A Year of Innovation
2 022 ANNUAL REPORT
At a Glance
Delivering innovative solutions to enhance the value of our customers’
products and create value for all stakeholders
2022 Highlights
•
Grew Value-Added Sales Adjusted for
Foreign Exchange(1) by 8%
•
Delivered record $194 million Adjusted
EBITDA,(1) 16% more than 2021
•
Expanded Adjusted EBITDA(1) margin
by 310 bps to 25%
•
Continued to de-lever the Company—
Net Debt(1) lowest since 2017 acquisition
•
Achieved another record level of Content
per Wheel(1)—2022 Content per Wheel(1)
grew 14%
•
Attracted $400 million of new capital to
the Company
Content per
Wheel(1) Growth
Adj. EBITDA
Margin
(% of VAS)(1)
+14%
+310 bps
$52.36
25.2%
$45.83
22.1%
$ in millions
2021
2022
Net Sales
Value-Added Sales(1)
Gross Profit
Net Income
Adjusted EBITDA(1)
Adjusted EBITDA % of VAS
Net Debt(1)
$1,385
$ 754
$ 115
Content per
$
4
Wheel(1) Growth
$ 167
22%
$ 1,640
$ 771
Adj. EBITDA
$ 166
Margin
$ 37
(% of VAS)(1)
$ 194
25%
$ 503
$ 434
•
+14%
+310 bps
Advanced our Environmental, Social and Governance
(“ESG”) objectives, published 2022 Sustainability
Report and reduced carbon emissions from purchased
aluminum by 21% since 2020
$52.36
25.2%
•
Sourced aluminum with over 50% less CO2 footprint
than the global aluminum industry average
$45.83
22.1%
Responsible Aluminum Sourcing
2021
2022
2021
2022
Kg CO2 per kg AluminumScope 1+2+3 Emissions(2)
Superior Industries
10.0
8.3
7.9
16.6
2021
Aluminum
Industry
Global
Average(3)
2021
2022
2021
2022
2020
2021
2022
(1) Value-Added Sales, Value-Added Sales Adjusted for 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) Scope 1 covers direct emissions from owned or controlled sources, Scope 2 covers indirect emissions from the generation of electricity, steam, heating/cooling, etc.
and Scope 3 covers all other indirect emissions
(3) Source: ecoinvent database, Probas, management estimates
16.6
2021
Aluminum
Industry
Global
Average(3)
10.0
8.3
7.9
2020
2021
2022
DEAR FELLOW SHAREHOLDERS,
Our team delivered exceptional results in 2022, overcoming unprecedented industry headwinds, including
lower volumes, volatility and inflationary pressures. Through continued focus on our portfolio strategy
and operating performance, we delivered our fourth consecutive year of growth above market and
delivered all-time high EBITDA and margins despite volatility and lower volumes. Further, we continued
to deleverage our business, reducing net debt to the lowest level since 2017. These strong results are
the culmination of our efforts to execute on the value creation road map we laid out in 2019, building
upon a differentiated foundation and our continuous pursuit of operational excellence and profitable
growth initiatives.
Our market leading portfolio of technologies continues to stand out as our strongest growth driver. We
are meeting rising demand for larger, lighter wheels with premium finishes, which has resulted in a 33%
growth in Content per Wheel since 2019. This premium mix shift and ongoing industry adoption of our
technologies has enabled us to deliver another year of growth over market.
Our team accelerated its focus on cost discipline and continuous improvement initiatives to mitigate the
effects of a volatile operating environment. Lean six sigma black belt and green belt graduates drove
cost efficiencies across our business and created numerous savings, offsetting rising input costs. Equally
important has been our emphasis on commercial discipline as we collaborated with customers on cost
recoveries. Further, our local-for-local footprint has remained a major benefit for Superior, differentiating
our business for major OEMs seeking to mitigate risk through shorter supply chains and solutions to local
trade laws.
We are also making solid progress on our sustainability initiatives, including green products through our
R4TM strategy, ongoing CO2 footprint reduction, and increased use of renewable energy. In fact, Superior
sourced aluminum with over 50% less CO2 footprint than the global aluminum industry average. Our focus
on sustainability also extends to creating a safer workplace for our teams. Our Total Recordable Incident
Rate is now down to 0.62, a decrease of over 50% since 2018.
These efforts have translated to substantial free cash flow generation during 2022, improving our cash
position and enabling continued net debt reduction. With an enhanced financial profile, we attracted
$400 million in capital to refinance our term loan at the end of the year, giving us additional flexibility and
confidence to continue executing on our growth strategy in the coming years.
Moving into 2023, we remain cautious about the effects of macroeconomic headwinds on automotive
industry production. That said, we are confident in the strength of both our business and our team, and
we look forward to advancing our strategy to generate long-term value to our shareholders.
Sincerely,
Majdi Abulaban
President and Chief Executive Officer
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
(Millions of dollars)
Net Income
Adjusting Items:
- Interest Expense, net
- Income Tax Provision
- Depreciation
- Amortization
- Restructuring and Other
- Factoring Fees
Adjusted EBITDA
FY 2022
FY 2021
$
37.0
$
3.8
46.3
14.1
70.2
20.9
1.9
3.6
157.0
194.2
41.9
7.4
73.3
26.3
11.9
2.1
162.9
166.7
$
$
$
$
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
Free Cash Flow
(Millions of dollars)
Cash Flow Provided by Operating Activities
Net Cash Used in Investing Activities
Cash Payments for Non-debt Financing Activities
Free Cash Flow
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 2022
FY 2021
1,639.9
(869.3)
770.6
45.9
816.5
$ 1,384.8
(631.1)
753.7
(14.8)
738.9
$
15,592
52.36
16,123
45.83
$
FY 2022
FY 2021
152.6
(57.0)
(15.4)
80.2
$
$
44.9
(57.5)
(15.0)
(27.6)
FY 2022
FY 2021
641.5
5.9
647.4
(213.0)
434.4
$
$
610.2
6.1
616.3
(113.5)
502.8
$
$
$
$
$
$
$
$
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, 2022
Commission file number: 001-6615
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
Securities registered pursuant to Section 12(g) of the Act: None
New York Stock Exchange
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 ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
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 $106,713,694, based on a closing price of $3.95. On February 24, 2023, there were
27,016,125 shares of common stock issued and outstanding.
Portions of the registrant’s 2023 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 6
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
SIGNATURES
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. .......................................................................................................................................................
[Reserved].......................................................................................................................................................
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......................................................................................................................................
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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” (“MD&A”)) 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, supply chain disruptions, increased energy costs and semiconductor chip shortages, as
well as the Ukraine Conflict (as defined herein), on our future growth and earnings. 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 7,700 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 one of the leading European
aluminum wheel aftermarket manufacturers and suppliers. Our OEM aluminum wheels accounted for approximately 94 percent of our
sales in 2022 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Ford, GM,
Honda, Jaguar-Land Rover, Lucid Motors, Mazda, Mercedes-Benz Group, 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 2022 was 14.3
million vehicles, as compared to 13.0 million vehicles in 2021 and 2020, respectively. In Western and Central Europe, light-vehicle
production in 2022 was 13.4 million vehicles, as compared to 12.8 million and 13.6 million vehicles in 2021 and 2020, respectively.
While industry production volumes in 2020 were adversely impacted by the COVID-19 pandemic, 2021 and 2022 volumes were
constrained by the semiconductor chip shortage which started in the first two quarters of 2021, worsened in the last half of the year
and continued throughout 2022.
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, Ford and VW Group were our only customers individually accounting for 10 percent or more of our consolidated sales in 2022
and 2021. Our sales to these customers in 2022 and 2021 were as follows:
(Dollars in millions)
GM
Ford
VW Group
2022
2021
Percent of
Sales
26%
16%
14%
Dollars
431.3
253.9
223.4
$
$
$
Percent of
Sales
26%
13%
14%
Dollars
362.3
179.0
194.0
$
$
$
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 2022. Our aluminum requirements are met
through purchase orders with major global producers. During 2022, 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 2023.
We have contractual price adjustment clauses with our OEM customers to minimize the aluminum price risk, as well as the price risk
associated with silicon and alloy premium. In the aftermarket business, we use derivatives to hedge price variability on our aluminum
purchases.
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.
1
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 and cash flows.
Competition
Competition in the market for aluminum wheels is based primarily on delivery, overall customer service, price, quality and
technology. 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 aftermarket
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 Lüdensheid, Germany, support our research and development in North America and Europe for
our global OEM customers. Research and development of our European aftermarket wheels is performed in Bad Dürkheim, 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 $2.9 million in 2022 and $3.0 million in 2021. 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.
Sustainability
We published our 2022 Sustainability Report on August 31, 2022. That report reflected the results of the materiality assessment we
conducted in 2021 to identify the sustainability interests of our stakeholders and develop our sustainability strategy. Based on that
input, we remain committed to reducing natural gas, electricity and water consumption, solid waste and air emissions at our facilities.
All Superior manufacturing plants have implemented Environmental Management Systems that are ISO14001 certified and are subject
to annual audits by an independent third party.
The 2022 Sustainability Report confirmed our goal to be carbon neutral by 2039 and reported the carbon footprint of our global
operations. We reduced our carbon footprint by approximately 9% and our emissions per pound of aluminum shipped by 18% versus
2020 levels. We continue to explore opportunities to:
•
•
reduce fuel consumption and greenhouse gas emissions and
offer low or zero carbon wheels to our customers.
2
Furthermore, our research and development team continues to develop light weighting solutions, such as our patented Alulite™
technology, and aerodynamic solutions that will assist in reducing our customers’ carbon footprint. We also collaborate with our
customers and suppliers regarding sustainability practices throughout their supply chains.
Employees
As of December 31, 2022, we employed approximately 7,700 full-time employees, with 4,500 employees in North America and 3,200
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 (the “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., Investor 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.
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” 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 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.
3
Industry and Economic Risks
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, general levels of inflation, 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 markets in
which we compete have 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.
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. 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.
Specific risks to our Company associated with the impact of COVID-19 pandemic include the following:
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negative impacts to our operations resulting from instability in OEM production schedules, reductions in production
volumes and production efficiency levels;
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.
To the extent the COVID-19 pandemic or other public health crises adversely affect our operations and global economic conditions
more generally, it may also have the effect of heightening many of the other risks described herein.
4
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, Volvo, BMW and Toyota, together, represented 77 percent and 74 percent of our sales in 2022 and 2021,
respectively. Global procurement practices, including demand for price reductions may make it more difficult for us 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 nonexclusive 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 technologies 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
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. 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. Both domestic and international markets in which we operate experienced significant
inflationary pressures in fiscal year 2022, which are expected to continue for the near-term. In addition, the Federal Reserve in the
United States and other central banks in various countries have raised, and may again raise, interest rates in response to concerns about
inflation, which, coupled with reduced government spending and volatility in financial markets, may have the effect of further
increasing economic uncertainty and heightening these risks. Interest rate increases or other government actions taken to reduce
inflation could also result in recessionary pressures in many parts of the world. While there has been some improvement in the latter
part of 2022, we expect inflationary pressure to continue to impact our raw material and other costs in 2023.
