Two Thousand Fifteen
ANNUAL REPORT
Dear Fellow Shareholders:
2015 was an encouraging year for our Company. In many ways I consider our journey as just beginning,
but I am pleased with the progress we have made on our five key strategic priorities: 1) Improving Our
Global Competitiveness, 2) Expanding Our Process and Product Innovation and Technology, 3)
Evaluating Opportunities for Growth and Value Creation, 4) Balancing Our Capital Allocation, and 5)
Improving Our Investor Communication.
Improving Our Global Competitiveness
In late 2014, we opened our new manufacturing plant in Mexico and began production of basic wheel
models. Throughout 2015, we successfully ramped up the facility to manufacture our full range of wheel
designs, and by year end achieved our objective of running the plant at its full production capacity. This
investment, along with the improved finishing capabilities we’ve added in Mexico and many other
operational enhancements made throughout our other facilities, drove earnings per share growth of
176%, and adjusted EBITDA growth of 36%, despite flat unit volumes. Our solid execution also allowed
us to achieve our stated goal of double-digit EBITDA margin as a percentage of net sales in 2015, two
years ahead of our plan.
In November of 2015, we completed the relocation of our corporate headquarters from Van Nuys,
California to Southfield, Michigan. Our new location’s close proximity to our customers has already
strengthened many of our customer relationships, while allowing us to better showcase our next
generation products.
Additionally in 2015, we drove higher levels of operating efficiencies throughout the business, with the
implementation and ongoing roll-out of more effective and efficient processes. These include, the opening
of our new Shared Services Center in Mexico, which centrally locates key support functions and enables
the sharing of best practices, the rollout of an enhanced project management system to assist in
managing the ever increasing complexity of design and launch of new products, implementation of a new
performance management system that will sharpen the standards by which our productivity is measured,
and in the fourth quarter, the rollout of a tax restructuring plan that will reduce our effective tax rate going
forward.
As we enter 2016, we remain focused on further strengthening our manufacturing platform and driving
increased operating efficiencies through best-in-class processes. In just the first quarter, we expect to
complete the expansion of our newest Mexico facility, which will increase our production capacity by
500,000 wheels, allowing us to efficiently meet elevated customer demand. We also expect to make
further progress toward a 24/7 manufacturing schedule, complete the ramp-up of our Mexican finishing
facility, and by year end complete the rollout our new ERP system, providing us with improved analytical
tools to better manage our business.
Expanding Our Process and Product Innovation and Technology
Over the past year, we have made significant advances in the quality, selection, and innovation of our
products, such as the patent of a new lighter weight wheel design. We believe this is further differentiating
us from our competitors. As we look ahead, we will continue to bring innovative wheel styles to our
customers through targeted investments in R&D and further enhancements to our wheel finishing
capabilities.
As our business becomes increasingly complex with customers requiring more differentiated wheels, this
necessitates an ever more advanced and flexible manufacturing platform. We believe our aforementioned
investments, along with our strengthened management team and systems position us to capitalize on this
trend and will drive unit volume growth with a more favorable mix of products.
Evaluating Opportunities for Growth and Value Creation
We ended the year with a debt-free balance sheet and $53.0 million of cash and short-term investments.
Our strong balance sheet places us in an excellent position to reinvest in our business and enhance our
capabilities while at the same time explore strategies to increase shareholder value through acquisitions,
joint ventures, or other equity investments. As we have in the past, we continue to actively look at the
range of alternatives where we can deploy our resources most effectively through both organic and
inorganic growth opportunities.
Balancing Our Capital Allocation
We have remained committed to maintaining a balanced approach to capital allocation with respect to
returning cash to our shareholders. In 2015, we returned $38.7 million to our shareholders through share
repurchases and dividends. We also recently announced a new $50.0 million share repurchase program
and began repurchasing additional shares in February 2016. We will continue to opportunistically
repurchase shares while evaluating the relative attractiveness of other capital allocation alternatives.
Improving Our Investor Communication
During 2015, we significantly improved the Company’s investor outreach, having met with nearly 100
current and potential institutional investors on non-deal roadshows and through presentations and
meetings at numerous industry investor conferences. Our increased visibility among equity analysts was
underscored by the initiation of research coverage by an additional sell-side equity analyst in 2015,
adding to our already meaningful institutional research coverage. We believe that our efforts in this area
are important to reaching new investors and conveying our strong investment thesis.
Moving Forward in 2016 and Beyond
Despite our progress and achievements in 2015, we believe there remains significant opportunity to grow
revenue, increase profitability, and improve cash flow by actively partnering with our customers and
continuing to drive efficiency through our operations.
On behalf of the management team and Board of Directors, I want to thank our employees who are at the
core of our success and our loyal customers for the continued trust they place in us. I also want to thank
you, our shareholders, for your support as we continue to make progress on our journey towards
significant and sustainable value creation.
We look forward to continued success in 2016.
Sincerely,
Don Stebbins
President and Chief Executive Officer
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, 2015
Commission file number: 1-6615
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
95-2594729
(I.R.S. Employer Identification No.)
26600 Telegraph Road, Suite 400
Southfield, Michigan
(Address of Principal Executive Offices)
48034
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (248) 352-7300
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 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. Yes [X] No [ ]
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 [X] No [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) 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. [X]
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 $0.01 par value common equity held by non-affiliates as of the last business day of the
registrant’s most recently completed second quarter was $499,546,000, based on a closing price of $18.69. On March 4, 2016, there were
25,436,582 shares of common stock issued and outstanding.
Portions of the registrant’s 2016 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
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.
Executive Officers of the Registrant.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Selected Financial Data.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
Directors, Executive Officers and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accountant Fees and Services.
Exhibits and Financial Statement Schedules.
Valuation and Qualifying Accounts.
PAGE
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S-1
PART I
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 4A
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
PART III
Item 10
Item 11
Item 12
Item 13
Item 14
PART IV
Item 15
Schedule II
SIGNATURES
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our
behalf. We have included or incorporated by reference in this Annual Report on Form 10-K (including in the sections entitled
"Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations"), and from time
to time our management may make, statements that may constitute “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements
are based upon management's current expectations, estimates, assumptions and beliefs concerning future events and conditions
and may discuss, among other things, anticipated future performance (including sales and earnings), expected growth, future
business plans and costs and potential liability for environmental-related matters. Any statement that is not historical in nature is
a forward-looking statement and may be identified by the use of words and phrases such as “expects,” “anticipates,” “believes,”
“will,” “will likely result,” “will continue,” “plans to” and similar expressions. These statements include our belief and statements
regarding general automotive industry and market conditions and growth rates, as well as general domestic and international
economic conditions.
Readers are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements are necessarily
subject to risks, uncertainties and other factors, many of which are outside the control of the company, which could cause actual
results to differ materially from such statements and from the company's historical results and experience. These risks, uncertainties
and other factors include, but are not limited to those described in Part I - Item 1A - Risk Factors and Part II - Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K and elsewhere
in the Annual Report and those described from time to time in our future reports filed with the Securities and Exchange Commission.
Readers are cautioned that it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect
future results and that the risks described herein should not be considered to be a complete list. Any forward-looking statement
speaks only as of the date on which such statement is made, and the company undertakes no obligation to update or revise any
forward-looking statement, whether as a result of new information, future events or otherwise.
Table of Contents
ITEM 1 - BUSINESS
Description of Business and Industry
PART I
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 wheels for sale to original equipment manufacturers ("OEMs").
We are one of the largest suppliers of cast aluminum wheels to the world's leading automobile and light truck manufacturers, with
wheel manufacturing operations in the United States and Mexico. Products made in our North American facilities are delivered
primarily to automotive assembly operations in North America for global OEMs. Our OEM aluminum wheels primarily are sold
for factory installation, as either optional or standard equipment, on many vehicle models manufactured by BMW, Fiat Chrysler
Automobiles N.V. ("FCA"), Ford, General Motors ("GM"), Mitsubishi, Nissan, Subaru, Tesla, Toyota and Volkswagen.
We have gone through a transformation over the last several years as we have shifted our manufacturing base from higher cost to
lower cost sources. With the diversification and increased demands for more customized premium wheels, we have made
investments in engineering and design. With these investments, we are enhancing our capabilities to become a leader in premium
wheels. We have doubled the wheel finishes that we offer in the last couple of years and we have developed patents, which is all
part of our strategic evolution to become a competitive full line manufacturer of aluminum wheels. Another part of our evolution
was to move our corporate office to Southfield, Michigan to be closer to many of our customers so we can further strengthen
relationships and partner with them to design world class products. We have made significant strides with our customers over the
last year as evidenced by receiving the 2015 supplier of the year award from GM. With the addition of our new facility in Mexico
we have expanded our manufacturing capacity to allow for growth in the next couple of years. We continue to explore and
implement operating improvements to further expand manufacturing capacity with relatively low capital investment. We are also
investigating acquisition opportunities to further enhance the value and drive the growth of our business. The charts below show
our major customers and our manufacturing capacity by headcount split between lower cost and higher cost sourced labor.
Our industry is mainly driven by production levels in North America and to a much lesser extent in South America. The North
American production level, in 2015, was 17.4 million vehicles, a 3 percent, or 0.5 million unit, increase over 2014. We track
annual production rates based on information from Ward's Automotive Group. The North American annual production levels of
automobiles and light-duty trucks (including SUV's, vans and "crossover vehicles") continue the trend of growth since the 2009
recession. Current economic conditions, low consumer interest rates and relatively inexpensive gas prices have been generally
supportive of market growth and, in addition, the relatively high average age of vehicles on the road appears to be contributing
to higher rates of vehicle replacement. It was reported in 2015 that the average age of all light vehicles in the U.S. increased to
an all-time high of 11.5 years, according to IHS Automotive.
In 2014, production of automobiles and light-duty trucks in North America reached 16.9 million units, an increase of 5 percent
over 2013. Production in 2013 reached 16.1 million units, an increase of 0.7 million, or 5 percent, from 15.4 million vehicles in
2012.
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We were initially incorporated in Delaware in 1969 and reincorporated in California in 1994. In 2015, we moved our
headquarters from Van Nuys, California to Southfield, Michigan and reincorporated in Delaware in 2015. Our stock is traded
on the New York Stock Exchange under the symbol "SUP."
Raw Materials
The raw materials used in manufacturing our products are readily available and are obtained through numerous suppliers with
whom we have established trade relations. We purchase aluminum for the manufacture of our aluminum wheels, which accounted
for the vast majority of our total raw material requirements during 2015. The majority of our aluminum requirements are met
through purchase orders with certain major producers, with physical supply coming from North American locations. 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 2015, we were able to successfully secure aluminum commitments from our primary suppliers to meet production
requirements and we anticipate being able to source aluminum requirements to meet our expected level of production in 2016.
We procure other raw materials through numerous suppliers with whom we have established trade relationships.
When market conditions warrant, we also may enter into purchase commitments to secure the supply of certain commodities used
in the manufacture of our products, such as aluminum, natural gas and other raw materials. We had purchase commitments for
the delivery of natural gas through the end of 2015. These natural gas contracts were considered to be derivatives under U.S.
generally accepted accounting principles ("GAAP"), and when entering into these contracts, it was expected that we would take
full delivery of the contracted quantities of natural gas over the normal course of business. Accordingly, at inception, these contracts
qualified for the normal purchase, normal sale ("NPNS") exemption provided under U.S. GAAP.
Customer Dependence
We have proven our ability to be a consistent producer of high 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, design, 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, Toyota and FCA were our only customers individually accounting for more than 10 percent of our consolidated trade
sales. Net sales to these customers in 2015, 2014 and 2013 were as follows (dollars in millions):
Ford
GM
Toyota
FCA
2015
2014
2013
Percent of
Net Sales
44%
24%
14%
8%
Dollars
$315.1
$175.6
$104.5
$56.3
Percent of
Net Sales
44%
24%
12%
10%
Dollars
$321.6
$175.8
$88.3
$72.0
Percent of
Net Sales
45%
24%
12%
10%
Dollars
$349.7
$186.4
$92.1
$78.1
The loss of all or a substantial portion of our sales to Ford, GM, Toyota or FCA would have a significant adverse effect on our
financial results. See also Item 1A - Risk Factors of this Annual Report.
Foreign Operations
We manufacture a significant portion of our products in Mexico that are sold both in the United States and Mexico. Net sales of
wheels manufactured in our Mexico operations in 2015 totaled $550.7 million and represented 76 percent of our total net sales.
The portion of our products produced in Mexico versus the United States will increase in 2016, as we expect to achieve full
commercial production at a new wheel plant in Mexico for most of 2016. Net property, plant and equipment used in our operations
in Mexico totaled $190.4 at December 31, 2015, including $112.2 million related to our recently completed wheel plant. The
overall cost for us to manufacture wheels in Mexico currently is lower than the cost to manufacture wheels in the U.S., in particular,
because of reduced labor cost due to lower prevailing wage rates. Such current advantages to manufacturing our product in Mexico
can be affected by changes in cost structures, trade protection laws, policies and other regulations affecting trade and investments,
social, political, labor, or general economic conditions in Mexico. Other factors that can affect the business and financial results
of our Mexican operations include, but are not limited to, valuation of the peso, availability and competency of personnel and tax
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regulations in Mexico. See also Item 1A- Risk Factors - International Operations and Item 1A - Risk Factors - Foreign Currency
Fluctuations.
Net Sales Backlog
We receive OEM purchase orders to produce aluminum wheels typically for multiple model years. These purchase orders are
typically for one year for vehicle wheel programs that usually last three to five years. We manufacture and ship based on customer
release schedules, normally provided on a weekly basis, which can vary in part due to changes in demand, industry and/or customer
maintenance cycles, new program introductions or dealer inventory levels. Accordingly, even though customer purchase orders
cover multiple model years, our management does not believe that our firm backlog is a meaningful indicator of future operating
results.
Competition
Competition in the market for aluminum wheels is based primarily on price, technology, quality, delivery and overall customer
service. We are one of the leading suppliers of aluminum wheels for OEM installations in the world, and are the largest producer
in North America. We currently supply approximately 20 percent of the aluminum wheels installed on passenger cars and light-
duty trucks in North America. Competition is global in nature with growing exports from Asia into North America. There are
several competitors with facilities in North America but we have more than twice the North American production capacity of any
competitor based on our current estimation. See also Item 1A - Risk Factors of this Annual Report. Other types of road wheels,
such as those made of steel, also compete with our products. According to Ward's Automotive Group, the aluminum wheel
penetration rate on passenger cars and light-duty trucks in the U.S. was 79 percent for the 2015 model year and 81 percent for the
2014 model year, compared to 80 percent for the 2013 model year. We expect the ratio of aluminum to steel wheels to remain
relatively stable. However, several factors can affect this rate including price, fuel economy requirements and styling preference.
Although aluminum wheels currently are more costly than steel, aluminum is a lighter material than steel, which is desirable for
fuel efficiency and generally viewed as aesthetically superior to steel, and thus more desirable to the OEMs and their customers.
Research and Development
Our policy is to continuously review, improve and develop our engineering capabilities to satisfy our customer requirements 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 sales center at our corporate headquarters in Southfield, Michigan that maintains a complement of engineering staff
centrally located near some of our largest customers' headquarters and 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 our consolidated income statements. Amounts expended on research and development costs during each of the last
three years were $2.6 million in 2015; $4.4 million in 2014; and $4.8 million in 2013.
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 in material compliance with all presently applicable standards. However, costs related to environmental
protection may grow due to increasingly stringent laws and regulations. The cost of environmental compliance was approximately
$0.7 million in 2015; $0.4 million in 2014; and $0.5 million in 2013. We expect that future environmental compliance expenditures
will approximate these levels and will not have a material effect on our consolidated financial position. Furthermore, 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 products. See also Item 1A - Risk Factors - Environmental Matters of this Annual Report.
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Employees
As of December 31, 2015, we had approximately 3,050 full-time employees compared to approximately 3,000 employees at
December 31, 2014. None of our employees are covered by a collective bargaining agreement.
Fiscal Year End
Our fiscal year is the 52- or 53-week period ending generally on the last Sunday of the calendar year. The fiscal years 2015, 2014
and 2013 comprised the 52-week periods ended on December 27, 2015, December 28, 2014 and December 29, 2013, 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.
Segment Information
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 5 - Business Segments in Notes to Consolidated Financial Statements
in Item 8 - Financial Statements and Supplementary Data of this Annual Report.
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.
Available Information
Our Annual Report on Form 10-K, quarterly reports on Form 10-Q and any amendments thereto are available, without charge, on
or through our website, www.supind.com, under “Investors,” 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 "Investor," is our Code of Conduct, 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 Conduct are also available, without
charge, upon request from Superior Industries International, Inc., Shareholder Relations, 26600 Telegraph Road, Suite 400,
Southfield, MI 48034.
The content on any website referred to in this Annual Report on Form 10-K is not incorporated by reference in this Annual Report
on Form 10-K unless expressly noted.
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 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.
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
business encounters can also be found in the MD&A section and in the business description in Item 1 - Business of this Annual
Report. Below, we have described our present view of the most significant 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.
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Risks Relating To Our Company
The automotive industry is cyclical and volatility in the automotive industry could adversely affect our financial performance.
The majority of our sales are made in domestic U.S. markets and almost exclusively within North America. Therefore, our financial
performance depends largely on conditions in the U.S. automotive industry, which in turn can be affected significantly by broad
economic and financial market conditions. Consumer demand for automobiles is subject to considerable volatility as a result of
consumer confidence in general economic conditions, levels of employment, prevailing wages, fuel prices and the availability and
cost of consumer credit. With steady improvement in the North American automotive industry since the global recession that
began in 2008, vehicle production levels in 2015 reached the highest level in the last decade. However, there can be no guarantee
that the improvements in recent years will be sustained or that reductions from current production levels will not occur in future
periods. Demand for aluminum wheels can be further affected by other factors, including pricing and performance comparisons
to competitive materials such as steel. Finally, the demand for our products is influenced by shifts of market share between vehicle
manufacturers and the specific market penetration of individual vehicle platforms being sold by our customers.
A limited number of customers represent a large percentage of our sales. The loss of a significant customer or decrease in demand
could adversely affect our operating results.
Ford, GM, Toyota and FCA, together represented approximately 90 percent of our total wheel sales in 2015. Our OEM customers
are not required to purchase any minimum amount of products from us. Increasingly global procurement practices, the pace of
new vehicle introduction and demand for price reductions may make it more difficult to maintain long-term supply arrangements
with our customers, and there are no guarantees that we will be able to negotiate supply arrangements with our customers on terms
acceptable to us in the future. The contracts we have entered into with most of our customers provide that we will manufacture
wheels for a particular vehicle model, rather than manufacture 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 consumer 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 adversely affect our results of operations and
financial condition.
Our new operations at a recently constructed facility in Mexico may not achieve the expected benefits.
In anticipation of continued growth in demand for aluminum wheels in the North American market, we constructed a new
manufacturing facility in Mexico. Initial commercial production at this facility began in early 2015. The new manufacturing
facility entails a number of risks, including the ability to ramp-up commercial production within the cost and time-frame estimated
and to attract a sufficient number of skilled workers to meet the needs of the new facility. Additionally, our assessment of the
projected benefits associated with the construction of a new manufacturing facility is subject to a number of estimates and
assumptions, including future demand for our products, which in turn are subject to significant economic, competitive and other
uncertainties that are beyond our control. Operating results could be unfavorably impacted by start-up costs until production levels
at the new facility reach planned levels. Additionally, our overall ability to increase total company revenues in the future can be
affected by factors affecting the volume of products manufactured at our existing factories.
We experience continual pressure to reduce costs.
The vehicle market is highly competitive at the OEM level, which drives continual cost-cutting initiatives by our customers.
Customer concentration, relative supplier fragmentation and product commoditization have translated into continual pressure from
OEMs to reduce the price of our products. It is possible that pricing pressures beyond our expectations could intensify as OEMs
pursue restructuring and cost-cutting initiatives. If we are unable to generate sufficient production cost savings in the future to
offset such price reductions, our gross margin, rate of profitability and cash flows could be adversely affected. In addition, changes
in OEMs' purchasing policies or payment practices could have an adverse effect on our business. Our OEM customers typically
attempt to qualify more than one wheel supplier for the programs we participate in and for programs we may bid on in the future.
As such, our OEM customers are able to negotiate favorable pricing or may decrease sales volume. Such actions may result in
decreased sales volumes and unit price reductions for our company, resulting in lower revenues, gross profit, operating income
and cash flows.
We operate in a highly competitive industry.
The automotive component supply industry is highly competitive, both domestically and internationally. Competition is based
on a number of factors, including price, technology, quality, delivery and overall customer service and available capacity to meet
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customer demands. Some of our competitors are companies, or divisions or subsidiaries of companies, which 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 competitors. In particular, our ability to increase manufacturing capacity typically requires significant
investments in facilities, equipment and personnel. Our operating facilities are at full or near to full capacity levels which may
cause us to incur labor costs at premium rates in order to meet customer requirements, experience increased maintenance expenses
or require us to replace our machinery and equipment on an accelerated basis. Furthermore, the nature of the markets in which
we compete has attracted new entrants, particularly from low cost countries. As a result, our sales levels and margins continue to
be adversely affected by pricing pressures reflective of significant competition from producers located in low-cost foreign markets,
such as China. Such competition with lower cost structures poses a significant threat to our ability to compete internationally and
domestically. These factors have led to our customers awarding business 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, develop
products that are superior to our products, have the ability to produce similar products at a lower cost, or adapt more quickly to
new technologies or evolving customer requirements. Consequently, our products may not be able to compete successfully with
competitors' products.
Our international operations make us vulnerable to risks associated with doing business in foreign countries.
We manufacture a substantial portion of our products in Mexico, have a minor investment in a wheel manufacturing company in
India and we sell our products internationally. Accordingly, unfavorable changes in foreign cost structures, trade protection laws,
regulations and policies affecting trade and investments and social, political, labor, or economic conditions in a specific country
or region, among other factors, could have a negative effect on our business and results of operations. Legal and regulatory
requirements differ among jurisdictions worldwide. Violations of these laws and regulations could result in fines, criminal sanctions,
prohibitions on the conduct of our business, and damage to our reputation. Although we have policies, controls, and procedures
designed to ensure compliance with these laws, our employees, contractors, or agents may violate our policies.
Fluctuations in foreign currencies may adversely impact our financial condition.
Due to the growth of our operations outside of the United States, we have experienced increased exposure to 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
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 foreign currencies may be used, in part, to service our U.S. dollar-denominated liabilities,
or vice versa.
In addition, due to customer requirements, we have experienced a significant shift in the currency denominated in our contracts
with our customers. As a result of this change, we currently project that in 2016 and beyond the vast majority of our revenues
will be denominated in the US dollar, rather than a more balanced mix of U.S. dollar and Mexican peso. In the past we have relied
upon significant revenues denominated in the Mexican peso to provide a "natural hedge" against foreign exchange rate changes
impacting our peso denominated costs incurred at our facilities in Mexico. Accordingly, the foreign exchange exposure associated
with peso denominated costs is a growing risk and could have a material adverse effect on our operating results.
Fluctuations in foreign currency exchange rates may also 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.
We may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange
risks associated with certain existing assets and liabilities, certain firmly committed transactions and forecasted future cash flows.
We have implemented a program to hedge a portion of our material foreign exchange exposures, typically for up to 36 months.
However, we may choose not to hedge certain foreign exchange exposures for a variety of reasons, including but not limited to
accounting considerations and the prohibitive economic cost of hedging particular exposures. There is no guarantee that our hedge
program will effectively mitigate our exposures to foreign exchange changes which could have material adverse effects on our
cash flows and results of operations.
Increases in the costs and restrictions on availability of raw materials could adversely affect our operating margins and cash flow.
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
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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 certain aluminum cost increases on to 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.
Interruption in our production capabilities could reduce our operating results.
An interruption in production capabilities at any of our facilities as a result of equipment failure, interruption of raw materials 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 and harm our customer relationships. 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 typically do
not hold large inventories. In the event of a production interruption 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 to our customers could be severely
affected. Any significant delay in deliveries to our customers could lead to premium freight costs and other performance penalties,
as well as contract cancellations, and cause us to lose future sales and expose us to other 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
which could have a material adverse effect on our results of operations or financial condition.
Similarly, it also is possible that our customers may experience production delays or disruptions for a variety of reasons, which
could include supply-chain disruption for parts other than wheels, equipment breakdowns or other events affecting vehicle assembly
rates that impact us, work stoppages or slow-downs at factories where our products are consumed, or even catastrophic events
such as fires, disruptive weather conditions or natural disasters. Such disruptions at the customer level may cause the affected
customer to halt or limit the purchase of our products.
