<PAGE> 1
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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
for the transition period from ___________ to ___________
COMMISSION FILE NO. 1-6615
SUPERIOR INDUSTRIES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-2594729
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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
--------------
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
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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 [ ]
The aggregate market value of voting stock of the registrant held by
non-affiliates of the registrant on March 15, 2000 was $472,446,496. On March
15, 2000, there were 26,118,349 shares of common stock issued and outstanding.
The following documents are incorporated by reference and made a part of
the Form 10-K:
1. Portions of Superior's 1999 Annual Report to Shareholders are
incorporated into Parts I, II and IV.
2. Portions of Superior's 1999 Annual Proxy Statement are
incorporated into Parts I and III.
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TABLE OF CONTENTS
<TABLE>
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Page
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PART I
Item 1 Business 1
General Development and Description of Business 1
Principal Products 3
Customer Dependence 3
New Products 3
Net Sales Backlog 4
Seasonal Variations and Work Stoppage 4
Raw Materials 4
Patents and Licensing Agreements 5
Research and Development 5
Government Regulation 5
Environmental Compliance 6
Competition 6
Employees 6
Item 2 Properties 7
Item 3 Legal Proceedings 7
Item 4 Submission of Matters to a Vote of Security Holders 8
Executive Officers of the Registrant 8
PART II
Item 5 Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters 9
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 7A Quantitative and Qualitative Disclosures about Market Risk 9
Item 8 Financial Statements and Supplementary Data 9
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 10
PART III
Item 10 Directors and Executive Officers of the Registrant 10
Item 11 Executive Compensation 10
Item 12 Security Ownership of Certain Beneficial Owners and Management 10
Item 13 Certain Relationships and Related Transactions 10
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K 11
Signatures
</TABLE>
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PART I
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain statements incorporated herein by reference, 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
our future performance and financial results are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
included 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 our strategic and operating plans.
ITEM 1. BUSINESS
General Development and Description of Business
Superior Industries International, Inc.'s principal business is the
design and manufacture of motor vehicle parts and accessories for sale to
original equipment manufacturers (OEMs) and the automotive aftermarket on an
integrated one-segment basis. Our primary production is vehicle aluminum road
wheels for the domestic and international OEMs in the automobile industry.
The Company was initially incorporated in Delaware in 1969 and
reincorporated in California in 1994, as the successor to three businesses
founded by Louis L. Borick, President and Chief Executive Officer. These
businesses had been engaged in the design, manufacture and sale of automotive
accessories and related products since 1957.
Our entry into the OEM road wheel business in 1973 resulted from our
successful development of manufacturing technology, quality control and quality
assurance techniques, which enabled us to satisfy the quality and volume
requirements of the OEM market. Our long-term strategy involved broadening both
our domestic and international OEM customer base and expanding product lines
into complementary areas, which would utilize our design and manufacturing
expertise.
In 1990, we formed a sale and marketing joint venture, Topy-Superior
Limited ("TSL"), with Topy Industries, Limited ("Topy"), Japan's largest wheel
manufacturer. TSL markets and sells wheels made by Superior to Japanese OEM
customers both in Japan and the United States. In 1999, TSL had agreements to
provide ten wheel programs for export to domestic Japanese OEM customers, or to
their U.S. operations.
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In 1994, we built our first plant in Mexico. Wheels manufactured at the
Chihuahua, Mexico facility are for both export and installation on Mexican
manufactured cars built mostly for indirect export back to the U.S. During 1997,
we announced an expansion project at the plant doubling its capacity to meet
future increases in export activities and customer demands. This expansion was
completed in 1999. Also in 1999, we committed to building a second manufacturing
facility in the same industrial complex as our existing facility in Chihuahua,
Mexico. Construction of this ultra modern wheel plant began in late 1999 and is
expected to be completed by year-end 2000. The new wheel plant will again double
our capacity in Mexico to meet increasing customer demands.
In 1994, in response to the steadily growing popularity of chrome-plated
aluminum wheels and to provide capacity due to increased customer demand, we
completed construction of a new chrome plating wheel facility in Fayetteville,
Arkansas. We are the only OEM aluminum wheel manufacturer to develop this
in-house capability and the plant is the largest of its kind in the world. Also
during 1998, we added a fully automated polishing facility for aluminum wheels
to the chrome plating plant. This plant demonstrates our commitment to
diversifying into new product lines complementary to our core business and gives
us among the most diverse wheel finishing capability in the industry.
In 1995, we entered into a 50-50 joint venture, Suoftec Light Metal
Products, Ltd. ("Suoftec"), with German based Otto Fuchs Metallwerke ("Otto
Fuchs") to establish a European manufacturing facility. The joint venture
produces both lightweight forged and cast aluminum wheels for sale to OEM
customers principally in Europe. Shipments of forged wheels began in 1997 and of
cast aluminum wheels in 1998. The facility, located in Tatabanya, Hungary,
established our commitment to entering the European market and introduced new
wheel making technology to both the European and U.S. markets. In 1998, we
completed the expansion of the cast aluminum production facility, doubling its
capacity to accommodate the demand for these products in the European and other
markets.
In 1997, we won our first non-wheel aluminum automotive components
order, a transmission support bracket for the Oldsmobile Intrigue. Taking the
next step in our strategy to expand our non-wheel aluminum components business,
during 1998 we entered into an exclusive licensing agreement for a unique
proprietary "hybrid" aluminum casting/forging technology called, "Cobapress".
The Cobapress technology combines the design flexibility, lightweight and cost
advantages of casting with improved strength characteristics of forging. This
technology, which can be used to manufacture non-wheel components that will be
less expensive while maintaining the structural requirements of conventional
forged aluminum and steel components, is currently being used to manufacture
aluminum components for several automobile manufacturers in Europe and the U.S.
In 1999, we acquired a manufacturing facility in Heber Springs, Arkansas to
accommodate our aluminum components manufacturing operations. Senior management
and marketing personnel have been hired and the new facility is expected to be
operational before the end of the year 2000.
During 1999 and early 2000, we were awarded new aluminum wheel supply
contracts valued at more that $350 million that we expect to deliver over the
next three years. These orders included major new customers including Rover
Group Ltd. and Mitsubishi, which we added to our client roster for the first
time, and a renewed relationship with DaimlerChrysler. We are working with
DaimlerChrysler's world class engineering and product teams on contracts for
2000 and beyond that could add over $30 million in annual revenue. We look
forward to expanding our relationship with these important new customers in the
years to come.
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Principal Products
Our OEM aluminum road wheels are sold for factory installation as
optional or standard equipment on selected vehicle models, to Ford Motor Company
("Ford"), General Motors Corporation ("GM"), DaimlerChrysler Corporation
("DaimlerChrysler"), Toyota Motor Corporation ("Toyota"), Mazda Motor
Corporation ("Mazda"), Nissan Motor Corporation Ltd. ("Nissan"), Isuzu Motors
Limited ("Isuzu"), Audi AG ("Audi"), Bayerische Motoren Werke ("BMW"),
Volkswagen AG ("Volkswagen"), Mitsubishi Motor ("Mitsubishi") and Rover Group
Ltd. ("Rover").
During the past twenty-six years, we have provided aluminum road wheels
to U.S. domestic, Japanese and European auto manufacturers from our seven OEM
aluminum wheel manufacturing facilities in three countries. In 1998, we also
began manufacturing our first OEM non-wheel aluminum automotive component, a
transmission bracket for GM's Oldsmobile Intrigue. Sales of OEM aluminum road
wheels for the three years ended December 31, 1999 averaged approximately 95% of
consolidated net sales. The balance of our consolidated net sales were
represented by a line of accessories sold to the automotive aftermarket.
Customer Dependence
We have proven our ability to be a consistent 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 our rapid plant expansion program, but also through our
demonstrated ability to meet frequent customer requests to absorb additional
capacity requirements. We strive to continually enhance our relationships with
our customers through continuous improvement programs, not only through our
manufacturing operations but in the engineering and product development area as
well. Moreover, we ship wheels for approximately 160 individual different
vehicle styles and trimlines.
GM and Ford were the only customers accounting for more than 10% of our
consolidated net sales in 1999. Sales to GM, as a percentage of consolidated net
sales, were 46.8%, 43.5% and 43.1% in 1999, 1998 and 1997, respectively. Sales
to Ford, as a percentage of consolidated net sales, were 39.8%, 41.3% and 42.8%
in 1999, 1998 and 1997, respectively.
Although the loss of all or a substantial portion of our sales to GM or
Ford would have a significant adverse effect on our financial results until the
lost sales volume could be replaced, we do not believe this represents a
material risk due to the excellent long-term relationships including multi-year
contractual arrangements that are in place.
New Products
In September 1999, we acquired a manufacturing facility in Heber
Springs, Arkansas to house our dedicated aluminum components manufacturing
operations. This facility, which is a short distance from our wheel
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manufacturing facility and engineering center in Fayetteville, Arkansas, will
house the specially designed equipment for the proprietary Cobapress
manufacturing technology licensed by us in 1998. Senior manufacturing and
marketing professionals have already been hired, and we expect the new facility
to be operational before the end of 2000.
Our U.S. and foreign automotive customers are reacting enthusiastically
to product samples of the non-wheel automotive components, and during 1999 and
in early 2000, we won important new contracts with significant follow-on
potential to manufacture aluminum front upper control arm/bracket assemblies for
certain 2002, 2003 and 2004 model year vehicles. We believe that production
employing the new technology can begin relatively quickly, as it is already in
production for customer orders in Europe.
In March 1997, General Motors awarded us a contract to supply aluminum
transmission support brackets for the Oldsmobile Intrigue. This product, which
replaced a stamped steel bracket, reduces vibration and provides for quieter
performance. Production of this new product, which did not require a significant
capital investment, currently takes place at our plant in Van Nuys, California.
Net Sales Backlog
We receive OEM tooling purchase orders to produce aluminum road wheels
typically for multiple model years. These purchase orders are for vehicle wheel
programs that can last three to five years. We manufacture and ship based on
customer release schedules, normally provided on a weekly basis, which can vary
due to cyclical automobile production.
Seasonal Variations and Work Stoppage
The automotive industry is cyclical and varies based on the timing of
consumer purchases of vehicles and general economic conditions. Production
schedules can vary significantly from quarter to quarter to meet customer
scheduling demands. During the past few years, there has been no significant
consistent seasonal variation.
In early June 1998, the United Auto Workers (UAW) initiated a strike
against General Motors (GM), one of our major customers. The work stoppage,
which reduced shipments of our aluminum road wheels during that period, ended at
the end of July 1998 and shipments of aluminum wheels to GM increased steadily
during the fourth quarter to make up for the lost production during the strike.
Raw Materials
We purchase substantial quantities of aluminum ingot for the manufacture
of our aluminum road wheels. These purchases accounted for approximately 85
percent of our total material requirements during 1999. The majority of our
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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
(typically one year) of the orders. During 1999, we were able to successfully
secure aluminum commitments from our primary suppliers to meet production
requirements.
