Superior Industries International, Inc.
Annual Report 2009
SUPERIOR INDUSTRIES INTERNaTIONal
is one of the world’s largest OEM suppliers of
aluminum road wheels for the global automotive
industry.
Headquartered in Van Nuys, California, Superior
operates six manufacturing facilities employing
approximately 3,500 people in the United States,
Mexico and Europe.
SUP
Listed
THE NEW YORK STOCK EXCHANGES
NYSE
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT 2009
1
Dear Fellow Shareholders:
For most of 2009, the automobile industry as a whole continued its slump.
However, in the last quarter of the year, virtually all of our customers achieved
strong sales momentum and increased their production volumes over the preceding
quarter. Superior Industries reported corresponding sequential quarterly sales
growth and improved operating margins.
While one quarter does not make a trend, the signs are encouraging and portend
better things to come. Moreover, we believe the decisive and timely actions we
took over the last few years to manage our costs and right-size our company
enabled Superior to benefit from this recent rebound in U.S. auto sales and
maintain our positive cash flow.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT 2009
2
Financial Results
Full-year financial results for 2009 included a number of non-recurring
costs related to plant closures and workforce reductions, including asset
impairments, equipment dismantling and severance costs. In aggregate, these
special adjustments totaled $33.3 million.
Net sales for 2009 decreased $336.1 million, or 44.5%, to $418.8 million from
$754.9 million for 2008. The decline was due to lower unit wheel shipments,
which were down 31.9% from the prior year, as well as a decrease in the
pass-through price of aluminum to our customers and a change in sales mix.
Gross loss was $10.2 million, or 2.4% of net sales, compared to gross profit of
$6.6 million, or 0.9% of net sales, in 2008. Cost of sales included non-recurring
plant closure and related expenditures described above of $21.3 million and $6.3
million in 2009 and 2008, respectively.
SG&A expenses decreased 12% in 2009 to $22.6 million from $25.7 million in
the prior year, principally due to lower salaries and wages.
Income tax provision was $26.0 million, compared to an income tax benefit of
$1.8 million in 2008. The 2009 income tax provision includes expense related to
increases in the valuation allowances of our U.S. and Mexico deferred tax assets,
totaling $42.9 million, partially offset by a benefit of $8.2 million on our 2009
operating loss, a benefit of $6.1 million related to a refund claim, along with $3.2
million in reductions of the liability for uncertain tax positions.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT 2009
3
Our 50% share of the operating results of our Hungarian joint venture, Suoftec, was
a loss of $24.8 million, compared with income of $742,000 in the prior year. The
current year loss included an impairment of the joint venture’s long-lived assets of
which our share of the charge was $14.4 million. The decline experienced in the
European automotive market during 2009, along with indications of a longer-term
turn around in the future, contributed to the impairment adjustment.
Net loss for 2009 was $94.1 million, or $3.53 per share, compared with net loss of
$26.1 million, or $0.98 per share, for 2008.
During 2009, cash flow from operations was $22.3 million. At year-end, cash and
short-term investments were $140.5 million. Working capital and the current ratio
remained strong at $241.4 million and 4.6 to1, respectively. The company has no
debt.
With two fewer wheel plants in operation at the end of 2009, our inventory balance
decreased $22.5 million to $47.6 million from $70.1 million at the end of the prior
year. We continue to consider balance sheet management a very high priority.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT 2009
4
Restructuring
Our efforts to better align production with expected demand for aluminum wheels
continued in 2009. Over the past few years, we have closed several manufacturing
facilities in a program that was completed this past summer. Since the end of 2005,
our North American workforce has been reduced by 51 percent. The shuttered
plants were older and less efficient than our newer ones. A small yet important
benefit to rationalizing our facilities was the strategic redeployment of assets,
which will have the effect of lowering future capital expenditures.
Due to moving much of our production into our Mexico facilities, 69% of our
wheels are manufactured in Mexico and the remaining 31% in the US. For the
foreseeable future, we expect the production mix between our Mexico and U.S.
facilities to remain at approximately these same levels.
Operations Review
During the first half of 2009, unit shipments and net sales were down significantly,
compared with the first half of 2008. Product demand began to improve in our
third quarter, due, in part, to the “cash for clunkers” program and the re-opening
of General Motors’ and Chrysler’s assembly plants following their emergence
from bankruptcy proceedings. Although the increased demand that has continued
into the first quarter of 2010 is encouraging, and we are cautiously optimistic
about the future, we are not yet convinced that this is an indication of a sustained
turnaround trend.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT 2009
5
Looking Ahead
In April of 2010, we expect to complete the implementation of a new Enterprise
Resource Planning (ERP) solution, which we call Imagine. We were operating
on a legacy platform that was inefficient, inhibited data collection time and was
costly to operate. We invested in the new system to automate processes, standardize
best practices, make our operations more effective and drive improvement
throughout our entire organization. Importantly, the new system also will allow
us to look at data points in new ways. We believe this will significantly help us
to improve forecasting, identify and respond to issues and opportunities more
quickly, and understand our business better.
Moving forward, we will continue to manage our workforce and production costs
and maintain a level necessary to meet our customers’ demand. In that regard,
we are looking at strategic ways to further lower operating expenses throughout
the company. We also are now comfortable in shifting our focus from defensive
to offensive, as we evaluate potential opportunities to further strengthen our
company and expand our geographic footprint.
On behalf of board of directors and management, I express my sincere appreciation
and admiration to our entire Superior team for their tireless efforts. To our
shareholders and customers, thank you for your loyalty and support.
Sincerely,
Steven J. Borick
Chairman, Chief Executive Officer and President
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT 2009
FINANCIAL HIGHLIGHTS
Fiscal Year Ended December 31,
2009
2008
2007
2006
2005
Statement of Operations ($ - 000s)
Net sales
Gross profit (loss)
Impairments of long-lived assets
Income (loss) from operations
Income (loss) from continuing operations
before income taxes and equity earnings
Income tax (provision) benefit
Equity earnings (loss)
Net income (loss)
Balance Sheet ($ - 000s)
Current assets
Current liabilities
Working capital
Total assets
Long-term debt
Shareholders' equity
Financial Ratios
Current ratio
Long-term debt/total capitalization
Return on average shareholders' equity
Share Data
Net income (loss)
- Basic
- Diluted
Shareholders' equity at year-end
Dividends declared
418,846
(10,169)
11,804
(44,618)
(43,255)
(26,047)
(24,840)
(94,142)
308,132
66,776
241,356
541,853
-
373,272
4.6:1
0.0%
-22.3%
754,894
6,577
18,501
(37,668)
(28,573)
1,778
742
(26,053)
319,289
62,201
257,088
628,539
-
471,593
5.1:1
0.0%
-5.1%
956,892
32,492
-
3,321
10,200
(6,263)
5,355
9,292
356,079
95,596
260,483
729,922
-
550,573
3.7:1
0.0%
1.7%
789,862
8,740
4,470
(21,409)
(16,088)
285
5,004
(10,799)
346,593
112,083
234,510
712,505
-
563,114
3.1:1
0.0%
-1.8%
804,161
48,824
7,855
19,167
23,908
(9,572)
5,039
19,375
359,740
110,634
249,106
719,895
-
583,988
3.3:1
0.0%
-1.2%
$
$
$
$
(3.53)
(3.53)
14.00
0.640
$
$
$
$
(0.98)
(0.98)
17.68
0.640
$
$
$
$
0.35
0.35
20.67
0.640
$
$
$
$
(0.41)
(0.41)
21.16
0.640
$
$
$
$
0.73
0.73
21.95
0.635
QUARTERLY COMMON STOCK PRICE INFORMATION
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2009
2008
2007
High
Low
High
Low
High
Low
$
$
$
$
12.88
15.18
16.35
16.35
$
$
$
$
8.31
11.85
13.60
13.26
$
$
$
$
21.55
22.21
19.97
19.35
$
$
$
$
16.43
17.42
16.07
8.92
$
$
$
$
23.19
24.06
23.05
22.23
$
$
$
$
19.07
21.25
18.33
17.81
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 2009
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
(State or Other Jurisdiction of
Incorporation or Organization)
7800 Woodley Avenue, Van Nuys, California
(Address of Principal Executive Offices)
95-2594729
(IRS Employer
Identification No.)
91406
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (818) 781-4973
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, no par value
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ]
No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ]
No [X]
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
No [ ]
Yes [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
No [ ]
Yes [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Accelerated filer [X]
Non-accelerated filer [ ]
Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the registrant’s no par value common equity held by non-affiliates as of the last business day of the
registrant’s most recently completed second quarter was $376,292,000, based on a closing price of $14.11. On March 5, 2010, there were 26,668,440
shares of common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s 2010 Annual Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after
the close of the registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item
Item
Item
Item
Item
Item
Business.
1
1A Risk Factors.
1B Unresolved Staff Comments.
2
3
4
Properties.
Legal Proceedings.
Reserved.
Executive Officers of the Registrant.
PART II
Item
5 Market for Registrant’s Common Equity, Related Stockholder Matters
Item
Item
Item
Item
Item
Item
Item
and Issuer Purchases of Equity Securities.
Selected Financial Data.
6
7 Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
7A Quantitative and Qualitative Disclosures About Market Risk.
8
9
Financial Statements and Supplementary Data.
Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
9A Controls and Procedures.
9B Other Information.
PART III
Item
Item
Item
10 Directors, Executive Officers and Corporate Governance.
11
12
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
Item
Item
13 Certain Relationships and Related Transactions, and Director Independence.
14
Principal Accountant Fees and Services.
PART IV
Item
15
Schedule II
Exhibits and Financial Statement Schedules.
Valuation and Qualifying Accounts.
SIGNATURES
Forward-Looking Statements
PAGE
1
5
12
12
12
14
14
15
16
17
34
35
65
66
67
68
68
68
68
68
69
S-1
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made
by us or on our behalf. We may from time to time make written or oral statements that are “forward-looking”, within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended (Exchange Act), including statements contained in this report and other filings
with the Securities and Exchange Commission and reports and other public statements to our shareholders. These
statements may, for example, express expectations or projections about future actions or results that we may
anticipate but, due to developments beyond our control, do not materialize. Actual results could differ materially
because of issues and uncertainties such as those listed herein, which, among others, should be considered in
evaluating our financial outlook. The principal factors that could cause our actual performance and future events and
actions to differ materially from such forward-looking statements include, but are not limited to, the worsening
financial crisis, changes in the automotive industry, financial distress of our customers, declines in industry sales
volumes resulting from economic conditions, increased global competitive pressures, our dependence on major
customers and third party suppliers and manufacturers, our exposure to foreign currency fluctuations, and other
factors or conditions described in Item 1A – Risk Factors section of this Annual Report on Form 10-K. We assume
no obligation to update publicly any forward-looking statements.
ITEM 1 - BUSINESS
General Development and Description of Business
PART I
Headquartered in Van Nuys, California, the principal business of Superior Industries International, Inc. (referred to
herein as the “company” or in the first person notation “we,” “us” and “our”) is the design and manufacture of
aluminum road wheels for sale to original equipment manufacturers (OEM). 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 18 percent of our net sales to international customers by our
North American facilities, primarily delivered to their assembly operations in the United States.
The company was initially incorporated in Delaware in 1969 and reincorporated in California in 1994, as the
successor to three businesses founded by Louis L. Borick, founding Chairman and a Director of the company.
These businesses had been engaged in the design, manufacture and sale of automotive accessories and related
aftermarket products since 1957. All of the aftermarket businesses were sold or discontinued by the end of 2002.
Our entry into the OEM aluminum road wheel business in 1973 resulted from our successful development of
manufacturing technology, quality control and quality assurance techniques that enabled us to satisfy the quality and
volume requirements of the OEM market for aluminum road wheels. The first aluminum road wheel for a domestic
OEM customer was a Mustang wheel for Ford Motor Company (Ford).
Our OEM aluminum road wheels, including wheels produced by our 50 percent-owned joint venture in Hungary, are
sold for factory installation, or as optional or standard equipment on many vehicle models, to Ford, General Motors
(GM), Chrysler, Audi, BMW, Jaguar, Land Rover, Mercedes Benz, Mitsubishi, Nissan, Seat, Skoda, Subaru,
Suzuki, Toyota, Volkswagen and Volvo. We currently supply cast and forged aluminum wheels for many North
American model passenger cars and light trucks.
The Chairman and Chief Executive Officer is our chief operating decision maker (CODM). The CODM evaluates
both consolidated and disaggregated financial information at each manufacturing facility in deciding how to allocate
resources and assess performance. Each manufacturing facility functions as a separate cost center, manufactures the
same products, ships product to the same group of customers, utilizes the same cast manufacturing process and as a
result, production can be transferred among our facilities. Accordingly, we operate as a single integrated business
and, as such, have only one operating segment - automotive wheels. Financial information about this segment and
geographic areas is contained in Note 2 – Business Segments in Notes to Consolidated Financial Statements in Item
8 – Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Beginning with the third quarter of 2008, the automotive industry was negatively impacted by the continued
dramatic shift away from full-size trucks and SUVs caused by continuing high fuel prices, rapidly rising commodity
prices and the tightening of consumer credit due to the then deteriorating financial markets. Accordingly, our OEM
customers announced unprecedented restructuring actions, including assembly plant closures, significant reductions
in production of light trucks and SUVs, delayed launches of key 2009 model-year light truck programs and
movement toward more fuel-efficient passenger cars and cross-over type vehicles. These restructuring actions
culminated in the bankruptcy reorganization of Chrysler and GM in 2009. In addition to the financial uncertainty of
several of our key customers, we also continue to face continued global competitive pricing pressures. While we
have had long-term relationships with our customers and our supply arrangements are generally for multi-year
periods, the recent bankruptcy filings and resulting assembly plant closures and other restructuring activities by our
customers will continue to negatively impact our business. These factors may make it more difficult to maintain
long-term supply arrangements with our customers and there are no guarantees that supply arrangements will be
negotiated on terms acceptable to us in the future.
The availability and demand for aluminum wheels are subject to unpredictable factors, such as changes in the
general economy, the automobile industry, gasoline prices and consumer credit availability and 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.
1
Our customers continue to request price reductions as they work through their own financial challenges. We are
engaged in ongoing programs to reduce our own costs through process automation and identification of industry best
practices in an attempt to mitigate these pricing pressures. However, it has become increasingly more difficult to
react quickly enough given the continuing pressure for price reductions, reductions in customer orders, and the
lengthy transitional periods necessary to reduce labor and other costs. As such, our profit margins will continue to
be lower than our historical levels for some period of time. We will continue to strive to increase our operating
margins from current operating levels by aligning our plant capacity with industry demand and aggressively
implementing cost-saving strategies to enable us to meet customer-pricing expectations. However, as we incur costs
to implement these strategies, the initial impact on our future financial position, results of operations and cash flow
may be negative. Additionally, even if successfully implemented, these strategies may not be sufficient to offset the
impact of on-going pricing pressures and additional reductions in customer demand in future periods.
We have taken steps during the last two years to manage our costs in order to rationalize our production capacity
after the announcements over the last six fiscal quarters by our major customers of assembly plant closures and
sweeping production cuts, particularly in the light truck and SUV platforms. In August 2008, we announced the
planned closure of our wheel manufacturing facility located in Pittsburg, Kansas, and workforce reductions in our
other North American plants, resulting in the layoff of approximately 665 employees and the elimination of 90 open
positions. On January 13, 2009, we also announced the planned closure of our Van Nuys, California wheel
manufacturing facility, thereby eliminating an additional 290 jobs. The Kansas and California facilities ceased
operations in December 2008 and June 2009, respectively.
Due to the deteriorating financial condition of our major customers and others in the automotive industry, we have
been performing quarterly impairment analyses on all of our long-lived assets, in accordance with Generally
Accepted Accounting Principles in the United States of America (U.S. GAAP). Based on these analyses, we
concluded during the first quarter of 2009 that the estimated future undiscounted cash flows of our Fayetteville,
Arkansas manufacturing facility would not be sufficient to recover the carrying value of our long-lived assets
attributable to that facility. As a result, we recorded a pretax asset impairment charge against earnings totaling $8.9
million during the first quarter of 2009, reducing the $18.2 million carrying value of certain assets at this facility to
their respective estimated fair values. The estimated fair values of the long-lived assets at our Fayetteville, Arkansas
manufacturing facility were based, in part, on the estimated fair values of comparable properties.
Additionally, our 50 percent-owned joint venture in Hungary is also affected by these same economic conditions.
As a result, management of the joint venture has been performing quarterly impairment analyses on all of its long-
lived assets in accordance with U.S. GAAP. During the fourth quarter of 2009, this analysis indicated that the
estimated undiscounted future cash flows were not sufficient to cover the carrying value of the asset group, which
resulted in an impairment of the long-lived assets of the group. We recorded our share of the charge, or $14.4
million, in our equity in earnings (losses) from joint ventures during the fourth quarter of 2009.
Raw Materials
We purchase aluminum for the manufacture of our aluminum road wheels, which accounted for substantially all of
our total raw material requirements during 2009. The majority of our aluminum requirements are met through
purchase orders with several major domestic and foreign producers. Generally, the orders are fixed as to minimum
and maximum quantities of aluminum, which the producers must supply during the term of the orders. During 2009,
we were able to successfully secure aluminum commitments from our primary suppliers to meet production
requirements and we are not anticipating any problems with aluminum requirements for our expected level of
production in 2010. We procure other raw materials through numerous suppliers with whom we have established
trade relationships.
When market conditions warrant, we may also enter into contracts to purchase certain commodities used in the
manufacture of our products, such as aluminum, natural gas and other raw materials. Typically, any such commodity
commitments are expected to be purchased and used over a reasonable period of time in the normal course of
business.
2
We currently have several purchase agreements for the delivery of natural gas through 2012. With the closure of
our manufacturing facility in Van Nuys, California in June 2009, and closure in December 2008 of our
manufacturing facility in Pittsburg, Kansas, we no longer qualified for the Normal Purchase, Normal Sale (NPNS),
exemption provided for in accordance with U.S. GAAP for the remaining natural gas purchase commitments related
to those facilities. In addition, in the first and second quarters of 2009, we concluded that the natural gas purchase
commitments for our manufacturing facility in Arkansas and certain natural gas commitments for our facilities in
Chihuahua, Mexico, respectively, no longer qualified for the NPNS exemption provided for under U.S. GAAP since
we could no longer assert that it was probable we would take full delivery of these contracted quantities in light of
the continued decline of our industry. In accordance with U.S. GAAP these natural gas purchase commitments are
classified as being with “no hedging designation” and, accordingly, we are required to record any gains and/or losses
associated with the changes in the estimated fair values of these commitments in our current earnings. The contract
and fair values of the purchase commitments that no longer qualified for the NPNS exemption at December 31, 2009
were $8.6 million and $5.6 million, respectively, which represents a gross liability of $3.0 million, which was
included in accrued expenses in our December 31, 2009 consolidated balance sheet. See Note 11 – Commitments
and Contingent Liabilities in Notes to Consolidated Financials Statements in Item 8 – Financials Statements and
Supplementary Data for further discussion.
Seasonal Variations
The automotive industry is cyclical and varies based on the timing of consumer purchases of vehicles, which in turn
vary based on a variety of factors such as general economic conditions, availability of consumer credit, interest rates
and fuel costs. While there have been no significant seasonal variations in the past few years, production schedules
in our industry can vary significantly from quarter to quarter to meet the scheduling demands of our customers.
Customer Dependence
We have proven our ability to be a consistent producer of quality aluminum wheels with the capability to meet our
customers’ price, quality, delivery and service requirements. We strive to continually enhance our relationships with
our customers through continuous improvement programs, not only through our manufacturing operations but in the
engineering, wheel development and quality areas as well. These key business relationships have resulted in
multiple vehicle supply contract awards with our key customers over the past year.
Ford, GM and Chrysler were our only customers accounting for more than 10 percent of our consolidated net sales
in 2009. Sales to GM, as a percentage of consolidated net sales and in dollars, were 34 percent or $143.4 million in
2009; 40 percent or $298.1 million in 2008; and 36 percent or $345.6 million in 2007. Sales to Ford, as a percentage
of consolidated net sales and in dollars, were 35 percent or $146.1 million in 2009; 28 percent or $213.5 million in
2008; and 33 percent or $311.3 million in 2007. Sales to Chrysler, as a percentage of consolidated net sales and in
dollars, were 12 percent or $52.0 million in 2009; 14 percent or $107.0 million in 2008; and 13 percent or $123.8
million in 2007.
The loss of all or a substantial portion of our sales to Ford, GM or Chrysler would have a significant adverse effect
on our financial results, unless the lost sales volume could be replaced. However, given the continued financial
uncertainty and the current economic climate in the automobile industry, we can not provide any assurance that any
lost sales volume could be replaced. We have had excellent long-term relationships with our customers. However,
intense global competitive pricing pressure continues to make it difficult to maintain these relationships, and we
expect this trend to continue into the future.
Net Sales Backlog
We receive OEM purchase orders to produce aluminum road wheels typically for multiple model years. These
purchase orders are for vehicle wheel programs that usually last three to five years. However, customers can impose
competitive pricing provisions in those purchase orders each year, thereby reducing our profit margins or increasing
the risk of our losing future sales under those purchase orders. We manufacture and ship based on customer release
schedules, normally provided on a weekly basis, which can vary due to cyclical automobile production or high
dealer inventory levels. Accordingly, even though we have purchase orders covering multiple model years, weekly
release schedules can vary with customer demand, thus firm backlog is not meaningful.
3
Competition
The market for aluminum road wheels is highly competitive based primarily on price, technology, quality, delivery
and overall customer service. We are one of the leading suppliers of aluminum road wheels for OEM installations in
the world. We supply approximately 30 to 35 percent of the aluminum wheels installed on passenger cars and light
trucks in North America. Competition is global in nature with growing exports from Asia. There are several
competitors with facilities in North America, none of which aggregate greater than 10 percent of the total North
American production capacity. See additional comments concerning competition in Item 1A – Risk Factors below.
Other types of road wheels, such as those made of steel also compete with our products. For the model year 2008,
according to Wards Auto Info Bank, an industry publication, aluminum wheel installation rates on passenger cars
and light trucks produced in North America remained unchanged from 2007 at 65 percent compared to 63 percent
for the model year 2006. While aluminum wheel installation rates have grown from only 10 percent in the mid-
1980s, in recent years, this growth rate has slowed. We expect the trend of slow growth or no growth in installation
rates to continue. Accordingly, we expect that our ability to grow in the future will be dependent upon increasing
our share of the existing declining market. Although aluminum wheel installation rates have remained steady in
percentage terms, total new automotive sales declines in 2008 and again in 2009. In addition, intense global pricing
pressures and further contraction of the automotive industry may further decrease our profitability and could
potentially result in the loss of business in the future.
Research and Development
Our policy is to continuously review, improve and develop engineering capabilities so that customer requirements
are met in the most efficient and cost effective manner available. We strive to achieve this objective by attracting
and retaining top engineering talent and by maintaining the latest state-of-the-art computer technology to support
engineering development. A fully staffed engineering center, located in Fayetteville, Arkansas, supports our
research and development manufacturing needs. We also have a technical center in Detroit, Michigan, that maintains
a complement of engineering staff centrally located near our largest customers’ headquarters, engineering and
purchasing offices.
Research and development costs (primarily engineering and related costs), which are expensed as incurred, are
included in cost of sales in the consolidated statements of operations. Amounts expended on research and
development costs during each of the last three years were $3.1 million in 2009, $4.7 million in 2008 and $6.3
million in 2007. The decrease experienced in 2009 was due to closure of our engineering center in Van Nuys,
California, and the reduction of wheel program development activities in the current year.
Government Regulation
Safety standards in the manufacture of vehicles and automotive equipment have been established under the National
Traffic and Motor Vehicle Safety Act of 1966. We believe that we are in compliance with all federal standards
currently applicable to OEM suppliers and to automotive manufacturers.
Environmental Compliance
Our manufacturing facilities, like most other manufacturing companies, are subject to solid waste, water and air
pollution control standards mandated by federal, state and local laws. Violators of these laws are subject to fines
and, in extreme cases, plant closure. We believe our facilities are substantially in compliance with all standards
presently applicable. However, costs related to environmental protection may continue to grow due to increasingly
stringent laws and regulations and our ongoing commitment to rigorous internal standards. The cost of
environmental compliance was approximately $0.7 million in 2009, $1.0 million in 2008 and $1.3 million in 2007.
We expect that future environmental compliance expenditures will approximate these levels and will not have a
material effect on our consolidated financial position. See further discussion of environmental compliance issues in
Item 3 – Legal Proceedings.
4
Employees
As of December 31, 2009, we had approximately 3,500 full-time employees including our joint venture, Suoftec
Light Metal Products Production & Distribution Ltd. (Suoftec), compared to approximately 3,700 employees at
December 31, 2008 and 5,300 at December 31, 2007. Our joint venture manufacturing facility in Hungary employed
approximately 500 full-time employees at December 31, 2009. None of our employees are part of a collective
bargaining agreement.
Fiscal Year End
Our fiscal year is the 52- or 53-week period ending on the last Sunday of the calendar year. The fiscal years 2009,
2008 and 2007 comprised the 52-week periods ended December 27, 2009 and December 28, 2008, and December
30, 2007, respectively. For convenience of presentation, all fiscal years are referred to as beginning as of January 1
and ending as of December 31, but actually reflect our financial position and results of operations for the periods
described above.
Available Information
Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and other
information statements, and any amendments thereto are available, without charge, on or through our website
www.supind.com under “Investor”, as soon as reasonably practicable after they are filed electronically with the
Securities and Exchange Commission (SEC). The public may read and copy any materials filed with the SEC at the
SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the
Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website,
www.sec.gov, which contains these reports, proxy and information statements and other information regarding the
company. Also included on our website, www.supind.com under Investors is our Code of Business Conduct and
Ethics, which, among others, applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting
Officer. Copies of all SEC filings and our Code of Business Conduct and Ethics are also available, without charge,
from Superior Industries International, Inc., Shareholder Relations, 7800 Woodley Avenue, Van Nuys, CA 91406.
ITEM 1A – RISK FACTORS
The following discussion of risk factors contains “forward-looking” statements, which may be important to
understanding any statement in this Annual Report on Form 10-K or elsewhere. The following information should
be read in conjunction with Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) and Item 8 – Financial Statements and Supplementary Data of this Annual Report on Form 10-
K.
Our business routinely encounters and addresses risks and uncertainties. Our business, results of operations and
financial condition could be materially adversely affected by the factors described below. Discussion about the
important operational risks that our businesses encounter can also be found in the MD&A section and in the
business description in Item 1 – Business of this Annual Report on Form 10-K. Below, we have described our
present view of certain risks and uncertainties we face. Additional risks and uncertainties not presently known to us,
or that we currently do not consider significant, could also potentially impair our business, results of operations and
financial condition. Our reactions to these risks and uncertainties as well as our competitors’ reactions will affect
our future operating results.
Risks Relating To Our Company
Current Economic and Financial Market Conditions - Current global economic and financial market conditions,
including severe disruptions in the credit markets and potential weakness in the recovery from global economic
recession, may materially and adversely affect our results of operations and financial condition. These conditions
have and are likely to continue to materially impact the automotive industry generally and the financial stability of
our customers, suppliers and other parties with whom we do business. Specifically, the impact of these volatile and
negative conditions may include: decreased demand for our products due to the financial position of our OEM
customers and general declines in the level of automobile demand; our decreased ability to accurately forecast future
5
product trends and demand; and a negative impact on our ability to timely collect receivables from our customers
and, conversely, reductions in the level and tightening of terms of trade credit available to us.
