Superior Industries(US:SUP)2025-03-06 21:05PART I Business Superior Industries designs and manufactures aluminum wheels for OEMs in North America and Europe, with 92% of 2024 sales from OEMs, consolidating European manufacturing in Poland after a 2023 German subsidiary deconsolidation - The company's principal business is designing and manufacturing aluminum wheels for OEMs, which accounted for about 92% of sales in 20241618 - The company operates and reports in two segments: North America (manufacturing primarily in Mexico) and Europe (production now concentrated in Poland following the deconsolidation of its German subsidiary)1928 - On August 31, 2023, the German subsidiary, Superior Industries Production Germany GmbH (SPG), filed for insolvency and was deconsolidated from the company's financial statements17 Customer Concentration (% of Consolidated Net Sales) | Customer | 2024 | 2023 | | :--- | :--- | :--- | | GM | 24% | 21% | | Ford | 16% | 15% | | VW Group | 12% | 15% | | Toyota | 12% | 11% | - Aluminum is the primary raw material, with price adjustment clauses with OEM customers to mitigate aluminum price risk, and derivatives used to hedge this risk for its aftermarket business3031 Risk Factors The company faces significant risks from automotive industry cyclicality, intense competition, high customer concentration, a highly leveraged capital structure, raw material cost fluctuations, trade tariffs, and cybersecurity threats - The business is exposed to the cyclicality of the automotive industry and operates in a highly competitive global market, facing pricing pressure from competitors in low-cost countries4142 - A limited number of customers, including GM, Ford, VW Group, and Toyota, represent a large percentage of sales (77% in 2024), making the company vulnerable to shifts in their demand or purchasing decisions47 - The company is exposed to cost fluctuations for raw materials like aluminum, silicon, and energy, with OEM contracts allowing for pass-through of aluminum costs, but the aftermarket business not similarly protected495152 - The company has a heavily leveraged capital structure and does not expect to generate sufficient cash to repay all its indebtedness by maturity, making it dependent on accessing capital markets for refinancing717274 - International operations, particularly manufacturing in Mexico and Poland, expose the company to risks from trade agreements, tariffs, and foreign currency fluctuations, with recently announced U.S. tariffs on imports from Mexico, Canada, and China posing a significant risk626467 Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None114 Cybersecurity Superior's cybersecurity strategy focuses on cyber-resilience using the NIST framework, with Board oversight and CIO management, addressing threats like BEC and legacy system vulnerabilities - The cybersecurity strategy focuses on cyber-resilience, aiming for a zero-trust architecture, and is based on the National Institute of Standards and Technology (NIST) framework115116 - Oversight is provided by the Board of Directors and the Audit Committee, with the Chief Information Officer (CIO) having primary management responsibility120122 - Business Email Compromise (BEC) is identified as a top cybersecurity threat, alongside potential vulnerabilities in business systems and infrastructure117 Properties The company owns four manufacturing facilities in Mexico and three in Poland for its North American and European operations, while its headquarters and other key facilities are leased - The company owns all its primary manufacturing facilities: four in Chihuahua, Mexico, and three in Stalowa Wola, Poland126127 - Leased properties include the worldwide headquarters in Southfield, Michigan, the European headquarters in Bad Dürkheim, Germany, and shared service centers in Mexico and Poland126127 Legal Proceedings The company is involved in various legal proceedings, including a March 2022 German Federal Cartel Office investigation into suspected anti-competitive conduct among European wheel manufacturers - The company is cooperating with an investigation by the German Federal Cartel Office initiated in March 2022 regarding suspected anti-competitive conduct among European wheel manufacturers, with the duration and outcome currently unknown130 Mine Safety Disclosures This item is not applicable to the company - Not applicable131 Information about Our Executive Officers This section provides biographical information for the company's executive officers, who are appointed annually by the Board of Directors Executive Officers as of December 31, 2024 | Name | Age | Position | | :--- | :--- | :--- | | Majdi B. Abulaban | 61 | President