
PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of the company's financial condition and operational results Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including income, balance sheets, cash flows, and equity, with detailed notes on business, revenue, and debt for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Statements of Income (Loss) The company reported a significant increase in net loss for both the three and six months ended June 30, 2025, primarily driven by a substantial impairment of long-lived assets and a decline in net sales Condensed Consolidated Statements of Income (Loss) (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | $207,897 | $318,967 | $529,499 | $635,243 | | Gross Profit (Loss) | $(21,448) | $31,620 | $(5,348) | $52,766 | | Income (Loss) from Operations | $(113,215) | $10,244 | $(112,593) | $10,558 | | Net Income (Loss) | $(181,053) | $(11,124) | $(193,982) | $(43,873) | | EPS – Basic | $(6.66) | $(0.75) | $(7.63) | $(2.26) | | EPS – Diluted | $(6.66) | $(0.75) | $(7.63) | $(2.26) | - Impairment of long-lived assets was $66,906 thousand for both the three and six months ended June 30, 2025, compared to zero in the prior year periods9 Condensed Consolidated Statements of Comprehensive Income (Loss) The company's comprehensive loss significantly increased in Q2 and H1 2025 compared to 2024, despite a positive foreign currency translation gain, due to the substantial net loss Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(181,053) | $(11,124) | $(193,982) | $(43,873) | | Foreign currency translation gain (loss), net of tax | $38,726 | $(18,247) | $48,924 | $(15,748) | | Change in unrecognized gains (losses) on derivative instruments, net of tax | $1,475 | $(15,976) | $5,405 | $(13,282) | | Other comprehensive income (loss), net of tax | $40,201 | $(34,220) | $54,329 | $(28,849) | | Comprehensive income (loss) | $(140,852) | $(45,344) | $(139,653) | $(72,722) | Condensed Consolidated Balance Sheets As of June 30, 2025, the company's total assets decreased significantly compared to December 31, 2024, primarily due to reductions in property, plant and equipment, and deferred income tax assets, while long-term debt increased and equity remained in deficit Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $85,268 | $40,110 | | Total current assets | $320,683 | $308,761 | | Property, plant and equipment, net | $274,838 | $329,892 | | Deferred income tax assets, net | $0 | $39,046 | | Total assets | $630,321 | $740,129 | | Total current liabilities | $181,248 | $195,926 | | Long-term debt (less current portion) | $537,490 | $481,449 | | Total liabilities, mezzanine equity and shareholders' equity (deficit) | $630,321 | $740,129 | | Total shareholders' equity (deficit) | $(444,705) | $(276,218) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company generated positive cash flow from operating activities, a significant improvement from the prior year, primarily due to cash from early termination of derivative instruments and changes in working capital, with financing activities also providing substantial cash Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided (used) by operating activities | $6,033 | $(4,544) | | Net cash provided (used) by investing activities | $(11,911) | $(14,844) | | Net cash provided (used) by financing activities | $46,858 | $(8,094) | | Net changes in cash and cash equivalents | $45,158 | $(29,344) | | Cash and cash equivalents at the end of the period | $85,268 | $172,262 | - Cash proceeds from early termination of derivative instruments contributed $37,537 thousand to operating activities in H1 202514 Condensed Consolidated Statements of Shareholders' Equity (Deficit) The company's total shareholders' equity deficit significantly widened during both the three and six months ended June 30, 2025, primarily due to substantial net losses and redeemable preferred 9% dividend and accretion Condensed Consolidated Statements of Shareholders' Equity (Deficit) (in thousands, except shares) | Metric (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Net income (loss) | $(181,053) | $(193,982) | $(11,124) | $(43,873) | | Change in accumulated other comprehensive income (loss), net of tax | $40,201 | $54,329 | $(34,220) | $(28,849) | | Stock-based compensation | $625 | $874 | $2,158 | $2,742 | | Redeemable preferred 9% dividend and accretion | $(15,811) | $(29,697) | $(10,353) | $(20,519) | | Total shareholders' equity (deficit) at period end | $(444,705) | $(444,705) | $(176,446) | $(176,446) | NOTE 1 – DESCRIPTION OF THE BUSINESS Superior Industries International, Inc. designs and manufactures aluminum wheels for OEMs and the European aftermarket, and recently entered a Merger Agreement to be acquired by affiliates of its existing lenders, expected to close in Q3 2025 - The principal business is the design and manufacture of aluminum wheels for OEMs in North America and Europe, and for the aftermarket in Europe under brands like ATS, RIAL, ALUTEC, and ANZIO18 - On July 8, 2025, the Company entered into a Merger Agreement to be acquired by SUP Parent Holdings, LLC, an affiliate of its existing lenders, with the Company surviving as a wholly owned subsidiary of Parent19 - Common Shares will be converted into the right to receive $0.09 per share in cash, while Series A Preferred Shares will receive a cash amount and 3.5% of Parent's common equity2021 - The merger is subject to conditions including stockholder adoption, governmental approvals, no Company Material Adverse Effect, and new credit facilities, with an expected closing in Q3 20252223 NOTE 2 – BASIS OF PRESENTATION