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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, 1996
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.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-2594729
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7800 WOODLEY AVENUE, VAN NUYS, CALIFORNIA 91406
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (818) 781-4973
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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.
Yes X No_________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
28,228,014 shares of common stock were outstanding as of March 17,
1997.
Aggregate market value of voting stock held by nonaffiliates of
registrant was $494,997,528 on March 17, 1997.
The following documents are incorporated by reference and made a part
of the Form 10-K:
1. Registrant's 1996 Annual Report to Shareholders (Parts I, II
and IV)
2. Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held May 16, 1997 (Part III)
Listing of Exhibits - Pages 20-22
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PART I
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain 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.
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 and
distributes 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 1996 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 (93.7 percent of net sales)
2. Aftermarket - Custom Road Wheels and Automotive Accessories
(6.3 percent of net sales)
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The Company's net sales for these product lines for 1996, 1995 and
1994 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"), Jaguar Cars Ltd.
("Jaguar") and Ford of Australia for factory installation as optional or
standard equipment on selected vehicle models. As discussed below, there are
several advantages for automobile and light truck manufacturers, dealers and
consumers provided by cast aluminum wheels. These advantages help promote the
success of the Company. Consolidated net sales in 1996, 1995, and 1994 were to
principally two major automotive manufacturers, Ford and General Motors.
During the past twenty-three years the Company has provided cast
aluminum road wheels to Ford, General Motors, Chrysler and, for the last
decade, Japanese and European auto manufacturers for an increasing number of
vehicle models, from eight models in 1980 to 163 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.
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 31 percent for the 1990 model year then to
41 percent for the 1996 model year. Aluminum road wheel installation rates for
domestic light trucks and utility vehicles jumped from approximately 24 percent
for the 1990 model year to almost 53 percent for the 1996 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 with the installation of cast aluminum
wheels. 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.
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With approximately 88 percent of the Company's 1996 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 previous
long-term contracts 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, in 1995, the Company signed a
"lifetime" contract with General Motors which extends from January 1, 1996
through December 31, 2000 and pertains to the "lifetime" of all current models.
In addition to securing all current models, the contract also gives the Company
last right of refusal for all replacement wheels. Accordingly, the Company
expects to be awarded a significant portion of General Motors overall aluminum
requirements.
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 customers through continuous
improvement programs. These factors have resulted in the Company's market
share expanding to approximately 40 percent of the domestic aluminum road wheel
market. Moreover, the Company currently ships wheels for approximately 127
different vehicle 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 one of their
highest rated suppliers 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 three new international
markets: Japan, Europe and Latin America as well as related 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. 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 sales and marketing 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
several new contracts to manufacture wheels for domestic Japanese OEMs as well
as for three of their U.S. 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 contract by Jaguar
to supply wheels. The wheels are manufactured in the United States and
exported to the United Kingdom. In addition, the Company received a contract
with European based
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BMW, to supply wheels for the new BMW Z3 roadster convertible. Shipments began
in 1995 to BMW's new plant in Spartanburg, South Carolina. Moreover, in 1995,
validating BMW's high regard for its quality and production capabilities, the
Company was awarded five additional wheel programs by BMW for shipment to the
Spartanburg plant as well as export to Germany. The Company began deliveries
to Ford of Australia in 1996 of a chrome plated wheel for their LTD "Hawk"
luxury car.
Further in pursuit of developing its ties to the European market, the
Company in 1995 entered into a 50-50 joint venture with German based Otto Fuchs
Metallwerke ("Otto Fuchs") to establish a European manufacturing presence. The
joint venture, known as Suoftec Light Metal Products, KFT ("Suoftec") will
produce both light weight forged and cast aluminum wheels for sale to European
OEMs. Construction of the building is complete and initial shipments are
slated to begin in 1997. The facility, located in Tatabanya, Hungary, a
country with competitive labor and production costs and available labor force,
establishes the Company's commitment toward entering the European market. The
facility is located in close proximity to large European OEM assembly plants
and will bring new wheel making technology to the Company for use in European
and U.S. markets.
Demonstrating OEMs' interest in this new light weight forging
technology, Suoftec received a long term contract from Audi calling for 700,000
wheels per year. The contract represents over $30 million per year in revenues
and represents almost half of first phase capacity of 1.5 million wheels per
year. The Company also received a new multi-year contract to supply cast
aluminum wheels for the new Audi TT convertible. Negotiations continue for
business with additional OEMs.
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. Wheels
manufactured at the Chihuahua, Mexico facility are both for installation on
Mexican-manufactured cars built mostly for export back to the U.S. and as
direct exports to the U.S. and Europe. 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 views the long-term
prospects of this manufacturing operation positively and, moreover, has held
discussions with OEMs regarding new and expanded export activities from this
facility. This plant is currently operating at very competitive costs. During
1996 the Company acquired land next to the plant for future expansion to handle
the expected increase in demand.
Contracts for OEMs other than Ford and GM doubled from 3% to 6% in
1996. They are significant for the growth of the Company by geographically
diversifying and expanding its global presence. The Company will continue to
focus its efforts on new global markets as they 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 fully automated
chrome-plating wheel facility. The Company is the only OEM aluminum wheel
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manufacturer to develop this in-house capability and the plant is the largest
of its kind in the world. This facility has encountered severe start up
difficulties but has implemented corrective action that has led to improved
results during the fourth quarter of 1996. One of the most severe problems was
in establishing waste treatment systems that were reliable and able to meet
production levels. Significant resources were devoted and key managers placed
to achieve higher production levels. The plant represents the Company's
commitment toward diversifying into new product lines complementary to its core
business (see also "Manufacturing").
New Products
The Company reported on March 11, 1997 that General Motors had awarded
Superior a contract to supply cast aluminum transmission brackets for one new
Oldsmobile Intrigue program. This contract marks the Company's initial move
into other aluminum components for the automotive market. It is part of the
Company's planned diversification program, aimed at maximizing its resources
and applying its manufacturing expertise and more than four decades of industry
experience to meet increasing demand for aluminum components, which are
increasingly replacing traditional heavier metals.
The new product, which replaces a heavier stamped steel bracket, will
reduce vibration and provide for quieter performance. Production is planned
for Superior's plant in Van Nuys, California.
The GM contract represents the first step in the Company's
diversification program. Management looks forward to continuing the strategic
expansion into other aluminum products for the automotive industry as a means
to create even stronger partnering relationships with customers and to foster
the profitable growth of the Company.
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, manufactures and distributes 68 different
product lines including 3,800 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 cover continues to be
a significant product line and has achieved national recognition.
The decline of 8.5% in 1996 in aftermarket accessories shows a trend
begun in 1995 and continued in 1996 due to soft economic conditions and reduced
customer order levels. In 1996 the Company has also experienced a decrease of
13.9% in the roadwheel product lines, specifically, stylized aluminum and
chrome-plated aluminum wheels sold under the "Streetwear" trade name.
Aftermarket net sales, since 1992, 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
7.5 percent growth rate in the roadwheel product line while the accessory
business has declined approximately 1 percent. The approach to this business
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
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chrome-plated aluminum wheels with mass market appeal are developed and
introduced to the product line. Consumer response to new wheel styles has
encouraged development of new wheel programs.
Factors accounting for the decline in the aftermarket business include
high customer inventory levels accentuating a soft economic environment which
reduced orders. 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.
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
Discount Auto Parts. The Company also supplies major tire distributors such as
Les Schwab, Interstate Tire Corp.(ITCO), 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 and aftermarket products.
The Company employs low-pressure casting technology in its existing
North American factories, a process which the Company believes is the most
efficient process for high volume, high quality aluminum wheels. The
manufacture of cast aluminum wheels, in which aluminum ingot is melted, cast,
de-sprued, heat treated, painted, machined, clearcoated or chrome plated and
packaged, is performed entirely at the Company's facilities.
The Company operates six OEM aluminum wheel 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 nine
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.
Implementing the Company's long-term strategy of penetrating the Latin
American market, the Company has purchased additional land next to its OEM
wheel facility in Chihuahua, Mexico. This will allow for future expansion of
the existing plant.
Entry into the European market, through the joint-venture with Otto
Fuchs, with its newly completed aluminum wheel facility begins in 1997 in
Tatabanya, Hungary. The plant will be initially capable of producing 1.5
million wheels per year. The manufacturing process will take advantage of a
new forging technology developed by Otto Fuchs to forge lighter weight aluminum
wheels, supplemented with Superior's own light weight low pressure process.
The cost of the facility has been funded through capital contributions by each
partner and long-term project financing.
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In response to the growing popularity of chrome-plated cast aluminum
wheels, the Company completed construction in 1994 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
shipments commenced in 1995. The plant experienced severe start up
difficulties related to waste treatment and production processes. These
problems required capital and process improvements which were managed by key
personnel. Further discussion related to the chrome plant can be found in the
"Management's Discussion and Analysis of Financial Condition" section of the
Annual Report incorporated herein by reference.
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 statistical process control (SPC) and
advanced statistical analysis, such as design of experiments (DOE). Advanced
Product Quality Planning ("APQP") 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.
Beginning in 1989, the Company earned General Motors' highest quality
"Mark of Excellence" award for excellence in all five categories (Quality,
Cost, Delivery, Technology and Management.) Since then all plants producing GM
parts have received this coveted award. Ford awarded the Company's domestic
OEM facilities and Chihuahua producing Ford wheels with the prestigious "Q1"
quality rating.
In 1994, Ford awarded the Company the highly coveted "Full Service
Supplier" award in recognition of its advanced design, engineering and program
management capabilities. Superior was the first OEM wheel supplier in the
world to achieve this status.
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.
The Company's quality, management and employee efforts have enabled
the Company to achieve QS-9000 Registration of our Rogers and Pittsburg OEM
plants and engineering center in Fayetteville. Registration of all other
plants is expected by the end of 1997. The ability to achieve this hallmark of
excellence, a quality system conformance standard jointly developed by
Chrysler, Ford, and General Motors, further emphasizes the Company's commitment
to the highest quality at a competitive price.
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Marketing
Commencing January 1, 1996 the Company established a technical sales
center in Detroit and terminated its relationship with a third party
representative. The office will provide technical engineering and sales staff
in closer proximity to the Company's major customers and will enhance the
Company's already strong sales and technical resources to meet the ever
demanding requirements of its OEM customers. In addition, the Company's sales
and marketing 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 1996, the Company had approximately 300 aftermarket accounts
operating through thousands of retail outlets. The Company's ten largest
customers in 1996 accounted for approximately 76 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 one 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, 1996 and 1995, 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 1996, seasonal factors included work stoppages at
our customer assembly plants in the first and fourth quarters and severe winter
weather during the first quarter. During the past few years, there has been no
significant consistent seasonal variation.
