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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
(NO FEE REQUIRED)
For the transition period from ___________ to ___________
COMMISSION FILE NO. 1-6615
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-2594729
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7800 WOODLEY AVENUE, VAN NUYS, CALIFORNIA 91406
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (818) 781-4973
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $0.50
REGISTERED ON THE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. / /
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
29,599,974 shares of common stock were outstanding as of March 13, 1995.
Aggregate market value of voting stock held by nonaffiliates of registrant
was $599,224,054 on March 13, 1995.
The following documents are incorporated by reference and made a part of
the Form 10-K:
1. Registrant's 1994 Annual Report to Shareholders (Parts I, II and IV)
2. Registrant's Proxy Statement for its Annual Meeting of Stockholders to
be held May 19, 1995 (Part III)
Listing of Exhibits - Pages 19-21
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Superior Industries International, Inc.'s (the "Company" or the
"Registrant") principal business is the design and manufacture of cast aluminum
road wheels for original equipment manufacturers (OEMs). It also designs a
variety of products for the automotive aftermarket, including custom road wheels
and accessories. The Registrant was initially incorporated in Delaware in 1969
and reincorporated in California in 1994 as the successor to three businesses
founded by Louis L. Borick, which had been engaged in the design, manufacture
and sale of automotive accessories and related products since 1957.
Recent developments in the Company's business are described in the
Company's 1994 Annual Report to Shareholders ("Annual Report") which is
incorporated herein by reference.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company manages its business on an integrated one-segment basis.
Information relating thereto has been included in Note 8 of "Notes to
Consolidated Financial Statements" in the Annual Report which is incorporated
herein by reference.
NARRATIVE DESCRIPTION OF BUSINESS
Principal Products
The Registrant's products are divided into two categories:
1. OEM - Cast Aluminum Road Wheels (91.4 percent of net sales)
2. Aftermarket - Custom Road Wheels and Automotive Accessories (8.6 percent
of net sales)
The Company's net sales for these product lines for 1994, 1993 and 1992 are
included in the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of the Annual Report which is incorporated herein
by reference.
OEM - Cast Aluminum Road Wheels
The Company's entry into the OEM road wheel business in 1973 resulted from
its successful development of manufacturing technology, quality control and
quality assurance techniques which enabled it to satisfy the quality and volume
requirements of the OEM market. The Company's OEM cast aluminum road wheels are
sold to The Ford Motor Company ("Ford"), General Motors Corporation ("General
Motors"), Chrysler de Mexico, several Japanese manufacturers, including Toyota
Motor Corporation ("Toyota"), Mazda Motor Corporation ("Mazda"), Nissan Motor
Corporation Ltd. ("Nissan"), Fuji Heavy Industries, Ltd. ("Subaru"), and Isuzu
Motors Limited ("Isuzu"), and two European automotive manufacturers, Bayerische
Motoren Werke ("BMW") and Jaguar Cars Ltd. ("Jaguar") for factory
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installation as optional or standard equipment on selected vehicle models. As
discussed below, there are several advantages to manufacturers, dealers and
consumers by installing cast aluminum wheels which help promote this product's
success. Consolidated net sales in 1994, 1993, and 1992 were to principally two
major automotive manufacturers (Ford and General Motors) for use on 138, 128 and
114 different models, respectively.
During the past twenty-one years the Company has provided cast aluminum
road wheels to Ford, General Motors, Chrysler and, beginning in 1989, Japanese
auto manufacturers for an increasing number of vehicle models, from eight models
in 1980 to 148 currently. It has been the Company's experience that once the
manufacturer has ordered the Company's cast aluminum wheels for use on a
particular year's model, the Company's wheel will be included in that model's
production in later years as well. In addition, the number of vehicle models on
which the Company's aluminum wheels are standard equipment has increased from
none in 1980 to 46 in 1994.
Demand for OEM cast aluminum wheels such as those manufactured by the
Company has been increasing. Ward's Automotive, an industry publication, reports
that the installation rate of such wheels for domestic cars rose from
approximately 4 percent in 1980 to 29 percent for the 1989 model year to over 42
percent for the 1994 model year. Aluminum road wheel installation rates for
domestic light trucks and utility vehicles jumped from approximately 15 percent
for the 1989 model year to almost 43 percent for the 1994 model year. This
growth in aluminum wheel installation rates has taken place while the automotive
market has been cyclical.
The Company believes that the increased use of cast aluminum wheels on
domestic vehicles is due to several factors. The aesthetic appeal of cast
aluminum wheels has fueled customer demand. Aluminum wheels typically weigh less
than conventional steel wheels and this weight savings contributes to increasing
the vehicle's fuel efficiency. Because the federal government requires each
domestic manufacturer's total annual production to meet certain minimum fuel
efficiency levels referred to as "CAFE" (Corporate Average Fuel Economy), the
Company's customers have sought to meet these levels in part by reducing the
weight of their vehicles. The installation of cast aluminum wheels achieves this
objective. Manufacturers and dealers also benefit from the installation of
aluminum wheels on their models because of higher profit margins. Aluminum
wheels contribute to the road handling ability and ride of a vehicle because of
the weight savings to critical suspension areas and because of the greater
precision achieved in manufacturing aluminum wheels over conventional steel
wheels.
With approximately 88 percent of the Company's 1994 sales made to Ford and
General Motors, the Company is dependent on these two significant customers. The
Company does not believe this represents a material risk due to the following
factors. First, in 1993 the Company was awarded a new five-year contract with
Ford. The contract, which expires in 1998, replaces the previous contract and
covers passenger cars, light trucks and utility vehicles. This relationship
should result in the Company continuing to be Ford's primary aluminum wheel
supplier. Second, certain contracts are in place with General Motors which
guarantee the Company a significant portion of its overall aluminum wheel
requirements. Additionally, the Company has proven its ability to be a
consistently low-cost producer of quality aluminum wheels with the capability of
quickly expanding production capacity to meet increasing customer sales demands.
This has been evidenced not only through the Company's rapid plant expansion
program, but also through the Company's demonstrated ability to meet frequent
customer requests to absorb additional capacity requirements. The Company
strives to continually enhance its relationships with its
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customers through continuous improvement programs. These factors have resulted
in the Company's market share expanding to over 40 percent of the domestic
aluminum road wheel market. Moreover, the Company ships over 100 different wheel
models to Ford and General Motors indicating the broad usage of the Company's
wheels throughout both OEM customers' product lines. Finally, both Ford and
General Motors continue to rank the Company as their highest rated supplier of
cast aluminum road wheels.
The Company's long-term strategy involves broadening both its domestic and
international OEM customer base and expanding its product lines into
complementary areas which will utilize the Company's manufacturing expertise.
The Company has embarked on a strategy to develop and penetrate three new
international markets: Japan, Europe and Latin America as well as related
transplant operations (foreign OEMs with manufacturing facilities in the United
States).
The Company's first step towards achieving this goal was to explore and
develop relationships with Japanese OEMs. In pursuit of this objective, during
1989 the Company announced it had, in conjunction with Topy Industries, Limited
("Topy"), Japan's largest wheel manufacturer, obtained its first order with a
Japanese OEM from Mazda. In 1990, the Company further penetrated this market by
receiving a contract from Toyota. Also in 1990, the Company increased its
marketing efforts into this area by forming a joint-venture with Topy. The
joint-venture, named Topy-Superior Limited ("TSL"), markets and sells wheels
made by the Company to Japanese OEM customers both in Japan and the United
States. Since inception the Company, through TSL, has received many new
contracts to manufacture wheels for domestic Japanese OEMs as well as for three
transplant operations. In total, TSL has contracts with five Japanese OEM
customers. This venture is one key step forward in the Company's international
marketing efforts and the Company expects continued sales growth from this
venture.
A second step in the Company's international marketing efforts was achieved
in 1994 as the Company successfully entered the European marketplace by
obtaining two new customers. The Company was awarded a multi-year contract by
Jaguar to supply wheels beginning with the 1995 model year. The wheels are
manufactured in the United States and exported to the United Kingdom. This
contract represents the Company's first relationship with a European automotive
manufacturer. In addition, the Company received its second contract with a
European based manufacturer, BMW, to supply wheels for the new BMW roadster
convertible. Shipments are slated to begin June 1995 to BMW's new plant in
Spartanburg, South Carolina.
Further in pursuit of developing its ties to the European market, the
Company announced, subsequent to year-end, the signing of a memorandum of
understanding for a 50-50 joint-venture with German based Otto Fuchs Metallwerke
("Otto Fuchs") to establish a European manufacturing presence. The facility,
which the Company anticipates locating in Hungary, a country with low labor and
production costs and a highly skilled labor force, will establish the Company's
commitment toward entering the European market. The facility will be located in
close proximity to large European OEMs and bring new wheel making technology to
the Company for use in European and U.S. markets.
Development of the Company's initial Latin American program commenced
during 1994 with the first shipments from the Company's Chihuahua, Mexico plant.
Relative to this market the Company received orders from Ford and GM and renewed
its relationship with Chrysler by receiving orders to produce two wheel models
from Chrysler de Mexico for the 1995 and 1996 model years. The wheels are
produced at the Chihuahua, Mexico facility for installation on
Mexican-manufactured cars built for the
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Mexican market and for direct export back to the U.S. Prior to the devaluation
of the Mexican Peso (see "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" section of the Annual Report which is
incorporated herein by reference) the Mexican market was growing rapidly and
major automotive manufacturers were increasing production and adding capacity.
Subsequent to the devaluation, this expansion activity in the domestic Mexican
automotive industry has slowed. However, management still views the long-term
prospects of this market positively and, moreover, has held discussions with
OEMs regarding new and expanded export activities from this facility.
While these non-domestic contracts are small in relation to domestic
original equipment contracts, they are nonetheless significant for the growth of
the Company by geographically diversifying and expanding its global presence.
The Company will continue to focus its efforts on these new global markets as
these become the fastest growing segments of its business.
In 1994, in response to the steadily growing popularity of chrome-plated
cast aluminum wheels and to provide capacity for several new customer orders,
the Company completed construction of a new chrome-plating wheel facility. The
Company is the only aluminum wheel manufacturer to provide this in-house
capability and the plant is the largest of its kind in the world. This facility
is now ramping-up production and in the qualifying phase. The plant represents
the Company's commitment toward diversifying into new product lines
complementary to its core business (See also "Manufacturing").
Aftermarket
The automotive aftermarket consists of products sold to vehicle owners as
replacements for, or additions to, OEM equipment to enhance the comfort, safety,
style, design and performance of vehicles such as passenger cars, pick-up
trucks, vans, recreational and off-road vehicles, light motor homes and boat
trailers. The Company designs and manufactures 62 different product lines
including 3,000 part numbers of custom steel, aluminum and chrome-plated steel
and aluminum road wheels and accessories, including steering wheel covers,
lighting products, suspension and other accessories for this market. The
Company's Sport Grip(R) steering wheel covers have been highly successful over
the years and have achieved national recognition. In 1994 the Company announced
it had received its largest single order for Sport Grip(R) valued at $1.4
million.
Since 1990, aftermarket net sales, excluding the impact of the August, 1993
divestiture of the Canadian aftermarket mirror and light business, which
marketed products under the trade name "Do-Ray", have experienced a compounded
8.6 percent growth rate. This increase has been achieved as a result of
continued growth in the roadwheel product lines, specifically, stylized aluminum
and chrome-plated aluminum wheels sold under the "Streetwear" trade name. The
success of the "Streetwear" line of wheels, which experienced sales gains
approaching 50 percent in 1994, reflects the Company's strategy with regard to
growing this product line. Generally, this approach entails the identification
of strategic geographic markets throughout the United States and the development
of key alliances with distributors who maintain extensive lines of distribution
within those markets. Simultaneously, new styles of aluminum and chrome-plated
aluminum wheels with mass market appeal were successfully developed and
introduced to the product line. Strong consumer response to new wheel styles has
spurred further development of new wheel programs. The Company expects continued
growth in this product line as new wheels are developed and introduced to our
existing distributor base.
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In 1993 and 1994 the general line of aftermarket accessories has
experienced modest sales increases as a result of a stronger economy and new
product introductions. In spite of improvement in overall shipping levels, the
aftermarket general accessories line continues to be negatively impacted by
ongoing retail market contraction and intensive market competition. The trend
of manufacturers to incorporate more accessories as original equipment when
vehicles are sold has also impacted this business. Through new product
introductions, cost cutting programs and effective asset management, the
Company has significantly improved profitability in this area of business.
The Company is a major aftermarket road wheel and accessory supplier to
companies with multiple retail outlets such as Autozone, Pep Boys, Canadian
Tire, Wal-Mart, Northern Automotive (Schuck's, Checker, Kragen), Western Auto,
Paccar Automotive Inc. (formerly General Automotive/Grand Auto), NAPA and WSR
Corp. (Whitlock, Strauss, Roses). The Company also supplies major tire
distributors such as Les Schwab, Interstate Tire Corp., Belle Tire, and other
wheel and performance distributors.
Manufacturing
The Company believes that its ability to efficiently process raw materials
into finished goods has enhanced its competitive position as a manufacturer of
OEM products. The Company's manufacturing capabilities also enable it to
manufacture and assemble many of the products it sells in the aftermarket.
The manufacture of cast aluminum wheels, in which aluminum ingot is
melted, cast, de-sprued, heat treated, painted or chrome-plated, machined,
clearcoated and packaged, is performed entirely at the Company's facilities.
The Company employs low-pressure casting, a process which the Company believes
is the most efficient process for high volume, high quality aluminum wheels.
The Company operates six OEM manufacturing facilities. The facilities,
located in Fayetteville and Rogers, Arkansas, Van Nuys, California, Pittsburg,
Kansas, Johnson City, Tennessee and Chihuahua, Chihuahua, Mexico are recognized
by the Company's customers as "world class" manufacturing plants utilizing
state-of-the-art processes and equipment. Five of the facilities have been
constructed and brought on-line over the past eight years beginning with
Fayetteville in 1986 (with subsequent expansion in 1993 and 1994), Rogers in
1988, Pittsburg in 1991, Johnson City in 1992 and Chihuahua in 1994. Chihuahua
began shipping wheels in the beginning of the third quarter of 1994.
To provide additional capacity to meet growing customer demand for cast
aluminum road wheels, the Company has undertaken several aggressive expansion
programs. First, the previously announced first phase expansion of the
Fayetteville OEM wheel facility was completed and began shipping wheels in the
fourth quarter of 1993 (bringing the capacity from 1.2 million wheels per year
to 2.7 million wheels per year). Simultaneously, the Company accelerated the
second phase of the Fayetteville expansion which will bring ultimate plant
capacity to over 3.5 million wheels per year making it the world's largest cast
aluminum wheel plant. The second phase of expansion is scheduled for completion
during 1995.
Matching the Company's long-term strategy of penetrating the Latin
American market, the Company completed construction of the first phase of its
OEM wheel facility in Chihuahua, Mexico. The second phase of construction is
currently underway and is scheduled for completion during 1995. The plant will
ultimately have the capacity to ship 1.2 million wheels per year.
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Entry into the European market, through the aforementioned joint-venture
with Otto Fuchs, will be facilitated through the construction of a two million
wheel per year aluminum wheel facility located in Hungary. Site selection for
this new facility is currently underway. The manufacturing process will take
advantage of a new forging technology developed by Otto Fuchs to forge lighter
weight aluminum wheels. This will be supplemented with Superior's own light
weight low pressure process. The joint-venture expects to begin shipping wheels
sometime in late 1996. The cost of the facility will be approximately $50
million and will be funded equally by both parties.
Combined with existing production capabilities, these new and expanded
facilities will bring Company-wide North American production capacity to over 12
million wheels annually.
In response to the aforementioned growing popularity of chrome-plated cast
aluminum wheels, and as a result of the Company's successful development of the
chrome-plating process, the Company in 1994 completed construction of a new
state-of-the-art chrome-plating facility primarily to service the OEM market.
The facility is located adjacent to the Company's Fayetteville, Arkansas wheel
plant and is slated to ultimately chrome-plate over 1.5 million wheels annually.
This facility is currently in a start-up mode and initial shipments are
scheduled to commence in the second quarter of 1995. With the completion of this
facility, the Company will become the only world-wide manufacturer of cast
aluminum wheels with the capability of state-of-the-art chrome-plating.
The Company maintains a high level of quality assurance in the manufacture
of its products and has built and maintained a reputation as a supplier of high
quality aluminum road wheels. This reputation is maintained by day-to-day
product, process and systems audits. In addition, Company-wide continuous
improvement programs are employed to ensure competitive leadership in all facets
of the Company's business. The Company's facilities and processes are subject to
continual technical and quality review by the OEM engineering, quality and
purchasing departments. To maintain its position as a "world class" OEM supplier
and ensure all products and underlying services meet and exceed customer
expectations the Company utilizes a Total Quality Management ("TQM") system.
Optimal process performance at the lowest cost is significantly enhanced by the
use of advanced statistical analysis, such as design of experiments and loss
function analysis. Quality Functional Deployment ("QFD") and Quality Operating
Systems ("QOS") are elements in place that provide management with a summary of
key measurables to monitor operations and to identify and promote continuous
improvement throughout the organization.
As a result of the Company's quality, management and employee efforts, the
Company was the first and one of only two wheel suppliers in the world to earn
General Motors' highest quality "Mark of Excellence" award for excellence in all
five categories (Quality, Cost, Delivery, Technology and Management). Ford has
awarded all of the Company's domestic OEM facilities producing Ford wheels with
the prestigious "Q1" quality rating.
Moreover, in 1994 the Company was named by General Motors as one of the
elite 171 suppliers selected from a total of 30,000 companies recognized as
Worldwide Suppliers of the Year 1993. The award reflects the Company's ability
to exceed specific performance standards established by GM relative to quality,
service and price.
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Marketing
The Company's domestic OEM sales activities are supported by a
Detroit-based representative firm and managed by an internal marketing and sales
organization. Sales activities in Europe are also supported by sales
representative organizations. Sales activities for Mexico are managed
internally. In addition, the Company's joint-venture with Topy maintains an
office in Japan which adds local support to the Company's Japanese customers.
The Company believes that it has maintained its long-standing relationships with
OEMs on the basis of quality production with timely deliveries in accordance
with OEM requirements, timely response to customer needs and competitive
pricing.
A large proportion of the Company's aftermarket sales are made through
eighteen independent manufacturers' representative organizations throughout
North America. These representative organizations solicit orders from catalog
houses, department and auto accessory stores and chain stores. These
manufacturers' representatives are also supported by the Company's internal
marketing and sales organization.
In 1994, the Company had approximately 500 aftermarket accounts operating
through thousands of retail outlets. The Company's ten largest customers in 1994
accounted for approximately 70 percent of aftermarket sales.
Net Sales Backlog
The Company receives OEM tooling purchase orders to produce multi-year
requirements for cast aluminum road wheels. These purchase orders are for
vehicle model programs that can last three to five years. The Company
manufactures and ships based on customer firm releases, normally provided on a
weekly basis, which can vary due to cyclical automobile production.
Customer orders for aftermarket products are normally shipped within ten
days of receipt. As of December 31, 1994 and 1993, the company had no
significant backlog of such orders.
Seasonal Variations
The automotive industry is cyclical and varies based on the timing of
consumer purchases of vehicles and general economic conditions. Production
schedules can vary significantly from quarter to quarter to meet customer
scheduling demands. During the past few years, there has been no significant
consistent seasonal variation.
Suppliers
The Company purchases substantial quantities of aluminum ingot for the
manufacture of its cast aluminum road wheels. These purchases accounted for
approximately 79 percent of the Company's total material requirements during
1994. The majority of the Company's requirements are met through purchase orders
with several major domestic aluminum producers. Generally, the orders are fixed
as to minimum and maximum quantities of aluminum which the producers must supply
during the term of the orders, which is typically one-to-two years. The Company
was able to successfully secure aluminum commitments from its primary suppliers
at the beginning of 1994 to meet its production requirements. For 1995, the
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Company has procured contracts to meet its estimated aluminum ingot requirements
for the full year and has contracted for a portion of its 1996 requirements as
well.
The aluminum market over the past several years has been extremely
volatile. During 1994, a memorandum of understanding was developed among
worldwide producers to curtail the production and the supply of aluminum which
resulted in increased aluminum prices throughout the year.
The Company obtains its requirements for other materials through numerous
suppliers with whom it has established trade relations. In instances where
outside suppliers produce components for the Company's products, the Company
normally owns the tools and dies located in the supplier's facilities, or has
the right to purchase such items.
Patents And Licensing Agreements
The Company currently holds patents for 20 of its inventions and has six
other patents pending. While the Company has a policy of applying for patents if
and when it develops new products or processes, it believes that its success is
dependent upon its manufacturing and engineering skills and the quality and
market acceptance of its products, rather than upon its ability to obtain and
defend patents.
The Company is currently licensed to use five patents owned by other
persons. Most of these licenses are for the duration of the patent and are
exclusive for the United States.
Research And Development
The Company's policy is to continuously review, improve and develop
engineering capabilities so that advance compliance with customer requirements
are met in the most efficient and cost effective manner available. The Company
strives 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. Further in pursuit of this objective and to
enhance customer relationships, the Company will expand its engineering presence
in Detroit by staffing an engineering center located near OEMs.
The Company utilizes computer-aided design, computer-aided engineering and
computer-aided manufacturing (CAD/CAE/CAM) in the design of a wheel, finite
element analysis to identify potential design problems prior to manufacturing
and three dimensional prototyping for styling evaluation. Additionally, in 1994
the Company added fluid flow and thermal analysis capabilities to aid in molds
and casting cycles at both its engineering centers in Van Nuys, California and
Fayetteville, Arkansas. By continuously improving its engineering capabilities,
the Company is able to reduce the time required to develop a wheel and identify
cost saving technologies which can be shared with customers.
As part of the Company's on-going continuous improvement programs,
manufacturing technologies and processes are continually challenged, refined,
and enhanced to ensure the Company maintains its position as the low cost and
highest quality manufacturer of cast aluminum wheels.
Development of the Company's patented helium leak testing device for
aluminum wheels has been an important breakthrough in the Company's ongoing
effort to provide the most efficient manufacturing
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processes and methods. These machines, which detect microscopic leaks at a rapid
rate, are currently utilized in several of the Company's facilities. The Company
is continuing to develop new and more advanced technologies in this field. In
this regard, the Company has recently released the newest and most advanced
model of the helium leak test machines to date, the HLT-4000. Through its
wholly-owned subsidiary, Superior Engineered Technologies, Inc., the Company has
begun to market this technology and has made shipments of helium leak test
machines to other companies since 1993.
Further evidencing the Company's commitment towards diversifying its
product lines and maintaining a leadership position in new technologies, the
Company entered into an agreement with Aluminum Company of America ("Alcoa") to
determine the economic and technical feasibility of developing a new line of
cast aluminum wheels for commercial trucks and buses in the class 3 through 8
range. Class 3 through 8 vehicles include small or medium size wholesale and
retail delivery trucks, airport-type courtesy vans, motor homes, buses and heavy
duty over-the-road tractor trailer rigs. Under the terms of the agreement, the
Company manages the project at its Van Nuys, California manufacturing facility
utilizing technical specifications developed by Alcoa. Successful completion of
this venture, which is currently in the testing state and has yielded very
positive results, may lead to a joint-venture under which the Company would
manufacture wheels marketed under the Alcoa name through Alcoa's existing Wheel
Division sales organization. The joint development project could serve as a
basis for the Company to expand its technology to develop other cast aluminum
parts.
