Superior Industries International
Annual Report 2021

Plain-text annual report

2021 ANNUAL REPORT WINNING ACROSS OUR PORTFOLIO SUPERIOR AT A GLANCE Delivering innovative solutions to enhance the value of our customers’ products and create value for all stakeholders 2021 HIGHLIGHTS • Net Sales increased by 26% to $1.4 billion in 2021 • Delivered $167 million Adjusted EBITDA(1), 29% ($37 million) above 2020 based on 6% increase of sold wheels, and expanded Adjusted EBITDA(1) margin as a percentage of Value-Added Sales(1) by 2.1% • Achieved another record level of product complexity in our facilities; average 2021 Content per Wheel(1) grew 9% compared to 2020 • Grew Value-Added Sales excluding Foreign Exchange(1) over Market by 17%(2); achieving third consecutive year of growth wheels more than 43% of OEM shipments for FY 2021 • Continuous advancement of portfolio; 19” or greater • Maintained strong available liquidity(3) position of $309 million at year-end, despite elevated working capital requirements due to increased aluminum prices • Passed durability testing with second major OEM for PVD, a finishing technology for which we were nominated a finalist for the 2021 Automotive News PACE Award ($ in millions, Units in thousands) Units Net Sales 2020 15,194 2021 16,123 $1,100.8 $1,384.8 Value-Added Sales(1) $ 648.3 $ 753.7 Gross Profit Net Income Adj. EBITDA(1) $ 65.6 $ 114.7 $ (243.6) $ 3.8 $ 129.4 $ 166.7 Adj. EBITDA % of VAS 20% 22% Total Debt(4) Net Debt(1) $ 643.2 $ 616.3 $ 490.8 $ 502.8 2021 SALES BY CUSTOMER OTHER 38% GM 26% VW GROUP 14% AFTER- MARKET 9% FORD 13% CONTENT PER WHEEL(1) GROWTH ADJ. EBITDA MARGIN (% OF VALUE-ADDED SALES)(1) 9 . 0 % + $42.06 $42.06 $45.83 $45.83 S P 0 B 1 2 + 20.0% 20.0% 22.1% 22.1% 2020 2020 2021 2021 2020 2020 2021 2021 (1) Value-Added Sales, Value-Added Sales excluding Foreign Exchange, Content per Wheel, Net Debt, and Adjusted EBITDA are non-GAAP financial measures; see reconciliations to the most comparable GAAP measures in the tables of this annual report (2) Based on Value-Added Sales Adjusted for Foreign Exchange(1); comparison vs. North American and Western and Central Europe industry production as reported by IHS on February 14, 2022 (3) Includes cash and availability on committed revolving credit facilities (4) Excluding Debt Issuance Cost 2020202120202021$42.06$45.8320.0%22.1% DEAR FELLOW SHAREHOLDERS, Amidst another volatile year for the automotive industry, Superior achieved encouraging results, building additional momentum to position the Company for long-term growth. Throughout 2021, our teams focused on execution against our value creation roadmap, demonstrating agility to deliver value to customers through our broadening portfolio of premium technologies. We have continued to capture the secular shift towards CO2 reduction and electrification through execution on product complexity, supporting our Growth over Market(1) of 17%, as well as ongoing Content Per Wheel(2) growth. These results culminated in Superior’s third consecutive year of Growth over Market, advancing our competitive position as a premium wheel supplier. Our operational focus, including sharing of best practices across our global facilities, coupled with an emphasis on lean and continuous improvement, have also enabled sustained earnings despite lower production volumes. In an environment where OEMs are migrating away from long supply chains, having a low-cost manufacturing footprint located in the same regions where our customers operate has proven to be a significant competitive advantage. Industry-wide adoption of our differentiated technologies has accelerated. Superior was one of the first North American aluminum wheel manufacturers to supply premium wheels made from low carbon footprint for the all-electric Ford Mustang Mach-E. In addition, Physical Vapor Deposition (PVD) technology, an environmentally-friendly alternative to chrome that was nominated as a finalist for the prestigious Automotive News PACE Award in 2021, passed durability testing with a second major North American OEM, which is a key milestone towards further commercializing this offering. Further, Superior was awarded its first-ever 24-inch aluminum cast wheel program, which will go into production in 2024. We also made substantial progress towards our environmental, social, and governance initiatives throughout the year, including the launch of our inaugural UN Global Compact Sustainability Report and the implementation of our global DE&I council. Through our initiatives, we are focused on reducing our environmental footprint, increasing our safety standards, and protecting the health of our employees. We look forward to reporting on the advancement of these sustainability efforts well into the future. Importantly, as the COVID-19 pandemic lingers, the safety of our employees remains a top priority for Superior. We took action to drop our Total Recordable Incident Rate (TRIR) by 11% for the full year and continue to maintain all safety protocols to ensure the well-being of the entire Superior organization. As we advance into 2022, we are excited for the opportunities that lay ahead. I would like to thank our employees, customers, and shareholders for their commitment in driving growth and supporting continued success for Superior. Sincerely, Majdi Abulaban President and Chief Executive Officer (1) Based on Value-Added Sales excluding Foreign Exchange movements compared to North America and Western and Central Europe industry production as reported by IHS on February 14, 2022. (2) Value-Added Sales and Content per Wheel are non-GAAP financial measures. See reconciliation in this annual report to the most comparable GAAP measure. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Adjusted EBITDA (Millions of dollars) Net (Loss) Income Adjusting Items: - Interest Expense, net - Income Tax Provision (Benefit) - Depreciation - Amortization - Integration, Restructuring and Other - Factoring Fees - Impairment of Goodwill and Indefinite-Lived Intangibles Adjusted EBITDA FY 2021 FY 2020 $ 3.8 $ (243.6) 41.9 7.4 73.3 26.3 11.9 2.1 — $ $ 162.9 166.7 $ $ 45.4 14.9 72.8 25.4 19.4 1.4 193.6 372.9 129.4 Value-Added Sales; Value-Added Sales Adjusted for FX; and Content per Wheel (Millions of dollars) Net Sales Less: Aluminum Value and Outside Service Provider Costs Value-Added Sales Impact of FX on Value-Added Sales Value-Added Sales Adjusted for FX Wheels Shipped Content per Wheel Net Debt (Millions of dollars) Long Term Debt (Less Current Portion) (1) Short Term Debt Total Debt (1) Less: Cash and Cash Equivalents Net Debt (1) Excluding Debt Issuance Cost FY 2021 FY 2020 1,384.8 (631.1) 753.7 (14.8) 738.9 $ 1,100.8 (452.5) 648.3 (9.2) 639.1 $ 16,123 45.83 15,194 42.06 $ FY 2021 FY 2020 610.2 6.1 616.3 (113.5) 502.8 $ $ 637.1 6.1 643.2 (152.4) 490.8 $ $ $ $ $ $ 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 31, 2021 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) 48033 (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 Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock, $0.01 par value SUP 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 ☒ 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 ☒ 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Non-accelerated filer ☐ ☐ Accelerated filer Smaller reporting company Emerging growth company ☒ ☒ ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ 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 $225,046,322, based on a closing price of $8.62. On February 24, 2022, there were 26,163,077 shares of common stock issued and outstanding. Portions of the registrant’s 2022 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. Auditor Firm Id: 34 Auditor Name: Deloitte & Touche LLP Auditor Location: Detroit, Michigan DOCUMENTS INCORPORATED BY REFERENCE SUPERIOR INDUSTRIES INTERNATIONAL, INC. ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PART I Item 1 Item 1A Item 1B Item 2 Item 3 Item 4 Item 4A PART II Item 5 Item 7 Item 7A Item 8 Item 9 Item 9A Item 9B Item 9C PART III Item 10 Item 11 Item 12 Item 13 Item 14 PART IV Item 15 Schedule II Item 16 Business. ............................................................................................................................................................. Risk Factors. ....................................................................................................................................................... Unresolved Staff Comments............................................................................................................................... Properties. ........................................................................................................................................................... Legal Proceedings............................................................................................................................................... Mine Safety Disclosures. .................................................................................................................................... Information About Executive Officers. .............................................................................................................. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities........................................................................................................................................................ 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. .............................................................................................................................................. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ............................................................... 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, Financial Statement Schedules............................................................................................................ Valuation and Qualifying Accounts. .................................................................................................................. Form 10-K Summary.......................................................................................................................................... SIGNATURES............................................................................................................................................................................. PAGE 1 4 16 16 16 16 17 19 20 31 32 67 67 67 67 68 68 68 68 68 69 73 74 75 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, the impact of COVID-19 and supply chain disruption on our future business, results, operation and prospects, 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 using words and phrases such as “expects”, “anticipates”, “believes”, “will”, “will likely result”, “will continue”, “plans to”, “could”, “continue”, “estimates” and similar expressions. These statements include our belief 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 this Annual Report and those described from time to time in our other 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. ITEM 1 - BUSINESS Description of Business and Industry Superior Industries International, Inc.’s (referred to herein as the “Company”, “Superior”, or “we” and “our”) principal business is the design and manufacture of aluminum wheels for sale to original equipment manufacturers (“OEMs”) in North America and Europe and to the aftermarket in Europe. We employ approximately 7,800 full-time employees, operating in eight manufacturing facilities in North America and Europe. We are one of the largest aluminum wheel suppliers to global OEMs and we believe we are the #1 European aluminum wheel aftermarket manufacturer and supplier. Our OEM aluminum wheels accounted for approximately 91 percent of our sales in 2021 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Daimler (Mercedes-Benz, AMG, Smart), Ford, GM, Honda, Jaguar-Land Rover, Lucid Motors, Mazda, Nissan, PSA, Renault, Stellantis, Subaru, Suzuki, Toyota, VW Group (Volkswagen, Audi, SEAT, Skoda, Porsche, Bentley) and Volvo. We sell aluminum wheels to the European aftermarket under the brands ATS, RIAL, ALUTEC and ANZIO. North America and Europe represent the principal markets for our products, but we have a diversified global customer base consisting of North American, European and Asian OEMs. Demand for our products is mainly driven by light-vehicle production levels in North America and Europe and customer take rates on specific vehicle platforms that we serve and wheel SKUs that we produce. North American light-vehicle production in 2021 was 13.0 million vehicles, as compared to 13.0 million and 16.3 million vehicles in 2020 and 2019, respectively. In Western and Central Europe, light-vehicle production in 2021 was 12.7 million vehicles, as compared to 13.6 million and 17.8 million vehicles in 2020 and 2019, respectively. While industry production volumes in 2020 were adversely impacted by the COVID-19 pandemic, 2021 volumes were constrained by the semiconductor chip shortage which emerged in the first two quarters of 2021 and worsened in the last half of the year. The majority of our customers’ wheel programs are awarded two to four years before actual production is scheduled to begin. Our purchase orders with OEMs are typically specific to a particular vehicle model. Each year, the automotive manufacturers introduce new models, update existing models and discontinue certain models. In this process, we may be selected as the supplier on a new model, we may continue as the supplier on an updated model or we may lose the supply contract for a new or updated model to a competitor. Customer Dependence We have proven our ability to be a consistent producer of high-quality aluminum wheels with the capability to meet our customers’ requirements regarding delivery, overall customer service, price, quality, and technology. We continually strive to 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. GM, VW Group and Ford were our only customers individually accounting for 10 percent or more of our consolidated sales in 2021 and 2020. Our sales to these customers in 2021 and 2020 were as follows: (Dollars in millions) GM VW Group Ford Percent of Sales 26% 14% 13% 2021 $ $ $ Dollars 362.3 194.0 179.0 Percent of Sales 24% 16% 11% 2020 $ $ $ Dollars 274.2 175.8 125.0 The loss of all or a substantial portion of our sales to these customers would have a significant adverse effect on our financial results. Refer to Item 1A, “Risk Factors,” of this Annual Report. Raw Materials Aluminum accounted for the vast majority of our total raw material requirements during 2021. Our aluminum requirements are met through purchase orders with major global producers. During 2021, we successfully secured aluminum commitments from our primary suppliers sufficient to meet our production requirements, and we anticipate being able to source aluminum requirements to meet our expected level of production in 2022. We establish price adjustment clauses with our OEM customers to minimize the aluminum price risk. In the aftermarket business, we use derivatives to hedge price variability on our aluminum purchases. 1 When market conditions warrant, we may also enter into purchase commitments to secure the supply of certain other commodities used in the manufacture of our products, such as natural gas, electricity and other raw materials. Foreign Operations We manufacture all of our North American products in Mexico for sale in the United States, Canada and Mexico. The overall cost for us to manufacture wheels in Mexico is currently lower than in the United States, due to lower labor costs as a result of lower prevailing wage rates. Similarly, we manufacture the majority of our products for the European market in Poland, for sale throughout Europe. Similar to our Mexican operations, the overall cost to manufacture wheels in Poland is substantially lower than in both the United States and Germany at the present time due principally to lower labor costs. We may enter into forward contracts, option contracts, swaps, collars or other derivative instruments to hedge the effect of foreign currency fluctuations on expected future cash flows and on certain existing assets and liabilities. In such cases, subsidiaries, whose functional currency is the U.S. dollar or the Euro, may hedge a portion of their forecasted foreign currency costs denominated in the Mexican Peso and Polish Zloty, respectively, in order to reduce the effect of fluctuating foreign currency exchange rates on our margins. Competition Competition in the market for aluminum wheels is based primarily on delivery, overall customer service, price, quality and technology. We currently supply 17.8 percent and 13.0 percent of the aluminum wheels installed on passenger cars and light-duty trucks in North America and Europe, respectively. Competition is global in nature with a significant volume of exports from Asia into Europe and North America. Some of the key competitors in North America include Central Motor Wheel of America, CITIC Dicastal Co., Ltd., Prime Wheel Corporation, Enkei, Hands Corporation, and Ronal. Key European competitors include Ronal, Borbet, Maxion and CMS. We believe we are the leading manufacturer of alloy wheels in the European aftermarket, where the competition is highly fragmented. Key competitors include Alcar, Brock, Borbet, ATU and Mak. 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. Our engineering centers located in Fayetteville, Arkansas and Ludensheid, Germany, support our research and development in North America and Europe for our global OEM customers. We also have a technical sales function at our corporate headquarters in Southfield, Michigan that maintains a complement of engineering staff located near some of our largest customers’ headquarters and engineering and purchasing offices. Research and development of our European aftermarket wheels is performed in Bad Durkheim, Germany. 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, as amended. 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. The cost of environmental compliance was approximately $3.0 million in 2021 and $1.3 million in 2020. We expect that future environmental compliance expenditures will approximate these levels and will not have a material effect on our consolidated financial position or results of operations. However, 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. Refer to Item 1A, “Risk Factors - We are subject to various environmental laws” of this Annual Report. 2 Sustainability Superior conducted an assessment in 2021 to identify the sustainability interests of our stakeholders and inform our sustainability strategy. Superior is committed to reducing natural gas, electricity, and water consumption, solid waste and air emissions at all of our facilities globally. All Superior manufacturing plants have implemented Environmental Management Systems that are ISO14001 certified and are subject to annual audits by an independent third party. In 2021, we assessed the carbon footprint for each of our operations globally in connection with our Communication on Progress report to the UN Global Compact published in June 2021. These assessments are helping us identify potential opportunities to: (cid:129) (cid:129) reduce fuel consumption and greenhouse gas emissions and offer low or zero carbon wheels to our customers. Superior has established a goal to be carbon neutral by 2039 and we anticipate that by 2025 we will have reduced our emissions 40% from the level generated in 2020. Superior also reported through Carbon Disclosure Project’s (“CDP”) climate change and water security sections in 2021. Furthermore, our research and development team is developing automotive light weighting solutions, such as our patented Alulite™ technology, and aerodynamic solutions that will assist in reducing our customers’ carbon footprint. We continue to collaborate with our customers and suppliers regarding sustainability practices throughout their supply chains. Employees As of December 31, 2021, we employed approximately 7,800 full-time employees, with 4,500 employees in North America and 3,300 employees in Europe. Segment Information We have aligned our executive management structure, organization and operations to focus on our performance in our North American and European regions. Financial information about our reporting segments is contained in Note 5, “Business Segments” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” of this Annual Report. History We were initially incorporated in Delaware in 1969. Our entry into the OEM aluminum wheel business in 1973 resulted from our successful development of manufacturing technology, quality control and quality assurance techniques that enabled us to satisfy the quality and volume requirements of the OEM market for aluminum wheels. The first aluminum wheel for a domestic OEM customer was a Mustang wheel for Ford. On May 30, 2017, we acquired a majority interest in UNIWHEELS, AG, which was a European supplier of OEM and aftermarket aluminum wheels. UNIWHEELS, AG was renamed in 2018 to Superior Industries Europe AG. Our stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “SUP.” 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 “Investor Relations,” as soon as reasonably practicable after they are filed electronically with the Securities and Exchange Commission (“SEC”). Also included on our website, www.supind.com, under “Investor Relations,” 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, Michigan 48033. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information related to issuers that file electronically with the SEC. 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. 3 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, financial condition and cash flows 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, financial condition and cash flows. Our reactions to these risks and uncertainties as well as our competitors’ and customers’ reactions will affect our future operating results. Industry and Economic Risks The COVID-19 pandemic has disrupted, and may continue to disrupt our business, which may have a material adverse impact on our business, results of operations, financial condition and cash flows. To date, the COVID-19 pandemic (including associated variants) has caused a widespread health crisis, and resulted in an economic downturn and government imposed measures to reduce the spread of COVID-19. In Europe and North America (our primary markets), federal, state and local governments have, at varying times, either recommended or mandated actions to slow the transmission of COVID-19. Most U.S. states and most countries implemented shelter-in-place orders, quarantines, significant restrictions on travel, as well as work restrictions that prohibited non-essential employees from going to work. While these governmental actions have generally eased, it is possible that more stringent restrictions are imposed in the future. The impact of COVID-19 and uncertainty with respect to the economic effects of the pandemic introduced significant volatility in the financial markets and has had a widespread adverse effect on the automotive industry. In addition to public health considerations, the COVID- 19 pandemic has also contributed to supply chain disruptions across a number of industries. The automotive industry has been, and will likely continue to be, impacted by the supply chain disruptions, which emerged in late 2020 as OEMs began to scale production following the industry shutdown and became a more significant challenge in 2021. Specific risks to our Company associated with the COVID-19 pandemic include the following: (cid:129) reductions in OEM automotive production, and therefore a decrease in demand for our products; (cid:129) OEMs may adjust their supply chains to eliminate reliance on certain suppliers, including Superior, based on credit rating agencies’ assessments of suppliers; (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) deterioration of worldwide credit and financial markets could limit our ability to access the capital markets, or disrupt consumers’ ability to obtain financing to purchase new vehicles; uncertainties associated with COVID-19 impacts on the automotive sector coupled with our negative equity position may result in a decrease in (or elimination of) credit insurance available to our European suppliers, resulting in adverse payment term changes with our suppliers; continuing disruptions to the automotive industry supply chain, including shortages of semiconductor chips, electric vehicle batteries, shipping containers, steel, resin and foam; disruptions in availability of raw materials, energy, supplies or equipment as a result of government mandated restrictions initiated to contain the spread of COVID-19; negative impacts to our operations resulting from instability in OEM production schedules, reductions in production volumes and production efficiency levels and increased costs resulting from our efforts and the efforts of federal, state and local governments to mitigate the impact of COVID-19 and to protect our employees’ health and well-being; the occurrence of COVID-19 incidents at our customers’ facilities or in our facilities may interrupt our customers’ and our operations for an indeterminate period of time; the temporary or permanent closure of our customers’ facilities or our facilities. The ultimate impact that COVID-19 and associated variants will have on our business, results of operations, financial condition and cash flows will depend on a number of factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; the impact of recent resurgences of COVID-19 cases in North America and Europe, the efficacy and distribution of COVID-19 vaccines, governmental, OEMs’, suppliers’, customers’ and individuals’ actions that have been and continue to be taken in 4 response to the pandemic and the impact of the pandemic on economic activity and actions taken in response to such impact by the OEMs’ suppliers and customers. The automotive industry is cyclical and volatility in the automotive industry could adversely affect our financial performance. Predominantly, our sales are made to the European and U.S. automotive markets. Therefore, our financial performance depends largely on conditions in the European and 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, as well as changing consumer preferences. Demand for aluminum wheels can be further affected by other factors, including pricing and performance comparisons to competitive products. Finally, the demand for our products is influenced by shifts of market share between vehicle manufacturers and the market penetration of the specific vehicle models being sold by our customers. Decreases in demand for automobiles in Europe and the United States could adversely affect the valuation of our productive assets, results of operations, financial condition and cash flows. We operate in a highly competitive industry and efforts by our competitors to gain market share could adversely affect our financial performance. The global automotive component supply industry is highly competitive. Competition is based on a number of factors, including delivery, overall customer service, price, quality, technology and available capacity to meet 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 maintain or increase manufacturing capacity typically requires significant investments in facilities, equipment and personnel. Additionally, as a result of evolving customer requirements, we may incur labor costs at premium rates, experience increased maintenance expenses or have 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 globally. 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 developments 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. Risks Relating to our Business, Strategy and Operations 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. GM, VW Group, Ford, Daimler Group, Volvo, BMW and Toyota, together, represented 81 percent and 82 percent of our sales in 2021 and 2020, respectively. Global procurement practices, including 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, financial condition and cash flows. We may be unable to successfully launch new products and/or achieve technological advances which could adversely affect our ability to compete resulting in an adverse impact on our financial condition, operating results and cash flows. In order to compete effectively in the global automotive component supply industry, we must be able to launch new products and adopt technology to meet our customers’ demands 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. The global automotive industry is 5 experiencing a period of significant technological change. As a result, the success of our business requires us to develop and/or incorporate leading technologies. Such technologies may be subject to rapid obsolescence. Our inability to maintain access to these technologies (either through development or licensing) may adversely affect our ability to compete. If we are unable to differentiate our products, maintain a low-cost footprint or compete effectively with technology-focused new market entrants, we may lose market share or be forced to reduce prices, thereby lowering our margins. Any such occurrences could adversely affect our financial condition, operating results and cash flows. 