
|
705,660
|
|
|
$
|
445,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
$
|
4,343
|
|
|
$
|
7,324
|
|
|
Mexico
|
|
|
|
|
|
|
|
|
|
|
204,673
|
|
|
|
212,821
|
|
|
Germany
|
|
|
|
|
|
|
|
|
|
|
82,527
|
|
|
|
82,162
|
|
|
Poland
|
|
|
|
|
|
|
|
|
|
|
211,543
|
|
|
|
219,817
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
|
$
|
503,086
|
|
|
$
|
522,124
|
|
|
NOTE 6 - INVENTORIES
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
48,401
|
|
|
$
|
46,712
|
|
Work in process
|
|
|
64,054
|
|
|
|
45,394
|
|
Finished goods
|
|
|
85,535
|
|
|
|
62,874
|
|
Inventories, net
|
|
$
|
197,990
|
|
|
$
|
154,980
|
|
Service wheel and supplies inventory included in other non-current assets in the condensed consolidated balance sheets totaled $10.3 million and $12.1 million at June 30, 2021 and December 31, 2020, respectively.
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
Land and buildings
|
|
$
|
148,579
|
|
|
$
|
149,295
|
|
Machinery and equipment
|
|
|
873,928
|
|
|
|
899,764
|
|
Leasehold improvements and others
|
|
|
14,296
|
|
|
|
14,912
|
|
Construction in progress
|
|
|
44,983
|
|
|
|
46,718
|
|
|
|
|
1,081,786
|
|
|
|
1,110,689
|
|
Accumulated depreciation
|
|
|
(578,700
|
)
|
|
|
(588,565
|
)
|
Property, plant and equipment, net
|
|
$
|
503,086
|
|
|
$
|
522,124
|
|
Depreciation expense for the three and six months ended June 30, 2021 was $18.9 million and $37.6 million, respectively.
Depreciation expense for the three and six months ended June 30, 2020 was $17.8 million and $36.1 million, respectively.
13
NOTE 8 – GOODWILL AND OTHER INTANGIBLE ASSETS
At March 31, 2020, the impact of COVID-19 and uncertainty with respect to the economic effects of the pandemic had introduced significant volatility in the financial markets and was having a widespread adverse effect on the automotive industry. In response to the COVID-19 pandemic, our key customers temporarily closed nearly all their production facilities in Europe and North America (our primary markets) during the quarter ended March 31, 2020. As a result, we concluded that an interim test of our goodwill was required as of March 31, 2020. More specifically, the Company concluded that the following events and circumstances, in the aggregate, indicated that it was more likely than not that the carrying value of our European reporting unit exceeded its fair value: (1) our European reporting unit’s carrying value was effectively set to fair value at December 31, 2019, due to the $102.2 million impairment charges to goodwill and indefinite-lived intangibles, (2) lower forecasted 2020 industry production volumes for Western and Central Europe, including those for our primary European customers, due to OEM shutdowns to mitigate COVID-19 spread and subsequent reduced production levels over the remainder of the year, as compared to our prior production forecasts (including estimates used in our 2019 assessment) and (3) the volatility in financial markets that had both increased European interest rates due to rising credit spreads and risk premiums and lowered median European automotive market multiples. Based on the results of our quantitative analysis, we recognized a non-cash goodwill impairment charge equal to the remaining goodwill balance of $182.6 million since the carrying value exceeded the fair value of the European reporting unit by more than the amount of the goodwill balance at March 31, 2020. Additionally, we recognized a non-cash impairment charge of $11.0 million related to our aftermarket trade name indefinite-lived intangible asset which was primarily attributable to a further decline in forecasted aftermarket revenues and a decline in associated profitability. Total impairment charges of $193.6 million were recognized as a separate charge at March 31, 2020 and included in income (loss) from operations.
We utilized both an income and a market approach, weighted 75 percent and 25 percent respectively, to determine the fair value of the European reporting unit as part of our goodwill impairment assessment. The income approach is based on projected debt-free cash flow, which is discounted to the present value using discount factors that consider the timing and risk of cash flows. The discount rate used is the weighted average of an estimated cost of equity and of debt (“weighted average cost of capital”). The weighted average cost of capital is adjusted as necessary to reflect risk associated with the business of the European reporting unit. Financial projections are based on estimated production volumes, product prices and expenses, including raw material cost, wages, energy and other expenses. Other significant assumptions include terminal value cash flow and growth rates, future capital expenditures and changes in future working capital requirements. The market approach is based on the observed ratios of enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA) of comparable, publicly traded companies. The market approach fair value is determined by multiplying historical and anticipated financial metrics of the European reporting unit by the EBITDA pricing multiples derived from comparable, publicly traded companies.
At March 31, 2020, we determined that the carrying value of the European reporting unit exceeded its fair value by an amount greater than the remaining goodwill balance. The decline in fair value was primarily due to significantly lower market multiples and increased discount rates, as well as further declines in forecasted industry production volumes in Western and Central Europe as a result of the COVID-19 pandemic and consequent economic instability. Forecasted revenues, EBITDA and cash flow for the European reporting unit also declined as compared to the prior year long-range plan due to lower forecasted industry production volumes which adversely impacted fair value under both the income and market approaches. Significant assumptions used under the income approach included a weighted average cost of capital (WACC) of 12.0 percent and a long-term growth rate of 1.5 percent, as compared to 10.0 percent and 2.0 percent, respectively, used in the 2019 assessment. In determining the WACC, management considered the level of risk inherent in the cash flow projections and current market conditions, including the significant increase in credit spreads and systemic market and Company specific risk premiums. The decline in the fair value under the market approach is attributable to the decline in the average EBITDA market multiple (4.9X EBITDA in 2020, 5.7X EBITDA in 2019) and lower forecasted EBITDA, as compared to the 2019 assessment. The use of these unobservable inputs results in classification of the fair value estimate as a Level 3 measurement in the fair value hierarchy. A considerable amount of management judgment and assumptions are required in performing the quantitative impairment test, principally related to determining the fair value of the reporting unit. While the Company believes its judgments and assumptions are reasonable, different assumptions could change the estimated fair value.