The financial statements are prepared under U.S. GAAP, utilizing estimates, and the company faces substantial doubt about its ability to continue as a going concern due to significant customer resourcing actions, severely impacting liquidity and leading to asset impairments - Customers in North America notified the Company of their intent to resource substantially all outstanding purchase orders, impacting approximately 33% of projected consolidated net sales for fiscal year 202527 - The Company borrowed $42.5 million on its revolving credit facility and secured an incremental $70.0 million delayed draw term loan facility ($10.0 million funded) to address liquidity concerns2728 - A limited waiver of financial covenants was obtained for the period ended June 30, 2025, but the Company does not expect to meet covenants as early as September 30, 2025, raising substantial doubt about its ability to continue as a going concern30 NOTE 3 – REVENUE Revenue is disaggregated by North America and Europe segments, with trade receivables increasing and contract liabilities decreasing, and a non-cash charge of $3.1 million recorded to write-down a customer trade receivable due to customer resourcing actions Revenue Metrics (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Trade receivables | $63,839 | $56,690 | | Contract liabilities—current | $4,454 | $6,819 | | Contract liabilities—noncurrent | $4,931 | $6,845 | - A non-cash charge of $3.1 million was recorded during Q2 and H1 2025 to write-down a customer trade receivable due to customer resourcing actions36 NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE The company uses derivative instruments to mitigate foreign currency, interest rate, and commodity price risks, but terminated all outstanding derivatives during Q2 2025, recognizing a significant non-cash impairment charge of $66.9 million on North America long-lived assets due to customer actions - The Company terminated all outstanding foreign exchange, commodity, and interest rate derivative instruments during the three months ended June 30, 202542 Notional Amount of Derivative Instruments (in thousands) | Notional Amount (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Foreign exchange contracts | $0 | $434,327 | | Interest rate contracts | $0 | $150,000 | - A non-cash impairment charge of $66.9 million was recorded to property, plant, and equipment during Q2 and H1 2025 for the North America asset group due to customer resourcing actions51 NOTE 5 - BUSINESS SEGMENTS The North America segment experienced a substantial decline in net sales and a significant operating loss in both Q2 and H1 2025, primarily due to customer resourcing and asset impairment, while the Europe segment saw a modest decrease in net sales and an increased operating loss in Q2, but a decreased operating loss in H1 Segment Performance (in thousands) | Metric (in thousands) | North America Q2 2025 | Europe Q2 2025 | Total Q2 2025 | North America Q2 2024 | Europe Q2 2024 | Total Q2 2024 | | :-------------------- | :-------------------- | :------------- | :------------ | :-------------------- | :------------- | :------------ | | Net Sales | $93,804 | $114,093 | $207,897 | $203,203 | $115,764 | $318,967 | | Income (loss) from operations | $(107,404) | $(5,811) | $(113,215) | $13,195 | $(2,951) | $10,244 | | Depreciation and amortization | $8,392 | $10,230 | $18,622 | $10,334 | $11,554 | $21,888 | | Capital expenditures | $2,070 | $3,877 | $5,947 | $4,013 | $4,213 | $8,226 | Segment Performance (in thousands) | Metric (in thousands) | North America H1 2025 | Europe H1 2025 | Total H1 2025 | North America H1 2024 | Europe H1 2024 | Total H1 2024 | | :-------------------- | :-------------------- | :------------- | :------------ | :-------------------- | :------------- | :------------ | | Net Sales | $297,512 | $231,987 | $529,499 | $396,711 | $238,532 | $635,243 | | Income (loss) from operations | $(102,469) | $(10,124) | $(112,593) | $21,277 | $(10,719) | $10,558 | | Depreciation and amortization | $17,048 | $21,116 | $38,164 | $20,677 | $23,157 | $43,834 | | Capital expenditures | $4,907 | $7,004 | $11,911 | $8,570 | $6,274 | $14,844 | Property, Plant and Equipment, net (in thousands) | Property, Plant and Equipment, net (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | U.S. | $1,332 | $1,505 | | Mexico | $102,329 | $172,674 | | Germany | $3,640 | $573 | | Poland | $167,537 | $155,140 | | Total | $274,838 | $329,892 | NOTE 6 - INVENTORIES Total inventories decreased from December 31, 2024, to June 30, 2025, with a non-cash charge of $11.9 million (Q2) and $12.1 million (H1) recognized to write-down inventory due to customer resourcing actions Inventory Classification (in thousands) | Inventory Classification (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Raw materials | $31,842 | $34,339 | | Work in process | $31,200 | $34,449 | | Finished goods | $65,294 | $76,948 | | Inventories, net | $128,336 | $145,736 | - A non-cash charge of $11.9 million (Q2 2025) and $12.1 million (H1 2025) was recognized to write-down inventory to net realizable value due to customer resourcing actions57 NOTE 7 – INTANGIBLE ASSETS Amortization expense for intangible assets decreased in Q2 and H1 2025 compared to the prior year, with total anticipated future amortization of $5.19 million Amortization Expense (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Amortization expense | $3,594 | $4,842 | $8,323 | $9,726 | Annual Anticipated Future Amortization (in thousands) | Annual Anticipated Future Amortization | Amount (in thousands) | | :------------------------------------- | :-------------------- | | Six