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 of raw materials may be driven by the supply and demand for that commodity or governmental regulation, including trade laws and tariffs. 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 our OEM contracts provide for the pass through of fluctuating aluminum costs, we may not be able to do so in the future. Moreover, we establish our aftermarket selling prices six months in advance of the spring and winter sales periods. The aluminum we use to manufacture wheels contains alloying materials, including silicon. The cost of alloying materials is therefore a component of the overall cost of a wheel. The price of the alloys we purchase is based on certain published market indices; however, most of our OEM customer agreements do not provide price adjustments for changes in market prices of alloying materials. Increases or decreases in the market prices of alloying materials could have a material effect on our operating margins and cash flows. Furthermore, our customers are not obligated to accept energy or other supply cost increases that we may attempt to pass along to them. The inability to pass cost increases on to our customers could adversely affect our operating margins and cash flows. In 2021, aluminum prices increased by approximately 45 percent and, while we were able to protect the margins of our OEM business by passing these costs on to our customers, rising aluminum prices have increased our investment in working capital and therefore reduced our operating cash flow. In addition, since we are not able to pass aluminum price increases on to our aftermarket customers, the margins of our aftermarket business were adversely affected in 2021. This and other price increases, such as rising silicon, natural gas and electricity costs if unabated could continue to adversely affect our margins in 2022. Aluminum and alloy pricing, and the timing of our receipt of payment from customers for aluminum price fluctuations, may have a material effect on our operating margins and cash flows. The cost of aluminum is a significant component in the overall cost of our wheels and in our selling prices to customers. Our OEM customer prices are adjusted for fluctuations in aluminum prices based on changes in certain published market indices, but the timing of price adjustments is based on specific customer agreements and can vary from monthly to quarterly. As a result, the timing of aluminum price adjustments with customers in sales rarely will match the timing of such changes in cost of sales and can result in fluctuations to our gross profit. This is especially true during periods of frequent and dramatic increases or decreases in the market price of aluminum. We experience continual pressure from our customers to reduce costs and, if we are unable to generate sufficient cost reductions, our revenues, operating margins and cash flows could be adversely affected. The global vehicle market is highly competitive, resulting in continual cost-cutting initiatives by our customers. Customer concentration, 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 or other cost-cutting initiatives. If we are unable to generate sufficient production cost savings in the future to offset such price reductions, our operating margins 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 supplier for the vehicle programs we participate on and for programs we may bid on in the future. Accordingly, our OEM customers may be able to negotiate favorable pricing or may decrease wheel orders from us. Such actions may result in decreased sales volumes and unit price reductions for the Company, resulting in lower revenues, operating margins and cash flows. We may be unable to successfully implement cost-saving measures or achieve expected benefits under our plans to improve operations which could negatively impact our financial position, results of operations and cash flow. As part of our ongoing focus to provide high quality products at reasonable prices, 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 6 required to develop and implement cost reduction initiatives. Additional factors such as inconsistent customer ordering patterns, increasing product complexity and heightened quality standards may increase our costs and may make it more difficult to reduce our costs. It is possible that the costs we incur to implement improvement strategies may negatively impact our financial position, results of operations and cash flow. We may be unable to attract and retain key personnel, including our senior management team, which may adversely affect our ability to conduct our business. Our success depends, in part, on our ability to attract, hire, train and retain qualified managerial, operational, engineering, sales and marketing personnel. We face significant competition for these types of employees in our industry. We may be unsuccessful in attracting and retaining the personnel we require to conduct our operations successfully. In addition, key personnel may leave us and compete against us. Our success also depends, to a significant extent, on the continued service of our senior management team. During the last several years we have experienced significant turnover in our senior management members, additional losses of members 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 lower revenues, or lead to employee morale problems and/or the loss of other key employees. Purchase of additional shares of Superior Industries Europe AG (formerly UNIWHEELS, AG) may require a higher purchase price. Superior executed a Domination and Profit Loss Transfer Agreement, “DPLTA”, which became effective in January 2018. According to the terms of the DPLTA, we offered to purchase any outstanding shares of UNIWHEELS, AG for cash consideration of €62.18 per share. The cash consideration paid to shareholders for shares tendered under the DPTLA may be subject to change based on appraisal proceedings that the minority shareholders of UNIWHEELS, AG have initiated. Legal, Compliance and Regulatory Risks We are from time to time subject to litigation, which could adversely affect our results of operations, financial condition or cash flows. 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 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 guarantee that we will be able to maintain such insurance on acceptable terms or that such insurance will provide adequate protection against future 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 or a requirement to participate in any product recall, could have a material adverse effect on our results of operations, financial condition or cash flows. Our business requires extensive product development activities to launch new products. Accordingly, there is a risk that wheels under development may not be ready by the start of production or may fail to meet the customer’s specifications. In any such case, warranty or compensation claims might be raised, or litigation might be commenced, against the Company. Moreover, there are risks related to civil liability under our customer supply contracts (civil liability clauses in contracts with customers, contractual risks related to civil liability for causing delay in production launch, etc.). If we fail to ensure production launch as and when required by the customer, thus jeopardizing production processes at the customer’s facilities, this could lead to increased costs, giving rise to recourse claims against, or causing loss of orders by the Company. This could also have an adverse effect on our results of operations, financial condition or cash flows. International trade agreements and our international operations make us vulnerable to risks associated with doing business in foreign countries that can affect our business, financial condition, results of operations and cash flows. We manufacture our products in Mexico, Germany and Poland and we sell our products internationally. Accordingly, unfavorable changes in foreign cost structures, trade protection laws, tariffs on aluminum or wheels, 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. It remains unclear what the U.S. administration or foreign governments, including China, will or will not do with respect to tariffs or other international trade agreements and policies. In 2018, 25% tariffs (the “301 tariffs”) were imposed by the United States Trade 7 Representative on various products imported from China, including aluminum wheels, based on Section 301 of the Trade Act of 1974. While the 301 tariffs are currently still in effect, there is a risk they could be removed or not extended. Removal of these tariffs may increase competitive pressure from Chinese producers who have cost advantages. This may have an adverse effect on our business, financial condition, results of operations and cash flows. The free trade agreement between the United States of America, the United Mexican States and Canada (the “USMCA”) entered into force on July 1, 2020 and includes several provisions relating to automobile manufacturing. One provision requires that automobiles must have 75 percent of their components manufactured in Mexico, the United States, or Canada by 2023 to qualify for zero tariffs (up from 62.5 percent under NAFTA). Another provision requires vehicle producers to certify that 40 percent to 45 percent of automobile parts are made by workers who earn $16 per hour by 2023. Although this requirement applies to vehicle producers, our workers in Mexico currently earn less than $16 per hour. As a result, we will be unable to assist the vehicle producers with meeting this requirement. Mexico has passed new labor laws that are intended to make it easier for Mexican workers to unionize. As a result, the USMCA may increase our cost of manufacturing in Mexico which could have an adverse effect on our business, financial condition, results of operations and cash flows. The USMCA must be reviewed by the member countries every six years and sunsets after sixteen years. A trade war, other governmental action related to tariffs or international trade agreements, changes in United States social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently manufacture and sell products, and any resulting negative sentiments towards the United States, these territories and countries as a result of such changes, likely would have an adverse effect on our business, financial condition, results of operations and cash flows. The cost of manufacturing our products in Mexico, Germany and Poland may be affected by tariffs imposed by any of these countries or the United States, trade protection laws, policies and other regulations affecting trade and investments, social, political, labor, or general economic conditions. Other factors that can affect the business and financial results of our Mexican, German and Polish operations include, but are not limited to, changes in cost structures, currency effects of the Mexican Peso, Euro and Polish Zloty, availability and competency of personnel and developments in tax regulations. There is a risk of discontinuation of the European Union (EU) anti-dumping duty from China which may increase the competitive pressure from Chinese producers, including in the aftermarket. In 2010, the European Commission imposed provisional anti-dumping duties of 22.3 percent on imports of aluminum road wheels from China after a complaint of unfair competition from European manufacturers. The European Commission argued that the EU manufacturers had suffered a significant decrease in production and sales, and a loss of market share, as well as price depression due to cheaper imports from China. On January 23, 2017, the European Commission decided to maintain the anti-dumping duties (Commission Implementing Regulation (EU) 2017/109) for another five-year period. The anti-dumping duties protect the EU producers until January 24, 2022. In October 2021, the EU manufacturers filed a petition seeking an extension and increase of these tariffs. The EU Commission did not render a decision prior to the January 24, 2022 expiration date; therefore, the current tariffs will stay in place until the EU Commission issues its decision. If the EU Commission does not extend these tariffs, the competitive pressures from Chinese producers, which have cost advantages, may adversely affect the Company’s financial condition, results of operations and cash flows. We are subject to various environmental laws. We incur 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 comply 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 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 condition. Further, changes in legislation or regulation imposing reporting obligations on, or limiting emissions of greenhouse gases from, or otherwise impacting or limiting our equipment, operations, or 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. Capital Structure Risks 8 We do not expect to generate sufficient cash to repay all of our indebtedness (including the Term Loan Facility and Notes) by their respective maturity dates and we may be forced to take other actions to satisfy these obligations, which may not be successful. In addition, we may be unable to repay the redeemable preferred stock in the event the holder exercises its redemption rights. The Company’s capital structure is heavily leveraged as a result of debt incurred in connection with the 2017 acquisition of our European business. At December 31, 2021, our capital structure consisted of: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) $400.0 million Senior Secured Term Loan Facility (“Term Loan Facility” or “Term Loan B”) due May 23, 2024 with an outstanding balance of $349.2 million (together with the Revolving Credit Facility referred to as the USD Senior Secured Credit Facility, “USD SSCF”); €250.0 million original principal amount of 6.0% Senior Notes due June 15, 2025 (the “Notes”) with an outstanding balance of €217 million, or $245.8 million; redeemable preferred stock of $199.9 million (unconditionally redeemable with a $300 million redemption value on or after September 14, 2025 or upon the occurrence of a Redemption Right Event as defined in the Certificate of Designations); equipment loans and finance leases of $21.2 million; and shareholders’ deficit of $70.4 million. The Company also had available unused commitments under its Revolving Credit Facility and European Senior Secured Credit Facility (“EUR SSCF”) of $195.2 million at December 31, 2021. Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain other factors beyond our control. At the present time, we do not expect to generate sufficient cash to repay all principal due under our indebtedness, in full by the respective maturity dates, which will likely require us to refinance a portion or all of our outstanding debt. Our ability to restructure or refinance our debt will depend on the condition of the capital and credit markets and our financial condition at such time. We might not be able to refinance the debt on satisfactory terms. Any refinancing of our debt could be at higher interest rates and associated transactions costs and may require us to comply with more onerous covenants, which could further restrict our business operations and limit our financial flexibility. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit ratings, which could harm our ability to incur additional indebtedness or issue equity, or to refinance all or portions of these obligations. In the absence of sufficient cash flows, refinancing or adequate funds available under credit facilities, we could face substantial liquidity constraints and might be required to reduce or delay capital expenditures, seek additional capital, sell material assets or operations to attempt to meet our debt service and other obligations. The credit agreements governing the USD SSCF and EUR SSCF, taken together the Global Senior Secured Credit Facilities (“GSSCF”), and the Indenture for the Notes restrict our ability to conduct asset sales and/or use the proceeds from asset sales. We may not be able to consummate these asset sales to raise capital or sell assets at prices and on terms that we believe are fair, and any proceeds that we do receive may not be adequate to meet any debt service obligations then due. If we cannot meet our debt service obligations, the holders of our debt may accelerate our debt and, to the extent such debt is secured, foreclose on our assets. In such an event, we may not have sufficient assets to repay all of our debt. Under the USD SSCF and EUR SSCF, we had available unused commitments of $127.7 million and $67.5 million (€59.6 million), respectively, as of December 31, 2021, which could become critical to the Company’s ability to pay its operating obligations in a timely manner. The commitment under the USD SSCF will mature in two tranches, $25.0 million on May 23, 2022 and the remaining $107.5 million on October 31, 2023, and the EUR SSCF will mature on May 22, 2023, all of which are prior to the maturities of our Term Loan Facility and Notes, as well as the date as of which our preferred shareholder could unconditionally redeem their shares. We might not be able to extend these credit lines beyond the current due dates or may only be able to extend them for smaller amounts. This in turn might reduce our ability to refinance our other outstanding debt in future years. It might also cause the rating agencies to downgrade our credit ratings. Additionally, it might require us to hold more cash in our bank accounts to ensure our ability to pay our obligations in a timely manner, which in turn could reduce our ability to pay down debt or other obligations. Under the Certificate of Designations for our redeemable preferred stock, the holders have redemption rights that allow them to force us to redeem the preferred stock either as a result of the occurrence of an early redemption event (a change in control, recapitalization, merger, sale of substantially all of the Company’s assets, liquidation or delisting of the Company’s common stock from the NYSE) or unconditionally on or after September 14, 2025. The redemption obligation of our redeemable preferred stock consists of a redemption price equal to the greater of 2 times the then current Stated Value (defined in the Certificate of Designations as $150.0 million, plus any accrued and unpaid dividends or dividends paid-in-kind), currently $300.0 million, or the product of the number of common shares into which the redeemable preferred stock could be converted (5.3 million shares currently) and the then current market price of our common stock. Under Delaware law, any redemption payment would be limited to the “surplus” that our Board 9 determines is available to fund a full or partial redemption without rendering us insolvent. The shares of preferred stock that have not been redeemed would continue to receive a dividend of 9 percent per annum on the then current Stated Value, as defined in the Certificate of Designations, until such shares of preferred stock are redeemed. The Board would have to evaluate on an ongoing basis the ability of the Company to make any remaining payments until the full redemption amount has been paid. A redemption payment, if required, for some or all of our outstanding shares of preferred stock would negatively impact our liquidity and could adversely affect our business, results of operations and financial condition. Our substantial indebtedness and the corresponding interest expense could adversely affect our financial condition We have a significant amount of indebtedness. As of December 31, 2021, our total debt was $616.2 million ($608.4 million net of unamortized debt issuance costs of $7.8 million). Additionally, we had availability of $127.7 million under the USD SSCF, as well as $67.5 million (€59.6 million) under the EUR SSCF at December 31, 2021. A significant portion of our cash flow from operations will be used to pay our interest expense and will not be available for other business purposes. We cannot be certain that our business will generate sufficient cash flow or that we will be able to enter into future financings that will provide sufficient proceeds to meet or pay the interest on our debt. Subject to the limits contained in the credit agreements governing our GSSCF and the indenture governing the Notes (with outstanding principal balance of $245.8 million (€217.0 million) at December 31, 2021) and our other debt instruments, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. In addition, the indenture covering the Notes (the “Indenture”) and the credit agreements governing the GSSCF and our other debt instruments contain restrictive covenants that among other things, could limit our ability to incur liens, engage in mergers and acquisitions, sell, transfer or otherwise dispose of assets, make investments or acquisitions, redeem our capital stock or pay dividends. In addition, the GSSCF agreement requires us to maintain appropriate insurance coverages, including insurance with respect to assets which secure the underlying debt obligations. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of the maturity of all of our debt. A downgrade of our credit rating or a decrease of the prices of the Company’s common stock, the USD SSCF or the Notes could adversely impact our financial performance. The Company, its USD SSCF, and the Notes, are rated by Standard and Poor’s and Moody’s. These ratings are widely followed by investors, customers, and suppliers, and a downgrade by one or both of these rating agencies might cause: suppliers to cancel our contracts, demand price increases, or decrease payment terms; customers to reduce their business activities with us; or investors to reconsider investments in financial instruments issued by Superior, all of which might cause a decrease of the price of our common stock, our Notes, or the price of the bilaterally traded Term Loan Facility which is a part of the USD SSCF. A decrease in our common stock, Notes and/or Term Loan Facility prices, in turn, might accelerate such negative trends. A reduction in the price of the Notes and Term Loan Facility implies an increase of the yield debt investors demand to provide us with financing, which, in turn, would make it more difficult for us to refinance our existing debt, redeemable preferred stock obligations and/or future debt or redeemable preferred stock obligations. The terms of the credit agreements governing the GSSCF, the Indenture, and other debt instruments, as well as the documents governing other debt that we may incur in the future, may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions. The Indenture, the credit agreements governing the GSSCF and our other debt instruments, and the documents governing other debt that we may incur in the future, may contain a number of covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including restrictions on our ability to: • • • • incur additional indebtedness and guarantee indebtedness; create or incur liens; engage in mergers or consolidations or sell all or substantially all of our assets; sell, transfer or otherwise dispose of assets; • make investments, acquisitions, loans or advances or other restricted payments; • • pay dividends or distributions, repurchase our capital stock or make certain other restricted payments; prepay, redeem, or repurchase any subordinated indebtedness; 10 • • • designate our subsidiaries as unrestricted subsidiaries; enter into agreements which limit the ability of our non-guarantor subsidiaries to pay dividends or make other payments to us; and enter into certain transactions with our affiliates. In addition, the restrictive covenants in the credit agreements governing the GSSCF and other debt instruments require us to maintain specified financial ratios and satisfy other financial condition tests to the extent subject to certain financial covenant conditions. Our ability to meet those financial ratios and tests can be affected by events beyond our control. We may not meet those ratios and tests. A breach of the covenants or restrictions under the Indenture governing the Notes, under the credit agreements governing the GSSCF, or under other debt instruments could result in an event of default under the applicable indebtedness. Such a default may allow the creditors under such facility to accelerate the related debt, which may result in the acceleration of any other debt to which a cross- acceleration or cross-default provision applies. In addition, an event of default under the credit agreements governing our GSSCF would permit the lenders under our revolving credit facilities to terminate all commitments to extend further credit under these facilities. Furthermore, if we were unable to repay the amounts due and payable under the GSSCF or under other secured debt instruments, those lenders could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under the GSSCF. In the event our lenders or holders of the Notes accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness or be able to borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms acceptable to us. As a result of these restrictions, we may be: • • • limited in how we conduct our business; unable to raise additional debt or equity financing to operate during general economic or business downturns; or unable to compete effectively or to take advantage of new business opportunities. These restrictions, along with restrictions that may be contained in agreements evidencing or governing other future indebtedness, may affect our ability to grow or pursue other important initiatives in accordance with our growth strategy. Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Borrowings under our GSSCF are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease. As of December 31, 2021, approximately $349.2 million of our debt was variable rate debt. Our anticipated annual interest expense on $349.2 million variable rate debt at the current rate of 4.1 percent would be $14.3 million. We have entered into interest rate swaps exchanging floating for fixed rate interest payments in order to reduce interest rate volatility. As of December 31, 2021, we had outstanding interest rate swaps with an aggregate principal amount of $200.0 million, maturing $50 million September 30, 2022, and $150 million December 31, 2022. In the future, we may again enter into interest rate swaps to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk. We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the use of alternative reference rates. The interest rates under our USD SSCF are calculated using LIBOR. On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021 with the exception of U.S. dollar LIBOR rates for one, three, six and twelve-month terms which will be available through June 30, 2023. No later than when LIBOR ceases to exist, a comparable or successor reference rate as approved by the Administrative Agent under the USD SSCF will apply or such other reference rate as may be agreed by the Company and the lenders under the credit agreement governing the USD SSCF. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is planning to replace U.S. dollar LIBOR with the secure overnight financing rate (SOFR), a newly created index, calculated based on repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere. To the extent these interest rates increase, our interest expense will increase, which could adversely affect our financial condition, operating results and cash flows. A delisting of our common stock from the NYSE could reduce the liquidity and market price of our common stock; reduce the number of investors and analysts that cover our common stock; limit our ability to issue additional shares, and damage our reputation which could have a material adverse impact on our business, results of operations and financial condition. In addition, a delisting of our 11 common stock from the NYSE could cause a redemption of some or all of our outstanding redeemable preferred stock which would negatively impact our liquidity. We are required under the NYSE continued listing standards to maintain a market capitalization of at least $50 million, over a consecutive 30 trading-day period, or maintain stockholders’ equity of at least $50 million. As of March 31, 2020, our market capitalization was less than $50 million over a consecutive 30-day trading period and our stockholders’ equity was less than the minimum threshold. As a result, on June 5, 2020, the NYSE sent us a formal notification that we were not in compliance with the NYSE continued listing standards. In May 2021, the NYSE notified the Company that, in view of our improved market capitalization, which had been well in excess of the required threshold for the preceding six months, we regained compliance with its continued listing standards. If our market capitalization were to fall below $50 million over a consecutive thirty-day trading period, we could again fail to maintain compliance with NYSE continued listing standards which could result in delisting. As of December 31, 2021, our market capitalization was $117.2 million. A delisting of our common stock could have a material adverse impact on our business, results of operations and financial condition by, among other things: reducing the liquidity and market price of our common stock; reducing the number of investors, including institutional investors, willing to hold or acquire our common stock, which could negatively impact our ability to raise equity; decreasing the amount of news and analyst coverage relating to us; limiting our ability to issue additional securities, obtain additional financing or pursue strategic restructuring, refinancing or other transactions; and impacting our reputation and, as a consequence, our ability to attract new business. In addition, the holder of our redeemable preferred stock has the right to redeem all of the outstanding shares of redeemable preferred stock if our common stock is delisted from the NYSE. If this were to occur, we would be required to: (1) increase the then carrying value of the redeemable preferred stock to the $300 million redemption value through a corresponding charge (decrease) to our retained earnings, and (2) make a redemption payment in any amount up to $300 million if our Board determined, under Delaware law, that there was a “surplus” sufficient to fund a full or partial redemption and such payment would not render us insolvent. A redemption payment, if required, for some or all of our outstanding shares of preferred stock would negatively impact our liquidity and could adversely affect our business, results of operations and financial condition. Taxation Risks We are subject to taxation related risks in multiple jurisdictions. We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. Tax laws are dynamic and subject to change; new laws are passed and new interpretations of the law are issued or applied. Changes in tax laws or interpretations of tax laws may result in higher taxes, including making it more costly to move funds amongst different tax jurisdictions. We are subject to ongoing tax audits and may be subject to tax litigation. Audits and litigation can involve complex issues, which may require an extended period of time to resolve and can be highly subjective. Tax authorities have disagreed with certain tax reporting positions taken by us and, as a result, may assess additional taxes against us. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws, including a global minimum tax, that, if enacted, could increase our tax obligations in countries where we do business. The impact of tax law changes and tax law interpretation could adversely affect our results of operations, financial condition, cash flows and liquidity. We may fail to comply with conditions of the state tax incentive programs in Poland. The Company carries out its business activity in Poland in the area of Tarnobrzeg Special Economic Zone “Euro-Park Wislosan,” sub- zone of Stalowa Wola, Poland which provides various state income tax incentives under certain conditions. The Company conducts its business activity pursuant to permits that stipulate production, trade, and service activities relating to products and services manufactured/provided in the zone. These activities include processing of metals and applying coating on metals, tools, other finished metal products, machines for metallurgy, other parts and accessories for motor vehicles, excluding motorcycles, as well as services relating to recovery of segregated materials and recycled materials. The permits require certain conditions to be met, which include increasing the number of employees, keeping the number of employees at such level and incurring certain levels of capital 12 expenditures. In addition, particular permits indicate deadlines for completion of respective stages of investments. As of December 31, 2021, the Company had 5 permits that are effective until 2026, and we believe all conditions of the permits have been met. As of December 31, 2021, the Company utilized Polish Zloty 185.7 million of the zone-related credit and the total amount of the remaining eligible credit available to the Company amounted to Polish Zloty 6.4 million. In the event of failure to satisfy the permit conditions, the Company must reimburse the utilized public aid received together with interest which may have a material negative impact on our assets, financial condition, results of operations or cash flows. Tax regulations in Poland are dynamic and subject to varying interpretations, both inside state authorities and between state authorities and enterprises, which can result in a lack of clarity and consistent application. As a result, tax risks in Poland are higher than in countries with a more developed tax system. Tax settlements and other areas of activity subject to specific regulations (e.g., customs or FX issues) may be inspected by administrative bodies which are entitled to impose penalties and sanctions. Tax settlements may be subject to inspections for five years from the end of the year in which the tax has been paid. Consequently, the Company may be subject to additional material tax liabilities, based on the result of these tax audits. We are currently unable to fully deduct interest charges on German and US indebtedness. The interest deduction barriers under German tax law (Zinsschranke) and US tax law limit the tax deductibility of interest expenses. If no exception to these limits applies, the net interest expense (interest expense less interest income) is deductible up to 30 percent of the EBITDA taxable in Germany and the US, respectively, in a given year. Non-deductible interest expenses can be carried forward. Interest carry-forwards are subject to the same tax cancellation rules as tax loss carry-forwards. Whenever interest expenses are not deductible or if an interest carry-forward is lost, the tax burden in future assessment periods could rise, which might have alone, or in combination, a material adverse effect on our assets, financial condition, results of operation or cash flows. We may be exposed to risks related to existing and future profit and loss transfer agreements executed with German subsidiaries of our European operations. Profit and loss transfer agreements are one of the prerequisites of the taxation of Superior and its German subsidiaries as a German tax group. For tax purposes, a profit and loss transfer agreement must have a contract term for a minimum of five years. In addition, such agreement must be fully executed. If a profit and loss transfer agreement or its actual execution does not meet the prerequisites for taxation as a German tax group, Superior Industries International Germany GmbH (“SII Germany”), formerly known as Superior Industries International AG, and each subsidiary are taxed on their own income (and under certain circumstances even with retrospective effect). Additionally, 5 percent of dividends from the subsidiary to SII Germany, or other Superior European controlling entities within the European Union would be regarded as non-deductible expenses at the SII Germany level, or level of other Superior European controlling entities. Furthermore, the compensation of a loss of a subsidiary would be regarded as a contribution by SII Germany into the subsidiary and thus, would not directly reduce SII Germany’s profits. As a consequence, if the profit and loss transfer agreements do not meet the prerequisites of a German tax group, this could have a future material adverse effect on our assets, financial condition, results of operations or cash flows. General Risk Factors We may not be able to renew our various insurance policies or renew them on terms and condition acceptable to us. We carry a variety of property, liability, and other insurance policies. These insurance policies might not cover all possible future risks we are exposed to, or we might not be able to successfully enforce an insurance claim. Additionally, although we carry insurance, coverage is limited to losses in excess of any applicable deductible. Coverage under such insurance is also limited to losses up to but not in excess of any applicable coverage limit. Furthermore, we may not be able to renew our various insurance policies or may have to renew them at terms and conditions adverse or unacceptable to us. Fluctuations in foreign currencies and commodity and energy prices may adversely impact our financial results. Due to our operations outside of the United States, we experience exposure to foreign currency gains and losses in the ordinary course of our business. We settle transactions between currencies (i.e. U.S. dollar to Mexican Peso, Euro to U.S. dollar, U.S. dollar to Euro and Euro to Polish Zloty.) To the extent possible, we attempt to match the timing and magnitude of transaction settlements between currencies to create a “natural hedge.” Based on our current business model and levels of production and sales activity, the net imbalance between currencies depends on specific circumstances. While changes in the terms of the contracts with our customers will create an imbalance between currencies that we hedge with foreign currency forward or option 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. Additionally, we are exposed to commodity and energy price risks due to significant aluminum and silicon raw material requirements and the energy intensive nature of our operations. Natural gas and electricity prices are subject to a to large number of variables that 13 are outside of our control. We use financial derivatives and fixed-price agreements with suppliers to reduce the effect of any volatility on our financial results. The foreign currency forward or option contracts, the natural gas forward contracts, and the fixed-price agreements we enter into with financial institutions and suppliers are designed to protect against foreign exchange risks and price risks associated with certain existing assets and liabilities, certain firmly committed transactions and forecasted future cash flows. We have a program to hedge a significant portion of our foreign exchange or commodity and energy price exposures, typically for up to 48 months. However, we may choose not to hedge certain foreign exchange or commodity or energy price exposures for a variety of reasons including, but not limited to, accounting considerations, the prohibitive economic cost of hedging particular exposures, or our inability to identify willing counterparties. There is no guarantee that our hedge program will effectively mitigate our exposures to foreign exchange and commodity and energy price changes which could have material adverse effects on our cash flows and results of operations. In addition, fixed-price supplier and derivative contracts are subject to counterparty credit risk. Fluctuations in foreign currency exchange rates may also affect the USD value of assets and liabilities of our foreign operations, as well as assets and liabilities denominated in non-functional currencies such as the Euro, and may adversely affect reported earnings and, accordingly, the comparability of period-to-period results of operations. Changes in currency exchange rates or commodity and energy prices 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 or commodities and energy prices may affect the cost of certain items required in our operations. We cannot ensure that fluctuations in exchange rates or commodities and energy prices 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 and cash flows. A disruption in our information technology systems, including a disruption related to cybersecurity, could adversely affect our financial condition and financial performance. We rely on the accuracy, capacity and security of our information technology systems. Despite the security measures that we have implemented, our systems, and those of our customers, suppliers and other service providers, are subject to cyber security incidents, including computer viruses, malware, phishing attacks, and denial-of-service attacks. Our systems are also subject to natural or man- made incidents or disasters or unauthorized physical or electronic access. These types of incidents (collectively, a “system disruption”) have become more prevalent and pervasive across industries, including in our industry, and are expected to continue in the future. A system disruption could result in business disruption, theft of our intellectual property, trade secrets or customer information and unauthorized access to personnel information. Although cybersecurity and the continued development and enhancement of our controls, processes, practices and training designed to protect our information technology systems from attack, damage or unauthorized access are a high priority for us, our activities and investment may not be deployed quickly enough or successfully protect our systems against all vulnerabilities, including technologies developed to bypass our security measures. In addition, outside parties may attempt to fraudulently induce employees or customers to disclose access credentials or other sensitive information in order to gain access to our secure systems and networks. There are no assurances that our actions and investments to improve the maturity of our systems, processes and risk management framework or remediate vulnerabilities will be sufficient or completed quickly enough to prevent or limit the impact of any system disruption. Moreover, because the techniques used to gain access to or sabotage systems often are not recognized until launched against a target, we may be unable to anticipate the methods necessary to defend against these types of attacks and we cannot predict the extent, frequency or impact these problems may have on us. To the extent that our business is interrupted or data is lost, destroyed or inappropriately used or disclosed, such disruptions could adversely affect our competitive position, relationships with our customers, financial condition, operating results and cash flows. In addition, we may be required to incur significant costs to protect against the damage caused by these disruptions or security breaches in the future. We are also dependent on security measures that some of our third-party customers, suppliers and other service providers take to protect their own systems and infrastructures. Some of these third parties store or have access to certain of our sensitive data, as well as confidential information about their own operations, and as such are subject to their own system disruptions. Any system disruption of any of these third-parties’ systems could result in unauthorized access to our information technology systems, cause us to be non- compliant with applicable laws or regulations, subject us to legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, any of which could adversely affect our financial performance. 14 Competitors could copy our products or technologies and we could violate protected intellectual property rights or trade secrets of our competitors or other third parties. We register business-related intellectual property rights, such as industrial designs, patents and trademarks, hold licenses and other agreements covering the use of intellectual property rights, and have taken steps to ensure that our trade secrets and technological know-how remain confidential. Nevertheless, there is a risk that third parties would attempt to copy, in full or in part, our products, technologies or industrial designs, or to obtain unauthorized access and use of Company secrets, technological know-how or other protected intellectual property rights. Also, other companies could successfully develop technologies, products or industrial designs similar to ours, and thus potentially compete with us. Further, there can be no assurance that we will not unknowingly infringe intellectual property rights of our competitors, such as patents and industrial designs, especially due to the fact that the interpretations of what constitutes protected intellectual property may differ. Similarly, there is a risk that we will illegitimately use intellectual property developed by our employees, which is subject in each case to relevant regulations governing employee-created innovations. If a dispute concerning intellectual property rights arises, in which the relevant court issues an opinion on the disputed intellectual property rights contrary to us, identifying a breach of intellectual property rights, we may be required to pay substantial damages or to stop the use of such intellectual property. In addition, we are exposed to the risk of injunctions being imposed to prevent further infringement, leading to a decrease in the number of customer orders. All these events could have a material adverse effect on our assets, financial condition, results of operations or cash flows. 15 ITEM 1B - UNRESOLVED STAFF COMMENTS None. ITEM 2 - PROPERTIES Our worldwide headquarters is located in Southfield, Michigan. In our North American operations, we maintain and operate four facilities that manufacture aluminum wheels for the automotive industry including our facility for finishing wheels with physical vapor deposition. These facilities are located in Chihuahua, Mexico. We own all of our manufacturing facilities in North America, and we lease our worldwide headquarters located in Southfield, Michigan. Our European operations include four locations. The European headquarters is located in Bad Dürkheim, Germany which includes our European management, sales and distribution functions, as well as the logistics center and warehouse for the aftermarket business. The largest European production facility is located in Stalowa Wola, Poland and consists of 3 plants. Another production facility is located in Werdohl, Germany, where most development work is performed. Our European business also includes a location in Lüdenscheid, Germany, that supports our research and development in Europe. We own all of our manufacturing facilities in Europe and we lease our Lüdenscheid facility and our European headquarters in Bad Dürkheim, Germany. In general, our manufacturing facilities, which have been constructed at various times, are in good operating condition and are adequate to meet our current production capacity requirements. Active maintenance programs 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 15 “Leases,” in the 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. Refer to under Item 1A, “Risk Factors - We are from time to time subject to litigation, which could adversely affect our results of operations, financial condition or cash flows” of this Annual Report. ITEM 4 - MINE SAFETY DISCLOSURES Not applicable. 16 ITEM 4A -INFORMATION ABOUT OUR EXECUTIVE OFFICERS Information regarding executive officers who are also Directors is contained in our 2022 Proxy Statement under the caption “Election of Directors.” Such information is incorporated into Part III, Item 10, “Directors, Executive Officers and Corporate Governance.” All executive officers are appointed annually by the Board of Directors and serve at the will of the Board of Directors. The following table sets forth the names, ages and positions of our executive officers. Name Majdi B. Abulaban Kevin Burke Michael Dorah Joanne M. Finnorn Michael J. Hatzfeld Jr. Parveen Kakar Andreas Meyer C. Timothy Trenary Age 58 53 56 57 49 55 56 65 Position President and Chief Executive Officer Senior Vice President and Chief Human Resources Officer Senior Vice President and North American President Senior Vice President, General Counsel and Corporate Secretary Vice President of Finance and Corporate Controller Senior Vice President of Sales, Marketing and Product Development Senior Vice President, President, Europe Executive Vice President and Chief Financial Officer Set forth below is a description of the business experience of each of our executive officers. Majdi B. Abulaban Kevin Burke Michael Dorah Mr. Abulaban is the Company’s President and Chief Executive Officer, a position he has held since May 2019. Mr. Abulaban was previously employed by Aptiv PLC (formerly Delphi Automotive) (NYSE: APTV) (“Aptiv”), a technology company that develops safer, greener and more connected solutions for a diverse array of global customers, from 1985 to April 2019, most recently as Senior Vice President and Group President, Global Signal and Power Solutions Segment from January 2017 to April 2019. From February 2012 to January 2017, Mr. Abulaban served as the Senior Vice President and Group President, Global Electrical and Electronic Architecture Segment and President of Aptiv Asia Pacific. Prior to that, Mr. Abulaban held various business unit leadership positions with Delphi in China, Singapore and the United States. Mr. Abulaban is currently a member of the Board of Directors of SPX FLOW, Inc. (NYSE: FLOW), a global supplier of highly specialized, engineered solutions. Mr. Abulaban holds a bachelor’s degree in mechanical engineering from the University of Pittsburgh and a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University. Mr. Burke is the Company’s Senior Vice President and Chief Human Resources Officer, a position he has held since October 2019. He joined Superior from Valeo North America, a Tier One auto supplier and technology company, where he was Head of Human Resources – North America since March 2018, with responsibility for all human resources across the United States, Mexico and Canada. From 2015 to 2017, he was at Lear Corporation, a Tier One auto supplier, as Vice President of Human Resources – Asia Pacific based in Shanghai, China. From 2013 to 2015, Mr. Burke was the Chief Human Resources Officer for ITC Holdings, an independent electric transmission company. Prior to that, he held various HR leadership positions with General Mills, Pulte Homes and Dow Corning Corporation. Mr. Burke earned a Bachelor of Arts in Communication and a Master of Labor & Industrial Relations from Michigan State University, as well as a Master of Business Administration from Northwestern University’s Kellogg School. Mr. Dorah is the Company’s Senior Vice President and North American President, a position he has held since January 11, 2021. Mr. Dorah was previously the Senior Vice President, Manufacturing Systems of Delphi Technologies, Plc. (NYSE;DLPH), a global commercial vehicle parts supplier, from 2019 to 2020. Prior to that, he served as Vice President of Operations of Chassix, Inc, a global supplier of precision casting and machining solutions for the automotive industry from 2016-2019. Mr. Dorah also served as Chassix’s General Manager, Chassix, Brazil from 2012 to 2016. Prior to that, Mr. Dorah was the Vice President and General Manager, Brazil for Acument Global Technologies, Inc., a global manufacturer of screws, bolts, nuts and cold formed components for the automotive, industrial and aerospace industries from 2008 to 2010. He also served from 2008 to 2010 as Acument’s Vice President – Operations. Prior to that, Mr. Dorah held various positions with American Axle & Manufacturing, Inc. (NYSE;AXL), a global Tier 1 supplier to the automotive industry, from 1996 to 2008 culminating in his position of Director, Purchasing and Global Supply Based Management from 2004 to 2008. Mr. Dorah holds a Bachelor of Science degree in Materials Engineering from Stevens Institute of Technology and a Master of Business Administration degree and Master of Science degree in Materials Engineering from the Massachusetts Institute of Technology. 17 Joanne M. Finnorn Ms. Finnorn is the Company’s Senior Vice President, General Counsel and Corporate Secretary, a position she has held since September 2017. Previously, Ms. Finnorn served as Vice President, General Counsel and Chief Compliance Officer of Amerisure Mutual Insurance Company from February 2016 to August 2017. From 2013 to January 2016, Ms. Finnorn served as General Counsel, HouseSetter LLC, a home monitoring company. Ms. Finnorn began her career as an attorney with General Motors in Detroit before taking the role of General Counsel for GMAC’s European Operations in Zurich, Switzerland. Ms. Finnorn also served as Vice President & General Counsel and Vice President, Subscriber Services for OnStar LLC. Ms. Finnorn obtained a Bachelor of Arts degree from Alma College and a Juris Doctor from Stanford Law School. Michael J. Hatzfeld Jr. Mr. Hatzfeld Jr. is the Company’s Vice President of Finance and Corporate Controller, a position he has held Parveen Kakar Andreas Meyer C. Timothy Trenary since December 2018. Prior to joining the Company, Mr. Hatzfeld Jr. held various positions with General Motors Company since 2011, most recently as Controller, US Sales and Marketing Unit in 2018, Controller, Global Revenue Recognition Project from 2016 to 2018, Controller, Customer Care and Aftersales Units from 2014 to 2016 and Assistant Director, Corporate Reporting and Analysis from 2013 to 2014. Mr. Hatzfeld Jr. began his career in public accounting at Ernst & Young LLP. Mr. Hatzfeld Jr. holds a Bachelor of Science degree from Duquesne University. Mr. Hatzfeld Jr. is also a Certified Public Accountant. Mr. Kakar is the Company’s Senior Vice President of Sales, Marketing and Product Development, a position he has held since September 2014. Mr. Kakar joined the Company in 1989 as the Director of Engineering Services and has held various positions at the Company since then. From July 2008 to September 2014, Mr. Kakar served as the Company’s Senior Vice President of Corporate Engineering and Product Development and from 2003 to 2008 as the Vice President of Program Development. Mr. Kakar holds a Bachelor of Science in Mechanical Engineering from Punjab Engineering College in India. Mr. Meyer is the Company’s Senior Vice President, President, Europe, a position he has held since November 2019. He was previously the Senior Vice President of Snop / Tower Automotive Holding GmbH, a first tier automotive supplier, from January 2017 to October 2019. Prior to that, he served as Tower’s Vice President of Operations from July 2015 to January 2017. From July 2013 to June 2015, Mr. Meyer was the Managing Director of Hörmann Automotive GmbH (“Hörmann”), a first tier automotive supplier. Mr. Meyer also served as Managing Director of Hörmann Automotive Components from October 2007 to June 2015. Mr. Meyer graduated from Helmut Schmidt University Hamburg with a degree in business management. Mr. Trenary is the Company’s Executive Vice President and Chief Financial Officer, a position he has held since September 2020. Prior to joining Superior, Mr. Trenary was Executive Vice President and Chief Financial Officer at Commercial Vehicle Group, Inc. from 2013 to 2020. Previously, Mr. Trenary had served in several Chief Financial Officer roles, including ProBuild Holdings, LLC, EMCON Technologies Holdings Limited, and DURA Automotive Systems, Inc. In addition, he has previously served in various executive positions with both public and private companies. Mr. Trenary began his career in public accounting at Arthur Young & Co., now part of Ernst & Young, and holds a Bachelor of Arts degree from Michigan State University and a Master of Business Administration degree from the University of Detroit Mercy. 18 PART II ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Superior Common Stock is traded on the NYSE under the symbol “SUP”. As of February 24, 2022, there were approximately 349 holders of record of our common stock. ITEM 6 – [RESERVED] 19 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. 