The Company is a partner in a joint-venture under the name "Astechnology",
with Alumax, Inc. ("Alumax") to develop semi-solid metal technology. The venture
is continuing to evaluate the viability of this technology and its feasibility
for aluminum wheels and other applications. Whether or not this new technology
or the Alcoa development project prove to be commercially viable, the Company is
committed to maintaining its leadership position in technology, research and
development activities.
Through joint-ventures and development projects, technological advances,
new processes and expanded engineering capabilities, the Company is positioning
itself to become a full spectrum manufacturer of aluminum wheels as well as
other aluminum products.
The Company is currently engaged in 40 engineering programs for the
development of OEM wheels for future model years, including several wheel models
for Japanese, Latin American and European OEM manufacturers, including 11
engineering programs for the development of chrome-plated aluminum wheels.
Reference is made to Note 1 of "Notes to Consolidated Financial Statements"
in the Annual Report which is incorporated herein by reference for a summary of
research and development costs over the past three years.
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. The Company believes that it is in compliance with all federal standards
currently applicable to OEM suppliers and to automotive aftermarket
manufacturers and products.
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Environmental Controls
The Company's manufacturing facilities 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.
Although from time to time the Company has paid fines arising out of asserted
violations of these standards, no such fines have been material in nature. The
Company believes it is substantially in compliance with all standards presently
applicable. Compliance with environmental regulations has necessitated changes
in processes and equipment upgrades and may in certain instances require the
acquisition of "trading credits". The annual cost of environmental compliance is
approximately $500,000 and the Company anticipates spending no more than
$1,000,000 relating to domestic capital expenditures for environmental equipment
over the next two years. The Company will continue on an on-going basis to
modify its processes in order to maintain compliance with federal, state and
local laws. See Item 3. "Legal Proceedings" for information concerning the
Company's involvement with certain United States Environmental Protection Agency
activities.
Liability Insurance
The Company's liability insurance coverage (including product liability
insurance coverage) for events occurring on and after June 30, 1986 is at
substantially reduced amounts. The reduction in insurance coverage resulted from
a general decline in the availability of insurance at reasonable premium costs.
This development reflected the current state of insurance markets and impacted
most major U.S. corporations. The Company has never settled claims for amounts
in excess of the reduced level of coverage now in effect.
Competition
The business sectors in each of the Company's product areas are highly
competitive. The Company is the world's largest supplier of cast aluminum road
wheels for OEM installations and the Company believes it holds over 40 percent
of the domestic market for cast aluminum road wheels for automotive
installation. Since 1980 the demand for OEM cast aluminum road wheels has grown
from approximately four percent of vehicle installations to almost 40 percent.
The Company anticipated this eventuality and developed new state-of-the-art
"world class" manufacturing facilities located centrally to OEM production
plants. The Company believes that as a result it has become very competitive
both in terms of cost and quality. The Company's primary competitor in the North
American market is Hayes Wheels International, Inc.
In the aftermarket business intense market competition has been heightened
by ongoing market contraction of major retailers and the presence of more
products manufactured outside the United States. In order to retain valued
customers, the Company has had to provide greater sales allowances to its
customers and has been generally unable to pass along timely and matching
selling price increases. These factors in the past have contributed to
diminished margins in the aftermarket business. Through the aforementioned new
product introductions and restructuring in the Company's aftermarket business,
margins have been experiencing improvement since 1991.
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Employees
As of December 31, 1994, the Company had approximately 4,500 full-time
employees. At the present time approximately 100 employees at the Company's
Tijuana, Mexico maquiladora, which polishes wheels for aftermarket applications,
are covered by collective bargaining agreements.
In March 1995 the International Union, United Automotive, Aerospace &
Agricultural Implement Workers of American (the "UAW") filed a representation
petition with the National Labor Relations Board ("NLRB") seeking an election
among the production, maintenance and warehouse workers at the Company's Johnson
City, Tennessee production facility. The employees will be given the opportunity
to vote by secret ballot election for or against UAW representation. In 1994,
the employees of the Johnson City plant voted against representation by the same
union.
ITEM 2. PROPERTIES
The Company maintains and operates 11 facilities (including a closed
facility in Oskaloosa, Iowa) located in Arkansas, California, Iowa, Kansas,
Tennessee, Puerto Rico, and Baja and Chihuahua, Mexico. The facilities encompass
manufacturing, warehouse and office space in 17 buildings with approximately 2.2
million square feet. Six of the buildings are owned by the Company, with the
remainder operated under lease agreements expiring at various dates through
2063.
The Company's corporate offices, manufacturing and warehousing facilities
located in Van Nuys, California are subleased from Louis L. Borick, its
President and Chairman of the Board, and Juanita A. Borick. The Company also
leases additional plant and warehousing facilities in Van Nuys, California from
Keswick Properties, owned jointly by Steven J. Borick, a director of the
Company, and two other of Mr. Louis L. Borick's children and the Borick Building
Corporation, a company wholly-owned by Louis L. Borick and Juanita A. Borick.
The Company believes that the terms of the aforementioned leases are no less
favorable than those which it could obtain from an unaffiliated party on similar
property with comparable facilities in the vicinity.
In general, the facilities are in good operating condition, have been
designed and constructed for their specific use, and are adequate to meet the
productive capacity requirements of each plant. Because of increasing customer
demand, the Company has several plants undergoing expansion in order to help it
meet future customer orders. (See also "Manufacturing.")
Additionally, reference is made to Notes 3 and 10 of the "Consolidated
Financial Statements" and "Notes to Consolidated Financial Statements" section
of the Annual Report which are incorporated herein by reference.
Page 12
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS
The Company has been notified by the United States Environmental Protection
Agency (EPA), that the Company is considered a potentially responsible party
(PRP) for costs to clean up the Operating Industries, Inc. (OII) site because of
deposits, which were permitted and approved by appropriate regulatory agencies
when made, at the site located in Monterey Park, California. The total costs to
clean up the site cannot be determined but the EPA has informed all PRP's that
such costs may exceed $500 million. The PRP's are jointly and severally liable
although it is possible, but there is no guarantee, that the EPA will accept
contribution according to the severity of the deposits made. The Company's
insurance carriers have been placed on notice and their insurance policies are
currently under review to determine whether the Company's liability is covered
by insurance. To date, by private agreement with the other settling defendants,
the Company has paid $482,567 to settle its liability under the first three
phases of clean-up. Based on facts now known to the Company, including the low
level of participation claimed against the Company by the EPA and based on the
number and financial strength of Companies with greater participation in the
cleanup activities, management believes sufficient reserves have been
established to cover the Company's ultimate financial exposure.
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Page 13
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1994 to a vote of
security holders through the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information regarding executive officers of the Company
who are not directors. Information regarding executive officers who are
directors is contained in the Company's Proxy Statement issued in connection
with its Annual Meeting of Stockholders scheduled to be held on May 19, 1995
which is incorporated herein by reference (1995 Proxy Statement). All executive
officers are appointed annually by the Board of Directors and serve one-year
terms. Also see "Employment Agreements" in the Company's 1995 Proxy Statement.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Charles E. Barrantes 42 Corporate Controller and Secretary
Joseph T. D'Amico 65 Vice President, Materiel
Michael D. Dryden 57 Vice President, International
Business Development
Ronald F. Escue 49 Vice President, General Manager -
Aftermarket Wheel Division
James M. Ferguson 46 Vice President, OEM Marketing Group
Morris Herstein 67 Vice President, Services
John Knott 54 Vice President, Manufacturing
Henry C. Maldini 60 Vice President, Engineering
Delbert J. Schmitz 62 Vice President, Aftermarket Marketing
</TABLE>
Charles E. Barrantes
Mr. Barrantes, a certified public accountant, joined the Company in January
1991 as Corporate Controller and is the chief accounting officer. In May 1991,
he was appointed Corporate Secretary of the Company. Mr. Barrantes was an
independent financial consultant from June 1990 until January 1991 and Vice
President, Finance for MICA Resources Ltd. from January 1989 until May 1990.
From May 1977 until January 1989, Mr. Barrantes was employed by the
international accounting firm of Arthur Andersen & Co. where he was promoted to
audit manager in 1982.
Joseph T. D'Amico
Mr. D'Amico joined Superior in 1981 as Director of Materiel. In 1984, he
was promoted to Vice President, Materiel. He is responsible for domestic and
international purchasing, raw materials and finished goods inventories,
warehousing, receiving, distribution, traffic and material control.
Page 14
<PAGE> 15
Michael D. Dryden
Mr. Dryden joined Superior in March 1990 as Vice President, International
Business Development to assist Mr. Ferguson in the sales and marketing of
products to international original equipment manufacturers. For the prior five
years, he served as the Director of Business Development, Asia-Pacific for
Kelsey Hayes Company, Aluminum Wheel Group.
Ronald F. Escue
Mr. Escue became Vice President, Aftermarket Sales in January 1987 and he
was promoted to Vice President, General Manager - Aftermarket Wheel division in
January 1995. He is responsible for the Company's aftermarket wheel division
including, nationwide sales, marketing and manufacturing activities. He joined
Superior in September 1975.
James M. Ferguson
Mr. Ferguson joined Superior in 1977 as an OEM Sales Engineer and became an
officer in 1984 and was promoted in 1990 to Vice President, OEM Marketing Group.
He is responsible for assisting Mr. Raymond C. Brown, Senior Vice President, in
directing the sales and marketing of products for national and international
original equipment manufacturers.
Morris Herstein
Mr. Herstein, Vice President, Services, has held this position since 1957,
and is responsible for Superior's industrial relations and safety programs. His
brother-in-law, Louis L. Borick, is Superior's President and Chairman of the
Board of Directors.
John L. Knott
Mr. Knott joined Superior in 1995 as Vice President, Manufacturing. Before
coming to Superior, Mr. Knott was Vice President and General Manager of the
Norris Defense Unit of NI Industries.
Henry C. Maldini
Mr. Maldini was appointed Vice President, Engineering in June 1986.
Previously he was Assistant Vice President, Engineering for the Company. He
joined the Company in 1975.
Delbert J. Schmitz
Mr. Schmitz was appointed Vice President, Aftermarket Marketing in January
1987 and is responsible for the marketing and sales of the Company's entire line
of aftermarket accessories. Mr. Schmitz was employed as Vice President, Sales
from 1972 until January 1987.
Page 15
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S
SECURITIES AND RELATED
STOCKHOLDER MATTERS
Reference is made to the "Quarterly Common Stock Price Information,"
"Financial Highlights", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 15 to "Notes to Consolidated
Financial Statements" sections of the Annual Report which are incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the "Financial Highlights" section of the Annual
Report which is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Reference is made to the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of the Annual Report which is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Reference is made to the "Consolidated Financial Statements" and "Notes to
Consolidated Financial Statements" sections of the Annual Report which is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
(This space intentionally left blank)
Page 16
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
Reference is made to Item 4. "Executive Officers of the Registrant" and the
Company's 1995 Proxy Statement which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the Company's 1995 Proxy Statement which is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the Company's 1995 Proxy Statement which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Reference is made to the Company's 1995 Proxy Statement which is
incorporated herein by reference.
(This space intentionally left blank)
Page 17
<PAGE> 18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a)1. Financial Statements
The following financial statements of the Registrant, together with the
Report of Independent Public Accountants, are included in the Annual
Report, which is incorporated herein by reference, and filed herewith
as part of this report:
(1) Report of Independent Public Accountants
(2) Consolidated Statements of Income for each of the three years in
the period ended December 31, 1994
(3) Consolidated Balance Sheets as of December 31, 1994 and 1993
(4) Consolidated Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1994
(5) Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1994
(6) Notes to Consolidated Financial Statements
2. Supplemental Financial Statement Schedules
The following report and schedule appear on pages 22-23 of this report:
(1) Report of Independent Public Accountants on Supplemental Schedule
(2) Schedule II, Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted because the
required information is shown in the consolidated financial statements
or in the notes thereto, or the amounts involved are not significant or
the required matter is not applicable.
(This space intentionally left blank)
Page 18
<PAGE> 19
3. Exhibits
3.1 Articles of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
9.1 Voting Trust Agreement (Incorporated by reference to Exhibit 9.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1985.)
9.2 First Amendment to the Voting Trust Agreement (Incorporated by reference
to Exhibit 9.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989.)
9.3 Second Amendment to the Voting Trust Agreement (Incorporated by
reference to Exhibit 9.1 to Registrant's Quarterly Report on Form 10-Q
for the Quarter ended September 30, 1992.)
10.2 Lease dated March 2, 1976 between the Registrant and Louis L. Borick
filed on Form 8-K dated May, 1976 (Incorporated by reference to Exhibit
10.2 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1983.)
10.9 Incentive Stock Option Plan and Third Amendment of Non-Qualified Stock
Option Plan of the Registrant (Incorporated by reference to the
Registrant's 1984 Proxy Statement.)
10.11 Lease Agreement dated December 18, 1970 and amendments dated November
30, 1974 and April 20, 1981 between Borick Building Corporation and
Registrant (Incorporated by reference to Exhibit 10.11 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1983.)
10.15 Employment Agreement dated January 1, 1992 between Louis L. Borick and
the Registrant (Incorporated by reference to Exhibit 10.15 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.)
10.16 Employment Agreement dated January 1, 1987 between Raymond C. Brown and
the Registrant (Incorporated by reference to Exhibit 10.16 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1986.)
10.17 Employment Agreement dated January 1, 1987 between R. Jeffrey Ornstein
and the Registrant (Incorporated by reference to Exhibit 10.17 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1986.)
10.19 Lease and Addenda thereto dated December 19, 1987 between Steven J.
Borick, Linda S. Borick and Robert A. Borick as tenants in common,
d.b.a. Keswick Properties, and the Registrant (Incorporated by reference
to Exhibit 10.19 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1987.)
10.20 Supplemental Executive Retirement Plan of the Registrant (Incorporated
by reference to Exhibit 10.20 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1987.)
Page 19
<PAGE> 20
10.21 $15 million Note Agreement dated as of July 15, 1988 between Teachers
Insurance Annuity Association of America and the Registrant
(Incorporated by Reference to Exhibit 10.21 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.)
10.23 Employment Agreement dated January 1, 1989 between Iftikhar H. Kazmi and
the Registrant (Incorporated by Reference to Exhibit 10.23 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1988.)
10.24 1988 Stock Option Plan of the Registrant (Incorporated by Reference to
Exhibit 10.24 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1988.)
10.25 Amendment dated December 12, 1988 to Employment Agreements between the
Registrant and each of Raymond C. Brown and R. Jeffrey Ornstein
(Incorporated by reference to Exhibit 10.25 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.)
10.26 $25 million Note Agreement dated as of September 15, 1989 between Aetna
Life Insurance Company, Teachers Insurance Annuity Association of
America and the Registrant (Incorporated by Reference to Exhibit 10.25
to Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
10.27 Stock Option Agreement dated February 24, 1989 between the Registrant
and Louis L. Borick (Incorporated by reference to Exhibit 28.2 to
Registrant's Form S-8 dated November, 1989.)
10.29 Amendment dated June 1, 1990 to Employment Agreement between the
Registrant and Iftikhar A. Kazmi (Incorporated by Reference to Exhibit
10.29 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990.)
10.30 Amendment dated January 1, 1991 to Employment agreements between the
Registrant and each of Raymond C. Brown and R. Jeffrey Ornstein
(Incorporated by Reference to Exhibit 10.29 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990.)
10.31 Amendment dated January 23, 1992 to Employment Agreement between the
Registrant and Iftikhar A. Kazmi (Incorporated by reference to Exhibit
10.30 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10.32 Employment Agreement dated January 1, 1994 between Louis L. Borick and
the Registrant (Incorporated by reference to Exhibit 10.32 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)
10.33 1993 Stock Option Plan of the Registrant (Incorporated by reference to
Exhibit 28.1 to Registrant's Form S-8 filed June 10, 1993.)
10.34 Amendment to the 1988 Stock Option Plan of the Registrant (Incorporated
by reference to Exhibit 10.34 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991.)
Page 20
<PAGE> 21
10.35 1991 Non-Employee Director Stock Option Plan (Incorporated by reference
to Exhibit 28.1 to Registrant's Form S-8 dated June, 1992.)
10.36 Stock Option Agreement dated March 9, 1993 between Louis L. Borick and
the Registrant (Incorporated by Reference to Exhibit 28.2 to
Registrant's Form S-8 filed June 10, 1993.)
10.37 Amendment dated December 18, 1993 to Employment agreements between the
Registrant and each of Raymond C. Brown, R. Jeffrey Ornstein and
Iftikhar H. Kazmi (Incorporated by Reference to Exhibit 10.37 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)
10.38 Stock Option Agreement dated January 4, 1993 between Robert F. Sloane
and the Registrant (Incorporated by Reference to Exhibit 28.3 to
Registrant's Form S-8 filed June 10, 1993.)
10.39 Chief Executive Officer Annual Incentive Program dated May 9, 1994
between Louis L. Borick and the Registrant.
10.40 Letter dated February 15, 1995 between Iftikhar H. Kazmi and the
Registrant.
11.1 Computation of earnings per share (see Note 7 of "Notes to Consolidated
Financial Statements" in the Annual Report to Shareholders which is
incorporated herein by reference.)
13.1 1994 Annual Report to Shareholders
21.1 List of Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants for the
Registrant
27.1 1994 Financial Data Schedule
1995 Proxy Statement
(b) Reports of Form 8-K
No reports on Form 8-K have been filed during the fourth quarter of
1994.
(This space intentionally left blank)
Page 21
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE
To Superior Industries International, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Superior Industries International,
Inc.'s annual report to shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated February 13, 1995. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed in the index above is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
February 13, 1995
Page 22
<PAGE> 23
SUPERIOR INDUSTRIES INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<S> <C>
BALANCE AT DECEMBER 31, 1991 $ 838,000
ADD (DEDUCT):
PROVISION 21,000
RECOVERIES 44,000
ACCOUNTS WRITTEN OFF (71,000)
---------
BALANCE AT DECEMBER 31, 1992 832,000
ADD (DEDUCT):
PROVISION -
RECOVERIES 13,000
ACCOUNTS WRITTEN OFF (276,000)
---------
BALANCE AT DECEMBER 31, 1993 569,000
ADD (DEDUCT):
PROVISION -
RECOVERIES 1,000
ACCOUNTS WRITTEN OFF (29,000)
---------
BALANCE AT DECEMBER 31, 1994 $ 541,000
---------
</TABLE>
Page 23
<PAGE> 24
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.
March 24, 1995
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
By /s/ Louis L. Borick
----------------------------
LOUIS L. BORICK
President and Chief Executive Officer
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 capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
President, March 24, 1995
/s/ Louis L. Borick Chairman of the Board
----------------------------- and Director
Louis L. Borick (Principal Executive Officer)
/s/ R. Jeffrey Ornstein Vice President & CFO March 24, 1995
----------------------------- and Director
R. Jeffrey Ornstein (Principal Financial Officer)
/s/ Charles E. Barrantes Corporate Controller March 24, 1995
----------------------------- and Secretary
Charles E. Barrantes (Principal Accounting Officer)
/s/ Raymond C. Brown Senior Vice President March 24, 1995
----------------------------- and Director
Raymond C. Brown
/s/ Sheldon I. Ausman Director March 24, 1995
-----------------------------
Sheldon I. Ausman
/s/ Steven J. Borick Director March 24, 1995
-----------------------------
Steven J. Borick
/s/ Philip W. Colburn Director March 24, 1995
-----------------------------
Philip W. Colburn
/s/ V. Bond Evans Director March 24, 1995
-----------------------------
V. Bond Evans
/s/ Jack H. Parkinson Director March 24, 1995
-----------------------------
Jack H. Parkinson
</TABLE>
Page 24
<PAGE> 25
SUPERIOR INDUSTRIES
EXHIBIT INDEX
DESCRIPTIONS
3.1 Articles of Incorporation of the Registrant.
3.2 By-laws of the Registrant.
9.1 Voting Trust Agreement (Incorporated by reference to Exhibit 9.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 1985.)
9.2 First Amendment to the Voting Trust Agreement (Incorporated by
reference to Exhibit 9.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1989.)
9.3 Second Amendment to the Voting Trust Agreement (Incorporated by
reference to Exhibit 9.1 to Registrant's Quarterly Report on Form 10-Q
for the Quarter ended September 30, 1992.)
10.2 Lease dated March 2, 1976 between the Registrant and Louis L. Borick
filed on Form 8-K dated May, 1976 (Incorporated by reference to Exhibit
10.2 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1983.)
10.9 Incentive Stock Option Plan and Third Amendment of Non-Qualified Stock
Option Plan of the Registrant (Incorporated by reference to the
Registrant's 1984 Proxy Statement.)
10.11 Lease Agreement dated December 18, 1970 and amendments dated November
30, 1974 and April 20, 1981 between Borick Building Corporation and
Registrant (Incorporated by reference to Exhibit 10.11 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1983.)
<PAGE> 26
10.15 Employment Agreement dated January 1, 1992 between Louis L. Borick
and the Registrant (Incorporated by reference to Exhibit 10.15 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991.)
10.16 Employment Agreement dated January 1, 1987 between Raymond C. Brown
and the Registrant (Incorporated by reference to Exhibit 10.16 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1986.)
10.17 Employment Agreement dated January 1, 1987 between R. Jeffrey Ornstein
and the Registrant (Incorporated by reference to Exhibit 10.17 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1986.)
10.19 Lease and Addenda thereto dated December 19, 1987 between Steven J.
Borick, Linda S. Borick and Robert A. Borick as tenants in common,
d.b.a. Keswick Properties, and the Registrant (Incorporated by
reference to Exhibit 10.19 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1987.)
10.20 Supplemental Executive Retirement Plan of the Registrant (Incorporated
by reference to Exhibit 10.20 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1987.)
10.21 $15 million Note Agreement dated as of July 15, 1988 between Teachers
Insurance Annuity Association of America and the Registrant
(Incorporated by Reference to Exhibit 10.21 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.)
10.23 Employment Agreement dated January 1, 1989 between Iftikhar H. Kazmi
and the Registrant (Incorporated by Reference to Exhibit 10.23 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1988.)
10.24 1988 Stock Option Plan of the Registrant (Incorporated by Reference
to Exhibit 10.24 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988.)
10.25 Amendment dated December 12, 1988 to Employment Agreements between the
Registrant and each of Raymond C. Brown and R. Jeffrey Ornstein
(Incorporated by reference to Exhibit 10.25 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.)
10.26 $25 million Note Agreement dated as of September 15, 1989 between Aetna
Life Insurance Company, Teachers Insurance Annuity Association of
America and the Registrant (Incorporated by Reference to Exhibit 10.25
to Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1989.)
10.27 Stock Option Agreement dated February 24, 1989 between the Registrant
and Louis L. Borick (Incorporated by reference to Exhibit 28.2 to
Registrant's Form S-8 dated November, 1989.)