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Suppliers
The Company purchases substantial quantities of aluminum ingot for the
manufacture of its cast aluminum road wheels. These purchases accounted for
approximately 80 percent of the Company's total material requirements during
1996. 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 year. The
Company was able to successfully secure aluminum commitments from its primary
suppliers at the beginning of 1996 to meet its production requirements. For
1997, the Company has procured contracts to meet the majority of its estimated
aluminum ingot requirements.
The aluminum market over the past several years has been extremely
volatile. Selling prices are adjusted for these raw material increases. See
"Management Discussion and Analysis" in the Annual Report for further
information.
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. Two fully staffed engineering centers located
in Van Nuys, California and Fayetteville, Arkansas support the Company's R & D
manufacturing needs. Further in pursuit of this objective and to enhance
customer relationships, the Company opened, in 1996, a technical center in
Detroit which maintains a compliment of engineering staff centrally located
near the Company's largest customers.
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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. The Company also
utilizes fluid flow and thermal analysis capabilities to aid in molds and
casting cycles. 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 a breakthrough in the Company's ongoing effort to
provide the most efficient manufacturing processes and methods. These
machines, which detect microscopic leaks at a rapid rate, are currently
utilized in several of the Company's facilities. Through its wholly-owned
subsidiary, Superior Engineered Technologies, Inc., the Company has begun to
market this technology and has made limited 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,
shortly after year end 1995, the Company consummated a joint venture agreement
with Aluminum Company of America ("Alcoa") to manufacture and sell a new line
of cast aluminum wheels for commercial trucks and buses in the class 3 through
6 range. Class 3 through 6 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. The Company developed a cast
aluminum wheel for this market and is beginning to manufacture sample wheels at
its Van Nuys facility marketed through Alcoa's existing Wheel Division sales
organization. The joint venture could serve as a basis for the Company to
expand its technology to develop other cast aluminum parts.
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. These efforts have resulted in receiving our
first order to produce cast aluminum transmission brackets for the Oldsmobile
Intrigue.
The Company is currently engaged in many 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 9
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.
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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.
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 1996 annual cost
of environmental compliance is approximately $2,500,000. 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. Significant resources were
expended during the start up period to modify the waste treatment system in the
chrome plant so that it could increase production levels.
Liability Insurance
The Company maintains liability insurance including product liability,
for limits it believes are appropriate to match the risks and exposures
inherent to the Company's business. Over the past five years, the Company has
never settled claims in excess of the coverage then in effect.
Competition
The business sectors in each of the Company's product areas are highly
competitive. The Company is one of the leading suppliers of cast aluminum road
wheels for OEM installations in the world and the Company estimates it supplies
between 35 and 40 percent of the North American aluminum wheels for the car and
light truck market. Based on Ward's Automotive, an industry publication,
aluminum wheel installation rates on automobiles and light trucks rose to a
record 46.1 percent for the 1996 model year. This significant growth began in
1980 when demand for OEM cast aluminum road wheels was approximately four
percent of vehicle installations. The Company anticipated this eventuality and
developed new state-of-the-art "world class" manufacturing facilities located
closer to OEM final assembly 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.
Page 12
<PAGE> 13
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.
Employees
As of December 31, 1996, the Company had approximately 4,500 full-time
employees. At the present time approximately 80 employees at the Company's
Tijuana, Mexico maquiladora, which polishes wheels for aftermarket
applications, are covered by collective bargaining agreements. For the past
several years, union organizations have attempted to organize workers at
certain of the Company's plants. In every instance, the workers voted
overwhelmingly against representation by the union.
ITEM 2. PROPERTIES
The Company maintains and operates 12 facilities located in Arkansas,
California, Michigan, Hungary, Kansas, Tennessee, Puerto Rico, and Baja and
Chihuahua, Mexico. The facilities encompass manufacturing, warehouse and
office space in 15 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.
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.
ITEM 3. LEGAL PROCEEDINGS
In 1988, the Company was 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.
Page 13
<PAGE> 14
The PRP's are jointly and severally liable although it is possible 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 $461,816, net of settlements from other
parties, 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.
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 and 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. The Company filed a motion to dismiss this action
on the basis that it failed to state a claim and failed to plead fraud with the
requisite particularity. The United States District Court initially dismissed
the complaint on June 10, 1996 without prejudice. On July 1, 1996, the same
plaintiff filed an amended complaint against the Company and several of the
individuals named as defendants in the original complaint. Subsequently, the
Company and the other defendants moved to dismiss the plaintiff's amended
complaint. On March 9, 1997, the District Court granted the defendants' motion
and dismissed the amended complaint with prejudice.
(This space intentionally left blank)
Page 14
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1996 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
17, 1996 which is incorporated herein by reference (1996 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 1996 Proxy
Statement.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Joseph T. D'Amico 67 Vice President, Materiel
Michael D. Dryden 59 Vice President, International
Business Development
Ronald F. Escue 51 Vice President, General Manager -
Aftermarket Wheel Division
James M. Ferguson 48 Vice President, OEM Marketing Group
Morris Herstein 69 Vice President, Services
John Knott 56 Vice President, Manufacturing
Daniel L. Levine 38 Corporate Secretary and Assistant Treasurer
Henry C. Maldini 62 Vice President, Engineering
Frank Monteleone 58 Vice President, Purchasing
Michael J. O'Rourke 36 Vice President, Program Administration
Delbert J. Schmitz 64 Vice President, Aftermarket Marketing
</TABLE>
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.
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.
Page 15
<PAGE> 16
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.
Daniel L. Levine
Mr. Levine became Corporate Secretary in March 1996. He is also
responsible for overseeing the Company's taxes and assisting in the
administration of corporate treasury activities, including risk management and
credit. He joined Superior in 1990.
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.
Frank Monteleone
Mr. Monteleone was appointed Corporate Vice President, Purchasing in
July 1996. Prior to his appointment, Mr. Monteleone was Corporate Purchasing
Director beginning in February 1986. He joined the Company in 1982.
Page 16
<PAGE> 17
Michael J. O'Rourke
Mr. O'Rourke was appointed Vice President, Program Administration in
July 1995. He is responsible to assist Mr. Ferguson in the administration of
OEM sales and marketing programs of the Company including executive oversight
of the Company's Detroit technical sales center. Mr. O'Rourke joined Superior
in 1987. Prior to his promotion he held various managerial positions in the
marketing department.
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.
(This space intentionally left blank)
Page 17
<PAGE> 18
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 18
<PAGE> 19
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 1996 Proxy Statement which is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the Company's 1996 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 1996 Proxy Statement which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Reference is made to the Company's 1996 Proxy Statement which is
incorporated herein by reference.
(This space intentionally left blank)
Page 19
<PAGE> 20
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, 1996
(3) Consolidated Balance Sheets as of December 31, 1996 and 1995
(4) Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended December 31, 1996
(5) Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1996
(6) Notes to Consolidated Financial Statements
2. Supplemental Financial Statement Schedules
The following report and schedule appear on pages 24 and 26 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 20
<PAGE> 21
3. Exhibits
3.1 Articles of Incorporation of the Registrant (Incorporated by
reference to Exhibit 3.1 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994.)
3.2 By-Laws of the Registrant (Incorporated by reference to
Exhibit 3.2 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994.)
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.)
9.4 Third Amendment to the Voting Trust Agreement. (Incorporate by
reference to Exhibit 9.4 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1995.)
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.)
Page 21
<PAGE> 22
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.)
10.24 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.)
10.26 $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.)
10.30 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.)
10.32 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.)
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.)
10.38 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.)
Page 22
<PAGE> 23
10.39 Chief Executive Officer Annual Incentive Program dated May 9,
1994 between Louis L. Borick and the Registrant (Incorporated
by reference to Exhibit 10.39 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994.)
10.40 Letter dated February 15, 1995 between Iftikhar H. Kazmi and
the Registrant (Incorporated by reference to Exhibit 10.40 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994.)
10.41 Amendment dated December 15, 1995 to Employment agreements
between Registrant and Raymond C. Brown and R. Jeffrey
Ornstein. (Incorporate by reference to Exhibit 10.41 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995.)
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 1996 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 1996 Financial Data Schedule
1996 Proxy Statement
(b) Reports of Form 8-K
No reports on Form 8-K have been filed during the fourth quarter of
1996.
(This space intentionally left blank)
Page 23
<PAGE> 24
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 12, 1997.
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 states in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 12, 1997
Page 24
<PAGE> 25
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 28, 1997
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>
President,
/s/ Louis L. Borick Chairman of the Board
- ------------------- and Director
Louis L. Borick (Principal Executive Officer)
March 28, 1997
/s/ R. Jeffrey Ornstein Vice President & CFO
- ----------------------- and Director
R. Jeffrey Ornstein (Principal Financial Officer) March 28, 1997
/s/ Raymond C. Brown Senior Vice President
- -------------------- and Director March 28, 1997
Raymond C. Brown
/s/ Sheldon I. Ausman Director March 28, 1997
- ---------------------
Sheldon I. Ausman
/s/ Steven J. Borick Director March 28, 1997
- --------------------
Steven J. Borick
/s/ Philip W. Colburn Director March 28, 1997
- ---------------------
Philip W. Colburn
/s/ V. Bond Evans Director March 28, 1997
- ---------------------
V. Bond Evans
/s/ Jack H. Parkinson Director March 28, 1997
- ---------------------
Jack H. Parkinson
</TABLE>
Page 25
<PAGE> 26
SUPERIOR INDUSTRIES INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<S> <C>
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
ADD (DEDUCT):
PROVISION 244,000
RECOVERIES 20,000
ACCOUNTS WRITTEN OFF (83,000)
---------------
BALANCE AT DECEMBER 31, 1995 722,000
---------------
ADD (DEDUCT):
PROVISION 35,000
RECOVERIES -
ACCOUNTS WRITTEN OFF ( 39,000)
---------------
BALANCE AT DECEMBER 31, 1996 $ 718,000
===============
</TABLE>
Page 26
<PAGE> 1
EXHIBIT 13.1
Cover
1996
Annual
Report
Superior Industries International, Inc.
<PAGE> 2
(IFC)
The Company
Superior Industries International, Inc. is one of the world's leading
manufacturers of cast aluminum wheels for the original equipment manufacturer
(OEM) automotive industry with sales of over $500 million in 1996. The Company
is also a leading manufacturer of automotive accessory products for the
aftermarket, supplying 68 product lines and 3,800 parts ranging from steering
wheels and covers, suspension products, seat belts and license plate holders to
chrome-plated steel and aluminum road wheels.
Superior, which is beginning its 40th year in business, grew from its modest
beginnings as a small aftermarket supplier in 1957 to an internationally
recognized corporation, one of the leading suppliers of OEM aluminum wheels in
the world. With a strong presence in Detroit, Superior has enjoyed long term
relationships with Ford and General Motors as their largest and one of their
highest-rated suppliers. The Company has also expanded and is increasing its
business with international customers, supplying to Chrysler de Mexico, BMW,
Audi, and Jaguar as well as various Japanese manufacturers including Toyota,
Mazda, Nissan, Subaru and Isuzu.