We obtain our requirements for other materials through numerous
suppliers with whom we have established trade relations. When an outside
supplier produces components for our products, we normally own, or have the
right to purchase the tools and dies located in the supplier's facilities.
Patents and Licensing Agreements
We currently hold patents for 12 of our inventions and have no patents
pending. We have a policy of applying for patents when new products or
processes are developed. However, we believe our success is more dependent upon
manufacturing and engineering skills and the quality and market acceptance of
our products, than upon our ability to obtain and defend patents. In 1998, we
entered into a licensing agreement for the Cobapress technology that will
require royalty payments to be made upon the sale of parts manufactured using
that technology.
Research and Development
Our policy is to continuously review, improve and develop engineering
capabilities so that compliance with customer requirements are met in the most
efficient and cost effective manner available. We strive to achieve this
objective by attracting and retaining top engineering talent and by maintaining
the latest state-of-the-art computer technology to support engineering
development. Two fully staffed engineering centers located in Van Nuys,
California and Fayetteville, Arkansas support our research and development
manufacturing needs. We also have a technical center in Detroit, which maintains
a compliment of engineering staff centrally located near our largest customers.
We are currently engaged in approximately 68 engineering programs for
the development of OEM wheels and other suspension components for future model
years, including several wheel models for Japanese, Latin American and European
OEM manufacturers, including approximately 8 engineering programs for the
development of chrome-plated aluminum wheels.
Research and development costs are expensed as incurred. Amounts
expended during the three years ended December 31,1999 were $5,730,000 in 1999,
$4,959,000 in 1998 and $4,204,000 in 1997.
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. We believe that we are in compliance with all federal standards currently
applicable to OEM suppliers and to automotive aftermarket manufacturers and
products.
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Environmental Compliance
Our 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. We
believe our facilities are substantially in compliance with all standards
presently applicable. The 1999 cost of environmental compliance was
approximately $1,470,000. See Item 3 "Legal Proceedings" for information
concerning our involvement with certain United States Environmental Protection
Agency activities.
Competition
The business sectors in each of our product areas are highly
competitive. We are one of the leading suppliers of aluminum road wheels for OEM
installations in the world. We supply approximately one third of the aluminum
wheels for the North American car and light truck market. Based on Automotive
News, an industry publication, aluminum wheel installation rates on automobiles
and light trucks are estimated to be 55 percent for the 1999 model year. Our
primary competitor in the North American market is Hayes Lemmerz International,
Inc.
Employees
As of December 31, 1999, we have approximately 5,200 full-time employees
(including 564 at our joint venture in Hungary). At the present time the only
employees covered by collective bargaining agreements are the 78 employees at
our wheel polishing facility in Tijuana, Mexico.
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ITEM 2. PROPERTIES
We maintain and operate 12 facilities located in Arkansas, California,
Michigan, Kansas, Tennessee, Tijuana and Chihuahua, Mexico and Tatabanya,
Hungary. The facilities encompass manufacturing, warehouse and office space in
approximately 3.1 million square feet. All of these facilities are owned except
for our corporate offices, manufacturing and warehousing facilities in Van Nuys,
California and a sales/engineering office in Michigan.
In general, the facilities are in good operating condition and are
adequate to meet the productive capacity requirements of each plant. The
facilities have been constructed at various times over the past several years.
There are active maintenance programs to keep facilities in good condition. In
addition, we have an active capital spending program to replace equipment as
needed to keep it technologically competitive on a worldwide basis.
The principal facilities in the United States are as follows:
- Approximately 1,877,000 square feet of owned space in
Arkansas, Kansas, and Tennessee
- Approximately 389,000 square feet of leased space in
California and Michigan
The principal international facilities are as follows:
- Approximately 711,000 square feet of owned space in
Chihuahua, Mexico and Tatabanya, Hungary (a joint
venture facility)
- Approximately 26,000 square feet of leased space in
Tijuana, Mexico
Additionally, reference is made to Notes 1, 5 and 9 of "Notes to
Consolidated Financial Statements" on pages 23, 26 and 28, respectively, in the
Company's 1999 Annual Report to Shareholders, which are incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
In 1988, we were notified by the United States Environmental Protection
Agency (EPA), that we are considered a potentially responsible party (PRP) for
costs to clean up the Operating Industries, Inc. site in Monterey Park,
California. To date, by private agreement with the other settling defendants, we
have paid $515,000 net of settlements from other parties, to settle our
liability under the first three phases of clean-up. Based on known facts,
including the low level of participation claimed against us by the EPA and based
on the number and financial strength of the other PRP's with greater
participation in the cleanup activities, we are working with other small
defendants to cash out of the remaining liability for a de minimus settlement,
which is fully reserved for.
In the fall of 1998, we were notified by the EPA that we were considered
a PRP for costs to clean up the Casmalia Disposal Site in Santa Barbara County,
California. The EPA indicated that we qualified for a de minimus settlement in
December of 1999, we paid $118,500 in full settlement of this liability.
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ITEM 4. SUBMISSION OF MATTERS TO
A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1999, no matters were submitted to a vote
of security holders through the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names of corporate executive officers as of the
fiscal year end who are not directors. Information regarding executive officers
who are directors is contained in our 2000 Annual Proxy Statement to be issued
in connection with our Annual Meeting of Stockholders scheduled for May 12,
2000. The 2000 Annual Proxy Statement is incorporated herein by reference. All
executive officers are appointed annually by the Board of Directors and serve
one-year terms. Also see "Employment Agreements" on pages 6 and 7 in our 2000
Annual Proxy Statement, which is incorporated herein by reference.
Listed below is the name, age, position and business experience of each of our
officers who are not directors:
<TABLE>
<CAPTION>
Assumed
Name Age Position Position
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<S> <C> <C> <C>
Joseph T. D'Amico 70 Vice President, Materiel 1984
Michael D. Dryden 62 Vice President, International Business Development 1990
Ronald F. Escue 54 Vice President, General Manager - Aftermarket Wheels 1995
Vice President, Aftermarket Sales 1987
Emil J. Fanelli 57 Corporate Controller 1997
Vice President-Finance, Sinclair Paint Company 1982
James M. Ferguson 51 Vice President, OEM Marketing Group 1990
William B. Kelley 51 Vice President, Operations and Quality 1998
Corporate Director Quality Assurance 1993
Daniel L. Levine 41 Corporate Secretary and Treasurer 1997
Corporate Secretary and Assistant Treasurer 1996
Assistant Treasurer and Director of Tax 1992
Frank Monteleone 61 Vice President, Purchasing 1996
Corporate Purchasing Director 1986
Michael J. O'Rourke 39 Vice President, OEM Program Administration 1995
Director, OEM Programs 1991
Delbert J. Schmitz 67 Vice President, Aftermarket Marketing 1987
</TABLE>
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PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS
ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Reference is made to the presentation of "Quarterly Common Stock Price"
information," on page 14 and to Note 16 of "Notes to Consolidated Financial
Statements", on page 32 of our 1999 Annual Report to Shareholders, which is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the presentation of "Financial Highlights" on page
1 of our 1999 Annual Report to Shareholders, 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 presentation of "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 15 through
18 of our 1999 Annual Report to Shareholders, which is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
Reference is made to the presentation of "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 15 through
18 of our 1999 Annual Report to Shareholders, which is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Reference is made to the Consolidated Statements of Income, Consolidated
Balance Sheets, Consolidated Statements of Shareholders' Equity, Consolidated
Statements of Cash Flow, Notes to Consolidated Financial Statements, Quarterly
Financial Data and the Report of Independent Public Accountants, as set forth on
pages 19 through 34 of our 1999 Annual Report to Shareholders, which is
incorporated herein by reference.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There has been no change in independent public accountants nor have
there been any disagreements on accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
Information relating to Directors is set forth under the caption
"Election of Directors" on page 3 through 7 in our Annual Proxy Statement, which
is incorporated herein by reference. Certain information regarding Executive
Officers of the Registrant is contained in Item 4 of Part I of this Annual
Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to Executive Compensation is set forth under the
captions "Compensation of Directors" on page 7 and "Executive Compensation" on
pages 7 and 8 in our 2000 Annual Proxy Statement, which is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Information related to Security Ownership of Certain Beneficial Owners
and Management is set forth under caption "Voting Securities and Principal
Holders" on pages 1 and 2 in our 2000 Annual Proxy Statement, which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Information related to Certain Relationships and Related Transactions is
set forth under captions "Election of Directors" and "Certain Relationships and
Related Transactions", on pages 3 through 6 in our 2000 Annual Proxy Statement,
which is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements
Among the responses to this Item 14(a) are the following financial
statements which are incorporated herein by reference:
(i) Consolidated Statements of Income for the three years ended
December 31, 1999, 1998 and 1997
(ii) Consolidated Balance Sheets as of December 31, 1999 and 1998
(iii) Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 1999, 1998 and 1997
(iv) Consolidated Statements of Cash Flows for the three years ended
December 31, 1999, 1998 and 1997
(v) Notes to Consolidated Financial Statements
(vi) Report of Independent Public Accountants
2. Financial Statement Schedules
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(A) Schedule Description Pages
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Report of Independent Public Accountants on
Financial Statement Schedule S-1
Schedule II Valuation and Qualifying Accounts S-2
</TABLE>
All other schedules are omitted because they are not required, are
inapplicable, or the information is otherwise shown in the financial
statements or notes thereto.
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.)
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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.)
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.)
10.19 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.)
10.32 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.)
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.)
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10.40 Amendment to the 1993 Stock Option Plan on the Registrant
(Incorporated by reference to Exhibit 10.40 to Registrant's 1999
Proxy Statement.)
11 Computation of earnings per share (see Note 1 of "Notes to
Consolidated Financial Statements" in the Company's 1999 Annual
Report to Shareholders, which is incorporated herein by
reference.)
13 1999 Annual Report to Shareholders
21 List of Subsidiaries of the Company
23 Consent of Arthur Andersen LLP, Independent Public Accountants
for the Registrant
27 1999 Financial Data Schedule
(b) Reports of Form 8-K
No reports on Form 8-K have been filed during the fourth quarter of
1999.
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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 17, 2000
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>
<CAPTION>
<S> <C> <C>
President,
/s/ Louis L. Borick Chairman of the Board
- ------------------- and Director
Louis L. Borick (Principal Executive Officer) March 17, 2000
/s/ Steven J. Borick Executive Vice President & March 17, 2000
- -------------------- Director
Steven J. Borick
/s/ R. Jeffrey Ornstein Vice President & CFO
- ----------------------- and Director
R. Jeffrey Ornstein (Principal Financial Officer) March 17, 2000
/s/ Sheldon I. Ausman Director March 17, 2000
- ---------------------
Sheldon I. Ausman
/s/ Raymond C. Brown Director March 17, 2000
- --------------------
Raymond C. Brown
/s/ Philip W. Colburn Director March 17, 2000
- ---------------------
Philip W. Colburn
/s/ V. Bond Evans Director March 17, 2000
- ---------------------
V. Bond Evans
/s/ Jack H. Parkinson Director March 17, 2000
- ---------------------
Jack H. Parkinson
</TABLE>
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To Superior Industries International, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, 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
10, 2000. 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
consolidated 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 consolidated financial statements taken as a whole.
