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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
_________ TO _________
COMMISSION FILE NUMBER 1-6615
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-2594729
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7800 WOODLEY AVENUE
VAN NUYS, CALIFORNIA 91406
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(818) 781-4973
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT
TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LAST PRACTICABLE DATE.
CLASS OF COMMON STOCK OUTSTANDING AT APRIL 28, 2000
--------------------- -----------------------------
$.50 PAR VALUE 26,127,572
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
Page
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Part I - Financial Information
Item 1 - Financial Statements
Consolidated Condensed Statements of Income ................................................... 1
Consolidated Condensed Balance Sheets.......................................................... 2
Consolidated Condensed Statements of Cash Flows................................................ 3
Consolidated Condensed Statements of Shareholders' Equity...................................... 4
Notes to Consolidated Condensed Financial Statements........................................... 5
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................... 9
Part II - Other Information
Signatures........................................................................................... 12
Exhibit 27 - Financial Data Schedule
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended March 31
2000 1999
------------ ------------
Net Sales ............................................ $ 155,390 $ 136,909
Cost of Sales ........................................ 122,555 108,258
------------ ------------
Gross Profit ......................................... 32,835 28,651
Selling, General and Administrative Expenses ......... 5,078 5,131
------------ ------------
Income From Operations ............................... 27,757 23,520
Non-Operating Income / Expense:
Interest income, net .............................. 1,840 1,049
Miscellaneous expense, net ........................ 1,313 640
------------ ------------
527 409
Income Before Provision for Income Taxes ............. 28,284 23,929
Provision for Income Taxes ........................... 9,829 8,435
------------ ------------
Net Income ........................................... $ 18,455 $ 15,494
============ ============
Earnings Per Share - Basic ........................... $ 0.70 $ 0.57
============ ============
Earnings Per Share - Diluted ......................... $ 0.70 $ 0.57
============ ============
Dividends Declared Per Share ......................... $ 0.09 $ 0.08
============ ============
See accompanying Notes to Consolidated Condensed Financial Statements
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except par value and share data)
March 31 December 31
ASSETS 2000 1999
--------- -----------
(Unaudited)
Current Assets:
Cash and cash equivalents ............................................. $ 98,139 $ 108,081
Accounts receivable, net .............................................. 123,833 107,032
Inventories ........................................................... 49,568 39,488
Deferred income tax ................................................... 6,608 6,371
Other current assets .................................................. 2,495 2,768
--------- ---------
Total current assets ............................................ 280,643 263,740
Property, Plant and Equipment, net ....................................... 165,800 163,113
Other Long-term Assets ................................................... 32,576 33,615
--------- ---------
Total Assets ............................................................. $ 479,019 $ 460,468
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ...................................................... $ 51,828 $ 45,454
Accrued liabilities ................................................... 44,574 41,060
Current portion capitalized leases .................................... 333 333
--------- ---------
Total current liabilities ....................................... 96,735 86,847
Capitalized Leases ....................................................... 258 340
Deferred Income Taxes .................................................... 7,936 6,932
Other Long-term Liabilities .............................................. 13,206 13,263
Shareholders' Equity
Preferred stock, par value $25.00,
1,000,000 shares authorized, none issued ........................... -- --
Common stock, par value $.50,
100,000,000 shares authorized ...................................... 13,056 13,227
Foreign currency translation adjustments .............................. (14,450) (15,114)
Retained earnings ..................................................... 362,278 354,973
--------- ---------
Total shareholders' equity ...................................... 360,884 353,086
Total Liabilities and Shareholders' Equity ............................... $ 479,019 $ 460,468
========= =========
See accompanying Notes to Consolidated Condensed Financial Statements
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended March 31
2000 1999
------------ ------------
Net Cash Provided by Operating Activities .................. $ 11,090 $ 28,130
Cash Flows from Financing Activities:
Repurchases of common stock ............................. (9,041) (5,950)
Cash dividends paid ..................................... (2,383) (2,185)
Payments of capitalized leases .......................... (82) (73)
Stock options exercised ................................. 79 173
------------ ------------
Net Cash Used in Financing Activities ................ (11,427) (8,035)
------------ ------------
Cash Flows from Investing Activities:
Additions to property, plant and equipment .............. (9,623) (9,905)
Proceeds from sale of property, plant and equipment ..... 18 32
Investments in and advances to joint ventures ........... -- (280)
------------ ------------
Net Cash Used in Investing Activities ................ (9,605) (10,153)
------------ ------------
Net Increase in Cash and Cash Equivalents .................. (9,942) 9,942
Cash and Cash Equivalents at Beginning of Period ........... 108,081 86,566
------------ ------------
Cash and Cash Equivalents at End of Period ................. $ 98,139 $ 96,508
============ ============
See accompanying Notes to Consolidated Condensed Financial Statements
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SUPERIOR INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousand, except share data)
Common Stock Accumulated
---------------------- Additional Other
Number of Paid-In Retained Comprehensive
Shares Amount Capital Earnings Income (Loss) Total
--------- --------- ---------- --------- ---------------- -----------
Balances at December 31, 1999 ............... 26,454,219 $ 13,227 $ 0 $ 354,973 $ (15,114) $ 353,086
Comprehensive income:
Net income .................................. -- -- -- 18,455 -- 18,455
Foreign currency translation adjustment ..... -- -- -- -- 664 664
Comprehensive income ........................ -- -- -- -- -- 19,119
Cash dividends declared ($.09/share) ........ -- -- -- (2,359) -- (2,359)
Repurchases of common stock ................. (349,500) (175) (75) (8,791) -- (9,041)
Stock options exercised, including related
tax benefit ............................... 8,430 4 75 -- -- 79
--------- --------- --------- --------- ---------------- -----------
Balances at March 31, 2000 ................. 26,113,149 $ 13,056 $ 0 $ 362,278 $ (14,450) $ 360,884
========== ========= ========= ========= ================ ===========
See accompanying Notes to Consolidated Condensed Financial Statements
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. Nature of Operations
Our principal business is the design and manufacture of motor vehicle
parts and accessories for sale to original equipment manufacturers (OEM)
and the automotive aftermarket, on an integrated one-segment basis. We
are one of the largest suppliers of cast and forged aluminum wheels to
the world's leading automobile and light truck manufacturers, with wheel
manufacturing operations in the United States, Mexico and Hungary.
Customers in North America represent the principal market for our
products, with approximately 10% of our products, on an annual basis,
being exported to International customers or delivered to their assembly
operations in the United States.
We are also making steady progress in building our position in the
rapidly growing market for aluminum suspension and related underbody
components to compliment our OEM aluminum wheel business. A dedicated
manufacturing site has been acquired and plans to expand the existing
facility are currently being developed. Senior manufacturing,
engineering and marketing personnel have been hired and automotive
customers throughout the world are reacting enthusiastically to product
samples. We have won contracts to manufacture front upper control
arm/bracket assemblies for certain 2002, 2003 and 2004 model year
vehicles. We believe that production of these products can begin
relatively quickly.
General Motors and Ford represented approximately 87% of our annual
sales in 1999. The loss of all or a substantial portion of our sales to
these two customers would have a significant adverse impact on our
financial results until the lost volume could be replaced. We do not
believe this represents a material risk due to excellent long-term
relationships with both, including multi-year contractual arrangements.
It should also be noted that early in 2000, we announced a renewed
relationship with DaimlerChrysler for substantial new contract awards.
The availability and demand for aluminum wheels are subject to
unpredictable factors, such as changes in the general economy, the
automobile industry, the price of gasoline and consumer interest rates.
The raw materials used in producing our products are readily available
and are obtained through numerous suppliers with whom we have
established trade relations.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000
(Unaudited)
2. Presentation of Consolidated Condensed Financial Statements
During interim periods, Superior Industries International, Inc. and its
subsidiaries follow the accounting policies set forth in its Annual Report
to Shareholders and apply appropriate interim financial reporting
standards, as indicated below. Users of financial information produced for
interim periods are encouraged to refer to the notes contained in the 1999
Annual Report to Shareholders when reviewing interim financial results.
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, including the use of estimated
effective tax rates. Inevitably, some assumptions may not materialize and
unanticipated events and circumstances may occur which vary from those
estimates and such variations may significantly affect our future results.
In our opinion, the accompanying unaudited consolidated condensed
financial statements have been prepared in accordance with the Securities
and Exchange Commission's requirements of Form 10-Q and contain all
adjustments, of a normal and recurring nature, which are necessary for a
fair presentation of i) the consolidated condensed statements of income
for the three months ended March 31, 2000 and 1999, ii) the consolidated
condensed balance sheets at March 31, 2000 and December 31, 1999, iii) the
consolidated condensed statements of cash flows for the three months ended
March 31, 2000 and 1999, and iv) the consolidated condensed statements of
shareholders' equity at March 31, 2000 and December 31, 1999.
