Superior Industries(SUP) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This part presents the unaudited quarterly financial statements, management's analysis, and market risk disclosures Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited statements reveal a net loss and a going concern warning due to the subsequent loss of major customers Condensed Consolidated Statements of Income (Loss) The company's Q1 2025 net loss improved year-over-year despite a decline in gross profit on slightly higher sales Condensed Consolidated Statements of Income (Loss) (in thousands, except per share amounts) | Financial Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | NET SALES | $321,602 | $316,276 | | GROSS PROFIT | $16,100 | $21,146 | | INCOME (LOSS) FROM OPERATIONS | $622 | $314 | | NET INCOME (LOSS) | $(12,929) | $(32,749) | | EARNINGS (LOSS) PER SHARE – DILUTED | $(0.92) | $(1.52) | Condensed Consolidated Balance Sheets Total assets and liabilities increased as of March 31, 2025, while the shareholders' deficit continued to widen Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $54,458 | $40,110 | | Total current assets | $335,086 | $308,761 | | Total assets | $763,779 | $740,129 | | Total current liabilities | $224,513 | $195,926 | | Long-term debt | $481,763 | $481,449 | | Total shareholders' equity (deficit) | $(288,661) | $(276,218) | Condensed Consolidated Statements of Cash Flows Net cash from operations improved significantly in Q1 2025, driven by favorable working capital changes Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,507 | $3,470 | | Net cash used by investing activities | $(5,964) | $(6,618) | | Net cash used by financing activities | $(4,357) | $(6,548) | | Net change in cash and cash equivalents | $14,348 | $(10,535) | Notes to Condensed Consolidated Financial Statements Key disclosures include a going concern warning, segment performance details, and expected future asset impairments - Going Concern Warning: Subsequent to March 31, 2025, the company was notified by certain North American customers of their intent to resource substantially all purchase orders to other suppliers[20][21] - These customers represented approximately 40% of 2024 consolidated net sales, which, combined with the suspension of factoring arrangements, raises substantial doubt about the Company's ability to continue as a going concern[20][21] - Subsequent Events: The company expects to record material asset impairment charges in the second quarter of 2025 related to inventory, deferred tax assets, and property, plant, and equipment in North America due to the loss of business[87][88][90] - The company has a $520.0 million Term Loan Facility and a $60.0 million Revolving Credit Facility, and it expects it will not be able to meet financial covenants as early as June 30, 2025[21][46][50] Segment Performance - Q1 2025 vs Q1 2024 (in thousands) | Segment | Net Sales (Q1 2025) | Net Sales (Q1 2024) | Income (Loss) from Operations (Q1 2025) | Income (Loss) from Operations (Q1 2024) | | :--- | :--- | :--- | :--- | :--- | | North America | $203,708 | $193,508 | $4,935 | $8,082 | | Europe | $117,894 | $122,768 | $(4,313) | $(7,768) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management highlights severe liquidity challenges and going concern doubts following the loss of key customers - Subsequent to Q1 2025, certain North American customers, representing ~33% of projected 2025 sales and 40% of 2024 sales, notified the company of their intent to resource all business to other suppliers[98] - Due to customer losses and suspension of factoring programs, management does not expect to have sufficient liquidity to fund operations over the next twelve months and anticipates breaching debt covenants as early as June 30, 2025, raising substantial doubt about its ability to continue as a going concern[99][125] - The company has engaged financial advisors to explore strategic alternatives, including new debt/equity financing, asset sales, and is in discussions with lenders for potential new financing and covenant relief[126] Q1 2025 vs Q1 2024 Key Metrics (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $321,602 | $316,276 | | Gross Profit | $16,100 | $21,146 | | Net Loss | $(12,929) | $(32,749) | | Adjusted EBITDA | $25,088 | $30,849 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exempt from this disclosure requirement as a smaller reporting company - As a smaller reporting company, the Company is not required to provide the information required by this item[153] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2025, the Company's disclosure controls and procedures were effective[155] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[156] PART II - OTHER INFORMATION This part covers legal proceedings, updated risk factors, and other required corporate disclosures Item 1. Legal Proceedings The company discloses an ongoing anti-competitive conduct investigation by German authorities with an unknown outcome - In March 2022, the German Federal Cartel Office began an investigation into European light alloy wheel manufacturers, including a subsidiary of the Company, on suspicion of anti-competitive conduct[160] Item 1A. Risk Factors A critical new risk factor regarding the company's ability to continue as a going concern has been added - A new significant risk factor has been added: The company's current cash and liquidity projections raise substantial doubt about its ability to continue as a going concern[162] - The going concern issue stems from the loss of customers representing 40% of 2024 net sales and the suspension of factoring programs, which will significantly affect cash generation[162] - The company expects it will not be able to meet financial covenants under its Credit Agreements as early as June 30, 2025, without new funding or waivers[162] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[164] Item 3. Defaults upon Senior Securities No defaults upon senior securities occurred during the reporting period - None[165] Item 4. Mine Safety Disclosures This disclosure requirement is not applicable to the company's operations - Not applicable[166] Item 5. Other Information No other material information was required to be reported during the period - None[167] Item 6. Exhibits This section lists all exhibits filed with the report, including credit agreement amendments and SOX certifications - Key exhibits include the First Amendment to the Amended and Restated Credit Agreement and CEO/CFO certifications[169]