Aluminum and alloy pricing may have a material effect on our operating margins and results of operations.
The cost of aluminum is a significant component in the overall cost of a wheel and in our selling prices to OEM customers. The
price for aluminum we purchase is adjusted monthly based primarily on changes in certain published market indices, but the timing
of such adjustments is based on specific customer agreements and can vary from monthly to quarterly. As a result, the timing of
aluminum price adjustments flowing through sales rarely will match the timing of such changes in cost, and can result in fluctuations
to our gross profit. This is especially true during periods of frequent increases or decreases in the market price of aluminum.
The aluminum we use to manufacture wheels also contains additional alloying materials, including silicon. The cost of alloying
materials also is a component of the overall cost of a wheel. The price of the alloys we purchase is also based on certain published
market indices; however, most of our customer agreements do not provide price adjustments for changes in market prices of
alloying materials. Increases or decreases in the market prices of these alloying materials could have a material effect on our
operating margins and results of operations.
Implementing a new enterprise resource planning system could interfere with our business or operations.
We are in the process of implementing a new enterprise resource planning (ERP) system. This project requires a significant
investment of capital and human resources, the re-engineering of many processes of our business, and the attention of many
personnel who would otherwise be focused on other aspects of our business. Should the system not be implemented successfully,
or if the system does not perform in a satisfactory manner once implementation is complete, our business and operations could
be disrupted and our results of operations negatively affected, including our ability to report accurate and timely financial results.
We are from time to time subject to litigation, which could adversely impact our financial condition or results of operations.
The nature of our business exposes 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
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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. 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. We cannot give assurance that any current or future claims will not adversely affect our cash
flows, financial condition or results of operations.
We may be unable to successfully implement cost-saving measures or achieve expected benefits under our plans to improve
operations.
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. 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. Cost reductions may not fully offset decreases in the prices of our products due to
the time required to develop and implement cost reduction initiatives. Additional factors such as inconsistent customer ordering
patterns, increasing product complexity and heightened quality standards are making it increasingly more difficult to reduce our
costs. It is possible that as we incur costs to implement improvement strategies, the impact on our financial position, results of
operations and cash flow may be negative.
We may be unable to successfully launch new products and/or achieve technological advances.
In order to effectively compete in the automotive supply industry, we must be able to launch new products and adopt technology
to meet our customers' demand in a timely manner. However, we cannot ensure that we will be able to install and certify the
equipment needed for new product programs in time for the start of production, or that the transitioning of our manufacturing
facilities and resources 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 the launch of their new product programs on schedule.
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. Further, changes in competitive technologies
may render certain of our products obsolete or less attractive. Our ability to anticipate changes in technology 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.
Our failure to successfully and timely launch new products or adopt new technologies, or a failure by our customers to successfully
launch new programs, could adversely affect our results. 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 subject to various environmental laws
We incur significant costs to comply with applicable environmental, health and safety laws and regulations in the ordinary course
of our business. We cannot ensure that we have been or will be at all times in complete compliance with such laws and regulations.
Failure to be in compliance with such laws and regulations could result in material fines or sanctions. Additionally, changes to
such laws or regulations may have a significant impact on our cash flows, financial condition and results of operations.
We are also 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. 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. 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.
Further, changes in legislation or regulation imposing reporting obligations on, or limiting emissions of greenhouse gases from,
or otherwise impacting or limiting our equipment and operations or from the vehicles that use our products could adversely affect
demand for those vehicles or require us to incur costs to become compliant with such regulations.
We may be unable to attract and retain 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
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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 reduced 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.
Our share repurchase program may limit our flexibility to pursue other initiatives.
Although our existing cash and funds available under our senior secured credit facility are currently adequate to fund our approved
common stock repurchase plan, dedication of our financial resources to the repurchase of outstanding shares will reduce our
liquidity and working capital, which in turn may limit our flexibility to pursue other initiatives to grow our business or to return
capital to our shareholders through other means. After making such expenditures, a significant change in our business, the economy
or an unexpected decrease in our cash flow for any reason could result in the need for additional outside financing.
We may be unable to maintain 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 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. Material weaknesses
or deficiencies may cause our financial statements to contain material misstatements, unintentional errors, or omissions, and late
filings with regulatory agencies may occur.
A disruption in our information technology systems, including a disruption related to cybersecurity, could adversely affect our
financial performance.
A cyber-attack that bypasses our information technology ("IT") security systems causing an IT security breach may lead to a
material disruption of our IT business systems and/or the loss of business information resulting in adverse consequences to our
business, including: an adverse impact on our operations due to the theft, destruction, loss, misappropriation or release of
confidential data or intellectual property, operational or business delays resulting from the disruption of IT systems and subsequent
clean-up and mitigation activities, an inability to timely prepare and file our financial reports with the Securities Exchange
Commission and negative publicity resulting in reputation or brand damage with our customers, partners or industry peers.
We may be unable to successfully achieve expected benefits from our joint ventures or acquisitions.
As we continue to expand globally, we have engaged, and may continue to engage, in joint ventures and we may pursue acquisitions
that involve potential risks, including failure to successfully integrate and realize the expected benefits of such joint ventures or
acquisitions. Integrating acquired operations is a significant challenge and there is no assurance that we will be able to manage
the integrations successfully. Failure to successfully integrate operations or to realize the expected benefits of such joint ventures
or acquisitions may have an adverse impact on our results of operations and financial condition.
ITEM 1B - UNRESOLVED STAFF COMMENTS
None.
ITEM 2 - PROPERTIES
Our worldwide headquarters is located in Southfield, Michigan. We currently maintain and operate a total of five facilities that
manufacture aluminum wheels for the automotive industry. Four of these five facilities are located in Chihuahua, Mexico and
one facility is located in Fayetteville, Arkansas. One of the facilities in Chihuahua, Mexico is new, with construction completed
in 2014. The new facility also produces aluminum wheels for the automotive industry, and production levels reached initial rated
capacity in the fourth quarter of 2015. An expansion to this facility is in the process of being installed and is expected to be
completed during the first quarter of 2016. Excluding the Rogers, Arkansas location which was closed in 2014, the five active
facilities encompass 2,540,000 square feet of manufacturing space. We own all of our manufacturing facilities, and we lease one
warehouse in Rogers, Arkansas and our worldwide headquarters located in Southfield, Michigan.
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In general, our manufacturing facilities, which have been constructed at various times over the past several years, are in good
operating condition and are adequate to meet our current production 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
maintain factory reliability and remain technologically competitive on a worldwide basis.
Additionally, reference is made to Note 1 - Summary of Significant Accounting Policies, Note 8 - Property, Plant and Equipment
and Note 11 - Leases and Related Parties, in Notes to the Consolidated Financial Statements in Item 8 - Financial Statements and
Supplementary Data of this Annual Report.
ITEM 3 - LEGAL PROCEEDINGS
We are party to various legal and environmental proceedings incidental to our business. Certain claims, suits and complaints
arising in the ordinary course of business have been filed or are pending against us. Based on facts now known, 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. See also under Item 1A - Risk
Factors - Legal Proceedings of this Annual Report.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers who are also Directors is contained in our 2016 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 2016 Annual Proxy Statement, which is incorporated herein by reference.
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Listed below are the name, age, position and business experience of each of our officers, as of the filing date, who are not directors:
Age
Position
Assumed
Position
2015
2014
2011
2008
2014
2008
2003
2015
2014
2011
2009
2010
2010
2006
2014
2013
2009
Name
Scot S. Bowie
Parveen Kakar
Lawrence R. Oliver
42
49
51
Vice President and Corporate Controller
Corporate Controller, Black Diamond Equipment.
Chief Accounting Officer, Affinia Group Inc.
Corporate Controller of External Reporting, Affinia
Group Inc.
Senior Vice President
Sales, Marketing and Product Development
Senior Vice President, Corporate Engineering and
Product Development
Vice President, Program Development
Senior Vice President, Manufacturing Operations
Vice President, Operations, GAF Materials
Corporation
Vice President, Operations & Integrated Supply
Chain, Ingersoll Rand PLC
General Manager and Director of Texas Operations,
Residential, Commercial Water, ITT Corporation
Kerry A. Shiba
61
Executive Vice President and Chief Financial Officer
Director - Ramsey Industries, LLC, a manufacturer of
winches, truck mounted cranes and industrial drives
Senior Vice President and Chief Financial Officer -
Remy International, a manufacturer of electrical
automotive components
James F. Sistek
52
Senior Vice President, Business Operations
and Systems
Chief Executive Officer and Founder - Infologic, Inc.
Vice President, Shared Services and Chief
Information Officer - Visteon Corporation
11
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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 417 shareholders of record
and 25.4 million shares issued and outstanding as of March 4, 2016.
2011
2012
2013
2014
2015
Russel 2000
Proxy Peers
$
$
$
$
$
96
111
155
162
155
$
$
$
$
$
77
87
140
144
142
Superior
Industries
International, Inc.
80
$
106
108
107
104
$
$
$
$
12
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Dividends
Per share cash dividends declared totaled $0.72 during 2015 and 2014. Dividends declared and paid in 2013 totaled $0.20 per
share and excluded an accelerated payment of the 2013 regular cash dividend that was paid in December 2012 equal to $0.16 per
share. In the third quarter of 2013, the Board of Directors approved a $0.02 increase in the company's quarterly dividend to $0.18
per share from $0.16 per share, or on an annualized basis to $0.72 per share from $0.64 per share. Continuation of 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 sales price per share of our common stock during the fiscal periods indicated.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2015
2014
High
Low
High
Low
$
$
$
$
20.12
19.68
20.22
20.45
$
$
$
$
17.63
18.17
16.60
17.75
$
$
$
$
20.75
21.77
20.97
20.25
$
$
$
$
16.89
18.82
17.94
17.04
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On March 27, 2013, our Board of Directors approved a new stock repurchase program (the "2013 Repurchase Program") authorizing
the repurchase of up to $30.0 million of our common stock. Through December 31, 2014, we repurchased and retired 1,510,759
shares under the program at a total cost of $30.0 million under the 2013 Repurchase Program.
In October 2014, our Board of Directors approved a new stock repurchase program (the "2014 Repurchase Program") authorized
the repurchase of up to $30.0 million of our common stock. Under the 2014 Repurchase Program, we repurchased common stock
from time to time on the open market or in private transactions, totaling 1,056,954 shares of company stock at a cost of $19.6
million in 2015 and 585,970 shares for $10.3 million in January 2016.
In January of 2016, our Board of Directors approved a new stock repurchase program (the “2016 Repurchase Program”), authorizing
the repurchase of up to an additional $50.0 million of common stock. Under the 2016 Repurchase Program, we may repurchase
common stock from time to time on the open market or in private transactions. The timing and extent of the repurchases under
the 2016 Repurchase Program will depend upon market conditions and other corporate considerations in our sole discretion.
Recent Sales of Unregistered Securities
During the fiscal year 2015, there were no sales of unregistered securities.
In 2015, we withheld 12,260 shares at an average price per share of $19.36 for withholding taxes pertaining to a grant of
common stock and the vesting of shares of restricted stock.
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.
Our fiscal year is the 52- or 53-week period ending generally on the last Sunday of the calendar year. The fiscal years 2015, 2014,
2013 and 2011 comprised the 52-week periods ended on December 27, 2015, December 28, 2014, December 29, 2013, and
December 25, 2011, respectively. The 2012 fiscal year comprised the 53-week period ended December 30, 2012. 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.
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Fiscal Year Ended December 31,
2015
2014
2013
2012
2011
Income Statement (000s)
Net sales
Value added sales (1)
Closure and Impairment Costs (2)
Gross profit
Income from operations
Income before income taxes
and equity earnings
Income tax (provision) benefit (3)
Adjusted EBITDA (4)
Net income
Balance Sheet (000s)
Current assets
Current liabilities
Working capital
Total assets
Long-term debt
Shareholders' equity
Financial Ratios
Current ratio (5)
Return on average shareholders' equity (6)
Share Data
Net income
- Basic
- Diluted
Shareholders' equity at year-end
Dividends declared
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
727,946
360,846
7,984
71,217
36,294
35,283
(11,339)
76,053
23,944
245,820
73,862
171,958
539,929
$
$
$
$
$
$
$
$
$
$
$
$
$
745,447
369,355
8,429
50,222
17,913
15,702
(6,899)
55,753
8,803
276,011
71,962
204,049
579,910
$
$
$
$
$
$
$
$
$
$
$
$
$
789,564
400,591
$
$
821,454
397,915
$
$
822,172
380,120
— $
— $
64,061
34,593
36,841
(14,017)
63,616
22,824
384,218
99,430
284,788
653,388
$
$
$
$
$
$
$
$
$
$
60,607
32,880
34,489
(3,598)
59,599
30,891
404,908
66,578
338,330
599,601
$
$
$
$
$
$
$
$
$
$
1,337
67,060
39,835
41,926
25,243
69,700
67,169
404,283
68,550
335,733
593,231
— $
— $
— $
— $
—
413,912
$
439,006
$
483,063
$
466,905
$
460,515
3.3:1
5.6%
3.8:1
1.9%
3.9:1
4.8%
6.1:1
6.7%
5.9:1
15.4%
0.90
0.90
15.86
0.72
$
$
$
$
0.33
0.33
16.42
0.72
$
$
$
$
0.83
0.83
17.79
0.20
$
$
$
$
1.13
1.13
17.11
1.12
$
$
$
$
2.48
2.46
16.96
0.64
(1) Value added sales is a key measure that is not calculated according to U.S. generally accepted accounting principles (“GAAP”). In the
discussion of operating results, we provide information regarding value added sales. Value added sales represents net sales less the value of
aluminum and services provided by outside service providers that are included in net sales. As discussed further below, arrangements with our
customers allow us to pass on changes in aluminum prices and outside service provider costs; therefore, fluctuations in underlying aluminum
prices and the use of outside service providers generally do not directly impact our profitability. Accordingly, value added sales is worthy of
being highlighted for the benefit of users of our financial statements. Our intent is to allow users of the financial statements to consider our net
sales information both with and without the aluminum and outside service provider cost components thereof. During 2015, we modified the
presentation of value added sales to also exclude third-party manufacturing costs passed directly through to customers and retrospectively applied
this modification to 2011 thru 2014. See the Non-GAAP financial measures section of this annual report for reconciliation of value added sales
to net sales.
(2) See Note 2 - Restructuring in Notes to Consolidated Financial Statements in Item 8 - Financial Statements and Supplementary Data in this
Annual Report for a discussion of restructuring charges. During 2015, we completed the shutdown of the Rogers facility which resulted in a
gross margin loss of $8.0 million. We incurred $4.3 million in restructuring costs related to an impairment of fixed assets and other associated
costs such as asset relocation costs. Additionally, we incurred $2.0 million of further closure costs including carrying costs for the closed facility
and $1.7 million in depreciation. The adjusted EBITDA impact of the Rogers facility closure for 2015 was $6.3 million, which includes the
$4.3 million of restructuring costs and $2.0 million of carrying costs related to the closed facility. The carrying costs for the closed facility are
not included in restructuring line in the Consolidated Income Statements of our Consolidated Financial Statements. During 2014, we had $8.4
million of restructuring costs related to the closure of the Rogers facility.
(3) See Note 10 - Income Taxes in Notes to Consolidated Financial Statements in Item 8 - Financial Statements and Supplementary Data in this
Annual Report for a discussion of material items impacting the 2015, 2014 and 2013 income tax provisions.
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(4) Adjusted EBITDA is a key measure that is not calculated according to GAAP. Adjusted EBITDA is defined as earnings before interest income
and expense, income taxes, depreciation, amortization, restructuring and other closure costs and impairments of long-lived assets and investments.
We use Adjusted EBITDA as an important indicator of the operating performance of our business. We use Adjusted EBITDA in internal forecasts
and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our board of directors
and evaluating short-term and long-term operating trends in our operations. We believe the Adjusted EBITDA financial measure assists in
providing a more complete understanding of our underlying operational measures to manage our business, to evaluate our performance compared
to prior periods and the marketplace, and to establish operational goals. We believe that these non-GAAP financial adjustments are useful to
investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial
and operational decision-making. Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute
for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as
similarly titled measures used by other companies. See the Non-GAAP Financial Measures section of this annual report for a reconciliation of
our Adjusted EBITDA to net income.
(5) The current ratio is current assets divided by current liabilities.
(6) Return on average shareholders' equity is net income 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. This discussion contains forward-looking statements, which involve risks and
uncertainties. For cautions about relying on such forward-looking statements, please refer to the section entitled “Forward Looking
Statements” at the beginning of this Annual Report immediately prior to Item 1. 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.
Executive Overview
Adjusted EBITDA as a percent of value added sales grew to 21.1% in 2015 from 15.1% in 2014 as our initiatives to reduce costs
in the current year and the prior year were realized. During the fourth quarter of 2014, we opened a new facility in Mexico and
closed an older facility in Rogers. We ramped up the new facility to full capacity by the end of 2015. The new facility expands
our capacity to take on new business and includes a state of the art paint facility, which improves our competitive position in higher
value-added products. The transition of unit production to our operations in Mexico after the closure of the Rogers manufacturing
facility and other cost-cutting initiatives resulted in a 14% decrease in manufacturing labor cost per wheel in 2015 when compared
with 2014. The Company continued its strategic initiatives by moving its headquarters to Southfield, Michigan from California.
This move brought all of its corporate departments together in one location, in order to be closer to and better serve its customers.
The total estimated costs related to the relocation were approximately $4 million and were mainly incurred during the third and
fourth quarters of 2015. Excluding the relocation costs, EBITDA as a percent of value added sales would have been 22.2%. The
chart below illustrates the EBITDA margin improvement in the current year.
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We continue to focus on research and development to further customize our products and expand our market share.
We anticipate in 2016 that with our new plant at full capacity for the entire year we will continue to see improvements. During
2015, we completed the shutdown of the Rogers facility, which resulted in a gross margin loss of $8.0 million. We incurred $4.3
million in restructuring costs related to an impairment of fixed assets and other associated costs such as asset relocation costs.
Additionally, we also experienced $2.0 million of further closure costs including inefficiencies and $1.7 million in depreciation.
The adjusted EBITDA impact of the Rogers facility closure for 2015 was $6.3 million, which includes the $4.3 million of
restructuring costs and $2.0 million of inefficiency costs related to the closure.
Overall North American production of passenger cars and light-duty trucks in 2015 was reported by industry publications as being
flat versus 2014, with production of light-duty trucks which includes pick-up trucks, SUV's, vans and "crossover vehicles"--
increasing 5 percent with production of passenger cars decreasing 1 percent. Current production levels of the North American
automotive industry now have reached the highest level in the past decade. Results for 2015, 2014 and 2013 reflect the continuing
trend of growth since the 2009 recession. Current economic conditions and low consumer interest rates have been generally
supportive of market growth and, in addition, the continuing high levels in the average age of vehicles on the road appears to be
contributing to higher rates of vehicle replacement.
Net sales in 2015 decreased $17.5 million to $727.9 million from $745.4 million in 2014. Wheel sales in 2015 decreased $15.4
million to $721.1 million from $736.5 million in 2014, while our wheel unit shipments increased 0.1 million to 11.2 million in
2015. Value added sales in 2015 decreased $8.6 million to $360.8 million from $369.4 million in 2014. See the Non-GAAP
Financial Measures section of this annual report for a reconciliation of value added sales to net sales.
Gross profit in 2015 was $71.2 million, or 10 percent of net sales, compared to $50.2 million, or 7 percent of net sales, in 2014. Net
income for 2015 was $23.9 million, or $0.90 per diluted share, including income tax expense of $11.3 million, compared to net
income in 2014 of $8.8 million, or $0.33 per diluted share, which included an income tax expense of $6.9 million. Net income
as a percentage of net sales was 3 percent in 2015, as compared to 1 percent in 2014. Adjusted EBITDA as a percentage of value
added sales in 2015 was 21 percent, as compared to 15 percent in 2014. See the Non-GAAP Financial Measures section of this
annual report for a reconciliation of Adjusted EBITDA to net income, and value added sales to net sales.
The comparisons below of 2015 and 2014 operating results reflect higher margins due primarily to the impacts of the company’s
cost reduction efforts. The comparisons below of 2014 and 2013 operating results reflect the impact of costs in 2014 totaling
$12.2 million ($8.6 million after tax, or $0.32 per share) associated with several items including the closure of our Rogers facility,
the sale of the company's two aircraft and the impairment of an investment in an unconsolidated subsidiary located in India.
Adjustments for the Rogers facility closure reduced gross profit $8.4 million, while adjustments for the aircraft added charges
totaling $1.3 million in SG&A and a $2.5 million impairment charge for the investment in the unconsolidated Indian subsidiary
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is included in other income (expense). Lower costs in 2013 resulted from several factors including improved equipment and
manufacturing process reliability as a result of capital reinvestment and more rigorous maintenance programs.
We continue to focus on programs to reduce costs overall through improved operational and procurement practices, capital
reinvestment and more rigorous factory maintenance to improve equipment reliability. These investments typically consisted of
equipment upgrades and other capital projects focused on improving equipment reliability, increasing production efficiency and
enhancing manufacturing process control to better accommodate newer, more complex wheel programs. While our capital
investment projects decreased in 2015 following significant increases in 2014 and 2013 resulting from the construction of the new
plant in Mexico, it is possible that capital expenditure levels will continue at 2015 levels as we continue to focus on achieving
further improvement to operational efficiencies and manufacturing process capability.
We announced in 2013 our plans to build a new manufacturing facility in Mexico. Initial commercial production began the first
quarter of 2015 and reached initial rated capacity during the fourth quarter. We began a project to expand production capacity at
this facility which we expect to be completed during the first quarter of 2016. The total costs incurred to date were $132.7 million
of which $127.0 million related to the initial rated capacity of the new facility and $5.7 million related to the expansion.
Committed to enhance shareholder value, in March 2013, our Board of Directors approved the 2013 Repurchase Program,
authorizing the repurchase of up to $30.0 million of our common stock. Under the 2013 Repurchase Program we repurchased
1,510,759 shares of company stock at a cost of $30.0 million of which 1,089,560 shares were repurchased for $21.8 million in
2014. In October 2014, our Board of Directors approved the 2014 Repurchase Program, authorizing the repurchase of up to $30.0
million of our common stock. Under the 2014 Repurchase Program, we repurchased 1,056,954 shares of company stock at a cost
of $19.6 million in 2015 and 585,970 shares for $10.3 million in January 2016. In January of 2016, our Board of Directors approved
the 2016 Repurchase Program, authorizing the repurchase of up to $50.0 million of common stock.
We established a senior secured revolving credit facility in December 2014. The facility provides an initial aggregate principal
amount of $100.0 million. In addition, the company is entitled to request, under the terms and conditions of the agreement, an
increase in the aggregate revolving commitments under the facility or to obtain incremental term loans in an aggregate amount
not to exceed $50.0 million, which currently is uncommitted to by any lenders. At December 31, 2015, we had no borrowings
under the facility.
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
Value added sales (1)
Gross profit
Percentage of net sales
Income from operations
Percentage of net sales
Adjusted EBITDA (2)
Percentage of net sales (3)
Percentage of value added sales (4)
Net income
Percentage of net sales
Diluted earnings per share
2015
2014
2013
$
$
$
$
$
$
$
727,946
360,846
71,217
9.8%
36,294
5.0%
76,053
10.4%
21.1%
23,944
3.3%
0.90
$
$
$
$
$
$
$
745,447
369,355
50,222
6.7%
17,913
2.4%
55,753
7.5%
15.1%
8,803
1.2%
0.33
$
$
$
$
$
$
$
789,564
400,591
64,061
8.1%
34,593
4.4%
63,616
8.1%
15.9%
22,824
2.9%
0.83
(1) Value added sales represents net sales less the value of aluminum and other charges passed through to customers included in net sales.
As discussed further below, arrangements with our customers generally allow us to pass on changes in aluminum prices and charges for outside
service providers (OSP’s); therefore, fluctuations in underlying aluminum price and services provided by OSP’s generally do not directly impact
our profitability. Accordingly, we believe value added sales may provide an additional perspective that may benefit users of our financial
statements and their understanding of factors affecting net sales. Our intent is to allow users of the financial statements to consider our net sales
information both with and without the aluminum and OSP cost component thereof. See the Non-GAAP Financial Measures section of this
annual report for a reconciliation of value added sales to net sales.