Remaining Months of 2025 | $1,352 | | 2026 | $2,709 | | 2027 | $1,129 | | Total anticipated future amortization | $5,190 | NOTE 8 – DEBT The company's long-term debt increased significantly, primarily due to increased borrowings under its Revolving Credit Facility and the new Delayed Draw Term Loan Facility, with recent amendments providing additional liquidity and covenant waivers, though future compliance remains a concern Long-Term Obligations (in thousands) | Long-Term Obligations (in thousands) | June 30, 2025 Carrying Value | December 31, 2024 Carrying Value | | :----------------------------------- | :----------------------------- | :------------------------------- | | Revolving Credit Facility | $42,473 | $0 | | Term Loan Facility | $499,586 | $488,298 | | Delayed Draw Term Loan Facility | $10,025 | $0 | | Total long-term debt (less current portion) | $537,490 | $481,449 | - The company entered into a Second Amendment to its Term Loan Agreement, providing an incremental $70.0 million Delayed Draw Term Loan Facility, of which $10.0 million was funded on June 4, 2025, and an additional $25.0 million was drawn subsequent to June 30, 20256569 - Amendments to the Term Loan Agreement and Revolving Credit Agreement included a limited waiver of financial covenants for the test period ending June 30, 2025, and permission to unwind hedging arrangements6768 - Factoring arrangements were temporarily suspended during Q2 2025 but reinstated prior to June 30, 2025, and the company was required to repurchase $6.3 million of accounts receivable75 NOTE 9 - SUPPLIER FINANCE PROGRAM The company's supplier finance program was suspended during Q2 2025, with $15.2 million in obligations due to the financial institution as of June 30, 2025 - The supplier finance program was suspended during the three months ended June 30, 202576 - Obligations due under the program were $15.2 million as of June 30, 2025, down from $26.0 million at December 31, 202476 NOTE 10 - REDEEMABLE SHARES Preferred stock dividends were paid-in-kind, increasing stated and carrying values, and in connection with the proposed merger, the preferred shareholder (TPG) agreed to waive certain dividend and redemption rights - Preferred stock dividends of $3.7 million (Q2 2025) and $7.5 million (H1 2025) were paid-in-kind, increasing the stated value77 Redeemable Preferred Stock (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Stated value | $167,600 | $160,100 | | Carrying value | $318,162 | $288,465 | - TPG, the holder of Series A Preferred Shares, waived its right to receive dividends and certain redemption rights until the earlier of the merger's effective time or termination of the Preferred VSA7880 NOTE 11 – EARNINGS PER SHARE Basic and diluted earnings per share calculations reflect significant losses for both periods, with preferred dividends and noncontrolling redeemable equity dividends deducted from net income, and preferred shares excluded from diluted EPS due to anti-dilutive effects and lack of contractual obligation to share in losses Earnings Per Share (in thousands, except per share) | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common shareholders | $(181,053) | $(11,124) | $(193,982) | $(43,873) | | Redeemable preferred stock dividends and accretion | $(15,811) | $(10,353) | $(29,697) | $(20,519) | | Basic numerator | $(196,870) | $(21,477) | $(223,690) | $(64,399) | | Weighted average shares outstanding – Basic | 29,570 | 28,732 | 29,318 | 28,493 | | Basic earnings (loss) per share | $(6.66) | $(0.75) | $(7.63) | $(2.26) | | Diluted earnings (loss) per share | $(6.66) | $(0.75) | $(7.63) | $(2.26) | - Approximately 80.2 thousand (Q2 2025) and 273.7 thousand (H1 2025) stock-based compensation shares were anti-dilutive and excluded from diluted EPS8485 - Redeemable preferred shares (convertible into ~6.0 million shares) were not included in diluted EPS because preferred shareholders do not have a contractual obligation to share in the Company's losses86 NOTE 12 - INCOME TAXES The company recorded significant income tax provisions on pre-tax losses for both Q2 and H1 2025, resulting in negative effective tax rates that differ from the statutory rate primarily due to valuation allowances and the mix of earnings across tax jurisdictions, with substantially all U.S., Mexico, Poland, and German deferred tax assets subject to valuation allowances Income Tax (Provision) Benefit (in thousands, except rate) | Metric (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Income tax (provision) benefit | $(45,470) | $(40,029) | $(6,420) | $(23,068) | | Income (loss) before income taxes | $(135,583) | $(153,953) | $(4,704) | $(20,805) | | Effective income tax rate | (33.5)% | (26.0)% | (136.5)% | (110.9)% | - The effective income tax rates differ from the statutory rate primarily due to valuation allowances and the mix of earnings among tax jurisdictions8990 - Substantially all U.S., Mexico, Poland, and German deferred tax assets, net of deferred tax liabilities, were subject to valuation allowances as of June 30, 202591 NOTE 13 - LEASES Total lease expense increased slightly in Q2 and H1 2025, with the company having both operating and finance leases for various assets, and corresponding assets and liabilities recorded on the balance sheet Lease Expenses and Cash Flows (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total lease expense | $1,019 | $941 | $2,055 | $1,908 | | Operating cash outflows from operating leases | $801 | $833 | $1,632 | $1,685 | | Financing cash outflows from finance leases | $237 | $144 | $456 | $293 | Balance Sheet