<PAGE> 27
10.29 Amendment dated June 1, 1990 to Employment Agreement between the
Registrant and Iftikhar A. Kazmi (Incorporated by Reference to Exhibit
10.29 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990.)
10.30 Amendment dated January 1, 1991 to Employment Agreements between the
Registrant and each of Raymond C. Brown and R. Jeffrey Ornstein
(Incorporated by reference to Exhibit 10.29 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990.)
10.31 Amendment dated January 23, 1992 to Employment Agreement between the
Registrant and Iftikhar A. Kazmi (Incorporated by reference to Exhibit
10.30 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
10.32 Employment Agreement dated January 1, 1994 between Louis L. Borick and
the Registrant (Incorporated by reference to Exhibit 10.32 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)
10.33 1993 Stock Option Plan of the Registrant (Incorporated by reference to
Exhibit 28.1 to Registrant's Form S-8 dated June 10, 1993.)
10.34 Amendment to the 1988 Stock Option Plan of Registrant (Incorporated by
reference to Exhibit 10.34 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991.)
10.35 1991 Non-Employee Director Stock Option Plan (Incorporated by
reference to Exhibit 28.1 to Registrant's Form S-8 dated June, 1992.)
10.36 Stock Option Agreement dated March 9, 1993 between Louis L. Borick and
the Registrant (Incorporated by Reference to Exhibit 28.2 to
Registrant's Form S-8 filed June 10, 1993.)
10.37 Amendment dated December 18, 1993 to Employment Agreements between the
Registrant and each of Raymond C. Brown, R. Jeffrey Ornstein and
Iftikhar H. Kazmi (Incorporated by Reference to Exhibit 10.37 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)
10.38 Stock Option Agreement dated January 4, 1993 between Robert F. Sloane
and the Registrant (Incorporated by Reference to Exhibit 28.3 to
Registrant's Form S-8 filed June 10, 1993.)
10.39 Chief Executive Officer Annual Incentive Program dated May 9, 1994
between Louis L. Borick and the Registrant.
10.40 Letter dated February 15, 1995 between Iftikhar H. Kazmi and the
Registrant.
11.1 Computation of earnings per share (see Note 7 of "Notes to Consolidated
Financial Statements" in the Annual Report of Shareholders which is
incorporated herein by reference.)
13.1 1994 Annual Report to Shareholders.
<PAGE> 28
21.1 List of Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants for the
Registrant
27.1 1994 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ONE: The name of this corporation is SUPERIOR INDUSTRIES
INTERNATIONAL, INC.
TWO: The purpose of this corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
THREE: This corporation is authorized to issue two classes of shares
designated, respectively, "Common Stock" and "Preferred Stock." The number of
shares of Common Stock authorized to be issued is one hundred million
(100,000,000) and the number of shares of Preferred Stock authorized to be
issued is one million (1,000,000).
The Preferred Stock may be divided into such number of series
as the Board of Directors may determine. The Board of Directors is authorized
to determine and alter the rights, preferences, privileges and restrictions
granted to and imposed upon the Preferred Stock or any series thereof with
respect to any wholly unissued class or series of Preferred Stock, and to fix
the number of shares of any series of Preferred Stock and the designation of
any such series of Preferred Stock. The Board of Directors, within the limits
and restrictions stated in any resolution of the Board of Directors originally
fixing the number of shares constituting any series, may increase or decrease
(but not below the number of shares of such series then outstanding) the number
of shares of any series subsequent to the issue of shares of that series.
FOUR: The liability of the directors of this corporation for
monetary damages shall be eliminated to the fullest extent permissible under
California law.
FIVE: This corporation is authorized to indemnify the directors and
officers of this corporation to the fullest extent permissible under California
law.
SIX: Any action required or permitted to be taken by the
shareholders of this corporation must be effected at a duly called annual or
special meeting of shareholders of this corporation and may not be effected
by any consent in writing by such shareholders.
<PAGE> 2
SEVEN: The bylaws shall set forth the number of directors
constituting the Board of Directors. The directors shall be divided into three
classes, as nearly equal in number as reasonably possible, with the term of
office of the first class to expire at the 1995 annual meeting of shareholders,
the term of office of the second class to expire at the 1996 annual meeting of
shareholders and the term of office of the third class to expire at the 1997
annual meeting of shareholders. At each annual meeting of shareholders
following such initial classification and election, directors elected to
succeed those directors whose terms expire shall be elected for a term of
office to expire at the third succeeding annual meeting of shareholders after
their election.
Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies in the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled only by a
majority vote of the directors then in office though less than a quorum, and
directors so chosen shall hold office for a term expiring at the annual meeting
of shareholders at which the term of office of the class to which they have
been elected expires. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
This provision shall become effective only when this
corporation becomes a "listed" corporation within the meaning of Section 301.5
of the General Corporation Law of California.
EIGHT: Upon this corporation becoming a "listed" corporation within
the meaning of Section 301.5 of the General Corporation Law of California,
shareholders shall not have cumulative voting rights in the election of
directors.
NINE: Bylaws of this corporation shall be adopted, amended or
repealed only by the Board of Directors or the affirmative vote of the holders
of at least eighty percent (80%) of the voting power of all of the then
outstanding shares of the capital stock of this corporation entitled to vote
generally in the election of directors, voting together as a single class.
TEN: This corporation reserves the right to amend or repeal any
provision contained in these Articles of Incorporation in the manner prescribed
by the laws of the State of California and all rights conferred upon
shareholders are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of these Articles of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, and in
addition to any vote
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of the holders of any class or series of the stock of this Corporation required
by law or by these Articles of Incorporation,
(1) the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all of the then outstanding shares
of the capital stock of this corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
amend or repeal this Article TEN, Article SIX, Article SEVEN, Article EIGHT,
Article NINE or Article ELEVEN; and
(2) in addition to the vote specified in paragraph (1) of
this Article TEN, the affirmative vote of the holders of at least a majority of
the voting power of all of the then outstanding shares of the capital stock of
this corporation entitled to vote generally in the election of directors, other
than such capital stock of which an Interested Shareholder (as defined in
Article ELEVEN) is the beneficial owner, voting together as a single class,
shall be required in order to amend or repeal Article ELEVEN or Article TWELVE.
ELEVEN: The shareholder vote required to approve Business Combinations
(as hereinafter defined) shall be as set forth in this Article.
A. (1) Except as otherwise expressly provided in Section B of
this Article:
(i) Any merger or consolidation of this
corporation or any Subsidiary (as hereinafter defined) with (a) any Interested
Shareholder (as hereinafter defined) or (b) any other corporation (whether or
not itself an Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate (as hereinafter defined) of an Interested
Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of transactions)
to or with any Interested Shareholder or any Affiliate of any Interested
Shareholder of any assets of this corporation or any Subsidiary having an
aggregate Fair Market Value (as hereinafter defined) of ten percent (10%) of
the total value of the assets of this corporation and its consolidated
subsidiaries as reflected in the most recent balance sheet of this corporation;
or
(iii) the issuance or transfer by this corporation or
any Subsidiary (in one transaction or a series of transactions) of any
securities of this corporation or any Subsidiary to any Interested Shareholder
or any Affiliate of any Interested Shareholder in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair Market
Value of $15,000,000 or more; or
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<PAGE> 4
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of this corporation proposed by or on behalf of any
Interested Shareholder or any Affiliate of any Interested Shareholder; or
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of this corporation, or any
merger or consolidation of this corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving any
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class of
equity or convertible securities of this corporation or any Subsidiary that is
directly or indirectly owned by any Interested Shareholder or any Affiliate of
any Interested Shareholder;
shall require (a) the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all of the then outstanding shares of the
capital stock of this corporation entitled to vote generally in the election of
directors (hereinafter in this Article referred to as the "Voting Stock"),
voting together as a single class (it being understood that, for purposes of
this Article, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article THREE of these Articles of Incorporation or
any designation of the rights, powers and preferences of any class or series of
preferred stock made pursuant to said Article THREE (a "Preferred Stock
Designation")) and (b) the affirmative vote of the holders of at least a
majority of the voting power of all of the then outstanding shares of Voting
Stock other than the Voting Stock of which an Interested Shareholder or an
Affiliate of any Interested Shareholder is the beneficial owner, voting
together as a single class. Such affirmative votes shall be required
notwithstanding any other provisions of these Articles of Incorporation or any
provision of law or of any agreement with any national securities exchange
which might otherwise permit a lesser vote or no vote, but such affirmative
votes shall be required in addition to any affirmative vote of the holders of
any particular class or series of the Voting Stock required by law, these
Articles of Incorporation or any Preferred Stock Designation.
(2) The term "Business Combination" as used in this
Article shall mean any transaction which is referred to in any one or more of
subparagraphs (i) through (v) of paragraph (1) of this Section A.
B. The provisions of Section A of this Article shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by law, any
other provision of these Articles of Incorporation, any Preferred Stock
Designation or any agreement with any national securities exchange, if, in
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the case of a Business Combination that does not involve any cash or other
consideration being received by the shareholders of this corporation, solely in
their respective capacities as shareholders of this corporation, the condition
specified in the following paragraph (1) is met, or, in the case of any other
Business Combination, the conditions specified in either of the following
paragraphs (1) and (2) are met:
(1) The Business Combination shall have been approved by
a majority of the Continuing Directors (as hereinafter defined), it being
understood that this condition shall not be capable of satisfaction unless
there is at least one Continuing Director.
(2) All of the following conditions shall have been met:
(i) The consideration to be received by holders
of shares of a particular class of outstanding Voting Stock shall be in cash or
in the same form as the Interested Shareholder has paid for shares of such
class of Voting Stock within the two-year period ending on and including the
date on which the Interested Shareholder became an Interested Shareholder (the
"Determination Date"). If, within such two-year period, the Interested
Shareholder has paid for shares of any class of Voting Stock with varying forms
of consideration, the form of consideration to be received per share by holders
of shares of such class of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class of Voting Stock acquired
by the Interested Shareholder within such two-year period.
(ii) The aggregate amount of (x) the cash and (y)
the Fair Market Value, as of the date (the "Consummation Date") of the
consummation of the Business Combination, of the consideration other than cash
to be received per share by holders of Common Stock in such Business
Combination, shall be at least equal to the higher of the following (it being
intended that the requirements of this paragraph (2)(ii) shall be required to
be met with respect to all shares of Common Stock outstanding regardless of
whether the Interested Shareholder has previously acquired any shares of Common
Stock):
(a) (if applicable) the highest per
share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder for any
shares of Common Stock acquired by it within the two-year period
immediately prior to the date of the first public announcement of the
proposal of the Business Combination (the "Announcement Date") or in
the transaction in which it became an Interested Shareholder,
whichever is higher, plus interest compounded annually from the
Determination Date
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<PAGE> 6
through the Consummation Date at the prime rate of interest of Bankers
Trust Company (or such other major bank as may be selected by the
Continuing Directors) from time to time in effect in the City of Los
Angeles, less the aggregate amount of any cash dividends paid, and the
Fair Market Value of any dividends paid in other than cash, on each
share of Common Stock from the Determination Date through the
Consummation Date in an amount up to but not exceeding the amount of
interest so payable per share of Common Stock; or
(b) the Fair Market Value per share of
Common Stock on the Announcement Date.
(iii) The aggregate amount of (x) the cash and (y)
the Fair Market Value, as of the Consummation Date, of the consideration other
than cash to be received per share by holders of shares of any class, other
than Common Stock, of outstanding Voting Stock shall be at least equal to the
highest of the following (it being intended that the requirements of this
paragraph (2)(iii) shall be required to be met with respect to every such class
of outstanding Voting Stock, regardless of whether the Interested Shareholder
has previously acquired any shares of a particular class of Voting Stock):
(a) (if applicable) the highest per
share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder for any
shares of such class of Voting Stock acquired by it within the
two-year period immediately prior to the Announcement Date or in the
transaction in which it became an Interested Shareholder, whichever is
higher, plus interest compounded annually from the Determination Date
through the Consummation Date at the prime rate of interest of Bankers
Trust Company (or such other major bank as may be selected by the
Continuing Directors) from time to time in effect in the City of Los
Angeles, less the aggregate amount of any cash dividends paid, and the
Fair Market Value of any dividends paid in other than cash, on each
share of such class of Voting Stock from the Determination Date
through the Consummation Date in an amount up to but not exceeding the
amount of interest so payable per share of such class of Voting Stock;
or
(b) the Fair Market Value per share of
such class of Voting Stock on the Announcement Date; or
(c) the highest preferential amount per
share to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of this corporation.
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(iv) After such Interested Shareholder has become
an Interested Shareholder and prior to the consummation of such Business
Combination: (a) except as approved by a majority of the Continuing Directors,
there shall have been no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not cumulative) on any
outstanding Preferred Stock; (b) there shall have been (I) no reduction in the
annual rate of dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as approved by a majority
of the Continuing Directors, and (II) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of the Common
Stock, unless the failure so to increase such annual rate is approved by a
majority of the Continuing Directors; and (c) such Interested Shareholder shall
not have become the beneficial owner of any additional shares of Voting Stock
except as part of the transaction which results in such Interested Shareholder
becoming an Interested Shareholder.
(v) After such Interested Shareholder has become
an Interested Shareholder, such Interested Shareholder shall not have received
the benefit, directly or indirectly (except proportionately, solely in such
Interested Shareholder's capacity as a shareholder of this corporation), of any
loans, advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by this corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing
the proposed Business Combination, complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, rules or regulations) and setting
forth, as an exhibit thereto, the opinion of an investment banking firm
selected by a majority of the Continuing Directors, or, if there are no
Continuing Directors, an opinion of the investment banking firm most recently
retained by this corporation before the Interested Shareholder became an
Interested Shareholder, or any successor in interest to such investment banker,
that the proposed Business Combination is fair from a financial point of view
to the shareholders of this corporation other than the Interested Shareholder,
shall be mailed to all shareholders of this corporation at least 30 days prior
to the consummation of such Business Combination (regardless of whether such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions).
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<PAGE> 8
C. For the purposes of this Article:
(1) A "person" shall mean any individual, firm,
corporation or other entity.
(2) "Interested Shareholder" shall mean any person (other
than this corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or
indirectly, of more than twenty percent (20%) of the voting power of the
outstanding Voting Stock; or
(ii) is an Affiliate of this corporation and at
any time within the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of twenty percent (20%) or
more of the voting power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded
to any shares of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an Interested
Shareholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
(3) A person shall be a "beneficial owner" of any Voting
Stock:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns, directly or indirectly;
or
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b) the right to vote
pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares of Voting Stock.
(4) For the purposes of determining whether a person is
an Interested Shareholder pursuant to paragraph (2) of this Section C, the
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of paragraph (3) of this Section C but shall
not include any other shares of Voting Stock which may be issuable
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<PAGE> 9
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(5) "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on April
24, 1987.
(6) "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or indirectly, by
this corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in paragraph (2) of this Section C, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by this corporation.
(7) "Continuing Director" means any member of the Board
of Directors of this corporation (the "Board") who is unaffiliated with the
Interested Shareholder and was a member of the Board prior to the time that the
Interested Shareholder became an Interested Shareholder, and any successor of a
Continuing Director who is unaffiliated with the Interested Shareholder and is
recommended to succeed a Continuing Director by a majority of Continuing
Directors then on the Board.
(8) "Fair Market Value" means: (i) in the case of stock,
the highest closing sale price during the 30-day period immediately preceding
the date in question of a share of such stock on the principal United States
securities exchange registered under the Securities Exchange Act of 1934 on
which such stock is listed, or, if such stock is not listed on any such
exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc., Automated Quotations System or any
system then in use, or if no such quotations are available, the fair market
value of such property on the date in question as determined by the Board in
good faith.
(9) In the event of any Business Combination in which
this corporation survives, the phrase "consideration other than cash to be
received" as used in paragraphs (2)(ii) and (2)(iii) of Section B of this
Article shall include the shares of Common Stock and/or the shares of any other
class of outstanding Voting Stock retained by the holders of such shares.
D. A majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized
directorships at the time any such determination as is hereinafter specified in
this Section D is
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to be made by the Board) shall have the power and duty to determine, on the
basis of information known to them after reasonable inquiry, all facts
necessary to determine compliance with this Article, including, without
limitation, (1) whether a person is an Interested Shareholder, (2) the number
of shares of Voting Stock beneficially owned by any person, (3) whether a
person is an Affiliate or Associate of another, (4) whether the applicable
conditions set forth in paragraph (2) of Section B have been met with respect
to any Business Combination, (5) whether the assets which are the subject of
any Business Combination referred to in paragraph (1) (ii) of Section A have an
aggregate Fair Market Value of 10% of the assets of this corporation and its
consolidated subsidiaries as reflected in the most recent balance sheet of this
corporation, and (6) whether the consideration to be received for the issuance
or transfer of securities by this corporation or any Subsidiary in any Business
Combination referred to in paragraph (1) (iii) of Section A has an aggregate
Fair Market Value of $15,000,000 or more.
E. Nothing contained in this Article shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by
law.
TWELVE: The directors of this corporation, when evaluating any offer
of another party (a) to make a tender or exchange offer for any Voting Stock of
this corporation (as defined in Article ELEVEN) or (b) to effect a Business
Combination (as defined in Article ELEVEN) shall, in connection with the
exercise of its judgment in determining what is in the best interests of this
corporation as a whole, be authorized to give due consideration to such factors
as they determine to be relevant, including, without limitation:
(i) the interests of this corporation's
shareholders;
(ii) whether the proposed transaction might
violate federal or state laws;
(iii) not only the consideration being offered in the
proposed transaction, in relation to the then current market price for the
outstanding capital stock of this corporation, but also the market price for
the capital stock of this corporation over a period of years, the estimated
price that might be achieved in a negotiated sale of this corporation as a
whole or in part or through orderly liquidation, the premiums over market price
for the securities of other corporations in similar transactions, current
political, economic and other factors bearing on securities prices and this
corporation's financial condition and future prospects; and
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(iv) the social, legal and economic effects upon
employees, suppliers, customers and others having similar relationships with
this corporation, and the communities in which this corporation conducts its
business.
In connection with any such evaluation, the directors are authorized to conduct
such investigations and to engage in such legal proceedings as they may
determine.
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EXHIBIT 3.2
RESTATED
BYLAWS
for the regulation, except as
otherwise provided by statute or
the Articles of Incorporation, of
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
a California corporation
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I. GENERAL PROVISIONS .......................................... 1
Section 1.01 Principal Executive Office .............................. 1
Section 1.02 Number of Directors ..................................... 1
ARTICLE II. SHARES AND SHAREHOLDERS .................................... 1
Section 2.01 Meetings of Shareholders ................................ 1
a. Place of Meetings. .................................. 1
b. Annual Meetings. .................................... 1
c. Special Meetings. ................................... 1
d. Notice of Meetings. ................................. 2
e. Adjourned Meeting and Notice Thereof. ............... 2
f. Waiver of Notice. ................................... 2
g. Quorum. ............................................. 3
Section 2.02 No Action Without Meeting. .............................. 3
Section 2.03 Voting of Shares. ....................................... 3
(a) In General. ......................................... 3
(b) Cumulative Voting. .................................. 3
(c) Election by Ballot. ................................. 3
Section 2.04 Proxies. ................................................ 3
Section 2.05 Inspectors of Election. ................................. 4
(a) Appointment. ........................................ 4
(b) Duties. ............................................. 4
Section 2.06 Record Date. ............................................ 4
Section 2.07 Share Certificates. ..................................... 5
(a) In General. ......................................... 5
</TABLE>
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<TABLE>
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(b) Two or More Classes or Series. ...................... 5
(c) Special Restrictions. ............................... 6
Section 2.08 Transfer of Certificates. ............................... 6
Section 2.09 Lost Certificates. ...................................... 7
Section 2.10 Nominations by Shareholders ............................. 7
ARTICLE III. DIRECTORS ................................................. 8
Section 3.01 Powers. ................................................. 8
Section 3.02 Committees of the Board. ................................ 8
Section 3.03 Election and Term of Office. ............................ 8
Section 3.04 Vacancies. .............................................. 9
Section 3.05 Removal. ................................................ 9
Section 3.06 Resignation. ............................................ 9
Section 3.07 Meetings of the Board of Directors and Committees. ...... 9
(a) Regular Meetings. ................................... 9
(b) Organization Meeting. ............................... 9
(c) Special Meetings. ................................... 10
(d) Notices; Waivers. ................................... 10
(e) Adjournment. ........................................ 10
(f) Place of Meeting. ................................... 10
(g) Presence by Conference Telephone Call. .............. 10
(h) Quorum. ............................................. 10
Section 3.08 Action Without Meeting. ................................. 11
Section 3.09 Committee Meetings....................................... 11
ARTICLE IV. OFFICERS.................................................... 11
Section 4.01 Officers................................................. 11
</TABLE>
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<TABLE>
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Section 4.02 Elections................................................... 11
Section 4.03 Other Officers.............................................. 11
Section 4.04 Removal..................................................... 11
Section 4.05 Resignation................................................. 11
Section 4.06 Vacancies................................................... 12
Section 4.07 Chairman of the Board....................................... 12
Section 4.08 President................................................... 12
Section 4.09 Vice President.............................................. 12
Section 4.10 Secretary................................................... 12
Section 4.11 Chief Financial Officer..................................... 13
Section 4.12 Treasurer................................................... 13
ARTICLE V. MISCELLANEOUS................................................... 13
Section 5.01 Records and Reports......................................... 13
(a) Books of Account and Proceedings..................... 13
(b) Annual Report........................................ 14
(c) Shareholders' Requests for Financial
Reports.............................................. 14
Section 5.02 Rights of Inspection........................................ 14
(a) By Shareholders...................................... 14
(1) Record of Shareholders...................... 14
(2) Corporate Records........................... 15
(3) Bylaws...................................... 15
(b) By Directors......................................... 15
Section 5.03 Checks, Drafts, Etc......................................... 15
Section 5.04 Representation of Shares of Other
Corporations.................................................. 16
Section 5.05 Indemnification and Insurance............................... 16
</TABLE>
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<TABLE>
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(a) Right to Indemnification............................. 16
(b) Right of Claimant to Bring Suit...................... 17
(c) Non-Exclusivity of Rights............................ 17
(d) Insurance............................................ 17
(e) Indemnification of Employees and
Agents of the Corporation............................ 18
Section 5.06 Employee Stock Purchase Plans............................... 18
Section 5.07 Construction and Definitions................................ 18
ARTICLE VI. AMENDMENTS..................................................... 19
Section 6.01 Power of Shareholders....................................... 19
Section 6.02 Power of Directors.......................................... 19
</TABLE>
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<PAGE> 6
RESTATED BYLAWS
for the regulation, except as otherwise provided
by statute or the Restated Articles of Incorporation,
of
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
a California corporation
ARTICLE I. GENERAL PROVISIONS
Section 1.01 Principal Executive Office. The principal executive office of
the corporation shall be located at 7800 Woodley Avenue, Van Nuys, California.
The Board of Directors shall have the power to change the principal office to
another location and may fix and locate one or more subsidiary offices within
or without the State of California.