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(2) Adjusted EBITDA is defined as earnings before interest income and expense, income taxes, depreciation, amortization, restructuring charges
and other closure costs and impairments of long-lived assets and investments. We use Adjusted EBITDA as an important indicator of the operating
performance of our business. We use Adjusted EBITDA in internal financial forecasts and models when establishing internal operating budgets,
supplementing the financial results and forecasts reported to our board of directors, evaluating short-term and long-term operating trends in our
operations and as a key measure for compensation plans. We believe the Adjusted EBITDA financial measure assists in providing a more complete
understanding of our underlying operational measures to manage our business, to evaluate our performance compared to prior periods and the
marketplace, and to establish operational goals. We believe that these non-GAAP financial adjustments are useful to investors because they allow
investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-
making. See the Non-GAAP Financial Measures section of this annual report for a reconciliation of our Adjusted EBITDA to net income.
(3) Adjusted EBITDA: Percentage of net sales is a key measure that is not calculated according to GAAP. Adjusted EBITDA as a percentage
of net sales is defined as Adjusted EBITDA divided by net sales. See the Non-GAAP Financial Measures section of this annual report for a
reconciliation of Adjusted EBITDA.
(4) Adjusted EBITDA: Percentage of value added sales is a key measure that is not calculated according to GAAP. Adjusted EBITDA as a
percentage of value added sales is defined as Adjusted EBITDA divided by value added sales. See the Non-GAAP Financial Measures section
of this annual report for a reconciliation of Adjusted EBITDA and value added sales.
2014 Restructuring Actions and Ongoing Cost
During the third quarter of 2014, we completed a review of initiatives to reduce costs and enhance our competitive position. Based
on this review, we committed to a plan to close operations at our Rogers, Arkansas facility, which was completed during the fourth
quarter of 2014. The closure resulted in a reduction of workforce of approximately 500 employees and a shift in production to
other facilities. In addition, other measures were taken to reduce costs, including the sale of the company's two aircraft. The
results for 2014 reflect the impacts of costs totaling $9.7 million ($6.1 million after tax) related to these actions, including costs
associated with the closure of our Rogers facility affecting gross profit totaling $8.4 million, charges totaling $1.3 million in SG&A
for the write-down of the carrying value of an aircraft we sold in 2015 and a small loss on the sale of our second aircraft.
Cost of sales in 2014 includes $5.4 million of depreciation accelerated due to shortened useful lives for assets abandoned when
operations ceased at the Rogers facility.
As noted above, the operations ceased at the Rogers facility in the third quarter of 2014. The property is currently held for sale
at the current carrying value of the land and building of $2.9 million.
One-time employee severance benefits, equipment lease termination costs, inventory write-downs and other costs related to the
Rogers plant closure of $3.1 million in total was recorded in 2014. Within the total 2014 charge, costs for one-time employee
severance benefits totaled $1.8 million and were included in cost of sales. These one-time employee severance benefits were
derived from the individual agreements with each employee and were accrued ratably over the related remaining service period.
During 2015, we completed the shutdown of the Rogers facility which resulted in a gross margin loss of $8.0 million. We incurred
$4.3 million in restructuring costs related to an impairment of fixed assets and other associated costs such as asset relocation costs.
Additionally, we also experienced $2.0 million of further carrying costs associated with the closed facility and $1.7 million in
depreciation. The adjusted EBITDA impact of the Rogers facility closure for 2015 was $6.3 million.
The total cost expected to be incurred as a result of the Rogers facility closure is $15.6 million, of which $4.1 million is
expected to be paid in cash. As of December 31, 2015, estimated remaining cash payments total $0.4 million.
Net Sales
2015 versus 2014
Net sales in 2015 decreased $17.5 million to $727.9 million from $745.4 million in 2014. Wheel sales in 2015 decreased $15.4
million to $721.1 million from $736.5 million in 2014. Wheel shipments increased by 1 percent in 2015 compared to 2014 with
the higher volume resulting in $6.7 million higher sales compared to 2014. Net sales were unfavorably impacted by a decline in
the value of the aluminum component of sales which we generally pass through to our customers and resulted in $11.3 million
lower revenues. The average selling price of our wheels decreased 2 percent as the unfavorable impact of the decline in aluminum
value and the mix of wheel sizes and finishes sold was offset partially by a favorable change in the volume of wheels sold. Decreases
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in unit shipments to FCA, BMW, Mitsubishi, Nissan, Tesla and VW were partially offset by increases in unit shipments to Ford,
GM, Mazda, Subaru and Toyota. Wheel program development revenues totaled $6.9 million in 2015 and $9.0 million in 2014.
U.S. Operations
Wheel sales of our U.S. wheel plants in 2015 decreased $81.9 million, or 32 percent, to $171.3 million from $253.2 million in
2014, reflecting a decrease in unit shipments and a decrease in the average selling price of our wheels. Unit shipments from our
U.S. plants decreased 32 percent in 2015, primarily reflecting the reallocation of production volume from the Rogers facility to
our plants in Mexico. The decline in volume resulted in $80.4 million lower sales. The volume impact and the 1 percent decrease
in the average selling price of our wheels, primarily due to the mix of wheel sizes and finishes sold, was partially offset by an
increase in the pass-through price of aluminum. The lower aluminum value decreased revenues by approximately $2.7 million
when compared to 2014.
Mexico Operations
Wheel sales of our Mexico wheel plants in 2015 increased $66.5 million, or 14 percent, to $549.8 million from $483.3 million in
2014, reflecting a 17 percent increase in unit shipments offset partially by a 2 percent decrease in the average selling prices of our
wheels. Unit shipments increased in 2015 with the increase in volume resulting in $83.2 million higher sales. The 2 percent
decrease in the average selling price of our wheels primarily was a result of an unfavorable mix of wheel sizes and finishes sold
and the lower pass-through price of aluminum. The lower aluminum value decreased revenues by approximately $8.6 million
when compared to 2014.
2014 versus 2013
Net sales in 2014 decreased $44.2 million to $745.4 million from $789.6 million in 2013. Wheel sales in 2014 decreased $43.0
million to $736.5 million from $779.5 million in 2013. Wheel shipments decreased by 7 percent compared to 2013 with the lower
volume resulting in $50.6 million lower sales compared to 2013. Net sales were favorably impacted by an increase in the value
of the aluminum component of sales which we generally pass through to our customers and resulted in $11.9 million higher
revenues. The average selling price of our wheels increased 1 percent as the favorable impact of the increase in aluminum value
was offset by unfavorable changes in the mix of wheel sizes and finishes sold. Decreases in unit shipments to Ford, GM, FCA,
BMW, Toyota and Mitsubishi were partially offset by increases in unit shipments to Nissan, Subaru, Mazda, Tesla and VW. Wheel
program development revenues totaled $9.0 million in 2014 and $10.1 million in 2013.
U.S. Operations
Net sales of our U.S. wheel plants in 2014 decreased $23.9 million, or 9 percent, to $253.2 million from $277.1 million a year
ago, reflecting a decrease in unit shipments partially offset by an increase in the average selling price of our wheels. Unit shipments
decreased 13 percent in 2014, with the decline in volume resulting in $36.4 million lower sales. The volume impact was partially
offset by a 5 percent increase in the average selling price of our wheels, primarily due to an improved mix of wheel sizes and
finishes sold and an increase in the pass-through price of aluminum. The higher aluminum value increased revenues by
approximately $3.4 million in 2014 when compared to 2013.
Mexico Operations
Net sales of our Mexico wheel plants in 2014 decreased $19.2 million, or 4 percent, to $483.3 million from $502.5 million in
2013, reflecting a decline in unit shipments and a small decrease in average selling prices of our wheels. Unit shipments decreased
3 percent in 2014, with the decline in volume resulting in $14.0 million lower sales. The average selling price of our wheels
decreased 1 percent in 2014 primarily as a result of an unfavorable mix of wheel sizes and finishes sold, partially offset by a higher
pass-through price of aluminum. The higher aluminum value increased revenues approximately $8.5 million when compared to
2013.
When looking at our major customer mix, OEM unit shipment percentages were as follows:
Fiscal Year Ended December 31,
2015
2014
2013
Ford
GM
Toyota
FCA
International customers
Total
42%
25%
14%
8%
11%
100%
42%
24%
12%
10%
12%
100%
42%
25%
12%
11%
10%
100%
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According to Ward's Auto Info Bank, overall North American production of passenger cars and light-duty trucks in 2015 increased
approximately 3 percent, while production of the specific passenger car and light-duty truck programs using our wheels increased
1 percent. In contrast to the overall market, our total shipments increased by only 1 percent, resulting in our share of the North
American aluminum wheel market declining by less than 1 percentage point on a year-over-year basis. The decline in market
share was 2 percentage points in light-duty trucks, offset by a 2 percentage point rise in passenger car programs.
According to Ward's Automotive Group, the aluminum wheel penetration rate on passenger cars and light-duty trucks in the U.S.
was 79 percent for the 2015 model year and 81 percent for the 2014 model year, compared to 80 percent for the 2013 model year.
We expect the ratio of aluminum to steel wheels to remain relatively stable. In addition, our ability to increase net sales and sales
volume in the future may be negatively impacted by continued customer pricing pressures, increased competition from offshore
competitors and overall economic conditions that impact the sales of passenger cars and light-duty trucks.
At the customer level, shipments in 2015 to Ford increased less than 1 percent compared to 2014, as shipments of passenger car
wheels increased 34 percent and light-duty truck wheels decreased 9 percent. At the program level, the major unit shipment
increases were for the Focus, Fusion, Taurus, F-Series trucks and Explorer offset by shipment decreases for the Mustang, Fiesta,
MKZ, Edge, Flex, Expedition, Escape, MKC and Navigator.
Shipments to GM in 2015 increased 4 percent compared to 2014, as unit volume of passenger car wheels increased 4 percent and
light-duty truck wheel shipments increased 4 percent. The major unit shipment increases to GM were for the Malibu, Traverse,
K2XX platform vehicles, Colorado and Denali/Escalade offset by major unit shipment decreases for the ATS, Volt, Impala, XTS,
SRX, Enclave, Terrain and Equinox.
Shipments to Toyota in 2015 increased 17 percent compared to 2014, as shipments of passenger car wheels increased 27 percent
and light-duty truck wheels increased 13 percent. The major unit shipment increases to Toyota were for the Camry, Avalon,
Corolla, Highlander, Sienna and Tacoma offset by unit shipment decreases for the Venza, Sequoia and Tundra.
Shipments to FCA in 2015 decreased 23 percent compared to 2014, as passenger car wheel shipments decreased 12 percent and
unit volume of light-duty truck wheels decreased 24 percent. The major unit shipment decreases to FCA were for the Dodge
Challenger, Town and Country, Journey, Durango, Compass and Dodge-Ram trucks which were partially offset by major unit
shipment increases for the Magnum/Charger.
Shipments to other customers in 2015 increased 1 percent compared to 2014, as shipments of passenger car wheels increased 6
percent while shipments of light-duty truck wheels decreased 13 percent. Unit shipments increased to Mazda and Subaru, while
shipments to Nissan, BMW and VW decreased when compared to 2014. The higher unit volumes included increases of 2,471
percent to Mazda and 3 percent to Subaru, while unit volumes decreased 26 percent to Nissan, 8 percent to BMW and 6 percent
to VW. At the program level, major unit shipment increases to international customers were for Nissan's Note and Titan, Mazda
2, Scion iA, Xterra/Frontier and Subaru's Outback, offset by major unit shipment decreases for the Maxima, Tesla Model S, Nissan
Xterra/Frontier and BMW X3.
Cost of Sales
Aluminum, natural gas and other direct material costs are a significant component of our costs to manufacture wheels. These
costs are substantially the same for all of our plants since many common suppliers service both our U.S. and Mexico operations.
Consolidated cost of sales includes costs for both our U.S. and international operations, which are principally our wheel
manufacturing operations in Mexico, and certain costs that are not allocated to a specific operation. These unallocated expenses
include corporate services that are primarily incurred in the U.S. but are not charged directly to our world-wide operations, such
as engineering services for wheel program development and manufacturing support, environmental and other governmental
compliance services.
2015 versus 2014
In 2015, consolidated cost of goods sold decreased $38.5 million to $656.7 million, or 90 percent of net sales, compared to $695.2
million, or 93 percent of net sales, in 2014. Cost of sales in 2015 primarily reflects a decrease in labor and other costs, reflective
of the reallocation of production from the U.S. to facilities in Mexico, as well as due to a decline in aluminum prices, which we
generally pass through to our customers, when compared to 2014. Plant labor and benefit costs decreased $23.3 million to $93.5
million in 2015, from $116.8 million in 2014. Direct material and subcontract costs increased approximately $3.2 million to
$414.1 million from $410.9 million in 2014 primarily due to the 1 percent rise in sales volume. However, the increase in direct
material costs was offset by a decrease of approximately $5.3 million of aluminum price which we generally pass through to our
customers. Repair and maintenance costs declined $4.6 million to $22.1 million in 2015, compared to $26.7 million in 2014 and
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supply costs decreased $4.4 million to $19.1 million in 2015, from $23.5 million in 2014. Cost of goods sold for our U.S. operations
decreased $82.4 million, while cost of goods sold for our Mexico operations increased $44.4 million, when comparing 2015 to
2014 due to the change in units sold as discussed below. Cost of sales associated with corporate services such as engineering
support for wheel program development and manufacturing support decreased $0.7 million in 2015 when compared to 2014.
Productivity, measured in terms of wheels produced per labor hour increased 8 percent in 2015 when compared with 2014, and a
14 percent decrease in manufacturing labor cost per wheel was realized due to the transition of unit production to our operations
in Mexico after the closure of the Roger’s manufacturing facility. Included below are the major items that impacted cost of sales
for our U.S. and Mexico operations during 2015.
U.S. Operations
Cost of sales for our U.S. operations decreased by $82.4 million, or 31 percent, in 2015, when compared to 2014. Cost of sales
for our U.S. wheel plants in 2015 primarily reflects the effect of reallocating production volume to Mexico facilities which resulted
in a 32 percent decline in unit shipments and reduced labor and other costs, when compared to 2014. During 2015, plant labor
and benefit costs, including overtime premiums, decreased approximately $26.8 million, or 46 percent, primarily as a result of
reduced headcount and decreases in contract labor, when compared to 2014. The rise in aluminum prices, which we generally
pass through to our customers, was $0.5 million. During 2015, labor cost per wheel decreased 11 percent in 2015 when compared
with 2014 and the wheels produced per labor hour incurred increased 20 percent, as compared to 2014. Other favorable changes
in 2015 included a $3.9 million decrease in supply and small tool costs and a $4.4 million decrease in plant repair and maintenance
costs. These cost reductions largely reflect the decline in production volumes due to the closure of the Roger’s facility.
Mexico Operations
Cost of sales for our Mexico operations increased by $44.4 million in 2015 when compared to 2014, which is mainly driven by a
17% increase in wheel shipments. During 2015, plant labor and benefit costs, including overtime premiums, increased
approximately $3.5 million, or a 6 percent increase, when compared to last year, primarily as a result of higher average headcount
and wage increases. Direct material and subcontract costs increased approximately $41.3 million to $307.2 million from $265.9
million in 2014 primarily due to the 17 percent rise in unit shipments. The increase in direct material costs was partially offset
by a decrease of approximately $7.1 million of aluminum price which we generally pass through to our customers. Depreciation
increased $7.9 million to $24.9 million from $17.0 million in 2014 due to the addition of the new plant in 2015. Supply and small
tool costs decreased $0.4 million and plant repair and maintenance expenses decreased $0.2 million. A 21 percent decrease in
labor cost per wheel manufactured in 2015 as compared to 2014, and a 3 percent increase in wheels produced per labor hour
compared to 2014, reflects the impact of shifting production to the facilities in Mexico and having the new plant in Mexico
operating near full capacity by the end of 2015.
2014 versus 2013
Consolidated cost of goods sold decreased $30.3 million to $695.2 million in 2014, or 93 percent of net sales, compared to $725.5
million, or 92 percent of net sales, in 2013. When compared to 2013, cost of sales in 2014 primarily reflects a decrease in costs
due to a 7 percent decrease in unit shipments and decreases in labor and other costs, partially offset by an increase in aluminum
prices, which we generally pass through to our customers, and $8.4 million of additional costs related to the Rogers facility closure
discussed above. Direct material and subcontract costs decreased approximately $20.8 million to $410.9 million from $431.7
million in 2013 primarily due to the decline in sales volume. The decrease in direct material costs was partially offset by an
increase of approximately $10.3 million of aluminum price. Depreciation expense increased $5.4 million in 2014 as compared
to 2013, with the increase attributable to accelerated write down of value, to reflect a shortened useful life, for assets that were
retired after operations ceased at the Rogers facility. Plant labor and benefit costs included $1.9 million of severance costs for the
Rogers facility closure and totaled $113.7 million in 2014, a decrease of $13.6 million from $127.3 million incurred in 2013.
Supply costs decreased $3.4 million to $22.9 million in 2014, from $26.3 million in 2013, and repair and maintenance costs
decreased $2.5 million to $26.7 million in 2014, compared to $29.2 million in 2013. Cost of goods sold for our U.S. operations
decreased $17.2 million, while cost of goods sold for our Mexico operations decreased $11.7 million, when comparing 2014 to
2013. Cost of sales associated with corporate services such as engineering support for wheel program development and
manufacturing support decreased $1.3 million in 2014 when compared to 2013.
The lower levels of manufacturing costs reflect a variety of factors which primarily include lower unit volumes, labor costs,
supplies and maintenance spending, partially offset by higher aluminum prices and Rogers facility closure costs. Productivity,
measured in terms of wheels produced per labor hour increased 6 percent in 2014 when compared with 2013, and a 1 percent
increase in manufacturing labor cost per wheel was lower than the average rate of hourly wage increase in our manufacturing
operations. Included below are the major items that impacted cost of sales for our U.S. and Mexico operations during 2014.
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U.S. Operations
Cost of sales for our U.S. operations decreased by $17.2 million, or 6 percent, in 2014, when compared to 2013. Lower cost of
sales for our U.S. wheel plants in 2014 primarily reflects the impact of a 13 percent decline in unit shipments and improved
productivity resulting in reduced labor and other costs, when compared to a year ago. The lower cost of sales in 2014 was partially
offset by higher aluminum prices which we generally pass on to our customers, and $8.4 million of higher costs resulting from
the Rogers facility closure, including additional depreciation charges totaling $5.4 million. When compared to 2013, plant labor
and benefit costs decreased approximately $14.8 million, or 20 percent in 2014, primarily as a result of reduced headcount and
decreases in contract labor, partially offset by $1.9 million of severance costs related to the Rogers closure. The increase in
aluminum prices was $2.4 million. During 2014, labor cost per wheel decreased slightly, while the wheels produced per labor
hour incurred increased 11 percent, as compared to 2013. Other favorable changes in 2014 included a $3.2 million decrease in
supply and small tool costs and a $2.2 million decrease in plant repair and maintenance costs. These cost reductions largely reflect
efficiency gains due to improved equipment reliability and process control resulting from capital reinvestment and more robust
maintenance programs, and the decline in production volumes.
Mexico Operations
Cost of sales for our Mexico operations decreased by $11.7 million in 2014 when compared to 2013. Cost of sales in 2014 primarily
reflects a decrease in costs due to a 3 percent decline in unit shipments partially offset by an increase in aluminum prices, which
we generally pass through to our customers, and increases in labor and other costs. Cost of sales in 2014 reflects an increase in
aluminum prices, which we generally pass through to our customers, of approximately $7.8 million. During 2014, plant labor
and benefit costs increased approximately $1.2 million, or 2 percent, when compared to last year, primarily as a result of wage
increases and a $0.7 million increase in severance expenses. A utility cost increase of $0.7 million was offset partially by a $0.2
million decline in supply and small tool costs and plant repair and maintenance expenses which decreased $0.3 million. A 3
percent increase in labor cost per wheel manufactured partially reflects the higher labor cost incurred in 2014 as compared to 2013.
Gross Profit
Consolidated gross profit increased $21.0 million for 2015 to $71.2 million, or 10 percent of net sales, compared to $50.2 million,
or 7 percent of net sales, last year. The increase in gross profit primarily reflects the favorable impact of the 1 percent increase in
unit shipments and the decrease in labor and other costs which relates to the shift in manufacturing from our Rogers facility to
facilities in Mexico.
Consolidated gross profit decreased $13.9 million in 2014 to $50.2 million, or 7 percent of net sales, compared to $64.1 million,
or 8 percent of net sales, in 2013. The decrease in gross profit primarily reflects the unfavorable impact of the 7 percent decrease
in unit shipments and the $8.4 million of costs related to the Rogers facility closure which equaled 1 percent of net sales in 2014.
The cost of aluminum is a component of our selling prices to OEM customers and a significant component of the overall cost of
a wheel. The price for aluminum we purchase is adjusted monthly based primarily on changes in certain published market indices.
Our selling prices are adjusted periodically based upon aluminum market price changes, but the timing of such adjustments is
based on specific customer agreements and can vary from monthly to quarterly. Even if aluminum selling price adjustments were
to perfectly match changes in aluminum purchase prices, an increasing aluminum price will result in a declining gross margin
percentage - i.e., same gross profit dollars divided by increased sales dollars equals lower gross profit percentage. The opposite
is true in periods during which the price of aluminum decreases. In addition, although our sales are continuously adjusted for
aluminum price changes, these adjustments rarely will match exactly the changes in our aluminum purchase prices and cost of
sales. As estimated by the company, when compared to 2014, the unfavorable impact on gross profit related to such differences
in timing of aluminum adjustments was approximately $6.1 million in 2015. When comparing 2014 with 2013, the favorable
impact on gross profit related to such differences in timing of aluminum adjustments was approximately $1.5 million in 2014;
however, this impact was offset by unreimbursed cost increases for aluminum alloying premiums.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $34.9 million, or 5 percent of net sales, in 2015 compared to $32.3 million, or
4 percent of net sales, in 2014 and $29.5 million, or 4 percent of net sales, in 2013. The 2015 increase is primarily attributable to
higher professional service fees of $1.4 million and legal fees of $0.6 million. The higher level of professional service and legal
fees incurred during 2015 relate to cost incurred in association with the move of the corporate office from California to Michigan.
We incurred recruiting costs, severance, relocation, duplicative costs and training costs of $4.1 million to ensure a successful
transition. Compared to 2013, the $2.8 million increase in 2014 expenses primarily reflects higher professional service fees of
$2.1 million, depreciation expense of $1.7 million which includes revised salvage value estimates for the company's aircraft and
legal fees of $0.6 million, somewhat offset by $1.3 million lower provisions for doubtful accounts receivable.
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Income from Operations
2015 versus 2014
As described in the discussion of cost of sales above, aluminum, natural gas and other direct material costs are substantially the
same for all our plants since many common 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 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 specific 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.
Consolidated income from operations includes results for both our U.S. and international operations, which are principally our
wheel manufacturing operations in Mexico, and certain costs that are not allocated to a specific operation. These unallocated
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.
Consolidated income from operations increased $18.4 million in 2015 to $36.3 million, or 5 percent of net sales, from $17.9
million, or 2 percent of net sales, in 2014. Income from our Mexico operations increased $21.3 million and income from our U.S.
operations increased $0.6 million, when comparing 2015 to 2014. Offsetting these increases were costs relating to relocating our
corporate office. Included below are the major items that impacted income from operations for our U.S. and Mexico operations
during 2015.
Consolidated income from operations in 2015 was unfavorably impacted by start-up costs associated with our new wheel plant
in Mexico and the transition of our corporate office. While initial commercial production began in the first quarter of 2015, cost
absorption was sub-optimal until production volumes reach planned levels towards the end of the year.
U.S. Operations
Operating income from our U.S. operations for 2015 increased by $0.6 million compared to the previous year. Operating income
increased in 2015 as lower costs overall offset the impact of a 32 percent decrease in unit shipments. The overall cost improvement
included reductions in labor due to the reallocation of production to Mexico facilities and improved productivity, as well as lower
supply, repair and maintenance costs as more fully explained in the cost of sales discussion above. However, the lower production
levels had an unfavorable impact on operating income due to lower absorption of fixed overhead costs in 2015 when compared
to last year. As a percentage of net sales, our gross margin decreased 2 percent in 2015 when compared to 2014.
Mexico Operations
Operating income from our Mexico operations increased by $21.3 million in 2015 compared to 2014. Income from operations
in 2015 reflects a $22.4 million increase in gross profit in 2015, as compared to 2014. The increase in gross profit is due to a 17
percent increase in unit shipments offset by lower average selling price due to an unfavorable mix of wheel sizes and finishes sold,
when compared to 2014.
