1
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 JUNE 30, 1997
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 91406
VAN NUYS, CALIFORNIA --------
(ZIP CODE)
- ----------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(818) 781-4973
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
---------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGE SINCE LAST REPORT)
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.
OUTSTANDING AT
CLASS OF COMMON STOCK AUGUST 11, 1997
--------------------- ---------------
$.50 PAR VALUE 28,009,472
1
2
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31,
1997 1996
-------- --------
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 44,501 $ 36,815
Short-term investments, at the lower of
cost or market 5,446 5,288
Receivables, net 72,624 66,567
Inventories
Raw materials 15,991 16,474
Work in process 12,961 13,461
Finished goods 21,010 17,795
-------- --------
49,962 47,730
Other current assets 7,302 7,680
-------- --------
Total current assets 179,835 164,080
-------- --------
PROPERTY, PLANT AND EQUIPMENT, net 155,795 161,670
OTHER ASSETS 35,910 31,840
-------- --------
$371,540 $357,590
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $ 3,874 $ 3,874
Accounts payable 37,243 46,178
Accrued liabilities 31,915 26,317
-------- --------
Total current liabilities 73,032 76,369
-------- --------
LONG-TERM DEBT, net 1,823 1,940
OTHER LONG-TERM LIABILITIES 18,610 17,850
DEFERRED INCOME TAXES 10,120 10,320
SHAREHOLDERS' EQUITY 267,955 251,111
-------- --------
$371,540 $357,590
======== ========
See notes to consolidated condensed financial statements.
2
3
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended
June 30,
1997 1996
------------ ------------
NET SALES $ 142,090 $ 137,554
Cost of Sales 113,384 107,198
------------ ------------
Gross Profit 28,706 30,356
Selling, general and administrative
expenses 5,270 5,529
------------ ------------
INCOME FROM OPERATIONS 23,436 24,827
Other Income (Expense):
Interest expense 140 422
Interest income 407 186
Miscellaneous expense, net 58 2,655
------------ ------------
209 (2,891)
------------ ------------
INCOME BEFORE INCOME TAXES 23,645 21,936
Income Taxes 8,571 8,027
------------ ------------
NET INCOME $ 15,074 $ 13,909
============ ============
EARNINGS PER SHARE $ 0.54 $ 0.48
============ ============
Weighted Average and Equivalent Shares
Outstanding 28,127,000 28,998,000
============ ============
See notes to consolidated condensed financial statements.
3
4
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Six Months Ended
June 30,
1997 1996
------------ ------------
NET SALES $ 267,983 $ 259,015
Cost of Sales 216,880 206,935
------------ ------------
Gross Profit 51,103 52,080
Selling, general and administrative
expenses 10,044 10,361
------------ ------------
INCOME FROM OPERATIONS 41,059 41,719
Other Income (Expense):
Interest expense 283 903
Interest income 988 360
Miscellaneous expense, net 4 5,543
------------ ------------
701 (6,086)
------------ ------------
INCOME BEFORE INCOME TAXES 41,760 35,633
Income Taxes 15,138 13,095
------------ ------------
NET INCOME $ 26,622 $ 22,538
============ ============
EARNINGS PER SHARE $ 0.95 $ 0.78
============ ============
Weighted Average and Equivalent Shares
Outstanding 28,089,000 29,023,000
============ ============
See notes to consolidated condensed financial statements.
4
5
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(DOLLARS IN THOUSANDS)
Six Months Ended
June 30,
1997 1996
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 28,232 $ 51,923
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings - (4,800)
Stock options exercised 424 525
Payments of long-term debt (117) (107)
Cash dividends (3,376) (3,223)
Repurchases of common stock (6,659) (13,117)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (9,728) (20,722)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment, net (7,479) (6,327)
Proceeds from sales of marketable securities 319 379
Investment in and advances to joint ventures (3,658) (10,651)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (10,818) (16,599)
-------- --------
Net Increase in Cash and Equivalents 7,686 14,602
Cash and Equivalents at Beginning of Period 36,815 3,366
-------- --------
Cash and Equivalents at End of Period $ 44,501 $ 17,968
======== ========
See notes to consolidated condensed financial statements.