Automotive Industry Trends - A significant portion of our sales are to domestic automotive OEMs and, therefore, our
financial performance depends, in large part, on conditions in the automotive industry, which, in turn, are dependent
upon the U.S. and global economies generally. As previously discussed, the results for fiscal year 2009 were
negatively impacted by severe reductions in customer demand caused by the economic recession, fluctuating fuel
prices and a lack of consumer credit. A significant number of our customers announced restructuring actions,
including planned assembly plant closures, delays in launching key 2009 model-year light truck programs, and other
actions to accelerate movement toward more fuel-efficient passenger cars and crossover-type vehicles. Weakness in
recoveries of the U.S. and global economies has adversely and may continue to adversely affect consumer spending,
and result in decreased demand for automobiles and light trucks. If OEMs were to decrease production due to such
reduced demand or union work stoppages, our financial performance could be further adversely affected.
In addition, relatively modest declines in our customers’ production levels could have a significant adverse impact
on our short-term profitability as any further declines in production by our customers may require further actions on
our part to address our capacity requirements. In the automotive industry, there has been a trend toward
consolidation as seen with the merger of Chrysler and Fiat in 2009. Continued consolidation of the automotive
industry could adversely affect our business. Such consolidation could result in a loss of some of our present
customers to our competitors and could thereby lead to reduced demand and greater pressure on our pricing, which
may have a significant negative impact on our business. Additionally, due to the present uncertainty in the
economy, our major customers have been seeking ways to lower their own costs of manufacturing through increased
use of internal manufacturing or through relocation of production to countries with lower production costs. This
internal manufacturing or reliance on local or other foreign suppliers may have a significant negative impact on our
business. If actual OEM production volume were to continue to be reduced accordingly, our business would be
adversely affected. Our sales are also impacted by our customers’ inventory levels and production schedules. If our
OEM customers significantly reduce their inventory levels and reduce their orders from us, our performance would
be adversely impacted. In this environment, we cannot predict future production rates or inventory levels or the
underlying economic factors. Continued uncertainty and unexpected fluctuations may have a significant negative
impact on our business.
The foregoing economic and financial conditions, including decreased access to credit, may lead to increased levels
of restructurings, bankruptcies, liquidations and other unfavorable events for our customers, suppliers and other
service providers and financial institutions with whom we do business. Such events could, in turn, negatively affect
our business either through loss of sales or inability to meet our commitments (or inability to meet them without
excess expense) due to a loss of suppliers or other providers.
GM, Ford and Chrysler, together represented approximately 82 percent of our total wheel sales for the fiscal years
2009 and 2008. Since late 2008, Chrysler and GM received emergency funding from the U.S. federal government as
part of efforts to restructure both automakers. On April 30, 2009, Chrysler filed a voluntary petition under Chapter
11 of the U.S. Bankruptcy Code. This was followed on June 1, 2009 by GM’s announcement that it was also filing
a voluntary petition under Chapter 11 of the Bankruptcy Code. Reorganized entities for both Chrysler and GM
emerged from bankruptcy on June 10, 2009 and July 10, 2009, respectively. Shortly after the Chapter 11 filings,
both Chrysler and GM designated us as a key supplier, indicating that all pre-and post-petition accounts receivable
would be paid in accordance with payment terms existing prior to the bankruptcy filings. There continues to be
uncertainty surrounding the various restructurings within the automotive industry, which may lead to additional
bankruptcy filings and additional financing from the U.S. government that may impose conditions on our customers
that would adversely impact demand for our products.
Although both Chrysler and GM have emerged from bankruptcy, there can be no assurance that their respective
bankruptcy restructurings will restore consumer confidence, increase vehicle production or improve the current
economic and financial conditions. In addition, there continues to be uncertainty surrounding other restructurings
within the automotive industry, which may lead to additional bankruptcy filings and additional financing from the
U.S. government that may impose conditions on our customers that would adversely impact demand for our
products.
6
Expiration of Government Programs – In 2009, the automotive industry was positively impacted by the federal
government’s Car Allowance Rebate System, also known as “cash for clunkers” and other programs designed to
increase consumer spending. The increase in automotive production resulted in increased demand for our products.
There are no assurances that automotive production and correspondingly, demand for our products, would have
reached the levels it did in 2009 without the “cash for clunkers’ program and other government programs.
Furthermore, there is no guarantee that the federal government will enact any further programs to increase consumer
spending or to improve the state of the economy and the automotive industry in particular. Although the U.S.
Department of the Treasury has outlined an Automotive Industry Financing Program designed to prevent significant
disruption of the U.S. auto industry, there is no guarantee that such a program will be successful or enacted at all. In
the event the federal government does not enact such programs or if such programs are unsuccessful, demand for our
products may be negatively impacted.
Global Pricing Pressure - We continue to experience increased competition in our domestic and international
markets. Since some products are being shipped to the U.S. from Asia and elsewhere, many of our North American
competitors have excess capacity and, in order to promote volume, are placing intense pricing pressure in our market
place. These competitive pressures are expected to continue and may result in decreased sales volumes and unit
price reductions, resulting in lower revenues, gross profit and operating income and cash flows.
Additionally, cost-cutting initiatives adopted by our customers generally result in increased downward pressure on
pricing. OEMs historically have had significant leverage over their outside suppliers because the automotive
component supply industry is fragmented and serves a limited number of automotive OEMs, and, as such, Tier 1
suppliers like us are subject to substantial continued pressure from OEMs to reduce the price of their products. If we
are unable to generate sufficient production cost savings in the future to offset price reductions, our gross margin
and profitability and cash flows would be adversely affected. In addition, changes in OEMs’ purchasing policies or
payment practices could have an adverse effect on our business.
Competition - The automotive component supply industry is highly competitive, both domestically and
internationally. Competition is based primarily on price, technology, quality, delivery and overall customer service.
Some of our competitors are companies, or divisions or subsidiaries of companies that are larger and have greater
financial and other resources than we do. We cannot ensure that our products will be able to compete successfully
with the products of these or other companies. Furthermore, the rapidly evolving nature of the markets in which we
compete has attracted new entrants, particularly in low cost countries. As a result, our sales levels and margins are
being adversely affected by pricing pressures caused by such new entrants, especially in low-cost foreign markets,
such as China. Such new entrants with lower cost structures pose a significant threat to our ability to compete
internationally and domestically. These factors led to selective sourcing of future business by our customers to
foreign competitors in the past and they may continue to do so in the future. In addition, any of our competitors may
foresee the course of market development more accurately than we are able to, develop products that are superior to
our products, have the ability to produce similar products at a lower cost than we do, or adapt more quickly than we
do to new technologies or evolving customer requirements. As a result, our products may not be able to compete
successfully with their products. As a result of highly competitive market conditions in our industry, a number of
our competitors have been forced to seek bankruptcy protection. These competitors may emerge and in some cases
have emerged from bankruptcy protection with stronger balance sheets and a desire to gain market share by offering
their products at a lower price than our products, which would have an adverse impact on our financial condition
and results of operations and cash flows.
Dependence on Major Customers - We derived approximately 82 percent of our fiscal 2009 and 2008 net sales from
Ford, GM and Chrysler and their subsidiaries. We do not have guaranteed long-term agreements with these
customers and cannot predict whether that we will maintain our current relationships with these customers or
whether we will continue to supply them at current levels. The loss of a significant portion of sales to Ford, GM or
Chrysler would have a material adverse effect on our business, unless the lost revenues were replaced. Ford, GM
and Chrysler have been experiencing decreasing market share in North America. In addition, if any of our
significant customers were to encounter further financial difficulties, work stoppages or seek bankruptcy protection,
our business could be adversely affected.
Furthermore, our OEM customers are not required to purchase any minimum amount of products from us. The
contracts we have entered into with most of our customers provide that we will provide wheels for a particular
7
vehicle model, rather than for manufacturing a specific quantity of products. Such contracts range from one year to
the life of the model (usually three to five years), typically are non-exclusive, and do not require the purchase by the
customer of any minimum number of wheels from us. Therefore, a significant decrease in demand for certain key
models or group of related models sold by any of our major customers, or a decision by a manufacturer not to
purchase from us, or to discontinue purchasing from us, for a particular model or group of models, could have a
material adverse effect on us.
Dependence on Third-Party Suppliers and Manufacturers - Generally, we obtain our raw materials, supplies and
energy requirements from various sources. Although we currently maintain alternative sources, our business is
subject to the risk of price increases and periodic delays in delivery. Fluctuations in the prices of raw materials may
be driven by the supply/demand relationship for that commodity or governmental regulation. In addition, if any of
our suppliers seek bankruptcy relief or otherwise cannot continue their business as anticipated, the availability or
price of raw materials could be adversely affected.
Although we are able to periodically pass aluminum cost increases onto our customers, we may not be able to pass
along all changes in aluminum costs and our customers are not obligated to accept energy or other supply cost
increases that we may attempt to pass along to them. In addition, fixed price natural gas contracts that expire in the
future may expose us to higher costs that cannot be immediately recouped in selling prices. This inability to pass on
these cost increases to our customers could adversely affect our operating margins and cash flow, possibly resulting
in lower operating income and profitability.
Existing Cost Structure – In recent years, we have implemented several cost cutting initiatives in order to reduce our
overall costs and improve our margins in response to pricing pressures from our customers. However, our strategy
of optimizing our cost structures may not be sufficient to offset future price pressures from our customers which
may have an adverse impact on our financial performance. If North American production of passenger cars and
light trucks using our wheel programs continues to decrease, it is possible that we will be unable to recover the full
value of certain other production assets in our other plants in North America, possibly resulting in additional
impairment charges. We will continue to monitor the recoverability of these assets to determine whether further
impairment charges are appropriate.
Unexpected Production Interruptions - An interruption in production capabilities at any of our facilities as a result of
equipment failure, interruption of raw material or other supplies, labor disputes or other reasons could result in our
inability to produce our products, which would reduce our sales and operating results for the affected period. We
have, from time to time, undertaken significant re-tooling and modernization initiatives at our facilities, which in the
past have caused and in the future may cause, unexpected delays and plant underutilization, and such adverse
consequences may continue to occur as we continue to modernize our production facilities. In addition, we
generally deliver our products only after receiving the order from the customer and thus do not hold large
inventories. In the event of a stoppage in production at any of our manufacturing facilities, even if only temporary,
or if we experience delays as a result of events that are beyond our control, delivery times could be severely
affected. Any significant delay in deliveries to our customers could lead to returns or cancellations and cause us to
lose future sales, as well as expose us to claims for damages. Our manufacturing facilities are also subject to the risk
of catastrophic loss due to unanticipated events such as fires, earthquakes, explosions or violent weather conditions.
We have in the past and may in the future experience plant shutdowns or periods of reduced production as a result of
facility modernization initiatives, equipment failure, delays in deliveries or catastrophic loss, which could have a
material adverse effect on our results of operations or financial condition.
Valuation of Deferred Tax Assets – During 2009, we established a valuation allowance against all of our domestic
deferred tax assets and against our foreign net operating loss carryforwards. In considering whether a valuation
allowance was required for our U.S. federal deferred tax assets, we considered all available positive and negative
evidence. Based on the weight of all available evidence, we have concluded that the negative evidence outweighs
the positive and that it is more likely than not that 1) the federal U.S. and state deferred tax assets, net of valuation
allowance, will not be realized within the carryforward period, and 2) the foreign net operating loss carryforwards
will not be realized within the carryforward period. This is because we can not look to future taxable income as a
source of income given our cumulative losses. We therefore established a full valuation allowance against this
deferred tax asset. However, we will continue to assess the need for further valuation allowances in the future.
8
Dependence on Key Personnel - Our success depends in part on our ability to attract, hire, train, and retain qualified
managerial, engineering, sales and marketing personnel. We face significant competition for these types of
employees in our industry. We may be unsuccessful in attracting and retaining the personnel we require to conduct
our operations successfully.
In addition, key personnel may leave us and compete against us. Our success also depends to a significant extent on
the continued service of our senior management team. We may be unsuccessful in replacing key managers who
either resign or retire. The loss of any member of our senior management team or other experienced, senior
employees could impair our ability to execute our business plans and strategic initiatives, cause us to lose customers
and experience reduces net sales, or lead to employee morale problems and/or the loss of other key employees. In
any such event, our financial condition, results of operations, internal control over financial reporting, or cash flows
could be adversely affected.
Effective Internal Control Over Financial Reporting – Management is responsible for establishing and maintaining
adequate internal control over financial reporting. Many of our key controls rely on maintaining a sufficient
complement of personnel with an appropriate level of accounting knowledge, experience and training in the
application of accounting principles generally accepted in the United States of America in order to operate
effectively. If we are unable to attract, hire, train and retain a sufficient complement of qualified personnel required
to operate these controls effectively, our financial statements may contain material misstatements, unintentional
errors, or omissions and late filings with regulatory agencies may occur.
Impact of Aluminum Pricing - The cost of aluminum is a significant component in the overall production cost of a
wheel. Additionally, a portion of our selling prices to OEM customers is tied to the cost of aluminum. Our selling
prices are adjusted periodically to current aluminum market conditions based upon market price changes during
specific pricing periods. Theoretically, assuming selling price adjustments and raw material purchase prices move at
the same rate, as the price of aluminum increases, the effect is an overall decrease in the gross margin percentage,
since the gross profit in absolute dollars would be the same. The opposite would then be true in periods during
which the price of aluminum decreases.
However, since the pricing periods and pricing methodologies during which selling prices are adjusted for changes
in the market prices of aluminum differ for each of our customers, and the selling price changes are fixed for various
periods, our selling price adjustments may not entirely offset the increases or decreases experienced in our
aluminum raw material purchase prices. This is especially true during periods of frequent increases or decreases in
the market price of aluminum and when a portion of our aluminum purchases is via long-term fixed purchase
agreements. Accordingly, our gross profit is subject to fluctuations, since the change in the product selling prices
related to the cost of aluminum does not necessarily match the change in the aluminum raw material purchase prices
during the period being reported, which may have a material adverse effect on our operating results for the period
being reported.
Legal Proceedings - The nature of our business subjects us to litigation in the ordinary course of our business. We
are exposed to potential product liability and warranty risks that are inherent in the design, manufacture and sale of
automotive products, the failure of which could result in property damage, personal injury or death. Accordingly,
individual or class action suits alleging product liability or warranty claims could result. Although we currently
maintain what we believe to be suitable and adequate product liability insurance in excess of our self-insured
amounts, we cannot assure you that we will be able to maintain such insurance on acceptable terms or that such
insurance will provide adequate protection against potential liabilities. In addition, if any of our products prove to be
defective, we may be required to participate in a recall involving such products. A successful claim brought against
us in excess of available insurance coverage, if any, or a requirement to participate in any product recall, could have
a material adverse effect on our results of operations or financial condition. See Item 3 - Legal Proceedings section
of this Annual Report on Form 10-K for a description of the significant legal proceedings in which we are presently
involved. We cannot assure you that any current or future claims will not adversely affect our cash flows, financial
condition or results of operations.
Implementation of New Systems - We are currently testing and validating the design of a new enterprise resource
planning system, as well as training the system users and we have not modified any of our existing controls and
procedures as of December 2009. We anticipate implementing the new system as of the beginning of the second
9
quarter of 2010. We may encounter technical and operating difficulties during the implementation of these
upgrades, as our employees learn and operate the systems, which are critical to our operations. Any difficulties we
encounter in upgrading the system may affect our internal control over financial reporting, disrupt our ability to deal
effectively with our employees, customers and other companies with which we have commercial relationships, and
also may prevent us from effectively reporting our financial results in a timely manner. Any such disruption could
have a material adverse impact on our financial condition, cash flows or results of operations. In addition, the costs
incurred in correcting any errors or problems with the upgraded system could be substantial.
Implementation of Operational Improvements - As part of our ongoing focus on being a low-cost provider of high
quality products, we continually analyze our business to further improve our operations and identify cost-cutting
measures. Our continued analysis may include identifying and implementing opportunities for: (i) further
rationalization of manufacturing capacity; (ii) streamlining of marketing and general and administrative overhead;
(iii) implementation of lean manufacturing and Six Sigma initiatives; or (iv) efficient investment in new equipment
and technologies and the upgrading of existing equipment. We may be unable to successfully identify or implement
plans targeting these initiatives, or fail to realize the benefits of the plans we have already implemented, as a result
of operational difficulties, a weakening of the economy or other factors.
We are continuing to implement action plans to improve operational performance and mitigate the impact of the
severe pricing environment in which we operate. We must emphasize, however, that while we continue to reduce
costs through process automation and identification of industry best practices, these cost reductions may not fully
offset decreases in the prices of our products due to the slow and methodical nature of developing and implementing
cost reduction initiatives. In addition, fixed price natural gas contracts that expire in the future years may expose us
to higher costs that cannot be immediately recouped in selling prices. The impact of these factors on our future
financial position and results of operations may be negative, to an extent that cannot be predicted, and we may not
be able to implement sufficient cost saving strategies to mitigate any future impact.
Resources for Future Expansion - In 2006, we opened our newest facility in Chihuahua, Mexico, to supply
aluminum wheels to the North American aluminum wheel market. This is our third manufacturing facility in
Chihuahua, Mexico. A significant change in our business, the economy or an unexpected decrease in our cash flow
for any reason could result in our inability to have the capital required to complete similar projects in the future
without outside financing.
New Product Introduction - In order to effectively compete in the automotive supply industry, we must be able to
launch new products to meet our customers’ demand in a timely manner. We cannot ensure, however, that we will
be able to install and certify the equipment needed to produce products for new product programs in time for the
start of production, or that the transitioning of our manufacturing facilities and resources to full production under
new product programs will not impact production rates or other operational efficiency measures at our facilities. In
addition, we cannot ensure that our customers will execute on schedule the launch of their new product programs,
for which we might supply products. Our failure to successfully launch new products, or a failure by our customers
to successfully launch new programs, could adversely affect our results.
Technological and Regulatory Changes - Changes in legislative, regulatory or industry requirements or in
competitive technologies may render certain of our products obsolete or less attractive. Our ability to anticipate
changes in technology and regulatory standards and to successfully develop and introduce new and enhanced
products on a timely basis will be a significant factor in our ability to remain competitive. We cannot ensure that we
will be able to achieve the technological advances that may be necessary for us to remain competitive or that certain
of our products will not become obsolete. We are also subject to the risks generally associated with new product
introductions and applications, including lack of market acceptance, delays in product development and failure of
products to operate properly.
International Operations - We manufacture our products in Mexico and Hungary and sell our products throughout
the world. Unfavorable changes in foreign cost structures, trade protection laws, policies and other regulatory
requirements affecting trade and investments, social, political, labor, or economic conditions in a specific country or
region, including foreign exchange rates, difficulties in staffing and managing foreign operations and foreign tax
consequences, among other factors, could have a negative effect on our business and results of operations.
10
Labor Relations - In the event of an adverse relationship with our workforce, our labor costs could increase which
would increase our overall production costs. In addition, we could be adversely affected by any labor difficulties or
work stoppage involving our customers.
Foreign Currency Fluctuations – Due to the growth of our operations outside of the United States, we have
experienced increased foreign currency gains and losses in the ordinary course of our business. As a result,
fluctuations in the exchange rate between the U.S. dollar, the euro, the Mexican peso and any currencies of other
countries in which we conduct our business may have a material impact on our financial condition as cash flows
generated in other currencies will be used, in part, to service our U.S. dollar-denominated creditors.
In addition, fluctuations in foreign currency exchange rates may affect the value of our foreign assets as reported in
U.S. dollars, and may adversely affect reported earnings and, accordingly, the comparability of period-to-period
results of operations. Changes in currency exchange rates may affect the relative prices at which we and our foreign
competitors sell products in the same market. In addition, changes in the value of the relevant currencies may affect
the cost of certain items required in our operations. We cannot ensure that fluctuations in exchange rates will not
otherwise have a material adverse effect on our financial condition or results of operations, or cause significant
fluctuations in quarterly and annual results of operations.
Environmental Matters - We are subject to various foreign, federal, state and local environmental laws, ordinances,
and regulations, including those governing discharges into the air and water, the storage, handling and disposal of
solid and hazardous wastes, the remediation of soil and groundwater contaminated by hazardous substances or
wastes, and the health and safety of our employees. Under certain of these laws, ordinances or regulations, a current
or previous owner or operator of property may be liable for the costs of removal or remediation of certain hazardous
substances on, under, or in its property, without regard to whether the owner or operator knew of, or caused, the
presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at
the time they occurred. The presence of, or failure to remediate properly, such substances may adversely affect the
ability to sell or rent such property or to borrow using such property as collateral. Persons who generate, arrange for
the disposal or treatment of, or dispose of hazardous substances may be liable for the costs of investigation,
remediation or removal of these hazardous substances at or from the disposal or treatment facility, regardless of
whether the facility is owned or operated by that person. Additionally, the owner of a site may be subject to common
law claims by third parties based on damages and costs resulting from environmental contamination emanating from
a site. We believe that we are in material compliance with environmental laws, ordinances and regulations and do
not anticipate any material adverse effect on our earnings or competitive position relating to environmental matters.
It is possible, however, that future developments could lead to material costs of environmental compliance for us.
The nature of our current and former operations and the history of industrial uses at some of our facilities expose us
to the risk of liabilities or claims with respect to environmental and worker health and safety matters which could
have a material adverse effect on our financial health. We are also required to obtain permits from governmental
authorities for certain operations. We cannot ensure that we have been or will be at all times in complete compliance
with such permits. If we violate or fail to comply with these permits, we could be fined or otherwise sanctioned by
regulators. In some instances, such a fine or sanction could be material. In addition, some of our properties are
subject to indemnification and/or cleanup obligations of third parties with respect to environmental matters.
However, in the event of the insolvency or bankruptcy of such third parties, we could be required to bear the
liabilities that would otherwise be the responsibility of such third parties.
Climate change legislation or regulations restricting emission of “greenhouse gases” could result in increased
operating costs and reduced demand for the vehicles that use our product. On December 15, 2009, the
U.S. Environmental Protection Agency (EPA) published its findings that emissions of carbon dioxide, methane and
other “greenhouse gases” present an endangerment to public health and the environment because emissions of such
gases are, according to the EPA, contributing to warming of the earth’s atmosphere and other climatic changes.
These findings allow the EPA to adopt and implement regulations that would restrict emissions of greenhouse gases
under existing provisions of the federal Clean Air Act. Accordingly, the EPA has proposed regulations that would
require a reduction in emissions of greenhouse gases from motor vehicles and could trigger permit review for
greenhouse gas emissions from certain stationary sources. In addition, on October 30, 2009, the EPA published a
final rule requiring the reporting of greenhouse gas emissions from specified large greenhouse gas emission sources
in the United States, including facilities that emit more than 25,000 tons of greenhouse gases on an annual basis,
beginning in 2011 for emissions occurring in 2010. At the state level, more than one-third of the states, either
11
individually or through multi-state regional initiatives, already have begun implementing legal measures to reduce
emissions of greenhouse gases. The adoption and implementation of any regulations imposing reporting obligations
on, or limiting emissions of greenhouse gases from, our equipment and operations or from the vehicles that use our
product could adversely affect demand for those vehicles or require us to incur costs to reduce emissions of
greenhouse gases associated with our operations.
We incur significant costs to comply with applicable environmental, health and safety laws and regulations in the
ordinary course of our business. Given the nature of our operations and the extensive environmental, public health
and safety regulatory framework, the clear course of action is to place more restrictions and limitations on activities
that may be perceived to affect the environment.
ITEM 1B – UNRESOLVED STAFF COMMENTS
None.
ITEM 2 – PROPERTIES
Our worldwide headquarters is located in leased office space in Van Nuys, California. We currently maintain and operate a
total of six facilities that produce aluminum wheels for the automotive industry, located in Arkansas; Chihuahua, Mexico;
and Tatabanya, Hungary. These six facilities encompass 3,160,000 square feet of manufacturing space and 30,000 square
feet of office space. We own all of our facilities with the exception of one warehouse in Rogers, Arkansas, and our
worldwide headquarters located in Van Nuys, California that are leased and we have a 50 percent ownership stake in our
Tatabanya, Hungary facility through our 50 percent ownership stake in Suoftec. We ceased wheel manufacturing
operations in our Johnson City, Tennessee facility, totaling 301,500 square feet, at the end of the first quarter of 2007.
Additionally, we ceased wheel manufacturing operations in our Pittsburg, Kansas facility, totaling 492,000 square feet
during the fourth quarter of 2008. Both of these properties are currently available for sale. In June 2009, we closed our Van
Nuys, California manufacturing and warehousing facilities, totaling 318,000 square feet.
In general, these facilities, which have been constructed at various times over the past several years, are in good
operating condition and are adequate to meet our productive capacity requirements. There are active maintenance
programs to keep these facilities in good condition, and we have an active capital spending program to replace
equipment as needed to keep technologically competitive on a worldwide basis.
Additionally, reference is made to Note 1 - Summary of Significant Accounting Policies, Note 5 - Property, Plant
and Equipment and Note 8 - Leases and Related Parties, in Notes to the Consolidated Financial Statements in Item 8
– Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
ITEM 3 - LEGAL PROCEEDINGS
Derivative Litigation
In late 2006, two shareholder derivative complaints were filed, one each by plaintiffs Gary B. Eldred and Darrell D.
Mack, based on allegations concerning some of the company’s past stock option grants and practices. These cases
were subsequently consolidated as In re Superior Industries International, Inc. Derivative Litigation, which is
pending in the United States District Court for the Central District of California. In the plaintiffs’ consolidated
complaint, filed on March 23, 2007, the company was named only as a nominal defendant from whom the plaintiffs
sought no monetary recovery. In addition to naming the company as a nominal defendant, the plaintiffs named
various present and former employees, officers and directors of the company as individual defendants from whom
they sought monetary and/or equitable relief, purportedly for the benefit of the company.
We reached an agreement in principle to settle the litigation. The settlement received the preliminary approval of
the Court on November 9, 2009 and, after notice was given as directed by the Court, the Court gave its final
approval of the settlement on February 3, 2010, and entered its Order and Final Judgment dismissing the litigation,
with prejudice. The terms of the settlement provide that, among other things: the Company will adopt and/or
maintain for a specified period certain procedures related to the granting and administration of stock options, as well
as certain corporate governance measures; counsel for the plaintiffs in the litigation will receive a specified dollar
amount for their fees and expenses, which amount shall be paid by the Company’s insurance carrier; the Company
12
and its past and present officers, directors and employees are released from any claims related to the matters alleged
in the litigation; and the plaintiffs and their counsel are released from any claims related to the filing, prosecution,
and settlement of the litigation.
Air Quality Matters
The South Coast Air Quality Management District (the SCAQMD) issued to us notices of violation, dated December
14, 2007 and December 5, 2008, alleging violations of certain permitting and air quality rules at our Van Nuys,
California manufacturing facility. The December 2007 notice involved operating three facility furnaces with
different burners than those described on the permit to operate the furnaces. The December 2008 notice was issued
after the company self-disclosed and corrected certain discrepancies associated with the manner that the facility
reported nitrogen oxide (NOx) emissions in 2004 and 2005. To resolve the violation notices, throughout 2008 and
2009, the company worked closely with the SCAQMD to achieve compliance and took all steps necessary to
remedy the issues associated with these violations, including the submission of permit applications to modify the
description of the burners for three of the plant’s furnaces. The company also took steps to ensure that all required
reporting and other regulatory obligations to SCAQMD were made. On September 22, 2009, Superior entered into a
settlement agreement with the SCAQMD. The salient terms of the agreement required the company to pay a civil
penalty of fifty thousand dollars in exchange for a release from all liability with regard to any condition at the
facility prior to June 30, 2009. The September 22, 2009 settlement agreement serves as a global resolution of the
notices of violations as well as any other past compliance issues associated with the facility.
Other
We are party to various other 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, we believe all such matters are adequately provided for, covered by insurance, are without merit, and/or
involve such amounts that would not materially adversely affect our consolidated results of operations, cash flows or
financial position.
13
ITEM 4 - RESERVED
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers who are also Directors is contained in our 2010 Annual Proxy Statement
under the caption “Election of Directors.” Such information is incorporated into Part III, Item 10 – Directors,
Executive Officers and Corporate Governance. With the exception of the Chief Executive Officer (CEO), all
executive officers are appointed annually by the Board of Directors and serve at the will of the Board of Directors.