Section 1.02 Number of Directors. The number of directors of the corporation
shall be not less than nine nor more than fifteen with the initial number being
nine. The number of directors may be changed within the above parameters by a
bylaw amending this Section 1.02 duly adopted by the vote or written consent of
a majority of the outstanding shares entitled to vote or by a resolution
adopted by a majority of the total number of authorized directors.
ARTICLE II. SHARES AND SHAREHOLDERS
Section 2.01 Meetings of Shareholders.
a. Place of Meetings. Meetings of shareholders shall be held at
any place within or without the State of California designated by the Board of
Directors. In the absence of any such designation, shareholders' meetings
shall be held at the principal executive office of the corporation.
b. Annual Meetings. An annual meeting of the shareholders of the
corporation shall be held on the second Tuesday of May of each year at 10:30
a.m. or at such other date and time as may be designated by the Board of
Directors. Should said day fall upon a legal holiday, the annual meeting of
shareholders shall be held at the same time on the next day thereafter ensuing
which is a full business day. At each annual meeting directors shall be
elected, and any other proper business may be transacted.
c. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors, the chairman of the board, the president, or
by the holders of shares entitled to cast not less than ten percent of the
votes at the meeting. Upon request in writing to the chairman of the
<PAGE> 7
board, the president, any vice president or the secretary by any person (other
than the board) entitled to call a special meeting of shareholders, the officer
forthwith shall cause notice to be given to the shareholders entitled to vote
that a meeting will be held at a time requested by the person or persons
calling the meeting, not less than 35 nor more than 60 days after the receipt
of the request. If the notice is not given within 20 days after receipt of the
request, the persons entitled to call the meeting may give the notice.
d. Notice of Meetings. Notice of any shareholders' meeting shall
be given in accordance with Sections 601(a) and 601(b) of the General
Corporation Law of the State of California.
If action is proposed to be taken at any meeting of
shareholders, which action is within Sections 310, 902, 1201, 1900 or 2007 of
the General Corporation Law of the State of California, the notice shall also
state the general nature of that proposal.
e. Adjourned Meeting and Notice Thereof. Any meeting of
shareholders may be adjourned from time to time by the vote of a majority of
the shares represented either in person or by proxy whether or not a quorum is
present. When a shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. However, if the adjournment is for
more than 45 days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
f. Waiver of Notice. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
need not specify either the business to be transacted or the purpose of any
annual or special meeting of shareholders, except that if action is taken or
proposed to be taken for approval of any of those matters specified in the
second paragraph of subparagraph (d) of Section 2.01 of this Article II, the
waiver of notice or consent shall state the general nature of the proposal.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
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g. Quorum. The presence in person or by proxy of the persons
entitled to vote a majority of the shares entitled to vote at any meeting shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of the majority of the shares represented and voting at
the meeting (which shares voting affirmatively also constitute at least a
majority of the required quorum) shall be the act of the shareholders, unless
the vote of a greater number or voting by classes is required by law or the
Articles of Incorporation of the corporation.
The shareholders present at a duly called or held meeting at
which a quorum is present may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, provided that any action taken (other than adjournment) must be
approved by at least a majority of the shares required to constitute a quorum.
Section 2.02 No Action Without Meeting. Any action required or permitted to
be taken by the shareholders of this corporation must be effected at a duly
called annual or special meeting of shareholders of this corporation and may
not be effected by any consent in writing by such shareholders.
Section 2.03 Voting of Shares.
(a) In General. Except as otherwise provided in the Articles of
Incorporation, each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote of shareholders.
(b) Cumulative Voting. Shareholders shall not be entitled to
cumulate their votes (i.e., cast for any one or more candidates a number of
votes greater than the number of votes which such shareholder normally is
entitled to cast) in the election of directors.
(c) Election by Ballot. Elections for directors need not be by
ballot unless a shareholder demands election by ballot at the meeting and
before the voting begins.
Section 2.04 Proxies. Every person entitled to vote shares may authorize
another person or persons to act by proxy with respect to such shares. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy continues in full force
and effect until revoked by the person executing it prior to the vote pursuant
thereto, except as otherwise herein provided. Such revocation may be effected
by a writing delivered to the corporation stating that the proxy is revoked or
by a subsequent proxy executed by the person executing the prior proxy and
presented to the meeting, or as to any meeting by attendance at such meeting
and voting in person by the person
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executing the proxy. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed. A proxy is not revoked by the death or
incapacity of the maker unless, before the vote is counted, written notice of
such death or incapacity is received by the corporation. The revocability of a
proxy that states on its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the California General Corporation
Law.
Section 2.05 Inspectors of Election.
(a) Appointment. In advance of any meeting of shareholders the
Board may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or if any
persons so appointed fail to appear or refuse to act, the chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election (or persons to
replace those who so fail or refuse) at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one
or more shareholders or proxies, the majority of shares represented in person
or by proxy shall determine whether one or three inspectors are to be
appointed.
(b) Duties. The inspectors of election shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum and the authenticity, validity and
effect of proxies, receive votes, ballots or consents, hear and determine all
challenges and questions in any way arising in connection with the right to
vote, count and tabulate all votes or consents, determine when the polls shall
close, determine the result and do such acts as may be proper to conduct the
election or vote with fairness to all shareholders. The inspectors of election
shall perform their duties impartially, in good faith, to the best of their
ability and as expeditiously as is practical. If there are three inspectors of
election, the decision, act or certificate of a majority is effective in all
respects as the decision, act or certificate of all. Any report or certificate
made by the inspectors of election is prima facie evidence of the facts stated
therein.
Section 2.06 Record Date. In order that the corporation may determine the
shareholders entitled to notice of any meeting or to vote or entitled to
receive payment of any dividend or other distribution or allotment of any
rights or entitled to exercise any rights in respect of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than 60 nor less than 10 days prior to the date of such meeting nor more than
60 days prior to any other action. If no record date is fixed:
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(1) The record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(2) The record date for determining shareholders for any
other purpose shall be at the close of business on the day on which the board
adopts the resolution relating thereto, or the 60th day prior to the date of
such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless
the board fixes a new record date for the adjourned meeting, but the board
shall fix a new record date if the meeting is adjourned for more than 45 days
from the date set for the original meeting.
Shareholders at the close of business on the record date are entitled
to notice and to vote or to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date,
except as otherwise provided in the Articles of Incorporation or by agreement
or in the California General Corporation Law.
Section 2.07 Share Certificates.
(a) In General. The corporation shall issue a certificate or
certificates representing shares of its capital stock. Each certificate so
issued shall be signed in the name of the corporation by the chairman or vice
chairman of the board or the president or a vice president and by the chief
financial officer or an assistant treasurer or the secretary or any assistant
secretary, shall state the name of the record owner thereof and shall certify
the number of shares and the class or series of shares represented thereby.
Any or all of the signatures on the certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if such person were an officer,
transfer agent or registrar at the date of issue.
(b) Two or More Classes or Series. If the shares of the
corporation are classified or if any class of shares has two or more series,
there shall appear on the certificate one of the following:
(1) A statement of the rights, preferences, privileges,
and restrictions granted to or imposed upon the respec-
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tive classes or series of shares authorized to be issued and upon the holders
thereof; or
(2) A summary of such rights, preferences, privileges and
restrictions with reference to the provisions of the Articles of Incorporation
and any certificates of determination establishing the same; or
(3) A statement setting forth the office or agency of the
corporation from which shareholders may obtain upon request and without charge,
a copy of the statement referred to in subparagraph (1).
(c) Special Restrictions. There shall also appear on the
certificate (unless stated or summarized under subparagraph (1) or (2) of
subparagraph (b) above) the statements required by all of the following clauses
to the extent applicable:
(1) The fact that the shares are subject to restrictions
upon transfer.
(2) If the shares are assessable, a statement that they
are assessable.
(3) If the shares are not fully paid, a statement of the
total consideration to be paid therefor and the amount paid thereon.
(4) The fact that the shares are subject to a voting
agreement or an irrevocable proxy or restrictions upon voting rights
contractually imposed by the corporation.
(5) The fact that the shares are redeemable.
(6) The fact that the shares are convertible and the
period for conversion.
Section 2.08 Transfer of Certificates. Where a certificate for shares is
presented to the corporation or its transfer clerk or transfer agent with a
request to register a transfer of shares, the corporation shall register the
transfer, cancel the certificate presented, and issue a new certificate if:
(a) the security is endorsed by the appropriate person or persons; (b)
reasonable assurance is given that those endorsements are genuine and
effective; (c) the corporation has no notice of adverse claims or has
discharged any duty to inquire into such adverse claims; (d) any applicable law
relating to the collection of taxes has been complied with; (e) the transfer is
not in violation of any federal or state securities law; and (f) the transfer
is in compliance with any applicable agreement governing the transfer of the
shares.
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Section 2.09 Lost Certificates. Where a certificate has been lost, destroyed
or wrongfully taken, the corporation shall issue a new certificate in place of
the original if the owner: (a) so requests before the corporation has notice
that the certificate has been acquired by a bona fide purchaser; (b) files with
the corporation a sufficient indemnity bond, if so requested by the Board of
Directors; and (c) satisfies any other reasonable requirements as may be
imposed by the Board. Except as above provided, no new certificate for shares
shall be issued in lieu of an old certificate unless the corporation is ordered
to do so by a court in the judgment in an action brought under Section 419(b)
of the California General Corporation Law.
Section 2.10 Nominations by Shareholders. Any shareholder entitled to vote in
the election of directors generally may nominate one or more persons for
election as director at a meeting only if written notice of such shareholder's
intent to make such nomination or nominations has been given, either by
personal delivery or by United States mail, postage prepaid, to the secretary
of the corporation not later than (i) with respect to an election to be held at
an annual meeting of shareholders, 120 days in advance of such meeting, and
(ii) with respect to an election to be held at a special meeting of
shareholders for the election of directors, the close of business on the
seventh day following the date on which notice of such meeting is first given
to shareholders. Each such notice shall set forth: (a) the name and address
of the shareholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the shareholder is a holder
of record of stock of the corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice; (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (d) such other information
regarding each nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or intended
to be nominated, by the board of directors; and (e) the consent of each nominee
to serve as a director of the corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedures, which nomination shall be void.
Nothing in this section shall be deemed to limit any voting rights arising upon
the occurrence of any dividend arrearages or otherwise provided to holders of
any series of preferred stock then outstanding.
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ARTICLE III. DIRECTORS
Section 3.01 Powers. Subject to the provisions of the California General
Corporation Law and the Articles of Incorporation, the business and affairs of
the corporation shall be managed and all corporate powers shall be exercised by
or under the direction of the Board of Directors. The Board may delegate the
management of the day-to-day operations of the business of the corporation to a
management company or other person provided that the business and affairs of
the corporation shall be managed and all corporate powers shall be exercised
under the ultimate direction of the Board.
Section 3.02 Committees of the Board. The Board may, by resolution adopted by
a majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the pleasure
of the Board. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
such committee, to the extent provided in the resolution of the Board, shall
have all the authority of the Board, except with respect to:
(1) The approval of any action which also requires, under
the California General Corporation Law, shareholders' approval or approval of
the outstanding shares;
(2) The filling of vacancies on the Board or in any
committee;
(3) The fixing of compensation of the directors for
serving on the Board or on any committee;
(4) The amendment or repeal of bylaws or the adoption of
new bylaws;
(5) The amendment or repeal of any resolution of the
Board which by its express terms is not so amendable or repealable;
(6) A distribution (within the meaning of the California
General Corporation Law) to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range set forth in the Articles
of Incorporation or determined by the Board; and
(7) The appointment of other committees of the Board or
the members thereof.
Section 3.03 Election and Term of Office. The directors shall be elected at
each annual meeting of shareholders but,
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if any such annual meeting is not held or the directors are not elected
thereat, the directors may be elected at any special meeting of shareholders
held for that purpose. Each director, including a director elected to fill a
vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
Section 3.04 Vacancies. Except for a vacancy created by the removal of a
director, vacancies on the Board may be filled by approval of the Board or, if
the number of directors then in office is less than a quorum, by (a) the
unanimous written consent of the directors then in office, (b) the affirmative
vote of a majority of the directors then in office at a meeting held pursuant
to notice or waivers of notice under the California General Corporation Law, or
(c) a sole remaining director. The shareholders may elect a director or
directors at any time to fill any vacancy or vacancies not filled by the
directors.
The Board of Directors shall have the power to declare vacant the
office of a director who has been declared of unsound mind by an order of
court, or convicted of a felony.
Section 3.05 Removal. Any or all of the directors may be removed without
cause if such removal is approved by the vote of a majority of the outstanding
shares entitled to vote, except that no director may be removed if the votes
cast against removal of the director would be sufficient to elect such director
if voted cumulatively (without regard to whether shares may otherwise be voted
cumulatively) at an election at which the same total number of votes were cast,
and either the number of directors elected at the most recent annual meeting of
shareholders, or if greater, the number of directors for whom removal in being
sought, were then being elected.
Section 3.06 Resignation. Any director may resign effective upon giving
written notice to the chairman of the board, the president, the secretary or
the Board of Directors of the corporation, unless the notice specifies a later
time for the effectiveness of such resignation. If the resignation is
effective at a future time, a successor may be elected to take office when the
resignation becomes effective.
Section 3.07 Meetings of the Board of Directors and Committees.
(a) Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place within or without the State
as may be designated from time to time by resolution of the Board or by written
consent of all members of the Board or in these bylaws.
(b) Organization Meeting. Immediately following each annual
meeting of shareholders the Board of Directors shall
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hold a regular meeting for the purpose of organization, election of officers,
and the transaction of other business. Notice of such meetings is hereby
dispensed with.
(c) Special Meetings. Special meetings of the Board of Directors
for any purpose or purposes may be called at any time by the chairman of the
board or the president or, by any vice president or the secretary or any two
directors.
(d) Notices; Waivers. Special meetings shall be held upon four
days' notice by mail or 48 hours' notice delivered personally or by telephone
or telegraph. Notice of a meeting need not be given to any director who signs
a waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
(e) Adjournment. A majority of the directors present, whether or
not a quorum is present, may adjourn any meeting to another time and place. If
the meeting is adjourned for more than 24 hours, notice of such adjournment to
another time and place shall be given prior to the time of the adjourned
meeting to the directors who were not present at the time of adjournment.
(f) Place of Meeting. Meetings of the Board may be held at any
place within or without the state which has been designated in the notice of
the meeting or, if not stated in the notice or there is no notice, then such
meeting shall be held at the principal executive office of the corporation, or
such other place designated by resolution of the Board.
(g) Presence by Conference Telephone Call. Members of the Board
may participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Such participation constitutes presence in person at
such meeting.
(h) Quorum. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present is the act of the Board of Directors,
unless a greater number be required by law, by the Articles of Incorporation or
by these bylaws. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for such
meeting.
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Section 3.08 Action Without Meeting. Any action required or permitted to be
taken by the Board of Directors, may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to such
action. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board. Such action by written consent shall have the
same force and effect as a unanimous vote of such directors.
Section 3.09 Committee Meetings. The provisions of Sections 3.07 and 3.08 of
these bylaws apply also to committees of the Board and action by such
committees, mutatis mutandis.
ARTICLE IV. OFFICERS
Section 4.01 Officers. The officers of the corporation shall consist of a
chairman of the board or a president, or both, a secretary, a chief financial
officer, and such additional officers as may be elected or appointed in
accordance with Section 4.03 of these bylaws and as may be necessary to enable
the corporation to sign instruments and share certificates. Any number of
offices may be held by the same person.
Section 4.02 Elections. All officers of the corporation, except such officers
as may be otherwise appointed in accordance with Section 4.03, shall be chosen
by the Board of Directors, and shall serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
Section 4.03 Other Officers. The Board of Directors, the chairman of the
board, or the president at their or his discretion, may appoint one or more
vice presidents, one or more assistant secretaries, a treasurer, one or more
assistant treasurers, or such other officers as the business of the corporation
may require, each of whom shall hold office for such period, have such
authority and perform such duties as the Board of Directors, the chairman of
the board, or the president, as the case may be, may from time to time
determine.
Section 4.04 Removal. Any officer may be removed, either with or without
cause, by the Board of Directors, or, except in case of an officer chosen by
the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors, subject to the rights, if any, of an
officer under any contract of employment, and without prejudice to the rights,
if any, of the corporation under any contract to which the officer is a party.
Section 4.05 Resignation. Any officer may resign at any time by giving
written notice to the Board of Directors or to the president, or to the
secretary of the corporation without prejudice to the rights, if any, of the
corporation under any
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contract to which the officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.06 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these bylaws for regular appointments to such office.
Section 4.07 Chairman of the Board. The chairman of the board, if there shall
be such an officer, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors. If there is no
president, the chairman of the board shall in addition be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 4.08 below.
Section 4.08 President. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the chairman of the board, if there be such
an officer, the president shall be general manager and chief executive officer
of the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and affairs of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence of the chairman of the board, or if there be none, at all meetings
of the Board of Directors. He shall be ex-officio a member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these bylaws.
Section 4.09 Vice President. In the absence of the president or in the event
of the president's inability or refusal to act, the vice president, or in the
event there be more than one vice president, the vice president designated by
the Board of Directors, or if no such designation is made, in order of their
election, shall perform the duties of president and when so acting, shall have
all the powers of and be subject to all the restrictions upon the president.
Any vice president shall perform such other duties as from time to time may be
assigned to such vice president by the president or the Board of Directors.
Section 4.10 Secretary. The secretary shall keep or cause to be kept the
minutes of proceedings and record of shareholders, as provided for and in
accordance with Section 5.01(a) of these bylaws.
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The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required by these bylaws or
by law to be given, and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors.
Section 4.11 Chief Financial Officer. The chief financial officer shall have
general supervision, direction and control of the financial affairs of the
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these bylaws. In the absence of a named treasurer,
the chief financial officer shall also have the powers and duties of the
treasurer as hereinafter set forth and shall be authorized and empowered to
sign as treasurer in any case where such officer's signature is required.
Section 4.12 Treasurer. The treasurer shall keep or cause to be kept the
books and records of account as provided for and in accordance with Section
5.01(a) of these bylaws. The books of account shall at all reasonable times be
open to inspection by any director.
The treasurer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositaries as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as treasurer and of the financial condition of the corporation,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or these bylaws. In the absence of a
named chief financial officer, the treasurer shall be deemed to be the chief
financial officer and shall have the powers and duties of such office as
hereinabove set forth.
Section 3.10 Loans to Officer. This corporation may make any loan of money or
property to, or guarantee the obligation of, any officer of this corporation
upon the approval of the Board of Directors alone if the Board determines that
such a loan or guaranty may reasonably be expected to benefit this corporation,
provided that such approval is by a vote sufficient without counting the vote
of any interested director or directors.
ARTICLE V. MISCELLANEOUS
Section 5.01 Records and Reports.
(a) Books of Account and Proceedings. The corporation shall keep
adequate and correct books and records of account and shall keep minutes of the
proceedings of its shareholders, Board and committees of the board and shall
keep at its principal executive office, or at the office of its transfer agent
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or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of shares held by each. Such minutes
shall be kept in written form. Such other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
(b) Annual Report. An annual report shall be sent to the
shareholders of the corporation not later than 120 days after the close of the
fiscal year and at least 15 (or, if sent by third-class mail, 35) days prior to
the annual meeting of shareholders to be held during the next fiscal year.
Such report shall contain a balance sheet as of the end of that fiscal year and
an income statement and statement of changes in financial position for such
fiscal year, accompanied by a report of independent accountants thereon, or if
there is no such report, the certificate of an authorized officer of the
corporation that such statements were prepared without audit from the books and
records of the corporation. Such report shall also include such further
statements required by law applicable to the corporation from time to time.
(c) Shareholders' Requests for Financial Reports. If no annual
report for the last fiscal year has been sent to shareholders, the corporation
shall, upon the written request of any shareholder made more than 120 days
after the close of that fiscal year, deliver or mail to the person making the
request within 30 days thereafter the financial statements for that year
required by Section 1501(a) of the California General Corporation Law. Any
shareholder or shareholders holding at least five percent of the outstanding
shares of any class of this corporation may make a written request to the
corporation for an income statement of the corporation for the three-month,
six-month or nine-month period of the current fiscal year ended more than 30
days prior to the date of the request and a balance sheet of the corporation as
of the end of such period, and the corporation shall deliver or mail the
statements to the person making the request within 30 days thereafter. A copy
of the statements shall be kept on file in the principal office of the
corporation for 12 months and they shall be exhibited at all reasonable times
to any shareholder demanding an examination of them or a copy shall be mailed
to such shareholder upon demand.
Section 5.02 Rights of Inspection.
(a) By Shareholders.
(1) Record of Shareholders. Any shareholder or
shareholders holding at least five percent in the aggregate of the outstanding
voting shares of the corporation or who hold at least one percent of such
voting shares and have filed a Schedule 14B with the United States Securities
and Exchange Commission relating to the election of directors of the
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corporation shall have an absolute right to do either or both of the following:
(i) inspect and copy the record of shareholders' names and addresses and
shareholdings during usual business hours upon five business days' prior
written demand upon the corporation, or (ii) obtain from the transfer agent for
the corporation, upon written demand and upon the tender of its usual charges
for such a list (the amount of which charges shall be stated to the shareholder
by the transfer agent upon request), a list of the shareholders' names and
addresses, who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which it has been compiled
or as of a date specified by the shareholder subsequent to the date of demand.
The list shall be made available on or before the later of five business days
after demand is received or the date specified therein as the date as of which
the list is to be compiled.
The record of shareholders shall also be open to
inspection and copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written demand on the
corporation, for a purpose reasonably related to such holder's interests as a
shareholder or holder of a voting trust certificate.
(2) Corporate Records. The accounting books and records
and minutes of proceedings of the shareholders and the Board and committees of
the board shall be open to inspection upon the written demand on the
corporation of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours, for a purpose reasonably related
to such holder's interests as a shareholder or as the holder of such voting
trust certificate. This right of inspection shall also extend to the records
of any subsidiary of the corporation.
(3) Bylaws. The corporation shall keep at its principal
executive office in this state, the original or a copy of its bylaws as amended
to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
(b) By Directors. Every director shall have the absolute right at
any reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the corporation of which
such person is a director and also of its subsidiary corporations, domestic or
foreign. Such inspection by a director may be made in person or by agent or
attorney and the right of inspection includes the right to copy and make
extracts.
Section 5.03 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corpora-
-15-
<PAGE> 21
tion, shall be signed or endorsed by such person or persons and in such manner
as, from time to time, shall be determined by resolution of the Board of
Directors.
Section 5.04 Representation of Shares of Other Corporations. The chairman of
the board, if any, president or any vice president of this corporation, or any
other person authorized to do so by the chairman of the board, president or any
vice president, is authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represent on behalf of this corporation any
and all shares held by this corporation in any other corporation or
corporations may be exercised either by such officers in person or by any other
person authorized so to do by proxy or power of attorney duly executed by said
officers.