Throughout its history, Superior has aggressively pursued a growth-oriented
approach with new technologies, capital improvements, and strategic investments
to gain advantages over its competition. Approximately 4,500 employees operate
12 manufacturing plants and offices throughout the United States, Puerto Rico,
Mexico and Europe. Together they bring a commitment to world-class excellence as
Superior continues to target future growth markets and meet the global
challenges of the 21st century.
Graph:
Shareholders' Equity (in millions)
$250
200
150
100
50
92 93 94 95 96
Graph:
Long-Term Debt (in millions)
$50
40
30
20
10
92 93 94 95 96
Certain statements included in this Annual Report 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.
<PAGE> 3
Page 1
Financial Highlights
<TABLE>
<CAPTION>
(In thousands except share data)
Years Ended December 31, 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Income Statement
Net Sales $504,241 $521,997 $456,638 $393,033 $325,314
Gross Profit 101,713 113,797 111,368 91,464 61,942
Net Income 46,850 53,064 56,315 45,177 28,596
Balance Sheet
Current Assets $164,080 $142,659 $160,771 $141,219 $134,158
Current Liabilities 76,369 81,746 106,923 75,991 63,296
Working Capital 87,711 60,913 53,848 65,228 70,862
Total Assets 357,590 341,770 357,683 310,123 267,198
Long-Term Debt, net 1,940 5,814 23,075 34,004 44,073
Shareholders' Equity 251,111 229,153 200,182 176,869 136,747
Financial Ratios
Current Ratio 2.1:1 1.7:1 1.5:1 1.9:1 2.1:1
Long-Term Debt/Total Capitalization 0.8% 2.5% 10.3% 16.1% 24.4%
Return on Average Shareholders' Equity 19.5% 24.7% 29.9% 28.8% 23.8%
Share Data
Earnings $ 1.63 $ 1.78 $ 1.85 $ 1.47 $ .94
Shareholders' Equity at Year-End 8.87 7.89 6.76 5.88 4.56
Dividends .23 .19 .17 .11 .10
</TABLE>
Quarterly Common Stock Price Information
<TABLE>
<CAPTION>
1996 1995 1994
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First Quarter $ 28 $23 7/8 $29 $23 7/8 $46 1/4 $31 3/8
Second Quarter 28 1/4 24 1/4 32 1/8 24 3/4 37 30
Third Quarter 26 1/2 22 7/8 35 3/4 25 3/4 34 28
Fourth Quarter 25 7/8 22 3/4 29 24 1/2 30 1/4 24 1/4
</TABLE>
The common stock of Superior Industries International, Inc. is traded on the New
York Stock Exchange (symbol: SUP). The Company had approximately 1,400
stockholders of record and 28.2 million shares outstanding as of January 31,
1997.
Cash Flow per Share (in dollars)
$3.00
2.50
2.00
1.50
1.00
.50
92 93 94 95 96
Net Sales (in millions)
$600
500
400
300
200
100
87 88 89 90 91 92 93 94 95 96
Earnings per Share (in dollars)
$2.00
1.50
1.00
.50
92 93 94 95 96
<PAGE> 4
Page 2
To Our Shareholders
In the competitive, ever-changing automotive OEM industry, Superior keeps
evolving . . . even though we are the recognized leader in the aluminum wheel
market. Since we introduced the first cast aluminum wheel to the OEM market in
1973 for the 1974 Mustang, there has been explosive growth. Installation rates
of aluminum wheels climbed significantly year to year. We continue to achieve
technological and financial successes and have consistently performed beyond
customer expectations. Amid all that success, we are keenly aware of the
industry's evolution. It's a new era in which OEMs are building closer ties with
fewer tier one suppliers. Superior has developed large production economies of
scale, technological expertise, the acumen to stay competitive in the world
marketplace and a global presence to support our customers' worldwide
operations. In 1996, we demonstrated our ability to successfully address these
challenges, made significant strides to ensure future growth, and maintained a
solid year of financial results.
First of all, we implemented an aggressive initiative last year to achieve
significant cost reductions and other profit improvements by the end of 1997
and beyond. We developed programs to identify how each of our facilities and
departments can contribute to the goal including cutting production costs,
improving operating efficiencies as well as enhancing quality control and plant
scheduling. This commitment comes from our management right down to the plant
floor and we have already started to see the successful implementation of these
programs through reduced costs at our plants. Secondly, we solidified our
position as a tier one supplier by achieving QS-9000 Registration of our Rogers
and Pittsburg OEM plants and engineering center in Fayetteville last year.
Registration of all our other plants is expected by the end of 1997. Our ability
to achieve registration for QS-9000 -- a quality system conformance standard
jointly developed by Chrysler, Ford, and General Motors -- demonstrates
Superior's continuing progress towards World Class excellence.
Adding to the progress in expanding our global presence was the timely
completion of our new joint venture OEM plant in Hungary which remains on
schedule to begin shipping wheels during the second quarter of 1997. Along with
our facility in Mexico, which we are looking to expand with additional
equipment, our new European plant will enable us to support the operations of
Superior's growing client base.
Caption
"At Superior, we believe quality enhancement is synonymous with cost reduction.
By improving the quality of our product, we have the ability to manufacture at
less cost and meet our customers' pricing requirements." - Louis L. Borick
<PAGE> 5
Page 3
One of our most significant accomplishments was the resolution of start-up
difficulties at our OEM chrome-plating facility. After assigning key personnel
to oversee the operations and implementing the necessary capital and process
improvements, we have seen an exceptional turn-around at our chrome plating
plant and are confident this operation is now well on the road to making a
positive impact on future earnings.
Last year also marked Superior's progress in other product markets that we have
been developing. The achievements include development of aluminum truck wheels
through our joint venture with ALCOA, and the expansion of our aftermarket
product line with stylized wheels and other innovative accessory products. We
have also advanced our expertise in aluminum casting to bring other components
to the OEM automotive market. This effort resulted in the Company's first
contract from General Motors to supply cast aluminum transmission brackets for
the Oldsmobile Intrigue, with initial shipments scheduled in early 1998.
We solidified our presence with our OEM customers by expanding our Detroit
Technical Sales Center with additional engineering and program management
personnel and sophisticated computer equipment to improve design and service
capabilities. This office has been instrumental in exceeding our customers'
demand for additional product development involvement.
Financial Results
We are pleased with the Company's overall financial results for 1996,
particularly since -- after absorbing significant losses at our chrome plating
facility during the first three quarters -- we ended so strongly. Net income was
$46.9 million and earnings per share were $1.63 compared to $53.1 million and
$1.78 in 1995. Company-wide sales exceeded $504 million, a 3.4% decrease from
1995. The Company continued to achieve record unit shipments of aluminum road
wheels with a 5% increase over 1995. This increase is strong considering overall
light vehicle sales in North America were down 1% due to labor disruptions and
severe winter weather.
We enter 1997 with a strong financial standing, exceptional cash flow, and key
programs that focus on competitive strategic positioning and profitability
improvement. Superior generated $97 million in cash from operations last year
which will fuel the Company's ability to seize future opportunities and
repurchase our Company's stock. In the long term, we are well positioned to
achieve excellent growth and will continue to search for complementary
businesses and products that extend our existing markets.
In closing, I would like to recognize the more than 4,500 Superior employees
whose unrelenting focus on customer needs, cost, and quality serve as the major
impetus that will enable the Company to seize growth opportunities, innovate new
products and processes, and enhance our vision for the future. On behalf of each
of them, I thank you for your continued support of our Company now and in the
years to come.
Signature
Louis L. Borick
President and Chairman of the Board
Photo (Award)
Specialty Equipment Market Association (SEMA)
Hall of Fame Award presented to Louis L. Borick
<PAGE> 6
Page 4
Management Team
Superior is headed by seasoned and dedicated management that operates on
teamwork, integrity, and productivity.
Under the careful leadership of Superior's President and Chairman, Louis Borick,
the Company has maintained a history of financial stability and excellent profit
margins that is second to none in the industry. An entrepreneur and major
stockholder in Superior, Mr. Borick recognizes and takes advantages of market
opportunities without risking the Company's financial strength. Superior's
management structure is such that it promulgates the entrepreneurial spirit and
synergy that has advanced the Company through 39 years of growth. The Company
maintains ongoing communications between and within each division to ensure
management stays apprised of expenses, production, inventory, and quality issues
on a daily basis. Management also has the ability to solve problems quickly and
react to customer needs which is essential in today's competitive automotive
marketplace.
Superior believes strongly that integrity is the underpinning for every aspect
of its business. It is what drives the Company to engineer and manufacture the
highest quality products. And, it's the basis for the consistent exceptional
service provided and sound financial decisions made by Superior.
Such integrity would not be possible if it were not ingrained in Superior's
people. The Company's policy is to hire, train, and promote the best people in
the industry with a goal of enabling each individual to realize his or her full
potential. Superior recognizes that the individual talents and contributions of
its people enhance the Company's competitive advantage.
From accounting and marketing to engineering and manufacturing, Superior has a
solid infrastructure in place to successfully carry the Company into the 21st
century and beyond.
Caption-Photo
Ray Brown, Senior Vice President; Lou Borick, President and
Chairman of the Board;
Jeff Ornstein, Vice President & CFO
Caption-Photo
Dan Levine, Corporate Secretary
and Assistant Treasurer;
Jeff Ornstein, Vice President & CFO
Caption-Photo
Mike O'Rourke, Vice President, OEM Programs;
Mike Dryden, Vice President, International Marketing;
Seated: Jim Ferguson, Vice President, OEM Marketing;
Ray Brown, Senior Vice President
Caption-Photo
Henry Maldini, Vice President, Engineering;
Bernie O'Neil, Director of Manufacturing
Caption-Photo
Del Schmitz, Vice President, Aftermarket;
Ron Escue, Vice President, Aftermarket Wheel Division;
Seated: Frank Monteleone, Vice President, Purchasing;
Joe D'Amico, Vice President, Materiel
<PAGE> 7
Page 5
Joint Ventures
Hungarian Plant
Last year marked a significant milestone for Superior's joint venture with
Germany-based Otto Fuchs Mettalwerke, exemplifying the success of Superior's
entry into the European market.
Superior completed the initial phase of construction of its new manufacturing
plant in Hungary. The initial phase, designed for a capacity of 1.5 million
wheels a year, is now equipped with state-of-the-art casting and forging
machinery. After testing the equipment, the Company is now ramping up production
on its previously announced order from Audi for 700,000 annual lightweight
forged wheels. In 1996, the Company received a new multi-year contract to supply
cast aluminum wheels for the new Audi TT convertible -- representing the first
casting order for the plant. Shipment of these wheels to Audi's plant in Gyor,
Hungary is scheduled to begin in April 1998.
