SUP - Earnings call transcript Q3 2018 | Superior Industries International, Inc.

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Operator

Good day and welcome to the Superior Industries' Third Quarter 2018 Earnings Teleconference. Today's conference is being recorded. At this time, I would like to turn the conference over to Troy Ford. Sir, please go ahead.

Troy Ford

Thank you. welcome third and call. XXXX everyone, morning, to quarter our earnings Good

of www.supind.com. our be available which section will today, on website to Investors During we presentation, referring discussion our earnings the our at is

President commented any Joining me today or President Securities recently as would on are call X on and our to CFO. as statements Masanovich, of everyone Executive contained uncertainties presentation forward-looking to considered provisions start materially Private like and this the that on where to Stebbins, the XXXX. differ Matti Slide be Harbor are and Litigation today well appointed Safe of could CEO; Don in the our subject Act issues because that need Vice Actual I of remind results Reform will company's on in Specific may evaluating forward-looking forward-looking noted any no our factors assume to like that the unknown detail We slide. financial publicly including are our represent obligation December update that to to point XX-K ended outlook. cause the Factors year conditions, a and statements I you to and would filings, XXXX, events from these statements on issues, statements. in differ statements. Report actual for forward-looking the complete XX, for more may Form Risk forward-looking discussion Annual on I SEC

the financial not with with presentation. exclude financial GAAP the release the XXXX including found have value-added the today, in measures Appendix accordance most certain our of earnings sales in and, measures directly press will EBITDA. Reconciliations also data GAAP. financial non-GAAP of third We of in with in comparable to be adjusted These this discussing these accordance quarter calculated or presented may non-GAAP and providing tables be certain included been measures and therefore, impact items

in quarter of comparative turn operations to were a calendar XXXX, additional by third a like North in fiscal realignment inclusion XXXX. Don week quarters of American of I the XXXX the third of and our CEO. period result impacted now of for quarter over Stebbins, of the As President reminder, would calendar call results the one as to Don? to

Don Stebbins

good Troy, today. joining you thank us everyone, for Thanks, and morning,

begin in first with X me of provide automotive excited an to industry. welcoming is let him overview presentation. accomplished XXXX Superior that, on me executive Matti. Slide third significant Let team. Matti our the results, starting the by have quarter join the experience With an of We're

over sales million per $XX, the $X.XX X% $XXX X.X quarter, million year-over-year were to million. $XX and For with sales net units. value-added Value-added was adjusted we EBITDA to third increased $XXX sales while nearly shipped million increasing wheel

launches of quarter the basis while engineering experienced were few large designs and were associated of a launch in on in and costs year-over-year Light third reduced Our in with by results United production Test WLTP, Harmonized OEM second Mexico. quarter production volumes, softer factors of the associated Vehicle of the European implementation Worldwide complexity the these the finishes some increased, Kingdom, impacted with a to substantially XXXX, OEM due or lower number there energy Procedure in from prices In part schedules the number the late our were with higher in of including and costs expectations, and rising the line levels our launches customers slightly a that changes. aftermarket

compared the the remain to expect to quarter volumes fourth XXXX. quarter increase but of the level to fourth We of quarter third shipment in below the

shipments of for growth. was vehicle zero OEMs a production flat have our in the North quarter of third production quarter on OEM were American X, period North our we and few American particular for by OEM growth WLTP which Turning with the lower driven a outperformed the levels reduced basis North to versus year-over-year of in the heavily were compared Mercedes. Europe Superior's for XXXX light as during BMW vehicle OEM driven the Market limited quarter quarter the by Western volumes customers America of to regions by to in where X% earlier, third same I well shipments from Slide sales. XXXX XXXX programs volumes mentioned impacted the for third That largely production Superior's light European UK. as said, as the in

last With comments lower remain global regarding WLTP. to We respect in the make also a year but latest developments. due saw few it the continues to to QX volumes aftermarket trade fluid, compared environment, to I'll

as imposed mechanisms adjustment in imported based United States, changes Therefore on price aluminum these customers. are on relates we First, to aluminum through to prices. with our customers price the our passed into it tariffs have indexed