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 Our principal business is the design and manufacture of aluminum wheels for sale to OEMs in North America and Europe and to the aftermarket in Europe. We employ approximately 7,800 full-time employees, operating in eight manufacturing facilities in North America and Europe. We are one of the largest aluminum wheel suppliers to global OEMs and we believe we are the #1 European aluminum wheel aftermarket manufacturer and supplier. Our OEM aluminum wheels accounted for approximately 91 percent of our sales in 2021 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Daimler (Mercedes-Benz, AMG, Smart), Ford, GM, Honda, Jaguar-Land Rover, Lucid Motors, Mazda, Nissan, PSA, Renault, Stellantis, Subaru, Suzuki, Toyota, VW Group (Volkswagen, Audi, SEAT, Skoda, Porsche, Bentley) and Volvo. We sell aluminum wheels to the European aftermarket under the brands ATS, RIAL, ALUTEC and ANZIO. North America and Europe represent the principal markets for our products, but we have a diversified global customer base consisting of North American, European and Asian OEMs. Effect of COVID-19 Pandemic In 2020, the COVID-19 pandemic introduced significant volatility in the financial markets and had a widespread adverse effect on the automotive industry. While navigating through this period of volatility and uncertainty, Superior’s top priorities were: (cid:129) Ensuring the health and safety of our employees (cid:129) Maintaining the financial health of the Company, and (cid:129) Serving our customers. In order to ensure the health and safety of our employees globally and respond to the then current industry production environment, we closed production at our European facilities in late March 2020. In North America, our manufacturing operations ceased production in early April 2020. The Company reopened all of its facilities by June 1, 2020, in line with industry demand and finished goods levels, and in accordance with local government requirements. As a result, COVID-19 had a significant adverse effect on our business, results of operations and financial condition in 2020, but this effect had largely subsided by the end of 2020 with the exception of supply chain disruptions which emerged late in 2020 and continued in 2021. We are continuing to monitor the resurgence of the virus, including the emergence of new virus variants and the progress of the vaccination efforts. Industry Overview and Supply Chain Disruption A broad range of factors impact automotive industry sales and production volumes, including consumer demand and preferences, dealer inventory levels, labor relations, trade agreements, cost and availability of raw materials and components, fuel prices, regulatory requirements, government initiatives, availability and cost of credit, changing consumer attitudes toward vehicle ownership and other factors. Our sales are driven generally by overall automotive industry production volumes and, more specifically, by the volumes of the vehicles for which we supply wheels. In addition, favorable product mix drives higher sales since larger diameter wheels and premium finishes command higher unit prices. Larger cars and light trucks, as well as premium vehicle platforms, such as luxury, sport utility and crossover vehicles, typically employ larger diameter wheels and premium finishes. The COVID-19 pandemic has also contributed to supply chain disruptions across a number of industries. The automotive industry has been, and will likely continue to be, impacted by the supply chain disruptions that emerged in late 2020 as OEM vehicle production resumed and began to scale following the shutdown caused by the COVID-19 pandemic. These supply chain disruptions became a more significant challenge in 2021 and include shortages of semiconductor chips, electric vehicle batteries, shipping containers, steel, resin and foam. The semiconductor chip shortage, which began to affect global automotive industry production in the first two quarters of 2021, drove significantly lower OEM vehicle production and high OEM production volatility in the third and fourth quarters of 2021. Although automotive industry production volumes in the first half of 2021 were higher than the first half of 2020, production volumes in the second half of 2021 were lower than 2020. Lower production volumes coupled with OEM customer order 20 volatility have resulted in manufacturing inefficiencies, including elevated labor, scrap and equipment change over costs. In addition, certain of our costs increased significantly in 2021, particularly the cost of aluminum, energy and materials that incorporate resins. Although our OEM contracts provide for the pass through of fluctuating aluminum costs, the mechanisms generally do not adequately incorporate the current cost to alloy the aluminum. Our OEM contracts generally do not provide for the pass through of other costs, including energy and materials that incorporate resins. With respect to our aftermarket business, we adjust our pricing periodically to reflect increased costs. Rising costs and OEM production volatility have caused our inventory balance to increase, negatively impacting our cash flows. Automotive industry production volumes in the North American and Western and Central European regions, our principal markets, are shown below for the year ended December 31, 2021, as compared to the corresponding periods of 2020 and 2019: (Units in thousands) December 31, 2021 2020 2019 2021 vs 2020 % Change 2021 vs 2019 % Change North America 13,032 13,024 16,314 0.1% (20.1%) Western and Central Europe 12,737 13,584 17,774 (6.2%) (28.3%) Total 25,769 26,608 34,088 (3.2%) (24.4%) Automotive passenger and light truck vehicle production volumes in North America and Western and Central Europe, remained relatively flat in 2021 as compared to 2020 (only 3.2 percent lower), but were 24.4 percent lower than 2019. North American volumes in 2021 were flat as compared to 2020, however volumes for Western and Central Europe declined 6.2 percent. While industry production volumes in 2020 were adversely impacted by the COVID-19 pandemic, 2021 volumes were constrained by the semiconductor chip shortage which emerged in the first two quarters of 2021 and worsened in the last half of the year. Although volumes had improved 30.3 percent in the first half of 2021 as compared to the first half 2020, they declined 25.5 percent in the latter half of the year as compared to the second half of 2020. IHS, an independent automotive industry analyst firm, forecasts that 2022 production volumes in North America and Western and Central Europe will increase18.6 percent over 2021 (16.6 percent in North America and 20.6 percent in Western and Central Europe), but volumes will continue to lag 2019 by 10.3 percent. While semiconductor manufacturers have announced plans to expand capacity over the next several years, it is unclear when automotive industry semiconductor chip shortages will begin to subside. The rebound in production volumes will be dependent upon broader availability of semiconductor chips, among other factors. During 2021, we experienced significant increases in the cost of aluminum, the principal raw material used in the manufacture of our wheels, of over 45 percent on a year-over-year basis. While we were able to protect the margins of our OEM business by passing these costs on to our customers in 2021, aluminum price increases have increased our working capital and reduced our operating cash flow. In addition, our electricity and natural gas costs have risen significantly in 2021, as has the cost of materials incorporating resins. If these cost pressures continue in 2022, our margins and operating cash flow could be adversely impacted. Business Overview Globally, we shipped 16.1 million units in 2021, up from 15.2 million in 2020 but down from 19.2 million in 2019. Superior volumes increased 6.1 percent, better than the 3.2 percent decline in overall industry volumes for 2021 but 16.2 percent lower than our 2019 volumes. 21 The following chart shows the comparison of our operational performance in 2021 and 2020 (in millions): Sales in 2021 were higher than 2020 primarily due to favorable product mix and higher aluminum prices and shipment volumes (despite the semiconductor chip shortage which constrained OEM 2021 vehicle production volumes), as well as favorable foreign exchange rates. Our income from operations increased year-over-year due to the goodwill and indefinite-lived intangible asset impairment charge of $193.6 million recognized in 2020, as well as improved North American profitability primarily associated with favorable product mix and higher shipment volumes. Similarly, our 2021 Adjusted EBITDA was higher than 2020 primarily due to North American favorable product mix and higher shipment volumes. 22 The following table is a summary of the Company’s operating results for 2021 and 2020: Results of Operations Fiscal Year Ended December 31, (Dollars in thousands, except per share amounts) Net sales North America Europe Net sales Cost of sales Gross profit Percentage of net sales Selling, general and administrative expenses Impairment of goodwill and indefinite-lived intangibles Income (loss) from operations Percentage of net sales Interest expense, net Other expense, net Income tax provision Net income (loss) Percentage of net sales Diluted loss per share Value added sales (1) Adjusted EBITDA (2) Percentage of net sales Percentage of value added sales Unit shipments in thousands 2021 2020 $ $ 744,904 639,846 1,384,750 (1,270,035) 114,715 550,079 550,681 1,100,760 (1,035,134) 65,626 8.3% 6.0% 59,339 — 55,376 4.0% (41,879) (2,306) (7,437) 3,754 753,669 166,713 0.3% (1.17) $ $ $ 12.0% 22.1% 16,123 52,420 193,641 (180,435) (16.4)% (45,418) (2,827) (14,881) (243,561) (22.1)% (10.81) 648,308 129,373 11.8% 20.0% 15,194 $ $ $ (1) Value added sales is a key measure that is not calculated according to U.S. GAAP. Refer to Item 7, “Management’s Discussion and Analysis, Non-GAAP Financial Measures” section of this Annual Report for a definition of value added sales and a reconciliation of value added sales to net sales, the most comparable U.S. GAAP measure. (2) Adjusted EBITDA is a key measure that is not calculated according to U.S. GAAP. Refer to Item 7, “Management’s Discussion and Analysis, Non-GAAP Financial Measures” section of this Annual Report for a definition of Adjusted EBITDA and a reconciliation of our Adjusted EBITDA to net income (loss), the most comparable U.S. GAAP measure. 2021 versus 2020 Shipments Wheel unit shipments were 16.1 million for 2021, compared to wheel unit shipments of 15.2 million in the prior year, an increase of 6.1 percent. The increase was attributable to a 9.9 percent increase in North American volume and a 2.2 percent increase in European volume. Net Sales Net sales for 2021 were $1,384.8 million compared to net sales of $1,100.8 million in the prior year, an increase of $284.0 million or 25.8 percent. The increase in revenue was due to $178.0 million attributable to higher pass through of aluminum to the OEMs; $88.3 million related to favorable product mix and higher shipment volumes; and $17.7 million resulting from favorable foreign exchange, primarily related to the Euro. The increase in shipment volumes was primarily due to the 2020 shutdowns at our key OEM customers in response to the COVID-19 pandemic, while the increase in aluminum pass through was due to the higher cost of aluminum and higher shipment volumes, as well as product mix. Cost of Sales Cost of sales was $1,270.0 million for 2021, compared to $1,035.1 million in the prior year, an increase of $234.9 million. The increase in cost of sales was due to $159.3 million in higher raw material costs; $65.6 million related to increased shipment volumes and product mix; and $10.0 million resulting from higher foreign exchange, primarily related to the Euro. 23 Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses for 2021 were $59.3 million, or 4.3 percent of net sales, compared to $52.4 million, or 4.8 percent of net sales in the prior year. The $6.9 million increase was primarily due to a $10.7 million increase in compensation and benefit expense, including $4.7 million due to the modification of the 2019 and 2020 PSU awards, and temporary savings actions taken in 2020 in response to the COVID-19 pandemic, partially offset by a $4.4 million gain on the sale of our Fayetteville, Arkansas facility in 2021. Impairment of Goodwill and Indefinite-lived Intangibles In the first quarter of 2020, we recognized a goodwill and indefinite-lived intangible asset impairment charge of $193.6 million relating to our European reporting unit (refer to Note 9, “Goodwill and Other Intangible Assets” in the Notes to Consolidated Financial Statements in Item 8 “Financial Statements and Supplementary Data” of this Annual Report). Net Interest Expense Net interest expense for 2021 was $41.9 million, compared to interest expense of $45.4 million in the prior year. The $3.5 million decrease was due to lower average interest rates on the term Loan Facility and substantially lower borrowings under our revolving lines of credit during 2021, as compared to 2020. Other Income (Expense) Other expense, net was $2.3 million in 2021, primarily due to a net casualty loss of $1.5 million associated with a flood at our Werdohl, Germany location. Other expense of $2.8 million in 2020 was primarily due to $2.4 million of foreign exchange losses. Income Tax Provision The income tax provision for 2021 was $7.4 million on pre-tax income of $11.2 million, representing an effective tax rate of 66.5 percent. The 2021 effective tax rate differs from the statutory rate primarily due to the recognition of a valuation allowance on deferred tax assets, nondeductible charges and U.S. tax on foreign earnings, partially offset by a favorable split of pre-tax jurisdictional income. The income tax provision for 2020 was $14.9 million on pre-tax loss of $228.7 million, representing an effective income tax rate of (6.5) percent. The 2020 effective tax rate differs from the statutory rate primarily due to the effect of the goodwill impairment in Germany and the recognition of a valuation allowance on deferred tax assets, partially offset by a favorable split of pre-tax jurisdictional income. Net Income (Loss) Net income in 2021 was $3.8 million, or a loss per diluted share of $1.17, compared to net loss of $243.6 million, or a loss per diluted share of $10.81 in 2020. Segment Sales and Income from Operations Year Ended December 31, 2021 2020 Change (Dollars in thousands) Selected data Net sales North America Europe Total net sales $ 744,904 $ 639,846 550,079 $ 550,681 $ 1,384,750 $ 1,100,760 $ 194,825 89,165 283,990 Income (loss) from operations North America Europe Total income (loss) from operations $ $ 50,798 $ 4,578 8,872 $ (189,307) 41,926 193,885 55,376 $ (180,435) $ 235,811 24 North America In 2021, net sales of our North America segment increased 35.4 percent, as compared to 2020. The increase in net sales was due to $129.5 million in higher aluminum pass through to the OEMs and $65.3 million related to a 9.9 percent increase in shipment volumes and favorable product mix. North American segment income from operations for 2021 was $41.9 million higher than the prior year due to $27.1 million related to favorable material and manufacturing cost performance and $20.2 million related to favorable product mix and higher shipment volumes, partially offset by a $5.4 million increase in compensation and benefit expense. The increase in compensation and benefit expense was largely due to the modification of the 2019 and 2020 PSU awards. Europe In 2021, net sales of our European segment increased 16.2 percent, compared to 2020. The increase in net sales was due to $48.5 million in higher aluminum pass through to the OEMs; $23.0 million related to favorable product mix and a 2.2 percent increase in shipment volumes; and $17.7 million in favorable foreign exchange. European segment income from operations for 2021 was $193.9 million higher than the prior year due to a $193.6 million goodwill and indefinite-lived intangible asset impairment charge recognized in 2020. Financial Condition, Liquidity and Capital Resources As of December 31, 2021, our cash and cash equivalents totaled $113.5 million compared to $152.4 million at December 31, 2020. Our sources of liquidity primarily include cash and cash equivalents, cash provided by operating activities, borrowings under available debt facilities, factoring arrangements for trade receivables and, from time to time, other external sources of funds. Working capital (current assets minus current liabilities) and our current ratio (current assets divided by current liabilities) were $172.4 million and 1.7:1, respectively, at December 31, 2021, versus $152.5 million and 1.7:1 at December 31, 2020. While the Company continues to effectively manage all elements of working capital, inventories have increased in 2021 due to rising raw material costs and, to a lesser extent, higher conversion costs. Our working capital requirements, investing activities and cash dividend payments have historically been funded from internally generated funds, debt facilities, cash and cash equivalents, and we believe these sources will continue to meet our future requirements. Capital expenditures relate to improving production quality and efficiency and extending the useful lives of existing property and expenditures for new product offerings, as well as expanded capacity for existing products. During 2022, we expect that capital expenditures will be approximately $80.0 million, $42.9 million of which has been committed under outstanding purchase orders at December 31, 2021. In connection with the acquisition of our European operations, we entered into several debt and equity financing arrangements during 2017. On March 22, 2017, we entered into a USD Senior Secured Credit facility (“USD SSCF”) consisting of a $400.0 million Senior Secured Term Loan Facility (“Term Loan Facility”) and a $160.0 million Revolving Credit Facility (“Revolving Credit Facility,” together with the Term Loan Facility referred to as the USD Senior Secured Credit Facility, “USD SSCF”). On May 22, 2017, we issued 150,000 shares of redeemable preferred stock for an aggregate purchase price of $150.0 million. On June 15, 2017, we issued €250.0 million aggregate principal amount of 6.00% Senior Notes due June 15, 2025 (the “Notes”). Finally, as part of the European business acquisition, we also assumed $70.7 million of outstanding debt, including a €30.0 million European Revolving Credit Facility (“EUR SSCF”) (subsequently increased to €60.0 million). In addition, the European business entered into equipment loan agreements totaling $13.4 million (€12.0 million) in the fourth quarter of 2019. The Company drew down €10.6 million on these equipment loans in the first quarter of 2020 and drew the remaining €1.4 million in the first quarter of 2021. With the onset of the COVID-19 pandemic and the ensuing economic uncertainty, the Company drew down on its USD SSCF and EUR SSCF revolving credit facilities to provide additional liquidity. As of March 31, 2020, the Company had borrowings outstanding under these facilities of $207.9 million. The Company resumed all its operations by June 1, 2020 and fully repaid the borrowings under the revolving credit facilities by September 30, 2020. There are no borrowings under the Company’s USD SSCF or EUR SSCF at December 31, 2021. Balances outstanding under the Term Loan Facility, Notes, and equipment loans as of December 31, 2021 were $349.2 million, $245.8 million, and $18.6 million, respectively. The balance of the redeemable preferred stock was $199.9 million as of December 31, 2021. The Term Loan Facility matures May 23, 2024 and the Notes mature June 15, 2025. In addition, the redeemable preferred stock may be unconditionally redeemed on or after September 14, 2025 at the redemption amount, currently $300 million, provided the Company has sufficient available funds. Under Delaware law, any redemption payment would be limited to the “surplus” that our Board determines is available to fund a full or partial redemption without rendering us insolvent. The shares of preferred stock that have not been redeemed would continue to receive an annual dividend of 9 percent on the $150.0 million original stated value, plus any accrued and unpaid dividends, which would be paid quarterly. The Board would have to evaluate on an ongoing basis the ability of the Company to make any further redemption payments until the full redemption amount has been paid. The Company intends to 25 refinance a portion or all of its debt obligations, including the Term Loan Facility and Notes, prior to maturity. As a part of any refinancing, the Company will review its overall capital structure and may evaluate other sources of capital which could include issuance of common stock or restructuring of the preferred stock. On May 3, 2021, the Company extended the term of the Revolving Credit Facility under its USD SSCF. The commitment under the facility was reduced from $160.0 million to $132.5 million, with $25.0 million of the commitment maturing May 23, 2022 and the remaining $107.5 million maturing October 31, 2023. During the second quarter of 2021, the Company amended its European Revolving Credit Facility (“EUR SSCF”), extending the term to May 22, 2023 and increasing the applicable margins and commitment fees, while maintaining the €60.0 million commitment. Our liquidity totaled $308.7 million at December 31, 2021, including cash and cash equivalents of $113.5 million and available unused commitments under credit facilities of $195.2 million. As part of our ongoing efforts to improve our cash flow and related liquidity, we negotiate with suppliers to optimize our terms and conditions, including extended payment terms. Beginning in 2021, the Company receives extended payment terms for a portion of our purchases with one of our principal aluminum suppliers in exchange for a nominal adjustment to the product pricing. The payment terms provided to us are consistent with aluminum industry norms, as well as those offered to the supplier’s other customers. The supplier intends to finance these extended terms by factoring receivables due from us with a financial institution. We are not a party to the supplier’s factoring agreement with the financial institution. We remit payments directly to our supplier, except with respect to product purchased under extended terms which have been factored by the supplier. These payments are remitted directly to the financial institution in accordance with the payment terms originally negotiated with our supplier. As of December 31, 2021, the Company owed $17.6 million to the financial institution which is included in accounts payable in the consolidated balance sheets. The Company made $78.3 million in payments to the financial institution pursuant to the supplier’s factoring arrangement for the year ended December 31, 2021. These payments are included in cash flows from operations within the consolidated statements of cash flows. As of December 31, 2021, we had no significant off-balance sheet arrangements other than factoring of $97.6 million of our trade receivables. The following table summarizes the cash flows from operating, investing, and financing activities as reflected in the consolidated statements of cash flows. Fiscal Year Ended December 31, (Dollars in thousands) 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 $ 2021 2020 44,885 (57,524) (24,025) (2,286) (38,950) $ 150,121 (44,179) (37,060) 5,614 74,496 2021 versus 2020 Operating Activities Net cash provided by operating activities was $44.9 million in 2021, as compared to $150.1 million in 2020. The decrease in cash flow provided by operating activities was primarily driven by an increase in working capital, partially offset by increased profitability. In 2021, the increase in working capital consumed $66.3 million of cash, while the reduction in working capital in 2020 provided $73.5 million of cash. The increase in working capital was primarily due to the higher cost of aluminum. Investing Activities Net cash used in investing activities was $57.5 million in 2021, as compared to $44.2 million in 2020. This increase in investing activities was driven by resumption of certain capital projects that were suspended in 2020 due to the COVID-19 production shutdowns and ongoing investments to support increased production capabilities in both the North American and European regions, partially offset by proceeds of $6.6 million from the sale of our Fayetteville, Arkansas facility. 26 Financing Activities Net cash used in financing activities in 2021 was $24.0 million, as compared to $37.1 million in 2020. This change was primarily due to prepayments of the Term Loan Facility in 2020 that did not recur in 2021. NON-GAAP FINANCIAL MEASURES In this Annual Report, we discuss two important measures that are not calculated according to U.S. GAAP, value added sales and Adjusted EBITDA. 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 outsourced service providers (“OSPs”) that are included in net sales. Contractual arrangements with our customers allow us to pass on changes in aluminum prices. Value added sales is worthy of being highlighted for the benefit of users of our financial statements as it allows users of the financial statements to consider our net sales information both with and without the aluminum and OSP costs. Management utilizes value added sales as a key metric to determine growth of the Company because it eliminates the volatility of aluminum prices. Fiscal Year Ended December 31, (Dollars in thousands) Net sales Less: aluminum value and outside service provider costs Value added sales 2021 2020 $ $ 1,384,750 $ (631,081) 753,669 $ 1,100,760 (452,452) 648,308 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, changes in the fair value of the redeemable preferred stock embedded derivative liability, acquisition and integration and certain hiring and separation related costs, proxy contest fees, gains associated with early debt extinguishment, and accounts receivable factoring fees. 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 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 U.S. GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. The following table reconciles our net income, the most directly comparable U.S. GAAP financial measure, to our Adjusted EBITDA: Fiscal Year Ended December 31, (Dollars in thousands) Net income (loss) Interest expense, net Income tax provision Depreciation Amortization Impairment of goodwill and indefinite-lived intangibles Integration, restructuring, factoring fees and other (1) (2) Change in fair value or redeemable preferred stock embedded derivative liability (3) Adjusted EBITDA Adjusted EBITDA as a percentage of net sales Adjusted EBITDA as a percentage of value added sales $ $ 2021 2020 $ 3,754 41,879 7,437 73,343 26,292 — 14,033 166,713 (25) $ 12.0% 22.1% (243,561) 45,418 14,881 72,777 25,401 193,641 19,247 1,569 129,373 11.8% 20.0% (1)In 2021, we incurred $5.3 million of restructuring costs comprised of ongoing fixed costs associated with our Fayetteville, Arkansas facility, relocation and installation costs of repurposed machinery and costs of site preparation activities which occurred as part of the sale of the facility. Additionally, we recognized a gain on sale of $4.4 million related to the sale of the Fayetteville, Arkansas facility. We also incurred $1.5 million of costs from a flood at our Werdohl, Germany facility, $4.5 million related to the Werdohl restructuring, $4.3 million of certain hiring and separation costs, $2.1 million of accounts receivable factoring fees, and $0.7 million of other costs. 27 (2)In 2020, we incurred charges of approximately $11.6 million of restructuring costs primarily comprised of ongoing fixed costs associated with our Fayetteville, Arkansas facility and relocation and installation costs of repurposed machinery. Additionally, we incurred $4.1 million of restructuring costs in connection with exiting the automotive racing market segment, as well as $1.5 million of certain hiring and separation costs, $1.4 million of accounts receivable factoring fees, and $0.6 million of other costs. (3)The change in the fair value is mainly driven by the change in our stock price during the respective periods. Critical Accounting Estimates Accounting estimates are an integral part of the consolidated financial statements. These estimates require the use of judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the periods presented. We believe the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in developing estimates actual results could differ from the original estimates, requiring adjustments to these balances in future periods (refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report for our significant accounting policies related to our critical accounting estimates). Revenue Recognition – Revenue estimation uncertainty primarily relates to deferral and recognition of tooling revenue and recognition of certain price adjustments on sales to our OEM customers treated as variable consideration. Tooling revenues, related to the initial tooling reimbursed by our customers, are deferred and recognized over the average life of the vehicle wheel program on a straight-line basis. A portion of our selling prices to OEM customers is attributable to the aluminum content of our wheels. Our selling prices are adjusted for changes in the current aluminum market based upon specified aluminum price indices during specific pricing periods, as agreed with our customers. Our selling prices also incorporate a wheel weight price component which is based on customer product specifications. We estimate the variable consideration using the “most likely” amount estimation approach. Changes in aluminum prices are monitored and revenue is adjusted as changes in the aluminum index occur. Weights are monitored, and prices are adjusted as variations arise. Customer contract prices are generally adjusted quarterly to incorporate these price adjustments. Price adjustments due to production efficiencies are generally recognized as and when negotiated with customers. Adjustments to selling prices in 2021 and 2020 related to prior year revenues were $2.6 million and $0.7 million, respectively. 