For a description of the CEO’s employment agreement, see “Employment Agreements” in our 2010 Annual Proxy
Statement, which is incorporated herein in reference.
Listed below are the name, age, position and business experience of each of our officers who are not directors:
Name
Robert D. Bracy
Robert A. Earnest
Emil J. Fanelli
Stephen H. Gamble
Parveen Kakar
Michael J. O’Rourke
Razmik Perian
Eddie Rodriguez
Gabriel Soto
Kenneth A. Stakas
Cameron Toyne
Age
62
48
67
55
43
48
52
55
61
58
50
Position
Senior Vice President, Facilities
Vice President, Facilities
Vice President, General Counsel and
Corporate Secretary
Director, Tax and Legal and Corporate Secretary
Director, Tax and Customs – Nissan North America
Vice President and Corporate Controller
Acting Chief Financial Officer
Vice President and Corporate Controller
Vice President, Treasurer
Director, Financial Planning and Analysis
Senior Vice President, Corporate Engineering and
Product Development
Vice President, Program Development
Executive Vice President, Sales, Marketing and
Operations
Senior Vice President, Sales and Administration
Chief Information Officer
Director, Corporate Information Technology
Vice President, Human Resources
Director, Human Resources – The Coca-Cola
Company
Vice President, Mexico Operations
Senior Vice President, Manufacturing
Vice President of Operations -
Amcast Automotive, Components Group
Vice President, Supply Chain Management
Vice President, Purchasing
Director of Purchasing
Assumed
Position
2005
1997
2007
2006
2001
2008
2007
2001
2006
2001
2008
2003
2009
2003
2006
2000
2007
2004
2004
2006
2000
2008
2007
2004
14
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the New York Stock Exchange (symbol: SUP). We had approximately 540
shareholders of record as of February 8, 2010 and 26.7 million shares issued and outstanding as of March 5, 2010.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
Superior Industries International, Inc.
Dow Jones US Total Market Index
Dow Jones US Auto Parts Index
300
250
200
150
100
50
0
2004
2005
2006
2007
2008
2009
*Assumes the value of the investment in Superior Industries International common stock and each index was $100
on December 31, 2004 and that all dividends were reinvested.
Superior Industries
Dow Jones
US Total
International, Inc. Market Index
$
$
$
$
$
$
100.00
78.72
70.55
68.62
41.38
63.03
$
$
$
$
$
$
100.00
106.32
122.88
130.26
81.85
105.42
Dow Jones
US Auto
Parts Index
$
$
$
$
$
$
100.00
84.27
90.25
103.67
51.64
77.04
2004
2005
2006
2007
2008
2009
15
Dividends
Cash dividends declared during 2009 and 2008 totaled $0.64 per share in each year and were paid on a quarterly
basis. Continuation of quarterly dividends is contingent upon various factors, including economic and market
conditions, none of which can be accurately predicted, and the approval of our Board of Directors.
Quarterly Common Stock Price Information
The following table sets forth the high and low closing sales price per share of our common stock during the periods
indicated.
2009
2008
High
Low
High
Low
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$ 12.88
$ 15.18
$ 16.35
$ 16.35
$ 8.31
$ 11.85
$ 13.60
$ 13.26
$ 21.55
$ 22.21
$ 19.97
$ 19.35
$ 16.43
$ 17.42
$ 16.07
$
8.92
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On March 17, 2000, the Board of Directors authorized the repurchase of 4.0 million shares of our common stock as
part of the 2000 Stock Repurchase Plan (Repurchase Plan). During the fiscal year 2009, there were no repurchases
of common stock. As of December 31, 2009, approximately 3.2 million shares remained available for repurchase
under the Repurchase Plan.
Recent Sales of Unregistered Securities
During the fiscal year 2009, there were no sales of unregistered securities.
ITEM 6 - SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of Operations and Item 8 – Financial Statements and
Supplementary Data of this Annual Report on Form 10-K.
Our fiscal year is the 52- or 53-week period ending on the last Sunday of the calendar year. The fiscal years 2009,
2008 and 2007 comprised the 52-week periods ended December 27, 2009, December 28, 2008 and December 30,
2007, respectively. The fiscal year 2006 comprised the 53-week period ended December 31, 2006. The fiscal year
2005 comprised the 52-week periods ended December 25, 2005. For convenience of presentation, all fiscal years
are referred to as beginning as of January 1 and ending as of December 31, but actually reflect our financial position
and results of operations for the periods described above.
16
Fiscal Year Ended December 31,
2009
2008
2007
2006
2005
Statement of Operations ($ - 000s)
Net sales
Gross profit (loss)
Impairments of long-lived assets
Income (loss) from operations
Income (loss) from continuing operations
before income taxes and equity earnings
Income tax (provision) benefit (1)
Equity earnings (loss) (2)
Net income (loss)
Balance Sheet ($ - 000s)
Current assets
Current liabilities
Working capital
Total assets
Long-term debt
Shareholders' equity
Financial Ratios
Current ratio (3)
Long-term debt/total capitalization (4)
Return on average shareholders' equity (5)
Share Data
Net income (loss)
- Basic
- Diluted
Shareholders' equity at year-end
Dividends declared
418,846
(10,169)
11,804
(44,618)
(43,255)
(26,047)
(24,840)
(94,142)
308,132
66,776
241,356
541,853
-
373,272
4.6:1
0.0%
-22.3%
754,894
6,577
18,501
(37,668)
(28,573)
1,778
742
(26,053)
319,289
62,201
257,088
628,539
-
471,593
5.1:1
0.0%
-5.1%
956,892
32,492
-
3,321
10,200
(6,263)
5,355
9,292
356,079
95,596
260,483
729,922
-
550,573
789,862
8,740
4,470
(21,409)
(16,088)
285
5,004
(10,799)
346,593
112,083
234,510
712,505
-
563,114
3.7:1
0.0%
1.7%
3.1:1
0.0%
-1.8%
804,161
48,824
7,855
19,167
23,908
(9,572)
5,039
19,375
359,740
110,634
249,106
719,895
-
583,988
3.3:1
0.0%
-1.2%
$
$
$
$
(3.53)
(3.53)
14.00
0.640
$
$
$
$
(0.98)
(0.98)
17.68
0.640
$
$
$
$
0.35
0.35
20.67
0.640
$
$
$
$
(0.41)
(0.41)
21.16
0.640
$
$
$
$
0.73
0.73
21.95
0.635
(1) See Note 7 - Income Taxes in Notes to Consolidated Financial Statements in Item 7 - Financial Statements and Supplementary Data in
this Annual Report on Form 10-K for a discussion of material items impacting the 2009 income tax provision.
(2) See Note 6 - Investments in Notes to Consolidated Financial Statements in Item 7 - Financial Statements and Supplementary Data in
this Annual Report on Form 10-K for a discussion of material items impacting our 2009 joint venture losses.
(3) The current ratio is current assets divided by current liabilities.
(4) Long-term debt/total capitalization represents long-term debt divided by total shareholders' equity plus long-term debt.
(5) Return on average shareholders' equity is net income (loss) divided by average shareholders' equity. Average shareholders' equity is
the beginning of the year shareholders' equity plus the end of year shareholders' equity divided by two.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our
Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in Item 8 -
Financial Statements and Supplementary Data in this Annual Report on Form 10-K. This discussion contains
forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of certain factors, including but not limited to those
discussed in Item 1A - Risk Factors and elsewhere in this Annual Report on Form 10-K.
17
Executive Overview
Beginning with the third quarter of 2008, the automotive industry was negatively impacted by the continued
dramatic shift away from full-size trucks and SUVs caused by continuing high fuel prices, rapidly rising commodity
prices and the tightening of consumer credit due to the then deteriorating financial markets. Accordingly, our OEM
customers announced unprecedented restructuring actions, including assembly plant closures, significant reductions
in production of light trucks and SUVs, delayed launches of key 2009 model-year light truck programs and
movement toward more fuel-efficient passenger cars and cross-over type vehicles. In the second quarter of 2009,
both Chrysler and GM announced on April 30, 2009 and June 1, 2009, respectively, that they were filing a voluntary
petition under Chapter 11 of the U.S. Bankruptcy Code after receiving emergency funding from the U.S. federal
government. Chrysler emerged from bankruptcy on June 10, followed by GM on July 11. The majority, if not all,
of Chrysler’s and GM’s assembly plants were closed during their bankruptcy proceedings.
We have taken steps to manage our costs in order to rationalize our production capacity after the announcements
beginning in the third quarter of 2008 by our major customers of assembly plant closures and sweeping production
cuts, particularly in the light truck and SUV platforms. In August 2008, we announced the planned closure of our
wheel manufacturing facility located in Pittsburg, Kansas, and workforce reductions in our other North American
plants, resulting in the layoff of approximately 665 employees and the elimination of 90 open positions. On January
13, 2009, we also announced the planned closure of our Van Nuys, California wheel manufacturing facility, thereby
eliminating an additional 290 jobs. The Kansas and California facilities ceased operations in December 2008 and
June 2009, respectively.
Our customers continue to request price reductions as they work through their own financial challenges. We are
engaged in ongoing programs to reduce our own costs through process automation and identification of industry best
practices in an attempt to mitigate these pricing pressures. However, it has become increasingly more difficult to
react quickly enough given the continuing pressure for price reductions, reductions in customer orders, and the
lengthy transitional periods necessary to reduce labor and other costs. As such, our profit margins will likely
continue to be lower than our historical levels for some period of time. We will continue to strive to increase our
operating margins from current operating levels by aligning our plant capacity with industry demand and
aggressively implementing cost-saving strategies to enable us to meet customer-pricing expectations. However, as
we incur costs to implement these strategies, the initial impact on our future financial position, results of operations
and cash flow may be negative. Additionally, even if successfully implemented, these strategies may not be
sufficient to offset the impact of on-going pricing pressures and additional reductions in customer demand in future
periods.
Overall North American production of passenger cars and light trucks during the year was reported by industry
publications as being down approximately 32 percent versus a year ago, as production of passenger cars decreased
36 percent and production of light trucks and SUVs decreased 28 percent. The U.S. automotive industry in 2009
was impacted negatively by extended assembly plant closures and the lack of available consumer credit as a result of
the deterioration of the financial markets and overall recessionary economic conditions in the U.S.
Unit shipments in our first and second quarters of 2009 approximated 1.4 million wheels per quarter, the lowest
level for any quarter since the first quarter of 1992. Unit shipments increased to approximately 2.0 million wheels in
the third quarter of 2009 and were approximately 2.4 million wheels in the fourth quarter of 2009. Sales in the
second half of 2009 were positively impacted by increased production, as both GM and Chrysler began to return to
more normalized production levels following their emergence from Chapter 11 bankruptcy protection. We also
believe that automotive production generally was positively impacted by increased consumer demand for new
automobiles, largely driven by the federal government’s Car Allowance Rebate System, also known as “cash for
clunkers”. Gross loss for the year was ($10.2) million, or (2) percent of net sales, compared to profit of $6.6 million,
or 1 percent of net sales, in the same period a year ago. The net loss after income taxes and equity earnings for the
period was ($94.1) million, or ($3.53) per diluted share, compared to a net loss in 2008 of ($26.1) million, or ($0.98)
per diluted share.
18
Listed in the table below are several key indicators we use to monitor our financial condition and operating
performance.
Results of Operations
Fiscal Year Ended December 31,
(Thousands of dollars, except per share amounts)
Net sales
Gross profit
Percentage of net sales
Income (loss) from operations
Percentage of net sales
Net income (loss) from continuing operations
Percentage of net sales
Diluted earnings (loss) per share
Net Sales
2009
2008
2007
$
$ 418,846
(10,169)
$
-2.4%
(44,618)
-10.7%
(94,142)
-22.5%
(3.53)
$
$
$
$ 754,894
6,577
$
0.9%
(37,668)
-5.0%
(26,053)
-3.5%
(0.98)
$
$
$
$ 956,892
32,492
$
3.4%
3,321
0.3%
9,292
1.0%
0.35
$
$
Consolidated net sales decreased $336.1 million, or 45 percent, to $418.8 million in 2009 from $754.9 million in
2008. Aluminum wheel sales decreased $329.5 million in 2009 to $408.9 million from $738.4 million a year ago, a
45 percent decrease. Unit shipments in 2009 decreased 3.2 million, or 31 percent, to 7.2 million from 10.4 million in
2008. The average selling price of our wheels in 2009 decreased by 20 percent compared to 2008, as the average
pass-through price of aluminum decreased by 16 percent in 2009 compared to 2008. The change in the average
selling price related to aluminum price changes accounted for $81.4 million of the wheel sales decrease and the unit
shipment decline accounted for $228.2 million of the decrease. The balance of the total wheel sales decline was due
to the change in sales mix. Tooling reimbursement revenues that were recognized were $10.0 million this year
compared to $16.5 million a year ago.
U.S. Operations
Consolidated net sales by our U.S. wheel plants decreased $272.0 million, or 67 percent, to $134.3 million in 2009
from $406.3 million in 2008. The decrease in revenues in 2009 is directly attributable to a 58 percent decrease in
unit shipments and a lower average selling price due principally to a reduction in the pass-through price of
aluminum. We closed our Kansas and California plants in the U.S. in December 2008 and June 2009, respectively,
and shifted a portion of these facilities production to our Mexico plants which partially contributed to the decrease in
unit shipments. The significant decrease in 2009 unit shipments and revenues compared 2008 is attributable to the
reduced consumer demand for automobiles and light trucks and the shift of production from the U.S. to Mexico.
Mexico Operations
Net sales by our Mexican wheel plants decreased $57.9 million, or 18 percent, to $272.9 million in 2009 from
$330.8 million in 2008. The decrease in net sales in 2009 compared to 2008 is primarily attributable to the decrease
in average selling price due to the reduction in the aluminum pass through price, partially offset by the 4 percent
increase in units shipped. In addition, changes in foreign exchange rates negatively impacted net sales in 2009 by
approximately 19 percent when comparing 2008 revenues to 2009.
Unit shipments to Ford increased to 35 percent of our total OEM unit shipments in 2009 from 26 percent a year ago,
while unit shipments to GM decreased to 34 percent from 39 percent in 2008. Unit shipments to Chrysler decreased
to 13 percent from 15 percent in 2008, while shipments to our international customers totaled 18 percent compared
to 20 percent in 2008. According to Wards Auto Info Bank, overall North American production of passenger cars
and light trucks in 2009 decreased approximately 32 percent compared to our 31 percent decrease in aluminum
wheel shipments. However, production of the specific passenger cars and light trucks using our wheel programs
decreased 34 percent compared to our 31 percent decrease in our total shipments, indicating a slight increase in
market share. Production of light trucks and SUVs with our wheel programs decreased 30 percent compared to our
22 percent decrease in shipments. Production of passenger cars with our wheel programs was down 38 percent
compared to our 41 percent decrease in shipments.
19
Consolidated net sales decreased $202.0 million, or 21 percent, to $754.9 million in 2008 from $956.9 million in
2007. Aluminum wheel sales decreased $206.1 million in 2008 to $738.4 million from $944.5 million in 2007, a 22
percent decrease. Unit shipments in 2008 decreased 2.8 million, or 22 percent, to 10.4 million from 13.2 million in
2007. The average selling price of our wheels in 2008 was approximately the same as the average selling price in
2007, as the average pass-through price of aluminum was the same in both years and there was no significant change
in sales mix. The decrease in unit shipments accounted for $203.3 million of the wheel sales decrease, with the
balance of the decrease due to the change in sales mix. Tooling reimbursement revenues were $16.5 million in 2008
compared to $12.4 million in 2007.
According to Wards Automotive Yearbook 2009, aluminum wheel installation rates on passenger cars and light
trucks in the U.S. was 65 percent for the 2008 and 2007 model years compared to 63 percent for the 2006 model
year. Aluminum wheel installation rates have increased to this level since the mid-1980s, when this rate was only
10 percent. However, in recent years, this growth rate has slowed with the aluminum wheel installation rate
increasing only 13 percentage points from 52 percent for the 1997 model year, while experiencing a slight decrease
between 2004 and 2005. We expect this trend of slow growth or no growth to continue. In addition, our ability to
grow in the future may be negatively impacted by continued customer pricing pressures and overall economic
conditions that impact the sales of passenger cars and light trucks, such as continued fluctuating fuel prices and a
continued lack of available consumer credit.
U.S. Operations
Consolidated net sales by our U.S. wheel plants decreased $146.0 million, or 26 percent, to $406.3 million in 2008
from $552.3 million in 2007. The decrease in revenues in 2008 is directly attributable to a 28 percent decrease in
unit shipments. During the first quarter of 2007, we closed our Tennessee plant in the U.S. and shifted a portion of
that facility’s production to our Mexico plants which partially contributed to the decrease in unit shipments. The
significant decrease in 2008 unit shipments and revenues compared 2007 is attributable to the reduced consumer
demand for automobiles and light trucks.
Mexico Operations
Net sales by our Mexican wheel plants decreased $57.6 million, or 15 percent, to $330.8 million in 2008 from
$388.4 million in 2007. The decrease in net sales in 2008 compared to 2007 is primarily attributable to a decrease in
unit shipments due to a reduction in consumer demand for automobiles and light trucks. During 2007, we opened a
new plant in Mexico and absorbed a portion of the production of our Tennessee plant that closed during the first
quarter of 2007. In addition, changes in foreign exchange rates negatively impacted net sales in 2008 by
approximately 2 percent.
Gross Profit (Loss)
During 2009, consolidated gross profit decreased $16.7 million to a gross loss of ($10.2) million, or (2) percent of
net sales, from a gross profit of $6.5 million, or 1 percent of net sales, in 2008. The major factors contributing to the
decreased gross profit in 2009 were the 31 percent and 32 percent decreases in unit shipments and wheels produced
in our plants, respectively. As indicated above, unit shipments and, therefore, plant productivity were impacted
severely by various customer restructuring actions and market conditions that affected the entire automotive industry
and reduced consumer demand for cars and light trucks. Due to our own restructuring actions during 2009, gross
profit included charges totaling approximately $21.3 million related to the following actions. One-time termination
benefit costs and other plant closure costs for the Van Nuys and Pittsburg facilities amounted to $14.5 million and
$1.8 million, respectively, and the one-time termination benefit costs associated with the workforce reductions at our
other North American plants amounted to approximately $2.5 million. Because of the closures of the Van Nuys and
Pittsburg facilities and reduced production volumes at our other facilities, certain forward natural gas contracts for
those operations no longer qualified for the normal purchase exemption under the accounting rules. Accordingly,
gross profit included a charge of $2.5 million, representing the difference between the contract and fair values of
those contracts.
During 2008, consolidated gross profit decreased $25.9 million to $6.6.million, or 1 percent of net sales, from $32.5
million, or 3 percent of net sales, in 2007. The major factors contributing to the decreased gross profit in 2008 were
the 22 percent decreases in both unit shipments and wheels produced in our plants. As indicated above, unit
20
shipments and, therefore, plant productivity were impacted severely by various customer restructuring actions and
market conditions that affected the entire automotive industry. Due to our own restructuring actions during 2008
referred to above, gross profit included charges totaling approximately $6.4 million. Severance and other plant
closure costs for the Kansas facility amounted to $3.8 million, and the severance costs associated with the workforce
reductions at our other North American plants amounted to approximately $1.0 million. Because of the closures of
the Kansas and California facilities, the forward natural gas contracts for those operations no longer qualified for the
normal purchase exemption under the accounting rules. Accordingly, gross profit included a charge of $1.6 million,
representing the difference between the contract and fair values of those contracts as of the end of 2008. Gross profit
in 2008 was also negatively impacted by the loss on the sale of forged wheels purchased from our joint venture and
sold by us to our customers in the United States, totaling $3.8 million. This amount included reductions to inventory
valuation due to decreases in the aluminum portion of our selling prices, freight and duty charges and third party
warehousing costs.
The cost of aluminum is a significant component in the overall cost of a wheel. Additionally, a portion of our selling
prices to OEM customers is attributable to the cost of aluminum. Our selling prices are adjusted periodically to
current aluminum market conditions based upon market price changes during specific pricing periods though we are
exposed to timing differences. Theoretically, assuming selling price adjustments and raw material purchase prices
move at the same rate, as the price of aluminum increases, the effect is an overall decrease in the gross margin
percentage, since the gross profit in absolute dollars would be the same. The opposite would then be true in periods
during which the price of aluminum decreases.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $22.6 million, or 5 percent of net sales, in 2009 compared to
$25.7 million, or 3 percent of net sales, in 2008, and $29.2 million, or 3 percent of net sales, in 2007. The $3.1
million decrease in selling, general and administrative expenses in 2009 was due principally to reductions in salaries
and related fringe expenses of $1.2 million and in reductions in the provision for bad debts of $1.2 million. Selling,
general and administrative expenses were $3.4 million lower in 2008 than 2007, due principally to reduction in legal
expenses of $2.9 million.
Impairment of Long-Lived Assets and Other Charges
Due to the deteriorating financial condition of our major customers and other changes in the automotive industry, we
performed impairment analyses at the end of each fiscal quarter at the end of the year 2009 on all long-lived assets
in our operating plants, in accordance with U.S. GAAP. Our estimated undiscounted cash flow projections as of the
end of the year exceeded the asset carrying values in all of our wheel manufacturing plants in North America;
therefore, no impairment was required to be made to our long-lived assets in our operating plants in the fourth
quarter of 2009.
Based on the impairment analyses conducted at the end of the first quarter of 2009, we concluded that the estimated
future undiscounted cash flows of our Fayetteville, Arkansas manufacturing facility would not be sufficient to
recover the carrying value of our long-lived assets attributable to that facility. As a result, we recorded a pretax
asset impairment charge against earnings totaling $8.9 million during the first quarter of 2009, reducing the $18.2
million carrying value of certain assets at this facility to their respective estimated fair values. The estimated fair
values of the long-lived assets at our Fayetteville, Arkansas manufacturing facility were determined with the
assistance of estimated fair values of comparable properties and an independent third party appraisal of the
machinery and equipment. These assets are classified as held and used in accordance with U.S. GAAP. We have
classified the inputs to the nonrecurring fair value measurement of these assets as being Level 2 within the fair value
hierarchy in accordance with U.S. GAAP.
In January 2009, we announced the planned closure of our wheel manufacturing facility located in Van Nuys,
California in an effort to further reduce costs and more closely align our capacity with sharply lower demand for
aluminum wheels by the automobile and light truck manufacturers. The facility ceased operations at the end of the
second quarter of 2009, resulting in the layoff of approximately 290 employees. A pretax asset impairment charge
against earnings totaling $10.3 million, reducing the $10.8 million carrying value of certain assets at the Van Nuys
manufacturing facility to their respective fair values, was recorded in the fourth quarter of 2008, when we concluded
21
that the estimated future undiscounted cash flows of that operation would not be sufficient to recover the carrying
value of our long-lived assets attributable to that facility. We used an independent third party appraiser to assist us
in determining the fair values of these assets.
During the second quarter of 2009, we received an offer for the sale of our Johnson City, Tennessee facility which
was subsequently cancelled. We believe this offer was the best indicator of the current fair value of the property and
we recorded a reduction in our carrying value of this facility by $0.6 million to the $2.2 million offer. Additionally,
we received some indications, based on equipment sales that occurred subsequent to June 28, 2009, that the carrying
values of the held for sale equipment from our Pittsburg, Kansas, and Van Nuys, California, facilities, totaling $2.6
million, were higher than their current market values. Consequently, we recorded an additional impairment charge
of $1.9 million to reduce the carrying value of this equipment to their new estimated fair values in the second quarter
also. We have classified the above nonrecurring fair value measurements as Level 2 inputs within the fair value
hierarchy utilizing the market approach in accordance with U.S. GAAP. Due to plant shutdowns and the
realignment of our business to match our current production needs, we have identified, and are in the process of
selling, specific long-lived assets from our former manufacturing operations in Johnson City, Tennessee, and
Pittsburg, Kansas. These assets, which totaled $6.8 million at December 31, 2009, are classified as assets held for
sale in accordance with U.S. GAAP.
In August 2008, we announced the planned closure of our wheel manufacturing facility located in Pittsburg, Kansas,
in an effort to eliminate excess wheel capacity and enhance overall efficiency. The closure, which was completed in
December 2008, resulted in the layoff of approximately 600 employees. A pretax asset impairment charge against
earnings totaling $5.0 million, reducing the carrying value of certain assets at the Pittsburg facility to their respective
fair values, was recorded in the third quarter of 2008, when we concluded that the estimated future undiscounted
cash flows of that operation would not be sufficient to recover the carrying value of our long-lived assets attributable
to that facility. In the fourth quarter of 2008, when it was determined that the carrying values of additional long-
lived assets would not be recovered, the impairment charge was increased by an additional $2.4 million. We used
an independent third party appraiser to assist us in determining the fair values of the assets at the Pittsburg, Kansas,
facility.
For the periods between the announced plant closures and the date operations actually ceased, these assets are
classified as held-and-used, in accordance with U.S. GAAP. Upon termination of plant operations, the remaining
assets are classified as held-for-sale.
One-time termination benefits and other shutdown costs related to the above plant closures and workforce reductions
in our other North American facilities were $19.1 million in 2009, of which $18.8 million was included in cost of
sales and $0.3 million was included in selling, general and administrative expenses. One-time termination benefits
and other shutdown costs were $4.7 million in 2008 and were included in costs of sales. One-time termination
benefits were derived from the individual agreements with each employee and were accrued ratably over the
requisite service period. Payments for one-time termination benefits and other shutdown costs totaled $16.7 million
in 2009 compared with $4.6 million in 2008 and the resulting liabilities of $2.5 million and $0.1 million for 2009
and 2008, respectively, were included in accrued expenses in our consolidated balance sheets for their respective
periods.
Income (Loss) from Operations
Aluminum, natural gas and other direct material costs are a significant component of the direct costs to manufacture
wheels. These costs are substantially the same for all of our plants since the same set of suppliers service both our
U.S. and Mexico operations. In addition, our operations in the U.S. and Mexico sell to the same customers, utilize
the same marketing and engineering resources, have the same material inputs, have interchangeable manufacturing
processes and provide the same basic end product. However, profitability between our U.S. and Mexico operations
can vary as a result of differing labor and benefit costs, the mix of wheels manufactured and sold by each plant, as
well as differing plant utilization levels resulting from our internal allocation of wheel programs to our plants.
Changes in raw material costs and product mix had a nominal impact on income (loss) from operations since
changes in aluminum costs are passed through to our customers and product mix remained relatively unchanged
during the periods presented. Overall profitability of our U.S. and Mexico operations was impacted severely by
22
various customer restructuring actions, global economic conditions that affected the entire automotive industry, and
our own restructuring actions during these three years.
Consolidated income (loss) from operations includes our U.S. operations and our international operations, which are
principally our wheel manufacturing operations in Mexico, and certain costs that are not allocated to a specific
operation. These expenses include corporate services that are primarily incurred in the U.S. but are not charged
directly to our world-wide operations, such as selling, general and administrative expenses, engineering services for
wheel program development and manufacturing support, environmental and other governmental compliance
services, etc.
Consolidated income (loss) from operations decreased $7.0 million to a loss of ($44.6) million in 2009 from the loss
of ($37.6) million in 2008. Income from operations of our U.S. operations decreased $12.7 million, while income
from our Mexican operations decreased $0.2 million when comparing 2009 to 2008. The net decrease in income
from our North American manufacturing operations compared to 2008 was offset by a $6.0 million improvement in
corporate costs during 2009. Included below are the major items that impacted income (loss) from operations for
our U.S. and Mexico operations during 2009.
U.S. Operations
As noted above, income (loss) from operations for our U.S. operations decreased by $12.7 million from 2008 to
2009. Our U.S. operations during 2009 consisted of two wheel plants for the entire year and our Van Nuys,
California, facility for the first half of the year, whereas 2008 also included our Kansas and California facilities for
the entire year. After the operations ceased at our Kansas and California facilities, the production was apportioned
between our other U.S. and Mexico facilities with the bulk of the production being redirected to our Mexico
facilities. The impairments related to the long-lived assets of our Kansas and California facilities, along with those
at our Fayetteville, Arkansas facility, and the related plant closure costs and workforce reductions at our other U.S.
facilities reduced our income (loss) from operations in the U.S. by $12.7 million from 2008 to 2009. The remaining
decrease in income (loss) from operations from 2008 to 2009 for our U.S. operations was attributable primarily to a
58 percent decrease in unit shipments due to the reduced consumer demand for passenger cars and light trucks and
to a decrease in plant utilization in 2009 of 25 percent.