Although our OEM contracts provide for the pass through of fluctuating aluminum and certain other raw material 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, many 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 such 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 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 and 2022. While aluminum prices began to decline in the latter
part of 2022, they remain somewhat elevated in relation to historical levels. In addition, rising silicon, natural gas and electricity costs
have increased significantly beginning in 2021 and, if unabated, could continue to adversely affect our margins in 2023.
5
Aluminum and alloy pricing, and the timing of our receipt of payment from customers for aluminum and certain other raw material
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 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 and certain other raw material price adjustments with customers in sales rarely will match the timing of such changes in
cost of sales and can result in fluctuations in 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
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 (the “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.
6
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.
Furthermore, sales of products to our OEM customers are subject to contracts that involve numerous terms and conditions and
incorporate extensive documentation developed throughout the sales and contracting process, including quotes and product
specifications. These terms and conditions can be complex and may be subject to differing interpretations, which could result in
contractual disputes. Contractual disputes may be costly, time-consuming, may result in contract or relationship terminations, and
could harm our reputation as well as 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
Representative (the “USTR”) 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. For
example, on October 17, 2022, the USTR initiated the second phase of its four-year review of the 301 tariffs, which focuses on the
merits of maintaining the tariffs versus taking alternative actions. 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.
Mexico has passed new labor laws that are intended to make it easier for Mexican workers to unionize. As a result, our cost of
manufacturing in Mexico may increase, which could have an adverse effect on our business, financial condition, results of operations
and cash flows.
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.
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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
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 upon redemption by the holder.
The Company’s capital structure is heavily leveraged as a result of debt incurred in connection with the 2017 acquisition of our
European business, part of which was refinanced on December 15, 2022. At December 31, 2022, our capital structure consisted of:
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$400.0 million Term Loan Facility (the “Term Loan Facility"), together with the Revolving Credit Facility (as defined
below) referred to as the "Senior Secured Credit Facilities" or the "SSCF”;
€250.0 million original principal amount of 6.00% Senior Notes due June 15, 2025 (the “Notes”) with an outstanding
balance of €217.1 million, or $232.4 million;
redeemable preferred stock of $222.8 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 $15.0 million; and
shareholders’ deficit of $25.3 million.
The Company also has available unused commitments under its revolving credit facility (the "Revolving Credit Facility") of $55.2
million at December 31, 2022. In the event unrestricted cash and cash equivalents fall below $37.5 million at any quarter end (or up to
$50.0 million following any increases in the commitment under the Revolving Credit Facility), the available commitment under the
Revolving Credit Facility would be reduced by the amount of any shortfall. At December 31, 2022, unrestricted cash and cash
equivalents substantially exceeded the requirement.
The Revolving Credit Facility and the Term Loan Facility are scheduled to mature on December 15, 2027 and December 15, 2028,
respectively. However, in the event the Company has not repaid, refinanced or otherwise extended the Notes beyond the maturity date
of the Term Loan Facility by the date 91 days prior to June 15, 2025 or has not redeemed, refinanced or otherwise extended the
unconditional redemption date of the redeemable preferred stock beyond the maturity date of the Term Loan Facility by the date 91
days prior to September 14, 2025, the Term Loan Facility and Revolving Credit Facility would mature 91 days prior to June 15, 2025
or September 14, 2025, respectively. In this event, we would be required to pay all amounts outstanding under the SSCF sooner than
they otherwise would be due, we may not have sufficient funds available to pay such amounts at that time, and we may not be able to
raise additional funds to pay such amounts on a timely basis, on terms we find acceptable, or at all.
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.
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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 SSCF 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 Certificate of Designations for our redeemable preferred stock, the holders may 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 two 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 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, 2022, our total debt was $647.4 million ($622.0 million net of
unamortized debt discount and issuance costs of $25.4 million). Additionally, we had availability of $55.2 million under the
Revolving Credit Facility at December 31, 2022. In the event unrestricted cash and cash equivalent balances fall below $37.5 million
at any quarter end (or up to a maximum of $50.0 million following any increase in borrowings available under the Revolving Credit
Facility), the available commitment under the Revolving Credit Facility would be reduced by the amount of the shortfall. At
December 31, 2022, unrestricted cash and cash equivalents exceeded the liquidity requirement and, accordingly, the full commitment
was available, less outstanding letters of credit.
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 SSCF and the indenture governing the Notes 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 SSCF 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 SSCF 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 SSCF or the Notes could adversely
impact our financial performance.
The Company, its 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 and our Notes.
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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.
The terms of the credit agreements governing the SSCF, 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 SSCF 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:
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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;
designate our subsidiaries as unrestricted subsidiaries;
enter into agreements which limit the ability of our nonguarantor 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 SSCF and other debt instruments require us to maintain
specified financial ratios, including a quarterly secured net leverage ratio and a quarterly total net leverage ratio as well as a minimum
liquidity. 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 SSCF, 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 SSCF 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 SSCF 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 SSCF. 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:
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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.
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Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase
significantly.
Borrowings under our SSCF 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,
2022, $400.0 million of our debt was variable rate debt. Our anticipated annual interest expense on $400.0 million of variable rate debt
at the current rate of 12.3 percent would be $49.2 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, 2022, we had outstanding interest rate swaps with an
aggregate notional amount of $250 million, maturing $50 million December 31, 2023, $50 million December 31, 2024 and $150
million December 31, 2025. 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 the secured overnight financing rate (“SOFR”) or Euro Interbank Offered Rate
(“EURIBOR”) reporting practices, the method in which SOFR or EURIBOR is determined or the use of alternative reference rates.
The interest rates under our SSCF are calculated using SOFR (or, in certain cases, EURIBOR), or alternate base rates. The Federal
Reserve Bank of New York (the “FRBNY”) began to publish SOFR in April 2018. SOFR was developed for use in certain U.S. dollar
derivatives and other financial contracts as an alternative to the U.S. dollar London interbank offered rate (“U.S. dollar LIBOR”).
Although the FRBNY has also begun publishing historical indicative SOFR going back to 2014, such historical indicative data
inherently involves assumptions, estimates and approximations. Therefore, SOFR has limited performance history and no actual
investment based on the performance of SOFR was possible before April 2018. The level of SOFR in future periods may bear little or
no relation to the historical level of SOFR. In addition, the differences between SOFR and U.S. dollar LIBOR may mean that market
participants would not consider SOFR a suitable substitute or successor for all of the purposes for which U.S. dollar LIBOR
historically has been used (including, without limitation, as a representation of the unsecured short-term funding costs of banks),
which may, in turn, lessen market acceptance of SOFR or lead to changes to the method in which SOFR is determined.
On September 21, 2017, the European Central Bank announced that it would be part of a new working group tasked with the
identification and adoption of a “risk free overnight rate” to serve as a basis for an alternative to benchmarks used in a variety of
financial instruments and contracts used in the euro area. On September 13, 2018, the working group on euro risk-free rates
recommended the new euro short-term rate (“€STR”) as the new risk free rate for the euro area. €STR was published for the first time
on October 2, 2019. In addition, in response to regulatory scrutiny and applicable legal requirements, the European Money Markets
Institute (the “EMMI”), as administrator of EURIBOR, conducted a series of consultations on a proposed reformed hybrid
methodology for EURIBOR. In July 2019, EMMI published its EURIBOR Benchmark Statement setting forth its reformed hybrid
methodology and received regulatory authorization for the continued administration of EURIBOR.
In the future, SOFR and EURIBOR could be subject to further regulatory scrutiny, reform efforts and/or other actions. 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
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. If our market capitalization were to fall
below $50 million over a consecutive thirty-day trading period, we would be noncompliant with NYSE continued listing standards
which could result in delisting. As of December 31, 2022, our market capitalization was $114.0 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.
11
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.
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 required that certain conditions be met, which include
increasing the number of employees, keeping the number of employees at such level and incurring certain levels of capital
expenditures. In addition, particular permits indicate deadlines for completion of respective stages of investments.
As of December 31, 2022, the Company has five permits that are effective until 2026. As of December 31, 2022, the Company
utilized Polish Zloty 243.5 million of the zone-related credit and has fully utilized all credits available under the permits. The
Company believes that we have satisfied all conditions required under the permits, however, if the Polish authorities determined that
these conditions were not fully satisfied, the Company would have to repay tax incentives received together with interest which could
have a material negative impact on our assets, financial condition, results of operations and 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 foreign exchange matters) 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 U.S. indebtedness.
The interest deduction barriers under German tax law (Zinsschranke) and U.S. tax law limit the tax deductibility of interest expenses.
If no exception to these limits applies, the annual net interest expense (interest expense less interest income) is deductible up to 30
percent of the EBITDA taxable in Germany and up to 30 percent of the EBIT taxable in the United States. Nondeductible 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.
12
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 nondeductible 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
The Ukraine Conflict may have a material adverse effect on our business, financial condition, results of operations and cash flows.
On February 24, 2022, Russia launched a military invasion of Ukraine (the “Ukraine Conflict”). In response to the Russian invasion,
various countries have developed comprehensive and coordinated sanctions and export restrictions on Russia, as well as on certain
Russian products and certain Russian individuals. These countries and others could impose wider sanctions and take other actions in
the future. In addition, the retaliatory measures that have been taken, and could be taken in the future, by NATO, the United States and
other countries, have created global security concerns that could result in broader European military and political conflicts and
otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business,
particularly our European operations.
The Ukraine Conflict has also given rise to macroeconomic risks which led, and may continue to lead, to significant declines in global
and regional economic growth, particularly in Europe. These risks may not only reduce global demand and automotive production
volumes but also have caused, and may continue to cause, further supply chain disruption and drive higher energy and commodity
prices, including increases in aluminum, and silicon, as well as inflation and higher interest rates. Energy prices in Europe, particularly
in Poland, increased significantly during 2022, partly due to the impact of the Ukraine Conflict and related sanctions and retaliatory
measures. Our OEM customers have, at times, temporarily shut down or lowered production as a result of the related supply
disruption.
The impact of the Ukraine Conflict, including economic sanctions and export controls such as restrictions on energy exports, or
additional military conflict, as well as potential responses to such actions by Russia, is currently unknown. It has led and may continue
to lead to further increases of our costs, affect our supply chain and customers, and reduce our sales, earnings and cash flows. In
addition, the continuation of the Ukraine Conflict could lead to other disruptions, instability and volatility in global markets that could
adversely impact our operations. To the extent the Ukraine Conflict adversely affects our operations and global economic conditions
more generally, it may also have the effect of heightening many of the other risks described herein.
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.
13
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 number of variables that 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 us 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 nonfunctional currencies, 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 commodity 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 three 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 14 “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, except as provided below and as
set forth in Note 18 “Commitments and Contingencies” in the Notes to the Consolidated Financial Statements regarding a contractual
dispute with the parent company of our energy supplier in Poland as well as an ongoing assessment of a loss contingency with an
OEM customer, 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
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.