Section 5.05 Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made a
party to or is threatened to be made a party to or is involuntarily involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "Proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the corporation or is or was serving (during such
person's tenure as director or officer) at the request of the corporation, any
other corporation, partnership, joint venture, trust or other enterprise in any
capacity, whether the basis of a Proceeding is an alleged action in an official
capacity as a director or officer or in any other capacity while serving as a
director or officer, shall be indemnified and held harmless by the corporation
to the fullest extent authorized by California General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation to
provide broader indemnification rights than said law permitted the corporation
to provide prior to such amendment), against all expenses, liability and loss
(including attorneys' fees, judgments, fines, or penalties and amounts to be
paid in settlement) reasonably incurred or suffered by such person in
connection therewith. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be paid by the
corporation the expenses incurred in defending a Proceeding in advance of its
final disposition; provided, however, that, if California General Corporation
Law requires, the payment of such expenses in advance of the final disposition
of a Proceeding shall be made only upon receipt by the corporation of an
undertaking by or on behalf of such director or officer to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this Section or other-
-16-
<PAGE> 22
wise. No amendment to or repeal of this Section 5.05 shall apply to or have
any effect on any right to indemnification provided hereunder with respect to
any acts or omissions occurring prior to such amendment or repeal.
(b) Right of Claimant to Bring Suit. If a claim for indemnity
under paragraph (a) of this Section is not paid in full by the corporation
within 90 days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expense of prosecuting such
claim including reasonable attorneys' fees incurred in connection therewith.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending a Proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the corporation) that the claimant has not met the standards
of conduct which make it permissible under California General Corporation Law
for the corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel, or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in California General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel,
or its shareholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The rights conferred in this
Section shall not be exclusive of any other rights which any director, officer,
employee or agent may have or hereafter acquire under any statute, provision of
the Articles of Incorporation, bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, to the extent the additional rights to
indemnification are authorized in the Articles of Incorporation of the
corporation.
(d) Insurance. In furtherance and not in limitation of the powers
conferred by statute:
(1) the corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or
not the corporation would have the
-17-
<PAGE> 23
power to indemnify the person against that expense, liability or loss under the
California General Corporation Law.
(2) the corporation may create a trust fund, grant a
security interest and/or use other means (including, without limitation,
letters of credit, surety bonds and/or other similar arrangements), as well as
enter into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to any
or all of the foregoing to ensure the payment of such amounts as may become
necessary to effect indemnification as provided therein, or elsewhere.
(e) Indemnification of Employees and Agents of the Corporation.
The corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the corporation the expenses incurred in defending a Proceeding in advance of
its final disposition, to any employee or agent of the corporation to the
fullest extent of the provisions of this Section or otherwise with respect to
the indemnification and advancement of expenses of directors and officers of
the corporation.
Section 5.06 Employee Stock Purchase Plans. The corporation may adopt and
carry out a stock purchase plan or agreement or stock option plan or agreement
providing for the issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to one or more
of the employees or directors of the corporation or of a subsidiary or to a
trustee on their behalf and for the payment for such shares in installments or
at one time, and may provide for aiding any such persons in paying for such
shares by compensation for services rendered, promissory notes or otherwise.
A stock purchase plan or agreement or stock option plan or agreement
may include, among other features, the fixing of eligibility for participation
therein, the class and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for, the method of
payment therefor, the reservation of title until full payment therefor, the
effect of the termination of employment, an option or obligation on the part of
the corporation to repurchase the shares upon termination of employment,
subject to the provisions of the California General Corporation Law,
restrictions upon transfer of the shares and the time limits of and termination
of the plan.
Section 5.07 Construction and Definitions. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the California General Corporation Law shall govern the
construction of these bylaws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
-18-
<PAGE> 24
number includes the plural and the plural number includes the singular, and the
term "person" includes a corporation as well as a natural person.
ARTICLE VI. AMENDMENTS
Section 6.01 Power of Shareholders. New bylaws may be adopted or these bylaws
may be amended or repealed by the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all of the then outstanding shares
of the capital stock of this corporation entitled to vote generally in the
election of directors, voting together as a single class.
Section 6.02 Power of Directors. Subject to the right of shareholders as
provided in Section 6.01 to adopt, amend or repeal bylaws, any bylaw may be
adopted, amended or repealed by the Board of Directors.
-19-
<PAGE> 1
EXHIBIT 10.39
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CHIEF EXECUTIVE OFFICER
ANNUAL INCENTIVE PROGRAM
MAY 9, 1994
1. PURPOSE
This Chief Executive Officer Annual Incentive Program is intended to
provide additional incentive to the Chief Executive Officer to improve the
Company's performance, to link the Chief Executive Officer's annual
compensation to the performance of the Company and to reward the Chief
Executive Officer for his contributions to such performance.
2. DEFINITIONS
The following terms shall, for purposes of this Plan, have the meanings
set forth below:
(a) "Annual Income" means the Company's pre-tax income for a Program
Year, adjusted to exclude extraordinary and nonrecurring items and
any expense related to incentive awards under this Program or any
other executive incentive arrangements.
(b) "CEO" means an individual who serves as the Company's Chief Executive
Officer during all or a portion of a Program Year.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Company" means Superior Industries International, Inc.
-1-
<PAGE> 2
(e) "Compensation Committee" means the Compensation Committee of the
Company's Board of Directors, or such other committee that is
appointed by the Board of Directors to administer the Program and
that consists solely of at least two "outside directors" within the
meaning of Section 162(m).
(f) "Planned Annual Income" means the amount of planned Annual Income
specified by the Committee for a Program Year pursuant to Section
3(b).
(g) "Program" means this Superior Industries International, Inc. Chief
Executive Officer Annual Incentive Program.
(h) "Program Year" means the 12 months ending November 30.
(i) "Section 162(m)" means Section 162(m) of the Code and any regulations
promulgated pursuant thereto.
3. ADMINISTRATION
(a) The Committee shall have full power, authority and discretion to
interpret and administer the Program, consistent with the provisions
of Section 162(m). Decisions of the Committee shall be final,
conclusive and binding on the Company and all persons claiming under
the Program.
(b) Prior to the beginning of each Program Year, or during such other
period as may be permissible pursuant to Section 162(m) for the
establishment of performance goals, the Committee shall specify, in
writing, a planned level of Annual Income for the Program Year;
provided, however, that for the Program Year ending November 30,
1994, such Planned Annual Income amount may be specified at any time
prior to April 1, 1994.
-2-
<PAGE> 3
(c) As soon as practicable following the completion of each Program
Year, the Committee shall:
(i) Certify the amount of the Company's Annual Income for the
Program Year;
(ii) Determine the amount payable pursuant to the formula in
Section 4;
(iii) Determine the extent to which the amount payable under the
Program should be subject to reduction, if at all, based on
the exercise of the Committee's discretionary judgment; and
(iv) Specify the time or times at which such amount shall be
payable, consistent with Section 6.
4. PROGRAM FORMULA
The maximum amount payable under the Program for a Program Year shall
equal a percent of the Company's Annual Income for the year. The percent
payable shall depend upon the percent of Planned Annual Income actually
achieved for the year, and shall be determined according to the following
formula:
<TABLE>
<CAPTION>
PERCENT OF PLANNED PERCENT OF
ANNUAL INCOME ACHIEVED ANNUAL INCOME PAYABLE
---------------------- ---------------------
<S> <C>
70% or below 1.0%
80% 1.4%
90% 1.8%
Over 90% 2.0%
</TABLE>
For percentages of Planned Annual Income between 70% and 90%, the percent
of Annual Income payable under the Program shall be determined by
interpolation.
-3-
<PAGE> 4
5. PARTIAL YEAR SERVICE
(a) Except as otherwise determined by the Committee, no amount shall be
payable pursuant to this Program for a Program Year to an individual
who is not the CEO of the Company as of the last day of the Program
Year.
(b) In the event an individual is the Company's CEO for less than a full
Program Year, the Committee shall have discretion to determine the
extent to which, if at all, such individual shall receive payment
pursuant to the Program for the Program Year; provided, however,
that in no event shall the aggregate amounts payable to one or more
CEOs pursuant to this Program for a Program Year exceed the amount
determined pursuant to the formula set forth in Section 4.
6. PAYMENT
Amounts payable under the Program shall be paid in cash within 60 days
after the appropriate certification by the Compensation Committee pursuant
to Section 3(c), except to the extent that the Committee has established
procedures for deferral of payment pursuant to voluntary elections by the
CEO. The Company shall have the right to deduct from any payment under
the Program any taxes it determines are required to be withheld with
respect to such payment.
7. GENERAL
(a) No award under this Plan shall be considered as compensation in
calculating any benefit for which the recipient is eligible unless
such benefit is granted under a plan which expressly provides that
incentive compensation shall be considered as compensation under
such plan.
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<PAGE> 5
(b) In the event of a CEO's death, any amount payable to the CEO
pursuant to this Program but not yet paid, shall be paid to his
legal representatives or, where the Committee has authorized the
designation of beneficiaries, to such beneficiaries as may have been
designated.
(c) No CEO, no person claiming through a CEO, nor any other person shall
have any right or interest in the Program or its continuance, or in
the payment of any award under the Program, unless and until all the
provisions of the Program have been fully complied with. No rights
under the Program, contingent or otherwise, shall be transferable,
assignable or subject to any pledge or encumbrance of any nature.
The Program shall be unfunded and any amounts payable under the
Program shall be paid from the general assets of the Company.
(d) Nothing contained herein shall be construed as a contract of
employment between the Company and any CEO or other employee, or as
giving a right to any person to continue in the employment of the
Company, or as limiting the right of the Company to discharge any
person at any time, with or without cause.
(e) This Program shall be governed by and construed in accordance with
the laws of the State of California.
8. SHAREHOLDER APPROVAL; AMENDMENT AND TERMINATION
(a) No amounts shall be payable under this Program unless the Program is
approved by a vote of the shareholders of the Company.
(b) This Program may be amended, suspended, or terminated by the
Compensation Committee at any time, without shareholder approval,
except to the extent required by Section 162(m).
-5-
<PAGE> 1
EXHIBIT 10.40
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
[SUPERIOR LOGO] 7800 WOODLEY AVENUE - VAN NUYS, CA 91406-1788
(818)781-4973 - TELEX:65-1454 - FAX:(818)780-5631
February 15, 1995
VIA FEDERAL EXPRESS
Mr. Iftikhar H. Kazmi
2602 Rosewood
Fayetteville, AR 72703
Dear Iftikhar:
I am pleased to inform you that the Board has authorized me to revise my
previous offer to you of 12/14/94 on the following terms:
(1) In lieu of the bonus offered to you in my 12/14/94 letter, I
would agree to an additional year of salary at the annual
amount of $100,000 to be paid weekly for the period January
13, 1996 to January 12, 1997. This extends your employment
term with the Company which affords you certain additional
benefits discussed below. This is in addition to the monies
due you under your employment contract.
(2) We will continue your health benefits until January 12, 1997.
Effective immediately: (i) we will give you the 1992
Cadillac for your use and transfer title to your name and you
will be responsible for all expenses, including insurance, gas
and repairs, (ii) you will retain possession of the Company
fax machine and personally bear all associated expenses, and
(iii) the country club membership will be transferred to an
individual designated by the Company. No further expenses
will be reimbursed by the Company.
(3) As a result of your employment termination date now being
extended until January 12, 1997, you will be entitled to the
benefits described in your January 1, 1987 Salary Continuation
Agreement and any additional stock options which become
exercisable.
(4) This agreement will be subject to (a) your not engaging in a
business competing with Superior within the meaning of Section
8 of your Employment Agreement; and (b) your not engaging in
other activities which, in its sole but reasonable judgment,
the Board deems to be detrimental to the best interests of
Superior for as long as any payments are due to you, including
payments under the Salary Continuation Agreement.
<PAGE> 2
Mr. Iftikhar H. Kazmi
February 15, 1995
Page 2
If you have any questions concerning the content of this letter, please call
either Jeff or me. If you are in agreement, please sign the counterpart of
this letter and return it in the enclosed self-addressed envelope.
Sincerely,
/s/ Louis L Borick
Louis L. Borick
President
LLB/srs
cc: Jeff Ornstein
Agreed this 17th of February, 1995
/s/ Iftikhar Kasmi 2/17/95
-----------------------------
(Iftikhar Kazmi)
<PAGE> 1
EXHIBIT 13.1
Superior
INDUSTRIES INTERNATIONAL, INC.
1994 ANNUAL REPORT
<PAGE> 2
Superior Industries International, Inc. is the world's largest manufacturer of
cast aluminum wheels and a leading manufacturer of automotive accessory
products for the aftermarket with approximately 4,500 employees and eight
manufacturing plants throughout the United States, Puerto Rico and in Mexico.
[CAPTION]
[POISED FOR CONTINUED GROWTH]
Recognized for its advanced technology; quality, competitively priced
products; and management depth and foresight; the Company's growth record,
financial performance, and outlook are outstanding.
Established in 1957, Superior built upon its expertise in the automotive
aftermarket and entered into the original equipment manufacturer (OEM) market in
the early 1970s with its first aluminum wheel order from Ford. Today, the
Company is the world's largest manufacturer of automotive aluminum wheels with a
market share of over 40 percent in North America, recording sales of over $455
million in 1994. Superior enjoys strong relationships with Ford and General
Motors as their largest and highest-rated supplier.
Superior's extraordinary achievements in the domestic OEM market
provided the foundation for a dynamic growth strategy that has enabled the
Company to successfully expand its core business internationally.
[SUPERIOR LOGO]
In 1990, the Company first entered into the Japanese market and rapidly
expanded its business with Japanese OEMs, supplying wheels to Toyota, Mazda,
Nissan, and Isuzu. The Company initiated its expansion into Latin America in
1993 with the construction of a new state-of-the-art plant in Mexico, selling
the plant's first phase to OEMs in Mexico for domestic supply and export, and
renewing opportunities with Chrysler through its business with Chrysler de
Mexico. Most recently, Superior penetrated the European marketplace with new
contracts from Jaguar Cars Ltd. and BMW, and has announced plans for a new joint
venture to build aluminum wheels in Europe. The Company looks forward to
expanding its opportunities as it continues to strengthen its relationships with
customers and develop new technology for future growth markets.
Throughout its history, Superior has met each new challenge with
propitious timing, expertise and financial integrity. The Company has grown
from its modest beginnings to an internationally recognized corporation
positioned to continue to capitalize on new opportunities created by today's
domestic and tomorrow's global markets.
<PAGE> 3
FINANCIAL
HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands except share data)
Years Ended December 31, 1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Net Sales $456,638 $393,033 $325,314 $273,490 $267,641
Gross Profit 111,368 91,464 61,942 45,306 44,597
Net Income 56,315 45,177 28,596 18,220 12,319(A)
-----------------------------------------------------------------------------------------------
BALANCE SHEET
Current Assets $160,771 $141,219 $134,158 $146,603 $121,492
Current Liabilities 106,923 75,991 63,296 91,870 70,233
Working Capital 53,848 65,228 70,862 54,733 51,259
Total Assets 357,683 310,123 267,198 271,001 234,440
Long-Term Debt, Net 23,075 34,004 44,073 53,320 63,191
Shareholders' Equity 200,182 176,869 136,747 103,992 85,960
-----------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Current Ratio 1.5:1 1.9:1 2.1:1 1.6:1 1.7:1
Long-Term Debt/Total Capitalization 10.3% 16.1% 24.4% 33.9% 42.4%
Return on Average Shareholders' Equity 29.9% 28.8% 23.8% 19.2% 15.1%
-----------------------------------------------------------------------------------------------
SHARE DATA
Earnings $ 1.85 $ 1.47 $ .94 $ .63 $ .43
Shareholders' Equity at Year-End 6.76 5.88 4.56 3.59 3.01
Dividends .17 .11 .10 .09 .08
-----------------------------------------------------------------------------------------------
</TABLE>
(A) Includes $3,197 unusual charge, net of tax ($.11 per share), for
realignment of production facilities and discontinuation of certain aftermarket
product lines.
Three graphs depicting the increasing trend of Net Sales, Net Income
and Shareholders' Equity for the years 1988-1994, inclusive.
<TABLE>
<CAPTION>
(In millions) 1988 1989 1990 1991 1992 1993 1994
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $200.2 $246.1 $267.6 $273.5 $325.3 $393.0 $456.6
Net Income $ 13.1 $ 16.2 $ 15.5 $ 18.2 $ 28.6 $ 45.2 $ 56.3
Shareholders' Equity $ 64.4 $ 77.0 $ 86.0 $104.0 $136.7 $176.9 $200.2
</TABLE>
1
<PAGE> 4
TO OUR SHAREHOLDERS
We believe that Superior, more than at any time in its successful history, is
poised for continued growth. We have carefully diversified and expanded into
new geographical markets which is important in enhancing the intrinsic value,
integrity, and outlook of Superior.
Superior has a solid foundation with its long-term relationships with customers,
manufacturing expertise and financial stability when expanding into new markets.
Building upon this foundation, we have been successful at seeking and
cultivating opportunities in new products and international markets.
[Photograph/Caption
Louis L. Borick,
President and Chairman
of the Board]
DOMESTIC AND INTERNATIONAL OPPORTUNITIES
Over the past several years, we have begun to seek new opportunities for the
growth of our Company. We have increased our core OEM business by building
several new cast aluminum wheel facilities, including our latest
state-of-the-art facility in Chihuahua, Mexico and by expanding our
Fayetteville, Arkansas plant. We have entered new markets with the construction
of our new state-of-the-art chrome-plating facility in Fayetteville; the
construction of a future plant in Europe where, in a joint venture with Otto
Fuchs Metallwerke, a well-known German manufacturer, we will employ our low
pressure casting techniques along with a new lightweight forging process; and
the joint development project for manufacturing cast aluminum wheels for heavier
trucks with Aluminum Company of America (ALCOA).
We carefully cultivated these opportunities and believe they will yield
financial results of continued earnings performance and gains for the Company in
years to come.
2
<PAGE> 5
We are very pleased to report the completion of the initial phase of
construction and first shipment of aluminum wheels from our new Chihuahua,
Mexico plant last year. The second phase, increasing the plant's capacity to
over one million wheels annually, has begun six months ahead of schedule and
will be completed in 1995. The Mexico plant has received orders from General
Motors and Ford as well as Chrysler de Mexico, the beginning of a renewed
relationship with Chrysler.
The first phase of our Fayetteville plant expansion was completed in 1994,
more than doubling our manufacturing capacity there to 2.7 million wheels
annually. Capacity will be increased to 3.7 million wheels annually and add $150
million to our sales with the completion of the second phase of expansion this
year.
We also completed our first phase of construction on our fully automated
chrome-plating facility last year and began limited shipping of chrome-plated
wheels. This is a new product line and growth opportunity that could add over
$100 million in additional annual sales over the next three years.
Our efforts abroad have resulted in a multi-year contract by Jaguar Cars,
Ltd. for painted and chrome-plated aluminum wheels and a contract from BMW
(Bayerische Motoren Werke) to supply wheels for its two-seat roadster beginning
with the 1996 model year. These contracts represent our initial relationships
with European car makers.
The European market for aluminum wheels is an outstanding growth
opportunity for our Company. We believe it makes sense to build a factory in a
country like Hungary which has low labor costs along with a European partner to
give us a head start on our sales relationships. To that end, we will form a
joint venture with Otto Fuchs Metallwerke, a well-known German manufacturer with
sales of over $1.2 billion, building a factory to manufacture aluminum wheels
for the European automotive market. Otto Fuchs' lightweight forging process
coupled with our technological expertise will provide significant sales
opportunities for the venture which will supply the lightest weight wheels
available.
[Photograph/Caption
Left to Right:
Raymond C. Brown
Senior Vice President
Louis L. Borick
President
R. Jeffrey Ornstein
Vice President & CFO
James M. Ferguson
Vice President, OEM Marketing Group]
By applying the same techniques to manufacturing cast aluminum wheels for
heavier trucks through the joint development project with ALCOA, we have
developed a new market and created the opportunity for a joint venture which
could result in another $100 million of business each year by the time the
operation matures.
3
<PAGE> 6
While production levels remained high in 1994 as domestic vehicle sales
continued to increase over 1993 levels, our geographic expansion and product
diversification will strengthen our ability to weather the cyclical nature of
the automotive market and economic conditions in the U.S. and abroad.
FINANCIAL GROWTH
In 1994, we showed significant increases in both our sales and net income.
Net sales climbed 16.2 percent over 1993 to over $456 million while net income
rose 24.7 percent to a record $56.3 million or $1.85 per share.
Last year, we increased our quarterly cash dividend to a rate of $.045 per
share, representing a 50 percent increase in the Company's cash dividend and the
eleventh consecutive year of cash dividend increases for Superior stockholders.
[Photograph/Caption
Superior's chrome-
plated wheels for the 1995
Jaguar sedan]
Our record financial results not only reflect a robust automotive market,
but our ability to gain a greater share of the expanding cast aluminum wheel
market.
Due to numerous programs with Japanese OEMs, our business in Japan has
increased and will continue to expand. In 1994, we started production on several
new programs awarded by Japanese OEMs the previous year, representing a 350%
increase in unit sales over 1993.
Our aftermarket division continues to grow with increasing demand for our
new chrome-plated and aluminum custom road wheels. We were particularly pleased
to announce the largest single order for our aftermarket Sport Grip(R) steering
wheel cover last year, valued at $1.4 million. Introduced over 27 years ago
with over 100 million units shipped to date, the order demonstrates the
continuing popularity of this product line.
OUTLOOK
We enter 1995 with outstanding financial strength and outlook. Most of the
capital expenditures for our expansion projects are behind us now. Our core
business will continue to expand along with growth in the North American
automotive industry. We have also seen a substantial increase in demand for
chrome wheels and are ramping up production at our new chrome-plating facility.
Japan's economy is strengthening and sales growth in its automotive market
will only increase. As a very strong competitor in Japan, we anticipate the
Japanese market will become the fastest growing part of our business, accounting
for ten percent of our business
4
<PAGE> 7
in three to five years. As a low cost U.S. manufacturer, particularly given the
recent weakness of the U.S. dollar, we continue to obtain business for worldwide
markets.
Our operations in Mexico will be at full capacity as exports to South
America and the U.S. increase. We've penetrated into the dynamic European
automotive market and plans to expand our manufacturing operations in Europe are
under way.
[Photograph/Captions
Top:
Superior's aluminum
wheels complement the
styling of the luxurious
Lincoln Mark VIII
Bottom:
Extensive usage of
Superior wheels on
General Motors
light trucks]
Our management is dedicated to the success of the Company's geographical
and diversified growth strategy that has made Superior not only the world's
largest manufacturer of cast aluminum wheels, but also a company that delivers
consistent year-to-year earnings performance and gains. Our management team has
done an excellent job at operating our existing business, developing new
technology, controlling expenditures, improving manufacturing efficiencies and
increasing plant utilization. Last year we reorganized the Midwest Group to
better serve our customers and are pleased to announce John Knott as our new
Vice President of Manufacturing. The depth of field and strength of our
management in responding to customer needs truly distinguishes Superior as a
leader in today's competitive marketplace.
It is with great sadness I report the passing of two of our directors,
Frank L. Bryant and James J. McMorrow, two very dear friends who served on our
Board for many years. V. Bond Evans, former President of Alumax, a
multi-billion dollar aluminum company, joined our Board late in the year. I am
pleased to have someone of Bond's talents to assist in building our Company into
the future.
We thank you for sharing in our optimism, continued interest and support
and look forward to serving our customers, shareholders and particularly our
employees in the future.