14
Following is a summary of the Company’s finite-lived and indefinite-lived intangible assets and goodwill as of June 30, 2021 and December 31, 2020.
As of June 30, 2021
|
|
Gross
Carrying
Amount
|
|
|
Accumulated Impairment
|
|
|
Accumulated
Amortization
|
|
|
Currency
Translation
|
|
|
Net Carrying Amount
|
|
|
Remaining
Weighted
Average
Amortization
Period
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brand name
|
|
$
|
9,000
|
|
|
$
|
—
|
|
|
$
|
(7,577
|
)
|
|
$
|
322
|
|
|
$
|
1,745
|
|
|
1-2
|
Technology
|
|
|
15,000
|
|
|
|
—
|
|
|
|
(12,628
|
)
|
|
|
537
|
|
|
|
2,909
|
|
|
2
|
Customer relationships
|
|
|
167,000
|
|
|
|
—
|
|
|
|
(85,132
|
)
|
|
|
7,420
|
|
|
|
89,288
|
|
|
2-7
|
Total finite
|
|
|
191,000
|
|
|
|
—
|
|
|
|
(105,337
|
)
|
|
|
8,279
|
|
|
|
93,942
|
|
|
|
Trade names
|
|
|
14,000
|
|
|
|
(13,772
|
)
|
|
|
—
|
|
|
|
(228
|
)
|
|
|
—
|
|
|
Indefinite
|
Total intangibles
|
|
$
|
205,000
|
|
|
$
|
(13,772
|
)
|
|
$
|
(105,337
|
)
|
|
$
|
8,051
|
|
|
$
|
93,942
|
|
|
|
As of December 31, 2020
|
|
Gross
Carrying
Amount
|
|
|
Accumulated Impairment
|
|
|
Accumulated
Amortization
|
|
|
Currency
Translation
|
|
|
Net Carrying Amount
|
|
|
Remaining
Weighted
Average
Amortization
Period
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brand name
|
|
$
|
9,000
|
|
|
$
|
—
|
|
|
$
|
(6,615
|
)
|
|
$
|
399
|
|
|
$
|
2,784
|
|
|
2-3
|
Technology
|
|
|
15,000
|
|
|
|
—
|
|
|
|
(11,024
|
)
|
|
|
666
|
|
|
|
4,642
|
|
|
1-3
|
Customer relationships
|
|
|
167,000
|
|
|
|
—
|
|
|
|
(74,322
|
)
|
|
|
10,692
|
|
|
|
103,370
|
|
|
3-8
|
Total finite
|
|
|
191,000
|
|
|
|
—
|
|
|
|
(91,961
|
)
|
|
|
11,757
|
|
|
|
110,796
|
|
|
|
Trade names
|
|
|
14,000
|
|
|
|
(13,772
|
)
|
|
|
—
|
|
|
|
(228
|
)
|
|
|
—
|
|
|
Indefinite
|
Total intangibles
|
|
$
|
205,000
|
|
|
$
|
(13,772
|
)
|
|
$
|
(91,961
|
)
|
|
$
|
11,529
|
|
|
$
|
110,796
|
|
|
|
Year Ended December 31, 2020
|
|
Beginning Balance
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
|
|
Gross
|
|
|
Accumulated Impairment
|
|
|
Net Balance
|
|
|
Impairment
|
|
|
Currency
Translation
|
|
|
Gross
|
|
|
Accumulated Impairment
|
|
|
Net Balance
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
284,337
|
|
|
$
|
(99,505
|
)
|
|
$
|
184,832
|
|
|
$
|
(182,602
|
)
|
|
$
|
(2,230
|
)
|
|
$
|
282,107
|
|
|
$
|
(282,107
|
)
|
|
$
|
—
|
|
Amortization expense for these intangible assets was $6.7 million and $6.1 million for the three months ended June 30, 2021 and 2020, respectively. Amortization expense for the six months ended June 30, 2021 and 2020 was $13.4 million and $12.2 million, respectively. The anticipated annual amortization expense for these intangible assets is $26.5 million for 2021, $23.5 million for 2022 and $21.4 million for 2023 and 2024 and $10.5 million for 2025.