/s/ Arthur Andersen LLP
- ---------------------------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
February 10, 2000
S-1
<PAGE> 18
SCHEDULE II
<TABLE>
<CAPTION>
SUPERIOR INDUSTRIES INTERNATIONAL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
FOR THE YEAR ENDED:
<S> <C>
DOUBTFUL ACCOUNTS $ 718,000
ADD (DEDUCT):
PROVISION -
RECOVERIES 6,000
ACCOUNTS WRITTEN OFF (91,000)
-----------
$ 633,000
SALES DISCOUNTS AND ALLOWANCES 552,000
-----------
BALANCE AT DECEMBER 31, 1997 $ 1,185,000
===========
DOUBTFUL ACCOUNTS $ 633,000
ADD (DEDUCT):
PROVISION 400,000
RECOVERIES 1,000
ACCOUNTS WRITTEN OFF (214,000)
-----------
$ 820,000
SALES DISCOUNTS AND ALLOWANCES 552,000
-----------
BALANCE AT DECEMBER 31, 1998 $ 1,372,000
===========
DOUBTFUL ACCOUNTS $ 820,000
ADD (DEDUCT):
PROVISION 30,000
RECOVERIES 26,000
ACCOUNTS WRITTEN OFF (60,000)
-----------
$ 816,000
SALES DISCOUNTS AND ALLOWANCES 552,000
-----------
BALANCE AT DECEMBER 31, 1999 $ 1,368,000
===========
</TABLE>
S-2
<PAGE> 1
SUPERIOR.
Superior Industries International, Inc.
1999 Annual Report
<PAGE> 2
About Us
Superior Industries International, Inc. is one of world's largest suppliers of
aluminum wheels to leading automobile manufacturers including Ford, General
Motors, DaimlerChrysler, BMW, Volkswagen, Audi, Rover, Toyota, Mazda, Nissan,
Mitsubishi and Isuzu. The Company is building a position in the rapidly growing
market for aluminum suspension and related underbody components to compliment
its strong position in the Original Equipment Manufacturing (OEM) aluminum wheel
market. The Company's 12 manufacturing facilities employ more than 5,200 people
in the United States, Mexico, and Europe, and produce wheels and related
components for approximately 160 individual vehicle platforms.
The percentage of cars and light trucks equipped with original equipment
aluminium wheels has increased steadily for many years, and currently exceeds
55%. This growth reflects the many performance and appearance advantages of
aluminum wheels compared to traditional steel wheels. These performance
advantages also are expanding the use of aluminum for suspension and related
underbody components, creating an exciting new market opportunity for Superior
Industries with enormous growth potential.
SUPERIOR.
<PAGE> 3
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1996 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT (IN MILLIONS)
Net Sales $521,997 $504,241 $549,131 $539,431 $571,782
Gross Profit 113,797 101,713 108,170 100,104 125,518
Net Income $ 53,064 $ 46,850 $ 55,389 $ 52,319 $ 70,808
- ----------------------------------------------------------------------------------------------------------------
BALANCE SHEET (IN MILLIONS)
Current Assets $142,659 $164,080 $199,846 $235,886 $263,740
Current Liabilities 81,746 76,369 65,415 91,111 86,847
Working Capital 60,913 87,711 134,431 144,775 176,893
Total Assets 341,770 357,590 382,679 427,430 460,468
Long-term Debt 5,814 1,940 1,344 673 340
Shareholders' Equity $229,153 $251,111 $287,416 $312,034 $353,086
- ----------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Current Ratio 1.7:1 2.1:1 3.1:1 2.6:1 3.0:1
Long-term Debt/Total Capitalization 2.5% 0.8% 0.5% 0.2% 0.1%
Return on Average Shareholders' Equity 24.7% 19.5% 20.6% 17.5% 21.3%
- ----------------------------------------------------------------------------------------------------------------
SHARE DATA
Earnings - Basic $ 1.80 $ 1.64 $ 1.97 $ 1.89 $ 2.63
Earnings - Diluted $ 1.78 $ 1.63 $ 1.96 $ 1.88 $ 2.62
Shareholders' Equity at Year-End $ 7.89 $ 8.87 $ 10.30 $ 11.42 $ 13.35
Dividends Declared $ 0.19 $ 0.23 $ 0.27 $ 0.31 $ 0.35
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SUP
Listed
NYSE
THE NEW YORK STOCK EXCHANGE
www.supind.com
1
<PAGE> 4
LETTER TO SHAREHOLDERS
[LOUIS L. BORICK PICTURE]
To Our Shareholders: Nineteen ninety-nine was the most profitable year ever for
Superior Industries. Revenue, orders and unit shipments also set new records. We
added important new automotive manufacturers and vehicle nameplates to our
world-class customer base, committed to significantly expanding manufacturing
capacity, and made steady progress in building Superior's position in the
rapidly growing market for aluminum suspension and related underbody components
to complement our strong position in the OEM aluminum wheel market. For Superior
Industries, we believe that the best is yet to come.
WE ARE PROUD OF SUPERIOR'S OUTSTANDING PERFORMANCE FOR 1999, WHICH DEMONSTRATES
THE STRENGTH OF OUR COMPANY AND OUR INDUSTRY AS WE ENTER THE NEW MILLENNIUM.
Expanding Orders -- Superior was awarded new aluminum wheel supply contracts
valued at more than $350 million, about equally divided between replacement
programs and new business, that we expect to deliver over the next three years.
The new business is represented by orders from major global auto manufacturers
for several model platforms. The replacement business consists of several
contracts for 2000 model year vehicles, including the Mercury Sable, Chevrolet
Suburban/Tahoe, GMC Yukon, Oldsmobile Intrigue, Buick Regal, Cadillac DeVille,
and BMW Z3 Coupe.
During 1999, we added Rover Group Ltd. to our client roster for the first time
with a new multi-year contract to supply cast aluminum wheels for several Rover
models from our joint venture facility in Tatabanya, Hungary. Early in 2000, we
were also gratified to renew our relationship with DaimlerChrysler with initial
orders for aluminum road wheels for Chrysler and Dodge nameplates.
Pre-production program activities on these initial orders are already underway.
We have secured additional business with DaimlerChrysler that could add up to
$30 million in annual revenue beginning in model year 2002. We are working
closely with DaimlerChrysler's world-class engineering and product teams on
these projects, and look forward to expanding our relationship with this
important customer in the years to come. In addition, we won our first contracts
with Mitsubishi, and expect to earn additional business with this new customer
as well.
We also were awarded a contract to supply aluminum suspension components for a
major global automotive manufacturer. This contract for aluminum front upper
control arm/bracket assemblies for a 2002 model year automobile, with shipments
scheduled to begin in the fourth quarter of 2001, has significant follow-on
potential. Our customer's engineers determined that light weight aluminum
control arm/bracket assemblies reduce vibration and improve ride and handling
compared to traditional steel components. We are aggressively pursuing
additional contracts in this area and are confident that Superior will enjoy
increasing success in this emerging market in the years to come.
Expanding Capacity -- We have committed to adding two new manufacturing
facilities to accommodate our growth - a second wheel plant in Mexico and a
dedicated suspension and related components facility in Arkansas. In addition,
we are significantly expanding wheel manufacturing capacity at two of our
existing plants.
Construction is underway on a new $50 million aluminum road wheel production
facility near our existing facility in Chihuahua, Mexico. When completed in late
2000, this new facility, our eighth wheel manufacturing plant, will be among the
most technologically advanced facilities in the world.
In addition, in 1999 we acquired a 142,000 square foot building and
approximately 69 acres of land in Heber Springs, Arkansas to house our dedicated
aluminum automotive components manufacturing operations. Only a short distance
from our wheel manufacturing facility and engineering center in Fayetteville,
Arkansas, this new facility will house the specially designed equipment for the
proprietary hybrid cast/forge manufacturing technology we licensed in 1998 that
combines the design flexibility,
2
<PAGE> 5
[STEVEN J. BORICK PICTURE]
light weight and cost advantages of casting with improved strength
characteristics. Senior manufacturing and marketing professionals have been
added to our staff, and we expect the new plant to be operational by year end.
Our decision to invest in a dedicated components plant clearly signals our
growing confidence that we will be successful in building Superior's position in
the emerging OEM market for aluminum suspension and similar performance-related
automotive components. Superior grew to its current leadership position in the
OEM aluminum wheel industry by delivering the highest quality products built to
exacting specifications in world class facilities. Our well-earned reputation
for engineering and manufacturing excellence has served us well in the aluminum
wheel business, and we believe it will help us garner a significant share of the
growing components market.
All of these capacity expansion projects are being funded entirely from cash on
hand and internally-generated cash flow. Our ability to absorb significant
capital expenditures to expand our share of our target markets without having to
access outside sources of capital is a significant competitive advantage for
Superior that underscores the wisdom of our long-standing commitment to a strong
balance sheet.
Financial Results -- Net income for 1999 rose 35.3% to a record $70.8 million,
or $2.62 per share, capped by a remarkable $21.6 million, or a record $0.81 per
share, for the fourth quarter alone. For 1998, net income was $52.3 million, or
$1.88 per diluted share, including then-record net income of $19.5 million, or
$0.71 per share, for the fourth quarter. Revenue rose to $571.8 million from
$539.4 million for 1998, also an impressive result in view of lower pass-through
aluminum selling prices compared to the prior year.
We are proud of Superior's outstanding performance for 1999, which demonstrates
the strength of our company and our industry. What makes the 1999 fourth quarter
performance so remarkable is that it surpassed the prior year result, itself a
record at the time. This outstanding performance is a clear indication of the
strength of our company and the outlook for our business as we enter the new
millennium.
As always over the years, we worked hard to make the fruits of our growth
available to shareholders. In May, the Board of Directors increased the
quarterly cash dividend by 12.5% to $0.09 per share, the sixteenth consecutive
year of increasing dividends. In addition, we bought back 885,000 shares for a
total of 1,634,000 shares under our current 2,000,000 share buy-back program
authorized in the fourth quarter of 1997. Superior's balance sheet remains
debt-free, and our $108 million cash position is well in excess of our
aggressive plant expansion capital programs.
Finally, the company announced that Steven J. Borick was named Executive Vice
President. Steven joined the company as Vice President, Strategic Planning in
1999, has been a Director of Superior since 1981 and is Chairman of the Long
Range Planning Committee. Steven has spearheaded our increasingly successful
programs to increase Superior's share of the aluminum wheel market and build our
position in the market for aluminum suspension and related underbody components.
With his expanded responsibilities as Executive Vice President, we expect Steven
to play an increasingly important role in managing Superior's continued growth.