U.S. versus Mexico Production
During 2015, wheels produced by our Mexico and U.S. operations accounted for 78 percent and 22 percent, respectively, of our
total production. During 2014, wheels produced by our Mexico and U.S. operations accounted for 69 percent and 31 percent,
respectively, of our total production.
2014 versus 2013
Consolidated income from operations decreased $16.7 million in 2014 to $17.9 million, or 2 percent of net sales, from $34.6
million, or 4 percent of net sales, in 2013. Income from our Mexico operations decreased $5.9 million and income from our U.S.
operations decreased $6.3 million, when comparing 2014 to 2013. Corporate service costs were $4.5 million higher during 2014
when compared to 2013, primarily as a result of the higher professional service fees of $2.1 million, depreciation expense of $1.7
million and legal fees of $0.6 million, described above in the selling, general and administrative expense discussion. Included
below are the major items that impacted income from operations for our U.S. and Mexico operations during 2014.
Consolidated income from operations in 2014 was unfavorably impacted by start-up costs associated with our new wheel plant
in Mexico. While initial commercial production began in the first quarter of 2015, cost absorption was sub-optimal until production
volumes reached planned levels towards the end of the year.
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U.S. Operations
Operating income from our U.S. operations for 2014 decreased by $6.3 million compared to the previous year, including $8.4
million of costs incurred in the current year for the Rogers facility closure as discussed above. Excluding the costs related to the
Rogers closure, operating income increased in 2014 as improvements in average selling prices of our wheels and lower costs
overall offset the impact of a 13 percent decrease in unit shipments. The average selling price of our wheels increased due to an
improved mix of wheel sizes and finishes sold. Excluding the Rogers closure costs, the overall cost improvement included
reductions in labor due to improved productivity, and lower supply, repair and maintenance costs as more fully explained in the
cost of sales discussion above. However, the lower production levels had an unfavorable impact on operating income due to lower
absorption of fixed overhead costs in 2014 when compared to last year. As a percentage of net sales, excluding the Rogers closure
costs, our gross margin improved slightly in 2014 when compared to the same period of 2013.
Mexico Operations
Operating income from our Mexico operations decreased by $5.9 million in 2014 compared to 2013. Income from operations in
2014 reflects a $7.5 million decrease in gross profit, while as a percentage of net sales our gross margins decreased 1 percentage
point in 2014, as compared to 2013. Unit shipments decreased 3 percent in 2014 and the average selling price of our wheels
decreased due to an unfavorable mix of wheel sizes and finishes sold, when compared to 2013.
U.S. versus Mexico Production
During 2014, wheels produced by our Mexico and U.S. operations accounted for 69 percent and 31 percent, respectively, of our
total production. During 2013, wheels produced by our Mexico and U.S. operations accounted for 64 percent and 36 percent,
respectively, of our total production. We anticipate that, absent any significant change in the market or overall demand, the
percentage of production in Mexico will range between 85 percent and 90 percent of our total production for 2016.
Interest Income, net and Other Income (Expense), net
Net interest income was $0.1 million, $1.1 million and $1.7 million in 2015, 2014 and 2013, respectively due to the decrease in
the average cash balance which was mainly related to the investment in a new plant in Mexico.
Net other income (expense) was expense of $1.1 million and $3.3 million in 2015 and 2014, respectively, and income of $0.6
million in 2013. Included in other income (expense) in 2014 was a $2.5 million impairment charge for an equity investment
accounted for under the cost method of accounting. In 2010 we acquired a minority interest in Synergies Casting Limited
("Synergies"), a private aluminum wheel manufacturer based in Visakhapatnam, India. In October 2014, a typhoon caused
significant damage to the facilities and operations of Synergies and, in the fourth quarter of 2014, we tested the $4.5 million
carrying value of our investment for impairment. Based on our evaluation, we determined that an other-than-temporary impairment
existed and wrote the investment down to its estimated fair value of $2.0 million.
Also included in other income (expense) net are foreign exchange gains and (losses), including losses of $1.2 million and $1.0
million in 2015 and 2014, respectively and a gain of $0.2 million in 2013.
Effective Income Tax Rate
Our income before income taxes was $35.3 million in 2015, $15.7 million in 2014 and $36.8 million in 2013. The effective tax
rate on the 2015 pretax income was 32.1 percent compared to 43.9 percent in 2014 and 38.0 percent in 2013.
The 2015 effective income tax rate was 32.1 percent. The effective tax rate was lower than the US federal statutory rate primarily
as a result of net decreases in the liability for uncertain tax positions partially offset by the reversal of deferred tax assets related
to stock based compensation.
Our effective income tax rate for 2014 was 43.9 percent. The effective tax rate was higher than the US federal statutory rate
primarily as a result of valuation allowances established for foreign deferred tax assets and various permanent differences including
non-deductible expenses related to recent tax law changes in Mexico partially offset by a favorable net impact of a reduction in
the liability for unrecognized tax positions.
Our effective income tax rate for 2013 was 38.0 percent. The effective rate was higher than the US federal statutory rate primarily
as a result of increases in the liability for unrecognized tax positions and a negative impact of a change in Mexican tax law, offset
partially by the favorable impact of tax credits.
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
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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.
Net Income
Net income in 2015 was $23.9 million, or 3 percent of net sales, and included an income tax provision of $11.3 million compared
to $8.8 million, or 1 percent of net sales in 2014, including an income tax provision of $6.9 million, and to $22.8 million, or 3
percent of net sales in 2013, and included an income tax provision of $14.0 million. Earnings per share were $0.90, $0.33 and
$0.83 per diluted share in 2015, 2014 and 2013, respectively.
Liquidity and Capital Resources
Our sources of liquidity include cash and cash equivalents, short-term investments, net cash provided by operating activities, our
senior secured revolving credit facility discussed below and other external sources of funds. During the three years ended
December 31, 2015, we had no bank or other interest-bearing debt. At December 31, 2015, our cash, cash equivalents and short-
term investments totaled $53.0 million compared to $66.2 million at year-end 2014 and $203.1 million at the end of 2013.
Our working capital requirements, investing activities and cash dividend payments have historically been funded from internally
generated funds, proceeds from the exercise of stock options or existing cash, cash equivalents and short-term investments, and
we believe these sources will continue to meet our capital requirements in the foreseeable future. Our working capital decreased
in 2015, primarily due to constructing and equipping our new wheel plant in Mexico discussed below, which was funded out of
existing cash during the period. The decrease in working capital is also due to payments to repurchase our common stock, discussed
below, and a decrease in inventory and other assets partially offset by an increase in accounts receivable. In December 2014, we
entered into a senior secured revolving credit facility (discussed below) to provide financing, as necessary, for general corporate
purposes.
During 2013 we announced our plans to build a new manufacturing facility in Mexico, in order to meet anticipated growth in
demand for aluminum wheels in the North American market. In 2013, we entered into contracts for the construction of the new
facility and for the purchase of equipment for the new facility. The total costs incurred to date were $132.7 million, of which
$127.0 million related to the initial rated capacity of the new facility and $5.7 related to an expansion. The new facility is operational
and initial commercial production began in the first quarter of 2015. The facility ramped up production in the first quarter and
was near full initial rated capacity at the end of the year.
Committed to enhancing shareholder value on March 27, 2013, our Board of Directors approved the 2013 Repurchase Program,
authorizing the repurchase of up to $30.0 million of our common stock. Under the 2013 Repurchase Program, we repurchased
1,510,759 shares of company stock at a cost of $30.0 million of which 1,089,560 shares were repurchased for $21.8 million in
2014. In October 2014, our Board of Directors approved the 2014 Repurchase Program, authorizing the repurchase of up to $30.0
million of our common stock. Through December 31, 2015, we repurchased 1,056,954 shares of company stock at a cost of $19.6
million under the 2014 Repurchase Program. The 2014 Repurchase Program was completed in January 2016, with purchases
since December 31, 2015 of 585,970 shares for a cost of $10.3 million. In January of 2016, our Board of Directors approved a
new stock repurchase program (the “2016 Repurchase Program”), authorizing the repurchase of up to $50.0 million of common
stock. Under the 2016 Repurchase Program, we may repurchase common stock from time to time on the open market or in private
transactions. The timing and extent of the repurchases under the 2016 Repurchase Program will depend upon market conditions
and other corporate considerations in our sole discretion.
On December 19, 2014, we entered into a senior secured credit agreement (the "Credit Agreement") with J.P. Morgan Securities
LLC, JPMorgan Chase Bank, N.A. (“JPMCB”) and Wells Fargo Bank, National Association (together with JPMCB, the “Lenders”).
The Credit Agreement consists of a senior secured revolving credit facility in an initial aggregate principal amount of $100.0
million (the “Facility”). In addition, the company is entitled to request, subject to certain terms and conditions and the agreement
of the Lenders, an increase in the aggregate revolving commitments under the Facility or to obtain incremental term loans in an
aggregate amount not to exceed $50.0 million, which are uncommitted to by any lender. The company intends to use the proceeds
of the Facility to finance the working capital needs, and for the general corporate purposes of the company and its subsidiaries.
At December 31, 2015, we had no borrowings under the Facility.
The following table summarizes the cash flows from operating, investing and financing activities as reflected in the consolidated
statements of cash flows.
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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
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
2015 versus 2014
$
$
2015
2014
2013
$
$
59,349
(34,946)
(31,348)
(3,470)
(10,415) $ (136,850) $
11,627
(110,435)
(33,612)
(4,430)
69,252
(67,424)
(5,566)
(325)
(4,063)
Our liquidity remained strong in 2015. Working capital (current assets minus current liabilities) and our current ratio (current
assets divided by current liabilities) were $172.0 million and 3.3:1, respectively, at December 31, 2015, versus $204.0 million and
3.8:1 at December 31, 2014. The 2015 decrease in working capital resulted primarily from expenditures for an expansion to our
new Mexican wheel plant, repurchases of our common stock (see "Item 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities" in this Annual Report) and timing of activity affecting the working
capital accounts. We generate our principal working capital resources primarily through operations. The increase in cash from
working capital in 2015 primarily reflects a lower balance of inventory and prepaid aluminum in addition to a higher balance in
accrued expenses, offset by higher accounts receivable, and lower accounts payable. Assuming continuation of our historically
strong liquidity, which includes funds available under our revolving credit facility, we believe we are well positioned to take
advantage of new and complementary business opportunities, and to fund our working capital and capital expenditure requirements
for the foreseeable future.
Net cash provided by operating activities increased $47.7 million to $59.3 million for 2015, compared to net cash provided by
operating activities of $11.6 million for 2014. The primary operating activities during 2015 included net income of $23.9 million
and depreciation of $34.5 million. Additional sources of cash flow related to an $11.5 million decrease in inventories, $4.7 million
increase in income tax payable and $4.6 million increase in other current liabilities. Offsetting amounts were cash flow uses of
$14.0 million increase in accounts receivable, $2.1 million increase in other assets and a $1.1 million decrease in accounts payable.
Our principal investing activities during 2015 were the funding of $39.5 million of capital expenditures and the purchase of $1.0
million of certificates of deposit, partially offset by the receipt of $3.8 million cash proceeds from maturing certificates of deposit
and $1.8 million proceeds from sales of fixed assets. Principal investing activities during 2014 included the funding of $112.6
million of capital expenditures and the purchase of $3.8 million of certificates of deposit, partially offset by the receipt of $3.8
million cash proceeds from maturing certificates of deposit and $1.9 million proceeds from sales of fixed assets.
Our principal financing activities during 2015 consisted of the repurchase of our common stock for cash totaling $19.6 million
and payment of cash dividends on our common stock totaling $19.1 million, partially offset by the receipt of cash proceeds from
the exercise of stock options totaling $7.3 million. Financing activities during 2014 consisted of the repurchase of our common
stock for cash totaling $21.8 million and payment of cash dividends on our common stock totaling $19.4 million, partially offset
by the receipt of cash proceeds from the exercise of stock options totaling $7.4 million.
2014 versus 2013
Working capital (current assets minus current liabilities) and our current ratio (current assets divided by current liabilities) were
$204.0 million and 3.8:1, respectively, at December 31, 2014, versus $284.8 million and 3.9:1 at December 31, 2013. The 2014
decrease in working capital resulted primarily from expenditures for our new Mexican wheel plant, repurchases of our common
stock (see "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities"
in this Annual Report) and timing of activity affecting the working capital accounts. We generate our principal working capital
resources primarily through operations. The decrease in working capital in 2014 primarily reflects a lower balance of cash on
hand, partially offset by higher accounts receivable, prepaid aluminum costs and inventory, as well as lower accounts payable and
accrued costs related to our new wheel plant in Mexico.
Net cash provided by operating activities decreased $57.6 million to $11.6 million for 2014, compared to net cash provided by
operating activities of $69.3 million for 2013. The primary operating activities during 2014 included net income of $8.8 million,
and adjustments for non-cash items of $37.2 million, primarily due to depreciation of $35.6 million, impairment of long-lived
assets of $2.5 million and stock-based compensation expense of $2.3 million, partially offset by tax liability changes of ($5.8)
million as well as net decreases in operating cash flows from changes in operating assets and liabilities totaling ($34.4) million.
Changes in operating assets included a ($16.2) million increase in our accounts receivable, a ($9.3) million increase in inventory
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and ($14.0) million higher other assets primarily due to increases in prepaid aluminum and customer owned tooling. The changes
in operating liabilities in 2014 included a $6.4 million increase for income taxes payable and a $4.8 million increase in other
liabilities primarily related to deferred tooling revenues, partially offset by a ($6.1) million decrease in accounts payable.
Our principal investing activities during 2014 were the funding of $112.6 million of capital expenditures and the purchase of $3.8
million of certificates of deposit, partially offset by the receipt of $3.8 million cash proceeds from maturing certificates of deposit
and $1.9 million proceeds from sales of fixed assets. Principal investing activities during 2013 included the funding of $68.0
million of capital expenditures and the purchase of $3.8 million of certificates of deposit, partially offset by the receipt of $4.0
million cash proceeds from maturing certificates of deposit.
Our principal financing activities during 2014 consisted of the repurchase of our common stock for cash totaling $21.8 million
and payment of cash dividends on our common stock totaling $19.4 million, partially offset by the receipt of cash proceeds from
the exercise of stock options totaling $7.4 million. Financing activities during 2013 consisted of the repurchase of our common
stock for cash totaling $8.1 million and payment of cash dividends on our common stock totaling $0.6 million, partially offset by
the receipt of cash proceeds from the exercise of stock options totaling $2.9 million.
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 operations in Mexico with sale and purchase transactions denominated in both pesos and dollars. The peso is the functional
currency of certain of our operations in Mexico. The settlement of accounts receivable and accounts payable transactions
denominated in a non-functional currency results in foreign currency transaction gains and losses. In 2015, the value of the
Mexican peso decreased by 17 percent in relation to the U.S. dollar. For the years ended December 31, 2015 and 2014 we had
foreign currency transaction losses of $1.2 million and $1.0 million, respectively, and for the year ended December 31, 2013, we
had a foreign currency transaction gain of $0.2 million, which are included in other income (expense) in the Consolidated Income
Statements in Item 8 - Financial Statements and Supplementary Data of this Annual Report.
Since 1990, the Mexican peso has experienced periods of relative stability followed by periods of major declines in value. The
impact of changes in value of our foreign operations relative to the U.S. dollar has resulted in a cumulative unrealized translation
loss at December 31, 2015 of $88.3 million. Translation gains and losses are included in other comprehensive income (loss) in
the Consolidated Statements of Shareholders' Equity in Item 8 - Financial Statements and Supplementary Data of this Annual
Report.
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. Due to customer requirements, a significant shift is occurring in the currency denominated in our contracts with our
customers. As a result of this change we currently project that in 2015 and beyond the vast majority of our revenues will be
denominated in the U.S. dollar, rather than a more balanced mix of U.S. dollar and Mexican peso. In the past we have relied upon
significant revenues denominated in the Mexican peso to provide a "natural hedge" against foreign exchange rate changes impacting
our peso denominated costs incurred at our facilities in Mexico. Accordingly, the foreign exchange exposure associated with peso
denominated costs is a growing risk factor and could have a material adverse effect on our operating results.
We are entering into foreign currency forward and option contracts with financial institutions to protect against foreign exchange
risks associated with certain existing assets and liabilities, certain firmly committed transactions and forecasted future cash flows.
We have implemented a program to hedge a portion of our material foreign exchange exposures, typically for up to 36 months.
However, we may choose not to hedge certain foreign exchange exposures for a variety of reasons, including but not limited to
accounting considerations and the prohibitive economic cost of hedging particular exposures. We do not use derivative contracts
for trading, market-making, or speculative purposes. For additional information on our derivatives, see Notes 4 and 15 of the
Notes to the Financial Statements in Item 8 - Financial Statements and Supplementary Data of this Annual Report.
When market conditions warrant, we may enter into purchase commitments to secure the supply of certain commodities used in
the manufacture of our products, such as aluminum, natural gas and other raw materials. We previously had several purchase
commitments for the delivery of natural gas through 2015. These natural gas contracts were considered to be derivatives under
U.S. GAAP, and when entering into these contracts, it was expected that we would take full delivery of the contracted quantities
of natural gas over the normal course of business. Accordingly, at inception, these contracts qualified for the normal purchase,
normal sale ("NPNS") exemption provided for under U.S. GAAP.
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Contractual Obligations
Contractual obligations as of December 31, 2015 are as follows (amounts in millions):
Payments Due by Fiscal Year
Contractual Obligations
2016
2017
2018
2019
2020
Thereafter
Total
Retirement plans
Purchase obligations
Operating leases
Total
$
$
1.6
1.1
1.2
3.9
$
$
1.2
—
0.6
1.8
$
$
1.5
—
0.7
2.2
$
$
1.4
—
0.4
1.8
$
$
1.5
—
0.4
1.9
$
$
48.8
$
56.0
—
2.7
1.1
6.0
51.5
$
63.1
The table above includes, under Purchase Obligations, amounts committed related to expansion or purchase of equipment. The
table above does not reflect unrecognized tax benefits of $7.3 million, for which the timing of settlement is uncertain, and a $14.2
million liability carried on our consolidated balance sheet at December 31, 2015 for derivative financial instruments maturing in
2016 through 2018.
Off-Balance Sheet Arrangements
As of December 31, 2015, 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,
2015. Cost increases in our principal raw material, aluminum, fundamentally are passed through to our customers, with timing
of the pass-through dependent on the specific commercial agreements. Wage increases have averaged approximately 3 percent
during this period. Cost increases for labor, other raw materials and for energy may not be recovered in our selling prices.
Additionally, competitive global pricing pressures are expected to continue, which may lessen the possibility of recovering these
types of cost increases in selling prices.
NON-GAAP FINANCIAL MEASURES
In this annual report, we discuss two important measures that are not calculated according to U.S. generally accepted accounting
principles (“GAAP”), value added sales and Adjusted EBITDA.
Value added sales is a key measure that is not calculated according to GAAP. In the discussion of operating results, we provide
information regarding value added sales. Value added sales represent net sales less the value of aluminum and services provided
by OSP’s that are included in net sales. As discussed further below, arrangements with our customers allow us to pass on changes
in aluminum prices and OSP costs; therefore, fluctuations in underlying aluminum price and the use of OSP’s generally do not
directly impact our profitability. Accordingly, value added sales is worthy of being highlighted for the benefit of users of our
financial statements. Our intent is to allow users of the financial statements to consider our net sales information both with and
without the aluminum and OSP cost components thereof.
Fiscal Year Ended December 31,
(Thousands of dollars)
Net Sales
Less, aluminum value and OSP
Value added sales
2015
2014
2013
2012
2011
$
$
727,946 $ 745,447 $
(367,100)
360,846 $ 369,355 $
(376,092)
789,564 $
(388,973)
400,591 $
821,454 $
(423,539)
397,915 $
822,172
(442,052)
380,120
Adjusted EBITDA is a key measure that is not calculated according to GAAP. Adjusted EBITDA is defined as earnings before
interest income and expense, income taxes, depreciation, amortization, restructuring charges and other closure costs and
impairments of long-lived assets and investments. We use Adjusted EBITDA as an important indicator of the operating performance
of our business. Adjusted EBITDA is used in our internal forecasts and models when establishing internal operating budgets,
supplementing the financial results and forecasts reported to our Board of Directors and evaluating short-term and long-term
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operating trends in our operations. We believe the Adjusted EBITDA financial measure assists in providing a more complete
understanding of our underlying operational measures to manage our business, to evaluate our performance compared to prior
periods and the marketplace, and to establish operational goals. Adjusted EBITDA is a non-GAAP financial measure and should
not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP
financial measure may not be computed in the same manner as similarly titled measures used by other companies.
Adjusted EBITDA as a percentage of net sales is a key measure that is not calculated according to GAAP. Adjusted EBITDA as
a percentage of net sales is defined as Adjusted EBITDA divided by net sales.
Adjusted EBITDA as a percentage of value added sales is a key measure that is not calculated according to GAAP. Adjusted
EBITDA as a percentage of value added sales is defined as Adjusted EBITDA divided by value added sales.
The following table reconciles our net income, the most directly comparable GAAP financial measure, to our Adjusted EBITDA:
Fiscal Year Ended December 31,
(Thousands of dollars)
Net income
Interest (income), net
Tax expense (benefit)
Depreciation (1)
Restructuring impairment and closure costs (excluding
accelerated depreciation) (2)
Loss on sale of unconsolidated affiliates
Adjusted EBITDA
2015
2014
2013
2012
2011
$
$
$
23,944
(103)
11,339
34,530
8,803
(1,095)
6,899
35,582
6,343
—
76,053
5,564
—
$ 55,753
$
$
22,824
(1,691)
14,017
28,466
—
—
63,616
$
$
30,891
(1,252)
3,598
26,362
—
—
59,599
$
$
67,169
(1,101)
(25,243)
27,538
1,337
—
69,700
Adjusted EBITDA as a percentage of net sales
Adjusted EBITDA as a percentage of value added sales
10.4%
21.1%
7.5%
15.1%
8.1%
15.9%
7.3%
15.0%
8.5%
18.3%
(1) Depreciation expense in 2015 and 2014 includes $1.7 million and $6.5 million, respectively of accelerated depreciation charges as a result of
shortened estimated useful lives due to restructuring activities described in Note 2 - Restructuring in Notes to Consolidated Financial Statements
in Item 8 - Financial Statements and Supplementary Data in this Annual Report.
(2) During 2015, we completed the shutdown of the Rogers facility which resulted in a gross margin loss of $8.0 million. We incurred $4.3
million in restructuring costs related to an impairment of fixed assets and other associated costs such as asset relocation costs. Additionally, we
also experienced $2.0 million of further closure costs including inefficiencies and $1.7 million in depreciation. The adjusted EBITDA impact
of the Rogers facility closure for 2015 was $6.3 million, which includes the $4.3 million of restructuring costs and $2.0 million of inefficiency
costs related to the closure. During 2014, we recorded $3.1 of restructuring costs excluding accelerated depreciation and we impaired an
investment by $2.5 million.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 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, amortization of preproduction costs, impairment of and the estimated useful lives of our long-lived assets
and the fair value of stock-based compensation, as well as those used in the determination of liabilities related to self-insured
portions of employee benefits, workers' compensation and derivatives and deferred income taxes.
Wheel 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
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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. See Preproduction Costs and Revenue Recognition Related to Long-Term
Supply Arrangements below for a discussion of tooling reimbursement revenues.
Derivative Financial Instruments and Hedging Activities - In order to hedge exposure related to fluctuations in foreign currency
rates and the cost of certain commodities used in the manufacture of our products, we periodically may purchase derivative financial
instruments such as forward contracts, options or collars to offset or mitigate the impact of such fluctuations. Programs to hedge
currency rate exposure may address ongoing transactions including, foreign-currency-denominated receivables and payables, as
well as specific transactions related to purchase obligations. Programs to hedge exposure to commodity cost fluctuations would
be based on underlying physical consumption of such commodity. At December 31, 2015, we held forward currency exchange
contracts as discussed below.
We account for our derivative instruments as either assets or liabilities and carry them at fair value.
For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow
hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other
comprehensive income ("AOCI") in shareholders’ equity and reclassified into income in the same period or periods during which
the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized
in current income. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to
expected future cash flows on hedged transactions. For forward exchange contracts designated as cash flow hedges, changes in
the time value are included in the definition of hedge effectiveness. Accordingly, any gains or losses related to this component
are reported as a component of AOCI in shareholders’ equity and reclassified into income in the same period or periods during
which the hedged transaction affects earnings. Derivatives that do not qualify as hedges are adjusted to fair value through current
income. See Note 4 - Derivative Financial Instruments in Notes to Consolidated Financial Statements in Item 8 for further
discussion of derivatives.