5
6
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Valuation
Common Stock Adjustment
-------------------------- Additional Cumulative to
Number of Paid-In Translation Marketable Retained
Shares Amount Capital Adjustment Securities Earnings Total
------ ------ ---------- ----------- ---------- -------- -----
Balances at
December 31, 1996 28,323,666 $ 14,161 $ 20,845 $ (13,845) $ (554) $ 230,504 $ 251,111
Net income - - - - - 26,622 26,622
Foreign currency
translation, net of
related deferred
income taxes - - - (52) - - (52)
Cash dividends
($.13/share) - - - - - (3,658) (3,658)
Repurchases of
common stock (280,200) (140) (6,519) - - - (6,659)
Stock options
exercised, including
related tax
benefit 37,148 19 405 - - - 424
Valuation adjustment to
marketable securities - - - - 167 - 167
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at
June 30, 1997 28,080,614 $ 14,040 $ 14,731 $ (13,897) $ (387) $ 253,468 $ 267,955
=========== =========== =========== =========== =========== =========== ===========
See notes to consolidated condensed financial statements.
6
7
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. During interim periods, the Company follows the accounting policies set
forth in its Annual Report to Stockholders and applies appropriate
interim financial reporting standards, including the use of estimated
annual effective tax rates. Users of financial information produced for
interim periods are encouraged to refer to the notes contained in the
Annual Report to Stockholders when reviewing interim financial results.
In the opinion of Management, the accompanying unaudited consolidated
condensed financial statements of Superior Industries International,
Inc. and subsidiaries (the "Company") contain all adjustments
necessary, which are of a normal and recurring nature, to present
fairly the financial position of the Company as of June 30, 1997, and
the results of its operations and cash flows for the three and six
month periods ended June 30, 1997 and 1996.
2. Per share amounts are based on the weighted average number of shares of
common stock outstanding and common stock equivalents, when dilutive,
during the period.
3. Interim financial reporting standards require management to make
estimates that are based on assumptions regarding the outcome of future
events and circumstances not known at the present time. Inevitably,
some assumptions may not materialize and unanticipated events and
circumstances may occur which vary from those estimates and such
variations may significantly affect the Company's future results.
4. Interest expense of $270,000 was paid for the six months ended June 30,
1997, and $903,000 was paid for the same period in 1996. No interest
was capitalized for either of these six month periods. Taxes paid were
$12,002,000 and $7,641,000 for the six months ended June 30, 1997 and
1996, respectively.
5. Some statements included in this filing which are not historical in
nature are forward looking statements within the meaning of the Private
Securities Legislation Act of 1995. Forward looking statements
regarding the Company's future performance and financial results are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those set forth in the forward
looking statements due to a variety of factors. Factors that may impact
such forward looking statements include, among others, changes in the
condition of the industry, changes in general economic conditions and
the success of the Company's strategic and operating plans.
7
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY OF SALES BY PRODUCT LINE
($000's)
Increase
(Decrease)
For the Three Months Ended June 30, 1997 1996 Over 1996
- ----------------------------------- -------- -------- ----------
OEM CAST ALUMINUM ROAD WHEELS $132,436 $128,703 2.9%
-------- --------
AFTERMARKET 9,654 8,851 9.1%
-------- --------
$142,090 $137,554 3.3%
======== ========
For the Six Months Ended June 30,
- ---------------------------------
OEM CAST ALUMINUM ROAD WHEELS $250,066 $241,349 3.6%
AFTERMARKET 17,917 17,666 1.4%
-------- --------
$267,983 $259,015 3.5%
======== ========
RESULTS OF OPERATIONS
Net sales were $142.1 and $268.0 for the quarter and six months ended June 30,
1997, representing an increase of 3.3 and 3.5 percent, respectively, from
comparable periods in 1996. Higher net sales resulted from including sales from
the chrome plating business in 1997. In 1996, the results of operations for the
chrome business, which was in start up, were reported as a component of
miscellaneous expense. For the six months and quarter, OEM unit shipments to
customers increased 2.8 percent and were flat, respectively, over comparable
periods in 1996. Production of vehicles by Ford and GM that utilize the
Company's cast aluminum wheels decreased by an estimated 7.0 percent for the
quarter which indicates a continued trend toward greater installation of
aluminum wheels on North American light vehicles. Shipments to Japanese and
European customers are up almost 100 percent over last year and now represent
approximately 8.0 percent of OEM units shipped.