Mexico Operations
Income from operations for our Mexico operations decreased by $0.2 million in 2009. Mexico operations during
2009 and 2008 consisted of three fully operational wheel plants. The increase in income from operations of our
Mexico operations after adjusting for workforce reductions costs and losses on certain forward natural gas contracts
was due primarily to a 4 percent increase in unit shipments, which was partially offset by a reduction in plant
utilization in 2009 of 14 percent and an increase in workforce reduction expenses of $1.4 million.
Included in our income (loss) from operations in Mexico were $2.3 million in workforce reduction costs and losses
on certain forward natural gas contracts in 2009 compared to workforce reduction costs on $0.6 million in 2008.
U.S. versus Mexico Production
In 2009, wheels produced by our Mexico and U.S. operations accounted for 69 percent and 31 percent, respectively,
of our total production. This compares to 45 percent in Mexico and 55 percent in the U.S. in 2008. We anticipate
that the percentage of production in Mexico will remain at approximately 69 percent of our total production in 2010.
Consolidated income (loss) from operations decreased $41.0 million to a loss of ($37.7) million in 2008 from
income of $3.3 million in 2007. Income from operations of our U.S. operations and Mexico operations decreased
$27.6 million and $15.6 million, respectively, when comparing 2007 to 2008. These decreases were offset slightly
by a $2.2 million improvement in corporate costs during 2008. Included below are the major items that impacted
income (loss) from operations for our U.S. and Mexico operations during this three year period.
U.S. Operations
As noted above, income (loss) from operations for our U.S. operations decreased by $27.6 million from 2007 to
2008. Our U.S. operations during 2008 consisted of four wheel plants for the entire year, whereas 2007 also
included our Tennessee plant until it ceased operations at the end of the first quarter of that year. After the
operations ceased at our Tennessee plant, its production was apportioned between our other U.S. and Mexico
23
facilities. The actions related to the Tennessee plant closure and the recently announced closures of our Kansas and
California wheel facilities referred to above, reduced our income (loss) from operation in the U.S. by $20.0 million
from 2007 due to impairments, plant closure costs and workforce reduction expenses incurred as a result of those
actions. The remaining decrease in income (loss) from operations from 2007 to 2008 for our U.S. operations was
attributable to reduced plant utilization of 21 percent and a 28 percent decrease in unit shipments due to the reduced
consumer demand for passenger cars and light trucks. Changes in pricing or product mix did not have a material
impact on the decrease in income (loss) from our U.S. operations when comparing 2007 to 2008.
Mexico Operations
Income (loss) from operations for our Mexico operations decreased $15.6 million when comparing 2007 to 2008.
Mexico operations during 2008 and 2007 consisted of three fully operational wheel plants in Mexico. Our third
wheel plant in Mexico began full production and sales as of the beginning of 2007. Workforce reduction expenses
in our Mexico operations increased by $0.6 million from 2007 to 2008. The remaining decrease in income (loss)
from operations for our Mexico operations was due to a 10 percent decrease in unit shipments and the resulting 11
percent decline in plant utilization. Changes in pricing, product mix, or currencies, did not have a material impact
on the decrease in income (loss) from operations for our Mexico operations.
U.S. versus Mexico Production
In 2008, our U.S. and Mexico operations accounted for 55 percent and 45 percent, respectively, of our total
production, compared to 59 percent and 41 percent, respectively, in 2007.
Interest Income, net and Other Income (Expense), net
Net interest income for the year decreased 26 percent to $2.2 million from $2.9 million in 2008, due principally to a
decrease in the average rate of return to 1.1 percent from 2.7 percent in 2008, offsetting an increase of $40.2 million
in the average balance of cash invested. Net interest income in 2008 decreased 21 percent to $2.9 million from $3.7
million in 2007, due principally to a decrease in the average rate of return to 2.7 percent from 4.9 percent in 2007,
offsetting an increase of $28.1 million in the average balance of cash invested.
Net other income (expense) in 2009 was ($0.8) million compared to $6.2 million in 2008. For the first nine months
of 2008, the Mexican peso exchange rate averaged 10.54 pesos to the U.S. dollar. During the fourth quarter, this rate
increased to 13.85 Mexican pesos to the U.S. dollar, averaging 13.20 Mexican pesos to the U.S. dollar for the
quarter. As a result, net other income (expense) in 2008 included foreign exchange transaction gains totaling $5.9
million in the fourth quarter and $5.4 million for the year 2008.
24
Effective Income Tax Rate
Our income (loss) from continuing operations before income taxes and equity earnings was ($43.3) million in 2009,
($28.6) million in 2008, and $10.2 million in 2007. The effective tax rate on the 2009 pretax income from
continuing operations was a provision of 60.2 percent compared to a tax benefit of 6.2 percent in 2008, and a
provision of 61.4 percent in 2007. The following is a reconciliation of the United States federal tax rate to our
effective income tax rate along with a discussion of the key drivers that impacted our effective income tax rate for
the periods presented:
Year Ended December 31,
2009
2008
2007
Statutory rate - (provision) benefit
State tax (provisions), net of federal income tax benefit (1)
Permanent differences (2)
Tax credits
Foreign income taxed at rates other than the statutory rate (3)
Valuation allowance (4)
Changes in tax liabilities, net (5)
Other
%
35.0
10.6
(5.0)
0.1
1.4
(106.4)
7.3
(3.2)
%
35.0
5.0
(12.0)
0.7
(0.3)
(25.2)
(0.6)
3.6
%
(35.0)
(0.6)
(20.9)
0.7
19.6
(6.5)
(18.3)
(0.4)
Effective income tax rate
(60.2)
%
6.2
%
(61.4)
%
1) Actual state tax provisions and benefits, net of federal income tax benefit during 2007, 2008, and 2009, were a provision of
$0.1 million, a benefit of $1.4 million, and a benefit of $4.6 million, respectively. The primary driver in the increase in state
provision for 2009 is the result of generating net state income tax losses during those periods.
2) Actual permanent differences impacting the income tax provisions during 2007, 2008 and 2009 were $2.1 million, $3.4
million, and $2.2 million, respectively. There were no material changes in the permanent differences for each of the periods
presented. The primary drivers of the percentage changes in the effective income tax rate related to permanent differences
were the fluctuating levels of income (loss) from continuing operations before income taxes and equity earnings.
3) During 2007, a greater proportion of our income was generated in foreign jurisdictions when compared to 2008 and 2009.
The impact of foreign income taxed at rates other than the statutory rate on our reported tax provisions was $2.0 million in
2007, $0.1 million in 2008, and $0.6 million in 2009. During these same periods, our income (loss) from continuing
operations before income taxes and equity earnings was $10.2 million in 2007, ($28.6) million in 2008, and ($43.3) million
in 2009. The higher proportion of foreign earnings in 2007 as a percentage of the lower consolidated income from
continuing operations before taxes and equity earnings in that year resulted in the significant impact on the effective income
tax rate in 2007.
4) During 2007, 2008, and 2009, increases in our valuation allowances resulted in additional tax expense of $0.7 million, $7.2
million, and $46.0 million, respectively. The significant increase in the tax expense related to valuation allowances during
2009 was due to an increase in the valuation allowance recorded for our beginning federal deferred tax assets in the amount
of $35.6 million, an increase related to current year deferred tax items for which a valuation allowance was established in
the amount of $7.5 million, and an increase in the valuation allowance recorded for our foreign net operating loss
carryforwards of $0.6 million for which we have determined that it was more likely than not that the benefit would not be
realized. The significant increase in the tax expense related to valuation allowances during 2008 was due to an increase in
the valuation allowance recorded for our foreign net operating loss carryforwards and foreign tax credit carryforwards for
which we determined that it was more likely than not that the benefit would not be realized.
5) The impact of changes in our tax liabilities resulted in additional tax expense of $1.9 million, expense of $0.2 million, and a
benefit of $3.2 million during 2007, 2008, and 2009, respectively. Effective January 1, 2007, we adopted the U.S. GAAP
method of accounting for uncertain tax positions. The increase in tax liabilities during 2007 relates to accruals for interest
and penalties on the liability established upon adoption of the U.S. GAAP method of accounting for uncertain tax positions
at the beginning of that year. In 2008, we continued to accrue interest and penalties on the tax liabilities established for
uncertain tax positions. However, also during 2008, we decreased the tax liabilities as a result of the expiration of statutes of
limitations on years for which a liability had originally been established upon adoption of the U.S. GAAP method of
accounting for uncertain tax positions. The increase in tax liabilities due to accruals for interest and penalties, minus the
decrease due to the expiration of statutes of limitations, resulted in a net increase of $0.2 million to our 2008 income tax
provision. During 2009, we continued to accrue interest and penalties on beginning tax liabilities which resulted in
25
increases to our tax provision in the amount of $4.3 million. During 2009, we completed certain audits that resulted in a net
reduction to the tax liability which decreased our tax provision in the amount of $7.5 million.
We are a multinational company subject to taxation in many jurisdictions. We record liabilities dealing with
uncertainty in the application of complex tax laws and regulations in the various taxing jurisdictions in which we
operate. If we determine that payment of these liabilities will be unnecessary, we reverse the liability and recognize
the tax benefit during the period in which we determine the liability no longer applies. Conversely, we record
additional tax liabilities or valuation allowances in a period in which we determine that a recorded liability is less
than we expect the ultimate assessment to be or that a tax asset is impaired. The effects of recording liability
increases and decreases are included in the effective income tax rate.
Equity in Earnings of Joint Ventures
Effective in June 2008, we terminated our 50 percent-owned marketing joint venture, Topy-Superior Limited (TSL),
which earned commissions for marketing our products to potential OEM customers based in Asia. The net operating
results through the date of dissolution and the final settlement of the TSL joint venture did not have a material
impact on our results of operations or financial condition.
We have a 50 percent-owned joint venture, Suoftec Light Metal Products Production & Distribution Ltd (Suoftec), a
manufacturer of both light-weight forged and cast aluminum wheels in Hungary. The investment in this joint venture
is accounted for utilizing the equity method of accounting. Accordingly, our share of joint venture’s net income is
included in the consolidated statements of operations in “Equity in Earnings (Losses) of Joint Ventures”.
Suoftec Joint Venture
Net sales of Suoftec were also negatively impacted by customer restructuring and the economic conditions affecting
the automotive industry in Europe. The joint venture’s net sales decreased $54.1 million, or 39 percent, in 2009 to
$83.1 million from $137.2 million in 2008, as unit shipments declined 31 percent and average selling price in U.S.
dollars fell by 13 percent. However, the average selling price in euros, the functional currency of the joint venture,
declined approximately 7 percent, which was compounded by a decrease in the U.S. dollar/euro exchange rate of
approximately 6 percent.
Net sales in 2008 decreased $8.5 million, or 6 percent, to $137.2 million from $145.7 million in 2007. Unit
shipments decreased 9 percent from those of the prior year at 2.3 million units, while the average selling price in
U.S. dollars increased 3 percent. However, the average selling price in euros, the functional currency of the joint
venture, declined by 5 percent, while the U.S. dollar/euro exchange rate of increased approximately 8 percent.
Gross profit in 2009 decreased to a loss of ($17.4) million, or (21) percent of net sales, from profit of $2.9 million,
or 2 percent of net sales, in 2008. Gross profit margin in 2009 was impacted negatively by the continuing shift in
sales mix to smaller, lower-profit margin wheels. Gross profit in 2009 was also impacted negatively by cost
increases related to operating inefficiencies and quality issues. Gross profit in 2008 decreased to $2.9 million, or 2
percent of net sales, from $14.9 million, or 10 percent of net sales, in 2007. Gross profit margin in 2008 was
impacted negatively by a significant shift in sales mix from larger, higher profit margin aluminum wheels to smaller,
lower-profit margin wheels. Gross profit in 2008 was also impacted negatively by a 25 percent increase in utility
costs, which was partially offset by lower operating supplies and depreciation expense.
Selling, general and administrative costs in 2009 were $1.9 million, or 2 percent of net sales, compared to $2.6
million, or 2 percent of net sales in 2008 and $2.0 million, or 1 percent of net sales in 2007. The principal reason for
the $0.7 million decrease in 2009 compared to 2008 was lower commission based sales in the current period.
Because our 50 percent-owned joint venture in Hungary was also affected by similar economic conditions impacting
the European automotive industry, management has tested the long-lived assets of the Hungarian joint venture,
Suoftec, for impairment at the end of each fiscal quarter in 2009 in accordance with U.S. GAAP. Due to the general
decline in the European automotive industry, during the fourth quarter of 2009, the projected future shipments
declined sharply compared to the projections earlier in the year. The impairment analysis performed at the end of
the year indicated that the estimated undiscounted future cash flows from the reduced projected shipments of our
joint venture facility would not be sufficient to recover the carrying value of long-lived assets attributable to that
26
facility. As a result, our joint venture recorded a $28.8 million pretax impairment charge against their long-lived
assets reducing the carrying value of the asset grouping of $76.0 million to the asset grouping’s fair value. We
recorded our share of the charge, or $14.4 million, in our equity in earnings (losses) from joint ventures during the
fourth quarter of 2009. The estimated fair value of the Suoftec asset group was determined using a discounted cash
flow model with the resulting value compared with comparable valuation multiples and was determined using Level
3 inputs within the fair value hierarchy in accordance with U.S. GAAP. The discounted cash flow analysis included
several key assumptions including the timing of cost savings initiatives that will be implemented, resolution of
certain operational inefficiencies and quality issues, and margin improvement on new business all of which may
never materialize or may not be sufficient to offset the impact of on-going pricing pressures and reductions in
customer demand in future periods. There is no guarantee that we will achieve our estimated results or that future
impairment charges will not be recorded. See Note 6 – Investments in Notes to Consolidated Financial Statements
in Item 8 – Financial Statements and Supplementary Data in this Annual Report on Form 10-K for further discussion
of our Suoftec joint venture.
The reduction in other income (expense), net in 2009 of $1.2 million was due principally to lower interest income
and higher foreign exchange transactional losses in the current period. The reduction in other income (expense), net
in 2008 of $0.6 million compared to 2007 was due principally to increased interest income being offset by foreign
exchange transactional losses.
Due to the net operating losses for the last three years and a reduced outlook, Suoftec’s management established
valuation allowances totaling $4.2 million during 2009 for net operating losses and other deferred tax assets. The
statutory income tax rate in Hungary was 16 percent in 2008 and 2007 plus an additional 4 percent solidarity tax.
Effective in January 2010, the statutory income tax rate in Hungary will increase to 19 percent and the 4 percent
solidarity tax will cease. The annual effective income tax rates were (2.2) percent in 2009, 22.2 percent in 2008,
compared to 18.7 percent in 2007.
The resulting net loss was ($50.1) million in 2009, compared to income of $0.4 million in 2008 and $11.2 million in
2007. Our 50-percent share of these earnings (losses) was ($25.1) million, $0.2 million and $5.6 million,
respectively. After adjusting for the elimination of intercompany profits on wheels purchased from Suoftec, our
equity earnings (losses) in each year were ($24.8) million in 2009, $0.7 million in 2008 and $5.2 million in 2007.
Suoftec’s cash at the end of 2009 was $14.9 million compared to $25.4 million a year ago. Working capital
decreased $14.3 million to $32.5 million from $46.8 million at the end of 2008, due principally to a reduction of
$10.5 million in cash, $3.6 million decrease in net inventories and an increase in current liabilities of $3.1 million,
partially offset by a $2.8 million increase in accounts receivable. The current ratio decreased to 3.3 from 5.1 a year
ago. Capital expenditures in 2009 were $4.3 million, compared to $15.5 million in 2008. No dividends have been
declared since 2007. We believe the joint venture’s current cash balance is sufficient for its future operating and
capital expenditure requirements.
Net Income (Loss)
Net loss in 2009 was ($94.1) million, or (22) percent of net sales, compared to net loss of ($26.1) million, or (4)
percent of net sales, in 2008, and net income of $9.3 million, or 1 percent of net sales, in 2007. Diluted earnings
(loss) per share was ($3.53) per diluted share in 2009 compared to ($0.98) in 2008 and $0.35 in 2007.
Liquidity and Capital Resources
Our sources of cash liquidity include cash and cash equivalents, net cash provided by operating activities, and other
external sources of funds. During the three years ended December 31, 2009, we had no bank or other interest-
bearing debt. At December 31, 2009, our cash and cash equivalents totaled $134.3 million compared to cash and
cash equivalents totaling $146.9 million a year ago and $106.8 million of cash and cash equivalents at the end of
2007. The $12.6 million decrease in cash and cash equivalents in 2009 was due principally to net cash provided by
operating activities of $22.3 million being offset by net cash used in investing activities of $17.8 million and net
cash used in financing activities of $17.1 million. Investing activities included the purchase of $10.2 million in
certificates of deposit with various maturity dates which are not classified as cash equivalents. At December 31,
2009, $6.2 million of these certificates of deposit were included in short-term investments and $4.0 million were
included in other assets.
27
The $40.1 million increase in cash and cash equivalents in 2008 was due principally to net cash provided by
operating activities of $67.9 million offsetting net cash used in investing activities and financing activities of $11.3
million and $16.5 million, respectively. Accordingly, working capital requirements, investing activities and cash
dividend payments during these three years have been funded from internally generated funds, the exercise of stock
options or existing cash and short-term investments. The following table summarizes the cash flows from operating,
investing and financing activities as reflected in the consolidated statements of cash flows.
Fiscal Year Ended December 31,
(Thousands of dollars)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
2009
2008
2007
$
$
22,327
(17,816)
(17,067)
67,872
(11,325)
(16,445)
$
74,858
(19,872)
(16,602)
Net increase (decrease) in cash and cash equivalents
$
(12,556) $
40,102
$
38,384
We generate our principal working capital resources primarily through operations. Net cash provided by operating
activities decreased $45.6 million to $22.3 million in 2009, compared to $67.9 million for the same period a year
ago. The increase in net loss of $68.1 million was further increased by net unfavorable changes in operating assets
and liabilities totaling $23.0 million and offset by the net favorable changes in non-cash items of $45.5 million. The
unfavorable change in operating assets and liabilities was due principally to unfavorable changes in accounts
receivable of $23.0 million, in income taxes receivable of $9.8 million and in inventories of $6.1 million, reduced by
the favorable change in funding requirements of accounts payable of $19.2 million. The principal changes in non-
cash items were increases in deferred income taxes of $49.5 million and losses from joint venture of $25.6 million,
offset by a reduction in depreciation expense of $12.9 million and impairment and other non cash items of $16.7
million.
The change in accounts receivable in 2009 was favorable by $4.2 million compared to a favorable change in 2008 of
$27.2 million, resulting in the unfavorable change of $23.0 million. Sales in the last two months of 2009 changed
only slightly compared with those in the same period in 2008. In 2008, however, net sales in the last two months
were 36 percent lower than in the same period of 2007, due to the sharp decrease in customer demand that began in
the third quarter of 2008. The unfavorable change in funding for income taxes of $9.8 million compared to the prior
year was due primarily to the recording of an income tax refund receivable of $6.1 million in the fourth quarter of
2009. The unfavorable change in inventories of $6.1 million was due to a leveling off of inventories as we closed
plants and managed inventory levels to meet reduced customer demand. The favorable change in funding
requirements of accounts payable compared to a year ago of $19.2 million was due to lower levels of raw material
and other purchases, which were also due to reduced customer demand and the plant closures.
The $22.3 million cash flow from operating activities in 2009, the $146.9 million of cash and cash equivalents as of
the prior year end and the $0.9 million of other cash proceeds from investing activities were used in part for
purchases of certificates of deposits of $10.2 million, capital expenditures of $8.5 million and for cash dividends of
$17.1 million. The decrease in capital expenditure requirements in 2009 and 2008 when compared to 2007 was due
primarily to the availability of machinery and equipment from our closed wheel plants and the completion in 2007
of our newest plant in Mexico.
Net cash provided by operating activities decreased $7.0 million to $67.9 million in 2008 compared to $74.9 million
for the same in 2007. The decrease in net income of $35.3 million was offset by the favorable change in non-cash
items of $12.7 million and favorable changes in operating assets and liabilities totaling $15.6 million. The principal
changes in non-cash items were adding back of the impairment charges of $18.5 million offset by the change in
deferred income taxes of $15.6 million. The favorable change in operating assets and liabilities was due principally
to favorable changes in accounts receivable and inventories of $20.1 million and $19.1 million, respectively,
reduced by unfavorable changes in funding requirements of accounts payable of $13.4 million and other liabilities of
$8.6 million.
28
The favorable change in accounts receivable in 2008 of $20.1 million compared to 2007 was principally due to the
36 percent decline in sales during the last two months of 2008 compared to the same period in 2007. The favorable
change in inventories of $19.1 million in 2008 compared to the prior year was due primarily to reduced customer
demand in the last half of 2008 and to the closure of two plants since March of 2007. The unfavorable change in
funding requirements of accounts payable and other liabilities in 2008 was due to lower levels of raw material and
other purchases and lower accruals for operating expenses.
The $67.9 million cash flow from operating activities in 2008, the $106.8 million of cash and cash equivalents as of
the 2007 year end and the $2.5 million of other cash proceeds from investing activities were used in part for capital
expenditures of $13.2 million and for cash dividends of $17.1 million in 2008.
Our liquidity remained strong in 2009. Working capital of $241.4 million at December 31, 2009 included $134.3
million in cash and cash equivalents and $6.2 million in short-term certificates of deposit. The current ratio at year-
end was 4.6:1 compared to 5.1:1 a year ago. Accordingly, we believe we are well positioned to withstand the
current economic climate.
Risk Management
We are subject to various risks and uncertainties in the ordinary course of business due, in part, to the competitive
global nature of the industry in which we operate, to changing commodity prices for the materials used in the
manufacture of our products, and to development of new products.
We have foreign operations in Mexico and Hungary that, due to the settlement of accounts receivable and accounts
payable, require the transfer of funds denominated in their respective functional and legal currencies – the Mexican
peso and the euro. The value of the Mexican peso increased by 5 percent in relation to the U.S. dollar in 2009. The
euro experienced a 2 percent decrease versus the U.S. dollar in 2009. For the years ended December 31, 2009, 2008
and 2007, we had foreign currency transaction (losses) and gains of ($0.8) million, $5.5 million and $0.5 million,
respectively, which are included in other income (expense) in the consolidated statements of operations.
Since 1990, the Mexican peso has experienced periods of relative stability followed by periods of major declines in
value. The impact of these changes in value relative to our Mexico operations has resulted in a cumulative
unrealized translation loss at December 31, 2009 of $61.3 million. Since our initial investment in our joint venture in
Hungary in 1995, the fluctuations in functional currencies have resulted in a cumulative unrealized translation gains
at December 31, 2009 of $6.7 million. Translation gains and losses are included in other comprehensive income
(loss) in the consolidated statements of shareholders’ equity.
Our primary risk exposure relating to derivative financial instruments results from the periodic use of foreign
currency forward contracts to offset the impact of currency rate fluctuations with regard to foreign-currency-
denominated receivables, payables or purchase obligations. At December 31, 2009 and 2008, we held no foreign
currency forward contracts.
When market conditions warrant, we may also enter into contracts to purchase certain commodities used in the
manufacture of our products, such as aluminum, natural gas and other raw materials. Typically, any such commodity
commitments are expected to be purchased and used over a reasonable period of time in the normal course of
business. Accordingly, these contracts qualify for the “normal purchase” exemption provided for under U.S. GAAP
and we are not required to record any gains and/or losses associated with these commitments in our current earnings,
unless there is a change in the facts or circumstances in regard to the commitments being used in the normal course
of business.
We currently have several purchase agreements for the delivery of natural gas through 2012. With the closure of
our manufacturing facility in Van Nuys, California in June 2009, and closure in December 2008 of our
manufacturing facility in Pittsburg, Kansas, we no longer qualified for the normal purchase, normal sale (NPNS)
exemption provided for in accordance with U.S. GAAP for the remaining natural gas purchase commitments related
to those facilities. In addition, we have concluded that the natural gas purchase commitments for our manufacturing
facility in Arkansas and certain natural gas commitments for our facilities in Chihuahua, Mexico no longer qualified
for the NPNS exemption provided for under U.S. GAAP since we could no longer assert that it was probable that we
29
would take full delivery of these contracted quantities in light of the continued declines of our industry experienced
in the first half of 2009. In accordance with U.S. GAAP these natural gas purchase commitments are classified as
being with “no hedging designation” and, accordingly, we are required to record any gains and/or losses associated
with the changes in the estimated fair values of these commitments in our current earnings. The contract and fair
values of these purchase commitments at December 31, 2009 were $8.6 million and $5.6 million, respectively,
which represents a gross liability of $3.0 million, which was included in accrued expenses in our December 31, 2009
consolidated balance sheet.
Based on the quarterly analysis of our estimated future production levels, certain natural gas purchase commitments
with a contract value of $8.7 million and a fair value of $6.8 million for our manufacturing facilities in Mexico
continue to qualify for the NPNS exemption since we can assert that it is probable we will take full delivery of the
contracted quantities. The contract and fair values of all natural gas purchase commitments were $17.3 million and
$12.4 million, respectively, at December 31, 2009. As of December 31, 2008, the aggregate contract and fair values
of natural gas commitments were approximately $28.0 million and $21.1 million, respectively. Percentage changes
in the market prices of natural gas will impact the fair values by a similar percentage. The recurring fair value
measurement of the natural gas purchase commitments are based on quoted market prices using the market approach
and the fair value is determined based on Level 1 inputs within the fair value hierarchy provided for under U.S.
GAAP.
Contractual obligations as of December 31, 2009 are as follows (amounts in millions):
Contractual Obligations
2010
Commodity contracts
Retirement plans
Operating leases
Total
$
13
2
3
$
18
2011
2
$
2
2
$
6
Payments Due by Fiscal Year
2012
2014
2013
Thereafter
Total
2
$
2
1
$
5
-$
-$
2
-
2
-
-
56
-
$
17
66
6
$
2
$
2
$
56
$
89
The table above does not reflect unrecognized tax benefits of $46.6 million, the timing of which is uncertain.
Included in the contractual obligation for commodity contracts in 2010 are two natural gas purchase commitments
related to our Van Nuys, California and Pittsburg, Kansas manufacturing operations which were settled in February
2010. The total contractual obligation related to these two contracts was $2.4 million as of December 31, 2009.
Off-Balance Sheet Arrangements
As of December 31, 2009, we had no significant off-balance sheet arrangements.
Inflation
Inflation has not had a material impact on our results of operations or financial condition for the three years ended
December 31, 2009. Wage increases have averaged 2 to 3 percent during this period and, as indicated above, cost
increases of our principal raw material, aluminum, are passed through to our customers. However, cost increases for
our other raw materials and for energy may not be similarly recovered in our selling prices. Additionally, the
competitive global pricing pressures we have experienced recently are expected to continue, which may also lessen
the possibility of recovering these types of cost increases.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to apply significant judgment in making estimates and
assumptions that affect amounts reported therein, as well as financial information included in this Management’s
Discussion and Analysis of Financial Condition and Results of Operations. These estimates and assumptions, which
are based upon historical experience, industry trends, terms of various past and present agreements and contracts,
and information available from other sources that are believed to be reasonable under the circumstances, form the
30
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent through
other sources. There can be no assurance that actual results reported in the future will not differ from these
estimates, or that future changes in these estimates will not adversely impact our results of operations or financial
condition.
As described below, the most significant accounting estimates inherent in the preparation of our financial statements
include estimates and assumptions as to revenue recognition, inventory valuation, impairment of and the estimated
useful lives of our long-lived assets, as well as those used in the determination of liabilities related to self-insured
portions of employee benefits, workers’ compensation, general liability programs and taxation.