Superior's world-class engineering capabilities and manufacturing excellence
allow us to deliver the highest quality products built to exacting
specifications, in large volume, on time and on budget. Our diligent pursuit of
this formula over the years has earned us a growing share of the market for
aluminum automotive wheels. We believe it will make us just as successful in the
new market for aluminum suspension and related underbody components.
With the dedication of our employees and loyal support of our customers,
Superior's momentum clearly is increasing. We are bullish about the outlook for
our company in 2000 and beyond as we continue to work diligently to build value
for our shareholders.
Sincerely,
/s/ LOUIS L. BORICK
Louis L. Borick
President and Chairman of the Board
/s/ STEVEN J. BORICK
Steven J. Borick
Executive Vice President
3
<PAGE> 6
NET SALES (IN MILLIONS)
<TABLE>
<CAPTION>
95 96 97 98 99
-- -- -- -- --
<S> <C> <C> <C> <C>
$522 $504 $549 $539 $572
</TABLE>
Despite lower pass-through aluminum selling prices, steady growth in unit
aluminum wheel shipments translated into record revenue for 1999.
EARNINGS PER SHARE
<TABLE>
<CAPTION>
95 96 97 98 99
-- -- -- -- --
<S> <C> <C> <C> <C>
$1.78 $1.63 $1.96 $1.88 $2.62
</TABLE>
Earnings per share also reached a new high as record sales, efficient
manufacturing and tight control over operating costs generated strong operating
margins.
4
<PAGE> 7
SHAREHOLDERS' EQUITY (IN MILLIONS)
<TABLE>
<CAPTION>
95 96 97 98 99
-- -- -- -- --
<S> <C> <C> <C> <C>
$229 $251 $287 $312 $353
</TABLE>
Superior's strong balance sheet provides unparalleled flexibility and reinforces
its commitment to maximizing shareholder value.
PERFORMANCE.
BOOK VALUE PER SHARE
<TABLE>
<CAPTION>
95 96 97 98 99
-- -- -- -- --
<S> <C> <C> <C> <C>
$7.89 $8.87 $10.30 $11.42 $13.35
</TABLE>
With no debt and a strong cash position, Superior can finance significant
capital expenditures to support its continued growth.
5
<PAGE> 8
PRODUCTS.
<PAGE> 9
Superior enjoys a well-earned reputation for producing quality products to
exacting specifications, on time and on budget. By combining advanced
engineering, design and manufacturing capabilities with unparalleled industry
expertise and customer responsiveness, in 1999 we were able to deliver more
products for more customers than ever before in our history.
Our growing engineering team, supported by advanced CAD/CAM design and automated
manufacturing technology, has enhanced our competitiveness and solidified our
industry leadership. Our successful program to dramatically shorten concept to
customer product development cycles also has contributed to Superior's growing
market share and enabled us to win new customers such as DaimlerChrysler,
Mitsubishi and Rover.
Superior's dedicated engineering and technical sales team in Detroit works
closely with customers to stay on top of the industry's changing evolution. As a
result, we react quickly to new product concepts and can move rapidly from
design to prototype delivery. For example, during 1999 a customer required
massive 20-inch aluminum wheels for a limited edition vehicle. We were able to
respond to this need with engineering and production capabilities unique to our
Company. No other company was able to meet their needs for both design and
manufacturing criteria and also meet the demanding OEM specification
requirements. In addition, our rapid response to a customer request for
prototype aluminum suspension components was the key to winning production
orders during the year as well. We delivered prototypes of this unique product
in record time and were awarded new business.
OEM UNIT SALES (IN MILLIONS)
<TABLE>
<CAPTION>
95 96 97 98 99
-- -- -- -- --
<S> <C> <C> <C> <C>
9.0 9.5 10.0 10.1 11.2
</TABLE>
Record OEM unit wheel shipments reflect a healthy, growing industry as well as
continued market share gains for Superior Industries.
<TABLE>
<S> <C>
General Motors 48%
Ford 41%
European and Japanese 11%
</TABLE>
7
<PAGE> 10
[ART WORK OF VARIOUS TYPES OF ALUMINUM WHEELS]
8
<PAGE> 11
[ART WORK OF VARIOUS TYPES OF ALUMINUM WHEELS]
9
<PAGE> 12
Superior was awarded new aluminum wheel supply contracts valued at more than
$350 million. These orders are about equally divided between replacement
programs and new business that we expect to deliver over the next three years.
2000 got off to a strong start with new contract awards from DaimlerChrysler and
Mitsubishi. We also are beginning to build our order book for aluminum
suspension and related underbody components with new orders scheduled to begin
shipping in 2001.
We are optimistic that we can sustain Superior's momentum. Technical strength is
a key to success in our industry. Superior's world-class engineering and
manufacturing resources allow us to meet and exceed the increasingly stringent
performance, weight, and cost requirements that strain the capabilities of many
of our competitors. We expect our investments in engineering and product
development to increase our competitive advantage in the years ahead.
GROWTH.
Underscoring our optimism, we have committed to building two new manufacturing
facilities to accommodate our anticipated growth - a second wheel plant in
Mexico and a dedicated suspension and related components facility in Arkansas.
In addition, we are significantly expanding wheel manufacturing capacity at two
of our existing plants.
MARKET GROWTH (OEM ALUMINUM WHEELS)
<TABLE>
<CAPTION>
85 90 95 97 99
-- -- -- -- --
<S> <C> <C> <C> <C>
10% 24% 44% 52% 55%
</TABLE>
OEM aluminum wheel penetration continues to increase because of aluminum's
performance, weight and appearance advantages.
10
<PAGE> 13
[ARTWORK OF MACHINE CARRYING ALUMINUM WHEEL]
11
<PAGE> 14
[ARTWORK OF ALUMINUM SUSPENSION AND UNDERBODY PRODUCTS]
CONTROL ARM CONTROL ARM/BRACKET ASSEMBLY
KNUCKLE CONTROL ARM
12
<PAGE> 15
...driven by aluminum's performance, weight, and appearance advantages in many
automotive applications... have spawned an exciting new growth opportunity for
Superior - the design and manufacture of aluminum suspension and related
underbody components for our OEM customers.
MARKETS.
Superior now is designing and building aluminum wheels for more automotive
manufacturers and individual nameplates than ever before. We added Rover to our
client base in 1999 and, in early 2000, were pleased to welcome Mitsubishi and
DaimlerChrysler as a returning customer. Superior's unit wheel shipments
increased 10.5% in 1999 to a new record, and once again exceeded the rate of
growth of auto and light truck sales for the year. This suggests that Superior
continues to increase its share of the worldwide OEM aluminum wheel business at
the same time that the market itself continues to expand. Aluminum wheel
penetration now exceeds 55% of all new vehicles, compared to 40% just five years
ago, driven by aluminum's performance, weight, and appearance advantages in many
automotive applications.
These advantages have spawned an exciting new growth opportunity for Superior -
the design and manufacture of aluminum suspension and related underbody
components for our OEM customers. This emerging multi-billion dollar market has
the potential to exceed Superior's opportunity in the aluminum wheel business in
the next few years. In 1999 we won an important new contract with significant
follow-on potential to supply aluminum front upper control arm/bracket
assemblies for a 2002 model year vehicle for a major global automotive
manufacturer. Based on this contract and our confidence that we will win
additional new business in this area, in 1999 we acquired a 142,000 square foot
building and approximately 69 acres of land in Heber Springs, Arkansas to house
our dedicated aluminum automotive components manufacturing operations. We expect
this advanced new facility to be operational before the end of the year.
13
<PAGE> 16
Nineteen ninety-nine was another great year for Superior Industries as revenue,
unit shipments and earnings all set new records. The Company was awarded new and
replacement aluminum wheel supply contracts valued at more than $350 million
that are scheduled to be delivered over the next three years, including initial
orders from DaimlerChrysler, Mitsubishi and Rover, the latest additions to the
Company's world-class customer base. Superior also committed to significantly
expanding manufacturing capacity, and made progress in building its position in
the rapidly growing market for aluminum suspension and related underbody
components to complement its large share of the OEM aluminum wheel market.
RESULTS.
QUARTERLY COMMON STOCK PRICE INFORMATION ($)
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------
High Low High Low High Low
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 28 1/2 23 5/16 33 3/16 25 7/8 25 3/8 22 1/2
Second Quarter 27 22 13/16 33 1/2 26 5/16 27 1/8 22 5/8
Third Quarter 28 7/16 25 14/16 27 15/16 20 3/16 29 3/8 25 13/16
Fourth Quarter 29 1/16 24 10/16 27 15/16 21 11/16 28 1/2 25
</TABLE>
Our common stock is traded on the New York Stock Exchange (symbol: SUP). We have
approximately 1,100 shareholders of record and 26.3 million shares outstanding
as of January 31, 2000.
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
SALES
<TABLE>
<CAPTION>
Years Ended December 31 1999 1998 1997
- -----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net Sales $571,782 $539,431 $549,131
</TABLE>
Unit shipments of aluminum road wheels to the automobile manufacturers in 1999
increased 10.5 percent over 1998 shipments to a record annual level. Original
equipment manufacturer (OEM) sales were $551.0 million in 1999 compared to
$506.2 million a year ago. This represents an increase of $44.8 million, or 8.9
percent. Sales dollars in 1999 increased at a lesser rate than unit shipments
due principally to the decline in average selling prices caused by a lower
pass-through price of aluminum to our customers. Net sales of our aftermarket
product lines decreased 37.6 percent to $20.8 million in 1999. This was due
principally to the discontinuance of our aftermarket road wheel business and
certain aftermarket accessories product lines during the year.
The 10.5 percent increase in OEM aluminum wheel unit shipments in 1999 compares
to an increase of 9.8 percent in North American automotive production of
passenger cars and light trucks. During 1999, we benefited from industry
expansion as well as market share gains. Based on Automotive News, an industry
publication, aluminum wheel installation rates on automobiles and light trucks
in the U.S. are estimated at a record 55 percent for the 1999 model year
compared to 51.1 percent for the 1998 model year.
Net sales in 1998 decreased 1.8 percent to $539.4 million compared to the $549.1
million in 1997, as unit shipments of aluminum road wheels were virtually
unchanged from 1997 levels, due primarily to the 52 day strike at General Motors
negatively affecting shipments to that important customer in the second and
third quarters of 1998.
GROSS MARGIN
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ---------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Gross Profit Margin 22.0% 18.6% 19.7%
</TABLE>
During 1999, the gross margin increased to 22.0 percent of net sales compared to
18.6 percent in 1998. The major reason for this margin increase was attributable
to improved incremental profit rates due to higher absorption of fixed costs
caused by the increased operating rates at each of our plants during 1999. In
addition, the price of aluminum decreased approximately 11.0 percent, which had
a positive effect on the gross margin percentage.
The aluminum content of selling prices to OEM customers is periodically adjusted
to current market conditions, which subjects us to the risks of market changes
when we, from time to time, enter 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. The
opposite is true in periods during which the price of aluminum increases.
While we have ongoing programs to reduce costs to our customers and, in the
past, have generally been successful in substantially mitigating pricing
pressure from our customers, it is becoming increasingly difficult to do so
without impacting margins. We will continue to aggressively implement cost
savings strategies to meet customer pricing expectations and maintain margins.