The Audi contracts combined amount to a total of over $40 million in annual
revenues and fill over one half of the plant's initial production capacity prior
to the first full year of operation. The results of this newly established
customer relationship reinforce the Company's growth opportunities in Europe.
Furthermore, Superior has been working very closely with other major European
OEMs and is confident that the technical quality and cost benefits of the new
Hungarian joint venture will result in increased cast and forged wheel business.
Hungary's highly skilled labor force at competitive rates and close proximity to
Western Europe, coupled with Otto Fuch's lightweight forging process and
Superior's technological expertise and casting process, underline the Company's
ability to succeed in the European OEM market.
Alcoa
Superior's joint venture with ALCOA, the world's largest manufacturer of forged
aluminum wheels for large trucks and buses, continued to progress in 1996.
Equipment to produce low-pressure cast aluminum truck wheels is now in place at
the Company's plant in Van Nuys. With customer interest high, Superior is
producing an initial run of sample 19 1/2" wheels for Class 4 through 6 trucks.
The Company has also been developing a 17 1/2" wheel for Class 3 trucks and
expects to begin full production on both wheels this year.
Through this joint venture, called ASI (Alcoa Superior International), Superior
is opening an arena of new business that will become a successful addition to
the Company's financial results in the near future.
Caption-Photo
Superior's European joint venture plant located in Hungary
Caption-Photo
New 19 1/2
cast aluminum
truck wheel developed
for ASI joint venture
<PAGE> 8
Page 6
Manufacturing
Superior has continually made strides in the global OEM market, demonstrating
its technological leadership, depth of expertise, and progress toward World
Class excellence. Last year was no exception.
As highlighted earlier in this annual report, the Company completed the
construction of its state-of-the-art manufacturing facility in Tatabanya,
Hungary. Completion of this new joint venture plant establishes a significant
operational presence for Superior in the European marketplace. Built to support
the business Superior anticipated receiving from European automakers, the
Hungarian plant has already proven successful with orders filling over one-half
of its initial capacity. The success of the operations in Hungary demonstrates
Superior's expertise in designing, building, and equipping its own OEM wheel
manufacturing facilities, selling a major portion of each facilities' production
capacity prior to completion, and achieving profitable results within a short
period of time.
Achieving World Class Excellence
In addition, Superior made an unprecedented commitment to achieve QS-9000
Registration of all its manufacturing facilities. QS-9000 was jointly developed
by a Chrysler/Ford/General Motors Supplier Quality Requirements Task Force to
harmonize the fundamental quality system expectations of the three major North
American automakers.
Last year, Superior's Rogers and Pittsburg manufacturing facilities as well as
its engineering center in Fayetteville were awarded QS-9000 Registration.
Superior is one of the select automotive suppliers to achieve this newly created
quality conformance -- standards that will secure the company's global
competitive stance in the future. By the end of 1997, all of Superior's aluminum
wheel plants are expected to receive registration.
This multi-registration of Superior's plants and engineering centers will allow
for tremendous flexibility with OEM customers. Whereas most contracts require
that a particular wheel program be produced at a specific plant, the goal of
multi-registration is to allow production in multiple plants, therefore enabling
the company to cross-load production and increase manufacturing efficiencies.
Caption-Photo
"Superior's position as a tier one supplier and growth in the international
marketplace will carry the Company into the 21st Century."
<PAGE> 9
Page 7
Progress At Chrome-Plating Operations
Superior is most pleased to announce the progress made at its aluminum wheel
chrome-plating facility last year. Located in Fayetteville, Arkansas, the
facility is the first of its kind in the world using a highly specialized and
automated process to manufacture chrome-plated aluminum wheels for the OEM
market.
After experiencing significant delays in gearing up the plant's operations,
Superior instituted major capital and process improvements. These improvements,
coupled with key personnel changes to oversee the operation, resulted in an
exceptional turnaround during the fourth quarter. Now that the plant is
achieving consistent higher production levels at substantially reduced operating
costs, Superior is focusing on increasing plant utilization and improving
manufacturing efficiencies.
Measuring Cost-Reduction & Quality Enhancement
The Company's focus on cutting production costs, improving operating
efficiencies and enhancing plant scheduling is not just limited to its chrome
plating plant. Last year, Superior established an aggressive company-wide
initiative to achieve significant cost reductions and other profit improvement
by the end of 1997 and beyond.
From improvements in product engineering and higher performance manufacturing
equipment to consistent output of higher quality products, the Company is
identifying how each Superior facility and department can contribute to the
goal. Key variables such as cost and labor per wheel as well as specific
problems and opportunities are shared among all Superior plants and challenged
periodically by a cost reduction management team. Through this cost reduction
team, the Company has implemented extensive checks and balances to measure the
manufacturing performance of each of its plants to ensure specific cost
reduction and quality enhancement goals are met. Superior has already started to
see successful implementation of this program through reduced costs at the
Company's plants.
Preparing For Future Expansion
Superior has not only consistently improved and refined its manufacturing
process, but the Company has maintained its reputation for prompt service and
accurate delivery by paying attention to its markets and anticipating future
capacity requirements.
In addition to studying opportunities in other markets of Latin America, the
Company is looking into expanding its plant in Mexico with additional equipment.
Superior anticipates as much as 80% of the wheels produced in its Mexico plant
- -- which is operating at the lowest manufacturing cost for the Company -- will
be used for export as U.S. automakers continue to invest more money in their
Mexico operations and export more cars. The Company has also focused on
upgrading human resources and bringing new talent into the Company's plants to
prepare for new products and future expansion.
Caption-Photo
Wheels exiting Automatic Machining Cell
<PAGE> 10
Page 8
Continuing improvement is key to the success of any business, and therefore
progress is an essential element at Superior. It means finding new ways to
enhance the quality and reduce the cost of Superior's product, increasing the
Company's service to customers, and examining the potential for entirely new
product applications of the Company's aluminum casting expertise.
Human Resource and Equipment Enhancements
Focused strongly on continual improvements is Superior's engineering team which
has expanded into three geographic centers in Detroit, Fayetteville, and Van
Nuys. All three centers are currently being equipped with additional and new
state-of-the-art cad cam computers. Superior has also been adding design,
quality and systems engineers to enhance its capabilities and provide customers
greater assembly plant service. In particular, the newest Technical Sales Center
in Detroit has strengthened Superior's customer relationships through its
enhanced service and technical support.
Improved Processes
Superior is listening to customer needs more closely than ever to exceed their
expectations. And, the Company has been broadening its aluminum wheel technology
and adding value to its design and manufacturing processes through weight
reduction procedures. Other enhancements include improving controls on casting
procedures and practices to achieve even more consistent quality and improved
productivity. Also, through new computer-simulated thermal analysis software as
well as improved tooling fabrication processes and casting process enhancements,
the Company has substantially reduced its research and development time
schedules beyond customer expectations.
New Product Development
In addition, Superior worked on developing other aluminum products for the
automotive industry as part of the Company's strategic plan for diversification.
This effort by Superior's engineering team culminated last year in the Company's
first contract from General Motors to supply cast aluminum transmission brackets
for the Oldsmobile Intrigue. This order is significant since it represents the
Company's entry into a new growth market with opportunities to expand into other
aluminum products such as chassis, suspension and engine components. As a
technological leader in aluminum foundry, Superior is positioned to benefit by
the increasing demand for aluminum components which are replacing many
traditional iron forged and steel parts.
Caption-Photo
"Superior's engineering team made a breakthrough last year with the development
of a new aluminum product for the automotive industry, representing the
Company's entry into a new growth market with opportunities for further
diversification."
<PAGE> 11
Page 9
Aftermarket
While Superior's aftermarket business accounted for about 6% of overall revenue
in 1996, the opportunity for growth is excellent. During the year, the Company
acquired certain new product lines and continues to work on new product ideas.
With industry-wide consolidation, more enhanced accessories being offered as
standard equipment on new cars, and increasing demand for price concessions, the
evolving automotive aftermarket is creating new challenges for Superior --
challenges the Company views as opportunities. Superior is meeting these chal-
lenges with its expertise to diversify further into other growth industries,
develop and acquire new product lines for the aftermarket, and broaden the
Company's distribution base.
In addition to popular accessory items, Superior has been focusing on the
extension of its existing product lines -- a profitable growth area for the
Company. Last year, Superior acquired the "Perfection" product lines from Walker
Manufacturing Company, adding approximately $3 million in annual revenues to the
Company's aftermarket business. The newly acquired product lines, some of which
are new accessories for Superior, include convoluted tubing and suspension
products.
Superior's aftermarket wheel line, comprised of 28 different styles of steel,
chrome-plated steel, and aluminum road wheels, continues to be popular among
tire dealers and large wholesalers. The Company has strategically expanded its
network of distributors and worked closely with customers to create new wheel
designs that are consumer-driven. Last year, the Company established various
accounts with distribution in new geographical areas such as Florida,
Mississippi and Texas. In addition, Superior developed five new wheel designs
that have proven to be successful in the marketplace.
Superior currently supplies 68 product lines and 3,800 parts for the automotive
aftermarket ranging from steering wheels and covers, suspension products, seat
belts and license plate holders to chrome-plated steel and aluminum road wheels.
The Company's diverse aftermarket products are sold in the U.S. and Canada
through such prominent wholesalers and retail outlets as ITCO Tire Company, Les
Schwab, Pep Boys, AutoZone, Northern Automotive, Belle Tire, Wal-Mart, Western
Auto, Canadian Tire, and Paccar.
Caption-Photo
Innovative new accessory products demonstrating excellent quality, variety,
styling and packaging
Caption-Photo
Additional examples of new products
<PAGE> 12
Page 10
Original Equipment Market
International Business
Business with international customers was one key to Superior's growth in the
OEM market last year and will be the focus of Superior's growth in the future.
Shipments to international customers doubled to 6% of Superior's total OEM unit
shipments in 1996. Superior projects this part of its business will increase to
10% in the future as the Company continues to build upon its relationships with
OEMs abroad and expand its customer base.
Several years of working on a customer relationship with BMW (Bayerische Motoren
Werke) resulted in a significant amount of business that continues to grow each
year. Through Superior's joint venture in Hungary, the Company has now
established a new relationship with Audi and an annual business estimated at $40
million for the new European plant. Superior's business with Japanese customers
continues to increase through the expansion of existing wheel programs as well
as new contracts. Most significant was Superior's growth in business with Toyota
and Nissan last year, evident by major new tooling orders.
Domestic Programs
As a key supplier to Ford and General Motors, Superior led the industry as one
of the leading suppliers of aluminum wheels in the world. Superior continued to
receive new replacement business for existing wheel programs such as for General
Motors' Chevrolet and Oldsmobile minivans. Calling for a 30% increase in tooling
capacity, this new replacement business for the new model year represented over
$30 million in annual revenues. Another highlight was the new business secured
from Ford to supply aluminum wheels for the Windstar minivan, a contract valued
in excess of $30 million in annual revenues.