/s/ Louis L. Borick
-------------------
Louis L. Borick
President and Chairman of the Board
5
<PAGE> 8
Superior's sales of OEM aluminum wheels have remained on a steady rise since its
first order from Ford Motor Company back in 1974, and last year was no
exception. 1994 brought continued growth in cast aluminum wheel sales and
domestic market share. But more importantly, it marked the company's
penetration into the European marketplace, once again establishing Superior as
the market leader in cast aluminum wheels.
ORIGINAL EQUIPMENT MARKET
DOMESTIC MARKET SHARE GAINS
Overall, Superior's OEM sales grew over 15 percent from 1993 due to the cyclical
rebound in North American automotive production, increased installation of cast
aluminum wheels, and the company's ability to gain market share. Superior,
which already supplies approximately 50 percent of Ford Motor Company's and 40
percent of General Motors' aluminum wheel requirements, continues to strengthen
its long-term customer relationships.
AWARDED FORD'S "FULL SERVICE" SUPPLIER
A significant indication of Ford's relationship with Superior was when the
company was awarded the "full service" supplier status last year. This enhanced
position with Ford represents an integral relationship involving Superior's
engineering, design capabilities and program management skills. Superior's
program managers have now taken on additional responsibilities that include
interfacing with other system-related component suppliers and managing the
program from concept to completion. Superior was the first chassis component
supplier and the only wheel manufacturer to attain this position, a relationship
that will only further business with Ford.
Last year, Superior was awarded new tooling orders and started shipping
wheels for Ford's Escort and Mercury Tracer models. Ford also awarded Superior
with its first low-pressure cast aluminum one-piece mini-spare program for both
the Ford Escort and Mercury Tracer.
INCREASED BUSINESS WITH GM
Superior saw continuing increases in its business with General Motors in 1994.
Superior was awarded additional tooling orders and began shipping wheels for
General Motors' full size pick-up trucks and sport utility vehicles marketed by
both Chevrolet and GMC truck divisions. These additional tooling orders
demonstrate General Motors' confidence in Superior for quality and on-time
delivery. Superior has maintained an excellent record and will continue to
strengthen its relationship with General Motors.
CHROME-PLATED FACILITY COMPLETED
A substantial rise in demand for chrome wheels was evident last year with
increasing orders by OEM customers. Superior completed construction on its new
OEM aluminum wheel chrome-plating facility in Fayetteville, designed to
ultimately plate 35,000 wheels per week, and is gearing up its operations for
1995 to serve this growing market.
DEVELOPMENT OF NEW PRODUCTS
Superior is also exploring other new product areas. With the collaboration of
ALCOA, Superior continued its work on developing a line of cast aluminum wheels
for commercial trucks and buses. When completed, the development project may
lead to a joint venture that could ultimately produce annual revenues of $100
million.
(Continued on page 8)
6
<PAGE> 9
AUTOMOTIVE OEM INDUSTRY
The original equipment auto industry is highly competitive, technologically
driven, and particularly vulnerable to economic conditions. Despite the
cyclical nature of the automotive industry, Superior's consistent growth record,
financial performance, and position as the market leader underscore the
company's intrinsic value and growth potential.
DOMESTIC AUTOMOTIVE PRODUCTION
Two factors to consider are the North American automotive production and
installation of cast aluminum wheels which accounts for over 90% of Superior's
business. The domestic market is growing due to the cyclical rebound in North
American automotive production. Sales of new cars and trucks totaled over 15
million units last year, up about 9% from 1993. Total vehicle demand is
expected to rise about 4% in 1995 and another 3% in 1996. Sales of light trucks
are outpacing those of automobiles -- a positive trend for Superior since
aluminum wheels are found on a higher percentage of light trucks.
INSTALLATION OF CAST ALUMINUM WHEELS
The installation of cast aluminum wheels has steadily gained market share, from
4% in 1980 to its current level of over 40%. Most industry experts concur
further gains lie ahead (with installation rates expected to rise to 60% over
the next five years) due to several factors: styling -- which appeals to
consumers and auto designers; reduced weight -- which enhances fuel economy and
facilitates OEM's effort to comply with Corporate Average Fuel Economy (CAFE)
standards; and improved handling due -- to weight savings to suspension areas
and more exact manufacturing specifications.
SUPERIOR: IN A CLASS OF ITS OWN
As the major supplier to Ford and GM, Superior is positioned to take advantage
of the forthcoming growth in aluminum wheel demand in North America. While the
rapid increase in aluminum wheel usage accounts for much of Superior's revenues,
the company's simultaneous growth in market share demonstrates its position as
the industry's leader.
Superior has continually met the stringent quality, price, and service
standards of the OEM market. It has been at the forefront of high technological
engineering -- pioneering and setting the standard in the industry for
manufacturing aluminum wheels. The company continually improves methods of
operation in all its plants, refining its manufacturing efficiencies to respond
to customer's expectations for pricing concessions and cost improvements. All
of Superior's domestic facilities have been awarded top quality ratings by Ford
and GM -- a distinction unmatched by any other OEM wheel manufacturer. Clearly,
Superior is the undisputed market leader and the gap between its competition
continues to widen as the company becomes a significant player in the
international arena, strengthening its presence in Japan and developing markets
in Latin America and Europe.
7
<PAGE> 10
[Photograph/Caption
Robotics are
extensively used
in the machining
operations]
(Continued from page 6)
Moreover, Superior is benefiting from the superb international growth
opportunities in Japan, Mexico and Europe. The company has already established
itself as a very strong competitor in the Japanese market and continues to
reinforce its presence there.
JAPANESE OEM SALES REMAIN STRONG
Due to the many significant programs awarded to Superior in 1993, the company
started production on seven new programs for the Japanese OEMs last year.
Despite Japan's recession, unit sales rose 350 percent in 1994. Superior looks
to strong sales growth in Japan with the rebound of Japan's economy and as
Japanese OEMs continue to build cars for export to the rest of the world.
STRONG START-UP FOR MEXICO PLANT
Superior is also expanding its market in Latin America with the completion of
the first phase of its Chihuahua, Mexico plant. The company received orders
from General Motors and Ford as well as its first wheel order from Chrysler de
Mexico last year, representing a good start-up for Superior and the beginning of
a renewed relationship with Chrysler.
[Photograph/Caption
Conveyorized
transfer of wheels
after casting operations]
Superior expects a major portion of the plant's production will be slated
for export to auto manufacturers throughout the world who will benefit by
foreign export credits. Based on additional export opportunities and expansion
of Mexico's domestic market, Superior's outlook for growth in Latin America is
bullish.
SIGNIFICANT RELATIONSHIPS WITH EUROPEAN OEMS
Superior has positioned itself to benefit from the eventual economic upturn in
Europe, as well as the changing demands of European auto manufacturers that are
preparing to meet the challenges of a unified and open market economy in Europe.
The first relationship with a European auto manufacturer was established
in 1993 when Superior was awarded a multi-year contract by Jaguar Cars, Ltd. to
supply painted and chrome-plated aluminum wheels starting with the Jaguar 1995
model year.
In 1994, Superior finalized its contract with BMW to supply wheels for its
two-seat roadster beginning with the 1996 model year. The company will begin
shipping wheels this year to BMW's new plant in South Carolina where the
vehicles will be manufactured for the North American market and export
worldwide.
8
<PAGE> 11
[Photograph/Caption
Otto Fuchs' plant in
Meinerzhagen, Germany.]
[Photograph/Caption
During a press conference
Dr. Hans Tepohl, Dr.
Gunter Scheipermeier,
Louis L. Borick and Dr.
Reinhard Fleer announced
the planned German-
American joint venture between
Superior Industries and
Otto Fuchs.]
NEW EUROPEAN JOINT
VENTURE AND PLANT
Most recently, the company has taken a critical step in its long-term strategy
to diversify and expand globally. Superior has established a new joint venture
with Otto Fuchs Metallwerke, a well-known German manufacturer with excellent
sales relationships in the European automotive market. The joint venture
involves the construction of a new plant in Hungary where Superior will combine
its technological expertise with Otto Fuchs' lightweight forging process to
manufacture the lightest weight aluminum wheel available. Superior's new
manufacturing facility and partnership with an established European OEM supplier
will reinforce the company as an internationally recognized corporation with
outstanding growth opportunities.
9
<PAGE> 12
Superior not only has robust growth potential but it also is one of the
best-managed operations in the automotive OEM industry. Management's depth of
expertise and foresight have transformed Superior from a small aftermarket
supplier into North America's aluminum wheel market share leader.
ENGINEERING & MANUFACTURING
In 1994, Superior was named "Worldwide Supplier of the Year 1993," one of
the elite 171 suppliers selected from a total of 30,000 companies by General
Motors for exceeding specific performance standards in quality, service and
price.
The company has received Ford's Q1 and GM's Mark of Excellence awards,
an accomplishment unmatched by any of its competitors. The company was also the
first and one of only two wheel suppliers to earn GM's Mark of Excellence award
for excellence in all five categories (quality, cost, delivery, technology and
management) at one time.
THE LEADER IN TECHNOLOGICAL INNOVATIONS
To reach this level of excellence, Superior has been at the forefront of the
industry in the development and implementation of new technologies to
continually exceed previous standards and customer expectations. Superior
developed and produced the casting technology that provided the best precision
in manufacturing aluminum wheels. State-of-the-art paint room robots were later
implemented for thorough coverage and consistency.
Superior then engineered its robot cell machines to increase speed and
accuracy when loading, unloading, and transferring wheels between manufacturing
operations. When the company found previous methods to detect leaks slow and
unreliable, Superior developed a new helium leak testing technology that detects
microscopic leaks accurately and at a fast rate.
Regardless of the challenge, Superior has consistently added, improved and
refined its manufacturing process to maintain the highest quality control,
efficiency and profitability throughout the company.
OPERATIONS: QUALITY, PRODUCTIVITY & TEAMWORK
Superior's emphasis on quality has set the pace throughout the company and
ensures an integrity that is both product and financial oriented. The company
operates on quality, productivity and teamwork, and has established programs to
support each of those areas.
All of Superior's plants operate from written procedures, and audits are
conducted each month to ensure compliance with the procedures. The company's
ongoing communication process between and within each division ensures
management stays apprised of expenses, production, and quality issues on a daily
basis.
[Photograph/Caption
Superior cast aluminum
wheels are increasingly
installed on many of GM's
popular minivans]
RAMPING UP CAPACITY TO MEET STRONG DEMAND
Superior now operates six OEM manufacturing facilities with a combined annual
capacity in excess of 10 million wheels. To meet the burgeoning demand of cast
aluminum wheels, Superior continues to expand its wheel manufacturing capacity.
With the completion of its expansion projects in 1995, Superior's overall
capacity will increase to over 12 million wheels a year.
10
<PAGE> 13
Last year, Superior completed the first phase of its Fayetteville plant
expansion, more than doubling the plant' s annual capacity from 1.2 to 2.7
million. With the completion of the second phase which is currently in
progress, the Fayetteville plant will become the largest OEM cast aluminum wheel
facility in the world with the capacity of producing over 3.5 million wheels a
year.
Superior's newest state-of-the-art manufacturing facility in Chihuahua,
Mexico began shipping aluminum wheels last year after the first phase of its
construction was completed. The second phase of construction, slated for
completion in 1995, will bring the facility's annual capacity up from 600,000 to
over one million wheels.
[Photograph/Caption
Ford World Car -- Contour
equipped with cast
aluminum wheels]
An important highlight of 1994 was the completion of Superior's new OEM
aluminum wheel chrome-plating facility in Fayetteville. The first of its kind
in the world, the $32-million-facility is designed to ultimately plate 35,000
wheels per week which could add over $100 million in additional annual sales.
Superior once again has demonstrated its leadership in technological innovation
by introducing this new product line to the OEM market and creating a new
opportunity for substantial growth.
Throughout its history, Superior has demonstrated foresight in anticipating
future capacity requirements to meet the growing demand for cast aluminum
wheels, providing the necessary lead time to acquire new plants, machinery, and
trained personnel. And through its ongoing effort to refine manufacturing
efficiencies, the company has continually responded to OEM expectations for
pricing concessions and cost improvements without deterioration to profit
margins.
[Photograph/Caption
Superior's engineering capabilities
have been recognized by Ford's Full
Service Supplier Award]
[Photograph/Caption
Excellence in quality,
service and price was
recognized by General
Motors selecting
Superior as the
Supplier of the Year]
11
<PAGE> 14
[Photograph/Caption
Fluoroscopic X-ray examination]
[Photograph/Caption
Engineer Performing stress analysis]
[Photograph/Caption
Precision mold maintenance is performed using computer controlled machinery]
12
<PAGE> 15
[Photograph/Caption
Sophisticated polishing equipment utilized for chrome-plated wheels]
[Photograph/Caption
Environmental testing laboratory]
[Photograph/Caption
Robotics utilized in painting and finishing operations]
13
<PAGE> 16
1994 was another record year of financial results for Superior. Net sales
reached nearly $460 million, up 16 percent from 1993. Net income increased 25
percent to $56.3 million and earnings per share rose to $1.85.
FINANCIAL
INCREASED OEM SALES & MARKET SHARE
The growth of net sales was primarily attributable to increased OEM demand of
aluminum wheels, and the company's own gains in domestic market share. OEM
wheel revenues surged by 17 percent to $417.5 million on a 16 percent increase
in wheel shipments. Superior continues to win contracts for aluminum wheels on
more models and the installation rate on existing models, particularly on light
trucks, continues to rise.
INCREASED DEMAND FOR AFTERMARKET WHEELS
The increasing popularity of Superior's aluminum and chrome-plated wheel lines
continues to drive growth in aftermarket net sales, which sales from continuing
operations increased 24 percent from the prior year. To ensure profitability in
this area of Superior's business, the company has continued to focus on
expanding its popular "Streetwear" custom aluminum and chrome-plated road wheel
line and consolidating its operations and product lines to only top selling
products.
HIGHER VOLUME, PLANT UTILIZATION, PROFIT MARGINS
Superior's ongoing program to reduce costs has helped the company mitigate
industry-wide pricing pressure from OEM customers while increasing
profitability. High customer order levels, greater production requirements, and
more efficient and higher plant utilization resulted in incrementally higher
profit margins. Superior benefited by higher volume and fuller absorption of
costs at its newly built plants which were key to the company's profitability
last year.
SOLID BALANCE SHEETS
Superior's strong balance sheets and cash position are particularly significant
considering the heavy commitment of resources due to the commencement of
production at the Mexico OEM facility and ongoing expansion activities in
Fayetteville. Furthermore, it's important to note that because the Mexico OEM
facility is only a small portion of the company's total manufacturing
capability, the impact of the devaluation of the peso is not significant to the
company's reported consolidated earnings. The company recorded a $10.9 million
translation loss on its net long term investment charged directly to
shareholders' equity last year. However, declining costs in local labor and
materials compared to those world-wide will increase the company's
competitiveness as a low cost supplier of aluminum wheels. More competitive
costs will ultimately lead to greater exports throughout the world which should
offset any further slowdown in the Mexican economy.
[Photograph/Caption
Restyled Ford Explorer
with attractive Superior
aluminum wheels]
In 1994, Superior stockholders enjoyed the eleventh consecutive year of
cash dividend increases. Commencing with the third quarter dividend, the
company increased its cash dividend by 50 percent to an annual rate of $.18 per
share.
14
<PAGE> 17
Shareholder value will continue to increase with the company's projected growth
in annual sales and earnings in the foreseeable future.
OEM SALES GROWTH: INTERNATIONAL GROWTH OPPORTUNITIES
Not only will Superior's OEM business further expand with the continued
increases in domestic automotive production, but sales with Japanese OEMs are
expected to grow rapidly and account for 10 percent of Superior's OEM business
in three to five years.
OUTLOOK
Furthermore, growth opportunities are already being realized in Mexico and
Europe as well as in new product lines such as Superior's OEM chrome-plated
aluminum wheels and cast wheels for commercial trucks and buses.
PRODUCT DIVERSIFICATION
Superior's bottom-line performance is expected to improve even more as the
company pays down debt, increases capacity utilization, and shifts its product
mix toward higher margin chrome-plated wheels.
ADDED CAPACITY
Added OEM wheel production capacity will be available in 1995 with the
completion of the Fayetteville facility expansion and second phase of
construction of the Mexico plant. Anticipated increases in sales of
chrome-plated wheels to OEMs will contribute to stronger profit margins as well
as the production efficiency to be attained in Mexico.
The company's repurchase of 627,000 shares of stock under the repurchase
program implemented late 1993 underlines Superior's confidence in its overall
strength, growth potential and future.
The outlook for Superior is outstanding. Superior has cultivated numerous
opportunities by diversifying its products and expanding its customer base.
Superior is positioned well for continued earnings performance and gains.
INDUSTRY EXPERTS
SHARE OPTIMISM
"Superior is currently selling for... 12.3 times our 1995 earnings estimate...
That represents about a 7% discount to the S&P 500 multiple. While that is a
better valuation than a number of OEM suppliers are currently achieving, we
think it does not sufficiently reflect the excellent growth potential in this
company; we estimate the long-term earning growth rate is 14%...Based on
projected 1996 earnings ..., and a market multiple of 13-14 times earnings, we
would expect SUP to reach a price of $38-$43 over 12-18 months."
--Wendy Beale Needham; Donaldson, Lufkin & Jenrette
Securities Corporation; October 12, 1994
"Aside from adding substantial wheel-making capacity at its current U.S. plants,
the company is undertaking several projects to further drive revenue growth over
the next 3 to 5 years...Good projected earnings growth to decade's end, and a
currently depressed share price add up to attractive appreciation potential
through the 1997-1999 time horizon."
--Alex Silverman; Value Line;
January 13, 1995
15
<PAGE> 18
AFTERMARKET
Superior started as a small aftermarket supplier in 1957 before entering into
the original equipment market. While the company's aftermarket business has now
matured and accounts for less than 10 percent of its total sales, the company
continues to demonstrate stability and profitability in its aftermarket product
lines by focusing on products with the largest profit margins and future sales
potential.
[Photograph]
[Photograph/Caption
Innovative new
designs supplied to Superior's
ever increasing aftermarket custom
aluminum road wheel business]
Currently, the company supplies 62 different product lines and about 3,000
parts including steering wheels and covers, suspension products, seat belts,
license plate holders, and chrome-plated and aluminum road wheels. Among the
well-known retailers and broad-based wholesalers in the United States and
Canada selling Superior's products are Canadian Tire, AutoZone, Wal-Mart,
Western Auto, Pep Boys and NAPA.
SIGNIFICANT ORDER FOR SPORT GRIP(R)
While Superior continues to seek specific market niches and create new product
lines, many of its products have become nationally recognized and maintained
their popularity for years. In 1994, the company received a substantial order
for its aftermarket Sport Grip(R) steering wheel cover, a product introduced
over 27 years ago with over 100,000,000 units shipped to date. The order,
valued at $1.4 million, was the largest single order ever received for the Sport
Grip(R) by a major national mass merchandiser chain.
[CAPTION
Assortment of
popular aftermarket
accessories]
GROWING POPULARITY OF CHROME-PLATED WHEELS
The growing popularity of chrome-plated aluminum wheels has been the key in
boosting Superior's aftermarket sales in recent years. Steel wheels continue to
be popular among tire dealers and large wholesalers and Superior's more
functional, decorative enhancement accessories have also flourished in the light
truck market.
NEW PRODUCTS, MARKET NICHES,
DIVERSIFICATION
As auto manufacturers continue to offer more enhanced accessories as standard
equipment on new cars, Superior will meet the challenge with its expertise in
creating new product lines for the aftermarket as well as by diversifying into
other growth industries with innovative accessory products.
16
<PAGE> 19
Q U A R T E R L Y
C O M M O N
S T O C K
P R I C E
INFORMATION
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------------------------------------
High Low High Low High Low
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $46 1/4 $31 3/8 $29 1/8 $18 5/8 $17 1/8 $10 3/4
Second Quarter 37 30 38 28 1/8 20 3/8 14 7/8
Third Quarter 34 28 39 1/4 37 18 1/8 13 1/8
Fourth Quarter 30 1/4 24 1/4 49 3/8 34 5/8 19 5/8 14 3/8
------------------------------------------------------------------------------------
</TABLE>
The common stock of Superior Industries International, Inc. is traded on the New
York Stock Exchange (symbol: SUP). The Company had approximately 1,300
stockholders of record and 29.6 million shares outstanding as of February 28,
1995.
1994 FINANCIAL
SECTION
Quarterly Common Stock Price
Information 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations 18
Consolidated Statements of Income 22
Consolidated Balance Sheets 23
Consolidated Statements
of Shareholders' Equity 24
Consolidated Statements of Cash Flows 25
Notes to Consolidated Financial Statements 26
Statement of Management's
Financial Responsibility 34
Report of Independent Public Accountants 35
17
<PAGE> 20
MANAGEMENT'S
DISCUSSION AND
ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS
OF OPERATIONS
<TABLE>
<CAPTION>
SUMMARY OF SALES BY PRODUCT LINE (In Thousands)
For the Years Ended December 31, 1994 1993 1992
----------------------------------------------------------------------------
<S> <C> <C> <C>
OEM CAST ALUMINUM ROAD WHEELS $417,537 $357,126 $292,235
AFTERMARKET 39,101 35,907 33,079
----------------------------------------------------------------------------
$456,638 $393,033 $325,314
==========================================
</TABLE>
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
Net sales in 1994 increased 16.2 percent to a record $456.6 million compared to
$393 million in 1993. The increase was primarily attributable to growth in the
Company's Original Equipment Manufacturer (OEM) cast aluminum wheel business.
Buoyed by a strong North American automotive market, the Company's OEM business
increased $60.4 million, or 16.9 percent over 1993. Unit shipments of cast
aluminum road wheels increased 15.5 percent from 1993, while average selling
prices, which rose throughout the year, were slightly higher than 1993. The
Company's strong performance, when compared to total North American automotive
sales increases of 8.3 percent, reflects the Company's ability to successfully
secure contracts to manufacture wheels for many of the industry's best selling
vehicles, higher industry-wide aluminum wheel installation rates and its
ability to capture increased market share. Aluminum wheel installation rates
on automobiles rose to a record 39.4 percent for the 1994 model year from 37.9
percent for the 1993 model year and 33 percent for the 1992 model year.
Aluminum wheel installation rates in the light truck and utility vehicle
market also increased to 42.9 percent for the 1994 model year from 42.3 percent
for the 1993 model year and 39 percent for the 1992 model year. Management
believes the trend of higher cast aluminum wheel installation rates will
continue.
Aftermarket product net sales, without the impact of "Do-Ray", a Canadian
mirror and light business sold in August, 1993, increased $7.4 million,
or 23.5 percent over 1993, and reflected increases in the "Streetwear" product
line, including new styles of aluminum and chrome-plated aluminum wheels. Year-
to-year net sales in the aftermarket business increased $3.2 million, or 8.9
percent over 1993.