The impact of future customer pricing pressures and increasing industrywide
competition on our financial position and results of operations is not known.
15
<PAGE> 18
Gross profit margin was 18.6 percent of net sales in 1998 compared to 19.7
percent in 1997. The decreased gross margin in 1998 was due primarily to
unabsorbed production costs during the aforementioned work action against
General Motors in the second and third quarters.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Due to our continued focus on cost control, selling, general and administrative
expenses, which increased slightly compared to the prior year, decreased to 3.6
percent of net sales in 1999, compared to 3.7 percent of net sales in 1998.
OTHER INCOME (EXPENSE)
In 1999, interest income increased to $5.6 million from $4.5 million in 1998 as
cash available for investment during the year averaged $20.4 million higher than
the prior year.
Interest income in 1998 increased to $4.5 million from $2.7 million in 1997 as
cash generated during the year averaged $34.2 million higher than the prior
year.
The decreased interest expense in 1998 was due to payment of the final $3.3
million installment of our 9.3 percent Senior Notes in December 1997.
The 50/50 joint venture formalized in 1995 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, began
production of forged wheels in early 1997 and cast wheels in mid 1998. In 1999,
a substantial expansion program to double the capacity of cast wheel production
was completed. Accordingly, miscellaneous expense for 1999 included $2.1 million
of expense representing our share of operating losses associated with this new
facility. This was considerably less than the prior year, with the fourth
quarter of 1999 loss at less than $150,000.
Miscellaneous expense in 1998 and 1997 included our share of initial start-up
costs associated with the new facility in Hungary, amounting to $3.8 million and
$3.4 million, respectively.
EFFECTIVE INCOME TAX RATE
The consolidated tax rate in 1999 decreased to 34.75 percent of pre-tax income
from 35.25 percent in 1998. The reduced rate was due primarily to an increase in
foreign income, which is taxed at rates other than the statutory federal rate,
and to increases in foreign sales and income from tax favored short-term
investments. The effective tax rate is subject to continuing review.
The consolidated tax rate in 1998 decreased to 35.25 percent of pre-tax income
from 35.75 percent in 1997. The reduced rate was due primarily to an increase in
federal tax credits, principally related to research and development.
16
<PAGE> 19
READINESS FOR YEAR 2000
Our company-wide program established on January 1, 1998 to identify, test and
correct all integrated business software and date-sensitive processes to be Year
2000 compliant was successful with no major problems encountered as of this
writing.
This program is being conducted by a management team led by a project manager
reporting directly to the Vice President of Operations & Quality. The team will
continue to coordinate the efforts of internal resources as well as third
parties to identify any systems, processes or equipment that might require
attention.
Costs incurred from inception of this program to become Year 2000 compliant are
estimated at less than $500,000 and are not anticipated to increase
significantly.
As of this writing, all of our mission critical systems that we control in our
domestic and international operations are functioning properly in the year 2000.
However, no assurance can be given that unforeseen circumstances will not arise
which would adversely affect our systems. As a result, we are unable to
determine the impact that any system interruption, especially those externally
generated, would have on our results of operations, financial position or cash
flows.
RISK MANAGEMENT
We are not substantially exposed to market risk from changes in foreign currency
exchange rates or interest rates, which could impact our results of operations
and financial condition. Therefore, we do not actively manage interest rate risk
or foreign currency exchange contracts. As a result of the minimal exposure to
the change in market conditions, we do not foresee any significant change in the
current strategy.
INFLATION
Inflation did not have a material impact on our results of operations or the
financial condition for 1999. We believe that purchase commitments and the
majority of our customer contracts are structured to minimize the impact of
changes caused by inflation.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
December 31, 1999 1998
- ------------------------------------------
(In Thousands)
<S> <C> <C>
Total Assets $460,468 $427,430
</TABLE>
Total assets at the end of 1999 increased $33.0 million, or 7.7 percent from
1998. This increase was primarily due to increases in cash and accounts
receivable of $21.5 million and $6.3 million, respectively. The accounts
receivable increase was in receivables from and advances to joint ventures,
principally for the expansion of the casting production line in Hungary.
<TABLE>
<CAPTION>
December 31, 1999 1998
- ---------------------------------------------
(In Thousands)
<S> <C> <C>
Total Liabilities $107,382 $115,396
</TABLE>
Total liabilities decreased $8.0 million, or 6.9 percent from 1998, primarily as
a result of a $12.3 million decrease in accounts payable due principally to the
timing of required payments.
17
<PAGE> 20
<TABLE>
<CAPTION>
December 31, 1999 1998
- ------------------------------------------------------
(In Thousands)
<S> <C> <C>
Total Shareholders' Equity $353,086 $312,034
</TABLE>
Shareholders' equity was increased by net income of $70.8 million and reduced by
the repurchases of common stock of $22.8 million and cash dividends declared of
$9.6 million. The balance of the increase in shareholders' equity is represented
by foreign currency translation adjustments and proceeds from the exercise of
our stock options.
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998
- -------------------------------------------------------------------
(In Thousands)
<S> <C> <C>
Net cash provided by operating activities $87,077 $79,619
</TABLE>
Cash provided by operating activities was $87.1 million in 1999 compared to
$79.6 million in 1998. The increase in net income of $18.5 million was offset by
an increase in working capital requirements, caused principally by the reduction
in accounts payable referred to above.
The $87.1 million in cash flows from operating activities in 1999 was reduced by
cash utilized to repurchase our common stock and to pay cash dividends, totaling
$22.8 million and $9.2 million, respectively, and for capital expenditures of
$33.0 million.
Under the current authorization to repurchase our outstanding common stock,
during 1998 and 1999, we have acquired 1.6 million shares for a total of $42.4
million. Capital expenditures in 1999 included completion of a major expansion
of our existing Chihuahua, Mexico facility, the acquisition of the Heber
Springs, Arkansas facility for the manufacture of suspension and related
components, as well as ongoing improvements of other existing facilities.
Over the past eleven years, we have expended approximately $375 million for new
plant and expansion programs. The majority of the expansion financing came from
internally generated cash flow, to construct and expand our world-class road
wheel facilities and to continuously improve all OEM manufacturing plants. In
addition, we anticipate expending over $50 million for our second wheel facility
in Chihuahua, Mexico. In the year 2000, expenditures will be incurred for major
capacity expansion projects at our existing wheel plants and for the start-up of
the suspension and related component facility in Heber Springs, Arkansas. We
anticipate funding these plans from internally generated cash flow and, to the
extent necessary, from existing cash and equivalents.
During 1999, the value of the Mexican peso experienced a 5 percent decline
relative to the U.S. dollar, as a result of the Mexican economy entering a
recovery period. 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 our wholly owned subsidiary, Superior
Industries de Mexico, SA de CV, has resulted in a cumulative unrealized
translation loss of $15.1 million, net of taxes, which has been charged directly
to shareholders' equity. This facility currently represents approximately 9
percent of our total net sales.
Our financial condition remains extremely strong, with record net sales and net
income. After expending $33.0 million for capital expenditures and $22.8 million
to repurchase our common stock in 1999, our working capital increased to $176.9
million from $144.8 million in 1998. The current ratio increased to 3.0:1 from
2.6:1 a year ago. With our strong balance sheet, which includes $108.0 million
in cash, we are well positioned to take full advantage of new and complimentary
business opportunities, to expand international markets and to withstand
potential downturns in the economy.
During 1999, our Board of Directors announced a 12.5 percent increase in the
cash dividend, representing the sixteenth consecutive year of dividend
increases. We anticipate continuing the policy of paying dividends, which is
contingent upon various factors, including economic and market conditions, none
of which can be accurately predicted.
18
<PAGE> 21
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 571,782,000 $ 539,431,000 $ 549,131,000
Cost of Sales 446,264,000 439,327,000 440,961,000
- -------------------------------------------------------------------------------------------------------
GROSS PROFIT 125,518,000 100,104,000 108,170,000
Selling, general and administrative expenses 20,310,000 19,758,000 19,986,000
- -------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 105,208,000 80,346,000 88,184,000
Other Income (Expense)
Interest income 5,580,000 4,452,000 2,662,000
Interest expense (129,000) (165,000) (492,000)
Miscellaneous, net (2,141,000) (3,832,000) (4,146,000)
- -------------------------------------------------------------------------------------------------------
3,310,000 455,000 (1,976,000)
INCOME BEFORE INCOME TAXES 108,518,000 80,801,000 86,208,000
Income Taxes 37,710,000 28,482,000 30,819,000
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 70,808,000 $ 52,319,000 $ 55,389,000
=======================================================================================================
EARNINGS PER SHARE-- BASIC $ 2.63 $ 1.89 $ 1.97
=======================================================================================================
EARNINGS PER SHARE-- DILUTED $ 2.62 $ 1.88 $ 1.96
=======================================================================================================
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 22
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 108,081,000 $ 86,566,000
Accounts receivable 107,032,000 100,754,000
Inventories 39,488,000 41,433,000
Deferred income taxes 6,371,000 4,698,000
Other current assets 2,768,000 2,435,000
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 263,740,000 235,886,000
PROPERTY, PLANT AND EQUIPMENT 163,113,000 158,194,000
LONG-TERM ASSETS 33,615,000 33,350,000
- ---------------------------------------------------------------------------------------------------------------------
$ 460,468,000 $ 427,430,000
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 45,454,000 $ 57,707,000
Accrued expenses 41,060,000 32,756,000
Current portion of capitalized leases 333,000 648,000
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 86,847,000 91,111,000
CAPITALIZED LEASES 340,000 673,000
OTHER LONG-TERM LIABILITIES 13,263,000 14,862,000
DEFERRED INCOME TAXES 6,932,000 8,750,000
COMMITMENTS AND CONTINGENT LIABILITIES -- --
SHAREHOLDERS' EQUITY
Preferred stock, par value $25.00, 1,000,000 shares authorized, none issued -- --
Common stock, par value $.50, 100,000,000 shares authorized 13,227,000 13,656,000
Accumulated other comprehensive income (loss) (15,114,000) (17,233,000)
Retained earnings 354,973,000 315,611,000
- ---------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 353,086,000 312,034,000
- ---------------------------------------------------------------------------------------------------------------------
$ 460,468,000 $ 427,430,000
=====================================================================================================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 23
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Accumulated
-------------------------- Additional Other
Number of Paid-In Retained Comprehensive
Shares Amount Capital Earnings Income (Loss) Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1996 28,323,666 $ 14,161,000 $ 20,845,000 $ 230,504,000 $ (14,399,000) $ 251,111,000
Comprehensive income:
Net income -- -- -- 55,389,000 -- 55,389,000
Other comprehensive
income (loss) -- -- -- -- 243,000 243,000
Comprehensive income -- -- -- -- -- 55,632,000
Stock options exercised,
including related
tax benefit 102,421 51,000 1,478,000 -- -- 1,529,000
Repurchases of
common stock (523,700) (261,000) (13,017,000) -- -- (13,278,000)
Cash dividends declared