In March 2022, the German Federal Cartel Office initiated an investigation related to European light alloy wheel manufacturers,
including Superior Industries Europe AG (a wholly owned subsidiary of the Company), on suspicion of conduct restricting
competition. The Company is cooperating fully with the German Federal Cartel Office. In the event Superior Industries Europe AG is
deemed to have violated the applicable statutes, the Company could be subject to a fine or civil proceedings. At this point, we are
unable to predict the duration or the outcome of the investigation.
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 2023 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
David Sherbin
C. Timothy Trenary
Age
59
54
57
58
50
56
63
66
Position
President and Chief Executive Officer
Senior Vice President and Chief Human Resources Officer
Senior Vice President and North American President
Senior Vice President, Investor Relations, Sustainability and Corporate
Secretary
Vice President of Finance and Corporate Controller
Senior Vice President of Sales, Marketing and Product Development
Senior Vice President and General Counsel
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 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, Investor Relations, Sustainability and Corporate
Secretary, a position she has held since June 2022. Ms. Finnorn was Senior Vice President, General Counsel
and Corporate Secretary from September 2017 to June 2022. 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
David Sherbin
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. Sherbin is the Company's Senior Vice President and General Counsel, a position he has held since June
2022. Prior to joining Superior, Mr. Sherbin was General Counsel, Senior Vice President, Secretary and Chief
Compliance Officer for Aptiv Plc and Secretary, Chief Compliance Officer and Senior Vice President at
Delphi Automotive LLP. Previously, Mr. Sherbin served as General Counsel for Pulte Homes and Federal-
Mogul Corporation. Mr. Sherbin received an undergraduate degree from Oberlin College and a graduate
degree from Cornell Law School.
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, 2023, there were approximately 340
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 7,700 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 one of the leading European aluminum
wheel aftermarket manufacturers and suppliers. Our OEM aluminum wheels accounted for approximately 94 percent of our sales in
2022 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Ford, GM, Honda,
Jaguar-Land Rover, Lucid Motors, Mazda, Mercedes-Benz Group, 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.
Industry Overview
In 2020, the COVID-19 pandemic introduced significant volatility in the financial markets and had a widespread adverse effect on the
automotive industry. In response 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 and 2022. We are continuing to monitor the resurgence of the virus, including the emergence of new virus
variants and the progress of the vaccination efforts.
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, 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 automotive industry continues to be impacted by the supply chain disruption, which emerged as OEM vehicle production resumed
and began to scale following the shutdown because of the COVID-19 pandemic. The supply chain disruption includes shortages of
semiconductor chips, electric vehicle batteries, shipping containers, steel, resin and foam. In 2022, the semiconductor chip shortage
continued to constrain OEM vehicle production. In addition, the Ukraine Conflict has resulted in temporary shutdowns at certain OEM
production facilities, which began to affect our production volume in March 2022. Cost inflation that we experienced in 2022 is
expected to continue due to high energy rates, particularly in Europe, as well as the Ukraine Conflict. While the prices under our OEM
contracts are adjusted for changes in the cost of aluminum, alloy premium and silicon, our aftermarket contracts do not provide such
pass through of these costs. Additionally, future increases in raw material costs and OEM production volatility may cause our
inventory levels 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, 2022, as compared to the corresponding periods of 2021 and 2020:
Twelve Months Ended
December 31,
2022 vs 2021
2021 vs 2020
Automotive Industry Production (North America and Western and Central Europe)
2022
2021
2020
% Change
% Change
(Units in thousands)
North America
Western and Central Europe
Total
14,307
13,428
27,735
13,047
12,828
25,875
20
13,024
13,584
26,608
9.7%
4.7%
7.2%
0.2%
(5.6%)
(2.8%)
While automotive industry production volumes were initially forecast by IHS, an independent automotive industry analyst firm, in
February 2022 to increase nearly 19.1 percent in 2022 (16.6 percent in North America and 21.7 percent in Western and Central
Europe), actual industry production volumes increased only 7.2 percent (9.7 percent in North America and 4.7 percent in Western and
Central Europe). This was primarily due to continuing semiconductor chip shortages, weaker economies in our principal markets and
the Ukraine Conflict. The Ukraine Conflict may continue to have an impact on future automotive production volumes and, therefore,
Superior production volumes.
The IHS forecast projects that production volumes in North America and Western and Central Europe will increase 6.2 percent in
2023 (5.4 percent in North America and 7.1 percent in Western and Central Europe). While semiconductor manufacturers have
announced plans to expand capacity over the next several years, it is unclear when automotive industry semiconductor chip shortages
will subside.
Business Overview
The following chart shows the comparison of our operational performance in 2022 and 2021 (in millions):
21
The following table is a summary of the Company’s operating results for 2022 and 2021:
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
Income from operations
Percentage of net sales
Interest expense, net
Other expense, net
Income tax provision
Net income
Percentage of net sales
Diluted earnings (loss) per share
Value added sales (1)
Value added sales adjusted for foreign exchange (1)
Adjusted EBITDA (2)
Percentage of net sales
Percentage of value added sales
Unit shipments in thousands
$
$
$
$
$
2022
2021
$
$
$
$
$
943,713
696,189
1,639,902
(1,473,515)
166,387
10.1%
68,347
98,040
6.0%
(46,314)
(588)
(14,104)
37,034
2.3%
0.02
770,649
816,514
194,154
11.8%
25.2%
15,592
744,904
639,846
1,384,750
(1,270,035)
114,715
8.3%
59,339
55,376
4.0%
(41,879)
(2,306)
(7,437)
3,754
0.3%
(1.17)
753,669
753,669
166,713
12.0%
22.1%
16,123
(1) Value added sales and value added sales adjusted for foreign exchange are key measures that are not calculated according to
U.S. GAAP. Refer to “Non-U.S. GAAP Financial Measures” for a definition of value added sales and value added sales
adjusted for foreign exchange and a reconciliation of value added sales and value added sales adjusted for foreign exchange
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 “Non-U.S. GAAP Financial
Measures” for a definition of adjusted EBITDA and a reconciliation of our adjusted EBITDA to net income, the most
comparable U.S. GAAP measure.
2022 versus 2021
Shipments
Wheel unit shipments were 15.6 million for 2022, compared to wheel unit shipments of 16.1 million in the prior year, a decrease of
3.3 percent. The decrease was driven by a 10.5 percent decrease in European unit shipment volumes, partially offset by a 3.2 increase
in shipment volumes in North America.
Net Sales
Net sales for 2022 were $1,639.9 million compared to net sales of $1,384.8 million in the prior year, an increase of 18.4 percent. The
increase in revenue was due to $325.1 million attributable to higher aluminum and other cost pass throughs to our OEM customers, as
well as certain inflationary cost recoveries, offset by approximately $71.0 million of unfavorable Euro foreign exchange.
Cost of Sales
Cost of sales was $1,473.5 million for 2022, compared to $1,270.0 million in the prior year, an increase of 16.0 percent. The increase
in cost of sales was primarily due to $218.8 million of higher aluminum costs and $36.3 million of higher conversion costs; partially
offset by a reduction in cost of sales of $67.0 million due to foreign exchange primarily related to the Euro.
22
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for 2022 were $68.3 million, or 4.2 percent of net sales, compared to $59.3
million, or 4.3 percent of net sales in the prior year. The $9.0 million increase was primarily due to the $4.4 million gain on the sale of
our Fayetteville, Arkansas facility recognized in 2021 and $3.1 million increase in costs associated with the increase in gross profit
and legal and consulting fees.
Net Interest Expense
Net interest expense for 2022 was $46.3 million compared to net interest expense of $41.9 million in 2021, a $4.4 million increase.
The majority of the increase is due to the $3.7 million write off of unamortized debt issuance costs upon repayment of the previously
outstanding term loan and termination of the revolving credit facilities. Refer to Note 10 “Debt,” in the Notes to the Consolidated
Financial Statements in Item 8, “Financial Statements and Supplementary Data”.
Other Expense
Other expense was $0.6 million in 2022 compared to other expense of $2.3 million in 2021, a decrease of $1.7 million. The higher
expense in 2021 is primarily attributable to a net casualty loss of $1.5 million associated with a flood at our Werdohl, Germany
location.
Income Tax Provision
The income tax provision for 2022 was $14.1 million on pre-tax income of $51.1 million, representing an effective tax rate of 27.6
percent. The 2022 effective tax rate differs from the statutory rate primarily due to valuation allowances, tax credits, and the mix of
earnings among tax jurisdictions. The income tax provision for 2021 was $7.4 million on pre-tax income of $11.2 million,
representing an effective income 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.
Net Income (Loss)
Net income in 2022 was $37.0 million, or earnings per diluted share of $0.02, compared to net income of $3.8 million, or a loss per
diluted share of $1.17 in 2021.
Segment Sales and Income from Operations
(Dollars in thousands)
Selected data
Net sales
North America
Europe
Total net sales
Income from operations
North America
Europe
Total income from operations
Year Ended
December 31,
2022
2021
Change
$
943,713 $
696,189
744,904 $
639,846
$ 1,639,902 $ 1,384,750 $
198,809
56,343
255,152
$
$
71,772 $
26,268
98,040 $
50,798 $
4,578
55,376 $
20,974
21,690
42,664
North America
In 2022, net sales of our North America segment increased 26.7 percent while unit shipments increased 3.2 percent, as compared to
the prior year. The $198.8 million increase in net sales was due to higher aluminum and other cost pass throughs to our OEM
customers, as well as certain inflationary cost recoveries. North American segment income from operations for 2022 was $21.0
million higher than the prior year primarily due to the timing of inflationary cost recoveries and higher unit shipment volumes of $35.4
million, partially offset by higher selling, general and administrative expenses of $11.1 million, as well as inflationary cost increases
in labor, utilities and other manufacturing costs. The increase in selling, general and administrative expenses was due to higher
compensation, benefit, legal and other expenses of $6.7 million and the $4.4 million gain on the sale of our Fayetteville, Arkansas
facility recognized in 2021.
23
Europe
In 2022, net sales of our European segment increased 8.8 percent despite an 10.5 percent decline in unit shipment volumes, compared
to the prior year. The increase in net sales of $56.3 million was primarily due to $127.2 million in higher aluminum and other cost
pass throughs, as well as certain inflationary cost recoveries, partially offset by unfavorable foreign exchange of $71.0 million and
lower unit shipment volumes. European segment income from operations for 2022 was $21.7 million higher than the prior year
primarily due to the timing of inflationary cost recoveries and product mix of $34.8 million, partially offset by inflationary cost
increases in labor, utilities and other manufacturing costs and unabsorbed fixed costs due to lower production volumes.
Financial Condition, Liquidity and Capital Resources
As of December 31, 2022, our cash and cash equivalents totaled $213.0 million compared to $113.5 million at December 31, 2021.
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 $257.6 million and
2.0:1, respectively, at December 31, 2022, versus $172.4 million and 1.7:1 at December 31, 2021. The increase in our working capital
of $85.2 million is due to a $99.5 million increase in our cash and cash equivalents from the effective management of working capital
during an inflationary cost environment throughout 2022, as well as the $24.9 million of residual proceeds from the December 2022
refinancing of a portion of our debt obligations.
