<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- -------------------------------------------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
_________ TO _________
COMMISSION FILE NUMBER 1-6615
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-2594729
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7800 WOODLEY AVENUE
VAN NUYS, CALIFORNIA 91406
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(818) 781-4973
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LAST PRACTICABLE DATE.
CLASS OF COMMON STOCK OUTSTANDING AT OCTOBER 31, 1997
--------------------- -------------------------------
$.50 PAR VALUE 27,903,387
<PAGE> 2
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Cover Page ...................................................................................... 1
Table of Contents ............................................................................... 2
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Condensed Balance Sheets .................................................... 3
Consolidated Condensed Statements of Income - Three Months .............................. 4
Consolidated Condensed Statements of Income - Nine Months ............................... 5
Consolidated Condensed Statements of Cash Flows .......................................... 6
Consolidated Condensed Statements of Shareholders' Equity ................................ 7
Notes to Consolidated Condensed Financial Statements ..................................... 8
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Part II - Other Information
Item 1 - Legal Proceedings ................................................................... 12
Item 5 - Other Important Information ......................................................... 12
Item 6 - Exhibits and Reports on Form 8K ..................................................... 12
Signatures ...................................................................................... 13
Exhibit 27 - Financial Data Schedule
</TABLE>
2
<PAGE> 3
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
ASSETS 1997 1996
------------ -----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash items ....................................... $ 49,636 $ 36,815
Short-term investments, at the lower of
cost or market ......................................... 5,605 5,288
Accounts receivable ....................................... 74,628 66,567
Inventories
Raw materials .......................................... 14,760 16,474
Work in process ........................................ 12,518 13,461
Finished goods ......................................... 21,959 17,795
-------- --------
49,237 47,730
Other current assets ...................................... 7,823 7,680
-------- --------
Total current assets .............................. 186,929 164,080
-------- --------
Property, Plant and Equipment .................................... 327,998 321,855
Less: Accumulated Depreciation .................................. 176,813 160,185
-------- --------
Net property, plant and equipment ................. 151,185 161,670
Other Assets ..................................................... 37,029 31,840
-------- --------
Total Assets ...................................... $375,143 $357,590
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable and current portion of
long-term debt ......................................... $ 3,874 $ 3,874
Accounts payable .......................................... 32,806 46,178
Accrued liabilities ....................................... 33,694 26,317
-------- --------
Total current liabilities ......................... 70,374 76,369
-------- --------
Long-term Debt ................................................... 1,763 1,940
Other Long-term Liabilities ...................................... 18,689 17,850
Deferred Income Taxes ............................................ 10,220 10,320
Shareholders' Equity ............................................. 274,097 251,111
-------- --------
Total Liabilities and Shareholders' Equity ........ $375,143 $357,590
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
3
<PAGE> 4
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30
------------------
1997 1996
--------- ---------
<S> <C> <C>
Net Sales .................................. $ 130,243 $ 120,447
Cost of Sales .............................. 105,699 96,038
--------- ---------
Gross Profit ............................... 24,544 24,409
Selling, General and Administrative Expenses 5,020 4,587
--------- ---------
Income From Operations ..................... 19,524 19,822
Non-Operating Income and Expense
Interest expense .................... 148 236
Interest income ..................... 823 232
Miscellaneous expense ............... 105 1,750
--------- ---------
570 (1,754)
Income Before Provision for Income Taxes ... 20,094 18,068
Provision for Income Taxes ................. 6,975 6,640
--------- ---------
Net Income ................................. $ 13,119 $ 11,428
========= =========
Earnings Per Share ......................... $ 0.47 $ 0.40
========= =========
Dividends Declared Per Share ............... $ 0.07 $ 0.06
========= =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
4
<PAGE> 5
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------
1997 1996
--------- ---------
<S> <C> <C>
