Superior Industries International, Inc. 10-K Filing Review

Superior Industries International, Inc. (hereafter referred to as 'Superior' or the 'Company') is a leading manufacturer of aluminum wheels for the automotive industry. The company's primary business involves designing and manufacturing aluminum wheels for sale to original equipment manufacturers (OEMs) in North America and Europe, as well as to the aftermarket in Europe. With approximately 6,600 full-time employees and seven manufacturing facilities across North America and Europe, Superior is one of the largest aluminum wheel suppliers to global OEMs and a significant player in the European aluminum wheel aftermarket.

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Financial Performance Overview

In the fiscal year ended December 31, 2023, Superior reported net sales of $1,385.3 million, a decrease of 15.5% from $1,639.9 million in the previous year. The decline in revenue was primarily attributed to lower aluminum pass-throughs to OEM customers and a decrease in unit shipments. The company's cost of sales also decreased by 13.8% to $1,269.5 million, primarily due to lower aluminum costs and shipment volumes. Despite the decrease in revenue and cost of sales, the gross profit margin slightly decreased from 10.1% in 2022 to 8.4% in 2023.

Selling, general, and administrative (SG&A) expenses increased to $87.6 million, or 6.3% of net sales, compared to $68.3 million, or 4.2% of net sales, in the prior year. The increase in SG&A expenses was primarily due to a provision for a valuation allowance on claims receivable from the SPG bankruptcy estate, advisor fees associated with the transformation of the European business, and restructuring severance charges related to the company's reduction in its global workforce.

The company reported a net loss of $92.9 million, or a loss per diluted share of $4.73, compared to net income of $37.0 million, or earnings per diluted share of $0.02, in 2022. The net loss was significantly impacted by a loss on the deconsolidation of subsidiary SPG, higher interest expenses due to rising interest rates and a higher credit spread on the new Term Loan Facility, and other expenses including a casualty loss related to flood damage.

Segment Performance

Superior operates in two reportable segments: North America and Europe. In 2023, the North American segment reported net sales of $794.4 million, a decrease of 15.8% from the previous year, while the European segment reported net sales of $590.9 million, a decrease of 15.1%. The decrease in unit shipments in Europe was primarily due to the wind-down and exit from an unprofitable contract with one of the company's customers during 2023, the deconsolidation of SPG, and a decrease in aftermarket unit shipments.

Financial Condition and Liquidity

As of December 31, 2023, Superior had cash and cash equivalents totaling $201.6 million. The company's liquidity position, including available unused commitments under the Revolving Credit Facility, totaled $219.2 million. Superior's working capital and current ratio were $261.0 million and 2.3:1, respectively. The company expects capital expenditures to be approximately $50.0 million in 2024.

Conclusion

Superior Industries International, Inc. faced several challenges in 2023, including a decrease in net sales, an increase in SG&A expenses, and a significant net loss. Despite these challenges, the company maintains a solid liquidity position and continues to invest in its operations. As Superior navigates the evolving automotive industry landscape, it remains focused on aligning its cost structure with industry production levels and pursuing strategic initiatives to enhance shareholder value.

Investment Score: 5.5

The investment score of 5.5 reflects the company's solid liquidity position and ongoing investments in its operations, balanced against the challenges of decreased net sales, increased expenses, and a significant net loss in 2023. Investors should closely monitor Superior's strategic initiatives and operational improvements in the coming year.