Revenue Recognition – Our products are manufactured to customer specifications under standard purchase orders.
We ship our products to OEM customers based on release schedules provided weekly by our customers. Our sales
and production levels are highly dependent upon the weekly forecasted production levels of our customers. Sales of
these products, net of estimated pricing adjustments, and their related costs are recognized when title and risk of loss
transfers to the customer, generally upon shipment. A portion of our selling prices to OEM customers is attributable
to the aluminum content of our wheels. Our selling prices are adjusted periodically for changes in the current
aluminum market based upon specified aluminum price indices during specific pricing periods, as agreed with our
customers.
Allowance for Doubtful Accounts – We maintain an allowance for doubtful accounts receivable based upon the
expected collectability of all trade receivables. The allowance is reviewed continually and adjusted for accounts
deemed uncollectible by management.
Inventories – Inventories are stated at the lower of cost or market value and categorized as raw material, work-in-
process or finished goods. When necessary, management uses estimates of net realizable value to record inventory
reserves for obsolete and/or slow-moving inventory. Our inventory values, which are based upon standard costs for
raw materials and labor and overhead established at the beginning of the year, are adjusted to actual costs on a first-
in, first-out (FIFO) basis. Current raw material prices and labor and overhead costs are utilized in developing these
adjustments.
Pre-Production Costs Related to Long-Term Supply Arrangements - We incur pre-production engineering and
tooling costs related to the products produced for our customers under long-term supply arrangements. We expense
all pre-production engineering costs for which reimbursement is not contractually guaranteed by the customer or is
in excess of the contractually guaranteed reimbursement amount. In addition, we expense all pre-production tooling
costs related to customer-owned tools for which reimbursement is not contractually guaranteed by the customer. We
amortize the cost of the customer-owned tooling over the expected life of the wheel program on a straight line basis.
Also, we defer any reimbursements made to us by our customer and recognize the tooling reimbursement revenue
over the same period in which the tooling is in use. Customer-owned tooling for which reimbursement is
contractually guaranteed by the customer included in our other assets as of December 31, 2009 was $11.8 million
which is net of $15.1 million of accumulated amortization. Deferred tooling reimbursement revenues included as
part of accrued expenses and other non-current liabilities were $7.0 million and $4.8 million, respectively, as of
December 31, 2009
Impairment of Long-Lived Assets and Investments – In accordance with U.S. GAAP, we periodically review the
carrying value of our property and equipment, with finite lives, to test whether current events or circumstances
indicate that such carrying value may not be recoverable. If the tests indicate that the carrying value of the asset
group is greater than the expected undiscounted cash flows to be generated by such asset group, then an impairment
adjustment needs to be recognized. Such adjustments consist of the amount by which the carrying value of the asset
group exceeds fair value. We generally measure fair value by considering sale prices for similar assets or by
discounting estimated future cash flows from such asset using an appropriate discount rate. Considerable
management judgment is necessary to estimate the fair value of assets, and accordingly, actual results could vary
significantly from such estimates. See Note 15 – Impairment of Long-Lived Assets and Other Charges in Item 8 –
Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Assets to be disposed of are
carried at the lower of their carrying value or fair value less costs to sell.
31
The company’s policy regarding its equity method investment in Suoftec is to evaluate the investment for an other
than temporary impairment (OTTI) when there are indicators of a loss in value. We generally determine if there is
an OTTI by using a discounted cash flow model and marketplace multiples, and if the present value of the
discounted cash flows is less than the carrying balance of the investment, then the decline in the fair value of the
investment is considered to be other-than-temporary. If a loss in the value of the investment is determined to be
other-than temporary, then the decline in value is recognized in earnings.
Retirement Plans – Subject to certain vesting requirements, our unfunded retirement plan generally provides for a
benefit based on final average compensation, which becomes payable on the employee’s death or upon attaining age
65, if retired. The net periodic pension cost and related benefit obligations are based on, among other things,
assumptions of the discount rate, future salary increases and the mortality of the participants. The net periodic
pension costs and related obligations are measured using actuarial techniques and assumptions. See Note 9 –
Retirement Plans in Notes to Consolidated Financial Statements in Item 8 – Financial Statements and
Supplementary Data for a description of these assumptions.
The following information illustrates the sensitivity to a change in certain assumptions of our unfunded retirement
plans as of December 31, 2009. Note that these sensitivities may be asymmetrical, and are specific to 2009. They
also may not be additive, so the impact of changing multiple factors simultaneously cannot be calculated by
combining the individual sensitivities shown.
The effect of the indicated increase (decrease) in selected factors is shown below (in thousands):
Increase (Decrease) in:
Projected Benefit
Obligation
Percentage
Change
at December 31,
2009
2010
Net Periodic
Pension Cost
Assumption
Discount rate
Rate of compensation increase
+ 1.0%
+ 1.0%
$
$
(2,218) $
778 $
(60)
166
Stock-Based Compensation – We account for stock-based compensation using the fair value recognition in
accordance with U.S. GAAP. We use the Black-Scholes option-pricing model to determine the fair value of any
options granted, which requires us to make estimates regarding dividend yields on our common stock, expected
volatility in the price of our common stock, risk free interest rates, forfeiture rates and the expected life of the
option. To the extent these estimates change, our stock-based compensation expense would change as well. We
recognize these compensation costs net of the applicable forfeiture rate and recognize the compensation costs for
only those shares expected to vest on a straight-line basis over the requisite service period of the award, which is
generally the option vesting term of four years. We estimated the forfeiture rate based on our historical experience.
No options were exercised during the current year and the total fair value of shares vested during the year was
approximately $2.3 million.
Workers’ Compensation and Loss Reserves – We self-insure any losses arising out of Worker’s Compensation
claims, Workers’ compensation accruals are based upon reported claims in process and actuarial estimates for losses
incurred but not reported. Loss reserves, including incurred but not reported reserves, are estimated using actuarial
methods and ultimate settlements may vary significantly from such estimates due to increased claims frequency or
the severity of claims.
Accounting for Income Taxes – Despite our belief that our tax return positions are consistent with applicable tax
laws, experience has shown that taxing authorities often challenge certain positions. Settlement of any challenge can
result in no change, a complete disallowance or some partial adjustment reached through negotiations or even
litigation. Accordingly, accounting judgment is required in evaluating our tax positions, which are adjusted only in
light of substantive changes in facts and circumstances, such as the resolution of an audit by taxing authorities or the
expiration of a statute of limitations. Accordingly, our tax expense for a given period will include provisions for
newly identified uncertainties, as well as reductions for uncertainties resolved through audit, expiration of a statute
of limitations, audit adjustments, estimates of future earnings, changes in the valuation allowance, or other
substantive changes in facts and circumstances. We believe that the determination to record a valuation allowance
32
to reduce a deferred income tax asset is a significant accounting estimate because it is based on an estimate of future
taxable income in the United States and certain other jurisdictions, which is susceptible to change and may or may
not occur, and because the impact of adjusting a valuation allowance may be material.
Realization of any of our deferred tax assets at December 31, 2009 is dependent on the company generating
sufficient taxable income in the future. The determination of whether or not to record a full or partial valuation
allowance on our deferred tax assets is a critical accounting estimate requiring a significant amount of judgment on
the part of management. We perform our analysis on a jurisdiction by jurisdiction basis.
In considering whether a valuation allowance was required for our U.S. federal deferred tax assets, we considered all
available positive and negative evidence. Positive evidence considered included reversing taxable temporary
differences and restructuring our operations in line with the deteriorating automotive industry and moving wheel
production to our lower cost operations in Mexico. This restructuring began with the closure of the Pittsburg facility
in December 2008 and with the closure of our Van Nuys facility in June of 2009. These closures allowed us to
realign capacity within our remaining plants and reduce our total fixed costs. During 2009, we began our
international tax restructuring plan, which is currently being implemented. We expect that the new tax structure will
be in effect in 2010. Based on its nature, implementation of this tax strategy will enable us to generate domestic
taxable income, thereby allowing us to utilize our federal deferred tax assets and, at the same time, reduce world-
wide tax payments.
Negative evidence considered included the taxable losses in the U.S. recorded during the three year period ended
December 31, 2009, on both an annual and cumulative basis, the continued deterioration of the automotive industry
into 2009 and the uncertainty as to the timing of recovery of both the automotive industry and global economy.
Based on the weight of all available evidence discussed above, we have concluded that the negative evidence
outweighs the positive and that it is more likely than not that the federal U.S. and state deferred tax asset, net of
valuation allowance, will not be realized within the carryforward period and we also concluded that based on the
weight of all available evidence the foreign net operating loss carryforwards will not be realized within the
carryforward period. This is because we can not look to future taxable income as a source of income given our
cumulative losses. We therefore established a full valuation allowance against this deferred tax asset. However, we
will continue to assess the need for a valuation allowance in the future.
The company adopted the U.S. GAAP method of accounting for uncertain tax positions during 2007. The purpose
of this method is to clarify accounting for uncertain tax positions recognized. The U.S. GAAP method of
accounting for uncertain tax positions utilizes a two-step approach to evaluate tax positions. Recognition, step one,
requires evaluation of the tax position to determine if based solely on technical merits it is more likely than not to be
sustained upon examination. Measurement, step two, is addressed only if a position is more likely than not to be
sustained. In step two, the tax benefit is measured as the largest amount of benefit, determined on a cumulative
probability basis, which is more likely than not to be realized upon ultimate settlement with tax authorities. If a
position does not meet the more likely than not threshold for recognition in step one, no benefit is recorded until the
first subsequent period in which the more likely than not standard is met, the issue is resolved with the taxing
authority, or the statute of limitations expires. Positions previously recognized are derecognized when a Company
subsequently determines the position no longer is more likely than not to be sustained. Evaluation of tax positions,
their technical merits, and measurement using cumulative probability are highly subjective management estimates.
Actual results could differ materially from these estimates.
As a result of adopting the U.S. GAAP method of accounting for uncertain tax positions, we recognized a reduction
in retained earnings of $16.8 million at January 1, 2007. The initial recording of the liability applying the U.S.
GAAP method of accounting for uncertain tax positions did not impact our effective rate. The effect was recorded
as a cumulative effect of accounting change, the recording of a deferred tax asset, a reclassification in our reserve for
taxes account, and an increase to our valuation allowance.
Included in the unrecognized tax benefits of $46.6 million at December 31, 2009 was $20.5 million of tax benefit
that, if recognized, would reduce our annual effective tax rate.
33
Within the next twelve-month period ending December 31, 2010, it is reasonably possible that up to $0.2 million of
unrecognized tax benefits will be recognized due to the expiration of certain statues of limitation.
New Accounting Standards
In December 2007, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards
Codification (ASC) 805 Business Combinations. This statement defines the acquirer as the entity that obtains
control of one or more businesses in the business combination and establishes the acquisition date as the date that
the acquirer achieves control. ASC 805 applies to business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of the
applicable provisions of ASC 805 as of January 1, 2009 did not have a material impact on our consolidated results of
operations or statement of financial position or disclosures.
In February 2008, the FASB issued a final Staff Position to allow a one-year deferral of adoption of ASC 820 for
nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial
statements on a nonrecurring basis. The ASC 820 excludes FASB ASC 840 Leases and its related interpretive
accounting pronouncements that address leasing transactions. We adopted ASC 820 effective January 1, 2009 for
nonrecurring fair value measurements of nonfinancial assets and liabilities.
In March 2008, the FASB issued FASB ASC 815 Derivatives and Hedging (ASC 815). This statement is intended
to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial position, financial performance, and
cash flows. Entities with instruments subject to ASC 815 must provide more robust qualitative disclosures and
expanded quantitative disclosures. ASC 815 is effective prospectively for financial statements issued for fiscal years
and interim periods beginning after November 15, 2008, with early application permitted. We adopted the
provisions of ASC 815 as of January 1, 2009.
In November 2008, the FASB ratified ASC 323, which clarifies the accounting for certain transactions and
impairment considerations involving equity method investments. ASC 323 is effective for fiscal years beginning
after December 15, 2008. The adoption of the applicable provisions of ASC 323 as of January 1, 2009, did not have
a material impact on our consolidated results of operations or statement of financial position or disclosures.
In June 2009, the FASB issued FASB ASC 810 Consolidation (ASC 810) which changes the approach in
determining the primary beneficiary of a variable interest entity (VIE) and requires companies to more frequently
assess whether they must consolidate VIEs. ASC 810 is effective for annual periods beginning after November 15,
2009. We are evaluating the impact, if any, the adoption of ASC 810 will have on our consolidated financial
statements.
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information related to Quantitative and Qualitative Disclosures About Market Risk are set forth in Item 1A – Risk
Factors and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operation, under
the caption “Risk Management”.
34
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to the Consolidated Financial Statements of Superior Industries International, Inc.
Reports of Independent Registered Public Accounting Firms
Financial Statements
Consolidated Statements of Operations for the Fiscal Years
2009, 2008 and 2007
Consolidated Balance Sheets as of Fiscal Year End 2009 and 2008
Consolidated Statements of Shareholders’ Equity and Comprehensive Income
(Loss) for the Fiscal Years 2009, 2008 and 2007
Consolidated Statements of Cash Flows for the Fiscal Years
2009, 2008 and 2007
Notes to Consolidated Financial Statements
PAGE
36
38
39
40
41
42
35
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Superior Industries International, Inc.
We have audited the accompanying consolidated balance sheet of Superior Industries International, Inc. and
subsidiaries (the "Company") as of December 27, 2009, and the related consolidated statements of operations,
shareholders equity, and cash flows for the year then ended. Our audit also included the financial statement schedule
for the year ended December 27, 2009 listed in the Index at Item 15. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on
these financial statements and the financial statement schedule based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such 2009 consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 27, 2009, and the results of operations and cash flows for the year then ended
in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company's internal control over financial reporting as of December 27, 2009, based on the criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 12, 2010, expressed an unqualified opinion on the Company's
internal control over financial reporting.
/s/ Deloitte and Touche, LLP
Los Angeles, California
March 12, 2010
36
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Superior Industries International, Inc.
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in
all material respects, the financial position of Superior Industries International, Inc. and its subsidiaries at December
28, 2008 and the results of their operations and their cash flows for each of the two years in the period ended
December 28, 2008 in conformity with accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents
fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements and financial
statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Los Angeles, California
March 10, 2009
37
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars, except share amounts)
Fiscal Year Ended December 31,
2009
2008
2007
NET SALES
Cost of sales
GROSS PROFIT (LOSS)
Selling, general and administrative expenses
Impairments of long-lived assets
$
418,846
429,015
(10,169)
22,645
11,804
$
754,894
748,317
$
6,577
25,744
18,501
INCOME (LOSS) FROM OPERATIONS
(44,618)
(37,668)
Interest income, net
Other income (expense), net
INCOME (LOSS) BEFORE INCOME TAXES AND
EQUITY EARNINGS
Income tax (provision) benefit
Equity in earnings (loss) of joint ventures
2,155
(792)
(43,255)
(26,047)
(24,840)
2,917
6,178
(28,573)
1,778
742
NET INCOME (LOSS)
$
(94,142)
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED $
(3.53)
$
$
(26,053)
(0.98)
$
$
956,892
924,400
32,492
29,171
-
3,321
3,684
3,195
10,200
(6,263)
5,355
9,292
0.35
See notes to consolidated financial statements.
38
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except per share amounts)
Fiscal Year Ended December 31,
2009
2008
ASSETS
Current assets:
Cash and cash equivalents
Short term investments
Accounts receivable, net
Inventories, net
Income taxes receivable
Deferred income taxes
Assets held for sale
Other current assets
Total current assets
Property, plant and equipment, net
Investment in joint venture
Non-current deferred tax asset, net
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Income taxes payable
Total current liabilities
Non-current tax liabilities (Note 7)
Non-current deferred tax liabilities, net
Other non-current liabilities
Commitments and contingent liabilities (Note 11)
Shareholders' equity:
Preferred stock, no par value
Authorized - 1,000,000 shares
Issued - none
Common stock, no par value
Authorized - 100,000,000 shares
Issued and outstanding - 26,668,440 shares
(26,668,440 shares at December 31, 2008)
Accumulated other comprehensive loss
Retained earnings
Total shareholders' equity
$
134,315
6,152
88,991
47,612
8,930
777
6,771
14,584
308,132
180,121
23,602
7,781
22,217
$
146,871
-
89,426
70,115
3,901
5,995
-
2,981
319,289
216,209
48,196
39,152
5,693
$
541,853
$
628,539
$
24,574
42,202
-
66,776
46,634
22,385
32,786
$
26,318
35,239
644
62,201
51,330
22,535
20,880
-
-
56,854
(56,576)
372,994
373,272
54,634
(67,244)
484,203
471,593
Total liabilities and shareholders' equity
$
541,853
$
628,539
See notes to consolidated financial statements.
39
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHESIVE INCOME (LOSS)
(Thousands of dollars, except per share amounts)
BALANCE AT FISCAL
YEAR END 2006
Cumulative effect of adoption of
U.S. GAAP method of accounting
for uncertain tax positions
Comprehensive income:
Net income
Other comprehensive income
Comprehensive income
Stock-based compensation expense
Stock options exercised
Repricing of stock option grants
Tax impact of stock options
Cash dividend declared ($0.64 per share)
BALANCE AT FISCAL
YEAR END 2007
Comprehensive loss:
Net loss
Other comprehensive loss
Comprehensive loss
Stock-based compensation expense
Stock options exercised
Tax impact of stock options
Cash dividend declared ($0.64 per share)
BALANCE AT FISCAL
YEAR END 2008
Comprehensive income (loss):
Net loss
Other comprehensive income
Comprehensive loss
Stock-based compensation expense
Tax impact of stock options
Cash dividend declared ($0.64 per share)
BALANCE AT FISCAL
YEAR END 2009
Common Stock
Number of
Shares
Amount
Accumulated Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
26,610,191
$
48,399
$
(37,129)
$
551,844
$
563,114
-
-
-
-
23,249
-
-
-
-
-
-
3,073
430
(57)
(12)
-
-
(16,786)
(16,786)
-
8,551
-
-
-
-
-
9,292
-
-
-
-
-
(17,032)
9,292
8,551
17,843
3,073
430
(57)
(12)
(17,032)
26,633,440
$
51,833
$
(28,578)
$
527,318
$
550,573
-
-
-
35,000
-
-
-
-
-
(38,666)
(26,053)
-
2,407
617
(223)
-
-
-
-
-
-
-
-
(17,062)
(26,053)
(38,666)
(64,719)
2,407
617
(223)
(17,062)
26,668,440
$
54,634
$
(67,244)
$
484,203
$
471,593
-
-
-
-
-
-
-
-
10,668
2,380
(160)
-
-
-
-
(94,142)
-
-
-
(17,067)
(94,142)
10,668
(83,474)
2,380
(160)
(17,067)
26,668,440
$
56,854
$
(56,576)
$
372,994
$
373,272
See notes to consolidated financial statements.
40
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Thousands of dollars)
Fiscal Year Ended December 31,
2009
2008
2007
NET INCOME (LOSS)
Adjustment to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization
Deferred income taxes
Equity in earnings of joint ventures, net of dividends received
Impairments of long-lived assets
Stock-based compensation
Other non-cash items
Gain on sale of available for sale securities
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Other assets
Accounts payable
Income taxes
Other liabilities
Non-current tax liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments
Additions to property, plant and equipment
Proceeds from sale of fixed assets
Proceeds from collection of notes receivable
Proceeds from dissolution of TSL joint venture
Proceeds from a held-to-maturity security
Proceeds from sale of available-for-sale securities
Proceeds from affordable-housing partnership investment
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid
Stock options exercised
NET CASH USED IN FINANCING ACTIVITIES
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
$
(94,142)
$
(26,053)
$
9,292
30,779
39,776
24,840
11,804
2,380
1,528
-
4,212
24,064
(11,616)
(3,530)
(5,879)
5,035
(6,924)
22,327
(10,217)
(8,484)
885
-
-
-
-
-
(17,816)
(17,067)
-
(17,067)
(12,556)
146,871
43,712
(9,705)
(742)
18,501
2,407
11,433
-
27,192
30,148
(120)
(22,755)
3,891
(8,379)
(1,658)
67,872
-
(13,227)
144
1,606
152
-
-
-
(11,325)
(17,062)
617
(16,445)
40,102
106,769
42,925
5,890
258
-
3,073
3,667
(2,906)
7,136
11,037
2,330
(9,310)
350
241
875
74,858
-
(37,639)
1,530
-
-
9,750
5,198
1,289
(19,872)
(17,032)
430
(16,602)
38,384
68,385
Cash and cash equivalents at the end of the year
$
134,315
$
146,871
$
106,769
See notes to consolidated financial statements.
41
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
Headquartered in Van Nuys, California, our principal business is the design and manufacture of aluminum road wheels
for sale to OEMs. 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 18 percent
of annual sales to international customers.
GM, Ford and Chrysler together represented approximately 82 percent of our annual sales in each of the years 2009,
2008 and 2007. Although the loss of all or a substantial portion of our sales to any of these customers would have a
significant adverse impact on our financial results, unless the lost volume could be replaced, we believe this risk is
partially offset due to long-term relationships with each, including multi-year program arrangements. However,
current global economic and financial markets conditions, including severe disruptions in the credit markets and the
potential for a significant and prolonged global economic recession, decreased demand for our products due to the
financial position of our OEM customers and general declines in the level of automobile demand have put these multi-
year arrangements at risk. Including our 50 percent-owned joint venture in Europe, we also manufacture aluminum
wheels for, Audi, BMW, Jaguar, Land Rover, Mercedes Benz, Mitsubishi, Nissan, Seat, Skoda, Subaru, Suzuki,
Toyota, Volkswagen and Volvo.
During 2008 and 2009, we took actions to reduce costs and more closely align our capacity with sharply lower demand
for aluminum wheels by the automobile and light truck manufacturers. As a result of these actions and the current
economic environment, we have closed certain facilities, incurred restructuring costs, and have recorded impairment
charges on certain of our long-lived assets. See Note 15 – Impairment of Long-lived Assets and Other Charges for a
discussion of these items.
Presentation of Consolidated Financial Statements
The consolidated financial statements include the accounts of the company and its wholly owned subsidiaries. All
significant intercompany transactions are eliminated in consolidation. Affiliated 50 percent-owned joint ventures are
recorded in the financial statements using the equity method of accounting. The carrying value of these equity
investments is reported in long-term investments and the company’s equity in net earnings of these investments is
reported separately in the consolidated statements of operations.
We have made a number of estimates and assumptions related to the reporting of assets, liabilities, revenues and
expenses to prepare these financial statements in conformity with accounting principles generally accepted in the
United States of America. Generally, assets and liabilities that are subject to estimation and judgment include the
allowance for doubtful accounts, inventory valuation allowance, depreciation and amortization periods of long-lived
assets, self-insurance accruals, fair value of stock-based compensation and income taxes. While actual results could
differ, we believe such estimates to be reasonable.
Our fiscal year is the 52- or 53-week period ending on the last Sunday of the calendar year. The fiscal years 2009,
2008 and 2007 comprised the 52-week periods ended on December 27, 2009, December 28, 2008 and December 30,
2007, respectively. For convenience of presentation, all fiscal years are referred to as beginning as of January 1 and
ending as of December 31, but actually reflect our financial position and results of operations for the periods described
above.
Cash and Cash Equivalents
Cash and cash equivalents generally consist of cash, certificates of deposit, and money market funds with original
maturities of three months or less. Our cash and cash equivalents are not subject to significant interest rate risk due to
the short maturities of these investments. Certificates of deposit whose original maturity is three months or less are
42
classified as a cash equivalent, certificates of deposit whose original maturity is between four months and one year are
classified as a short-term investment and certificates of deposit whose original maturity is greater than one year are
classified as other assets in our consolidated balance sheet. The purchase of any certificate of deposit that is classified
as short-term investments or other assets appear in the investing section of our consolidated statement of cash flows.
At times throughout the year and at year-end, cash balances held at financial institutions were in excess of federally
insured limits.
Restricted Deposits
Due to the tightened credit conditions and the recent turmoil in the automotive industry, the financial institutions that
we do business with have required that we maintain various deposits as a compensating balance in the event of our
default on our workers compensation and natural gas obligations. We purchased a total of $6.2 million in certificates
of deposit during 2009 that mature within the next twelve months that are used to secure our workers’ compensation
obligations in lieu of collateralized letters of credit. These certificates of deposit are classified as short term
investments on our consolidated balance sheet and are restricted in use. We also purchased $4.1 million in certificates
of deposit during the 2009 that mature after the end of our fiscal year 2010 that are used to secure our natural gas
contracts in Mexico and are restricted in use. These certificates of deposit are classified as long-term investments in
the other assets line of our consolidated balance sheet. All of the aforementioned cash deposits were either not
required or were not the most economical form to secure our obligations during the previous years. It is our intention
to eliminate any restricted cash deposits in the future when credit conditions return to normal and other forms of
securitization become more economically feasible.
Fair Values of Financial Instruments and Commitments
The company adopted the new GAAP accounting guidance relating to fair value measurements and disclosures
effective January 1, 2008. The new guidance clarifies the definition of fair value, prescribes methods for measuring
fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures
about the use of fair value measurements. The valuation techniques utilized are based upon observable and
unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable
inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:
Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations whose inputs are observable or whose significant value
drivers are observable.
Level 3 – Significant inputs to the valuation model are unobservable.
The carrying amounts for cash and cash equivalents, investments in certificates of deposit, accounts receivable,
accounts payable and accrued expenses approximate their fair values due to the short period of time until maturity.
Fair values of our natural gas contracts are discussed further in Note 11 – Commitments and Contingent Liabilities,
and are based upon quoted market prices using the market approach on a recurring basis and are considered Level 1
inputs within the fair value hierarchy provided in accordance with Generally Accepted Accounting Principles in the
United States of America (U.S. GAAP).
Inventories
Inventories, which are categorized as raw materials, work-in-process or finished goods, are stated at the lower of cost
or market using the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less accumulated depreciation. The cost of additions, improvements
and interest during construction, if any, are capitalized. Our maintenance and repair costs are charged to expense
when incurred. Depreciation is calculated generally on the straight-line method based on the estimated useful lives of
the assets.
43
Classification
Computer equipment
Production machinery and equipment
Buildings
Expected Useful Life
3 to 5 years
7 to 10 years
25 years
When property, plant and equipment is replaced, retired or disposed of, the cost and related accumulated depreciation
are removed from the accounts. Property, plant and equipment no longer used in operations, which are generally
insignificant in amount, are stated at the lower of cost or estimated net realizable value. Gains and losses, if any, are
recorded as a component of operating income if the disposition relates to an operating asset. If a non-operating asset is
disposed of, any gains and losses are recorded in other income or expense in the period of disposition or write down.
Pre-Production Costs Related to Long-Term Supply Arrangements
We incur pre-production engineering and tooling costs related to the products produced for our customers under long-
term supply agreements. We expense all pre-production engineering costs for which reimbursement is not
contractually guaranteed by the customer or is in excess of the contractually guaranteed reimbursement amount. In
addition, we expense all pre-production tooling costs related to customer-owned tools for which reimbursement is not
contractually guaranteed by the customer. We amortize the cost of the customer-owned tooling over the expected life
of the wheel program on a straight line basis. Also, we defer any reimbursements made to us by our customer and
recognize the tooling reimbursement revenue over the same period in which the tooling is in use. Customer-owned
tooling for which reimbursement is contractually guaranteed by the customer included in our long-term other assets as
of December 31, 2009 was $11.8 million which is net of $15.1 million of accumulated amortization. Deferred tooling
reimbursement revenues classified as part of accrued expenses and other non-current liabilities were $7.0 million and
$4.8 million, respectively, as of December 31, 2009.
