VAN NUYS, Calif. — Superior Industries International has reported a net loss of $20.1 million, or 75 cents per share, for the fourth quarter ended Dec. 31, 2008, compared to net income of $4.7 million, or 18 cents per diluted share, for the fourth quarter ended Dec. 31, 2007. For the 2008 full year, net loss was $26.1 million, or 98 cents per share, compared to net income of $9.3 million, or 35 cents per diluted share, for 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 aluminum rates,” said Steven Borick, chairman, CEO and president. “In aggregate, these special adjustments totaled $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 U.S. 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 percent 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 percent, or 1 million units, and the average selling price decreased 3.3 percent 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 Pittsburgh, Kan., and Van Nuys, Calif., 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 percent of net sales, compared with $5.4 million, or 2.4 percent 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 aluminum wheel manufacturing facility in Hungary. This compares to equity in earnings of $2.6 million in the year earlier period. This reduction reflects the weakening European automotive market.
At Dec. 31, 2008, working capital was $257.1 million, including cash and cash equivalents of $146.9 million. At Dec. 31, 2007, working capital was $260.5 million, including cash and cash equivalents of $106.8 million. Superior has no debt.
Net sales for 2008 decreased 21.1 percent to $754.9 million from $956.9 million for 2007. Unit wheel shipments decreased 21.6 percent compared with the prior year.
Gross profit was $6.6 million, or 0.9 percent 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 percent 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 labor-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 Pittsburgh 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.
Income tax benefit was $1.8 million compared to an income tax provision of $6.3 million for the year 2007. The company’s tax expense or benefit as a percentage of income before taxes will not compare to the U.S. statutory rate of 35 percent, due to differing tax rates in the various taxing jurisdictions in which the company operates, and to the mix of income and losses within those jurisdictions. A principal factor impacting the 2008 effective tax rate is a $6.8 million valuation reserve against our foreign deferred tax asset.