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 2023, we expect that capital
expenditures will be approximately $70.0 million, $16.7 million of which has been committed under outstanding purchase orders at
December 31, 2022.
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 senior secured credit facility consisting of a $400.0 million term loan facility
("Acquisition Term Loan Facility") and a $160.0 million revolving credit facility (the "US Revolving Credit Facility"), subsequently
reduced to $107.5 million by May 2022. 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 (the "European Revolving Credit Facility") which was 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.
On December 15, 2022, the Company entered into a $400.0 million term loan facility (the "Term Loan Facility") with Oaktree Fund
Administration L.L.C., in its capacity as the administrative agent, JPMorgan Chase Bank, N.A., in its capacity as collateral agent, and
other lenders party thereto. The Term Loan Facility requires quarterly principal payments of $1.0 million. Additional principal
payments may be due with respect to asset sales, debt issuances and as a percentage of cash flow in excess of a specified threshold.
Concurrent with the issuance of the Term Loan Facility, the Company entered into a $60.0 million revolving credit facility (the
"Revolving Credit Facility") and terminated the previously outstanding $107.5 million US Revolving Credit Facility and €60.0 million
European Revolving Credit Facility. The $388.0 million proceeds of the borrowings under the Term Loan Facility (consisting of the
$400.0 million aggregate principal less the original issuance discount of $12.0 million) were used to repay the $349.2 million balance
outstanding under the Acquisition Term Loan Facility and to pay debt issuance costs and expenses incurred in connection with the
Term Loan Facility and Revolving Credit Facility. As a result of the refinancing, our annual interest expense on the Term Loan
Facility is expected to increase by more than $20.0 million in 2023.
Balances outstanding under the Term Loan Facility, Notes, and equipment loans as of December 31, 2022 were $400.0 million,
$232.4 million, and $12.4 million, respectively. The balance of the redeemable preferred stock was $222.8 million as of December 31,
2022. The Revolving Credit Facility and the Term Loan Facility are scheduled to mature on December 15, 2027 and December 15,
2028, respectively. However, in the event the Company has not repaid, refinanced or otherwise extended the maturity of the Notes
beyond the maturity date of the Term Loan Facility by the date 91 days prior to June 15, 2025, the Term Loan Facility and Revolving
Credit Facility would mature 91 days prior to June 15, 2025. Similarly, in the event the Company has not redeemed, refinanced or
otherwise extended the unconditional redemption date of the redeemable preferred stock beyond the maturity date of the Term Loan
Facility by the date 91 days prior to September 14, 2025, the Term Loan Facility and Revolving Credit Facility would mature 91 days
prior to September 14, 2025.
24
The redeemable preferred stock may be unconditionally redeemed at the holder's election 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 repay, refinance or otherwise extend the Notes
prior to their maturity and to redeem, refinance or otherwise extend the unconditional redemption date of the redeemable preferred
stock.
As of December 31, 2022, the Company had no outstanding borrowings under the Revolving Credit Facility, outstanding letters of
credit of $4.8 million and available unused commitments under the Revolving Credit Facility of $55.2 million. As a result, our
liquidity totaled $230.7 million at December 31, 2022, consisting of cash and cash equivalents of $175.5 million ($213.0 million less
$37.5 million related to the contractual liquidity required pursuant to the Term Loan Facility and Revolving Credit Facility) and
available and unused commitments under the Revolving Credit Facility of $55.2 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, 2022, the
Company owed $14.4 million to the financial institution which is included in accounts payable in the consolidated balance sheets. The
Company made $141.5 million in payments to the financial institution pursuant to the supplier’s factoring arrangement for the year
ended December 31, 2022. These payments are included in cash flows from operations within the consolidated statements of cash
flows.
As of December 31, 2022, we had no significant off-balance sheet arrangements other than factoring of $97.2 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 provided by financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
$
2022
2021
152,570
(57,007)
4,505
(519)
99,549
$
44,885
(57,524)
(24,025)
(2,286)
(38,950)
2022 versus 2021
Operating Activities
Net cash provided by operating activities was $152.6 million in 2022, as compared to $44.9 million in 2021. The increase in cash flow
provided by operating activities was primarily driven by lower use of cash for working capital (accounts receivable, inventory and
accounts payable) of $70.2 million and increased profitability $33.3 million.
Investing Activities
Net cash used in investing activities was $57.0 million in 2022, relatively flat as compared to $57.5 million in 2021 because of a $7.0
million reduction in capital expenditures which was largely offset by proceeds of $6.6 million from the sale of our Fayetteville,
Arkansas facility recognized in 2021.
25
Financing Activities
Net cash provided by financing activities was $4.5 million in 2022, as compared to net cash used of $24.0 million in 2021. The $28.5
million increase in cash flow provided by financing activities was primarily due to Term Loan Facility proceeds of $388.0 million,
less $349.2 million used to repay the previously outstanding term loan and $12.6 million of debt issuance costs related to the Term
Loan Facility and Revolving Credit Facility.
NON-GAAP FINANCIAL MEASURES
In this Annual Report, we discuss three important measures that are not calculated according to U.S. GAAP, value added sales, value
added sales adjusted for foreign exchange and adjusted EBITDA.
Value added sales represents net sales less the value of aluminum and other costs, as well as outsourced service provider (“OSPs”)
costs that are included in net sales. Contractual arrangements with our customers allow us to pass on changes in aluminum and certain
other costs. Value added sales adjusted for foreign exchange represents value added sales on a constant currency basis. For entities
reporting in currencies other than the U.S. dollar, the current period amounts are translated using the prior year comparative period
exchange rates, rather than the actual exchange rates in effect during the current period. Value added sales adjusted for foreign
exchange allows users of the financial statements to consider our net sales information both with and without the aluminum, other
costs and OSP costs and fluctuations in foreign exchange rates. Management utilizes value added sales adjusted for foreign exchange
as a key metric in measuring and evaluating the growth of the Company because it eliminates the volatility of the cost of aluminum
and changes in foreign exchange rates. Management utilizes value added sales in calculating adjusted EBITDA margin to eliminate
volatility of the cost of aluminum in evaluating year-over-year margin growth.
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 fair value of the redeemable
preferred stock embedded derivative, acquisition and integration, 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 operating trends in our operations. We believe the adjusted EBITDA financial measure assists in providing a more
complete understanding of our underlying operational measures to manage our business, to evaluate our performance compared to
prior periods and the marketplace and to establish operational goals. Adjusted EBITDA is a non-GAAP financial measure and should
not be considered in isolation or as a substitute for financial information provided in accordance with 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 sales, the most directly comparable U.S. GAAP financial measure, to our value added sales and
value added sales adjusted for foreign exchange:
Fiscal Year Ended December 31,
(Dollars in thousands)
Net sales
Less: aluminum, other costs, and outside service provider costs
Value added sales
Currency impact on current period value added sales
Value added sales adjusted for foreign exchange
2022
2021
$
$
$
1,639,902
(869,253)
770,649
45,865
816,514
$
$
$
1,384,750
(631,081)
753,669
—
753,669
26
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
Interest expense, net
Income tax provision
Depreciation
Amortization
Restructuring, factoring fees and other (1) (2)
Change in fair value of 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
$
$
2022
2021
$
$
37,034
46,314
14,104
70,244
20,928
5,530
—
194,154
11.8%
25.2%
3,754
41,879
7,437
73,343
26,292
14,033
(25)
166,713
12.0%
22.1%
(1) In 2022, we incurred $3.6 million of accounts receivable factoring fees, $1.1 million of hiring and other costs and $0.8
million of restructuring costs.
(2) 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.
(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. Selling prices for our OEM customers are also adjusted for changes in current market prices for alloy
premium and silicon based on either price indices or other contractually defined terms. 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 the prices for aluminum, certain other raw materials and other costs are monitored
and revenue is adjusted as changes in the respective indices occur, or as our contracts otherwise stipulate. Weights are monitored, and
prices are adjusted as variations arise. Customer contract prices are generally adjusted quarterly to incorporate these price adjustments.
In North America, OEM price adjustments due to manufacturing efficiencies are generally recognized as and when negotiated with
customers. Contracts with European OEMs generally include annual price reductions based on expected manufacturing efficiencies
over the life of the vehicle wheel program which are accrued as revenue is recognized. Adjustments to selling prices in 2022 and 2021
related to prior year revenues were $1.5 million and $2.6 million, respectively.
Fair Value Measurements – The Company applies fair value accounting for all financial assets and liabilities and nonfinancial 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.
27
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 benchmark rate (e.g., SOFR) plus an adjustment for
nonperformance risk.
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.
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 15, “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, 2022. 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
Projected Benefit
Obligation at
December 31,
2022
Percentage
Change
+1.0% $
+1.0% $
(2,068) $
152 $
2023 Net
Periodic
Pension Cost
92
8
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.
28
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:
• 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.
•
•
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.
As of December 31, 2022, substantially all our U.S. and certain German deferred tax assets, net of deferred tax liabilities, were subject
to valuation allowances. If our financial results continue to improve, our assessment of the realization of our net deferred tax assets
could result in the release of some or all the valuation allowances. Such a release would result in a material non-cash income tax
benefit in the period of release and the recording of additional deferred tax assets. There is a reasonable possibility that within the next
six to eighteen months, sufficient positive evidence becomes available to reach a conclusion that all or a significant portion of the
valuation allowances against our US net deferred tax assets would no longer be required.
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, 2022 and 2021, deferred tax assets were $104.7 million and $102.1 million, respectively, and
valuation allowances against those deferred tax assets were $67.6 million and $69.4 million (refer to Note 13, “Income Taxes” in the
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.
29
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
31
34
35
36
37
38
39
30
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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the
results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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, 2022, 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 2, 2023, 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 13 to the financial statements
Critical Audit Matter Description
The Company operates in many different 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 $14.1 million for the year ended December 31, 2022 and net deferred tax assets of
$31.7 million, net of a valuation allowance of $67.6 million, and unrecognized tax benefits and related interest and penalties of $32.3
million as of December 31, 2022. 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.
31
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:
•
•
•
•
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.
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.
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.
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 2, 2023
We have served as the Company's auditor since 2009.
32
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, 2022, 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, 2022, 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, 2022, of the Company and our report dated
March 2, 2023, 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 2, 2023
33
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
INCOME FROM OPERATIONS
Interest expense, net
Other expense, net
INCOME BEFORE INCOME TAXES
Income tax provision
NET INCOME
EARNINGS (LOSS) PER SHARE – BASIC
EARNINGS (LOSS) PER SHARE – DILUTED
The accompanying notes are an integral part of these consolidated financial statements.
2022
2021
1,639,902
1,473,515
166,387
68,347
98,040
(46,314)
(588)
51,138
(14,104)
37,034
0.02
0.02
$
$
$
$
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)
$
$
$
$
34
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
Fiscal Year Ended December 31,
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)
Change in unrecognized gains (losses) on derivative instruments:
Change in fair value of derivatives
Tax (provision) benefit
Change in unrecognized gains (losses) on derivative instruments, net of tax
Defined benefit pension plan:
Actuarial gains on pension obligation, net of amortization
Tax provision
Pension changes, net of tax
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
2022
2021
$
37,034
$
3,754
86
(20,529)
29,773
(878)
28,895
7,724
—
7,724
36,705
73,739
$
(8,370)
1,057
(7,313)
1,314
—
1,314
(26,528)
(22,774)
$
The accompanying notes are an integral part of these consolidated financial statements.