NOTE 9 – DEBT
A summary of long-term debt and the related weighted average interest rates is shown below:
|
|
June 30, 2021
(Dollars in Thousands)
|
|
Debt Instrument
|
|
Total
Debt
|
|
|
Debt
Issuance
Costs (1)
|
|
|
Total
Debt, Net
|
|
|
Weighted
Average
Interest
Rate
|
|
Term Loan Facility
|
|
$
|
349,200
|
|
|
$
|
(5,251
|
)
|
|
$
|
343,949
|
|
|
|
4.1
|
%
|
6.00% Senior Notes
|
|
|
258,224
|
|
|
|
(3,933
|
)
|
|
|
254,291
|
|
|
|
6.0
|
%
|
European CapEx Loans
|
|
|
22,212
|
|
|
|
—
|
|
|
|
22,212
|
|
|
|
2.3
|
%
|
Finance Leases
|
|
|
3,305
|
|
|
|
—
|
|
|
|
3,305
|
|
|
|
2.8
|
%
|
|
|
$
|
632,941
|
|
|
$
|
(9,184
|
)
|
|
|
623,757
|
|
|
|
|
|
Less: Current portion
|
|
|
|
|
|
|
|
|
|
|
(6,545
|
)
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
$
|
617,212
|
|
|
|
|
|
15
|
|
December 31, 2020
(Dollars in Thousands)
|
|
Debt Instrument
|
|
Total
Debt
|
|
|
Debt
Issuance
Costs (1)
|
|
|
Total
Debt, Net
|
|
|
Weighted
Average
Interest
Rate
|
|
Term Loan Facility
|
|
$
|
349,200
|
|
|
$
|
(7,155
|
)
|
|
$
|
342,045
|
|
|
|
4.1
|
%
|
6.00% Senior Notes
|
|
|
266,928
|
|
|
|
(4,425
|
)
|
|
|
262,503
|
|
|
|
6.0
|
%
|
European CapEx Loans
|
|
|
23,668
|
|
|
|
—
|
|
|
|
23,668
|
|
|
|
2.3
|
%
|
Finance Leases
|
|
|
3,388
|
|
|
|
—
|
|
|
|
3,388
|
|
|
|
3.0
|
%
|
|
|
$
|
643,184
|
|
|
$
|
(11,580
|
)
|
|
|
631,604
|
|
|
|
|
|
Less: Current portion
|
|
|
|
|
|
|
|
|
|
|
(6,112
|
)
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
$
|
625,492
|
|
|
|
|
|
Senior Notes
On June 15, 2017, the Company issued €250.0 million aggregate principal amount of 6.00 percent Senior Notes (“Notes”) due June 15, 2025. Interest on the Notes is payable semiannually, on June 15 and December 15. The Company may redeem the Notes, in whole or in part, on or after June 15, 2021 at a redemption price of 101.5 percent and on or after June 15, 2022 at a redemption price of 100 percent, in each case plus any accrued and unpaid interest as of the applicable redemption date. If we experience a change of control or sell certain assets, the Company may be required to offer to purchase the Notes from the holders. The Notes are senior unsecured obligations ranking equally in right of payment with all of its existing and future senior indebtedness and senior in right of payment to any subordinated indebtedness. The Notes are effectively subordinated in right of payment to the existing and future secured indebtedness of the Company, including the Senior Secured Credit Facilities (as defined below), to the extent of the assets securing such indebtedness.
Guarantee
The Notes are unconditionally guaranteed by all material wholly-owned direct and indirect domestic restricted subsidiaries of the Company (the “Subsidiary Guarantors”), with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract, or would result in adverse tax consequences.
Covenants
Subject to certain exceptions, the indenture governing the Notes contains restrictive covenants that, among other things, limit the ability of the Company and the Subsidiary Guarantors to: (i) incur additional indebtedness or issue certain preferred stock; (ii) pay dividends on, or make distributions in respect of, their capital stock; (iii) make certain investments or other restricted payments; (iv) sell certain assets or issue capital stock of restricted subsidiaries; (v) create liens; (vi) merge, consolidate, transfer or dispose of substantially all of their assets; and (vii) engage in certain transactions with affiliates. These covenants are subject to several important limitations and exceptions that are described in the indenture.
The indenture provides for customary events of default that include, among other things (subject in certain cases to customary grace and cure periods): (i) nonpayment of principal, premium, if any, and interest, when due; (ii) failure for 60 days to comply with any obligations, covenants or agreements in the indenture after receipt of written notice from the Bank of New York Mellon, London Branch (“the Trustee”) or holders of at least 30 percent in principal amount of the then outstanding Notes of such failure (other than defaults referred to in the foregoing clause (i)); (iii) default under any mortgage, indenture or instrument for money borrowed by the Company or certain of its subsidiaries, (iv) a failure to pay certain judgments; and (iv) certain events of bankruptcy and insolvency. If an event of default occurs and is continuing, the Trustee or holders of at least 30 percent in principal amount of the then outstanding Notes may declare the principal, premium, if any, and accrued and unpaid interest on all the Notes to be due and payable. These events of default are subject to several important qualifications, limitations and exceptions that are described in the indenture. As of June 30, 2021, the Company was in compliance with all covenants under the indenture governing the Notes.
16
Senior Secured Credit Facilities
On March 22, 2017, the Company entered into a senior secured credit agreement (“Credit Agreement”) with certain banks and other lenders. The Credit Agreement consisted of a $400.0 million senior secured term loan facility (“Term Loan Facility”), which matures on May 23, 2024, and a $160.0 million revolving credit facility originally maturing on May 23, 2022 (the “Revolving Credit Facility”), together with the Term Loan Facility, the USD Senior Secured Credit Facilities (“USD SSCF”). On May 3, 2021, the Company extended the term of the Revolving Credit Facility under its USD SSCF and reduced the commitment under the facility from $160.0 million to $132.5 million, with $25.0 million of the commitment maturing May 23, 2022 and the remaining $107.5 million maturing October 31, 2023. The extension was treated as a modification of the revolving credit facility and the related debt issuance costs have been recognized as a deferred charge in other non-current assets and are being amortized ratably over the remaining term of the extended facility.
Borrowings under the Term Loan Facility will bear interest at a rate equal to, at the Company’s option, either (a) LIBOR for the relevant interest period, adjusted for statutory requirements, subject to a floor of 0.00 percent per annum, plus an applicable rate of 4.00 percent or (b) a base rate, subject to a floor of 2.00 percent per annum, equal to the highest of (1) the rate of interest in effect as publicly announced by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50 percent and (3) LIBOR for an interest period of one month plus 1.00 percent, in each case, plus an applicable rate of 3.00 percent.
