SUP - Earnings call transcript Q3 2020 | Superior Industries International, Inc.

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Operator

Ladies and gentlemen, good day and welcome to the Superior Industries Third Quarter 2020 Earnings Teleconference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Troy Ford. Please go ahead, sir.

Troy Ford

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

available section President our be joined President with Chief appointed which is will today, on newly the Trenary, our Executive Chief the to release, During Financial Majdi we Officer. and presentation, the referring call discussion Abulaban, I Superior’s of website. our and by earnings earnings Officer Vice on am Tim Investors our Executive along and

Safe Majdi, I this Before like the on I Private over to Reform of the forward-looking factors. and Safe filings, complete in Harbor turn company’s SEC everyone XXXX. a current Securities XX-K remind contained today statements company’s the and statement the risk this Act any the presentation refer Please would that Slide full provisions to call to commented X to including of to Report of forward-looking more of Harbor Litigation are for statements subject or on Annual discussion Form the presentation for

also to discussing not exclude can and measures measures today, I EBITDA. appendix these directly of measures GAAP the most call measures turn will certain Reconciliations GAAP. this presentation. adjusted U.S. Majdi. be be comparable with the in non-GAAP that, including non-GAAP sales impact accordance U.S. found and the of in value-added therefore These With calculated over of items to are the will We

Majdi Abulaban

for Thank morning you good today results. and Troy Thanks, quarter us our to everyone. joining review third

with track of significant automotive new Superior. is Tim industry. to and I begin, Tim strong experience Chief welcome would record executive Financial accomplished we like Officer, leadership in our Before to financial an Trenary a

pleased focus an third the challenging to now with Ensuring environment. when have these key employees and our strong priority. the liquidity that, Superior efficiency. of Recall in safety laid delivered on the as are our Slide a our and him of and continues quarter of we quarter. our We overview health With out team face began, areas: X, pandemic will team. we in I a be on are priorities. results, people, thrilled am the on priorities been I Beginning provide four to executed our top the how has has of proud cost, team

temporary structural Our to place, Safe saving is response measures Playbook includes cafeteria measures. to improve every cash from initiatives cost in to executed to-date in cost to Further, operations, capital protocols to of capital significantly be coupled These implemented with expand Work to from XXXX addition Also clear enabled margins. rapid focus. our have earnings the maximize for permanent able which were our flow we expenditures, saving throughout to in of effective cost several will decisive COVID, and and enabling proven busing saving continue These and and production. measures, these highly aspects business, cost have diligent liquidity. management through reductions working we we us

no Finally, successfully that am to-date production have I disruption. we restarted with pleased

impact our the remain. customer production, respond been Having that, volatility and and and needs. to uncertainties has to deliver to markets, team Our broader on scheduled customers said positively the potential able COVID reliably supply, our

been plan to-date, growing managing have the vigilant has EBITDA confident be we continue challenges. in a to be we have these success X, our for priority and for robust business and will and the we We main continues cash, business to had that us. given are Slide

portfolio Actually, as volume of wheels to basis contracted XX% quarter, points towards quarter. margin improved grew quarter unprecedented comprised improvements larger compared by shift year. XX-inch by driven our was and higher structural XXX the During the XX% of cost This wheels. of well third an the last EBITDA by ongoing for EBITDA and the as

of resulting our reduction debt net acquisition in of a business debt lowest European deliver level the of XXXX. to able $XX net the in were million, we addition, since In

position record our $XXX also to million. a liquidity level improved of We

a for fiscal are XXXX. As result, our year prior be neutral we flow now of guidance cash to well ahead

safety continued the has our everything priority top and we remained I evaluate As employees safe provide doing and ensure self a we to of can environment. are to a work mentioned, health we to have

quality In the that metrics Further, focus due our tracking and ahead operating customers on improving alignment addition around our pre-COVID our margin. to we and levels with performance profitability in are no in I significant improvement delivering have disruption, to fruit bearing America with of pleased to am manufacturing created our safety, North is delivery.