By every measure made, Superior is one of the world's leading manufacturers of
OEM aluminum wheels with respect to technology, market share, quality and
reliability. And the Company will remain that way.
Though Superior is positioned to benefit from greater aluminum wheel
penetration, the Company's focus for future growth is on the expansion of its
customer base and geographic reach as well as new product markets.
Caption-Photo
"By every measure made, Superior is one
of the world's leading
manufacturers of
OEM aluminum wheels with respect to technology,
market share, quality and reliability. And the Company will remain that way."
Ford Explorer
<PAGE> 13
Page 11
Caption-Car Photos
Buick Regal GS Sedan
Mercury Mountaineer
Mercury Sable
BMW Roadster
Toyota 4Runner
Mercury Cougar
Chevrolet Suburban 1500 4x4
Chevrolet Camaro Z28
BMW 540i Sedan
<PAGE> 14
Page 12
Financial Outlook
Considering all of Superior's accomplishments last year, nothing says more about
the strength and vitality of the Company than its cash flow. Superior generated
$97 million in cash from operations. Combining powerful cash generating
capability with a tradition of market innovation and growth, Superior has a very
bright future.
Installation of aluminum wheels continues to rise. Last year, Superior's total
OEM shipments were up 5% while overall North American automobile production was
virtually flat. Sales to international customers are expected to continue
growing and should account for 10% of Superior's OEM business in the next 12
months. All aspects of the Company are under control. Superior's cost-cutting
initiative established in 1996 is expected to realize significant cost
reductions and other profit improvements by the end of this year, with the full
effect to be felt in 1998 and beyond.
Superior's chrome-plating operations reported an exceptional turnaround during
the fourth quarter and, accordingly, have now been consolidated into the
Company's regular financial statements. This turnaround, coupled with the
increase in aluminum wheel usage on North American vehicles and expanding
shipments to international customers will result in continued earnings
performance and gains in 1997.
Furthermore, growth opportunities are already being realized in Europe with the
completion of Superior's joint venture plant in Hungary. Superior is close to
announcing additional cast and forged wheel orders for its European plant,
continuing to fill capacity and increase production efficiency. In addition, new
product lines developed for the automotive aftermarket and OEMs are beginning to
yield results and represent exceptional growth opportunities for the Company.
Superior's virtually debt-free balance sheet will enable the Company to explore
additional strategic growth opportunities and repurchase the Company's stock. To
date, the Company purchased over 1.5 million shares of stock against the
currently authorized 2 million share program. In 1996, Superior stockholders
enjoyed the thirteenth consecutive year of cash dividend increases. Commencing
with the second quarter dividend, the Company increased its quarterly cash
dividend by 20% to a rate of $.06 per share.
With a strong capital base to seek new market and product opportunities and the
strategies that will ensure the Company's continued success, Superior has never
been in a better position to face the challenges of the 21st century.
Caption-Photo
"Superior enters 1997 with a tradition of market innovation and growth, a strong
capital base to seek new market and product opportunities, and the strategies
that will ensure the Company's continued success."
<PAGE> 15
Page 13
Results of Operations
Management's Discussion and Analysis of Financial Condition
Summary of Sales by Product Line
(In Thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
OEM cast aluminum road wheels $472,431 $486,045 $417,537
Aftermarket 31,810 35,952 39,101
$504,241 $521,997 $456,638
</TABLE>
1996 Compared to 1995
Net sales in 1996 decreased 3.4 percent to $504.2 million compared to the record
net sales achieved in 1995 of $522.0 million. The Company continued to achieve
record unit shipments of cast aluminum road wheels with a 4.9 percent increase
over 1995 shipments. This increase in unit shipments occurred despite a 1.2
percent decline in North American automotive production. Based on Wards
Automotive, an industry publication, aluminum wheel installation rates on
automobiles and light trucks rose to a record 46.1 percent for the 1996 model
year compared to 43.9 percent for the 1995 model year, 41.0 percent for the 1994
model year and 39.5 percent for the 1993 model year. The modest decline from
1995 sales primarily reflects reduced prices as a result of lower material costs
to original equipment manufacturer (OEM) customers. 1996 net sales for the
Company's Aftermarket products decreased $4.1 million or 11.5 percent from 1995
due to the continued economic sluggishness in the aftermarket segment of the
automotive industry.
Gross profit margin was 20.2 percent of net sales in 1996 compared to 21.8
percent in 1995. While the Company has ongoing programs to reduce costs to its
customers and, in the past, has generally been successful in substantially
mitigating pricing pressure from its customers, it is becoming increasingly
difficult to do so without impacting margins. The Company will continue to
aggressively implement cost saving strategies to meet customer pricing
expectations and maintain margins; however, the impact of future customer
pricing pressures and increasing industrywide competition to the Company's
financial position and results of operations is not known. During 1996, the
price of raw material decreased throughout the year. The aluminum content of
selling prices to OEM customers is adjusted to current market conditions which
subjects the Company to the risks of market changes when the Company, from time
to time, enters into fixed purchase contracts. The cost of aluminum is a
significant component in the overall cost of a wheel. As the price of aluminum
decreases, the effect is to increase overall gross margin percentage although
gross profit in absolute dollars remains unchanged. However, this percentage
increase did not occur in 1996 due to several offsetting factors.
During 1996, plant utilization rates were affected by difficulties maintaining
level loading of plant production as a result of several customer work stoppages
throughout the year and severe winter weather early in the year. These
difficulties were accentuated by additional wheel making capacity added as a
result of plant expansions in prior years. Also, starting in the fourth quarter
of 1996, operating results of the Fayetteville, Arkansas chrome plating plant
are being consolidated with those of the entire Company, thereby reducing the
overall gross profit margin percentage. Refer to the discussion below on
Miscellaneous, net regarding the start-up of chrome plating operations. Selling,
general and administrative expenses in 1996 are approximately the same as 1995,
both as a percentage of net sales and in absolute dollars. A decline in selling
expenses in 1996 was substantially offset by increased legal expenses associated
with defending certain lawsuits.
Interest expense in 1996 was $1.5 million compared to $3.3 million in 1995. This
reduction occurred from the payments of the Senior notes and from not requiring
short-term borrowings during 1996, as had been required for 1995 working capital
requirements.
Superior Industries International, Inc. 13
<PAGE> 16
Page 14
Management's Discussion and Analysis of Financial Condition (continued)
Interest income was approximately the same as the prior year as cash generated
from operations continued to be utilized to fund capital expenditures, joint
venture investments, repurchases of the Company's common stock and on-going
working capital requirements. Moving forward into 1997, management expects cash
to continue increasing with a related increase in the amount of interest income
earned by the Company.
Miscellaneous, net for 1996 includes $7.4 million of pre-operating losses from
the Fayetteville, Arkansas chrome plating plant compared to $5.8 million of
pre-operating losses in 1995. During 1996, the Company instituted major
improvements in its chrome plating operations which are expected to decrease its
ongoing operating costs. Accordingly, the pre-production period was deemed by
management to cease as of September 30, 1996. Thereafter, the Company began
consolidating the operating results of the chrome plating plant with those of
the entire Company for the fourth quarter of 1996. The results of chrome-plating
for the fourth quarter 1996 were a $0.1 million loss after charging $0.6 million
of depreciation.
The consolidated tax rate in 1996 decreased to 36.75 percent of pre-tax income
from 37.5 percent in 1995. The reduced rate resulted from greater utilization of
federal tax credits and lower state income taxes. The Company expects a modest
decrease in the tax rate in the future. See Note 6 of the consolidated financial
statements.
1995 Compared to 1994
Net sales in 1995 increased 14.3 percent to a record $522.0 million compared to
$456.6 million in 1994. Higher net sales reflects higher pricing due to
increased material costs to OEM customers. The Company's OEM business increased
$68.5 million, or 16.4 percent over 1994, with unit shipments of cast aluminum
road wheels increasing 1.4 percent from 1994, while North American automotive
production decreased 1.6 percent.
Aftermarket product net sales decreased $3.1 million, or 8.1 percent over 1994
as a sluggish economy impacted the entire aftermarket industry.
Gross profit was 21.8 percent of net sales in 1995 compared to 24.4 percent in
1994. Reduced gross profit margins reflect a number of factors. First, lower
than expected OEM wheel shipment and production levels were accentuated by
additional wheel making capacity added as a result of plant expansion activities
in Fayetteville, Arkansas and Chihuahua, Mexico. Secondly, the price of raw
material increased throughout the year causing lower overall gross margin
percentages although gross profit in absolute dollars remains unchanged.
Finally, while the Company has ongoing programs to reduce costs to its
customers, pricing pressure from its customers may not be fully mitigated
without impacting margins.
Selling, general and administrative expenses, measured as a percentage of net
sales, decreased to 3.8 percent in 1995 compared to 4.2 percent in 1994, and
increased in absolute dollars. The increase in absolute dollars is a result of
higher OEM commissions, which are paid as a percentage of sales dollars, and two
aftermarket product liability lawsuit settlements. Interest expense increased
$0.4 million compared to 1994. The largest component of change was a reduction
of capitalized interest in 1995 reflecting reduced OEM plant construction
activities. However, the overall interest cost in 1995 was lower than 1994 due
to current and prior year payments and prepayments on Senior notes, including
the retirement of the 10.22% Senior notes, offset substantially by increased use
of short-term borrowings required to manage working capital requirements.
Interest income decreased $0.7 million over 1994 as cash and short-term
investments were utilized to fund capital expenditures, repurchases of the
Company's common stock and on-going working capital requirements.
Miscellaneous, net was $6.7 million and increased $5.9 million from 1994. Higher
expenses primarily reflect $5.8 million of pre-production costs associated with
the Fayetteville chrome-plating facility start-up, compared to $1.8 million of
pre-production charges for the Chihuahua, Mexico and Fayetteville chrome-plating
facilities in 1994, and investment and foreign exchange losses. The consolidated
tax rate in 1995 decreased slightly to 37.5 percent of pre-tax income versus
37.6 percent in 1994. See Note 6 of the consolidated financial statements.
Superior Industries International, Inc.
<PAGE> 17
Page 15
Management's Discussion and Analysis of Financial Condition (continued)
Financial Condition, Liquidity and Capital Resources
Cash provided by operating activities was $96.5 million in 1996 compared to
$83.7 million in 1995, reflecting strong earnings and high levels of non-cash
charges such as depreciation and amortization that were supplemented by
reductions of inventories and receivables. Lower inventory levels primarily
reflect the lower cost of raw materials.
Strong cash flows from operating activities were utilized for a number of
activities. The Company paid down outstanding short and long-term borrowings by
a combined $13.6 million, including the required principal payments on its 9.31%
Senior notes. After paying the required principal payments on its 9.31% Senior
notes in 1997, the Company will have effectively retired all of its long-term
debt. The Company also funded OEM plant enhancements, including improvements to
the chrome-plating plant in Fayetteville, Arkansas. Cash resources were also
utilized for the retirement of 740,000 shares of the Company's common stock.
