Superior Industries Reports 2009 Fourth Quarter and Annual Results

Superior Industries International, Inc. (NYSE:SUP) announced a sharply reduced net loss of $3.9 million, or $0.15 per share, for the fourth quarter of 2009, compared with a net loss of $20.1 million, or $0.75 per share, for the fourth quarter of 2008.

Unit shipments increased 9.9% in the fourth quarter of 2009, compared with the same period a year ago. Gross profit (loss) improved to $12.2 million in the fourth quarter of 2009 from a loss of $3.7 million in the fourth quarter of 2008. Gross profit (loss) included certain severance and other non-impairment costs associated with plant closures and other workforce reductions of $4.3 million in 2009 and $5.4 million in 2008.

Net sales for the fourth quarter of 2009 increased 30.2%, on 23.0% higher unit shipments, compared with the third quarter of 2009. General Motors and Chrysler continued to increase production levels in the fourth quarter, as Superior’s unit shipments to these two major customers increased by 23.8% and 24.4%, respectively, compared with the third quarter of 2009. Unit shipments to Ford and international customers also improved, compared with the previous quarter, increasing 17.7% and 30.5%, respectively.

Fourth Quarter Results

Consolidated net sales decreased $6.9 million, or 4.5%, to $145.0 million from $151.9 million when comparing the fourth quarter of 2009 with the fourth quarter of 2008. Unit wheel shipments increased 9.9% during the same period, which equated to an increase in net sales of $14.8 million. However, average selling prices decreased approximately 14.0%, compared with the prior year, due principally to a reduction in the pass-through pricing of aluminum, which equated to a decrease in net sales of $24.5 million.

Gross profit was $12.2 million, or 8.4% of net sales, for the fourth quarter of 2009, compared with gross loss of $3.7 million, or 2.4% of net sales, for the fourth quarter of 2008. Severance and other non-impairment costs associated with plant closures and other workforce reductions totaled approximately $4.3 million in the fourth quarter of 2009 and $5.4 million in the fourth quarter of 2008. The improvement in gross profit reflected the steps taken to manage costs and rationalize production capacity, which reduced employment related and other costs significantly, compared with the same period a year ago.

SG&A expenses decreased 3.0% to $6.3 million, or to 4.3% of net sales, for the fourth quarter of 2009, from $6.4 million, or 4.2% of net sales when compared to the fourth quarter of 2008.

Income before income taxes and equity earnings was $7.3 million for the fourth quarter of 2009, which included certain plant closure and related expenses of $4.3 million that were included in cost of sales. The loss before income taxes and equity earnings of $16.9 million for the fourth quarter of 2008 included impairment charges of $13.5 million, and other plant closure related costs of $5.4 million which were included in cost of sales. These non-recurring expenses in 2008 were partially offset by a foreign exchange transactional gain on the Mexican peso of $5.9 million.

The income tax benefit for the fourth quarter of 2009 was $6.4 million, compared with a tax provision of $1.4 million for the fourth quarter of 2008. The 2009 tax benefit includes an approximately $6.1 million income tax refund claimed as a result of the 2008 net federal operating losses becoming eligible for carry back following government legislation enacted in the fourth quarter of 2009.

The equity in the loss from our joint venture aluminum wheel manufacturing facility in Hungary was $17.6 million in the fourth quarter of 2009 compared to a loss of $1.8 million in the same period a year ago. The joint venture’s operations in 2009 were negatively impacted by the overall decline in the European auto industry and ongoing production and quality issues that are currently being addressed. Additionally, during the current quarter, because the projected multi-year future cash flows of the joint venture may not be sufficient to recover the carrying value of the joint venture’s net assets, an impairment charge was recorded to reduce the joint venture’s net assets to estimated fair value. Accordingly, the $17.6 million loss recorded in the fourth quarter of 2009 includes $14.4 million, which represents our share of that impairment charge.

At December 31, 2009, working capital was $241.4 million, including cash, cash equivalents and short-term investments of $140.5 million. At December 31, 2008, working capital was $257.1 million, including cash and cash equivalents of $146.9 million. Superior has no bank or other interest bearing debt.

Annual Results

Net sales decreased $336.1 million, or 44.5%, to $418.8 million from $754.9 million for 2008. Unit wheel shipments decreased 30.9%, compared with the prior year. The unit shipment decrease equated to $228.1 million of the decrease in net sales, while the decrease in the pass-through price of aluminum equated to $81.4 million of the decrease. The balance of the decrease in net sales was due primarily to the change in sales mix.

Gross loss in 2009 was $10.2 million, or 2.4% of net sales, compared to gross profit of $6.6 million or 0.9% of net sales. Cost of sales in 2009 included $21.3 million of costs associated with plant closures including severance costs, equipment dismantling and other plant closure related costs up from $6.3 million in 2008.

SG&A expenses decreased 12% to $22.6 million from $25.7 million in 2008. The principal decreases were in salaries and wages of $1.2 million and the provision for doubtful accounts of $1.2 million.

During 2009, the Company recorded impairment costs related to long-term assets totaling $11.8 million associated with the closures of its Pittsburg and Van Nuys plants, the operating assets at the Fayetteville, Arkansas plant and the Johnson City real property to reflect current market value. In 2008, such costs totaled $18.5 million related to the initial impairments of the Pittsburg and Van Nuys plants and a similar market value reduction to the Johnson City real property.

Loss before income taxes and equity earnings of the company’s joint venture in 2009 was $43.3 million, compared to $28.6 million in 2008. Impairment charges and other non-operating items approximated $33.3 million of the 2009 loss. The balance was due principally to the 63% decrease in sales in the first half of 2009 and the Company’s inability to absorb fixed costs during that same period, when production levels also decreased by 53% from the comparable prior year period. Fiscal 2008 included impairment charges and other non-operating items approximating $24.9 million, which was partially offset by a foreign exchange transactional gain on the Mexican peso of $5.4 million.

Income tax provision was $26.0 million, compared to an income tax benefit of $1.8 million in 2008. The income tax provision of $26.0 million in 2009 includes expense related to increases in the valuation allowances of our U.S. and Mexico deferred tax assets totaling $42.9 million, a benefit of $8.2 million on our 2009 operating loss, a benefit of $6.1 million for the refund claim referred to above, and reductions of the liability for uncertain tax positions of $3.2 million.

The Company recorded a $24.8 million loss in equity from its joint venture in 2009, which included the $14.4 million impairment charge referred to above, compared with income from equity of $0.7 million in 2008.

Net loss was $94.1 million, or $3.53 per share, compared with net loss of $26.1 million, or $0.98 per share, for 2008.