Information (in thousands) | Balance Sheet Information (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Operating leases: Other noncurrent assets | $6,182 | $7,057 | | Operating leases: Total operating lease liabilities | $5,994 | $6,952 | | Finance leases: Property, plant and equipment, net | $1,595 | $1,559 | | Finance leases: Total finance lease liabilities | $1,182 | $1,090 | NOTE 14 - STOCK-BASED COMPENSATION The company's equity incentive plan has 3.3 million shares available for future grants, RSU and PSU activity saw significant settlements and forfeitures in H1 2025, and total stock-based compensation expense decreased in Q2 and H1 2025, with a benefit from cash-settled awards in Q2 - As of June 30, 2025, there were 3.3 million shares available for future grants under the 2018 Equity Incentive Plan96 RSU and PSU Activity (Shares) | RSU and PSU Activity (Shares) | Balance at Jan 1, 2025 | Settled | Forfeited or expired | Balance at June 30, 2025 | | :---------------------------- | :--------------------- | :------ | :------------------- | :----------------------- | | Restricted Stock Units | 1,048,973 | (609,850) | (62,291) | 376,832 | | Performance Shares | 1,476,920 | (644,823) | (97,440) | 753,666 | Stock-based Compensation Expense (in thousands) | Stock-based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cash-settled share-based compensation expense (benefit) | $(856) | $0 | $263 | $0 | | Share-settled share-based compensation expense (benefit) | $745 | $2,367 | $1,655 | $4,087 | | Total compensation expense | $(111) | $2,367 | $1,918 | $4,087 | NOTE 15 – COMMITMENTS AND CONTINGENCIES The company has purchase commitments for commodities and is involved in various legal proceedings, including a German Federal Cartel Office investigation and a Polish energy contract dispute where an adverse judgment is now probable, leading to a $1.5 million provision - The German Federal Cartel Office initiated an investigation related to European light alloy wheel manufacturers, including Superior Industries Europe AG, on suspicion of conduct restricting competition104 - In a Polish energy contract dispute, the company concluded that an adverse judgment is probable and recognized a provision of $1.5 million, representing the low end of the estimated potential loss107 NOTE 16 – RESTRUCTURING The restructuring reserve balance decreased to $2.065 million as of June 30, 2025, and the company plans a workforce reduction in North America in Q3 2025, expecting to incur $15.0 million to $20.0 million in severance and other restructuring costs due to customer resourcing actions Restructuring Reserve Balance (in thousands) | Restructuring Reserve Balance (in thousands) | 2025 | 2024 | | :------------------------------------------- | :------------ | :------------ | | Balance at beginning of period | $5,152 | $3,386 | | Provision | $4,399 | $(933) | | Cash payment | $(6,735) | $(907) | | Balance at March 31 | $2,956 | $1,469 | | Provision (Q2) | $1,329 | $1,014 | | Cash payment (Q2) | $(2,379) | $(45) | | Balance at June 30 | $2,065 | $2,427 | - The company plans to reduce its North America manufacturing workforce in Q3 2025, expecting $15.0 million to $20.0 million in severance and other restructuring costs due to customer resourcing actions109 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and liquidity, highlighting the significant impact of customer resourcing actions, the proposed merger, and broader industry challenges, leading to substantial losses and a going concern warning Forward-Looking Statements This section serves as a cautionary note, stating that the report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations, and readers are advised not to place undue reliance on these statements - Forward-looking statements are based on management's current expectations and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially111 - The company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise112 Executive Overview The Executive Overview details Superior's core business of aluminum wheel manufacturing and the significant challenges it faces, including a proposed merger, major customer resourcing actions leading to a going concern warning, and broader industry headwinds like supply chain disruptions, inflation, and declining light vehicle production Overview of Superior Superior Industries designs and manufactures aluminum wheels for OEMs in North America and Europe, and for the European aftermarket, with demand driven by light vehicle production and customer take rates, and major customers including VW Group, Toyota, Ford, and GM - The principal business is the design and manufacture of aluminum wheels for OEMs in North America and Europe, and for the aftermarket in Europe114 - Demand for products is mainly driven by light vehicle production levels in North America and Europe and customer take rates115 Customer Sales Percentage | Customer | Q2 2025 Sales % | Q2 2024 Sales % | H1 2025 Sales % | H1 2024 Sales % | | :------- | :-------------- | :-------------- | :-------------- | :-------------- | | GM | 1% | 25% | 14% | 24% | | Ford | 7% | 16% | 14% | 16% | | VW Group | 25% | 13% | 19% | 12% | | Toyota | 24% | 11% | 17% | 11% | Proposed Merger The company entered into a Merger Agreement on July 8, 2025, to be acquired by affiliates of its existing lenders, with common shareholders receiving $0.09 per share in cash and preferred shareholders receiving cash and a 3.5% equity stake in the acquiring parent, expected to close in Q3 2025 - On July 8, 2025, the Company entered into a Merger Agreement to be acquired by SUP Parent