fully the margin closed have now the between GAAP We two regions.

outlook, to XXXX, uncertain year the quarter the outlook our production environment. due suspended Now, with full to first we of respect during our

in adjusted the and on and provide shutdowns. and industry terms able for roll-off will optimistic of robust and successful we production of our now cost stabilization temporary quarter anticipate in outlook. remain EBITDA reductions additional detail sales our for With are guidance the restart quarter. operations, fourth of and a recent provide the the We to Tim

guidance outlook We our production neutral be no ahead of assumes also prior cash to for COVID-related flow shutdowns Superior at the expect our flow year cash customers. of or free XXXX. This

mandated we in including Mexico, As Poland. I and the mentioned, the and COVID potential monitoring our closely impact any Germany, resurgence shutdowns are of regions,

down flat has North graph second highlights which America of to third industry since production the the North XX% essentially quarter, XXXX. quarter and than improvement the rebounded quarter America third the Slide with production X, the on Europe. in in Moving more to was XXXX, of as in both

production While the European been sequentially, down slower, improved volumes also with recovery X%. has

continue both IHS quarter, to X highlights fourth fourth of Slide relatively compared XXXX. wheels the of our regions propel trends how markets. to these light-weighting and to secular to above premium look is quarter the be flat forecasting growth we As

been the long a has quarter, strategy. our remains While for to ahead wheels, competitive is we premium the are by advantage value-added flat and ongoing to portfolio driven sales, with core technology, market. enabled market in our our of Superior third differentiated This year-to-date shift of by which is

continue customers’ seek serve our we trend to opportunities expect for to as We wheel increased desire content. this

value Slide on to to X, roadmap. our stay focused Turning we on continue creation shareholder

continue the actually the to operating improving and on on for through stay same focused is us time, cost are performance trends the examples bearing been of year-on-year above ahead efficiency has positive executing of excellence. management, two focus successful growth results, more to our this wheels. there we market by improve. X recent At leveraging in that immediate opportunity efforts and recognize These Our portfolio for fruit Slide we but secular our execution strategy. premium highlights manufacturing

F-XXX. on discussed, launched we earlier year, we physical production the vapor previously Ford As our deposition this line, have PVD

pleased production XXnd flawless World Ford Annual we launch, Award, week in received challenging times. Ford’s this past performance an award We at exceptional Excellence product that from these the continuity the this of and are recognizing the

a OEM, continue to advancements move during emerge the proud other executing recognition with We This this a we investments shareholder programs. along here are vehicle our testament announced and electric enabled were Further, segment. robust and in programs. grow has our priorities roadmap closing, performance turn wins I major program pandemic. and challenging creation In to our this these commitment this us differentiated company grow is We recently to North continue over as will we team. like portfolio from quarter strong to a stronger times. our actually performance for near-term our key America portfolio of navigate in of of that, a as to of who thank with awarded progress to on continuing would to our unwavering and products are to I Tim. everyone With Superior value it their at we

Tim Trenary

Thank you, Majdi.

is to million decline $XXX third in prior X%. the to and of industry quarter. production X% we FX decline value-added period Turning to XX, the excluding sales represents delivered the a This Slide during compared year equal

As wheels has marketplace. diameter in the trend mentioned, Majdi the toward continued global larger

just year of compared over wheels accounted the During in prior approximately portfolio XX% for quarter, XX-inch greater our XX% period. the and to

value-added in quarter impact quarter improved industry America XXXX. third sales North second were quarter Europe. sales flat in the recovery third the of COVID-XX downturn of in Europe’s be strong from second value-added to year-over-year, the the quarter, sequentially but reflecting the continues experienced following strongly seen Our