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 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 instruments and are not exchange traded. We estimate the fair value of these instruments using the income valuation approach. Under this approach, future cash flows are estimated and discounted 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. Impairment of Goodwill – Goodwill is not amortized but is instead evaluated for impairment annually at the end of the fiscal year, or more frequently if events and circumstances indicate that impairment may be more likely than not. A considerable amount of management judgment and assumptions are required in performing the quantitative impairment test, principally related to determining the fair value of the reporting unit. Estimation uncertainty in determining the fair value of the reporting unit primarily relates to estimation of the cash flows and weighted average cost of capital used in the income valuation approach and the estimated EBITDA and EBITDA market multiples used in the market valuation approach, among other factors. At March 31, 2020, the impact of the COVID-19 developments and uncertainty with respect to the economic effects of the pandemic had introduced significant volatility in the financial markets and was having a widespread adverse effect on the automotive industry, including reductions in both consumer demand and OEM automotive production. In response, our key customers temporarily closed 28 nearly all production facilities in Europe and North America (our primary markets) during the quarter ended March 31, 2020. As a result, we concluded that impairment was more likely than not, and that an interim test of our goodwill was required. We utilized both an income and a market approach, weighted 75 percent and 25 percent respectively, to determine the fair value of the European reporting unit as part of our goodwill impairment assessment. The income approach is based on projected debt-free cash flow, which is discounted to the present value using discount factors that consider the timing and risk of cash flows. The discount rate used is the weighted average of an estimated cost of equity and of debt (“weighted average cost of capital”). The weighted average cost of capital is adjusted as necessary to reflect risk associated with the business of the European reporting unit. Financial projections are based on estimated production volumes, product prices and expenses, including raw material cost, wages, energy and other expenses. Other significant assumptions include terminal value cash flow and growth rates, future capital expenditures and changes in future working capital requirements. The market approach is based on the observed ratios of enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA) of comparable, publicly traded companies. The market approach fair value is determined by multiplying historical and anticipated financial metrics of the European reporting unit by the EBITDA pricing multiples derived from comparable, publicly traded companies. At March 31, 2020, we determined that the carrying value of the European reporting unit exceeded its fair value by an amount greater than the remaining goodwill balance and we recognized a non-cash goodwill impairment charge equal to the remaining goodwill balance of $182.6 million. The decline in fair value was primarily due to significantly lower market multiples and increased discount rates, as well as further declines in forecasted industry production volumes in Western and Central Europe as a result of the COVID- 19 pandemic and consequent economic instability. Forecasted revenues, EBITDA and cash flow for the European reporting unit also declined as compared to the prior year long-range plan due to lower forecasted industry production volumes which adversely impacted fair value under both the income and market approaches. Significant assumptions used under the income approach included a weighted average cost of capital (WACC) of 12.0 percent and a long-term growth rate of 1.5 percent, as compared to 10.0 percent and 2.0 percent, respectively, used in the 2019 assessment. In determining the WACC, management considered the level of risk inherent in the cash flow projections and current market conditions, including the significant increase in credit spreads and systemic market and Company specific risk premiums. The decline in the fair value under the market approach was attributable to the decline in the average EBITDA market multiple (4.9X EBITDA in 2020, 5.7X EBITDA in 2019) and lower forecasted EBITDA, as compared to the 2019 assessment (refer to Note 9, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report for further discussion of asset impairments). Impairment of Intangible Assets – Intangible assets include both finite and indefinite-lived intangible assets. Finite-lived intangible assets consist of brand names, technology and customer relationships. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives (since the pattern in which the asset will be consumed cannot be reliably determined). Indefinite-lived intangible assets are not amortized but are instead evaluated for impairment annually at the end of the fiscal year, or more frequently if events and circumstances indicate that impairment may be more likely than not. Indefinite-lived intangible assets, excluding goodwill, consist of trade names associated with our aftermarket business. Estimation uncertainty in assessing impairment of our indefinite-lived intangible asset is primarily related to the assumptions used in estimating the underlying cash flows and the discount rate used in determining fair value. In the first quarter of 2020, we recognized a non-cash impairment charge of $11.0 million related to our aftermarket trade name indefinite-lived intangible asset which was primarily attributable to a further decline in forecasted aftermarket revenues and a decline in associated profitability. As a result, there were no indefinite-lived intangible assets associated with our European operations as of December 31, 2020 (refer to Note 9, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report for further discussion of asset impairments). Impairment of Long-Lived Assets - 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. Estimation uncertainty in evaluating recoverability of long-lived assets within a given asset group is primarily related to the assumptions used in estimating the cash flows associated with the respective asset group, as well as the discount rate used in determining fair value in the event of an impairment. The asset group is the unit of accounting for a long-lived asset or group of long- lived assets which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other asset groups. An impairment loss occurs when the carrying value of an asset group (including the carrying value of liabilities associated with the long-lived assets within the asset group) exceeds the undiscounted cash flows expected to be realized from the use and eventual disposition of the respective long-lived assets. Fair value is determined primarily by discounting the estimated expected cash flows. If the carrying amount of an asset group is impaired, a loss is recognized based on the amount by which the carrying value exceeds fair value. The Company’s asset groups consist of the North American and European reportable segments. 29 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 primarily based on assumptions regarding the discount rate and the mortality of the participants, among other factors. The net periodic pension costs and related obligations are measured using actuarial techniques and assumptions (refer to Note 16, “Retirement Plans” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report for a description of these assumptions). The following information illustrates the sensitivity to a change in certain assumptions of our unfunded retirement plan as of December 31, 2021. They also may not be additive, so the impact of changing multiple factors simultaneously cannot be calculated by combining the individual sensitivities shown. The effect of the indicated increase (decrease) in selected factors is shown below (in thousands): Increase (Decrease) in: Assumption Discount rate Rate of compensation increase Percentage Change Projected Benefit Obligation at December 31, 2021 +1.0% $ +1.0% $ (3,371) $ 272 $ 2022 Net Periodic Pension Cost 15 21 Income Taxes – The Company operates in a number of geographic locations and is subject to foreign, U.S. federal, state and local taxes applicable in each of the respective jurisdictions. These tax laws are complex and involve uncertainties in the application to our facts and circumstances that may be subject to interpretation. We recognize benefits for uncertain tax positions based on a process that requires judgment in the technical application of laws, regulations and various related judicial opinions. If an uncertain tax position is more likely than not (probability of greater than 50 percent) to be sustained upon examination, we estimate the tax benefit 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. Evaluation of tax positions, their technical merits, and measurements using cumulative probability are inherently subjective estimates since they require our assessment of the probability of future outcomes. We evaluate these uncertain tax positions on a quarterly basis, including consideration of changes in circumstances, such as new regulations, recent judicial opinions or the results of recent examinations by tax authorities. Any necessary changes to our estimates are recorded in the period in which the change occurs. As a part of our income tax provision, we must also evaluate the likelihood that we will be able to realize our deferred tax assets which is dependent on our ability to generate sufficient taxable income in future years. A valuation allowance must be provided when, in our judgment, based on currently available information, it is more likely than not that all or a portion of such deferred tax assets will not be realized. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and considers all available positive and negative evidence, including the following: (cid:129) Nature, frequency and severity of current and cumulative financial reporting losses: A pattern of recent losses is heavily weighted as a source of negative evidence. We generally consider cumulative pre-tax losses in the three-year period ending in the current quarter to be significant negative evidence of future profitability. We also consider the strength and trend of earnings. (cid:129) (cid:129) Sources of future taxable income: Future reversals of existing temporary differences are heavily weighted sources of objectively verifiable evidence. Projections of future taxable income are a source of positive evidence only when the projections are combined with a history of recent profitability and can be reasonably estimated. Otherwise, these projections are considered inherently subjective and generally will not be sufficient to overcome negative evidence that includes cumulative losses in recent years, particularly if the projected future profitability is dependent on a turnaround to profitability that has not yet been achieved. Tax planning strategies: If necessary and available, tax planning strategies could be implemented to accelerate taxable amounts to utilize expiring carryforwards. These strategies would be a source of additional positive evidence and, depending on their nature, could be heavily weighted. Our accounting for the valuation of deferred tax assets represents our best estimate of future events. Changes in our current estimates, due to unanticipated market conditions, governmental legislative actions or events, could have a material effect on our ability to utilize our deferred tax assets. At December 31, 2021 and 2020, deferred tax assets were $102.1 million and $90.7 million, respectively, and valuation allowances against those deferred tax assets were $69.4 million and $46.5 million (refer to Note 14, “Income Taxes” in the 30 Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” in this Annual Report for additional information). ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is not required to provide the information required by this item. 31 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to the Consolidated Financial Statements of Superior Industries International, Inc. Reports of Independent Registered Public Accounting Firm ................................................................................................... Financial Statements Consolidated Statements of Income (Loss).................................................................................................................... Consolidated Statements of Comprehensive Income (Loss)........................................................................................... Consolidated Balance Sheets .......................................................................................................................................... Consolidated Statements of Shareholders’ Equity (Deficit) ........................................................................................... Consolidated Statements of Cash Flows ......................................................................................................................... Notes to Consolidated Financial Statements................................................................................................................... PAGE 33 36 37 38 39 41 42 32 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Superior Industries International, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Superior Industries International, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income (loss), comprehensive income (loss), shareholders' equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Income Taxes — Refer to Notes 1 and 14 to the financial statements Critical Audit Matter Description The Company operates in a number of geographic locations and is subject to foreign, U.S. federal, state and local taxes applicable to each of the respective jurisdictions. Determining the provision for income taxes, the realizability of deferred tax assets and the recognition and measurement of tax positions requires management to make assumptions and judgments regarding the application of complex tax laws and regulations as well as projected future taxable income, eligible carry forward periods, and tax planning strategies. The Company recorded an income tax provision of $7.4 million for the year ended December 31, 2021 and net deferred tax assets of $23.8 million, net of a valuation allowance of $69.4 million, and unrecognized tax benefits and related interest and penalties of $22.2 million as of December 31, 2021. Accounting for income taxes requires management to make assumptions and judgments. Performing audit procedures to evaluate the reasonableness of management’s assumptions and judgments required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists. 33 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the provision for income taxes, the realizability of deferred tax assets and the recognition and measurement of tax positions included the following which were performed with the assistance of our income tax specialists, among others: (cid:129) We tested the effectiveness of controls over the Company’s determination of the provision for income taxes, the realizability of deferred tax assets and the recognition and measurement of tax positions. (cid:129) We tested the provision for income taxes, including the effective tax rate reconciliation, permanent and temporary differences and uncertain tax positions, by evaluating communications with tax advisors and regulators, and testing the underlying data for completeness and accuracy. (cid:129) We evaluated the significant assumptions used by management in establishing and measuring tax-related assets and liabilities, including the application of recent tax laws and regulations, as well as forecasted taxable income, eligible carry forward periods and tax planning strategies supporting the realizability of deferred tax assets. (cid:129) For a selection of tax positions, we evaluated the application of relevant tax laws and regulations and the reasonableness of management’s assessments of whether certain tax positions are more likely than not of being sustained. /s/ Deloitte & Touche LLP Detroit, Michigan March 3, 2022 We have served as the Company's auditor since 2009. 34 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Superior Industries International, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Superior Industries International, Inc. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated March 3, 2022, expressed an unqualified opinion on those financial statements. Basis for Opinion 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. 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. Definition and Limitations of Internal Control over Financial Reporting A company’s 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. 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Detroit, Michigan March 3, 2022 35 SUPERIOR INDUSTRIES INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Dollars in thousands, except per share data) Fiscal Year Ended December 31, NET SALES Cost of sales GROSS PROFIT Selling, general and administrative expenses Impairment of goodwill and indefinite-lived intangibles INCOME (LOSS) FROM OPERATIONS Interest expense, net Other expense, net INCOME (LOSS) BEFORE INCOME TAXES Income tax provision NET INCOME (LOSS) LOSS PER SHARE – BASIC LOSS PER SHARE – DILUTED The accompanying notes are an integral part of these consolidated financial statements. $ $ $ $ 2021 1,384,750 $ 1,270,035 114,715 59,339 — 55,376 (41,879) (2,306) 11,191 (7,437) 3,754 $ (1.17) $ (1.17) $ 2020 1,100,760 1,035,134 65,626 52,420 193,641 (180,435) (45,418) (2,827) (228,680) (14,881) (243,561) (10.81) (10.81) 36 2021 2020 $ 3,754 $ (243,561) (20,529) 14,197 (8,370) 1,057 (7,313) 1,314 — 1,314 (26,528) (22,774) $ (13,453) 1,764 (11,689) (1,876) — (1,876) 632 (242,929) SUPERIOR INDUSTRIES INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Dollars in thousands) Fiscal Year Ended December 31, Net income (loss) Other comprehensive (loss) income, net of tax: Foreign currency translation (loss) gain Change in unrecognized (losses) gains 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 amortization Tax provision Pension changes, net of tax Other comprehensive (loss) income, net of tax Comprehensive loss $ The accompanying notes are an integral part of these consolidated financial statements. 37  $ $ $ SUPERIOR INDUSTRIES INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands) Fiscal Year Ended December 31, ASSETS Current assets: Cash and cash equivalents Accounts receivable, net Inventories, net Income taxes receivable Other current assets Total current assets Property, plant and equipment, net Deferred income tax assets, net Goodwill Intangibles, net Other non-current assets Total assets LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable Short-term debt Accrued expenses Income taxes payable Total current liabilities Long-term debt (less current portion) Non-current income tax liabilities Deferred income tax liabilities, net Other non-current liabilities Commitments and contingent liabilities (Note 19) Mezzanine equity: Preferred stock, $0.01 par value Authorized - 1,000,000 shares Issued and outstanding – 150,000 shares outstanding at December 31, 2021 and December 31, 2020 European non-controlling redeemable equity Shareholders’ deficit: Common stock, $0.01 par value Authorized - 100,000,000 shares Issued and outstanding – 26,163,077 and 25,591,930 shares at December 31, 2021 and December 31, 2020 Accumulated other comprehensive loss Retained earnings Total shareholders’ deficit Total liabilities, mezzanine equity and shareholders’ deficit $ The accompanying notes are an integral part of these consolidated financial statements. 2021 2020 113,473 $ 83,447 172,099 4,957 30,279 404,255 494,401 27,715 — 76,870 50,906 1,054,147 $ 153,197 $ 6,081 71,525 1,076 231,879 602,355 8,289 3,913 77,089 — 152,423 48,995 154,980 4,957 22,301 383,656 522,124 30,860 — 110,796 61,889 1,109,325 151,839 6,112 71,079 2,107 231,137 625,492 7,635 9,104 76,426 — 199,897 1,146 179,387 1,666 103,214 (125,974) (47,661) (70,421) 1,054,147 $ 95,247 (99,446) (17,323) (21,522) 1,109,325 38 SUPERIOR INDUSTRIES INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (Dollars in thousands, except per share data) Common Stock Accumulated Other Comprehensive (Loss) Income Number of Shares Amount Unrecognized Gains (Losses) on Derivative Instruments Pension Obligations Cumulative Translation Adjustment Retained Earnings Total BALANCE AT DECEMBER 31, 2019 25,128,158 $ 93,331 $ 9,951 $ Net loss Change in unrecognized gains/(losses) on derivative instruments, net of tax Change in defined benefit plans, net of taxes Net foreign currency translation adjustment Common stock issued, net of shares withheld for employee taxes Stock-based compensation Redeemable preferred 9% dividend and accretion European non-controlling redeemable equity dividend BALANCE AT DECEMBER 31, 2020 — — — — 463,772 — — — — — — 1,916 — — — — (5,571) $ (104,458) $ 258,437 $ 251,690 — (243,561) (243,561) — (11,689) — (1,876) — 14,197 — — — — — — — — — (11,689) (1,876) 14,197 — 1,916 — (31,994) (31,994) — — — — — — — — — — 25,591,930 $ 95,247 $ (1,738) $ — (205) (7,447) $ (90,261) $ (17,323) $ (21,522) (205) — The accompanying notes are an integral part of these consolidated financial statements. 39 SUPERIOR INDUSTRIES INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (Dollars in thousands, except per share data) Common Stock Accumulated Other Comprehensive (Loss) Income Number of Shares Amount Unrecognized Gains (Losses) on Derivative Instruments Pension Obligations Cumulative Translation Adjustment Retained Earnings Total (7,447) $ (90,261) $ (17,323) $ (21,522) 3,754 3,754 — — — 1,314 — — — (20,529) — (7,313) 1,314 — — (20,529) — — — — — — — — 7,967 — (34,050) (34,050) — (42) (6,133) $ (110,790) $ (47,661) $ (70,421) (42) — BALANCE AT DECEMBER 31, 2020 25,591,930 $ 95,247 $ (1,738) $ Net income Change in unrecognized gains/(losses) on derivative instruments, net of tax Change in defined benefit plans, net of taxes Net foreign currency translation adjustment Common stock issued, net of shares withheld for employee taxes Stock-based compensation Redeemable preferred 9% dividend and accretion European non-controlling redeemable equity dividend BALANCE AT DECEMBER 31, 2021 — — — — 571,147 — — — — — — 7,967 — — — — — (7,313) — — — — — — 26,163,077 $ 103,214 $ (9,051) $ The accompanying notes are an integral part of these consolidated financial statements. 40 SUPERIOR INDUSTRIES INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Fiscal Year Ended December 31, CASH FLOWS FROM OPERATING ACTIVITIES: 2021 2020 Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: $ 3,754 $ (243,561) Depreciation and amortization Income tax, non-cash changes Impairment of goodwill and indefinite-lived intangibles Stock-based compensation Amortization of debt issuance costs Other non-cash items Changes in operating assets and liabilities: Accounts receivable Inventories Other assets and liabilities Accounts payable Income taxes NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment Proceeds from sale of fixed assets NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt Repayments of debt Proceeds from borrowings on revolving credit facility Repayments of borrowings on revolving credit facility Cash dividends paid Financing costs paid and other Payments related to tax withholdings for stock-based compensation Finance lease payments NET CASH USED IN FINANCING ACTIVITIES Effect of exchange rate changes on cash Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period The accompanying notes are an integral part of these consolidated financial statements. 99,635 (1,958) — 9,479 4,436 (10,505) (38,233) (26,371) 6,607 (1,691) (268) 44,885 (64,113) 6,589 (57,524) 1,658 (4,967) — — (13,543) (4,340) (1,512) (1,321) (24,025) (2,286) (38,950) 152,423 113,473 $ 98,178 7,489 193,641 2,374 4,020 5,776 28,052 20,921 11,257 24,523 (2,549) 150,121 (45,038) 859 (44,179) 11,690 (25,672) 313,825 (316,910) (13,555) (5,020) (458) (960) (37,060) 5,614 74,496 77,927 152,423 $ 41 SUPERIOR INDUSTRIES INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Superior Industries International, Inc.’s (referred to herein as the “Company,” “Superior,” or “we,” “us” and “our”) principal business is the design and manufacture of aluminum wheels for sale to original equipment manufacturers (“OEMs”) in North America and Europe and to the aftermarket in Europe. We employ approximately 7,800 full-time employees, operating in eight manufacturing facilities in North America and Europe. We are one of the largest aluminum wheel suppliers to global OEMs and we believe we are the #1 European aluminum wheel aftermarket manufacturer and supplier. Our OEM aluminum wheels accounted for approximately 91 percent of our sales in 2021 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Daimler (Mercedes-Benz, AMG, Smart), Ford, GM, Honda, Jaguar-Land Rover, Lucid Motors, Mazda, Nissan, PSA, Renault, Stellantis, Subaru, Suzuki, Toyota, VW Group (Volkswagen, Audi, SEAT, Skoda, Porsche, Bentley) and Volvo. We sell aluminum wheels to the European aftermarket under the brands ATS, RIAL, ALUTEC and ANZIO. North America and Europe represent the principal markets for our products, but we have a diversified global customer base consisting of North American, European and Asian OEMs. We have determined that our North American and European operations should be treated as separate reportable segments as further described in Note 5, “Business Segments.” 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. Accounting estimates are an integral part of the consolidated financial statements. These estimates require the use of judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in developing estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. Certain prior year amounts have been reclassified to conform with the current year presentation. Cash and Cash Equivalents Cash and cash equivalents generally consist of cash, certificates of deposit, fixed deposits and money market funds with original maturities of three months or less. Derivative Financial Instruments and Hedging Activities Our derivatives are over-the counter customized derivative instruments and are not exchange traded. We account for our derivative instruments as either assets or liabilities and adjust them to fair value each period. For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the gain or loss on the derivative instrument is recorded in accumulated other comprehensive income or loss in shareholders’ equity or deficit until the hedged item is recognized in earnings, at which point accumulated gains or losses are recognized in earnings and classified with the underlying hedged transaction. Derivatives that do not qualify or have not been designated as hedges are adjusted to fair value through earnings in the financial statement line item to which the derivative relates (refer to 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 electricity. These contracts are considered to be derivative instruments under U.S. GAAP; however, these purchase contracts are not accounted for as derivatives because they qualify for the normal purchase normal sale exemption. Accounts Receivable Accounts receivable primarily consists of amounts that are due and payable from our customers for the sale of aluminum wheels. We evaluate the collectability of receivables each reporting period and record an allowance for doubtful accounts representing our estimate of probable losses. Additions to the allowance are charged to bad debt expense reported in selling, general and administrative expenses. 42 Inventory Inventories, which are categorized as raw materials, work-in-process or finished goods, are stated at the lower of cost or net realizable value. The cost of inventories is measured using the FIFO (first-in, first-out) method or the average cost method. Inventories are reviewed to determine if inventory quantities are in excess of forecasted usage or if they have become obsolete. Aluminum is the primary material component in our inventories. In 2021 and 2020, the Company had two and three aluminum suppliers, respectively, which individually exceeded 10 percent of total aluminum purchases and, in the aggregate, represented 56.2 percent and 55.0 percent of our total aluminum purchases, respectively. 