Borrowings under the Revolving Credit Facility bear interest at a rate equal to, at the Company’s option, either (a) LIBOR for the relevant interest period, with a floor of 0.00 percent per annum, plus the applicable rate or (b) a base rate, with a floor of 0.00 percent, equal to the highest of (1) the rate of interest in effect as publicly announced by the administrative agent as its prime rate, (2) the federal funds effective rate plus 0.50 percent and (3) LIBOR for an interest period of one month plus 1.00 percent, in each case, plus the applicable rate. The applicable rates for borrowings under the Revolving Credit Facility are based upon the First Lien Net Leverage Ratio effective for the preceding quarter, with LIBOR applicable rates ranging between 3.50 percent and 3.00 percent, currently 3.25 percent, and base rate applicable rates ranging between 2.50 percent and 2.00 percent, currently 2.25 percent. Commitment fees for the unused commitment under the Revolving Credit Facility are also based upon the First Lien Net Leverage Ratio, effective for the preceding quarter, and range between 0.50 percent and 0.25 percent for the commitment maturing May 23, 2022, currently 0.375 percent, and between 0.625 percent and 0.375 percent for the remaining commitment maturing October 31, 2023, currently 0.50 percent. Commitment fees are included in interest expense.
As of June 30, 2021, the Company had repaid $50.8 million under the Term Loan Facility resulting in a balance of $349.2 million. In addition, the Company had no borrowings outstanding under the Revolving Credit Facility, outstanding letters of credit of $4.8 million and available unused commitments under this facility of $127.7 million as of June 30, 2021.
Guarantees and Collateral Security
Our obligations under the Credit Agreement are unconditionally guaranteed by the Subsidiary Guarantors, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in adverse tax consequences. The guarantees of such obligations, will be secured, subject to permitted liens and other exceptions, by substantially all of our assets and the Subsidiary Guarantors’ assets, including but not limited to: (i) a perfected pledge of all of the capital stock issued by each of the Subsidiary Guarantors (subject to certain exceptions) and up to 65 percent of the capital stock issued by each direct wholly-owned foreign restricted subsidiary of the Company (subject to certain exceptions) and (ii) perfected security interests in and mortgages on substantially all tangible and intangible personal property and material fee-owned real property of the Company and the Subsidiary Guarantors (subject to certain exceptions and exclusions).
Covenants
The Credit Agreement contains a number of restrictive covenants that, among other things, restrict, subject to certain exceptions, our ability to incur additional indebtedness and guarantee indebtedness, create or incur liens, engage in mergers or consolidations, sell, transfer or otherwise dispose of assets, make investments, acquisitions, loans or advances, pay dividends, distributions or other restricted payments, or repurchase our capital stock. The Credit Agreement also restricts our ability to prepay, redeem, or repurchase any subordinated indebtedness, enter into agreements which limit our ability to incur liens on our assets or that restrict the ability of restricted subsidiaries to pay dividends or make other restricted payments to us, and enter into certain transactions with our affiliates. Solely with respect to the Revolving Credit Facility, the Credit Agreement also requires a Total Net Leverage Ratio (calculated as defined in the Credit Agreement) of not more than 4.5 to 1.0 as of each fiscal quarter-end.
In addition, the Credit Agreement contains customary default provisions, representations and warranties and other covenants. The Credit Agreement also contains a provision permitting the Lenders to accelerate the repayment of all loans outstanding under the USD SSCF during an event of default. As of June 30, 2021, the Company was in compliance with all covenants under the Credit Agreement.
17
European Debt
In connection with the acquisition of UNIWHEELS AG, the Company assumed $70.7 million of outstanding debt. At June 30, 2021, $8.7 million of the assumed debt remained outstanding. This debt matures March 31, 2024 and is collateralized by financed equipment, guaranteed by Superior and bears interest at 2.2 percent. Covenants under the loan agreement include a default provision for non-payment, as well as a material adverse change default provision pursuant to which the lender could accelerate the loan maturity. As of June 30, 2021, the Company was in compliance with all covenants under the loan agreement.
During the second quarter of 2021, the Company amended its European Revolving Credit Facility (“EUR SSCF”), extending the term to May 22, 2023 and increasing the applicable margin and commitment fees, while maintaining the €60.0 million commitment. All other terms of the EUR SSCF remained unchanged. At June 30, 2021, the Company had no borrowings outstanding, outstanding letters of credit of $0.5 million (€0.4million) and available unused commitments under this facility of $70.9 million (€59.6 million). The EUR SSCF bears interest at Euribor (with a floor of 0.00 percent) plus a margin (ranging from 2.05 percent to 3.50 percent based on the net debt leverage ratio of Superior Industries Europe AG and its wholly owned subsidiaries, collectively “Superior Europe AG”), currently 2.05 percent. The annual commitment fee for unused commitments (ranging from 0.625 percent to 1.225 percent based on the net debt leverage ratio of Superior Europe AG) is currently 0.625 percent per annum. In addition, a management fee is assessed equal to 0.07 percent of borrowings outstanding at each month end. The commitment fee is included in interest expense. Superior Europe AG has pledged substantially all of its assets, including land and buildings, receivables, inventory, and other moveable assets (other than collateral associated with equipment loans) as collateral under the EUR SSCF.
The EUR SSCF is subject to a number of restrictive covenants that, among other things, restrict, subject to certain exceptions, the ability of Superior Europe AG to incur additional indebtedness and guarantee indebtedness, create or incur liens, engage in mergers or consolidations, sell, transfer or otherwise dispose of assets, make investments, acquisitions, loans or advances, pay dividends or distributions, or repurchase our capital stock, prepay, redeem, or repurchase any subordinated indebtedness, and enter into agreements which limit our ability to incur liens on our assets. In addition, the EUR SSCF includes an annual pay down provision requiring outstanding balances to be repaid but not reborrowed for a period of three business days and a material adverse change default provision pursuant to which the lender could accelerate the loan maturity. At June 30, 2021, Superior Europe AG was in compliance with all covenants under the EUR SSCF.