by Coupled the of compared Our to was shipments breakdown value-added our outlined with sales Slide of the million sales production in key value-added to in our quarter at decreased million and the we decreased excluding impact in prior compared In period. year the wheel earnings premium prior a the for customers prior EPS. driven decreased net $X.XX and diluted X%, primarily a to year third $X.X Europe. of units on $X toward income items We prior to unit per income impact acquisition, to compared or net diluted in the see the $X.XX with appendix quarter $XXX reported prior period. which from in reconciliation wheels year, $XX was year. of loss of offset the $XXX to of compared a diluted and diluted content the year of million share to the decrease XXXX as quarter, net million FX table aluminum partially sales shipments, a restructuring loss or share million the compared regional the of year the more lower in other third $X.X to larger XX, unit on the million The for sales On net change Please the and stronger period. net per levels by prices, EPS for period. shift

higher as Majdi mentioned, the customers’ the took permanent to costs the impact better that our These prior temporary decisive to XX, Turning mitigate resulted and year. in align enabled company now compared Slide of levels. to us to to actions COVID-XX initiatives as margins production

expenditures a and these $XX year accounts prior premium receivable efficiently at to arrangements manufacturing diameter permanent flow EBITDA mix, decrease current cost primarily lower On of cash expanding rates, cost lower million to shift period. by managing addition product reductions, improving the for capital million and initiatives, Slide compared sales production rationalizing balances, payment On the adjusted foreign $XX in by the margin XXXX customers temporary key increased The offset of align In continued by stronger period driven factoring decreased Europe environment. $XXX The our partially the our driven accounts XX, portfolio to value-added third to primarily reducing stronger increase higher was $XXX prior XX, footprint, larger prior inventory, our government prices including content temporary favorable with supplier enhanced we in production the year. to volume compared in enhancement wheels year incentives. energy year period. EBITDA initiatives, and million terms, offset receivable Slide exchange to versus quarter in the adjusted more to by million and was

of by driven from Slide the including receivable cash primarily Third flow prior balances, was compared primarily activities by cash compared target. cash extensions factory capital investing reduction working to was net accounts million in and ahead its This year $X supplier prior the $XX improvements, The In thereby $XX $XX XX. expand million quarter XXXX $XXX quarter, decrease cash receivables capital free third expenditures in enhancing operating flow activities and term higher us addressed to million Net our period. our period. year prior million used decreased versus million increase the year. in placing for was on driven an or to was to offset the

throughout due facilities, have the zero on the to to XXXX. end revolving financing of carefully third cash increased carry Net spending at for primarily credit all our capital We activities used balance quarter. managed which payments

we during million the generated We flow also $X paid of the $XX total, million quarter. cash quarter. in in preferred third In free dividends

the XX now significant strong also capital strides flow boosted quarter our reduce to third record for a made cash cash generating level. debt. an overview of to structure, toward The we Slide our in of goal liquidity our to flow Turning

As our $XXX the year XX, debt a under September since of as compared was maturity compared liquidity, September debt acquisition operations $XXX million by debt XXXX our available profile. net XX period. revolving second XX, Slide record low and the million in including of XXXX. decreased credit $XXX cash prior million. debt to million million, Net XXXX, was our to committed to summarizes Total $XXX total European funded facilities, amounts the in $XX down quarter, bringing of

significant near-term funded no maturities have We of debt.

and U.S. May next the facilities, our which mature revolving in significant being of credit With financing event extension the XXXX. European

facility revolving Our balance. credit having zero currently is

compliance our mature until covenants. does XXXX in loan in senior mature term full XXXX. loan notes remain Our and We with all not

We XX. progression flow and historical flow and described. cash of achieved is Slide third Our in million flow quarter by liquidity free the driven on the of cash free cost actions depicted $XX previously cash

of being issued outlook to X are this of flow cash flow cash beat payer in free We free on XXXX. on track our year August neutral

from continue is challenging Superior is at to economic addition, million. to in liquidity In believe pandemic. standing We environment well-positioned current resulting our a manage record this $XXX the

for virus. production footprint. the to increase latest on no outlook is of which production shutdowns an the America quarter the is industry North in quarter XXXX in fourth reflects flat our across of a current Our IHS fourth X% IHS’s quarter, assumes the XX and forecast arising fourth from Slide for quarter and be the flat production resulting in forecast relatively Europe for