Finally, the Company contributed its remaining investment of $10.6 million to
its Hungarian joint venture with German-based Otto Fuchs Metallwerke ("Otto
Fuchs"). See discussion below.
During 1995, the Company formalized its 50/50 joint-venture agreement with Otto
Fuchs to construct a plant in Tatabanya, Hungary for the production of both
lightweight forged and low pressure cast aluminum wheels for the European
automotive market. Ground breaking for this facility took place in the fourth
quarter of 1995 and initial shipments are slated for the second quarter of 1997.
The cost of this facility, approximately $70 million, was funded through equal
capital contributions by each partner and long-term project financing. Since
1990, funding for plant expansion in excess of $339 million, has come from
internally generated cash flow and working capital.
During 1996, the value of the Mexican peso experienced relative stability to the
U.S. dollar as a result of the local Mexican economy achieving moderate growth.
Since 1990, the Mexican peso has repeatedly experienced periods of relative
stability followed by periods of major decline in value. The impact of these
declines in value relative to the Company's wholly owned subsidiary, Superior
Industries de Mexico, SA de CV, has resulted in a cumulative unrealized
translation loss of $13.8 million, net of taxes and has been charged directly to
shareholders' equity. The Mexican production facility represents less than 10
percent of the Company's total capacity.
The Company's financial condition remains strong. In 1996, working capital and
current ratio increased to $87.7 million and 2.1:1, versus $60.9 million and
1.7:1 in 1995, respectively, as the Company paid down its debt and repurchased
its common stock. The long-term debt to total capitalization ratio improved to
0.8 percent in 1996 from 2.5 percent in 1995. The Company believes it is well
positioned to take full advantage of new and complementary business
opportunities, expanding international markets and, at the same time, able to
withstand downturns in the economy.
During 1996, the Board of Directors announced a 20 percent increase in the cash
dividend, representing the thirteenth 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.
Superior Industries International, Inc.
<PAGE> 18
Page 16
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Net Sales $ 504,241,000 $ 521,997,000 $ 456,638,000
Cost of Sales 402,528,000 408,200,000 345,270,000
Gross Profit 101,713,000 113,797,000 111,368,000
Selling, general and administrative expenses 19,931,000 19,965,000 19,203,000
Income From Operations 81,782,000 93,832,000 92,165,000
Other Income (Expense)
Interest expense (1,484,000) (3,288,000) (2,862,000)
Interest income 1,158,000 1,106,000 1,840,000
Miscellaneous, net (7,385,000) (6,732,000) (839,000)
(7,711,000) (8,914,000) (1,861,000)
Income Before Income Taxes 74,071,000 84,918,000 90,304,000
Income Taxes 27,221,000 31,854,000 33,989,000
Net Income $ 46,850,000 $ 53,064,000 $ 56,315,000
Earnings Per Share $ 1.63 $ 1.78 $ 1.85
</TABLE>
See notes to consolidated financial statements
Superior Industries International, Inc.
<PAGE> 19
Page 17
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 36,815,000 $ 3,366,000
Short-term investments, net 5,288,000 7,813,000
Receivables, net
Trade 52,465,000 56,092,000
Other 14,102,000 14,797,000
66,567,000 70,889,000
Inventories 47,730,000 53,823,000
Deferred income taxes 5,970,000 5,382,000
Other current assets 1,710,000 1,386,000
Total current assets 164,080,000 142,659,000
PROPERTY, PLANT AND EQUIPMENT, net 161,670,000 177,538,000
OTHER LONG-TERM ASSETS 31,840,000 21,573,000
$357,590,000 $341,770,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 3,874,000 $ 13,628,000
Accounts payable 46,178,000 46,920,000
Accrued liabilities 26,317,000 21,198,000
Total current liabilities 76,369,000 81,746,000
LONG-TERM DEBT, net 1,940,000 5,814,000
OTHER LONG-TERM LIABILITIES 17,850,000 17,207,000
DEFERRED INCOME TAXES 10,320,000 7,850,000
SHAREHOLDERS' EQUITY 251,111,000 229,153,000
$357,590,000 $341,770,000
</TABLE>
See notes to consolidated financial statements
Superior Industries International, Inc.
<PAGE> 20
Page 18
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Cumulative Loss On
Number of Paid-In Translation Short-term Retained
Shares Amount Capital Adjustment Investments Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1993 30,061,414 $15,031,000 $70,789,000 $ (442,000) $ -- $ 91,491,000 $176,869,000
Net income -- -- -- -- -- 56,315,000 56,315,000
Stock options exercised,
including related
tax benefit 94,221 47,000 1,585,000 -- -- -- 1,632,000
Repurchases of
common stock (544,000) (272,000) (16,819,000) -- -- -- (17,091,000)
Cash dividends
($.165/share) -- -- -- -- -- (4,913,000) (4,913,000)
Unrealized losses:
Foreign currency
translation -- -- -- (10,130,000) -- -- (10,130,000)
Short-term
investments -- -- -- -- (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
Net income -- -- -- -- -- 53,064,000 53,064,000
Stock options exercised,
including related
tax benefit 154,372 77,000 2,812,000 -- -- -- 2,889,000
Repurchases of
common stock (737,000) (369,000) (19,456,000) -- -- -- (19,825,000)
Cash dividends
($.195/share) -- -- -- -- -- (5,749,000) (5,749,000)
Unrealized losses:
Foreign currency
translation -- -- -- (3,256,000) -- -- (3,256,000)
Short-term
investments -- -- -- -- 1,848,000 -- 1,848,000
Balances at
December 31, 1995 29,029,007 14,514,000 38,911,000 (13,828,000) (652,000) 190,208,000 229,153,000
Net income -- -- -- -- -- 46,850,000 46,850,000
Stock options exercised,
including related
tax benefit 34,559 17,000 561,000 -- -- -- 578,000
Repurchases of
common stock (739,900) (370,000) (18,627,000) -- -- -- (18,997,000)
Cash dividends
($.23/share) -- -- -- -- -- (6,554,000) (6,554,000)
Unrealized losses:
Foreign currency
translation -- -- -- (17,000) -- -- (17,000)
Short-term
investments -- -- -- -- 98,000 -- 98,000
Balances at
December 31, 1996 28,323,666 $14,161,000 $20,845,000 $(13,845,000) $(554,000) $230,504,000 $251,111,000
</TABLE>
See notes to consolidated financial statements.
Superior Industries International, Inc.
<PAGE> 21
Page 19
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 96,548,000 $ 83,747,000 $ 49,953,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (13,465,000) (25,903,000) (60,231,000)
Investment in unconsolidated joint ventures (11,410,000) (9,664,000) --
Proceeds from sales of investments 1,350,000 17,732,000 29,377,000
Purchases of investments (973,000) (2,911,000) (26,834,000)
NET CASH USED IN INVESTING ACTIVITIES (24,498,000) (20,746,000) (57,688,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (4,800,000) (23,467,000) 28,267,000
Repurchases of common stock (18,997,000) (19,825,000) (17,091,000)
Payments of long-term debt (8,828,000) (19,367,000) (2,550,000)
Cash dividends (6,554,000) (5,749,000) (4,913,000)
Stock options exercised 578,000 2,889,000 1,632,000
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (38,601,000) (65,519,000) 5,345,000
Net Increase (Decrease) in Cash and Equivalents 33,449,000 (2,518,000) (2,390,000)
Cash and Equivalents at Beginning of Year 3,366,000 5,884,000 8,274,000
Cash and Equivalents at End of Year $ 36,815,000 $ 3,366,000 $ 5,884,000
See notes to consolidated financial statements
</TABLE>
Superior Industries International, Inc.
<PAGE> 22
Page 20
Reconciliation of Net Income to
Net Cash Provided By Operating Activities
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Net Income $ 46,850,000 $ 53,064,000 $ 56,315,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 27,330,000 27,716,000 26,604,000
Provision for retirement plans 1,098,000 1,169,000 1,108,000
Other non cash items 12,000 (1,320,000) 1,043,000
Changes in assets and liabilities:
(Increase) decrease in:
Receivables, net 4,322,000 10,252,000 (16,044,000)
Inventories 6,093,000 (9,077,000) (18,112,000)
Other items 3,357,000 3,786,000 3,637,000
Increase (decrease) in:
Accounts payable (742,000) 785,000 (5,869,000)
Accrued liabilities 6,346,000 (389,000) 155,000
Deferred income taxes 1,882,000 (2,239,000) 1,116,000
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 96,548,000 $ 83,747,000 $ 49,953,000
</TABLE>
See notes to consolidated financial statements
Superior Industries International, Inc.
<PAGE> 23
Page 21
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
The principal business of Superior Industries International, Inc. and its
subsidiaries (the Company) is the design and manufacture of cast aluminum road
wheels primarily for the domestic original equipment manufacturer (OEM) market.
It is also a leading manufacturer of custom road wheel and accessory products
for the automotive aftermarket.
The Company maintains both domestic and foreign manufacturing facilities,
including operations in Mexico and a manufacturing facility through a 50 percent
owned joint venture in Hungary. As of December 31, 1996, the carrying amount of
these foreign facilities is $61,493,000.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of 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. These
investments are included in other long-term assets and total $21,074,000 as of
December 31, 1996.
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principals which require the use of estimates and
assumptions by management.
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 generally places
these financial instruments with high quality institutions operating in various
industries, including government agencies, over a broad geographic area.
Cash equivalents consist primarily of certificates of deposit carried at cost,
which approximates market value. Certificates of deposit were $5,444,000 and
$2,880,000 at December 31, 1996 and 1995, respectively.
Marketable securities, which generally consist of U.S. government agency
securities, corporate bonds, money market preferred stock and equities, are all
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, 1996, which was
determined using quoted prices from national exchanges, resulted in a $554,000
unrealized loss recorded directly to shareholders' equity. The net realized gain
from sales of available-for-sale securities utilizing the specific
identification method was $141,000 during 1996 compared to the net realized loss
from sales of $709,000 for 1995. At December 31, 1996 and 1995, marketable
securities of $948,000 and $974,000, respectively, were pledged as collateral
against outstanding letters of credit.
Research and Development Costs
Research and development costs of $3,310,000, $3,265,000 and $5,413,000 have
been charged against operations during 1996, 1995 and 1994, respectively.
Superior Industries International, Inc.
<PAGE> 24
Page 22
Notes to Consolidated Financial Statements, (continued)
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 is recorded as a separate component of
shareholders' equity. Foreign exchange gains/(losses) of $(109,000), $(287,000)
and $164,000 have been recorded as part of operations during 1996, 1995 and
1994, respectively.
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 $1,445,000 and
$24,155,000 for 1996; $3,540,000 and $25,448,000 for 1995; $2,494,000 and
$32,610,000 for 1994, respectively.
reclassifications
Certain prior year items have been reclassified to conform with current year
presentation.