We enter into contracts to purchase certain commodities used in the manufacture of our products, such as aluminum, natural gas,
and other raw materials. Our natural gas contracts were considered to be derivative instruments under US GAAP. However, upon
entering into these contracts, we expected to fulfill our purchase commitments and take full delivery of the contracted quantities
of natural gas during the normal course of business. Accordingly, under U.S. GAAP, these purchase contracts are not accounted
for as derivatives because they qualify for the normal purchase normal sale exception under U.S. GAAP, 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 15 - Commitments and Contingent Liabilities in Notes to Consolidated Financial Statements in Item 8 for
additional information pertaining to these purchase commitments.
Fair Value Measurements - The company applies fair value accounting for all financial assets and liabilities and non-financial
assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis, while other assets
and liabilities are measured at fair value on a nonrecurring basis, such as when we have an asset impairment. Fair value is estimated
by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the
categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices
for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market
participants would use in pricing the asset or liability.
Our derivatives are over-the-counter customized derivative transactions and are not exchange traded. We estimate the fair value
of these instruments using industry-standard valuation models such as a discounted cash flow. These models project future cash
flows and discount the future amounts to a present value using market-based expectations for interest rates, foreign exchange rates,
commodity prices, and the contractual terms of the derivative instruments. The discount rate used is the relevant interbank deposit
rate (e.g., LIBOR) plus an adjustment for non-performance risk. In certain cases, market data may not be available and we may
use broker quotes and models (e.g., Black-Scholes) to determine fair value. This includes situations where there is lack of liquidity
for a particular currency or commodity or when the instrument is longer dated.
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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.
Preproduction Costs and Revenue Recognition Related to Long-Term Supply Arrangements - We incur preproduction engineering
and tooling costs related to the products produced for our customers under long-term supply agreements. We expense all
preproduction engineering costs for which reimbursement is not contractually guaranteed by the customer or that are in excess of
the contractually guaranteed reimbursement amount. 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. Changes in the facts and circumstances of
individual wheel programs may accelerate the amortization of both the cost of the customer-owned tooling and the deferred tooling
reimbursement revenues. Recognized tooling reimbursement revenues totaled approximately $5.8 million, $8.2 million and $9.3
million, in 2015, 2014 and 2013, respectively, and are included in net sales in the Consolidated Income Statements in Item 8 -
Financial Statements and Supplementary Data of this Annual Report. The following tables summarize the unamortized customer-
owned tooling costs included in our long-term other assets, and the deferred tooling revenues included in accrued expenses and
other non-current liabilities:
December 31,
(Dollars in Thousands)
Unamortized Preproduction Costs
Preproduction costs
Accumulated amortization
Net preproduction costs
Deferred Tooling Revenue
Accrued expenses
Other non-current liabilities
Total deferred tooling revenue
2015
2014
$
$
$
$
73,095
(58,632)
14,463
2,908
1,266
4,174
$
$
$
$
65,621
(53,408)
12,213
4,833
2,449
7,282
Impairment of Long-Lived Assets and Investments - In accordance with U.S. GAAP, management evaluates the recoverability and
estimated remaining lives of long-lived assets whenever facts and circumstances suggest that the carrying value of the assets may
not be recoverable or the useful life has changed. See Note 1 - Summary of Significant Accounting Policies in Notes to Consolidated
Financial Statements in Item 8 for further discussion of asset impairments.
When facts and circumstances indicate that there may have been a loss in value, management will also evaluate its cost and equity
method investments to determine whether there was an other-than-temporary impairment. 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. See Note 9 - Investment in
Unconsolidated Affiliate in Notes to Consolidated Financial Statements in Item 8 for discussion of our investment.
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 12 - Retirement Plans in Notes to Consolidated Financial Statements in Item 8
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, 2015. Note that these sensitivities may be asymmetrical, and are specific to 2015. They also may not be additive,
so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown.
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The effect of the indicated increase (decrease) in selected factors is shown below (in thousands):
Assumption
Discount rate
Rate of compensation increase
Percentage
Change
+ 1.0%
+ 1.0%
Increase (Decrease) in:
Projected Benefit
Obligation at
December 31, 2015
2015 Net Periodic
Pension Cost
$
$
(3,319) $
$
495
(178)
63
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 stock 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. The fair value of any restricted shares awarded is calculated using the closing market
price of our common stock on the date of issuance. We recognize these compensation costs net of the applicable forfeiture rates
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 three or four years. We estimated the forfeiture rate based on
our historical experience.
Workers' Compensation and Loss Reserves - We self-insure any losses arising out of workers' 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 claim frequency or the severity of claims.
Accounting for 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 that the tax rate change is enacted. 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 tax assets 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, among other things, 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.
In determining when to release the valuation allowance established against our net deferred income tax assets, we consider all
available evidence, both positive and negative. Consistent with our policy, the valuation allowance against our net deferred income
tax assets will not be reversed until such time as we have generated three years of cumulative pre-tax income and have reached
sustained profitability, which we define as two consecutive one year periods of pre-tax income.
We account for our uncertain tax positions in accordance with U.S. GAAP. 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. Step one, recognition, 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. Step two, measurement, 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 measurements using cumulative probability are highly
subjective management estimates. Actual results could differ materially from these estimates.
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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. Generally, the U.S. income taxes imposed on the repatriated earnings
would be reduced by foreign income taxes paid on the earnings. At this time the company does not have any plans to repatriate
additional income from its foreign subsidiaries.
New Accounting Standards
In May 2014, the FASB issued an Accounting Standards Update ("ASU') entitled “Revenue from Contracts with Customers.” The
ASU requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For a public entity,
the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim
periods within that reporting period. Early application is not permitted. In August 2015, the FASB approved a one-year deferral
of the effective date. Under the standard it is required to be adopted by public business entities in annual periods beginning on or
after December 15, 2017. Early application is not permitted. We are evaluating the impact this guidance will have on our financial
position and statement of operations.
In June 2014, the FASB issued an ASU entitled "Compensation - Stock Compensation." The ASU provides guidance on when
the terms of an award provide that a performance target could be achieved after the requisite service period. The new guidance
becomes effective for annual reporting periods beginning after December 15, 2015, and early adoption is permitted. We are
currently evaluating the impact this guidance will have on our financial position and results of operations.
In February 2015, the FASB issued an ASU entitled “Consolidation.” The ASU includes amendments to the consolidation analysis
which are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting
period. Early adoption, including adoption in interim periods, is permitted. We are evaluating the impact this guidance will have
on our financial position and statement of operations.
In April 2015, the FASB issued an ASU entitled “Compensation - Retired Benefits.” The ASU provides practical expedients for
the measurement date of an employer's defined benefit obligation and plan assets. The amendments in this ASU are effective for
annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, and early
adoption is permitted. We are evaluating the impact this guidance will have on our financial position and statement of operations.
In July 2015, the FASB issued an ASU entitled “Simplifying the Measurement of Inventory.” The ASU replaces the current lower
of cost or market test with a lower of cost or net realizable value test when cost is determined on a first-in, first-out or average
cost basis. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016, and interim
periods therein. It is to be applied prospectively and early adoption is permitted. We are evaluating the impact this guidance will
have on our financial position and statement of operations.
In September 2015, the FASB issued an accounting standards update with new guidance that eliminates the requirement in a
business combination to restate prior period financial statements for measurement period adjustments. Instead, measurement period
adjustments will be recognized in the reporting period in which the adjustment is identified. The standards update is effective for
fiscal years and interim periods beginning after December 15, 2015. The amendments should be applied prospectively to
measurement period adjustments that occur after the effective date of this update with early adoption permitted for financial
statements that have not been issued. We will adopt this standards update as required and recognize any such future adjustments
accordingly.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
("ASU 2015-17"). ASU 2015-17 requires entities to present deferred tax assets and liabilities as noncurrent in a classified balance
sheet instead of separating into current and noncurrent amounts. ASU 2015-17 is effective for financial statements issued for
annual periods beginning after December 15, 2016, and interim periods within those annual periods, on a prospective or
retrospective basis. Early adoption is permitted for all companies in any interim or annual period. ASU 2015-17 was early adopted
as of December 31, 2015 on a prospective basis and prior periods have not been restated. The adoption of ASU 2015-17 did not
have an impact on the Company's consolidated results of operations, net assets, or cash flows. See Note 10 for additional information
regarding deferred tax assets and liabilities.
In February of 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires an entity to
recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.
ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors
are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial
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statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02
is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period,
and requires a modified retrospective adoption, with early adoption permitted. We are evaluating the impact this guidance will
have on our financial position and statement of operations.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency. A significant portion of our business operations are conducted in Mexico. As a result, we have a certain
degree of market risk with respect to our cash flows due to changes in foreign currency exchange rates when transactions are
denominated in currencies other than our functional currency, including inter-company transactions. Historically, we have not
actively engaged in substantial exchange rate hedging activities and, prior to 2014, we had not entered into any significant foreign
exchange contracts. However, as a result of customer requirements, a significant shift is occurring in the currency denominated
in our contracts with our customers. As a result of this change, we currently project that in 2016 and beyond the vast majority of
our revenues will be denominated in the U.S. dollar, rather than a more balanced mix of U.S. dollar and Mexican peso. In the
past we have relied upon significant revenues denominated in the Mexican peso to provide a "natural hedge" against foreign
exchange rate changes impacting our peso denominated costs incurred at our facilities in Mexico. Accordingly, the foreign exchange
exposure associated with peso denominated costs is a growing risk that could have a material adverse effect on our operating
results.
In accordance with our corporate risk management policies, we may enter into foreign currency forward and option contracts with
financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly
committed transactions and forecasted future cash flows. We have implemented a program to hedge a portion of our material
foreign exchange exposures, typically for up to 36 months. However, we may choose not to hedge certain foreign exchange
exposures for a variety of reasons, including but not limited to accounting considerations and the prohibitive economic cost of
hedging particular exposures. We do not use derivative contracts for trading, market-making, or speculative purposes. For
additional information on our derivatives, see Note 4 - Derivative Financial Instruments and Note 15 - Commitments and Contingent
Liabilities in Notes to Consolidated Financial Statements in Item 8.
At December 31, 2015 the fair value liability of foreign currency exchange derivatives was $14.0 million. The potential loss in
fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates would be $14.2
million at December 31, 2015.
During 2015, the Mexican peso to U.S. dollar exchange rate averaged 15.8 pesos to $1.00. Based on the balance sheet at
December 31, 2015, the value of net assets for our operations in Mexico was 2,279 million pesos. Accordingly, a 10 percent
change in the relationship between the peso and the U.S. dollar may result in a translation impact of between $13.1 million and
$16.0 million, which would be recognized in other comprehensive income (loss).
Our business requires us to settle transactions between currencies in both directions - i.e., peso to U.S. dollar and vice versa. To
the greatest extent possible, we attempt to match the timing of transaction settlements between currencies to create a “natural
hedge.” For the full year 2015, we had a $1.2 million net foreign exchange transaction loss related to the peso. Based on the
current business model and levels of production and sales activity, the net imbalance between currencies depends on specific
circumstances. As discussed above, while changes in the terms of the contracts with our customers will be creating an imbalance
between currencies that we are hedging with foreign currency forward contracts, there can be no assurances that our hedging
program will effectively offset the impact of the imbalance between currencies or that the net transaction balance will not change
significantly in the future.
Natural Gas Purchase Commitments. When market conditions warrant, we enter into purchase commitments to secure the supply
of certain commodities used in the manufacture of our products, such as natural gas. However, under no circumstances do we
enter into derivatives or other financial instrument transactions for speculative purposes. At December 31, 2015, we had no natural
gas purchase agreements outstanding.
See the section captioned "Risk Management" in Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations for a further discussion about the market risk we face.
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ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to the Consolidated Financial Statements of Superior Industries International, Inc.
Report of Independent Registered Public Accounting Firm
Financial Statements
Consolidated Income Statements for the Fiscal Years 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for the Fiscal Years 2015, 2014, 2013
Consolidated Balance Sheets as of the Fiscal Year End 2015 and 2014
Consolidated Statements of Shareholders’ Equity for the Fiscal Years 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the Fiscal Years 2015, 2014 and 2013
Notes to Consolidated Financial Statements
PAGE
36
38
39
40
41
44
45
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Superior Industries International, Inc.
Southfield, Michigan
We have audited the accompanying consolidated balance sheets of Superior Industries International, Inc. and
subsidiaries (the “Company”) as of December 27, 2015 and December 28, 2014, and the related consolidated statements
of income, comprehensive income, shareholders’ equity, and cash flows for each of the three years ended December
27, 2015, December 28, 2014, and December 29, 2013. Our audits also included the financial statement schedule listed
in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits 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 consolidated financial statements present fairly, in all material respects, the financial position of
Superior Industries International, Inc. and subsidiaries as of December 27, 2015 and December 28, 2014, and the results
of their operations and their cash flows for each of the three years ended December 27, 2015, December 28, 2014, and
December 29, 2013, 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, present 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, 2015, based on the criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated March 11, 2016 expressed an unqualified opinion on the Company’s
internal control over financial reporting.
/s/ Deloitte & Touche LLP
Detroit, Michigan
March 11, 2016
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Superior Industries International, Inc.
Southfield, Michigan
We have audited the internal control over financial reporting of Superior Industries International, Inc. and subsidiaries
(the “Company”) as of December 27, 2015, based on criteria established in Internal Control - Integrated Framework
(2013) 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 Management's Report 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, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) 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, 2015 of the Company and our report dated March 11, 2016 expressed an unqualified opinion on those financial
statements and financial statement schedule.
/s/ Deloitte & Touche LLP
Detroit, Michigan
March 11, 2016
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, except per share data)
Fiscal Year Ended December 31,
2015
2014
2013
NET SALES
Cost of sales:
Cost of sales
Restructuring costs (Note 2)
GROSS PROFIT
Selling, general and administrative expenses
INCOME FROM OPERATIONS
Interest income, net
Other (expense) income, net
$
727,946
$
745,447
$
789,564
650,717
6,012
656,729
71,217
34,923
36,294
103
(1,114)
686,796
8,429
695,225
50,222
32,309
17,913
1,095
(3,306)
725,503
—
725,503
64,061
29,468
34,593
1,691
557
INCOME BEFORE INCOME TAXES
35,283
15,702
36,841
Income tax provision
NET INCOME
EARNINGS PER SHARE - BASIC
EARNINGS PER SHARE - DILUTED
(11,339)
23,944
0.90
0.90
$
$
$
$
$
$
(6,899)
8,803
0.33
0.33
$
$
$
(14,017)
22,824
0.83
0.83
The accompanying notes are an integral part of these consolidated financial statements.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Fiscal Year Ended December 31,
2015
2014
2013
Net income
Other comprehensive (loss) income, net of tax:
Foreign currency translation loss
Change in unrecognized losses on derivative instruments:
Change in fair value of derivatives
Tax benefit
Change in unrecognized losses on derivative instruments, net of
tax
Defined benefit pension plan:
Actuarial gains (losses) on pension obligation, net of curtailments
and amortization
Tax (provision) benefit
Pension changes, net of tax
Other comprehensive (loss) income, net of tax
Comprehensive income (loss)
$
23,944
$
8,803
$
22,824
(16,810)
(13,369)
(521)
(7,189)
2,665
(4,524)
(7,598)
2,833
(4,765)
1,807
(761)
1,046
(20,288)
3,656
$
(4,686)
1,758
(2,928)
(21,062)
(12,259) $
$
—
—
—
4,477
(1,705)
2,772
2,251
25,075
The accompanying notes are an integral part of these consolidated financial statements.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Fiscal Year Ended December 31,
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Income taxes receivable
Deferred income taxes, net
Other current assets
Assets held for sale
Total current assets
Property, plant and equipment, net
Investment in unconsolidated affiliate
Non-current deferred income taxes, net
Other non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Income taxes payable
Total current liabilities
Non-current income tax liabilities
Non-current deferred income tax liabilities, net
Other non-current liabilities
Commitments and contingent liabilities (Note 15)
Shareholders' equity:
Preferred stock, $0.01 par value
Authorized - 1,000,000 shares
Issued - none
Common stock, $0.01 par value
Authorized - 100,000,000 shares
Issued and outstanding - 26,098,895 shares
(26,730,247 shares at December 31, 2014)
Accumulated other comprehensive loss
Retained earnings
Total shareholders' equity
Total liabilities and shareholders' equity
2015
2014
$
52,036
950
112,588
61,769
1,104
—
14,476
2,897
245,820
234,646
2,000
25,598
31,865
539,929
$
$
20,913
46,214
6,735
73,862
4,510
8,094
39,551
—
62,451
3,750
102,493
74,677
3,740
9,897
17,768
1,235
276,011
255,035
2,000
17,852
29,012
579,910
23,938
48,024
—
71,962
13,621
15,122
40,199
—
—
—
88,108
(101,713)
427,517
413,912
539,929
$
81,473
(81,425)
438,958
439,006
579,910
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FISCAL YEAR ENDED DECEMBER 31, 2013
(Dollars in thousands, except per share data)
Accumulated Other Comprehensive
Income (Loss)
Common Stock
Unrecognized
Number of
Shares
Amount
Gains/Losses
on Derivative
Instruments
Pension
Obligations
Cumulative
Translation
Adjustment
Retained
Earnings
Total
27,295,488
$ 71,819
$
— $
(5,030) $
(57,584) $ 457,700
$ 466,905
BALANCE AT FISCAL
YEAR END 2012
Net income
Change in employee
benefit plans, net of taxes
Net foreign currency
translation adjustment
Stock options exercised
198,296
2,865
Restricted stock awards
granted, net of forfeitures
Stock-based compensation
expense
Tax impact of stock options
82,965
—
—
—
2,685
(899)
Common stock repurchased
(421,199)
(1,165)
Cash dividends declared
($0.20 per share)
—
—
22,824
22,824
—
—
—
—
—
—
2,772
(521)
2,865
—
2,685
(899)
(6,968)
(8,133)
(5,435)
(5,435)
(521)
—
—
—
—
—
—
2,772
—
—
—
—
—
—
—
BALANCE AT FISCAL
YEAR END 2013
27,155,550
$ 75,305
$
— $
(2,258) $
(58,105) $ 468,121
$ 483,063
The accompanying notes are an integral part of these consolidated financial statements.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FISCAL YEAR ENDED DECEMBER 31, 2014
(Dollars in thousands, except per share data)
Accumulated Other Comprehensive
Income (Loss)
Common Stock
Unrecognized
Number of
Shares
Amount
Gains/Losses
on Derivative
Instruments
Pension
Obligations
Cumulative
Translation
Adjustment
Retained
Earnings
Total
27,155,550
$ 75,305
$
— $
(2,258) $
(58,105) $ 468,121
$ 483,063
BALANCE AT FISCAL
YEAR END 2013
Net income
Change in unrecognized
gains/losses on derivative
instruments, net of tax
Change in employee
benefit plans, net of taxes
Net foreign currency
translation adjustment
Stock options exercised
453,745
7,423
Restricted stock awards
granted, net of forfeitures
Stock-based compensation
expense
Tax impact of stock options
210,512
—
—
—
2,315
(416)
Common stock repurchased
(1,089,560)
(3,154)
Cash dividends declared
($0.72 per share)
BALANCE AT FISCAL
YEAR END 2014
—
—
8,803
8,803
—
—
—
—
—
—
—
(4,765)
(2,928)
(13,369)
7,423
—
2,315
(416)
(18,636)
(21,790)
(13,369)
—
—
—
—
—
—
(19,330)
(19,330)
(4,765)
—
—
—
—
—
—
—
—
(2,928)
—
—
—
—
—
—
—
26,730,247
$ 81,473
$
(4,765) $
(5,186) $
(71,474) $ 438,958
$ 439,006
The accompanying notes are an integral part of these consolidated financial statements.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FISCAL YEAR ENDED DECEMBER 31, 2015
(Dollars in thousands, except per share data)
Accumulated Other Comprehensive
Income (Loss)
Common Stock
Unrecognized
Number of
Shares
Amount
Gains/Losses
on Derivative
Instruments
Pension
Obligations
Cumulative
Translation
Adjustment
Retained
Earnings
Total
26,730,247
$ 81,473
$
(4,765) $
(5,186) $
(71,474) $ 438,958
$ 439,006
BALANCE AT FISCAL
YEAR END 2014
Net income
Change in unrecognized
gains/losses on derivative
instruments, net of tax
Change in employee
benefit plans, net of taxes
Net foreign currency
translation adjustment
Stock options exercised
Restricted stock awards
granted, net of forfeitures
Stock-based compensation
expense
Tax impact of stock options
Cash dividends declared
($0.72 per share)
BALANCE AT FISCAL
YEAR END 2015
420,642
7,265
4,960
—
—
—
2,807
—
—
—
Common stock repurchased
(1,056,954)
(3,437)
(4,524)
—
—
—
—
—
—
—
—
1,046
—
—
—
—
—
—
—
23,944
23,944
—
—
—
—
—
—
—
(4,524)
1,046
(16,810)
7,265
—
2,807
—
(16,810)
—
—
—
—
(16,201)
(19,638)
—
(19,184)
(19,184)
26,098,895
$ 88,108
$
(9,289) $
(4,140) $
(88,284) $ 427,517
$ 413,912
The accompanying notes are an integral part of these consolidated financial statements.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Fiscal Year Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
2015
2014
2013
$
23,944
$
8,803
$
22,824
Depreciation
Tax liabilities, non-cash changes
Impairments of long-lived assets and other charges
Stock-based compensation
Other non-cash items
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Other assets and liabilities
Accounts payable
Income taxes
Non-current tax liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
Proceeds from sales and maturities of investments
Purchase of investments
Proceeds from sales of fixed assets
Other
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid
Cash paid for common stock repurchase
Proceeds from exercise of stock options
Excess tax benefits from exercise of stock options
NET CASH USED IN FINANCING ACTIVITIES
34,530
(9,531)
2,688
2,807
1,400
(14,030)
11,509
2,469
(1,132)
4,695
—
59,349
(39,543)
3,750
(950)
1,815
(18)
(34,946)
(19,082)
(19,638)
7,265
107
(31,348)
35,582
(5,771)
2,500
2,315
2,560
(16,184)
(9,297)
(9,138)
(6,109)
6,366
—
11,627
(112,556)
3,750
(3,750)
1,873
248
(110,435)
(19,351)
(21,790)
7,423
106
(33,612)
Effect of exchange rate changes on cash
(3,470)
(4,430)
28,466
5,630
—
2,685
(1,095)
9,074
5,716
3,578
(2,549)
(4,780)
(297)
69,252
(67,980)
3,970
(3,750)
16
320
(67,424)
(550)
(8,133)
2,865
252
(5,566)
(325)
Net (decrease) increase in cash and cash equivalents
(10,415)
(136,850)
(4,063)
Cash and cash equivalents at the beginning of the period
62,451
199,301
203,364
Cash and cash equivalents at the end of the period
$
52,036
$
62,451
$
199,301
The accompanying notes are an integral part of these consolidated financial statements.
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SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Headquartered in Southfield, Michigan, the principal business of Superior Industries International, Inc. (referred to herein as the
“company” or “we,” “us” and “our”) is the design and manufacture of aluminum wheels for sale to original equipment manufacturers
("OEMs"). We are one of the largest suppliers of cast aluminum wheels to the world’s leading automobile and light truck
manufacturers, with manufacturing operations in the United States and Mexico. Customers in North America represent the principal
market for our products. As described in Note 5 - Business Segments, the company operates as a single integrated business and,
as such, has only one operating segment - automotive wheels.
Presentation of Consolidated Financial Statements
The consolidated financial statements include the accounts of the company and its wholly owned subsidiaries. All intercompany
transactions are eliminated in consolidation. The equity method of accounting is used for investments in non-controlled affiliates
in which the company's ownership ranges from 20 to 50 percent, or in instances in which the company is able to exercise significant
influence but not control (such as representation on the investee's Board of Directors.)