35
$
$
$
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
Intangibles, net
Other noncurrent 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)
Noncurrent income tax liabilities
Deferred income tax liabilities, net
Other noncurrent liabilities
Commitments and contingent liabilities (Note 18)
Mezzanine equity:
Preferred stock, $0.01 par value
Authorized – 1,000,000 shares
Issued and outstanding – 150,000 shares outstanding at
December 31, 2022 and December 31, 2021
European noncontrolling redeemable equity
Shareholders’ deficit:
Common stock, $0.01 par value
Authorized – 100,000,000 shares
Issued and outstanding – 27,016,125 and 26,163,077 shares at
December 31, 2022 and December 31, 2021
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.
2022
2021
$
$
$
213,022
72,725
178,688
2,261
42,218
508,914
473,960
35,187
51,497
64,181
1,133,739
158,049
5,873
74,108
13,300
251,330
616,145
8,524
3,468
55,733
—
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
—
222,753
1,083
199,897
1,146
111,105
(89,269)
(47,133)
(25,297)
1,133,739
$
103,214
(125,974)
(47,661)
(70,421)
1,054,147
36
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 JANUARY 1, 2022
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 noncontrolling redeemable equity
dividend
BALANCE AT DECEMBER 31, 2022
BALANCE AT JANUARY 1, 2021
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 noncontrolling redeemable equity
dividend
BALANCE AT DECEMBER 31, 2021
26,163,077
—
$ 103,214
—
$
(9,051) $
—
(6,133) $ (110,790) $ (47,661) $ (70,421)
37,034
37,034
—
—
—
—
—
853,048
—
—
—
—
—
—
—
7,891
—
—
28,895
—
—
—
—
—
—
—
7,724
—
—
—
—
—
—
—
86
—
—
—
—
—
—
—
—
—
28,895
7,724
86
—
7,891
(36,453)
(36,453)
(53)
(53)
27,016,125
$ 111,105
$
19,844
$
1,591
$ (110,704) $ (47,133) $ (25,297)
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
25,591,930
—
$
95,247
—
$
(1,738) $
—
(7,447) $ (90,261) $ (17,323) $ (21,522)
3,754
3,754
—
—
—
—
—
571,147
—
—
—
—
—
—
—
7,967
—
—
(7,313)
—
—
—
1,314
—
—
—
(20,529)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(7,313)
1,314
(20,529)
—
7,967
(34,050)
(34,050)
(42)
(42)
26,163,077
$ 103,214
$
(9,051) $
(6,133) $ (110,790) $ (47,661) $ (70,421)
The accompanying notes are an integral part of these consolidated financial statements.
37
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Fiscal Year Ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
2022
2021
$
37,034
$
3,754
Depreciation and amortization
Income tax, noncash changes
Stock-based compensation
Amortization of debt issuance costs
Other noncash 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
Cash dividends paid
Financing costs paid and other
Payments related to tax withholdings for stock-based compensation
Finance lease payments
NET CASH PROVIDED BY FINANCING ACTIVITIES
Effect of exchange rate changes on cash
Net increase (decrease) 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.
91,172
(9,264)
9,679
8,654
(470)
10,180
(11,282)
(3,273)
5,051
15,089
152,570
(57,157)
150
(57,007)
388,000
(354,408)
(13,648)
(12,589)
(1,788)
(1,062)
4,505
(519)
99,549
113,473
213,022
$
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
$
38
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
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 7,700 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 one of the leading European
aluminum wheel aftermarket manufacturers and suppliers. Our OEM aluminum wheels accounted for approximately 94 percent of our
sales in 2022 and are primarily sold for factory installation on vehicle models manufactured by BMW (including Mini), Ford, GM,
Honda, Jaguar-Land Rover, Lucid Motors, Mazda, Mercedes-Benz Group, 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 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.
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.
39
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. The Company had three aluminum suppliers in 2022 and two
aluminum suppliers in 2021 which individually exceeded 10 percent of total aluminum purchases and, in the aggregate, represented
61.4 percent and 56.2 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 of, 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 nonoperating 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.
Intangible Assets
Intangible assets are finite-lived assets consisting 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).
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 and remeasurement gains of $1.35 million and $0.3
million in 2022 and 2021, respectively.
40
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,
alloy premium and silicon, 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. In North America OEM price adjustments due to manufacturing efficiencies
are generally recognized as and when negotiated with customers. Contracts with European OEMs generally include annual price
reductions based on expected manufacturing efficiencies over the life of the vehicle wheel program which are accrued as revenue is
recognized. 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
on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three years. Refer to Note
17, “Stock-Based Compensation” for additional information concerning our stock-based compensation awards.
41
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 2022 and 2021, 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 Noncash Investing Activities
Cash paid for interest was $38.2 million and $36.7 million, respectively, for the years ended December 31, 2022 and 2021. Cash paid
for income taxes was $8.0 million and $10.5 million for the years ended December 31, 2022 and 2021, respectively. As of December
31, 2022 and 2021, we had purchased but not yet paid for equipment of $9.3 million and $11.2 million, respectively, which are
included in accounts payable and accrued expenses in our consolidated balance sheets.
Adoption of New Accounting Standards
ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.” As of January
1, 2022, we adopted this standard on a prospective basis. The standard requires entities to disclose information about any 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, the amounts applicable to each financial statement line
item and significant terms and conditions of the transactions, including commitments and contingencies. The adoption of this
accounting standard did not have a material effect on our financial statements or disclosures since we have not received any significant
governmental assistance.
42
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 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 end of the period. As a smaller reporting company (as defined under SEC
regulations), the Company is required to adopt the standard January 1, 2023. We do not expect that adoption of the standard will result
in any cumulative adjustment nor have any material effect on our financial statements or disclosures since our credit losses have been
(and are expected to remain) immaterial due to the financial strength of our OEM customers and the relatively short term nature of our
contractual terms with our OEM and aftermarket customers.
Accounting Standards Update (ASU) 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier
Finance Program Obligations.” In September 2022, the Financial Accounting Standards Board issued ASU 2022-04 which requires
that a buyer in a supplier finance program disclose the key terms of the program, including a description of the payment terms. For the
obligations that the buyer has confirmed as valid to the finance provider or intermediary, the buyer must disclose: the amount
outstanding that remains unpaid by the buyer as of the end of each year, a description of where those obligations are presented in the
balance sheet and a rollforward of those obligations during the year, including the amount of obligations confirmed and the amount of
obligations subsequently paid. This standard becomes effective for fiscal years beginning January 1, 2023, including interim periods
within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after
December 15, 2023. Early adoption is permitted. In adopting this standard, disclosures currently included in management's discussion
and analysis regarding supply chain financing will be incorporated into the notes to the consolidated financial statements along with
disclosure of payment terms under the program, as well as a roll forward of the amounts owed to the financial institution which has
discounted supplier receivables.
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, 2022 and 2021 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,
2022
December 31,
2021
Change
$
63,565 $
6,251
8,355
74,887 $
6,887
10,526
(11,322)
(636)
(2,171)
The changes in the contract liability balances primarily result from timing differences between our performance and customer
payment while the decrease in customer receivables is primarily due to the decrease in the fourth quarter 2022 aluminum prices and
shipping volumes. During the years ended December 31, 2022 and 2021, the Company recognized tooling reimbursement revenue of
$10.5 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 recognized in the current and prior year. During the
year ended December 31, 2022 and 2021, the Company recognized revenue of $1.5 million and $2.6 million, respectively, from
obligations satisfied in prior periods as a result of adjustments to pricing estimates for production efficiencies and other revenue
adjustments.
43
NOTE 3 - FAIR VALUE MEASUREMENTS
The Company applies fair value accounting for all financial assets and liabilities and nonfinancial 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.
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 benchmark rate (e.g., SOFR) plus an adjustment
for nonperformance risk.
The following tables categorize items measured at fair value at December 31, 2022 and 2021:
December 31, 2022
(Dollars in thousands)
Assets
Derivative contracts
Total
Liabilities
Derivative contracts
Total
December 31, 2021
(Dollars in thousands)
Assets
Derivative contracts
Total
Liabilities
Derivative contracts
Total
Fair Value Measurement at Reporting Date Using
Significant
Significant
Unobservable
Other
Inputs
Observable
(Level 3)
Inputs (Level 2)
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
$
$
$
$
$
$
$
$
34,960
34,960
11,780
11,780
$
$
$
$
— $
— $
— $
— $
34,960
34,960
.
11,780
11,780
$
$
$
$
—
—
—
—
Fair Value Measurement at Reporting Date Using
Significant
Significant
Unobservable
Other
Inputs
Observable
(Level 3)
Inputs (Level 2)
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
10,362
10,362
19,711
19,711
$
$
$
$
— $
— $
— $
— $
10,362
10,362
.
19,711
19,711
$
$
$
$
—
—
—
—
44
Debt Instruments
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)
(1)
Total debt excluding the impact of unamortized debt issuance costs.
December 31,
2022
December 31,
2021
$
615,394 $
647,443
605,874
616,215
NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS
We use derivatives to partially offset our exposure to foreign currency, interest rate, aluminum and other commodity price 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 or other commodity prices.
To help mitigate gross margin and cash flow 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.
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 and are designated as cash flow hedges, the gain or
loss on the derivative instrument is recorded in accumulated other comprehensive income (“AOCI”) 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.