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. Classification Buildings Machinery and equipment Leasehold improvements Expected Useful Life 15 to 50 years 3 to 20 years Lease term When property, plant and equipment is replaced, retired or otherwise disposed, the cost and related accumulated depreciation are removed and any resulting gain or loss on the disposition of an operating asset is included in income or loss from operations and is classified as a part of selling, general and administrative expenses. Any gain or loss on the disposition of a non-operating asset, as well as any casualty gain or loss, is included in other income or expense. Impairment of Long-Lived Assets The carrying amount of long-lived assets to be held and used in the business is evaluated for impairment whenever facts and circumstances suggest that the carrying value of the assets may not be recoverable. An impairment loss occurs when the carrying value of an asset group (including the carrying value of liabilities associated with the long-lived assets within the asset group) exceeds the undiscounted cash flows expected to be realized from the use and eventual disposition of the respective long-lived assets. An asset group is the unit of accounting for a long-lived asset or group of long-lived assets which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other asset groups. Fair value is determined primarily by discounting the estimated expected cash flows. If the carrying amount of an asset group is impaired, a loss is recognized based on the amount by which the carrying value exceeds fair value. The Company’s asset groups consist of the North American and European reportable segments. Goodwill Goodwill is not amortized but is tested for impairment on at least an annual basis. Impairment testing is required more often than annually if an event or circumstance indicates that an impairment is more likely than not to have occurred. If the net book value of a reporting unit exceeds its fair value, an impairment loss is measured and recognized. We conduct our annual impairment testing as of December 31. Impairment charges, if any, related to goodwill are recorded as a separate charge included in income or loss from operations. In the first quarter of 2020 and fourth quarter of 2019, we recognized goodwill impairment charges of $182.6 million and $99.5 million, respectively, relating to our European reporting unit. As a result of these charges, there was no remaining goodwill as of December 31, 2020 (refer to Note 9, “Goodwill and Other Intangible Assets”). Intangible Assets Intangible assets include both finite and indefinite-lived intangible assets. Finite-lived intangible assets consist of brand names, technology and customer relationships. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives (since the pattern in which the asset will be consumed cannot be reliably determined). Indefinite-lived intangible assets, excluding goodwill, consist of trade names associated with our aftermarket business. Impairment charges, if any, related to intangible assets are recorded as a separate charge included in income or loss from operations. In the first quarter of 2020 and fourth quarter of 2019, we recognized indefinite-lived intangible asset impairment charges of $11.0 million and $2.7 million, respectively, relating to trade names used in our European aftermarket business. As a result of these charges, there was no remaining indefinite-lived intangible asset as of December 31, 2020 (refer to Note 9, “Goodwill and Other Intangible Assets”). 43 Foreign Currency Transactions and Translation The assets and liabilities of foreign subsidiaries that use local currency as their functional currency are translated to U.S. dollars based on the current exchange rate prevailing at each balance sheet date and any resulting translation adjustments are included in accumulated other comprehensive income or loss. The assets and liabilities of foreign subsidiaries whose local currency is not their functional currency are remeasured from their local currency to their functional currency and then translated to U.S. dollars. Revenues and expenses are translated into U.S. dollars using the average exchange rates prevailing for each period presented. Gains and losses arising from foreign currency transactions and the effects of remeasurement discussed in the preceding paragraph are recorded in other income or expense. We recognized foreign currency transaction gains (losses) of $0.3 million and $(2.4) million in 2021 and 2020, respectively. Revenue Recognition Revenue is recognized when performance obligations under our contracts are satisfied. Generally, this occurs upon shipment when control of products transfers to our customers. At this point, revenue is recognized in an amount reflecting the consideration we expect to be entitled to under the terms of our contract. The Company maintains long term business relationships with our OEM customers and aftermarket distributors; however, there are no definitive long-term volume commitments under these arrangements. Volume commitments are limited to near-term customer requirements authorized under purchase orders or production releases generally with delivery periods of approximately one month. Sales do not involve any significant financing component since customer payment is generally due 40-60 days after shipment. Contract assets and liabilities consist of customer receivables and deferred revenues related to tooling. At contract inception, the Company assesses goods and services promised in its contracts with customers and identifies a performance obligation for each promise to deliver a good or service (or bundle of goods or services) that is distinct. Principal performance obligations under our customer contracts consist of the manufacture and delivery of aluminum wheels, including production wheels, service wheels and replacement wheels. As a part of the manufacture of the wheels, we develop tooling necessary to produce the wheels. Accordingly, tooling costs, which are explicitly recoverable from our customers, are capitalized as preproduction costs and amortized to cost of sales over the average life of the vehicle wheel program. Similarly, customer reimbursement for tooling costs is deferred and amortized to net sales over the average life of the vehicle wheel program. In the normal course of business, the Company’s warranties are limited to product specifications and the Company does not accept product returns unless the item is defective as manufactured. Accordingly, warranty costs are treated as a cost of fulfillment subject to accrual, rather than a performance obligation. The Company establishes provisions for both estimated returns and warranty when revenue is recognized. In addition, the Company does not typically provide customers with the right to a refund but provides for product replacement. Prices allocated to production, service and replacement wheels are based on prices established in our customer purchase orders which represent the standalone selling price. Prices for service and replacement wheels are commensurate with production wheels with adjustment for any special packaging. In addition, prices are subject to adjustment for changes in commodity prices for aluminum, as well as production efficiencies and wheel weight variations from specifications used in pricing. These price adjustments are treated as variable consideration. Customer tooling reimbursement is generally based on quoted prices or cost not to exceed quoted prices. We estimate variable consideration by using the “most likely” amount estimation approach. For commodity prices, initial estimates are based on the commodity index at contract inception. Changes in commodity prices are monitored and revenue is adjusted as changes in the commodity index occur. Prices incorporate the wheel weight price component based on product specifications. Weights are monitored, and prices are adjusted as variations arise. Price adjustments due to production efficiencies are generally recognized as and when negotiated with customers. Customer contract prices are generally adjusted quarterly to incorporate price adjustments. Under the Company’s policies, shipping costs are treated as a cost of fulfillment. In addition, the Company does not disclose remaining performance obligations under its contracts since contract terms are substantially less than a year (generally less than one month). Our revenue recognition practices and related transactions and balances are further described in Note 2, “Revenue.” Stock-Based Compensation We account for stock-based compensation using the estimated fair value recognition method. We recognize these compensation costs net of the applicable forfeiture rate on a straight-line basis for only those shares expected to vest over the requisite service period of the award, which is generally the vesting term of three years. We estimate the forfeiture rate based on our historical experience. Refer to Note 18, “Stock-Based Compensation” for additional information concerning our stock-based compensation awards. 44 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 of a change in tax rates is recognized in income in the period that the tax rate change is enacted. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income in the future. 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 assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and considers all available positive and negative evidence factors. Our accounting for the valuation of deferred tax assets represents our best estimate of future events. 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 taxable income, 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. 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. In 2021 and 2020, we have provided deferred income taxes for the estimated U.S. federal and state income tax, foreign income tax and applicable withholding taxes on unremitted earnings of subsidiaries. Cash Paid for Interest and Taxes and Non-Cash Investing Activities Cash paid for interest was $36.7 million and $39.6 million, respectively, for the years ended December 31, 2021 and 2020. Cash paid for income taxes was $10.5 million and $7.3 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, we had purchased but not yet paid for equipment of $11.2 million and $0.9 million, respectively, which are included in accounts payable and accrued expenses in our consolidated balance sheets. Accounting Standards Issued But Not Yet Adopted Accounting Standards Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13 which requires entities to use a new impairment model based on current expected credit losses (“CECL”) rather than incurred losses. Under CECL, estimated credit losses would incorporate relevant information about past events, current conditions and reasonable and supportable forecasts and any expected credit losses would be recognized at the time of sale. As a smaller reporting company (as defined under SEC regulations), the Company is not required to adopt the standard until fiscal years beginning after December 31, 2022. We are evaluating the impact this standard will have on our financial statements and disclosures. ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.” In November 2021, the FASB issued ASU 2021-10 which requires entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. Disclosures under ASU 2021-10 include: information about the nature of the transactions and the related accounting policy used to account for the transactions, the financial statement line items affected by the transactions, and the amounts applicable to each financial statement line item and significant terms and conditions of the transactions, including commitments and contingencies. ASU 2021-10 is effective for annual periods beginning after December 15, 2021 and early application is permitted. ASU 2021-10 may be applied either prospectively to all transactions within its 45 scope that are reflected in financial statements at the date of initial application and new transactions entered into thereafter or retrospectively to those transactions. We are evaluating the impact this ASU will have on our financial statements and disclosures. NOTE 2 - REVENUE The Company disaggregates revenue from contracts with customers into our reportable segments, North America and Europe. Revenues by segment for the years ended December 31, 2021 and 2020 are summarized in Note 5, “Business Segments”. The opening and closing balances of the Company’s receivables and current and long-term contract liabilities are as follows: (Dollars in thousands) Customer receivables Contract liabilities—current Contract liabilities—noncurrent December 31, 2021 December 31, 2020 Change $ 74,887 $ 6,887 10,526 40,785 $ 8,249 13,106 34,102 (1,362) (2,580) The changes in the contract liability balances primarily result from timing differences between our performance and customer payment while the increase in customer receivables is primarily due to the increase in year-over-year aluminum prices. During the years ended December 31, 2021 and 2020, the Company recognized tooling reimbursement revenue of $13.1 million and $13.1 million, respectively, which had been deferred in prior periods and was previously included in contract liability (deferred revenue), as well as revenue on tooling invoiced, deferred and partially recognized in 2021. During the year ended December 31, 2021 and 2020, the Company recognized revenue of $2.6 million and $0.7 million, respectively, from obligations satisfied in prior periods as a result of adjustments to pricing estimates for production efficiencies and other revenue adjustments. NOTE 3 - FAIR VALUE MEASUREMENTS The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are required to be 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 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. The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short period of time until maturity. Derivative Financial Instruments Our derivatives are over-the-counter customized derivative instruments and are not exchange traded. We estimate the fair value of these instruments using the income valuation approach. Under this approach, we 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. 46 The following tables categorize items measured at fair value at December 31, 2021 and 2020: December 31, 2021 (Dollars in thousands) Assets Derivative contracts Total Liabilities Derivative contracts Total December 31, 2020 (Dollars in thousands) Assets Derivative contracts Total Liabilities Derivative contracts Total Debt Instruments $ $ $ $ $ $ $ $ Quoted Prices in Active Markets for Identical Fair Value Measurement at Reporting Date Using Significant Significant Unobservable Other Inputs Observable (Level 3) Inputs (Level 2) Assets (Level 1) 10,362 $ 10,362 $ 19,711 $ 19,711 $ — $ — $ — $ — $ 10,362 $ 10,362 $ . 19,711 $ 19,711 $ — — — — Fair Value Measurement at Reporting Date Using Significant Significant Unobservable Other Inputs Observable (Level 3) Quoted Prices in Active Markets for Identical Assets (Level 1) Inputs (Level 2) 10,218 $ 10,218 $ 15,259 $ 15,259 $ — $ — $ — $ — $ 10,218 $ 10,218 $ . 15,259 $ 15,259 $ — — — — The carrying values of the Company’s debt instruments vary from their fair values. The fair values were determined by reference to transacted prices and quotes for these securities (Level 2). The estimated fair value, as well as the carrying value, of the Company’s debt instruments are shown below: (Dollars in thousands) Estimated aggregate fair value Aggregate carrying value (1) December 31, 2021 December 31, 2020 $ 605,874 $ 616,215 624,207 643,184 (1) Total debt excluding the impact of unamortized debt issuance costs. NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS Derivative Instruments and Hedging Activities We use derivatives to partially offset our exposure to foreign currency, interest rate, aluminum and other commodity risks. 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 fully offset the financial impact resulting from movements in foreign currency exchange rates, interest rates, and aluminum and other commodity prices. To help mitigate gross margin fluctuations due to changes in foreign currency exchange rates, certain of our subsidiaries, whose functional currency is the U.S. dollar or the Euro, hedge a portion of their forecasted foreign currency costs denominated in the Mexican Peso and Polish Zloty, respectively. We may hedge portions of our forecasted foreign currency exposure up to 48 months. 47 The following tables display the fair value of derivatives by balance sheet line item at December 31, 2021 and December 31, 2020: (Dollars in thousands) Foreign exchange forward contracts designated as hedging instruments Foreign exchange forward contracts not designated as hedging instruments Aluminum forward contracts designated as hedging instruments Natural gas forward contracts designated as hedging instruments Interest rate swap contracts designated as hedging instruments Total derivative financial instruments (Dollars in thousands) Foreign exchange forward contracts designated as hedging instruments Foreign exchange forward contracts not designated as hedging instruments Aluminum forward contracts designated as hedging instruments Natural gas forward contracts designated as hedging instruments Interest rate swap contracts designated as hedging instruments Total derivative financial instruments December 31, 2021 Other Current Assets Other Non-current Assets Accrued Liabilities Other Non-current Liabilities $ 3,161 $ 2,194 $ 1,845 $ 13,565 579 2,677 — 39 3 — — — 1,294 418 135 276 — 7,711 $ — 2,651 $ 3,887 5,870 $ — 13,841 $ December 31, 2020 Other Current Assets Other Non-current Assets Accrued Liabilities Other Non-current Liabilities $ 1,218 $ 6,531 $ 3,435 $ 2,645 1,167 — 122 262 — 816 224 — 22 — — 70 — 3,463 $ — 6,755 $ 4,771 8,350 $ 4,194 6,909 $ The following table summarizes the notional amount and estimated fair value of our derivative financial instruments: (Dollars in thousands) Foreign exchange forward contracts designated as hedging instruments Foreign exchange forward contracts not designated as hedging instruments Aluminum forward contracts designated as hedging instruments Natural gas forward contracts designated as hedging instruments Interest rate swap contracts designated as hedging instruments Total derivative financial instruments December 31, 2021 December 31, 2020 Notional U.S. Dollar Amount Fair Value Notional U.S. Dollar Amount Fair Value $ 458,769 $ (10,055) $ 421,253 $ 1,669 24,419 576 71,217 1,045 37,609 2,716 4,068 8,915 1,301 5,523 262 948 200,000 729,712 $ $ (3,887) (9,349) $ 200,000 702,061 $ (8,965) (5,041) 48 Notional amounts are presented on a net 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 prices. The following tables summarize the gain or loss recognized in accumulated other comprehensive income or loss (“AOCI”), the amounts reclassified from AOCI into earnings, and the amounts recognized directly into earnings for the years ended December 31, 2021 and 2020: Year Ended December 31, 2021 (Dollars in thousands) Derivative contracts Total Year Ended December 31, 2020 (Dollars in thousands) Derivative contracts Total Amount of Gain or (Loss) Recognized in AOCI on Derivatives Amount of Pre-tax Gain or (Loss) Reclassified from AOCI into Income Amount of Pre-tax Gain or (Loss) Recognized in Income on Derivatives $ $ (7,313) $ (7,313) $ 4,106 $ 4,106 $ (1,047) (1,047) Amount of Gain or (Loss) Recognized in AOCI on Derivatives Amount of Pre-tax Gain or (Loss) Reclassified from AOCI into Income Amount of Pre-tax Gain or (Loss) Recognized in Income on Derivatives $ $ (11,689) $ (11,689) $ (8,365) $ (8,365) $ 2,098 2,098 NOTE 5 - BUSINESS SEGMENTS Our North American and European operations represent separate operating segments in view of significantly different markets, customers, and products between these regions. Within each of these regions, markets, customers, products, and production processes are similar. Moreover, our business within each region leverages common systems, processes, and infrastructure. Accordingly, North America and Europe comprise the Company’s reportable segments. Year Ended December 31, (Dollars in thousands) North America Europe Year Ended December 31, (Dollars in thousands) North America Europe Year Ended December 31, (Dollars in thousands) North America Europe Net Sales Income (Loss) from Operations 2021 2020 2021 2020 $ $ 744,904 $ 639,846 1,384,750 $ 550,079 $ 550,681 1,100,760 $ 50,798 $ 4,578 55,376 $ 8,872 (189,307) (180,435) Depreciation and Amortization Capital Expenditures 2021 2020 2021 2020 $ $ 36,243 $ 63,392 99,635 $ 34,935 $ 63,243 98,178 $ 30,005 $ 34,108 64,113 $ 24,929 20,109 45,038 Property, Plant and Equipment, net 2021 2020 Goodwill and Intangible Assets 2021 2020 $ $ 214,331 $ 280,070 $ 494,401 220,145 $ 301,979 522,124 $ — — $ 110,796 76,870 76,870 $ 110,796 Year Ended December 31, (Dollars in thousands) North America Europe Total Assets 2021 2020 $ $ 499,988 $ 554,159 1,054,147 $ 479,873 629,452 1,109,325 49 Geographic information See table below for our net sales and long-lived assets by location: Year Ended December 31, (Dollars in thousands) U.S. Mexico Germany Poland Net Sales Property, Plant and Equipment, net 2021 2020 2021 2020 $ $ 8,166 $ 736,738 227,887 411,959 1,384,750 $ 27,919 $ 522,160 212,689 337,992 1,100,760 $ 2,152 $ 212,179 76,849 203,221 494,401 $ 7,324 212,821 82,162 219,817 522,124 NOTE 6 - ACCOUNTS RECEIVABLE Year Ended December 31, (Dollars in thousands) Trade receivables Other receivables Allowance for doubtful accounts Accounts receivable, net 2021 2020 $ $ 75,713 $ 8,560 84,273 (826) 83,447 $ 41,647 8,211 49,858 (863) 48,995 The accounts receivable from GM, VW Group and Ford represented approximately 10 percent, 10 percent and 9 percent of the total accounts receivable, respectively, at December 31, 2021 and 11 percent, 5 percent and 3 percent of the total accounts receivable, respectively, at December 31, 2020. The related percentage of our total sales to each of these three customers is shown below: GM VW Group Ford NOTE 7 - INVENTORIES Year Ended December 31, (Dollars in thousands) Raw materials Work in process Finished goods Inventories, net 2021 Percent of Sales 2020 Percent of Sales 26% 14% 13% 24% 16% 11% 2021 2020 $ $ 47,392 $ 54,891 69,816 172,099 $ 46,712 45,394 62,874 154,980 Service wheel and supplies inventory included in other non-current assets in the consolidated balance sheets totaled $9.7 million and $12.1 million at December 31, 2021 and 2020, respectively. 50 NOTE 8 - PROPERTY, PLANT AND EQUIPMENT (Dollars in thousands) Land and buildings Machinery and equipment Leasehold improvements and others Construction in progress Accumulated depreciation Property, plant and equipment, net December 31, 2021 December 31, 2020 $ $ 129,826 $ 861,097 9,831 67,529 1,068,283 (573,882) 494,401 $ 149,295 899,764 14,912 46,718 1,110,689 (588,565) 522,124 Depreciation expense was $73.3 million and $72.8 million for the years ended December 31, 2021 and 2020, respectively. NOTE 9 - GOODWILL AND OTHER INTANGIBLE ASSETS At March 31, 2020, the impact of COVID-19 and uncertainty with respect to the economic effects of the pandemic had introduced significant volatility in the financial markets and was having a widespread adverse effect on the automotive industry, including reductions in both consumer demand and OEM automotive production. In response to the COVID-19 pandemic, our key customers temporarily closed nearly all their production facilities in Europe and North America (our primary markets) during the quarter ended March 31, 2020. As a result, we concluded that an interim test of our goodwill was required as of March 31, 2020. More specifically, the Company concluded that the following events and circumstances, in the aggregate, indicated that it was more likely than not that the carrying value of our European reporting unit exceeded its fair value: (1) our European reporting unit’s carrying value was effectively set to fair value at December 31, 2019, due to the $102.2 million impairment charges to goodwill and indefinite-lived intangibles, (2) lower forecasted 2020 industry production volumes for Western and Central Europe, including those for our primary European customers, due to OEM shutdowns to mitigate COVID-19 spread and subsequent reduced production levels over the remainder of the year, as compared to our prior production forecasts (including estimates used in our 2019 assessment) and (3) the volatility in financial markets that both increased European interest rates due to rising credit spreads and risk premiums and lowered median European automotive market multiples. Based on the results of our quantitative analysis, we recognized a non-cash goodwill impairment charge equal to the remaining goodwill balance of $182.6 million since the carrying value exceeded the fair value of the European reporting unit by more than the amount of the goodwill balance at March 31, 2020. Additionally, we recognized a non-cash impairment charge of $11.0 million related to our aftermarket trade name indefinite-lived intangible asset which was primarily attributable to a further decline in forecasted aftermarket revenues and a decline in associated profitability. Total impairment charges of $193.6 million were recognized as a separate charge at March 31, 2020 and included in loss from operations. We utilized both an income and a market approach, weighted 75 percent and 25 percent, respectively, to determine the fair value of the European reporting unit as part of our goodwill impairment assessment. The income approach is based on projected debt-free cash flow, which is discounted to the present value using discount factors that consider the timing and risk of cash flows. The discount rate used is the weighted average of an estimated cost of equity and of debt (“weighted average cost of capital”). The weighted average cost of capital is adjusted as necessary to reflect risk associated with the business of the European reporting unit. Financial projections are based on estimated production volumes, product prices and expenses, including raw material cost, wages, energy and other expenses. Other significant assumptions include terminal value cash flow and growth rates, future capital expenditures and changes in future working capital requirements. The market approach is based on the observed ratios of enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA) of comparable, publicly traded companies. The market approach fair value is determined by multiplying historical and anticipated financial metrics of the European reporting unit by the EBITDA pricing multiples derived from comparable, publicly traded companies. At March 31, 2020, we determined that the carrying value of the European reporting unit exceeded its fair value by an amount greater than the remaining goodwill balance. The decline in fair value was primarily due to significantly lower market multiples and increased discount rates, as well as further declines in forecasted industry production volumes in Western and Central Europe as a result of the COVID-19 pandemic and consequent economic instability. Forecasted revenues, EBITDA and cash flow for the European reporting unit also declined as compared to the prior year long-range plan due to lower forecasted industry production volumes which adversely impacted fair value under both the income and market approaches. Significant assumptions used under the income approach included a weighted average cost of capital (WACC) of 12.0 percent and a long-term growth rate of 1.5 percent, as compared to 10.0 percent and 2.0 percent, respectively, used in the 2019 assessment. In determining the WACC, management considered the level of risk inherent in the cash flow projections and current market conditions, including the significant increase in credit spreads and systemic market and Company specific risk premiums. The decline in the fair value under the market approach was attributable to the decline in the average EBITDA market multiple (4.9X EBITDA in 2020, 5.7X EBITDA in 2019) and lower forecasted EBITDA, as compared to 51 the 2019 assessment. The use of these unobservable inputs results in classification of the fair value estimate as a Level 3 measurement in the fair value hierarchy. A considerable amount of management judgment and assumptions are required in performing the quantitative impairment test, principally related to determining the fair value of the reporting unit. While the Company believes its judgments and assumptions are reasonable, different assumptions could change the estimated fair value. The Company’s finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Following is a summary of the Company’s finite-lived and indefinite-lived intangible assets and goodwill as of December 31, 2021 and 2020. Year Ended December 31, 2021 (Dollars in thousands) Brand name Technology Customer relationships Total finite Trade names Total intangibles Year Ended December 31, 2020 (Dollars in thousands) Brand name Technology Customer relationships Total finite Trade names Total intangibles Impairment Accumulated Amortization Currency Translation Remaining Weighted Average Amortization Period Net Carrying Amount $ — $ — — — (13,772) (8,503) $ (14,172) (95,540) (118,215) — $ (13,772) $ (118,215) $ 258 $ 430 3,397 4,085 (228) 3,857 $ 755 1,258 74,857 76,870 1-2 2 2-7 — Indefinite 76,870 Gross Carrying Amount $ 9,000 15,000 167,000 191,000 14,000 $ 205,000 Gross Carrying Amount Impairment Accumulated Amortization Currency Translation Remaining Weighted Average Amortization Period Net Carrying Amount $ 9,000 15,000 167,000 191,000 14,000 $ 205,000 $ — $ — — — (13,772) $ (13,772) $ (6,615) $ (11,024) (74,322) (91,961) — (91,961) $ 399 $ 666 2,784 4,642 10,692 103,370 11,757 110,796 2-3 1-3 3-8 (228) — Indefinite 11,529 $ 110,796 Year Ended December 31, 2020 (Dollars in thousands) Goodwill Beginning Balance Accumulated Impairment Gross Net Balance Impairment Currency Translation Gross Ending Balance Accumulated Impairment Net Balance $284,337 $ (99,505) $184,832 $(182,602) $ (2,230) $282,107 $ (282,107) $ — Amortization expense for these intangible assets was $26.3 million and $25.4 million for the years ended December 31, 2021 and 2020, respectively. The anticipated annual amortization expense for these intangible assets is $22.4 million for 2022, $20.4 million for 2023 and 2024, $10.0 million for 2025 and $2.6 million for 2026. 