The balance of certain post-acquisition equipment loans was $13.5 million as of June 30, 2021. The loans bear interest at 2.3 percent, mature September 30, 2027 and require quarterly principal and interest payments. The loans are secured with liens on the financed equipment and are subject to covenants that, among other things, include a material adverse change default provision pursuant to which the lender could accelerate the loan maturity, as well as a provision that restricts the ability of Superior Europe AG to reduce its ownership interest in Superior Industries Production Germany GmbH, its wholly-owned subsidiary and the borrower under the loan. The Company drew down €10.6 million on these equipment loans in the first quarter of 2020 and drew the remaining €1.4 million in the first quarter of 2021. Quarterly installment payments of $0.5 million (€0.4 million) under the loan agreements began in June of 2021. At June 30, 2021, the Company was in compliance with all covenants under the loans.
Debt maturities as of June 30, 2021, which are due in the next five years and thereafter, are as follows:
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
Debt Maturities
|
|
Amount
|
|
Six remaining months of 2021
|
|
$
|
3,374
|
|
2022
|
|
|
6,450
|
|
2023
|
|
|
6,031
|
|
2024
|
|
|
352,418
|
|
2025
|
|
|
260,563
|
|
Thereafter
|
|
|
4,105
|
|
Total debt liabilities
|
|
$
|
632,941
|
|
NOTE 10 - REDEEMABLE PREFERRED STOCK
During 2017, we issued 150,000 shares of Series A (140,202 shares) and Series B (9,798 shares) Perpetual Convertible Preferred Stock, par value $0.01 per share for $150.0 million. On August 30, 2017, the Series B shares were converted into Series A redeemable preferred stock, the “redeemable preferred stock,” after approval by our shareholders. The redeemable preferred stock has an initial stated value of $1,000 per share, par value of $0.01 per share and liquidation preference over common stock.
The redeemable preferred stock is convertible into shares of our common stock equal to the number of shares determined by dividing the sum of the stated value and any accrued and unpaid dividends by the conversion price of $28.162. The redeemable preferred stock
18
accrues dividends at a rate of 9.0 percent per annum, payable at our election either in-kind or in cash and is also entitled to participate in dividends on common stock in an amount equal to that which would have been due had the shares been converted into common stock.
We may mandate conversion of the redeemable preferred stock if the price of the common stock exceeds $84.49. The holder may redeem the shares upon the occurrence of any of the following events (referred to as a “redemption event”): a change in control, recapitalization, merger, sale of substantially all of the Company’s assets, liquidation or delisting of the Company’s common stock. In addition, the holder has the right, at its option, to unconditionally redeem the shares at any time after September 14, 2025. We may, at our option, redeem in whole at any time all of the shares of redeemable preferred stock outstanding. At redemption by either party, the redemption value will be the greater of two times the initial face value ($150.0 million) and any accrued unpaid dividends or dividends paid-in-kind, currently $300.0 million, 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 the common stock. We have determined that the conversion option and the redemption option exercisable upon occurrence of a “redemption event” which are embedded in the redeemable preferred stock must be accounted for separately from the redeemable preferred stock as a derivative liability.
Since the redeemable preferred stock may be redeemed at the option of the holder, but is not mandatorily redeemable, the redeemable preferred stock has been classified as mezzanine equity and initially recognized at fair value of $150.0 million (the proceeds on the date of issuance) less issuance costs of $3.7 million and $10.9 million assigned to the embedded derivative liability at date of issuance, resulting in an initial value of $135.5 million.
The difference between the redemption value of the redeemable preferred stock and the carrying value (the “premium”) is being accreted over the period from the date of issuance through September 14, 2025 using the effective interest method. The accretion is treated as a deemed dividend, recorded as a charge to retained earnings and deducted in computing earnings per share (analogous to the treatment for stated and participating dividends paid on the redeemable preferred stock). The cumulative premium accretion as of June 30, 2021 and December 31, 2020 was $53.9 million and $43.9 million, respectively, resulting in adjusted redeemable preferred stock balances of $189.4 million and $179.4 million, respectively.
NOTE 11 – EUROPEAN NON-CONTROLLING REDEEMABLE EQUITY
On May 30, 2017, the Company acquired 92.3 percent of the outstanding shares of UNIWHEELS AG. Subsequently, the Company commenced a delisting and associated tender offer for the remaining shares. On January 17, 2018, the Company entered into a Domination and Profit and Loss Transfer agreement (“DPLTA”) retroactively effective as of January 1, 2018 pursuant to which we offered to purchase the remaining outstanding shares at €62.18. This price may be subject to change based on appraisal proceedings initiated by the minority shareholders which have not yet been concluded. The Company must also pay an annual dividend of €3.23 as long as the DPLTA is in effect. For any shares tendered prior to the annual dividend payment, we must pay interest at a statutory rate, currently 4.12 percent, in place of the dividend. As a result of purchases pursuant to the tender offer and the DPLTA, the Company has increased its ownership to 99.9 percent as of June 30, 2021. The following table summarizes the European non-controlling redeemable equity activity through the period ended June 30, 2021:
(Dollars in thousands)
|
|
|
|
|
Balance at December 31, 2019
|
|
$
|
6,525
|
|
Dividends accrued
|
|
|
205
|
|
Dividends paid
|
|
|
(46
|
)
|
Translation adjustment
|
|
|
2
|
|
Purchase of shares
|
|
|
(5,020
|
)
|
Balance at December 31, 2020
|
|
|
1,666
|
|
Dividends accrued
|
|
|
38
|
|
Dividends paid
|
|
|
(3
|
)
|
Translation adjustment
|
|
|
(53
|
)
|
Purchase of shares
|
|
|
(58
|
)
|
Balance at June 30, 2021
|
|
$
|
1,590
|
|
19
NOTE 12 – EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income (loss), 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 discussed in Note 10, “Redeemable Preferred Stock” have not been included in the diluted earnings per share because the inclusion of such shares on an as converted basis would be anti-dilutive for the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,695
|
|
|
$
|
(43,218
|
)
|
|
$
|
14,817
|
|
|
$
|
(233,300
|
)
|
Less: Redeemable preferred stock dividends and accretion
|
|
|
(8,422
|
)
|
|
|
(7,905
|
)
|
|
|
(16,712
|
)
|
|
|
(15,755
|
)
|
Less: European non-controlling redeemable equity dividend
|
|
|
(25
|
)
|
|
|
(26
|
)
|
|
|
(38
|
)
|
|
|
(46
|
)
|
Basic numerator
|
|
$
|
(6,752
|
)
|
|
$
|
(51,149
|
)
|
|
$
|
(1,933
|
)
|
|
$
|
(249,101
|
)
|
Basic loss per share
|
|
$
|
(0.26
|
)
|
|
$
|
(2.00
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(9.81
|
)
|
Weighted average shares outstanding – Basic
|
|
|
25,974
|
|
|
|
25,562
|
|
|
|
25,841
|
|
|
|
25,403
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,695
|
|
|
$
|
(43,218
|
)
|
|
$
|
14,817
|
|
|
$
|
(233,300
|
)
|
Less: Redeemable preferred stock dividends and accretion
|
|
|
(8,422
|
)
|
|
|
(7,905
|
)
|
|
|
(16,712
|
)
|
|
|
(15,755
|
)
|
Less: European non-controlling redeemable equity dividend
|
|
|
(25
|
)
|
|
|
(26
|
)
|
|
|
(38
|
)
|
|
|
(46
|
)
|
Diluted numerator
|
|
$
|
(6,752
|
)
|
|
$
|
(51,149
|
)
|
|
$
|
(1,933
|
)
|
|
$
|
(249,101
|
)
|
Diluted loss per share
|
|
$
|
(0.26
|
)
|
|
$
|
(2.00
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(9.81
|
)
|
Weighted average shares outstanding – Basic
|
|
|
25,974
|
|
|
|
25,562
|
|
|
|
25,841
|
|
|
|
25,403
|
|
Dilutive effect of common share equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average shares outstanding – Diluted
|
|
|
25,974
|
|
|
|
25,562
|
|
|
|
25,841
|
|
|
|
25,403
|
|
NOTE 13 - INCOME TAXES
The estimated annual effective tax rate is forecasted quarterly using actual historical information and forward-looking estimates and applied to year-to-date ordinary income. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances, settlements with taxing authorities and effects of changes in tax laws or rates, are reported in the interim period in which they occur.
The income tax provision for the three and six months ended June 30, 2021 was $0.9 million and $1.7 million, respectively, on pre-tax income of $2.6 million and $16.5 million, resulting in effective income tax rates of 35.2 percent and 10.4 percent, respectively. The effective income tax rate for the three months ended June 30, 2021 differs from the statutory rate primarily due to U.S. valuation allowances and the mix of earnings among tax jurisdictions, partially offset by a favorable adjustment to a tax credit. The effective income tax rate for the six months ended June 30, 2021 differs from the statutory rate primarily due to a favorable adjustment to a tax credit and the reversal of an uncertain tax position, partially offset by the mix of earnings among tax jurisdictions and U.S. valuation allowances.
The income tax benefit for the three and six months ended June 30, 2020 was $3.8 million and $7.2 million, respectively, on pre-tax losses of $47.0 million and $240.5 million, resulting in effective income tax rates of 8.0 percent and 3.0 percent, respectively. The effective income tax rate for the three months ended June 30, 2020 differed from the statutory rate primarily due to the mix of earnings among tax jurisdictions partially offset by the recognition of a valuation allowance on non-deductible interest. The effective income tax rate for the six months ended June 30, 2020 was lower than the statutory rate primarily due to the mix of earnings among tax jurisdictions and the impairment of goodwill for which there is no corresponding tax benefit, partially offset by the recognition of a valuation allowance on non-deductible interest.
20
NOTE 14 - LEASES
The Company determines whether an arrangement is or contains a lease at the inception of the arrangement. Operating leases are included in other non-current assets, accrued expenses and other non-current liabilities in our condensed consolidated balance sheets. Finance leases are included in property, plant and equipment, net, short-term debt and long-term debt (less current portion) in our condensed consolidated balance sheets.
Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Finance and operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. Since we generally do not have access to the interest rate implicit in the lease, the Company uses our incremental borrowing rate (for fully collateralized debt) at the inception of the lease in determining the present value of the lease payments. The implicit rate is, however, used where readily available. Lease expense under operating leases is recognized on a straight-line basis over the term of the lease. Certain of our leases contain both lease and non-lease components, which are accounted for separately.
The Company has operating and finance leases for office facilities, a data center and certain equipment. The remaining terms of our leases range from over one year to eight years. Certain leases include options to extend the lease term for up to ten years, as well as options to terminate which have been excluded from the term of the lease since exercise of these options is not reasonably certain.