2. BORROWING ARRANGEMENTS
The Company maintains a $25,000,000 credit facility on a committed, unsecured
basis expiring in May 1997. This facility provides for an interest rate of 40 or
50 basis points above either the Interbank Offered Rate or the Federal Funds
rate, respectively. The Company also maintains combined line and letter of
credit facilities under which it may borrow up to $30,000,000 on an uncommitted,
unsecured basis at rates generally below prime. The Company had no short term
borrowings outstanding at December 31, 1996 as opposed to $4,800,000 at December
31, 1995. The weighted average interest rates during 1996, 1995 and 1994 were
5.8 percent, 6.7 percent and 4.8 percent, respectively.
The long-term debt of the Company is summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
9.31% Senior notes due 1997, with annual principal payments of
$8,333,000 beginning in 1995 $ 3,333,000 $11,666,000
Capitalized lease obligations and other debt, substantially
all of which is secured by fixed assets, with various maturities
and interest rates ranging between 7.3 percent and 11.3 percent 2,481,000 2,976,000
5,814,000 14,642,000
Less - Current portion 3,874,000 8,828,000
$ 1,940,000 $ 5,814,000
</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 $180,000,000 and certain financial ratios.
Included with capitalized lease obligations and other debt is a capital lease of
$980,000, funded through the proceeds of an industrial development revenue bond,
payable in varying annual principal payments through 1999 with remaining
interest rates ranging between 7.4 percent and 7.6 percent. The Company has
guaranteed the repayment of the underlying bonds. Future maturities of long-term
debt are approximately $3,878,000 for 1997, $592,000 for 1998, $645,000 for
1999, $330,000 for 2000 and $369,000 for 2001.
Superior Industries International, Inc.
<PAGE> 25
Page 23
Notes to Consolidated Financial Statements, (continued)
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, 1996 and 1995,
are buildings and equipment held under capital leases of $5,590,000 with
accumulated amortization of $3,134,000 and $2,949,000, respectively.
The Company leases certain land, facilities and equipment under long-term
operating leases expiring at various dates through 2063. The terms of certain
equipment leases require scheduled rent increases at specified intervals which
are not dependent on the occurrence of any future events. Additionally, the
Company reduced the amortization period of these equipment leases to
appropriately match with the estimated useful life of the underlying machinery.
Total lease expense for all operating leases amounted to $5,165,000 in 1996,
$5,040,000 in 1995 and $4,183,000 in 1994.
Future minimum payments under all leases are summarized as follows:
<TABLE>
<CAPTION>
Leases
Years Ending December 31, Operating Capital
<S> <C> <C>
1997 $ 4,628,000 $ 771,000
1998 4,311,000 768,000
1999 7,684,000 768,000
2000 2,217,000 392,000
2001 315,000 392,000
Thereafter 56,000 --
19,211,000 3,091,000
Amounts representing interest -- 619,000
$19,211,000 $ 2,472,000
</TABLE>
Future minimum payments of $3,211,000 for operating leases, including known rent
escalations, and $1,960,000, 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 1996, 1995 and 1994, for all leases were $1,583,000, $1,583,000
and $1,571,000, respectively.
4. STOCK OPTIONS
The Company has Stock Option Plans under which the Company is authorized to
issue incentive and non-qualified stock options to its directors, officers and
key employees totaling up to 3,200,000 shares of common stock. At December 31,
1996, 357,000 shares are available for future grant under these plans. Options
are generally granted at not less than fair market value on the date of grant
and expire no later than ten years after the date of grant. Vesting periods are
set at the discretion of the Option Committee, generally over a three or four
year period. When options are exercised, proceeds from the sale 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.
Beginning with the 1996 consolidated financial statements, the Company adopted
the disclosure requirements of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("Statement 123"). Therefore, the
following information is presented in accordance with the provisions of
Statement 123, including restatements of 1995 and 1994 information consistent
with the new disclosure requirements for 1996.
Superior Industries International, Inc.
<PAGE> 26
Page 24
Notes to Consolidated Financial Statements, (continued)
As permitted in Statement 123, the Company continues to apply the accounting
rules of APB Opinion 25 and related Interpretations governing the recognition of
compensation expense from its Stock Option Plans. Such accounting rules measure
compensation expense on the first date at which both the number of shares and
the exercise price are known. Under the Company's plans, this would typically be
the date of grant. To the extent that the exercise price equals or exceeds the
market value of the stock on the grant date, no expense is recognized.
Accordingly, no compensation expense has been recognized in the Company's income
accounts with respect to these Stock Option Plans.
Had the Company applied the fair-value based method of accounting which is not
required under Statement 123, compensation expense from its plans would have had
the effects of reducing 1996, 1995 and 1994 net income to the proforma amounts
of $46,257,000, $51,702,000, and $54,143,000, respectively, with corresponding
proforma earnings per share of $1.61, $1.73, and $1.78, respectively. These
proforma amounts were determined by estimating the fair value of each option on
its grant date using the Black-Scholes option-pricing model. Assumptions of 1
percent for dividend yield, 6.5 percent for risk-free interest rate and 22.77
percent for expected volatility rate were applied to all grants for each year
presented. Other assumptions applied separately to incentive stock options and
non qualified stock options include expected turnover rates of 15.32 percent and
2.49 percent, respectively, and expected lives of 7.21 years and 9.69 years,
respectively.
A summary of the status of the Company's Stock Option Plans and changes in
outstanding options is presented below:
Years Ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Under Exercise Under Exercise Under Exercise
Option Price Option Price Option Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year 1,301,476 $21.73 1,432,223 $20.99 1,413,944 $ 19.34
Options granted 53,000 22.98 137,000 25.31 119,000 30.75
Options exercised (34,559) 11.48 (154,372) 11.84 (94,221) 8.38
Options canceled or expired (35,561) 30.66 (113,375) 30.21 (6,500) 23.56
Options outstanding at end of year 1,284,356 $21.81 1,301,476 $21.73 1,432,223 $20.99
Options exercisable at end of year 1,136,832 856,268 636,515 $ 8.53 $ 9.96 $ 12.02
Weighted-average fair value of options
granted during the year
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Weighted Average Weighted Number Weighted Range of
Outstanding Remaining Average Exercisable Average
Exercise Prices at 12/31/96 Contractual Life Exercise Price at 12/31/96 Exercise Price
<C> <C> <C> <C> <C> <C>
$1.80-$16.00 261,648 4.25 years $ 11.01 261,648 $ 11.01
$19.00 - $25.00 265,208 7.54 years 21.97 121,434 20.68
Over $25.00 757,500 6.20 years 25.48 753,750 25.45
1,284,356 6.08 years $ 21.81 1,136,832 $ 21.62
</TABLE>
Superior Industries International, Inc.
<PAGE> 27
Page 25
Notes to Consolidated Financial Statements, (continued)
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.
The components of cost for this retirement plan are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years Ended December 31, 1996 1995 1994
Service cost $323,000 $315,000 $335,000
Interest cost 475,000 425,000 360,000
Net amortization 54,000 54,000 55,000
Other unrecognized loss 4,000 17,000 --
Net cost $856,000 $811,000 $750,000
</TABLE>
A schedule reconciling the projected benefit obligation with recorded plan
liability follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 4,571,000 $ 3,690,000
Accumulated benefit obligation $ 6,583,000 $ 5,900,000
Projected benefit obligation $ 7,259,000 $ 6,497,000
Unrecognized prior service cost (274,000) (329,000)
Adjustment required to recognize minimum liability 283,000 457,000
Other unrecognized experience losses (685,000) (725,000)
Recorded liability $ 6,583,000 $ 5,900,000
</TABLE>
Actuarial assumptions for the retirement plan include seven percent for the
assumed discount rate and five percent for the assumed rate of average future
compensation increases for 1996 and 1995. The Company has contributory employee
retirement savings plans in addition to mandatory profit sharing plans covering
substantially all of its employees. The employer contribution is determined at
the discretion of the Company and totaled $2,606,000, $2,330,000 and $2,471,000
for 1996, 1995 and 1994, 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 $444,000, $358,000 and $358,000 for 1996, 1995
and 1994, respectively.
Superior Industries International, Inc.
<PAGE> 28
Page 26
Notes to Consolidated Financial Statements, (continued)
6. TAXES ON INCOME
The provision (credit) for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Federal: Current $22,718,000 $22,338,000 $26,501,000
Deferred (1,374,000) 1,884,000 2,007,000
21,344,000 24,222,000 28,508,000
State: Current 2,466,000 3,891,000 5,527,000
Deferred (186,000) 208,000 169,000
2,280,000 4,099,000 5,696,000
Foreign: Current 116,000 175,000 414,000
Deferred 3,481,000 3,358,000 (629,000)
3,597,000 3,533,000 (215,000)
$27,221,000 $31,854,000 $33,989,000
Total: Current $25,300,000 $26,404,000 $32,442,000
Deferred 1,921,000 5,450,000 1,547,000
$27,221,000 $31,854,000 $33,989,000
</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 rate to the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995 1994
<S> <C> <C> <C>
Statutory amount, computed
at 35 percent $ 25,925,000 $ 29,721,000 $ 31,606,000
State tax provisions,
net of federal income tax benefit 1,482,000 2,664,000 3,702,000
Foreign income taxed at rates
other than the statutory rate (78,000) (107,000) (592,000)
Federal tax credits (1,266,000) (722,000) (486,000)
Other, net 1,158,000 298,000 (241,000)
$ 27,221,000 $ 31,854,000 $ 33,989,000
</TABLE>
Superior Industries International, Inc.
<PAGE> 29
Page 27
Notes to Consolidated Financial Statements, (continued)
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, 1996 1995
<S> <C> <C>
Deferred tax assets
Insurance reserves not currently deductible $ (834,000) $ (1,166,000)
Inventory reserves not currently deductible (641,000) (569,000)
Other reserves not currently deductible (5,348,000) (4,369,000)
Deferred compensation (3,913,000) (3,523,000)
Revenue recognized for tax purposes (607,000) (597,000)
State taxes expensed currently, deductible in following year (1,021,000) (1,057,000)
Foreign currency translation adjustment (7,300,000) (7,400,000)
Other (1,569,000) (929,000)
(21,233,000) (19,610,000)
Deferred tax liabilities
Differences between book and tax basis
of property, plant and equipment 19,316,000 19,351,000
Differences between financial & tax accounting
associated with foreign operations 6,267,000 2,727,000
25,583,000 22,078,000
$ 4,350,000 $ 2,468,000
</TABLE>
7. SHAREHOLDERS' EQUITY
The common stock of the Company at December 31, 1996 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
1996, 1995 and 1994 the weighted average number of common shares outstanding was
28,798,000, 29,895,000 and 30,376,000, respectively.