Net Sales .................................. $ 398,226 $ 379,462
Cost of Sales .............................. 322,579 302,973
--------- ---------
Gross Profit ............................... 75,647 76,489
Selling, General and Administrative Expenses 15,064 14,948
--------- ---------
Income From Operations ..................... 60,583 61,541
Non-Operating Income and Expense
Interest expense .................... 431 1,139
Interest income ..................... 1,811 592
Miscellaneous expense ............... 109 7,293
--------- ---------
1,271 (7,840)
Income Before Provision for Income Taxes ... 61,854 53,701
Provision for Income Taxes ................. 22,113 19,735
--------- ---------
Net Income ................................. $ 39,741 $ 33,966
========= =========
Earnings Per Share ......................... $ 1.41 $ 1.18
========= =========
Dividends Declared Per Share ............... $ 0.20 $ 0.17
========= =========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
5
<PAGE> 6
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------
1997 1996
-------- --------
<S> <C> <C>
Net Cash Provided by Operating Activities: $ 44,607 $ 68,947
Cash Flows from Financing Activities:
Short-term borrowings ........................ -- (4,800)
Stock options exercised ...................... 1,087 533
Payments of long-term debt ................... (177) (161)
Cash Dividends ............................... (5,375) (4,872)
Repurchases of common stock .................. (12,780) (17,197)
-------- --------
Net Cash Used in Financing Activities ............. (17,245) (26,497)
-------- --------
Cash Flows from Investing Activities
Additions to property, plant and equipment ... (9,623) (7,490)
Investment in and advances to joint ventures.. (5,047) (11,250)
Proceeds from sales of assets ................ 129 364
-------- --------
Net Cash Used in Investing Activities ............. (14,541) (18,376)
-------- --------
Net Increase in Cash and Cash Items ............... 12,821 24,074
Cash and Cash Items at Beginning of Period ........ 36,815 3,366
-------- --------
Cash and Cash Items at End of Period .............. $ 49,636 $ 27,440
======== ========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
6
<PAGE> 7
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Valuation
Common Stock Adjustment
------------------------- Additional Cumulative to
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, 1996 28,323,666 $ 14,161 $ 20,845 $ (13,845) $ (554) $ 230,504 $ 251,111
Net income -- -- -- -- -- 39,741 39,741
Foreign currency
translation, net of
related deferred
income taxes -- -- -- 220 -- -- 220
Cash dividends
($.20/share) -- -- -- -- -- (5,624) (5,624)
Repurchases of
common stock (504,500) (252) (12,528) -- -- -- (12,780)
Stock options
exercised, including
related tax
benefit 82,464 42 1,045 -- -- -- 1,087
Valuation adjustment to
marketable securities -- -- -- -- 342 -- 342
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at
September 30, 1997 27,901,630 $ 13,951 $ 9,362 $ (13,625) $ (212) $ 264,621 $ 274,097
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
7
<PAGE> 8
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
During interim periods, Superior Industries International, Inc. and its
subsidiaries (the "Company") follow the accounting policies set forth in its
Annual Report to Shareholders and applies appropriate interim financial
reporting standards, as indicated below. Users of financial information produced
for interim periods are encouraged to refer to the notes contained in the Annual
Report to Shareholders when reviewing interim financial results.
Interim financial reporting standards require management to make estimates that
are based on assumptions regarding the outcome of future events and
circumstances not known at the present time, including the use of estimated
effective tax rates. Inevitably, some assumptions may not materialize and
unanticipated events and circumstances may occur which vary from those estimates
and such variations may significantly affect the Company's future results.
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements of the Company have been prepared in accordance with the
Securities and Exchange Commission's requirements of form 10-Q and contain all
adjustments, of a normal and recurring nature, which are necessary to present
fairly the financial position of the Company as of September 30, 1997, and the
results of its operations and cash flows for the three and nine month periods
ended September 30, 1997 and 1996.
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.
8
<PAGE> 9
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Earnings per Share
Earnings per share are based upon the weighted average number of common shares
outstanding and the dilutive effect of common stock equivalents, consisting
solely of stock options. The weighted average of common and common equivalent
shares used in calculating earnings per share were 28,196,000 and 28,605,000 for
the three months ended September 30, 1997 and 1996, respectively, and were
28,277,000 and 28,882,000 for the nine months then ended, respectively.
Adoption of Financial Accounting Standard No. 128 - Earnings per Share, issued
by the Financial Accounting Standards Board in March, 1997 and effective for
financial periods ending after December 15, 1997, will not have a significant
impact on previously reported earnings per share.