($.27/share) -- -- -- (7,578,000) -- (7,578,000)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1997 27,902,387 13,951,000 9,306,000 278,315,000 (14,156,000) 287,416,000
Comprehensive income:
Net income -- -- -- 52,319,000 -- 52,319,000
Other comprehensive
income (loss) -- -- -- -- (3,077,000) (3,077,000)
Comprehensive income -- -- -- -- -- 49,242,000
Stock options exercised,
including related
tax benefit 158,999 80,000 3,063,000 46,000 -- 3,189,000
Repurchases of
common stock (749,300) (375,000) (12,369,000) (6,786,000) -- (19,530,000)
Cash dividends declared
($.31/share) -- -- -- (8,283,000) -- (8,283,000)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1998 27,312,086 13,656,000 -- 315,611,000 (17,233,000) 312,034,000
Comprehensive income:
Net income -- -- -- 70,808,000 -- 70,808,000
Other comprehensive
income (loss) -- -- -- -- 2,119,000 2,119,000
Comprehensive income -- -- -- -- -- 72,927,000
Stock options exercised,
including related
tax benefit 26,633 13,000 578,000 -- -- 591,000
Repurchases of
common stock (884,500) (442,000) (578,000) (21,803,000) -- (22,823,000)
Cash dividends declared
($.35/share) -- -- -- (9,643,000) -- (9,643,000)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1999 26,454,219 $ 13,227,000 $ -- $ 354,973,000 $ (15,114,000) $ 353,086,000
===================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME $ 70,808,000 $ 52,319,000 $ 55,389,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 28,523,000 26,698,000 26,917,000
Equity losses of joint ventures 2,096,000 4,123,000 3,722,000
Provision for retirement plans 1,384,000 957,000 1,127,000
Other non cash items (440,000) (141,000) 905,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (6,278,000) (22,211,000) (11,976,000)
Inventories 1,945,000 954,000 5,343,000
Other assets 59,000 (387,000) (697,000)
Increase (decrease) in:
Accounts payable (12,253,000) 23,456,000 (11,927,000)
Other liabilities 4,724,000 (1,976,000) 1,936,000
Deferred income taxes (3,491,000) (4,173,000) 3,875,000
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 87,077,000 79,619,000 74,614,000
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (33,029,000) (36,701,000) (13,326,000)
Investment in and advances to joint ventures 39,000 (4,830,000) (7,052,000)
Proceeds from sales of property, plant and equipment 172,000 121,000 150,000
Proceeds from sales of investments -- -- 5,488,000
Purchases of investments (1,000,000) -- --
- ----------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (33,818,000) (41,410,000) (14,740,000)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock (22,823,000) (19,530,000) (13,278,000)
Cash dividends paid (9,179,000) (8,324,000) (7,329,000)
Stock options exercised 591,000 3,189,000 1,529,000
Payments of long-term debt (333,000) (671,000) (3,918,000)
- ----------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (31,744,000) (25,336,000) (22,996,000)
- ----------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Equivalents 21,515,000 12,873,000 36,878,000
Cash and Equivalents at Beginning of Year 86,566,000 73,693,000 36,815,000
- ----------------------------------------------------------------------------------------------------------------
Cash and Equivalents at End of Year $ 108,081,000 $ 86,566,000 $ 73,693,000
================================================================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BUSINESS DESCRIPTION
Our principal business is the design and manufacture of motor vehicle parts and
accessories, primarily aluminum road wheels for the domestic and international
original equipment manufacturer (OEM) markets.
We maintain both domestic and foreign manufacturing facilities, including a
wholly-owned subsidiary in Mexico and a 50 percent owned joint venture
manufacturing facility in Hungary.
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the account balances of all
subsidiaries, after elimination of all significant intercompany accounts and
transactions. Investments in 50 percent owned joint ventures are accounted for
using the equity method. Our share of joint ventures' operating results is
reflected in other income. These investments are included in long-term assets.
USE OF ESTIMATES
Our financial statements conform with generally accepted accounting principles
that require us to make estimates and assumptions during the reporting period.
These estimates and assumptions affect the assets and liabilities that are
reported. They also have an effect on the financial statement revenues and
expenses during the reporting period. While actual results could differ, we
believe such estimates to be reasonable.
FISCAL YEAR END
Our fiscal year ends on December 26, 1999, the last Sunday of the calendar year,
which is comprised of fifty-two weeks. In the consolidated financial statements,
all fiscal years are shown to begin as of January 1st and end as of December
31st for clarity of presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Our financial instruments recorded on the balance sheet include cash and
equivalents, accounts and notes receivable, long-term investments and accounts
payable. Due to their nature, the carrying amount of cash and equivalents,
accounts and notes receivable and accounts payable approximates fair value. Fair
value of our long-term investments is discussed in Note 6 to the consolidated
financial statements.
CASH AND EQUIVALENTS
Cash and equivalents generally consist of cash and certificates of deposit with
maturities of three months or less. Certificates of deposit at December 31, 1999
and 1998 totaled $625,000 and $4,406,000, respectively. At times through the
year, cash balances held at financial institutions were in excess of federally
insured limits.
MARKETABLE SECURITIES
Marketable securities are carried at the lower of cost or market, with any
unrealized gains and losses reported as a component of shareholders' equity.
These securities, which generally consist of U.S. government agency securities,
corporate bonds, money market preferred stocks and equities, are all considered
"available-for-sale". We had no net realized gain or loss on marketable
securities during 1999 and 1998, but a loss of $354,000 was reported during
1997.
23
<PAGE> 26
FOREIGN CURRENCY TRANSLATION
Foreign currency asset and liability accounts are translated using the 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 of $96,000, $428,000 and $85,000
have been recorded as part of operations during 1999, 1998 and 1997,
respectively.
INVENTORIES
Inventories, which include material, labor and factory overhead, are stated at
the lower of cost or market. We use the first-in, first-out (FIFO) method to
value our inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, less accumulated depreciation
and amortization. The cost of additions, improvements and interest during
construction is capitalized. Our maintenance and repairs and tooling costs are
charged to expense when incurred. Depreciation and amortization are calculated
generally on the straight-line method based on the estimated useful lives of the
assets.
<TABLE>
<CAPTION>
Classification Expected Useful Life
- ----------------------------------------------------------
<S> <C>
Equipment 3 to 10 years
Building 25 to 33 years
</TABLE>
When property and equipment is replaced, retired or disposed of, the cost and
related accumulated depreciation or amortization are removed from the accounts.
Gains and losses, if any, are recorded in the results of operations for the
period. Property and equipment no longer used in operations, which are generally
insignificant in amount, are stated at the lower of cost or estimated fair value
and are included in other assets.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred. Amounts
expended during the three years ended December 31,1999 were $5,730,000 in 1999,
$4,959,000 in 1998 and $4,204,000 in 1997.
INCOME TAXES
Income taxes are accounted for using the asset and liability method pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). FAS 109 requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences
between the financial statement carrying amounts and the tax basis of assets and
liabilities. The effect on deferred taxes for a change in tax rates is
recognized in income in the period of enactment. Provision is made for U.S.
income taxes on undistributed earnings of international subsidiaries and 50
percent owned joint ventures, unless such future earnings are considered
permanently reinvested. Tax credits are accounted for as a reduction of the
provision for income taxes in the period in which the credits arise.
24
<PAGE> 27
STOCK-BASED COMPENSATION
We have elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations in accounting for our employee stock options. Under APB 25,
because the exercise price of employee stock options equals or exceeds the
market price of the underlying stock on the date of grant, no compensation
expense is recorded. We have adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), as reflected in Note 13 to the consolidated financial
statements.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income for the period by
the weighted average number of common shares outstanding for the period of
26,927,000 in 1999, 27,671,000 in 1998 and 28,069,000 in 1997. Diluted earnings
per share is computed by dividing net income for the period by the weighted
average number of common shares outstanding plus the dilutive effect of our
outstanding stock options ("common stock equivalents"), or 27,056,000 in 1999,
27,818,000 in 1998 and 28,221,000 in 1997.
NEW ACCOUNTING STANDARDS
In 1998, The Financial Accounting Standards Board issued Statements of Financial
Accounting Standard No. 132, "Employers Disclosures about Pensions and Other
Postretirement Benefits" ("FAS 132"), No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133") and No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" ("FAS 137"), which delays implementation of FAS No.
133 until years beginning after June 15, 1999. Implementation of the disclosure
requirements of FAS 132 did not have a material effect on our consolidated
financial statements. We do not anticipate the adoption of FAS 133, in the year
2000, to have a material effect on our consolidated financial statements.
2. BUSINESS SEGMENT
- --------------------------------------------------------------------------------
We manufacture motor vehicle parts and accessories for sale on normal, generally
unsecured trade terms to original equipment manufacturers (OEMs) and the
automotive aftermarket, primarily in North America, on an integrated one-
segment basis.
3. ACCOUNTS RECEIVABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Trade receivables $ 86,481,000 $ 91,629,000
Due from joint venture 8,764,000 701,000
Other receivables 13,155,000 9,797,000
- ------------------------------------------------------------------------------
108,400,000 102,127,000
Allowance for doubtful accounts (1,368,000) (1,373,000)
- ------------------------------------------------------------------------------
Total $ 107,032,000 $ 100,754,000
==============================================================================
</TABLE>
25
<PAGE> 28
The following percentages of our consolidated net sales were made to General
Motors Corporation and Ford Motor Company: 1999, 46.8 percent and 39.8 percent;
1998, 43.5 percent and 41.3 percent; 1997, 43.1 percent and 42.8 percent,
respectively. These two customers represented 91 percent and 82 percent of trade
receivables at December 31, 1999 and 1998, respectively.
4. INVENTORIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $10,748,000 $12,987,000
Work in process 10,908,000 10,998,000
Finished goods 17,832,000 17,448,000
- -------------------------------------------------------------------------------
$39,488,000 $41,433,000
===============================================================================
</TABLE>
5. PROPERTY PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 51,180,000 $ 47,944,000
Machinery and equipment 306,641,000 285,899,000
Leasehold improvements and other 4,472,000 5,283,000
Construction in progress 26,135,000 26,083,000
- --------------------------------------------------------------------------------
388,428,000 365,209,000
Less -- Accumulated depreciation and amortization 225,315,000 207,015,000
- --------------------------------------------------------------------------------
$163,113,000 $158,194,000
================================================================================
</TABLE>
Included in property, plant and equipment at December 31, 1999 and 1998, were
buildings and equipment held under capital leases of $5,360,000, with
accumulated depreciation of $3,674,000 and $3,472,000, respectively.
6. LONG-TERM ASSETS
- --------------------------------------------------------------------------------
Long-term assets at December 31, 1999 and 1998 include investments in our 50
percent owned joint ventures, totaling $21,737,000 and $23,872,000,
respectively. In 1995, we entered into a joint venture with Otto Fuchs
Metallwerke KG, a German manufacturing company, to form Suoftec Metal Products
Production and Distribution Ltd. ("Suoftec") to manufacture cast and forged
aluminum wheels for the European automobile industry.
