Superior Industries Reports $26.1 Million 2008 Loss

Wheel manufacturer Superior Industries International has reported a net loss of US$20.1 million for the fourth quarter ended December 31, 2008. This result is compares with a net income of $4.7 million for the fourth quarter of the previous financial year. For the 2008 full year, net loss was $26.1 million, compared to net income of $9.3 million in 2007.

“Our results included a number of non-recurring items related to asset impairments for the two announced plant closures, other workforce reductions, as well as an inventory write-down to recognize lower aluminium rates,” said company chairman, CEO and president Steven Borick. “In aggregate, these special adjustments totalled $23.3 million for the full year 2008. The workforce reductions and plant closings were severe measures, but steps that we believe were necessary in order to right-size our capacity and position the company to operate more efficiently. Perhaps most important, our actions will serve to protect our balance sheet and cash, allowing us to weather this unprecedented business cycle. Despite the economic challenges, we maintained a positive cash flow in 2008.

“Our financial performance for the 2008 fourth quarter and full year was impacted by the dramatic drop in US auto sales. We were ahead of the curve in reductions to our infrastructure and made some very difficult decisions to protect the future of our company. While we could not have predicted the extent and duration of the global economic downturn and its impact on the automotive industry, we have taken appropriate actions to stem losses and strengthen the company for the near and long-term.

“We continue to sharpen and streamline our operations, while making prudent investments that are necessary to lay the foundation for a prosperous future,” added Borick.

Fourth Quarter Results

Consolidated net sales decreased 33.7 per cent to $151.9 million, compared with $229.2 million for the fourth quarter of 2007. Unit wheel shipments approximated 2.2 million, a decrease of 31.3 per cent, or 1.0 million units, and the average selling price decreased 3.3 per cent compared with the prior year fourth quarter.

Negative gross profit was $3.7 million, which included $5.4 million for severance and other non-impairment costs associated with plant closures and workforce reduction actions at other plants in the U.S. and Mexico. This compares to gross profit of $11.5 million for the fourth quarter of 2007. The company recorded $12.8 million of impairment costs associated with the closures of its Pittsburg, Kansas and Van Nuys, California plants, as well as a $0.7 million write-down of other real property to reflect current market value.

Selling and administrative (S&A) expenses were $6.4 million, or 4.2 per cent of net sales, compared with $5.4 million, or 2.4 per cent of net sales, for the fourth quarter of 2007. The change is primarily due to an increase in bad debt reserve of $0.8 million.

Loss before income taxes and equity earnings from joint ventures was $16.9 million compared to income before income taxes and equity earnings from joint ventures of $7.8 million for the same period a year earlier. Included in the loss for the fourth quarter of 2008 were foreign exchange gains of $6.0 million. During the same period of 2007 there was a foreign exchange loss of $43,000.

The income tax provisions of $1.4 million and $5.6 million in the fourth quarters of 2008 and 2007, respectively, were the result of adjusting the year-to-date September income tax provision or benefit to those calculated for each full year.

The company recorded a $1.8 million loss in equity from its joint venture aluminium wheel manufacturing facility in Hungary. This compares to equity in earnings of $2.6 million in the year earlier period. This reduction, says Superior Industries, reflects the weakening European automotive market.

At December 31, 2008, working capital was $257.1 million, including cash and cash equivalents of $146.9 million. At December 31, 2007, working capital was $260.5 million, including cash and cash equivalents of $106.8 million. Superior has no debt.

Annual Results

Net sales for 2008 decreased 21.1 per cent to $754.9 million from $956.9 million for 2007. Unit wheel shipments decreased 21.6 per cent compared with the prior year. Gross profit was $6.6 million, or 0.9 per cent of net sales, which included $6.4 million of severance and other non-impairment costs associated with plant closures and workforce reductions. This compares to gross profit of $32.5 million, or 3.4 per cent of net sales, in 2007.

S&A expenses decreased to $25.7 million from $29.2 million in 2007. The principal decreases were in legal expenses of $2.9 million and bonus expense of $0.7 million. Legal expenses in 2007 included a labour-related legal settlement of $2.2 million and $0.5 million in legal fees related to a derivative lawsuit. The company recorded $17.8 million of impairment costs associated with the closures of its Pittsburg and Van Nuys plants, as well as a $0.7 million write-down of other real property to reflect current market value.

Loss before income taxes and equity earnings from joint ventures was $28.6 million compared to income before income taxes and equity earnings from joint ventures of $10.2 million for 2007. Included in the 2008 loss were foreign exchange gains of $5.5 million. The 2007 income included foreign exchange gains of $0.5 million. Equity in earnings of joint ventures was $0.7 million compared to $5.4 million for 2007, as the European market faced 2008 challenges similar to the North American market.