Net sales in the aftermarket business increased 9.1 percent and 1.4 percent for
the quarter and six months ended June 30, 1997, as compared to the same periods
in 1996. Sales in the aftermarket reflect increased sales in the exhaust
extension product line and the addition of products related to the acquisition
of certain inventory of the Perfection product line in October of 1996.
8
9
The gross margin was 20.2 percent and 19.1 percent for the quarter and six
months versus 22.1 percent and 20.1 percent for the comparable periods in 1996.
The decrease relates to the impact of including the chrome operations and price
reductions related to productivity on large OEM contracts.
Selling, general and administrative expenses, were 3.7 percent of net sales for
the related quarter and six months, compared to 4.0 percent in the same periods
last year. The company maintains tight controls over expenses.
Interest expense for the second quarter and six months in 1997 was down $282,000
and $620,000 respectively compared to 1996. This is a decrease of 66.8 percent
and 68.7 percent, respectively, and reflects declining debt amounts.
Interest income was up $221,000 and $628,000 for the quarter and six months
ended June 30, 1997 compared to 1996. The Company's cash flow increase is
invested in short-term investments causing higher interest income.
Miscellaneous expense decreased $2.6 million and $5.5 million for the quarter
and six months ended June 30, 1997, over the same period in 1996. These
decreases are principally a result of not including pre-production costs related
to the start up of the chrome plating business.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $15.3 million and $28.2 million
for the three months and six months ended June 30, 1997.
Cash was utilized to fund $2.7 million of capital expenditures for plant
improvements and equipment replacement during the quarter ended June 30, 1997.
Additionally, during the same period, the Company advanced $2.9 million as a
working capital loan to its joint venture with German-based Otto Fuchs
Metallwerke, in Tatabanya, Hungary. The joint-venture, which will operate under
the name Suoftec Light Metal Products KFT will produce both light weight forged
and cast aluminum wheels to the European automotive industry. $3.6 million was
also used to repurchase the Company's common stock, pursuant to its previously
announced authorized share buy-back program and $1.7 million was used to pay
first quarter dividends.
Working capital and current ratio were $106.8 million and 2.5:1 versus $63.7
million and 1.7:1 at June 30, 1997 and 1996, respectively. Long-term debt to
total capitalization ratio improved to 0.7 percent at quarter end versus 0.8
percent at year end. Cash and short term investments as of June 30, 1997 were
$49.9 million. The Company's cash position is sufficient to liquidate all
remaining debt.
9
10
PART II OTHER INFORMATION
ITEM 5. OTHER IMPORTANT INFORMATION
In 1978 the Company established a wholly owned captive insurance company, Suinco
Assurance, Ltd. (Suinco), in Bermuda which was consolidated with the results of
the registrant. During the second quarter steps were begun to liquidate the
captive. The Company expects that the final liquidation will be completed in the
third quarter. Suinco was established to provide workers compensation coverage
to the Company's operations in California. Due to changes in the tax laws it
became more advantageous for the Company to establish a state self-insurance
program for workers compensation. In July, 1992 the Company became self insured
and, under the State program, all subsequent claims were handled directly by the
Company.
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 filed during the quarter
ended June 30, 1997.
10
11
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 8/14/97 /s/ Louis L. Borick
-------------------------------------
Louis L. Borick
President and Chairman
of the Board
Date 8/14/97 /s/ R. Jeffrey Ornstein
-------------------------------------
R. Jeffrey Ornstein
Vice President and CFO
11