21
Lease expense and cash flow for the three and six months ended June 30, 2021 and 2020 and operating and finance lease assets and liabilities, average lease term and average discount rate as of June 30, 2021 and December 31, 2020 are as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets
|
|
$
|
350
|
|
|
$
|
290
|
|
|
$
|
671
|
|
|
$
|
644
|
|
Interest on lease liabilities
|
|
|
23
|
|
|
|
20
|
|
|
|
45
|
|
|
|
42
|
|
Operating lease expense
|
|
|
791
|
|
|
|
835
|
|
|
|
1,648
|
|
|
|
1,680
|
|
Total lease expense
|
|
$
|
1,164
|
|
|
$
|
1,145
|
|
|
$
|
2,364
|
|
|
$
|
2,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash outflows from finance leases
|
|
$
|
23
|
|
|
$
|
20
|
|
|
$
|
45
|
|
|
$
|
42
|
|
Operating cash outflows from operating leases
|
|
|
871
|
|
|
|
873
|
|
|
|
1,803
|
|
|
|
1,764
|
|
Financing cash outflows from finance leases
|
|
|
357
|
|
|
|
255
|
|
|
|
645
|
|
|
|
547
|
|
Right-of-use assets obtained in exchange for finance lease
liabilities, net of terminations and disposals
|
|
|
79
|
|
|
|
72
|
|
|
|
835
|
|
|
|
220
|
|
Right-of-use assets obtained in exchange for operating lease
liabilities, net of terminations and disposals
|
|
|
56
|
|
|
|
215
|
|
|
|
208
|
|
|
|
280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
(Dollars in thousands, except lease term and discount rate)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
$
|
12,245
|
|
|
$
|
13,598
|
|
Accrued liabilities
|
|
|
|
|
|
|
|
|
|
$
|
(2,613
|
)
|
|
$
|
(2,868
|
)
|
Other non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
(10,257
|
)
|
|
|
(11,513
|
)
|
Total operating lease liabilities
|
|
|
|
|
|
|
|
|
|
$
|
(12,870
|
)
|
|
$
|
(14,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment gross
|
|
|
|
|
|
|
|
|
|
$
|
6,938
|
|
|
$
|
5,735
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
(3,990
|
)
|
|
|
(3,319
|
)
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
|
$
|
2,948
|
|
|
$
|
2,416
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
$
|
(1,188
|
)
|
|
$
|
(1,113
|
)
|
Long-term debt (less current portion)
|
|
|
|
|
|
|
|
|
|
|
(2,117
|
)
|
|
|
(2,275
|
)
|
Total finance lease liabilities
|
|
|
|
|
|
|
|
|
|
$
|
(3,305
|
)
|
|
$
|
(3,388
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Term and Discount Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term - finance leases (years)
|
|
|
|
|
|
|
|
|
|
|
3.5
|
|
|
|
3.9
|
|
Weighted-average remaining lease term - operating leases (years)
|
|
|
|
|
|
|
|
|
|
|
5.4
|
|
|
|
6.1
|
|
Weighted-average discount rate - finance leases
|
|
|
|
|
|
|
|
|
|
|
2.8
|
%
|
|
|
3.0
|
%
|
Weighted-average discount rate - operating leases
|
|
|
|
|
|
|
|
|
|
|
3.7
|
%
|
|
|
3.8
|
%
|
22
Summarized future minimum payments under our leases as of June 30, 2021 are as follows:
|
|
|
|
|
|
Amount
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Maturities
|
|
|
|
|
|
Finance Leases
|
|
|
Operating Leases
|
|
Six remaining months of 2021
|
|
|
|
|
|
$
|
696
|
|
|
$
|
1,589
|
|
2022
|
|
|
|
|
|
|
1,093
|
|
|
|
2,838
|
|
2023
|
|
|
|
|
|
|
675
|
|
|
|
2,472
|
|
2024
|
|
|
|
|
|
|
241
|
|
|
|
2,228
|
|
2025
|
|
|
|
|
|
|
155
|
|
|
|
2,171
|
|
Thereafter
|
|
|
|
|
|
|
605
|
|
|
|
2,834
|
|
Total
|
|
|
|
|
|
|
3,465
|
|
|
|
14,132
|
|
Less: Imputed interest
|
|
|
|
|
|
|
(160
|
)
|
|
|
(1,262
|
)
|
Total lease liabilities, net of interest
|
|
|
|
|
|
$
|
3,305
|
|
|
$
|
12,870
|
|
NOTE 15 – RETIREMENT PLANS
We have an unfunded salary continuation plan covering certain directors, officers and other key members of management. Subject to certain vesting requirements, the plan provides for a benefit based on final average compensation, which becomes payable on the employee’s death or upon attaining age 65, if retired. The plan was closed to new participants effective February 3, 2011.
For the six months ended June 30, 2021, payments to retirees or their beneficiaries totaled approximately $0.7 million. We presently anticipate benefit payments in 2021 to total approximately $1.4 million. The following table summarizes the components of net periodic pension cost for the three and six months ended June 30, 2021 and 2020.
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
206
|
|
|
$
|
251
|
|
|
$
|
412
|
|
|
$
|
502
|
|
Net amortization
|
|
|
97
|
|
|
|
72
|
|
|
|
194
|
|
|
|
144
|
|
Net periodic pension cost
|
|
$
|
303
|
|
|
$
|
323
|
|
|
$
|
606
|
|
|
$
|
646
|
|
NOTE 16 - STOCK-BASED COMPENSATION
Equity Incentive Plan
Our 2018 Equity Incentive Plan (the “Plan”) was approved by stockholders in May 2018, authorizing us to issue up to 4.35 million shares of common stock, along with non-qualified stock options, stock appreciation rights, restricted stock and performance units to our officers, key employees, non-employee directors and consultants. In May 2021, the stockholders approved an amendment to the Plan that, among other things, increased the authorized shares by 2 million. At June 30, 2021, there were 1.3 million shares available for future grants under this Plan. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options.
Under the terms of the Plan, each year eligible participants are granted time value restricted stock units (“RSUs”), vesting ratably over a three-year period, and performance restricted stock units (“PSUs”), with three-year cliff vesting. Upon vesting, each restricted stock award is exchangeable for one share of the Company’s common stock, with accrued dividends.