Holdings, LLC, an affiliate of its existing Term Loan Agreement lenders117 - Common Shares will be converted into the right to receive $0.09 per Common Share in cash118121 - Series A Preferred Shares will receive a cash amount and 3.5% of Parent's common equity118121 - The merger is expected to close in the third quarter of 2025, contingent on stockholder approval, governmental consents, and other customary conditions119120 Recent Customer Resourcing Actions During Q2 2025, North American customers representing approximately 33% of projected 2025 net sales notified the company of their intent to switch suppliers, severely impacting liquidity, leading to asset impairments, and raising substantial doubt about the company's ability to continue as a going concern - Certain North American customers, representing approximately 33% of projected consolidated net sales for fiscal year 2025, notified the company of their intent to resource to other suppliers122 - These actions significantly affect the company's ability to generate cash from operating activities and have led to non-cash charges for inventory, accounts receivable, and long-lived asset impairments123 - The adverse conditions raise substantial doubt about the company's ability to continue as a going concern, as it does not expect to meet financial covenants as early as September 30, 2025, and future liquidity is uncertain124 Industry Overview, Supply Chain Disruption, and the Ukraine Conflict The automotive industry faces challenges from supply chain disruptions, cost inflation, and higher interest rates, all negatively impacting the company's earnings and cash flow, with OEM contracts adjusting for aluminum costs but aftermarket contracts generally not - The automotive industry has been affected by supply chain disruptions (e.g., semiconductor shortages) and cost inflation (raw materials, labor, energy)126 - Higher interest rates have adversely affected, and will likely continue to affect, the company's earnings and cash flow from operations126 - OEM contracts adjust for changes in aluminum and certain other costs, but aftermarket contracts generally do not127 Trade and Regulatory Uncertainty The U.S. government's additional tariffs on imported goods and reciprocal tariffs from other countries create significant uncertainty and could materially affect the company and the automotive industry - In April 2025, the U.S. government announced additional tariffs on various imported goods, with other countries announcing reciprocal tariffs128 - There is significant uncertainty regarding the duration and degree to which these tariffs and global trade disputes will affect the company and the automotive industry128 Light Vehicle Production Levels Light vehicle production volumes in North America and Western and Central Europe declined in both Q2 and H1 2025 compared to 2024, with forecasts projecting further declines in 2025, and the company expecting its North America volumes to decline more significantly due to customer resourcing Light Vehicle Production (Units in thousands) | Region | Q2 2025 Production (Units in thousands) | Q2 2024 Production (Units in thousands) | Q2 % Change | H1 2025 Production (Units in thousands) | H1 2024 Production (Units in thousands) | H1 % Change | | :----- | :-------------------------------------- | :-------------------------------------- | :---------- | :-------------------------------------- | :-------------------------------------- | :---------- | | North America | 3,976 | 4,100 | (3.0%) | 7,731 | 8,065 | (4.1%) | | Western and Central Europe | 3,701 | 3,809 | (2.8%) | 7,412 | 7,732 | (4.1%) | | Total | 7,677 | 7,909 | (2.9%) | 15,143 | 15,797 | (4.1%) | - IHS July 2025 forecast projects a 3.8% decline in production volumes in primary markets for 2025131 - Due to customer resourcing actions, the company expects its North America volumes to decline more than current IHS projections for the remainder of fiscal year 2025131 Overview of the Second Quarter of 2025 The second quarter of 2025 saw a substantial decline in net sales and a significant net loss, primarily driven by customer resourcing actions, a large impairment charge on North America long-lived assets, and increased interest and foreign exchange expenses, with both North America and Europe segments experiencing operational challenges Results of Operations (Q2 2025 vs Q2 2024) The company experienced a significant decline in net sales and a substantial increase in net loss for Q2 2025 compared to Q2 2024, primarily due to a large impairment charge and reduced gross profit Results of Operations (in thousands, except per share) | Metric (in thousands, except per share) | Q2 2025 | Q2 2024 | Net Change | | :-------------------------------------- | :----------- | :----------- | :----------- | | Net sales | $207,897 | $318,967 | $(111,070) | | Gross profit (loss) | $(21,448) | $31,620 | $(53,068) | | Income (loss) from operations | $(113,215) | $10,244 | $(123,459) | | Net income (loss) | $(181,053) | $(11,124) | $(169,929) | | Diluted earnings (loss) per share | $(6.66) | $(0.75) | $(5.91) | | Value added sales | $112,315 | $180,300 | $(67,985) | | Adjusted EBITDA | $4,520 | $39,978 | $(35,458) | Net Sales Drivers (Q2 2025 vs Q2 2024) The $111.1 million decrease in net sales for Q2 2025 was primarily driven by lower volumes, reduced aluminum and other pass-through costs, and unfavorable product mix and pricing, partially offset by favorable foreign exchange Net Sales Drivers (in millions) | Driver | Amount (in millions) | | :-------------------------- | :------------------- | | Volume | $(52.7) | | Aluminum and other