Initial manufacture and sale of forged aluminum wheels began in early 1997 and
cast aluminum wheels in mid 1998. Suoftec reported sales of $35.7 million in
1999 and $26.9 million in 1998. These sales are not included in our consolidated
sales, but our 50 percent share of Suoftec's operating results are included in
other income. These results were losses of $2.1 million in 1999 and $3.8 million
in 1998, due principally to the start-up of the cast aluminum wheel process in
those years. Our investment in Suoftec totaled $21.7 million and $23.8 million
as of December 31, 1999 and 1998, respectively.
We also have interests in affordable housing limited partnerships which provide
favorable income tax benefits generally over a fifteen-year period. These
investments totaled $4,904,000 and $5,397,000 at December 31, 1999 and 1998,
respectively. We believe that these amounts represent the best estimate of fair
value of these investments.
26
<PAGE> 29
7. BORROWING ARRANGEMENTS
- --------------------------------------------------------------------------------
We maintain a line of credit facility under which we may borrow up to
$25,000,000 on an uncommitted, unsecured basis at rates generally below prime.
We had no short-term borrowings during 1999 or 1998.
Our capitalized leases are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capitalized lease obligations, payable in installments through 2001,
with a weighted average interest rate of 11.3% $ 673,000 $ 971,000
Industrial development revenue bonds, final installment of $350,000 paid 1999,
with a weighted average interest rate of 7.6% -- 350,000
- ----------------------------------------------------------------------------------------------------------
673,000 1,321,000
Less -- Current portion 333,000 648,000
- ----------------------------------------------------------------------------------------------------------
$ 340,000 $ 673,000
==========================================================================================================
</TABLE>
8. TAXES ON INCOME
- --------------------------------------------------------------------------------
The provision (credit) for income taxes is comprised of the following
components:
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT TAXES
Federal $ 37,284,000 $ 23,759,000 $ 25,225,000
State 4,134,000 3,189,000 2,365,000
Foreign 320,000 4,206,000 104,000
- ----------------------------------------------------------------------------------------------------------
41,738,000 31,154,000 27,694,000
DEFERRED TAXES
Federal (3,088,000) (1,582,000) (706,000)
State (493,000) (272,000) 104,000
Foreign (447,000) (818,000) 3,727,000
- ----------------------------------------------------------------------------------------------------------
(4,028,000) (2,672,000) 3,125,000
TOTAL $ 37,710,000 $ 28,482,000 $ 30,819,000
==========================================================================================================
</TABLE>
Income tax payments were $39,796,000 in 1999, $29,907,000 in 1998 and
$24,305,000 in 1997.
The reconciliation of the statutory United States federal income tax rate to our
effective income tax rate is as follows:
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.00% 35.00% 35.00%
State tax provisions, net of federal income tax benefit 2.18 2.35 1.86
Federal tax credits (1.16) (2.32) (1.44)
Foreign income taxed at rates other than the statutory rate (0.66) 0.28 (0.62)
Other, net (0.61) (0.06) 0.95
- ----------------------------------------------------------------------------------------------------------
Effective income tax rate 34.75% 35.25% 35.75%
==========================================================================================================
</TABLE>
27
<PAGE> 30
Significant components of our deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31, 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Foreign currency translation adjustment $ 8,900,000 $ 9,500,000
Accruals not currently deductible 5,405,000 4,789,000
Deferred compensation 5,289,000 4,564,000
State taxes expensed currently, deductible in following year 1,093,000 982,000
Other -- 719,000
- -------------------------------------------------------------------------------------------------------------------
20,687,000 20,554,000
DEFERRED TAX LIABILITIES
Differences between book and tax basis
of property, plant and equipment 14,359,000 16,156,000
Differences between financial and tax accounting associated with
foreign operations 6,011,000 8,450,000
Other 878,000 --
- -------------------------------------------------------------------------------------------------------------------
21,248,000 24,606,000
- -------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 561,000 $ 4,052,000
===================================================================================================================
</TABLE>
9. LEASES AND RELATED PARTIES
- --------------------------------------------------------------------------------
We lease certain land, facilities and equipment under long-term operating leases
expiring at various dates through 2003. 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, we reduced the
amortization period for certain of these operating leases to appropriately match
with the estimated useful life of the underlying machinery. Total lease expense
for all operating leases amounted to $1,050,000 in 1999, $2,256,000 in 1998 and
$4,156,000 in 1997.
Our corporate office and certain manufacturing facilities are leased from Louis
L. Borick, President, and Juanita A. Borick, under both capital and operating
leases. The operating lease, which expires in the year 2001, has two option
periods of ten years each. The annual lease payment is $1,232,000, including
$392,000 for the capital lease portion as shown in the table below. Future
minimum payments to the Borick's through 2001 are $1,611,000 for the operating
lease and $751,000, including interest, for the capital lease. In addition,
certain other facilities were leased under short-term lease arrangements from a
related entity owned by Steven J. Borick, Executive Vice President, and two
other Borick children.
Total lease payments to the Borick's and the related entity were $1,524,000 in
1999, $1,598,000 in 1998 and $1,520,000 in 1997.
We believe the related party transactions described above were fair to the
Company and could have been obtained from an unaffiliated third party.
28
<PAGE> 31
Future minimum payments under all leases are summarized as follows:
<TABLE>
<CAPTION>
Operating Capital
Years Ended December 31, Leases Lease
- ------------------------------------------------------------------------------
<S> <C> <C>
2000 $2,339,000 $ 392,000
2001 1,057,000 359,000
2002 297,000 --
2003 9,000 --
2004 -- --
Thereafter -- --
- ------------------------------------------------------------------------------
3,702,000 751,000
Amounts representing interest -- 78,000
- ------------------------------------------------------------------------------
$3,702,000 $ 673,000
==============================================================================
</TABLE>
10. RETIREMENT PLANS
- --------------------------------------------------------------------------------
We have an unfunded supplemental executive retirement plan covering our
directors, officers and other key members of management. We purchase key-man
life insurance policies on each of the participants to provide for future
liabilities. Subject to certain vesting requirements, the plan provides for a
benefit, based on final average compensation, which becomes payable on the
employee's death or upon retirement.
The components of cost for this retirement plan are as follows:
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 302,000 $ 276,000 $ 279,000
Interest cost 432,000 509,000 521,000
Net amortization 55,000 55,000 55,000
Other unrecognized (gain) or loss (103,000) -- --
- ------------------------------------------------------------------------------
Net cost $ 686,000 $ 840,000 $ 855,000
==============================================================================
</TABLE>
A schedule reconciling the projected benefit obligation with recorded plan
liability follows:
<TABLE>
<CAPTION>
December 31, 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 4,294,000 $ 5,080,000
- ------------------------------------------------------------------------------
Accumulated benefit obligation $ 6,503,000 $ 7,116,000
- ------------------------------------------------------------------------------
Projected benefit obligation $ 7,078,000 $ 7,781,000
Unrecognized prior service cost (110,000) (164,000)
Other unrecognized experience losses (465,000) (501,000)
- ------------------------------------------------------------------------------
Recorded liability $ 6,503,000 $ 7,116,000
==============================================================================
</TABLE>
Actuarial assumptions for the retirement plan include an assumed discount rate
of 6.5 percent in 1999 and 7 percent in 1998 and an assumed rate of average
future compensation increases of 4 percent in 1999 and 5 percent in 1998.
We also have a contributory employee retirement savings plan covering
substantially all of our employees. The employer contribution is determined at
the discretion of the Company and totaled $2,529,000, $2,923,000 and $3,089,000
for 1999, 1998 and 1997, respectively.
29
<PAGE> 32
We also have a deferred compensation agreement with our President under which we
have agreed to pay certain amounts annually subsequent to retirement. For
accounting purposes, the present value of such payments has been charged to
expense. These charges totaled $850,000, $117,000 and $272,000 for 1999, 1998
and 1997, respectively.
11. LIABILITIES
- --------------------------------------------------------------------------------
The components of accrued expenses and other long-term liabilities are as
follows:
<TABLE>
<CAPTION>
December 31, 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
ACCRUED EXPENSES
Payroll and related benefits $14,922,000 $13,307,000
Income taxes 8,408,000 5,416,000
Insurance reserves 4,674,000 4,467,000
Taxes, other than income tax 3,044,000 3,157,000
Interest and dividends 2,375,000 1,914,000
Operating lease 1,473,000 2,302,000
Other 6,164,000 2,193,000
- ----------------------------------------------------------------------------------
Total accrued liabilities $41,060,000 $32,756,000
==================================================================================
OTHER LONG-TERM
Executive retirement and deferred compensation plans $12,474,000 $11,089,000
Operating lease 313,000 3,176,000
Other 476,000 597,000
- ----------------------------------------------------------------------------------
Total other long-term liabilities $13,263,000 $14,862,000
==================================================================================
</TABLE>
12. COMMITMENTS AND CONTINGENT LIABILITIES
- --------------------------------------------------------------------------------
We are party to various legal and environmental proceedings incidental to our
business. Certain claims, suits and complaints arising in the ordinary course of
business have been filed or are pending against us. Based on facts now known, we
believe all such matters are adequately provided for, covered by insurance or,
if not so covered or provided for, are without merit, or involve such amounts
that would not materially adversely affect our consolidated results of
operations and cash flows or financial position. At December 31, 1999, we had
outstanding letters of credit of approximately $3.5 million.
13. STOCK OPTIONS
- --------------------------------------------------------------------------------
We have a stock option plan that authorizes us to issue incentive and
non-qualified stock options to our directors, officers and key employees
totaling up to 3,700,000 shares of common stock. Shares available for future
grants under these plans totaled 411,788 at December 31, 1999. 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. Options granted
generally vest ratably over a 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.
We have adopted the disclosure-only requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"). Therefore, the following information is presented in accordance with the
provisions of that Statement.
30
<PAGE> 33
If we had elected to recognize compensation cost based on the fair value of
options granted as prescribed by FAS 123, net income and earnings per diluted
share would have been reduced to the proforma amounts indicated below.