Gross profit was 24.4 percent of net sales in 1994 compared to 23.3 percent
in 1993. Improved gross profit margins reflected higher customer order levels
that translated into greater production requirements and more efficient and high
plant utilization resulting in incrementally higher margins. Additionally, the
Company's aggressive and ongoing cost containment programs continued to
effectively reduce costs. The Company was able to achieve significant margin
gains in spite of several factors. First, the Company's Van Nuys, California
production facilities were impacted by the January 17, 1994 Northridge
earthquake. Though the Company was able to quickly recover and start-up
production without any disruption to customer delivery requirements, this event
resulted in a $1.1 million charge to earnings. Secondly, plant expansion
activities also impacted margins. The new Chihuahua, Mexico OEM facility became
operational early in the third quarter of 1994 and continued to ramp-up during
the year. The expansion of the Fayetteville, Arkansas OEM facility, which will
triple this plant's production capabilities from 1.2 million wheels per year to
over 3.5 million wheels per year, also was underway throughout the year. Full
production capacity of these two facilities should be achieved during 1995.
The Company is subject to industry-wide pricing pressure from both its OEM
and aftermarket customers. The Company has an ongoing program to reduce costs
to its customers and, to date, has been successful in substantially mitigating
such pressure by producing more efficiently and effectively absorbing fixed
costs through higher order levels. Although the Company believes it can
implement cost savings to its customers without any material adverse effect
to the Company's
18
<PAGE> 21
financial position or results of operations, the effect of future changing
market conditions is not known.
The aluminum content of selling prices to OEMs is adjusted to current
market conditions which, when the Company, from time to time, enters into fixed
purchase contracts, subjects the Company to the risks of market changes.
Throughout 1994 and continuing into the first quarter of 1995, aluminum prices
have been increasing. The cost of aluminum is a significant component in the
overall cost of a wheel. Thus if the trend of increasing aluminum costs
continues, it would have the effect of reducing overall gross margins although
margins relative to the remaining cost components will be unchanged or
improved.
Selling, general and administrative expenses, measured as a percentage of
net sales, decreased to 4.2 percent in 1994 compared to 4.3 percent in 1993, and
increased in absolute dollars. The increase in absolute dollars is a result of
the additional resources required to manage the Company's expanding business
while the decrease as a percentage of net sales reflects management's successful
containment of this required expansion.
Interest expense decreased $1.4 million compared to 1993, reflecting
current and prior year payments and prepayments of Senior notes. Accentuating
this decrease was $1.9 million of interest that was capitalized as a result of
the expansion activities in Fayetteville, Arkansas and Chihuahua, Mexico.
Offsetting these decreases were higher interest costs relating to greater
short-term borrowings required to manage working capital requirements.
Interest income decreased $1.5 million over 1993 as cash and short-term
investments were utilized to fund record capital expenditures of $60.2
million, repurchases of the Company's common stock and on-going working capital
requirements.
Miscellaneous, net was $839,000 and decreased $186,000 from 1993.
Included in this category are $1.8 million of pre-production costs relating to
the start-up of the Chihuahua, Mexico cast aluminum wheel and Fayetteville,
Arkansas chrome-plating facilities.
The consolidated tax rate in 1994 decreased slightly to 37.6 percent of
pre-tax income versus 37.8 percent in 1993. See note 6 of the consolidated
financial statements.
1993 COMPARED TO 1992
Net sales in 1993 were $393 million, compared with $325.3 million in 1992. This
$67.7 million, or 20.8 percent increase in net sales was primarily attributable
to growth in the Company's Original Equipment Manufacturer (OEM) business which
increased $64.9 million or 22.2 percent over the prior year. Unit shipments of
cast aluminum road wheels increased 24.5 percent over 1992 levels. Domestic
automotive manufacturers reported overall vehicle sales gains of 8 percent,
including a 15.5 percent increase in light truck and utility vehicle sales.
Net sales in the aftermarket business increased $2.8 million, or 8.5
percent over 1992. Continuing aftermarket product net sales, without the impact
of "Do-Ray," actually increased $5.2 million, or 19.8 percent over 1992, and
reflected increases in the aftermarket road wheel line, including new styles of
aluminum and chrome-plated aluminum wheels, and improvements across most
accessory product lines.
Gross profit was 23.3 percent of net sales in 1993 compared to 19 percent
in 1992. Improved gross profit margins reflect several factors. First, high
customer order levels translated into greater production requirements and more
efficient and higher plant utilization resulting in incrementally higher
margins. Secondly, the new Johnson City facility became fully operational in
1993 and achieved higher margins associated with higher levels of production.
Finally, ongoing cost containment programs continued to effectively reduce
costs.
19
<PAGE> 22
MANAGEMENT'S
DISCUSSION AND
ANALYSIS OF
FINANCIAL
CONDITION
AND RESULTS
OF OPERATIONS
(continued)
Selling, general and administrative expenses, measured as a percentage of
net sales, decreased to 4.3 percent in 1993 compared to 4.4 percent in 1992 and
increased in absolute dollars. The increase in absolute dollars is a result of
the additional resources required to manage the Company's expanding business
while the decrease as a percentage of net sales reflects management's successful
containment of this required expansion.
Interest expense decreased $939,000 relative to 1992 primarily reflecting
required and advanced Senior note principal payments made in 1992 and 1993,
including the 1993 retirement of the 9.35% Senior notes.
Interest income increased $807,000 in 1993 over 1992 levels as strong cash
flow from operating activities was temporarily invested in short-term
investments.
Miscellaneous, net decreased $1.3 million in 1993 when compared to 1992
primarily reflecting $1 million of pre-production costs charged during 1993
relating to the Chihuahua, Mexico OEM plant.
The consolidated tax rate in 1993 increased to 37.8 percent of pre-tax
income versus 37 percent in 1992. This increase was due primarily to the
enactment of the Omnibus Budget Reconciliation Act of 1993 which raised the
federal statutory rate from 34 percent to 35 percent, partially offset by a
greater amount of certain state tax credits taken in 1993 when compared to 1992.
Effective January 1, 1993 the Company adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes." -- Adoption of the standard
was not material to the results of operations or financial condition of the
Company.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $50 million in 1994 compared to
$72.7 million in 1993, reflecting record earnings and high levels of
depreciation and amortization that were offset somewhat by the build-up of
receivables and inventories, and the timing of payments on trade payables.
Increased receivables reflect higher shipping levels in the fourth quarter of
1994 relative to 1993 that will be collected during the first quarter of 1995.
Additionally, higher receivable balances reflect a greater number of development
projects for future wheel programs which represent engineering and tooling costs
reimbursable from customers. Higher inventory levels mirror increased business
activities, the timing of aluminum receipts and preparation for fulfillment of
high order levels in the first quarter of 1995.
Cash flow was utilized to fund OEM plant expansion and enhancements,
including both the chrome-plating and cast aluminum wheel expansion in
Fayetteville, Arkansas, and the new Chihuahua, Mexico wheel facility. Cash
resources were also utilized for the retirement of 544,000 shares of the
Company's common stock pursuant to the Company's stock repurchase program.
Daily cash requirements were supplemented through the use of the Company's $60
million committed and uncommitted credit facilities and management of its
short-term investment portfolio.
During 1994, the Company continued on its program of expanding and
strengthening its customer base, developing new product lines and committing to
new markets outside the United States. Three new OEM customers were added to the
Company's supplier base and the Company received substantial new production
orders from existing customers. Additionally, the Company was able to procure
several contracts to chrome plate cast aluminum wheels.
In pursuit of its strategy of developing international markets, the Company
announced, subsequent to year-end, the signing of a memorandum of understanding
for a 50/50 joint venture with German based Otto Fuchs Metallwerke. The
agreement calls for the construction of a plant in Europe to produce both
light weight forged and low pressure cast aluminum wheels for the European
automotive market by the second half of 1996. The plant is slated to have a two
million wheel annual capacity and site selection is currently underway. The
cost of the facility, which is
20
<PAGE> 23
not anticipated to be significant in 1995, will be approximately $50 million and
will be funded equally by both partners.
Previously announced domestic, international and new product expansion
programs progressed throughout the year. The first phase of the Company's new
OEM wheel facility in Chihuahua, Mexico was completed during 1994 with initial
wheel shipments made early in the third quarter. The second phase of expansion
is underway and will increase current capacity of 600,000 wheels per year to one
million wheels per year during 1995. The second phase of the Fayetteville
expansion, which will bring ultimate capacity to over 3.5 million wheels per
year, continues and is scheduled for completion later in 1995. The first phase
of the new and highly automated, state-of-the-art chrome-plating facility in
Fayetteville, Arkansas built for the original equipment market is substantially
complete and is in the start-up phase. Shipments are scheduled to begin in the
second quarter of 1995. OEM expansion programs have resulted in the Company
expending in excess of $290 million dollars over the past nine years to
construct and expand five world-class cast aluminum road wheel facilities, the
new chrome-plating plant and continuously improve all OEM manufacturing
facilities.
Since 1990, funding for plant expansion has come from internally generated
cash flow and working capital. Management anticipates future domestic expansion
activities will be funded similarly. As evidenced by these expansion programs,
the Company believes it is well positioned to take full advantage of
opportunities created by the trend of increasing aluminum wheel installation
rates, new international markets as well as new and complementary
business opportunities.
In December 1994, the Mexican government devalued and then removed
currency controls on the New Peso (the "peso") which caused an approximate 40
percent decline in the value of the peso relative to the U.S. dollar. The
impact of this decline in value relative to the Company's wholly owned
subsidiary, Superior Industries de Mexico, SA de CV, resulted in an unrealized
translation loss of $10.9 million charged directly to shareholders' equity. In
addition to the impact of this charge, the Company has experienced what is
believed to be a temporary cutback of shipments to the domestic Mexican
automotive market. The Mexican production facility represents less than five
percent of the Company's total capacity. While the long-term impact of the
peso devaluation cannot be accurately predicted, management believes that the
short-term impact caused by this cutback will be offset by increased
international demand for export wheels manufactured at the Chihuahua, Mexico
facility.
The Company's financial condition remains strong. In 1994, working capital
and current ratio decreased to $53.8 million and 1.5:1, versus $65.2 million and
1.9:1 in 1993, respectively, as current assets were converted to long-term
productive assets. Working capital and the current ratio were impacted by the
Company's significant OEM expansion programs and by the repurchase of the
Company's common stock. The long-term debt to total capitalization ratio
improved to 10.3 percent in 1994 from 16.1 percent in 1993. The aforementioned
factors indicate the overall strength of the Company's financial condition and
demonstrate the Company's ability to internally finance growth while displaying
a solid foundation which strategically positions the Company for further growth
opportunities.
During 1994, the Board of Directors announced a 50 percent increase in the
cash dividend, representing the eleventh consecutive year of dividend payments
and increases. Management anticipates continuing its policy of paying
dividends; however, this is contingent upon various factors, including economic
and market conditions, all of which cannot be accurately predicted.
INFLATION
Inflation did not have a material impact on the results of operations or the
financial condition of the Company. The Company believes its purchasing and the
majority of its customer contracts are structured to minimize the impact of
changes caused by inflation.
21
<PAGE> 24
CONSOLIDATED
STATEMENTS
OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $456,638,000 $393,033,000 $325,314,000
Cost of Sales 345,270,000 301,569,000 263,372,000
-----------------------------------------------------------------------------------------------
GROSS PROFIT 111,368,000 91,464,000 61,942,000
Selling, general and administrative expenses 19,203,000 16,887,000 14,165,000
-----------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 92,165,000 74,577,000 47,777,000
Other Income (Expense)
Interest expense (2,862,000) (4,298,000) (5,237,000)
Interest income 1,840,000 3,386,000 2,579,000
Miscellaneous, net (839,000) (1,025,000) 272,000
-----------------------------------------------------------------------------------------------
(1,861,000) (1,937,000) (2,386,000)
==============================================
INCOME BEFORE INCOME TAXES 90,304,000 72,640,000 45,391,000
Income Taxes 33,989,000 27,463,000 16,795,000
-----------------------------------------------------------------------------------------------
NET INCOME $ 56,315,000 $ 45,177,000 $ 28,596,000
===============================================================================================
EARNINGS PER SHARE $ 1.85 $ 1.47 $ .94
===============================================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1994 1993
-------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 5,884,000 $ 8,274,000
Marketable securities, net 21,158,000 28,314,000
Receivables, net
Trade 63,704,000 57,698,000
Other 17,619,000 7,581,000
-------------------------------------------------------------------------------------
81,323,000 65,279,000
-----------------------------
Inventories 44,746,000 26,634,000
Deferred income taxes 5,899,000 8,686,000
Other current assets 1,761,000 4,032,000
-------------------------------------------------------------------------------------
Total current assets 160,771,000 141,219,000
-------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, net 185,853,000 162,225,000
OTHER LONG-TERM ASSETS 11,059,000 6,679,000
-------------------------------------------------------------------------------------
$357,683,000 $310,123,000
=============================
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 39,201,000 $ 2,555,000
Accounts payable 46,135,000 52,004,000
Accrued liabilities 21,587,000 21,432,000
-------------------------------------------------------------------------------------
Total current liabilities 106,923,000 75,991,000
-------------------------------------------------------------------------------------
LONG-TERM DEBT, net 23,075,000 34,004,000
OTHER LONG-TERM LIABILITIES 16,897,000 10,982,000
DEFERRED INCOME TAXES 10,606,000 12,277,000
SHAREHOLDERS' EQUITY 200,182,000 176,869,000
-------------------------------------------------------------------------------------
$357,683,000 $310,123,000
=============================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
CONSOLIDATED
STATEMENTS
OF SHAREHOLDERS'
EQUITY
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Cumulative Loss on
Number of Paid-In Translation Marketable Retained
Shares Amount Capital Adjustment Securities Earnings Total
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1991 9,658,312 $4,829,000 $69,649,000 $ 346,000 $ -- $29,168,000 $103,992,000
Net income -- -- -- -- -- 28,596,000 28,596,000
Stock options
exercised,
including related
tax benefit 855,623 428,000 13,900,000 -- -- -- 14,328,000
Stock split 9,737,029 4,868,000 (4,868,000) -- -- -- --
Repurchases of
common stock (252,504) (126,000) (6,773,000) -- -- -- (6,899,000)
Cash dividends
($.10/share) -- -- -- -- -- (3,025,000) (3,025,000)
Foreign currency --
translation -- -- (245,000) -- -- (245,000)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1992 19,998,460 9,999,000 71,908,000 101,000 -- 54,739,000 136,747,000
Net income -- -- -- -- -- 45,177,000 45,177,000
Stock options
exercised,
including related
tax benefit 114,818 58,000 2,080,000 -- -- -- 2,138,000
Stock split 10,031,136 5,016,000 -- -- -- (5,016,000) --
Repurchases of
common stock (83,000) (42,000) (3,199,000) -- -- -- (3,241,000)
Cash dividends
($.11/share) -- -- -- -- -- (3,409,000) (3,409,000)
Foreign currency
translation -- -- -- (543,000) -- -- (543,000)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1993 30,061,414 15,031,000 70,789,000 (442,000) -- 91,491,000 176,869,000
Net income -- -- -- -- -- 56,315,000 56,315,000
Stock options
exercised,
including related
tax benefit 94,221 47,000 1,585,000 -- -- -- 1,632,000
Repurchases of
common stock (544,000) (272,000) (16,819,000) -- -- -- (17,091,000)
Cash dividends
($.17/share) -- -- -- -- -- (4,913,000) (4,913,000)
Unrealized losses:
Foreign currency
translation -- -- -- (10,130,000) -- -- (10,130,000)
Marketable
securities -- -- -- -- (2,500,000) -- (2,500,000)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1994 29,611,635 $14,806,000 $55,555,000 $(10,572,000) $(2,500,000) $142,893,000 $200,182,000
====================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 27
CONSOLIDATED
STATEMENTS
OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31, 1994 1993 1992
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $49,953,000 $72,713,000 $ 9,123,000
-------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (60,231,000) (53,834,000) (28,144,000)
Proceeds from sales of investments 29,377,000 78,369,000 17,753,000
Purchases of investments (26,834,000) (82,519,000) (35,379,000)
-------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (57,688,000) (57,984,000) (45,770,000)
-------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings 28,267,000 -- --
Repurchases of common stock (17,091,000) (3,241,000) (6,899,000)
Cash dividends (4,913,000) (3,409,000) (3,025,000)
Payments of long-term debt (2,550,000) (13,732,000) (9,233,000)
Stock options exercised 1,632,000 2,138,000 14,328,000
-------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 5,345,000 (18,244,000) (4,829,000)
-------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Equivalents (2,390,000) (3,515,000) (41,476,000)
Cash and Equivalents at Beginning of Year 8,274,000 11,789,000 53,265,000
-------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 5,884,000 $ 8,274,000 $11,789,000
=======================================================================================================
</TABLE>
RECONCILIATION
OF NET INCOME
TO NET CASH
PROVIDED BY
OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
Years Ended December 31, 1994 1993 1992
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME $56,315,000 $45,177,000 $28,596,000
-------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,604,000 21,695,000 21,530,000
Provision for retirement plans 1,108,000 904,000 944,000
Other non cash items 1,043,000 (262,000) 447,000
Changes in assets and liabilities:
(Increase) decrease in:
Receivables, net (16,044,000) (7,042,000) (14,101,000)
Inventories (18,112,000) (2,112,000) 3,593,000
Other items 3,637,000 422,000 (1,220,000)
Increase (decrease) in:
Accounts payable (5,869,000) 15,341,000 (28,693,000)
Accrued liabilities 155,000 2,198,000 105,000
Deferred income taxes 1,116,000 (3,608,000) (2,078,000)
-------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $49,953,000 $72,713,000 $ 9,123,000
=======================================================================================================
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 28
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Superior Industries International, Inc. and its subsidiaries (the Company),
after elimination of all significant intercompany accounts and transactions.
Investments in joint ventures in which the Company has common stock ownership of
50 percent are accounted for on the equity method.
FISCAL YEAR END
For presentation purposes, the Company denotes December 31 as the fiscal year
end. However, the Company's fiscal year ends on the last Sunday of the calendar
year.
FINANCIAL INSTRUMENTS
Financial instruments consist primarily of cash and equivalents, marketable
securities, short-term borrowings and Senior notes. The Company places these
financial instruments with high quality institutions operating in various
industries over a broad geographic area.
Cash equivalents consist primarily of certificates of deposit, carried at cost,
which approximates market value. Certificates of deposit were $5,630,000 and
$5,726,000 at December 31, 1994 and 1993, respectively.
Marketable securities, which generally consist of U.S. government agency
securities, corporate bonds, money market preferred stock and equities, are
considered "available-for-sale" and are carried at the lower of cost or market
on a portfolio basis. The stated maturities of marketable debt securities are
generally over ten years. Market value at December 31, 1994, which was
determined using quoted prices from national exchanges, resulted in a $2,500,000
unrealized loss recorded directly to shareholders' equity. At December 31, 1994
and 1993, marketable securities of $4,960,000 and $4,970,000, respectively, were
pledged as collateral against outstanding letters of credit.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs of $5,413,000, $3,332,000 and $4,078,000 have
been charged against operations during 1994, 1993 and 1992, respectively.
FOREIGN CURRENCY TRANSLATION
Foreign currency asset and liability accounts are translated at exchange rates
in effect at the end of the accounting period. Revenue and expense accounts are
translated at a weighted average of exchange rates during the period. The
cumulative effect of translation as well as gains and losses on intercompany
foreign currency transactions are recorded as a separate component of
shareholders' equity.
In December 1994, the Mexican government devalued and then removed currency
controls on the New Peso (the "peso") which caused an approximate 40 percent
decline in the value of the peso relative to the U.S. dollar. The impact of this
decline in value resulted in an unrealized translation loss of $10.9 million
charged directly to shareholders' equity.
STATEMENTS OF CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, the Company considers
all certificates of deposit and highly liquid investments with an original
maturity of three months or less to be cash equivalents. Purchases and proceeds
from investment transactions were all transacted in the Company's
available-for-sale portfolio of debt and equity securities.
Interest paid, net of amounts capitalized (see note 10), and income taxes paid
were $2,494,000 and $32,610,000 for 1994; $4,543,000 and $27,779,000 for 1993;
$5,530,000 and $11,106,000 for 1992, respectively.
RECLASSIFICATIONS
Certain prior year items have been reclassified to conform with current year
presentation.
2. BORROWING ARRANGEMENTS
The Company maintains a $15,000,000 credit facility on a committed, unsecured
basis expiring in May 1995. This facility provides for an interest rate of 7/8
of one percent above the Eurodollar deposit rate. The Company also maintains
combined line and letter of credit facilities under which it may borrow up to
$45,000,000 on an uncommitted, unsecured basis at rates generally below prime.
There were $28,267,000 in short-term borrowings outstanding at December 31,
1994. There were no outstanding borrowings at December 31, 1993. The weighted
average interest rates during 1994, 1993 and 1992 were 4.8 percent, 3.9 percent,
and 4.4 percent, respectively.
26
<PAGE> 29
<TABLE>
<CAPTION>
The long-term debt of the Company is summarized as follows:
December 31, 1994 1993
--------------------------------------------------------------------------------------------------
<S> <C> <C>
9.31% Senior notes due 1997, with annual principal payments
of $8,333,000 beginning in 1995 $25,000,000 $25,000,000
10.22% Senior notes due 1998, with annual principal payments
of $2,143,000 5,571,000 7,714,000
Capitalized lease obligations and other debt, substantially all
of which is secured by fixed assets, with various maturities
and interest rates ranging between 7.30 percent and 11.30 percent 3,438,000 3,845,000
--------------------------------------------------------------------------------------------------
34,009,000 36,559,000
Less - Current portion 10,934,000 2,555,000
--------------------------------------------------------------------------------------------------
$23,075,000 $34,004,000
============================
</TABLE>
The Senior notes and certain credit facility agreements contain, among other
covenants, restrictions with respect to borrowings, dividends, investments,
purchases and sales of assets outside the ordinary course of business, and
certain guarantees. Also required is the maintenance of a minimum tangible net
worth, as defined, of $125,000,000 and certain financial ratios.
Included with capitalized lease obligations and other debt is a capital lease of
$1,525,000, funded through the proceeds of an industrial development revenue
bond, payable in varying annual principal payments through 1999 with remaining
interest rates ranging between 7.30 percent and 7.60 percent. The Company has
guaranteed the repayment of the underlying bonds.
Future maturities of long-term debt are approximately $10,934,000 for 1995,
$10,971,000 for 1996, $10,164,000 for 1997, $593,000 for 1998, $645,000 for 1999
and $702,000 thereafter.
3. LEASES
The Company leases its corporate office and certain manufacturing facilities
from Louis L. Borick, President, and Juanita A. Borick. The lease expires in the
year 2001 and has a current annual payment of $1,140,000 (including rent of
$748,000 related to land and escalations which are accounted for as operating
leases), exclusive of future escalation payments which are determined every five
years.
Included in property, plant and equipment at both December 31, 1994 and 1993,
are buildings and equipment held under capital leases of $5,590,000 with
accumulated amortization of $2,738,000 and $2,518,000, respectively.
The Company leases certain land, facilities and equipment under long-term
operating leases expiring at various dates through 2063. During 1992, the
Company reduced the amortization period of certain operating lease expense in
the amount of $2,448,000 to appropriately match with the estimated useful life
of the underlying machinery. Total lease expense for all operating leases
amounted to $4,183,000 in 1994, $3,904,000 in 1993 and $5,853,000 in 1992.