52 NOTE 10 - DEBT A summary of long-term debt and the related weighted average interest rates is shown below: Total Debt 349,200 $ 245,809 18,595 2,611 616,215 $ $ $ Total Debt 349,200 $ 266,928 23,668 3,388 643,184 $ $ $ December 31, 2021 (Dollars in Thousands) Debt Issuance Costs (1) Total Debt, Net (4,338) $ (3,441) — — (7,779) $ 344,862 242,368 18,595 2,611 608,436 (6,081) 602,355 December 31, 2020 (Dollars in Thousands) Debt Issuance Costs (1) Total Debt, Net (7,155) $ (4,425) — — (11,580) $ 342,045 262,503 23,668 3,388 631,604 (6,112) 625,492 Weighted Average Interest Rate 4.1% 6.0% 2.3% 2.8% Weighted Average Interest Rate 4.1% 6.0% 2.3% 3.0% Debt Instrument Term Loan Facility 6.00% Senior Notes European CapEx loans Finance leases Less: Current portion Long-term debt Debt Instrument Term Loan Facility 6.00% Senior Notes European CapEx loans Finance leases Less: Current portion Long-term debt (1) Unamortized portion Senior Notes On June 15, 2017, Superior issued €250.0 million original principal amount of 6.00% Senior Notes due June 15, 2025 (the “Notes”). Interest on the Notes is payable semiannually, on June 15 and December 15. The Company may redeem the Notes, in whole or in part, on or after June 15, 2021 at a redemption price of 101.5 percent and on or after June 15, 2022 at a redemption price of 100.0 percent, in each case plus accrued and unpaid interest to, but not including, the applicable redemption date. If we experience a change of control or sell certain assets, the Company may be required to offer to purchase the Notes from the holders. The Notes are senior unsecured obligations ranking equally in right of payment with all of its existing and future senior indebtedness and senior in right of payment to any subordinated indebtedness. The Notes are effectively subordinated in right of payment to the existing and future secured indebtedness of the Company, including the Senior Secured Credit Facilities (as defined below), to the extent of the assets securing such indebtedness. Guarantee The Notes are unconditionally guaranteed by all material wholly-owned direct and indirect domestic restricted subsidiaries of the Company (the “Subsidiary Guarantors”), with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in adverse tax consequences. Covenants Subject to certain exceptions, the indenture governing the Notes contains restrictive covenants that, among other things, limit the ability of Superior and the Subsidiary Guarantors to: (i) incur additional indebtedness or issue certain preferred stock; (ii) pay dividends on, or make distributions in respect of, their capital stock; (iii) make certain investments or other restricted payments; (iv) sell certain assets or issue capital stock of restricted subsidiaries; (v) create liens; (vi) merge, consolidate, transfer or dispose of substantially all of their assets; and (vii) engage in certain transactions with affiliates. These covenants are subject to several important limitations and exceptions that are described in the indenture. 53 The indenture provides for customary events of default that include, among other things (subject in certain cases to customary grace and cure periods): (i) nonpayment of principal, premium, if any, and interest, when due; (ii) failure for 60 days to comply with any obligations, covenants or agreements in the indenture after receipt of written notice from the Bank of New York Mellon, London Branch (“the Trustee”) or holders of at least 30 percent in principal amount of the then outstanding Notes of such failure (other than defaults referred to in the foregoing clause (i)); (iii) default under any mortgage, indenture or instrument for money borrowed by the Company or certain of its subsidiaries; (iv) a failure to pay certain judgments; and (v) certain events of bankruptcy and insolvency. If an event of default occurs and is continuing, the Trustee or holders of at least 30 percent in principal amount of the then outstanding Notes may declare the principal, premium, if any, and accrued and unpaid interest on all the Notes to be due and payable. These events of default are subject to several important qualifications, limitations and exceptions that are described in the indenture. At December 31, 2021, the Company was in compliance with all covenants under the indenture governing the Notes. Senior Secured Credit Facilities On March 22, 2017, Superior entered into a senior secured credit agreement (the “Credit Agreement”) with Citibank, N.A, as Administrative Agent, Collateral Agent and Issuing Bank, JP Morgan Chase N.A., Royal Bank of Canada and Deutsche Bank AG New York Branch as Joint Lead Arrangers and Joint Book Runners, and the other lenders party thereto (collectively, the “Lenders”). The Credit Agreement consisted of a $400.0 million senior secured term loan facility (the “Term Loan Facility”), which matures on May 23, 2024, and a $160.0 million revolving credit facility (the “Revolving Credit Facility”) originally maturing on May 23, 2022, together with the Term Loan Facility, the USD Senior Secured Credit Facilities (“USD SSCF”). On May 3, 2021, the Company extended the term of the Revolving Credit Facility under its USD SSCF and reduced the commitment under the facility from $160.0 million to $132.5 million, with $25.0 million of the commitment maturing May 23, 2022 and the remaining $107.5 million maturing October 31, 2023. The extension was treated as a modification of the revolving credit facility and the related debt issuance costs have been recognized as a deferred charge in other non-current assets which is being amortized ratably over the remaining term of the extended facility. Borrowings under the Term Loan Facility will bear interest at a rate equal to, at the Company’s option, either (a) LIBOR for the relevant interest period, adjusted for statutory requirements, with a floor of 0.00 percent per annum, plus an applicable rate of 4.00 percent or (b) a base rate, with a floor of 2.00 percent per annum, equal to the highest of (1) the rate of interest in effect as publicly announced by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50 percent and (3) LIBOR for an interest period of one month plus 1.00 percent, in each case, plus an applicable rate of 3.00 percent. Borrowings under the Revolving Credit Facility bear interest at a rate equal to, at the Company’s option, either (a) LIBOR for the relevant interest period, with a floor of 0.00 percent per annum, plus the applicable rate or (b) a base rate, with a floor of 0.00 percent, equal to the highest of (1) the rate of interest in effect as publicly announced by the administrative agent as its prime rate, (2) the federal funds effective rate plus 0.50 percent and (3) LIBOR for an interest period of one month plus 1.00 percent, in each case, plus the applicable rate. The applicable rates for borrowings under the Revolving Credit Facility are based upon the First Lien Net Leverage Ratio effective for the preceding quarter with, LIBOR applicable rates ranging between 3.50 percent and 3.00 percent, currently 3.25 percent, and base rate applicable rates between 2.50 percent and 2.00 percent, currently 2.25 percent. Commitment fees for the unused commitment under the Revolving Credit Facility are also based upon the First Lien Net Leverage Ratio, effective for the preceding quarter, and range between 0.50 percent and 0.25 percent for the commitment maturing May 23, 2022, currently 0.375 percent, and between 0.625 percent and 0.375 percent for the remaining commitment maturing October 31, 2023, currently 0.50 percent. Commitment fees are included in interest expense. As of December 31, 2021, the Company had repaid $50.8 million under the Term Loan Facility resulting in a balance of $349.2 million. In addition, the Company had no outstanding borrowings under the Revolving Credit Facility, had outstanding letters of credit of $4.8 million and had available unused commitments under the Revolving Credit Facility of $127.7 million as of December 31, 2021. 54 Guarantees and Collateral Security Our obligations under the Credit Agreement are unconditionally guaranteed by the Subsidiary Guarantors, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in adverse tax consequences. The guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by substantially all of our assets and the Subsidiary Guarantors’ assets, including but not limited to: (i) a perfected pledge of all of the capital stock issued by each of the Subsidiary Guarantors’ (subject to certain exceptions) and up to 65 percent of the capital stock issued by each direct wholly-owned foreign restricted subsidiary of the Company or any guarantor (subject to certain exceptions) and (ii) perfected security interests in and mortgages on substantially all tangible and intangible personal property and material fee-owned real property of the Company and the Subsidiary Guarantors (subject to certain exceptions and exclusions). Covenants The Credit Agreement contains a number of restrictive covenants that, among other things, restrict, subject to certain exceptions, our ability to incur additional indebtedness and guarantee indebtedness, create or incur liens, engage in mergers or consolidations, sell, transfer or otherwise dispose of assets, make investments, acquisitions, loans or advances, pay dividends, distributions or other restricted payments, or repurchase our capital stock. The Credit Agreement also restricts our ability to prepay, redeem, or repurchase any subordinated indebtedness, enter into agreements which limit our ability to incur liens on our assets or that restrict the ability of restricted subsidiaries to pay dividends or make other restricted payments to us, and enter into certain transactions with our affiliates. Solely with respect to the Revolving Credit Facility, the Credit Agreement also requires a Total Net Leverage Ratio (calculated as defined in the Credit Agreement) of not more than 4.5 to 1.0 as of each fiscal quarter-end. In addition, the Credit Agreement contains customary default provisions, representations and warranties and other covenants. The Credit Agreement also contains a provision permitting the Lenders to accelerate the repayment of all loans outstanding under the USD SSCF during an event of default. At December 31, 2021, the Company was in compliance with all covenants under the Credit Agreement. European Debt In connection with the acquisition of UNIWHEELS, AG in 2017, the Company assumed $70.7 million of outstanding debt. As of December 31, 2021, $6.8 million of the assumed debt remained outstanding. The debt matures March 31, 2024, and is collateralized by the financed equipment, guaranteed by Superior and bears interest at a rate of 2.2 percent. Covenants under the loan agreement include a default provision for non-payment, as well as a material adverse change default provision pursuant to which the lender could accelerate the loan maturity. As of December 31, 2021, the Company was in compliance with all covenants under the loan agreement. During the second quarter of 2021, the Company amended its European Revolving Credit Facility (“EUR SSCF”), extending the term to May 22, 2023 and increasing the applicable margin and commitment fees, while maintaining the €60.0 million commitment. All other terms of the EUR SSCF remained unchanged. As of December 31, 2021, the Company had no borrowings outstanding, outstanding letters of credit of $0.5 million (€0.4 million) and available unused commitments under this facility of $67.5 million (€59.6 million). The EUR SSCF bears interest at Euribor (with a floor of zero) plus a margin (ranging from 2.05 percent to 3.50 percent based on the net debt leverage ratio of Superior Industries Europe AG and its wholly owned subsidiaries, collectively “Superior Europe AG”), currently 2.05 percent. The annual commitment fee for unused commitments (ranging from 0.625 percent to 1.225 percent based on the net debt leverage ratio of Superior Europe AG) is currently 0.625 percent per annum. In addition, a management fee is assessed equal to 0.07 percent of borrowings outstanding at each month end. The commitment fee is included in interest expense. Superior Europe AG has pledged substantially all of its assets, including land and buildings, receivables, inventory, and other moveable assets (other than collateral associated with equipment loans) as collateral under the EUR SSCF. The EUR SSCF is subject to a number of restrictive covenants that, among other things, restrict, subject to certain exceptions, the ability of Superior Europe AG to incur additional indebtedness and guarantee indebtedness, create or incur liens, engage in mergers or consolidations, sell, transfer or otherwise dispose of assets, make investments, acquisitions, loans or advances, pay dividends or distributions, or repurchase Superior Europe AG’s capital stock, prepay, redeem, or repurchase any subordinated indebtedness, and enter into agreements which limit Superior Europe AG’s ability to incur liens on our assets. In addition, the EUR SSCF includes an annual pay down provision requiring outstanding balances to be repaid but not reborrowed for a period of three business days and a material adverse change default provision pursuant to which the lender could accelerate the loan maturity. At December 31, 2021, Superior Europe AG was in compliance with all covenants under the EUR SSCF. The balance of certain post-acquisition equipment loans was $11.8 million as of December 31, 2021. The loans bear interest at 2.3 percent, mature September 30, 2027 and require quarterly principal and interest payments. The loans are secured with liens on the financed equipment and are subject to covenants that, among other things, include a material adverse change default provision 55 pursuant to which the lender could accelerate the loan maturity, as well as a provision that restricts the ability of Superior Europe AG to reduce its ownership interest in Superior Industries Production Germany GmbH, its wholly-owned subsidiary and the borrower under the loan. The Company drew down €10.6 million on these equipment loans in the first quarter of 2020 and drew the remaining €1.4 million in the first quarter of 2021. Quarterly installment payments of $0.5 million (€0.4 million) under the loan agreements began in June of 2021. At December 31, 2021, the Company was in compliance with all covenants under the loans. Debt maturities due in the next five years and thereafter are as follows: Year Ended December 31, (Dollars in thousands) Debt Maturities 2022 2023 2024 2025 2026 Thereafter Total debt liabilities Amount 6,081 5,765 352,282 248,036 2,122 1,929 616,215 $ $ NOTE 11 - REDEEMABLE PREFERRED STOCK During 2017, we issued 150,000 shares of Series A (140,202 shares) and Series B (9,798 shares) Perpetual Convertible Preferred Stock, par value $0.01 per share for $150.0 million. On August 30, 2017, the Series B shares were converted into Series A redeemable preferred stock (the “redeemable preferred stock”) after approval by our shareholders. The redeemable preferred stock has an initial stated value of $1,000 per share, par value of $0.01 per share and liquidation preference over common stock. The redeemable preferred stock is convertible into shares of our common stock equal to the number of shares determined by dividing the sum of the stated value (including any dividends paid-in-kind) and any accrued and unpaid dividends by the conversion price of $28.162. The redeemable preferred stock accrues dividends at a rate of 9 percent per annum, payable at our election either in-kind or in cash and is also entitled to participate in dividends on common stock in an amount equal to that which would have been due had the shares been converted into common stock. We may mandate conversion of the redeemable preferred stock if the price of the common stock exceeds $84.49. The holder may redeem the shares upon the occurrence of any of the following events (referred to as a “redemption event”): a change in control, recapitalization, merger, sale of substantially all of the Company’s assets, liquidation or delisting of the Company’s common stock. In addition, the holder has the right, at its option, to unconditionally redeem the shares at any time on or after September 14, 2025 (the “redemption date”, which was originally May 23, 2024, but was corrected to September 14, 2025 in 2018 through modification of the Certificate of Designations governing the terms and conditions of the preferred stock). We may, at our option, redeem in whole at any time all of the shares of redeemable preferred stock outstanding. At redemption by either party, the redemption value will be the greater of two times the initial face value ($150.0 million) and any accrued unpaid dividends or dividends paid-in-kind, currently $300.0 million, or the product of the number of common shares into which the redeemable preferred stock could be converted (5.3 million shares currently) and the then current market price of the common stock. We have determined that the conversion option and the redemption option exercisable upon the occurrence of a “redemption event” which are embedded in the redeemable preferred stock must be accounted for separately from the redeemable preferred stock as a derivative liability. Since the redeemable preferred stock may be redeemed at the option of the holder, but is not mandatorily redeemable, the redeemable preferred stock was classified as mezzanine equity and initially recognized at fair value of $150.0 million (the proceeds on the date of issuance), less issuance costs of $3.7 million and $10.9 million assigned to the embedded derivative liability at date of issuance, resulting in an adjusted initial value of $135.5 million. The difference between the redemption value of the redeemable preferred stock and the carrying value (the “premium”) is being accreted over the period from the date of issuance through September 14, 2025 using the effective interest method. The accretion is treated as a deemed dividend, recorded as a charge to retained earnings and deducted in computing earnings per share (analogous to the treatment for stated and participating dividends paid on the redeemable preferred shares). The cumulative premium accretion as of December 31, 2021 and 2020 was $64.4 million and $43.9 million, respectively, resulting in adjusted redeemable preferred stock balances of $199.9 million and $179.4 million, respectively. 56 NOTE 12 - EUROPEAN NON-CONTROLLING REDEEMABLE EQUITY On May 30, 2017, the Company acquired 92.3 percent of the outstanding shares of UNIWHEELS, AG. Subsequently, the Company commenced a delisting and associated tender offer for the remaining shares. On January 17, 2018, the Company entered into a Domination and Profit and Loss Transfer agreement (“DPLTA”) retroactively effective as of January 1, 2018 pursuant to which we offered to purchase the remaining outstanding shares at €62.18 per share. This price may be subject to change based on appraisal proceedings initiated by the minority shareholders which have not yet been concluded. The Company must also pay an annual dividend of €3.23 as long as the DPLTA is in effect. For any shares tendered prior to the annual dividend payment, we must pay interest at a statutory rate, currently 4.12 percent, in place of the dividend. As a result of purchases pursuant to the tender offer and the DPLTA, the Company has increased its ownership to 99.9 percent as of December 31, 2021. In addition, the carrying value of the non-controlling interests must be adjusted to redemption value since they are currently redeemable. The following table summarizes the European non-controlling redeemable equity activity for the two year period ended December 31, 2021: (Dollars in thousands) Balance at December 31, 2019 Dividends accrued Dividends paid Translation adjustment Purchase of shares Balance at December 31, 2020 Dividends accrued Dividends paid Translation adjustment Purchase of shares Balance at December 31, 2021 $ $ 6,525 205 (46) 2 (5,020) 1,666 42 (354) (117) (91) 1,146 57 NOTE 13 - EARNINGS PER SHARE Basic earnings per share is computed by dividing net income (loss), after deducting redeemable preferred stock dividends and accretion and European non-controlling redeemable equity dividends, by the weighted average number of common shares outstanding. For purposes of calculating diluted earnings per share, the weighted average shares outstanding includes the dilutive effect of outstanding stock options and time and performance based restricted stock units under the treasury stock method. The redeemable preferred shares discussed in Note 11, “Redeemable Preferred Stock” have not been included in the calculation of diluted earnings per share because inclusion of such shares on an as converted basis would be anti-dilutive. Year Ended December 31, (Dollars in thousands, except per share amounts) Basic Earnings Per Share: Net income (loss) Less: Redeemable preferred stock dividends and accretion Less: European non-controlling redeemable equity dividend Basic numerator Basic loss per share Weighted average shares outstanding – Basic Diluted Earnings Per Share: Net income (loss) Less: Redeemable preferred stock dividends and accretion Less: European non-controlling redeemable equity dividend Diluted numerator Diluted loss per share Weighted average shares outstanding – Basic Dilutive effect of common share equivalents Weighted average shares outstanding – Diluted $ $ $ $ $ $ 2021 2020 3,754 $ (34,050) (42) (30,338) $ (1.17) $ 25,995 3,754 $ (34,050) (42) (30,338) $ (1.17) $ 25,995 — 25,995 (243,561) (31,994) (205) (275,760) (10.81) 25,498 (243,561) (31,994) (205) (275,760) (10.81) 25,498 — 25,498 NOTE 14 - INCOME TAXES Income/(loss) before income taxes from domestic and international jurisdictions is comprised of the following: Year Ended December 31, (Dollars in thousands) Income (loss) before income taxes: Domestic Foreign The benefit/(provision) for income taxes is comprised of the following: Year Ended December 31, (Dollars in thousands) Current taxes Federal State Foreign Total current taxes Deferred taxes Federal State Foreign Total deferred taxes Income tax provision 2021 2020 $ $ (44,129) $ 55,320 11,191 $ (74,151) (154,529) (228,680) 2021 2020 $ $ (67) $ (99) (9,229) (9,395) 711 — 1,247 1,958 (7,437) $ 1,970 (29) (9,333) (7,392) (4,756) (3,622) 889 (7,489) (14,881) 58 The following is a reconciliation of the U.S. federal tax rate to our effective income tax rate: Year Ended December 31, Statutory rate State tax provisions, net of federal income tax benefit Tax credits Foreign income taxes at rates other than the statutory rate Valuation allowance Changes in tax liabilities, net Share based compensation Unremitted non-U.S. Earnings US tax on non-US income Non-deductible charges Impairment of goodwill Other Effective income tax rate 2021 2020 21.0% (14.2) (13.2) (97.1) 203.6 (89.7) 10.9 3.6 16.3 22.3 — 3.0 66.5% 21.0% 0.6 (0.1) 10.9 (10.4) (0.2) (0.2) (1.7) 0.8 (0.9) (25.3) (1.0) (6.5)% Tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: Year Ended December 31, (Dollars in thousands) Deferred income tax assets: Accrued liabilities Hedging and foreign currency gains (losses) Deferred compensation Inventory reserves Net loss carryforwards and credits Interest carryforwards 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: Intangibles, property, plant and equipment and other Unremitted earnings Deferred income tax liabilities Net deferred income tax assets The classification of our net deferred tax asset is shown below: Year Ended December 31, (Dollars in thousands) Long-term deferred income tax assets Long-term deferred income tax liabilities Net deferred tax asset 2021 2020 4,964 $ 9,231 8,162 3,777 40,747 29,366 4,739 1,143 102,129 (69,388) 32,741 (4,408) (4,531) (8,939) 23,802 $ 3,688 3,323 8,473 5,114 48,924 14,972 4,465 1,714 90,673 (46,490) 44,183 (17,959) (4,468) (22,427) 21,756 2021 2020 27,715 $ (3,913) $ 23,802 30,860 (9,104) 21,756 $ $ $ $ The increase in the valuation allowance of $22.9 million to reduce the U.S. federal, state and certain foreign deferred tax assets is due to the assessment that the Company is not more likely than not to realize these deferred tax assets. 59 As of December 31, 2021, we have cumulative tax effected U.S. federal and Germany NOL carryforwards of $27.0 million that carryforward indefinitely and U.S. state NOL carryforwards of $12.6 million that expire in the years 2022 to 2042. Also, we have $3.5 million of tax credit carryforwards, primarily in Poland, which expire in the years 2022 to 2028. The transition tax substantially eliminated the basis difference on foreign subsidiaries that existed previously for purposes of Accounting Standards Codification topic 740 (“ASC 740”). However, there are limited other taxes that could continue to apply such as foreign withholding and certain state taxes. Provisions are made for income tax liabilities on the undistributed earnings of non-U.S. subsidiaries. A reconciliation of the beginning and ending amounts of uncertain tax positions is as follows: Year Ended December 31, (Dollars in thousands) Beginning balance 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 2021 2020 $ $ 31,858 $ (1,192) 30,368 2,265 (13,633) 48 (719) (1,147) 372 — Ending balance $ 16,362 $ 31,858 Our policy regarding interest and penalties related to uncertain tax positions is to record interest and penalties as an element of income tax expense. At the end of 2021 and 2020, the Company had liabilities of $5.8 million and $4.7 million of potential interest and penalties associated with uncertain tax positions. Included in the unrecognized tax benefits 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 as uncertain tax positions begin to expire. Income tax returns are filed in multiple jurisdictions and are subject to examination by tax authorities in various jurisdictions where the Company operates. The Company has open tax years from 2015 to 2020 with various significant tax jurisdictions, including ongoing tax audits in the U.S. for 2015 to 2018. During the examination of our U.S. federal income tax return for tax years 2015-2018, the Internal Revenue Service (IRS) asserted that income earned by a foreign subsidiary from its Mexican branch operations should be categorized as foreign base company sales income (FBCSI) under Section 954(d) of the Internal Revenue Code and issued a Notice of Proposed Adjustment (NOPA). We believe that the proposed adjustment is without merit, and we have contested the matter, which is currently under review in the IRS’s administrative appeals process. We believe it is likely that we will be successful in ultimately defending our position. As such, we have not recorded any impact of the IRS’s proposed adjustment in our consolidated financial statements, as of December 31, 2021. In the event we are not successful in defending our position, the potential additional income tax expense and cash flow impact related to this issue is not expected to be significant as a result of available net operating losses and income tax credits currently offset by valuation allowances. We intend to continue to contest the conclusions reached in the NOPA through the IRS’s administrative appeals process, and, if necessary, through litigation. NOTE 15 - LEASES The Company determines whether an arrangement is or contains a lease at the inception of the arrangement. Operating leases are accounted for in other non-current assets, accrued expenses and other non-current liabilities in our consolidated balance sheets. Finance leases are included in property, plant and equipment, net, short-term debt and long-term debt (less current portion) in our consolidated balance sheets. Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term. Since we generally do not have access to the interest rate implicit in the lease, the Company uses our incremental borrowing rate (for fully collateralized debt) at the inception of the lease in determining the present value of the lease payments. The implicit rate is, however, used where readily available. Lease expense under operating leases is recognized on a straight-line basis over the term of the lease. Certain of our leases contain both lease and non-lease components, which are accounted for separately. 