XXXX, our flow cash million As a New year to to the the maintaining positive in to to cash to achieved in be million $XX range $XXX of cash units, not flow year. the to million we million. range standards flow decrease our million shareholders’ with to result, was We million company’s to through $XXX the resulting address we the listing. in would free of be compliance expect of of for listing sales neutral XXXX value-added capitalization $XXX of on notice the On end. to X.XX EBITDA and to-date prior that June these an most of million X.XX shipments I and X, $XXX in like full estimates, market the full Exchange range sales York equity. Superior the free million, improvement in $XX it Stock received anticipate due the be Based for outlook free anticipate be adjusted year net in to in

plan announced plan July remediation on that that increase XX to The out Exchange, plan a the within New the Stock required the York and on X. accepted submitted our have capitalization lays have market strategy September We timeframe.

will the to improve plan $XX capitalization greater are our David market continue health position the to to will to call Superior’s In remarks. open David? Safe to Playbook Work of safety and priorities other our call employees We we the closing, confident financial we than and prepared ensure shareholder executing I key That our to by turn execute to that our value. deliver and continue drive concludes questions. for million. back

Operator

question Thank from you. first [Operator Prestopino Our Barrington with Gary comes Instructions] Research.

Gary Prestopino

Great all. morning results. good Hey,

Majdi Abulaban

Good morning.

Tim Trenary

morning, Gary. Good

Gary Prestopino

the were keep And couldn’t of up of of Hey, repaid much how debt in going that right quarter of slides, here. million couple your how revolver in and of was some the terms the debt questions part I actually structure? and was the but you that you with of $XXX much fast your other of the how

Tim Trenary

Hi, Gary, it’s Tim.

Gary Prestopino

Hi, Tim.

Tim Trenary

repayment call That we repayment or of the revolvers.

Gary Prestopino

okay. Okay, well, great. That’s repayment of the revolvers,

Tim Trenary

That’s correct.

Gary Prestopino

source the guys just basically a you going right? liquidity Yes, have revolvers into pandemic, as those of

Majdi Abulaban

and I it’s of the zero sheet. comfortable pay are as is they can little of production that have of came back we and we revolvers midst we up, the pandemic north on did a the Yes, draw-down assure paid them are down sheet now down balance just the on $XXX mean, and cash our balances to million liquidity, but in the company liquidity, the that source our on balance cash of

Gary Prestopino

will start right? term B, down cash paying improves loan So, you some as the then, obviously flow

Majdi Abulaban

is that Well, certainly option. an

manage will flow our to virus quarter, want sure make we address continues execute continue to in here stay make is this course. strong, behind fourth the We sure and to us, will cash that due through

Gary Prestopino

on Okay. Did notes trade the your senior market? secured

Majdi Abulaban

Sorry?

Gary Prestopino

what Did now the trading senior secured at are toward know? you trade, they notes

Tim Trenary

XX. the latest was XX, the think I around I mid-XXs, saw

Gary Prestopino

don’t o’clock couple of call, I to a and jump. got a the I here I Okay, got want more then to got call. I questions but hog X

in weren’t shutdowns or terms IHS in maybe before Europe. going Majdi, of on the or on what’s the hey, predictions, in obviously auto operations? in – So on projections were could put been what’s new manufacturing those and the they What’s has view would assume this European on what all, with pandemic I that view cause shutdown QX your first no of your

Majdi Abulaban

Gary. yes, No,

has So, action been listen, Europe. and clearly, both by Mexico, lot this last couple there frankly in of weeks, of in a governments

disruption tell one impacted. Right post able you So not we effectively. either in we manage I up, don’t to far, been are now, operations. very manufacturing COVID those we would operations a replant to see Germany those both our and in in has big Poland of as that during manufacturing

Gary Prestopino

And that’s down this soon. call, good got here to I just I don’t the – said, am like to but I I I Okay, am hear. then and want to writing here jump hog

You Europe, the right levels closing same about North that’s talked an Majdi? and they – America which great. gap between about to the EBITDA on margin have now basis, really a on done testament are is and you both that guys an adjusted it’s on margin what Is

Majdi Abulaban

same say North the that extremely expect Gary, well. I America of we performed year. would has Yes, the for balance the and

Gary Prestopino

Right.