and Chief Executive Officer | | Kevin Burke | 56 | Senior Vice President, Chief Human Resources and Sustainability Officer | | Michael Dorah | 59 | Executive Vice President and Chief Operating Officer | | Parveen Kakar | 58 | Senior Vice President, Chief Commercial and Technology Officer | | David Sherbin | 65 | Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary | | Daniel D. Lee | 54 | Senior Vice President, Chief Financial Officer | | Stacie R. Schulz | 45 | Vice President, Chief Accounting Officer | PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Superior Industries' common stock is traded on the New York Stock Exchange (NYSE) under the ticker symbol "SUP", with approximately 264 holders of record as of February 28, 2025 - The company's common stock is listed on the New York Stock Exchange (NYSE) with the trading symbol "SUP"139 - As of February 28, 2025, there were approximately 264 holders of record of the common stock139 Reserved This item is reserved and contains no information - This section is intentionally left blank140 Management's Discussion and Analysis of Financial Condition and Results of Operations In 2024, net sales decreased to $1.27 billion, with a net loss of $78.2 million, an improvement from 2023, while Adjusted EBITDA declined and the company refinanced its debt with a new $520 million term loan Results of Operations In 2024, net sales decreased by 8.5% to $1.27 billion due to lower pass-through costs and volume, while income from operations improved significantly to $29.3 million, resulting in a net loss of $78.2 million Consolidated Results of Operations (in thousands) | Fiscal Year Ended Dec 31, | 2024 | 2023 | Net Change | | :--- | :--- | :--- | :--- | | Net sales | $1,267,344 | $1,385,283 | $(117,939) | | Gross profit | $110,534 | $115,748 | $(5,214) | | Income (loss) from operations | $29,252 | $(51,448) | $80,700 | | Net income (loss) | $(78,182) | $(92,852) | $14,670 | | Diluted earnings (loss) per share | $(4.25) | $(4.73) | $0.48 | | Adjusted EBITDA | $146,279 | $159,150 | $(12,871) | - The decrease in net sales was primarily driven by lower aluminum and other pass-through costs ($61.4 million), reduced volume ($44.3 million), and unfavorable product mix and pricing ($11.7 million)154 - The improvement in income from operations was mainly due to the absence of the $79.6 million loss on deconsolidation of a subsidiary that was recorded in 2023153158 - Net interest expense increased by 8.0% to $67.1 million in 2024, primarily due to the upsizing of borrowings under the amended term loan159 Segment Analysis In 2024, North America's net sales slightly decreased with lower operating income, while Europe's net sales significantly dropped, but its operating loss narrowed due to the absence of a prior-year deconsolidation loss Segment Sales and Income from Operations (in thousands) | Segment | Net Sales 2024 | Net Sales 2023 | Income (Loss) from Ops 2024 | Income (Loss) from Ops 2023 | | :--- | :--- | :--- | :--- | :--- | | North America | $786,124 | $794,386 | $43,010 | $51,791 | | Europe | $481,220 | $590,897 | $(13,758) | $(103,239) | | Total | $1,267,344 | $1,385,283 | $29,252 | $(51,448) | - North America's operating income decreased by $8.8 million due to lower product mix/pricing and higher costs, partially offset by higher volumes166 - Europe's operating loss decreased by $89.5 million, primarily due to the $79.6 million loss on deconsolidation of SPG in 2023 and lower material and conversion costs in 2024168 Financial Condition, Liquidity and Capital Resources As of December 31, 2024, the company had $44.7 million in liquidity, having refinanced its debt with a new $520.0 million term loan in August 2024, and faces significant obligations from redeemable preferred stock Available Liquidity as of Dec 31, 2024 (in millions) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $39.7 | | Unused commitments on revolving credit facility | $42.5 | | Minimum contractual liquidity per Credit Agreement | ($37.5) | | Total available liquidity | $44.7 | - On August 14, 2024, the company refinanced its debt, incurring a new $520.0 million Term Loan Facility maturing December 15, 2028, and redeeming its 6.000% Senior Notes due 2025175189 - The company's redeemable preferred stock had a carrying value of $288.5 million as of Dec 31, 2024, with a potential redemption value of $320.3 million, and holders can redeem on or after September 14, 2025191192 - Net cash provided by operating activities decreased to $18.3 million in 2024 from $64.4 million in 2023, primarily due to lower earnings (after adjusting for non-cash items) and changes in working capital199200 Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Superior