Second, on agreed Mexico, States, to which will USMCA United October Xst, and NAFTA. the replace the Canada,

United the XX% as positive finally, clearly slight optimistic on XXXX. remain see China We XX% North placed XX.X% to requirement are content that the a pleased X, agreement out on believe Overall we tariff development to on XXth, January is the in into us. the and XX% with ratification this of American a increase tariff was through from process. States, the coming to scheduled September wheels And for increase to moves

our explore Matti the customers we financials. America with a to an believe of significant to over America benefit the number no considering tariff let dialogue January possibility due North me said, call a tariff on That Xst. that American that to the maintaining North are And us, mitigate currently for of North XX% our with that, transition increased programs are view of the are turn risk. to on within had has customers to they bidding We opportunities an this for we today active as but

Matti Masanovich

the thrilled Superior team. part Thanks, of Don. to I'm be

operations sales quarter sales of period. offset in America quarter million to volumes during in year Turning Europe the mentioned. prices, volumes lower extra let's to by higher which in was aluminum week approximately Slide North part take in increase closer third of third and by largely lower of Net driven quarter. million, $XX from was look Don were the due at increase X quarter XXXX, that a of an for the XXXX $XXX for an The prior the the

Turning to for The adjusted higher XXXX decrease quarter in programs. X, of quarter of million adjusted approximately primarily wheel million. the volumes costs a to EBITDA in the launch $XX both decrease EBITDA of of related Slide $XX XXXX, was Mexico, energy $XX third driven EBITDA slightly third of the higher to new compared million by in regions, and adjusted lower in costs was

from $X.X last was year. of in can Our months additional aluminum the and prices. months the five driven XXXX, $XXX inclusion same The first XXXX performance for of of operations XXXX nine increase of the be by period seen from increase our year-to-date European Slide sales were sales higher million X. billion Net sales on an an

by and XXXX. higher the The costs operations launch see offset year-to-date can for Slide XXXX. in and period energy in million months by in adjusted EBITDA the driven European XXXX $XX in third higher inclusion you As was EBITDA X, of year-to-date an on to primarily of same additional was adjusted compared XXXX costs Mexico partially million five of increase quarter $XXX the our in

on Slide X. Turning to slide cash the flow

the portfolio the activities used product quarter third holders enhancement minority Capital quarter the for to the $XX.X operations. million million supported The which of was acquisition of year. cash including during was as as receivable accounts to by to maintenance the was its securitization improvement same the expenditures shares initiatives the the utilization of company's third program provided Superior's XXXX period of compared operating related For offset for driven $XX.X well European the by last continued growth of which during purchase expenditures. were of XXXX, $XX.X of quarter both technologies million

Uniwheels in and dividends. quarter common Also XXX,XXX $X.X we minority during $XX shareholders position for the XX.X%. Industries, million from million AG, remaining a Europe purchase the an shares During AG, million of we Superior's the preferred price bringing total to third $X.X quarter, acquired known total paid formerly of Superior additional ownership in dividends third as

on our portions the hand credit our third management $XXX In the terms of million liquidity cash unused the end and available facilities liquidity the of Europe. and of inclusive was at quarter U.S. of in total committed

goods were related aftermarket WLTP. and inventory the sales third to the As finished for preparation we slower in quarter, season to due Europe ended we in balances selling carrying higher

During the both to capital normal both related selling aftermarket profitable the reduction year-end through quarter, and move top we working in investments our improvements long-term. we season business and fourth allocation as remain customer expect the near priority the shutdown debt and in capital

updated review XXXX our will we which October outlook XX, XX. to on Moving Slide I