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
("U.S. GAAP") as delineated by the Financial Accounting Standards Board ("FASB") in its Accounting Standards Codification
("ASC"). Generally, assets and liabilities that are subject to estimation and judgment include the allowance for doubtful accounts,
inventory valuation, amortization of preproduction costs, impairment of and the estimated useful lives of our long-lived assets,
self-insurance portions of employee benefits, workers' compensation and general liability programs, fair value of stock-based
compensation, income tax liabilities and deferred 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 generally on the last Sunday of the calendar year. The fiscal years 2015, 2014
and 2013 comprised the 52-week periods ended on December 27, 2015, December 28, 2014 and December 29, 2013, 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 fixed deposits 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 and fixed deposits whose original maturity is greater than three months
and is one year or less are classified as short-term investments and certificates of deposit and fixed deposits whose maturity is
greater than one year at the balance sheet date are classified as non-current assets in our consolidated balance sheets. The purchase
of any certificates of deposit or fixed deposits that are classified as short-term investments or non-current assets appear in the
investing section of our consolidated statements 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
We purchase certificates of deposit that mature within twelve months and are used to secure or collateralize letters of credit securing
our workers’ compensation obligations. At December 31, 2015 and 2014, certificates of deposit totaling $1.0 million and $3.8
million, respectively, were restricted in use and were classified as short-term investments on our consolidated balance sheet.
Derivative Financial Instruments and Hedging Activities
In order to hedge exposure related to fluctuations in foreign currency rates and the cost of certain commodities used in the
manufacture of our products, we periodically may purchase derivative financial instruments such as forward contracts, options or
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collars to offset or mitigate the impact of such fluctuations. Programs to hedge currency rate exposure may address ongoing
transactions including, foreign-currency-denominated receivables and payables, as well as specific transactions related to purchase
obligations. Programs to hedge exposure to commodity cost fluctuations would be based on underlying physical consumption of
such commodity. At December 31, 2015 we held forward currency exchange contracts discussed below. At December 31, 2014
we held derivative financial instruments as well as the natural gas contracts discussed below.
We account for our derivative instruments as either assets or liabilities and carry them at fair value.
For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow
hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other
comprehensive income ("AOCI") in shareholders’ equity and reclassified into income in the same period or periods during which
the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized
in current income. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to
expected future cash flows on hedged transactions. For forward exchange contracts designated as cash flow hedges, changes in
the time value are included in the definition of hedge effectiveness. Accordingly, any gains or losses related to this component
are reported as a component of AOCI in shareholders’ equity and reclassified into income in the same period or periods during
which the hedged transaction affects earnings. Derivatives that do not qualify as hedges are adjusted to fair value through current
income. See Note 4 - Derivative Financial Instruments for additional information pertaining to our derivative instruments.
We enter into contracts to purchase certain commodities used in the manufacture of our products, such as aluminum, natural gas,
and other raw materials. Our natural gas contracts are considered to be derivative instruments under U.S. GAAP. However, upon
entering into these contracts, we expect to fulfill our purchase commitments and take full delivery of the contracted quantities of
natural gas during the normal course of business. Accordingly, under U.S. GAAP, these purchase contracts are not accounted for
as derivatives because we qualify for the normal purchase normal sale exception under U.S. GAAP, 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 15 - Commitments and Contingent Liabilities for additional information pertaining to these purchase
commitments.
Non-Cash Investing Activities
As of December 31, 2015, 2014 and 2013, $1.1 million, $6.4 million and $32.4 million, respectively, of equipment had been
purchased but not yet paid for and are included in accounts payable and accrued liabilities in our consolidated balance sheets.
During 2013 the company received a grant of a parcel of land valued at $0.7 million from the state of Chihuahua, Mexico, which
is included in property, plant and equipment in our 2013 consolidated balance sheet.
Accounts Receivable
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 amounts deemed uncollectible by management.
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. When necessary, management uses estimates of net realizable value to record inventory reserves
for obsolete and/or slow-moving inventory. Aluminum is the primary material component in our inventories. Our aluminum
requirements are supplied from two primary vendors, each accounting for more than 10 percent of our aluminum purchases during
2015 and 2014.
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.
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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.
Preproduction Costs and Revenue Recognition Related to Long-Term Supply Arrangements
We incur preproduction engineering and tooling costs related to the products produced for our customers under long-term supply
agreements. We expense all preproduction engineering costs for which reimbursement is not contractually guaranteed by the
customer or which are in excess of the contractually guaranteed reimbursement amount. 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. Changes
in the facts and circumstances of individual wheel programs may accelerate the amortization of both the cost of customer-owned
tooling and the deferred tooling reimbursement revenues. Recognized tooling reimbursement revenues, which totaled $5.8 million,
$8.2 million and $9.3 million in 2015, 2014 and 2013, respectively, are included in net sales in the consolidated income statements.
The following tables summarize the unamortized customer-owned tooling costs included in our non-current other assets, and the
deferred tooling revenues included in accrued liabilities and other non-current liabilities:
December 31,
(Dollars in Thousands)
Customer-Owned Tooling Costs
Preproduction costs
Accumulated amortization
Net preproduction costs
Deferred Tooling Revenue
Accrued expenses
Other non-current liabilities
Total deferred tooling revenue
2015
2014
$
$
$
$
73,095
(58,632)
14,463
2,908
1,266
4,174
$
$
$
$
65,621
(53,408)
12,213
4,833
2,449
7,282
Impairment of Long-Lived Assets and Investments
In accordance with the Property, Plant and Equipment Topic of the ASC, management evaluates the recoverability and estimated
remaining lives of long-lived assets. The company reviews long-lived assets for impairment whenever facts and circumstances
suggest that the carrying value of the assets may not be recoverable or the useful life has changed.
When facts and circumstances indicate that there may have been a loss in value, management will also evaluate its cost method
investments to determine whether there was an other-than-temporary impairment. If a loss in the value of the investment is
determined to be other than temporary, then the decline in value is recognized as a loss. See Note 9 - Investment in Unconsolidated
Affiliate and Note 2 - Restructuring, for discussion of investment impairment.
Foreign Currency Transactions and Translation
We have wholly-owned foreign subsidiaries with operations in Mexico whose functional currency is the peso. In addition, we
have operations with U.S. dollar functional currencies with transactions denominated in pesos and other currencies. These
operations had monetary assets and liabilities that were denominated in currencies that were different than their functional currency
and were translated into the functional currency of the entity using the exchange rate in effect at the end of each accounting period.
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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 income statements. We had
foreign currency transaction losses of $1.2 million and $1.0 million for the years ended December 31, 2015 and 2014, while we
had a foreign currency gain of $0.2 million for the year ended December 31, 2013, which are included in other income (expense)
in the consolidated income statements. In addition, we have a minority investment in India that has a functional currency of the
Indian rupee.
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 generally 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 the consolidated statements of shareholders' equity. The value of the Mexican peso
decreased by 17 percent in relation to the U.S. dollar in 2015.
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 related to initial tooling reimbursed by our customers are deferred and recognized over the
expected life of the wheel program on a straight line basis, as discussed above.
Research and Development
Research and development costs (primarily engineering and related costs) are expensed as incurred and are included in cost of
sales in the consolidated income statements. Amounts expensed during each of the three years in the period ended 2015, 2014
and 2013 were $2.6 million, $4.4 million, and $4.8 million, respectively.
Value-Added Taxes
Value-added taxes that are collected from customers and remitted to taxing authorities are excluded from sales and cost of sales.
Stock-Based Compensation
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 vesting term of three to four
years. We estimate the forfeiture rate based on our historical experience. See Note 16 - Stock-Based Compensation for additional
information concerning our share-based compensation awards.
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 that the tax rate change is enacted. 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 tax assets 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, among other things, 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.
In determining when to release the valuation allowance established against our net deferred income tax assets, we consider all
available evidence, both positive and negative. Consistent with our policy, the valuation allowance against our net deferred income
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tax assets will not be reversed until such time as we have generated three years of cumulative pre-tax income and have reached
sustained profitability, which we define as two consecutive one year periods of pre-tax income.
We account for uncertain tax positions utilizing a two-step approach to evaluate tax positions. Step one, recognition, 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. Step two, measurement, 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 measurements 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 Per Share
As summarized below, basic earnings per share is computed by dividing net income for the period by the weighted average number
of common shares outstanding for the period. 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.
Year Ended December 31,
2015
2014
2013
(Thousands of dollars, except per share amounts)
Basic Earnings Per Share
Reported net income
Weighted average shares outstanding
Basic earnings per share
Diluted Earnings Per Share
Reported net income
Weighted average shares outstanding
Weighted average dilutive stock options
Weighted average shares outstanding - diluted
Diluted earnings per share
$
$
$
23,944
$
26,599
8,803
$
26,908
0.90
$
0.33
$
23,944
$
8,803
$
26,599
34
26,633
26,908
112
27,020
0.90
$
0.33
$
22,824
27,392
0.83
22,824
27,392
139
27,531
0.83
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 average market prices for the respective periods: for the
year ended December 31, 2015 options to purchase 147,150 shares at prices ranging from $21.84 to $22.57; for the year ended
December 31, 2014 options to purchase 985,677 shares at prices ranging from $22.57 to $43.22; and for the year ended December
31, 2013 options to purchase 1,291,427 shares at prices ranging from $19.19 to $43.22 per share. In addition, the performance
shares discussed in Note 16 - Stock-Based Compensation are not included in the diluted income per share because the performance
metrics had not been met as of the year ended December 31, 2015.
New Accounting Pronouncements
In May 2014, the FASB issued an Accounting Standards Update ("ASU") entitled “Revenue from Contracts with Customers.”
The ASU requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015,
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the FASB approved a one-year deferral of the effective date. Under the standard it is required to be adopted by public business
entities in annual periods beginning on or after December 15, 2017. Early application is not permitted. We are evaluating the
impact this guidance will have on our financial position and statement of operations.
In June 2014, the FASB issued an ASU entitled "Compensation - Stock Compensation." The ASU provides guidance on when
the terms of an award provide that a performance target could be achieved after the requisite service period. The new guidance
becomes effective for annual reporting periods beginning after December 15, 2015, and early adoption is permitted. We are
currently evaluating the impact this guidance will have on our financial position and results of operations.
In February 2015, the FASB issued an ASU entitled “Consolidation.” The ASU includes amendments to the consolidation analysis
which are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting
period. Early adoption, including adoption in interim periods, is permitted. We are evaluating the impact this guidance will have
on our financial position and statement of operations.
In April 2015, the FASB issued an ASU entitled “Compensation - Retired Benefits.” The ASU provides practical expedients for
the measurement date of an employer's defined benefit obligation and plan assets. The amendments in this ASU are effective for
annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period, and early
adoption is permitted. We are evaluating the impact this guidance will have on our financial position and statement of operations.
In July 2015, the FASB issued an ASU entitled “Simplifying the Measurement of Inventory.” The ASU replaces the current lower
of cost or market test with a lower of cost or net realizable value test when cost is determined on a first-in, first-out or average
cost basis. The standard is effective for public entities for annual reporting periods beginning after December 15, 2016, and interim
periods therein. It is to be applied prospectively and early adoption is permitted. We are evaluating the impact this guidance will
have on our financial position and statement of operations.
In September 2015, the FASB issued an accounting standards update with new guidance that eliminates the requirement in a
business combination to restate prior period financial statements for measurement period adjustments. Instead, measurement period
adjustments will be recognized in the reporting period in which the adjustment is identified. The standards update is effective for
fiscal years and interim periods beginning after December 15, 2015. The amendments should be applied prospectively to
measurement period adjustments that occur after the effective date of this update with early adoption permitted for financial
statements that have not been issued. We will adopt this standards update as required and recognize any such future adjustments
accordingly.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
("ASU 2015-17"). ASU 2015-17 requires entities to present deferred tax assets and liabilities as noncurrent in a classified balance
sheet instead of separating into current and noncurrent amounts. ASU 2015-17 is effective for financial statements issued for
annual periods beginning after December 15, 2016, and interim periods within those annual periods, on a prospective or
retrospective basis. Early adoption is permitted for all companies in any interim or annual period. ASU 2015-17 was early adopted
as of December 31, 2015 on a prospective basis and prior periods have not been restated. As of December 31, 2014, the company
had $9.9 million of deferred tax assets which remains classified as current in the consolidated balance sheet. The adoption of
ASU 2015-17 did not have an impact on the Company's consolidated results of operations, net assets, or cash flows. See Note 10
for additional information regarding deferred tax assets and liabilities.
In February of 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires an entity to
recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.
ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors
are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial
statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02
is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period,
and requires a modified retrospective adoption, with early adoption permitted. We are evaluating the impact this guidance will
have on our financial position and statement of operations.
NOTE 2 - RESTRUCTURING
On July 30, 2014, we announced the planned closure of our wheel manufacturing facility located in Rogers, Arkansas. During
the fourth quarter of 2014, we shifted production to our other locations and closed operations at the Rogers facility. The closure
resulted in a reduction of workforce of approximately 500 employees. The action was undertaken in order to reduce costs and
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enhance our global competitive position. In addition, other measures were taken to reduce costs including the sale of the company's
two aircraft. One airplane was sold for cash in September 2014, incurring a $0.2 million loss on sale. The remaining airplane
was classified as held-for-sale with a carrying value of $0.9 million and was included in other current assets on our consolidated
balance sheet at December 31, 2014. In February 2015, this airplane was also sold.
Included in selling, general and administrative expense in the consolidated income statements for the year ended December 31,
2014 are charges totaling $1.1 million to reduce the carrying balance of the aircraft held for sale to its estimated fair value. Cost
of sales for the year ended December 31, 2014 includes $5.4 million of depreciation accelerated due to shorter useful lives for
assets to be retired after operations ceased at the Rogers facility. During 2015, we recorded $6.0 million of restructuring costs
which related to severance, other costs and depreciation.
As noted above, the operations ceased at the Rogers facility during the fourth quarter of 2014. The property is currently held for
sale. Based on the current carrying value of the land and building of $2.9 million, we do not expect a loss on sale at this time. In
addition, after production ceased at the facility, machinery and equipment to be held and used at our other plants will be transferred,
with the carrying values depreciating over the remaining estimated useful lives of these assets. We transferred a significant amount
of assets to other facilities during 2015 and we determined that some of the assets will not ultimately be transferred. For the assets
that were not transferred, we recorded a $2.7 million impairment during 2015.
The total cost expected to be incurred as a result of the Rogers facility closure is $15.6 million, of which $6.0 million and $8.4
million was recognized as of December 31, 2015 and 2014, respectively. The following table summarizes the Rogers, Arkansas
plant closure costs and classification in the consolidated income statement for the year ended December 31, 2015 and 2014:
Year Ended
December 31,
2015
Year Ended
December 31,
2014
Costs
Remaining
Total
Expected
Costs
Classification
(Dollars in thousands)
Accelerated and other
depreciation of assets idled
$
1,641
$
5,365
$
775
$
7,781
Cost of sales,
Restructuring costs
Severance costs
114
1,897
—
2,011
Cost of sales,
Restructuring costs
Equipment removal and
impairment, inventory written-
down, lease termination and
other costs
4,257
1,167
378
5,802
Cost of sales,
Restructuring costs
$
6,012
$
8,429
$
1,153
$
15,594
Changes in the accrued expenses related to restructuring liabilities during the years ended December 31, 2015 and 2014 are
summarized as follows (Dollars in thousands):
Balance December 31, 2013
Restructuring accruals - severance costs
Cash payments
Balance December 31, 2014
Restructuring accruals - severance costs
Cash payments
Balance December 31, 2015
NOTE 3 - FAIR VALUE MEASUREMENTS
$
$
—
1,897
(1,682)
215
114
(304)
25
The company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a recurring basis, while other assets and liabilities are measured
at fair value on a nonrecurring basis, such as when we have an asset impairment. Fair value is estimated by applying the following
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hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy
upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market
participants would use in pricing the asset or liability.
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.
Cash and Cash Equivalents
Included in cash and cash equivalents are highly liquid investments that are readily convertible to known amounts of cash, and
which are subject to an insignificant risk of change in value due to interest rate, quoted price, or penalty on withdrawal. A debt
security is classified as a cash equivalent if it meets these criteria and if it has a remaining time to maturity of three months or less
from the date of acquisition. Amounts on deposit and available upon demand, or negotiated to provide for daily liquidity without
penalty, are classified as cash and cash equivalents. Time deposits, certificates of deposit, and money market accounts that meet
the above criteria are reported at par value on our balance sheet and are excluded from the table below.
Derivative Financial Instruments
Our derivatives are over-the-counter customized derivative transactions and are not exchange traded. We estimate the fair value
of these instruments using industry-standard valuation models such as a discounted cash flow. These models project future cash
flows and discount the future amounts to a present value using market-based expectations for interest rates, foreign exchange rates,
commodity prices, and the contractual terms of the derivative instruments. The discount rate used is the relevant interbank deposit
rate (e.g., LIBOR) plus an adjustment for non-performance risk. In certain cases, market data may not be available and we may
use broker quotes and models (e.g., Black-Scholes) to determine fair value. This includes situations where there is lack of liquidity
for a particular currency or commodity or when the instrument is longer dated.
Investment in Unconsolidated Affiliate
In October 2014, a typhoon caused significant damage to the facilities and operations of Synergies Castings Limited ("Synergies"),
a private aluminum wheel manufacturer based in Visakhapatnam, India, a company we hold an investment carried on the cost
method of accounting (see Note 9 - Investment in Unconsolidated Subsidiary). In the fourth quarter of 2014 we tested the $4.5
million carrying value of our investment in Synergies for impairment. Based on our evaluation, we determined there was an other-
than-temporary impairment and wrote the investment down to its estimated fair value of $2.0 million, with the $2.5 million loss
recognized in income. The valuation was based on an income approach using current financial forecast data and rates and
assumptions market participants would use in pricing the investment using level 3 inputs.
The following tables categorize items measured at fair value at December 31, 2015 and 2014:
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December 31, 2015
(Dollars in thousands)
Assets
Fair Value Measurement at Reporting Date Using
Quoted Prices
Significant Other
Significant
in Active Markets
Observable
Unobservable
for Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Certificates of deposit
$
950
$
— $
950
$
Investment in unconsolidated affiliate
Cash surrender value
Derivative contracts
Total
Liabilities
Derivative contracts
Total
2,000
6,923
113
9,986
—
—
—
—
—
6,923
113
7,986
14,159
$
14,159
$
—
— $
14,159
14,159
$
—
2,000
—
—
2,000
—
—
December 31, 2014
(Dollars in thousands)
Assets
Fair Value Measurement at Reporting Date Using
Quoted Prices
Significant Other
Significant
in Active Markets
Observable
Unobservable
for Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Certificates of deposit
$
3,750
$
— $
3,750
$
Investment in unconsolidated affiliate
Cash surrender value
Total
Liabilities
Derivative contracts
Total
2,000
6,331
12,081
—
—
—
—
6,331
10,081
$
7,552
7,552
$
—
— $
7,552
7,552
$
—
2,000
—
2,000
—
—
NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS
We use derivatives to partially offset our business exposure to foreign currency risk. We may enter into forward contracts, option
contracts, swaps, collars or other derivative instruments to offset some of the risk on expected future cash flows and on certain
existing assets and liabilities. However, we may choose not to hedge certain exposures for a variety of reasons including, but not
limited to, accounting considerations and the prohibitive economic cost of hedging particular exposures. There can be no assurance
the hedges will offset more than a portion of the financial impact resulting from movements in foreign currency exchange rates.
To help protect gross margins from fluctuations in foreign currency exchange rates, certain of our subsidiaries whose functional
currency is the U.S. dollar hedge a portion of forecasted foreign currency costs. Generally, we may hedge portions of our forecasted
foreign currency exposure associated with costs, typically for up to 36 months.
We record all derivatives in the consolidated balance sheets at fair value. Our accounting treatment for these instruments is based
on the hedge designation. The effective portions of cash flow hedges are recorded in AOCI until the hedged item is recognized
in earnings. The ineffective portions of cash flow hedges are recorded in cost of sales. Derivatives that are not designated as
hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.
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Deferred gains and losses associated with cash flow hedges of foreign currency costs are recognized as a component of cost of
sales in the same period as the related cost is recognized. Our foreign currency transactions hedged with cash flow hedges as of
December 31, 2015, are expected to occur within 1 month to 36 months.
Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged
transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains
and losses in AOCI associated with such derivative instruments are reclassified immediately into other income and expense. Any
subsequent changes in fair value of such derivative instruments are reflected in other income and expense unless they are re-
designated as hedges of other transactions.
We had no gains or losses recognized in other income and expense for foreign currency forward and option contracts not designated
as hedging instruments during 2015, 2014 and 2013.
The following tables display the fair value of derivatives by balance sheet line item:
December 31, 2015
(Dollars in thousands)
Other Non-
current
Assets
Accrued
Liabilities
Other Non-
current
Liabilities
Foreign exchange forward contracts designated as hedging instruments
Total derivative instruments
$
$
113 $
113 $
9,629 $
9,629 $
4,530
4,530
December 31, 2014
(Dollars in thousands)
Accrued
Liabilities
Other Non-
current
Liabilities
Foreign exchange forward contracts designated as hedging instruments
Total derivative instruments
$
$
5,598 $
5,598 $
1,954
1,954
The following tables summarize the notional amount and estimated fair value of our derivative financial instruments:
December 31, 2015
(Dollars in thousands)
Notional U.S.
Dollar Amount
Fair Value
Foreign currency exchange contracts designated as cash flow hedges
Total derivative financial instruments
$
$
162,590 $
162,590 $
14,046
14,046
December 31, 2014
(Dollars in thousands)
Notional U.S.
Dollar Amount
Fair Value
Foreign currency exchange contracts designated as cash flow hedges
Total derivative financial instruments
$
$
115,442 $
115,442 $
7,552
7,552
Notional amounts are presented on a gross basis. The notional amounts of the derivative financial instruments do not represent
amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above.
The amounts exchanged are calculated by reference to the notional amounts and by other terms of the derivatives, such as interest
rates, foreign currency exchange rates, or commodity volumes and prices.
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The following tables provide the impact of derivative instruments designated as cash flow hedges on our consolidated income
statement:
Amount of Gain or (Loss)
Recognized in OCI on
Derivatives, net of tax
(Effective Portion)
Amount of Pre-tax Gain or
(Loss) Reclassified from
AOCI into Income (Effective
Portion)
Amount of Pre-tax Gain or
(Loss) Recognized in Income on
Derivative (Ineffective
Portion and Amount Excluded
from Effectiveness Testing)
(4,524) $
(4,524) $
(9,960) $
(9,960) $
19
19
Amount of Gain or (Loss)
Recognized in OCI on
Derivatives, net of tax
(Effective Portion)
Amount of Pre-tax Gain or
(Loss) Reclassified from
AOCI into Income (Effective
Portion)
Amount of Pre-tax Gain or
(Loss) Recognized in Income on
Derivative (Ineffective
Portion and Amount Excluded
from Effectiveness Testing)
(4,765) $
(4,765) $
— $
— $
—
—
Year Ended December 31, 2015
(Thousands of dollars)
Foreign exchange contracts
Total
Year Ended December 31, 2014
(Thousands of dollars)
Foreign exchange contracts
Total
NOTE 5 - BUSINESS SEGMENTS
$
$
$
$
The company's Chief Executive Officer is the chief operating decision maker ("CODM") because he has final authority over
performance assessment and resource allocation decisions. The CODM evaluates both consolidated and disaggregated financial
information for each of the company's business units in deciding how to allocate resources and assess performance. Each
manufacturing facility manufactures the same products, ships product to the same group of customers, utilizes the same cast
manufacturing process and as a result, production can generally be transferred amongst our facilities. Accordingly, we operate as
a single integrated business and, as such, have only one operating segment - automotive wheels.
Geographic information
Net sales by geographic location is the following:
Year Ended December 31,
(Thousands of dollars)
Net sales:
U.S.
Mexico
Consolidated net sales
2015
2014
2013
$
$
177,198
550,748
727,946
$
$
261,478
483,969
745,447
$
$
286,380
503,184
789,564
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Long Lived Assets
Long-lived assets includes property, plant and equipment, net, by geographic location as follows:
December 31,
(Thousands of dollars)
Property, plant and equipment, net:
U.S.
Mexico
Consolidated property, plant and equipment, net
NOTE 6 - ACCOUNTS RECEIVABLE
December 31,
(Thousands of dollars)
Trade receivables
Other receivables
Allowance for doubtful accounts
Accounts receivable, net
2015
2014
44,274
190,372
234,646
$
$
55,120
199,915
255,035
2015
2014
103,202
$
10,253
113,455
(867)
112,588
$
96,177
6,830
103,007
(514)
102,493
$
$
$
$
The following percentages of our consolidated net sales were made to Ford, GM, Toyota and Fiat Chrysler Automobiles: 2015 -
44 percent, 24 percent, 14 percent and 8 percent and 2014 - 44 percent, 24 percent, 12 percent and 10 percent, respectively. These
four customers represented 90 percent and 92 percent of trade receivables at December 31, 2015 and 2014, respectively.
