Superior Industries International has reported financial results for the fourth quarter and fiscal year ended Dec. 31, 2017.
“2017 was a transformational year for Superior, as we established our company as one of the largest aluminum wheel suppliers globally through our acquisition of UNIWHEELS AG, which changed the long-term trajectory of our business. Today, Superior is more diversified, by geography, customer and product, and is leveraging a common culture of innovation to capitalize on attractive secular trends,” said Don Stebbins, president and CEO. “In 2017, we increased value-added sales by 51 percent and Adjusted EBITDA by 58 percent year-over-year. As we look forward, we see significant improvement opportunities ahead of us. We continue to make strides in building a best-in-class organization with a commitment to operational excellence and ongoing investment in new technology and capabilities in anticipation of our customers’ needs. We believe we are well-positioned to drive increased value for all of our stakeholders.”
Fourth Quarter Results
As of Dec. 31, 2017, Superior owned approximately 94.1 percent of UNIWHEELS’ outstanding shares of common stock. The company’s results for the fourth quarter and full year 2017 are presented in accordance with GAAP and consolidate UNIWHEELS’ operations since June 1, 2017.
Net sales for the fourth quarter of 2017 were $361.8 million, compared to net sales of $188.3 million in the fourth quarter of 2016.
Gross profit for the fourth quarter of 2017 was $39.7 million, compared to $18.0 million in the prior year period. The increase in gross profit was primarily driven by the addition of the Company’s European operations, offset slightly by the non-recurring effects of purchase accounting adjustments of $1.3 million related to the acquisition of UNIWHEELS as well as ongoing amortization of intangibles related to the acquisition.
Selling, general and administrative expenses for the fourth quarter of 2017 were $25.9 million compared to $6.9 million in the prior year period. The increase is due to the inclusion of Superior’s European operations, as well as costs related to the acquisition and integration totaling $7.2 million, and higher compensation expense in North America during the quarter.
Income from operations for the fourth quarter of 2017 was $13.8 million, which compares to income from operations of $11.1 million in the prior year period. Excluding the impact of acquisition and integration costs, fourth quarter 2017 income from operations would have been $22.3 million.
The provision for income taxes for the fourth quarter of 2017 was $11.7 million, which compares to a provision in the fourth quarter of 2016 of $3.8 million. The income tax expense in the fourth quarter of 2017 reflects the impact of the acquisition-related costs, blend of earnings and losses in various jurisdictions, and the negative impact from recent tax reform legislation of approximately $16.6 million.
For the fourth quarter of 2017, the company reported a net loss attributable to Superior of $4.6 million. Earnings per diluted share, which includes the impact of preferred dividends and the ongoing accretion of the preferred shares, was (50 cents) for the fourth quarter. Net income for the quarter includes after-tax expense of $5.2 million, or 21 cents per diluted share, resulting from acquisition related items as well as a $16.6 million, or 67 cents per share, impact related to U.S. tax reform. Also, included in the impact of acquisition related items is the change in fair value of an embedded option related to the preferred shares. This embedded option is revalued on a quarterly basis and the change in value impacts net income. These results for the fourth quarter compare to $7.8 million of net income, or 31 cents per diluted share, in the fourth quarter of 2016. The decrease in net income is primarily due to increased interest and amortization expense.
Full Year 2017 Results
Wheel unit shipments were 17 million for 2017, compared to unit shipments of 12.3 million in 2016.
Net sales for 2017 were $1,108.1 million, compared to net sales of $732.7 million in 2016. Value-added sales were $616.8 million for 2017 versus Value-Added Sales of $408.7 million in 2016.
Gross profit for 2017 was $102.9 million compared to $86.2 million in the prior year. The increase in gross profit was driven by the addition of the company’s European operations, offset partially by the non-recurring effects of purchase accounting adjustments of $12.1 million related to the acquisition of UNIWHEELS as well as ongoing amortization of intangibles related to the acquisition.
Selling, general and administrative expenses for 2017 were $81.4 million compared to $31.6 million in the prior year period. The increase is due to the inclusion of seven months of Superior’s European operations, as well as costs related to the acquisition and integration totaling $32.1 million. Excluding the acquisition and integration costs, selling, general and administrative expenses would have been 4.4 percent of net sales in 2017, which compares to 4.3 percent in the prior year.
Income from operations for 2017 was $21.5 million compared to income from operations of $54.6 million in the prior year. Excluding the previously mentioned acquisition-related impacts on gross profit and selling, general and administrative expense, income from operations for 2017 would have been $65.7 million.
The income tax provision for 2017 was $6.9 million. This compares to a provision for income taxes of $13.3 million for the prior year. The income tax expense in the year reflects the impact of the acquisition-related costs, blend of earnings and losses in various jurisdictions, and the negative impact from recent tax reform legislation of approximately $16.6 million.
For 2017, the company reported a net loss attributable to Superior of $6.2 million. Earnings per diluted share, which includes the impact of preferred dividends and the ongoing accretion of the preferred shares, was ($1.01) for 2017. Net income for the year includes after-tax expense of $35.9 million, or $1.44 per diluted share, related to acquisition related items, as well as a $16.6 million, or 67 cents per share, impact related to U.S. tax reform. Included in the impact of acquisition related items is the change in fair value of an embedded option related to the preferred shares. These results compare to $41.4 million of net income, or $1.62 per diluted share, in 2016.
2018 Outlook
Based on current economic trends and industry outlook, Superior expects net sales to be in the range of $1.45 billion to $1.5 billion, driven by unit shipments of 21.25 million to 21.6 million. Adjusted EBITDA is expected to be in the range of $185 million to $200 million.