Restricted stock unit and restricted performance stock unit activity for the six months ended June 30, 2021 is summarized in the following table:
23
|
|
Equity Incentive Awards
|
|
|
|
Restricted
Stock Units
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
Performance
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
Balance at December 31, 2020
|
|
|
1,213,667
|
|
|
$
|
3.59
|
|
|
|
2,176,290
|
|
|
$
|
4.88
|
|
|
|
24,000
|
|
|
$
|
20.39
|
|
Granted
|
|
|
411,291
|
|
|
|
5.94
|
|
|
|
653,438
|
|
|
|
8.41
|
|
|
|
—
|
|
|
|
—
|
|
Settled
|
|
|
(548,504
|
)
|
|
|
3.37
|
|
|
|
(193,778
|
)
|
|
|
5.45
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited or expired
|
|
|
(32,525
|
)
|
|
|
8.13
|
|
|
|
(151,369
|
)
|
|
|
12.61
|
|
|
|
(15,000
|
)
|
|
|
22.57
|
|
Balance at June 30, 2021
|
|
|
1,043,929
|
|
|
$
|
4.49
|
|
|
|
2,484,581
|
|
|
$
|
6.67
|
|
|
|
9,000
|
|
|
$
|
16.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards estimated to vest in the future
|
|
|
987,615
|
|
|
$
|
4.55
|
|
|
|
2,200,512
|
|
|
$
|
6.78
|
|
|
|
9,000
|
|
|
$
|
16.76
|
|
Stock-based compensation expense for the three months ended June 30, 2021 and 2020 was $2.5 million and $0.9 million, respectively. Stock-based compensation for the six months ended June 30, 2021 and 2020 was $4.3 million and $0.7 million, respectively. The higher expense for the three and six months ended June 30, 2021 was primarily attributable to the modification of the 2019 and 2020 PSU awards, substituting budgeted amounts for actual performance for the second quarter of 2020 (one of twelve quarters in the respective performance periods), to offset the impact of COVID-19. This increased stock-based compensation for the three and six months ended June 30, 2021 by $1.2 million and $2.3 million, respectively. In addition, 2020 stock-based compensation was lower due to the first quarter 2020 reversal of $1.2 million of previously accrued expense as a result of lower expected performance achievement, in light of the global pandemic. Unrecognized stock-based compensation expense related to non-vested awards of $15.2 million is expected to be recognized over a weighted average period of approximately 1.9 years as of June 30, 2021.
NOTE 17 – COMMITMENTS AND CONTINGENCIES
Purchase Commitments
When market conditions warrant, we may enter into purchase commitments to secure the supply of certain commodities used in the manufacture of our products, such as aluminum, natural gas and other raw materials. Prices under our aluminum contracts are based on a market index, the London Mercantile Exchange, and regional premiums for processing, transportation and alloy components which are adjusted quarterly for purchases in the ensuing quarter. Certain of our purchase agreements include volume commitments; however, any excess commitments are generally negotiated with suppliers and those which have occurred in the past have been carried over to future periods.
Contingencies
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.
NOTE 18 – RECEIVABLES FACTORING
The Company sells certain customer trade receivables on a non-recourse basis under factoring arrangements with designated financial institutions. These transactions are accounted for as sales and cash proceeds are included in cash provided by operating activities. Factoring arrangements incorporate customary representations and warranties, including representations as to validity of amounts due, completeness of performance obligations and absence of commercial disputes. During the three months ended June 30, 2021 and 2020, the Company sold trade receivables totaling $197.3 million and $67.7 million, respectively, and incurred factoring fees of $0.5 million and $0.2 million, respectively. During the six months ended June 30, 2021 and 2020, the Company sold trade receivables totaling $384.0 million and $137.6 million, respectively, and incurred factoring fees of $1.0 million and $0.4 million, respectively. As of June 30, 2021 and December 31, 2020, receivables of $100.1 million and $96.6 million, respectively, had been factored and had not yet been paid by customers to the respective financial institutions. The collective limit under our factoring arrangements as of June 30, 2021 was $129.0 million. The collective limit under our factoring arrangements as of December 31, 2020 was $132.0 million.
24
NOTE 19 – RESTRUCTURING
During the quarter ended June 30, 2020, the Company decided to discontinue the manufacture and sale of high performance aftermarket wheels for the automotive racing market segment. The Company incurred a total non-cash charge of $3.4 million, including $2.8 million recorded in cost of sales, comprised of $1.3 million relating to write-downs of certain after-market inventory to salvage value, $1.0 million of employee severance costs and $0.5 million in contract terminations and other costs, as well as a $0.6 million non-cash charge recorded in selling, general and administrative expense related to non-production employee severance costs. In addition, during the six-month period ended December 31, 2020, we recognized an additional $0.7 million of severance costs, including charges to costs of sales of $0.4 million and selling, general and administrative expense of $0.3 million. As of June 30, 2021, $0.1 million of the restructuring severance accrual remains.
During the third quarter of 2019, the Company initiated a plan to significantly reduce production and manufacturing operations at its Fayetteville, Arkansas location. As a result, the Company recognized a non-cash charge of $13.0 million in cost of sales, principally comprised of accelerated depreciation for excess equipment and the write-down of certain supplies inventory to net salvage value. In addition, relocation costs for redeployment of machinery and equipment of $1.8 million were recognized in the fourth quarter of 2019. During 2020, we recognized additional charges to cost of sales of $3.3 million, principally related to relocation costs for redeployment of machinery and equipment. During the three and six months ended June 30, 2021, we recognized additional relocation costs in cost of sales for redeployment of machinery and equipment of $0.7 million and $1.5 million, respectively. As of June 30, 2021, $0.2 million of the restructuring severance accrual remains. On July 15, 2021, the Company consummated the sale of the Fayetteville facility for a net sale price of $7.6 million, including $0.5 million which was deposited to escrow pending satisfactory completion of certain site repairs and remediation. The net sale price will be more than sufficient to recover the carrying value of the facility and the resulting gain will be recognized upon closing and classified as a part of selling, general and administrative expenses.
NOTE 20 – SUBSEQUENT EVENT
Production at our Werdohl Germany manufacturing site was temporarily halted due to flooding at the plant on July 14, 2021. On July 16th, operations at this facility were restarted, with the exception of a painting line and certain machining cells. We have property and business interruption insurance coverage, each with a deductible of $2.5 million. We are in the process of determining the ultimate cost associated with this event.
25