$XXX $X.XX the For to shipments million be to to billion, unit be to while are of full-year of $X.XX range is $XXX the to in to range net a in billion range the million. to of million we XXXX, be EBITDA million expected of million value-added be sales expected are range in Adjusted XX.XX anticipated expect to units, $XXX million. $XXX in sales XX.XX

Our for anticipated expenditures million. $XXX capital cash $XX the operations be be is expected approximately is million million to to to from of and range flow $XXX outlook in

for me tax due for Jobs published XXXX. Tax let to and and his that, turn Lastly, we zero be recently further Act Cut Don With comments. effective our below U.S. at to call anticipate rate to back the refinements regulations or the concluding of

Don Stebbins

tailwind optimistic of continue benefit said, XXXX designs third factors Overall, to the more importance growing we'll increasing move Europe and light in a Matti. sophisticated and of attractive a that from half with our impacted Thanks, weighting, disappointed quarter despite North wheel That second results. including remain finishes. America and the we're the we towards that diameters,

operation is while to That better our global been us has the our long-term customer priority. strategies to back which and our in our remains drive turn launch additional positions me It continued that, for capturing growth let efficiencies of execution top Katie said, Our we activity above XXXX that that profitability testament to this of and for shareholders. base. innovative questions. a throughout serving our And the with level focus sustainable XXXX over technologies XX% are capabilities our call is

Operator

Instructions]. Thank sir. [Operator you,

Chris B. Van first Horn Riley FBR. with Your comes question from

Chris Van Horn

and Matti. thanks morning, the for taking call Good welcome

Matti Masanovich

Thank you.

Don Stebbins

Good morning, Chris.

Chris Van Horn

Good morning.

more China, -- you, how higher grab wheel at XX% us a China having, in they passenger more if classify just Could you're could go can much on So they quantify car just here look has going diameter or the as it remind elaborate bit share the of value possible and maybe domestically through. could smaller are I'm you diameter you for kind high you share tariffs or mean conversations when based? to wheels you these you I a little the should it

Don Stebbins

Yes.

market what's NAFTA. China imported into share just from XX% So broadly is

XX% you the have U.S., Mexico, manufactured is XX% the and is comes from in XX% So down it in way breaks China.

from to base quoting it's so China. complex there say types quoting, of other to and easiest some that, are In wheels that I just we're and volume range shift as your are programs we're of that XX-inch a make terms that there of a would more we under the are certainly these XX-inch the transition and wheels wheels. share And grab programs from then characterization those today

So it's spectrum. across the

Chris Van Horn

come activity, to path see that these kind -- take what still be launch you view for what visibility you two thanks a on look color. great, and learned we cadence past do that. cost it would and that? conservative heading Okay, schedule that for -- the see that what easier at And you do kind learning an going up of do year, plan -- look or or how you could have of side When things this then did like experienced how of quarters kind into -- you Thanks going for there's of this for up you’ve that always you launch you XXXX? kind of

Don Stebbins

the to year important in just an of expect somewhere And would XX% next question. less terms it's be of launches think XX% volume in terms we I of to launches.

XXX, you think had really other probably eight problems mean talking years XXX a issues double launches this were so here I out point with the programs about back I that go that so couple number XXXX, say important launches. we or we year. had was the or of of if of is And we're the to triple

number half diameter those the had very of a I and changes, specific that then So were four in that on with couple customer. eight, we premium and were engineering issues a wheels issues some not large very, would in a high-end for significant there say were after Europe late

a that we're better think no improvement next that for we've and us. -- that I be So for absolutely think will getting room there's I we're year question year better

Matti Masanovich

to And add that would will if us. may I history we premium in customers freight premium reduce and might volumes to experience add, I be and freight, request might customers impact we

at premium also phenomenon took all, year experience we customers So nor did see is testing, we et was not but or have that expedited overtime, of and around notice cetera it freight. customer facing this costs of scrap, none did rework, we or that increased any did additional

launch that So in than the effectively think I the teams past. have they much able to more