NOTE 7 - INVENTORIES
December 31,
(Dollars in thousands)
Raw materials
Work in process
Finished goods
Inventories
2015
2014
$
$
19,148
21,063
21,558
61,769
$
$
19,427
30,797
24,453
74,677
Service wheel and supplies inventory included in other non-current assets in the consolidated balance sheets totaled $6.9 million
and $6.4 million at December 31, 2015 and 2014, respectively. Included in raw materials were operating supplies and spare parts
totaling $9.2 million and $8.8 million at December 31, 2015 and 2014, respectively.
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT
December 31,
(Dollars in thousands)
Land and buildings
Machinery and equipment
Leasehold improvements and others
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
2015
2014
$
$
$
73,803
486,612
4,204
20,455
585,074
(350,428)
91,209
447,880
6,865
59,600
605,554
(350,519)
234,646
$
255,035
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Construction in progress includes approximately $5.5 million and $47.8 million of costs related to our new wheel plant in Mexico
at December 31, 2015 and 2014, respectively. Depreciation expense was $34.5 million, $35.6 million and $28.5 million for the
years ended December 31, 2015, 2014 and 2013, respectively. In 2014, depreciation expense includes $6.5 million of accelerated
depreciation charges as a result of shortened estimated useful lives due to restructuring activities described in Note 2 - Restructuring.
NOTE 9 - INVESTMENT IN UNCONSOLIDATED AFFILIATE
On June 28, 2010, we executed a share subscription agreement (the "Agreement") with Synergies, a private aluminum wheel
manufacturer based in Visakhapatnam, India, providing for our acquisition of a minority interest in Synergies. The total cash
investment in Synergies amounted to $4.5 million, representing 12.6 percent of the outstanding equity shares of Synergies. Our
Synergies investment is accounted for using the cost method. During 2011, a group of existing equity holders, including the
company, made a loan of $1.5 million to Synergies for working capital needs. The company's share of this unsecured advance
was $0.5 million. The remaining principal balance of the unsecured advance was paid in full during the first quarter of 2015.
In October 2014, a typhoon caused significant damage to the facilities and operations of Synergies, and in the fourth quarter of
2014 we tested the $4.5 million carrying value of our investment for impairment. Based on our evaluation, we determined there
was an other-than-temporary impairment and wrote the investment down to its estimated fair value of $2.0 million, with the $2.5
million loss recognized in income for the year ended December 31, 2014. The valuation was based on an income approach using
current financial forecast data, and rates and assumptions market participants would use in pricing the investment. There was no
further impairment in 2015.
NOTE 10 - INCOME TAXES
Year Ended December 31,
(Thousands of dollars)
Income before income taxes and equity earnings:
Domestic
International
The provision for income taxes is comprised of the following:
Year Ended December 31,
(Thousands of dollars)
Current taxes
Federal
State
Foreign
Total current taxes
Deferred taxes
Federal
State
Foreign
Total deferred taxes
$
$
$
2015
2014
2013
25,069
10,214
35,283
$
$
8,328
7,374
15,702
$
$
27,981
8,860
36,841
2015
2014
2013
$
(10,900)
481
(2,099)
(12,518)
$
(2,976)
(453)
(8,660)
(12,089)
(961)
(576)
2,716
1,179
657
(109)
4,642
5,190
(9,951)
(859)
(1,307)
(12,117)
183
277
(2,360)
(1,900)
Income tax provision
$
(11,339)
$
(6,899)
$
(14,017)
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The following is a reconciliation of the United States federal tax rate to our effective income tax rate:
Year Ended December 31,
Statutory rate
State tax provisions, net of federal income tax benefit
Permanent differences
Tax credits
Foreign income taxes at rates other than the statutory rate
Valuation allowance and other
Changes in tax liabilities, net
Share based compensation
Other
Effective income tax rate
2015
2014
2013
(35.0)%
(35.0)%
(35.0)%
3.8
(1.5)
0.9
2.3
(5.6)
6.4
(4.4)
1.0
(0.5)
(5.3)
2.8
(0.5)
(8.4)
4.2
—
(1.2)
(1.0)
(0.1)
6.0
0.7
—
(5.7)
—
(2.9)
(32.1)%
(43.9)%
(38.0)%
Our effective income tax rate for 2015 was 32.1 percent. The effective tax rate was lower than the US federal statutory rate
primarily as a result of net decreases in the liability for uncertain tax positions partially offset by the reversal of deferred tax assets
related to share-based compensation shortfalls.
Our effective income tax rate for 2014 was 43.9 percent. The effective tax rate was higher than the US federal statutory rate
primarily as a result of valuation allowances established for foreign deferred tax assets and various permanent differences including
non-deductible expenses related to recent tax law changes in Mexico.
Our effective income tax rate for 2013 was 38.0 percent. The effective rate was higher than the U.S. federal statutory rate primarily
as a result of increases in the liability for uncertain tax positions.
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.
Income taxes are accounted for pursuant to U.S. GAAP, which requires the use of the liability method and the recognition of
deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement
carrying amounts and the tax basis of assets and liabilities. The effect on deferred taxes for a change in tax rates is recognized in
the provision for income taxes in the period of enactment. U.S. income taxes on undistributed earnings of our international
subsidiaries have not been provided as such earnings are considered permanently reinvested. Tax credits and special deductions
are accounted for as a reduction of the provision for income taxes in the period in which the credits arise.
Tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred liabilities are as
follows:
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December 31,
(Thousands of dollars)
Deferred income tax assets:
2015
2014
Liabilities deductible in the future
$
7,060
$
Liabilities deductible in the future related to hedging and foreign currency losses
Deferred compensation
Net loss carryforwards and credits
Competent authority deferred tax assets and other foreign timing differences
Other
Total before valuation allowance
Valuation allowance
Net deferred income tax assets
Deferred income tax liabilities:
Differences between the book and tax basis of property, plant and equipment
Deferred income tax liabilities
Net deferred income tax assets
The classification of our net deferred tax asset is shown below:
December 31,
(Thousands of dollars)
Current deferred income tax assets
Current deferred income tax liabilities
Long-term deferred income tax assets
Long-term deferred income tax liabilities
Net deferred tax asset
$
$
$
8,469
11,833
5,891
4,836
(683)
37,406
(5,891)
31,515
(14,011)
(14,011)
17,504
$
7,046
3,378
14,023
3,395
8,603
1,430
37,875
(3,911)
33,964
(21,337)
(21,337)
12,627
2015
2014
— $
—
25,598
(8,094)
17,504
$
9,897
—
17,852
(15,122)
12,627
Realization of any of our deferred tax assets at December 31, 2015 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. In determining when to
release the valuation allowance established against our deferred income tax assets, we consider all available evidence, both positive
and negative. We perform our analysis on a jurisdiction by jurisdiction basis at the end of each reporting period.
As of December 31, 2015 we have cumulative state NOL carryforwards of $117.6 million that begin to expire in 2016. Also, we
have $2.5 million of state tax credit carryforwards which begin to expire in 2021.
We have not provided for deferred income taxes or foreign withholding tax on basis differences in our non-U.S. subsidiaries that
result from undistributed earnings of $73.1 million which the company has the intent and the ability to reinvest in its foreign
operations. Generally, the U.S. income taxes imposed upon repatriation of undistributed earnings would be reduced by foreign
tax credits from foreign income taxes paid on the earnings. 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 account for our uncertain tax positions in accordance with U.S. GAAP. A reconciliation of the beginning and ending amounts
of these tax benefits is as follows:
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Year Ended December 31,
(Thousands of dollars)
Beginning balance
2015
2014
2013
$
7,193
$
Increases (decreases) due to foreign currency translations
Increases (decreases) as a result of positions taken during:
Prior periods
Current period
Settlements with taxing authorities
Expiration of applicable statutes of limitation
Ending balance (1)
$
—
1,238
1,798
—
(2,911)
7,318
$
$
9,462
(244)
(2,553)
956
—
(428)
7,193
$
6,310
—
(197)
3,655
(306)
—
9,462
(1) Excludes $2.1 million, $6.4 million and $5.8 million of potential interest and penalties associated with uncertain tax positions
in 2015, 2014 and 2013, respectively.
Our policy regarding interest and penalties related to uncertain tax positions 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 liabilities for unrecognized
tax positions on the balance sheet. The balance sheets at December 31, 2015, 2014 and 2013 include the liability for uncertain
tax positions, cumulative interest and penalties accrued on the liabilities totaling $7.2 million, $13.6 million and $15.1 million,
respectively. During 2015, we reversed certain liabilities due to the expiration of statutes of limitations in the amount of $2.9
million and related penalties and interest of $4.3 million. During 2014, we accrued net potential interest and penalties of $0.5
million and $0.1 million respectively, related to uncertain tax benefits. Included in the unrecognized tax benefits of $7.2 million
is $3.1 million that, if recognized, would favorably affect our annual effective tax rate. Within the next twelve-month period we
expect a decrease in unrecognized tax benefits of $2.7 million.
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, but not limited to Mexico, the Netherlands, Costa Rica, India, Cyprus and the United
States. We are no longer under examination by the taxing authority regarding any U.S. federal income tax returns for years before
2012 while the years open for examination under various state and local jurisdictions vary. In 2014, the Internal Revenue Service
("IRS") completed its audit of the 2011 tax year of Superior Industries International and subsidiaries.
Mexico's Tax Administration Service (Servicio de Administracion Tributaria, or "SAT"), finalized their examination of the 2007
tax year of Superior Industries de Mexico S.A. de C.V., our wholly-owned Mexican subsidiary, during February 2013. In February
2013 we reached a settlement with SAT for the 2007 tax year and made a cash payment of $0.3 million. The closure of the 2007
tax year audit resulted in an immaterial decrease in the liability for uncertain tax positions.
Total income tax payments net of refunds were $12.6 million in 2015, $9.9 million in 2014 and $13.7 million in 2013,
respectively.
NOTE 11 - LEASES AND RELATED PARTIES
We lease certain land, facilities and equipment under long-term operating leases expiring at various dates through 2026. Total
lease expense for all operating leases amounted to $1.9 million in 2015 and 2014 and $1.8 million in 2013.
Our administrative office in Van Nuys, California was leased from the Louis L. Borick Trust and the Nita A. Borick Management
Trust. During 2013 the Louis L. Borick Foundation (the "Foundation") replaced the Louis L. Borick Trust as a landlord for the
company's administrative office facility. The Foundation is controlled by Mr. Steven J. Borick, the former Chairman and Chief
Executive Officer of the company, as President and Director of the Foundation. The Nita A. Borick Management Trust is controlled
by Nita A. Borick and Mr. Steven J. Borick as trustees.
The lease provided for annual lease payments of approximately $427,000, through March 2015. In November 2014, the lease
was originally amended to extend the lease term from March 2015 to March 2017, and to reduce the amount of office space and
annual rent. As amended, beginning April 2015, the annual lease payment is approximately $225,000, and the company has the
option to extend the lease term for six month periods beyond March 2017. The future minimum lease payments that are payable
to the Foundation and Trust for the Van Nuys administrative office lease total $0.3 million. Total lease payments to these related
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entities were $0.3 million, $0.4 million and $0.4 million for 2015, 2014 and 2013, respectively. We also have a lease for our new
headquarters in Southfield, Michigan from October 2015 to September 2026 which is with an unrelated party.
The following are summarized future minimum payments under all leases:
Year Ended December 31,
(Thousands of dollars)
2016
2017
2018
2019
2020
Thereafter
NOTE 12 - RETIREMENT PLANS
Operating Leases
$
$
1,165
641
645
437
438
2,640
5,966
We have an unfunded salary continuation plan covering certain directors, officers and other key members of management. We
purchase life insurance policies on certain participants to provide in part for future liabilities. Cash surrender value of these
policies, totaling $6.9 million and $6.3 million at December 31, 2015 and 2014, respectively, are included in other non-current
assets in the company's consolidated balance sheets. 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. The plan
was closed to new participants effective February 3, 2011. We have measured the plan assets and obligations of our salary
continuation 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 loss (gain)
Benefit payments
Ending benefit obligation
2015
2014
$
$
30,047
44
1,230
(1,372)
(1,550)
28,399
$
$
25,145
84
1,171
5,014
(1,367)
30,047
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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:
Accrued liabilities
Other 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
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of compensation increase
Components of net periodic pension cost are described in the following table:
$
$
$
$
$
$
2015
2014
— $
1,550
(1,550)
— $
—
1,367
(1,367)
—
(28,399)
$
(30,047)
$
$
$
(1,524)
(26,875)
(28,399)
6,492
(1)
6,491
4.4%
3.0%
(1,507)
(28,540)
(30,047)
8,399
(1)
8,398
4.2%
3.0%
Year Ended December 31,
(Thousands of dollars)
Components of net periodic pension cost:
Service cost
Interest cost
Amortization of actuarial loss
Net periodic pension cost
2015
2014
2013
$
$
44
$
84
$
1,230
535
1,171
328
1,809
$
1,583
$
230
1,159
430
1,819
Weighted average assumptions used to determine net periodic pension cost:
Discount rate
Rate of compensation increase
4.2%
3.0%
4.8%
3.0%
4.0%
3.0%
The increase in the 2015 net periodic pension cost compared to the 2014 cost was primarily due to increased amortization of
actuarial losses offset by decreased service cost from terminations and retirements. The decrease in the 2014 net periodic pension
cost compared to the 2013 cost was primarily due to decreased service cost from terminations and retirements, as well as decreased
amortization of actuarial losses.
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Benefit payments during the next ten years, which reflect applicable future service, are as follows:
Year Ended December 31,
(Thousands of dollars)
2016
2017
2018
2019
2020
Years 2021 to 2025
The following is an estimate of the components of net periodic pension cost in 2016:
Estimated Year Ended December 31,
(Thousands of dollars)
Service cost
Interest cost
Amortization of actuarial loss
Estimated 2016 net periodic pension cost
Other Retirement Plans
Amount
1,557
1,243
1,463
1,432
1,480
7,711
—
1,216
336
1,552
2016
$
$
$
$
$
$
$
$
We also contribute to employee retirement savings plans in the US and Mexico that cover substantially all of our employees. The
employer contribution totaled $1.5 million, $2.0 million and $2.1 million for the three years ended December 31, 2015, 2014 and
2013, respectively.
NOTE 13 - ACCRUED EXPENSES
December 31,
(Thousands of dollars)
Construction in progress
Payroll and related benefits
Current portion of derivative liability
Dividends
Taxes, other than income taxes
Current portion of executive retirement liabilities
Other
Accrued liabilities
NOTE 14 - LINE OF CREDIT
2015
2014
$
— $
13,538
9,629
4,964
7,354
1,524
9,205
$
46,214
$
4,090
13,202
5,598
4,862
6,961
1,507
11,804
48,024
On December 19, 2014, we entered into a senior secured credit agreement (the "Credit Agreement") with J.P. Morgan Securities
LLC, JPMorgan Chase Bank, N.A. (“JPMCB”) and Wells Fargo Bank, National Association (together with JPMCB, the “Lenders”).
The Credit Agreement consists of a senior secured revolving credit facility in an initial aggregate principal amount of $100.0
million (the “Facility”). In addition, the company is entitled to request, subject to certain terms and conditions and the agreement
of the Lenders, an increase in the aggregate revolving commitments under the Facility or to obtain incremental term loans in an
aggregate amount not to exceed $50.0 million which currently is uncommitted to by any lenders. We intend to use the proceeds
of the Facility to finance the working capital needs, and for the general corporate purposes of the company and its subsidiaries.
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The Company has $97.0 million of availability after giving effect to $3.0 million in outstanding letters of credit as of December 31,
2015.
The Credit Agreement expires on December 19, 2019 and borrowings under the Facility accrue interest at (i) a London interbank
offered rate plus a margin of between 0.75 percent and 1.25 percent based on the total leverage ratio of Superior and its subsidiaries
on a consolidated basis, (ii) a rate based on JPMCB’s prime rate plus a margin of between 0.00 percent and 0.25 percent based on
the total leverage ratio of the company and its subsidiaries on a consolidated basis or (iii) a combination thereof. Commitment
fees are 0.2 percent on the unused portion of the facility. The commitment fees are included as interest expense in our consolidated
financial statements.
Generally, all amounts under the Facility are guaranteed by certain of the U.S. subsidiaries of the company and are secured by a
first priority security interest in and lien on the personal property of the company and the U.S. guarantors (as defined in the Credit
Agreement) and a pledge of and first perfected security interest in the equity interests of the company’s existing and future U.S.
subsidiaries and 65 percent of the equity interests in certain non-U.S. direct material subsidiaries of the company and the U.S.
guarantors under the Facility.
The Credit Agreement contains certain customary restrictive covenants, including, among others, financial covenants requiring
the maintenance of a maximum total leverage ratio and a minimum fixed charge coverage ratio, and also includes, without limitation,
covenants, in each case with certain exceptions and allowances, limiting the ability of the company and its subsidiaries to incur
indebtedness, grant liens, make investments, dispose of assets, make certain restrictive payments, make optional payments and
modifications of subordinated debt instruments, enter into certain transactions with affiliates, enter into swap agreements, make
capital expenditures or make changes to its lines of business. At December 31, 2015, we were in compliance with all covenants
contained in the Credit Agreement. At December 31, 2015 and 2014, we had no borrowings under this facility other than the
outstanding letters of credit referred to above.
The Credit Agreement contains customary default provisions, representations and warranties and restrictive covenants.
The Credit Agreement also contains a provision permitting the lenders to accelerate the repayment of all loans outstanding under
the Facility during an event of default.
NOTE 15 - COMMITMENTS AND CONTINGENCIES
Steven J. Borick Separation Agreement
On October 14, 2013, the company and Steven J. Borick entered into a Separation Agreement (the "Separation Agreement"),
providing for Mr. Borick's separation from employment as the company's President and Chief Executive Officer. Mr. Borick’s
separation was effective March 31, 2014. In accordance with the Separation Agreement, in addition to payment of his salary and
accrued vacation through his separation date, the company paid or provided Mr. Borick with the following upon his separation:
• A lump-sum cash payment of $1,345,833
• Mr. Borick’s 2013 annual incentive bonus,
• A grant of a number of shares of company common stock equal to the Black-Scholes value of an annual award of
120,000 stock options divided by the company's closing stock price on the separation date (See Note 16 - Stock-
Based Compensation), and
• Vesting of all of Mr. Borick's unvested stock options and unvested restricted stock.
During the years ended December 31, 2014 and 2013, we recorded $1.1 million and $1.8 million, respectively, of compensation
expense in connection with the Separation Agreement.
Donald J. Stebbins, Executive Employment Agreement
On April 30, 2014, we entered into an Executive Employment Agreement (the “Employment Agreement”) with Donald J. Stebbins
in connection with his appointment as President and Chief Executive Officer of the company. The Employment Agreement became
effective May 5, 2014 and is for a three year term that expires on April 30, 2017, with additional one-year automatic renewals
unless either Mr. Stebbins or the company provides advance notice of nonrenewal of the Employment Agreement. The Employment
Agreement provides for an annual base salary of $900,000. Mr. Stebbins may receive annual bonuses based on attainment of
performance goals, determined by the company’s independent compensation committee, in the amount of 80 percent of annual
base salary at threshold level performance, 100 percent of annual base salary at target level performance, and up to 200 percent
of annual base salary for performance substantially above target level.
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Mr. Stebbins received inducement grants of restricted stock for 50,000 shares vesting April 30, 2017, and an additional number
of shares of 82,455 determined by dividing $1,602,920 by the per share value of the company’s common stock on May 5, 2014,
with the additional shares vesting on December 31, 2016. Beginning in 2015, Mr. Stebbins will be granted restricted stock unit
awards each year under Superior's 2008 Equity Incentive Plan, or any successor equity plan. Under the Employment Agreement,
Mr. Stebbins is to be granted time-vested restricted stock units each year, cliff vesting at the third fiscal year end following grant,
for a number of shares equal to 66.7 percent of his annual base salary divided by the per share value of Superior’s common stock
on the date of grant. In addition, Mr. Stebbins is to be granted performance-vested restricted stock units each year, vesting based
on company performance goals established by the independent compensation committee during the three fiscal years following
grant, for a maximum number of shares equal to 200 percent of his annual base salary divided by the per share value of Superior’s
common stock on the first day of the fiscal year. In general, the equity awards vest only if Mr. Stebbins continues in employment
with the company through the vesting date or end of the performance period.
The Employment Agreement also contains provisions for severance benefits including lump sum payments calculated based on
Mr. Stebbins' base salary and bonus, as well as health care continuation, if he is terminated without “cause” or resigns for “good
reason." In addition, if Mr. Stebbins is terminated without “cause” or resigns for “good reason” within one year following a change
in control of the company, the severance benefits are increased 100 percent.
Purchase Agreement
In the first quarter of 2015, we entered into an agreement to purchase a subscription to online software provided by New Generation
Software Inc. (“NGS”). Our Senior Vice President, Business Operations, is a board member and passive investor and our Vice
President of Information Technology is also a passive investor in NGS. We made payments to NGS of $351,000 during the 2015
fiscal year. The transaction was entered into in the ordinary course of business and is an arms-length transaction.
Stock Repurchase Programs
As discussed in Note17 - Common Stock Repurchase Programs, we have stock repurchase programs in place to repurchase our
common stock.
Derivatives and Purchase Commitments
In order to hedge exposure related to fluctuations in foreign currency rates and the cost of certain commodities used in the
manufacture of our products, we periodically may purchase derivative financial instruments such as forward contracts, options or
collars to offset or mitigate the impact of such fluctuations. Programs to hedge currency rate exposure may address ongoing
transactions including, foreign-currency-denominated receivables and payables, as well as, specific transactions related to purchase
obligations. Programs to hedge exposure to commodity cost fluctuations would be based on underlying physical consumption of
such commodities.
Historically, we have not actively engaged in substantial exchange rate hedging activities and, prior to 2014, we had not entered
into any significant foreign exchange contracts. However, as a result of customer requirements, a significant shift is occurring in
the currency denominated in our contracts with our customers. As a result of this change, we currently project that in 2016 and
beyond the vast majority of our revenues will be denominated in the U.S. dollar, rather than a more balanced mix of U.S. dollar
and Mexican peso. In the past we have relied upon significant revenues denominated in the Mexican peso to provide a "natural
hedge" against foreign exchange rate changes impacting our peso denominated costs incurred at our facilities in Mexico.
Accordingly, the foreign exchange exposure associated with peso denominated costs is a growing risk factor that could have a
material adverse effect on our operating results.
In accordance with our corporate risk management policies, we may enter into foreign currency forward and option contracts with
financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly
committed transactions and forecasted future cash flows. We have implemented a program to hedge a portion of our material
foreign exchange exposures, for up to 36 months. We do not use derivative contracts for trading, market-making, or speculative
purposes. For additional information on our derivatives, see Note 4 - Derivative Financial Instruments.
When market conditions warrant, we may also enter into purchase commitments to secure the supply of certain commodities used
in the manufacture of our products, such as aluminum, natural gas and other raw materials. We previously had several purchase
commitments for the delivery of natural gas through the end of 2015. These natural gas contracts were considered to be derivatives
under U.S. GAAP, and when entering into these contracts, it was expected that we would take full delivery of the contracted
quantities of natural gas over the normal course of business. Accordingly, at inception, these contracts qualified for the normal
purchase, normal sale ("NPNS") exemption provided for under U.S. GAAP. As such, we did not account for these purchase
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commitments as derivatives since there was no change in facts or circumstances in regard to the company's intent or ability to use
the contracted quantities of natural gas over the normal course of business.
Other
We are party to various legal and environmental proceedings incidental to our business. Certain claims, suits and complaints
arising in the ordinary course of business have been filed or are pending against us. Based on facts now known, 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. For additional information
concerning contingencies, risks and uncertainties, See Note 19 - Risk Management.
NOTE 16 - STOCK-BASED COMPENSATION
2008 Equity Incentive Plan
Our 2008 Equity Incentive Plan (the "Plan") was amended and restated effective May 22, 2013 upon approval by our shareholders
at our annual shareholders meeting. As amended, the Plan authorizes us to issue up to 3.5 million shares of common stock, along
with non-qualified stock options, stock appreciation rights, restricted stock and performance units to our officers, key employees,
non-employee directors and consultants. At December 31, 2015, there were 1.3 million shares available for future grants under
this plan. No more than 600,000 shares may be used under the plan as “full value” awards, which include restricted stock and
performance stock units. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options.