Forward Looking Statements
Some statements included in this filing which are not historical in nature are
forward looking statements within the meaning of the Private Securities
Legislation Act of 1995. Forward looking statements regarding the Company's
future performance and financial results are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward looking statements due to a variety of factors. Factors
that may impact such forward looking statements include, among others, changes
in the condition of the industry, changes in general economic conditions and the
success of the Company's strategic and operating plans.
9
<PAGE> 10
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months
Ended September 30,
----------------------
Increase
Summary of Sales by Product Line 1997 1996 Over 1996
- -------------------------------- -------- -------- ---------
<S> <C> <C> <C>
OEM Cast Aluminum Road Wheels $121,658 $113,130 7.5%
Automotive Aftermarket Products 8,585 7,317 17.3%
-------- -------- ----
$130,243 $120,447 8.1%
======== ======== ====
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-----------------------
Increase
1997 1996 Over 1996
--------- -------- ---------
<S> <C> <C> <C>
OEM Cast Aluminum Road Wheels $371,724 $354,479 4.9%
Automotive Aftermarket Products 26,502 24,983 6.1%
-------- -------- ---
$398,226 $379,462 4.9%
======== ======== ===
</TABLE>
RESULTS OF OPERATIONS
Net sales were $130.2 million and $398.2 million for the quarter and nine months
ended September 30, 1997, representing an increase of 8.1 percent and 4.9
percent, respectively, from comparable periods in 1996. Net sales in 1997
include sales of the chrome plating operation of $6.1 million for the quarter
and $16.5 million for the year-to-date period. In 1996, the results of
operations for the chrome business, which was in start up, were reported as a
component of miscellaneous expense. For the quarter and nine months, OEM unit
shipments to customers increased 2.7 percent over comparable periods in 1996.
Overall North American production of cars and light trucks decreased by two
percent during the quarter which indicates a continued trend toward greater
installation of aluminum wheels on North American light vehicles. Shipments to
Japanese and European customers were up almost 22 percent for the quarter and 49
percent for the nine months and now represent approximately 8.0 percent of OEM
units shipped.
Net sales in the automotive aftermarket business increased 17.3 percent and 6.1
percent for the quarter and nine months ended September 30, 1997, as compared to
the same periods in 1996. The sales increase for the quarter represents an 11
percent increase in road wheel sales and a 21 percent increase in other
accessories, such as suspension products and exhaust extension products, some of
which are related to the acquisition of certain inventory of the Perfection
product line in October of 1996.
10
<PAGE> 11
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The gross margin was 18.8 percent and 19.0 percent for the quarter and nine
months versus 20.3 percent and 20.2 percent for the comparable periods in 1996.
The decrease relates to the impact of including the chrome operations in 1997
and, to a lesser extent, price reductions related to productivity on large OEM
contracts.
Selling, general and administrative expenses, were 3.9 percent and 3.8 percent
of net sales for the quarter and nine months, respectively, compared to 3.8
percent and 3.9 percent in the same periods last year. The Company continues to
maintain tight controls over expenses.
Interest expense for the quarter and nine months in 1997 was down $88,000 and
$708,000 respectively compared to 1996. This is a decrease of 37.3 percent and
62.2 percent, respectively, and reflects continuation of debt repayments.
Interest income was up $591,000 and $1.2 million for the quarter and nine months
ended September 30, 1997, compared to 1996. The Company's cash flow increase is
invested in short-term investments causing higher interest income.
Miscellaneous expense decreased $1.6 million and $7.2 million for the quarter
and nine months ended September 30, 1997, compared to the same periods a year
ago. The 1996 periods included preproduction costs of $1.7 million and $7.4
million, respectively, related to the start up of the chrome plating business.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $44.6 million for the nine months
ended September 30, 1997, compared to $68.9 million for the same period a year
ago. The principal reasons for the reduced cash flow from operating activities
in 1997 were increased inventories and accounts receivable. The accounts
receivable increase was due to the timing of receipt of payments, as $26.6
million was received the day following the close of the quarter. The higher
inventory levels were produced to satisfy expected higher order levels during
the fourth quarter of 1997.