Chris Van Horn

can Okay, the there? affected somewhat great, get WLTP effect mentioned maybe describe are detail can what great. And of you you into or little you then more dynamics the think I on the aftermarket, why

Don Stebbins

the wheels. is buy here it wheel instead changing the in new in a primarily it animal people Yes, The different just to than here a tires, purchase aftermarket Europe tend in States is of aftermarket that. is the again so winter is United in purchase and than Europe

And tire so they keep the pairing together. wheel

slight experience that sense as given decline And sales, does in the a the would so car it well. new that also aftermarket decline make

Chris Van Horn

when lot for and a adding then macro with front? the you bidding great new for you're pipeline to out playing of a weighting engineered been highly complex wheels more considered it's the -- of trends And being if of the light to perspective, that just you it high-value, it. larger shift your those you're continue diameter Makes to from it, Got wheel you percentage on more see more one sense. higher and at do and is of can more the process, all business me, more the you've seeing last you a story got quantify but maybe look technologies

Don Stebbins

we the took in six up horizon let's would quotes. and No take be points, question, going above or up America the as it planning continue it seven -- the I we thought North that we to and for if percentage to XX-inch both say percentage Europe points, where six year-over-year was quotes continues during percent. XX-ish out opportunities past look expect the we XXXX here

and higher doing to I portfolio high will than what between And be trying bigger wheels. bit the little grow. continues that, think margin is it runners XXXX the so now higher we're balance to

Operator

you. Thank

Our Prestopino comes Gary next from Barrington question Research. with

Gary Prestopino

here year-over-year question you Hey, XXX wheels Don XX-inches with the basis got that points, when what was phenomenon? following wasn't distracted saying higher I were I you were up previous a

Don Stebbins

Yes.

Gary Prestopino

points? So XXX the up is basis wheel

Don Stebbins

portfolio. As the a percentage of

Gary Prestopino

here. which at you the with of Number hadn't of gave great. from guys you percentage Okay, quarter portfolio, European of assume the if guidance numbers okay, hadn't guidance? was of production in kind that was in when Europe just softer questions end you released have August, production Couple lower on one your you guidance, the had impact caused general, had schedules, you because I the what tail changed other you in to pre-announce really hit going bulk and to the the the that issue

Don Stebbins

closed Rover primarily and actually was of a is mean volumes Jaguar/Land October. late down and impact certainly in I it weeks September their although year-over-year an volume that also reduced Yes, in terms breaks August million $X the of in facility EBITDA the reduction couple due way to substantially to was WLTP for and related

think that related Jaguar/Land also us. so important us, but that's an customer impacted Rover I that WLTP is to also So don't

Gary Prestopino

okay. Right,

with to going So feel what's in OEMs WLTP, into European terms on of going the your XXXX? happen what's and forward

Don Stebbins

Yes, I impact in same are in we’ll where see think the quarter fourth seeing the fourth quarter. the the same we impact

able they is right cadence OEM I happen certify going think to to to to so what right and be vehicles. have side has WLTP on the get around the is that these to be

will as different used think the out and they in getting planning the the it forward. they'll move planning engine so terms be product changed be more and and And to certification but XXXX, will XXXX in I be structures of the

let's that European XXXX, more say for scenario the production normalized it OEMs. for returns a to I So overall think

guidance production it a kind so we Europe announce And rate at X% for but at in XXXX X%, mid-December we'll we January finalize as when look our in return XXXX. look a low in of and and growth for to would

Gary Prestopino

engines gas just both or Is and diesel this diesel? for

Don Stebbins

Both.

Gary Prestopino

Okay.

have go I'm but engines, re-modify is and is that that intervention down the some problem the that altogether on the of just just failed test and schedules problem off kind then government a out it current up the or has with production? they are production that's why too is clogging to and So so OEMs is their not the this

Don Stebbins

emission of in to or the government think all the the they their mandate engine drove Europe scandal OEMs I recertify ask that variants.