8. BUSINESS SEGMENT AND SIGNIFICANT CUSTOMERS
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,
1996 and 1995, the allowance for doubtful accounts receivable was $718,000 and
$722,000, respectively. The following percentages of the Company's consolidated
net sales were made to the Ford Motor Company and General Motors Corporation:
1996, 47.4 percent and 40.1 percent; 1995, 47.4 percent and 41.2 percent; 1994,
47.0 percent and 41.0 percent. These two customers represented 81% of trade
receivables at December 31, 1996.
9. INVENTORIES
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
Raw materials $16,474,000 $18,485,000
Work in process 13,461,000 12,815,000
Finished goods 17,795,000 22,523,000
$47,730,000 $53,823,000
</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.
Superior Industries International, Inc.
<PAGE> 30
Page 28
Notes to Consolidated Financial Statements, (continued)
10. PROPERTY AND DEPRECIATION
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
Land and buildings $ 48,124,000 $ 47,900,000
Machinery and equipment 258,490,000 243,685,000
Leasehold improvements and other 4,746,000 4,540,000
Construction in progress 10,495,000 13,764,000
321,855,000 309,889,000
Less -
Accumulated depreciation
and amortization 160,185,000 132,351,000
$161,670,000 $177,538,000
</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.
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
$40,000, $850,000 and $1,933,000 were capitalized during 1996, 1995 and 1994,
respectively.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
Carrying Carrying
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Assets:
Cash and equivalents $36,815,000 $36,815,000 $ 3,366,000 $ 3,366,000
Short-term investments 5,288,000 5,288,000 7,813,000 7,813,000
Long-term investments 6,378,000 6,378,000 6,883,000 6,883,000
Liabilities:
Short-term borrowings -- -- 4,800,000 4,800,000
Senior notes 3,333,000 3,421,000 11,666,000 12,048,000
</TABLE>
The carrying amount of short-term cash equivalents represents the best estimate
of fair value. At December 31, 1996, the Company's cash in banks exceeded
federally insured limits by $14,700,000, however substantially all of these
deposits are held by the largest banks in North America. 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.
Superior Industries International, Inc.
<PAGE> 31
Page 29
Notes to Consolidated Financial Statements, (continued)
12. LIABILITIES
The components of accrued and long-term liabilities are as follows:
<TABLE>
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
Accrued
Payroll and related benefits $11,609,000 $ 9,665,000
Insurance reserves 3,347,000 3,969,000
Taxes, other than income tax 3,199,000 2,478,000
Income taxes 2,988,000 2,217,000
Interest and dividends 1,777,000 1,538,000
Tooling and maintenance 611,000 718,000
Other 2,786,000 613,000
$26,317,000 $21,198,000
Long-term
Executive retirement and deferred
compensation plans $ 9,424,000 $ 8,290,000
Deferred operating lease payments 7,801,000 7,168,000
Other 625,000 1,749,000
$17,850,000 $17,207,000
</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
Miscellaneous, net includes pre-production costs of $7,400,000 and $5,800,000 in
1996 and 1995, respectively, relating to the start-up of the Fayetteville,
Arkansas chrome-plating facility.
Superior Industries International, Inc.
<PAGE> 32
Page 30
Notes to Consolidated Financial Statements, (continued)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth Total
December 31, 1996 Quarter Quarter Quarter Quarter Year
<S> <C> <C> <C> <C> <C>
Net Sales $121,461 $137,554 $120,447 $124,779 $504,241
Gross Profit 21,724 30,356 24,409 25,224 101,713
Net Income 8,629 13,909 11,428 12,884 46,850
Earnings Per Share .30 .48 .40 .45 1.63
Dividends Per Share .05 .06 .06 .06 .23
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Total
December 31, 1995 Quarter Quarter Quarter Quarter Year
<S> <C> <C> <C> <C> <C>
Net Sales $134,360 $142,761 $113,176 $131,700 $521,997
Gross Profit 31,419 34,200 20,890 27,288 113,797
Net Income 15,725 16,699 8,285 12,355 53,064
Earnings Per Share .52 .56 .28 .42 1.78
Dividends Per Share .045 .05 .05 .05 .195
</TABLE>
Superior Industries International, Inc.
<PAGE> 33
Page 31
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 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.
Signature
Louis L. Borick
President and Chairman of the Board
Signature
R. Jeffrey Ornstein
Vice President & CFO
Superior Industries International, Inc.
<PAGE> 34
Page 32
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, 1996 and 1995, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Signature
Arthur Andersen LLP
Los Angeles, California
February 12, 1997
Superior Industries International, Inc.
<PAGE> 35
IBC
Corporate Information
DIRECTORS
Louis L. Borick
President and
Chairman of the Board
Raymond C. Brown
Senior Vice President
R. Jeffrey Ornstein
Vice President & CFO
Sheldon I. Ausman
Senior V.P. & Director
Bowne of Los Angeles
Retired Managing Partner, Arthur Andersen LLP
Steven J. Borick
President, Texakota, Inc.
Philip W. Colburn
Chairman, Allen Group, Inc.
V. Bond Evans
Retired President and CEO, Alumax Inc.
Jack H. Parkinson
Retired Managing Director,
Chrysler de Mexico, SA.
CORPORATE
OFFICERS
Louis L. Borick
President and
Chairman of the Board
Raymond C. Brown
Senior Vice President
Joseph T. D'Amico
Vice President, Materiel
Michael D. Dryden
Vice President,
International Business
Development
Ronald F. Escue
Vice President, General
Manager - Aftermarket
Wheel Division
James M. Ferguson
Vice President, OEM
Marketing Group
Morris Herstein
Vice President, Services
John L. Knott
Vice President, Midwest Group
Daniel L. Levine
Corporate Secretary and Assistant Treasurer
Henry C. Maldini
Vice President, Engineering
Frank Monteleone
Vice President, Purchasing
R. Jeffrey Ornstein
Vice President & CFO
Michael J. O'Rourke
Vice President, OEM Program Administration
Delbert J. Schmitz
Vice President, Aftermarket Marketing
COUNSEL AND
AUDITORS
General Counsel
Irell & Manella
Auditors
Arthur Andersen LLP
PLANT AND
SUBSIDIARY
LOCATIONS
Van Nuys, California
Bernard J. O'Neil
Corporate Director of
Manufacturing
Fayetteville, Arkansas
Peter J. Corio,
Plant Manager
Rogers, Arkansas
David C. Rodgers,
Plant Manager
Chrome Plating Plant
Fayetteville, Arkansas
I. Armando Valdez,
Plant Manager
Pittsburg, Kansas
P.S. Reddy,
General Manager
Johnson City, Tennessee
Superior Puerto Rico
Pedro Mora,
General Manager
Superior Industries
de Mexico, SA de CV
Gabriel Soto,
General Manager
West Memphis, Arkansas
Terrence J. Schultz,
General Manager
Superior Engineered
Technologies, Inc.
JOINT VENTURES
ASI
Aluminum Company
of America (Alcoa)
Suoftec Kft (Europe)
Otto Fuchs Metallwerke
Topy-Superior Limited (Japan)
Topy Industries Limited
TRANSFER AGENT
AND REGISTRAR
Chase Mellon
Shareholder Services
Los Angeles, California
800.356.2017
ANNUAL
MEETING
The annual meeting of Superior Industries International, Inc. will be held at
10:00 a.m. on May 16, 1997 at the:
Regent Beverly Wilshire Hotel, 9500 Wilshire Blvd.,
Beverly Hills, California.
SHAREHOLDER
INFORMATION
Form 10K Annual Report to the Securities and Exchange Commission will be sent
free of charge to shareholders upon written request to R. Jeffrey Ornstein, Vice
President & CFO.
CORPORATE
OFFICES
7800 Woodley Avenue
Van Nuys, California 91406
818.781.4973
Fax 818.780.3500
SHAREHOLDER
RELATIONS
818.771.5906
INTERNET WEB
ADDRESS
http://www.supind.com
INVESTOR
RELATIONS
Pondel Parsons & Wilkinson
Los Angeles, California
310.207.9300
Design & Production by DIMON Creative Communications, Burbank, CA
<PAGE> 36
Back Cover
Superior Industries International, Inc.
7800 Woodley Avenue
Van Nuys, CA 91406
818.781.4973 Fax 818.780.3500
http://www.supind.com
Logo: NYSE
<PAGE> 1
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.
Suoftec Light Metal Products B.V. Netherlands 100%
owned by Company
</TABLE>
Exhibit 21.1
<PAGE> 2
<TABLE>
<CAPTION>
Percentage of
Voting Stock
Jurisdiction Owned by the
of Company or
Name Incorporation Other Subsidiary
---- ------------- ----------------
<S> <C> <C>
Suoftec Light Metal Products KFT Hungary 50%
owned by Suoftec Light
Metal Products B.V.
Superior Industries International - Tennessee, U.S.A. 100%
Tennessee, Inc. owned by Superior
International Distribution
Corporation
Superior Industries International - Kansas, U.S.A. 100%
Kansas, Inc. owned by Superior
International Distribution
Corporation
Superior Industries International - Arkansas, U.S.A. 100%
Arkansas, Inc. owned by Superior
International Distribution
Corporation
Superior Industries International - California, U.S.A. 100%
California, Inc. owned by Superior
International Distribution
Corporation
Superior Industries Management California, U.S.A. 100%
Corporation owned by Company
Superior Industries International California, U.S.A. 100%
Distribution Corporation owned by Company
Superior Industries International - Michigan, U.S.A. 100%
Michigan, Inc. owned by Superior
International Distribution
Corporation
</TABLE>
Exhibit 21.1
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports dated February 12, 1997, included in Superior Industries
International, Inc.'s annual report to shareholders on Form 10-K for the year
ended December 31, 1996, into the Company's previously filed Registration
Statements File Nos. 2-80130, 33-48547 and 33-64088.
ARTHUR ANDERSEN LLP
Los Angeles, California
March 21, 1997
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, 1996 AND THE CONSOLIDATED
STATEMENTS OF INCOME FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 36,815
<SECURITIES> 5,288
<RECEIVABLES> 67,837
<ALLOWANCES> 1,270
<INVENTORY> 47,730
<CURRENT-ASSETS> 164,080
<PP&E> 321,885
<DEPRECIATION> 160,195
<TOTAL-ASSETS> 357,590
<CURRENT-LIABILITIES> 3,874
<BONDS> 2,473
0
0
<COMMON> 14,162
<OTHER-SE> 236,949
<TOTAL-LIABILITY-AND-EQUITY> 357,590
<SALES> 504,241
<TOTAL-REVENUES> 505,399
<CGS> 402,528
<TOTAL-COSTS> 422,459
<OTHER-EXPENSES> 7,385<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,484
<INCOME-PRETAX> 74,071
<INCOME-TAX> 27,221
<INCOME-CONTINUING> 46,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,850
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 0
<FN>
<F1>FOOTNOTE 1: OTHER EXPENSES INCLUDE MISCELLANEOUS EXPENSE.
</FN>
</TABLE>