The principal financing activities of the Company during the nine months ended
September 30, 1997 were to repurchase the Company's common stock for $12.8
million, under a repurchase program authorized and begun in 1995, and to pay
cash dividends totaling $5.4 million. Similar financing activities during the
same period a year ago were for $17.2 million to repurchase common stock, $4.9
million to pay cash dividends and $4.8 million to repay short-term borrowings.
Investing activities for the period ended September 30, 1997 included funding
$9.6 million of capital expenditures for plant improvements and equipment
replacement, and advancing $4.3 million as a working capital loan to its joint
venture with German-based Otto Fuchs Metallwerke, in Tatabanya, Hungary. The
joint-venture, which operates under the name Suoftec Light Metal Products KFT
will produce both light weight forged and cast aluminum wheels to the European
automotive industry. During the same period a year ago, the Company invested
$7.5 million in capital expenditures and $11.3 million in the joint venture in
Hungary.
Working capital and current ratio were $116.6 million and 2.7:1 versus $87.7
million and 2.1:1 at December 31, 1996. Long-term debt to total capitalization
improved to 0.6 percent at September 30, 1997 versus 0.8 percent at year end.
Cash and short term investments as of September 30, 1997 were $55.2 million. The
Company's cash position is sufficient to liquidate all remaining debt and fund
working capital requirements.
11
<PAGE> 12
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 5, 1995, a class action complaint was filed in the United States
District Court - Central District of California naming as defendants the
Company, current and former officers and directors and an affiliated party. The
complaint was brought by a shareholder purporting to represent all purchasers of
the Company's common stock during the period from March 31, 1995 through
September 7, 1995. On March 9, 1997, the District Court granted the Company's
motion and dismissed the action with prejudice. A subsequent appeal filed by the
plaintiff was dismisssed by the Court of Appeals on September 22, 1997, and
accordingly, the matter is closed.
ITEM 5. OTHER IMPORTANT INFORMATION
In 1978, the Company established in Bermuda a wholly owned captive insurance
company, Suinco Assurance, Ltd. (Suinco), which was consolidated with the
results of the registrant. During the second quarter of 1997 steps were begun to
liquidate the captive. The Company expects that the final liquidation will be
completed in the fourth quarter of 1997. Suinco was established to provide
workers compensation coverage to the Company's operations in California. Due to
changes in the tax laws it became more advantageous for the Company to establish
a state self-insurance program for workers compensation. In July, 1992 the
Company became self insured and, under the State program, all subsequent claims
were handled directly by the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K - There were no reports on Form 8-K filed during the
three months ended September 30, 1997.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(Registrant)
Date 11/14/97 /s/ Louis L. Borick
--------------------- -------------------------------------
Louis L. Borick
President and Chairman of the Board
Date 11/14/97 /s/ R. Jeffrey Ornstein
--------------------- -------------------------------------
R. Jeffrey Ornstein
Vice President and CFO
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED, CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 49,636
<SECURITIES> 5,605
<RECEIVABLES> 74,628<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 49,237
<CURRENT-ASSETS> 186,929
<PP&E> 327,998
<DEPRECIATION> (176,813)
<TOTAL-ASSETS> 375,143
<CURRENT-LIABILITIES> 70,374
<BONDS> 0
0
0
<COMMON> 13,951
<OTHER-SE> 260,146
<TOTAL-LIABILITY-AND-EQUITY> 375,143
<SALES> 398,226
<TOTAL-REVENUES> 398,226
<CGS> 322,579
<TOTAL-COSTS> 337,643
<OTHER-EXPENSES> (1,702)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 431
<INCOME-PRETAX> 61,854
<INCOME-TAX> 22,113
<INCOME-CONTINUING> 39,741
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,741
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
<FN>
AMOUNTS INAPPLICABLE OR NOT DISCLOSED AS A SEPARATE LINE ON THE CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS ARE REPORTED AS 0 HEREIN.
<F1>
NOTES AND ACCOUNTS RECEIVABLE - TRADE ARE REPORTED NET OF ALLOWANCES FOR
DOUBTFUL ACCOUNTS IN THE CONSOLIDATED CONDENSED BALANCE SHEET.
</FN>
</TABLE>