60 The Company has operating and finance leases for office facilities, a data center and certain equipment. The remaining terms of our leases range from over one year to eight years. Certain leases include options to extend the lease term for up to ten years, as well as options to terminate, both of which have been excluded from the term of the lease since exercise of these options is not reasonably certain. Lease expense, cash flow, operating and finance lease assets and liabilities, average lease term and average discount rate are as follows: Year Ended December 31, (Dollars in thousands) Lease Expense Finance lease expense: Amortization of right-of-use assets Interest on lease liabilities Operating lease expense Total lease expense Cash Flow Components Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from finance leases Operating cash outflows from operating leases Financing cash outflows from finance leases Right-of-use assets obtained in exchange for finance lease liabilities, net of terminations and disposals Right-of-use assets obtained in exchange for operating lease liabilities, net of terminations and disposals Year Ended December 31, (Dollars in thousands, except lease term and discount rate) Balance Sheet Information Operating leases: Other non-current assets Accrued liabilities Other non-current liabilities Total operating lease liabilities Finance leases: Property, plant and equipment gross Accumulated depreciation Property, plant and equipment, net Current portion of long-term debt Long-term debt (less current portion) Total finance lease liabilities Lease Term and Discount Rates Weighted-average remaining lease term - finance leases (years) Weighted-average remaining lease term - operating leases (years) Weighted-average discount rate - finance leases Weighted-average discount rate - operating leases 61 $ $ $ $ $ $ $ $ $ $ 2021 2020 1,325 82 3,070 4,477 $ $ $ 82 3,460 1,321 922 416 1,219 85 3,388 4,692 85 3,621 960 879 657 2021 2020 $ 10,772 (2,371) $ (8,860) (11,231) $ 6,603 $ (4,644) $ 1,959 (982) $ (1,629) (2,611) $ 13,598 (2,868) (11,513) (14,381) 5,735 (3,319) 2,416 (1,113) (2,275) (3,388) 3.4 5.0 2.8% 3.6% 3.9 6.1 3.0% 3.8% Summarized future minimum payments under our leases are as follows: Year Ended December 31, (Dollars in thousands) Lease Maturities 2022 2023 2024 2025 2026 Thereafter Total Less: Imputed interest Total lease liabilities, net of interest NOTE 16 - RETIREMENT PLANS $ $ Amount Finance Leases Operating Leases 2,789 2,445 2,193 2,100 1,975 741 12,243 (1,012) 11,231 982 $ 666 248 148 125 560 2,729 (118) 2,611 $ We have an unfunded salary continuation plan covering certain directors, officers, and other key members of management. 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. The following table summarizes the changes in plan assets and plan benefit obligations. Year Ended December 31, (Dollars in thousands) Change in benefit obligation Beginning benefit obligation Interest cost Actuarial (gain) loss Benefit payments Ending benefit obligation 2021 2020 $ $ 32,640 $ 823 (928) (1,415) 31,120 $ 31,001 1,005 2,164 (1,530) 32,640 62 The actuarial gain in 2021 and loss in 2020 were primarily due to the year-over-year change in the discount rate. Year Ended December 31, (Dollars in thousands) 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 expenses 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 $ $ $ $ $ $ $ 2021 2020 $ — 1,415 (1,415) $ — (31,120) $ — 1,475 (1,475) — (32,640) (1,432) $ (29,688) (31,120) $ (1,447) (31,193) (32,640) 9,446 $ (1) $ 9,445 10,760 (1) 10,759 2.9% 3.0% 2.6% 3.0% Components of net periodic pension cost are described in the following table: Year Ended December 31, (Dollars in thousands) Components of net periodic pension cost: Interest cost Amortization of actuarial loss Net periodic pension cost Weighted average assumptions used to determine net periodic pension cost: Discount rate Rate of compensation increase 2021 2020 $ $ 823 386 1,209 $ $ 1,005 288 1,293 2.6% 3.0% 3.3% 3.0% Benefit payments during the next ten years, which reflect applicable future service, are as follows: Year Ended December 31, (Dollars in thousands) 2022 2023 2024 2025 2026 Years 2027 to 2031 The following is an estimate of the components of net periodic pension cost in 2022: Estimated Year Ended December 31, (Dollars in thousands) Interest cost Amortization of actuarial loss Estimated 2021 net periodic pension cost 63 $ Amount 1,453 1,458 1,506 1,715 1,779 8,911 2022 $ $ 872 332 1,204 Other Retirement Plans We also contribute to employee retirement savings plans in the U.S. and Mexico that cover substantially all of our employees in those countries. The employer contribution totaled $1.4 million and $1.3 million for the years ended December 31, 2021 and 2020, respectively. NOTE 17 - ACCRUED EXPENSES Year Ended December 31, (Dollars in thousands) Payroll and related benefits Taxes, other than income taxes Deferred tooling revenue Current portion of derivative liability Short-term operating lease liability Current portion of executive retirement liabilities Dividends and interest Professional fees Other Accrued liabilities 2021 2020 $ $ 31,930 $ 13,973 6,887 5,870 2,371 1,432 1,417 687 6,958 71,525 $ 26,930 14,502 8,249 8,350 2,868 1,447 1,453 1,102 6,178 71,079 NOTE 18 - STOCK-BASED COMPENSATION Equity Incentive Plan Our 2018 Equity Incentive Plan (the “Plan”) was approved by stockholders in May 2018, authorizing up to 4.35 million shares of common stock, along with non-qualified stock options, stock appreciation rights, restricted stock units and performance restricted stock units to our officers, key employees, non-employee directors and consultants. In May 2021, the stockholders approved an amendment to the Plan that, among other things, increased the authorized shares by 2 million. At December 31, 2021 there were 1.3 million shares available for future grants under this Plan. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options. Under the terms of the Plan, each year eligible participants are 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. RSU, PSU and option activity for the year ended December 31, 2021 is summarized in the following table: Balance at December 31, 2020 Granted Settled Forfeited or expired Balance at December 31, 2021 Weighted Average Grant Date Fair Value Performance Restricted Stock Units Equity Incentive Awards Weighted Average Grant Date Fair Value Options 4.88 8.41 5.45 12.61 6.67 3.59 2,176,290 $ 653,438 5.94 (193,778) 3.30 (151,369) 8.13 4.62 2,484,581 $ 24,000 $ — — (15,000) 9,000 $ Weighted Average Exercise Price 20.39 — — 22.57 16.76 Restricted Stock Units 1,213,667 $ 411,291 (626,004) (32,525) 966,429 $ Awards estimated to vest in the future 939,298 $ 4.67 1,997,713 $ 6.86 9,000 $ 16.76 Stock-based compensation expense was $9.5 million and $2.4 million for the years ended December 31, 2021 and 2020, respectively. The higher expense for the year ended December 31, 2021 was primarily attributable to the modification of the 2019 and 2020 PSU awards, substituting budgeted amounts for actual performance for the second quarter of 2020 (one of twelve quarters in the respective performance periods), to offset the impact of the COVID-19 pandemic. This increased stock-based compensation for the year ended December 31, 2021 by $4.7 million. In addition, 2020 stock-based compensation was lower due to the reversal of $1.2 million of previously accrued expense as a result of lower expected performance achievement, in light of the COVID-19 pandemic. 64 Unrecognized stock-based compensation expense related to non-vested awards of $8.9 million is expected to be recognized over a weighted average period of approximately 1.7 years. NOTE 19 - COMMITMENTS AND CONTINGENCIES Purchase Commitments 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. Prices under our aluminum contracts are based on a market index, the London Mercantile Exchange (LME), and regional premiums for processing, transportation and alloy components which are generally adjusted quarterly for purchases in the ensuing quarter. Changes in aluminum prices are generally passed through to our OEM customers and adjusted on a quarterly basis. Certain of our purchase agreements include volume commitments, however any excess commitments are generally negotiated with suppliers and those which have occurred in the past have been carried over to future periods. Contingencies 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. Casualty Loss On July 14, 2021, the city of Werdohl, Germany, and surrounding area experienced torrential rains which resulted in extensive flooding. The flooding caused damage to our Werdohl manufacturing facility and production was temporarily halted on July 14, 2021. On July 16, 2021, operations at the facility resumed with the exception of the paint line and certain machining operations, which were brought on-line later in the third quarter. During the year ended December 31, 2021, the Company recognized a net casualty loss of $1.5 million which was included in other expense, net. There was only nominal disruption to our ability to fulfill orders and deliver product to our customers due to the expeditious resumption of operations at the facility. NOTE 20 - RECEIVABLES FACTORING The Company sells certain customer trade receivables on a non-recourse basis under factoring arrangements with designated financial institutions. These transactions are accounted for as sales and cash proceeds are included in cash provided by operating activities. Factoring arrangements incorporate customary representations and warranties, including representations as to validity of amounts due, completeness of performance obligations and absence of commercial disputes. During the years ended December 31, 2021 and 2020, the Company sold trade receivables totaling $775.6 million and $522.5 million, respectively, and incurred factoring fees of $2.1 million and $1.4 million, respectively. As of December 31, 2021 and December 31, 2020, receivables of $97.6 million and $96.6 million, respectively, had been factored and had not yet been paid by customers to the respective financial institutions. The collective limit under our factoring arrangements as of December 31, 2021 was $125.1 million. The collective limit under our factoring arrangements as of December 31, 2020 was $132.0 million. NOTE 21- RESTRUCTURING During the fourth quarter of 2021, the Company announced a reduction in its workforce at Werdohl, Germany. As a result, the Company recognized a restructuring charge of $4.5 million in cost of sales, principally comprised of termination and related benefits. There were no payments made in 2021 and, accordingly, the restructuring accrual at December 31, 2021 was $4.5 million. During the quarter ended June 30, 2020, the Company discontinued the manufacture and sale of high-performance aftermarket wheels for the automotive racing market segment. The Company incurred a total non-cash charge of $3.4 million, including $2.8 million recorded in cost of sales, comprised of $1.3 million relating to write-downs of certain aftermarket inventory to salvage value, $1.0 million of employee severance costs, $0.5 million in contract terminations and other costs, as well as a $0.6 million non-cash charge recorded in selling, general and administrative expenses related to non-production employee severance costs. During the six-month period ended December 31, 2020, we recognized an additional $0.7 million of severance costs, including charges to cost of sales of $0.4 million and selling, general and administrative expenses of $0.3 million. As of December 31, 2021, the restructuring benefits have been fully paid. During the third quarter of 2019, the Company initiated a plan to significantly reduce production and manufacturing operations at its Fayetteville, Arkansas location, recognizing restructuring expenses of $14.8 million in cost of sales. On July 15, 2021, the Company 65 consummated the sale of the Fayetteville facility for an adjusted net sale price of $7.1 million, resulting in a gain of $4.4 million which has been credited against selling, general and administrative expenses. During the years ended December 31, 2021 and December 31, 2020, we recognized additional charges to cost of sales of $2.2 million and $3.3 million, respectively, principally related to relocation costs for redeployment of machinery and equipment and environmental remediation and repairs required under the sale agreement. As of December 31, 2021, $0.1 million of the restructuring severance accrual remains. 66 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 our 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, 2021. 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, 2021 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, 2021 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, 2021 based on the criteria in the 2013 Internal Control - Integrated Framework issued by COSO. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included in this Annual Report. 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, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B - OTHER INFORMATION None. ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICIONS THAT PREVENT INSPECTIONS Not applicable. 67 PART III ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Except as set forth herein, the information required by this Item is incorporated herein by reference to our 2022 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 2022 Proxy Statement under the caption “Proposal No. 1 - Election of Directors.” Such information is incorporated herein by reference. 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 Chief Executive Officer’s employment agreement, see “Executive Compensation and Related Information - Narrative Disclosure Regarding Compensation” in our 2022 Proxy Statement, which is incorporated herein by reference. Code of Ethics - Included on our website, www.supind.com, under “Investor Relations,” 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, Michigan 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 - Narrative Disclosure Regarding Compensation” in our 2022 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 2022 Proxy Statement. Also see Note 18, “Stock-Based Compensation” in the 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 2022 Proxy Statement. ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES Information related to Principal Accountant Fees and Services is set forth under the caption “Proposal No. 3 - Ratification of Independent Registered Public Accounting Firm - Principal Accountant Fees and Services” in our 2022 Proxy Statement and is incorporated herein by reference. 68 ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as a part of this report: PART IV 1. 2. Financial Statements: See the “Index to the Consolidated Financial Statements and Financial Statement Schedule” in Item 8 of this Annual Report. Financial Statement Schedule Schedule II – Valuation and Qualifying Accounts for the Years Ended December 31, 2021 and 2020 3. Exhibits 2.1 2.2 3.1 3.2 3.3 3.4 4.1 4.2 4.3 10.1 10.2 10.3 10.4 10.5 10.6 Undertaking Agreement, dated as of March 23, 2017, between Superior Industries International, Inc. and Uniwheels Holding (Malta) Ltd. (Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed March 24, 2017). Combination Agreement, dated March 23, 2017, between Superior Industries International, Inc. and UNIWHEELS, AG (Incorporated by reference to Exhibit 2.2 of the Registrant’s Current Report on Form 8-K filed March 24, 2017). 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). Amended and Restated By-Laws of the Registrant effective as of October 25, 2017 (Incorporated by reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed October 30, 2017). Certificate of Designations, Preferences and Rights of Series A Perpetual Convertible Preferred Stock and Series B Perpetual Preferred Stock of Superior Industries International, Inc. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 26, 2017). Certificate of Correction, filed in the State of Delaware on November 7, 2018 (Incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018). 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). Indenture, dated as of June 15, 2017, among Superior Industries International, Inc., the subsidiaries of Superior identified therein, The Bank of New York Mellon SA/NV, Luxembourg Branch, as registrar and transfer agent and The Bank of New York Mellon acting through its London Branch, as trustee (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed June 20, 2017). Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (Incorporated by reference to Exhibit 4.3 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019). Registrant’s Salary Continuation Plan Amended and Restated as of August 19, 2011 (Incorporated by reference to Exhibit 10.1 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020). 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).* 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 8-K filed May 20, 2010).* Superior Industries International, Inc. Executive Change in Control Severance Plan, as Amended and Restated as of March 30, 2012 (Incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020).* 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).* 69  10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 Form of Restricted Stock Unit Agreement under the Superior Industries International, Inc. Amended and Restated 2008 Equity Incentive Plan (Incorporated by reference to Exhibit 10.24 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015).* Form of Performance Based Restricted Stock Unit Agreement under the Superior Industries International, Inc. Amended and Restated 2008 Equity Incentive Plan (Incorporated by reference to Exhibit 10.25 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015).* Form of Non-Employee Director Restricted Stock Unit Agreement under the Superior Industries International, Inc. Amended and Restated 2008 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 26, 2016).* Superior Industries International, Inc. Annual Incentive Performance Plan (Incorporated by reference to Annex A to Registrant’s Definitive Proxy Statement on Schedule 14-A filed on March 25, 2016).* 2018 Equity Incentive Plan of the Registrant, as amended. (Incorporated by reference to Exhibit 10.1 of the Registration’s Current Report on Form 8-K filed on June 1, 2021).* Form of Restricted Stock Unit Agreement under the Superior Industries International, Inc. 2018 Equity Incentive Plan (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018).* Form of Performance Based Restricted Stock Unit Agreement under the Superior Industries International, Inc. 2018 Equity Incentive Plan (Incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018).* Superior Industries International, Inc. 2019 Inducement Grant Plan (Incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-8 filed on August 8, 2019).* Indemnification Agreement, dated March 23, 2017, between Superior Industries International, Inc. and Uniwheels Holding (Malta) Ltd. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed March 24, 2017). Investment Agreement, dated March 22, 2017, between Superior Industries International, Inc., and TPG Growth III Sidewall, L.P. (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed March 24, 2017). Investor Rights Agreement, dated as of May 22, 2017, by and between Superior Industries International, Inc. and TPG Growth III Sidewall, L.P. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 26, 2017). Nomination Withdrawal Agreement, dated May 5, 2020, by and between Superior Industries International, Inc. and D.C. Capital Partners, L.P. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 7, 2020). English Translation of the Domination and Profit Transfer Agreement between Superior Industries International Germany AG and UNIWHEELS, AG, dated December 5, 2017 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 11, 2017). Credit Agreement, dated March 22, 2017, among Superior Industries International, Inc., Citibank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed March 24, 2017).*** First Amendment to Credit Agreement, dated May 23, 2017, among Superior Industries International, Inc., the subsidiaries of Superior identified therein, Citibank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed June 20, 2017). Second Amendment to Credit Agreement, dated May 31, 2017, among Superior Industries International, Inc., the subsidiaries of Superior identified therein, Citibank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed June 20, 2017). Third Amendment to Credit Agreement, dated June 15, 2017, among Superior Industries International, Inc., the subsidiaries of Superior identified therein, Citibank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed June 20, 2017). 70  10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 10.36 10.37 10.38 10.39 21 23 Fourth Amendment to Credit Agreement, dated June 29, 2018, among Superior Industries International, Inc., the subsidiaries of Superior identified therein, Citibank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed June 29, 2018). Fifth Amendment to Credit Agreement, dated May 3, 2021, among Superior Industries International, Inc, the subsidiaries of Superior identified therein, Citibank, N.A., as Administrative Agent, JPMorgan Chase Bank N.A., as Sub-Agent, and the Lenders and Issuing Banks party thereto. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021). Executive Employment Agreement, dated March 28, 2019, between Superior Industries International, Inc. and Majdi B. Abulaban, including forms of award agreements to be granted under the Inducement Plan (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed April 1, 2019).* Amendment Agreement, dated April 6, 2020, to Executive Employment Agreement, dated March 28, 2019, between Superior Industries International, Inc. and Majdi B. Abulaban, including forms of award agreements to be granted under the Inducement Plan (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020).* Retention Letter Agreement, dated August 25, 2020, between Superior Industries International, Inc. and Majdi B. Abulaban (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed August 27, 2020).*, **** Offer Letter of Employment, dated July 28, 2017 between Superior Industries International, Inc. and Joanne Finnorn (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017).* Retention Award Letter, dated August 8, 2019, between Joanne Finnorn and Superior Industries International, Inc. (Incorporated by reference to Exhibit 10.31 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019).* Offer Letter of Employment, dated September 17, 2019, between Superior Industries International, Inc. and Kevin Burke (Incorporated by reference to Exhibit 10.34 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019).* Retention Letter Agreement, dated August 25, 2020, between Superior Industries International, Inc. and Kevin Burke (Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed August 27, 2020).* Management Board Member Service Contract, dated September 26, 2019, between Superior Industries Europe AG and Andreas Meyer (Incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019).* Amendment Agreement, dated October 30, 2019, to the Management Board Member Service Contract, dated September 26, 2019, between Superior Industries Europe AG and Andreas Meyer (Incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019).* Retention Letter Agreement, dated September 10, 2020, between Superior Industries International, Inc. and Andreas Meyer (Incorporated by reference to Exhibit 10.34 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020).* Retention Award Letter, dated December 13, 2019, between Parveen Kakar and Superior Industries International, Inc. (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed December 16, 2019).* Offer Letter of Employment, dated August 17, 2020 between Superior Industries International, Inc. and Timothy Trenary (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed August 27, 2020).* Offer Letter of Employment, dated December 15, 2020 between Superior Industries International, Inc. and Michael Dorah (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 18, 2020).* Amendment to the Superior Industries, Int. Executive Employment Agreement dated October 12, 2021 by and between Superior Industries, Int. and Majdi B. Abulaban (Incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed October 15, 2021.) List of Subsidiaries of the Company.** Consent of Deloitte & Touche LLP, our Independent Registered Public Accounting Firm.** 71  31.1 31.2 32.1 Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.** 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.** Certification of Majdi B. Abulaban, President and Chief Executive Officer, and C. Timothy Trenary, 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.INS Inline XBRL Instance Document.***** 101.SCH Inline XBRL Taxonomy Extension Schema Document.***** 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.***** 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.***** 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.***** 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.***** 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) **** Indicates management contract or compensatory plan or arrangement. * ** Filed herewith. *** Certain schedules and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request. **** Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request. ***** Submitted electronically with the report. 72 SUPERIOR INDUSTRIES INTERNATIONAL, INC. ANNUAL REPORT ON FORM 10-K Schedule II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020 (Dollars in thousands) 2021 Allowance for doubtful accounts receivable $ Valuation allowances for deferred tax assets $ 2020 Allowance for doubtful accounts receivable $ Valuation allowances for deferred tax assets $ Balance at Beginning of Year Charge to Costs and Expenses Additions Other Deductions From Reserves Balance at End of Year 863 $ 46,490 $ 484 $ 23,467 $ — $ (569) (521) $ $ 826 69,388 2,867 $ 22,879 $ 253 $ 22,146 $ — $ 1,465 $ (2,257) $ — $ 863 46,490 73 SUPERIOR INDUSTRIES INTERNATIONAL, INC. ANNUAL REPORT ON FORM 10-K ITEM 16- FORM 10-K SUMMARY None. 74 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/ Majdi B. Abulaban Majdi B. Abulaban President and Chief Executive Officer March 3, 2022 KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Majdi B. Abulaban and C. Timothy Trenary as his or her true and lawful attorneys-in-fact (with full power to each of them to act alone), with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-K, and to file the same, with the exhibits thereto, and other documents in connection herewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent, full power and authority to do and perform each and every act and thing required and necessary to be done in and about the foregoing as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 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/ Majdi B. Abulaban Majdi B. Abulaban /s/ C. Timothy Trenary C. Timothy Trenary /s/ Michael J. Hatzfeld Jr. Michael J. Hatzfeld Jr. /s/ Raynard D. Benvenuti Raynard D. Benvenuti /s/ Michael R. Bruynesteyn Michael R. Bruynesteyn /s/ Richard J. Giromini Richard J. Giromini /s/ Paul J. Humphries Paul J. Humphries /s/ Ransom A. Langford Ransom A. Langford /s/ Timothy C. McQuay Timothy C. McQuay /s/ Ellen B. Richstone Ellen B. Richstone March 3, 2022 March 3, 2022 March 3, 2022 March 3, 2022 March 3, 2022 March 3, 2022 March 3, 2022 March 3, 2022 March 3, 2022 March 3, 2022 President and Chief Executive Officer (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial Officer) Vice President of Finance and Corporate Controller (Principal Accounting Officer) Director Director Director Director Director Director Director 75 2021 SALES BY CUSTOMER $45.83 22.1% $42.06 20.0% 2020 2021 2020 2021 Corporate Information DIRECTORS EXECUTIVE OFFICERS Timothy C. McQuay Chairman Majdi Abulaban Raynard D. Benvenuti Compensation and Benefits Committee Nominating and Corporate Governance Committee Michael R. Bruynesteyn Audit Committee Nominating and Corporate Governance Committee Majdi Abulaban President and Chief Executive Officer C. Timothy Trenary Executive Vice President— Chief Financial Officer Kevin Burke Senior Vice President— Chief Human Resources Officer Michael Dorah Senior Vice President— President North America Richard J. Giromini Nominating and Corporate Governance Committee* Compensation and Benefits Committee Joanne Finnorn Senior Vice President— General Counsel and Corporate Secretary Paul J. Humphries Compensation and Benefits Committee* Audit Committee Michael Hatzfeld Jr. Vice President of Finance and Corporate Controller Ransom A. Langford Ellen B. Richstone Audit Committee* Nominating and Corporate Governance Committee * Committee Chair Parveen Kakar Senior Vice President— Sales, Marketing and Product Development Andreas Meyer Senior Vice President— President Europe REGISTRAR AND TRANSFER COMPANY Shareholder correspondence should be mailed to: Computershare P.O. Box 505000 Louisville, KY 40233 Overnight correspondence should be sent to: Computershare 462 South 4th Street, Suite 1600 Louisville, KY 40202 Shareholder website: www.computershare.com/investor Shareholder online inquiries: https://wwwus.computershare. com/investor/Contact Toll fee in the US + 1 (800) 368-5948 Outside the US + (781) 575-4223 Fax (866) 519-2854 ANNUAL MEETING The annual meeting will be held on April 28, 2022 at 10:00 a.m. Eastern Time via live audio webcast at www.virtualstockholdermeeting.com/ SUP2022 CORPORATE OFFICES INVESTOR RELATIONS STOCK EXCHANGE Superior Industries International, Inc. 26600 Telegraph Rd. Suite 400 Southfield, MI 48033 Phone: 248.352.7300 Fax: 248.352.6989 www.supind.com Superior Industries Clemens Denks 248.234.7104 Investor.Relations@supind.com Clermont Partners Victoria Sivrais 312.690.6004 vsivrais@clermontpartners.com Superior common stock is listed for trading on the New York Stock Exchange under the ticker symbol SUP. AUDITORS Deloitte & Touche LLP 26600 Telegraph Rd. Suite 400 Southfield, MI 48033 248.352.7300 NYSE: SUP www.supind.com 

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