The following tables display the fair value of derivatives by balance sheet line item at December 31, 2022 and December 31, 2021:
(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, 2022
Other
Current
Assets
Other
Noncurrent
Assets
Accrued
Liabilities
Other
Noncurrent
Liabilities
$
11,210
$
15,890
$
2,873
$
5,212
603
—
498
—
—
655
4,112
16,423
$
1,992
18,537
$
$
192
1,213
1,520
—
5,798
—
—
770
—
5,982
$
45
(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
Noncurrent
Assets
Accrued
Liabilities
Other
Noncurrent
Liabilities
$
3,161
$
2,194
$
1,845
$
13,565
579
2,677
1,294
—
7,711
$
—
39
418
3
—
135
—
—
276
—
2,651
$
3,887
5,870
$
—
13,841
$
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, 2022
December 31, 2021
Notional
U.S. Dollar
Amount
Fair
Value
Notional
U.S. Dollar
Amount
Fair
Value
$
462,783
$
19,015
$
458,769
$
(10,055)
39,726
411
24,419
9,495
(1,213)
37,609
13,500
(1,137)
8,915
576
2,716
1,301
250,000
775,504
$
$
6,104
23,180
$
200,000
729,712
$
(3,887)
(9,349)
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,
2022 and 2021:
Year Ended December 31, 2022
(Dollars in thousands)
Derivative contracts
Year Ended December 31, 2021
(Dollars in thousands)
Derivative contracts
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
$
$
28,895 $
14,962 $
2,074
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) $
4,106 $
(1,047)
46
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
Year Ended December 31,
(Dollars in thousands)
North America
Europe
Net Sales
2022
2021
Income from Operations
2021
2022
$
$
$
$
943,713
696,189
1,639,902
$
$
744,904
639,846
1,384,750
Depreciation and Amortization
2022
2021
36,301
54,871
91,172
$
$
36,243
63,392
99,635
Property, Plant and Equipment, net
2022
2021
$
$
220,321
253,639
473,960
$
$
214,331
280,070
494,401
$
$
$
$
$
$
71,772
26,268
98,040
$
$
50,798
4,578
55,376
Capital Expenditures
2022
2021
39,265
17,892
57,157
$
$
30,005
34,108
64,113
Intangible Assets
2022
2021
— $
51,497
51,497
$
—
76,870
76,870
Total Assets
2022
2021
$
$
582,339 $
551,400
1,133,739 $
499,988
554,159
1,054,147
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
2022
2021
2022
2021
$
5,574 $
8,166 $
938,139
203,979
492,210
736,738
227,887
411,959
$ 1,639,902 $ 1,384,750 $
1,476 $
218,845
76,158
177,481
473,960 $
2,152
212,179
76,849
203,221
494,401
NOTE 6 - ACCOUNTS RECEIVABLE
Year Ended December 31,
(Dollars in thousands)
Trade receivables
Other receivables
Allowance for doubtful accounts
Accounts receivable, net
2022
2021
$
$
64,225
9,161
73,386
(661)
72,725
$
$
75,713
8,560
84,273
(826)
83,447
47
The accounts receivable from GM, Ford and VW Group represented approximately 7 percent, 7 percent and 11percent of the total
accounts receivable, respectively, at December 31, 2022 and 10 percent, 9 percent and 10 percent of the total accounts receivable,
respectively, at December 31, 2021.
The related percentage of our total sales to each of these three customers is shown below:
GM
Ford
VW Group
NOTE 7 - INVENTORIES
Year Ended December 31,
(Dollars in thousands)
Raw materials
Work in process
Finished goods
Inventories, net
2022
Percent of Sales
2021
Percent of Sales
26%
16%
14%
26%
13%
14%
2022
2021
$
$
62,639
37,993
78,056
178,688
$
$
47,392
54,891
69,816
172,099
Service wheel and supplies inventory included in other noncurrent assets in the consolidated balance sheets totaled $11.3 million and
$9.7 million at December 31, 2022 and 2021, respectively.
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,
2022
December 31,
2021
$
$
144,870 $
887,222
4,993
80,263
1,117,348
(643,388)
473,960 $
129,826
861,097
9,831
67,529
1,068,283
(573,882)
494,401
Depreciation expense was $70.2 million and $73.3 million for the years ended December 31, 2022 and 2021, respectively.
NOTE 9 - INTANGIBLE ASSETS
The Company’s finite-lived intangible assets as of December 31, 2022 and December 31, 2021 are summarized in the following table.
Year Ended December 31, 2022
(Dollars in thousands)
Brand name
Technology
Customer relationships
Total finite-lived intangibles
Gross
Carrying
Amount
Accumulated
Amortization
Currency
Translation
Net Carrying
Amount
$
$
9,000
15,000
167,000
191,000
$
$
(9,134) $
(15,222)
(114,595)
(138,951) $
$
134
222
(908)
(552) $
—
—
51,497
51,497
Remaining
Weighted
Average
Amortization
Period
—
—
1-6
48
Year Ended December 31, 2021
(Dollars in thousands)
Brand name
Technology
Customer relationships
Total finite-lived intangibles
Gross
Carrying
Amount
Accumulated
Amortization
Currency
Translation
Net Carrying
Amount
$
$
9,000
15,000
167,000
191,000
$
$
(8,503) $
(14,172)
(95,540)
(118,215) $
258
430
3,397
4,085
$
$
$
$
755
1,258
74,857
76,870
Remaining
Weighted
Average
Amortization
Period
1-2
2
2-7
Amortization expense for these intangible assets was $20.7 million and $26.3 million for the years ended December 31, 2022 and
2021, respectively. The anticipated annual amortization expense for these intangible assets is $19.3 million for 2023 and 2024, $9.5
million for 2025, $2.4 million for 2026 and $1.0 million for 2027.
NOTE 10 - DEBT
A summary of long-term debt and the related weighted average interest rates is shown below:
Debt Instrument
(Dollars in thousands)
Term Loan Facility
6.00% Senior Notes
European CapEx loans
Finance leases
Less: Current portion
Long-term debt
Debt Instrument
(Dollars in thousands)
Term Loan Facility
6.00% Senior Notes
European CapEx loans
Finance leases
Less: Current portion
Long-term debt
(1)
Unamortized portion
December 31, 2022
Total
Debt
Debt Discount and
Issuance Costs (1)
Total
Debt, Net
Weighted
Average
Interest Rate
400,000 $
232,352
12,365
2,726
647,443 $
(22,967) $
(2,458)
—
—
(25,425)
$
377,033
229,894
12,365
2,726
622,018
(5,873)
616,145
12.3%
6.0%
2.3%
2.7%
December 31, 2021
Total
Debt
Debt Issuance
Costs (1)
Total
Debt, Net
Weighted
Average
Interest Rate
349,200 $
245,809
18,595
2,611
616,215 $
(4,338) $
(3,441)
—
—
(7,779)
$
344,862
242,368
18,595
2,611
608,436
(6,081)
602,355
4.1%
6.0%
2.3%
2.8%
$
$
$
$
49
Senior Notes
On June 15, 2017, the Company issued €250 million aggregate principal amount of 6.00% Senior Notes (“Notes”) due June 15, 2025.
Interest on the Notes is payable semiannually, on June 15 and December 15. The Company may redeem the Notes, in whole or in part,
at a redemption price of 100 percent, plus any 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 “Notes 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 the Company 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.
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. As of
December 31, 2022, the Company was in compliance with all covenants under the indenture governing the Notes.
Senior Secured Credit Facilities
On December 15, 2022, the Company entered into a $400.0 million term loan facility (the “Term Loan Facility”) pursuant to a credit
agreement (the “Term Loan Credit Agreement”) with Oaktree Fund Administration L.L.C., in its capacity as the administrative agent,
JPMorgan Chase Bank, N.A., in its capacity as collateral agent, and other lenders party thereto. Concurrent with the execution of the
Term Loan Facility, the Company entered into a $60.0 million revolving credit facility (the “Revolving Credit Facility” and, together
with the Term Loan Facility, the “Senior Secured Credit Facilities” or "SSCF") pursuant to a credit agreement (the “Revolving Credit
Agreement” and, together with the Term Loan Credit Agreement, the "Credit Agreements") with JPMorgan Chase Bank, N.A., in its
capacity as administrative agent, collateral agent and issuing bank, and other lenders and issuing banks thereunder. The previously
outstanding $107.5 million US revolving credit facility and €60.0 million European revolving credit facility were terminated.
The Revolving Credit Facility and the Term Loan Facility are scheduled to mature on December 15, 2027 and December 15, 2028,
respectively. However, in the event the Company has not repaid, refinanced or otherwise extended the maturity date of the Notes
beyond the maturity date of the Term Loan Facility by the date 91 days prior to June 15, 2025, the Term Loan Facility and Revolving
Credit Facility would mature 91 days prior to June 15, 2025. Similarly, in the event the Company has not redeemed, refinanced or
otherwise extended the unconditional redemption date of the redeemable preferred stock beyond the maturity date of the Term Loan
Facility by the date 91 days prior to September 14, 2025, the Term Loan Facility and Revolving Credit Facility would mature 91 days
prior to September 14, 2025. The Term Loan Facility requires quarterly principal payments of $1.0 million. Additional principal
payments may be due with respect to asset sales, debt issuances and as a percentage of cash flow in excess of a specified threshold.
50
The $388.0 million of proceeds from the Term Loan Facility (consisting of the $400.0 million aggregate principal less the original
issuance discount of $12.0 million) were used to repay $349.2 million in borrowings under the previously outstanding term loan and
pay debt issuance costs and expenses incurred in connection with the Term Loan Facility and Revolving Credit Facility. Debt issuance
costs associated with the Term Loan Facility of $11.1 million have been reflected as a reduction of the outstanding borrowing and are
being amortized over the six-year term. Debt issuance costs and expenses associated with the Revolving Credit Facility of $3.2 million
have been recognized as a deferred charge and are being amortized over the five-year term. In connection with the termination of the
previously outstanding term loan and revolving credit facilities, unamortized debt issuance costs of $3.7 million were written off and
charged to interest expense.
The Company may at any time request one or more increases in the amount of (i) commitments under the Term Loan Facility, up to an
unlimited additional amount if, on a pro forma basis after the incurrence of such amount, the First Lien Net Leverage Ratio (as defined
in the Term Loan Credit Agreement) does not exceed 2.00 to 1.00 and (ii) commitments under the Revolving Credit Facility, up to an
aggregate maximum additional amount of $50.0 million, in each case, subject to certain conditions (including the agreement of a
lender to provide such commitment increase). Amounts borrowed under the Term Loan Facility may be voluntarily prepaid at any
time subject to a prepayment premium of 2.00 percent of the loan principal plus the net present value of any lost interest in the first
year and 2.00 percent and 1.00 percent of the loan principal during second and third years, respectively. After the third anniversary of
the closing date, there is no prepayment premium.
Borrowings under the Term Loan Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) the secured
overnight financing rate (“SOFR”), with a floor of 1.50 percent per annum, or (ii) a base rate (“Term Base Rate”), with a floor of 1.50
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 New York Federal Reserve Bank (the "NYFRB") rate plus 0.50 percent and (3) SOFR for an interest period of one
month plus 1.00 percent, in each case, plus the applicable rate. Initially, the applicable rate for the fiscal quarter ending December 31,
2022 is equal to 8.00 percent for SOFR loans and 7.00 percent for Term Base Rate loans. Thereafter, the applicable rate will be
determined by reference to the Company’s Secured Net Leverage Ratio (as defined in the Term Loan Credit Agreement) and will
range between 7.50 percent and 8.00 percent for SOFR loans and between 6.50 percent and 7.00 percent for Term Base Rate loans. In
the event of a payment default under the Term Loan Credit Agreement, past due amounts shall be subject to an additional default
interest rate of 2.00 percent.
Borrowings under the Revolving Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) SOFR plus 0.10
percent (or, with respect to any borrowings denominated in euros, the adjusted Euro Interbank Offered Rate, “EURIBOR”), with a
floor of 0.00 percent per annum or (ii) a base rate (“Revolving Loan Base Rate”), with a floor of 1.00 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 NYFRB rate plus
0.50 percent and (3) SOFR for an interest period of one month plus 1.00 percent, in each case, plus the applicable rate. Initially, the
applicable rate for the fiscal quarter ending December 31, 2022, is equal to 4.00 percent for SOFR and EURIBOR loans and 3.00
percent for Revolving Base Rate loans. Thereafter, the applicable rate will be determined by reference to the Company’s Secured Net
Leverage Ratio (as defined in the Revolving Credit Agreement) and will range between 3.50 percent and 4.50 percent for SOFR and
EURIBOR loans and between 2.50 percent and 3.50 percent for Revolving Base Rate loans. The commitment fee for the unused
commitment under the Revolving Credit Facility varies between 0.50 percent and 0.625 percent depending on the Company’s Secured
Net Leverage Ratio. Commitment fees are included in interest expense. In the event of a payment default under the Revolving Credit
Agreement, past due amounts shall be subject to an additional default interest rate of 2.00 percent.