Gary Prestopino

Okay.

you taking Okay. this And the then going add do production? question some China last production, with is that to and on new OEMs with in is that be about America North put tariff, vehicles talking capacity you're have Chinese of to

Don Stebbins

important -- an we it's we and can Yes, question. have

again Chris's finish actually So could that be XXXX. variety as that at every we begin in I that a then but programs in quickest sizes, the level over have we probably of and wide don't with you mid-XXXX would the in finishes, so capacity have others are and some every question take mentioned would early

Gary Prestopino

capacity Arkansas? have you Arkansas, or Do Okay. Mexico, in just in

Don Stebbins

We Mexico. expect to these would put into

Operator

Thank you.

next with Financial. comes Our BWS from Vahid question Khorsand

Vahid Khorsand

split a first a sales? question. on shipped wheel Can and morning, you provide regional Good split, value-added

Matti Masanovich

me Yes, a moment. give

Don Stebbins

that looking do They're up. another question? you have Vahid,

Vahid Khorsand

Yes, off inventory, that build sense how taking inventory get to much place fourth like QX does you you’re looks you or wanted quarter you you the did the built slower quarter, on and inventory why have of a WLTP of build-up? it expecting side do and up was the inventory would a I inventory in building the anticipate from

Don Stebbins

in very the October, is with going we're years a excited season sales. of selling that so in of aftermarket Most us very, about far really for the that we're time selling complement really season we've couple full inventory solid so and last first for build-up aftermarket the where and product, is the of this had the into

from certainly it of on -- is pleased that, majority perspective of with the not some OEM side. it's is yes there the we're the But quite on aftermarket side. the So so

Vahid Khorsand

Okay. next I And question had -- then,

Don Stebbins

Vahid?

Vahid Khorsand

Yes, the correct? that of when are at in August, Uniwheels picking shares when you acquisition beginning you’re doing more August the was up

Don Stebbins

correct. August,

Vahid Khorsand

And were additional quarter any closed? there share since purchases the

Don Stebbins

a XXXX. than Less

Vahid Khorsand

I'm the are is allocate the WLTP mean dividend in more just is and if of wise, to a common I your to is cut shares, to So that you trying to going to something could table, purchase cash continue answer continue where liquidity expecting get are being the you to on discussed? if preferred you you're XXXX, if softness sense converting into

Don Stebbins

that the of shares terms in we were option. first let's not our share purchases, the Yes, at acquired

XX% to essentially that do also the threshold, out now squeeze us. option crossed have option So we've the they shares shareholders. put an have we to the remaining But those to

So routinely discussion prepare were level the December. in in that purchased meeting that of then, our in that we the the board not allocation, our those Those capital as or bought and terms will we plan we put long so for certainly at at that's range XXXX. after for board we out -- shares August XXX process. us, to of shares And are the at discussed level and budget the shares part topics be squeeze board

Vahid Khorsand

now the first Okay. you cash will to get have through quarter, But end between you're confident the enough of that and that?

Don Stebbins

I'm absolutely no confident there's question.

Vahid Khorsand

Okay. that wheels? split And question, was final my so on just regional then

Matti Masanovich

America Europe. million, And circle in and splits, on units, units million value-added North America, million million back the in global on Europe. QX is $XXX and for to the so $XX But sales for in X.X North X.X globe, million $XX X.X the million regional

Operator

you. Thank

Michael with next Our comes Management. Boam Asset Sona from question

Michael Boam

Hi, a can. I if few questions

worth was EBITDA? XXXX, to you what in in that Firstly the extra week

Matti Masanovich

I can think EBITDA not. that weekly wheels number made say we is but of the we

Don Stebbins

about wheels. XXX,XXX It's

Michael Boam

Okay.

how how at and you during drew quarter, of please? the your on facility was quarter is on end ABL facility me big that you can Secondly the much tell outstanding the the

Matti Masanovich

million million we $XXX we've in $XX $XX a facility. million and $XX America North Europe is facility and drew a got in Europe Facility million.