<TABLE>
<CAPTION>
Future minimum payments under all leases are summarized as follows:
Leases
Years Ending December 31, Operating Capital
-------------------------------------------------------------
<S> <C> <C>
1995 $ 4,460,000 $ 776,000
1996 4,371,000 767,000
1997 4,276,000 771,000
1998 3,958,000 768,000
1999 3,345,000 768,000
Thereafter 2,542,000 784,000
-------------------------------------------------------------
22,952,000 4,634,000
Amounts representing interest -- 1,213,000
-------------------------------------------------------------
$22,952,000 $3,421,000
===========================
</TABLE>
27
<PAGE> 30
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(continued)
3. LEASES (continued)
Future minimum payments of $4,551,000 for operating leases, including known rent
escalations, and $2,744,000, including interest, for capital leases are payable
to Louis L. Borick, President, and Juanita A. Borick. The amounts paid to Louis
L. Borick, Juanita A. Borick or a related entity owned by Louis L. Borick's
children during 1994, 1993 and 1992, for all leases was $1,571,000, $1,542,000
and $1,464,000, respectively.
4. STOCK OPTIONS
At December 31, 1994 and 1993, the Company had reserved 2,398,337 and 2,492,558
shares of its common stock, respectively, for issuance to directors, officers
and key employees under Stock Option Plans. Options are generally subject to
grant at not less than fair market value on the date of grant and expire no
later than ten years after the date of the grant. At December 31, 1994 and
1993, exercisable options to purchase shares of the Company's common stock
totaled 616,540 and 249,509, respectively.
A summary of changes in outstanding options follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
Under Option Under Option Under Option
Option Price Option Price Option Price
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of year 1,413,944 $1.80-$39.88 444,446 $2.70-$22.63 587,360 $2.70-$15.44
Options granted 119,000 26.25- 31.00 602,500 19.08- 39.88 104,500 16.06- 22.63
Stock split - - 485,948 1.80- 29.67 611,676 2.70- 22.63
Options exercised (94,221) 5.19- 19.08 (114,818) 3.75- 15.09 (855,623) 2.70- 20.23
Options canceled
or expired (6,500) 15.09- 31.00 (4,132) 5.19- 15.09 (3,467) 15.57-22.63
----------------------------------------------------------------------------------------------------------------
Options outstanding
at end of year 1,432,223 $1.80-$39.88 1,413,944 $1.80-$39.88 444,446 $2.70-$22.63
================================================================================================================
</TABLE>
No significant amounts are reflected in the Company's income accounts with
respect to these stock options. Proceeds from the sales of stock under option
are credited to common stock at par value, with amounts in excess of par value
credited to additional paid-in capital.
5. RETIREMENT PLANS
The Company has an unfunded supplemental executive retirement plan covering its
directors, officers and other key members of management. The Company has
purchased key man life insurance policies on each of the participants to provide
for future liabilities. The plan provides for a defined benefit to become
payable on the employee's death or upon retirement which is based on final
average compensation, subject to certain vesting requirements.
<TABLE>
<CAPTION>
The components of cost for this retirement plan are as follows:
Years Ended December 31, 1994 1993 1992
-------------------------------------------------------
<S> <C> <C> <C>
Service cost $335,000 $226,000 $219,000
Interest cost 360,000 312,000 256,000
Net amortization 55,000 55,000 52,000
-------------------------------------------------------
Net cost $750,000 $593,000 $527,000
=======================================================
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
A schedule reconciling the projected benefit obligation with recorded plan
liability follows:
December 31, 1994 1993
--------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $3,230,000 $2,848,000
--------------------------------------------------------------------------------------------
Accumulated benefit obligation $4,962,000 $3,979,000
--------------------------------------------------------------------------------------------
Projected benefit obligation $5,501,000 $4,211,000
Unrecognized prior service cost (383,000) (438,000)
Adjustment required to recognize minimum liability 330,000 97,000
Other unrecognized experience gains (losses) (486,000) 109,000
--------------------------------------------------------------------------------------------
Recorded liability $4,962,000 $3,979,000
============================================================================================
</TABLE>
Actuarial assumptions for the retirement plan include seven and eight percent
for the assumed discount rate and five and three percent for the assumed rate of
average future compensation increases for 1994 and 1993, respectively. During
1994, the Company recorded an adjustment of $233,000 to recognize the minimum
pension liability required by Statement of Financial Accounting Standard No. 87.
The adjustment, which had no effect on income, was offset by recording an equal
amount as an intangible asset.
The Company has contributory employee retirement savings plans covering
substantially all of its employees. The employer contribution is determined at
the discretion of the Company and totaled $2,471,000, $2,401,000 and $1,761,000
for 1994, 1993 and 1992, respectively.
The Company also has a deferred compensation agreement with its President under
which the Company has agreed to pay certain amounts annually subsequent to
retirement. For accounting purposes, the present value of such payments is
being charged ratably to expense over the average estimated remaining years of
active employment. These charges totaled $358,000, $300,000 and $380,000 for
1994, 1993 and 1992, respectively.
6. TAXES ON INCOME
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Under Statement 109, deferred
tax assets and liabilities are determined under the "liability method" based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Prior to the adoption of
Statement 109, income tax expense was determined under the "deferred method"
based on items of income and expense that were reported in different years in
the financial statements and tax returns and were measured at the tax rate in
effect in the year the differences originated.
As permitted by Statement 109, the Company has elected not to restate the
financial statements of any prior years. The cumulative effect of the change in
the method of accounting for income taxes for the year ended December 31, 1993
was not material.
29
<PAGE> 32
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(continued)
The provision (credit) for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
------------------------------------------------------------------------------------------ -----------
Years Ended December 31, 1994 1993 1992
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL: Current $26,501,000 $24,836,000 $14,301,000
Deferred 2,007,000 (1,421,000) (515,000)
----------------------------------------------------------------------------------------------------------
28,508,000 23,415,000 13,786,000
--------------------------------------------
STATE: Current 5,527,000 4,160,000 3,142,000
Deferred 169,000 (306,000) (345,000)
----------------------------------------------------------------------------------------------------------
5,696,000 3,854,000 2,797,000
--------------------------------------------
FOREIGN: Current 414,000 95,000 86,000
Deferred (629,000) 99,000 126,000
----------------------------------------------------------------------------------------------------------
(215,000) 194,000 212,000
--------------------------------------------
$33,989,000 $27,463,000 $16,795,000
============================================
TOTAL: Current $32,442,000 $29,091,000 $17,529,000
Deferred 1,547,000 (1,628,000) (734,000)
----------------------------------------------------------------------------------------------------------
$33,989,000 $27,463,000 $16,795,000
============================================
</TABLE>
Provision is made for United States income taxes on undistributed earnings of
international subsidiaries. Tax credits are accounted for as a reduction of the
provision for income taxes in the year in which the credits arise.
The reconciliation of the statutory United States federal income tax rates to
the Company's effective income tax rates is as follows:
<TABLE>
<CAPTION>
Liability Deferred
Metho Method
------------------------------------------------------------------------------------------ -----------
Years Ended December 31, 1994 1993 1992
------------------------------------------------------------------------------------------ -----------
<S> <C> <C> <C>
Statutory amount, computed at 35 percent
for 1994 and 1993 and 34 percent for 1992 $31,606,000 $25,424,000 $15,433,000
State tax provisions, net of federal income tax benefit 3,702,000 2,505,000 1,846,000
Foreign income taxed at rates other than the statutory rate (592,000) (602,000) (447,000)
Federal tax credits (486,000) -- (55,000)
Other, net (241,000) 136,000 18,000
----------------------------------------------------------------------------------------------------------
$33,989,000 $27,463,000 $16,795,000
============================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31, 1994 1993
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Insurance reserves not currently deductible $ (1,297,000) $ (1,193,000)
Inventory reserves not currently deductible (520,000) (1,097,000)
Other reserves not currently deductible (6,509,000) (7,938,000)
Deferred compensation (2,844,000) (2,433,000)
Revenue recognized for tax purposes (437,000) (1,299,000)
State taxes expensed currently, deductible in following year (831,000) (706,000)
Net operating loss carryforwards (735,000) --
Other (1,818,000) (793,000)
--------------------------------------------------------------------------------------------------------
(14,991,000) (15,459,000)
===========================
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities
Differences between book and tax basis
of property, plant and equipment 18,068,000 17,893,000
Other 1,630,000 1,157,000
--------------------------------------------------------------------------------------------
19,698,000 19,050,000
----------------------------
$ 4,707,000 $ 3,591,000
============================
</TABLE>
The components of the provision for deferred taxes for the year ended December
31, 1992 under the deferred method are as follows:
<TABLE>
<CAPTION>
<S> <C>
Depreciation $ 962,000
Insurance reserves (211,000)
Inventory items (467,000)
Change in currently nondeductible reserves (1,292,000)
Other 274,000
--------------------------------------------------------
$ (734,000)
===========
</TABLE>
7. SHAREHOLDERS EQUITY
The common stock of the Company at December 31, 1994 consists of 100,000,000
authorized shares with a $.50 par value. The Company also has authorized
1,000,000 shares of preferred stock with a par value of $25.00, none of which
has been issued.
The computation of earnings per share is based upon the weighted average number
of common shares outstanding and common stock equivalents, when dilutive. During
1994, 1993 and 1992 the weighted average number of common shares outstanding was
30,376,000, 30,708,000 and 30,266,000, respectively.
8. BUSINESS SEGMENT
The Company manufactures motor vehicle parts and accessories for sale on normal,
generally unsecured trade terms to original equipment manufacturers (OEMs) and
the automotive aftermarket on an integrated one-segment basis. At December 31,
1994 and 1993, the allowance for doubtful accounts receivable was $541,000 and
$569,000, respectively. The following percentages of the Company's consolidated
net sales were made to the Ford Motor Company and General Motors Corporation:
1994, 47.0 percent and 41.0 percent; 1993, 46.8 percent and 42.4 percent; and
1992, 48.0 percent and 40.5 percent.
9. INVENTORIES
<TABLE>
<CAPTION>
December 31, 1994 1993
--------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $18,210,000 $10,391,000
Work in process 8,965,000 6,277,000
Finished goods 17,571,000 9,966,000
--------------------------------------------------------------------------------------------
$44,746,000 $26,634,000
============================
</TABLE>
Inventories (which include material, labor and factory overhead) are stated at
the lower of cost, using the first-in, first-out (FIFO) method, or market.
31
<PAGE> 34
10. PROPERTY AND DEPRECIATION
<TABLE>
<CAPTION>
December 31, 1994 1993
----------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 43,030,000 $ 39,301,000
Machinery and equipment 214,656,000 177,398,000
Leasehold improvements and other 4,487,000 4,189,000
Construction in progress 30,609,000 26,286,000
----------------------------------------------------------------------------------
292,782,000 247,174,000
Less -- Accumulated depreciation and amortization 106,929,000 84,949,000
----------------------------------------------------------------------------------
$185,853,000 $162,225,000
=============================
</TABLE>
Property, plant and equipment are recorded at cost. Major replacements or
improvements are capitalized, with expenditures for minor replacements,
maintenance and repairs and tooling costs charged against current operations.
Maintenance and repairs charged against operations during 1994, 1993 and 1992
were $12,113,000, $10,877,000 and $9,076,000, respectively. Depreciation and
amortization are generally provided on the straight-line method over the
estimated useful lives which range from 3-33 years. Such depreciation and
amortization of fixed assets totaled $24,571,000, $20,595,000 and $19,082,000
during 1994, 1993 and 1992, respectively. Costs and related accumulated
depreciation of property replaced, retired or otherwise disposed of are removed
from the accounts and gains or losses, if any, are included in the results of
operations for the period. Property and equipment no longer used in operations
are stated at the lower of cost or estimated net realizable value and included
in other current assets.
Interest is capitalized on the construction of major facilities. Capitalized
interest is recorded as part of the cost of the asset to which it is related and
is depreciated over the asset's estimated useful life. Interest costs of
$1,933,000, $405,000 and $353,000 were capitalized during 1994, 1993 and 1992,
respectively.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1994 1993
--------------------------------------------------------------------------------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and equivalents $5,884,000 $5,884,000 $8,274,000 $8,274,000
Marketable securities 21,158,000 21,158,000 28,314,000 28,314,000
Long-term investments 5,322,000 5,322,000 3,800,000 3,800,000
Liabilities:
Short-term borrowings 28,267,000 28,267,000 -- --
Senior notes 30,571,000 31,033,000 32,714,000 35,175,000
</TABLE>
Long-term investments include interests in affordable housing limited
partnerships which provide favorable income tax benefits to the Company over a
fifteen-year period. While the fair value of these long-term investments is not
practicable to obtain, the Company believes that the carrying amount represents
the best estimate of fair value. The carrying amount of short-term borrowings
approximates fair value. The fair value of the Company's Senior notes is
estimated based on the discounted value of future cash flows utilizing an
estimated discount rate currently available to the Company for similarly
structured debt.
32
<PAGE> 35
12. LIABILITIES
The components of accrued and long-term liabilities are as follows:
<TABLE>
<CAPTION>
December 31, 1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C>
Accrued
Payroll and related benefits $10,171,000 $ 6,402,000
Insurance reserves 4,473,000 4,716,000
Taxes, other than income tax 2,135,000 2,035,000
Interest and dividends 1,664,000 1,287,000
Income taxes 1,579,000 1,475,000
Tooling and maintenance 732,000 1,345,000
Other 833,000 4,172,000
----------------------------------------------------------------------------------------
$21,587,000 $21,432,000
============================
Long-term
Executive retirement and deferred compensation plans $ 6,949,000 $ 5,675,000
Deferred lease payments 6,262,000 5,258,000
Other 3,686,000 49,000
----------------------------------------------------------------------------------------
$16,897,000 $10,982,000
============================
</TABLE>
13. CONTINGENCIES
The Company is party to various legal and environmental proceedings incidental
to its business. Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against the Company. Based on
facts now known to the Company, management believes all such matters are
adequately provided for, covered by insurance or, if not so covered or provided
for, are without merit, or involve such amounts that would not materially
adversely affect the consolidated results of operations and cash flows or
financial position of the Company.
The Company has employment agreements with certain executive officers that, in
addition to customary benefit and severance provisions, guarantee lump sum
payments after a change in control of the Company, if certain events occur.
Compensation which might be payable under these agreements has not been accrued
as no such change in control has occurred.
14. OTHER INCOME
Other income (expense) includes $1,800,000 of pre-production costs relating to
the start-up of the Chihuahua, Mexico cast aluminum wheel and Fayetteville,
Arkansas chrome-plating facilities in 1994 and $1,000,000 of pre-production
costs related to the Chihuahua, Mexico plant in 1993.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
First Second Third Fourth Total
December 31, 1994 Quarter Quarter Quarter Quarter Year
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $105,938 $120,706 $107,384 $122,610 $456,638
Gross Profit 24,574 30,328 26,138 30,328 111,368
Net Income 12,515 15,397 12,642 15,761 56,315
Earnings Per Share .41 .51 .42 .52 1.85
Dividends Per Share .03 .045 .045 .045 .17
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Total
December 31, 1993 Quarter Quarter Quarter Quarter Year
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $98,119 $106,884 $82,813 $105,217 $393,033
Gross Profit 21,064 26,062 19,638 24,700 91,464
Net Income 10,066 13,250 9,286 12,575 45,177
Earnings Per Share .33 .43 .30 .41 1.47
Dividends Per Share .027 .027 .03 .03 .11
</TABLE>
33
<PAGE> 36
STATEMENT OF MANAGEMENT'S
FINANCIAL RESPONSIBILITY
TO OUR SHAREHOLDERS:
The management of Superior Industries International, Inc. is responsible for the
integrity and objectivity of the financial and operating information contained
in this Annual Report, including the consolidated financial statements. The
consolidated financial statements were prepared in accordance with generally
accepted accounting principles appropriate in the circumstances, and include
amounts that are based on management's best estimates and judgment.
Management of the Company has established a system of internal accounting
controls which provides reasonable assurance that assets are properly
safeguarded and accounted for and that transactions are executed in accordance
with management's authorization and recorded and reported properly. The system
also includes a program of financial and operational reviews by an internal
auditor.
The consolidated financial statements have been audited by our independent
public accountants, Arthur Andersen LLP whose unqualified report is presented
herein. Their opinion is based on procedures performed in accordance with
generally accepted auditing standards, including tests of the accounting
records, obtaining an understanding of internal accounting controls solely for
purposes of planning and performing their audits, and such other auditing
procedures as they considered necessary in the circumstances to provide them
reasonable assurance that the consolidated financial statements are neither
materially misleading nor contain material errors.
The Audit Committee of the Board of Directors, consisting solely of
outside Directors, meets periodically with the independent public accountants,
the internal auditor, and management to review and discuss the scope and major
findings of the independent accountants examination and results of internal
audit reviews, including the system of internal accounting control, and
accounting principles and practices. Both the independent accountants and the
internal auditor have free access to the Audit Committee at any time.
/s/ Louis L. Borick
-----------------------------------
Louis L. Borick
President and Chairman of the Board
/s/ R. Jeffrey Ornstein
-----------------------------------
R. Jeffrey Ornstein
Vice President & CFO
/s/ Charles E. Barrantes
-----------------------------------
Charles E. Barrantes
Corporate Controller and Secretary
34
<PAGE> 37
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
TO SUPERIOR INDUSTRIES INTERNATIONAL, INC.:
We have audited the accompanying consolidated balance sheets of Superior
Industries International, Inc. (a California corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Superior Industries
International, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Los Angeles, California
February 13, 1995
35
<PAGE> 38
[CAPTION]
[CORPORATE
INFORMATION]
<TABLE>
<S> <C> <C>
DIRECTORS
Louis L. Borick Sheldon I. Ausman Philip W. Colburn
President and Senior V.P., Chairman, Allen Group, Inc.
Chairman of the Board Johnson & Higgins
V. Bond Evans
Raymond C. Brown Retired Managing Partner, Retired President and CEO,
Senior Vice President Arthur Andersen & Co. Alumax Inc.
R. Jeffrey Ornstein Steven J. Borick Jack H. Parkinson
Vice President & CFO President, Texakota, Inc. Retired Executive V.P.,
Sunroad Enterprises
CORPORATE OFFICERS
Louis L. Borick Michael D. Dryden Morris Herstein
President and Vice President, Vice President, Services
Chairman of the Board International Business
Development John Knott
Raymond C. Brown Vice President, Manufacturing
Senior Vice President Ronald F. Escue
Vice President, General Henry C. Maldini
Charles E. Barrantes Manager - Aftermarket Vice President, Engineering
Corporate Controller Wheel Division
and Secretary R. Jeffrey Ornstein
James M. Ferguson Vice President & CFO
Joseph T. D'Amico Vice President, OEM
Vice President, Materiel Marketing Group Delbert J. Schmitz
Vice President, Aftermarket Marketing
COUNSEL AND AUDITORS
General Counsel Auditors
Irell & Manella Arthur Andersen LLP
PLANT AND SUBSIDIARY LOCATIONS
Superior Van Nuys Johnson City, Tennessee Superior Engineered
Leon E. Easton, Technologies, Inc.
Fayetteville, Arkansas Plant Manager
Rogers, Arkansas Joint Ventures
Larry W. Beals, Superior Puerto Rico Astechnology, Inc.
General Manager Pedro Mora, Superior-Otto Fuchs (Europe)
General Manager Topy-Superior Limited (Japan)
Chrome Plating Plant
Fayetteville, Arkansas Superior Industries Joint Development
James J. Hollingsworth, de Mexico, SA de CV Project With:
General Manager Gabriel Soto, Aluminum Company
General Manager of America (Alcoa)
Pittsburg, Kansas
P.S. Reddy, Superior West Memphis
General Manager Terrence J. Schultz,
General Manager
TRANSFER AGENT ANNUAL MEETING SHAREHOLDER
AND REGISTRAR INFORMATION
The annual meeting of
Chemical Trust Company Superior Industries Form 10K Annual Report to the
of California International, Inc. will be held Securities and Exchange Commission
Los Angeles, California at 10:00 a.m. on May 19, 1995 will be sent free of charge to
800.356.2017 at the Regent Beverly Wilshire shareholders upon written request to
Hotel, 9500 Wilshire Blvd., R. Jeffrey Ornstein, Vice President &
Beverly Hills, California. CFO.
CORPORATE OFFICES SHAREHOLDER
RELATIONS
7800 Woodley Avenue
Van Nuys, California 91406 818.771.5906
818.781.4973
Fax 818.780.3500
Telex 65.1454
</TABLE>
<PAGE> 39
Superior
Industries International, Inc.
7800 Woodley Avenue
Van Nuys, California
91606
818.781.4973
Fax 818.780.3500
Telex 65.1454
<PAGE> 1
EXHIBIT 21.1
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Percentage of
Voting Stock
Jurisdiction Owned by the
of Company or
Name Incorporation Other Subsidiary
---- ------------- ----------------
<S> <C> <C>
Superior - Ideal, Inc Iowa, U.S.A. 100%
owned by Company
Superior Performance Ontario, Canada 100%
Products (Canada) Inc owned by Company
Industrias Universales Mexico 100%
Unidas de Mexico, S.A owned by Company
Superior Industries Delaware, U.S.A. 100%
International - owned by Company
P.R. Inc
Suinco Assurance Ltd Bermuda 100%
owned by Company
Superior Industries Delaware, U.S.A. 100%
International Leasing owned by Superior
Corporation Industries
International -
P.R. Inc
Superior Astechnology Delaware, U.S.A. 100%
Inc owned by Company
Topy-Superior Limited Tokyo, Japan 50%
owned by Company
Superior Engineered Delaware, U.S.A. 100%
Technologies, Inc owned by Company
Superior Industries Chihuahua, Mexico 100%
de Mexico S.A. de C.V owned by Company
and Superior Engineered
Technologies, Inc
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated February 13, 1995, included in Superior Industries International,
Inc.'s annual report to shareholders on Form 10-K for the year ended December
31, 1994, into the Company's previously filed Registration Statements File Nos.
2-80130, 33-68547 and 33-64088.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
March 21, 1995
Exhibit 23.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1994 AND THE CONSOLIDATED
STATEMENTS OF INCOME FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 5,884
<SECURITIES> 21,158
<RECEIVABLES> 81,864
<ALLOWANCES> 541
<INVENTORY> 44,746
<CURRENT-ASSETS> 160,771
<PP&E> 292,782
<DEPRECIATION> 106,929
<TOTAL-ASSETS> 357,683
<CURRENT-LIABILITIES> 106,923
<BONDS> 3,417
<COMMON> 14,806
0
0
<OTHER-SE> 185,376
<TOTAL-LIABILITY-AND-EQUITY> 357,683
<SALES> 456,638
<TOTAL-REVENUES> 458,476
<CGS> 345,270
<TOTAL-COSTS> 364,473
<OTHER-EXPENSES> 839<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,862
<INCOME-PRETAX> 90,304
<INCOME-TAX> 33,989
<INCOME-CONTINUING> 56,315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,315
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 0
<FN>
<F1>OTHER EXPENSES INCLUDE MISCELLANEOUS EXPENSE.
</FN>
</TABLE>