Guarantees and Collateral Security
Our obligations under the Credit Agreements are unconditionally guaranteed by the Notes Subsidiary Guarantors and certain other
domestic and foreign subsidiaries of the Company (collectively, the “SSCF 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 SSCF Subsidiary Guarantors’ assets, including but not limited to: (i) a perfected pledge of all of
the capital stock issued by each of the SSCF Subsidiary Guarantors’ (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 SSCF Subsidiary Guarantors (subject to certain exceptions and exclusions). The Company’s obligations under the Revolving
Credit Facility are secured by liens on a super-priority basis ranking ahead of the liens securing the Term Loan Facility.
51
Covenants
The Credit Agreements contain 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 Agreements also restrict 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.
The Term Loan Credit Agreement requires the Company to maintain (i) a quarterly Secured Net Leverage Ratio (as defined in the
Term Loan Credit Agreement) of no more than 3.50:1.00 and (ii) Liquidity (defined as the sum of unrestricted cash and cash
equivalent balances and unborrowed commitments under the Revolving Credit Facility) of at least $37.5 million (subject to
adjustments up to $50.0 million following any increase in the commitment under the Revolving Credit Facility). The Revolving Credit
Agreement requires the Company to maintain (i) a quarterly Total Net Leverage Ratio (as defined in the Revolving Credit Agreement)
of no more than 4.50:1.00; (ii) a quarterly Secured Net Leverage Ratio (as defined in the Revolving Credit Agreement) of no more
than 3.50:1.00; and (iii) Liquidity of at least $37.5 million (subject to adjustments up to $50.0 million following any increase in the
commitment under the Revolving Credit Facility) but only so long as loans under the Term Loan Facility are outstanding. In the event
unrestricted cash and cash equivalent balances fall below $37.5 million at any quarter end (or up to a maximum of $50.0 million
following any increase in borrowings available under the Revolving Credit Facility), the available commitment under the Revolving
Credit Facility would be reduced by the amount of any shortfall.
The Credit Agreements contain customary default provisions that include among other things: non-payment of principal or interest
when due, failure to comply with obligations, covenants or other provisions in the Credit Agreements, any failure of representations
and warranties, cross-default under other debt agreements for obligations in excess of $20.0 million, insolvency, failure to pay
judgments in excess of $20.0 million within 60 days of the judicial award, failure to pay any material plan withdrawal obligations
under ERISA, invalidity of the loan agreement, invalidity of any security interest in the loan collateral, change of control and failure to
maintain the financial covenants. In the event a default occurs, all commitments under the Senior Secured Credit Facilities would be
terminated and the lenders would be entitled to declare the principal, premium, if any, and accrued and unpaid interest on all
borrowings outstanding to be due and payable.
In addition, the Credit Agreements contain customary representations and warranties and other covenants. As of December 31, 2022,
the Company was in compliance with all covenants under the Credit Agreements.
Available Unused Commitments under the Revolving Credit Facility
As of December 31, 2022, 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 $55.2 million as of December 31,
2022. At December 31, 2022, unrestricted cash and cash equivalents substantially exceeded the Liquidity requirement and,
accordingly, the full commitment was available, less outstanding letters of credit.
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, 2022, $3.6 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 nonpayment, as well as a material adverse change default provision pursuant to which the lender could
accelerate the loan maturity. As of December 31, 2022, the Company was in compliance with all covenants under the loan agreement.
The balance of certain post-acquisition equipment loans was $8.8 million as of December 31, 2022. 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
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 (€0.5 million) under the loan agreements
began in June of 2021. As of December 31, 2022, the Company was in compliance with all covenants under the loans.
52
Debt maturities due in the next five years and thereafter are as follows:
Debt Maturities
(Dollars in thousands)
2023
2024
2025
2026
2027
Thereafter
Total debt liabilities
Amount
5,873
3,672
234,728
2,055
1,117
399,998
647,443
$
$
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 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 may unconditionally redeem the shares at any time on or after September 14, 2025. 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. 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.
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, 2022 and 2021 was $87.3 million and $64.4 million, respectively, resulting in adjusted redeemable preferred stock
balances of $222.8 million and $199.9 million, respectively.
53
NOTE 12 - EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income (loss), after deducting preferred dividends and accretion and European
noncontrolling 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” (convertible into 5,326 thousand shares) have not been included in the diluted
earnings per share because the inclusion of such shares on an as converted basis would be anti-dilutive for the years ended December
31, 2022 and 2021.
Year Ended December 31,
(Dollars in thousands, except per share amounts)
Basic Earnings Per Share:
Net income
Less: Redeemable preferred stock dividends and accretion
Less: European noncontrolling redeemable equity dividend
Basic numerator
Basic earnings (loss) per share
Weighted average shares outstanding – Basic
Diluted Earnings Per Share:
Net income
Less: Redeemable preferred stock dividends and accretion
Less: European noncontrolling redeemable equity dividend
Diluted numerator
Diluted earnings (loss) per share
Weighted average shares outstanding – Basic
Dilutive effect of common share equivalents
Weighted average shares outstanding – Diluted
$
$
$
$
$
$
2022
2021
$
$
$
$
$
$
37,034
(36,453)
(53)
528
0.02
26,839
37,034
(36,453)
(53)
528
0.02
26,839
751
27,590
3,754
(34,050)
(42)
(30,338)
(1.17)
25,995
3,754
(34,050)
(42)
(30,338)
(1.17)
25,995
—
25,995
NOTE 13 - 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
2022
2021
(22,538) $
73,676
51,138
$
(44,129)
55,320
11,191
2022
2021
(1,946) $
(77)
(21,345)
(23,368)
275
—
8,989
9,264
(14,104) $
(67)
(99)
(9,229)
(9,395)
711
—
1,247
1,958
(7,437)
$
$
$
$
54
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
Other
Effective income tax rate
2022
2021
21.0%
1.7
(26.4)
(19.9)
15.6
4.9
3.4
2.0
19.9
4.1
1.2
27.5%
21.0%
(14.2)
(13.2)
(97.1)
203.6
(89.7)
10.9
3.6
16.3
22.3
3.0
66.5%
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
Intangibles, property, plant and equipment and other
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
2022
2021
$
$
$
7,220
1,353
6,638
3,895
48,774
23,098
7,865
4,915
946
104,704
(67,626)
37,078
(5,359)
(5,359)
31,719
$
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
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
2022
2021
$
$
35,187 $
(3,468)
31,719 $
27,715
(3,913)
23,802
55
As of December 31, 2022, we have cumulative tax effected Germany NOL carryforwards of $25.6 million that carryforward
indefinitely and U.S. state NOL carryforwards of $11.5 million that expire in the years 2023 to 2043. Also, we have $13.9 million of
U.S. tax credit carryforwards.
The Company continuously evaluates the realizability of our net deferred tax assets. As of December 31, 2022, substantially all our
U.S. and certain German deferred tax assets, net of deferred tax liabilities, were subject to valuation allowances. If our financial results
continue to improve, our assessment of the realization of our net deferred tax assets could result in the release of some or all the
valuation allowances. Such a release would result in a material non-cash income tax benefit in the period of release and the recording
of additional deferred tax assets. There is a reasonable possibility that within the next six to eighteen months, sufficient positive
evidence becomes available to reach a conclusion that all or a significant portion of the valuation allowances against our U.S. net
deferred tax assets would no longer be required.
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
Ending balance
2022
2021
16,362
(712)
$
31,858
(1,192)
10,580
50
(180)
26,100
$
(13,633)
48
(719)
16,362
$
$
$
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 2022 and 2021, the Company had liabilities of $6.2 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 12-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 2021 with various significant tax jurisdictions, including
ongoing tax audits in the U.S. for 2015 to 2018 and Germany for 2018 to 2019.
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
believed that the proposed adjustment was without merit and contested the matter with the IRS administrative appeals office. The IRS
administrative appeals office denied our position, however, the final assessment has not been received as of December 31, 2022. At
this time, we do not intend to further pursue with litigation and as a result we have recorded the relevant income tax expense and
liability, which is not significant.
NOTE 14 - 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 noncurrent assets, accrued expenses and other noncurrent 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.
56
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. Finance and 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.
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 seven 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 noncurrent assets
Accrued liabilities
Other noncurrent 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
57
$
$
$
$
$
$
$
$
$
$
2022
2021
$
$
$
1,040
59
2,601
3,700
59
2,738
1,062
1,249
333
1,325
82
3,070
4,477
82
3,460
1,321
922
416
2022
2021
8,325
(2,137)
(6,516)
(8,653)
7,899
(5,684)
2,215
(1,053)
(1,673)
(2,726)
$
$
$
$
$
$
$
3.2
4.2
2.7%
3.6%
10,772
(2,371)
(8,860)
(11,231)
6,603
(4,644)
1,959
(982)
(1,629)
(2,611)
3.4
5.0
2.8%
3.6%
Summarized future minimum payments under our leases are as follows:
Year Ended December 31,
(Dollars in thousands)
Lease Maturities
2023
2024
2025
2026
2027
Thereafter
Total
Less: Imputed interest
Total lease liabilities, net of interest
NOTE 15 - RETIREMENT PLANS
Amount
Finance Leases
1,053
993
411
167
104
101
2,829
(103)
2,726
$
$
Operating Leases
2,250
$
2,199
2,044
1,886
870
43
9,292
(639)
8,653
$
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 loss (gain)
Benefit payments
Ending benefit obligation
2022
2021
$
$
31,120 $
872
(7,392)
(1,445)
23,155 $
32,640
823
(928)
(1,415)
31,120
58
The actuarial gain in 2022 and 2021 calendar years was due to an increase in the year-over-year 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 noncurrent 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
$
$
$
$
$
$
$
2022
2021
— $
1,445
(1,445)
— $
(23,155) $
—
1,415
(1,415)
—
(31,120)
(1,393) $
(21,762)
(23,155) $
(1,432)
(29,688)
(31,120)
1,721
—
1,721
$
$
9,446
(1)
9,445
5.4%
3.0%
2.9%
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
2022
2021
$
$
872
332
1,204
$
$
823
386
1,209
2.9%
3.0%
2.6%
3.0%
Benefit payments during the next ten years, which reflect applicable future service, are as follows:
Year Ended December 31,
(Dollars in thousands)
2023
2024
2025
2026
2027
Years 2028 to 2032
The following is an estimate of the components of net periodic pension cost in 2023:
Estimated Year Ended December 31,
(Dollars in thousands)
Interest cost
Amortization of actuarial loss
Estimated 2023 net periodic pension cost
59
Amount
1,431
1,481
1,693
1,759
1,716
8,964
2023
1,217
—
1,217
$
$
$
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 $1.7 million and $1.4 million for the years ended December 31, 2022 and 2021,
respectively.