Michael Boam

that not? Is or in included liquidity your

Matti Masanovich

Yes.

Michael Boam

Okay.

downtime? point In standpoint can be the into QX of take terms the seeing, and coming production more disruption, QX tell in coming schedule of the to a worse OEMs from of inventory you're in what going with production additional us quarter because needed to you or to back come have Europe, from kind is

Don Stebbins

of is No, will unit value-added QX our as in up expectation versus sales. be terms sales as well that QX

Michael Boam

the or And that is to far quarter so tracking not?

Don Stebbins

-- is tracking. it Yes, it yes, is

Michael Boam

given back will you going Then you Okay. shares, how to you point if back incremental much said cost the question XX.X%, the any to put it's all in X.X% the time? on

Matti Masanovich

$XX million.

Don Stebbins

$XX million.

Michael Boam

you are? what disclosed then this, million. can if your with you $XX any bank already And share if covenants us haven’t

Matti Masanovich

We fairly revolver but the XX% yes. facilities -- on we light we a have. primary and covenant the any given the quarter a end covenant times the X.X I have that’s really light there test if get covenant debt-to-EBITDA covenant at take net is on LTM of drawn then

Michael Boam

from say I should with is to not you market, what volume So going call launches, or be XXXX is fair is on well from mean than QX. I Chinese not? QX be that the fewer track take back better entering possible the QX, really tailwinds

Don Stebbins

I volumes as from taking don't view. additional upside so on think our look be counting that at we to our in we’re XXXX just from would China, share

Michael Boam

are you a But yes? Okay. expecting year, better

Don Stebbins

Absolutely, absolutely.

Operator

Thank [Operator Instructions]. you.

next comes Monnoyeur BNP. question Olivier Our with from

Olivier Monnoyeur

taking my the North like to the moment, for account one? usage I there have would you million is is to thank a of actually. the usage, European back $XX any said receivable go $XXX million, usage in facility the few I at is America you Hi, question,

Matti Masanovich

facility $XXX and facility. is credit XX there America for a revolving credit million in North Euro is There revolving million

Olivier Monnoyeur

the accounts fixed receivables program? No, securitization

Matti Masanovich

$XX of under on that we million have million the about so -- program drawn and QX. that we approximately availability in $XX end had Yes, at

Olivier Monnoyeur

sorry -- All -- to right. there Is as

Matti Masanovich

million million earlier, availability utilized million that referred to availability. million. we the include liquidity of $XX that $XX said I our $XXX not our excludes $XX that We calculations about that million $XX that of of do in we

Olivier Monnoyeur

right, All understood.

level? of the the to that just do usage cash it or will intend quarter reduce down program level the bring year, securitization inventory of you to in As the the you fourth accrue

Matti Masanovich

strategic on revolver. It’s borrowing on different it we because rate versus kind of pay the

seasonality the to where and depends and kind end of by normal just expect of So end though our really do normal unwind the inventory is the we fully year year, course. we positions

Olivier Monnoyeur

on or interest the after is before flow guidance cash payments? operation, from that the On

Matti Masanovich

Yes, are included. after interest payments

Olivier Monnoyeur

so after included, payments. Yes,

Matti Masanovich

payments. after Yes,

Olivier Monnoyeur

haven't can differences America as the last net goods; the And back quarters? you North the kick good. Europe shipments, granularity Okay, question, for two value-added and you and between past around sales,

Don Stebbins

Yes, we in Appendix that put the certainly can absolutely.

Operator

Thank the would to Stebbins Don I'm in this questions back turn now call closing no queue. for showing time, you. to remarks. like further I the At over

Don Stebbins

everybody Thank good a much you. have you day. Thank and very

Operator

Thank you, ladies gentlemen. today's and This concludes teleconference.

may now You disconnect.

Superior Industries International (SUP) 9 Nov 182018 Q3 Earnings call transcript