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 and restricted shares granted under this plan generally require no less than a three year ratable vesting period.
During 2015, no stock options were granted, 420,642 stock options were exercised, 117,269 stock options were cancelled and
905,500 stock options expired. During 2014, no stock options were granted, 453,745 stock options were exercised, 72,167 stock
options were cancelled and 121,250 stock options expired.
Restricted stock awards, or “full value” awards, generally vest ratably over no less than a three year period. Shares of restricted
stock granted under the Plan are considered issued and outstanding at the date of grant, have the same dividend and voting rights
as other outstanding common stock, are subject to forfeiture if employment terminates prior to vesting, and are expensed ratably
over the vesting period. Dividends paid on the restricted shares granted under the Plan are non-forfeitable if the restricted shares
do not ultimately vest.
During 2015, we granted 23,814 restricted shares to our Board of Directors vesting May 5, 2016. The fair value of the issued
restricted stock on the date of grant was $18.31. During the first quarter of 2015, the company implemented a long term incentive
program for the benefit of certain members of company management. The program was designed to strengthen employee retention
and to provide a more structured incentive program to stimulate improvement in future company results. Per the terms of the
program, participants were granted time value restricted stock units (“RSUs”), vesting ratably over a three year time period, and
performance restricted stock units (“PSUs”), with a three year cliff vesting. Upon vesting, each restricted stock award is
exchangeable for one share of the company’s common stock, with accrued dividends. The PSUs are categorized further into three
individual categories whose vesting is contingent upon the achievement of certain targets as follows:
•
•
•
40% of the PSUs vest upon certain Return on Capital targets
40% of the PSUs vest upon certain EBITDA margin targets
20% of the PSUs vest upon certain market based Shareholder Return targets.
In the aggregate the company granted, net of forfeitures, a total of 190,015 RSUs and PSUs in 2015, net of forfeitures, comprising:
•
•
•
53,323 time value based RSUs with a grant date fair value of $18.78 per unit
109,354 PSUs with an initial grant date fair value of $18.78 per unit
27,338 market based PSUs with a grant date fair value of $24.81 per unit.
During 2014, we granted 225,205 shares of restricted stock, with original vesting periods of one to three years. The fair values
of each issued restricted share on the applicable date of grant averaged $19.35 for 2014. Included in the restricted stock granted,
in 2014, were 35,081 restricted shares in connection with Mr. Steven J. Borick's, our former company President and Chief Executive
Officer's, separation agreement (see Note 15 - Commitments and Contingencies). These shares fully vested on the grant date
(March 31, 2014) and the cost was recognized from the date of the separation agreement (October 14, 2013) through March 31,
2014, the separation date. The shares issued also were net of an amount equal to required tax withholdings. The cash equivalent
of the withheld shares was remitted by the company to the tax authorities.
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Other Awards
During 2014, we granted 132,455 restricted shares, including 50,000 shares vesting April 30, 2017, and 82,455 shares vesting on
December 31, 2016. The fair value of each of these restricted shares was $19.44. These grants were made outside of the Plan as
inducement grants in connection with the appointment of our new CEO and company President (see Note 15 - Commitments and
Contingencies).
We received cash proceeds of $7.3 million, $7.4 million and $2.9 million from stock options exercised in 2015, 2014 and 2013,
respectively. The total intrinsic value of options exercised was $0.8 million and $1.5 million, during the years ended December
31, 2015 and 2014, respectively. Upon the exercise of stock options and the issuance of restricted stock awards, it is our policy
to only issue shares from authorized common stock. At December 31, 2015 there were 1.3 million shares available for future
grants under this plan.
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 the consolidated statements of cash flows.
Stock option activity in 2015 and 2014:
Weighted
Average
Exercise
Price
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
Outstanding
Balance at December 31, 2013
Granted
Exercised
Canceled
Expired
Balance at December 31, 2014
Granted
Exercised
Canceled
Expired
Balance at December 31, 2015
2,466,606
$
— $
(453,745) $
(72,167) $
(121,250) $
$
1,819,444
—
(420,642) $
(117,269) $
(905,500) $
$
376,033
Options vested or expected to vest at December 31, 2015
376,033
Exercisable at December 31, 2015
376,033
$
$
20.31
—
16.36
22.37
34.18
20.28
—
17.29
21.80
22.05
18.89
18.89
18.89
1.9
$
2,101,753
3.6
3.6
$
$
452,128
452,128
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 $18.87.
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Stock options outstanding at December 31, 2015 and 2014:
Options
Outstanding
at 12/31/2015
Weighted
Average
Remaining
Contractual
Life (in Years)
Weighted
Average
Exercise
Price
Options
Exercisable
at 12/31/2015
Weighted
Average
Exercise
Price
Range of
Exercise Prices
15.17 — $
16.55 — $
17.64 — $
20.21 — $
22.18 — $
16.54
17.63
20.20
22.17
22.57
84,250
89,833
61,500
79,250
61,200
376,033
4.0
3.6
3.1
2.4
5.4
3.6
Range of
Exercise Prices
15.17 — $
17.64 — $
19.37 — $
21.79 — $
22.55 — $
17.63
19.36
21.78
22.54
25.00
Options
Outstanding
at 12/31/2014
Weighted
Average
Remaining
Contractual
Life (in Years)
436,600
397,167
240,000
360,377
385,300
1,819,444
3.8
1.3
0.6
1.8
1.5
1.9
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
15.74
17.23
18.21
21.84
22.55
18.89
84,250
89,833
61,500
79,250
61,200
376,033
Weighted
Average
Exercise
Price
Options
Exercisable
at 12/31/2014
16.72
18.43
20.63
21.91
24.48
20.28
407,597
395,500
240,000
360,377
385,300
1,788,774
$
$
$
$
$
$
$
$
$
$
$
$
15.74
17.23
18.21
21.84
22.55
18.89
Weighted
Average
Exercise
Price
16.71
18.43
20.63
21.91
24.48
20.34
Restricted stock activity in 2015 and 2014:
Balance at December 31, 2013
Granted
Vested
Canceled
Balance at December 31, 2014
Granted
Vested
Canceled
Balance at December 31, 2015
Number of
Awards
Weighted
Average Grant
Date Fair Value
Weighted
Average
Remaining
Amortization
Period (in Years)
124,163
$
225,205
$
(82,199) $
(14,693) $
$
252,476
$
23,814
(65,293) $
(18,704) $
$
192,293
17.70
19.35
17.88
18.18
18.93
18.31
18.61
18.56
19.20
2.1
1.7
68
Table of Contents
Stock-based compensation expense related to our equity incentive plans in accordance with U.S. GAAP was allocated as follows:
Year Ended December 31,
(Thousands of dollars)
Cost of sales
2015
2014
2013
$
370
$
113
$
Selling, general and administrative expenses
Stock-based compensation expense before income taxes
Income tax benefit
Total stock-based compensation expense after income taxes
$
2,437
2,807
(1,044)
1,763
$
2,202
2,315
(740)
1,575
$
214
2,471
2,685
(762)
1,923
The 2013 compensation expense includes $0.7 million of costs primarily for accrued and accelerated share-based payment costs
associated with the company CEO's Separation Agreement, see Note 15 - Commitments and Contingent Liabilities. There were
no significant capitalized stock-based compensation costs at December 31, 2015 or 2014. As of December 31, 2015 there was
$3.8 million of unrecognized stock-based compensation expense expected to be recognized related to unvested stock-based awards.
That cost is expected to be recognized over a weighted-average period of 1.7 years.
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
2012
3.7%
41.2%
1.4%
6.9 years
$5.10
(a) This assumed that cash dividends of $0.16 per share would be paid each quarter on our common stock.
(b) Expected volatility is based on the historical volatility of our stock price, over the expected term of the option.
(c) The risk-free rate is based upon the rate on a U.S. Treasury note for the period representing the expected term of the option.
(d) The expected term of the option is based on historical employee exercise behavior, a contractual life of ten years and employees'
post-vesting employment termination behavior.
NOTE 17 - COMMON STOCK REPURCHASE PROGRAMS
In March 2013, our Board of Directors approved a new stock repurchase program (the "2013 Repurchase Program") which
authorized the repurchase of up to $30.0 million of our common stock. This 2013 Repurchase Program replaced the previously
existing share repurchase program. Shares repurchased under the 2013 Repurchase Program totaled 1,510,759 at a cost of $30.0
million, including 1,089,560 shares repurchased at a cost of $21.8 million in 2014. Accordingly, no additional shares may be
repurchased under the 2013 Repurchase Program. All repurchased shares described above were canceled and retired.
In October 2014, our Board of Directors approved a new stock repurchase program (the "2014 Repurchase Program") which
authorized the repurchase of up to $30.0 million of our common stock. Under the 2014 Repurchase Program, we repurchased
common stock from time to time on the open market or in private transactions. Shares repurchased under the 2014 Repurchase
Program totaled 1,056,954 shares at a cost of $19.6 million, all of which was repurchased during 2015. The 2014 Repurchase
Program was completed in January 2016, with purchases since December 31, 2015 of 585,970 shares for a cost of $10.3 million.
The repurchased shares described above were either canceled and retired or added to treasury stock after the reincorporation in
Delaware in 2015.
In January of 2016, our Board of Directors approved a new stock repurchase program (the “2016 Repurchase Program”), authorizing
the repurchase of up to $50.0 million of common stock. Under the 2016 Repurchase Program, we may repurchase common stock
69
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from time to time on the open market or in private transactions. The timing and extent of the repurchases under the 2016 Repurchase
Program will depend upon market conditions and other corporate considerations in our sole discretion.
NOTE 18 - QUARTERLY FINANCIAL DATA (UNAUDITED)
(Thousands of dollars, except per share amounts)
Year 2015
Net sales
Gross profit
Income from operations
Income before income taxes
Income tax (provision) benefit
Net income
Income per share:
Basic
Diluted
Dividends declared per share
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
$
$
$
$
$
$
$
173,729
11,222
3,669
3,572
762
4,334
0.16
0.16
0.18
$
$
$
$
$
$
$
$
$
183,940
19,920
11,039
$
$
$
10,734
$
(4,200) $
$
6,534
0.24
0.24
0.18
$
$
$
175,656
16,484
8,059
$
$
$
7,615
$
(2,669) $
$
4,946
0.19
0.19
0.18
$
$
$
194,621
23,591
13,527
$
$
$
13,362
$
(5,232) $
$
8,130
0.31
0.31
0.18
$
$
$
Year
727,946
71,217
36,294
35,283
(11,339)
23,944
0.90
0.90
0.72
Year 2014
Net sales
Gross profit
Income (loss) from operations
Income (loss) before income taxes
Income tax (provision) benefit
Net income (loss)
Income (loss) per share:
Basic
Diluted
Dividends declared per share
NOTE 19 - RISK MANAGEMENT
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
176,419
$
186,672
$
$
$
$
$
$
$
$
$
183,390
15,636
7,702
8,059
$
$
$
$
(3,237) $
4,822
0.18
0.18
0.18
$
$
$
$
198,966
15,732
8,444
$
$
$
$
8,662
(3,623) $
$
5,039
0.19
0.18
0.18
$
$
$
7,318
$
(2,637) $
(2,740) $
321
$
(2,419) $
(0.09) $
(0.09) $
$
0.18
$
$
$
11,536
4,404
$
1,721
(360) $
$
1,361
0.05
0.05
0.18
$
$
$
Year
745,447
50,222
17,913
15,702
(6,899)
8,803
0.33
0.33
0.72
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, changing commodity prices for the materials used in the manufacture of our products and the
development of new products.
The functional currency of certain foreign operations in Mexico is the Mexican peso. The settlement of accounts receivable and
accounts payable for our operations in Mexico requires the transfer of funds denominated in the Mexican peso, the value of which
decreased 17 percent in relation to the U.S. dollar in 2015. Foreign exchange losses totaled $1.2 million and $1.0 million in 2015
and 2014, respectively and a foreign exchange gain totaled $0.2 million in 2013. All transaction gains and losses are included in
other income (expense) in the condensed consolidated statements of operations.
As it relates to foreign currency translation gains and losses, however, 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 resulted in a cumulative unrealized translation loss at December 31, 2015 of $88.3 million. Translation gains and losses
are included in other comprehensive income in the condensed consolidated statements of comprehensive (loss) income.
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When market conditions warrant, we may also enter into purchase commitments to secure the supply of certain commodities used
in the manufacture of our products, such as aluminum, natural gas and other raw materials. At December 31, 2015, we did not
have any purchase commitments in place for the delivery of natural gas in 2016.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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, 2015. 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 decisions regarding required disclosures.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2015 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 all 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.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented
or detected on a timely basis.
Management performed an assessment of the effectiveness of the company's internal control over financial reporting as of December
31, 2015 based upon criteria established in the 2013 Internal Control -- Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, management determined that our
internal control over financial reporting was effective as of December 31, 2015 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, 2015 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.
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Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the most recent fiscal quarter ended December
31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting,
except as discussed above in the Management's Report on Internal Control Over Financial Reporting.
ITEM 9B - OTHER INFORMATION
None.
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 2016 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. Information regarding executive officers who are Directors is contained in our 2016 Annual
Proxy Statement under the caption “Proposal No. 1 - 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 “Executive
Compensation and Related Information - Compensation Discussion and Analysis” in our 2016 Annual Proxy Statement, which is
incorporated herein by reference.
Code of Ethics - Included on our website, www.supind.com, under “Investors,” is our Code of Conduct, which, among others,
applies to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. Copies of our Code of Conduct are
available, without charge, from Superior Industries International, Inc., Shareholder Relations, 26600 Telegraph Road, Suite 400,
Southfield, MI 48033.
ITEM 11 - EXECUTIVE COMPENSATION
Information relating to Executive Compensation is set forth under the captions “Compensation of Directors” and “Executive
Compensation and Related Information - Compensation Discussion and Analysis” in our 2016 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 Ownership” in our 2016 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.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information related to Certain Relationships and Related Transactions is set forth under the caption, “Certain Relationships and
Related Transactions,” in our 2016 Annual Proxy Statement, and in Note 11 - Leases and Related Parties in Notes to the Consolidated
Financial Statements in Item 8 - Financial Statements and Supplementary Data of this Annual Report.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information related to Principal Accountant Fees and Services is set forth under the caption “Proposal No. 5 - Ratification of
Independent Registered Public Accounting Firm - Principal Accountant Fees and Services” in our 2016 Annual Proxy Statement
and is incorporated herein by reference.
ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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PART IV
Table of Contents
(a) The following documents are filed as a part of this report:
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, 2015, 2014 and 2013
3. Exhibits
2.1
2.2
2.3
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Agreement dated June 14, 2010 between the Registrant and Otto Fuchs Kg (Incorporated by reference
to Exhibit 2.1 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2010).
Sale and Purchase Agreement dated June 14, 2010 between the Registrant and Otto Fuchs Kg (Incorporated
by reference to Exhibit 2.2 to Registrant’s Annual Report on Form 10-K for the year ended December
31, 2010).
Agreement and Plan of Merger of Superior Industries International, Inc., a Delaware corporation
(Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed May 21,
2015).
Certificate of Incorporation of the Registrant (Incorporated by reference to Exhibit 3.1 to Registrant’s
Current Report on Form 8-K filed May 21, 2015).
By-Laws of the Registrant (Incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on
Form 8-K filed May 21, 2015).
Form of Superior Industries International, Inc.'s Common Stock Certificate (Incorporated by reference
to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed May 21, 2015).
Sublease 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). *
2003 Equity Incentive Plan of the Registrant (Incorporated by reference to Exhibit 99.1 to Registrant's
Form S-8 dated July 28, 2003. Registration No. 333-107380). *
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). *
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).*
2008 Equity Incentive 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).*
Employment letter between the Registrant and Kerry A. Shiba, Senior Vice President and Chief Financial
Officer (Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the
period ended September 26, 2010).*
Form of Notice of Grant and Restricted Stock Agreement pursuant to Registrant's 2008 Equity Incentive
Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form
filed May
20, 2010).*
Second Amendment to Sublease Agreement dated April 1, 2010 by and among The Louis L. Borick Trust
and The Nita Borick Management Trust and Registrant (Incorporated by reference to Exhibit 10.1 to
Registrant's Current Report on Form 8-K filed March 25, 2010).
10.10
10.11
2010 Employee Incentive Plan of the Registrant (Incorporated by reference to exhibit 10.14 to Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2010).*
Superior Industries International, Inc. Annual Incentive Performance Plan (Incorporated by reference to
Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated March 24, 2011).*
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10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
Superior Industries International, Inc. CEO Annual Incentive Performance Plan (Incorporated by reference
to Exhibit 10.2 to Registrant’s Current Report on Form 8-K dated March 24, 2011).*
Superior Industries International, Inc. Executive Change in Control Severance Plan (Incorporated by
reference to Exhibit 10.4 to Registrant’s Current Report on Form 8-K dated March 24, 2011).*
Amended and Restated 2008 Equity Incentive Plan of the Registrant (Incorporated by reference to Exhibit
10.1 to Registrant’s Current Report on Form 8-K filed May 23, 2013).*
Separation Agreement between the Registrant and Robert Earnest (Incorporated by reference to Exhibit
10.1 to Registrant’s Current Report on Form 8-K filed August 22, 2013).*
Separation Agreement between the Registrant and Steven J. Borick (Incorporated by reference to Exhibit
10.1 to Registrant’s Current Report on Form 8-K filed October 15, 2013).*
Consulting Agreement between the Registrant and Steven J. Borick (Incorporated by reference to Exhibit
10.2 to Registrant’s Current Report on Form 8-K filed October 15, 2013).*
Executive Employment Agreement, effective May 5, 2014, by and between the Registrant and Donald J.
Stebbins. (Incorporated by reference to Exhibit 10.23 to Registrant’s Current Report on Form 8-K dated
April 28, 2014).*
Credit agreement dated December 19, 2014 between Superior Industries International, Inc. and JPMorgan
Chase Bank, N.A. and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.1
to Registrant’s Current Report on Form 8-K filed December 23, 2014).
Amendment No. 1 to the Credit Agreement dated as of March 3, 2015, by and among Superior Industries
International, Inc., the Lenders from time to time a party thereto and JP Morgan Chase Bank, N.A. as
Administrative Agent (Incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form
10-Q for the quarter ended March 29, 2015).
Consent and Amendment No. 2 dated as of October 14, 2015 to the Credit Agreement dated as of December
19, 2014, by and among Superior Industries International, Inc., the Lenders from time to time party thereto
and JP Morgan Chase Bank, N.A., as Administrator (Incorporated by reference to Exhibit 10.2 to
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 27, 2015).
Separation Agreement between the Registrant and Michael J. O'Rourke (Incorporated by reference to
Exhibit 10.1 to Registrant’s Current Report on Form 8-K/A dated February 26, 2015).*
Severance Letter, dated August 25, 2015, between the Registrant and Mike Nelson (Incorporated by
reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on August 28, 2015).
**10.24 Form of Restricted Stock Unit Agreement under the Superior Industries International, Inc. Amended and
Restated 2008 Equity Incentive Plan.*
**10.25 Form of Performance Based Restricted Stock Unit Agreement under the Superior Industries International,
Inc. Amended and Restated 2008 Equity Incentive Plan.*
11
21
23
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).
List of Subsidiaries of the Company (filed herewith).
Consent of Deloitte and Touche LLP, our 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 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 Donald J. Stebbins, Chief Executive Officer and President, and Kerry A. Shiba, Executive
Vice President and 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).
101
Interactive data file (furnished electronically herewith pursuant to Rule 406T of Regulation S-T).
* Indicates management contract or compensatory plan or arrangement.
** Filed herewith.
74
Table of Contents
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(Thousands of dollars)
Additions
Balance at
Beginning of
Year
Charge to
Costs and
Expenses
Other
Comprehensive
Income (Loss)
Deductions
From
Reserves
Balance at
End of
Year
380
$
— $
(27)
$
$
867
5,891
1,980
(426)
473
838
4
$
$
$
$
— $
30
$
514
40
$
— $
3,911
— $
(501)
$
910
— $
— $
3,398
2015
Allowance for doubtful accounts receivable
Valuation allowances for deferred tax
assets
2014
Allowance for doubtful accounts receivable
Valuation allowances for deferred tax
assets
2013
Allowance for doubtful accounts receivable
Valuation allowances for deferred tax
assets
$
$
$
$
$
$
514
3,911
910
3,398
573
3,394
$
$
$
$
$
$
S-1
Table of Contents
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT ON 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/ Donald J. Stebbins
Donald J. Stebbins
Chief Executive Officer and President
March 11, 2016
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/ Donald J. Stebbins
Donald J. Stebbins
Chief Executive Officer and President
(Principal Executive Officer)
March 11, 2016
/s/ Kerry A. Shiba
Kerry A. Shiba
/s/ Scot S. Bowie
Scot S. Bowie
/s/ Margaret S. Dano
Margaret S. Dano
/s/ Michael R. Bruynesteyn
Michael R. Bruynesteyn
/s/ Jack A. Hockema
Jack A. Hockema
/s/ Paul J. Humphries
Paul J. Humphries
/s/ James S. McElya
James S. McElya
/s/ Timothy McQuay
Timothy McQuay
/s/ Francisco S. Uranga
Francisco S. Uranga
Executive Vice President and Chief Financial Officer
March 11, 2016
(Principal Financial Officer)
Vice President and Corporate Controller
March 11, 2016
(Principal Accounting Officer)
Chairman of the Board
March 11, 2016
Director
Director
Director
Director
Director
Director
March 11, 2016
March 11, 2016
March 11, 2016
March 11, 2016
March 11, 2016
March 11, 2016
CORPORATE INFORMATION
DIRECTORS
Margaret S. Dano
Chairman
Nominating and Corporate
Governance Committee
EXECUTIVES
Donald J. Stebbins
President and
Chief Executive Officer
Donald J. Stebbins
President and Chief Executive
Officer
Kerry A. Shiba
Executive Vice President,
Chief Financial Officer and
Secretary
Parveen Kakar
Senior Vice President – Sales,
Marketing, Engineering and
Product Development
James F. Sistek
Senior Vice President –
Business Operations and
Systems
Lawrence R. Oliver
Senior Vice President –
Manufacturing Operations
CORPORATE OFFICES
Superior Industries
International, Inc.
26600 Telegraph Rd.
Suite 400
Southfield, MI 48034
Phone: (248) 352-7300
Fax: (248) 352-6989
www.supind.com
Michael R. Bruynesteyn
Audit Committee
Jack A. Hockema
Audit Committee
Nominating and Corporate
Governance Committee (*)
Paul J. Humphries
Audit Committee
Compensation and Benefits
Committee
James S. McElya
Compensation and Benefits
Committee (*)
Nominating and Corporate
Governance Committee
Timothy C. McQuay
Audit Committee (*)
Compensation and Benefits
Committee
Francisco S. Uranga
Compensation and Benefits
Committee
Nominating and Corporate
Governance Committee
(*) Committee Chair
INVESTOR RELATIONS
Contacts:
Superior Industries
Troy Ford
(248) 234-7104
FTI Consulting
Effie Veres
(212) 850-5676
effie.veres@fticonsulting.com
REGISTRAR AND TRANSFER
COMPANY
Computershare
Shareholder correspondence
should be mailed to:
Computershare
P.O. BOX 30170
College Station, TX 77842-3170
Overnight correspondence should
be sent to:
Computershare
211 Quality Circle, Suite 210
College Station, TX 77845
Shareholder website:
www.computershare.com/investor
Shareholder online inquiries:
https://www-
us.computershare.com/investor/Con
tact
Telephone and Fax:
U.S.
Toll free in the
Outside the U.S. (781) 575-3120
Fax (312) 604-2312
(800) 962-4284
ANNUAL MEETING
The annual meeting of Superior
Industries International, Inc. will be
held at 10:00 a.m. Eastern Time on
April 26, 2016 at:
The Westin Detroit Metropolitan
Airport
2501 Worldgateway Place
Detroit, MI 48242
AUDITORS
Deloitte & Touche LLP
STOCK EXCHANGE
Superior common stock is listed for
trading on the New York Stock
Exchange under the ticker symbol
SUP.
26600 Telegraph Rd., Suite 400 (cid:2)(cid:3)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:10)(cid:11)(cid:12)(cid:13)(cid:3)(cid:14)(cid:15)(cid:3)(cid:16)(cid:17)(cid:18)(cid:19)(cid:16)(cid:3)(cid:2)(cid:3)(cid:20)(cid:16)(cid:17)(cid:21)(cid:19)(cid:22)(cid:20)(cid:21)(cid:23)(cid:19)(cid:18)(cid:18)