pass through costs | $(43.1) | | Product mix and pricing | $(18.7) | | Foreign exchange | $3.4 | Cost of Sales Drivers (Q2 2025 vs Q2 2024) Cost of sales decreased by $58.0 million in Q2 2025, mainly due to lower volumes and material/conversion costs, which included an $11.9 million non-cash inventory write-down related to customer resourcing Cost of Sales Drivers (in millions) | Driver | Amount (in millions) | | :-------------------------- | :------------------- | | Volume | $(32.6) | | Material and conversion costs | $(24.3) | | Mix | $(3.3) | | Foreign exchange | $2.2 | - Material and conversion costs include a non-cash charge of $11.9 million to write-down inventory due to customer resourcing actions139 Selling, General and Administrative Expenses (Q2 2025 vs Q2 2024) SG&A expenses increased by $3.5 million in Q2 2025, primarily due to a $3.1 million non-cash write-down of a customer trade receivable and higher professional services fees related to strategic initiatives - SG&A expenses increased by $3.5 million to $24.9 million in Q2 2025140 - The increase was primarily due to a $3.1 million non-cash charge to write-down a customer trade receivable and higher professional services fees related to strategic initiatives140 Impairment of Long-Lived Assets (Q2 2025) A non-cash impairment charge of $66.9 million was recognized on the North America long-lived asset group during Q2 2025 - A non-cash impairment charge of $66.9 million was recognized for the North America long-lived asset group in Q2 2025141 Interest Expense, Net (Q2 2025 vs Q2 2024) Net interest expense increased by $2.3 million in Q2 2025, driven by higher borrowings under the amended term loan and revolving credit facility, partially offset by reduced interest on redeemed senior notes - Net interest expense increased by $2.31 million to $18.1 million in Q2 2025142 - The increase was primarily due to the upsizing of borrowings under the amended and restated term loan and an increase in interest expense on the Revolving Credit Facility142 Other Income (Expense), Net (Q2 2025 vs Q2 2024) Other income shifted to an expense of $4.2 million in Q2 2025, primarily due to a $5.5 million increase in foreign exchange loss - Other expense was $4.2 million in Q2 2025, compared to other income of $0.9 million in Q2 2024143 - This increase in expense was primarily due to a $5.5 million increase in foreign exchange loss143 Income Tax (Provision) Benefit (Q2 2025 vs Q2 2024) The income tax provision for Q2 2025 was $45.5 million on a pre-tax loss of $135.6 million, resulting in a negative effective tax rate of (33.5)%, primarily due to valuation allowances and the mix of earnings among tax jurisdictions - The income tax provision for Q2 2025 was $45.5 million on a pre-tax loss of $135.6 million, with an effective income tax rate of (33.5)%144 - The effective tax rate differs from the statutory rate primarily due to valuation allowances and the mix of earnings among tax jurisdictions144 Net Income (Loss) (Q2 2025 vs Q2 2024) Net loss for Q2 2025 significantly increased to $181.1 million, or a $6.66 loss per diluted share, compared to a net loss of $11.1 million, or a $0.75 loss per diluted share, in Q2 2024 - Net loss for Q2 2025 was $181.1 million, or a $6.66 loss per diluted share, compared to a net loss of $11.1 million, or a $0.75 loss per diluted share, for Q2 2024145 Segment Sales and Income from Operations (Q2 2025 vs Q2 2024) North America segment sales decreased by 53.8% and operating income declined by $120.6 million, primarily due to customer resourcing and a $66.9 million asset impairment, while Europe segment sales decreased by 1.4%, and its operating loss increased by $2.86 million Segment Sales and Income from Operations (in thousands) | Segment (in thousands) | Q2 2025 Net Sales | Q2 2024 Net Sales | Net Change Net Sales | Q2 2025 Income (loss) from operations | Q2 2024 Income (loss) from operations | Net Change Income (loss) from operations | | :--------------------- | :---------------- | :---------------- | :------------------- | :------------------------------------ | :------------------------------------ | :--------------------------------------- | | North America | $93,804 | $203,203 | $(109,399) | $(107,404) | $13,195 | $(120,599) | | Europe | $114,093 | $115,764 | $(1,671) | $(5,811) | $(2,951) | $(2,860) | - North America net sales decreased 53.8% due to lower aluminum pass-through costs ($50.6 million), lower volumes ($49.3 million), and lower product mix and pricing ($9.5 million)148 - North America operating income decreased by $120.6 million, primarily due to a $66.9 million asset impairment charge, lower volumes ($19.8 million), and higher material/conversion costs ($17.7 million, including $11.9 million inventory write-down)149 - Europe net sales decreased 1.4% due to lower product mix/pricing ($9.2 million) and volumes ($3.4 million), partially offset by higher aluminum pass-through costs ($7.5 million) and favorable foreign exchange ($3.4 million)150 Overview of the First Half of 2025 The first half of 2025 was marked by a significant decline in net sales and a substantial net loss, primarily driven by customer resourcing actions, a large impairment charge on North America long-lived assets, and increased interest and foreign exchange expenses, with the North America segment seeing a sharp decline, while the Europe segment experienced a modest sales decrease but a reduced operating loss Results of Operations (H1 2025 vs H1 2024) The company reported a significant decrease in net sales and a substantial increase in net loss for H1 2025 compared to H1 2024, primarily