3. Earnings Per Share
Basic earnings per share is computed by dividing net income for the period
by the weighted average number of common shares outstanding for the
period, or 26,259,000 and 27,234,000 for the three months ended March 31,
2000 and 1999, respectively. For purposes of calculating "diluted"
earnings per share, net income is divided by the total of the weighted
average shares outstanding plus the dilutive effect of our outstanding
stock options ("common stock equivalents"), or 26,364,000 and 27,355,000
for the three months ended March 31, 2000 and 1999, respectively.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000
(Unaudited)
4. Accounting Matters
New Accounting Standards - In 1998, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standard No. 132,
"Employers Disclosures about Pensions and Other Postretirement Benefits"
("FAS 132"), No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133") and No. 137 "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133" ("FAS 137"), which delays implementation of FAS No. 133 until
years beginning after June 15, 1999. Implementation of the disclosure
requirements of FAS 132 did not have a material effect on our consolidated
financial statements. We do not anticipate the adoption of FAS 133, in the
year 2000, to have a material effect on our consolidated financial
statements.
5. Accounts Receivable
The following is a summary of our consolidated accounts receivable:
(Thousands of dollars)
March 31, December 31,
2000 1999
------------ ------------
Accounts Receivable:
Trade ..................................... $ 99,861 $ 86,481
Due from joint venture .................... 9,918 8,764
Other ..................................... 15,387 13,155
------------ ------------
125,166 108,400
Allowance for Doubtful Accounts ................. (1,333) (1,368)
------------ ------------
$ 123,833 $ 107,032
6. Inventories
The following is a summary of our consolidated inventories:
(Thousands of dollars)
March 31, December 31,
2000 1999
------------ ------------
Raw materials .................................... $ 16,109 $ 10,748
Work in process .................................. 11,630 10,908
Finished goods ................................... 21,829 17,832
------------ ------------
$ 49,568 $ 39,488
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SUPERIOR INDUSTRIES INTERNATIONAL, INC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
MARCH 31, 2000
(Unaudited)
7. Property, Plant and Equipment
Property, plant and equipment, net consists of the following:
(Thousands of dollars)
March 31, December 31,
2000 1999
------------ ------------
Land and buildings ......................... $ 52,943 $ 51,180
Machinery and equipment .................... 312,647 306,641
Leasehold improvements and others .......... 5,310 4,472
Construction in progress ................... 26,770 26,135
------------ ------------
397,670 388,428
Accumulated depreciation ................... (231,870) (225,315)
------------ ------------
$ 165,800 $ 163,113
Depreciation expense was $6.9 million and $7.2 million for the three month
periods ended March 31, 2000 and 1999, respectively.
8. 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 to us, we believe all such matters are adequately provided
for, covered by insurance or, if not so covered or provided for, are
without merit, or involve such amounts that would not materially adversely
affect our consolidated results of operations and cash flows or financial
position.
9. Forward Looking Statements
Some statements included in this filing which are not historical in nature
are forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward looking statements
regarding our future performance and financial results are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those discussed in such forward looking statements due to
a variety of factors including, among others, changes in the condition of
the industry, changes in general economic conditions and the success of
our strategic and operating plans.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The operating results for the first quarter of 2000 were the best for a first
quarter in our history, as new records were set in unit shipments, net sales,
net income and diluted earnings per share. Compared to the previous records, all
of which had been set in the first quarter of 1999, unit shipments, net sales
and diluted earnings per share increased 11%, 14% and 23%, respectively.
Compared to the previous record set in the first quarter of 1995 and to the same
period a year ago, net income increased 17% and 19%, respectively. The higher
percentage increase in diluted earnings per share was principally due to our
common stock repurchases, which have reduced the average shares outstanding by
approximately 1 million, or 4%, since the first quarter a year ago.
Our consolidated net sales for the first quarter of 2000 increased $18.5
million, or 13.5%, to $155.4 million from $136.9 million in the first quarter a
year ago. OEM net sales increased $21.5 million, or 16.5%, to $152.2 million
compared to $130.7 million in the 1999 period, while OEM unit shipments for the
same period increased 10.5% over the prior year to 2,989,000. Sales dollars in
the current period increased at a greater rate than unit shipments due
principally to the increase in average selling prices caused by a higher
pass-through price of aluminum to our customers, and to a higher percentage of
chrome plated and polished wheels.