Industries is not required to provide the information for this item - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company219 Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2024 and 2023, with an unqualified auditor's opinion, highlighting a critical audit matter regarding U.S. deferred tax assets and reporting a 2024 net loss of $78.2 million - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and identified the realizability of U.S. deferred tax assets as a critical audit matter due to the significant judgments involved223227229 Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $308,761 | $459,929 | | Total Assets | $740,129 | $1,030,571 | | Long-term Debt | $481,449 | $610,632 | | Total Liabilities | $721,702 | $878,216 | | Total Shareholders' Equity (Deficit) | $(276,218) | $(85,940) | Consolidated Statement of Cash Flows Highlights (in thousands) | | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $18,313 | $64,431 | | Net cash used by investing activities | $(28,283) | $(45,607) | | Net cash used by financing activities | $(148,339) | $(34,230) | | Net change in cash and cash equivalents | $(161,496) | $(11,416) | - On August 31, 2023, the company's German subsidiary, SPG, filed for insolvency and was deconsolidated, resulting in a loss of $79.6 million in 2023373 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None377 Controls and Procedures As of December 31, 2024, management concluded that disclosure controls and internal control over financial reporting were effective, with the latter assessment audited by Deloitte & Touche LLP - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024378 - Management determined that internal control over financial reporting was effective as of December 31, 2024, based on the COSO framework, and this was audited by Deloitte & Touche LLP381382 Other Information CEO Majdi Abulaban adopted a Rule 10b5-1 trading plan on September 9, 2024, for the potential sale of up to 500,000 shares, expiring June 30, 2025 - CEO Majdi Abulaban adopted a Rule 10b5-1 trading arrangement on September 9, 2024, which provides for the sale of up to 500,000 shares of common stock and expires on June 30, 2025385 Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable387 PART III Directors, Executive Officers and Corporate Governance The information required for this item, including details about directors, executive officers, and corporate governance matters, is incorporated by reference from the company's 2025 Proxy Statement - Information required by this item is incorporated by reference from the company's 2025 Proxy Statement389 Executive Compensation The information required for this item, relating to director and executive compensation, is incorporated by reference from the company's 2025 Proxy Statement - Information regarding executive compensation is incorporated by reference from the company's 2025 Proxy Statement393 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required for this item, concerning security ownership by beneficial owners and management, is incorporated by reference from the company's 2025 Proxy Statement - Information regarding security ownership is incorporated by reference from the company's 2025 Proxy Statement394 Certain Relationships and Related Transactions, and Director Independence The information required for this item, regarding related party transactions and director independence, is incorporated by reference from the company's 2025 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2025 Proxy Statement395 Principal Accountant Fees and Services The information required for this item, detailing fees paid to and services provided by the principal accountant, is incorporated by reference from the company's 2025 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the company's 2025 Proxy Statement396 PART IV Exhibits, Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including financial statements, Schedule II, and a comprehensive list of exhibits - This section contains the index of financial statements, Schedule II (Valuation and Qualifying Accounts), and all exhibits filed with the annual report399 Schedule II - Valuation and Qualifying Accounts (in thousands) | Description | Balance at Beg. of 2024 | Additions | Deductions | Balance at End of 2024 | | :--- | :--- | :--- | :--- | :--- | | Allowance for doubtful accounts receivable | $718 | $— | $(655) | $63 | | Allowance on long term receivable | $14,779 | $— | $(14,779) | $— | | Valuation allowances for deferred tax assets | $60,387 | $29,951 | $(2,464) | $87,874 | Form 10-K Summary The company has not provided a summary in this section of the Form 10-K - None413