due to a large impairment charge and reduced gross profit Results of Operations (in thousands, except per share) | Metric (in thousands, except per share) | H1 2025 | H1 2024 | Net Change | | :-------------------------------------- | :----------- | :----------- | :----------- | | Net sales | $529,499 | $635,243 | $(105,744) | | Gross profit (loss) | $(5,348) | $52,766 | $(58,114) | | Income (loss) from operations | $(112,593) | $10,558 | $(123,151) | | Net income (loss) | $(193,982) | $(43,873) | $(150,109) | | Diluted earnings (loss) per share | $(7.63) | $(2.26) | $(5.37) | | Value added sales | $280,852 | $352,498 | $(71,646) | | Adjusted EBITDA | $29,608 | $70,827 | $(41,219) | Net Sales Drivers (H1 2025 vs H1 2024) The $105.7 million decrease in net sales for H1 2025 was primarily driven by lower volumes, reduced aluminum and other pass-through costs, and unfavorable product mix and pricing Net Sales Drivers (in millions) | Driver | Amount (in millions) | | :-------------------------- | :------------------- | | Volume | $(59.6) | | Aluminum and other pass through costs | $(34.1) | | Product mix and pricing | $(13.2) | | Foreign exchange | $1.2 | Cost of Sales Drivers (H1 2025 vs H1 2024) Cost of sales decreased by $47.6 million in H1 2025, mainly due to lower volumes, material and conversion costs (including a $12.1 million non-cash inventory write-down), and mix, partially offset by foreign exchange Cost of Sales Drivers (in millions) | Driver | Amount (in millions) | | :-------------------------- | :------------------- | | Volume | $(37.7) | | Material and conversion costs | $(1.9) | | Mix | $(4.8) | | Foreign exchange | $(3.3) | - Material and conversion costs include a non-cash charge of $12.1 million to write-down inventory due to customer resourcing actions159 Selling, General and Administrative Expenses (H1 2025 vs H1 2024) SG&A expenses decreased by $1.9 million in H1 2025, primarily due to lower incentive compensation expense, partially offset by increased professional services fees related to strategic initiatives - SG&A expenses decreased by $1.9 million to $40.3 million in H1 2025160 - This decrease was primarily due to lower incentive compensation expense, partially offset by increased professional services fees related to strategic initiatives160 Impairment of Long-Lived Assets (H1 2025) A non-cash impairment charge of $66.9 million was recognized on the North America long-lived asset group during H1 2025 - A non-cash impairment charge of $66.9 million was recognized for the North America long-lived asset group in H1 2025161 Interest Expense, Net (H1 2025 vs H1 2024) Net interest expense increased by $3.5 million in H1 2025, driven by higher borrowings under the amended term loan and revolving credit facility, partially offset by reduced interest on redeemed senior notes - Net interest expense increased by $3.46 million to $35.2 million in H1 2025162 - The increase was primarily due to the upsizing of borrowings under the amended and restated term loan and an increase in interest expense on the Revolving Credit Facility162 Other Income (Expense), Net (H1 2025 vs H1 2024) Other income shifted to an expense of $6.2 million in H1 2025, primarily due to a $6.3 million increase in foreign exchange loss - Other expense was $6.2 million in H1 2025, compared to other income of $0.3 million in H1 2024163 - This increase in expense was primarily due to a $6.3 million increase in foreign exchange loss163 Income Tax (Provision) Benefit (H1 2025 vs H1 2024) The income tax provision for H1 2025 was $40.0 million on a pre-tax loss of $154.0 million, resulting in a negative effective tax rate of (26.0)%, primarily due to valuation allowances and the mix of earnings among tax jurisdictions - The income tax provision for H1 2025 was $40.0 million on a pre-tax loss of $154.0 million, with an effective income tax rate of (26.0)%164 - The effective tax rate differs from the statutory rate primarily due to valuation allowances, the reversal of an uncertain tax position, and the mix of earnings among tax jurisdictions164 Net Income (Loss) (H1 2025 vs H1 2024) Net loss for H1 2025 significantly increased to $194.0 million, or a $7.63 loss per diluted share, compared to a net loss of $43.9 million, or a $2.26 loss per diluted share, in H1 2024 - Net loss for H1 2025 was $194.0 million, or a $7.63 loss per diluted share, compared to a net loss of $43.9 million, or a $2.26 loss per diluted share, for H1 2024165 Segment Sales and Income from Operations (H1 2025 vs H1 2024) North America segment sales decreased by 25.0% and operating income declined by $123.7 million, primarily due to customer resourcing and a $66.9 million asset impairment, while Europe segment sales decreased by 2.7%, but its operating loss decreased by $0.6 million due to lower SG&A Segment Sales and Income from Operations (in thousands) | Segment (in thousands) | H1 2025 Net Sales | H1 2024 Net Sales | Net Change Net Sales | H1 2025 Income (loss) from operations | H1 2024 Income (loss) from operations | Net Change Income (loss) from operations | | :--------------------- | :---------------- | :---------------- | :------------------- | :------------------------------------ | :------------------------------------ | :--------------------------------------- | | North America | $297,512 | $396,711 | $(99,199) | $(102,469) | $21,277 | $(123,746) | | Europe | $231,987 | $238,532 | $(6,545) | $(10,124) | $(10,719) | $595 | - North America net sales decreased 25.0% due to lower volumes ($51.3 million), lower aluminum cost pass-throughs ($41.1 million), and lower product mix and pricing ($6.6 million)167 - North America operating income decreased by $123.7 million, primarily due to a $66.9 million asset impairment charge, higher material/conversion costs ($23.6 million, including $12.1 million inventory write-down), and lower volumes ($20.9 million)168 - Europe net sales decreased 2.7% due to lower volumes ($8.3 million) and product mix/pricing ($6.6 million), partially offset by higher aluminum cost pass-throughs ($7.0 million)169 - Europe operating loss decreased by $0.6 million, primarily due to lower SG&A expenses ($8.5 million) associated with the European Transformation170 Financial Condition, Liquidity and Capital Resources The company's liquidity is severely impacted by recent customer resourcing actions, leading to substantial doubt about its ability to continue as a going concern, and despite securing additional debt and covenant waivers, future liquidity and covenant compliance remain uncertain - Customer resourcing actions are expected to significantly affect the company's ability to generate cash from operating activities or from the sale of trade receivables172 - The company borrowed $42.5 million on its revolving credit facility and secured an incremental $70.0 million delayed draw term loan facility, with $10.0 million funded in June 2025 and an additional $25.0 million drawn post-June 30, 2025172 - A limited waiver of financial covenants was obtained for Q2 2025, but the company does not expect to meet covenants as early as September 30, 2025, raising substantial doubt about its ability to continue as a going concern173 - As of June 30, 2025, the company had approximately $48.4 million of accounts payable past due, including a $15.2 million obligation under its supply chain financing program178 Senior Secured Credit Facilities The company's Senior Secured Credit Facilities include a $60.0 million Revolving Credit Facility and a Term Loan Facility, which was amended to include a $70.0 million Delayed Draw Term Loan Facility, with recent amendments increasing liquidity thresholds, permitting paid-in-kind interest, and waiving financial covenants for Q2 2025 Senior Secured Credit Facilities (in thousands) | Senior Secured Credit Facilities (in thousands) | June 30, 2025 Principal | June 30, 2025 Carrying Value | | :---------------------------------------------- | :---------------------- | :--------------------------- | | Revolving Credit Facility | $42,473 | $42,473 | | Term Loan Facility | $527,016 | $499,586 | | Delayed Draw Term Loan Facility | $10,300 | $10,025 | - The Term Loan Agreement was amended to provide an incremental $70.0 million Delayed Draw Term Loan Facility, with $10.0 million funded on June 4, 2025, and an additional $25.0 million drawn subsequent to June 30, 2025183187 - Amendments included permitting paid-in-kind interest on the Term Loan Facility and a limited waiver of financial covenants for the test period ending June 30, 2025185186 - As of June 30, 2025, interest rates were 11.8% for the Term Loan Facility, 12.3% for the Delayed Draw Term Loan Facility, and 11.0% for the Revolving Credit Facility189 Available Unused Commitments under the Revolving Credit Facility As of June 30, 2025, the company had $7.2 million in unused commitments under its Revolving Credit Facility, after accounting for outstanding borrowings and letters of credit - As of June 30, 2025, the company had $42.5 million in outstanding borrowings and $7.2 million in unused commitments under the Revolving Credit Facility, reduced by $10.3 million in outstanding letters of credit192 Redeemable Preferred Stock Preferred stock dividends were paid-in-kind, increasing the stated value, and in connection with the proposed merger, the preferred shareholder (TPG) waived certain dividend and redemption rights, with the redemption value being the greater of two times the stated value or the common stock conversion value - Preferred stock dividends of $3.7 million (Q2 2025) and $7.5 million (H1 2025) were paid-in-kind, increasing the stated value193 - The stated value of preferred stock was $167.6 million (June 30, 2025) and the carrying value was $318.2 million193 - TPG, the preferred shareholder, waived its right to receive dividends and certain redemption rights under the Preferred VSA in connection with the merger194196 Factoring Arrangements Factoring arrangements were temporarily suspended by financial institutions during Q2 2025 but were reinstated, and the company was required to repurchase $6.3 million of accounts receivable - Factoring arrangements were temporarily suspended by financial institutions during Q2 2025 but were reinstated prior to June 30, 2025198 - As of June 30, 2025, the company was required to repurchase $6.3 million of accounts receivable from one of its factoring institutions198 Supplier Finance Program The supplier finance program was suspended during Q2 2025, with $15.2 million in obligations due to the financial institution as of June 30, 2025 - The supplier finance program was suspended during the three months ended June 30, 2025199 - Obligations due to the financial institution under the program were $15.2 million as of June 30, 2025199 Cash Flows For the first half of 2025, net cash provided by operating activities significantly improved due to hedging termination proceeds and working capital changes, while net cash provided by financing activities also increased substantially due to net borrowings and paid-in-kind preferred dividends Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | H1 2025 | H1 2024 | | :-------------------------------- | :----------- | :----------- | | Net cash provided (used)