The increase in OEM unit shipments of 10.5% compares to an increase of 4% in
North American vehicle production during the same period, indicating further
gains in market share. For the model year 1999, industry-wide aluminum wheel
installation rates are estimated to have increased to 55%, continuing a
long-term upward trend. Unit shipment increases were experienced in both
passenger car and light truck styles, while shipments to international customers
approximated 7.3% of total OEM unit shipments for the quarter.
Gross profit for the quarter increased to $32.8 million, or 21.1% of net sales,
compared to $28.7 million, or 20.9% of net sales, for the same period a year
ago. The increased gross profit in the first quarter of 2000 was due principally
to higher capacity utilization rates at our OEM wheel plants and the improved
profitability of the chrome plating facility.
Selling, general and administrative expenses for the first quarter of 2000 were
$5.1 million, or 3.3% of net sales in 2000 compared to $5.1 million, or 3.7% of
net sales in 1999, which indicates a consistent selling, general and
administrative expense trend.
Operating income for the first quarter increased $4.2 million, or 18.0%, to
$27.7 million from $23.5 million in the same period a year ago. Accordingly, the
operating income margin for the first quarter of 2000 was 17.9% of net sales
compared to 17.2% of net sales in the same period in 1999.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Interest income for the first quarter increased to $1.9 million from $1.1
million a year ago, as cash available for investing during the period increased
by approximately $23 million. Miscellaneous expense for the first quarter
included pre-tax equity losses related to our fifty percent owned joint
ventures, expenses associated with the startup of our second wheel manufacturing
plant in Chihuahua, Mexico and our aluminum automotive components facility in
Heber Springs, Arkansas and foreign exchange losses.
As a result of the above, net income for the quarter increased $3.0 million, or
19.1%, to $18.5 million, or 11.9% of net sales, from $15.5 million, or 11.3% of
net sales last year. Diluted earnings per share for the first quarter of 2000
was $0.70, an increase of 22.8% over the $0.57 per diluted share in the same
period a year ago.
READINESS FOR YEAR 2000
Our company-wide program established on January 1, 1998 to identify, test and
correct all integrated business software and date-sensitive processes to be Year
2000 compliant was successful with no major problems encountered. Costs incurred
from inception of this program are estimated at less than $500,000. Although we
do not anticipate any major disruption in any of our domestic and international
operations, no assurance can be given that unforeseen circumstances will not
arise which would adversely affect our systems. As a result, we are unable to
determine the impact that any system interruption, especially those externally
generated, would have on our results of operations, financial position or cash
flows.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $11.1 million for the three months
ended March 31, 2000, compared to $28.1 million for the same period a year ago.
The $3.0 million increase in 2000 net income was offset by a higher funding
requirement for working capital, due principally to a $21.7 million payment of
accounts receivable being received shortly after closing the quarter. In 1999, a
similar payment of accounts receivable was received prior to closing the first
quarter.
Our principal financing activities during the three months ended March 31, 2000
were to repurchase 349,500 shares of our common stock for $9.0 million, pursuant
to a 2.0 million share repurchase plan authorized in the fourth quarter of 1997,
and to pay cash dividends on our common stock totaling $2.4 million. Similar
financing activities during the same period a year ago were for $6.0 million to
repurchase common stock and $2.2 million to pay cash dividends.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The principal investing activity during the three month period ended March 31,
2000 was funding $9.6 million of capital expenditures principally for the Van
Nuys, California facility improvements and the new Chihuahua, Mexico wheel
plant. Similar investment activities during the same period a year ago included
$9.9 million of capital expenditures.
Working capital and the current ratio were $183.9 million and 2.9:1 versus
$176.9 million and 3.0:1 at March 31, 2000 and December 31, 1999, respectively,
and $150.9 million and 3.0:1, respectively, at March 31, 1999. Cash and
short-term investments as of March 31, 2000 were $98.1 million compared to
$108.1 million at December 31, 1999 and $96.5 million at March 31, 1999. Our
cash position is forecasted to be more than sufficient to fund our working
capital and capital investment requirements for the remainder of the year.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K - There were no reports on Form 8-K filed during the
three months ended March 31, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(Registrant)
Date 5/8/00 /s/ Louis L. Borick
-------------------- -------------------------------------------
Louis L. Borick
President and Chairman of the Board
Date 5/8/00 /s/ R. Jeffrey Ornstein
--------------------- -------------------------------------------
R. Jeffrey Ornstein
Vice President and CFO
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