Impairment of Long-Lived Assets and Investments
The company’s policy regarding long-lived assets is to evaluate the recoverability of its assets at least annually or
when the facts and circumstances suggest that the assets may be impaired. This assessment of recoverability is
performed based on the estimated undiscounted cash flows compared to the carrying value of the assets. If the future
cash flows (undiscounted and without interest charges) are less than the carrying value, a write-down would be
recorded to reduce the related asset to its estimated fair value. See Note 15 – Impairment of Long-Lived Assets and
Other Charges for further discussion of asset impairments.
The company’s policy regarding its equity method investment is to evaluate the investment for an other than
temporary impairment (OTTI) when there are indicators of a loss in value. We generally determine if there is an OTTI
by using a discounted cash flow model and marketplace multiples, and if the present value of the discounted cash
flows is less than the carrying balance of the investment, then the decline in the fair value of the investment is
considered to be other-than-temporary. If a loss in the value of the investment is determined to be other-than
temporary, then the decline in value is recognized in earnings.
Derivative Instruments and Hedging Activities
We may periodically enter into foreign currency forward contracts to reduce the risk from exchange rate fluctuations
associated with future purchase commitments, such as wheel purchases denominated in euros from our 50 percent-
owned joint venture in Hungary. This type of risk management activity, which attempts to protect our planned gross
margin as of the date of the purchase commitment, may qualify as a cash flow hedge under U.S. GAAP. Accordingly,
we assess whether the cash flow hedge is effective both at inception and periodically thereafter. The effective portion
of the related gains and losses is recorded as an asset or liability in the consolidated balance sheets with the offset as a
component of other comprehensive income (loss) in shareholders’ equity. The ineffective portion of related gains or
losses, if any, is reported in current earnings. As hedged transactions are consummated, amounts previously
accumulated in other comprehensive income (loss) are reclassified into current earnings. At December 31, 2009 and
2008, we held no foreign currency forward contracts.
44
We also enter into contracts to purchase certain commodities used in the manufacture of our products, such as
aluminum, natural gas, and other raw materials. Typically, any such commodity commitments are expected to be
purchased and used over a reasonable period of time in the normal course of business. Accordingly, under U.S. GAAP,
such commodity commitments would not be accounted for as a derivative, unless there is a change in the facts or
circumstances that causes management to believe that these commitments would not be used in the normal course of
business. See Note 11 – Commitments and Contingent Liabilities for additional information pertaining to these
purchase commitments.
Foreign Currency Transactions and Translation
We have foreign subsidiaries with operations in Mexico and Hungary whose functional currency is the peso and the
euro, respectively. These subsidiaries have monetary assets and liabilities that are denominated in currencies that are
different than the functional and are translated into the functional currency of the entity using the exchange rate in
effect at the end of each accounting period. Any gains and losses recorded as a result of the remeasurement of
monetary assets and liabilities into the functional currency are reflected as transaction gains and losses and included in
other income (expense) in the consolidated statement of operations. For the years ended December 31, 2009, 2008 and
2007, we had foreign currency transaction (losses) and gains of ($0.8) million, $5.5 million and $0.5 million,
respectively, which are included in other income (expense) in the consolidated statements of operations.
When our foreign subsidiaries translate their financial statements from the functional currency to the reporting
currency, the balance sheet accounts are translated using the exchange rates in effect at the end of the accounting
period, and retained earnings is translated using historical rates. The income statement accounts are translated at the
weighted average of exchange rates during the period and the cumulative effect of translation is recorded as a separate
component of accumulated other comprehensive income (loss) in shareholders' equity, as reflected in Note 14 – Other
Comprehensive Income (Loss). The value of the Mexican peso increased by 5 percent in relation to the U.S. dollar in
2009. The euro experienced a 2 percent increase versus the U.S. dollar in 2009.
Revenue Recognition
Sales of products and any related costs are recognized when title and risk of loss transfers to the purchaser, generally
upon shipment. Tooling reimbursement revenues and initial tooling that are reimbursed by our customers are deferred
and recognized over the expected life of the wheel program on a straight line basis. Changes in the facts and
circumstances of individual wheel programs may accelerate the amortization of deferred tooling reimbursement
revenues. Recognized tooling reimbursement revenues totaled $10.0 million in 2009, $16.5 million in 2008, and $12.4
million in 2007, and are included in net sales in the consolidated statements of operations.
Research and Development
Research and development costs (primarily engineering and related costs), which are expensed as incurred, are
included in cost of sales in the consolidated statements of operations. Amounts expended during each of the three
years in the period ended December 31, 2009 were $3.1 million in 2009, $4.7 million in 2008, and $6.3 million in
2007. The decrease experienced in 2008 was due to closure of our engineering center in Van Nuys, California, and the
reduction of wheel program development activities in the current year.
Stock-Based Compensation
Our 2008 Equity Incentive Plan authorizes us to issue incentive and non-qualified stock options, as well as stock
appreciation rights, restricted stock and performance units to our non-employee directors, officers, employees and
consultants totaling up to 3.5 million shares of common stock. No more than 100,000 shares may be used under such
plan as “full value” awards, which include restricted stock and performance units. It is our policy to issue shares from
authorized but not issued shares upon the exercise of stock options. At December 31, 2009, there were 2.9 million
shares available for future grants under this plan. Options are granted at not less than fair market value on the date of
grant and expire no later than ten years after the date of grant. Options granted under this plan to employees and non-
employee directors require no less than a three year ratable vesting period if vesting is based on continuous service.
Vesting periods may be shorter than three years if performance based.
45
We account for stock-based compensation using the fair value recognition method in accordance with U.S. GAAP.
We recognize these compensation costs net of the applicable forfeiture rate and recognize the compensation costs for
only those shares expected to vest on a straight-line basis over the requisite service period of the award, which is
generally the option vesting term of four years. We estimate the forfeiture rate based on our historical experience.
Income Taxes
We account for income taxes using the asset and liability method. The asset and liability method requires the
recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that
currently exist between the tax basis and financial reporting basis of our assets and liabilities. We calculate current and
deferred tax provisions based on estimates and assumptions that could differ from actual results reflected on the
income tax returns filed during the following years. Adjustments based on filed returns are recorded when identified in
the subsequent years.
The effect on deferred taxes for a change in tax rates is recognized in income in the period of enactment. In assessing
the realizability of deferred tax assets, we consider whether it is more likely than not that some portion of the deferred
tax assets will not be realized. A valuation allowance is provided for deferred income taxes when, in our judgment,
based upon currently available information and other factors, it is more likely than not that all or a portion of such
deferred income tax assets will not be realized. The determination of the need for a valuation allowance is based on an
on-going evaluation of current information including, among other things, historical operating results, estimates of
future earnings in different taxing jurisdictions and the expected timing of the reversals of temporary differences. We
believe that the determination to record a valuation allowance to reduce a deferred income tax asset is a significant
accounting estimate because it is based on an estimate of future taxable income in the United States and certain other
jurisdictions, which is susceptible to change and may or may not occur, and because the impact of adjusting a
valuation allowance may be material.
The company adopted the U.S. GAAP method of accounting for uncertain tax positions during 2007. The purpose of
this method is to clarify accounting for uncertain tax positions recognized. The U.S. GAAP method of accounting for
uncertain tax positions utilizes a two-step approach to evaluate tax positions. Recognition, step one, requires
evaluation of the tax position to determine if based solely on technical merits it is more likely than not to be sustained
upon examination. Measurement, step two, is addressed only if a position is more likely than not to be sustained. In
step two, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis,
which is more likely than not to be realized upon ultimate settlement with tax authorities. If a position does not meet
the more likely than not threshold for recognition in step one, no benefit is recorded until the first subsequent period in
which the more likely than not standard is met, the issue is resolved with the taxing authority, or the statute of
limitations expires. Positions previously recognized are derecognized when we subsequently determine the position
no longer is more likely than not to be sustained. Evaluation of tax positions, their technical merits, and measurement
using cumulative probability are highly subjective management estimates. Actual results could differ materially from
these estimates.
Presently we have not recorded a deferred tax liability for temporary differences related to investments in foreign
subsidiaries that are essentially permanent in duration. These temporary differences may become taxable upon a
repatriation of earnings from the subsidiaries or a sale or liquidation of the subsidiaries. At this time the company does
not have any plans to repatriate income from its foreign subsidiaries.
Earnings (Loss) Per Share
As summarized below, basic earnings (loss) per share is computed by dividing net income (loss) for the period by the
weighted average number of common shares outstanding for the period. 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 under the treasury stock method, which includes consideration of stock-based compensation
required by U.S. GAAP.
46
Year Ended December 31,
(Thousands of dollars, except per share amounts)
2009
2008
2007
Basic Earnings (Loss) Per Share
Reported net income (loss)
Weighted average shares outstanding
Basic earnings (loss) per share
Diluted Earnings (Loss) Per Share
Reported net income (loss)
Weighted average shares outstanding
Weighted average dilutive stock options
Weighted average shares outstanding - diluted
Diluted earnings (loss) per share
$
$
$
$
(94,142)
$
(26,053)
$
26,668
26,655
(3.53)
$
(0.98)
$
(94,142)
$
(26,053)
$
26,668
-
26,668
26,655
-
26,655
(3.53)
$
(0.98)
$
9,292
26,617
0.35
9,292
26,617
18
26,635
0.35
The following potential shares of common stock were excluded from the diluted earnings per share calculations
because they would have been anti-dilutive due to their exercise prices exceeding the market prices for the respective
periods: for the year ended December 31, 2009, options to purchase 3,466,575 shares at prices ranging from $13.15 to
$43.22; for the year ended December 31, 2008, options to purchase 3,214,737 shares at prices ranging from $17.55 to
$43.22 per share; and for the year ended December 31, 2007, options to purchase 3,147,792 shares at prices ranging
from $21.72 to $43.22 per share. Additionally, stock options to purchase 135,000 shares of common stock were
excluded from the 2009 diluted earning per share because they would have been anti-dilutive due to our net loss
position.
New Accounting Standards
In December 2007, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards
Codification (ASC) 805 Business Combinations. This statement defines the acquirer as the entity that obtains control
of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer
achieves control. ASC 805 applies to business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2008. The adoption of the applicable
provisions of ASC 805 as of January 1, 2009 did not have a material impact on our consolidated results of operations
or statement of financial position or disclosures.
In February 2008, the FASB issued a final Staff Position to allow a one-year deferral of adoption of ASC 820 for
nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements
on a nonrecurring basis. The ASC 820 excludes FASB ASC 840 Leases and its related interpretive accounting
pronouncements that address leasing transactions. We adopted ASC 820 effective January 1, 2009 for nonrecurring
fair value measurements of nonfinancial assets and liabilities.
In March 2008, the FASB issued FASB ASC 815 Derivatives and Hedging (ASC 815). This statement is intended to
improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and
hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. Entities
with instruments subject to ASC 815 must provide more robust qualitative disclosures and expanded quantitative
disclosures. ASC 815 is effective prospectively for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application permitted. We adopted the provisions of ASC 815 as of
January 1, 2009.
In November 2008, the FASB ratified ASC 323, which clarifies the accounting for certain transactions and impairment
considerations involving equity method investments. ASC 323 is effective for fiscal years beginning after
December 15, 2008. The adoption of the applicable provisions of ASC 323 as of January 1, 2009, did not have a
material impact on our consolidated results of operations or statement of financial position or disclosures.
47
In June 2009, the FASB issued FASB ASC 810 Consolidation (ASC 810) which changes the approach in determining
the primary beneficiary of a variable interest entity (VIE) and requires companies to more frequently assess whether
they must consolidate VIEs. ASC 810 is effective for annual periods beginning after November 15, 2009. We are
evaluating the impact, if any, the adoption of ASC 810 will have on our consolidated financial statements.
NOTE 2 – BUSINESS SEGMENTS
The Chairman and Chief Executive Officer is our chief operating decision maker (CODM). The CODM evaluates
both consolidated and disaggregated financial information at each manufacturing facility in deciding how to allocate
resources and assess performance. Each manufacturing facility functions as a separate cost center, manufactures the
same products, ships product to the same group of customers, utilizes the same cast manufacturing process and as a
result, production can be transferred among our facilities. Accordingly, we operate as a single integrated business and,
as such, have only one operating segment - automotive wheels.
Year Ended December 31,
(Thousands of dollars)
Net sales:
U.S.
Mexico
Consolidated net sales
December 31,
(Thousands of dollars)
Property, plant and equipment, net:
U.S.
Mexico
Consolidated property, plant and equipment, net
NOTE 3 – ACCOUNTS RECEIVABLE
December 31,
(Thousands of dollars)
Trade receivables
Receivable from joint venture
Unbilled tooling reimbursement receivables
Other receivables
2009
2008
2007
$
$
144,970
273,876
418,846
$
$
$
$
$
$
$
$
$
$
415,059
339,835
754,894
2009
48,311
131,810
180,121
2009
82,065
2,764
2,767
1,881
89,477
568,489
388,403
956,892
2008
80,016
136,193
216,209
2008
82,647
482
4,628
4,797
92,554
Allowance for doubtful accounts
Accounts receivable, net
(486)
(3,128)
$
88,991
$
89,426
The following percentages of our consolidated net sales were made to GM, Ford and Chrysler: 2009 - 34 percent, 35
percent and 12 percent; 2008 - 40 percent, 28 percent and 14 percent; and 2007 - 36 percent, 33 percent and 13
percent, respectively. These three customers represented 90 percent and 79 percent of trade receivables at December
31, 2008 and 2007, respectively. Shortly after the bankruptcy filings by Chrysler on April 30, 2009 and by GM on
June 1, 2009, both customers designated us as a key supplier, indicating that all pre- and post-petition accounts
receivable would be paid in accordance with payment terms existing prior to the bankruptcy filing dates. As of
December 31, 2009, all of the pre-petition accounts receivable balances for both GM and Chrysler were substantially
paid.
48
NOTE 4 – INVENTORIES
December 31,
(Thousands of dollars)
Raw materials
Work-in-process
Finished goods
Inventories, net
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
December 31,
(Thousands of dollars)
Land and buildings
Machinery and equipment
Leasehold improvements and others
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
$
$
$
2009
2008
$
$
$
7,281
19,230
21,101
47,612
2009
69,589
386,785
8,379
8,444
473,197
(293,076)
12,755
22,266
35,094
70,115
2008
86,600
464,674
9,359
18,728
579,361
(363,152)
$
180,121
$
216,209
The asset impairment charges of $11.8 million in 2009 and, $18.5 million in 2008 were recorded in the appropriate
fixed asset cost categories in the table above as discussed in Note 15 – Impairment of Long-Lived Assets and Other
Charges. The net book values of all assets available for sale at the Pittsburg and Johnson City plants subsequent to
impairment were $4.6 million and $2.2 million, respectively which have been included in assets held for sale in the
consolidated balance sheet as of December 31, 2009.
NOTE 6 – INVESTMENT IN JOINT VENTURE
In 1995, we entered into a joint venture with Otto Fuchs, to form Suoftec to manufacture cast and forged aluminum
wheels in Hungary for the European automobile industry. During each of the three years in the period ended December
31, 2009, we acquired cast and forged wheels from this joint venture, totaling $1.3 million in 2009, $21.0 million in
2008 and $50.0 million in 2007. At December 31, 2009, accounts payable owed to Suoftec totaled $0.9 million. There
were no payables to Suoftec for wheel purchases at the end of 2008.
Because our 50 percent-owned joint venture in Hungary was also affected by similar economic conditions impacting
the European automotive industry, management has tested the long-lived assets of the Hungarian joint venture,
Suoftec, for impairment at the end of each fiscal quarter in 2009 in accordance with U.S. GAAP. Due to the general
decline in the European automotive industry, during the fourth quarter of 2009, the projected future shipments
declined sharply compared to the projections prepared earlier in the year. The impairment analysis performed at the
end of the year indicated that the estimated undiscounted future cash flows from the reduced projected shipments of
our joint venture facility would not be sufficient to recover the carrying value of long-lived assets attributable to that
facility. As a result, our joint venture recorded a $28.8 million pretax impairment charge against their long-lived
assets reducing the carrying value of the asset grouping of $76.0 million to the asset grouping’s fair value. We
recorded our share of the charge, or $14.4 million, in our equity in earnings (losses) from joint ventures during the
fourth quarter of 2009. The estimated fair value of the Suoftec asset group was determined using a discounted cash
flow model with the resulting value compared with comparable valuation multiples and was determined using Level 3
inputs within the fair value hierarchy in accordance with U.S. GAAP. The discounted cash flow analysis included
several key assumptions including the timing of cost savings initiatives that will be implemented and realized,
resolution of certain production and quality issues, and margin improvement on new business all of which may never
materialize or may not be sufficient to offset the impact of on-going pricing pressures and reductions in customer
49
demand in future periods. There is no guarantee that we will achieve our estimated results or that future impairment
charges will not be recorded.
We have also tested our investment in Suoftec for an OTTI by using a discounted cash flow model and marketplace
multiples to determine the fair value of our investment in Suoftec. This analysis indicated that there was not an OTTI
as of December 31, 2009 primarily due to the reduction in the investment during the current year caused by the
impairment recorded by Suoftec during the fourth quarter of 2009 discussed above.
Included below are summary statements of operations and balance sheets for Suoftec, which is 50 percent-owned, non-
controlled and, therefore, not consolidated but accounted for using the equity method.
Summary Statements of Operations
(Thousands of dollars)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment of long-lived assets
Income from operations
Other income (expense), net
Income before income taxes
Income tax provision
Net income
Superior's share of Suoftec net income (loss)
Intercompany profit elimination
Superior's equity in earnings (loss) of Suoftec
Equity in earnings of Topy-Superior Ltd
Total equity in earnings (loss) of joint ventures
Year Ended December 31,
2009
2008
2007
$
$
$
$
83,068
100,418
(17,350)
1,895
28,759
(48,004)
(1,046)
(49,050)
(1,079)
(50,129)
(25,065)
225
(24,840)
-
(24,840)
$
137,173
134,226
$
145,707
130,769
2,947
2,612
-
335
165
500
(111)
389
195
547
742
-
742
$
$
$
14,938
2,011
-
12,927
812
13,739
(2,569)
11,170
5,585
(428)
5,157
198
5,355
$
$
$
50
Summary Balance Sheets as of December 31,
(Thousands of dollars)
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Total current assets
Property, plant and equipment, net
Other assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Superior's share of net assets
NOTE 7 – INCOME TAXES
Year Ended December 31,
(Thousands of dollars)
2009
2008
14,898
14,827
17,189
46,914
13,897
1,169
61,980
14,413
363
14,776
47,204
23,602
$
$
$
25,403
11,984
20,750
58,137
47,435
1,281
106,853
11,311
148
11,459
95,394
47,697
$
$
$
2009
2008
2007
Income (loss) from continuing operations before income
taxes and equity earnings:
Domestic
International
$
$
(51,932)
8,677
(43,255)
$
$
(41,407)
12,834
(28,573)
$
$
(13,168)
23,368
10,200
The (provision) benefit for income taxes is comprised of the following:
Year Ended December 31,
(Thousands of dollars)
Current Taxes
Federal
State
Foreign
Total Current
Deferred Taxes
Federal
State
Foreign
Total Deferred Taxes
2009
2008
2007
$
$
18,765
183
(5,218)
13,730
(35,154)
(400)
(4,222)
(39,776)
$
(758)
(213)
(6,956)
(7,927)
12,832
1,077
(4,204)
9,705
(41)
1,040
(1,372)
(373)
2,714
(605)
(7,999)
(5,890)
(Provision) benefit for income taxes:
$
(26,046)
$
1,778
$
(6,263)
51
The following is a reconciliation of the United States federal tax rate to our effective income tax rate:
Year Ended December 31,
2009
2008
2007
Statutory rate - (provision) benefit
State tax (provisions), net of federal income tax benefit (1)
Permanent differences (2)
Tax credits
Foreign income taxed at rates other than the statutory rate (3)
Valuation allowance (4)
Changes in tax liabilities, net (5)
Other
%
35.0
10.6
(5.0)
0.1
1.4
(106.4)
7.3
(3.2)
%
35.0
5.0
(12.0)
0.7
(0.3)
(25.2)
(0.6)
3.6
%
(35.0)
(0.6)
(20.9)
0.7
19.6
(6.5)
(18.3)
(0.4)
Effective income tax rate
(60.2)
%
6.2
%
(61.4)
%
1) Actual state tax provisions and benefits, net of federal income tax benefit during 2007, 2008, and 2009, were a provision of
$0.1 million, a benefit of $1.4 million, and a benefit of $4.6 million, respectively. The primary driver in the increase in state
provision for 2009 is the result of generating net state income tax losses during those periods.
2) Actual permanent differences impacting the income tax provisions during 2007, 2008 and 2009 were $2.1 million, $3.4
million, and $2.2 million, respectively. There were no material changes in the permanent differences for each of the periods
presented. The primary drivers of the percentage changes in the effective income tax rate related to permanent differences
were the fluctuating levels of income (loss) from continuing operations before income taxes and equity earnings.
3) During 2007, a greater proportion of our income was generated in foreign jurisdictions when compared to 2008 and 2009. The
impact of foreign income taxed at rates other than the statutory rate on our reported tax provisions was $2.0 million in 2007,
$0.1 million in 2008, and $0.6 million in 2009. During these same periods, our income (loss) from continuing operations
before income taxes and equity earnings was $10.2 million in 2007, ($28.6) million in 2008, and ($43.3) million in 2009. The
higher proportion of foreign earnings in 2007 as a percentage of the lower consolidated income from continuing operations
before taxes and equity earnings in that year resulted in the significant impact on the effective income tax rate in 2007.
4) During 2007, 2008, and 2009, increases in our valuation allowances resulted in additional tax expense of $0.7 million, $7.2
million, and $45.5 million, respectively. The significant increase in the tax expense related to valuation allowances during
2009 was due to an increase in the valuation allowance recorded for our beginning federal deferred tax assets in the amount of
$37.4 million, an increase related to current year deferred tax items for which a valuation allowance was established in the
amount of $7.5 million, and an increase in the valuation allowance recorded for our foreign net operating loss carryforwards of
$0.6 million for which we have determined that it was more likely than not that the benefit would not be realized. The
significant increase in the tax expense related to valuation allowance during 2008 was due to an increase in the valuation
allowances recorded for our foreign net operating loss carryforwards and foreign tax credit carryforwards for which we
determined that it was more likely than not that the benefit would not be realized.
5) The impact of changes in our tax liabilities resulted in additional tax expense of $1.9 million, expense of $0.2 million, and a
benefit of $3.2 million during 2007, 2008, and 2009, respectively. Effective January 1, 2007, we adopted the U.S. GAAP
method of accounting for uncertain tax positions. The increase in tax liabilities during 2007 relates to accruals for interest and
penalties on the liability established upon adoption of the U.S. GAAP method of accounting for uncertain tax positions at the
beginning of that year. In 2008, we continued to accrue interest and penalties on the tax liabilities established for uncertain tax
positions. However, also during 2008, we decreased the tax liabilities as a result of the expiration of statutes of limitations on
years for which a liability had originally been established upon adoption of the U.S. GAAP method of accounting for uncertain
tax positions. The increase in tax liabilities due to accruals for interest and penalties, minus the decrease due to the expiration
of statutes of limitations, resulted in a net increase of $0.2 million to our 2008 income tax provision. During 2009, we
continued to accrue interest and penalties on beginning tax liabilities which resulted in increases to our tax provision in the
amount of $4.3 million. During 2009, we completed certain audits that resulted in a net reduction to the tax liability which
decreased our tax provision in the amount of $7.5 million.
We are a multinational company subject to taxation in many jurisdictions. We record liabilities dealing with
uncertainty in the application of complex tax laws and regulations in the various taxing jurisdictions in which we
operate. If we determine that payment of these liabilities will be unnecessary, we reverse the liability and recognize
the tax benefit during the period in which we determine the liability no longer applies. Conversely, we record
additional tax liabilities or valuation allowances in a period in which we determine that a recorded liability is less than
52
we expect the ultimate assessment to be or that a tax asset is impaired. The effects of recording liability increases and
decreases are included in the effective income tax rate.
Tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred
liabilities at December 31, 2009 and 2008:
December 31,
(Thousands of dollars)
Deferred Tax Assets
Other comprehensive income and loss adjustments
Liabilities deductible in the future
Deferred compensation
Net loss carryforward
Tax credit carryforward
Financial and tax accounting differences associated with foreign operations
Other
$
Total before valuation allowances
Valuation allowances
Net deferred tax assets
Deferred Tax Liabilities
Differences between the book and tax basis of property, plant
and equipment
Differences between financial and tax accounting associated
with foreign operations
Other
Deferred tax liabilities
2009
2008
$
-
6,569
13,948
24,255
6,640
26,308
877
78,597
(66,143)
12,454
847
5,940
12,463
22,632
12,813
25,256
114
80,065
(19,357)
60,708
(17,286)
(34,885)
(8,556)
(439)
(2,813)
(398)
(26,281)
(38,096)
Net Deferred Tax Assets (Liabilities)
$
(13,827)
$
22,612
As of December 31, 2009 and 2008, we had approximately $13.8 million of deferred tax liability and $22.6 million of
deferred tax assets, respectively, the majority of which are in Mexico and the U.S. We have recorded valuation
allowances of $66.1 million and $19.4 million against our deferred tax assets at December 31, 2009 and 2008,
respectively, based on our assessment of our ability to utilize these deferred tax assets. The valuation allowances
established relate to all U. S. and state deferred tax assets, and foreign net operating loss carryforwards for which we
have determined that it is more likely than not that a benefit will not be realized.
Realization of any of our deferred tax assets at December 31, 2009 is dependent on the company generating sufficient
taxable income in the future. The determination of whether or not to record a full or partial valuation allowance on our
deferred tax assets is a critical accounting estimate requiring a significant amount of judgment on the part of
management. We perform our analysis on a jurisdiction by jurisdiction basis.
In considering whether a valuation allowance was required for our U.S. federal deferred tax assets, we considered all
available positive and negative evidence. Positive evidence considered included reversing taxable temporary
differences and restructuring our operations in line with the deteriorating automotive industry and moving wheel
production to our lower cost operations in Mexico. This restructuring began with the closure of the Pittsburg facility
in December 2008 and with the closure of our Van Nuys facility in June of 2009. These closures allowed us to realign
capacity within our remaining plants and reduce our total fixed costs. During 2009, we began our international tax
restructuring plan, which is currently being implemented. We expect that the new tax structure will be in effect in
2010. Based on its nature, implementation of this tax strategy will enable us to generate domestic taxable income,
thereby allowing us to utilize our federal deferred tax assets and, at the same time, reduce world-wide tax payments.
53
Negative evidence considered included the taxable losses in the U.S. recorded during the three year period ended
December 31, 2009, on both an annual and cumulative basis, the continued deterioration of the automotive industry
into 2009 and the uncertainty as to the timing of recovery of both the automotive industry and global economy.
Based on the weight of all available evidence discussed above, we have concluded that the negative evidence
outweighs the positive and that it is more likely than not that 1) the federal U.S. and state deferred tax asset, net of
valuation allowance, will not be realized within the carryforward period and 2) the foreign net operating loss
carryforwards will not be realized within the carryforward period. This is because we can not look to future taxable
income as a source of income given our cumulative losses. We, therefore, established full valuation allowances
against those deferred tax assets. However, we will continue to assess the need for valuation allowances in the future.
As of December 31, 2009, we have federal tax credit carryforwards of $5.7 million that begin to expire in 2014. As of
December 31, 2009, we have cumulative federal and state net operating loss carryforwards of $37.7 million and $84.8
million, respectively, that begin to expire in 2029 and 2016, respectively. As of December 31, 2009, we have
cumulative foreign net operating loss carryforwards of $26.3 million that begin to expire in 2017. We have state tax
credit carryforwards for 2009 and 2008 of $1.4 million and $1.4 million, respectively. The state tax credit
carryforwards begin to expire in 2014.
The valuation allowances established relate to all U. S. and state deferred tax assets, and foreign net operating loss
carryforwards for which we have determined that it is more likely than not that a benefit will not be realized.