Majdi Abulaban

In I the the as familiar to place. out are really with the That pandemic face but in we executed took cost very we pandemic you the was some during only, all actions, not prior put challenging is that initiatives is plan environment, of we the mean, discussed. story the panning

Gary Prestopino

pickups just am moved at stuff, guys one is up, maybe belittling was either look an and things done plus guess you SUVs I down, and sell-through one that these Okay. idea U.S. obviously am have fact to I is of sluggish, Europe great you that not way way? get at And how came what it and way because what to in is came such the to at I it look that trying am I have it? getting

Majdi Abulaban

dimensions substantially Europe Europe very Gary, Europe. quarter, from than of is you third margins. North nature, did America structural story the holding North on a done I the volume Again, all an a in of has better and We standpoint, will see the really but reducing cost America tell job that business. is impact along for good in

Gary Prestopino

that in I initially, about at were that? that I in Okay. large XX%. talking somewhere the terms as the I to of grow and percentage is low still XXs, the mean portfolio diameter you And go mean, at there XX%, to? just can now mid-XXs wheels of a where then room it’s think,

Majdi Abulaban

this larger Gary, actually overall, still trend That we represents small a towards premium continue. expect content story the whole I wheels, fleet. percentage mean, of wheels, more to

out was this charts, you us, because are are our moved about overall, last at platforms North XX%. year, off at the America are on. For are year, we we the XX%, mix average we the But as at, year, in on we favor average on the

We continue. expect trend to that

Gary Prestopino

you program give then you was the That’s can manufacturer on? Great. good new who clue And news. us any the got that lastly, EB

Majdi Abulaban

go would as three. one it’s big of as saying the far I only

Gary Prestopino

Okay, you to jump. I lot, that’s great. That’s all a got Thanks know. guys.

We will speak to you soon.

Tim Trenary

Thanks, Gary.

Operator

Thank you.

Our next Stephanie comes JPMorgan. Vincent with from question

Stephanie Vincent

Hi, thank very taking much for questions. you my

COGS First off, keeping you can’t model or through very XXXX, any do wanting in into of That just should either numbers costs good rein a into plugging maybe that either very sure especially on quarter one-time guys support make we just you next that tight question. SG&A? be to items first my or on going would year on margins, when there back we are forward, the be our kind government

to But this holding your balance than be into my type CapEx, put in you guess CapEx what medium-term to happy cash excess comfortable you terms question it’s years? is higher in to I These sheet I am wanting per that outlook just feel revolver, we a of on a mean, in know you maybe previous I view, Superior? have of bondholders’ from environment in paid in questions. bond similar taken perspective, forward second realizing would can cash going finally, look And your the buyback. then that The on very perspective, initial your from are have down and what that annum very, for

Tim Trenary

lower the try some during Stephanie, benefit will were I part, from temporary was did take them cost beginning for the rolling quarter, I call, the than a but cost and/or end virus most XXXX. they going the some to there quarter large you off company part were during in questions, and certain we and to normal a we fourth and obviously it somewhat think and into on quarter an thank Yes, impact would will actions for in example, this quarter, the customers, gone Okay, the third of resurgence, some third Tim. here our benefit, will XXXX, for and some saving there quarter. the actions, the the benefit small in travel that temporary reductions continue I your think example, compensation for back expect indicated be cost normally other would temporary for will order. will the actions by be resurgence in the absent be it’s of be I our most benefits structure gone But

whichever we respect but be year to some want spending would a the to of expenditures, at the that some bit. where would discretionary that the of have and very watched present that off expect fourth suspension you margins those look we you give ranges capital guidance are look to like, could, you you If was to capital would the provided use indication during when we encourage temporary what like pushed this indication of little cost post I carefully of what the as quarter virus will to With to, part and we spending we right, reductions. the absolutely you heavily