<TABLE>
<CAPTION>
Years ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reported net income $ 70,808,000 $ 52,319,000 $ 55,389,000
Proforma net income $ 69,257,000 $ 51,970,000 $ 54,927,000
Reported diluted earnings per share $ 2.62 $ 1.88 $ 1.96
Proforma diluted earnings per share $ 2.58 $ 1.87 $ 1.95
</TABLE>
The fair value of each option grant was estimated as of the date of grant using
the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
Years ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 6.5% 4.8% 5.6%
Expected dividend yield 1.0% 1.0% 1.0%
Expected stock price volatility 31.2% 29.0% 25.0%
Expected option lives
Incentive 7.3 7.3 7.0
Non-qualified 9.4 9.4 7.0
</TABLE>
A summary of the status of our stock option plan and changes in outstanding
options is presented below:
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
Shares Weighted Shares Weighted Shares Weighted
Under Average Under Average Under Average
Option Exercise Price Option Exercise Price Option Exercise Price
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 1,491,252 $ 23.64 1,238,851 $ 22.69 1,284,356 $ 21.81
Granted 251,000 25.66 413,400 23.74 76,500 22.97
Exercised (26,633) 19.69 (158,999) 16.49 (102,421) 10.97
Canceled or expired (14,500) 21.19 (2,000) 22.69 (19,584) 26.84
- ------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 1,701,119 $ 24.03 1,491,252 $ 23.64 1,238,851 $ 22.69
==================================================================================================================
Exercisable at end of year 1,118,069 1,010,852 1,112,045
==================================================================================================================
Weighted-average fair
value of options granted
during the year $ 11.24 $ 9.58 $ 8.27
==================================================================================================================
</TABLE>
The following table summarizes information about options outstanding at December
31, 1999:
<TABLE>
<CAPTION>
Options Weighted Average Options
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Prices at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 5.19-$ 5.58 31,045 0.94 years $ 5.24 31,045 $ 5.24
$10.29-$15.09 51,174 2.20 years 14.25 51,174 14.25
$19.08-$27.13 1,618,900 5.95 years 24.69 1,035,850 24.76
- ---------------------------------------------------------------------------------------------------------------
1,701,119 5.75 years $ 24.03 1,118,069 $ 23.74
===============================================================================================================
</TABLE>
31
<PAGE> 34
14. OTHER EXPENSE
- --------------------------------------------------------------------------------
Other miscellaneous expense includes our share of operating results of our joint
ventures. Miscellaneous expense in 1999 included $2.1 million representing our
share of the operating loss associated with the joint venture wheel facility in
Tatabanya, Hungary. During the facility's start-up phases for casting operations
in 1998 and forging operations in 1997, our share of pre-operating losses
totaled $3.8 million and $3.4 million, respectively.
15. COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130"),
which became effective in 1998. FAS 130 requires presentation of comprehensive
income and its components in the financial statements. Listed below are the
components of other comprehensive income (loss) as reflected in the consolidated
statement of shareholders' equity.
<TABLE>
<CAPTION>
Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Foreign currency translation adjustments $ 2,119,000 $(3,077,000) $ (311,000)
Unrealized loss on marketable securities -- -- 554,000
- -----------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) $ 2,119,000 $(3,077,000) $ 243,000
=================================================================================================================
</TABLE>
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
First Second Third Fourth Total
December 31, 1999 Quarter Quarter Quarter Quarter Year
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 136,909 $ 155,029 $ 131,430 $ 148,414 $ 571,782
Gross Profit 28,651 33,977 26,954 35,936 125,518
Net Income 15,494 19,211 14,489 21,614 70,808
Earnings Per Share
Basic .57 .71 .54 .81 2.63
Diluted .57 .71 .54 .81 2.62
Dividends Declared Per Share .08 .09 .09 .09 .35
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Total
December 31, 1998 Quarter Quarter Quarter Quarter Year
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 136,371 $ 138,130 $ 112,245 $ 152,685 $ 539,431
Gross Profit 24,837 23,421 16,551 35,295 100,104
Net Income 12,791 12,304 7,677 19,547 52,319
Earnings Per Share
Basic .46 .44 .28 .71 1.89
Diluted .46 .44 .28 .71 1.88
Dividends Declared Per Share .07 .08 .08 .08 .31
</TABLE>
32
<PAGE> 35
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 controls, and
accounting principles and practices. Both the independent accountants and the
internal auditor have free access to the Audit Committee at any time.
/s/ LOUIS L. BORICK
Louis L. Borick
President and Chairman of the Board
/s/ R. JEFFREY ORNSTEIN
R. Jeffrey Ornstein
Vice President & CFO
/s/ EMIL J. FANELLI
Emil J. Fanelli
Corporate Controller
33
<PAGE> 36
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, 1999 and 1998, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Los Angeles, California
February 10, 2000
34
<PAGE> 37
CORPORATE INFORMATION
DIRECTORS
Louis L. Borick
President and
Chairman of the Board
Steven J. Borick
Executive Vice President
Sheldon I. Ausman
Vice Chairman of
Compensation Resource Group, Inc.,
Raymond C. Brown
Retired Senior Vice President
Philip W. Colburn
Chairman, Allen Telecom, Inc.
V. Bond Evans
Retired President and CEO,
Alumax Inc.
R. Jeffrey Ornstein
Vice President and CFO
Jack H. Parkinson
Retired Managing Director,
Chrysler de Mexico, S.A.
CORPORATE OFFICERS
Louis L. Borick
President and
Chairman of the Board
Steven J. Borick
Executive 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 Wheels
Emil J. Fanelli
Corporate Controller
James M. Ferguson
Vice President,
OEM Marketing Group
William B. Kelley
Vice President Operations and Quality
Daniel L. Levine
Corporate Secretary and Treasurer
Frank Monteleone
Vice President, Purchasing
R. Jeffrey Ornstein
Vice President and CFO
Michael J. O'Rourke
Vice President, OEM Program Administration
Delbert J. Schmitz
Vice President, Aftermarket Marketing
COUNSEL AND AUDITORS
General Counsel
Irell and Manella
AUDITORS
Arthur Andersen LLP
FACILITIES
Robert D. Bracy
Vice President
PLANT AND SUBSIDIARY LOCATIONS
Van Nuys, California
Bernard J. O'Neil
Corporate Director of Manufacturing
Fayetteville, Arkansas
P.S. Reddy, General Manager
Rogers, Arkansas
David C. Rogers, General Manager
Pittsburg, Kansas
E. James Conover
General Manager
Johnson City, Tennessee
Gene W. Jole
General Manager
Fayettevillle, Arkansas
Chrome Plating Plant
I. Armando Valdez, 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
Suoftec Kft (Europe)
Otto Fuchs Metallwerke
Robert H. Bouskill,
Managing Director
Topy-Superior Limited (Japan)
Topy Industries Limited
DIVIDEND REINVESTMENT PLAN
TRANSFER AGENT AND REGISTRAR
Information about the Company's Dividend Reinvestment Plan, a convenient and
economical method of using the dividend to increase holdings and any other
questions about shareholder accounts should be directed to:
Chase Mellon
Shareholder Services
Los Angeles, California
800.356.2017
www.chasemellon.com
ANNUAL MEETING
The annual meeting of Superior Industries International, Inc.
will be held at 10:00 am on May 12, 2000 at the:
Airtel Plaza Hotel
7277 Valjean Avenue
Van Nuys, 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 and CFO.
CORPORATE OFFICES
Superior Industries International, Inc.
7800 Woodley Avenue
Van Nuys, CA 91406
ph: 818.781.4973
fax: 818.780.3500
www.supind.com
SHAREHOLDER RELATIONS
www.supind.com
818.902.2701
INVESTOR RELATIONS
Neil G. Berkman Associates
Los Angeles, California
310.277.5162
SUP
LISTED
NYSE
THE NEW YORK STOCK EXCHANGE
35
<PAGE> 38
OUR WORLD WIDE CUSTOMERS
FORD
GM
DAIMLERCHRYSLER
AUDI
NISSAN
MITSUBISHI MOTORS
ISUZU
MAZDA
BMW
VOLKSWAGEN
TOYOTA
ROVER
36
<PAGE> 39
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> 40
[SUPERIOR LOGO]
7800 Woodley Avenue
Van Nuys, CA 91406
ph: 818.781.4973
fax: 818.780.3500
www.supind.com
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Percentage of
Voting Stock
Jurisdiction Owned by the
of Company or
Name Incorporation Other Subsidiary
---- ------------- ----------------
<S> <C> <C>
Industrias Universales 100%
Unidas de Mexico, S.A. Tijuana, Mexico owned by Company
Suoftec Light Metal Products B.V. Netherlands 100%
owned by Company
Suoftec Light Metal Products Hungary 50%
Production & Distribution Ltd owned by Suoftec Light
Metal Products B.V.
Superior Engineered 100%
Technologies, Inc. Delaware, U.S.A. owned by Company
Superior Industries 100%
de Mexico S.A. de C.V. Chihuahua, Mexico owned by Company
Superior Industries International 100%
Distribution Corporation California, U.S.A. owned by Company
Superior Industries International - 100%
Arkansas, Inc. Arkansas, U.S.A. owned by Company
Superior Industries International - 100%
California, Inc. California, U.S.A. owned by Company
Superior Industries International - 100%
Kansas, Inc. Kansas, U.S.A. owned by Company
Superior Industries International - 100%
Michigan, Inc. Michigan, U.S.A. owned by Company
Superior Industries International - 100%
Tennessee, Inc. Tennessee, U.S.A. owned by Company
</TABLE>
<PAGE> 2
Exhibit 21
LIST OF SUBSIDIARIES
(Continued)
<TABLE>
<CAPTION>
Percentage of
Voting Stock
Jurisdiction Owned by the
of Company or
Name Incorporation Other Subsidiary
---- ------------- ----------------
<S> <C> <C>
Superior Industries Management 100%
Corporation California, U.S.A. owned by Company
Superior Industries 100%
International - P.R. Inc. Delaware, U.S.A. owned by Company
Superior Industries V.I., Inc. Virgin Islands 100%
owned by Company
Topy-Superior Limited Tokyo, Japan 50%
owned by Company
Superior Industries 100%
International Leasing Corp. Delaware, U.S.A. owned by Company
Superior Performance Products Inc. Canada 100%
owned by Company
Suinco Assurance Ltd. Bermuda 100%
owned by Company
Superior Astechnology Inc. Delaware, USA 100%
owned by Company
Superior - Ideal Inc. Delaware, USA 100%
owned by Company
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated February 10, 2000, included in Superior Industries International,
Inc.'s Annual Report to Shareholders in this Form 10-K for the year ended
December 31, 1999, into the Company's previously filed Registration Statements
File Nos. 2-80130, 33-48547 and 33-64088.
ARTHUR ANDERSEN LLP
Los Angeles, California
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-28-1998
<PERIOD-END> DEC-31-1999
<CASH> 108,081
<SECURITIES> 0
<RECEIVABLES> 108,400
<ALLOWANCES> (1,368)
<INVENTORY> 39,488
<CURRENT-ASSETS> 263,740
<PP&E> 388,428
<DEPRECIATION> (225,315)
<TOTAL-ASSETS> 460,468
<CURRENT-LIABILITIES> 86,847
<BONDS> 0
0
0
<COMMON> 13,227
<OTHER-SE> 339,859
<TOTAL-LIABILITY-AND-EQUITY> 460,468
<SALES> 571,782
<TOTAL-REVENUES> 571,782
<CGS> 446,264
<TOTAL-COSTS> 466,574
<OTHER-EXPENSES> 2,141
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,451)
<INCOME-PRETAX> 108,518
<INCOME-TAX> 37,710
<INCOME-CONTINUING> 70,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,808
<EPS-BASIC> 2.63
<EPS-DILUTED> 2.62
</TABLE>