NOTE 16 - 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
Dividends and interest
Current portion of executive retirement liabilities
Professional fees
Other
Accrued liabilities
NOTE 17 - STOCK-BASED COMPENSATION
Equity Incentive Plan
2022
2021
$
$
35,076
15,330
6,251
5,798
2,137
1,532
1,393
1,046
5,545
74,108
$
$
31,930
13,973
6,887
5,870
2,371
1,417
1,432
687
6,958
71,525
Our 2018 Equity Incentive Plan (the “Plan”) was approved by stockholders in May 2018, authorizing us to issue up to 4.35 million
shares of common stock, along with nonqualified stock options, stock appreciation rights, restricted stock and performance restricted
stock units to our officers, key employees, nonemployee 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, 2022, there were 0.2
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 period, and performance restricted stock units (“PSUs”), with three-year cliff vesting. Upon vesting, each restricted stock
award is exchangeable for one share of the Company’s common stock, with accrued dividends.
The following tables summarize the RSU, PSU and option activity for the year ended December 31, 2022 and 2021:
Balance at January 1, 2022
Granted
Settled
Forfeited or expired
Balance at December 31, 2022
Restricted
Stock Units
966,429
515,491
(580,551)
(4,570)
896,799
Weighted
Average
Grant Date
Fair Value
4.62
$
3.93
4.73
3.77
4.16
$
Equity Incentive Awards
Performance
Shares
2,484,581
667,345
(719,659)
(109,166)
2,323,101
Weighted
Average
Grant Date
Fair Value
6.67
$
5.33
6.68
7.24
6.26
$
Weighted
Average
Exercise
Price
Options
$
9,000
—
—
(9,000)
— $
16.76
—
—
16.76
—
Awards estimated to vest in the future
896,799
$
4.16
2,323,101
$
6.26
— $
—
60
Balance at January 1, 2021
Granted
Settled
Forfeited or expired
Balance at December 31, 2021
Restricted
Stock Units
1,213,667
411,291
(626,004)
(32,525)
966,429
Weighted
Average
Grant Date
Fair Value
3.59
$
5.94
3.30
8.13
4.62
$
Equity Incentive Awards
Performance
Shares
2,176,290
653,438
(193,778)
(151,369)
2,484,581
Weighted
Average
Grant Date
Fair Value
4.88
$
8.41
5.45
12.61
6.67
$
Options
24,000
—
—
(15,000)
9,000
Awards estimated to vest in the future
939,298
$
4.67
1,997,713
$
6.86
9,000
Weighted
Average
Exercise
Price
$
$
$
20.39
—
—
22.57
16.76
16.76
Stock-based compensation expense was $9.7 million and $9.5 million for the years ended December 31, 2022 and 2021, respectively.
Unrecognized stock-based compensation expense related to nonvested awards of $7.3 million is expected to be recognized over a
weighted average period of approximately 1.6 years.
NOTE 18 - 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 and regional premiums for processing, transportation and alloy components which are adjusted quarterly for
purchases in the ensuing quarter. 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, except as provided below, 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.
In March 2022, the German Federal Cartel Office initiated an investigation related to European light alloy wheel manufacturers,
including Superior Industries Europe AG (a wholly owned subsidiary of the Company), on suspicion of conduct restricting
competition. The Company is cooperating fully with the German Federal Cartel Office. In the event Superior Industries Europe AG is
deemed to have violated the applicable statutes, the Company could be subject to a fine or civil proceedings. At this point, we are
unable to predict the duration or the outcome of the investigation.
The Company purchases electricity and natural gas requirements for its manufacturing operations in Poland from a single energy
distributor. Superior and its energy distributor, as well as the parent company of the energy distributor, have filed various claims
against one another. These claims generally request the court to determine whether Superior's energy contracts with the energy
distributor were valid during the period December 2021 through May 2022. In December 2021, the Company’s energy distributor
informed the Company it would no longer supply energy, notwithstanding its contractual obligation to continue supply. Following a
request from the Company, the court enjoined the energy distributor from terminating supply to the Company. In February 2022, the
Company filed a claim requesting the court affirm the validity of the energy supply agreements, which contained favorable hedged
purchase contracts. The energy distributor contested the Company’s validity claims. The energy distributor's parent filed a suit against
the Company asserting that the Company's energy contracts were no longer valid and asserting that the Company owed additional
amounts for its purchases equal to the excess of market prices over prices set forth in the energy contracts. If the court concludes that
the energy contracts were not valid during this period, Superior could be required to pay up to an additional $14.0 million for its
energy purchases. Any such adverse judgment would be appealed by the Company. A final conclusion in this matter is anticipated to
take 18-24 months. We have concluded that an unfavorable ruling is not probable and, therefore, we have not recognized any
provision for this contingent loss in our consolidated financial statements as of December 31, 2022.
61
Sales of products to our OEM customers are subject to contracts that involve numerous terms and conditions and incorporate
extensive documentation developed throughout the sales and contracting process, including quotes and product specifications. These
terms and conditions can be complex and may be subject to differing interpretations, which could result in contractual disputes. In the
first quarter of 2023, the Company and one of its OEM customers began assessing whether certain wheels shipped between January
2021 and October 2022 were in conformity with the product specifications. Management’s current assessment is that the wheels
shipped meet the customer’s product specifications. However, the customer may conclude differently. Potential outcomes include the
customer agreeing with our assessment, entering into a commercial settlement or the provision of replacement wheels. In the event
replacement wheels are required, our current estimate to manufacture and install the replacement wheels is approximately $11 million.
Based upon facts currently known, we have concluded that it is not probable that provision of replacement wheels will be required
and, therefore, we have not recognized any provision for this contingent loss at December 31, 2022. We expect this matter to be
resolved within the first half of 2023.
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 19 - RECEIVABLES FACTORING
The Company sells certain customer trade receivables on a nonrecourse 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, 2022 and 2021,
the Company sold trade receivables totaling $955.1 million and $775.6 million, respectively, and incurred factoring fees of $3.6
million and $2.1 million, respectively. As of December 31, 2022 and December 31, 2021, receivables of $97.2 million and $97.6
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, 2022 was $150.0 million. The collective limit under our factoring
arrangements as of December 31, 2021 was $125.1 million.
NOTE 20- 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.
During 2022 we incurred termination costs and related expenses of $1.9 million which were charged against the restructuring accrual.
As of December 31, 2022, the Company determined that there are no further planned staffing reductions and reversed the remaining
accrual and credited cost of sales for $2.3 million, the original accrual balance less charges incurred and foreign exchange of $0.3
million.
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
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 year ended December 31, 2021, we recognized
additional charges to cost of sales of $2.2 million, principally related to relocation costs for redeployment of machinery and equipment
and environmental remediation and repairs required under the sale agreement.
62
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, 2022. 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, 2022 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, 2022 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, 2022 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, 2022 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,
2022 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 JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
63
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 2023 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 2023 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 2023 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., Investor Relations, 26600 Telegraph Road, Suite 400,
Southfield, Michigan 48033.
ITEM 11 - EXECUTIVE COMPENSATION
Information relating to Executive Compensation is set forth under the captions “Director Compensation” and “Executive
Compensation and Related Information - Narrative Disclosure Regarding Compensation” in our 2023 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 2023 Proxy Statement. Also see Note 17, “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 2023 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. 5 - Ratification of
Independent Registered Public Accounting Firm - Principal Accountant Fees and Services” in our 2023 Proxy Statement and is
incorporated herein by reference.
64
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, 2022 and 2021
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 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).*
65
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
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 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 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 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 December 15, 2022, among Superior Industries International, Inc., Oaktree Fund
Administration, LLC, in its capacity as administrative agent, JPMorgan Chase Bank, N.A., in its capacity as collateral
agent, and the other lenders party thereto (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K filed December 19, 2022).***
Revolving Credit Agreement, dated December 15, 2022, among Superior Industries International, Inc., JPMorgan Chase
Bank, N.A., in its capacity as administrative agent, collateral agent and issuing bank, and the other lenders and issuing
banks party thereto (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed
December 19, 2022).***
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).*
66
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
21
23
31.1
31.2
32.1
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.**
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).**
67
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 similar attachments to this exhibit have been omitted in accordance with Item 601(a)(5) 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 not material and the Company customarily and actually treats that information as private or confidential. 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.
68
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2022 and 2021
(Dollars in thousands)
Balance at
Beginning of
Year
Charge to
Costs and
Expenses
Additions
Other
Deductions
From
Reserves
Balance at
End of Year
2022
Allowance for doubtful accounts receivable
Valuation allowances for deferred tax assets
2021
Allowance for doubtful accounts receivable
Valuation allowances for deferred tax assets
$
$
$
$
826
69,388
863
46,490
$
$
$
$
(122)
7,779
484
23,467
$
$
$
$
— $
$
(9,541)
(43)
$
— $
661
67,626
— $
$
(569)
(521)
$
— $
826
69,388
69
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
ITEM 16- FORM 10-K SUMMARY
None.
70
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 2, 2023
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 2, 2023
March 2, 2023
March 2, 2023
March 2, 2023
March 2, 2023
March 2, 2023
March 2, 2023
March 2, 2023
March 2, 2023
March 2, 2023
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
71
At a Glance
Corporate Information
Directors
Executive Officers
Timothy C. McQuay
Chair
Majdi Abulaban
Raynard D. Benvenuti
Human Capital and Compensation Committee
Nominating and Corporate Governance Committee
Michael R. Bruynesteyn
Audit Committee
Human Capital and Compensation Committee
Richard J. Giromini
Nominating and Corporate Governance Committee*
Human Capital and Compensation Committee
Paul J. Humphries
Human Capital and Compensation Committee*
Audit Committee
Ransom A. Langford
Ellen B. Richstone
Audit Committee*
Nominating and Corporate Governance Committee
* Committee Chair
Majdi Abulaban
President and
Chief Executive Officer
Tim Trenary
Executive Vice President—
Chief Financial Officer
Kevin Burke
Senior Vice President—
Chief Human Resources Officer
Michael Dorah
Senior Vice President—
President North America
Michael Hatzfeld Jr.
Vice President of Finance
and Corporate Controller
Parveen Kakar
Senior Vice President—
Sales, Marketing and
Product Development
David Sherbin
Senior Vice President—
General Counsel,
Chief Compliance Officer
and Corporate Secretary
Registrar And
Transfer Company
Shareholder correspondence
should be mailed to:
Computershare
P.O. Box 43006
Providence, RI 02940-3006
United States
Overnight correspondence
should be sent to:
Computershare
150 Royal Street
Suite 101
Canton, MA 02021
United States
Shareholder website:
www.computershare.com/investor
Shareholder online inquiries:
Contact Us | Investor Center
(computershare.com)
Toll free 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
May 17, 2023 at 10:00 a.m. Eastern
Time via live audio webcast at
www.virtualstockholdermeeting.com/
SUP2023
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
248.234.7104
Investor.Relations@supind.com
Riveron
Victoria Sivrais
312.690.6004
Victoria.sivrais@riveron.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