historical as financial in see you levels. can did ability With company’s we very time which the that thought with most capital watch until just mean, it got capital virus, being to for this and capital prudent I For say a to would to say, here the of deal we spending spending, would we spending, to as undertake a that respect therefore eventually it’s we the we return near-term snowplow. the we we well. arms as to sort will I our results, could the prospective I spending around. annual but cash bit expect of The part, the closely our in our

of out have will the you on year. the and liquidity given of here specifically, where all we the position, thought both again, the flow balances the the there the more September, our cash regards, end have of At revolvers, at come zero cash a amount is we balance As revolvers cash, end company’s the sheet. fair

some absent into of us see might number It again, So, and gives position flexibility, of fit to factors. balance going a year, sheet depending of amount a strong. virus, of we a it stay to opportunity that the manage optimize we resurgence our next Stephanie, lot expect as on liquidity fair lot

can’t point, specific because for is year this this in on at yet don’t flow remarkable say, cash of and I come flow, to flexibility. be and exactly, behind I more lot know So, results the whether liquidity to and virus suffice quarter position but the remainder us that good third the here tremendous this, cash outlook pretty gives a good of

Stephanie Vincent

and Thanks. end-markets strong. in saw And QX we obviously did that a really going were a a negotiations, conference going than decent wondering from can next part I They have different supplier And And couple that year? your uptick that’s I it to up for we you of slip a is that’s through call am late week a be QX in and shaping can I from me. actually said is more. reversed finally, QX, most into this QX say in then with with to quarter-over-quarter we payables. expect of something if also be slightly just supplier the agree assessment? last mean, just you but basis, guys on sort would they geographic

Tim Trenary

part, the production the projecting. we again. am volumes for any next the don’t year, tire better with Thanks. respect Stephanie. It’s most business are to agreeable have with information not and for with moment, Tim absent familiar what is IHS I any we

So of terms point I towards projections you would those QX. in

at receivables, As operators you to the a quarters, in on offset inventory, procurement the guys, nice finally, as quite did a regards, actually bit. factoring quarter, end of last light payables in the with the job payables, working the good has over managed the know in the respect capital the of we the we function increase the our have company’s uptick terms up of managing few position increased the to third the that production. management And

see you calculations, will the DPOs do you are up. if that So,

terms in quarter ask little So, or the a of place. respect expect timing may event little exogenous from bills. function we been of with the otherwise, again, the in me remain the at to those bit have some something would There payment virus to shared services a

little there dramatic. quarter, pullback fourth So, but the be I in might a expect perhaps don’t anything

Stephanie Vincent

very you much. Thank

Majdi Abulaban

have recovery in just Stephanie, for to fundamentally and point our markets now is And significant IHS, reference XX% to to Europe the a they improve are a we They next a forecasting the on recovery forecasting, continued America forecasting this data in X outlook. point back were just consider XX% your we a recovery year. relative IHS that ago, and down months for if X go see won’t now X you year, North outlook, years.

resurgence to our So, but it’s the it be the how outlook all on appears positive, hinges and very impacts business.

Stephanie Vincent

few first the guidance. their at of one was it strong Yes, to you in supplier of up me, kind thank very numbers months that but and have don’t I geographic looks XX% front actually particular now looking relative think the I just for QX there for quarter. but are in was QX ago, a I are in that globally, breakdown expectations

Operator

have we questions. other no At you. time, this Thank

So, Mr. closing to Abulaban I for turn Majdi it comments. back will

Majdi Abulaban

am taking are want team that everyone confident for creation we the executing on value. how Well, joining. right shareholder thank the with you I to pleased entire and value to We response the we steps Thank deliver of are roadmap reiterate Superior remain you. the to I our pandemic. focused

Operator

Ladies Thank presentation. that morning’s gentlemen, concludes you. this and

joining today. you your thank You may for and phone disconnect lines us

Superior Industries International (SUP) 2 Nov 202020 Q3 Earnings call transcript