We have not provided for deferred income taxes or foreign withholding tax on basis differences in our non-U.S.
subsidiaries of $146.8 million that result primarily from undistributed earnings the company intends to reinvest
indefinitely. Determination of the deferred income tax liability on these basis differences is not reasonably estimable
because such liability, if any, is dependent on circumstances existing if and when remittance occurs.
We adopted the U.S. GAAP method of accounting for uncertain tax positions on January 1, 2007. A reconciliation of
the beginning and ending amount of unrecognized tax benefits is as follows:
Summary of Unrecognized Tax Benefits
(Thousands of dollars)
Year Ended December 31,
2009
2008
2007
Beginning balance
$
28,568
$
34,804
$
36,521
Increases (decreases) due to foreign currency translations
Increases (decreases) as a result of positions taken during:
Prior period
Current period
Settlements with taxing authorities
Expiration of applicable statutes of limitation
Ending balance (1)
1,002
-
-
(10,355)
(169)
(4,709)
2,229
-
-
(3,756)
(58)
-
-
-
(1,659)
$
19,046
$
28,568
$
34,804
(1) Excludes $27.6 million, $22.8 million and $27.4 million of potential interest and penalties associated with uncertain tax
positions in 2009, 2008 and 2007, respectively.
At December 31, 2009, we had unrecognized tax benefits in the amount of $19.0 million. During 2009, we accrued
potential interest and penalties of $3.5 million and $0.8 million, respectively, related to unrecognized tax benefits. As
of December 31, 2009, we have recorded liabilities for potential interest and penalties of $15.7 million and $11.9
million, respectively.
Included in the unrecognized tax benefits of $46.6 million at December 31, 2009, was $20.5 million of tax benefit that,
if recognized, would reduce our annual effective tax rate. Within the next twelve-month period ending December 31,
2010, it is reasonably possible that up to $9.5 million of unrecognized tax benefits will be recognized due to the
expiration of certain statutes of limitation.
Our policy regarding interest and penalties related to unrecognized tax benefits is to record interest and penalties as an
element of income tax expense. The cumulative amounts related to interest and penalties are added to the total
54
unrecognized tax liabilities on the balance sheet. Accordingly, the total amount on the balance sheet includes the
unrecognized tax benefits, cumulative interest and penalties accrued on the liabilities.
We conduct business internationally and, as a result, one or more of our subsidiaries files income tax returns in U.S.
federal, U.S. state and certain foreign jurisdictions. Accordingly, in the normal course of business, we are subject to
examination by taxing authorities throughout the world, including Hungary, Mexico, the Netherlands, and the United
States. We are no longer subject to U.S. federal, state and local, or Mexico (our major filing jurisdictions) income tax
examinations for years before 2002.
Superior Industries International, Inc. and subsidiaries are under audit by Mexico’s Tax Administration Service
(Servicio de Administracion Tributaria) in relation to Superior Industries de Mexico S.A. de C.V. for the 2003 tax
year. During 2009, Mexico’s Tax Administration Service began a review of the outside auditor’s documentations for
the years 2004 and 2007. A review of the outside auditor’s documentations often leads to a full examination of that
tax period.
Total income tax payments made were $5.9 million in 2009, $2.2 million in 2008, and $4.9 million in 2007.
NOTE 8 - LEASES AND RELATED PARTIES
We lease certain land, facilities and equipment under long-term operating leases expiring at various dates through
2014. Total lease expense for all operating leases amounted to $3.2 million in 2009, $3.1 million in 2008 and $3.8
million in 2007.
Our corporate office and former manufacturing and warehouse facility in Van Nuys, California are leased from the
Louis L. Borick Trust and the Juanita A. Borick Management Trust (the Trusts). The Trusts are controlled by Mr. L.
Borick, Founding Chairman and a Director of the company, and Juanita A. Borick, Mr. L. Borick’s former spouse,
respectively. The current operating lease expires in June 2012. An option to extend the lease for ten years was
exercised as of July 2002. There is one additional ten-year lease extension option remaining. The current annual lease
payment is $1.9 million. The facilities portion of the lease agreement requires rental increases every five years based
upon the change in a specific Consumer Price Index. The last such adjustment was as of July 1, 2006. The future
minimum lease payments that are payable to Mr. Borick for the Van Nuys corporate office and manufacturing facility
lease is $5.0 million. Total lease payments to these related entities were $1.9 million in 2009, $2.0 million for 2008
and $1.6 million for 2007. During 2007, a $1.0 million payment was made to the Trusts as settlement for a retroactive
rental rate adjustment on the ground lease portion of the agreement for our Van Nuys, California, property for the five
year period ended June 30, 2007.
Due to the closure of manufacturing operations at our Van Nuys, California facility in June of 2009, we entered into
negotiations to amend the lease of this facility to include only the office space occupied by our corporate office. We
expect these negotiations to result in an executed amendment to the existing lease some time in the first quarter of
2010.
The following are summarized future minimum payments under all leases. The table below contains the current
annual lease payments of $2.1 million for the entire Van Nuys, California facility through June 30, 2012.
Year Ended December 31,
(Thousands of dollars)
2010
2011
2012
2013
2014
Thereafter
55
Operating Leases
$
$
2,707
2,411
1,209
32
12
-
6,371
NOTE 9 – RETIREMENT PLANS
We have an unfunded supplemental executive retirement plan covering our directors, officers and other key members
of management. We purchase life insurance policies on the participants to provide for future liabilities. Cash
surrender value of these policies, totaling $5.9 million at December 31, 2009 and $4.6 million as of December 31,
2008, are included in Other Assets as general assets of the company. Subject to certain vesting requirements, the plan
provides for a benefit based on final average compensation, which becomes payable on the employee's death or upon
attaining age 65, if retired. We have measured the plan assets and obligations of our supplemental executive
retirement plan as of our fiscal year end for all periods presented.
The following table summarizes the changes in plan benefit obligations:
Year Ended December 31,
(Thousands of dollars)
Change in benefit obligation
Beginning benefit obligation
Service cost
Interest cost
Actuarial (gain) loss
Benefit payments
Ending benefit obligation
The following table summarizes the balance sheet components:
Year Ended December 31,
(Thousands of dollars)
Change in plan assets
Fair value of plan assets at beginning of year
Employer contribution
Benefit payments
Fair value of plan assets at end of year
Funded Status
Amounts recognized in the Consolidated Balance Sheets consist of:
Current liabilities
Non-current liabilities
Net amount recognized
Amounts recognized in Accumulated Other Comprehensive Loss consist of:
Net actuarial loss
Prior service cost
Net amount recognized, before tax effect
2009
2008
$
$
20,379
921
1,242
(843)
(913)
20,795
471
1,156
(1,179)
(864)
$
20,786
$
20,379
2009
2008
$
$
$
$
$
$
$
-
913
(913)
-
(20,787)
(1,017)
(19,770)
(20,787)
2,004
-
2,004
$
$
$
$
$
$
$
-
864
(864)
-
(20,379)
(1,004)
(19,375)
(20,379)
2,911
-
2,911
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of compensation increase
6.25
3.00
%
%
6.25
3.00
%
%
56
Components of net periodic pension cost are:
Year Ended December 31,
(Thousands of dollars)
Components of net periodic pension cost
Service cost
Interest cost
Contractual termination benefits
Amortization of actuarial loss
Net periodic pension cost
2009
2008
2007
$
$
921
1,242
-
64
2,227
$
$
471
1,156
-
168
1,795
Weighted average assumptions used to determine net periodic pension cost
Discount rate
Rate of compensation increase
6.25
3.00
%
%
5.75
3.50
%
%
Benefit payments during the next ten years, which reflect applicable future service, are as follows:
Year Ended December 31,
(Thousands of dollars)
2010
2011
2012
2013
2014
Years 2015 - 2019
The following is an estimate of the components of net periodic pension cost in 2010:
Estimated Year Ended December 31,
(Thousands of dollars)
Service cost
Interest cost
Amortization of actuarial loss
Estimated 2009 net periodic pension cost
$
$
$
$
$
567
1,121
-
192
1,880
5.75
3.50
%
%
Amount
1,054
1,156
1,268
1,381
1,434
7,415
2010
583
1,267
-
1,850
The $0.4 million decrease in the 2010 estimated net periodic pension cost compared to the 2009 cost is due to the
termination of unvested participants in 2009.
Other Retirement Plans
We also have a contributory employee retirement savings plan covering substantially all of our employees. The
employer contribution was determined at the discretion of the company and totaled $1.3 million, $2.2 million and $2.9
million for the three years ended December 31, 2009, 2008 and 2007, respectively. The reduced employer
contribution in 2009 was due to fewer employees in the plan in addition to utilizing forfeitures to fund a portion of the
employer contributions.
Pursuant to the deferred compensation provision of his 1994 Employment Agreement (Agreement), Mr. Louis L.
Borick, Founding Chairman and a Director, was paid an annual amount of $1.0 million in 26 equal payments through
2009. The Agreement calls for one-half of such payments to be made starting in 2010 for up to 10 years, or until his
death. As of December 31, 2009, the actuarial present value of the remaining payments under the Agreement, totaling
$2.0 million, has been accrued for and is included in accrued expenses and other non-current liabilities in the
consolidated balance sheet.
57
NOTE 10 – ACCRUED EXPENSES
December 31,
(Thousands of dollars)
Payroll and related benefits
Dividends
Taxes, other than income taxes
Loss on natural gas commodity contracts
Other plant shutdown costs
Current portion of executive retirement liabilities
Other
2009
2008
$
$
8,423
4,267
9,478
2,961
2,471
1,510
13,092
8,129
4,267
7,234
1,632
107
1,976
11,894
35,239
Accrued expenses
$
42,202
$
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES
Derivative Litigation
In late 2006, two shareholder derivative complaints were filed, one each by plaintiffs Gary B. Eldred and Darrell D.
Mack, based on allegations concerning some of the company’s past stock option grants and practices. These cases
were subsequently consolidated as In re Superior Industries International, Inc. Derivative Litigation, which is pending
in the United States District Court for the Central District of California. In the plaintiffs’ consolidated complaint, filed
on March 23, 2007, the company was named only as a nominal defendant from whom the plaintiffs sought no
monetary recovery. In addition to naming the company as a nominal defendant, the plaintiffs named various present
and former employees, officers and directors of the company as individual defendants from whom they sought
monetary and/or equitable relief, purportedly for the benefit of the company.
Plaintiffs purported to base their claims against the individual defendants on allegations that the grant dates for some
of the options granted to certain company directors, officers and employees occurred prior to upward movements in
the stock price, and that the stock option grants were not properly accounted for in the company’s financial reports and
not properly disclosed in the company’s SEC filings. The company and the individual defendants filed motions to
dismiss plaintiffs’ consolidated complaint on May 14, 2007. In an order dated August 9, 2007, the court granted our
motion to dismiss the consolidated complaint, and granted the plaintiffs leave to file an amended complaint.
On August 29, 2007, the plaintiffs filed an amended consolidated complaint that was substantially similar to the prior
consolidated complaint. In response, the company and the individual defendants filed motions to dismiss on September
21, 2007. In an order dated April 14, 2008, the court again granted our motion to dismiss the amended consolidated
complaint, with leave to amend. On May 5, 2008, the plaintiff filed a second amended consolidated shareholder
derivative complaint that alleges claims substantially similar to the prior complaints. Once again, the company and the
individual defendants filed motions to dismiss on May 30, 2008. The court conducted a hearing on the motions to
dismiss on September 15, 2008, but before the Court ruled on the motions, the parties reached an agreement in
principle to settle the litigation. The settlement received the preliminary approval of the Court on November 9, 2009
and, after notice was given as directed by the Court, the Court gave its final approval of the settlement on February 3,
2010, and entered its Order and Final Judgment dismissing the litigation, with prejudice. The terms of the settlement
provide that, among other things: the Company will adopt and/or maintain for a specified period certain procedures
related to the granting and administration of stock options, as well as certain corporate governance measures; counsel
for the plaintiffs in the litigation will receive a specified dollar amount for their fees and expenses, which amount shall
be paid by the Company’s insurance carrier; the Company and its past and present officers, directors and employees
are released from any claims related to the matters alleged in the litigation; and the plaintiffs and their counsel are
released from any claims related to the filing, prosecution, and settlement of the litigation.
Air Quality Matters
The South Coast Air Quality Management District (the SCAQMD) issued to us notices of violation, dated December
14, 2007 and December 5, 2008, alleging violations of certain permitting and air quality rules at our Van Nuys,
California manufacturing facility. The December 2007 notice involved operating three facility furnaces with different
58
burners than those described on the permit to operate the furnaces. The December 2008 notice was issued after the
company self-disclosed and corrected certain discrepancies associated with the manner that the facility reported
nitrogen oxide (NOx) emissions in 2004 and 2005. To resolve the violation notices, throughout 2008 and 2009, the
company worked closely with the SCAQMD to achieve compliance and took all steps necessary to remedy the issues
associated with these violations, including the submission of permit applications to modify the description of the
burners for three of the plant’s furnaces. The company also took steps to ensure that all required reporting and other
regulatory obligations to SCAQMD were made. On September 22, 2009, Superior entered into a settlement agreement
with the SCAQMD. The salient terms of the agreement required the company to pay a civil penalty of fifty thousand
dollars in exchange for a release from all liability with regard to any condition at the facility prior to June 30, 2009.
The September 22, 2009 settlement agreement serves as a global resolution of the notices of violations as well as any
other past compliance issues associated with the facility.
Other
We are party to various other 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, we believe all such matters are adequately provided for, covered by insurance, are without merit, and/or
involve such amounts that would not materially adversely affect our consolidated results of operations, cash flows or
financial position.
Our primary risk exposure relating to derivative financial instruments results from the periodic use of foreign currency
forward contracts to offset the impact of currency rate fluctuations with regard to foreign-currency-denominated
receivables, payables or purchase obligations. At December 31, 2009 and 2008, we held no foreign currency forward
contracts.
When market conditions warrant, we may also enter into contracts to purchase certain commodities used in the
manufacture of our products, such as aluminum, natural gas and other raw materials. Typically, any such commodity
commitments are expected to be purchased and used over a reasonable period of time in the normal course of business.
Accordingly, these contracts qualify for the “normal purchase” exemption provided for under U.S. GAAP and we are
not required to record any gains and/or losses associated with these commitments in our current earnings, unless there
is a change in the facts or circumstances in regard to the commitments being used in the normal course of business.
We currently have several purchase agreements for the delivery of natural gas through 2012. With the closure of our
manufacturing facility in Van Nuys, California in June 2009, and closure in December 2008 of our manufacturing
facility in Pittsburg, Kansas, we no longer qualified for the normal purchase, normal sale (NPNS) exemption provided
for in accordance with U.S. GAAP for the remaining natural gas purchase commitments related to those facilities. In
addition, we have concluded that the natural gas purchase commitments for our manufacturing facility in Arkansas and
certain natural gas commitments for our facilities in Chihuahua, Mexico no longer qualified for the NPNS exemption
provided for under U.S. GAAP since we can no longer assert that it is probable we will take full delivery of these
contracted quantities in light of the continued decline of our industry. In accordance with U.S. GAAP these natural
gas purchase commitments are classified as being with “no hedging designation” and, accordingly, we are required to
record any gains and/or losses associated with the changes in the estimated fair values of these commitments in our
current earnings. The contract and fair values of these purchase commitments at December 31, 2009 were $8.6 million
and $5.6 million, respectively, which represents a gross liability of $3.0 million, which was included in accrued
expenses in our December 31, 2009 consolidated balance sheet.
Based on the quarterly analysis of our estimated future production levels, certain natural gas purchase commitments
with a contract value of $8.7 million and a fair value of $6.8 million for our manufacturing facilities in Mexico
continue to qualify for the NPNS exemption since we can assert that it is probable we will take full delivery of the
contracted quantities. The contract and fair values of all natural gas purchase commitments were $17.3 million and
$12.4 million, respectively, at December 31, 2009. As of December 31, 2008, the aggregate contract and fair values of
natural gas commitments were approximately $28.0 million and $21.1 million, respectively. Percentage changes in the
market prices of natural gas will impact the fair values by a similar percentage. The recurring fair value measurement
of the natural gas purchase commitments are based on quoted market prices using the market approach and the fair
value is determined based on Level 1 inputs within the fair value hierarchy provided for under U.S. GAAP.
59
At December 31, 2009 and 2008, we had outstanding letters of credit of approximately $9.2 million and $6.5 million,
respectively.
NOTE 12 – STOCK-BASED COMPENSATION
Our 2008 Equity Incentive Plan authorizes us to issue incentive and non-qualified stock options, as well as stock
appreciation rights, restricted stock and performance units to our non-employee directors, officers, employees and
consultants totaling up to 3.5 million shares of common stock. No more than 100,000 shares may be used under such
plan as “full value” awards, which include restricted stock and performance units. It is our policy to issue shares from
authorized but not issued shares upon the exercise of stock options. At December 31, 2009, there were 2.9 million
shares available for future grants under this plan. Options are granted at not less than fair market value on the date of
grant and expire no later than ten years after the date of grant. Options granted under this plan to employees and non-
employee directors require no less than a three year ratable vesting period if vesting is based on continuous service.
Vesting periods may be shorter than three years if performance based.
We account for stock-based compensation using the fair value recognition provisions in accordance with U.S. GAAP.
We recognize these compensation costs net of the applicable forfeiture rate and recognize the compensation costs for
only those shares expected to vest on a straight-line basis over the requisite service period of the award, which is
generally the option vesting term of four years. We estimated the forfeiture rate based on our historical experience. No
options were exercised during the fiscal year 2009 and the total fair value of shares vested during the year was
approximately $2.3 million.
We have elected to adopt the alternative transition method for calculating the initial pool of excess tax benefits and to
determine the subsequent impact of the tax effects of employee stock-based compensation awards that are outstanding
on shareholders’ equity and consolidated statements of cash flow.
Balance at December 31, 2008
Granted
Exercised
Cancelled
Balance at December 31, 2009
Options vested or expected to vest
Exercisable at December 31, 2009
Options outstanding at December 31, 2009:
Outstanding
3,214,737
622,500
-
(235,662)
3,601,575
3,503,858
2,257,469
$
$
$
$
Range of
Exercise Prices
Options
Outstanding
at 12/31/09
$ 10.09
$ 15.62
$ 21.14
$ 26.66
$ 32.18
$ 37.70
- $ 15.61
- $ 21.13
- $ 26.65
- $ 32.17
- $ 37.69
- $ 43.22
609,500
1,019,900
1,047,075
71,453
492,526
361,121
3,601,575
Weighted
Average
Remaining
Contractual Life
(in years)
9.52
7.17
6.83
1.16
2.30
3.68
$
6.34
$
60
Weighted
Average
Exercise
Price
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
25.79
14.10
-
24.20
23.87
24.06
27.79
6.34
4.19
5.02
$
$
$
745,935
745,935
-
Weighted
Average
Exercise
Price
Options
Exercisable
at 12/31/09
Weighted
Average
Exercise
Price
14.08
17.90
22.97
28.61
35.50
43.08
23.87
$
-
664,545
667,824
71,453
492,526
361,121
2,257,469
$
-
17.86
23.61
28.61
35.50
43.08
27.79
The aggregate intrinsic value represents the total pretax difference between the closing stock price on the last trading
day of the reporting period and the option exercise price, multiplied by the number of in-the-money options. This is
the amount that would have been received by the option holders had they exercised and sold their options on that day.
This amount varies based on changes in the fair market value of our common stock. The closing price of our common
stock on the last trading day of our fiscal year was $16.04.
Stock-based compensation expense related to stock option plans in accordance with U.S. GAAP was allocated as
follows:
Year Ended December 31,
(Thousands of dollars)
Cost of sales
Selling, general and administrative expenses
Stock-based compensation expense before income taxes
Income tax benefit
2009
2008
2007
$
$
388
1,992
2,380
-
$
353
2,054
2,407
(694)
487
2,586
3,073
(1,038)
2,035
Total stock-based compensation expense after income taxes
$
2,380
$
1,713
$
As of December 31, 2009, there was $4.5 million of unrecognized stock-based compensation expense expected to be
recognized related to unvested stock options. That cost is expected to be recognized over a weighted-average period of
2.49 years.
There were no stock options exercised in 2009. We received cash proceeds of $617,000 and $430,000 from stock
options exercised in 2008 and 2007, respectively.
The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model
with the following assumptions:
Year Ended December 31,
Expected dividend yield (a)
Expected stock price volatility (b)
Risk-free interest rate (c)
Expected option lives (d)
Weighted average grant date fair value of
options granted during the period
2009
3.7
37.3
3.0
6.9
%
%
%
yrs
2008
3.2
30.2
3.5
7.1
%
%
%
yrs
2007
3.3
30.1
4.0
7.3
%
%
%
yrs
$3.95
$5.30
$5.14
(a) This assumes that cash dividends of $0.16 per share are paid each quarter on our common stock.
(b) Expected volatility is based on the historical volatility of our stock price, over the expected life of the option.
(c) The risk-free rate is based upon the rate on a U.S. Treasury note for the period representing the average remaining
contractual life of all options in effect at the time of the grant.
(d) The expected term of the option is based on historical employee exercise behavior, the vesting terms of the
respective option and a contractual life of ten years.
NOTE 13 - COMMON STOCK REPURCHASE PROGRAMS
Since 1995, our Board of Directors has authorized several common stock repurchase programs totaling 8.0 million
shares, under which we have repurchased approximately 4.8 million shares for approximately $130.9 million, or
$27.16 per share. Under the latest authorization to repurchase up to 4.0 million shares, approved in March 2000, to
date we have repurchased a total of 818,000 shares for a total cost of $26.9 million at an average cost per share of
$32.82. All repurchased shares are immediately cancelled and retired. There have been no stock repurchases since
2005. As of December 31, 2009, approximately 3.2 million additional shares can be repurchased under the current
authorization.
61
NOTE 14 - OTHER COMPREHENSIVE INCOME (LOSS)
Components of other comprehensive income (loss) as reflected in the consolidated statements of shareholders’ equity
as follows:
Year Ended December 31,
(Thousands of dollars)
2009
2008
2007
Net foreign currency translation gains (losses)
$
10,872
$
(39,567)
$
10,113
Actuarial gains on pension obligation
Income tax (provision)
Net actuarial gains on pension obligation
Unrealized gain on marketable securities
Income tax (provision)
Net unrealized gain on marketable securities
Realized gains from marketable securities
Income tax benefit
Net realized gains from marketable securities
907
(1,111)
(204)
1,346
(445)
901
-
-
-
-
-
-
-
-
-
-
-
-
Other comprehensive income (loss)
$
10,668
$
(38,666)
$
220
(82)
138
40
(15)
25
(2,720)
995
(1,725)
8,551
Accumulated balances of other comprehensive income (loss) as reflected in the consolidated balance sheets and
statements of shareholders’ equity as follows:
December 31,
(Thousands of dollars)
2009
2008
2007
Net accumulated foreign currency translation gains (losses)
$
(54,572)
$
(65,444)
$
(25,877)
Accumulated actuarial (loss) on pension obligation
Income tax benefit
(2,004)
-
(2,911)
1,111
Net accumulated actuarial (loss) on pension obligation
Accumulated other comprehensive loss
(2,004)
(56,576)
$
(1,800)
(67,244)
$
$
(4,257)
1,556
(2,701)
(28,578)
During the year 2009, the value of the Mexican peso increased by 5 percent in relation to the U.S. dollar, resulting in a
gain of $10.1 million in foreign currency translation adjustments related to our operations in Mexico. Despite the euro
decreasing by 2 percent relative to the U.S. dollar, there was a gain for the year of $1.0 million in foreign currency
translation adjustments related to our 50 percent-owned joint venture in Hungary. At December 31, 2009, cumulative
unrealized foreign currency translation losses related to our operations in Mexico was $61.3 million, compared to the
cumulative unrealized foreign currency translation gains of $6.7 million related to our joint venture in Hungary.
NOTE 15 – IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER CHARGES
Due to the deteriorating financial condition of our major customers and other changes in the automotive industry, we
performed impairment analyses at the end of each fiscal quarter at the end of the year 2009 on all long-lived assets in
our operating plants, in accordance with U.S. GAAP. Our estimated undiscounted cash flow projections as of the end
of the year exceeded the asset carrying values in all of our wheel manufacturing plants in North America; therefore, no
impairment was required to be made to our long-lived assets in our operating plants in the fourth quarter of 2009.
Based on the impairment analyses conducted at the end of the first quarter of 2009, we concluded that the estimated
future undiscounted cash flows of our Fayetteville, Arkansas manufacturing facility would not be sufficient to recover
62
the carrying value of our long-lived assets attributable to that facility. As a result, we recorded a pretax asset
impairment charge against earnings totaling $8.9 million during the first quarter of 2009, reducing the $18.2 million
carrying value of certain assets at this facility to their respective estimated fair values. The estimated fair values of the
long-lived assets at our Fayetteville, Arkansas manufacturing facility were determined with the assistance of estimated
fair values of comparable properties and independent third party appraisals of the machinery and equipment. These
assets are classified as held and used in accordance with U.S. GAAP. We have classified the inputs to the
nonrecurring fair value measurement of these assets as being Level 2 within the fair value hierarchy in accordance
with U.S. GAAP.
In January 2009, we announced the planned closure of our wheel manufacturing facility located in Van Nuys,
California in an effort to further reduce costs and more closely align our capacity with sharply lower demand for
aluminum wheels by the automobile and light truck manufacturers. The facility ceased operations at the end of the
second quarter of 2009, resulting in the layoff of approximately 290 employees. A pretax asset impairment charge
against earnings totaling $10.3 million, reducing the $10.8 million carrying value of certain assets at the Van Nuys
manufacturing facility to their respective fair values, was recorded in the fourth quarter of 2008, when we concluded
that the estimated future undiscounted cash flows of that operation would not be sufficient to recover the carrying
value of our long-lived assets attributable to that facility. We used an independent third party appraiser to assist us in
determining the fair values of these assets.
During the second quarter of 2009, we received an offer for the sale of our Johnson City, Tennessee facility which was
subsequently cancelled. We believe this offer was the best indicator of the current fair value of the property and we
recorded a reduction in our carrying value of this facility by $0.6 million to the $2.2 million offer. Additionally, we
received some indications, based on equipment sales that occurred subsequent to June 28, 2009, that the carrying
values of the held for sale equipment from our Pittsburg, Kansas, and Van Nuys, California, facilities, totaling $2.6
million, were higher than their current market values. Consequently, we recorded an additional impairment charge of
$1.9 million to reduce the carrying value of this equipment to their new estimated fair values in the second quarter
also. We have classified the above nonrecurring fair value measurements as Level 2 inputs within the fair value
hierarchy utilizing the market approach in accordance with U.S. GAAP. Due to plant shutdowns and the realignment
of our business to match our current production needs, we have identified, and are in the process of selling, specific
long-lived assets from our former manufacturing operations in Johnson City, Tennessee, and Pittsburg, Kansas. These
assets, which totaled $6.8 million at December 31, 2009, are classified as assets held for sale in accordance with U.S.
GAAP.
In August 2008, we announced the planned closure of our wheel manufacturing facility located in Pittsburg, Kansas, in
an effort to eliminate excess wheel capacity and enhance overall efficiency. The closure, which was completed in
December 2008, resulted in the layoff of approximately 600 employees. A pretax asset impairment charge against
earnings totaling $5.0 million, reducing the carrying value of certain assets at the Pittsburg facility to their respective
fair values, was recorded in the third quarter of 2008, when we concluded that the estimated future undiscounted cash
flows of that operation would not be sufficient to recover the carrying value of our long-lived assets attributable to that
facility. In the fourth quarter of 2008, when it was determined that the carrying values of additional long-lived assets
would not be recovered, the impairment charge was increased by an additional $2.4 million. We used an independent
third party appraiser to assist us in determining the fair values of the assets at the Pittsburg, Kansas, facility.
For the periods between the announced plant closures and the date operations actually ceased, these assets are
classified as held-and-used, in accordance with U.S. GAAP. Upon termination of plant operations, the remaining
assets are classified as held-for-sale.
63
One-time termination benefits and other shutdown costs related to the above plant closures and workforce reductions
in our other North American facilities were $19.1 million in 2009, of which $18.8 million was included in cost of sales
and $0.3 million was included in selling, general and administrative expenses. One-time termination benefits and
other shutdown costs were $4.7 million in 2008 and were included in costs of sales. One-time termination benefits
were derived from the individual agreements with each employee and were accrued ratably over the requisite service
period. The following table summarizes the expenses, payments and resulting liabilities that were included in accrued
expenses for one-time termination benefits and other shutdown costs:
Year Ended December 31,
(Thousands of dollars)
Beginning liability balance
One-time termination benefit expenses
Other plant closure costs
Total expenses
Payments
Ending liability balance
2009
2008
$
107
$
-
5,066
13,990
19,056
(16,692)
$
2,471
$
2,728
2,000
4,728
(4,621)
107
NOTE 16 - QUARTERLY FINANCIAL DATA (UNAUDITED)
(Thousands of dollars, except per share amounts)
Year 2009
Net sales
Gross profit (loss)
Impairment of long-lived assets (Note 15)
Income (loss) from operations
Income (loss) before income taxes
and equity earnings
Income tax (provision) benefit (1)
Equity earnings (losses) (Note 6)
Net loss
Loss per share:
Basic
Diluted
Dividends declared per share
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
$
$
$
$
$
$
$
$
81,548
(14,513)
8,910
(28,198)
(29,099)
(26,460)
(942)
(56,501)
(2.12)
(2.12)
0.16
$
$
$
$
$
$
$
$
$
$
$
80,886
(12,056)
2,894
(20,788)
(21,582)
2,817
(2,204)
(20,969)
(0.79)
(0.79)
0.16
$
$
$
$
$
$
$
$
$
$
$
111,371
4,222
-
(1,559)
$ 145,041
12,178
$
-
$
5,927
$
103
(8,772)
(4,072)
(12,741)
7,323
$
$
6,368
$ (17,622)
(3,931)
$
(0.48)
(0.48)
0.16
$
$
$
(0.15)
(0.15)
0.16
Year
418,846
(10,169)
11,804
(44,618)
(43,255)
(26,047)
(24,840)
(94,142)
(3.53)
(3.53)
0.64
$
$
$
$
$
$
$
$
$
$
$
1) Includes income tax (provision) benefit of ($25.3) million, ($18.5) million and $0.8 million for the first, third and fourth quarters
of 2009, respectively, due to changes in the valuation allowances against deferred tax assets. The third quarter of 2009 also
includes $11.1 million of income tax benefit related to the termination of certain tax examinations.
64
Year 2008
Net sales
Gross profit (loss)
Impairment of long-lived assets (Note 15)
Income (loss) from operations
Income (loss) before income taxes
and equity earnings
Income tax (provision) benefit
Equity earnings (losses)
Net income (loss)
Earnings (loss) per share:
Basic
Diluted
Dividends declared per share
First
Quarter
222,238
9,386
-
3,176
3,714
(2,620)
2,085
3,179
0.12
0.12
0.16
$
$
$
$
$
$
$
$
$
$
$
Second
Quarter
217,385
12,054
-
5,154
4,396
79
620
5,095
0.19
0.19
0.16
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Third
Quarter
Fourth
Quarter
163,354
(11,191)
5,044
(22,422)
$ 151,917
$
(3,672)
13,457
$
$ (23,576)
(19,758)
5,694
(143)
(14,207)
$ (16,925)
(1,375)
$
$
(1,820)
$ (20,120)
(0.53)
(0.53)
0.16
$
$
$
(0.76)
(0.76)
0.16
Year
754,894
6,577
18,501
(37,668)
(28,573)
1,778
742
(26,053)
(0.98)
(0.98)
0.64
$
$
$
$
$
$
$
$
$
$
$
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On May 7, 2009, PricewaterhouseCoopers LLP (PwC) was dismissed as the company’s independent registered public
accounting firm. The company's Audit Committee of the Board of Directors (the Audit Committee) participated in and
approved the decision to change its independent registered public accounting firm.
The reports of PwC on the company’s financial statements for the fiscal years ended December 31, 2008 and
December 31, 2007 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principle.
During the fiscal years ended December 31, 2008 and December 31, 2007, and through May 7, 2009, there have been
no disagreements with PwC on any matters of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the satisfaction of PwC would have caused them
to make reference thereto in their reports on the financial statements for such years.
During the fiscal years ended December 31, 2008 and December 31, 2007, and through May 7, 2009, there have been
no "reportable events" (as defined in Item 304(a)(1)(v) of Regulation S-K), except for the identification of a material
weakness in internal control over financial reporting related to the completeness, accuracy and valuation of the
accounting and disclosure of income taxes as of December 31, 2007 which was remediated as of December 31, 2008.
On May 28, 2009, the Audit Committee approved the engagement of Deloitte & Touche LLP (D&T) as its
independent registered public accounting firm for the fiscal year ending December 31, 2009.
During the two fiscal years ended December 31, 2008 and the subsequent interim period prior to engaging D&T,
neither the company nor anyone acting on behalf of the company, consulted D&T regarding either (i) the application
of accounting principles to a specified transaction, either completed or proposed; or (ii) the type of audit opinion that
might be rendered on the company’s financial statements; or (iii) any matter that was either the subject of a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of
Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).
65
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
The company's management, with the participation of the Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of December 31, 2009. Our disclosure controls and procedures are designed to
ensure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in SEC rules and forms and that such
information is accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decision regarding required disclosures.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31,
2009, our disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As
defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. The company's internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changing conditions, or that the degree of compliance with policies or procedures may
deteriorate.
Management performed an assessment of the effectiveness of the company’s internal control over financial reporting
as of December 31, 2009 based upon criteria established in Internal Control -- Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on their assessment,
management determined that our internal control over financial reporting was effective as of December 31, 2009 based
on the criteria in the Internal Control -- Integrated Framework issued by COSO. The effectiveness of the company’s
internal control over financial reporting as of December 31, 2009 has been audited by Deloitte and Touche LLP, an
independent registered public accounting firm, as stated in their report, which is included in this Annual Report on
Form 10-K.
Changes in Internal Control Over Financial Reporting
On October 2, 2009, Erika H. Turner, our Chief Financial Officer resigned, effective October 23, 2009, and Emil J.
Fanelli, Vice President and Corporate Controller since 1997, was named acting Chief Financial Officer pending the
recruitment of a permanent successor. Other than these changes, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Statement Regarding New York Stock Exchange (NYSE) Mandated Disclosures
The company has filed with the SEC as exhibits to its 2009 Annual Report on Form 10-K the certifications of the
company's Chief Executive Officer and its Chief Financial Officer required under Section 302 of the Sarbanes-Oxley
Act and SEC Rule 13a-14(a) regarding the company's financial statements, disclosure controls and procedures and
66
other matters. On June 26, 2009, following its 2009 annual meeting of stockholders, the company submitted to the
NYSE the annual certificate of the company's Chief Executive Officer required under Section 303A.12(a) of the
NYSE Listed Company Manual, that he was not aware of any violation by the company of the NYSE's corporate
governance listing standards.
ITEM 9B – OTHER INFORMATION
None.
67
PART III
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as set forth herein, the information required by this Item is incorporated by reference to our 2010 Annual Proxy
Statement.
Executive Officers
The names of corporate executive officers as of fiscal year end who are not also Directors are listed at the end of Part I
of this Annual Report on Form 10-K. Information regarding executive officers who are Directors is contained in our
2010 Annual Proxy Statement under the caption “Election of Directors.” Such information is incorporated herein by
reference. With the exception of the Chief Executive Officer (CEO), all executive officers are appointed annually by
the Board of Directors and serve at the will of the Board of Directors. For a description of the CEO’s employment
agreement, see “Employment Agreements” in our 2010 Annual Proxy Statement, which is incorporated herein in
reference.
Code of Ethics
Included on our website, www.supind.com, under “Investors,” is our Code of Business Conduct and Ethics, which,
among others, applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. Copies of
our Code of Business Conduct and Ethics are available, without charge, from Superior Industries International, Inc.,
Shareholder Relations, 7800 Woodley Avenue, Van Nuys, CA 91406.
ITEM 11 - EXECUTIVE COMPENSATION
Information relating to Executive Compensation is set forth under the captions “Compensation of Directors” and
“Compensation Discussion and Analysis” in our 2010 Annual Proxy Statement, which is incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information related to Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters is set forth under the caption “Voting Securities and Principal Holders” in our 2010 Annual Proxy Statement.
Also see Note 12- Stock Based Compensation in Notes to the Consolidated Financial Statements in Item 8 – Financial
Statements and Supplementary Data of this Annual Report on Form 10-K.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information related to Certain Relationships and Related Transactions is set forth under the captions, “Election of
Directors” and “Transactions with Related Persons,” in our 2010 Annual Proxy Statement, and in Note 8 - Leases and
Related Parties in Notes to the Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary
Data of this Annual Report on Form 10-K.
ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information related to Principal Accountant Fees and Services is set forth under the caption “Audit Fees,” “Audit
Related Fees” and “Tax Fees” in our 2010 Annual Proxy Statement and is incorporated herein by reference.
68
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as a part of this report:
PART IV
1. Financial Statements: See the “Index to the Consolidated Financial Statements and Financial Statement
Schedule” in Item 8 of this Annual Report.
2. Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts for the Years Ended
December 31, 2009, 2008 and 2007
3. Exhibits
Page
S-1
3.1
3.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Restated Articles of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to
Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994)
Amended and Restated By-Laws of the Registrant (Incorporated by reference to Exhibit 3.1 to
Registrant’s Current Report on Form 8-K filed on September 5, 2007.
Lease dated March 2, 1976 between the Registrant and Louis L. Borick filed on Registrant’s Current
Report on Form 8-K dated May 1976 (Incorporated by reference to Exhibit 10.2 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1983) *
Supplemental Executive Individual Retirement Plan of the Registrant (Incorporated by reference to
Exhibit 10.20 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1987.) *
Employment Agreement dated January 1, 1994 between Louis L. Borick and the Registrant
(Incorporated by reference to Exhibit 10.32 to Registrant’s Annual Report on Form 10-K for the year
ended December 31, 1993, as amended) *
1993 Stock Option Plan of the Registrant (Incorporated by reference to Exhibit 28.1 to Registrant’s
Form S-8 filed June 10, 1993, as amended. Registration No. 33-64088.) *
Stock Option Agreement dated March 9, 1993 between Louis L. Borick and the Registrant
(Incorporated by Reference to Exhibit 28.2 to Registrant's Form S-8 filed June 10, 1993.
Registration No. 33-64088) *
Chief Executive Officer Annual Incentive Program dated May 9, 1994 between Louis L. Borick and
the Registrant (Incorporated by reference to Exhibit 10.39 to Registrant’s Annual Report on Form
10-K for the year ended December 31, 1994) *
Executive Employment Agreement dated January 1, 2005 between Steven J. Borick and the
registrant (Incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q
for the first quarter of 2005 ended March 27, 2005) *
Executive Annual Incentive Plan dated January 1, 2005 between Steven J. Borick and the registrant
(Incorporated by reference to Exhibit A to Registrant’s Definitive Proxy Statement on Schedule 14A
filed on April 19, 2005 *
2006 Option Repricing Agreement entered into between the Registrant and each of the following
persons separately: Raymond C. Brown, Philip C. Colburn, V. Bond Evans, R. Jeffery Ornstein,
Emil J. Fanelli, Stephen H. Gamble and Kola Phillips dated December 28, 2006; Sheldon I. Ausman,
Steven J. Borick, Jack H. Parkinson, Robert H. Bouskill, Bob Bracy, Parveen Kakar, Michael J.
O’Rourke and Gabriel Soto dated December 29, 2006 (Incorporated by reference to Exhibit 10.45 to
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006) *
69
10.10
2006 Option Correction Amendment entered into between the Registrant and each of the following
persons separately: Louis L. Borick, James H. Ferguson and William B. Kelley dated December 29,
2006 (Incorporated by reference to Exhibit 10.46 to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2006) *
10.11 Amendment to Stock Option Agreement entered into between the Registrant and each of the
following persons separately: Robert A. Earnest, Razmik Perian and Cameron Toyne dated October
9, 2007 (Incorporated by reference to Exhibit 10.47 to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2007) *
10.12 Salary Continuation Plan of The Registrant, amended and restated as of November 14, 2008
(Incorporated by reference to Exhibit 10.12 to Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2008) *
10.13
2008 Equity Incentive Plan of the Registrant (Incorporated by reference to Exhibit A to Registrant’s
Definitive Proxy Statement on Schedule 14A filed on April 28, 2008)
10.14
2008 Equity Inventive Plan Notice of Stock Option Grant and Agreement (Incorporated by reference
to Exhibit 10.2 to Registrant’s Form S-8 filed November 10, 2008. Registration No. 333-155258)
10.15 Agreement entered into between the Registrant and Emil J. Fanelli, Vice President and Corporate
Controller of the Registrant to compensate Mr. Fanelli for serving as acting Chief Financial Officer
of the Registrant pending the appointment of a permanent successor (Incorporated by reference to
Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on February 18, 2010)*
11
14
16
21
23
23.1
31.1
31.2
32
Computation of Earnings Per Share (contained in Note 1 – Summary of Significant Accounting
Policies in Notes to Consolidated Financial Statements in Item 8 – Financial Statements and
Supplementary Data of this Annual Report on Form 10-K)
Code of Business Conduct and Ethics (posted on the Registrant’s Internet Website pursuant to
Regulation S-K, item 406 (c)(2))
Letter from PricewaterhouseCoopers LLP (Incorporated by reference to Exhibit 16.1 to Registrant's
Form 8-K filed on May 12, 2009)
List of Subsidiaries of the Company (filed herewith)
Consent of Deloitte and Touche LLP, our Independent Registered Public Accounting Firm (filed
herewith)
Consent of PricewaterhouseCoopers LLP, our former Independent Registered Public Accounting
Firm (filed herewith)
Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith)
Chief Accounting Officer and acting Chief Financial Officer Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed
herewith)
Certification of Steven J. Borick, Chairman, Chief Executive Officer and President, and Emil J.
Fanelli, Chief Accounting Officer and acting Chief Financial Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished
herewith)
* Indicates management contract or compensatory plan or arrangement.
70
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT OF FORM 10-K
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
(Thousands of dollars)
Additions
Balance at
Beginning of
Year
Adoption of
Charge to
Costs and New Accounting Comprehensive
Income (Loss)
Expenses
Principles
Other
Deductions
From
Reserves
Balance at
End of
Year
2009
Allowance for doubtful
accounts
Inventory reserves
Valuation allowances for
deferred tax assets
2008
Allowance for doubtful
accounts
Inventory reserves
Valuation allowances for
deferred tax assets
2007
Allowance for doubtful
accounts
Inventory reserves
Valuation allowances for
deferred tax assets
$
$
$
$
$
$
$
$
$
3,128
2,232
19,357
2,427
1,651
12,083
2,789
1,204
1,418
$
$
$
$
$
$
$
$
$
485
1,719
46,028
1,164
806
7,274
95
896
665
$
$
$
$
$
$
$
$
$
-
-
-
-
-
-
-
-
10,000
$
$
$
$
$
$
$
$
$
-
-
758
-
-
-
-
-
-
$
$
$
$
$
$
$
$
$
(3,127)
(185)
-
(463)
(225)
-
(457)
(449)
-
$
$
$
$
$
$
$
$
$
486
3,766
66,143
3,128
2,232
19,357
2,427
1,651
12,083
S-1
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT OF FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By /s/ Steven J. Borick
Steven J. Borick
Chairman, Chief Executive Officer and President
March 12, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacity and on the dates indicated.
/s/ Louis L. Borick
Louis L. Borick
Founding Chairman and Director
March 12, 2010
/s/ Steven J. Borick
Steven J. Borick
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
March 12, 2010
/s/ Emil J. Fanelli
Emil J. Fanelli
Vice President and Corporate Controller
(Principal Accounting Officer and acting Chief
Financial Officer)
March 12, 2010
/s/ Sheldon I. Ausman
Sheldon I. Ausman
/s/ Philip W. Colburn
Philip W. Colburn
/s/ Margaret S. Dano
Margaret S. Dano
/s/ V. Bond Evans
V. Bond Evans
/s/ Michael J. Joyce
Michael J. Joyce
/s/ Francisco S. Uranga
Francisco S. Uranga
Lead Director
March 12, 2010
Director
March 12, 2010
Director
March 12, 2010
Director
March 12, 2010
Director
March 12, 2010
Director
March 12, 2010
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT OF FORM 10-K
LIST OF SUBSIDIARIES
Exhibit 21
Name of Subsidiaries
100% Owned by Company
Suoftec Light Metal Products B.V.
Superior Industries International Arkansas, LLC
Jurisdiction of
Incorporation
The Netherlands
Delaware, U.S.A.
Superior Industries International Asset Management, Inc.
California, U.S.A.
Superior Industries International Holdings, LLC
Superior Industries International Kansas, LLC
Superior Industries International Michigan, LLC
Superior Industries International - Tennessee, LLC
Superior Industries de Mexico, S. de R.L. de C.V.
Superior Industries North America, S. de R.L. de C.V.
Delaware, U.S.A.
Delaware, U.S.A.
Delaware, U.S.A.
Tennessee, U.S.A.
Chihuahua, Mexico
Chihuahua, Mexico
Superior Industries Trading de Mexico, S. de R.L. de C.V.
Chihuahua, Mexico
50% Owned Joint Venture
Suoftec Light Metal Products Production & Distribution Ltd.
Tatabanya, Hungary
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT OF FORM 10-K
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements No. 33-64088, 333-107380 and 333-155258 on
Form S-8 of our report dated March 12, 2010, relating to the consolidated financial statements and financial statement
schedule of Superior Industries International, Inc. (the “Company”), and the effectiveness of the Company’s internal control
over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 27,
2009.
/s/ Deloitte and Touche LLP
Los Angeles, California
March 12, 2010
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT OF FORM 10-K
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in Registration Statements on Form S-8 (Nos. 33-64088, 333-107380 and
333-155258) of Superior Industries International, Inc. of our report dated March 10, 2009 relating to the consolidated financial
statements and financial statement schedule, which appears in this Form 10-K.
/s/PricewaterhouseCoopers LLP
Los Angeles, California
March 12, 2010
CERTIFICATION Exhibit 31.1
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Steven J. Borick, certify that:
1. I have reviewed this Annual Report on Form 10-K of Superior Industries International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this Annual Report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this Annual Report is being prepared;
b. Designed such internal control over financial reporting or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual
Report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the
period covered by the report based on such evaluation; and
d. Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 12, 2010
/s/ Steven J. Borick
Steven J. Borick
Chairman, Chief Executive Officer and President
CERTIFICATION Exhibit 31.2
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Emil J. Fanelli, certify that:
1. I have reviewed this Annual Report on Form 10-K of Superior Industries International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Annual Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this Annual Report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this Annual Report is being prepared;
b. Designed such internal control over financial reporting or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual
Report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the
period covered by the report based on such evaluation; and
d. Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 12, 2010
/s/ Emil J. Fanelli
Emil J. Fanelli
Chief Accounting Officer and
acting Chief Financial Officer
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned hereby certifies, in his capacity as an officer of Superior Industries International, Inc. (the
“company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that to the best of his knowledge:
(cid:131) The Annual Report of the company on Form 10-K for the period ended December 31, 2009 as filed with the
Securities and Exchange Commission fully complies with the requirements of Section 13(a) or Section 15(d),
as applicable, of the Securities Exchange Act of 1934, as amended; and
(cid:131) The information contained in such report fairly presents, in all material respects, the financial condition and
results of operation of the company.
Dated: March 12, 2010
/s/ Steven J. Borick
Steven J. Borick
Chairman, Chief Executive Officer and President
/s/ Emil J. Fanelli
Emil J. Fanelli
Chief Accounting Officer and
acting Chief Financial Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 2009
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
(State or Other Jurisdiction of
Incorporation or Organization)
7800 Woodley Avenue, Van Nuys, California
(Address of Principal Executive Offices)
95-2594729
(IRS Employer
Identification No.)
91406
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (818) 781-4973
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, no par value
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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 (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.Yes [X] No [ ]
Yes [ ] No [X]
Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).Yes [ ] No [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated
filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the registrant’s no par value common equity held by non-affiliates as of the last business day of the
registrant’s most recently completed second quarter was $376,292,000, based on a closing price of $14.11. On March 5, 2010, there were 26,668,440
shares of common stock issued and outstanding.
Portions of the registrant’s 2010 Annual Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after
the close of the registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
EXPLANATORY NOTE
This Amendment No. 1 amends Superior Industries International, Inc.’s (the “Company”) Annual Report on Form 10-K for the year ended
December 27, 2009, which was filed with the Securities and Exchange Commission on March 12, 2010 (the “Original Filing”). The Company is filing
this Amendment No. 1 for the sole purpose of including the Report of the Independent Registered Public Accounting Firm related to our internal
controls over financial reporting as of December 27, 2009, which was inadvertently excluded from Item 9A in our Original Filing. This amendment
contains the corrected Part II, Item 9A – Controls and Procedures, in its entirety as well as updated certifications of our Chief Executive Officer and
acting Chief Financial Officer in Part IV, Item 15 – Exhibits and Financial Statement Schedules.
Except as described above, this Amendment No. 1 does not amend any other information set forth in the Original Filing and the Company has not
updated disclosures included therein to reflect any events that may have occurred subsequent to March 12, 2010.
ITEM 9A - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
PART II
The company's management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the
company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 27, 2009. Our
disclosure controls and procedures are designed to ensure that information required to be disclosed in reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information
is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decision
regarding required disclosures.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 27, 2009, our disclosure controls
and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under
the Exchange Act, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. The company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changing conditions, or that
the degree of compliance with policies or procedures may deteriorate.
Management performed an assessment of the effectiveness of the company’s internal control over financial reporting as of December 27, 2009
based upon criteria established in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on their assessment, management determined that our internal control over financial reporting was effective
as of December 27, 2009 based on the criteria in the Internal Control -- Integrated Framework issued by COSO. The effectiveness of the
company’s internal control over financial reporting as of December 27, 2009 has been audited by Deloitte and Touche LLP, an independent
registered public accounting firm, as stated in their report, which is included below.
Report of the Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Superior Industries International, Inc.
We have audited the internal control over financial reporting of Superior Industries International, Inc. and subsidiaries (the “Company”) as of
December 27, 2009 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Annual Report of
Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and
principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 27, 2009, based
on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
financial statements and financial statement schedule as of and for the year ended December 27, 2009 of the Company and our report dated March
12, 2010 expressed an unqualified opinion on those financial statements and financial statement schedule.
/s/ Deloitte & Touche LLP
Los Angeles, California
March 12, 2010
Changes in Internal Control Over Financial Reporting
On October 2, 2009, Erika H. Turner, our Chief Financial Officer resigned, effective October 23, 2009, and Emil J. Fanelli, Vice President and
Corporate Controller since 1997, was named acting Chief Financial Officer pending the recruitment of a permanent successor. Other than these
changes, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Statement Regarding New York Stock Exchange (NYSE) Mandated Disclosures
The company has filed with the SEC as exhibits to its 2009 Annual Report on Form 10-K the certifications of the company's Chief Executive Officer
and its Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act and SEC Rule 13a-14(a) regarding the company's financial
statements, disclosure controls and procedures and other matters. On June 26, 2009, following its 2009 annual meeting of stockholders, the
company submitted to the NYSE the annual certificate of the company's Chief Executive Officer required under Section 303A.12(a) of the NYSE
Listed Company Manual, that he was not aware of any violation by the company of the NYSE's corporate governance listing standards.
PART IV
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(b) Exhibits
31.1 Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
02
(filed herewith)
31.2 Chief Accounting Officer and acting Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302
02
(a) of the Sarbanes-Oxley Act of 2002 (filed herewith)
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT OF FORM 10-K/A
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
to be
signed on its behalf by the undersigned, thereunto duly authorized.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(Registrant)
By /s/ Steven J. Borick
Steven J. Borick
Chairman, Chief Executive Officer and President
March 18, 2010
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Steven J. Borick, certify that:
1.
2.
3.
4.
I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of Superior Industries International, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this Annual Report;
Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
Annual Report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this Annual Report is being prepared;
Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual Report our
conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based
on such evaluation; and
Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 18, 2010
/s/ Steven J. Borick
Steven J. Borick
Chairman, Chief Executive Officer and
President
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Emil J. Fanelli, certify that:
1.
2.
3.
4.
I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of Superior Industries International, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this Annual Report;
Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
Annual Report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this Annual Report is being prepared;
Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual Report our
conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based
on such evaluation; and
Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 18, 2010
/s/ Emil J. Fanelli
Emil J. Fanelli
Chief Accounting Officer and
acting Chief Financial Officer
NOTES
Corporate Information
DIRECTORS
Louis L. Borick
Founding Chairman
Steven J. Borick
Chairman, Chief Executive Officer
and President
Sheldon I. Ausman
Lead Director
Philip W. Colburn
Business Consultant
Margaret S. Dano
Honeywell International, Inc.
Retired Vice President
V. Bond Evans
Alumax, Inc.
Retired President and CEO
Michael J. Joyce
Pacific Baja Light Metals
Retired President and CEO
Francisco S. Uranga
Foxconn Electronics, Inc.
Corporate Vice President
CORPORATE OFFICERS
Steven J. Borick
Chairman, Chief Executive Officer
and President
Michael J. O’Rourke
Executive Vice President,
Sales, Marketing and Operations
Robert D. Bracy
Senior Vice President, Facilities
Parveen Kakar
Senior Vice President, Corporate
Engineering and Product Development
Kenneth A. Stakas
Senior Vice President,
Manufacturing
Emil J. Fanelli
Chief Financial Officer, Vice President
and Corporate Controller
CORPORATE OFFICERS
(continued)
Razmik R. Perian
Chief Information Officer
Robert A. Earnest
Vice President,
General Counsel and
Corporate Secretary
Stephen H. Gamble
Vice President and
Treasurer
Cameron D. Toyne
Vice President,
Supply Chain Management
PLANT AND SUBSIDIARY
LOCATIONS
Fayetteville, Arkansas
Michael W. Allen
General Manager
Rogers, Arkansas
Robert D. Davis
Plant Manager
Superior Industries
de Mexico, S. de R.L. de C.V.
Gabriel Soto
Vice President,
Mexico Operations
JOINT VENTURE
Suoftec Light Metal Products Production
and Distribution Ltd.
CORPORATE OFFICES
Superior Industries International, Inc.
7800 Woodley Avenue
Van Nuys, California 91406
Phone: 818/ 781.4973
Fax: 818/ 780.3500
www.supind.com
DIVIDEND REINVESTMENT
PLAN, TRANSFER AGENT
AND REGISTRAR
Information about the Company’s Dividend
Reinvestment Plan, a convenient and
economical method of using the dividend to
increase holdings, and any questions about
shareholder accounts should be directed to:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
800/ 368.5948
www.rtco.com
ANNUAL MEETING
The annual meeting of Superior Industries
International, Inc. will be held at 10:00 a.m.
on May 21, 2010 at the:
Airtel Plaza Hotel
7277 Valjean Avenue
Van Nuys, California 91406
SHAREHOLDER
RELATIONS
818/ 902.2701
www.supind.com
Form 10-K Annual Report to the
Securities and Exchange Commission
will be sent free of charge to
shareholders upon written request to:
Shareholder Relations
at the Company’s Corporate Office
INVESTOR RELATIONS
PondelWilkinson, Inc.
1880 Century Park East, Suite 700
Los Angeles, California 90067
310/ 279.5980
AUDITORS
Deloitte & Touche LLP
STOCK EXCHANGE
Superior common stock is listed for trading
on the New York Stock Exchange under the
ticker symbol SUP.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
7800 Woodley Avenue
Van Nuys, California 91406
Tel: 818-781-4973
Fax: 818-780-3500
www.supind.com